<PAGE>
As filed with the Securities and Exchange Commission on April 4, 2000
File Nos. 811-4138 and 2-94067
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. ____ [_]
Post-Effective Amendment No. 40 [X]
-------------------------------------------------------------------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 41 [X]
--
ALLMERICA INVESTMENT TRUST
--------------------------
(Name of Registrant)
440 Lincoln Street
WORCESTER, MASSACHUSETTS 01653
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(508) 855-1000
(Names and Addresses of Agents for Service:)
George M. Boyd, Esq. Gregory D. Sheehan, Esq.
Allmerica Financial Ropes & Gray
440 Lincoln Street One International Place
Worcester, MA 01653 Boston, Massachusetts 02110
Approximate Date of Proposed Public Offering: as soon after filing as
- ---------------------------------------------------------------------
practicable
- -----------
It is proposed that this filing will become effective:
____ immediately upon filing pursuant to paragraph (b)
____on (date) pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)(1)
_________on (date) pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to paragraph (a)(2)
X on July 1, 2000 pursuant to paragraph (a)(2) of rule 485.
- -------
If appropriate, check the following box:
____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Part A:
- ------
This Post-Effective Amendment relates only to the Select Strategic Income Fund,
a new series of the Registrant currently registered under the Investment Company
Act of 1940. No information relating to any other series of the Registrant is
amended or superseded hereby.
<PAGE>
Allmerica Investment Trust
- ---------------------------
Prospectus
July 1, 2000
This Prospectus offers shares of the Select Strategic Income Fund.
The Select Strategic Income Fund is a separate portfolio of the Trust which
serves as the underlying investment for insurance related accounts.
This Prospectus explains what you should know about the Fund. Please read it
carefully before you invest.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this Prospectus is adequate or complete. Any representation to the contrary is a
criminal offense.
ALLMERICA
INVESTMENT
TRUST
440 Lincoln Street
Worcester, Massachusetts 01653
1-800-828-0540
<PAGE>
Table of Contents
-----------------
<TABLE>
<S> <C>
FUND SUMMARY....................................................... 3
Objectives, Strategies and Risks............................... 4
EXPENSE SUMMARY.................................................... 5
DESCRIPTION OF PRINCIPAL INVESTMENT RISKS.......................... 6
OTHER INVESTMENT STRATEGIES........................................ 8
MANAGEMENT OF THE FUND............................................. 10
PRICING OF FUND SHARES............................................. 11
PURCHASE AND REDEMPTION OF SHARES.................................. 11
DISTRIBUTIONS AND TAXES............................................ 12
APPENDIX........................................................... 13
</TABLE>
LEGEND
------
Performance [GRAPHIC APPEARS HERE]
Investment Objectives [GRAPHIC APPEARS HERE]
Management of Fund [GRAPHIC APPEARS HERE]
Risk [GRAPHIC APPEARS HERE]
Investment Strategies [GRAPHIC APPEARS HERE]
____________________________
2 Allmerica Investment Trust
<PAGE>
Fund Summary
------------
This Prospectus describes the Select Strategic Income Fund of Allmerica
Investment Trust, which provides a broad range of investment options through 14
separate investment portfolios, or Funds. The other Funds are described in
separate prospectuses. Shares of the Fund are sold exclusively to variable
annuity and variable life insurance Separate Accounts and qualified pension and
retirement plans.
The investment manager of the Trust is Allmerica Financial Investment Management
Services, Inc. (the "Manager") The Manager is responsible for managing the
Trust's daily business and has general responsibility for the management of the
investments of the Fund. The Manager, at its expense, has contracted with
Western Asset Management Company ("WAM" or the "Sub-Adviser") to manage the
investments of the Select Strategic Income Fund. WAM has been selected as the
Fund's Sub-Adviser on the basis of various factors including management
experience, investment techniques and staffing. See "Management of the Fund" for
more information about the Manager and the Sub-Adviser.
The following summary describes the Select Strategic Income Fund's investment
objective and principal investment strategies, and identifies the principal
investment risks of investing in the Fund. Note that any percentage limitations
listed under the Fund's principal investment strategies apply at the time of
investment. The principal risks are discussed in more detail under "Description
of Principal Investment Risks".
____________________________
Allmerica Investment Trust 3
<PAGE>
Objectives, Strategies and Risks
Select Strategic Income Fund
----------------------------
[GRAPHIC APPEARS HERE] Sub-Adviser: Western Asset Management Company
[GRAPHIC APPEARS HERE] Investment Objective: The Fund seeks to maximize total
return, consistent with prudent investment management
and liquidity needs, by investing in various types of
fixed income securities.
[GRAPHIC APPEARS HERE] Principal Investment Strategies: Examples of the types
of securities in which the Fund invests are corporate
debt obligations such as bonds, notes and debentures,
and obligations convertible into common stock;
obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and mortgage-backed
and asset-backed securities. The Fund may invest up to
25% of its assets in foreign securities (not including
its investments in American Depositary Receipts),
including up to 20% of its assets in non-U.S. dollar
denominated securities.
The dollar weighted average duration of the Fund is
expected to range within 20% of the duration of the
domestic bond market as a whole (normally four to six
years, although this may vary) as measured by the Sub-
Adviser. The Fund may invest up to 15% of its assets in
high yield securities or "junk bonds" rated below
investment grade but at least B or higher by Moody's
Investors Services or Standard & Poor's Rating Services
or similar rating organizations, and in unrated
securities determined by the Sub-Adviser to be of
comparable quality. For more information about rating
categories, see the Appendix to the Statement of
Additional Information ("SAI").
[GRAPHIC APPEARS HERE] Principal Risks:
. Credit Risk
. Currency Risk
. Derivatives Risk
. Emerging Market Risk
. Foreign Investment Risk
. Interest Rate Risk
. Investment Management Risk
. Liquidity Risk
. Market Risk
. Prepayment Risk
See "Description of Principal Investment Risks."
____________________________
4 Allmerica Investment Trust
<PAGE>
Expense Summary
---------------
Expenses are one of several factors to consider when investing in the Select
Strategic Income Fund. Expenses shown are based on expenses that will be
incurred in respect of shares of the Fund for the 2000 fiscal year. The Example
shows the cumulative expenses attributable to a hypothetical $10,000 investment
in the Fund over specified periods.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you invest in the
Fund. Please note that the expenses listed below do not include the expenses of
the applicable variable insurance product that you are purchasing. You should
refer to the variable insurance product prospectus for more information relating
to the fees and expenses of that product, which are in addition to the expenses
of the Fund.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
Shareholder (expenses deducted from Fund assets) Total Annual
Fees Fund
(fees paid directly Management Distribution Other Operating
from your investment) Fees (12b-1) Fees Expenses Expenses
----------------------- ----------------- ------------------ ------------ ----------------
<S> <C> <C> <C> <C>
None 0.60% None 0.17%(1) 0.77%(2)
</TABLE>
(1) "Other Expenses" are based on estimated amounts for the current fiscal
year.
(2) Through December 31, 2000, the Manager has declared a voluntary expense
limitation of 1.00% for the Select Strategic Income Fund.
The declaration of a voluntary management fee or expense limitation in any
year does not bind the Manager to declare future expense limitations with
respect to the Fund. The limitation may be terminated at any time.
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment earns a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 Year 3 Years
------ -------
$ 79 $ 248
____________________________
Allmerica Investment Trust 5
<PAGE>
[GRAPHIC] Description of Principal Investment Risks
---------------------------------------------------
The following is a summary of the principal risks of investing in the Select
Strategic Income Fund and the factors likely to cause the value of your
investment in the Fund to decline. The principal risks applicable to the Fund
are identified under "Fund Summary". There are also many factors that could
cause the value of your investment in the Fund to decline which are not
described here. It is important to remember that there is no guarantee that the
Fund will achieve its investment objective, and an investor in the Fund could
lose money.
Credit Risk
Credit risk is the risk that the issuer of a fixed income security will not be
able to pay principal and interest when due. There are different levels of
credit risk. Funds that invest in lower-rated securities have higher levels of
credit risk. Lower-rated or unrated securities of equivalent quality, generally
known as "junk bonds", have very high levels of credit risk. "Junk bonds" are
considered to be speculative in their capacity to pay interest and repay
principal. Since the Fund may invest in fixed income securities issued in
connection with corporate restructurings by highly leveraged issuers or in fixed
income securities for which the payment of interest or principal is uncertain,
the Fund may be subject to greater credit risk because of these investments. The
price of a fixed income security can be expected to fall if the issuer defaults
on its obligation to pay principal or interest, the rating agencies downgrade
the issuer's credit rating or there is negative news that affects the market's
perception of the issuer's credit risk. During recessions and periods of broad
market declines, a high percentage of issuers of junk bonds may default on
payments of principal and interest, and junk bonds could become less liquid,
meaning that they will be harder to value or sell at a fair price. To the extent
that the Fund invests in foreign securities, it is subject to increased credit
risk because of the difficulties of requiring foreign entities to honor their
contractual commitments and because a number of foreign governments and other
issuers are already in default.
Currency Risk
This is the risk that the value of the Fund's investments may decline due to
fluctuations in exchange rates between the U.S. dollar and foreign currencies.
Funds that invest in securities denominated in or are receiving revenues in
foreign currencies are subject to currency risk. There is often a greater risk
of currency fluctuations and devaluations in emerging markets countries.
Derivatives Risk
The Fund may use derivatives to hedge against an opposite position that the Fund
also holds. While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. When a Fund uses derivatives to hedge, it takes the risk that
changes in the value of the derivative will not match those of the asset being
hedged. Incomplete correlation can result in unanticipated losses. The Fund may
also use derivatives as an investment vehicle to gain market exposure. Gains or
losses from derivative investments may be substantially greater than the
derivative's original cost. When a Fund uses derivatives, it is also subject to
the risk that the other party to the agreement will not be able to perform.
Additional risks associated with derivatives include mispricing and improper
valuation.
Emerging Markets Risk
Investments in emerging markets securities involve all of the risks of
investments in foreign securities, and also have additional risks. The markets
of developing countries have been more volatile than the markets of developed
countries with more mature economies. Many emerging markets companies in the
early stages of development are dependent on a small number of products and lack
substantial capital reserves. In addition, emerging markets often have less
developed legal and financial systems. These markets often have provided
significantly higher or lower rates of return than developed markets and usually
carry higher risks to investors than securities of companies in developed
countries.
Foreign Investment Risk
Investing in foreign securities involves risks relating to political, social and
economic developments abroad, as well as risks resulting from the differences
between the regulations to which U.S. and foreign issuers and markets are
subject. These risks may include the seizure by the government of company
assets, excessive taxation, withholding taxes on dividends and interest,
limitations on the use or transfer of portfolio assets, and political or social
instability. In the event of nationalization, expropriation or other
confiscation, a Fund could lose its entire investment. Funds investing in
foreign securities may experience rapid changes in value. One reason for this
volatility is that the securities markets of many foreign countries are
relatively small, with a limited number of companies representing a small number
of industries. Enforcing legal rights may be difficult, costly and slow in
foreign countries. Also, foreign companies may not be subject to governmental
supervision or accounting standards comparable to those applicable to U.S.
companies, and there may be less public information about their operations. The
conversion of certain European currencies to the "euro" may present additional
risks to those Funds exposed to such currenices.
____________________________
6 Allmerica Investment Trust
<PAGE>
Interest Rate Risk
When interest rates rise, the prices of fixed income securities in the Fund's
portfolio will generally fall. Conversely, when interest rates fall, the prices
of fixed income securities in the Fund's portfolio will generally rise. Even
Funds that invest in the highest quality debt securities are subject to interest
rate risk. Interest rate risk usually will affect the price of a fixed income
security more if the security has a longer maturity because changes in interest
rates are increasingly difficult to predict over longer periods of time. Fixed
income securities with longer maturities will therefore be more volatile than
other fixed income securities with shorter maturities.
Investment Management Risk
Investment management risk is the risk that the Fund does not achieve its
investment objective, even though the Sub-Adviser uses various investment
strategies and techniques.
Liquidity Risk
This is the risk that the Fund will not be able to sell a security at a
reasonable price because there are too few people who actively buy and sell, or
trade, that security on a regular basis. Liquidity risk increases for Funds
investing in foreign investments (especially emerging markets securities),
smaller companies, lower credit quality bonds (also called "junk bonds"),
restricted securities, over-the-counter securities and derivatives.
Market Risk
This is the risk that the price of a security held by the Fund will fall due to
changing economic, political or market conditions or to factors affecting
investor psychology.
Prepayment Risk
While mortgage-backed securities may have a stated maturity, their expected
maturities may vary when interest rates rise or fall. When interest rates fall,
homeowners are more likely to prepay their mortgage loans which may result in an
unforeseen loss of future interest income to the Fund. Also, because prepayments
increase when interest rates fall, the prices of mortgage-backed securities do
not increase as much as other fixed income securities when interest rates fall.
____________________________
Allmerica Investment Trust 7
<PAGE>
[GRAPHIC] Other Investment Strategies
-------------------------------------
The Fund Summary on page 3 describes the investment objective and the principal
investment strategies and risks of the Fund. The Fund may at times use the
following investment strategies. Attached as an Appendix is a chart with a
listing of various investment techniques and strategies that the Sub-Adviser of
the Fund may utilize. The Fund may decide that it is in the best interests of
shareholders to make changes to its investment objective and strategies
described in this Prospectus. The investment objective and strategies may be
changed with the approval of the Board of Trustees, but without shareholder
approval.
Derivative Investments. Instead of investing directly in the types of portfolio
securities described in the Summary, the Fund may buy or sell a variety of
"derivative" investments to gain exposure to particular securities or markets.
Derivatives are financial contracts whose value depends on, or is derived from,
the value of an underlying asset, reference rate or index. The Fund's Sub-
Adviser will sometimes use derivatives as part of a strategy designed to reduce
other risks and sometimes will use derivatives to enhance returns, which
increases opportunities for gain but also involves greater risk.
Foreign Investments. The Fund may invest all or a substantial part of its
portfolio in securities of companies that are located or primarily doing
business in a foreign country. A company is considered to be located in a
foreign country if it is organized under the laws of, or has a principal office
in, that country. A company is considered as primarily doing business in a
country if (i) the company derives at least 50% of its gross revenues or profits
from either goods or services produced or sold in the country or (ii) at least
50% of the company's assets are situated in the country. The Fund may invest in
foreign securities either directly or indirectly through the use of depositary
receipts, such as ADRs. Depositary receipts are generally issued by banks or
trust companies and evidence ownership of underlying foreign securities. An ADR
may be sponsored by the issuer of the underlying foreign security or it may be
issued in unsponsored form. The holder of a sponsored ADR is likely to receive
more frequent and extensive financial disclosure concerning the foreign issuer
than the holder of an unsponsored ADR and generally will bear lower transaction
charges.
High Yield Securities. The Select Strategic Income Fund may purchase corporate
debt securities which are high yield securities, or "junk bonds" (rated at the
time of purchase BB or lower by Moody's or S&P, or equivalently rated by another
rating agency, or unrated but believed by the Sub-Adviser to have similar
quality.) These securities are considered to be speculative in their capacity to
pay interest and repay principal.
____________________________
8 Allmerica Investment Trust
<PAGE>
Lending of Securities. To realize additional income, the Fund may lend
portfolio securities to broker-dealer or financial institutions in an amount up
to 33-1/3% of the Fund's total assets. While any such loan is outstanding, the
Fund will continue to receive amounts equal to the interest or dividends paid by
the issuer on the securities, as well as interest (less any rebates to be paid
to the borrower) on the investment of the collateral or a fee from the borrower.
The Fund will have the right to call each loan and obtain the securities.
Lending portfolio securities involves possible delays in receiving additional
collateral or in the recovery of the securities or possible loss of rights in
the collateral.
Restricted Securities. The Fund may purchase securities that are not registered
under Federal securities law ("restricted securities"), but can be offered and
sold to certain "qualified institutional buyers". The Fund will not invest more
than 15% of its net assets in restricted securities (and securities deemed to be
illiquid). This limit does not apply if the Board of Trustees determines that
the restricted securities are liquid. The Board of Trustees has adopted
guidelines and delegated to the Manager the daily function of determining and
monitoring the liquidity of restricted securities. The Board, however, retains
sufficient oversight and is ultimately responsible for the determinations. This
investment practice could increase the level of illiquidity in the Fund if
buyers lose interest in restricted securities. As a result, the Fund might not
be able to sell these securities when its Sub-Adviser wants to sell, or might
have to sell them at less than fair value. In addition, market quotations for
these securities are less readily available.
Temporary Defensive Strategies. At times the Sub-Adviser may determine that
market conditions make it desirable temporarily to suspend the Fund's normal
investment activities. This is when the Fund may temporarily invest in a variety
of lower-risk securities, such as U.S. Government and other high quality bonds
and short-term debt obligations. Such strategies attempt to reduce changes in
the value of the Fund's shares. The Fund may not achieve its investment
objective while these strategies are in effect.
Frequent Trading. The Fund from time to time may engage in active and frequent
trading to achieve its investment objective. Frequent trading increases
transaction costs, which could detract from the Fund's performance.
____________________________
Allmerica Investment Trust 9
<PAGE>
[GRAPHIC] Management of the Funds
---------------------------------
The Trust is governed by a Board of Trustees. Allmerica Financial Investment
Management Services, Inc. is the investment Manager of the Trust responsible for
managing the Trust's day-to-day business affairs. The Manager is located at 440
Lincoln Street, Worcester, MA 01653. The Manager and its predecessor, Allmerica
Investment Management Company, Inc., have been managing mutual funds since 1985.
The Manager currently serves as investment manager to one other mutual fund.
Western Asset Management Company ("WAM"), located at 117 E. Colorado Blvd.,
Pasadena, CA 91105, serves as the Fund's Sub-Adviser. WAM is a wholly-owned
subsidiary of Legg Mason Inc., a publicly owned holding company which is also
the parent company of Legg Mason Wood Walker, Inc., a broker-dealer founded in
1899. WAM provides fixed-income management services to a wide variety of
institutional clients and, as of December 31, 1999, had $59.4 billion in assets
under management.
The Trust and Manager have obtained an order of exemption from the SEC that
permits the Manager to enter into and materially amend sub-advisory agreements
with non-affiliated Sub-Advisers without obtaining shareholder approval. The
Manager has ultimate responsibility to oversee the Sub-Adviser. The Manager has
the ability, subject to approval of the Trustees, to hire and terminate the Sub-
Adviser and to change materially the terms of the Sub-Adviser Agreement,
including the compensation paid to the Sub-Adviser. The Sub-Adviser has been
selected by the Manager and Trustees with the help of BARRA RogersCasey, Inc., a
pension consulting firm. The fees earned by the Sub-Adviser and BARRA
RogersCasey are paid by the Manager. The performance by the Sub-Adviser is
reviewed quarterly by a committee of the Board of Trustees, with assistance from
BARRA RogersCasey.
An investment team of more than 30 individuals from WAM, headed by Stephen A.
Walsh, Director of Portfolio Management, is primarily responsible for the day-
to-day management of the Select Strategic Income Fund. Mr. Walsh has served as
Director of Portfolio Management at WAM since 1991. Prior to 1991, Mr. Walsh
served as a Portfolio Manager with Security Pacific Investment Managers, Inc.
____________________________
10 Allmerica Investment Trust
<PAGE>
The Fund will pay the Manager a fee computed daily at an annual rate of the
average daily net assets of the Fund as set forth below:
Net Assets Fee
---------- ---
First $50 million 0.60%
Next $50 million 0.55%
Over $100 million 0.45%.
The Manager will pay WAM a fee computed daily at an annual rate of the average
daily net assets of the Fund as set forth below:
Net Assets Fee
---------- ---
First $100 million 0.30%
Over $100 million 0.15%.
Pricing of Fund Shares
----------------------
The Select Strategic Income Fund sells and redeems its shares at a price equal
to its net asset value ("NAV") without paying any sales or redemption charges.
The NAV of a share is computed by adding the current value of all the Fund's
assets, subtracting its liabilities and dividing by the number of its
outstanding shares. NAV is computed once daily at the close of regular trading
on the New York Stock Exchange each day the Exchange is open - normally 4:00
p.m. Eastern Time. Orders for the purchase or redemption of shares are filled at
the next NAV computed after an order is received by the Fund. The Fund does not
accept orders or compute its NAV on days when the Exchange is closed.
Debt securities (other than short-term obligations) normally are valued based on
pricing service valuations. Debt obligations with a remaining maturity of 60
days or less are valued at amortized cost when amortized cost is considered to
represent fair value. Values for short-term obligations having a remaining
maturity of more than 60 days are based upon readily available market
quotations. Certain foreign markets may be open on days when the Fund does not
accept orders or price its shares. As a result, the NAV of the Fund's shares may
change on days when shareholders will not be able to buy or sell shares. In
other cases, debt and equity securities and any other assets are valued at their
fair value following procedures approved by the Trustees.
Purchase and Redemption of Shares
---------------------------------
Shares of the Fund currently are purchased only by Separate Accounts which are
the funding mechanisms for variable annuity contracts and variable life
insurance policies. The Distributor, Allmerica Investments, Inc., at its
expense, may provide promotional incentives to dealers who sell variable annuity
contracts which invest in the Fund. The Trust has obtained an exemptive order
from the Securities and Exchange Commission to permit Fund shares to be sold to
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans. Material irreconcilable conflicts may arise among
various insurance policy owners and plan participants. The Trustees will monitor
events to identify any material conflicts and determine if any action should be
taken to resolve such conflict.
No fee is charged by the Trust on redemption. The variable contracts funded
through the Separate Accounts are sold subject to certain fees and charges which
may include sales and redemption charges. See the prospectuses for the variable
insurance products.
Normally, redemption payments will be made within seven days after the Trust
receives a written redemption request. Redemptions may be suspended when trading
on the New York Stock Exchange is restricted or when permitted by the Securities
and Exchange Commission.
____________________________
Allmerica Investment Trust 11
<PAGE>
Distributions and Taxes
-----------------------
Distributions
The Fund pays out substantially all of its net capital gains to shareholders
each year. Net investment income is paid quarterly. Distributions of net
capital gains for the year, if any, are made annually. All dividends and
capital gain distributions are applied to purchase additional Fund shares at net
asset value as of the payment date. Fund shares are held by the Separate
Accounts and any distributions are reinvested automatically by the Separate
Accounts.
Taxes
The Trust seeks to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies so that the Trust will not be
subject to federal income tax. Under current tax law, dividend or capital gain
distributions from the Fund are not currently taxable when left to accumulate
within a variable annuity or variable life insurance contract. Withdrawals from
a contract generally are subject to ordinary income tax and, in many cases, to
an additional 10% penalty tax on withdrawals before age 59 1/2. Tax consequences
to investors in the Separate Accounts which are invested in the Trust are
described in more detail in the prospectuses for those accounts.
____________________________
12 Allmerica Investment Trust
<PAGE>
[GRAPHIC] APPENDIX
Investment Techniques and Strategies
In managing its portfolios of investments, the Fund may make use of the
following investment techniques and strategies:
Symbols
o Permitted
-- Not Permitted
INVESTMENT TECHNIQUE/STRATEGY
Asset-Backed Securities o
Financial Futures Contracts
and Related Options o
Foreign Securities o
Forward Commitments o
Forward Contracts on Foreign Currencies --
High Yield Securities o
Investments in Money Market Securities o
Mortgage-Backed Securities o
Purchasing Options o
Repurchase Agreements o
Restricted Securities o
Reverse Repurchase Agreements --
Securities Lending o
Stand-By Commitments o
Stripped Mortgage-Backed Securities o
Swap and Swap-Related Products --
When-Issued Securities o
Writing Covered Options o
____________________________
Allmerica Investment Trust 13
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY.
____________________________
14 Allmerica Investment Trust
<PAGE>
Allmerica Investment Trust
Select Strategic Income Fund
The Trust's Statement of Additional Information ("SAI") includes additional
information about the Fund. The SAI is incorporated by reference into this
prospectus, which means it is a part of this prospectus for legal purposes. You
may get a free copy of the SAI, request other information about the Fund or make
shareholder inquiries by calling 1-800-828-0540.
You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange 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. You may also access reports and other
information about the Trust on the Commission's Internet site at
http://www.sec.gov. You may get copies of this information, with payment of a
duplication fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Trust's file number
under the Investment Company Act, which is 811-4138.
ALLMERICA INVESTMENT TRUST
440 Lincoln Street, Worcester, Massachusetts 01653
1-800-828-0540
<PAGE>
Part B:
- ------
<PAGE>
ALLMERICA INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
SELECT EMERGING MARKETS FUND
SELECT AGGRESSIVE GROWTH FUND
SELECT CAPITAL APPRECIATION FUND
SELECT VALUE OPPORTUNITY FUND
SELECT INTERNATIONAL EQUITY FUND
SELECT GROWTH FUND
SELECT STRATEGIC GROWTH FUND
CORE EQUITY FUND
EQUITY INDEX FUND
SELECT GROWTH AND INCOME FUND
SELECT STRATEGIC INCOME FUND
SELECT INVESTMENT GRADE INCOME FUND
GOVERNMENT BOND FUND
MONEY MARKET FUND
THIS STATEMENT OF ADDITIONAL INFORMATION ("SAI") IS NOT A PROSPECTUS. IT SHOULD
BE READ IN CONJUNCTION WITH THE APPLICABLE PROSPECTUSES OF ALLMERICA INVESTMENT
TRUST DATED MAY 1, 2000 AND JULY 1, 2000. A FREE COPY OF THE APPLICABLE
PROSPECTUS MAY BE OBTAINED FROM ALLMERICA INVESTMENT TRUST (THE "TRUST"), 440
LINCOLN STREET, WORCESTER, MASSACHUSETTS 01653, (508) 855-1000.
The Trust's Financial Statements and related notes and the report of the
independent accountants for the fiscal year ended December 31, 1999 are
incorporated by reference into this SAI and are included in the Trust's Annual
Report to Shareholders. The Annual Report to Shareholders is available, without
charge, upon request, by calling the following toll free number: 1-800-828-0540.
DATED: JULY 1, 2000
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
TRUST HISTORY............................................................ 3
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS................. 3
INVESTMENT RESTRICTIONS AND POLICIES.................................... 9
INVESTMENT STRATEGIES AND TECHNIQUES.................................... 10
PORTFOLIO TURNOVER...................................................... 25
MANAGEMENT OF THE TRUST.................................................. 25
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...................... 27
INVESTMENT MANAGEMENT AND OTHER SERVICES................................. 27
BROKERAGE ALLOCATION AND OTHER PRACTICES................................. 39
CAPITAL STOCK AND OTHER SECURITIES....................................... 41
PURCHASE, REDEMPTION AND PRICING OF SHARES............................... 42
TAXATION OF THE FUNDS OF THE TRUST....................................... 43
UNDERWRITERS............................................................. 44
CALCULATION OF PERFORMANCE DATA.......................................... 44
FINANCIAL STATEMENTS..................................................... 47
</TABLE>
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Allmerica Investment Trust 2
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TRUST HISTORY
The Trust is an open-end, diversified series investment company designed to
provide the underlying investment vehicle for various separate investment
accounts established by First Allmerica Financial Life Insurance Company ("First
Allmerica") or Allmerica Financial Life Insurance and Annuity Company
("Allmerica Financial Life"), a wholly-owned subsidiary of First Allmerica.
Shares of the Trust are not offered to the general public but solely to such
separate investment accounts ("Separate Accounts"). Not all of the Funds are
offered to each Separate Account.
The Trust is a Massachusetts business trust established on October 11, 1984. It
currently is comprised of fourteen different portfolios: Select Emerging Markets
Fund, Select Aggressive Growth Fund, Select Capital Appreciation Fund, Select
Value Opportunity Fund, Select International Equity Fund, Select Growth Fund,
Select Strategic Growth Fund, Core Equity Fund (formerly the Growth Fund),
Equity Index Fund, Select Growth and Income Fund, Select Strategic Income Fund,
Select Investment Grade Income Fund (formerly the Investment Grade Income Fund),
Government Bond Fund and Money Market Fund (each, a "Fund"). The Trustees may
create additional funds in the future.
DESCRIPTION OF THE FUNDS
AND THEIR INVESTMENTS AND RISKS
ADDITIONAL INFORMATION ABOUT THE FUNDS
For a description of the Funds' principal investment strategies and risks, types
of investments each Fund may acquire and certain investment techniques it may
utilize, see "Principal Investment Strategies and Risks" and "Other Investment
Strategies and Risks" in the appropriate Prospectus for the underlying Funds of
the applicable Separate Account. Following are descriptions of additional Fund
strategies, policies and restrictions. Note that any percentage limitations
listed under each Fund below apply at the time of investment.
SELECT EMERGING MARKETS FUND
The Fund invests at least 65% of its total assets in equity securities of
companies that are domiciled or primarily doing business in developing countries
with emerging markets. A company is considered to be domiciled in a developing
country if it is organized under the laws of, or has a principal office in, that
country. A company is considered as primarily doing business in a developing
country if (i) the company derives at least 50% of its gross revenues or profits
from either goods or services produced or sold in the developing country or (ii)
at least 50% of the company's assets are situated in the developing country.
The Sub-Adviser may employ a temporary defensive strategy if deemed by it to be
appropriate due to economic or political conditions in emerging markets. When
using a defensive strategy, the Fund may invest up to 100% of its assets in
cash, high-quality debt securities or money market instruments of U.S. or
foreign issuers. In addition, most or all of its investment may be made in the
United States and in U.S. dollars for temporary defensive purposes.
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
Investing in the Fund entails a substantial degree of risk. Investors are
strongly advised to consider carefully the special risks involved in investing
in emerging markets, which are in addition to the usual risks of investing in
developed countries around the world.
SELECT AGGRESSIVE GROWTH FUND
The selection of securities is made solely on the basis of their potential for
capital appreciation. Dividend and interest income from portfolio securities, if
any, is incidental to the Fund's investment objective.
At any given point, a substantial portion of the Fund's equity investments may
be in securities which are not listed for trading on national securities
exchanges and which, although publicly traded, may be less liquid than
securities issued
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3 Allmerica Investment Trust
<PAGE>
by larger, more seasoned companies which trade on national securities exchanges.
Up to 15% of the Fund's net assets may be invested in securities which are
illiquid.
Because the price movement of the securities held by the Fund can be expected to
be more volatile than is the case for the market as a whole, and the net asset
value of a share of the Fund may fluctuate significantly, the Fund should not be
considered suitable for investors who are unable or unwilling to assume the risk
of loss inherent in an aggressive growth portfolio, nor should investment in the
Fund be considered a balanced or complete investment program.
When the Sub-Adviser of the Fund determines that market conditions warrant a
temporary defensive position, the Fund may invest without limitation in high-
grade, fixed income securities or U.S. Government securities, or hold assets in
cash or cash equivalents.
SELECT CAPITAL APPRECIATION FUND
Up to 15% of the Fund's net assets may be invested in securities which are
illiquid. When the Sub-Adviser of the Fund determines that market conditions
warrant a temporary defensive position, the Fund may invest without limitation
in high-grade, fixed income securities or U.S. Government securities, or hold
assets in cash or cash equivalents.
SELECT VALUE OPPORTUNITY FUND
The Fund may invest temporarily in preferred stocks, bonds and other defensive
issues. There are no restrictions or guidelines regarding the investment of Fund
assets in shares listed on an exchange or traded over-the- counter. The Fund may
invest up to 15% of its net assets in securities which are illiquid.
The portfolio normally will be diversified among different industry sectors, but
is not an index approach. Stocks are bought as investments and generally held
for the long term, rather than as active trading vehicles.
SELECT INTERNATIONAL EQUITY FUND
The Fund may invest up to 15% of its net assets in securities which are
illiquid. When the Sub-Adviser of the Fund determines that market conditions
warrant a temporary defensive position, the Fund may invest without limitation
in high-grade, fixed income securities or U.S. Government securities, or hold
assets in cash or cash equivalents.
SELECT GROWTH FUND
Although the Fund may invest in dividend-paying stocks, the generation of
current income is not an objective of the Fund. Any income that is received is
incidental to the Fund's objective of long-term growth of capital.
When choosing securities for the portfolio, the Sub-Adviser for the Select
Growth Fund focuses on companies that display strong financial characteristics
and earnings growth potential.
The stocks of smaller growth companies may involve a higher degree of risk than
other types of securities and the price movement of such securities can be
expected to be more volatile than is the case of the market on the whole. The
Fund may hold stocks traded on one or more of the national exchanges as well as
in the over-the-counter markets. Because opportunities for capital growth may
exist not only in new and expanding areas of the economy but also in mature and
cyclical industries, the Fund's portfolio investments are not limited to any
particular type of company or industry.
When the Sub-Adviser determines that market conditions warrant a temporary,
defensive position, the Fund may invest without limitation in high-grade, fixed-
income securities or U.S. Government securities, or hold assets in cash or cash
equivalents. To the extent the Fund is so invested it is not achieving its
objective to the same degree as under normal conditions.
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Allmerica Investment Trust 4
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The Select Growth Fund's objective of seeking long-term growth of capital means
that its assets generally will be subject to greater risk than may be involved
in investing in securities that are not selected for growth potential. The Fund
may invest up to 15% of its net assets in securities which are illiquid.
SELECT STRATEGIC GROWTH FUND
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
CORE EQUITY FUND (formerly the Growth Fund)
The Core Equity Fund proposes to keep its assets fully invested, but may
maintain reasonable amounts in cash or in high-grade, short-term debt securities
to meet current expenses and anticipated redemptions, and during temporary
periods pending investment in accordance with its policies.
In periods considered by management to warrant a more defensive position, the
Core Equity Fund may place a larger proportion of its portfolio in high-grade
preferred stocks, bonds or other fixed-income securities, including U.S.
Government securities, whether or not convertible into stock or with rights
attached, or retain cash.
The Core Equity Fund may invest in both listed and unlisted securities. The Core
Equity Fund also may invest in foreign as well as domestic securities.
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
EQUITY INDEX FUND
The Equity Index Fund will attempt to replicate the investment results of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500") while
minimizing transactional costs and other expenses. Stocks in the S&P 500 are
ranked in accordance with their statistical weighting from highest to lowest.
The method used to select investments for the Equity Index Fund involves
investing in common stocks in approximately the order of their weighting in the
S&P 500, beginning with those having the highest weighting. The Fund uses the
S&P 500 as the performance standard because it represents over 70 percent of the
total market value of all publicly-traded common stocks in the U.S., is well-
known to investors and, in the opinion of the Sub-Adviser, is representative of
the performance of common stocks publicly-traded in the United States. Many, but
not all, of the stocks in the S&P 500 are issued by companies that are among the
500 largest as measured by the aggregate market value of their outstanding stock
(market price per share multiplied by number of shares outstanding). Inclusion
of a stock in the S&P 500 does not imply that Standard & Poor's Ratings Service,
a division of McGraw-Hill Companies, Inc. ("S&P") has endorsed it as an
investment. With respect to investing in common stocks, there can be no
assurance of capital appreciation and there is a substantial risk of market
decline.
The Equity Index Fund's ability to duplicate the performance of the S&P 500 will
be influenced by the size and timing of cash flows into or out of the Fund, the
liquidity of the securities included in the S&P 500, transaction and operating
expenses and other factors. These factors, among others, may result in "tracking
error," which is a measure of the degree to which the Fund's results differ from
the results of the S&P 500.
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5 Allmerica Investment Trust
<PAGE>
Tracking error is measured by the difference between total return for the S&P
500 with dividends reinvested and total return for the Fund with dividends
reinvested after deductions of transaction and operating expenses. For the 12
months ended December 31, 1999, the S&P 500 gained 21.03% versus a gain of
20.41% for the Equity Index Fund producing a tracking error of 0.62% before
advisory and administrative fees. Tracking error is monitored by the Sub-Adviser
on a regular basis. All tracking error deviations are reviewed to determine the
effectiveness of investment policies and techniques. If the tracking error
deviation exceeds industry standards for the Fund's asset size, the Sub-Adviser
will bring the deviation to the attention of the Trustees.
While the Board of Trustees of the Trust has selected the S&P 500 as the index
the Fund will attempt to replicate, the Trustees reserve the right to select
another index at any time without seeking shareholder approval if they believe
that the S&P 500 no longer represents a broad spectrum of common stocks that are
publicly traded in the United States or if there are legal, economic or other
factors limiting the use of any particular index. If the Trustees change the
index which the Equity Index Fund attempts to replicate, the Equity Index Fund
may incur significant transaction costs in switching from one index to another.
The Equity Index Fund will invest only in those stocks, and in such amounts, as
its investment adviser determines to be necessary or appropriate for the Equity
Index Fund to approximate the S&P 500. As the size of the Equity Index Fund
increases, the Equity Index Fund may purchase a larger number of stocks included
in the S&P 500, and the percentage of its assets invested in most stocks
included in the S&P 500 will approach the percentage that each such stock
represents in the S&P 500. However, there is no minimum or maximum number of
stocks included in the S&P 500 which the Equity Index Fund will hold. Under
normal circumstances, it is expected that the Equity Index Fund will hold
approximately 500 different stocks included in the S&P 500. The Equity Index
Fund may compensate for the omission of a stock that is included in the S&P 500,
or for purchasing stocks in other than the same proportions that they are
represented in the S&P 500, by purchasing stocks which are believed to have
characteristics which correspond to those of the omitted stocks.
The Equity Index Fund may invest in short-term debt securities to maintain
liquidity or pending investment in stocks. Such investments will not be made for
defensive purposes or in anticipation of a general decline in the market price
of stocks in which the Equity Index Fund invests; investors in the Equity Index
Fund bear the risk of general declines in the stock markets. The Equity Index
Fund also may take advantage of tender offers, resulting in higher returns than
are reflected in the performance of the S&P 500. In addition, the Equity Index
Fund may hold warrants, preferred stocks and debt securities, whether or not
convertible into common stock or with rights attached, if acquired as a result
of in-kind dividend distributions, mergers, acquisitions or other corporate
activity involving the common stocks held by the Equity Index Fund. Such
investment transactions and securities holdings may result in positive or
negative tracking error.
The Equity Index Fund may purchase or sell futures contracts on stocks indexes
for hedging purposes and in order to achieve a fully invested position while
maintaining sufficient liquidity to meet possible net redemptions. The
effectiveness of a strategy of investing in stock index futures contracts will
depend upon the continued availability of futures contracts based on the S&P 500
or which tend to move together with stocks included in the S&P 500. The Equity
Index Fund would not enter into futures contacts on stock indexes for
speculative purposes.
The Equity Index Fund may invest up to 25% of its assets in foreign securities
(not including its investments in American Depositary Receipts ("ADRs")). The
Equity Index Fund may invest up to 15% of its net assets in securities which are
illiquid.
Because of its policy of tracking the S&P 500, the Equity Index Fund is not
managed according to traditional methods of active investment management, which
involve the buying and selling of securities based upon investment analysis of
economic, financial and market factors. Consequently, the projected adverse
financial performance of a company normally would not result in the sale of the
company's stock and projected superior financial performance by a company
normally would not lead to an increase in the holdings of the company. From time
to time, the Sub-Adviser may make adjustments in the portfolio because of cash
flows, mergers, changes in the composition of the S&P 500 and other similar
reasons.
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Allmerica Investment Trust 6
<PAGE>
Standard & Poor's Corporation is not in any way affiliated with the Equity Index
Fund or the Trust. "Standard & Poor's," "Standard & Poor's 500," and "500" are
trademarks of Standard & Poor's Corporation.
SELECT GROWTH AND INCOME FUND
To achieve its objective of long-term growth of capital and current income, the
Select Growth and Income Fund will invest primarily in dividend-paying common
stocks and securities convertible into common stocks. These may include
securities of large well-known companies as well as smaller growth companies.
The Fund may hold securities traded on one or more of the national exchanges as
well as in the over-the-counter markets. The Fund may purchase individual stocks
not presently paying dividends which offer opportunities for capital growth or
future income, provided that the Sub-Adviser believes the overall portfolio is
appropriately positioned to achieve its income objective. In certain
circumstances, fixed-income securities may be purchased by the Fund for long-
term growth potential.
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
When the Sub-Adviser determines that market conditions warrant a temporary,
defensive position, the Fund may invest without limitation in high-grade, fixed-
income or U.S. Government securities, or hold assets in cash or cash
equivalents. To the extent the Fund is so invested, it is not achieving its
objective to the same degree as under normal conditions. There can be no
assurance of growth of capital, of course, and because the Fund invests a
substantial portion of its assets in common stocks and other securities which
fluctuate in value, there is substantial risk of market decline.
SELECT STRATEGIC INCOME FUND
Corporate debt securities in which the Fund invests are: (a) assigned a rating
within the six highest grades (Baa/BBB or higher) by either Moody's Investor
Service, Inc. ("Moody's") or S&P, (b) equivalently rated by another nationally
recognized statistical rating organization ("NRSRO") or (c) unrated securities
but determined by the Sub-Adviser to be of comparable quality. Securities rated
in the fourth highest grade (rated Baa and BBB by Moody's and S&P, respectively)
are investment grade but are considered to have some speculative
characteristics. Securities below investment grade (rated Ba and B and BB and B
by Moody's and S&P, respectively), are "junk" bonds. For more information
concerning the rating categories of corporate debt securities and commercial
paper, see the Appendix to the SAI. The types of securities in which the Fund
invests include but are not limited to U.S. dollar obligations of supranational
entities such as the World Bank, European Investment Bank and African
Development Bank. The Fund may also invest in interest-only and principal-only
Treasury securities and in municipal bonds when such bonds are deemed by the
Sub-Adviser to be attractive investments for the portfolio. The Fund serves as
an investment vehicle for variable annuity contracts and variable life insurance
policies. Investments by the Fund in municipal bonds offer no tax benefits in
addition to those already offered to variable annuity contract owners and
variable life insurance policyholders.
Although the Fund does not invest for short-term trading purposes, portfolio
securities may be sold from time to time without regard to the length of time
they have been held. The value of the Fund's portfolio securities generally will
vary inversely with changes in prevailing interest rates, declining as interest
rates rise and increasing as rates decline. The value will also be affected by
other market and economic factors. There is the risk with corporate debt
securities that the issuers may not be able to meet their obligations on
interest and principal payments.
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
Obligations in which the Select Strategic Income Fund may invest include debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Obligations of supranational
entities may be supported by appropriated but unpaid commitments of their member
countries, and there is no assurance that these commitments will be undertaken
or met in the future.
SELECT INVESTMENT GRADE INCOME FUND (formerly the Investment Grade Income Fund)
The debt securities in which the Fund may invest are considered "investment
grade" in that they generally are suitable for purchase by prudent investors.
However, the lowest category of investment grade securities (rated Baa by
Moody's or BBB by S&P) may have speculative characteristics, such that changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case of
debt securities with higher ratings. If the rating of a security falls below
investment grade, or an unrated security is deemed to have fallen below
investment grade, AAM analyzes relevant economic and market data in making a
determination of whether to retain or dispose of the investment. The performance
of the securities in the portfolio is monitored continuously, and they are
purchased and sold as conditions warrant and permit.
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7 Allmerica Investment Trust
<PAGE>
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
Obligations in which the Fund may invest include debt obligations of
supranational entities. Supranational entities include international
organizations designed or supported by governmental entities to promote economic
reconstruction or development and international banking institutions and related
government agencies. Obligations of supranational entities may be supported by
appropriated but unpaid commitments of their member countries, and there is no
assurance that these commitments will be undertaken or met in the future.
GOVERNMENT BOND FUND
The Government Bond Fund will invest in obligations issued or guaranteed by the
U.S. Government, its agencies and instrumentalities, and options and futures
thereon, as described in the Prospectus. Some U.S. Government securities are
backed by the full faith and credit of the United States. Other U.S. Government
securities are supported by (i) the right of the issuer to borrow from the U.S.
Treasury, (ii) discretionary authority of the U.S. Government to purchase the
obligations of the agency or instrumentality, or (iii) only the credit of the
instrumentality itself. No assurances can be given that the U.S. Government
would provide financial support to the U.S. Government sponsored
instrumentalities if it is not obligated to do so by law. The securities in
which the Government Bond Fund may invest include, but are not limited to, U.S.
Treasury bills, notes and bonds and obligations of the following: Banks for
Cooperatives, the Commodity Credit Corporation, the Federal Deposit Insurance
Corporation, Federal Farm Credit Banks, the Federal Financing Bank, Federal
National Mortgage Association, the General Insurance Fund, Government National
Mortgage Association, Government Services Administration (GSA Public Building
Trust Participation Certificates), the Production Credit Association, the
Student Loan Marketing Association, the Tennessee Valley Authority and the U.S.
Postal Service.
The Government Bond Fund may invest in mortgage-backed securities (including
pass-through securities) and participation certificates) of the Government
National Mortgage Association ("Ginnie Mae"), the Federal Home Loan Mortgage
Corporation ("Freddie Mac") and the Federal National Mortgage Association
("Fannie Mae").
Ginnie Mae certificates are mortgage-backed securities representing part
ownership of a pool of mortgage loans. The mortgage loans are issued by lenders
such as mortgage bankers, commercial banks and savings and loan associations,
and are either insured by the Federal Housing Administration or guaranteed by
the Veterans Administration. After approval of the pool by Ginnie Mae,
certificates in the pool are offered to investors by securities dealers. Once
the pool has been approved by Ginnie Mae, the timely payment of interest and
principal on the certificates is guaranteed by the full faith and credit of the
U.S. Government. The certificates are "pass through" securities because a pro
rata share of regular interest and principal payments, as well as unscheduled
early prepayments, on the underlying mortgage pool is passed through monthly to
the Fund.
Freddie Mac, a corporate instrumentality of the U.S. Government created by
Congress to increase the availability of mortgage credit for residential
housing, issues participation certificates representing undivided interests in
Freddie Mac's mortgage portfolio. While Freddie Mac guarantees the timely
payment of interest and ultimate collection of the principal of its
participation certificates, the participation certificates are not backed by the
full faith and credit of the U.S. Government. The "pass-through" characteristics
of Freddie Mac participation certificates are similar to Ginnie Mae
certificates, but Freddie Mac certificates differ from Ginnie Mae certificates
in that Freddie Mac mortgages are primarily conventional residential mortgages
rather than mortgages issued or guaranteed by a federal agency or
instrumentality.
Fannie Mae is a federally chartered corporation owned by private stockholders.
Fannie Mae purchases both conventional and federally insured or guaranteed
residential mortgages form various entities, and packages pools of such
mortgages in the form of pass-through certificates. Fannie Mae guarantees the
timely payment of principal and interest. Fannie Mae is authorized to borrow
from the U.S. Treasury to meet its obligations, but the certificates are not
backed by the full faith and credit of the U.S. Government.
The effective maturity of a mortgage-backed security may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages, which may affect their effective yield. When the Government Bond Fund
receives the monthly "pass-through" payments (which may include unscheduled
prepayments of principal) it may be able to invest the payments only at a lower
rate of interest. During periods of declining interest rates, such securities
_____________________________
Allmerica Investment Trust 8
<PAGE>
therefore may be less effective as a means of "locking in" attractive long-term
interest rates and may have less potential for appreciation than conventional
bonds with comparable stated maturities.
The Fund may enter into repurchase agreements and, from time to time, may have
temporary investments in short-term debt obligations (including certificates of
deposit, bankers acceptances and commercial paper) pending the making of other
investments or for liquidity purposes.
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
Obligations in which the Fund may invest include debt obligations of
supranational entities. Supranational entities include international
organizations designed or supported by governmental entities to promote economic
reconstruction or development and international banking institutions and related
government agencies. Obligations of supranational entities may be supported by
appropriated but unpaid commitments of their member countries, and there is no
assurance that these commitments will be undertaken or met in the future.
U.S. Government securities may be purchased or sold without regard to the length
of time they have been held to attempt to take advantage of short-term
differentials in yields, with the objective of seeking income while conserving
capital. While short-term trading increases portfolio turnover, the Government
Bond Fund incurs little or no brokerage costs for U.S. Government securities.
MONEY MARKET FUND
The Fund may invest in dollar-denominated obligations of foreign branches of
U.S. banks ("Euro dollars") and U.S. branches of foreign banks (if such U.S.
branches are subject to state banking requirements and Federal reserve reporting
requirements) which at the date of the investment have deposits of at least $1
billion as of their most recently published financial statements.
The Money Market Fund will not purchase any security unless (i) the security has
received the highest or second highest quality rating by at least two NRSROs or
by one NRSRO if only one has rated the security, or (ii) the security is unrated
and in the opinion of Allmerica Asset Management, Inc. ("AAM"), as Sub-Adviser
to the Fund, in accordance with guidelines adopted by the Trustees, is of a
quality comparable to one of the two highest ratings of an NRSRO. These
standards must be satisfied at the time an investment is made. If the quality of
the investment later declines, the Fund may continue to hold the investment, but
the Trustees will evaluate whether the security continues to present minimal
credit risks.
INVESTMENT RESTRICTIONS AND POLICIES
The following is a description of certain restrictions on investments of the
Funds (in addition to those described in the Prospectus). The investment
restrictions numbered 1 through 9 are fundamental and may not be changed without
the approval of a majority in interest of the shareholders of that Fund. The
other investment restrictions are not deemed fundamental and may be changed by
the Trustees without shareholder approval. The following investment restrictions
apply to each Fund, except as noted:
1. The Fund will not issue "senior securities" as defined in Section 18(g)
of the Investment Company Act of 1940 ("1940 Act").
2. The Fund will not borrow money, except in accordance with the
provisions of the 1940 Act and for temporary purposes when the aggregate amount
borrowed does not exceed 33% of the value of the Fund's total assets at the time
such borrowing is made. In general, a borrowing shall be regarded as being for
temporary purposes if it is repaid within 60 days and is not extended or
renewed.
3. The Fund will not act as an underwriter except to the extent that, in
connection with the disposition of portfolio securities, it may be deemed to be
an underwriter under certain federal securities laws.
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9 Allmerica Investment Trust
<PAGE>
4. The Fund will not buy or sell real estate or interest in real estate,
although it may purchase and sell (a) securities which are secured by real
estate and (b) securities of companies which invest or deal in real estate.
5. The Fund will not engage in the purchase and sale of physical
commodities or contracts relating to physical commodities.
6. The Fund may make loans to other persons only through repurchase
agreements and securities lending. For purposes of this paragraph, the purchase
of an issue of publicly distributed bonds, debentures, or other debt securities,
whether or not the purchase was made upon the original issue of the securities,
is not to be considered the making of a loan by the Fund.
7. The Fund will not purchase securities on margin but may obtain such
short-term credits as are necessary for clearance transactions, and (except for
the Money Market Fund) may make margin payments in connection with financial
futures (including securities index futures) contracts, and options on such
future contracts and in the case of the Select Capital Appreciation Fund,
futures contracts on foreign currencies and related options. The Fund will not
participate on a joint or joint and several basis in any trading account in
securities or effect a short sale of securities.
*8. No Fund will concentrate its investments in particular industries,
including debt obligations of supranational entities and foreign governments,
but a Fund may invest up to 25% of the value of its total assets in a particular
industry. The restriction does not apply to investments in obligations issued or
guaranteed by the United States of America, its agencies or instrumentalities,
or to investments by the Money Market Fund in securities issued or guaranteed by
domestic branches of U.S. banks.
*9. As to 75% of the value of its total assets (100% for the Money Market
Fund), no Fund will invest more than 5% of the value of its total assets in the
securities of any one issuer (other than securities issued by or guaranteed as
to principal or interest by the United States Government or any agency or
instrumentality thereof) or acquire more than 10% of the voting securities of
any issuer. The remaining 25% of assets (other than for the Money Market Fund)
may be invested in the securities of one or more issuers without regard to such
limitations.
10. The Fund does not intend to invest in companies for the purpose of
exercising control or management.
11. The Fund may invest in the securities of one or more other investment
companies, subject to the provisions of the 1940 Act, as amended, any other
applicable laws or regulations and any applicable exemptive orders issued by the
Securities and Exchange Commission.
12. The Fund intends to purchase securities for investment and not to
purchase and sell them for trading purposes, except that the Select Capital
Appreciation Fund and the Government Bond Fund may engage in short term trading
of U.S. Government securities.
13. The Fund (except the Money Market Fund) may engage in transactions in
financial futures contracts and related options. The Money Market Fund will not
engage in transactions in financial futures or related options.
* These limitations apply as of the time of purchase. If through market
action the percentage limitations are exceeded, the Fund will not be required to
reduce the amount of its holdings in such investments.
INVESTMENT STRATEGIES AND TECHNIQUES
In managing its portfolios of investments, the Trust may make use of the
following investment strategies and techniques:
SECURITIES LENDING
Each Fund may loan its portfolio securities to broker-dealers pursuant to
agreements requiring that the loans be continuously secured by cash, cash
equivalents or securities issued or guaranteed by the United States government
or its agencies, or any combination of cash, cash equivalents and such
securities as collateral equal at all times to at least 102%
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Allmerica Investment Trust 10
<PAGE>
of the market value of the securities loaned. Such loans are not made if, as a
result, the aggregate of all outstanding loans would exceed 33 1/3% of the value
of the Fund's total assets taken at current value. The Fund continues to receive
interest or dividends on the securities loaned, and simultaneously earns
interest on the investment of the loan collateral in U.S. Treasury securities,
certificates of deposit or other high-grade, short-term obligations or interest-
bearing cash equivalents or receives a fee from the borrower. Although voting
rights, or rights to consent, attendant to securities lent pass to the borrower,
such loans may be called at any time and may be called so that the securities
may be voted by the Fund if a material event affecting the investment is to
occur. There may be risks of delay in recovery of the securities or even loss of
rights in the collateral should the borrower of the securities fail financially.
However, loans are made only to firms deemed by the Fund's Sub-Adviser to be of
good standing, and when, in the judgment of the Fund's Sub-Adviser, the
consideration which can be earned currently from such securities loans justifies
the attendant risk.
FOREIGN SECURITIES
Each Fund except the Government Bond Fund may purchase foreign securities. The
Money Market Fund may invest only in U.S. dollar denominated foreign securities.
Accordingly, the relative strength of the U.S. dollar may be an important factor
in the performance of the Fund, depending on the extent of the Fund's foreign
investments. Securities of foreign issuers, particularly non- governmental
issuers, involve risks which are not associated ordinarily with investing in
domestic issuers. These risks include changes in currency exchange rates and
currency exchange control regulations. In addition, investments in foreign
countries could be affected by other factors generally not thought to be present
in the United States, including the unavailability of financial information or
the difficulty of interpreting financial information prepared under foreign
accounting standards, less liquidity and more volatility in foreign markets, the
possibility of expropriation, the possibility of heavy taxation, the impact of
political, social or diplomatic developments, limitations on the removal of
funds or other assets of a Fund, difficulties in evoking legal process abroad
and enforcing contractual obligations, and the difficulty of assessing economic
trends in foreign countries. Some foreign securities exchanges may not be as
developed or efficient as those in the United States and securities traded on
foreign securities exchanges generally are subject to greater price volatility.
There is also the possibility of adverse changes in investment or exchange
control regulations, expropriation or confiscatory taxation and limitations on
the removal of funds or other assets.
Investments in emerging countries involve exposure to economic structures that
are generally less diverse and mature than in the United States, and to
political systems which may be less stable. In addition, securities of issuers
located in emerging countries may have limited marketability and may be subject
to more abrupt or erratic price fluctuations. The risk also exists that an
emergency situation may arise in one or more emerging markets as a result of
which trading of securities may cease or may be substantially curtailed and
prices for a Fund's portfolio securities in such markets may not be readily
available. Many emerging market countries have experienced high rates of
inflation for many years. Inflation and rapid fluctuations in inflation rates
have had and may continue to have negative effects on the economies and
securities markets of certain countries with emerging markets. Emerging markets
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be affected adversely by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed by the countries with which they trade. In
certain markets there have been times when settlements of securities
transactions have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions.
The Funds may buy or sell foreign currencies, options on foreign currencies and
foreign currency futures contracts and options thereon and, in addition, the
Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund and Select Strategic Income Fund may invest in foreign
currency forward contracts. Although such instruments may reduce the risk of
loss due to a decline in the value of the currency that is sold, they also limit
any possible gain which might result should the value of the currency increase.
Such instruments will be used primarily to protect a Fund from adverse currency
movements; however, they also involve the risk that anticipated currency
movements will not be accurately predicted, thus adversely affecting a Fund's
total return. See "Financial Futures Contracts and Related Options" and "Forward
Contracts on Foreign Currencies."
The Funds' investments may include ADRs. For many foreign securities, there are
U.S. dollar-denominated ADRs which are traded in the United States on exchanges
or over the counter. ADRs represent the right to receive securities of foreign
issuers deposited in a domestic bank or a correspondent bank. An ADR may be
sponsored by the issuer of the underlying foreign security, or it may be issued
in unsponsored form. The holder of a sponsored ADR is likely to receive more
frequent and extensive financial disclosure concerning the foreign issuer than
the holder of an unsponsored ADR
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11 Allmerica Investment Trust
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and generally will bear lower transaction charges. Each Fund may invest in both
sponsored and unsponsored ADRs. The Select International Equity Fund and the
Select Capital Appreciation Fund also may utilize European Depositary Receipts,
which are designed for use in European securities markets, and also may invest
in Global Depositary Receipts.
Obligations in which the Select Strategic Income Fund, Select Investment Grade
Income Fund and Government Bond Fund may invest include debt obligations of
supranational entities. Supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. Obligations of supranational entities may be
supported by appropriated but unpaid commitments of their member countries, and
there is no assurance that these commitments will be undertaken or met in the
future. A Fund may not invest more than 25% of its assets in debt obligations of
supranational entities.
Certain state insurance regulations may impose additional restrictions on a
Fund's holdings of foreign securities.
FORWARD COMMITMENTS
The Select Capital Appreciation Fund, Select Strategic Income Fund, Select
Investment Grade Income Fund, Government Bond Fund and Money Market Fund may
enter into contracts to purchase securities for a fixed price at a specified
future date beyond customary settlement time ("forward commitments"). If the
Funds do so, they will maintain cash or other liquid obligations having a value
in an amount at all times sufficient to meet the purchase price. Forward
commitments involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date. Although the Funds generally will enter
into forward commitments with the intention of acquiring securities for their
portfolio, they may dispose of a commitment prior to settlement if their Sub-
Adviser deems it appropriate to do so. The Funds may realize short-term gains or
losses upon the sale of forward commitments. The Sub-Adviser will monitor the
creditworthiness of the parties to such forward commitments.
WHEN-ISSUED SECURITIES
Each Fund from time to time may purchase securities on a "when-issued" basis or
delayed delivery basis. Debt securities and municipal obligations often are
issued on this basis. The yield of such securities is fixed at the time a
commitment to purchase is made, with actual payment and delivery of the security
generally taking place 15 to 45 days later. During the period between purchase
and settlement, typically no payment is made by a Fund and no interest accrues
to the Fund. The market value of when-issued securities may be more or less than
the purchase price payable at settlement date. Purchase of when-issued
securities involves the risk that yields available in the market when delivery
occurs may be higher than those available when the when-issued order is placed
resulting in a decline in the market value of the security. There is also the
risk that under some circumstances the purchase of when-issued securities may
act to leverage the Fund. The Fund will establish a segregated account with the
Custodian in which it will maintain cash or liquid securities at least equal to
commitments for when-issued securities.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements. Under a repurchase agreement, a
Fund may purchase an obligation of or guaranteed by the United States
Government, its agents or instrumentalities, with an agreement that the seller
will repurchase the obligation at an agreed upon price and date. The repurchase
price reflects an agreed-upon interest rate which is unrelated to the coupon
rate on the purchased obligation. Repurchase agreements usually are for short
periods, such as under one week, but may be as long as thirty days. No
repurchase agreement will be effected if, as a result, more than 30% of a Fund's
total assets taken at current value will be invested in repurchase agreements.
No more than 15% (10% for the Money Market Fund) of a Fund's total assets taken
at current value will be invested in repurchase agreements extending for more
than seven days and in other securities which are not readily marketable.
If a seller defaults upon the obligation to repurchase, the Funds may incur a
loss if the value of the purchased obligation (collateral) declines, and may
incur disposition costs in liquidating the collateral. If bankruptcy proceedings
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are commenced with respect to a seller, realization upon the collateral by the
Funds may be delayed or limited.
Prior to entering into a repurchase agreement, the Fund's Sub-Adviser evaluates
the creditworthiness of entities with which the Fund proposes to enter into the
repurchase agreement. The Trustees have established guidelines and standards of
review for the evaluation of creditworthiness by the Funds' Sub- Advisers and
monitor such Sub-Advisers' actions with respect to repurchase transactions.
The Select Capital Appreciation Fund also may enter into reverse repurchase
agreements. In a reverse repurchase agreement, a fund sells a portfolio security
to another party, such as a bank or broker-dealer, in return for cash and agrees
to repurchase the instrument at a particular price and at a future date. Reverse
repurchase agreement transactions can be considered a form of borrowing by the
Fund. Reverse repurchase agreements may be used to provide cash to satisfy
unusually heavy redemption requests or for other temporary or emergency purposes
without the necessity of selling portfolio securities or to earn additional
income on portfolio securities, such as treasury bills and notes. While a
reverse repurchase agreement is outstanding, the Fund will maintain cash and
appropriate liquid assets in a segregated custodial account to cover its
obligation under the reverse repurchase agreement. The Select Capital
Appreciation Fund will enter into reverse repurchase agreements only with
parties that its Sub-Adviser deems creditworthy.
WRITING COVERED OPTIONS
Each Fund other than the Money Market Fund may write call options and put
options on securities which the Fund owns as its Sub-Adviser shall determine to
be appropriate and to the extent permitted by applicable law. A call option
gives the purchaser of the option the right to buy and a writer the obligation
to sell the underlying security at the exercise price at any time prior to the
expiration of the option, regardless of the market price of the security during
the option period. A premium is paid to the writer as the consideration for
undertaking the obligations under the option contract. The writer forgoes the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price except insofar as the premium represents such
a profit.
As the writer of a call option, a Fund receives a premium for undertaking the
obligation to sell the underlying security at a fixed price during the option
period if the option is exercised. So long as the Fund remains obligated as the
writer of a call, it forgoes the opportunity to profit from increases in the
market price of the underlying security above the exercise price of the option,
except insofar as the premium represents such a profit, and retains the risk of
loss should the value of the security decline. The Fund also may enter into
"closing purchase transactions" in order to terminate its obligation as the
writer of a call option prior to the expiration of the option. There is no
assurance that a Fund will be able to effect such transactions at any particular
time or at any acceptable price.
The writer of a put option is obligated to purchase specified securities from
the option holder at a specified price at any time before the expiration date of
the option. The purpose of writing such options is to generate additional income
for the Fund, but the Fund accepts the risk that it will be required to purchase
the underlying securities at a price in excess of the securities' market value
at the time of purchase.
Option transactions may increase a Fund's transaction costs and may increase the
portfolio turnover rate, depending on how many options written by the Fund are
exercised in a particular year.
PURCHASING OPTIONS
Each Fund other than the Money Market Fund may purchase put and call options to
the extent permitted by applicable law. A Fund will not purchase put or call
options if after such purchase more than 5% of its net assets, as measured by
the aggregate of the premiums paid for all such options held by the Fund, would
be so invested. A Fund would also be able to enter into closing sale
transactions in order to realize gains or minimize losses on exchange traded
options purchased by the Fund.
A Fund normally would purchase call options in anticipation of an increase in
the market value of securities. The purchase of a call option entitles the Fund,
in return for the premium paid, to purchase specified securities at a specified
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13 Allmerica Investment Trust
<PAGE>
price during the option period. If the value of such securities exceeded the sum
of the exercise price, the premium paid and transaction costs during the option
period, the Fund would ordinarily realize a gain, if not, the Fund would realize
a loss.
A Fund normally would purchase put options in anticipation of a decline in the
market value of securities in its portfolio ("protective puts") or securities of
the type in which it may invest. The purchase of a put option would entitle the
Fund, in exchange for the premium paid, to sell specified securities at a
specified price during the option period. Gains or losses on the purchase of put
options would tend to be offset by countervailing changes in the value of
underlying portfolio securities. A Fund ordinarily would realize a gain if,
during the option period, the value of the underlying securities decreased below
the exercise price sufficiently to cover the premium and transaction costs;
otherwise, the Fund would realize a loss on the purchase of the put option.
There is no assurance that a liquid secondary market on an options exchange will
exist for a particular option or at a particular time. The hours of trading for
options on options exchanges may not conform to the hours during which the
underlying securities are traded. To the extent that the option markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying securities markets that cannot be
reflected in the option markets. In addition, the purchase of options is a
highly specialized activity which depends in part on the Sub-Adviser's ability
to predict future price fluctuations and the degree of correlation between the
options and securities markets. A Fund pays brokerage commission or spread in
connection with its options transactions as well as for purchases and sales of
the underlying securities.
FINANCIAL FUTURES CONTRACTS AND RELATED OPTIONS
Each Fund (other than the Money Market Fund) may invest in transactions in
financial futures contracts and related options for hedging purposes. In
addition, the Select Emerging Markets Fund, Select Capital Appreciation Fund,
Select International Equity Fund, Select Growth Fund and Select Strategic Income
Fund may utilize futures contracts on foreign currencies and related options.
Through certain hedging activities involving such futures contracts and related
options, it is possible to reduce the effects of fluctuations in interest rates
and the market prices of securities which may be quite volatile. Hedging is a
means of transferring a risk which an investor does not desire to assume during
an uncertain interest rate or securities market environment to another investor
who is willing to assume that risk.
The Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund, Select Growth Fund and Select Strategic Income Fund
may buy and write options on foreign currencies in a manner similar to that in
which futures or forward contracts on foreign currencies will be utilized. For
example, a decline in the U.S. dollar value of a foreign currency in which
portfolio securities are denominated will reduce the U.S. dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund, Select Growth Fund and Select Strategic Income Fund
may buy put options on the foreign currency. If the value of the currency
declines, the Funds will have the right to sell such currency for a fixed amount
in U.S. dollars and will offset, in whole or in part, the adverse effect on its
portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Select Emerging Markets Fund, Select Capital
Appreciation Fund, Select International Equity Fund, Select Growth Fund and
Select Strategic Income Fund may buy call options thereon. The purchase of such
options could offset, at least partially, the effects of the adverse movements
in exchange rates. As in the case of other types of options, however, the
benefit to the Funds from purchases of foreign currency options will be reduced
by the amount of the premium and related transaction costs. In addition, if
currency exchange rates do not move in the direction or to the extent desired,
the Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund, Select Growth Fund and Select Strategic Income Fund
could sustain losses on transactions in foreign currency options that would
require such Funds to forgo a portion or all of the benefits of advantageous
changes in those rates.
The Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund, Select Growth Fund and Select Income Fund also may
write options on foreign currencies. For example, to hedge against a potential
decline in the U.S. dollar value of foreign currency denominated securities due
to adverse fluctuations in
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<PAGE>
exchange rates, the Funds could write a call option on the relevant currency
instead of purchasing a put option. If the expected decline occurs, the option
will most likely not be exercised and the diminution in value of portfolio
securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against a potential
increase in the U.S. dollar cost of securities to be acquired, the Select
Emerging Markets Fund, Select Capital Appreciation Fund, Select International
Equity Fund, Select Growth Fund and Select Strategic Income Fund could write a
put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Funds to hedge the increased
cost up to the amount of the premium. As in the case of other types of options,
however, the writing of a foreign currency option will constitute only a partial
hedge up to the amount of the premium. If exchange rates do not move in the
expected direction, the option may be exercised and the Funds would be required
to buy or sell the underlying currency at a loss which may not be offset by the
amount of the premium. Through the writing of options on foreign currencies, the
Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund, Select Growth Fund and Select Strategic Income Fund
also may lose all or a portion of the benefits which might otherwise have been
obtained from favorable movements in exchange rates.
The Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund, Select Growth Fund and Select Strategic Income Fund
may write covered call options on foreign currencies. A call option written on a
foreign currency by the Funds is "covered" if the Funds own the underlying
foreign currency covered by the call or have an absolute and immediate right to
acquire that foreign currency without additional cash consideration (or for
additional cash consideration held in a segregated account by the Fund's
custodian) upon conversion or exchange of other foreign currency held in their
portfolios. A call option also is covered if the Funds have a call on the same
foreign currency and in the same principal amount as the call written if the
exercise price of the call held (i) is equal to or less than the exercise price
of the call written or (ii) is greater than the exercise price of the call
written, if the difference is maintained by the Funds in cash or other liquid
assets in a segregated account with the Funds' custodian.
The Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund, Select Growth Fund and Select Strategic Income Fund
also may write call options on foreign currencies for cross-hedging purposes
that would not be deemed to be covered. A call option on a foreign currency is
for cross- hedging purposes if it is not covered but is designed to provide a
hedge against a decline due to an adverse change in the exchange rate in the
U.S. dollar value of a security that the Funds own or have the right to acquire
and that is denominated in the currency underlying the option. In such
circumstances, the Select Emerging Markets Fund, Select Capital Appreciation
Fund, Select International Equity Fund, Select Growth Fund and Select Strategic
Income Fund collateralize the option by segregating cash or other liquid assets
in an amount not less than the value of the underlying foreign currency in U.S.
dollars marked-to-market daily. The Select Emerging Markets Fund, Select Capital
Appreciation Fund, Select International Equity Fund, Select Growth Fund and
Select Strategic Income Fund may invest without limitation in foreign currency
options.
GENERAL INFORMATION
A futures contract on a security is a standardized agreement under which each
party is entitled and obligated either to make or to accept delivery, at a
particular time, of securities having a specified face value and rate of return
on foreign currencies. Currently, futures contracts are available on debt and
equity securities and on certain foreign currencies.
Futures contracts are traded on exchanges that are licensed and regulated by the
Commodity Futures Trading Commission ("CFTC"). A futures contract on an
individual security may be deemed to be a commodities contract. A Fund engaging
in a futures transaction initially will be required to deposit and maintain with
its Custodian, in the name of its brokers, an amount of cash or U.S. Treasury
bills equal to a small percentage (generally less than 5%) of the contract
amount to guarantee performance of its obligations. This amount is known as
"initial margin." Margin in a futures transaction is different from margin in a
securities transaction, in that financial futures initial margin does not
involve the borrowing of funds to finance the transactions. Unlike securities
margin, initial margin in a futures transaction is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
fund upon termination of the financial future, assuming all contractual
obligations have been satisfied. As the price of the underlying security
fluctuates, making the position in the financial futures more or less valuable,
subsequent payments called "maintenance margin" or "variation margin" are made
to and from the broker on a daily basis. This process is called "marking to
market."
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15 Allmerica Investment Trust
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The purchase and sale of financial futures is for the purpose of hedging against
changes in securities prices or interest rates. Hedging transaction serve as a
substitute for transactions in the underlying securities and can effectively
reduce investment risk. When prices are expected to rise, a fund, through the
purchase of futures contracts, can attempt to secure better prices than might be
later available in the stock market when it anticipates effecting purchases.
Similarly, when interest rates are expected to increase, a fund can seek to
offset a decline in the value of its debt securities through the sale of futures
contracts.
OPTIONS ON FINANCIAL FUTURES
The Funds other than the Money Market Fund may use options on futures contracts
in connection with hedging strategies. The purchase of put options on futures
contracts is a means of hedging the Fund's portfolio against the risk of
declining prices. The purchase of a call option on a futures contract represents
a means of hedging against a market advance when a Fund is not invested fully.
Depending on the pricing of the option compared with either the futures contract
upon which it is based or upon the price of the underlying securities, the
option may or may not be less risky than ownership of the futures contract or
underlying securities.
The writing of a call option on a futures contract may constitute a partial
hedge against declining prices of the securities or currencies which are
deliverable upon exercise of the futures contract. If the futures price at
expiration is below the exercise price, a Fund will retain the full amount of
the option premium, which provides a partial hedge against any decline that may
have occurred in the Fund's holding of securities or currencies.
The writing of a put option on a futures contract is analogous to the purchase
of a futures contract. If the option is exercised, the net cost to the Fund of
the securities or currencies acquired by it will be reduced by the amount of the
option premium received. If, however, market prices have declined, the Fund's
purchase price upon exercise may be greater than the price at which the
securities or currencies might be purchased in the cash market.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES AND RELATED OPTIONS
A Fund generally will engage in transactions in futures contracts or related
options only as a hedge against changes in the values of securities or
currencies held in a Fund's portfolio or which it intends to purchase, or to a
limited extent to engage in non-hedging strategies. A Fund may not purchase or
sell a futures contract for non-hedging purposes if immediately thereafter the
sum of the amount of margin deposits and amount of variation margins paid from
time to time on the Fund's existing futures and related options positions and
premiums paid for related options would exceed 5% of the market value of the
Fund's total assets. The reasons a Fund may engage in non-hedging strategies
include: to seek to enhance return and to adjust efficiently the Fund's overall
exposure to certain markets. In instances involving the purchase of futures
contracts or call options thereon or the writing of put options thereon by a
Fund, an amount of cash and cash equivalents, equal to the market value of the
futures contracts and related options (less any related margin deposits), will
be deposited in a segregated account with its custodian in the name of the
broker to collateralize the position, and thereby insure that the use of such
futures contracts and options is unleveraged.
In implementing a Fund's overall risk management strategy, it is possible that
its Sub-Adviser will choose not to engage in any futures transactions or that
appropriate futures contracts or related options may not be available. A Fund
will engage in futures transactions only for appropriate hedging, risk
management or non-hedging purposes. A Fund will not enter into any particular
futures transaction unless its Sub-Adviser determines that the particular
transaction demonstrates an appropriate correlation with the Fund's investment
objectives and portfolio securities.
RISK OF TRANSACTIONS IN FUTURES
The sale and purchase of futures contracts is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. There are several risks in
connection with the use of financial futures by a Fund as a hedging device.
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Allmerica Investment Trust 16
<PAGE>
Successful use of financial futures by a Fund is subject to its Sub- Adviser's
ability to predict movements in the direction of interest rates or securities
prices and to assess other factors affecting markets for securities. For
example, a Fund may hedge against the possibility of an increase in interest
rates which would affect adversely the prices of debt securities held in its
portfolio. If prices of the debt securities increase instead, the Fund may lose
part or all of the benefit of the increased value of the hedged debt securities
because it may have offsetting losses in the futures positions. In addition, in
this situation, if the Fund has insufficient cash, it may have to sell
securities to meet the daily maintenance margin requirements. These sales may
be, but will not necessarily be, at increased prices to reflect the rising
market. The Fund may have to sell securities at a time when it may be
disadvantageous to do so.
Another risk arises because of the imperfect correlation between movements in
the price of the financial future and movements in the price of the securities
or currencies which are the subject of the hedge. First of all, the hours of
trading for futures contracts may not conform to the hours during which the
underlying assets are traded. To the extent that the futures markets close
before the markets for the underlying assets, significant price and rate
movements can take place in the underlying asset's market that cannot be
reflected in the futures markets. But even during identical trading hours, the
price of the future may move more than or less than the price of the assets
being hedged. While a hedge will not be fully effective if the price of the
future moves less that the price of the hedged assets, if the price of the
hedged assets has moved in an unfavorable direction, the Fund would be in a
better position than if it had not hedged at all. On the other hand, if the
price of the hedged assets has moved in a favorable direction, this advantage
may be offset partially by the price movement of the futures contract. If the
price of the futures moves more than the price of the asset, the Fund will
experience either a loss or a gain on the futures contract which will not be
completely offset by movements in the prices of the assets which are the subject
of the hedge.
In addition to the possibility that there may be an imperfect correlation at
all, between movements in the futures and the portion of the portfolio being
hedged, the market prices of the futures may be affected by certain other
factors. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures through offsetting
transaction, which could distort the normal relationship between securities or
currencies and futures markets. Secondly, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price or currency
distortions. Due to the possibility of price distortion in the futures market
and because of the imperfect correlation between movements in the prices of
securities or currencies and movements in the prices of futures, a correct
forecast of interest rate trends or market price movements by the Sub-Adviser
still may not result in a successful hedging transaction over a short time
frame.
Positions in futures contracts may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange or board of trade will exist for any
particular contract or at any particular time. Thus, it may not be possible to
close a futures position, and, in the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of maintenance margin.
However, in the event futures have been used to hedge portfolio positions, such
underlying assets will not be sold until the futures can be terminated. In such
circumstances, an increase in the price of the underlying assets, if any, may
offset partially or completely losses on the future.
RISKS OF TRANSACTIONS IN OPTIONS ON FUTURES
There are several special risks relating to options on futures. First, the
ability to establish and close out positions in options is subject to the
maintenance of a liquid secondary market. A Fund will not purchase options on
futures on any exchange or board of trade unless, in the opinion of its Sub-
Adviser, the market for such options is developed sufficiently so that the risks
in connection with options on futures transactions are not greater than the
risks in connection with futures transactions. Compared with the purchase or
sale of futures, the purchase of call or put options on futures involves less
potential risk to the Fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). However, there may be
circumstances when the purchase of a call or put option on futures would result
in a loss to the Fund when the purchase or sale of a future would not, such as
when there is no
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<PAGE>
movement in the price of the underlying securities. The writing of an option on
a futures contract involves risks similar to those risks relating to the sale of
futures contracts, as described above under "Risks of Transactions in Futures."
An option position may be closed out only on an exchange or board of trade which
provides a secondary market for an option of the same series. Although a Fund
generally will purchase only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market
will exist for any particular option or at any particular time. It might not be
possible to effect closing transactions in particular options, with the result
that the Fund would have to exercise its options in order to realize any profit
and would incur transaction costs upon the sale of financial futures pursuant to
the exercise of put options.
Because of the risks and the transaction costs associated with hedging
activities, there can be no assurance that a Fund's portfolio will perform as
well as or better than a comparable fund that does not invest in futures
contracts or related options.
FORWARD CONTRACTS ON FOREIGN CURRENCIES
A forward contract is an agreement between two parties in which one party is
obligated to deliver a stated amount of a stated asset at a specified time in
the future and the other party is obligated to pay a specified invoice amount
for the assets at the time of delivery. The Select Emerging Markets Fund, Select
Capital Appreciation Fund, Select International Equity Fund, Select Growth Fund
and Select Strategic Income Fund may enter into forward contracts to purchase
and sell government securities, foreign currencies or other financial
instruments. Forward contracts generally are traded in an interbank market
conducted directly between traders (usually large commercial banks) and their
customers. Unlike futures contracts which are standardized contracts, forward
contracts can be drawn specifically to meet the needs of the parties that enter
into them. The parties to a forward contract may agree to offset or terminate
the contract before its maturity, or may hold the contract to maturity and
complete the contemplated exchange. The following discussion summarizes the
Select Emerging Markets Fund's, Select Capital Appreciation Fund's, Select
International Equity Fund's, Select Growth Fund's and Select Strategic Income
Fund's principal uses of forward currency exchange contracts ("forward currency
contracts"). The Funds may enter into a forward currency contract with the
stated contract value of up to the value of the Funds' assets. A forward
currency contract is an obligation to buy or sell an amount of a specified
currency for an agreed price (which may be in U.S. dollars or a foreign
currency). The Select Emerging Markets Fund, Select Capital Appreciation Fund,
Select International Equity Fund, Select Growth Fund and Select Strategic Income
Fund will exchange foreign currencies for U.S. dollars and for other foreign
currencies in the normal course of business and may buy and sell currencies
through forward currency contracts in order to fix a price for securities they
have agreed to buy or sell ("transaction hedge"). The Select Emerging Markets
Fund, Select Capital Appreciation Fund, Select International Equity Fund, Select
Growth Fund and Select Strategic Income Fund also may hedge some or all of their
investments denominated in foreign currency against a decline in the value of
that currency relative to the U.S. dollar by entering into forward currency
contracts to sell an amount of that currency (or a proxy currency whose
performance is expected to replicate or exceed the performance of that currency
relative to the U.S. dollar) approximating the value of some or all of their
portfolio securities denominated in that currency ("position hedge") or by
participating in options or futures contracts with respect to the currency. The
Funds also may enter into a forward currency contract with respect to a currency
where the Funds are considering the purchase or sale of investments denominated
in that currency but have not yet selected the specific investments
("anticipatory hedge").
In any of these circumstances, the Select Emerging Markets Fund, Select Capital
Appreciation Fund, Select International Equity Fund, Select Growth Fund and
Select Strategic Income Fund may enter alternatively into a forward currency
contract to purchase or sell one foreign currency for a second currency that is
expected to perform more favorably relative to the U.S. dollar if their Sub-
Advisers believe there is a reasonable degree of correlation between movements
in the two currencies ("cross-hedge").
These types of hedges minimize the effect of currency appreciation as well as
depreciation, but do not eliminate fluctuations in the underlying U.S. dollar
equivalent value of the proceeds of or rates of return on such Funds' foreign
currency denominated portfolio securities. The matching of the increase in value
of a forward contract and the decline in the U.S. dollar equivalent value of the
foreign currency denominated asset that is the subject of the hedge generally
will not be precise. Shifting the Funds' currency exposure from one foreign
currency to another removes the Funds' opportunity to profit from increases in
the value of the original currency and involves a risk of increased losses to
the Funds if their Sub-Advisers' projections of future exchange
____________________________
Allmerica Investment Trust 18
<PAGE>
rates is inaccurate. Proxy hedges and cross-hedges may result in losses if the
currency used to hedge does not perform similarly to the currency in which
hedged securities are denominated. Unforeseen changes in currency prices may
result in poorer overall performance for the Select Emerging Markets Fund,
Select Capital Appreciation Fund, Select International Equity Fund, Select
Growth Fund and Select Strategic Income Fund than if they had not entered into
such contracts.
The Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund, Select Growth Fund and Select Strategic Income Fund
will cover outstanding forward currency contracts by maintaining liquid
portfolio securities denominated in or whose value is tied to the currency
underlying the forward contract or the currency being hedged. To the extent that
the Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund, Select Growth Fund and Select Strategic Income Fund
are not able to cover their forward currency positions with underlying portfolio
securities, the Funds' custodian will segregate cash or liquid assets having a
value equal to the aggregate amount of its commitments under forward contracts
entered into with respect to position hedges, cross-hedges and anticipatory
hedges. If the value of the securities used to cover a position or the value of
segregated assets declines, the Select Emerging Markets Fund, Select Capital
Appreciation Fund, Select International Equity Fund, Select Growth Fund and
Select Strategic Income Fund will find alternative cover or segregate additional
cash or liquid assets on a daily basis so that the value of the covered
segregated assets will be equal to the amount of the Funds' commitments with
respect to such contracts. As an alternative to segregating assets, the Select
Emerging Markets Fund, Select Capital Appreciation Fund, Select International
Equity Fund, Select Growth Fund and Select Strategic Income Fund may buy call
options permitting it to buy the amount of foreign currency being hedged by a
forward sale contract or the Funds may buy put options permitting them to sell
the amount of foreign currency subject to a forward buy contract.
While forward contracts currently are not regulated by the CFTC, the CFTC may in
the future assert authority to regulate forward contracts. In such event, the
Select Emerging Markets Fund's, Select Capital Appreciation Fund's, Select
International Equity Fund's, Select Growth Fund's and Select Strategic Income
Fund's ability to utilize forward contracts may be restricted. In addition, the
Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund, Select Growth Fund and Select Strategic Income Fund
may not always be able to enter into forward contracts at attractive prices and
may be limited in their ability to use these contracts to hedge portfolio
assets.
SWAP AND SWAP-RELATED PRODUCTS
The Select Capital Appreciation Fund may enter into interest rate swaps, caps,
and floors on either an asset-based or liability-based basis, depending upon
whether it is hedging its assets or its liabilities, and will usually enter into
interest rate swaps on a net basis (i.e., the two payment streams are netted out
with the Fund receiving or paying, as the case may be, only the net amount of
the two payments). Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest; for
example, an exchange of floating rate payments for fixed rate payments with
respect to a notional amount of principal. A currency swap is an agreement to
exchange cash flows on a notional amount of two or more currencies based on the
relative value differential among them. An index swap is an agreement to swap
cash flows on a notional amount based on changes in the values of the reference
indices. The purchase of a cap entitles the purchaser to receive payments on a
notional principal amount from the party selling such cap to the extent that a
specified index exceeds a predetermined interest rate or amount. The purchase of
a floor entitles the purchaser to receive payments on a notional principal
amount from the party selling such floor to the extent that a specified index
falls below a predetermined interest rate or amount.
The net amount of the excess, if any, of the Fund's obligations over its
entitlement with respect to each interest rate swap will be calculated on a
daily basis and an amount of cash or other liquid assets having an aggregate net
asset value at least equal to the accrued excess will be maintained in a
segregated account by the Fund's custodian. If the Fund enters into an interest
rate swap on other than a net basis, it will maintain a segregated account in
the full amount accrued on a daily basis of its obligations with respect to the
swap. The Fund will not enter into any interest rate swap, cap or floor
transaction unless the unsecured senior debt or the claims-paying ability of the
other party thereto is rated in one of the three highest rating categories of at
least one nationally recognized statistical rating organization at the time of
entering into such transaction. The Sub-Adviser will monitor the
creditworthiness of all counterparties on an ongoing basis. If there is a
default by the other party to such a transaction, the Fund will have contractual
remedies pursuant to the agreement related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps and floors are more recent innovations for which
standardized documentation has not yet
_____________________________
19 Allmerica Investment Trust
<PAGE>
been developed and, accordingly, they are less liquid than swaps. To the extent
the Fund sells (i.e., writes) caps and floors, it will segregate cash or high-
grade liquid assets having an aggregate net asset value at least equal to the
full amount on a daily basis of its obligations with respect to any caps or
floors.
There is no limit on the amount of interest rate swap transactions that may be
entered into by the Fund. These transactions may in some instances involve the
delivery of securities or other underlying assets to the Fund or its
counterparty to collateralize obligations under the swap. Under the
documentation currently used in those markets, the risk of loss with respect to
interest rates swaps is limited to the net amount of the payments that the Fund
is obligated contractually to make. If the other party to an interest rate swap
that is not collateralized defaults, the Fund would risk the loss of the net
amount of the payments that it contractually is entitled to receive. The Fund
may buy and sell (i.e., write) caps and floors without limitation, subject to
the segregation requirement described above.
ADDITIONAL RISKS OF OPTIONS ON FOREIGN CURRENCIES, FORWARD CONTRACTS AND FOREIGN
INSTRUMENTS
Unlike transactions entered into by the Funds in futures contracts, options on
foreign currencies and forward contracts are not traded on contract markets
regulated by the CFTC or (with the exception of certain foreign currency
options) by the SEC. To the contrary, such instruments are traded through
financial institutions acting as market-makers, although foreign currency
options also are traded on certain exchanges, such as the Philadelphia Stock
Exchange and the Chicago Board Options Exchange, subject to SEC regulation.
Similarly, options on currencies may be traded over-the-counter. In an over-the-
counter trading environment, many of the protections afforded to exchange
participants will not be available. For example, there are no daily price
fluctuation limits, and adverse market movements therefore could continue to an
unlimited extent over a period of time. Although the buyer of an option cannot
lose more than the amount of the premium plus related transaction costs, this
entire amount could be lost. Moreover, an option writer and a buyer or seller of
futures or forward contracts could lose amounts substantially in excess of any
premium received or initial margin or collateral posted due to the potential
additional margin and collateral requirements associated with such positions.
Options on foreign currencies traded on exchanges are within the jurisdiction of
the SEC, as other securities traded on such exchanges. As a result, many of the
protections provided to traders on organized exchanges will be available with
respect to such transactions. In particular, all foreign currency option
positions entered into on an exchange are cleared and guaranteed by the Office
of the Comptroller of the Currency ("OCC"), thereby reducing the risk of
counterparty default. Further, a liquid secondary market in options traded on an
exchange may be more readily available than in the over-the-counter market,
potentially permitting a Fund to liquidate open positions at a profit prior to
exercise or expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign currency options, however, is
subject to the risks of the availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively through the OCC
which has established banking relationships in applicable foreign countries for
this purpose. As a result, the OCC, if it determines that foreign government
restrictions or taxes would prevent the orderly settlement of foreign currency
option exercises or would result in undue burdens on the OCC or its clearing
member, may impose special procedures on exercise and settlement, such as
technical changes in the mechanics of delivery, the fixing of dollar settlement
prices or prohibitions on exercise.
In addition, options on U.S. Government securities, futures contracts, options
on futures contracts, forward contracts and options on foreign currencies may be
traded on foreign exchanges and over-the-counter in foreign countries. Such
transactions are subject to the risk of governmental actions affecting trading
in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in a Fund's
ability to act upon economic events occurring in foreign markets during non-
business hours in the United States, (iv) the imposition of different exercise
and settlement terms and procedures and margin requirements from those in the
United States and (v) low trading volume.
___________________________
Allmerica Investment Trust 20
<PAGE>
RESTRICTED SECURITIES
Each Fund may invest up to 15% (10% for the Money Market Fund) of its net assets
in restricted securities (and securities deemed to be illiquid) unless the Board
of Trustees determines that such restricted securities are liquid. The Board of
Trustees has adopted guidelines and delegated to Allmerica Financial Investment
Management Services, Inc. (the "Manager" or "AFIMS") the daily function of
determining and monitoring liquidity of restricted securities. The Board,
however, will retain sufficient oversight and be responsible ultimately for the
determinations. Since it is not possible to predict with assurance exactly how
this market for restricted securities sold and offered under Rule 144A will
develop, the Board will monitor carefully a Fund's investments in securities,
focusing on such important factors, among others, as valuation, liquidity and
availability of information. Because market quotations are less readily
available, judgment at times may play a greater role in valuing these securities
than in the case of unrestricted securities.
INVESTMENTS IN MONEY MARKET SECURITIES
Each Fund may hold at least a portion of its assets in cash equivalents or money
market instruments. There is always the risk that the issuer of a money market
instrument may be unable to make payment upon maturity.
The Money Market Fund may hold uninvested cash reserves pending investment
during temporary, defensive periods or if, in the opinion of the Sub-Adviser,
suitable securities are not available for investment. Securities in which the
Money Market Fund may invest may not earn as high a level of current income as
long-term, lower quality securities which, however, generally have less
liquidity, greater market risk and more fluctuation in market value.
HIGH YIELD SECURITIES
Corporate debt securities purchased by the Select Emerging Markets Fund, Select
Capital Appreciation Fund, Select Growth Fund, Select Growth and Income Fund and
Select Strategic Income Fund will be rated at the time of purchase B or better
by Moody's or S&P, or equivalently rated by another NRSRO, or unrated but
believed by the Sub-Adviser to be of comparable quality under the guidelines
established for the Funds. The Select Growth Fund and the Select Growth and
Income Fund may not invest more than 15% of their assets, the Select Strategic
Income Fund and the Select Capital Appreciation Fund may not invest more than
25% of their assets and the Select Emerging Markets Fund may not invest more
than 35% of its assets at the time of investment in securities rated below Baa
by Moody's or BBB by S&P, or equivalently rated by another NRSRO, or unrated but
believed by the Sub-Adviser to be of comparable quality. Securities rated B by
Moody's or S&P (or equivalently by another NRSRO) are below investment grade and
are considered, on balance, to be predominantly speculative with respect to
capacity to pay interest and repay principal and will generally involve more
credit risk than securities in the higher rating categories.
Periods of economic uncertainty and changes can be expected to result in
increased volatility of market prices of lower-rated securities, commonly known
as "high yield" securities or "junk bonds," and of the asset value of the Select
Emerging Markets Fund, Select Capital Appreciation Fund, Select Growth Fund,
Select Growth and Income Fund and Select Strategic Income Fund. Many issuers of
high yield corporate debt securities are leveraged substantially at times, which
may impair their ability to meet debt service obligations. Also, during an
economic downturn or substantial period of rising interest rates, highly
leveraged issuers may experience financial stress.
The lack of a liquid secondary market in certain lower-rated securities may have
an adverse impact on their market price and the ability of a Fund to dispose of
particular issues when necessary to meet its liquidity needs or in response to a
specific economic event such as a deterioration in the credit- worthiness of the
issuer. In addition, a less liquid market may interfere with the ability of a
Fund to value accurately high yield securities and, consequently, value a Fund's
assets. Furthermore, adverse publicity and investor perceptions may decrease
the value and liquidity of high yield securities. It is reasonable to expect any
recession to disrupt severely the market for high yield fixed-income securities,
have an adverse impact on the value of such securities and adversely affect the
ability of the issuers of such securities to repay principal and pay interest
thereon. The market prices of lower-rated securities are generally less
sensitive to interest rate changes than higher-rated investments, but more
sensitive to adverse economic or political changes or individual developments
specific to the issuer. Periods of economic or political uncertainty and change
can be expected to result in volatility of prices of these securities.
___________________________
21 Allmerica Investment Trust
<PAGE>
The Funds also may invest in unrated debt securities of foreign and domestic
issuers. Unrated debt, while not necessarily of lower quality than rated
securities, may not have as broad a market. Sovereign debt of foreign
governments generally is rated by country. Because these ratings do not take
into account individual factors relevant to each issue and may not be updated
regularly, the Sub-Adviser may treat such securities as unrated debt. Unrated
debt securities and securities with different ratings from more than one agency
will be included in the 15%, 25% and 35% limits of the Funds as stated above,
unless such Fund's Sub-Adviser deems such securities to be the equivalent of
investment grade securities.
ASSET-BACKED SECURITIES
The Core Equity Fund, Select Growth and Income Fund, Select Strategic Income
Fund, Select Investment Grade Income Fund, Government Bond Fund and Money Market
Fund may purchase asset-backed securities, which represent a participation in,
or are secured by and payable from, a stream of payments generated by particular
assets, frequently a pool of assets similar to one another. Assets generating
such payments include instruments such as motor vehicle installment purchase
obligations, credit card receivables and home equity loans. Payment of principal
and interest may be guaranteed for certain amounts and time periods by a letter
of credit issued by a financial institution unaffiliated with the issuer of the
securities. The estimated life of an asset-backed security varies with the
prepayment experience of the underlying debt instruments. The rate of such
prepayments, and hence the life of the asset-backed security, will be primarily
a function of current market rates, although other economic and demographic
factors will be involved. Under certain interest rate and prepayment rate
scenarios, the Funds may fail to recoup fully their investment in asset-backed
securities. A Fund will not invest more than 20% of its total assets in asset-
backed securities.
MORTGAGE-BACKED SECURITIES
The Select Strategic Income Fund, Select Investment Grade Income Fund and
Government Bond Fund may invest in mortgage-backed securities which are debt
obligations secured by real estate loans and pools of loans on single family
homes, multi-family homes, mobile homes and, in some cases, commercial
properties. The Funds may acquire securities representing an interest in a pool
of mortgage loans that are issued or guaranteed by a U.S. government agency such
as Ginnie Mae, Fannie Mae and Freddie Mac.
Mortgage-backed securities are in most cases "pass-through" instruments through
which the holder receives a share of all interest and principal payments from
the mortgages underlying the certificate. Because the prepayment characteristics
of the underlying mortgages vary, it is not possible to predict accurately the
average life or realized yields of a particular issue of pass- through
certificates. During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities can be expected to accelerate.
When the mortgage obligations are prepaid, the Funds reinvest the prepaid
amounts in securities, the yield of which reflects interest rates prevailing at
the time. Moreover, prepayment of mortgages that underlie securities purchased
at a premium could result in losses.
The Funds also may invest in multiple class securities issued by U.S. government
agencies and instrumentalities such as Fannie Mae, Freddie Mac and Ginnie Mae,
including guaranteed collateralized mortgage obligations ("CMOs") and Real
Estate Mortgage Investment Conduit ("REMIC") pass-through or participation
certificates, when consistent with the Funds' investment objective, policies and
limitations. A CMO is a type of bond secured by an underlying pool of mortgages
or mortgage pass-through certificates that are structured to direct payment on
underlying collateral to different series or classes of obligations. A REMIC is
a CMO that qualifies for special tax treatment under the Internal Revenue Code
and invests in certain mortgages principally secured by interests in real
property and other permitted investments.
CMOs and guaranteed REMIC pass-through certificates ("REMIC Certificates")
issued by Fannie Mae, Freddie Mac and Ginnie Mae are types of multiple pass-
through securities. Investors may purchase beneficial interests in REMICs, which
are known as "regular" interests or "residual" interests. The Funds currently do
not intend to purchase residual interests in REMICs. The REMIC Certificates
represent beneficial ownership interests in a REMIC trust, generally consisting
of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae guaranteed mortgage
pass-through certificates. The obligations of Fannie Mae or Freddie Mac under
their respective guaranty of the REMIC Certificates are obligations solely of
Fannie Mae or Freddie Mac, respectively.
___________________________
Allmerica Investment Trust 22
<PAGE>
Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. In addition, Fannie Mae
will be obligated to distribute the principal balance of each class of REMIC
Certificates in full, whether or not sufficient funds are available otherwise.
For Freddie Mac REMIC Certificates, Freddie Mac guarantees the timely payment of
interest and also guarantees the payment of principal as payments are required
to be made on the underlying mortgage participation certificates ("PCs"). PCs
represent undivided interests in specified residential mortgages or
participations therein purchased by Freddie Mac and placed in a PC pool. With
respect to principal payments on PCs, Freddie Mac generally guarantees ultimate
collection of all principal of the related mortgage loans without offset or
deduction. Freddie Mac also guarantees timely payment of principal on certain
PCs referred to as "Gold PCs."
Ginnie Mae REMIC Certificates guarantee the full and timely payment of interest
and principal on each class of securities (in accordance with the terms of those
classes). This Ginnie Mae guarantee is backed by the full faith and credit of
the United States.
REMIC Certificates issued by Fannie Mae, Freddie Mac and Ginnie Mae are treated
as U.S. government securities for purposes of investment policies. There can be
no assurance that the U.S. Government will continue to provide financial support
to Fannie Mae, Freddie Mac or Ginnie Mae in the future.
STRIPPED MORTGAGE-BACKED SECURITIES
The Select Strategic Income Fund, Select Investment Grade Income Fund and
Government Bond Fund may invest in stripped mortgage-backed securities ("SMBS").
SMBS are derivative multiclass mortgage securities. SMBS may be issued by
agencies or instrumentalities of the U.S. Government or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose entities
of the foregoing.
SMBS usually are structured with two classes that receive different proportions
of the interest and principal distributions on a pool of mortgage assets. One
type of SMBS will have one class receiving some of the interest and most of the
principal from the mortgage assets, while the other class will receive most of
the interest and the remainder of the principal. In some cases, one class will
receive all of the interest (the interest-only or "IO" class) while the other
class will receive all of the principal (the principal-only or "PO" class). The
yield to maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayment on the related underlying mortgage assets), and a
rapid rate of principal payments may have a material, adverse effect on a
portfolio yield to maturity from these securities. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, the Funds
may fail to recoup fully their initial investment in these securities even if
the security is in one of the highest rating categories. Certain SMBS may be
deemed "illiquid" and subject to the Funds' limitations on investment in
illiquid securities. The market value of the PO class generally is unusually
volatile in response to changes in interest rates. The yields on a class of SMBS
that receives all or most of the interest from mortgage assets generally are
higher than prevailing market yields in other mortgage-backed securities because
their cash flow patterns are more volatile and there is a greater risk that the
initial investment will not be recouped fully. The Sub- Adviser will seek to
manage these risks (and potential benefits) by investing in a variety of such
securities and by using certain hedging techniques.
_____________________________
23 Allmerica Investment Trust
<PAGE>
INTEREST-ONLY AND PRINCIPAL-ONLY TREASURY SECURITIES
The Select Strategic Income Fund and Government Bond Fund may invest in
separately-traded principal and interest components of U.S. Treasury securities.
Treasury securities are high-quality securities issued or guaranteed by the U.S.
Government and backed by the full faith and credit of the U.S. Treasury.
Treasury securities include Treasury bills, notes and bonds, which may differ
only in their interest rates, maturities and times of issuance. The yield to
maturity on an interest-only Treasury security is extremely sensitive to the
rate of principal payments, and a rapid rate of principal payments may have a
material, adverse effect on the portfolio's yield to maturity from these
securities. The market value of principal-only Treasury securities is unusually
volatile in response to changes in interest rates.
MUNICIPAL SECURITIES
The Select Strategic Income Fund may invest in municipal bonds. Municipal
securities are debt obligations issued by or on behalf of states, cities,
municipalities and other public authorities. The two principal classifications
of municipal securities are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of a
facility being financed. Revenue securities may include private activity bonds.
Such bonds may be issued by or on behalf of public authorities to finance
various privately operated facilities and are not payable from the unrestricted
revenues of the issuer. As a result, the credit quality of private activity
bonds is frequently related directly to the credit standing of private
corporations or other entities. In addition, the interest on private activity
bonds issued after August 7, 1986 is subject to the federal alternative minimum
tax.
Municipal securities can be significantly affected by political changes as well
as uncertainties in the municipal market related to taxation, legislative
changes, or the rights of municipal security holders. Because many municipal
securities are issued to finance similar projects, especially those relating to
education, health care, transportation and utilities, conditions in those
sectors can affect the overall municipal market. In addition, changes in the
financial condition of an individual municipal issuer can affect the overall
municipal market.
HEDGING TECHNIQUES AND INVESTMENT PRACTICES
The Select Emerging Markets Fund, Select Capital Appreciation Fund and Select
International Equity Fund may employ certain strategies in order to manage
exchange rate risks. For example, the Funds may hedge some or all of their
investments denominated in a foreign currency against a decline in the value of
that currency. The Funds may enter into contracts to sell that foreign currency
for U.S. dollars (not exceeding the value of a Fund's assets denominated in or
exposed to that currency) or by participating in options on futures contracts
with respect to such currency ("position hedge"). The Funds also could hedge
that position by selling a second currency that is expected to perform similarly
to the currency in which portfolio investments are denominated for U.S. dollars
("proxy hedge"). The Funds also may enter into a forward contract to sell the
currency in which the security is denominated for a second currency that is
expected to perform better relative to the U.S. dollar if their Sub-Adviser
believes there is a reasonable degree of correlation between movements in the
two currencies ("cross-hedge"). As an operational policy, the Funds will not
commit more than 10% of their assets to the consummation of cross-hedge
contracts and either will cover currency hedging transactions with liquid
portfolio securities denominated in or whose value is tied to the applicable
currency or segregate liquid assets in the amount of such commitments. In
addition, when the Funds anticipate repurchasing securities denominated in a
particular currency, the Funds may enter into a forward contract to purchase
such currency in exchange for the dollar or another currency ("anticipatory
hedge").
These strategies minimize the effect of currency appreciation as well as
depreciation, but do not protect against a decline in the underlying value of
the hedged security. In addition, such strategies may reduce or eliminate the
opportunity to profit from increases in the value of the original currency and
may have an adverse impact on a Fund's performance if its Sub-Adviser's
projection of future exchange rates is inaccurate.
STAND-BY COMMITMENTS
The Select Strategic Income Fund, Select Investment Grade Income Fund,
Government Bond Fund and Money Market Fund may enter into Stand-by Commitments.
Under a stand-by commitment, a dealer agrees to purchase from the Fund, at the
Fund's option, specified securities at a specified price. Stand-by commitments
are exercisable by the Fund at any time before the maturity of the underlying
security, and may be sold, transferred or assigned by the Fund only with respect
to the underlying instruments.
Although stand-by commitments are often available without the payment of any
direct or indirect consideration, if necessary or advisable, the Fund may pay
for a stand-by commitment either separately in cash or by paying a higher price
for securities which are
acquired subject to the commitment.
Where the Fund pays any consideration directly or indirectly for a stand-by
commitment, its cost will be reflected as unrealized depreciation for the period
during which the commitment is held by the Fund.
The Fund will enter into stand-by commitments only with banks and broker-
dealers which present minimal credit risks. In evaluating the creditworthiness
of the issuer of a stand-by commitment, the Sub-Adviser will review periodically
the issuer's assets, liabilities, contingent claims and other relevant financial
information.
The Fund will acquire stand-by commitments solely to facilitate liquidity and
does not intend to exercise its rights thereunder for trading purposes. Stand-by
commitments will be valued at zero in determining the Fund's net asset value.
PORTFOLIO TURNOVER
The portfolio turnover rate for a Fund is calculated by dividing the lesser of
purchases or sales of portfolio securities by the Fund for a given year by the
monthly average of the value of the Fund's portfolios securities for that year.
____________________________
Allmerica Investment Trust 24
<PAGE>
A higher portfolio turnover rate may involve corresponding greater brokerage
commissions and other transaction costs, which would be borne directly by the
Fund, as well as additional realized gains and/or losses to shareholders.
Following are explanations of any significant variations in the Funds' portfolio
turnover rates over the two most recently completed fiscal years or any
anticipated variation in the portfolio turnover rate.
<TABLE>
<CAPTION>
FUND DECEMBER 31, 1998 DECEMBER 31, 1999
- ---- ------------------ ------------------
<S> <C> <C>
Select Emerging Markets Fund 62%** 60%
Select Aggressive Growth Fund 99% 101%
Select Capital Appreciation Fund* 141% 61%
Select Value Opportunity Fund 73% 98%
Select International Equity Fund 27% 18%
Select Growth Fund 86% 84%
Select Strategic Growth Fund 24%** 58%
Core Equity Fund (formerly the Growth Fund) 100% 116%
Equity Index Fund 6% 21%
Select Growth and Income Fund 112% 131%
Select Investment Grade Income Fund*** 158% 75%
(formerly the Investment Grade Income Fund)
Government Bond Fund 61% 37%
Money Market Fund N/A N/A
</TABLE>
* The portfolio turnover rate was greater in fiscal year 1998 due to a change
in the Fund's Sub-Adviser.
** Not annualized
*** The portfolio turnover rate was greater in fiscal year 1998 due to the
larger number of mortgage rolls held by the Fund during that period.
MANAGEMENT OF THE TRUST
The Trust is managed by a Board of Trustees. The Trustees have overall
responsibility for implementation of the investment policies and operations of
the Funds of the Trust. The Board of Trustees of the Trust holds regular
quarterly meetings and at other times on an as needed basis. The affairs of the
Trust are conducted in accordance with the Bylaws adopted by the Trustees and
the applicable laws of the Commonwealth of Massachusetts, the state in which the
Trust is organized.
<TABLE>
<CAPTION>
POSITIONS HELD PRESENT POSITION AND PRINCIPAL
NAME, ADDRESS AND AGE WITH THE TRUST/(1)/ OCCUPATIONS DURING THE PAST 5 YEARS
- --------------------- ------------------- -----------------------------------
<S> <C> <C>
P. Kevin Condron (54) Trustee President and Chief Executive Officer,
The Granite Group The Granite Group (plumbing supplies), 1998
12 E. Worcester Street - present; President, Central Supply Co., 1983 -
Worcester, Massachusetts 1997; Director, Peoples Heritage Financial Group;
Director, Family Bank
**Cynthia A. Hargadon (45) Trustee Director of Investments, National Automobile
1880 Virginia Avenue Dealers Association (retirement trust), 1999 -
McLean, Virginia present; President, Stable Value Investment Association (investment
trade group), 1996 - 1998; Senior Vice President and Chief
Investment Officer, ICMA Retirement Corporation
(investment adviser), 1987 - 1996
Gordon Holmes (62)(2) Trustee Lecturer at Bentley College, 1998 - present;
75 Clarendon Street Lecturer and Executive in Residence, Boston
Boston, Massachusetts University, 1997 - present; Certified Public
Accountant; Retired Partner, Tofias, Fleishman,
Shapiro & Co., P.C. (Accountants) 1976-1996
**John P. Kavanaugh (45)* Trustee and President, Allmerica Asset Management,
440 Lincoln Street Vice President, Inc. since 1995; Vice President, Director, Chief
Worcester, Massachusetts Investment Officer, First Allmerica and
Allmerica Financial Life Insurance and Annuity
Company ("Allmerica Financial Life")
**Bruce E. Langton (68) Trustee Trustee, Bankers Trust institutional mutual funds;
99 Jordan Lane Director, TWA Pilots Trust Annuity Plan; Member,
Stamford, Connecticut Investment Committee, Unilever United States
-Pension & Thrift plans
</TABLE>
____________________________
25 Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRESENT POSITION AND PRINCIPAL
NAME, ADDRESS AND AGE WITH THE TRUST/(1)/ OCCUPATIONS DURING THE PAST 5 YEARS
- --------------------- ------------------- -----------------------------------
<S> <C> <C>
John F. O'Brien (57)* Trustee and President, Chief Executive Officer and Director, First
440 Lincoln Street Chairman of the Board, Allmerica; Director and Chairman of the Board,
Allmerica Financial Life; Director, Allmerica
Investments, Inc.; Director, ABIOMED, Inc.
(medical devices); Director, Cabot Corporation
(special chemicals), Director, TJX Corporation,
Inc. (retail)
Attiat F. Ott (64) Trustee Professor of Economics and Director of the
262 Salisbury Street Institute for Economic Studies, Clark University
Worcester, Massachusetts
**Paul D. Paganucci (69) Trustee Director and Chairman, Ledyard National Bank,
33 Rope Ferry Road since 1991; Director, Filene's Basement, Inc. (retailing)
Hanover, New Hampshire Director, Urstadt Biddle Properties, Inc. (real estate
investment firm); Director, IGI, Inc. (pharmaceuticals).
**Richard M. Reilly (61)* Trustee President, Allmerica Financial Life since
440 Lincoln Street and President 1995; Vice President, First Allmerica; President,
Worcester, Massachusetts AFIMS; Director, Allmerica Investments, Inc.
**Ranne P. Warner (55) Trustee President, Centros Properties, USA (real estate);
Centros Properties USA, Inc. Owner, Ranne P. Warner and Company;
176 Federal Street, 6/th/ Floor Director, Wainwright Bank & Trust Co.
Boston, Massachusetts 02110 (commercial bank); Trustee, Ericksen Trust
(real estate)
Paul T. Kane (42)(2) Assistant Vice President Assistant Vice President, First Allmerica
440 Lincoln Street and Treasurer since June 1999; Vice President/Treasurer
Worcester, Massachusetts (Principal Accounting of Tax & Financial Services, BISYS Fund
Officer) Services, 1997-1999; Director of Shareholder
Reporting, Fidelity Investments, 1992-1997
George Boyd (55)(2) Secretary Counsel, First Allmerica since January 1997;
440 Lincoln Street Director, Mutual Fund Administration - Legal
Worcester, Massachusetts and Regulatory, Investors Bank & Trust Company,
1995 - 1996; Vice President and Counsel, 440
Financial Group and First Data Investor Services
Group, 1992 - 1995.
</TABLE>
(1) The individuals listed hold the same position with Allmerica Securities
Trust, a closed-end management investment company which is a part of the Trust
complex that includes the Trust.
(2) The individuals listed hold the same position with The Fulcrum Trust, an
open-end management investment company which is part of the Trust complex that
includes the Trust.
* Indicates the Trustees who are "interested persons" of the Trust as defined
in the 1940 Act.
** Indicates members of the Trust's Investment Operations Committee, which
reviews the performance of each Fund and recommends to the Board of Trustees
the selection and retention of Sub-Advisers.
The Trustees who are not directors, officers, or employees of the Trust or
any investment adviser are reimbursed for their travel expenses in attending
meetings of the Trust.
Listed below is the compensation paid to each Trustee by the Trust and by
all funds in the Trust complex for the fiscal year ended December 31, 1999. The
Fund currently does not provide any pension or retirement benefits for its
Trustees or officers.
_____________________________
26 Allmerica Investment Trust
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST COMPLEX
*NAME OF PERSON AND POSITION FROM TRUST PAID TO TRUSTEES*
---------------------------- ---------- ------------------
<S> <C> <C>
P. Kevin Condron $16,920 $19,000
Cynthia Hargadon $19,420 $21,500
Gordon Holmes $19,920 $29,500
Bruce E. Langton $22,420 $24,500
Attiat F. Ott $19,920 $22,000
Paul D. Paganucci** $11,500 $11,500
Ranne P. Warner $23,420 $25,500
John P. Kavanaugh 0 0
John F. O'Brien 0 0
Richard M. Reilly 0 0
</TABLE>
* Includes two other investment companies.
** Mr. Paganucci was appointed Trustee as of March 11, 2000.
The Trust, AFIMS, the Sub-Advisers and the Distributor, Allmerica Investments,
Inc. ("AII"), have adopted codes of ethics under Rule 17j-1 of the 1940 Act
which permit personnel subject to such codes to invest in securities, including
securities that may be purchased or held by the Funds of the Trust.
CONTROL PERSON AND PRINCIPAL HOLDERS OF SECURITIES
The Trust was established as a Massachusetts business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust dated October 11, 1984
(the "Trust Declaration"). AFIMS is the Manager of the Trust. The shares of each
of the Funds of the Trust currently are purchased only by Separate Accounts
established by First Allmerica or Allmerica Financial Life for the purpose of
funding variable annuity contracts and variable life insurance policies. The
Trust has obtained an exemptive order from the Securities and Exchange
Commission to permit Fund shares to be sold to variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies and certain qualified pension and retirement plans. The
Separate Accounts of First Allmerica or its affiliates are the shareholders of
the Trust. As of March 15, 2000, Allmerica Financial Life, owned both of
record and beneficially in excess of 44% of the shares of the Select Emerging
Markets Fund and in excess of 16% of the shares of the Select Strategic Growth
Fund. A shareholder that owns more than 25% of the shares of a Fund is deemed to
be a controlling person of such Fund. As of March 15, 2000, the Trustees and
officers of the Trust, as a group, owned less than 1% of the outstanding shares
of any Fund. AFIMS, First Allmerica and Allmerica Financial Life are direct or
indirect wholly-owned subsidiaries of Allmerica Financial Corporation ("AFC"), a
publicly-traded Delaware holding company for a group of affiliated companies,
the largest of which is First Allmerica. The address of AFIMS, First Allmerica,
Allmerica Financial Life and AFC is 440 Lincoln Street, Worcester, MA 01653.
AFIMS and First Allmerica were organized in Massachusetts and Allmerica
Financial Life was organized in Delaware. AFIMS also serves as investment
manager of The Fulcrum Trust, another open-end investment management company.
INVESTMENT MANAGEMENT AND OTHER SERVICES
The overall responsibility for the supervision of the affairs of the Trust vests
in the Board of Trustees of the Trust which meets on a quarterly basis. AFIMS
serves as investment manager of the Trust pursuant to a management agreement
between the Trust and the Manager (the "Management Agreement"). The Manager is
responsible for the management of the Trust's day-to-day business affairs and
has general responsibility for the management of the investments of the Funds.
The Manager has entered into sub-adviser agreements with different investment
advisory firms (the "Sub-Advisers") to manage each of the Funds, at its expense,
subject to the requirements of the 1940 Act, as amended. Each Sub- Adviser,
which has been selected on the basis of various factors including management
experience, investment techniques, and staffing, is authorized to engage in
portfolio transactions on behalf of the applicable Fund subject to such general
or specific instructions as may be given by the Trustees and/or the Manager.
__________________________
27 Allmerica Investment Trust
<PAGE>
The Sub-Advisers have been selected by the Manager and Trustees in consultation
with BARRA RogersCasey, Inc. ("BARRA RogersCasey"), a pension consulting firm.
BARRA RogersCasey is wholly controlled by BARRA, Inc. The cost of such
consultation is borne by the Manager.
BARRA RogersCasey provides consulting services to pension plans representing
hundreds of billions of dollars in total assets and, in its consulting capacity,
monitors the investment performance of over 1,000 investment advisers. As a
consultant, BARRA RogersCasey has no decision-making authority with respect to
the Funds, and is not responsible for advice provided by the Manager or the Sub-
Advisers. From time to time, specific clients of BARRA RogersCasey and the Sub-
Advisers will be named in sales materials.
The following is information relating to control and affiliations of the Manager
and certain Sub-Advisers of the Trust.
AFIMS, First Allmerica and Allmerica Financial Life are direct or indirect
wholly-owned subsidiaries of Allmerica Financial Corporation ("AFC"), a
publicly-traded Delaware holding company for a group of affiliated companies,
the largest of which is First Allmerica. First Allmerica and Allmerica Financial
Life have established Separate Accounts for the purpose of funding variable
annuity contracts and variable life insurance policies. The shares of each of
the Funds of the Trust may be purchased only through these Separate Accounts.
Schroder Investment Management North America Inc. ("Schroder"), Sub-Adviser to
the Select Emerging Markets Fund, is a wholly-owned U.S. subsidiary of Schroders
U.S. Holdings, Inc., the indirect wholly-owned U.S. subsidiary of Schroders plc,
a publicly owned holding company organized under the laws of England. As of June
30, 1999, Schroders plc and its affiliates had assets under management of
approximately $208 billion.
Nicholas-Applegate Capital Management, L.P. ("NACM") was founded in 1984 and
serves as Sub-Adviser to the Select Aggressive Growth Fund. NACM currently
manages over $40 billion of discretionary assets for numerous clients, including
employee benefit plans of corporations, public retirement systems and unions,
university endowments, foundations and other institutional investors and
individuals. NACM's principal business address is 600 West Broadway, San Diego,
California 92101.
T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as Sub-Adviser to the
Select Capital Appreciation Fund. T. Rowe Price International Series, Inc., an
investment company managed by a T. Rowe Price affiliate, is currently used as an
investment vehicle for certain insurance products sponsored by First Allmerica
and Allmerica Financial Life.
Cramer Rosenthal McGlynn, LLC ("CRM"), Sub-Adviser to the Select Value
Opportunity Fund, is owned by its active investment professionals, Cramer
Rosenthal McGlynn, Inc., ("Cramer Rosenthal") and WT Investments, Inc. ("WTI")
an indirect, wholly-owned subsidiary of Wilmington Trust Corporation ("WTC").
Founded in 1973, Cramer Rosenthal provides investment advice to individuals,
state and local government agencies, pension and profit sharing plans, trusts,
estates, endowments and other organizations. WTC is a bank and holding company
and has operations in Delaware, Pennsylvania, Florida, Maryland and New York.
Through its subsidiaries, WTC engages in residential, commercial and
construction lending, deposit taking, insurance, travel, investment advisory and
broker-dealer services and mutual fund administration. As of December 31, 1999,
WTC, together with its subsidiaries, had $7.2 billion in assets. Wilmington
Trust Company, the largest subsidiary of WTC, is among the nation's largest
personal trust companies and holds approximately $137 billion in fiduciary
capacity. As of December 31, 1999, WTI owned a 26.14% fully diluted interest in
CRM.
Bank of Ireland Asset Management (U.S.) Limited ("BIAM"), Sub-Adviser to the
Select International Equity Fund, is a wholly-owned subsidiary of Bank of
Ireland. Bank of Ireland provides investment management services through a
network of affiliated companies, including BIAM which represents North American
clients.
Putnam Investment Management, Inc., ("Putnam") Sub-Adviser to the Select Growth
Fund, is a wholly-owned subsidiary of Putnam Investments, Inc., a holding
company which, other than a minority interest owned by employees, is in turn
wholly-owned by Marsh & McLennan Companies, Inc., a publicly-owned holding
company whose principal businesses are international insurance and reinsurance
brokerage, employee benefit consulting and investment management.
__________________________
Allmerica Investment Trust 28
<PAGE>
TCW Investment Management Company ("TCW"), Sub-Adviser to the Select Strategic
Growth Fund, is a wholly-owned subsidiary of The TCW Group, Inc., a Nevada
corporation ("TCW Group"). TCW is a registered investment adviser with the
Securities and Exchange Commission under the Investment Advisers Act of 1940, as
amended. TCW's affiliates include other registered investment advisers and an
independent trust company chartered by the State of California (collectively,
"TCW Affiliates"). Ownership of TCW Group lies approximately 95% with employees
and 5% with directors. TCW Affiliates' primary business is the provision of
investment management services. TCW Affiliates specialize in the management of
taxable and tax-exempt pools of capital for pension and profit sharing funds,
retirement/health and welfare funds, public employee retirement funds, financial
institutions, endowments and foundations as well as foreign investors. Through
TCW Affiliates' Private Client Services Group, customized investment management
services are provided to high net worth individuals and family offices. In
addition, TCW Affiliates manages a full line of no load mutual funds under the
brand name TCW Galileo Funds.
Miller Anderson & Sherrerd, LLP ("MAS"), Sub-Adviser to the Core Equity Fund
(formerly the Growth Fund), is wholly-owned by indirect subsidiaries of Morgan
Stanley Dean Witter & Co. ("MSDW"), and is a division of Morgan Stanley Dean
Witter Investment Management. MAS is the adviser of the MAS Funds, a registered
investment company offering investment alternatives to institutional clients
with a minimum initial investment of $1 million. MAS also manages certain assets
for First Allmerica and its affiliates. MSDW is a preeminent global financial
services firm that maintains leading market positions in each of its three
primary businesses - securities, asset management and credit services.
AAM serves as Sub-Adviser to the Equity Index Fund as well as the Select
Investment Grade Income Fund (formerly the Investment Grade Income Fund),
Government Bond Fund and Money Market Fund, other series of the Trust. AAM is a
direct, wholly-owned subsidiary of AFC. AAM serves as investment adviser to
First Allmerica's General Account and to a number of affiliated insurance
companies and other affiliated accounts, and as Adviser to Allmerica Securities
Trust, a diversified, closed-end management investment company. AFC is a
publicly-traded Delaware holding company for a group of affiliated companies.
J.P. Morgan Investment Management Inc. ("J.P. Morgan"), Sub-Adviser to the
Select Growth and Income Fund, is a wholly-owned asset management subsidiary of
J.P. Morgan & Co. Incorporated, which was founded in 1861, and serves as an
investment adviser for employee benefit plans and other institutional assets, as
well as mutual funds and variable annuities. J.P. Morgan & Co. Incorporated is
a bank holding company and a global financial services firm, providing
specialized advice and services for governments, businesses and individuals.
Western Asset Management Company ("WAM"), Sub-Adviser to the Select Strategic
Income Fund, is a wholly-owned subsidiary of Legg Mason Inc., a publicly owned
holding company which is also the parent company of Legg Mason Wood Walker,
Inc., a broker-dealer founded in 1899. WAM provides fixed-income management
services to a wide variety of institutional clients.
The following is a list of persons who are affiliated persons of the Trust and
affiliated persons of the Manager and/or any Sub-Adviser and the capacities in
which the person is affiliated.
<TABLE>
<CAPTION>
POSITION(S) HELD POSITION(S) HELD WITH THE MANAGER
NAME WITH THE TRUST OR SUB-ADVISER OF THE TRUST
---- -------------- ---------------------------
<S> <C> <C>
Ann K. Tripp Vice President Vice President, AAM
Paul T. Kane Assistant Vice President and Treasurer Assistant Vice President, AFIMS
(Principal Accounting Officer)
John C. Donohue Vice President Vice President, AAM
John P. Kavanaugh Vice President President, AAM; Vice President,
AFIMS
Richard J. Litchfield Vice President Vice President, AAM
John F. O'Brien Chairman of the Board Chairman and Director, AFIMS;
Director, AAM
Richard M. Reilly President Director and President, AFIMS
</TABLE>
__________________________
59 Allmerica Investment Trust
<PAGE>
First Allmerica, Allmerica Financial Life, AFIMS and AAM are direct or indirect,
wholly-owned subsidiaries of AFC. The Trust serves as an investment vehicle for
the Separate Accounts established by First Allmerica and Allmerica Financial
Life.
Under its Management Agreement with the Trust, the Manager is obligated to
perform certain administrative and management services for the Trust; furnishes
to the Trust all necessary office space, facilities, and equipment; and pays the
compensation, if any, of officers and Trustees who are affiliated with the
Manager. Other than the expenses specifically assumed by the Manager under the
Management Agreement, all expenses incurred in the operation of the Trust are
borne by the Trust, including fees and expenses associated with the registration
and qualification of the Trust's shares under the Securities Act of 1933 (the
"1933 Act"); other fees payable to the SEC; independent accountant, legal and
custodian fees; association membership dues; taxes; interest; insurance
premiums; brokerage commissions; fees and expenses of the Trustees who are not
affiliated with the Manager; expenses for proxies, prospectuses and reports to
shareholders; Fund recordkeeping expenses and other expenses.
For the services provided to the Funds, the Manager receives fees computed daily
at an annual rate based on the average daily net asset value of each Fund as set
forth below.
<TABLE>
<CAPTION>
SELECT SELECT SELECT CAPITAL SELECT VALUE SELECT SELECT
EMERGING AGGRESSIVE APPRECIATION OPPORTUNITY INTERNATIONAL GROWTH
MARKETS FUND GROWTH FUND FUND FUND EQUITY FUND FUND
------------ ----------- ---- ---- ----------- ----
<S> <C> <C> <C> <C> <C> <C>
Manager Fee 1.35%* (1) (1) (2) (1) (2)
</TABLE>
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
STRATEGIC CORE EQUITY SELECT GROWTH STRATEGIC INVESTMENT
GROWTH EQUITY INDEX AND INCOME INCOME GRADE
FUND FUND FUND FUND FUND INCOME FUND
---- ---- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
Manager Fee 0.85% (1) (3) (1) (4) (4)
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT MONEY
BOND MARKET
FUND FUND
---- ----
<S> <C> <C>
Manager Fee 0.50% (3)
</TABLE>
*The Manager voluntarily has agreed until further notice to waive its management
fee in the event that expenses of the Select Emerging Markets Fund exceed 2.00%
of the Fund's average daily net assets. The amount of such waiver will be
limited to the net amount of management fees earned by the Manager from the Fund
after subtracting the fees paid by the Manager to Schroder for sub-advisory
services.
(1) The Manager's fees for the Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select International Equity Fund, Core Equity Fund
(formerly the Growth Fund) and Select Growth and Income Fund, computed daily
at an annual rate based on the average daily net assets of each Fund, are
based on the following schedule:
<TABLE>
<CAPTION>
SELECT SELECT GROWTH
SELECT AGGRESSIVE SELECT CAPITAL INTERNATIONAL CORE AND INCOME
ASSETS GROWTH FUND APPRECIATION FUND EQUITY FUND EQUITY FUND FUND
------ ----------- ----------------- ----------- ----------- ----
<S> <C> <C> <C> <C> <C>
First $100 Million.. 1.00% 1.00% 1.00% 0.60% 0.75%
Next $150 Million... 0.90% 0.90% 0.90% 0.60% 0.70%
Next $250 Million... 0.80% 0.80% 0.85% 0.40% 0.65%
Over $500 Million... 0.70% 0.70% 0.85% 0.35% 0.65%
Over $1 Billion 0.65% 0.65% 0.85% 0.35% 0.65%
</TABLE>
__________________________
Allmerica Investment Trust 30
<PAGE>
(2) The Manager's fees for the Select Value Opportunity Fund and Select Growth
Fund, computed daily at an annual rate based on the average daily net assets of
each Fund, are based on the following schedule:
<TABLE>
<CAPTION>
SELECT VALUE
OPPORTUNITY SELECT GROWTH
ASSETS FUND FUND
------ ---- ----
<S> <C> <C>
First $100 Million.............. 1.00% 0.85%
Next $150 Million............... 0.85% 0.85%
Next $250 Million............... 0.80% 0.80%
Next $250 Million............... 0.75% 0.75%
Over $750 Million............... 0.70% 0.70%
</TABLE>
The Manager voluntarily has agreed to limit its management fees to an annual
rate of 0.90% of average daily net assets of the Select Value Opportunity Fund
until further notice.
(3) The Manager's fees for the Equity Index Fund and Money Market Fund,
computed daily at an annual rate based on the average daily net assets of each
Fund, are based on the following schedule:
<TABLE>
<CAPTION>
EQUITY MONEY
INDEX MARKET
ASSETS FUND FUND
------ ---- ----
<S> <C> <C>
First $50 Million............. 0.35% 0.35%
Next $200 Million............. 0.30% 0.25%
Over $250 Million............. 0.25% 0.20%
</TABLE>
(4) The Manager's fees for the Select Strategic Income Fund and Select
Investment Grade Income Fund (formerly the Investment Grade Income Fund),
computed daily at an annual rate based on the average daily net assets of each
Fund, are based on the following schedule:
<TABLE>
<CAPTION>
SELECT SELECT
STRATEGIC INVESTMENT
INCOME GRADE
ASSETS FUND INCOME FUND
------ ---- -----------
<S> <C> <C>
First $50 Million............. 0.60% 0.50%
Next $50 Million.............. 0.55% 0.45%
Over $100 Million............. 0.45% 0.40%
</TABLE>
The Manager is responsible for the payment of all fees to the Sub-Advisers. The
Manager pays each Sub-Adviser fees computed daily at an annual rate based on the
average daily net asset value of each Fund as set forth below. In certain
Funds, Sub-Adviser fees vary according to the level of assets in such Funds,
which will reduce the fees paid by the Manager as Fund assets grow but will not
reduce the operating expenses of such Funds.
<TABLE>
<CAPTION>
SELECT SELECT SELECT CAPITAL SELECT VALUE SELECT SELECT
EMERGING AGGRESSIVE APPRECIATION OPPORTUNITY INTERNATIONAL GROWTH
MARKETS FUND GROWTH FUND FUND FUND EQUITY FUND FUND
------------ ----------- ---- ---- ----------- ----
<S> <C> <C> <C> <C> <C> <C>
Sub-Adviser Fee (5) (6) 0.50% (7) (8) (9)
</TABLE>
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT
STRATEGIC CORE EQUITY SELECT GROWTH STRATEGIC INVESTMENT
GROWTH EQUITY INDEX AND INCOME INCOME GRADE INCOME
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sub-Adviser Fee (10) (11) 0.10% (12) (13) 0.20%
</TABLE>
__________________________
31 Allmerica Investment Trust
<PAGE>
GOVERNMENT MONEY
BOND MARKET
FUND FUND
---- ----
Sub-Adviser Fee 0.20% 0.10%
(5) For its services, Schroder will receive a fee computed daily at an annual
rate based on the average daily net assets of the Select Emerging Markets Fund,
under the following schedule:
ASSETS RATE
------ ----
First $50 Million................... 1.00%
Next $50 Million.................... 0.85%
Next $150 Million................... 0.75%
Over $250 Million................... 0.60%
(6) For its services, NACM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Aggressive Growth Fund,
under the following schedule:
ASSETS RATE
------ ----
First $100 Million.................. 0.60%
Next $150 Million................... 0.50%
Next $250 Million................... 0.40%
Next $250 Million................... 0.375%
Over $750 Million................... 0.35%
(7) For its services, CRM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Value Opportunity Fund,
under the following schedule:
ASSETS RATE
------ ----
First $100 Million.................. 0.60%
Next $150 Million................... 0.50%
Next $250 Million................... 0.40%
Next $250 Million................... 0.375%
Over $750 Million................... 0.35%
(8) For its services, BIAM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select International Equity Fund,
under the following schedule:
ASSETS RATE
------ ----
First $50 Million................... 0.45%
Next $50 Million.................... 0.40%
Over $100 Million................... 0.30%
(9) For its services, Putnam will receive a fee computed daily at an annual
rate based on the average daily net assets of the Select Growth Fund under the
following schedule:
ASSETS RATE
------ ----
First $50 Million................... 0.50%
Next $100 Million................... 0.45%
Next $100 Million................... 0.35%
Next $100 Million................... 0.30%
Over $350 Million................... 0.25%
__________________________
Allmerica Investment Trust 32
<PAGE>
(10) For its services, TCW will receive a fee computed daily and paid quarterly
at an annual rate of 0.85% based on the average daily net assets of the Select
Strategic Growth Fund of up to $100 million. When the average daily net assets
of the Fund exceed $100 million, the fee shall be computed daily and paid
quarterly at an annual rate of 0.75% of the total average daily net assets of
the Fund.
(11) MAS will receive a fee based on the aggregate assets of the Core Equity
Fund and certain other accounts of the Manager and its affiliates which are
managed by MAS, under the following schedule:
ASSETS RATE
------ ----
First $50 Million....................... 0.50%
Next $50 Million........................ 0.375%
Next $400 Million....................... 0.25%
Next $350 Million....................... 0.20%
Over $850 Million....................... 0.15%
(12) For its services, J.P. Morgan will receive a fee computed daily at an
annual rate based on the average daily net assets of the Select Growth and
Income Fund, under the following schedule:
ASSETS RATE
------ ----
First $500 Million...................... 0.30%
Next $500 Million....................... 0.25%
Over $1 Billion......................... 0.20%
(13) For its services, WAM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Strategic Income Fund,
under the following schedule:
ASSETS RATE
------ ----
First $100 Million...................... 0.30%
Over $100 Million....................... 0.15%
The total gross fees (before reimbursement) paid to the Manager under the
Management Agreement for each of the last three fiscal years ended December 31,
1999 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR 1999 FISCAL YEAR 1998 FISCAL YEAR 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Select Emerging Markets Fund* $ 427,873 $ 225,711 N/A
Select Aggressive Growth Fund $6,803,973 $5,977,909 $4,850,649
Select Capital Appreciation Fund $3,061,620 $2,417,031 $1,813,444
Select Value Opportunity Fund $2,531,026 $2,138,839 $1,433,016
Select International Equity Fund $4,936,001 $4,117,316 $3,258,876
Select Growth Fund $7,471,700 $5,112,118 $2,959,723
Select Strategic Growth Fund* $ 185,532 $ 68,645 N/A
Core Equity Fund (formerly the Growth Fund) $4,047,919 $3,519,665 $2,840,683
Equity Index Fund $1,531,338 $1,087,069 $ 705,708
Select Growth and Income Fund $4,909,248 $3,790,917 $2,807,177
Select Investment Grade Income Fund $1,059,711 $ 933,311 $ 710,821
(formerly the Investment Grade Income Fund)
Government Bond Fund $ 478,327 $ 338,796 $ 244,355
Money Market Fund $1,019,642 $ 731,259 $ 647,964
</TABLE>
* The Select Emerging Markets Fund and Select Strategic Growth Fund began
operations on February 20, 1998.
The total gross fees paid to each Sub-Adviser under the respective Sub- Adviser
Agreement for each of the last three fiscal years ended December 31, 1999 were
as follows:
<TABLE>
<CAPTION>
PAYMENTS MADE AS OF DECEMBER 31,
--------------------------------
FUND/SUB-ADVISER FISCAL YEAR 1999 FISCAL YEAR 1998 FISCAL YEAR 1997
- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Select Emerging Markets Fund*
Schroder Investment Management North America Inc. $ 317,359 $ 167,193 N/A
("Schroder")
Select Aggressive Growth Fund
Nicholas-Applegate Capital Management, L.P. $3,819,739 $3,470,632 $2,885,239
Select Capital Appreciation Fund**
T. Rowe Price Associates, Inc. ("T. Rowe") $1,537,991 $1,332,970 $1,070,021
</TABLE>
__________________________
33 Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
PAYMENTS MADE AS OF DECEMBER 31,
--------------------------------
FUND/SUB-ADVISER FISCAL YEAR 1999 FISCAL YEAR 1998 FISCAL YEAR 1997
- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Select Value Opportunity Fund
Cramer Rosenthal McGlynn, LLC ("CRM") $1,478,541 $1,269,130 $ 851,815
Select International Equity Fund
Bank of Ireland Asset Management (U.S.) Limited $1,640,792 $1,498,759 $1,137,825
Select Growth Fund
Putnam Investment Management, Inc. ("Putnam") $2,641,438 $2,030,082 $1,328,717
Select Strategic Growth Fund*
Cambiar Investors, Inc. ("Cambiar") $ 109,343 $ 40,380 N/A
Core Equity Fund (formerly the Growth Fund)
Miller Anderson & Sherrerd ("MAS")*** $1,973,870 $2,979,910 $2,669,867
Select Growth and Income Fund
J.P. Morgan Investment Management Inc. ("J.P. Morgan")**** $1,895,701 $1,668,885 $1,159,260
Allmerica Asset Management, Inc.
Equity Index Fund, Select Investment Grade Income Fund (formerly the
Investment Grade Income Fund), Government Bond Fund and Money Market Fund $1,560,580 $1,218,085 $ 911,548
</TABLE>
* The Select Emerging Markets Fund and Select Strategic Growth Fund began
operations on February 20, 1998. Cambiar was replaced by TCW as Sub-Adviser
of the Select Strategic Growth Fund on April 1, 2000.
** The Select Capital Appreciation Fund began business operations on April 28,
1995. Janus Capital Corporation ("JCC") was replaced by T. Rowe as Sub-
Adviser for the Select Capital Appreciation Fund on April 1, 1998. The
total dollar amount paid to JCC for the period January 1, 1998 through
March 31, 1998 was $345,171. The total dollar amount paid to T. Rowe for
the period April 1, 1998 through December 31, 1998 was $987,799.
*** Effective May 1, 2000, the name of the Growth Fund was changed to the Core
Equity Fund. Includes payments to MAS for advisory services provided to
certain other accounts of First Allmerica.
**** John A. Levin & Co., Inc. was replaced by J.P. Morgan as Sub- Adviser of
the Select Growth and Income Fund on April 1, 1999.
The following table shows voluntary expense limitations which the Manager has
declared for each Fund and the operating expenses incurred for the fiscal year
ended December 31, 1999 for each Fund:
__________________________
Allmerica Investment Trust 34
<PAGE>
PERCENTAGE OF AVERAGE DAILY ASSETS
----------------------------------
<TABLE>
<CAPTION>
VOLUNTARY EXPENSE OPERATING
FUND LIMITATIONS EXPENSES+
---- ----------------- ---------
<S> <C> <C>
Select Emerging Markets Fund * 1.88%
Select Aggressive Growth Fund 1.35% 0.88%
Select Capital Appreciation Fund 1.35% 0.98%
Select Value Opportunity Fund 1.25% 0.88%
Select International Equity Fund 1.50% 1.01%
Select Growth Fund 1.20% 0.81%
Select Strategic Growth Fund 1.20% 1.17%
Core Equity Fund (formerly the Growth Fund) 1.20% 0.45%
Equity Index Fund 0.60% 0.35%
Select Growth and Income Fund 1.10% 0.73%
Select Investment Grade Income Fund 1.00% 0.50%
(formerly the Investment Grade Income Fund)
Government Bond Fund 1.00% 0.62%
Money Market Fund 0.60% 0.29%
</TABLE>
+Including reductions such as directed brokerage credits. See "Brokerage
Allocation - Directed Brokerage Program" in the SAI.
* The Manager has agreed until further notice to waive voluntarily its
management fee in the event that expenses of the Select Emerging Markets Fund
exceed 2.00% of the Fund's average daily net assets. The amount of such waiver
will be limited to the net amount of management fees earned by the Manager from
the Fund after subtracting fees paid by the Manager to Schroder for sub-advisory
services.
The Manager will voluntarily reimburse its fees and any expenses above the
expense limitations. The expense limitations are voluntary and may be removed at
any time after a Fund's first fiscal year of operations with notice to existing
shareholders. The Manager reserves the right to recover from a Fund any fees,
within a current fiscal year period, which were reimbursed in that same year to
the extent that total annual expenses did not exceed the applicable expense
limitation. The expenses which are subject to the voluntary expense limitations
include management fees, independent accountant, legal and custodian fees;
recordkeeping expenses; fees and expenses of Trustees who are not affiliated
with the Manager; association membership dues, insurance; expenses for proxies,
prospectuses and reports to shareholders and fees associated with the
registration of Fund shares. Non-recurring and extraordinary expenses generally
are excluded in the determination of expense ratios of the Funds for purposes of
determining any applicable expense waiver or reimbursement. Quotations of yield
or total return for any period when an expense limitation is in effect will be
greater than if the limitation had not been in effect.
Each of the Management Agreement and sub-advisory agreements provides that it
may be terminated as to any Fund at any time by a vote of a majority in interest
of the shareholders of such Fund, by the Trustees or by the investment adviser
to such Fund without payment of any penalty on not more than 60 days' written
notice; provided, however, that the agreement will terminate automatically in
the event of its assignment. Each of the agreements will continue in effect as
to any Fund for a period of no more than two years from the date of its executor
only so long as such continuance is approved specifically at least annually by
the Trustees or by vote of a majority in interest of the shareholders of such
Fund. In either event, such continuance also must be approved by vote of a
majority of the Trustees who are not parties to the agreement or interested
persons of the Trust, the Manager or any sub- adviser, cast in person at a
meeting called for the purpose of voting such approval. The Trust and Manager
have obtained an order of exemption from the SEC that would permit the Manager
to enter into and materially amend sub-advisory agreements with non-affiliated
Sub-Advisers without obtaining shareholder approval. Under such agreements, any
liability of either the Manager or a sub- adviser is limited to situations
involving its willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
___________________________
35 Allmerica Investment Trust
<PAGE>
As printed in Nelson's Directory of Plan Sponsors - 1998, following is a listing
of Schroder's current representative clients in emerging markets investments:
<TABLE>
<S> <C>
- Georgia-Pacific - New York City Retirement Systems
- Idaho P.E.R.S. - NYS Teachers' Retirement Systems
- Intermountain Health Care - Orange County Retirement System
- ISPAT Inland Inc. - Utah State Retirement System
- L.A. City Employees Retirement - Virginia Retirement Systems
- Louisiana State E.R.S. - Washington State Investment Board
- Merck & Co.
A listing of NACM's current representative clients is as follows:
- Champion International Corp. - San Francisco City and County
- Johnson & Johnson - Unisys Corporation
- Motion Picture Industry Pension Plan - United Parcel Services of America
- Screen Actors Guild - University of Notre Dame
- University of Southern California
A listing of T. Rowe's current representative clients is as follows:
- Allegheny Power System - Milliken & Company
- Armco, Inc. - New England Electric System
- Automobile Club of Southern California - New York Power Authority
- Baltimore Gas & Electric
Company (BGE) - Parsons Brinckerhoff
- The Black & Decker Corporation - The Pittston Company
- Consolidated Freightways Corporation - Polo Ralph Lauren
- Costco Wholesale - PRC Inc.
- Crawford & Company - Puget Sound Energy
- Cyprus Amex - Rank America
- Dames & Moore - Rochester Gas and Electric Corporation
- DataCard - The Rouse Company
- Data General Corporation - Simplex Time Recorder Co.
- The Dial Corporation - Southeastern Freight Lines
- Entergy Corporation - State of Florida
- Federal Deposit Insurance - State of Illinois
Corporation
- Hocchst Marion Roussel, Inc. - State of Oklahoma
- Hyatt Corporation - Warner-Lambert Company
- Leo Burnett - Western Digital Corporation
- Lorrilard Tobacco Company - Winn-Dixie Stores
A listing of CRM's current representative clients is as follows:
- Indiana University Foundation - The McGraw-Hill Companies, Inc
- Maine State Retirement - The UCLA Foundation
- National Basketball Association Players
Pension Plan - University of Cincinnati
- New Mexico State Investment Council - University of Illinois Foundation
- Niagara Mohawk Power Corp. - U.S. Airways
- St. Mary's College of California
A listing of BIAM's current representative clients is as follows:
- CALSTRS - Pfizer Retirement Annuity Plan
- City of Dallas Employees' - Maryland State Retirement System
Retirement Fund
- Loyola Marymount University - Screen Actors Guild -Producers
Endowment Fund Pension Plan
- LTV Steel Corporation Pension
Fund - Tuft's University Endowment Fund
- Major League Baseball Players - Worcester County Retirement System
Benefit Plan
</TABLE>
___________________________
Allmerica Investment Trust 36
<PAGE>
A listing of Putnam Advisory Company, Inc.'s ("PAC")* current representative
clients is as follows:
- Bacardi Corporation - Matsushita Electric Corporation
of America
- California Public Employees' - New York Philharmonic Orchestra
Retirement System - The Nemours Foundation
- Hercules Incorporated - The Robert Wood Johnson Foundation
- Kemper Insurance - United Furniture Workers, AFL-CIO
- Los Angeles County Employees' - U.S. Chamber of Commerce
Retirement Association
*(PAC is the institutional affiliate of Putnam.)
A listing of TCW's current representative clients is as follows:
<TABLE>
<S> <C>
- Bakery, Confectionery, Tobacco Workers & - Maryland State Retirement System
Grain Millers International Union - MCI Communications Corporation
- Boilermaker-Blacksmith National - Michigan State University
Pension Trust - Minnesota State Board of Investment
- Boston College - New York State Common Retirement Fund
- Bradley Foundation - Northwest Airlines, Inc.
- California State Teachers' - Oklahoma Public Employees
Retirement System Retirement System
- Cargill, Incorporated - Oregon Public Employees'
- Central States Pension Plan Retirement System
- Cincinnati Bell Inc. - Pfizer, Inc.
- Colorado Public Employees - SunAmerica Life Insurance Company
Retirement Association - Textron, Inc.
- Eastman Kodak Company - The Boeing Company
- Florida State Board of Administration - The Duke Endowment
- General Mills, Inc. - The John D. and Catherine T. MacArthur
- GTE Investment Management Corporation Foundation
- Halliburton Company - The Kresge Foundation
- Hallmark Cards, Inc. - The University of Notre Dame Du Lac
- IBM Corporation - University of Pittsburgh
- Illinois State Board of Investment - U.S. West
- Lehigh University - Vanderbilt University
- Litton Industries, Inc. - Xerox Corporation
A listing of MAS' current representative clients is as follows:
- AT&T - New York Philharmonic Society
- Boeing Company - Philip Morris, Inc.
- Federal Reserve - Smithsonian Institution
- J. Paul Getty Trust - United Technologies Corporation
- University of Notre Dame
A listing of AAM's current representative clients is as follows:
- First Allmerica - Hannibal Regional Hospital
- Citizens Insurance - Massachusetts Education and
- Hanover Insurance Government Association Workers
- City of Worcester Retirement Compensation Trust
System
- Worcester County Contributory - Farm Credit System Association
Retirement System Captive Insurance Company
</TABLE>
___________________________
37 Allmerica Investment Trust
<PAGE>
Under the terms of the Management Agreement, the Trust recognizes the Manager's
control of the name "Allmerica Investment Trust." The Trust agrees that its
right to use that name is non-exclusive and can be terminated by the Manager at
any time.
SERVICES AGREEMENTS
UNDERWRITER
Allmerica Investments, Inc. ("AII"), located at 440 Lincoln Street, Worcester,
Massachusetts 01653, (508) 855-1000, serves as the Trust's distributor pursuant
to a Distribution Agreement. AII is an indirect, wholly-owned subsidiary of
AFC. The following is a list of persons who are affiliated with both the Trust
and AII.
<TABLE>
<CAPTION>
POSITION(S) HELD POSITION(S) HELD
NAME WITH THE TRUST WITH AII
---- -------------- --------
<S> <C> <C>
Paul T. Kane Assistant Vice President and Treasurer Assistant Vice President
(Principal Accounting Officer)
John F. O'Brien Chairman of the Board Director
Richard M. Reilly President Director
</TABLE>
FUND RECORDKEEPING SERVICES AGENT AND CUSTODIAN
Investors Bank & Trust Company ("IBT") replaced First Data Investor Services
Group, Inc. ("Investor Services Group") as the Trust's fund record keeping
services agent and replaced Bankers Trust Company as Custodian of the cash and
investment securities of the Trust on April 1, 1999. IBT is located at 200
Clarendon Street, 16/th/ Floor, Boston, MA 02116. Under the terms of a Custodian
Agreement, IBT provides certain fund accounting, custodian and administration
services, including, but not limited to, determining the net asset value per
share of each of the Funds and maintaining the accounting records of the Trust;
and holding in custody the Trust's portfolio securities and receiving and
delivering them upon purchases and sales. IBT is entitled to receive an annual
fee for its services based on Fund assets and certain out-of-pocket expenses.
The Custodian Agreement provides for an initial term of three years and
thereafter renews automatically for successive one-year terms unless advance
notice of termination is delivered by the non-renewing party. The Custodian
Agreement may be terminated prior to the expiration of the initial term or a
renewal term provided certain conditions are met. The Custodian Agreement with
IBT is similar to the Fund Accounting Services Agreement previously in effect
with Investor Services Group and the Custodian Agreement previously in effect
with Bankers Trust Company. The compensation paid to Investor Services Group and
Bankers Trust Company was similar to the compensation which is paid to IBT in
terms of total dollar amount paid. The total fund recordkeeping fees paid to
Investor Services Group for the following periods were as follows:
<TABLE>
<CAPTION>
THREE-MONTHS ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-------------- ----------------- -----------------
<S> <C> <C>
$240,112 $883,909 $748,941
</TABLE>
The total fees paid to Bankers Trust Company for custodial services for the
following periods were as follows:
<TABLE>
<CAPTION>
THREE-MONTHS ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-------------- ----------------- -----------------
<S> <C> <C>
$194,918 $850,873 $743,606
</TABLE>
The total fee paid to IBT for fund accounting, custodial and administration
services for the nine-months ended December 31, 1999 was $1,653,590.
___________________________
Allmerica Investment Trust 38
<PAGE>
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as the Fund's independent accountants providing audit and accounting
services including (i) examination of the annual financial statements, (ii)
assistance and consultation with respect to the preparation of filings with the
Securities and Exchange Commission, and (iii) review of annual income tax
returns.
BROKERAGE ALLOCATION AND OTHER PRACTICES
In accordance with the Management Agreement and sub-advisory agreements, the
respective Sub-Adviser has the responsibility for the selection of brokers for
the execution of purchases and sales of the securities in a given Fund's
portfolio subject to the direction of the Trustees. The Sub-Advisers place the
Funds' portfolio transactions with brokers and, if applicable, negotiate
commissions.
Broker-dealers may receive brokerage commissions on portfolio transactions of
the Funds. The Sub-Advisers also may place portfolio transactions with such
broker-dealers acting as principal, in which case no brokerage commissions are
payable but other transaction costs are incurred. The Funds have not dealt nor
do they intend to deal exclusively with any particular broker-dealer or group of
broker-dealers. It is each Fund's policy always to seek best execution. This
means that each Fund's portfolio transactions will be placed where the Fund can
obtain the most favorable combination of price and execution services in
particular transactions or as provided on a continuing basis by a broker-dealer,
and that the Fund will deal directly with a principal market maker in connection
with over-the-counter transactions, except when it is believed that best
execution is obtainable elsewhere. In evaluating the execution services of a
broker-dealer, including the overall reasonableness of its brokerage commissions
paid, consideration is given to the firm's general execution and operational
capabilities and to its reliability, integrity and financial condition. Subject
to the practice of always seeking best execution, the Funds' securities
transactions may be executed by broker-dealers who also provide research
services (as defined below) to the Funds, the Sub-Advisers and the other clients
advised by the Sub-Advisers. Examples of such research services include reports
on specific companies or industries, economic and financial data, performance
measurement services, computer databases and pricing and appraisal services. The
sub-advisers may use all, some or none of such research services in providing
investment advisory services to each of its investment companies and other
clients, including the Funds. To the extent that such services are used, they
tend to reduce the expenses of the Sub-Advisers. In the opinion of the Sub-
Advisers it is impossible to assign an exact dollar value to such services.
BROKERAGE AND RESEARCH SERVICES
The agreements provide that, subject to such policies as the Trustees may
determine, the Sub-Advisers may cause a given Fund to pay a broker-dealer which
provides brokerage and research services an amount of commission for effecting a
securities transaction for that Fund in excess of the amount of commission which
another broker-dealer would have charged for effecting that transaction. As
provided in Section 28(e) of the Securities Exchange Act of 1934, "brokerage and
research services" include advice as to the value of securities; the
advisability of investing in, purchasing or selling securities; the availability
of securities or purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends;
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). The Sub-Advisers must determine in good faith that such greater
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker-dealer viewed in terms of that
particular transaction or the overall responsibilities of the Sub-Advisers to
its respective Funds and all other clients. The Sub-Advisers also may consider
sales by broker-dealers of variable and group annuity contracts and variable
life insurance policies that contemplate the Funds as an investment option as a
factor in the selection of broker-dealers to execute portfolio transactions.
The other investment companies and clients advised by the Sub-Advisers sometimes
invest in securities in which the Funds also invest. A Sub-Adviser also may
invest for its own account in the securities in which the Funds invest. If the
Funds, such other investment companies and other clients of the Sub- Advisers
desire to buy or sell the same portfolio security at about the same time, the
purchases and sales normally are made as nearly as practicable on a pro rata
basis in proportion to the amounts desired to be purchased or sold by each. It
is recognized that in some cases this practice could have a detrimental effect
on the price or volume of the security as far as the Funds are concerned. In
other cases,
___________________________
39 Allmerica Investment Trust
<PAGE>
however, it is believed that this practice may produce better executions. It is
the opinion of the Trustees that the desirability of retaining the Sub-Advisers
as investment advisers to their respective Funds outweighs the disadvantages, if
any, which might result from this practice.
Brokerage commissions for each of the last three years were as follows:
<TABLE>
<CAPTION>
FUND 1999 1998 1997
---- ---------- ---------- ----------
<S> <C> <C> <C>
Select Emerging Markets Fund* $ 140,922 $ 105,823 N/A
Select Aggressive Growth Fund $1,710,414 $1,812,711 $1,238,116
Select Capital Appreciation Fund** $ 481,557 $ 683,523 $ 474,666
Select Value Opportunity Fund** $1,357,442 $ 742,439 $ 649,306
Select International Equity Fund $ 333,988 $ 369,191 $ 453,544
Select Growth Fund** $1,017,774 $ 724,915 $ 459,136
Select Strategic Growth Fund* $ 56,538 $ 32,898 N/A
Core Equity Fund** (formerly the Growth Fund) $2,626,717 $1,522,185 $ 969,754
Equity Index Fund $ 185,943 $ 106,104 $ 100,012
Select Growth and Income Fund** $1,216,781 $1,032,489 $ 962,045
</TABLE>
* The Select Emerging Markets Fund and Select Strategic Growth Fund began
operations on February 20, 1998.
** The following are the reasons for the differences in the amounts of brokerage
commissions paid for the most recent fiscal year compared to either of the two
prior fiscal years:
(1) The differences in the amounts of brokerage commissions paid during the
last three fiscal years for the Select Capital Appreciation Fund are due to a
change in Sub-Advisers on April 1, 1998 and the ensuing portfolio turnover.
(2) The differences in the amounts of brokerage commissions paid during the
last three fiscal years for the Core Equity Fund are due to portfolio
repositioning and normal portfolio activity trading. (3) The differences in
the amounts of brokerage commissions paid during the last three fiscal years
for the Select Value Opportunity Fund, Select Growth Fund and Select Growth
and Income Fund are attributable to growth in the assets of each Fund.
The Select Strategic Income Fund, Select Investment Grade Income Fund
(formerly the Investment Grade Income Fund), Government Bond Fund and Money
Market Fund did not incur brokerage commissions in any of these years.
DIRECTED BROKERAGE PROGRAM
Certain Funds managed by the Manager participate in a directed brokerage program
whereby the Funds receive credit for brokerage activity and apply those credits
toward the payment of Fund expenses. Such Funds have entered into an agreement
with certain brokers which rebate a portion of commissions as credits toward
Fund expenses. In addition, this program gives Fund management the ability to
direct brokerage by firms which sell insurance products sponsored by First
Allmerica Financial and its affiliates. This second aspect of the program, which
would be limited to 15% of total commissions, has not been implemented. Such
amounts earned by the Funds in 1997, 1998 and 1999 under such agreements were as
follows:
<TABLE>
<CAPTION>
FUND 1999 1998 1997
- ---- -------- -------- --------
<S> <C> <C> <C>
Select Emerging Markets Fund* $ 11,910 $ 561 N/A
Select Aggressive Growth Fund $270,533 $229,479 $221,364
Select Capital Appreciation Fund $ 3,127 $ 41,567 N/A
Select Value Opportunity Fund $241,313 $ 96,620 $ 84,389
Select International Equity Fund $ 53,537 $ 24,678 $ 70,636
Select Growth Fund $232,990 $151,581 $ 90,962
Select Strategic Growth Fund $ 6,979 $ 5,373 N/A
Equity Index Fund $ 9,000 N/A N/A
Core Equity Fund (formerly the Growth Fund) $335,248 $208,457 $152,829
Select Growth and Income Fund $ 25,338 $175,705 $102,293
</TABLE>
___________________________
Allmerica Investment Trust 40
<PAGE>
The Trust Declaration provides that all persons extending credit to, contracting
with, or having any claims against the Trust or a particular Fund shall look
only to the assets of the Trust or particular Fund for payment under such
credit, contract or claim, and neither the shareholders, Trustees, nor any of
the Trust's officers, employees or agents shall be personally liable thereof.
Under Massachusetts law, shareholders could, under certain circumstances, be
held liable for the obligations of the Trust. The Trust Declaration, however,
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 Trust
Declaration provides for indemnification out of a Fund's property for all loss
and expense of any shareholder of that Fund held liable on account of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund of which he or she was a shareholder would be unable to meet its
obligations.
Pursuant to the Trust Declaration, a Trustee is liable for his or her own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, but is not liable for
errors of judgment, mistakes of fact or law any act or omission in accordance
with the advice of counsel or other experts with respect to the meaning of the
Trust Declaration, or for failing to follow such advice.
CAPITAL STOCK AND OTHER SECURITIES
The Trust has an unlimited authorized number of shares of beneficial interest
which may be divided into an unlimited number of series of such shares, and
which are divided presently into 14 series of shares, one series underlying each
Fund. The Trust's shares are entitled to one vote per share (with proportional
voting for fractional shares). The rights accompanying Fund shares are vested
legally in the Separate Accounts. As a matter of policy, however, holders of
variable premium life insurance or variable annuity contracts funded through the
Separate Accounts have the right to instruct the Separate Accounts as to voting
Fund shares on all matters to be voted on by Fund shareholders. Voting rights of
the participants in the Separate Accounts are set forth more fully in the
prospectuses or offering circular relating to those Accounts.
Matters subject to a vote by the shareholders include changes in the fundamental
policies of the Trust as described in the Prospectus and the SAI, the election
or removal of Trustees and the approval of agreements with investment advisers.
A majority, for the purposes of voting by shareholders pursuant to the 1940 Act,
is 67% or more of the voting securities of an investment company present at an
annual or special meeting of shareholders if 50% of the outstanding voting
securities of such company are present or represented by proxy or more than 50%
of the outstanding voting securities of such company, whichever is less.
The Trust is not required to hold annual meetings of shareholders. The Trustees
or shareholders holding at least 10% of the outstanding shares may call special
meetings of shareholders.
The Trust Declaration provides that, on any matter submitted to a vote of the
shareholders, all shares shall be voted by individual series, except (1) when
required by the 1940 Act, shares shall be voted in the aggregate and not by
individual series, and (2) when the Trustees have determined that the matter
affects only the interests of one or more series, then only the shareholders of
such series shall be entitled to vote thereon.
Shares are freely transferable, are entitled to dividends as declared by the
Trustees and, on liquidation of the Trust, shareholders are entitled to receive
their pro rata portion of the net assets of the Fund of which they hold shares,
but not of any other Fund. Shareholders have no preemptive or conversion rights.
The Trust Declaration provides that all persons extending credit to, contracting
with, or having any claims against the Trust or a particular Fund shall look
only to the assets of the Trust or particular Fund for payment under such
credit, contract or claim, and neither the shareholders, Trustees, nor any of
the Trust's officers, employees or agents shall be personally liable thereof.
Under Massachusetts law, shareholders could, under certain circumstances, be
held liable for the obligations of the Trust. The Trust Declaration, however,
disclaims shareholder liability for acts of obligations of the
___________________________
41 Allmerica Investment Trust
<PAGE>
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 Trust Declaration provides for indemnification out of a Fund's property for
all loss and expense of any shareholder of that Fund held liable on account of
being or having been a shareholder. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund of which he or she was a shareholder would be unable to meet
its obligations.
Pursuant to the Trust Declaration, a Trustee is liable for his or her own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, but is not liable for
errors of judgment, mistakes of fact or law any act or omission in accordance
with the advice of counsel or other experts with respect to the meaning of the
Trust Declaration, or for failing to follow such advice.
PURCHASE, REDEMPTION, AND PRICING OF SECURITIES BEING OFFERED
Shares of the Funds are sold in a continuous offering and currently may be
purchased only by Separate Accounts of First Allmerica or its subsidiaries. The
Separate Accounts are the funding mechanisms for variable annuity contracts and
variable life insurance policies. Shares of the Trust are also currently being
issued under separate prospectuses to Separate Accounts of Allmerica Financial
Life, First Allmerica and subsidiaries of First Allmerica which issue variable
or group annuity policies or variable premium life insurance policies ("mixed
funding"). Shares of the Trust may also be issued to Separate Accounts of
unaffiliated life insurance companies and qualified pension and retirement plans
outside of the separate account context ("shared funding"). The Trust may serve
as a funding vehicle for all types of variable annuity contracts and variable
life insurance contracts offered by various participating insurance companies
and for qualified plans. Although neither Allmerica Financial Life nor the Trust
currently foresees any disadvantage, it is conceivable that in the future such
mixed funding may be disadvantageous for variable or group annuity policyowners
or variable premium life insurance policyowners ("Policyowners"). The Trustees
of the Trust intend to monitor events in order to identify any conflicts that
may arise between such Policyowners and to determine what action, if any, should
be taken in response thereto. If the Trustees were to conclude that separate
funds should be established for variable annuity and variable premium life
separate accounts, Allmerica Financial Life would pay the attendant expenses.
As described in the Prospectus, shares of each Fund are sold and redeemed at
their net asset value as next computed after receipt of the purchase or
redemption order without the addition of any selling commission or "sales load."
The redemption price may be more or less than the shareholder's cost. Each
purchase is confirmed to the Separate Account in a written statement of the
number of shares purchased and the aggregate number of shares currently held.
Unlike the Money Market Fund which attempts to maintain a stable net asset
value, the net asset value of the other Funds will fluctuate.
The net asset value per share of each Fund is the total net asset value of that
Fund divided by the number of shares outstanding. The total net asset value of
each Fund is determined by computing the value of the total assets of that Fund
and deducting total liabilities, including accrued liabilities. The net asset
value of the shares of each Fund is determined once daily as of the close of the
New York Stock Exchange on each day on which the Exchange is open for trading,
and no less frequently than once daily on each other day (other than a day
during which no shares of the Fund were tendered for redemption and no order to
purchase or sell such shares was received by the Fund) in which there was a
sufficient degree in trading in the Fund's portfolio securities that the current
net asset value of the Fund's shares might be affected materially by changes in
the value of such portfolio securities.
Equity securities are valued based on market value if market quotations are
readily available. Portfolio securities listed or traded on national securities
exchanges, or reported on the National Association of Securities Dealers
national market reporting system, are valued at the last sale price, or, if
there have been no sales on that day, at the mean of the current bid and ask
price. Over-the-counter securities for which market quotations are readily
available are valued at the mean between the most recent bid and ask price.
Securities that are primarily traded on foreign exchanges generally are valued
at the preceding closing values of such securities on their respective
exchanges. In valuing assets, prices denominated in foreign currencies are
converted to U.S. dollar equivalents at the current exchange rate. As
authorized by the Trustees, debt securities (other than short-term obligations)
of the Funds other than the Money Market Fund are valued on the basis of
valuations furnished by pricing services which reflect broker-dealer supplied
valuations and electronic data processing techniques. Such methods include the
use of market transactions for comparable securities and various relationships
between securities which generally are recognized by institutional traders.
Short-term obligations having remaining maturities of sixty (60) days or less
are valued at amortized cost.
___________________________
Allmerica Investment Trust 42
<PAGE>
Short-term debt securities of the Funds other than the Money Market Fund having
a remaining maturity of more than sixty (60) days will be valued using a
"market-to-market" method based upon either the readily available market price
or, if reliable market quotations are not available, upon quotations by dealers
or issuers for securities of a similar type, quality and maturity. "Marking-to-
market" takes into account unrealized appreciation or depreciation due to
changes in interest rates or other factors which would influence the current
fair value of such securities.
All portfolio securities of the Money Market Fund will be valued by the
amortized cost method. The purpose of this method of calculation is to attempt
to maintain a constant net asset value per share of $1.00. No assurance can be
given that this goal can be attained. Amortized cost is an approximation of
market value determined by increasing systematically the carrying value of a
security acquired at a discount or reducing systematically the carrying value of
a security acquired at a premium, so that the carrying value is equal to
maturity value on the maturity date. It does not take into consideration
unrealized gains or losses. While the amortized cost method provides certainty
and consistency in portfolio valuation, it may result in valuations of portfolio
securities which are higher or lower than the prices at which the securities
could be sold. During such periods, the yield to investors in a Fund may differ
somewhat from that obtained if the Fund were to use mark-to-market value for its
portfolio securities. For example, if the use of amortized cost resulted in a
lower (higher) aggregate portfolio value on a particular day, a prospective
investor in the Fund would obtain a somewhat higher (lower) yield than would
result from marked-to-market valuation, and existing investors would receive
less (more) investment income.
The use of the amortized cost method of valuation by the Money Market Fund is
subject to rules of the Securities and Exchange Commission. Under the rules, the
Fund is required to maintain a dollar weighted average portfolio maturity of 90
days or less and to limit its investments to instruments which (1) its Sub-
Adviser, subject to the guidelines established by the Trustees, determines
present minimal credit risks; (2) have high quality ratings or are deemed
comparable, such that they are "eligible securities" as defined below; and (3)
have remaining maturity of thirteen months (397 days) or less at the time of
purchase, or are subject to a demand feature which reduces the remaining
maturity to thirteen months or less.
The Money Market Fund may purchase only "First or Second Tier eligible
securities" which are defined to include (1) securities which have received the
highest or second highest rating by at least two nationally recognized
statistical rating organizations ("NRSRO") or by only one NRSRO if only one has
rated the security and (2) securities which are unrated, but, in the Sub-
Adviser's opinion, are of comparable quality. The Money Market Fund may purchase
securities which were long-term at issuance but have a remaining maturity of
thirteen months or less at the time of purchase if (a) the issuer has comparable
short-term debt securities outstanding which are eligible securities or (b) the
issuer has no short-term rating and the securities have either no long-term
rating or a long-term rating in one of the two highest categories by an NRSRO.
The above standards must be satisfied at the time an investment is made. If the
quality of the investment later declines, the Fund (a) may dispose of the
security within five business days of the Sub-Adviser becoming aware of the new
rating, or (b) may continue to hold the investment, but the Trustees will
evaluate whether the security continues to present minimal credit risks.
As a part of the overall duty of care they owe to the Fund's shareholders, the
Trustees have established procedures reasonably designed to stabilize the net
asset value per share of the Money Market Fund as computed for the purpose of
distribution and redemption at $1.00 per share taking into account current
market conditions and the Fund's investment objective. At such reasonable
intervals as they deem appropriate in light of current market conditions, the
Trustees will compare the results of calculating the net asset value per share
based on amortized cost with the results based on available indications of
market value. If a difference of more than 1/2 of 1% occurs between the two
methods of valuation, the Trustees will consider taking whatever steps they deem
necessary to minimize any material dilution or other unfair results, such as
shortening the average portfolio maturity or realizing gains or losses.
All other securities and assets of a Fund, any any assets whose value does not,
in the Manager's opinion, reflect fair value, will be valued at fair value as
determined in good faith pursuant to procedures adopted by the Board of Trustees
of the Trust.
TAXATION OF THE FUNDS OF THE TRUST
The Trust qualifies under Subchapter M of the Internal Revenue Code so that the
Trust will not be subject to federal income tax on any net income and any
capital gains to the extent they are distributed or are deemed to have been
___________________________
43 Allmerica Investment Trust
<PAGE>
distributed to shareholders. See the prospectuses for the Separate Accounts for
tax consequences to investors.
To comply with regulations under Section 817(h) of the Code which contains
certain diversification requirements, each Fund of the Trust will be required to
diversify its investments so that on the last day of each quarter of a calendar
year, no more than 55% of the value of its assets is represented by any one
investment, no more than 70% is represented by any two investments, no more than
80% is represented by any three investments, and no more than 90% is represented
by any four investments. Generally, securities of a single issuer are treated as
one investment and obligations of each U.S. Government agency and
instrumentality (such as the Government National Mortgage Association) are
treated for purposes of Section 817(h) as issued by separate issuers. In
addition, any security issued, guaranteed or insured (to the extent so
guaranteed or insured) by the United States or an instrumentality of the U.S.
will be treated as a security issued by the U.S. Government or its
instrumentality, whichever is applicable.
UNDERWRITERS
Under a Distribution Agreement, AII has a nonexclusive right to use its best
efforts to obtain from investors unconditional orders for the continuous
offering of shares authorized for issuance by the Trust. AII does not receive
direct compensation for its services as distributor of the Trust. AII, at its
expense, may provide promotional incentives to dealers that sell variable
annuity contracts for which the Funds serve as investment vehicles.
CALCULATION OF PERFORMANCE DATA
The Trust may advertise performance information for the Funds and may compare
performance of the Funds with other investment or relevant indices. The Funds
may also advertise "yield", "total return" and other non-standardized total
return data. For the non-money market funds, "yield," is calculated differently
than for the Money Market Fund. The Money Market Fund may advertise "yield" or
"effective yield," ALL PERFORMANCE FIGURES ARE BASED ON HISTORICAL EARNINGS AND
ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. A Fund's share price, yield and
total return may fluctuate in response to market conditions and other factors,
and the value of Fund shares when redeemed may be more or less than their
original cost.
YIELDS AND TOTAL RETURNS QUOTED FOR THE FUNDS INCLUDE THE EFFECT OF DEDUCTING
THE FUNDS' EXPENSES, BUT MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE TO A
PARTICULAR INSURANCE PRODUCT. SINCE SHARES OF THE FUNDS CAN BE PURCHASED ONLY
THROUGH A VARIABLE ANNUITY OR VARIABLE LIFE CONTRACT, YOU SHOULD REVIEW
CAREFULLY THE PROSPECTUS OF THE INSURANCE PRODUCT YOU HAVE CHOSEN FOR
INFORMATION ON RELEVANT CHARGES AND EXPENSES. INCLUDING THESE CHARGES IN THE
QUOTATIONS OF THE FUNDS' YIELDS AND TOTAL RETURNS WOULD HAVE THE EFFECT OF
DECREASING PERFORMANCE. PERFORMANCE INFORMATION FOR THE INSURANCE PRODUCT MUST
ALWAYS ACCOMPANY, AND BE REVIEWED WITH, ANY PERFORMANCE INFORMATION QUOTED FOR
THE FUNDS.
YIELDS OF THE FUNDS OTHER THAN THE MONEY MARKET FUND
The 30-day (or one month) standard yields of the Funds other than the Money
Market Fund are calculated as follows:
YIELD = 2[( a - b + 1)/6/ - 1)]
-------------------------------
cd
Where: a = dividends and interest earned by a Fund during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period entitled to receive dividends; and
d = the maximum offering price per share on the last day of the
period.
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by a
Fund is recognized by accruing 1/360 of the stated dividend rate of the security
each day that the security is in the Fund. Except as noted below, interest
earned on debt obligations held by a Fund is calculated by computing the yield
to maturity of each obligation based on the market value of the obligation
(including actual accrued interest) at the close of business on the last
business day of each month, or, with respect to obligations purchased during the
month, the purchase price (plus actual accrued interest) and dividing the result
by 360 and multiplying the quotient by the market value of the obligation
(including actual accrued interest) in order to determine the interest income on
the obligation for each day of the subsequent month that the obligation is held
by the Fund. For purposes of this calculation, it is assumed that each month
contains 30 days. The maturity of an obligation with a call provision is the
next call date on which the obligation reasonably may be expected to be called
or, if none, the maturity date. With respect to debt obligations purchased at a
discount or premium, the formula generally calls for amortization of the
discount or premium. The amortization schedule will be adjusted monthly to
reflect changes in the market value of such debt obligations. Expenses accrued
for the period (variable "b" in the formula) include all recurring fees charged
by
___________________________
Allmerica Investment Trust 44
<PAGE>
a Fund to all shareholder accounts in proportion to the length of the base
period and the Fund's mean (or median) account size. Undeclared earned income
will be subtracted from the offering price per share (variable "d" in the
formula).
MONEY MARKET FUND - YIELD AND EFFECTIVE YIELD
The yield of the Money Market Fund refers to the net income generated by an
investment in the Fund over a stated seven-day period, expressed as an annual
percentage rate. Yield is computed by determining the net change (exclusive of
capital changes) in the value of a hypothetical pre-existing account having a
balance of 1 (one) share at the beginning of a seven-day calendar period,
dividing the net change in account value by the value of the account at the
beginning of the period, and multiplying the return over the seven-day period by
365/7. Thus the income is "annualized:" the amount of income generated by the
investment during the seven-day period is assumed to be generated each week over
a 52-week period and is shown as a percentage of the investment. For purposes
of the calculation, net change in account value reflects the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any additional shares, but does not reflect
realized gains or losses or unrealized appreciation or depreciation.
The effective yield is calculated similarly, but the income earned by an
investment in the Money Market Fund is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of this compounding
effect.
TOTAL RETURN
The Funds may advertise total return. The total return shows what an investment
in each Fund would have earned over a specific period of time (one, five, or ten
years since commencement of operations, if less) assuming that all distributions
and dividends by the Fund were reinvested, and less all recurring fees.
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statement of total return
or other performance data on the Fund will be accompanied by information on the
Fund's average annual total return over the most recent four calendar quarters
and the period from the Fund's inception of operations. The Fund also may
advertise aggregate annual total return information over different periods of
time.
A Fund's average annual total return is determined by reference to a
hypothetical $1,000 investment that includes capital appreciation and
depreciation for the stated period, according to the following formula:
P(1+T)n = ERV
Where: P = A hypothetical initial purchase of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of the hypothetical purchase at the
end of the period
Total return quoted in advertising reflects all aspects of the Fund's return,
including the effect of reinvesting dividends and capital gains distributions,
and any change in the Fund's net asset value per share over the period.
AVERAGE ANNUAL RETURNS are calculated by determining the change in value of a
hypothetical investment in the Fund over a stated period, and calculating the
annually compounded percentage rate that would have produced the same result if
the rate of growth or decline in value has been constant over the period.
Average annual returns covering periods of less than one year are calculated by
determining the Fund's total return for the period, extrapolating that return
for a full year, and stating the result as an annual return. Because this method
assumes that performance will remain constant for the entire year when in fact
it is unlikely that performance will remain constant, average annual returns for
a partial year must be viewed as strictly theoretical information.
INVESTORS ALSO SHOULD BE AWARE THAT A FUND'S PERFORMANCE IS NOT CONSTANT OVER
TIME, BUT VARIES FROM YEAR TO YEAR. AVERAGE ANNUAL RETURN REPRESENTS AVERAGED
FIGURES AS OPPOSED TO THE ACTUAL PERFORMANCE OF THE FUND.
_____________________
45 Allmerica Investment
Trust
<PAGE>
A Fund also may quote cumulative total returns which reflect the simple change
in value of an investment over a stated period. Average annual total returns and
cumulative total returns may be quoted as a percentage or as a dollar amount.
They may be calculated for a single investment, for a series of investments or
for a series of redemptions over any time period. Total returns may be broken
down into their components of income and capital in order to show their
respective contributions to total return. Performance information may be quoted
numerically or in a table, graph or similar illustration.
OTHER PERFORMANCE INFORMATION
Performance information for a Fund may be compared with: (1) the S&P 500, Dow
Jones Industrial Average, Lehman Aggregate Bond Index, Russell 2000, Russell
3000, Beta Adjusted Russell 3000, Lehman Government corporate and 90 day
Treasury Bills, Solomon High Yield Bond Index, Bank Rate Monitor, NASDAQ Index
or other unmanaged indices so that investors may compare a Fund's results with
those of a group of unmanaged securities widely regarded by investors as
representative of the securities markets in general; (2) other registered
investment companies or other investment products tracked (a) by Lipper
Analytical Services; Morningstar, Inc. and IBC/Donoghue, Inc., all widely used
independent research firms which rank mutual funds and other investment
companies by overall performance, investment objectives and assets, or (b) by
other services, companies, publications or persons who rank such investment
companies on overall performance or other criteria; (3) or the Consumer Price
Index (a measure for inflation) to assess the real rate of return from an
investment in the Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses.
All performance information is based on historical results and is not intended
to indicate future performance. Performance information reflects only the
performance of a hypothetical investment during the particular time period on
which the calculations are based. Performance information should be considered
in light of the investment objectives and policies, characteristics and quality
of the Fund and the market conditions during the given time period. Yield and
total return information may be useful for reviewing the performance of the Fund
and for providing a basis for comparison with other investment alternatives.
However, unlike bank deposits or other investments which pay a fixed yield for a
stated period of time, the yield and total return do fluctuate.
PERFORMANCE INFORMATION FOR PERIOD ENDED DECEMBER 31, 1999
Set forth below is average annual total return information for the Select
Emerging Markets Fund, Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select Value Opportunity Fund, Select International Equity
Fund, Select Growth Fund, Select Strategic Growth Fund, Core Equity Fund
(formerly the Growth Fund), Equity Index Fund, Select Growth and Income Fund,
Select Income Fund, Select Investment Grade Income Fund (formerly the Investment
Grade Income Fund), Government Bond Fund and Money Market Fund for the 1 year, 5
year, 10 year and/or since inception (the Trust began operations on April 29,
1985) periods ended December 31, 1999, yields for the Select Income Fund, Select
Investment Grade Income Fund and Government Bond Fund for the 30-day period
ended December 31, 1999 and yield and effective yield information for the Money
Market Fund for the seven-day period ended December 31, 1999.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
1 Year Period 5 Year Period 10 Year Period Since Inception
-------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Select Emerging Markets Fund 65.72% N/A N/A 15.22%*
Select Aggressive Growth Fund 38.66% 23.32% N/A 20.71%
Select Capital Appreciation Fund 25.36% N/A N/A 21.42%
Select Value Opportunity Fund (4.70)% 13.52% N/A 11.57%
Select International Equity Fund 31.71% 18.54% N/A 15.47%
Select Growth Fund 29.80% 29.06% N/A 20.57%
Select Strategic Growth Fund 16.06% N/A N/A 6.89%*
Core Equity Fund (formerly the Growth Fund) 29.33% 25.23% 17.31% 17.47%
Equity Index Fund 20.41% 27.77% N/A 20.66%
</TABLE>
______________________________
Allmerica Investment Trust 46
<PAGE>
<TABLE>
<CAPTION>
1 Year Period 5 Year Period 10 Year Period Since Inception
-------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Select Growth and Income Fund 18.43% 21.69% N/A 15.92%
Select Investment Grade Income Fund (0.97)% 7.38% 7.69% 8.26%
(formerly Investment Grade Income Fund)
Government Bond Fund 0.23% 6.22% N/A 6.16%
Money Market Fund 5.19% 5.47% 5.23% 5.80%
</TABLE>
* Not Annualized
The Core Equity Fund (formerly the Growth Fund), Select Investment Grade
Income Fund (formerly the Investment Grade Income Fund) and the Money Market
Fund all began business operations on April 29, 1985. The Equity Index Fund
began operations on September 28, 1990. The Government Bond Fund began
operations on August 26, 1991. The Select Aggressive Growth Fund, Select Growth
Fund, Select Growth and Income Fund. The Select Value Opportunity Fund began
operations on April 30, 1993. The Select International Equity Fund began
operations on May 2, 1994. The Select Capital Appreciation Fund began operations
on April 28, 1995. The Select Emerging Markets Fund and Select Strategic Growth
Fund began operations on February 20, 1998.
YIELDS FOR 30-DAY PERIODS
ENDED DECEMBER 31, 1999
-----------------------
(Unaudited)
Select Investment Grade Income Fund 7.04%
(formerly Investment Grade Income Fund)
Government Bond Fund 6.92%
<TABLE>
<CAPTION>
YIELD FOR SEVEN DAY PERIOD EFFECTIVE YIELD FOR SEVEN DAY PERIOD
ENDED DECEMBER 31, 1999 ENDED DECEMBER 31, 1999
----------------------- -----------------------
<S> <C> <C>
(Unaudited) (Unaudited)
Money Market Fund 5.57% 6.12%
</TABLE>
FINANCIAL STATEMENTS
The Trust's Financial Statements and related notes and the report of the
independent accountants contained in the Trust's annual report for the fiscal
year ended December 31, 1999 are incorporated by reference into this Statement
of Additional Information.
____________________________
47 Allmerica Investment Trust
<PAGE>
APPENDIX
Descriptions of Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Service, a division of McGraw-Hill Companies, Inc. ("S&P")
commercial paper and bond ratings:
COMMERCIAL PAPER RATINGS
MOODY'S EMPLOYS THREE DESIGNATIONS, ALL JUDGED TO BE INVESTMENT GRADE, TO
INDICATE THE RELATIVE REPAYMENT CAPACITY OF RATED ISSUERS. THE TWO HIGHEST
DESIGNATIONS ARE AS FOLLOWS:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity normally will be evidenced by the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This normally
will be evidenced by many of the characteristics cited above, but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be subject
more to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
S&P COMMERCIAL PAPER RATINGS ARE GRADED INTO SEVERAL CATEGORIES, RANGING FROM
"A-1" FOR THE HIGHEST QUALITY OBLIGATIONS TO "D" FOR THE LOWEST. THE TWO
HIGHEST RATING CATEGORIES ARE DESCRIBED AS FOLLOWS:
A-1 - This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MUNICIPAL OBLIGATIONS
Moody's ratings for state and municipal and other short-term obligations will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in the
short-term borrowing, while various factors of the first importance in long-term
borrowing risk are of lesser importance in the long run. Symbols used will be as
follows:
MIG-1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2 - This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
___________________________
Allmerica Investment Trust 48
<PAGE>
A short-term rating also may be assigned on an issue having a demand feature.
Such ratings will be designated as VMIG to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact that the source of payment may be limited to the external liquidity with no
or limited legal recourse to the issuer in the event that demand is not met.
VMIG-1 and VMIG-2 ratings carry the same definitions as MIG-1 and MIG-2,
respectively.
DESCRIPTION OF MOODY'S BOND RATINGS
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are referred to
as "gilt edge". Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are known
generally as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment some time in the
future.
Baa - Bonds that are rated Baa are considered to be medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba - Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
Those bonds within the Aa, A, Baa, Ba, and B categories that Moody's
believes possess the strongest credit attributes within those categories
are designated by the symbols Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF S&P'S DEBT RATINGS
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rates
categories.
____________________________
49 Allmerica Investment Trust
<PAGE>
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC, or C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation
and C the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.
Plus (+) or (-): The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major
categories.
___________________________
Allmerica Investment Trust 50
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
--------
Exhibit 1 Agreement and Declaration of Trust, dated October 11, 1984, as
amended May 12, 1992 was filed previously in Post-effective
Amendment No. 36 on April 15, 1998 and is incorporated herein by
reference.
Exhibit 2 Bylaws as amended May 10, 1999 were filed previously in Post-
effective Amendment No. 39 on February 28, 2000 and are
incorporated herein by reference.
Exhibit 3 None
Exhibit 4(a) Management Agreement between Registrant and Allmerica Financial
Investment Management Services, Inc. (the "Manager") dated April
16, 1998 (compensation schedule amended as of July 1, 2000) is
filed herein.
Exhibit 4(b) Sub-Adviser Agreement between the Manager and Schroder Investment
Management North America Inc. with respect to the Select Emerging
Markets Fund dated April 16, 1998 was filed previously in Post-
effective Amendment No. 37 on February 25, 1999 and is incorporated
herein by reference.
Exhibit 4(c) Sub-Adviser Agreement between the Manager and Nicholas-Applegate
Capital Management, L.P. with respect to the Select Aggressive
Growth Fund dated April 16, 1998 (compensation schedule amended as
of September 1, 1999) was filed previously in Post-effective
Amendment No. 39 on February 28, 2000 and is incorporated herein by
reference.
Exhibit 4(d) Sub-Adviser Agreement between the Manager and T. Rowe Price
Associates, Inc. with respect to the Select Capital Appreciation
Fund dated April 16, 1998 was filed previously in Post-effective
Amendment No. 37 on February 25, 1999 and is incorporated herein
by reference.
Exhibit 4(e) Sub-Adviser Agreement between the Manager and Cramer Rosenthal
McGlynn, LLC dated April 16, 1998 with respect to the Select
Value Opportunity Fund was filed previously in Post-effective
Amendment No. 37 on February 25, 1999 and is incorporated herein
by reference.
Exhibit 4(f) Sub-Adviser Agreement between the Manager and Bank of Ireland
Asset Management (U.S.) Limited with respect to the Select
International Equity Fund dated April 16, 1998 was filed previously
in Post-effective Amendment No. 37 on February 25, 1999 and is
incorporated herein by reference.
Exhibit 4(g) Sub-Adviser Agreement between the Manager and Putnam Investment
Management, Inc. with respect to the Select Growth Fund dated April
16, 1998 was filed previously in Post-effective Amendment No. 37 on
February 25, 1999 and is incorporated herein by reference.
Exhibit 4(h) Sub-Adviser Agreement between the Manager and TCW Investment
Management Company with respect to the Select Strategic Growth Fund
dated April 1, 2000 is filed herein.
Exhibit 4(i) Sub-Adviser Agreement between the Manager and Miller Anderson &
Sherrerd, LLP with respect to the Core Equity Fund (formerly the
Growth Fund) dated April 16, 1998 was filed previously in Post-
effective Amendment No. 37 on February 25, 1999 and is incorporated
herein by reference.
Exhibit 4(j) Sub-Adviser Agreement between the Manager and J. P. Morgan
Investment Management Inc. with respect to the Select Growth and
Income Fund dated April 1, 1999 was filed previously in Post-
effective Amendment No. 38 on April 29, 1999 and is incorporated
herein by reference.
Exhibit 4(k) Form of Sub-Adviser Agreement between the Manager and Western
Asset Management Company with respect to the Select Strategic
Income Fund dated July 1, 2000 is filed herein.
1
<PAGE>
Exhibit 4(l) Sub-Adviser Agreement between the Manager and Allmerica Asset
Management, Inc. with respect to the Equity Index Fund, Select
Investment Grade Income Fund (formerly the Investment Grade Income
Fund), Government Bond Fund and Money Market Fund dated April 16,
1998 was filed previously in Post- effective Amendment No. 37 on
February 25, 1999 and is incorporated herein by reference.
Exhibit 5 Distribution Agreement with Allmerica Investments, Inc. dated
February 25, 1998 was filed previously in Post-effective
Amendment No. 36 on April 15, 1998 and is incorporated herein by
reference.
Exhibit 6 None
Exhibit 7 Custodian Agreement with Investors Bank & Trust Company was filed
previously in Post-effective Amendment No. 39 on February 28, 2000
and is incorporated herein by reference.
Exhibit 8 Administration Services Agreement between Manager, Registrant and
Investors Bank & Trust Company was filed previously in Post-
effective Amendment No. 39 on February 28, 2000 and is incorporated
herein by reference.
Exhibit 8(a) Securities Lending Agency Agreement with Investors Bank & Trust
Company was filed previously in Post-effective Amendment No. 39 on
February 28, 2000 and is incorporated herein by reference.
Exhibit 9 Opinion and consent of counsel is filed herein.
Exhibit 10 Consent of Independent Accountants is filed herein.
2
<PAGE>
Exhibit 11 None
Exhibit 12 Participation Agreement among Registrant, the Manager and First
Allmerica Financial Life Insurance Company dated March 22, 2000 is
filed herein.
Exhibit 12(a) Participation Agreement among Registrant, the Manager and
Allmerica Financial Life Insurance and Annuity Company dated March
22, 2000 is filed herein.
Exhibit 13 None
Exhibit 14 None
Exhibit 15 None
Exhibit 16 Code of Ethics of Allmerica Investment Trust was filed previously
in Post-effective Amendment No. 39 on February 28, 2000 and is
incorporated herein by reference.
Exhibit 16(a) Code of Ethics of Schroder Investment Management North America
Inc. is filed herein.
Exhibit 16(b) Code of Ethics of Nicholas-Applegate Capital Management, L.P. is
filed herein.
Exhibit 16(c) Code of Ethics of T. Rowe Price Associates, Inc. is filed herein.
Exhibit 16(d) Code of Ethics of J.P. Morgan Investment Management Inc. is filed
herein.
Exhibit 16(e) Code of Ethics of TCW Investment Management Company is filed
herein.
Exhibit 16(f) Code of Ethics of Cramer Rosenthal McGlynn, LLC is filed
herein.
Exhibit 16(g) Code of Ethics of Miller Anderson & Sherrerd, LLP is filed herein.
Exhibit 17 Power of Attorney was filed previously in Post-effective Amendment
No. 39 on February 28, 2000 and is incorporated herein by
reference.
Exhibit 17(a) Power of Attorney of Paul D. Paganucci is filed herein.
Item 24. Persons Under Common Control with Registrant
--------------------------------------------
Registrant was organized by State Mutual Life Assurance Company of America, now
known as First Allmerica Financial Life Insurance Company ("First Allmerica"),
primarily for the purpose of providing a vehicle for the investment of assets
received by various separate investment accounts ("Separate Accounts")
established by First Allmerica and life insurance company subsidiaries of First
Allmerica including Allmerica Financial Life Insurance and Annuity Company
("Allmerica Financial Life"). The assets in such Separate Accounts are, under
state law, assets of the life insurance companies which have established such
accounts. Thus at any time First Allmerica and its life insurance company
subsidiaries will own such of Registrant's outstanding shares as are purchased
with Separate Account assets; however, where required to do so, First Allmerica
and its life insurance company subsidiaries will vote such shares only in
accordance with instructions received from owners of the contracts pursuant to
which sums are placed in such Separate Accounts.
Item 25. Indemnification
---------------
Article VIII of Registrant's Agreement and Declaration Trust, entitled
"Indemnification," was filed previously in Post-effective Amendment No. 36 on
April 15, 1998 and is incorporated herein by reference.
Article III, Section 12 of the Bylaws of First Allmerica was filed previously in
Post-effective Amendment No. 36 on April 15, 1998 and is incorporated herein by
reference.
Item 26. Business and Other Connections of Investment Manager and Sub-
-------------------------------------------------------------
Advisers
--------
The following Schedule Ds of Form ADV are incorporated by reference: Nicholas-
Applegate Capital Management, L.P., File No. 801-21442; Allmerica Asset
Management, Inc., File No. 801-44189; Allmerica Financial Investment Management
Services, Inc., File No. 801-55463; Miller, Anderson & Sherrerd, LLP, File No.
801-10437; Bank of Ireland Asset Management (U.S.) Limited, File No. 801-29606;
J.P. Morgan Investment Management Inc., File No. 801-21011; T. Rowe Price
Associates, Inc., File No. 801-856; Putnam Investment Management, Inc., File No.
801-7974; Cramer Rosenthal McGlynn, LLC, File No. 801-55244; Schroder Investment
Management North America Inc., File No. 801-15834; TCW Investment Management
Company, File No. 801-29075; and Western Asset Management Company, File No. 801-
08162.
3
<PAGE>
Item 27. Principal Underwriters
----------------------
(a) Allmerica Investments, Inc., the Distributor, does not act as principal
underwriter, depositor or investment adviser for any other investment company.
(b) The following information is provided with respect to the directors and
officers of Allmerica Investments, Inc., the Distributor:
<TABLE>
<CAPTION>
Name and Principal Business Positions and Offices with Positions and Offices with
Address Distributor Registrant
------- ----------- ----------
<S> <C> <C>
John F. Kelly Director N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
John F. O'Brien Director Trustee
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Stephen Parker Director N/A
Allmerica Financial Chief Executive Officer
440 Lincoln Street President
Worcester, MA 01653
- -------------------
Richard M. Reilly Director Trustee, President
Allmerica Financial Life Chairman of the Board
Insurance and Annuity Company
440 Lincoln Street
Worcester, MA 01653
- -------------------
Eric A. Simonsen Director N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Margaret L. Abbott Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Emil J. Aberizk Jr. Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Abigail M. Armstrong Counsel N/A
Allmerica Financial Assistant Secretary
440 Lincoln Street
Worcester, MA 01653
- -------------------
Edward T. Berger Chief Compliance Officer N/A
Allmerica Financial Vice President
440 Lincoln Street
Worcester, MA 01653
- -------------------
Michael J. Brodeur Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Business Positions and Offices with Positions and Offices with
Address Distributor Registrant
------- ----------- ----------
<S> <C> <C>
Kevin A. Chute Assistant Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Mark R. Colborn Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Claudia J. Eckels Vice President Operations N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Mary Eldridge Secretary/Clerk N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Lee W. Erickson Assistant Treasurer N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Philip L. Heffernan Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Paul T. Kane Assistant Vice President Assistant Vice President and
Allmerica Financial Treasurer
440 Lincoln Street (Principal Accounting Officer)
Worcester, MA 01653
- -------------------
Joseph W. MacDougall Jr. Assistant Secretary Assistant Secretary
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Daniel Mastrototaro Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Jennifer R. Mazza Assistant Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
William F. Monroe Jr. Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
David J. Mueller Chief Financial Officer N/A
Allmerica Financial Controller, Vice President
440 Lincoln Street Financial Operations Principal
Worcester, MA 01653
- -------------------
Patricia A. Norton-Gatto Assistant Treasurer N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Edward J. Parry III Treasurer N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- --------------------
Martin A. Snow Assistant Treasurer N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA
- -------------
Mark G. Steinberg Senior Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
Paula J. Testa Assistant Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- -------------------
</TABLE>
(c) Not Applicable.
Item 28. Location of Accounts and Records
--------------------------------
Each account, book, or other document required to be maintained by Registrant
pursuant to Section 31(a) of
5
<PAGE>
the Investment Company Act of 1940, as amended and Rules 31a-1 to 31a-3
thereunder are maintained by Registrant at 440 Lincoln Street, Worcester,
Massachusetts 01653 or on behalf of the Registrant by Investors Bank & Trust
Company, 200 Clarendon Street, 16th Floor, Boston, MA 02116.
Item 29. Management Services
-------------------
Not applicable
Item 30. Undertakings
------------
Not applicable
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company
Act, Allmerica Investment Trust has duly caused this Registration Statement to
be signed on its behalf by the undersigned, duly authorized, in the City of
Worcester and Commonwealth of Massachusetts on the 31st day of March, 2000.
ALLMERICA INVESTMENT TRUST
--------------------------
By: /s/ Richard M. Reilly
-------------------------------
Richard M. Reilly, President
Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed below by the following persons in the capacities and on the
date(s) indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Richard M. Reilly President, Chief Executive Officer March 31, 2000
- -----------------------
Richard M. Reilly and Trustee
John F. O'Brien Chairman of the Board and Trustee March 31, 2000
Paul T. Kane Treasurer (Principal Accounting Officer) March 31, 2000
P. Kevin Condron Trustee March 31, 2000
Cynthia A. Hargadon Trustee March 31, 2000
Gordon Holmes Trustee March 31, 2000
John P. Kavanaugh Trustee March 31, 2000
Bruce E. Langton Trustee March 31, 2000
Attiat F. Ott Trustee March 31, 2000
Paul D. Paganucci Trustee March 31, 2000
Ranne P. Warner Trustee March 31, 2000
</TABLE>
Richard M. Reilly, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named Trustees and officers of Allmerica Investment
Trust pursuant to the Powers of Attorney dated February 15, 2000, February 16,
2000 and March 29, 2000 duly executed by such persons.
/s/ Richard M. Reilly
- -------------------------------------
Richard M. Reilly, Attorney-In-Fact
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
Exhibit 4(a) Management Agreement (the "Management Agreement") between
Registrant and Allmerica Financial Investment Management
Services, Inc. (the "Manager") dated April 16, 1998 (compensation
schedule amended as of July 1, 2000).
Exhibit 4(h) Sub-Adviser Agreement between the Manager and TCW Investment
Management Company with respect to the Select Strategic Growth
Fund dated April 1, 2000.
Exhibit 4(k) Form of Sub-Adviser Agreement between the Manager and Western
Asset Management Company with respect to the Select Strategic
Income Fund dated July 1, 2000.
Exhibit 9 Opinion and consent of counsel.
Exhibit 10 Consent of Independent Accountants.
Exhibit 12 Participation Agreement among Registrant, the Manager and First
Allmerica Financial Life Insurance Company dated March 22, 2000.
Exhibit 12(a) Participation Agreement among Registrant, the Manager and
Allmerica Financial Life Insurance and Annuity Company dated
March 22, 2000.
Exhibit 16(a) Code of Ethics of Schroder Investment Management North America
Inc.
Exhibit 16(b) Code of Ethics of Nicholas-Applegate Capital Management, L.P.
Exhibit 16(c) Code of Ethics of T. Rowe Price Associates, Inc.
Exhibit 16(d) Code of Ethics of J.P. Morgan Investment Management Inc.
Exhibit 16(e) Code of Ethics of TCW Investment Management Company.
Exhibit 16(f) Code of Ethics of Cramer Rosenthal McGlynn LLC.
Exhibit 16(g) Code of Ethics of Miller Anderson & Sherrerd, LLP.
Exhibit 17(a) Power of Attorney of Paul D. Paganucci.
<PAGE>
Exhibit 4(a)
MANAGEMENT AGREEMENT
Allmerica Financial Investment Management Services, Inc. (the "Adviser") and
Allmerica Investment Trust ("Trust") hereby confirm their Agreement covering
services as hereinafter set forth. The terms and provisions of this Agreement
shall take effect on April 16, 1998.
1. The Trust hereby retains the Adviser as investment adviser for the series
of shares of the Trust as listed on Schedule A attached hereto and for such
other series of shares as the Trust and the Adviser may from time to time
agree on, each such series of shares being hereinafter referred to as a
"Fund." The Adviser shall also manage, supervise and conduct the other
affairs and business of the Trust and matters incidental thereto, subject
always to the provisions of the Trust's Agreement and Declaration of Trust,
Bylaws and of the provisions of the Investment Company Act of 1940, as
amended ("1940 Act"). In providing and performing such services, the
Adviser will function in cooperation with and subject always to the
direction and control of the Trustees of the Trust and in cooperation with
the Trust's authorized officers and representatives.
2. Investment Advisory Services. The Adviser agrees to act as the investment
----------------------------
adviser for, and to manage the investment of assets of, each Fund and to
make purchases and sales of securities for each Fund's account. The Adviser
shall assume responsibility for the management of the portfolio securities
of each Fund and the making and execution of all investment decisions for
each Fund.
A. Investment of each Fund's assets shall be in accordance with the
objectives and policies of each Fund as set forth in the current
Registration Statement of the Trust filed with the Securities and
Exchange Commission (the "SEC"), and any applicable federal and state
laws.
B. The Adviser shall report to the Trustees of the Trust (the "Trustees")
at such times and in such detail as the Trustees may from time to time
determine to be appropriate in order to permit the Trustees to
determine the adherence by the Adviser to the investment policies and
legal requirements of each Fund.
C. The Adviser shall place all orders for the purchase and sale of
portfolio investments for the account of the Funds with issuers,
brokers or dealers selected by the Adviser which may include brokers
or dealers affiliated with the Adviser. In the selection of such
brokers or dealers and the placing of such orders, the Adviser shall
always seek best execution (except to the extent permitted by the next
sentence hereof), which is to place portfolio transactions where the
Trust can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuous basis
by a broker or dealer, and to deal directly with a principal market
maker in connection with over-the-counter transactions, except when it
is believed that best execution is obtainable elsewhere. Subject to
such policies as the Trustees may determine, the
<PAGE>
Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by
reason of its having caused the Trust to pay a broker or dealer that
provides brokerage and research services an amount of commission for
effecting a portfolio investment transaction which is in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction, if the Adviser determines in good faith
that such excess amount of commission was reasonable in relation to
the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Adviser and its
affiliates with respect to the Trust and to other clients as to which
the Adviser or any affiliate of the Adviser exercises investment
discretion.
D. Subject to the provisions of the Trust's Agreement and Declaration of
Trust and the 1940 Act, the Adviser, at its expense, may select and
contract with one or more investment advisers (the "Sub-Advisers") to
provide to the Adviser such investment advice relating to the assets
of a Fund and related services as the Adviser may from time to time
deem appropriate, or delegate any or all of its functions hereunder to
one or more Sub-Advisers, provided that the Trustees shall approve any
such contract with a Sub-Adviser. So long as any Sub-Adviser serves as
investment adviser to any Fund pursuant to a Sub-Adviser Agreement in
substantially the form attached hereto as Exhibit A (the "Sub-Adviser
Agreement"), the obligation of the Adviser under this Agreement with
respect to managing the investment portfolio of such Fund shall be,
subject in any event to the control of the Trustees, to determine and
review with such Sub-Adviser the investment objectives, policies and
restrictions and placing of all orders for the purchase and sale of
portfolio securities for such Fund, all as further described in the
Sub-Adviser Agreement. The Adviser will compensate any Sub-Adviser of
any Fund for its services to such Fund. The Adviser may terminate the
services of any Sub-Adviser at any time, subject to the approval of
the Trustees, and shall at such time assume the responsibilities of
such Sub-Adviser unless and until a successor Sub-Adviser is selected.
3. Management Services. The Adviser will perform (or arrange for the
-------------------
performance by its affiliates) the management and administrative services
necessary for the operation of the Trust.
A. Subject to the supervision of the Trustees, and unless otherwise
provided herein the Adviser shall be responsible for the day to day
business activities of the Trust and shall perform all services
appropriate thereto, including: (i) providing for members of its
organization to serve without salaries as Trustees, officers, or
agents of the Trust; (ii) furnishing at its expense such office space
as may be necessary for the suitable conduct of the Trust's business
(other than pricing and bookkeeping) and all necessary light, heat,
telephone service, office equipment stationery, and stenographic,
clerical, mailing and messenger service in
2
<PAGE>
connection with such office; (iii) on behalf of the Funds of the
Trust, supervising relations with, and monitoring the performance of,
custodians, depositories, transfer and pricing agents, accountants,
attorneys, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary or desirable; (iv)
preparing all general shareholder communications, including
shareholder reports; (v) conducting shareholder relations; (vi)
maintaining the Trust's existence and its records; (vii) during such
times as shares are publicly offered, maintaining the registration and
qualification of the Trust's shares under federal and state law; and
(viii) investigating the development of management and shareholder
services (and, if appropriate, assisting in the development and
implementation of such services) designed to enhance the value or
convenience of the Funds of the Trust as investment vehicles.
B. The Adviser shall also furnish such reports, evaluations, information
or analyses to the Trust as the Trustees may request from time to time
or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Trustees with respect to Fund policies, and
shall carry out such policies as are adopted by the Trustees. The
Adviser shall, subject to review by the Trustees, furnish such other
services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement.
Should the Trust have occasion to call upon the Adviser for services
not herein contemplated or through the Adviser to arrange for the
services of others, the Adviser will act for the Trust upon request to
the best of its ability, the compensation for its services to be
agreed upon with respect to each such occasion as it arises.
C. The Adviser will not furnish the Trust the following services under
this Agreement:
(i) determinations of the Trust's net assets and the net asset value
per share of its shares ("pricing");
(ii) maintenance of accounts, books and records as required by
Section 31(a) of the 1940 Act and the rules thereunder
("bookkeeping"); and
(iii) provision of custodian services, transfer agent services,
dividend disbursement and reinvestment services, shareholder
services, or shareholder recordkeeping services.
4. Expenses of the Trust. It is understood that the Trust will pay all its
---------------------
expenses other than those expressly stated to be payable by the Adviser
hereunder. The expenses payable by the Trust shall include, without
limitation; (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses associated with pricing and
bookkeeping; (iv) fees and expenses of its Trustees other than those who
are "interested
3
<PAGE>
persons" of the Trust or the Adviser; (v) legal and audit expenses; (vi)
custodian, registrar and transfer agent fees and expenses; (vii) fees and
expenses related to the registration and qualification of the Trust and the
Fund's shares for distribution under state and federal securities laws;
(viii) expenses of printing and mailing reports and notices and proxy
material to shareholders of the Funds; (ix) all other expenses incidental
to holding meetings of the Trust's shareholders, including proxy
solicitations therefor; (x) insurance premiums for fidelity and other
coverage; (xi) its proportionate share of association membership dues;
(xii) expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xiii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders: and (ix) such non-
recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust is a party and the
legal obligation which the Trust may have to indemnify the Trust's Trustees
and officers with respect thereto.
5. Compensation. As full compensation for the services furnished and expenses
------------
borne by the Adviser herein, the Trust will pay a monthly fee to the
Adviser, computed and paid monthly at an annual rate of the average daily
net assets of each Fund, as described in Schedule B which is attached
hereto.
The fee computed with respect to the net assets of each Fund shall be paid
from the assets of such Fund. The average daily net assets of each Fund
shall be determined by taking an average of all of the determinations of
net asset value during each month at the close of business on each business
day during such month while this Agreement is in effect. The fee for each
month shall be payable within five (5) business days after the end of the
month.
In the event that expenses of any Fund for any fiscal year should exceed
the expense limitation on investment company expenses imposed by any
statute or regulatory authority of any jurisdiction in which shares of the
Fund are then qualified for offer and sale, the compensation due the
Adviser such period shall be reduced by the amount of such excess by a
reduction or refund thereof, subject to readjustment during the Fund's
fiscal year. In the event that the expenses with respect to any Fund should
exceed any expense limitation which the Adviser may, by written notice to
the Trust, voluntarily declare to be effective, subject to such terms and
conditions as the Adviser may prescribe in the notice, the compensation due
the Adviser shall be reduced, and, if necessary, the Adviser shall bear
expenses with respect to the Fund, to the extent required by the expense
limitation.
If the Adviser shall serve for any period less than a full month, the
foregoing compensation shall be prorated according to the proportion which
such period bears to a full month.
4
<PAGE>
In addition to the foregoing, the Trust will reimburse the Adviser for the
traveling and incidental expenses (other than the regular Worcester office
expenses described above) which may be incurred in connection with special
work performed at its request.
6. Limitation of Liability. The Adviser shall be under no liability to the
-----------------------
Trust or its Shareholders or creditors for any matter or thing in
connection with the performance of any of the Adviser's services hereunder
or for any losses sustained or that may be sustained in the purchase, sale
or retention of any investment for the Funds of the Trust made by it in
good faith; provided, however, that nothing herein contained shall be
construed to protect the Adviser against any liability to the Trust by
reason of the Adviser's own willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder.
7. Amendment. This Agreement may be amended at any time by mutual consent of
---------
the parties, provided that such amendment shall have been approved (i) by
vote of a majority of the outstanding voting securities of each Fund
affected by such amendment, and (ii) by vote of a majority of the Trustees
of the Trust who are not interested persons of the Adviser or any Sub-
Adviser or of the Trust, cast in person at a meeting called for the purpose
of voting on such approval.
8. Termination. This Agreement shall be effective as of the date executed, and
-----------
shall remain in full force and effect as to each Fund continuously
thereafter, until terminated as provided below.
A. Unless terminated as herein provided, this Agreement shall remain in
full force and effect through May 30, 1998, and shall continue in full
force and effect for successive periods of one year thereafter, but
only so long as each such continuance is approved (i) by the Trustees
or by the affirmative vote of a majority of the outstanding voting
securities of a Fund, and (ii) by a vote of a majority of the Trustees
who are not interested persons of the Trust or of the Adviser or of any
Sub-Adviser, by vote cast in person at a meeting called for the purpose
of voting on such approval; provided, however, that if the continuance
of this Agreement is submitted to the shareholders of a Fund for their
approval and such shareholders fail to approve such continuance of this
Agreement as provided herein, the Adviser may continue to serve
hereunder in a manner consistent with the 1940 Act and the rules and
regulations thereunder.
B. This Agreement may be terminated as to any Fund without the payment of
any penalty by vote of the Trustees or by vote of a majority of the
outstanding voting securities of such Fund at any annual or special
meeting or by the Adviser on sixty days' written notice.
C. This Agreement shall automatically terminate in the event of its
assignment.
5
<PAGE>
9. Agreement and Declaration of Trust. A copy of the Trust's Agreement and
----------------------------------
Declaration is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed
by the Trustees as Trustees and not individually, and that the obligations
of this instrument are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets and property
of the Trust.
10. Other Agreements, etc. It is understood that any of the shareholders,
---------------------
Trustees, officers and employees of the Trust may be a shareholder,
partner, director, officer or employee of, or be otherwise interested in,
the Adviser, and in any person controlled by or under common control with
the Adviser, and that the Adviser and any person controlled by or under
common control with the Adviser may have an interest in the Trust. It is
also understood that the Adviser and persons controlled by or under common
control with the Adviser have and may have advisory, management service or
other contracts with other organizations and persons, and may have other
interests and businesses.
11. Miscellaneous. The Adviser, its directors, officers, and its employees
-------------
retain the right to engage in other business, and to render portfolio
management, investment advisory, or other services of any kind to any other
corporation, firm, individual, or association. Neither the Adviser nor any
officer, director, or shareholder of the Adviser shall act as principal or
receive any compensation in connection with the purchase or sale of
securities by or on behalf of the Trust other than the compensation
provided in this Agreement.
The Adviser is an independent contractor and not an agent of the Trust.
The Trust recognizes the Adviser's control of the names "SMA Investment
Trust" and "Allmerica Investment Trust" and agrees that its right to use
such names is non-exclusive and can be terminated by the Adviser at any
time. The use of such names will be terminated automatically if at any time
the Adviser or affiliate of the Adviser ceases to be investment adviser for
the Trust.
For the purposes of this Agreement, majority of the outstanding voting
securities of a Fund at any annual or special meeting shall mean a
concurring vote of (i) 67% or more of the shares of the Fund represented at
such meeting, if more than 50% of the outstanding shares of the Fund are
represented in person or by proxy, or (ii) 50% of the outstanding shares of
the Fund, whichever is less.
For the purposes of this Agreement, the terms "interested person" and
"assignment" shall have their respective meanings defined in the 1940 Act,
subject, however, to such exemptions as may be granted by the SEC under
said Act; the term "specifically approve at least annually" shall be
construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder; and the term "brokerage and research services"
shall
6
<PAGE>
have the meaning given in the Securities Exchange Act of 1934 and the rules
and regulations thereunder.
Each party hereto shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Securities and
Exchange Commission, the NASD and State insurance regulators) and shall
permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or
the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner, or the Insurance
Commissioner of any other state, with any information or reports in
connection with services provided under this Agreement which such
Commissioner may reasonably request in order to ascertain whether the
variable contracts operations of the Company are being conducted in a
manner consistent with the state's regulations concerning variable
contracts and any other applicable law or regulations.
This Agreement shall be effective on the date executed. Executed this
16/th/ day of April, 1998.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
/s/ Julia Fletcher By: /s/ Richard M. Reilly
- ------------------ ---------------------
Witness
ALLMERICA INVESTMENT TRUST
/s/ Julia Fletcher By: /s/ Thomas P. Cunningham
- ------------------ ------------------------
Witness
7
<PAGE>
SCHEDULE A
SERIES OF SHARES OF THE TRUST
as of Effective July 1, 2000
Select Emerging Markets Fund
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select International Equity Fund
Select Growth Fund
Select Strategic Growth Fund
Core Equity Fund
Equity Index Fund
Select Growth and Income Fund
Select Strategic Income Fund
Select Investment Grade Income Fund
Government Bond Fund
Money Market Fund
8
<PAGE>
SCHEDULE B
COMPENSATION
Effective as of July 1, 2000
As full compensation for the services furnished and expenses borne by the
Adviser herein, the Trust will pay a monthly fee to the Adviser, computed and
paid monthly at an annual rate of the average daily net assets of each Fund, as
described below:
<TABLE>
<CAPTION>
Select Select Select Capital Select Value Select Select
Emerging Aggressive Appreciation Opportunity International Growth
Markets Fund Growth Fund Fund Fund Equity Fund Fund
------------- ------------ ---- ---- -------------- ----
<S> <C> <C> <C> <C> <C> <C>
Manager Fee 1.35% (1) (1) (2) (1) (2)
Select Select Select
Strategic Core Equity Select Growth Strategic Investment
Growth Equity Index and Income Income Grade Income
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
Manager Fee 0.85% (1) (3) (1) (4) (4)
Government Money
Bond Market
Fund Fund
---- ----
Manager Fee 0.50% (3)
</TABLE>
- --------------------------------------------------------------------------------
(1) The Manager's fees for the Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select International Equity Fund, Core Equity Fund and
Select Growth and Income Fund, computed daily at an annual rate based on the
average daily net assets of each Fund, are based on the following schedule:
<TABLE>
<CAPTION>
Select Core Select Growth
Select Aggressive Select Capital International Equity and Income
Assets Growth Fund Appreciation Fund Equity Fund Fund Fund
- ------ --------------- ------------------ ------------ ----------- -----
<S> <C> <C> <C> <C> <C>
First $100 Million.................. 1.00% 1.00% 1.00% 0.60% 0.75%
$100 to $250 Million................ 0.90% 0.90% 0.90% 0.60% 0.70%
$250 to $500 Million................ 0.80% 0.80% 0.85% 0.40% 0.65%
$500 to $1 Billion.................. 0.70% 0.70% 0.85% 0.35% 0.65%
Over $1 Billion..................... 0.65% 0.65% 0.85% 0.35% 0.65%
</TABLE>
9
<PAGE>
(2) The Manager's fee for the Select Value Opportunity Fund and Select Growth
Fund, computed daily at an annual rate based on the average daily net assets
of the Fund, is based on the following schedule:
Select
Value Select
Opportunity Growth
Assets Fund Fund
------ ---- ----
First $100 Million........... 1.00% 0.85%
Next $150 Million............ 0.85% 0.85%
Next $250 Million............ 0.80% 0.80%
Next $250 Million............ 0.75% 0.75%
Over $750 Million............ 0.70% 0.70%
(3) The Manager's fees for the Equity Index Fund and Money Market Fund, computed
daily at an annual rate based on the average daily net assets of each Fund,
are based on the following schedule:
Equity Money
Index Market
Assets Fund Fund
------ ---- ----
First $50 Million............ 0.35% 0.35%
Next $200 Million............ 0.30% 0.25%
Over $250 Million............ 0.25% 0.20%
(4) The Manager's fees for the Select Strategic Income Fund and Select
Investment Grade Income Fund, computed daily at an annual rate based on the
average daily net assets of each Fund, are based on the following schedule:
Select
Select Investment
Strategic Grade
Assets Income Fund Income Fund
------ ------------ ------------
First $50 Million............ 0.60% 0.50%
Next $50 Million............. 0.55% 0.45%
Over $100 Million............ 0.45% 0.40%
10
<PAGE>
EXHIBIT A
FORM OF
SUB-ADVISER AGREEMENT
SUB-ADVISER AGREEMENT executed as of ________________,1998 between Allmerica
Financial Investment Management Services, Inc. (the "Manager") and
__________________________________ (the "Sub-Adviser").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser,
at its expense, will furnish continuously an investment program for
the following series of shares of the Trust: the
__________________________ (the "Fund") and such other series of
shares as the Trust, the Manager and the Sub-Adviser may from time to
time agree on (together, the "Funds"). The Sub-Adviser will make
investment decisions on behalf of the Fund and place all orders for
the purchase and sale of portfolio securities. In the performance of
its duties, the Sub-Adviser will comply with the provisions of the
Agreement and Declaration of Trust and Bylaws of the Trust and the
objectives and policies of the Fund, as set forth in the current
Registration Statement of the Trust filed with the Securities and
Exchange Commission ("SEC") and any applicable federal and state laws,
and will comply with other policies which the Trustees of the Trust
(the "Trustees") or the Manager, as the case may be, may from time to
time determine and which are furnished to the Sub-Adviser. The
Sub-Adviser shall make its officers and employees available to the
Manager from time to time at reasonable times to review investment
policies of the Fund and to consult with the Manager regarding the
investment affairs of the Fund. In the performance of its duties
hereunder, the Sub-Adviser is and shall be an independent contractor
and, unless otherwise expressly provided or authorized, shall have no
authority to act for or represent the Trust in any way or otherwise be
deemed to be an agent of the Trust.
(b) The Sub-Adviser, at its expense, will furnish (i) all investment and
management facilities, including salaries of personnel necessary for
it to perform the duties set forth in this Agreement, and (ii)
administrative facilities, including clerical personnel and equipment
necessary for the conduct of the investment affairs of the Fund
(excluding brokerage expenses and pricing and bookkeeping services).
11
<PAGE>
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investments for the Fund with issuers, brokers or dealers
selected by the Sub-Adviser which may include brokers or dealers
affiliated with the Sub-Adviser. In the selection of such brokers or
dealers and the placing of such orders, the Sub-Adviser always shall seek
best execution (except to the extent permitted by the next sentence
hereof), which is to place portfolio transactions where the Fund can
obtain the most favorable combination of price and execution services in
particular transactions or provided on a continuing basis by a broker or
dealer, and to deal directly with a principal market maker in connection
with over-the-counter transactions, except when it is believed that best
execution is obtainable elsewhere. Subject to such policies as the
Trustees may determine, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Trust to pay a broker
or dealer that provides brokerage and research services 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, if the Sub-Adviser determines in good faith
that such excess amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or the
overall responsibilities of the Sub-Adviser and its affiliates with
respect to the Trust and to other clients of the Sub-Adviser as to which
Sub-Adviser or any affiliate of the Sub-Adviser exercises investment
discretion.
2. OTHER AGREEMENTS
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-Adviser, and in any person
controlled by or under common control with the Sub-Adviser, and that the Sub-
Adviser and any person controlled by or under common control with the Sub-
Adviser may have an interest in the Trust. It is also understood that the Sub-
Adviser and persons controlled by or under common control with the Sub-Adviser
have and may have advisory, management service or other contracts with other
organizations and persons, and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered a fee, determined as described in Schedule A which
is attached hereto and made a part hereof. Such fee shall be paid by the
Manager and not by the Trust.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A attached hereto) shall not be amended
as to any
12
<PAGE>
Fund unless such amendment is approved at a meeting by the affirmative vote of
a majority of the outstanding voting securities of the Fund, if such approval
is required under the Investment Company Act of 1940, as amended ("1940 Act"),
and by the vote, cast in person at a meeting called for the purpose of voting
on such approval, of a majority of the Trustees who are not interested persons
of the Trust or of the Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain
in full force and effect as to each Fund continuously thereafter, until
terminated as provided below:
(a) Unless terminated as herein provided, this Agreement shall remain in full
force and effect through _______________ and shall continue in full force
and effect for successive periods of one year thereafter, but only so long
as such continuance is specifically approved at least annually (i) by the
Trustees or by the affirmative vote of a majority of the outstanding
voting securities of the Fund, and (ii) by a vote of a majority of the
Trustees who are not interested persons of the Trust or of the Manager or
of any Sub-Adviser, by vote cast in person at a meeting called for the
purpose of voting on such approval; provided, however, that if the
continuance of this Agreement is submitted to the shareholders of the Fund
for their approval and such shareholders fail to approve such continuance
of this Agreement as provided herein, the Sub-Adviser may continue to
serve hereunder in a manner consistent with the 1940 Act and the rules and
regulations thereunder.
(b) This Agreement may be terminated as to any Fund without the payment of any
penalty by the Manager, subject to the approval of the Trustees, by vote
of the Trustees, or by vote of a majority of the outstanding voting
securities of such Fund at any annual or special meeting or by the Sub-
Adviser, in each case on sixty days' written notice.
(c) This Agreement shall terminate automatically, without the payment of any
penalty, in the event of its assignment or in the event that the
Management Agreement with the Manager shall have terminated for any
reason.
(d) In the event of termination of this Agreement, the Fund will no longer use
the name "______________" or "_________________" in materials relating to
the Fund except as may be required by the 1940 Act and the rules and
regulations thereunder.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding voting securities" means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by
13
<PAGE>
proxy, or (b) of the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "control", "interested
person" and "assignment" shall have their respective meanings defined in the
1940 Act and rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the SEC under said Act; the term "specifically
approve at least annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder; and the term "brokerage and
research services" shall have the meaning given in the Securities Exchange Act
of 1934 and the rules and regulations thereunder.
7. NON-LIABILITY OF SUB-ADVISER
The Sub-Adviser shall be under no liability to the Trust, the Manager or
the Trust' s Shareholders or creditors for any matter or thing in connection
with the performance of any of the Sub-Adviser's services hereunder or for any
losses sustained or that may be sustained in the purchase, sale or retention
of any investment for the Funds of the Trust made by it in good faith;
provided, however, that nothing herein contained shall be construed to protect
the Sub-Adviser against any liability to the Trust by reason of the Sub-
Adviser's own willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed by the Trustees as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees, officers or shareholders individually but are binding
only upon the assets and property of the appropriate Fund.
14
<PAGE>
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and ___________________________ has caused this
instrument to be signed in duplicate on its behalf by its duly authorized
representative, all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By: ______________________________________
Its: ______________________________________
(NAME OF SUB-ADVISER)
By: ______________________________________
Its: ______________________________________
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By: ______________________________________
Its: ______________________________________
15
<PAGE>
SCHEDULE A
----------
The Manager will pay to the Sub-Adviser as full compensation for the Sub-
Adviser's services rendered, a fee computed daily and paid quarterly at an
annual rate of the average daily net assets of the Fund as described below:
NET ASSETS FEE RATE
---------- --------
The average daily net assets of the Fund shall be determined by taking an
average of all of the determinations of net asset during each month at the close
of business on each business day during such month while this Agreement is in
effect.
The fee for each quarter shall be payable within ten (10) business days after
the end of the quarter.
If the Sub-Adviser shall serve for any period less than a full month, the
foregoing compensation shall be prorated according to the proportion which such
period bears to a full month.
16
<PAGE>
Exhibit 4(h)
SUB-ADVISER AGREEMENT
SUB-ADVISER AGREEMENT executed as of April 1, 2000 between Allmerica Financial
Investment Management Services, Inc. (the "Manager") and TCW Investment
Management Company (the "Sub-Adviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser, at
its expense, will furnish continuously an investment program for the
following series of shares of the Trust: the Select Strategic Growth Fund
(the "Fund") and such other series of shares as the Trust, the Manager
and the Sub-Adviser may from time to time agree on (together, the
"Funds"). The Sub-Adviser will make investment decisions on behalf of the
Fund and place all orders for the purchase and sale of portfolio
securities. In the performance of its duties, the Sub-Adviser will comply
with the provisions of the Agreement and Declaration of Trust and Bylaws
of the Trust and the objectives and policies of the Fund, as set forth in
the current Registration Statement of the Trust filed with the Securities
and Exchange Commission ("SEC") and any applicable federal and state
laws, and will comply with other policies which the Trustees of the Trust
(the "Trustees") or the Manager, as the case may be, may from time to
time determine and which are furnished to the Sub-Adviser. The Sub-
Adviser shall make its officers and employees available to the Manager
from time to time at reasonable times to review investment policies of
the Fund and to consult with the Manager regarding the investment affairs
of the Fund. In the performance of its duties hereunder, the Sub-Adviser
is and shall be an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent
the Trust in any way or otherwise be deemed to be an agent of the Trust.
(b) The Sub-Adviser, at its expense, will furnish (i) all investment and
management facilities, including salaries of personnel necessary for it
to perform the duties set forth in this Agreement, and (ii)
administrative facilities, including clerical personnel and equipment
necessary for the conduct of the investment affairs of the Fund
(excluding brokerage expenses and pricing and bookkeeping services).
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investments for the Fund with issuers, brokers or dealers
selected by the Sub-Adviser which may include brokers or dealers
affiliated with the Sub-Adviser. In the selection of such brokers or
dealers and the placing of such orders, the Sub-Adviser always shall seek
best execution (except to the extent permitted by the next sentence
hereof), which
<PAGE>
is to place portfolio transactions where the Fund can obtain the most
favorable combination of price and execution services in particular
transactions or provided on a continuing basis by a broker or dealer, and
to deal directly with a principal market maker in connection with over-
the-counter transactions, except when it is believed that best execution
is obtainable elsewhere. Subject to such policies as the Trustees may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Trust to pay a broker or dealer
that provides brokerage and research services 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, if the Sub-Adviser determines in good faith that such excess
amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the overall
responsibilities of the Sub-Adviser and its affiliates with respect to
the Trust and to other clients of the Sub-Adviser as to which Sub-Adviser
or any affiliate of the Sub-Adviser exercises investment discretion.
2. OTHER AGREEMENTS
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-Adviser, and in any
person controlled by or under common control with the Sub-Adviser, and that
the Sub-Adviser and any person controlled by or under common control with the
Sub-Adviser may have an interest in the Trust. It is also understood that the
Sub-Adviser and persons controlled by or under common control with the Sub-
Adviser have and may have advisory, management service or other contracts
with other organizations and persons, and may have other interests and
businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered a fee, determined as described in Schedule A
which is attached hereto and made a part hereof. Such fee shall be paid by
the Manager and not by the Trust.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A attached hereto) shall not be amended
as to any Fund unless such amendment is approved at a meeting by the
affirmative vote of a majority of the outstanding voting securities of the
Fund, if such approval is required under the Investment Company Act of 1940,
as amended ("1940 Act"), and by the vote, cast in person at a meeting called
for the purpose of voting on such approval, of a majority of the Trustees who
are not interested persons of the Trust or of the Manager or of the Sub-
Adviser.
2
<PAGE>
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain
in full force and effect as to each Fund continuously thereafter, until
terminated as provided below:
(a) Unless terminated as herein provided, this Agreement shall remain in
full force and effect through May 30, 2000 and shall continue in full
force and effect for successive periods of one year thereafter, but only
so long as such continuance is specifically approved at least annually
(i) by the Trustees or by the affirmative vote of a majority of the
outstanding voting securities of the Fund, and (ii) by a vote of a
majority of the Trustees who are not interested persons of the Trust or
of the Manager or of any Sub-Adviser, by vote cast in person at a
meeting called for the purpose of voting on such approval; provided,
however, that if the continuance of this Agreement is submitted to the
shareholders of the Fund for their approval and such shareholders fail
to approve such continuance of this Agreement as provided herein, the
Sub-Adviser may continue to serve hereunder in a manner consistent with
the 1940 Act and the rules and regulations thereunder.
(b) This Agreement may be terminated as to any Fund without the payment of
any penalty by the Manager, subject to the approval of the Trustees, by
vote of the Trustees, or by vote of a majority of the outstanding voting
securities of such Fund at any annual or special meeting or by the Sub-
Adviser, in each case on sixty days' written notice.
(c) This Agreement shall terminate automatically, without the payment of any
penalty, in the event of its assignment or in the event that the
Management Agreement with the Manager shall have terminated for any
reason.
(d) In the event of termination of this Agreement, the Fund will no longer
use the name "TCW Investment Management Company" or "The TCW Group" in
materials relating to the Fund except as may be required by the 1940 Act
and the rules and regulations thereunder.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding voting securities" means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the outstanding shares of
the Fund entitled to vote at such meeting are present in person or by proxy,
or (b) of the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "control", "interested
person" and "assignment" shall have their respective meanings defined in the
1940 Act and rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the SEC
3
<PAGE>
under said Act; the term "specifically approve at least annually" shall be
construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and the rules
and regulations thereunder.
7. NON-LIABILITY OF SUB-ADVISER
The Sub-Adviser shall be under no liability to the Trust, the Manager or
the Trust's Shareholders or creditors for any matter or thing in connection
with the performance of any of the Sub-Adviser's services hereunder or for
any losses sustained or that may be sustained in the purchase, sale or
retention of any investment for the Funds of the Trust made by it in good
faith; provided, however, that nothing herein contained shall be construed to
protect the Sub-Adviser against any liability to the Trust by reason of the
Sub-Adviser's own willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed by the Trustees as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees, officers or shareholders individually but are binding
only upon the assets and property of the appropriate Fund.
4
<PAGE>
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and TCW INVESTMENT MANAGEMENT COMPANY has caused this
instrument to be signed in duplicate on its behalf by its duly authorized
representative, all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By: /s/ Richard M. Reilly
--------------------------------------
Title: President
--------------------------------------
TCW INVESTMENT MANAGEMENT COMPANY
By: /s/ Alvin R. Albe, Jr.
--------------------------------------
Title: Executive Vice President
--------------------------------------
By: /s/ Patricia M. Navis
--------------------------------------
Title: Vice President
--------------------------------------
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By: /s/ Paul T. Kane
-----------------------------------
Title: Treasurer
-----------------------------------
5
<PAGE>
SCHEDULE A
----------
The Manager will pay to the Sub-Adviser as full compensation for the Sub-
Adviser's services rendered, a fee computed daily and paid quarterly at an
annual rate of 0.85% based on average daily net assets of the Fund of up to $100
million. When the average daily net assets of the Fund exceed $100 million, the
fee shall be computed daily and paid quarterly at an annual rate of 0.75% of the
total average daily net assets of the Fund.
The average daily net assets of the Fund shall be determined by taking an
average of all of the determinations of net asset during each month at the close
of business on each business day during such month while this Agreement is in
effect.
The fee for each quarter shall be payable within ten (10) business days after
the end of the quarter.
If the Sub-Adviser shall serve for any period less than a full month, the
foregoing compensation shall be prorated according to the proportion which such
period bears to a full month.
6
<PAGE>
Exhibit 4 (k)
FORM OF
SUB-ADVISER AGREEMENT
SUB-ADVISER AGREEMENT executed as of July 1, 2000 between Allmerica Financial
Investment Management Services, Inc. (the "Manager") and Western Asset
Management Company (the "Sub-Adviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser,
at its expense, will furnish continuously an investment program for
the following series of shares of the Trust: the Select Strategic
Income Fund (the "Fund") and such other series of shares as the Trust,
the Manager and the Sub-Adviser may from time to time agree on
(together, the "Funds"). The Sub-Adviser will make investment
decisions on behalf of the Fund and place all orders for the purchase
and sale of portfolio securities. In the performance of its duties,
the Sub-Adviser will comply with the provisions of the Agreement and
Declaration of Trust and Bylaws of the Trust and the objectives and
policies of the Fund, as set forth in the current Registration
Statement of the Trust filed with the Securities and Exchange
Commission ("SEC") and any applicable federal and state laws, and will
comply with other policies which the Trustees of the Trust (the
"Trustees") or the Manager, as the case may be, may from time to time
determine and which are furnished to the Sub-Adviser in writing. The
Sub-Adviser shall make its officers and employees available to the
Manager from time to time at reasonable times to review investment
policies of the Fund and to consult with the Manager regarding the
investment affairs of the Fund. In the performance of its duties
hereunder, the Sub-Adviser is and shall be an independent contractor
and, unless otherwise expressly provided or authorized, shall have no
authority to act for or represent the Trust in any way or otherwise be
deemed to be an agent of the Trust.
(b) The Sub-Adviser, at its expense, will furnish (i) all investment and
management facilities, including salaries of personnel necessary for
it to perform the duties set forth in this Agreement, and (ii)
administrative facilities, including clerical personnel and equipment
necessary for the conduct of its investment activities for the Fund
(excluding brokerage expenses and pricing and bookkeeping services).
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investments for the Fund with issuers, brokers or dealers
selected by the Sub-Adviser which may include brokers or dealers
affiliated with the Sub-Adviser. In the selection
<PAGE>
of such brokers or dealers and the placing of such orders, the Sub-
Adviser always shall seek best execution (except to the extent
permitted by the next sentence hereof), which is to place portfolio
transactions where the Fund can obtain the most favorable combination
of price and execution services in particular transactions or provided
on a continuing basis by a broker or dealer, and to deal directly with
a principal market maker in connection with over-the-counter
transactions, except when it is believed that best execution is
obtainable elsewhere. Subject to such policies as the Trustees may
determine, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Trust to pay a
broker or dealer that provides brokerage and research services 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, if the Sub-Adviser
determines in good faith that such excess amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the
Sub-Adviser and its affiliates with respect to the Trust and to other
clients of the Sub-Adviser as to which Sub-Adviser or any affiliate of
the Sub-Adviser exercises investment discretion.
2. OTHER AGREEMENTS
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-Adviser, and in any
person controlling, controlled by or under common control with the Sub-
Adviser, and that the Sub-Adviser and any person controlling, controlled by
or under common control with the Sub-Adviser may have an interest in the
Trust. It is also understood that the Sub-Adviser and persons controlling,
controlled by or under common control with the Sub-Adviser have and may
have advisory, management service or other contracts with other
organizations and persons, and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered a fee, determined as described in Schedule A,
which is attached hereto and made a part hereof. Such fee shall be paid by
the Manager and not by the Trust.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A attached hereto) shall not be
amended as to any Fund unless such amendment is approved at a meeting by
the affirmative vote of a majority of the outstanding voting securities of
the Fund, if such approval is required under the Investment Company Act of
1940, as amended ("1940 Act"), and by the vote, cast in person at a meeting
called for the purpose of voting on such approval, of a majority of the
Trustees who are not interested persons of the Trust or of the Manager or
of the Sub-Adviser.
2
<PAGE>
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain
in full force and effect as to each Fund continuously thereafter, until
terminated as provided below:
(a) Unless terminated as herein provided, this Agreement shall remain in
full force and effect through May 30, 2001 and shall continue in full
force and effect for successive periods of one year thereafter, but
only so long as such continuance is specifically approved at least
annually (i) by the Trustees or by the affirmative vote of a majority
of the outstanding voting securities of the Fund, and (ii) by a vote
of a majority of the Trustees who are not interested persons of the
Trust or of the Manager or of any Sub-Adviser, by vote cast in person
at a meeting called for the purpose of voting on such approval;
provided, however, that if the continuance of this Agreement is
submitted to the shareholders of the Fund for their approval and such
shareholders fail to approve such continuance of this Agreement as
provided herein, the Sub-Adviser may continue to serve hereunder in a
manner consistent with the 1940 Act and the rules and regulations
thereunder.
(b) This Agreement may be terminated as to any Fund without the payment of
any penalty by the Manager, subject to the approval of the Trustees,
by vote of the Trustees, or by vote of a majority of the outstanding
voting securities of such Fund at any annual or special meeting or by
the Sub-Adviser, in each case on sixty days' written notice.
(c) This Agreement shall terminate automatically, without the payment of
any penalty, in the event of its assignment or in the event that the
Management Agreement with the Manager shall have terminated for any
reason.
(d) In the event of termination of this Agreement, the Fund will no longer
use the name, "Western Asset Management Company", "Western Asset
Management", "Western Asset", "WAMCO" and WAM" in materials relating
to the Fund except as may be required by the 1940 Act and the rules
and regulations thereunder.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the ''affirmative vote of a
majority of the outstanding voting securities" means the affirmative vote, at
a duly called and held meeting of shareholders, (a) of the holders of 67% or
more of the shares of the Fund present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the outstanding
shares of the Fund entitled to vote at such meeting are present in person or
by proxy, or (b) of the holders of more than 50% of the outstanding shares of
the Fund entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "control", "interested
person" and "assignment" shall have their respective meanings defined in the
1940 Act and rules and
3
<PAGE>
regulations thereunder, subject, however, to such exemptions as may be
granted by the SEC under said Act; the term "specifically approve at least
annually" shall be construed in a manner consistent with the 1940 Act and the
rules and regulations thereunder; and the term "brokerage and research
services" shall have the meaning given in the Securities Exchange Act of 1934
and the rules and regulations thereunder.
7. NON-LIABILITY OF SUB-ADVISER
The Sub-Adviser shall be under no liability to the Trust, the Manager or
the Trust's Shareholders or creditors for any matter or thing in connection
with the performance of any of the Sub-Adviser's services hereunder or for
any losses sustained or that may be sustained in the purchase, sale or
retention of any investment for the Funds of the Trust made by it in good
faith; provided, however, that nothing herein contained shall be construed to
protect the Sub-Adviser against any liability to the Trust by reason of the
Sub-Adviser's own willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed by the Trustees as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees, officers or shareholders individually but are binding
only upon the assets and property of the appropriate Fund.
4
<PAGE>
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and WESTERN ASSET MANAGEMENT COMPANY has caused this
instrument to be signed in duplicate on its behalf by its duly authorized
representative, all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By: ______________________________________
Title: ______________________________________
WESTERN ASSET MANAGEMENT COMPANY
By: ______________________________________
Title: ______________________________________
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By: ______________________________________
Title: ______________________________________
5
<PAGE>
SCHEDULE A
----------
The Manager will pay to the Sub-Adviser as full compensation for the Sub-
Adviser's services rendered, a fee computed daily and paid quarterly at an
annual rate based on the average daily net assets of the Fund as described
below:
FUND NET ASSETS FEE RATE
---- ---------- --------
Select Strategic Income Fund First $100 million 0.30%
Over $100 million 0.15%
The average daily net assets of the Fund shall be determined by taking an
average of all of the determinations of net asset during each month at the close
of business on each business day during such month while this Agreement is in
effect.
The fee for each quarter shall be payable within ten (10) business days after
the end of the quarter.
If the Sub-Adviser shall serve for any period less than a full month, the
foregoing compensation shall be prorated according to the proportion which such
period bears to a full month.
6
<PAGE>
EXHIBIT 9
March 31, 2000
Allmerica Investment Trust
440 Lincoln Street
Worcester, MA 01653
Ladies and Gentlemen:
In my capacity as Secretary of and Counsel to Allmerica Investment Trust (the
"Trust"), I have participated in the preparation of Amendment No. 41 to its
Registration Statement on Form N-1A under the Investment Company Act of 1940 and
Post-effective Amendment No. 40 under the Securities Act of 1933 with respect to
the issuance of its shares. I am of the opinion that, when sold in accordance
with the terms of the Prospectuses and Statement of Additional Information in
effect at the time of sale, the shares of each Fund of the Trust will be legally
issued, fully paid and non-assessable by the Trust.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as in my judgment are necessary or
appropriate. I hereby consent to the filing of this opinion as an exhibit to
the Registration Statement on Form N-1A.
Sincerely,
/s/ George M. Boyd
George M. Boyd
Secretary and Counsel
<PAGE>
EXHIBIT 10
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 40 to the registration statement on Form N-1A ("Registration
Statement") of our report dated February 14, 2000, relating to the financial
statements and financial highlights which appears in the December 31, 1999
Annual Report to Shareholders of the Allmerica Investment Trust, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Independent Accountants" and "Financial
Statements" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 31, 2000
<PAGE>
Exhibit 12
PARTICIPATION AGREEMENT
Among
ALLMERICA INVESTMENT TRUST
ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC.
and
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
DATED
MARCH 22, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. Purchase of Fund Shares 4
ARTICLE II Representations and Warranties 5
ARTICLE III Prospectuses, Reports to Shareholders
and Proxy Statements, Voting 6
ARTICLE IV Sales Material and Information 8
ARTICLE V Fees and Expenses 9
ARTICLE VI Diversification 9
ARTICLE VII Potential Conflicts 10
ARTICLE VIII Indemnification 11
ARTICLE IX. Applicable Law 15
ARTICLE X Termination 15
ARTICLE XI Notices 16
ARTICLE XII Miscellaneous 17
SCHEDULE A Separate Accounts and Variable Products A -1
SCHEDULE B Portfolios of Allmerica Investment Trust B -1
SCHEDULE C Proxy Voting Procedures C -1
</TABLE>
2
<PAGE>
THIS AGREEMENT, made and entered into as of the 22nd day of March, 2000 by and
among: FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY (hereinafter the
"Company"), a Massachusetts corporation, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule A hereto, as may be
amended from time to time (each such account hereinafter referred to as the
"Account"); ALLMERICA INVESTMENT TRUST, an unincorporated Massachusetts business
trust (hereinafter the "Fund"), and ALLMERICA FINANCIAL INVESTMENT MANAGEMENT
SERVICES, INC. (hereinafter the "Adviser"), a Massachusetts corporation
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as (i) the investment vehicle for separate
accounts established by insurance companies for individual and group life
insurance policies and annuity contracts with variable accumulation and/or pay-
out provisions (hereinafter referred to individually and/or collectively as
"Variable Products") and (ii) the investment vehicle for certain qualified
pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an investment
vehicle under their Variable Products enter into participation agreements with
the Fund and the Adviser (the "Participating Insurance Companies");
WHEREAS, shares of the Fund are divided into several series of shares, each
representing the interest in a particular managed portfolio of securities and
other assets (each such series hereinafter referred to as a "Portfolio"), any
one or more of which may be made available under this Agreement, as may be
amended from time to time by mutual agreement of the parties hereto; and
WHEREAS, the Fund has received for an order from the Securities and
Exchange Commission, granting Participating Insurance Companies and Variable
Insurance Product separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended
(hereinafter the "1940 Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by separate accounts of both affiliated and unaffiliated life insurance
companies and Qualified Plans (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws and manages each of the certain portfolios of the Fund and retains Sub-
Advisers for the daily investment and reinvestment of the assets of each
portfolio; and
WHEREAS, Allmerica Investments, Inc. (the "Distributor") is registered as a
broker/dealer under the Securities Exchange Act of 1934, as amended (hereinafter
the "1934 Act"), is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, the Company either has registered or will register certain
Variable Products under the 1933 Act or the Contracts are not registered because
they are properly exempt from registration under Section 3(a)(2) of the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under Section 4(2) or Regulation D of the 1933 Act; and
3
<PAGE>
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, to set aside and invest assets attributable to the
aforesaid Variable Products, and the Company has either: (i) registered or will
register each Account as a unit investment trust under the 1940 Act; or (ii)
will not register such Account pursuant to the exemptions provided in Sections
3(c)(1) or 3(c)(7) of the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase, on behalf of each Account, shares
in the Portfolios set forth in Schedule B attached to this Agreement, to fund
certain of the aforesaid Variable Insurance Products and the Fund is authorized
to sell such shares to each such Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the parties
hereto agree as follows:
ARTICLE I. Purchase of Fund Shares
1.1. The Fund agrees to make available for purchase by the Company shares
of the Fund and shall execute orders placed for each Account on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
such order. For purposes of this Section 1.1, the Company shall be the designee
of the Fund for receipt of such orders from each Account and receipt by such
designee of an order prior to the close of regular trading on the New York Stock
Exchange ("NYSE") shall constitute receipt by the Fund; provided that the Fund
receives notice of such order by 10:00 a.m. Eastern time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund, so long as this Agreement is in effect, agrees to make its
shares available indefinitely for purchase at the applicable net asset value per
share by the Company and its Accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the Securities and Exchange Commission
and the Fund shall use reasonable efforts to calculate such net asset value on
each day which the New York Stock Exchange is open for trading. Notwithstanding
the foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to permit the Fund to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.3. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts and to certain
Qualified Plans. No shares of any Portfolio will be sold to the general public.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee of a
request prior to the close of regular trading on the NYSE shall constitute
receipt by the Fund, provided that the Fund receives notice of such request for
redemption on the next following Business Day.
4
<PAGE>
1.5. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus.
1.6. The Company shall pay for Fund shares no later than the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.9. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 6:30 p.m. Eastern time)
and shall use its best efforts to make such net asset value per share available
by 7:00 p.m. Eastern time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Variable Products either
(i) are or will be registered under the 1933 Act; or (ii) are not registered
because they are properly exempt from registration under Section 3(a)(2) of the
1933 Act or will be offered exclusively in transactions that are properly exempt
from registration under Section 4(2) or Regulation D of the 1933 Act, in which
case the Company will make every effort to maintain such exemption and will
notify the Fund immediately upon having a reasonable basis for believing that
such exemption no longer applies or might not apply in the future.
2.2. The Company represents and warrants that with respect to any Accounts
which are exempt from registration under the 1940 Act in reliance on 3(c)(1) or
3(c)(7) thereof: (i) the principle underwriter for each such Account and any
sub-accounts thereof is a registered broker-dealer with the SEC under the 1934
Act; (ii) the shares of the Portfolios of the Trust are an will continue to be
the only investment securities held by the corresponding sub-accounts; and (iii)
with regard to each Portfolio, the Company, on behalf of the corresponding sub-
account.
2.3. The Company represents and warrants that the Variable Products will
be issued and sold in compliance in all material respects with all applicable
federal and state laws, and that the sale of the Variable Products shall comply
in all material respects with state insurance suitability requirements. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law, that it has legally and
validly established each Account as a segregated asset account under the
Massachusetts Insurance Code, and each Account either (i) has been registered
or, prior to any issuance or sale of the Contracts, will be registered as a unit
investment trust under the
5
<PAGE>
1940 Act to serve as a segregated investment account for the Variable Products;
or (ii) has not been so registered in proper reliance upon an exemption from
registration under Section 3(c) of the 1940 Act.
2.4. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the Commonwealth of
Massachusetts and all applicable federal and state securities laws, and that the
Fund is and shall make every effort to remain registered under the 1940 Act.
The Fund shall amend the registration statement for its shares under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund.
2.5. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company promptly upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.6. The Company represents that the Variable Products are currently
treated as life insurance policies or annuity contracts under applicable
provisions of the Code, that it will make every effort to maintain such
treatment, and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Variable Products have ceased to be so treated or
that they might not be so treated in the future.
2.7. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have its board of Trustees, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.8. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.9. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.10. The Adviser represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
compliance in all material respects with the laws of its state of domicile and
any applicable state and federal securities laws.
2.11. The Fund represents and warrants that its Trustees, officers,
employees, and other individuals/entities dealing with the money and/or
securities of the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule 17g-(1)
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
6
<PAGE>
2.12. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount not less $5 million. The aforesaid,
which includes coverage for larceny and embezzlement, shall be issued by a
reputable bonding company. The Company agrees to make all reasonable efforts to
see that this bond or another bond containing these provisions is always in
effect, and agrees to notify the Fund and the Distributor promptly in writing in
the event that such coverage no longer applies.
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus and statement of additional
information as the Company may reasonably request. If requested by the Company,
in lieu of providing printed copies, the Fund shall provide camera-ready film or
computer diskettes containing the Fund's prospectus and statement of additional
information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
statement of additional information for the Fund is amended during the year) to
have the prospectus for the Variable Products and the Fund's prospectus printed
together in one document, and to have the statement of additional information
for the Fund and the statement of additional information for the Variable
Products printed together in one document. Alternatively, the Company may print
the Fund's prospectus and/or its statement of additional information in
combination with other fund companies' prospectuses and statements of additional
information.
3.2. Except as provided in this Section 3.2., all expenses of printing and
distributing Fund prospectuses and statements of additional information shall be
the expense of the Company. For any prospectuses and statements of additional
information provided by the Company to the existing owners of Variable Products
who currently own shares of one or more of the Fund's Portfolios, in order to
update disclosure as required by the 1933 Act and/or the 1940 Act, the cost of
printing shall be borne by the Fund. If the Company chooses to receive camera-
ready film or computer diskettes in lieu of receiving printed copies of the
Fund's prospectus, the Fund will reimburse the Company in an amount equal to the
product of x and y where x is the number of such prospectuses distributed to
owners of the Variable Products who currently own shares of one or more of the
Fund's Portfolios, and y is the Fund's per unit cost of typesetting and printing
the Fund's prospectus. The same procedures shall be followed with respect to
the Fund's statement of additional information. The Company agrees to provide
the Fund or its designee with such information as may be reasonably requested by
the Fund to assure that the Fund's expenses do not include the cost of printing
any prospectuses or statements of additional information other than those
actually distributed to existing owners of the Variable Products.
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Company or such other person as the Fund may designate, as
agreed upon by the parties.
3.4. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and statements of additional information, which are covered in
section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distribution to contract owners. The Fund or its designee shall
bear the cost of printing, duplicating, and mailing these documents to current
contract owners, and the Company shall bear the cost for such documents used for
purposes other than distribution to current contract owners.
7
<PAGE>
3.5. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contract owners;
(ii) vote the Fund shares in accordance with instructions received
from contract owners; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Portfolio for
which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. The Fund and the Company shall follow the procedures, and
shall have the corresponding responsibilities, for the handling of proxy and
voting instruction solicitations, as set forth in Schedule C attached hereto and
incorporated herein by reference. Participating Insurance Companies shall be
responsible for ensuring that each of their separate accounts participating in
the Fund calculates voting privileges in a manner consistent with the standards
set forth on Schedule C, which standards will also be provided to the other
Participating Insurance Companies, if any.
3.6. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, including Sections 16(a) and, if and when applicable,
16(b). Further, the Fund will act in accordance with the Securities and
Exchange Commission's interpretation of the requirements of Section 16(a) with
respect to periodic elections of trustees and with whatever rules the Commission
may promulgate with respect thereto.
3.7. The Fund shall use reasonable efforts to provide Fund prospectuses,
reports to shareholders, proxy materials and other Fund communications (or
camera-ready equivalents) to the Company sufficiently in advance of the
Company's mailing dates to enable the Company to complete, at reasonable cost,
the printing, assembling and/or distribution of the communications in accordance
with applicable laws and regulations.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser(s) is named, at least fifteen Business
Days prior to its use. No such material shall be used if the Fund or its
designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Variable Products other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
8
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4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its separate account(s)
is named at least fifteen Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such use
within fifteen Business Days after receipt of such material.
4.4. The Fund and the Adviser shall not give any information or make any
representations on behalf of the Company or concerning the Company, each
Account, or the Variable Products, other than the information or representations
contained in a registration statement, prospectus or private placement
memorandum for the Variable Products, as such registration statement, prospectus
and private placement memorandum may be amended or supplemented from time to
time, or in published reports for each Account which are in the public domain or
approved by the Company for distribution to contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, which are relevant
to the Company or the Variable Products.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
private placement memorandums, reports, solicitations for voting instructions,
sales literature and other promotional materials, applications for exemptions,
requests for no action letters, and all amendments to any of the above, that
relate to the investment in the Fund under the Variable Products.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
----
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, private placement
memorandums, shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Distributor may make payments to the Company or to the distributor for the
Variable Products if and in amounts agreed to by the Distributor in writing.
5.2. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund, other than expenses assumed by the Adviser under the
Management Agreement between the Fund
9
<PAGE>
and the Adviser or by another party. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Variable Products in
such a manner as to ensure that the Variable Products will be treated as
variable contracts under the Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Fund will at all times comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by Variable Insurance Product owners; or (f) a decision by a
Participating Insurance Company to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. Each of the Company and the Adviser will report any potential or
existing conflicts of which it is aware to the Board. Each of the Company and
the Adviser will assist the Board in carrying out its responsibilities under SEC
rules and regulations. The Adviser, and the participating insurance companies
and participating qualified plans will at least annually submit to the Board
such reports, materials, or data as the Board may reasonably request so that the
Board may fully carry out the obligations imposed upon by the conditions
contained in the Shared Funding Exemptive Order, and said reports, materials,
and data will be submitted more frequently if deemed appropriate by the Board.
The responsibilities to report such information and conflicts and to assist the
Board will be carried out with a view only to the interests of contract owners
and plan participants, as applicable.
7.3. If it is determined by a majority of the Board, or a majority of its
members who are not "interested persons" of the Fund, the Adviser or the Company
as that term is defined in the 1940 Act (hereinafter "disinterested members"),
that a material irreconcilable conflict exists, the Company and other
Participating Insurance Companies shall, at their expense and to the extent
reasonably practicable (as determined by a majority of the disinterested
directors), take whatever steps are necessary to remedy
10
<PAGE>
or eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance policy
----
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Distributor and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.5 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Variable Products. The Company shall not be required by Section 7.3 to
establish a new funding medium for the Variable Products if an offer to do so
has been declined by vote of a majority of contract owners materially adversely
affected by the irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding,
or if the Fund obtains a Shared Exemptive Order which requires provisions that
are materially different from the provisions of this Agreement, then (a) the
Fund and/or the Participating Insurance Companies, as appropriate, shall take
such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, or to the terms of the Shared Exemptive
Order, to the extent applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
------------------------------
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8.1(a) The Company agrees to indemnify and hold harmless the Fund and the
Adviser, each of their respective officers, employees, and Trustees or
Directors, and each person, if any, who controls the Fund or the Adviser within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually, "Indemnified Party," for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Variable Products and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement, prospectus or private placement memorandum for the Variable
Products or contained in the Variable Products or sales literature for the
Variable Products (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the registration statement, prospectus or private
placement memorandum for the Variable Products or in the Variable Products
or sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Variable Products or Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature of the Fund not supplied by the Company, or
persons under its control and other than statements or representations
authorized by the Fund or an Adviser) or unlawful conduct of the Company or
persons under its control, with respect to the sale or distribution of the
Variable Products or Fund shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such a statement or omission was made
in reliance upon and in conformity with information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of or
result from any other material breach of this Agreement by the Company, as
limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
12
<PAGE>
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Variable Products or the
operation of the Fund.
8.2. Indemnification by the Adviser
------------------------------
8.2(a). The Adviser agrees, with respect to each Portfolio that it manages,
to indemnify and hold harmless the Company, each of its directors, officers, and
employees, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" and
individually, "Indemnified Party," for purposes of this Section 8.2) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Adviser) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of shares of the Portfolio
that it manages or the Variable Products and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or sales literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to the Fund by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature
(or any amendment or supplement) or otherwise for use in connection with
the sale of the Variable Products or Portfolio shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Products not supplied by
the Fund or persons under its control and other than statements
13
<PAGE>
or representations authorized by the Company) or unlawful conduct of the
Fund, Adviser(s) or Distributor or persons under their control, with
respect to the sale or distribution of the Variable Products or Portfolio
shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable Products, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Adviser; as limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Products or
the operation of each Account.
8.3. Indemnification by the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (hereinafter
collectively, the "Indemnified Parties" and individually, "Indemnified Party,"
for
14
<PAGE>
purposes of this Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Fund) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), litigation or settlements result from
the gross negligence, bad faith or willful misconduct of the Board or any member
thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement; or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement by the Fund, as
limited and in accordance with the provisions of Sections 8.3(b) and
8.3(a);
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as may arise from such Indemnified
Party's gross negligence, bad faith, or willful misconduct the performance of
such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement.
8.3(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the Fund of the commencement
of any litigation or proceedings against it or any of its respective officers or
directors in connection with this Agreement, the issuance or sale of the
Variable Products, with respect to the operation of either Account, or the sale
or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the
15
<PAGE>
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
10.1(a) termination by any party for any reason by at least sixty (60)
days advance written notice delivered to the other parties; or
10.1(b) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio based upon the Company's determination
that shares of such Portfolio are not reasonably available to meet the
requirements of the Variable Products; or
10.1(c) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event any of the Portfolio's shares
are not registered, issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as the underlying
investment media of the Variable Products issued or to be issued by the Company;
or
10.1(d) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such Portfolio ceases to
qualify as a Regulated Investment Company under Subchapter M of the Code or
under any successor or similar provision, or if the Company reasonably believes
that the Fund may fail to so qualify; or
10.1(e) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such Portfolio fails to
meet the diversification requirements specified in Article VI hereof; or
10.1(f) termination by the Fund by written notice to the Company if the
Fund shall determine, in its sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a material adverse change
in its business, operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity, or
10.1(g) termination by the Company by written notice to the Fund and the
Adviser, if the Company shall determine, in its sole judgment exercised in good
faith, that either the Fund or the Adviser has suffered a material adverse
change in its business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse publicity; or
10.1(h) termination by either the Company or the Fund if the exemption from
registration under Section 3(c) of the 1940 Act no longer applies, or might not
apply in the future, to the unregistered Accounts, or that the exemption from
registration under Section 4(2) or Regulation D promulgated under the 1933 Act
no longer applies or might not apply in the future, to interests under the
unregistered Contracts.
10.2. Notwithstanding any termination of this Agreement, the Fund shall,
at the option of the Company, continue to make available additional shares of
the Fund pursuant to the terms and conditions of this Agreement, for all
Variable Products in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Variable Products").
Specifically, without limitation, the owners of the Existing Variable Products
shall be permitted to direct reallocation of investments in the Portfolios of
the Fund, redemption of investments in the Portfolios of the Fund and/or
investment in the
16
<PAGE>
Portfolios of the Fund upon the making of additional purchase payments under the
Existing Variable Products. The parties agree that this Section 10.2 shall not
apply to any termination under Article VII and the effect of such Article VII
termination shall be governed by Article VII of this Agreement.
10.3. The provisions of Article VIII Indemnification shall survive any
termination of this Agreement pursuant to this Article X Termination.
10.4. The Company shall not redeem Fund shares attributable to the
Variable Products (as distinct from Fund shares attributable to the Company's
assets held in the Account) except (i) as necessary to implement contract owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the Securities and Exchange Commission pursuant to
Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish
to the Fund the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund) to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Variable Products, the Company
shall not prevent contract owners from allocating payments to a Portfolio that
was otherwise available under the Variable Products without first giving the
Fund 90 days prior written notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when hand delivered or sent by
registered or certified mail to the other party at the address of such party set
forth below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Fund:
Allmerica Investment Trust
440 Lincoln Street
Worcester, MA 01653
Attention: George M. Boyd, Esq.
If to Adviser:
Allmerica Financial Investment Management Services, Inc.
440 Lincoln Street
Worcester, MA 01653
Attention: George M. Boyd, Esq.
If to the Company:
First Allmerica Financial Life Insurance Company
440 Lincoln Street
Worcester, Massachusetts 01653
Attention: Richard M. Reilly, President
ARTICLE XII. Miscellaneous
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12.1. A copy of the Fund's Agreement and Declaration of Trust, as may be
amended from time to time, is on file with the Secretary of the Commonwealth of
Massachusetts. Notice is hereby given that this instrument is executed by the
Fund's Trustees as Trustees and not individually, and the Fund's obligations
under this Agreement are not binding upon any of the Trustees or Shareholders of
the Fund, but are binding only upon the assets and property of the Fund.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Variable Products and all information reasonably identified
as confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company controlled by or
under common control with the Adviser, if such assignee is duly licensed and
registered to perform the obligations of the Adviser under 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 duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified above.
18
<PAGE>
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By: /s/ Richard M. Reilly
--------------------------------
Name: Richard M. Reilly
Title: Vice President
ALLMERICA INVESTMENT TRUST
By: /s/ John P. Kavanaugh
--------------------------------
Name: John P. Kavanaugh
Title: Vice President
ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC.
By: /s/ Paul T. Kane
--------------------------------
Name: Paul T. Kane
Title: Vice President
19
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND VARIABLE PRODUCTS
---------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Variable Life Products
Separate Account Product Name 1933 Act # 1940 Act #
- ---------------- ------------ ---------- ----------
<S> <C> <C> <C>
VEL II VEL ('93) 33-71050 811-8130
Inheiritage Inheiritage 33-74184 811-8304
Select Inheiritage
Allmerica Select Separate Account II Select Life 333-62369 811-8987
Group Vel Group VEL 333-06383 811-7663
FUVUL Separate Account ValuePlus Assurance Pending Pending
[To Be Determined] [PremierFocus] N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Variable Annuity Products
Separate Account Product Name 1933 Act # 1940 Act #
- ---------------- --------------------------- ----------- ----------
<S> <C> <C> <C>
VA-K ExecAnnuity Plus 91 33-71052 811-8114
ExecAnnuity Plus 93
Allmerica Advantage
Allmerica Select Separate Account Allmerica Select Resource I 33-71058 811-8116
Allmerica Select Resource II
Allmerica Select Charter
Separate Accounts VA-A, VA-B, VA-C, Variable Annuities
VA-G, VA-H (discontinued)
- -----------------------------------------------------------------------------------------------------------------
Fulcrum Separate Account Fulcrum 333-16929 811-7947
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE B
Portfolios of
-------------
Allmerica Investment Trust
--------------------------
Select Emerging Markets Fund
Select International Equity Fund
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select Strategic Growth Fund
Select Growth Fund
Core Equity Fund (formerly Growth Fund)
Equity Index Fund
Select Growth and Income Fund
Select Income Fund
Select Investment Grade Income Fund
(formerly Investment Grade Income Fund)
Government Bond Fund
Money Market Fund
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
-----------------------
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from owners of the Variable Products and to facilitate the
establishment of tabulation procedures. At this time the Fund will inform
the Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
. Promptly after the Record Date, the Company will perform a "tape run," or
other activity, which will generate the names, addresses and number of
units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described above. The Company will use its best efforts to call in the
number of Customers to the Fund, as soon as possible, but no later than
two weeks after the Record Date.
. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting instruction
solicitation material. The Fund will provide the last Annual Report to the
Company pursuant to the terms of Section 3.43 of the Agreement to which
this Schedule relates.
. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Fund or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
. name (legal name as found on account registration)
. address
. fund or account number
. coding to state number of units
. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
<PAGE>
. During this time, the Fund will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices
and statements will be sent to Company for insertion into envelopes
(envelopes and return envelopes are provided and paid for by the Company).
Contents of envelope sent to Customers by the Company will include:
. Voting Instruction Card(s)
. One proxy notice and statement (one document)
. return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
. "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
. cover letter - optional, supplied by Company and reviewed and approved
in advance by the Fund.
. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Fund.
. Package mailed by the Company.
The Fund must allow at least a 15-day solicitation time to the Company as
the shareowner. (A 5-week period is recommended.) Solicitation time is
calculated as calendar days from (but not including,) the meeting, counting
---
backwards.
. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
--- --------
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If
<PAGE>
the initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) The Fund must review
------
and approve tabulation format.
. Final tabulation in shares is verbally given by the Company to the Fund on
the morning of the meeting not later than 10:00 a.m. Eastern time. The Fund
may request an earlier deadline if reasonable and if required to calculate
the vote in time for the meeting.
. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will be
permitted reasonable access to such Cards.
. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
<PAGE>
Exhibit 12(a)
PARTICIPATION AGREEMENT
Among
ALLMERICA INVESTMENT TRUST
ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC.
and
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
DATED
MARCH 22 , 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. Purchase of Fund Shares 4
ARTICLE II Representations and Warranties 5
ARTICLE III Prospectuses, Reports to Shareholders
and Proxy Statements, Voting 6
ARTICLE IV Sales Material and Information 8
ARTICLE V Fees and Expenses 9
ARTICLE VI Diversification 9
ARTICLE VII Potential Conflicts 10
ARTICLE VIII Indemnification 11
ARTICLE IX. Applicable Law 15
ARTICLE X Termination 15
ARTICLE XI Notices 16
ARTICLE XII Miscellaneous 17
SCHEDULE A Separate Accounts and Variable Products A-1
SCHEDULE B Portfolios of Allmerica Investment Trust B-1
SCHEDULE C Proxy Voting Procedures C-1
</TABLE>
2
<PAGE>
THIS AGREEMENT, made and entered into as of the 22nd day of March, 2000 by and
among: ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY (hereinafter the
"Company"), a Delaware corporation, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule A hereto, as may be
amended from time to time (each such account hereinafter referred to as the
"Account"); ALLMERICA INVESTMENT TRUST, an unincorporated Massachusetts business
trust (hereinafter the "Fund"), and ALLMERICA FINANCIAL INVESTMENT MANAGEMENT
SERVICES, INC. (hereinafter the "Adviser"), a Massachusetts corporation
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as (i) the investment vehicle for separate
accounts established by insurance companies for individual and group life
insurance policies and annuity contracts with variable accumulation and/or pay-
out provisions (hereinafter referred to individually and/or collectively as
"Variable Products") and (ii) the investment vehicle for certain qualified
pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an investment
vehicle under their Variable Products enter into participation agreements with
the Fund and the Adviser (the "Participating Insurance Companies");
WHEREAS, shares of the Fund are divided into several series of shares, each
representing the interest in a particular managed portfolio of securities and
other assets (each such series hereinafter referred to as a "Portfolio"), any
one or more of which may be made available under this Agreement, as may be
amended from time to time by mutual agreement of the parties hereto; and
WHEREAS, the Fund has received for an order from the Securities and
Exchange Commission, granting Participating Insurance Companies and Variable
Insurance Product separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended
(hereinafter the "1940 Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by separate accounts of both affiliated and unaffiliated life insurance
companies and Qualified Plans (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws and manages each of the certain portfolios of the Fund and retains Sub-
Advisers for the daily investment and reinvestment of the assets of each
portfolio; and
WHEREAS, Allmerica Investments, Inc. (the "Distributor") is registered as a
broker/dealer under the Securities Exchange Act of 1934, as amended (hereinafter
the "1934 Act"), is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, the Company either has registered or will register certain
Variable Products under the 1933 Act or the Contracts are not registered because
they are properly exempt from registration under Section 3(a)(2) of the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under Section 4(2) or Regulation D of the 1933 Act; and
3
<PAGE>
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, to set aside and invest assets attributable to the
aforesaid Variable Products, and the Company has either: (i) registered or will
register each Account as a unit investment trust under the 1940 Act; or (ii)
will not register such Account pursuant to the exemptions provided in Sections
3(c)(1) or 3(c)(7) of the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase, on behalf of each Account, shares
in the Portfolios set forth in Schedule B attached to this Agreement, to fund
certain of the aforesaid Variable Insurance Products and the Fund is authorized
to sell such shares to each such Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the parties
hereto agree as follows:
ARTICLE I. Purchase of Fund Shares
1.1. The Fund agrees to make available for purchase by the Company shares
of the Fund and shall execute orders placed for each Account on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
such order. For purposes of this Section 1.1, the Company shall be the designee
of the Fund for receipt of such orders from each Account and receipt by such
designee of an order prior to the close of regular trading on the New York Stock
Exchange ("NYSE") shall constitute receipt by the Fund; provided that the Fund
receives notice of such order by 10:00 a.m. Eastern time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund, so long as this Agreement is in effect, agrees to make its
shares available indefinitely for purchase at the applicable net asset value per
share by the Company and its Accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the Securities and Exchange Commission
and the Fund shall use reasonable efforts to calculate such net asset value on
each day which the New York Stock Exchange is open for trading. Notwithstanding
the foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to permit the Fund to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.3. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts and to certain
Qualified Plans. No shares of any Portfolio will be sold to the general public.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee of a
request prior to the close of regular trading on the NYSE shall constitute
receipt by the Fund, provided that the Fund receives notice of such request for
redemption on the next following Business Day.
4
<PAGE>
1.5. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus.
1.6. The Company shall pay for Fund shares no later than the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.9. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 6:30 p.m. Eastern time)
and shall use its best efforts to make such net asset value per share available
by 7:00 p.m. Eastern time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Variable Products either
(i) are or will be registered under the 1933 Act; or (ii) are not registered
because they are properly exempt from registration under Section 3(a)(2) of the
1933 Act or will be offered exclusively in transactions that are properly exempt
from registration under Section 4(2) or Regulation D of the 1933 Act, in which
case the Company will make every effort to maintain such exemption and will
notify the Fund immediately upon having a reasonable basis for believing that
such exemption no longer applies or might not apply in the future.
2.2. The Company represents and warrants that with respect to any Accounts
which are exempt from registration under the 1940 Act in reliance on 3(c)(1) or
3(c)(7) thereof: (i) the principle underwriter for each such Account and any
sub-accounts thereof is a registered broker-dealer with the SEC under the 1934
Act; (ii) the shares of the Portfolios of the Trust are an will continue to be
the only investment securities held by the corresponding sub-accounts; and (iii)
with regard to each Portfolio, the Company, on behalf of the corresponding sub-
account.
2.3. The Company represents and warrants that the Variable Products will
be issued and sold in compliance in all material respects with all applicable
federal and state laws, and that the sale of the Variable Products shall comply
in all material respects with state insurance suitability requirements. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law, that it has legally and
validly established each Account as a segregated asset account under Section
2932 of Delaware Insurance Code, and each Account either (i) has been registered
or, prior to any issuance or sale of the Contracts, will be registered as a unit
investment trust under the 1940 Act to serve as a segregated investment account
for the Variable Products; or (ii) has not
5
<PAGE>
been so registered in proper reliance upon an exemption from registration under
Section 3(c) of the 1940 Act.
2.4. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the Commonwealth of
Massachusetts and all applicable federal and state securities laws, and that the
Fund is and shall make every effort to remain registered under the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund.
2.5. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company promptly upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.6. The Company represents that the Variable Products are currently
treated as life insurance policies or annuity contracts under applicable
provisions of the Code, that it will make every effort to maintain such
treatment, and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Variable Products have ceased to be so treated or
that they might not be so treated in the future.
2.7. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have its board of Trustees, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.8. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.9. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.10. The Adviser represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
compliance in all material respects with the laws of its state of domicile and
any applicable state and federal securities laws.
2.11. The Fund represents and warrants that its Trustees, officers,
employees, and other individuals/entities dealing with the money and/or
securities of the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule 17g-(1)
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
6
<PAGE>
2.12. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount not less $5 million. The aforesaid, which
includes coverage for larceny and embezzlement, shall be issued by a reputable
bonding company. The Company agrees to make all reasonable efforts to see that
this bond or another bond containing these provisions is always in effect, and
agrees to notify the Fund and the Distributor promptly in writing in the event
that such coverage no longer applies.
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus and statement of additional
information as the Company may reasonably request. If requested by the Company,
in lieu of providing printed copies, the Fund shall provide camera-ready film or
computer diskettes containing the Fund's prospectus and statement of additional
information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
statement of additional information for the Fund is amended during the year) to
have the prospectus for the Variable Products and the Fund's prospectus printed
together in one document, and to have the statement of additional information
for the Fund and the statement of additional information for the Variable
Products printed together in one document. Alternatively, the Company may print
the Fund's prospectus and/or its statement of additional information in
combination with other fund companies' prospectuses and statements of additional
information.
3.2. Except as provided in this Section 3.2., all expenses of printing and
distributing Fund prospectuses and statements of additional information shall be
the expense of the Company. For any prospectuses and statements of additional
information provided by the Company to the existing owners of Variable Products
who currently own shares of one or more of the Fund's Portfolios, in order to
update disclosure as required by the 1933 Act and/or the 1940 Act, the cost of
printing shall be borne by the Fund. If the Company chooses to receive camera-
ready film or computer diskettes in lieu of receiving printed copies of the
Fund's prospectus, the Fund will reimburse the Company in an amount equal to the
product of x and y where x is the number of such prospectuses distributed to
owners of the Variable Products who currently own shares of one or more of the
Fund's Portfolios, and y is the Fund's per unit cost of typesetting and printing
the Fund's prospectus. The same procedures shall be followed with respect to the
Fund's statement of additional information. The Company agrees to provide the
Fund or its designee with such information as may be reasonably requested by the
Fund to assure that the Fund's expenses do not include the cost of printing any
prospectuses or statements of additional information other than those actually
distributed to existing owners of the Variable Products.
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Company or such other person as the Fund may designate, as
agreed upon by the parties.
3.4. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and statements of additional information, which are covered in
section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distribution to contract owners. The Fund or its designee shall bear
the cost of printing, duplicating, and mailing these documents to current
contract owners, and the Company shall bear the cost for such documents used for
purposes other than distribution to current contract owners.
7
<PAGE>
3.5. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contract owners;
(ii) vote the Fund shares in accordance with instructions received
from contract owners; and
(iii) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such Portfolio for which
instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Fund and the Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule C, which standards will also be provided to the other Participating
Insurance Companies, if any.
3.6. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, including Sections 16(a) and, if and when applicable,
16(b). Further, the Fund will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect to
periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
3.7. The Fund shall use reasonable efforts to provide Fund prospectuses,
reports to shareholders, proxy materials and other Fund communications (or
camera-ready equivalents) to the Company sufficiently in advance of the
Company's mailing dates to enable the Company to complete, at reasonable cost,
the printing, assembling and/or distribution of the communications in accordance
with applicable laws and regulations.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser(s) is named, at least fifteen Business
Days prior to its use. No such material shall be used if the Fund or its
designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Variable Products other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
8
<PAGE>
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its separate account(s)
is named at least fifteen Business Days prior to its use. No such material shall
be used if the Company or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.4. The Fund and the Adviser shall not give any information or make any
representations on behalf of the Company or concerning the Company, each
Account, or the Variable Products, other than the information or representations
contained in a registration statement, prospectus or private placement
memorandum for the Variable Products, as such registration statement, prospectus
and private placement memorandum may be amended or supplemented from time to
time, or in published reports for each Account which are in the public domain or
approved by the Company for distribution to contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, which are relevant
to the Company or the Variable Products.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
private placement memorandums, reports, solicitations for voting instructions,
sales literature and other promotional materials, applications for exemptions,
requests for no action letters, and all amendments to any of the above, that
relate to the investment in the Fund under the Variable Products.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
----
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, private placement
memorandums, shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Distributor may make payments to the Company or to the distributor for the
Variable Products if and in amounts agreed to by the Distributor in writing.
5.2. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund, other than expenses assumed by the Adviser under the
Management Agreement between the Fund
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<PAGE>
and the Adviser or by another party. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Variable Products in
such a manner as to ensure that the Variable Products will be treated as
variable contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by Variable Insurance Product owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of contract owners. The
Board shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. Each of the Company and the Adviser will report any potential or
existing conflicts of which it is aware to the Board. Each of the Company and
the Adviser will assist the Board in carrying out its responsibilities under SEC
rules and regulations. The Adviser, and the participating insurance companies
and participating qualified plans will at least annually submit to the Board
such reports, materials, or data as the Board may reasonably request so that the
Board may fully carry out the obligations imposed upon by the conditions
contained in the Shared Funding Exemptive Order, and said reports, materials,
and data will be submitted more frequently if deemed appropriate by the Board.
The responsibilities to report such information and conflicts and to assist the
Board will be carried out with a view only to the interests of contract owners
and plan participants, as applicable.
7.3. If it is determined by a majority of the Board, or a majority of its
members who are not "interested persons" of the Fund, the Adviser or the Company
as that term is defined in the 1940 Act (hereinafter "disinterested members"),
that a material irreconcilable conflict exists, the Company and other
Participating Insurance Companies shall, at their expense and to the extent
reasonably practicable (as determined by a majority of the disinterested
directors), take whatever steps are necessary to remedy
10
<PAGE>
or eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance policy
---
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Distributor and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.5 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Variable Products. The Company shall not be required by Section 7.3 to establish
a new funding medium for the Variable Products if an offer to do so has been
declined by vote of a majority of contract owners materially adversely affected
by the irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding,
or if the Fund obtains a Shared Exemptive Order which requires provisions that
are materially different from the provisions of this Agreement, then (a) the
Fund and/or the Participating Insurance Companies, as appropriate, shall take
such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, or to the terms of the Shared Exemptive
Order, to the extent applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
------------------------------
11
<PAGE>
8.1(a) The Company agrees to indemnify and hold harmless the Fund and the
Adviser, each of their respective officers, employees, and Trustees or
Directors, and each person, if any, who controls the Fund or the Adviser within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually, "Indemnified Party," for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Variable Products and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement, prospectus or private placement memorandum for the Variable
Products or contained in the Variable Products or sales literature for the
Variable Products (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the registration statement, prospectus or private
placement memorandum for the Variable Products or in the Variable Products
or sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Variable Products or Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature of the Fund not supplied by the Company, or
persons under its control and other than statements or representations
authorized by the Fund or an Adviser) or unlawful conduct of the Company or
persons under its control, with respect to the sale or distribution of the
Variable Products or Fund shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such a statement or omission was made
in reliance upon and in conformity with information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
12
<PAGE>
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Variable Products or the
operation of the Fund.
8.2. Indemnification by the Adviser
------------------------------
8.2(a). The Adviser agrees, with respect to each Portfolio that it
manages, to indemnify and hold harmless the Company, each of its directors,
officers, and employees, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually, "Indemnified Party," for purposes of this Section
8.2) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Adviser) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of shares of the
Portfolio that it manages or the Variable Products and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or sales literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to the Fund by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature
(or any amendment or supplement) or otherwise for use in connection with
the sale of the Variable Products or Portfolio shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Products not supplied by
the Fund or persons under its control and other than statements
13
<PAGE>
or representations authorized by the Company) or unlawful conduct of the
Fund, Adviser(s) or Distributor or persons under their control, with
respect to the sale or distribution of the Variable Products or Portfolio
shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable Products, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Adviser in this Agreement or arise out of or
result from any other material breach of this Agreement by the Adviser; as
limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Products or
the operation of each Account.
8.3. Indemnification by the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (hereinafter
collectively, the "Indemnified Parties" and individually, "Indemnified Party,"
for
14
<PAGE>
purposes of this Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Fund) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), litigation or settlements result from
the gross negligence, bad faith or willful misconduct of the Board or any member
thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement; or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement by the Fund, as
limited and in accordance with the provisions of Sections 8.3(b) and
8.3(a);
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as may arise from such Indemnified
Party's gross negligence, bad faith, or willful misconduct the performance of
such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement.
8.3(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the Fund of the commencement
of any litigation or proceedings against it or any of its respective officers or
directors in connection with this Agreement, the issuance or sale of the
Variable Products, with respect to the operation of either Account, or the sale
or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the
15
<PAGE>
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
10.1(a) termination by any party for any reason by at least sixty (60)
days advance written notice delivered to the other parties; or
10.1(b) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio based upon the Company's determination
that shares of such Portfolio are not reasonably available to meet the
requirements of the Variable Products; or
10.1(c) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event any of the Portfolio's shares
are not registered, issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as the underlying
investment media of the Variable Products issued or to be issued by the Company;
or
10.1(d) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such Portfolio ceases to
qualify as a Regulated Investment Company under Subchapter M of the Code or
under any successor or similar provision, or if the Company reasonably believes
that the Fund may fail to so qualify; or
10.1(e) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such Portfolio fails to
meet the diversification requirements specified in Article VI hereof; or
10.1(f) termination by the Fund by written notice to the Company if the
Fund shall determine, in its sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a material adverse change
in its business, operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity, or
10.1(g) termination by the Company by written notice to the Fund and the
Adviser, if the Company shall determine, in its sole judgment exercised in good
faith, that either the Fund or the Adviser has suffered a material adverse
change in its business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse publicity; or
10.1(h) termination by either the Company or the Fund if the exemption
from registration under Section 3(c) of the 1940 Act no longer applies, or might
not apply in the future, to the unregistered Accounts, or that the exemption
from registration under Section 4(2) or Regulation D promulgated under the 1933
Act no longer applies or might not apply in the future, to interests under the
unregistered Contracts.
10.2. Notwithstanding any termination of this Agreement, the Fund shall,
at the option of the Company, continue to make available additional shares of
the Fund pursuant to the terms and conditions of this Agreement, for all
Variable Products in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Variable Products").
Specifically, without limitation, the owners of the Existing Variable Products
shall be permitted to direct reallocation of investments in the Portfolios of
the Fund, redemption of investments in the
16
<PAGE>
Portfolios of the Fund and/or investment in the Portfolios of the Fund upon the
making of additional purchase payments under the Existing Variable Products. The
parties agree that this Section 10.2 shall not apply to any termination under
Article VII and the effect of such Article VII termination shall be governed by
Article VII of this Agreement.
10.3. The provisions of Article VIII Indemnification shall survive any
termination of this Agreement pursuant to this Article X Termination.
10.4. The Company shall not redeem Fund shares attributable to the
Variable Products (as distinct from Fund shares attributable to the Company's
assets held in the Account) except (i) as necessary to implement contract owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the Securities and Exchange Commission pursuant to
Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish
to the Fund the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund) to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Variable Products, the Company
shall not prevent contract owners from allocating payments to a Portfolio that
was otherwise available under the Variable Products without first giving the
Fund 90 days prior written notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when hand delivered or sent by
registered or certified mail to the other party at the address of such party set
forth below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Fund:
Allmerica Investment Trust
440 Lincoln Street
Worcester, MA 01653
Attention: George M. Boyd, Esq.
If to Adviser:
Allmerica Financial Investment Management Services, Inc.
440 Lincoln Street
Worcester, MA 01653
Attention: George M. Boyd, Esq.
If to the Company:
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, Massachusetts 01653
Attention: Richard M. Reilly, President
ARTICLE XII. Miscellaneous
17
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12.1. A copy of the Fund's Agreement and Declaration of Trust, as may be
amended from time to time, is on file with the Secretary of the Commonwealth of
Massachusetts. Notice is hereby given that this instrument is executed by the
Fund's Trustees as Trustees and not individually, and the Fund's obligations
under this Agreement are not binding upon any of the Trustees or Shareholders of
the Fund, but are binding only upon the assets and property of the Fund.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Variable Products and all information reasonably identified
as confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company controlled by or
under common control with the Adviser, if such assignee is duly licensed and
registered to perform the obligations of the Adviser under 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 duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified above.
18
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ Richard M. Reilly
----------------------------------
Name: Richard M. Reilly
Title: President
ALLMERICA INVESTMENT TRUST
By: /s/ John P. Kavanaugh
----------------------------------
Name: John P. Kavanaugh
Title: Vice President
ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC.
By: /s/ Paul T. Kane
----------------------------------
Name: Paul T. Kane
Title: Vice President
19
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND VARIABLE PRODUCTS
---------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Variable Life Products
Separate Account Product Name 1933 Act # 1940 Act #
- ---------------- ------------ ---------- ----------
<S> <C> <C> <C>
VEL VEL ('87) 33-14672 811-5183
VEL VEL ('91) 33-90320 811-5183
VEL II VEL ('93) 33-57792 811-7466
VEL VEL (Plus) 33-42687 811-5183
Inheiritage Inheiritage 33-70948 811-8120
Select Inheiritage
Allmerica Select Separate Account II Select Life 33-83604 811-8746
Group Vel Group VEL 33-82658 811-08704
Fulcrum Variable Life Separate SPVUL 333-15569 811-07913
Account
FUVUL Separate Account ValuePlus Assurance 333-93013 811-09731
[To Be Determined] [PremierFocus] N/A N/A
Variable Annuity Products
Separate Account Product Name 1933 Act # 1940 Act #
- ---------------- ------------ ---------- ----------
VA-K ExecAnnuity Plus 91 33-39702 811-6293
ExecAnnuity Plus 93
Allmerica Advantage
Allmerica Select Separate Account Allmerica Select Resource I 33-47216 811-6632
Allmerica Select Resource II
Separate Accounts VA-A, VA-B, VA-C, Variable Annuities
VA-G, VA-H (discontinued)
- ---------------------------------------------------------------------------------------------
Fulcrum Separate Account Fulcrum 333-11377 711-7799
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE B
Portfolios of
-------------
Allmerica Investment Trust
--------------------------
Select Emerging Markets Fund
Select International Equity Fund
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select Strategic Growth Fund
Select Growth Fund
Core Equity Fund (formerly Growth Fund)
Equity Index Fund
Select Growth and Income Fund
Select Income Fund
Select Investment Grade Income Fund
(formerly Investment Grade Income Fund)
Government Bond Fund
Money Market Fund
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
-----------------------
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from owners of the Variable Products and to facilitate the
establishment of tabulation procedures. At this time the Fund will inform
the Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
. Promptly after the Record Date, the Company will perform a "tape run," or
other activity, which will generate the names, addresses and number of
units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described above. The Company will use its best efforts to call in the
number of Customers to the Fund, as soon as possible, but no later than two
weeks after the Record Date.
. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting instruction
solicitation material. The Fund will provide the last Annual Report to the
Company pursuant to the terms of Section 3.43 of the Agreement to which
this Schedule relates.
. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Fund or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
. name (legal name as found on account registration)
. address
. fund or account number
. coding to state number of units
. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
<PAGE>
. During this time, the Fund will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices
and statements will be sent to Company for insertion into envelopes
(envelopes and return envelopes are provided and paid for by the Company).
Contents of envelope sent to Customers by the Company will include:
. Voting Instruction Card(s)
. One proxy notice and statement (one document)
. return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
. "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
. cover letter - optional, supplied by Company and reviewed and approved
in advance by the Fund.
. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Fund.
. Package mailed by the Company.
The Fund must allow at least a 15-day solicitation time to the Company as
the shareowner. (A 5-week period is recommended.) Solicitation time is
calculated as calendar days from (but not including,) the meeting, counting
---
backwards.
. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
--- --------
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories
<PAGE>
depending upon their vote; an estimate of how the vote is progressing may
then be calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may entail
a recount.
. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) The Fund must review
------
and approve tabulation format.
. Final tabulation in shares is verbally given by the Company to the Fund on
the morning of the meeting not later than 10:00 a.m. Eastern time. The Fund
may request an earlier deadline if reasonable and if required to calculate
the vote in time for the meeting.
. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will be
permitted reasonable access to such Cards.
. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
<PAGE>
Exhibit 16(a)
CODE OF ETHICS
Scope and Purpose
This Code of Ethics (the "Code") applies to:
<TABLE>
<S> <C> <C>
. all directors, officers and employees of: }
- Schroder Investment Management North America Inc., } Collectively }
- Schroder Investment Management North America } "SIM NA" }
Limited }
- Schroder Fund Advisors Inc., ("SFA") } Collectively
. Schroder Investment Management International } The "US
Limited ("SIMIL") } Schroder
. New York based employees of Schroder US Holdings } Group"
Inc. ("SI") who are located on the 34/th/ floor of }
787 Seventh Avenue, New York, NY 10019. }
. all persons employed by any subsidiary of }
Schroders plc ("Schroders") who are Access Persons }
(as defined below) of any registered investment }
company managed by SIM NA. }
</TABLE>
Set forth below is the Code of Ethics (the "Code") for the US Schroder Group, as
required by Rule 17j-1 under the Investment Company Act of 1940 (the "Investment
Company Act"), Section 204A of the Investment Advisers Act of 1940 (the
"Advisers Act"), Rule 204-2(a)(12) under the Advisers Act and Section 20A of the
Securities Exchange Act of 1934 (the "Exchange Act"). The Code applies to every
employee (full- and part-time) of the US Schroder Group.
The objective of the Code is to ensure that all business dealings and securities
transactions undertaken by employees, whether for clients or for personal
purposes, are subject to the highest ethical standards. Incorporated within the
Code are an Insider Trading Policy and a Personal Securities Transactions
Policy, which contain procedures that must be followed by all personnel.
Every employee, by means of an Annual Certification of Compliance with the Code
of Ethics (see Exhibit B), must retain, read and acknowledge receipt and
understanding of this Code, which will be updated as necessary. Any questions
regarding the Code should be referred to the appropriate Ethics Supervisor.
The Code contains additional restrictions and requirements for certain Access
Persons (as defined in Appendix A), including all US Schroder Group fund
managers, investment
- 1 -
<PAGE>
analysts, traders, and those employees who, in connection with their duties, are
aware of securities under consideration for purchase or sale on behalf of
clients. Such persons will be notified in writing of their status. These
restrictions are designed to prevent any conflict or the appearance of any
conflict of interest between trading for their personal accounts and securities
transactions initiated or recommended for clients.
Statement of Policies
(a) Confidentiality
Personnel are expected to honor the confidential nature of company and
client affairs. Information designated as confidential shall not be
communicated outside of the US Schroder Group or other affiliated companies
of Schroders other than to advisers consulted on a confidential basis, and
shall only be communicated within Schroders on a "need to know" basis or as
otherwise authorized by management in conformity with the Code.
Personnel must also avoid making unnecessary disclosure of any internal
information concerning Schroders and its business relationships and must
use such information in a prudent and proper manner in the best interests
of Schroders and its clients.
(b) Level of Care
Personnel are expected to represent the interests of Schroders and its
clients in an ethical manner and to exercise due skill, care, prudence and
diligence in all business dealings, including but not limited to compliance
with all applicable regulations and laws, and to avoid illegal activities
and other conduct specifically prohibited to its personnel by the
respective policies of any of the US Schroder Group companies in relation
to which a person is a director, officer or employee.
(c) Fiduciary Duties
All personnel have fiduciary duties:
(i) at all times to place the interests of their clients before their own
and not to take inappropriate advantage of their position, and
(ii) to conduct themselves in a manner which will avoid any actual or
potential conflict of interest or any abuse of a position of trust and
responsibility.
- 2 -
<PAGE>
(d) Requirements
(i) Personnel are required to comply with the Insider Trading Policy and
Personal Securities Transactions Policy incorporated herein.
(ii) Personnel are prohibited from receiving any gift or other thing of
more than de minimis value from any person or entity that does
business with or on behalf of any client.
Personnel are prohibited from serving on the board of directors of any publicly
listed or traded company or of any company whose securities are held in any
client portfolio, except with the prior authorization of the Chairman or Chief
Executive of SIM NA, the Chairman of SIMIL or, in their absence, a majority of
the Ethics Committee, based upon a determination that the board service would be
consistent with the interests of Schroders' clients. If permission to serve as a
director is given, the company will be placed permanently on Section Two of the
US Schroder Group Restricted List. Transactions in that company's securities for
client and personal securities accounts will only be authorized when
certification has been obtained from that company's Secretary or similar officer
that its directors are not in possession of material price sensitive information
with respect to its securities.
Compliance
The Ethics Committee (see Appendix A) is responsible for ensuring that a copy of
the Code is delivered to all persons at the time of the commencement of their
employment with any US Schroder Group company, as well as on an annual basis. As
a condition of continuing employment, each employee is required to acknowledge
in writing receipt of a copy of the Code and that he or she has understood the
obligations and responsibilities hereunder and on an annual basis to certify
compliance with it on the form provided.
The Ethics Supervisors (see Appendix A) are each responsible for maintaining
with respect to their company the records and filings required under the Code
and must report immediately to the Ethics Committee any evidence of a breach of
the Code by any personnel. Following such report, there will be a prompt review
of the situation by the Ethics Committee and, if necessary, appropriate
disciplinary and/or dismissal proceedings will be instituted, including, but not
limited to, referral to the appropriate regulatory agency. Each Ethics
Supervisor will conduct a regular annual review, in addition to any other
special reviews which may be deemed appropriate by the Ethics Supervisor, to
supervise the operation of the Code (including the Insider Trading and Personal
Securities Transactions Policies) and will report such reviews by January 31/st/
of each year to the Ethics Committee or other senior officer of the US Schroder
Group appointed to receive this information.
- 3 -
<PAGE>
Questions
All questions about an individual's responsibilities and obligations under the
Code of Ethics should be referred to any member of the Ethics Committee, to the
Chief Compliance Officer in New York or London, to the General Counsel of
Schroder U.S. Holdings Inc., or to the relevant Ethics Supervisor.
- 4 -
<PAGE>
INSIDER TRADING POLICY
The Scope and Purpose of the Policy
It is a violation of United States federal law and a serious breach of
Schroders' policies for any employee to trade in, or recommend trading in, the
securities of a company, either for his/her personal gain or on behalf of the
firm or its clients, while in the possession of material, nonpublic information
("inside information") which may come into his/her possession either in the
course of performing his/her duties, or through personal contacts. Such
violations could subject you, Schroders, and our parent organizations, to
significant civil as well as criminal liability, including the imposition of
monetary penalties, and could also result in irreparable harm to the reputation
of Schroders. Tippees (i.e., persons who receive material, nonpublic
----
information) also may be held liable if they trade or pass along such
information to others.
The US Insider Trading and Securities Fraud Enforcement Act of 1988 ("ITSFEA")
requires all broker-dealers and investment advisers to establish and enforce
written policies and procedures reasonably designed to prevent misuse of
material, non-public information. Although ITSFEA itself does not define
"insider trading", the US Supreme Court has previously characterized it as the
purchase or sale of securities (which include debt instruments and put and call
options) while in possession of information which is both material and non-
public, i.e., information not available to the general public about the
---
securities or related securities, the issuer and in some cases the markets for
the securities. The provisions of ITSFEA apply both to trading while in
possession of such information and to communicating such information to others
who might trade on it improperly. This policy supplements the policies and
procedures set forth in SIM NA, SFA's and SI's Chinese Wall Procedures, which
are incorporated herein by reference.
Materiality
Inside information is generally understood as material information about an
issuer of publicly-traded securities that has not been made known to either the
professional investment community or to the public at large. Inside information
is material if it would be likely to have an effect on the price of the issuer's
securities or if a reasonable investor would be likely to consider it important
in making his/her investment decision. Such information usually originates from
the issuer itself and could include, among other things, knowledge of a
company's earnings or dividends, a significant change in the value of assets,
changes in key personnel or plans for a merger or acquisition.
For example, a portfolio manager, analyst or trader may receive information
about an issuer's earnings or a new product in a private communication with the
issuer. Such information is usually considered material and is generally inside
information because it has not been effectively disseminated to the public at
large. As a general rule, any information
- 5 -
<PAGE>
received from an issuer that has not been made public in a press release or a
public filing will be considered inside information. Upon learning the
information, the employee may not purchase or sell securities of the issuer for
him/herself or for any account under management until the information is
effectively disseminated to the public.
If an employee has received information regarding an issuer and he/she believes
that the information given has not been given in breach of fiduciary duties,
then that person may retain and act upon the information.
Market information which emanates from outside the corporation but affects the
market price of an issuer's securities can also be inside information. For
example, inside information can also originate within Schroders itself. This
would include knowledge of activities or plans of an affiliate, or knowledge of
securities transactions that are being considered or executed on behalf of
clients. Inside information can also be obtained from knowledge about a client
that an employee has discovered in his/her dealings with that client. Inside
information pertaining to a particular issuer could also involve another company
that has a material relationship to the issuer, such as a major supplier's
decision to increase its prices.
In addition, Rule 14e-3 under the Exchange Act makes it unlawful to buy or sell
securities while in possession of material information relating to a tender
offer, if the person buying or selling the securities knows or has reason to
know that the information is nonpublic and has been acquired, directly or
indirectly from the person making or planning to make the tender offer, from the
target company, or from any officer, director, partner or employee or other
person acting on behalf of either the bidder or the target company. This rule
prohibits not only trading, but also the communication of material, nonpublic
information relating to a tender offer to another person in circumstances under
which it is reasonably foreseeable that the communication will result in a trade
by someone in possession of the material, nonpublic information.
Procedures and Responsibilities of Employees
1. Personnel who acquire non-public information (that may possibly be
material) about a company are immediately prohibited:
(a) from trading in the securities of that company or related securities
and financial instruments (as defined below) whether for client
accounts, for Schroder company accounts, or for any Personal Account
(see definition in Appendix A), and
(b) from communicating the information either inside or outside Schroders
except as provided below.
2. Such personnel, other than Senior Executives as defined in the Chinese Wall
Procedures, are required immediately to notify the most senior-ranking
available
- 6 -
<PAGE>
member of the Ethics Committee (see Appendix A) who will evaluate whether
the information is both material and non-public.
IF YOU ARE IN ANY DOUBT, SPEAK TO THE SENIOR-RANKING AVAILABLE MEMBER OF
THE ETHICS COMMITTEE.
3. If the information is determined by this member of the Ethics Committee to
be material and non-public, all securities of the relevant company (or
companies) and related securities or financial instruments will be placed
on Section One of the US Schroder Group Restricted List (see discussion
below) with immediate effect.
4. Only the member of the Ethics Committee who determined the information to
be material and non-public may decide whether it is necessary to
communicate the Inside Information to another party, either inside or
outside Schroders. If so, the communication must state clearly and
expressly that such information is material, non-public and confidential
and that its possession precludes trading for any account in any security
of the specified company or any related security or financial instrument.
5. This same member of the Ethics Committee is responsible for notifying the
Ethics Supervisor when such information ceases to be material and non-
public and for ensuring that the securities of the relevant company or
companies and related securities or financial instrument are removed from
the US Schroder Group Restricted List. The person who initially reported
possession of the information is required to notify the member of the
Ethics Committee of any change in status of the information of which he or
she becomes aware.
6. All employees are also responsible for preventing disclosure of any non-
public information in Schroders' possession, whether or not that
information is material, except in accordance with the procedures set out
in this Policy.
7. Any files likely to contain non-public information must be kept locked and
access to computerized files must be restricted at all times, except when
required by authorized personnel for the performance of their duties at
Schroders.
8. Non-public information which has not been deemed to be material under 2.
above may be communicated only to such personnel as require such information for
the performance of their duties at Schroders.
- 7 -
<PAGE>
Penalties
- ---------
Penalties for trading on or communicating material, nonpublic information are
severe, both for the individuals involved in such unlawful conduct and their
employers. Under the law, a person can be subject to some or all of the
penalties below, even if s/he does not personally benefit from the violation.
Penalties include:
1) civil injunctions;
2) disgorgement of profits;
3) treble damages - fines for the access person who committed the
violation, of up to 3 times the profit gained or loss avoided, whether
or not the person actually benefited;
4) fines for the employer or other controlling person of up to the
greater of $1,000,000, or 3 times the profit gained or loss avoided;
and
5) jail sentences.
Special Provisions For Trading In the Securities of Schroders plc
Special restrictions apply to dealing in the securities of Schroders plc because
staff, by virtue of their employment, may be deemed to have Inside Information:
1. Securities of Schroders plc will not be purchased for any client account
without the permission of that client, and then only if permitted by
applicable law and with the prior approval of a member of the Ethics
Committee or Ethics Supervisor.
2. Personal securities transactions in the securities of Schroders plc are
subject to blackout periods and other restrictions which are outlined in
the Schroder London Group Staff Handbook. Copies of the restrictions are
available from the Ethics Supervisors. Staff wishing to deal in the
securities of Schroders plc must first contact the senior-ranking dealer in
Schroders' London equity dealing room who will explain the applicable
blackout periods, restrictions and authorizations required.
US Schroder Group Restricted List
The US Schroder Group Restricted List is circulated only to those employees
responsible for placing securities trades, to members of the Ethics Committee
and to the Ethics Supervisors.
- 8 -
<PAGE>
Section One: No personnel may place trades in any securities, which term
includes options, warrants, debentures, futures, etc., on such securities
(hereinafter referred to as a related security or financial instruments, of any
company on Section One of the US Schroder Group Restricted List for any account
whatsoever, including client accounts, Schroder company accounts or Personal
Accounts at any time.
Section Two: Trades in the securities or related securities or financial
instruments of any company on Section Two of the US Schroder Group Restricted
List (which contains those companies that have an officer of a US Schroder Group
Company on their board of directors, or where a US Schroder Group Company
manages a part of their balance sheet assets, i.e., corporate cash rather than
-----
pension fund assets) may only be undertaken with the written permission of the
appropriate Ethics Supervisor.
No approval to trade will be given by the Ethics Supervisor:
(i) for any securities of a company currently on Section One of the US Schroder
Group Restricted List;
(ii) for any security of a company on Section Two of the US Schroder Group
Restricted List because an officer of a US Schroder Group Company serves as
a director of that company unless the Ethics Supervisor (or alternate) can
obtain confirmation from that company's Secretary or similar officer that
its directors are not in possession of material price sensitive information
with respect to its securities. Permission to trade in the securities of
any company on Section Two of the US Schroder Group Restricted List because
a US Schroder Group Company manages balance sheet assets for that company
(as opposed to pension fund assets) will only be given if the Ethics
Supervisor (or alternate) can obtain confirmation from the portfolio
manager responsible for that client that no US Schroder Group Company holds
any price sensitive information with respect to that company. Permission
will not, in any event, be given to any personnel personally involved in
the management of that client's account.
- 9 -
<PAGE>
PERSONAL SECURITIES TRANSACTIONS
POLICY
Scope and Purpose of the Policy
This Personal Securities Transactions Policy sets out the policies and
procedures required to be followed by all personnel in connection with trades
for Covered Accounts in Covered Securities (see Appendix A) in order to comply,
inter alia, with the US Schroder Group's Code of Ethics. It sets out additional
- ----------
restrictions and requirements for Level One Access Persons (as defined in
Appendix A). Further, it sets out the policies and procedures required to be
followed by outside directors (as defined in Appendix A) of Schroder Capital
Funds, Schroder Capital Funds (Delaware) and Schroder Series Trust
(collectively, the "Schroder Funds").
SIM NA London, New York, SIMIL, and SI-New York Personnel
The procedures applicable to personnel employed by SIM NA in London and the US,
SIMIL, and to SI - New York personnel vary in detail but not in principle.
Establishing an Account
Before undertaking any transactions in Covered Securities, employees must
establish an account in accordance with the requirements of their employer
company.
New York
All US-based personnel of SIM NA and SI, unless exempted in writing by the
Ethics Committee, are required to maintain their Covered Accounts at Salomon
Smith Barney ("SSB") or Charles Schwab & Co. ("Schwab"). SSB and Schwab provide
an electronic download of employees' trades on T+1 which are accessed daily by
the Compliance Department. Additionally, both firms provide contemporaneous
copies of monthly account statements and trade confirmations to the Compliance
Department.
Personnel on secondment from London to New York may apply for a waiver of the
requirement to maintain brokerage accounts at SSB or Schwab for non-US
securities. At a minimum, such personnel must follow the procedures set forth
in the "Schroder Investment Management London Group Personal Investment Dealing
Rules" as described below and report their transactions in Covered Securities
quarterly to the New York Ethics Supervisor.
London
- ------
All London-based personnel are required to comply with the requirements of the
"Schroder Investment Management London Group Personal Investment Dealing Rules,"
which are incorporated herein by reference, including placing all transactions
in Covered Securities
- 10 -
<PAGE>
through the Schroder London dealing room. London-based personnel must establish
an account to deal through Schroders' London dealing room according to the
procedures set out in the London Staff Handbook. Such procedures are
incorporated herein by reference within this Personal Securities Transactions
Policy. Upon establishing an account, London-based personnel covered by this
Policy are required to make arrangements for copies of all contracts and
confirmations to be sent to their Ethics Supervisor.
Toronto and Mexico City
- -----------------------
All Toronto and Mexico City based SIM NA personnel may maintain Covered Accounts
at the brokerage firm of their choosing, provided that Compliance (New York) is
notified. These employees are required to provide Compliance with copies of
monthly/periodic account statements and trade confirmations.
Transactions
All transactions fall into one of four categories:
. transactions prohibited by the Policy
. transactions exempt from all provisions of the Policy
. transactions exempt from the pre-clearance requirements but subject to the
reporting provisions of the Policy
. transactions subject to pre-clearance and the reporting provisions
Prohibited Transactions
All personnel are prohibited from trading for any Covered Account where the
execution of any such transaction would violate the principles and procedures of
the Code or Insider Trading Policy and no personnel shall request permission to
trade for any Covered Account if he or she knows that such trade:
(i) would result in the buying or selling of securities in competition with buy
or sell orders of, or on behalf of, clients, or operate to the detriment of
such clients including, without limitation, executing a securities
transaction on a day during which any client, including any investment
company for which a US Schroder Group company serves as investment adviser,
sub-adviser or manager (a "Schroder Managed Fund"), has a pending "buy" or
"sell" order in that same security until that order is executed or
withdrawn;
(ii) would be for the purpose of, or result in, the buying or selling of
securities to take advantage of recent or imminent trades of clients;
- 11 -
<PAGE>
(iii) would involve a security being considered for recommendation for
purchase or sale on behalf of a client;
(iv) would take place before a sufficient period of time has elapsed after
an open-market purchase or sale of any such security, by or on behalf
of any client, for the effects of such purchase or sale on the market
price to dissipate;
(v) would involve any security of any company currently on the US Schroder
Group Restricted List or any company with respect to which such person
has non-public information which has not been evaluated by a member of
the Ethics Committee in accordance with the provisions of the Insider
Trading Policy;
(vi) would involve trading in options on any of the stocks held by or
contemplated for client accounts;
(vii) would involve a "short sale" or otherwise would expose the employee to
unlimited risk of loss.
De minimis exception: Transactions involving shares in certain companies traded
on US stock exchanges or the NASDAQ, will be approved regardless of whether
there are outstanding client orders unless there is a large outstanding order
for the purchase or sale of such securities by clients. A large order will
generally occur if the US equity large cap model has been revised. Other than
an adjustment in the model, outstanding orders for wrap fee or managed accounts
or to re-balance institutional or private accounts, will not preclude clearance
for a de minimis transaction.
The exception applies to transactions involving no more than 500 shares per
issuer per week in the aggregate for an employee's Covered Accounts, in
securities of companies with market capitalizations of $5 billion or more. In
the case of options, an employee may purchase or sell up to 5 option contracts
per week to control up to 500 shares in the underlying security of such large
cap company.
Short Term Trading
All personnel are strongly advised against short-term trading. All
personnel are bound by the Schroder Group policy that no one may
purchase and sell the same (or equivalent) security within seven
calendar days. (Please note that all London-based personnel are bound
by the 60 day holding period outlined below for Level One Access
Persons.) Such personnel are, in addition, subject to tighter
restrictions outlined below. The trading records of all personnel will
be reviewed quarterly by their Ethics Supervisor. Any personnel that
appear to have established a pattern of short term trading may be
subject to additional restrictions or penalties including, but not
-12-
<PAGE>
limited to, a limit or ban on future personal trading activity and a
requirement to disgorge profits on short-term trades.
The Short Term Trading Prohibition shall not pertain to the exercise
of a call sold by an employee to cover a long position. However,
although an employee may purchase a put to cover a long position, the
exercise of such put will only be approved if the underlying security
was held for the minimum required period (7 days or 60 days, as
appropriate). The exercise of a covered put is subject to the same
preclearance and reporting requirements as the underlying security.
Covered Securities
- ------------------
Securities, such as stocks, bonds and options, are covered by this Policy. The
same limitations pertain to transactions in a security related to a Covered
Security, such as an option to purchase or sell a Covered Security and any
security convertible into or exchangeable for a Covered Security.
Not covered by this Policy are:
. securities which are direct obligations of the U.S. Government (i.e.,
-----
Treasuries)
. any debt security directly guaranteed by any OECD member Government
. bankers' acceptances, bank certificates of deposit, commercial paper,
repurchase agreements and other high quality short-term debt instruments/1/
. shares or units in any open-end US registered investment company (mutual
fund)
. shares of any UK authorized unit trust/2/
If a security is not covered by this Policy, you may purchase or sell it without
obtaining pre-clearance and you do not have to report the transaction.
Exempt from Preclearance
The preclearance requirements do not apply to the following
transactions. However, such transactions must be reported as set forth
in the section on Reporting Requirements.
1) Non-discretionary Accounts
--------------------------
______________________
/1/ High quality short-term debt instruments means any instrument having a
maturity at issuance of less than 366 days and which is rated in one of the
highest two rating categories by a Nationally Recognized Statistical Rating
Organization, or which is unrated but is of comparable quality.
/2/ Please note that Schroder Unit Trusts Limited does not currently accept
investments by US Persons into Schroders UK authorized unit trusts.
-13-
<PAGE>
Transactions effected in any Covered Account over which the employee
has no direct or indirect influence or control is deemed a non-
discretionary account. An employee shall be deemed to have no direct
or indirect influence or control over an account only if the following
conditions are met:
a) Investment discretion for such account has been delegated in
writing to an independent fiduciary and such investment
discretion is not shared with the employee or decisions for the
account are made by a family member and not by the employee;
b) The employee (and where applicable, the family member) certifies
in writing that he/she has not and will not discuss any potential
investment decisions with such independent fiduciary or family
member; and
c) The Ethics Committee approves such arrangements.
2) Non-Volitional Trades
---------------------
Transactions which are non-volitional on the part of the employee
(i.e., the receipt of securities pursuant to a stock dividend or
---
merger). However the volitional sale of securities acquired in a non-
volitional manner is treated as any other securities trade and subject
to the preclearance requirements.
3) Automatic Transactions and Dividend Reinvestment Plans
------------------------------------------------------
Purchases of the stock of a company pursuant to an automatic dividend
reinvestment plan, automatic direct stock purchase plan, dividend
reinvestment plan or an employee stock purchase plan sponsored by such
company. Such deductions that take place on an automatic, regular
(i.e., weekly, monthly, quarterly) basis from either a paycheck or
----
account (i.e., bank account, money market account) need not be
---
pre-cleared.
However the volitional sale of such securities is treated as any other
securities trade and subject to the preclearance requirements. In
addition, if an employee mails in a payment to purchase securities
directly from the issuer, that purchase must be pre-cleared on the day
the payment is mailed in to the issuer (see the following section).
4) Rights Offerings
----------------
Receipt or exercise of rights issued by a company on a pro rata basis
to all holders of a class of security and the sale of such rights.
Employees must, however, pre-clear transactions for the acquisition of
such rights from a third-party or the disposition of such rights.
-14-
<PAGE>
Trading PreClearance
Before each transaction in a Covered Security, all personnel must complete a
"Personal Securities Transaction - Request to Trade" form (see Appendix C).
U.S. Securities
Personnel wishing to trade in US securities must have the form signed by the
senior fund manager present (in New York or London and corresponding to the
director's, officer's or employee's location) responsible for supervising client
investments in large capitalization US equities, small capitalization US
equities, investment grade fixed income securities or high yield securities, as
appropriate, to the effect that no client trades are presently contemplated in
that security. Boston-based personnel wishing to trade in small capitalization
US equities should obtain certification from the senior fund manager in Boston;
all other personnel wishing to trade in small capitalization US equities should
obtain certification from the senior New York or London-based (as applicable)
small company fund manager.
If you wish to purchase an initial public offering/3/ or securities in a private
placement/4/ you must obtain permission from the Chief Compliance Officer.
Any employee who has been authorized to acquire securities in a Private Place is
required to disclose that investment in any subsequent consideration of a
client's investment in securities of the issuer. In such circumstances, the
decision to purchase securities of the issuer for a client shall be subject to
an independent review by personnel with no personal interest in the matter.
Non U.S. Securities
Personnel wishing to trade in non-US equity securities must obtain
certification, by fax if necessary, from the senior London-based SIM NA or SIMIL
fund manager responsible for supervising client investments in the country where
such securities are primarily traded. Country funds and ADRs are treated as
non-US securities and certification must therefore be obtained from the senior
London based SIM NA or SIMIL fund manager responsible for the relevant country.
__________________________
/3/ An IPO is an offering of securities registered under the Securities Act, the
issuer of which, immediately before the registration, was not subject to
reporting requirements under the federal securities laws.
/4/ A private placement is an offering of securities that are not registered
under the Securities Act because the offering qualified for an exemption from
the registration provisions.
-15-
<PAGE>
Approval of Trading
Final responsibility for approving all trades, other than those placed through
Schroders' London dealing room, rests with the Ethics Supervisor, or in his/her
absence with any member of the Ethics Committee. London-based personnel must
send the signed Request to Trade form to their Ethics Supervisor at the same
time that the required dealing ticket is submitted to the senior-ranking dealer
in Schroders' London dealing room. Members of the Ethics Committee, including
the Ethics Supervisor, shall have their own personal trades, other than those
placed through Schroders' London dealing room, approved by another member of the
Ethics Committee.
If an employee receives permission to trade a security or instrument, the trade
must be executed after such permission is granted and, for US-based personnel
before the end of the next business day after permission has been received.
Trades for London-based personnel must be executed within 24 hours after
permission is granted. If the trade is not executed within the appropriate time
frame and the person still wishes to effect the transaction, pre-clearance must
again be obtained - this would be the case for limit orders and orders such as
good-till-canceled as well.
(For Personal Equity Plans and similar vehicles which are subject to a mandatory
cooling-off period, trade date shall be deemed to be the date on which the
application is submitted rather than the date on which the cooling-off period
expires and not the date the trade is executed.)
If an employee fails to preclear a transaction in a Covered Security, he/she may
be monetarily penalized, by a fine and/or disgorgement of profits or avoidance
of loss. These types of violations will result in reprimands and could also
negatively affect the person's employment at Schroders. All preclearance
violations will be forwarded to the Ethics Committee to determine sanctions.
In cases where approval is not granted for any Covered Account transactions in a
security, Schroders will provide no compensation for any consequential losses in
a Covered Account.
Additional Restrictions and Requirements For Level One Access Persons
The following additional restrictions and requirements apply to Level One Access
Persons, namely all US Schroder Group fund managers, investment analysts,
traders and those persons who, in connection with their regular functions or
duties, obtain: (i) information regarding the purchase or sale of a security on
behalf of a client or (ii) information as to specific securities under
consideration for purchase or sale on behalf of clients. These additional
restrictions are designed to prevent any conflict or the appearance of any
conflict
-16-
<PAGE>
of interest between trading for their Covered Accounts and securities
transactions initiated or recommended by them for clients:
i) Level One Access Persons are prohibited from buying or selling a security
within seven calendar days before and after any client trades in that
security. Any profits realized on transactions within the proscribed
periods (based on the difference in the price per share between that paid
or received, as appropriate, by the client and that paid or received by
such Access Person) will be required to be disgorged to the appropriate
client or, if that is not possible, to a charitable organization designated
by the Ethics Committee.
ii) Level One Access Persons are prohibited from profiting in the purchase and
sale of the same (or equivalent) securities within 60 calendar days. This
60 day restriction is in lieu of the general seven day restriction on
short-term trading described above. Any profits realized on any such short-
term trades will be required to be disgorged to a charitable organization
designated by the Ethics Committee.
iii) Level One Access Persons are required to disclose, on commencement of
employment and subsequently in an annual filing to their Ethics Supervisor,
all their personal securities holdings.
Reporting Requirements
- ----------------------
All personnel are required to report his/her transactions in Covered Securities
holdings in Covered Accounts, as follows.
Reports of Each Transaction in a Covered Security
-------------------------------------------------
. Personnel are required to report to Compliance, no later than at the
opening of business on the business day following the day of execution of a
trade for a Personal Account, including:
name of security
nature of transaction (purchase, sale, etc.)
number of shares/units or principal amount
price of transaction
date of trade
name of broker
SSB and Schwab provide the New York Compliance Department with a daily report of
the above information with respect to any personal securities transactions
executed by New York-based personnel.
Any personnel seconded from London to New York who are granted a waiver from the
requirement to maintain personal accounts at SSB or Schwab shall, within ten
days after the
-17-
<PAGE>
end of each calendar quarter, provide the New York Ethics Supervisor with copies
of all pre-clearance forms and contract notes for transactions executed through
the London dealing desk.
The reporting obligation of London-based personnel shall be discharged by
arranging in advance for copies of contract notes/confirmations for all their
transactions to be sent automatically to Compliance upon completion of a trade.
Initial Employment
. No later than 10 days after initial employment with a US Schroder Group
Company, each employee must provide Compliance (New York or London, as
appropriate) with a list of each Covered Security s/he owns (as defined
above). The information provided must include the title of the security,
number of shares owned, and principal amount, as well as a of list of all
Covered Accounts where Covered Securities are held. The employee will sign
and date the report.
Quarterly Reports
. No later than 10 days after the end of each calendar quarter, each employee
will provide Compliance (New York or London, as appropriate) with a report of
all transactions in Covered Securities in the quarter, including the name of
the Covered Security, the number of shares and principal amount, whether it
was a buy or sell, the price and the name of the broker through whom
effected. The employee will also report any new Covered Accounts established
during the quarter, including the name of the broker/dealer and the date the
Covered Account was established. The report will be signed and dated by the
employee.
Annual Reports
. Within 30 days after the end of the calendar, each employee must report all
his/her holdings in Covered Securities as at December 31, including the
title, number of shares and principal amount of each Covered Security the
employee owns (as defined above) and the names of all Covered Accounts. The
employee will sign and date the report.
Exceptions:
. An employee need not report any transactions in Covered Securities or any
Covered Accounts in which s/he has no direct or indirect influence or
control.
. A director of a Schroder Fund who is not an "interested person"/5/ is not
required to make initial, quarterly or annual reports provided that s/he did
not know, nor in the ordinary course of fulfilling his/her duties as a
director, s/he should not have known, that during
__________________________
/5/ As defined in Section 2(a)(19) of the Investment Company Act.
-18-
<PAGE>
the 15 day period immediately before or after his/her transaction in a
Covered Security, the Fund purchased or sold the Covered Security or that the
Covered Security was considered for purchase or sale by the Fund.
The information on personal securities transactions received and recorded by SIM
NA and SIMIL (on behalf of their employees) will be deemed to satisfy the
reporting obligations contained in Rule 204-2(a)(12) under the Advisers Act and
Rule 17j-1 under the Investment Company Act. Such reports may, where
appropriate, contain a statement to the effect that the reporting of the
transaction is not to be construed as an admission that the person has any
direct or indirect beneficial interest or ownership in the security.
Reports by the Ethics Supervisors
On a quarterly basis, the appropriate Ethics Supervisors, in order to assist
them in fulfilling their regulatory obligations, will report to the Boards of
Trustees of the Schroder Funds or the Schroder-managed Funds, as appropriate,
and the Supervisory Principal of SFA, any violations of this Code and the
actions, if any, taken by the Ethics Committee.
Adopted: October 1, 1995
Amended: May 15, 1996
May 1, 1997
June 12, 1998
June 2, 1999
March 14, 2000
-19-
<PAGE>
APPENDIX A
DEFINITIONS
"Ethics Supervisor" means the persons designated from time to time by the Ethics
Committee to administer the Code, who currently are:
- --------------------------------------------------------------------------------
Barbara Brooke Manning for: Schroders U.S. Holdings Inc.
(alts: ) Evett Lawrence Schroder Investment Management North
Brian Murphy America Inc. (New York and Mexico City)
Schroder Investment Management North America
Ltd. (Toronto only)
- --------------------------------------------------------------------------------
Barbara Brooke Manning for: Schroder Fund Advisors Inc.
(alt: Sandra Poe) Schroder Capital Funds
Schroder. Investment Management North America
Inc. (New York)
Schroder Capital Funds (Delaware)
Schroder Series Trust
- --------------------------------------------------------------------------------
Paul Martin for: Schroder Investment Management North America
Inc. (London)
Schroder Investment Management North America
Limited (London)
Schroder Investment Management International
Limited
- --------------------------------------------------------------------------------
"Ethics Committee" means the committee designated by the US Schroder Group
Companies from time to time, which currently comprises:
Jeremy Willoughby (Chairman)
Richard Foulkes
Barbara Brooke Manning
Richard Mountford
Andrew Smethurst
Mark Smith
"Access Person" will be divided into two categories: Level One Access Person
means any director, officer or employee who is an Advisory Person (as defined
herein) of SIM NA, SFA, SI and the Schroder Funds. All other directors and
officers are Level Two Access Persons.
"Advisory Person" is any employee who, in connection with his/her regular
functions or duties, makes, participates in, or obtains information regarding
the purchase or sale of a security on behalf of any advisory client or
information regarding securities under consideration for purchase or sale on
behalf of clients or whose functions relate to the making of any recommendations
with respect to such purchases or sales.
-20-
<PAGE>
A security is "being considered for purchase or sale" when a recommendation to
purchase or sell a security has been made or communicated and, with respect to
the person making the recommendation, when such person seriously considers
making such a recommendation.
"Covered Account" is an account in which securities are owned by you. This
includes IRA accounts. Under the Policy, accounts held by your spouse
(including his/her IRA accounts), minor children and other members of your
immediate family (children, stepchildren, grandchildren, parents, step parents,
grandparents, siblings, in-laws and adoptive relationships) who share your
household are also considered your accounts. In addition, accounts maintained by
your domestic partner (an unrelated adult with whom you share your home and
contribute to each other's support) are considered your accounts under this
Policy.
If you are in any doubt as to whether an account falls within this definition of
Covered Account, please see Compliance. Further, if you believe that there is a
reason that you are unable to comply with the Policy, for example, your spouse
works for another regulated firm, you make seek a waiver from Compliance.
"Covered Securities" generally means stocks, bonds and options. The same
limitations pertain to transactions in a security related to a Covered Security,
such as an option to purchase or sell a Covered Security and any security
convertible into or exchangeable for a Covered Security.
Not covered by this Policy are:
. securities which are direct obligations of the U.S. Government (i.e.,
-----
Treasuries)
. any debt security directly guaranteed by any OECD member Government
. bankers' acceptances, bank certificates of deposit, commercial paper,
repurchase agreements and other high quality short-term debt instruments/6/
. shares or units in any open-end US registered investment company (mutual
fund)
. shares of any UK authorized unit trust/7/
"Disinterested Director/Trustee" means a Director or Trustee of the any of the
Schroder Funds who is not an "interested person" of the Funds within the meaning
of Section 2(a)(19) of the Investment Company Act or the rules thereunder.
__________________________
/6/ High quality short-term debt instruments means any instrument having a
maturity at issuance of less than 366 days and which is rated in one of the
highest two rating categories by a Nationally Recognized Statistical Rating
Organization, or which is unrated but is of comparable quality.
/7/ Please note that Schroder Unit Trusts Limited does not currently accept
investments by US Persons into Schroders UK authorized unit trusts.
-21-
<PAGE>
"US Schroder Group Restricted List" means a list of securities determined from
time to time by the Ethics Committee, in accordance with provisions of the
Insider Trading Policy, to be inappropriate for trading by personnel covered by
this Code and, in certain circumstances, by any client portfolio of any US
Schroder Group Company.
-22-
<PAGE>
Exhibit 16(b)
NICHOLAS-APPLEGATE
================================================================================
- --------------------------------------------------------------------------------
CODE OF ETHICS
AND CONDUCT
- --------------------------------------------------------------------------------
<PAGE>
NICHOLAS-APPLEGATE
CAPITAL MANAGEMENT
================================================================================
NICHOLAS-APPLEGATE
SECURITIES
================================================================================
NICHOLAS-APPLEGATE
INSTITUTIONAL FUNDS
<PAGE>
MESSAGE FROM THE MANAGING PARTNER
Nicholas-Applegate, quite simply, does not exist without our clients. While
it's true we are an investment management firm, known for providing excellent
investment returns and client service, a large part of our success is built on
our reputation for integrity and professionalism. Our clients place not only
their money, but also their trust with us when they hire us. It is up to us as
a firm, and each one of us individually, to ensure that trust is upheld.
Without it, we would not have a single client, regardless of our investment
returns.
With this in mind, the firm has long had a formal Code of Ethics in place.
Every employee commits to follow this Code when he/she joins the firm, and we,
as a firm, are committed to the principles embodied by the Code. The driving
principle is actually pretty easy to express: "Our clients come first."
Everything, really, flows from that simple statement. When you review and sign
the attached Code of Ethics, I'd like you to keep these principles in mind and
know that they are supported at our firm from the top down. I'd also like you
to recognize that ultimately the Code of Ethics is really just an expression
about the way we, as a firm, want to do business, and that it is our
responsibility individually, and as a firm, to ensure the Code is followed in
spirit, as well as word. The Code can't cover every individual situation that
may come up, so we must all use our best efforts to apply the principles of the
Code in our everyday business. We, and our clients, should expect nothing less.
Art Nicholas
i
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
A. Definitions................................................................... A-1
-----------
I. Introduction & Overview....................................................... 1
-----------------------
II Persons Covered by This Code
----------------------------
a. Employees & Covered Persons.............................................. 3
b. Outside Fund Directors /Trustees......................................... 3
c. The Administrator........................................................ 4
III Personal Securities Transactions
--------------------------------
a. Covered Securities & Transactions........................................ 5
b. Exempt Securities & Transactions......................................... 5
IV. Procedures for Trading Securities
---------------------------------
A. Pre-Clearance............................................................ 7
B. Violations............................................................... 8
C. Holding Period Restriction............................................... 10
D. Blackout Period.......................................................... 10
E. De Minimis Transactions.................................................. 10
F. Initial Public Offerings ("IPOs") & Private Placements................... 11
G. Front-Running............................................................ 11
H. Inside Information....................................................... 11
V. Reports & Certifications Regarding Personal Securities Transactions
-------------------------------------------------------------------
A. Personal Holdings Reports................................................ 13
B. Monthly Transaction & Gift Reports....................................... 13
C. Duplicate Brokerage Statements & Confirmations........................... 14
D. Certification of Compliance.............................................. 14
VI. Potential Conflict of Interest Issues
-------------------------------------
a. Service on Boards of Other Companies..................................... 15
b. Gifts.................................................................... 15
c. Gift Pre-clearance....................................................... 15
d. Gift Violations.......................................................... 16
</TABLE>
ii
<PAGE>
---------------------------------------------------------------------------
TABLE OF CONTENTS (Cont'd)
---------------------------------------------------------------------------
<TABLE>
<S> <C>
VII. Violations of the Code.................................... 17
----------------------
VIII. Annual Board Review....................................... 18
-------------------
IX. Administration & Construction............................. 19
-----------------------------
X. Amendments & Modifications................................ 20
--------------------------
</TABLE>
Policies & Procedures - Insider Trading Policy APPENDIX I
----------------------------------------------
Examples Of Beneficial Ownership APPENDIX II
---------------------------------
Personal Trading Restriction Summary APPENDIX III
------------------------------------
Exceptions to Ban on Short-Term Trading APPENDIX IV
---------------------------------------
Code of Ethics Signature Pages APPENDIX V
------------------------------
iii
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
The following definitions apply to this Code of Ethics:
NACM Nicholas-Applegate Capital Management, Inc.,
a CA LP
NAS Nicholas-Applegate Securities
NAIF or Funds Nicholas-Applegate Institutional Funds
NA Nicholas-Applegate (i.e., NACM, NAS and NAIF)
Code NA Code of Ethics
Employees All officers, partners and employees of NACM
and NAS, well as part-time employees,
consultants, temps and interns after one
month
Covered Persons Any Employee and any relative by blood or
marriage living in the Employee's household
or any person who holds an account that names
Employee as a beneficiary or otherwise
Investment Personnel Trading Desk personnel, portfolio managers
and financial analysts
Administrator Brown Brothers Harriman - Administrator of
the Funds
Advisory Clients Shareholders of funds, institutional clients
and any other person or entity whom NA
provides investment advisory services
Exempt Transactions Any transaction that does not require pre-
clearance by NA's Compliance Department prior
to execution (e.g., open-end mutual funds,
---
U.S, government securities and named indices
as listed in the Code at Appendix IV)
-----------
Trustees Trustees of the Funds
Beneficial Ownership For purposes of this Code, "beneficial
ownership" means any interest in a security
for which a Covered Person can directly or
indirectly receive a monetary benefit,
including the right to buy or sell a
security, to direct the purchase or sale of a
security, or to vote or direct the voting of
a security. Please refer to Appendix II for
-----------
additional examples of beneficial ownership
A-1
<PAGE>
Non-Employee Trustees Trustees of the Funds who are not
Employees of NACM or NAS (including
employees of the Administrator)
Personal Securities Transaction Any trade in debt or equity securities
executed on a stock market, or other
securities not defined as "exempt
securities" under the NA Code of Ethics,
by a Covered Person. This includes all
futures, options, warrants, short-sells,
margin calls, or other instrument of
investment relating to an equity
security
Exempt Securities Securities, which, under the Code, do
not require pre-clearance authorization
by the Compliance Department (see page
11 and Appendix IV)
Blueform Monthly Personal Securities Transaction
and Gift Report
Insider Persons who are officers, directors,
employees and spouse and anyone else who
is privy to inside information
Insider Trading Buying or selling of a security while in
possession of material, non-public
information or anyone who has
communicated such information in
connection with a transaction that
results in a public trade or information
service or medium
Non-public Information Any information that is not made known
via a public magazine, newspaper or
other public document
Access Person Any Employee of NA, including temporary
employees (if here more than one month),
interns and consultants (working on NA
premises)
Open-End Investment Companies Funds that continuously offer new shares
(Open-End Mutual Funds) and redeem outstanding shares at NAV on
any business day. Shares are purchased
directly from the distributor of the
funds
Closed-End Investment Companies Funds whose shares traded on the
secondary market with most being listed
on stock exchanges. New shares are not
continuously offered, nor are
outstanding shares redeemable.
A-2
<PAGE>
Code of Ethics and Conduct
Nicholas-Applegate Capital Management
Nicholas-Applegate Securities
Nicholas-Applegate Institutional Funds
Revised as of March 20, 2000
- --------------------------------------------------------------------------------
I. INTRODUCTION & OVERVIEW
- --------------------------------------------------------------------------------
Nicholas-Applegate Capital Management ("NACM"), Nicholas-Applegate
Securities ("NAS") and Nicholas-Applegate Institutional Funds ("NAIF")
(collectively, "NA") have developed and maintain a reputation for integrity
and high ethical standards. Therefore, it is essential not only that NA
and its employees comply with relevant federal and state securities laws,
but that we also maintain high standards of personal and professional
conduct. NA's Code of Ethics and Conduct (the "Code") is designed to help
ensure that we conduct our business in a manner consistent with these high
standards.
As a registered investment adviser, NA and its employees owe a fiduciary
duty to our clients that requires each of us to place the interests of our
clients ahead of our own. A critical component of meeting our fiduciary
duty is to avoid potential conflicts of interest. Accordingly, you must
avoid all activities, interests and relationships that interfere or appear
to interfere with making decisions in the best interests of the
shareholders of NAIF (or "Funds") and any other person or entity to which
NA provides investment advisory services (together, "Advisory Clients").
Please bear in mind a conflict of interest can arise even if there is no
financial loss to Advisory Clients and regardless of the employee's
motivation. Many potential conflicts of interest can arise in connection
with employee personal trading and related activities. The Code is designed
to address and prevent potential conflicts of interest pertaining to
personal trading and related activities and is based on the following
principles:
1) We must at all times place the interests of our Advisory Clients
first. In other words, as a fiduciary, you must scrupulously
avoid serving your own personal interests ahead of the interests
of NA Advisory Clients.
2) We must make sure that all personal securities transactions are
conducted consistent with the Code and in such a manner as to
avoid any actual or potential conflicts of interest or any abuse
of an individual's position of trust and responsibility.
3) We must not take inappropriate advantage of our positions. The
receipt of investment opportunities, perquisites, or gifts from
persons seeking business with NA could call into question the
exercise of your independent judgment.
1
<PAGE>
The Code contains policies and procedures relating to personal trading by
Covered Persons, as well as Trustees of the Funds.
---------------------------------------------------------------------------
You must become familiar
with and abide by the Code
---------------------------------------------------------------------------
Compliance with the Code is a condition of your employment with NA.
Violations of the Code will be taken seriously and will result in sanctions
against the violator, up to and including termination of employment.
As with all policies and procedures, the Code was designed to apply to a
myriad of circumstances and conduct. However, this Code is not intended to
be all-inclusive as no policy can anticipate every potential conflict of
interest that can arise in connection with personal trading.
---------------------------------------------------------------------------
you are expected to abide not only by the letter of the Code,
but also by the spirit of the Code
---------------------------------------------------------------------------
Whether or not a specific provision of the Code addresses a particular
situation, you must conduct your activities in accordance with the general
principles contained in the Code and in a manner that is designed to avoid
any actual or potential conflicts of interest. NA reserves the right, when
it deems necessary in light of particular circumstances, to impose more
stringent requirements on those persons subject to the Code, or to grant
exceptions to the Code.
Because governmental regulations and industry standards relating to
personal trading and potential conflicts of interest can evolve over time,
NA reserves the right to modify any or all of the policies and procedures
set forth in the Code. If NA revises the Code, the Director of Compliance
will provide you with written notification of the changes. You must
familiarize yourself with any modifications to the Code.
If you have any questions about any aspect of the Code, or if you have
questions regarding application of the Code in a particular situation,
contact the Compliance Department.
2
<PAGE>
- --------------------------------------------------------------------------------
II. PERSONS COVERED BY THIS CODE
- --------------------------------------------------------------------------------
A. Employees & Covered Persons
The policies and procedures set forth in the Code apply to all officers,
principals and employees of NACM and NAS (collectively, "Employees"). The
Code also applies to all temporary employees, consultants and interns (if
here more than one month) who work for NA on premises.
The policies and procedures set forth in the Code also apply to all members
of an Employee's immediate family which, for purposes of the Code, refers
to any relative by blood or marriage living in the Employee's household
(together with Employees, "Covered Persons").
---------------------------------------------------------------------------
The Code also applies to accounts in which the
Employee is named as a beneficiary, trustee or
is otherwise able to exercise investment control
---------------------------------------------------------------------------
B. Outside Fund Directors/Trustees
Special rules apply to Fund Trustees who are not employees of NACM or NAS
("Non-Employee Trustees"). Specifically, Non-Employee Trustees are NOT
subject to the:
. 3-day blackout period;
. prohibition on initial public offerings;
. restrictions on private placements;
. ban on short-term trading profits;
. gift restrictions; or
. restriction on service as a director.
Further, a Non-Employee Trustee is not required to pre-clear personal
securities transactions provided he or she did not have knowledge of any
--------
current or pending transactions in the Security that have been completed
within the last fifteen (15) calendar days immediately preceding the date
of the transaction.
A Non-Employee Trustee is not required to submit quarterly personal
securities transaction reports, unless he or she knew, or should have
known, in the ordinary course of the fulfillment of his or her official
duties as a trustee of one of the Funds, that during the 15-day period
immediately preceding or following the date of a transaction in a security
by the Non-Employee Trustee that such security was purchased or sold, or
was considered for a purchase or sale, by a Fund or by NA for an Advisory
Client. Non-Employee Trustees also are not required to submit annual
portfolio holdings reports to NA.
3
<PAGE>
C. The Administrator
Officers of the Fund who are officers or employees of the Fund's
Administrator are exempt from all provisions of this Code to the extent
that the Administrator has adopted reasonable written policies and
procedures regarding personal securities transactions by its employees.
4
<PAGE>
- --------------------------------------------------------------------------------
III. PERSONAL SECURITIES TRANSACTIONS
- --------------------------------------------------------------------------------
The firm's policies and procedures set forth in the Code regarding personal
investing apply to ALL personal securities transactions by Covered Persons,
---
unless a transaction is in an Exempt Security or the transaction is an
------
Exempt Transaction as defined below.
A. Covered Securities & Transactions
Personal securities transactions subject to the Code include, but are not
limited to:
. equity securities including common and preferred stock, except as
otherwise exempted below;
. investment and non-investment grade debt securities;
. investments convertible into, or exchangeable for, stock or debt
securities;
. any derivative instrument relating to any of the above securities,
including options, warrants and futures;
. any interest in a partnership investment in any of the foregoing; and
. shares of closed-end investment companies.
B. Exempt Securities & transactions
The Code pre-clearance procedures and reporting requirements do not apply
to the following types of securities and transactions, unless specified
otherwise, which are referred to as "Exempt Securities" and "Exempt
Transactions":
Exempt Securities
-----------------
1. Shares of registered open-end mutual funds and money market funds;
2. Treasury bonds, treasury notes, treasury bills, U.S. Savings Bonds,
and other instruments issued by the U.S. government or its agencies or
instrumentalities;
3. Debt instruments issued by a banking institution, such as bankers'
acceptances and bank certificates of deposit; (this does not exempt
corporate bonds or high yield bonds)
4. Commercial paper;
5. Municipal bonds; or
6. Stock indices; (See Appendix IV)
---------------
Exempt Transactions
-------------------
1. Transactions in an account over which a Covered Person has no direct
or indirect influence or control; or in any account held by a Covered
Person which is managed on a discretionary basis by a person other
than the Covered Person and, with respect to which the Covered Person
does not influence or control the transactions;
5
<PAGE>
2. Transactions that are non-voluntary on the part of the Covered Person
(these transactions must be reported on the monthly report or "Blue
Form") (e.g., bond calls, stock splits, spin-offs, etc.);
---
3. Purchases that are part of an automatic dividend reinvestment plan.
However, your initial purchase into a DRIP program must be pre-cleared
with Compliance and reported on your first monthly report after
starting the program. If you ever contribute more than the automatic
deduction to this plan, you must pre-clear this transaction as if it
were a non-exempt transaction;
4. Purchases as a result of the exercise by a Covered Person of rights
issued pro rata to all holders of a class of securities, to the extent
that such rights were acquired from the issuer, and the sale of such
rights;
5. Other similar circumstances as determined by the Director of
Compliance or General Counsel; or
6. Transactions in options or futures contracts on commodities,
currencies or interest rates.
Additionally, transactions in accounts over which the Covered Person has no
beneficial ownership, nor exercises direct or indirect influence or
control, may be excluded from the Code (and treated as Exempt
Transactions).
If you have any questions about whether a particular transaction qualifies
as an Exempt Transaction, contact the Compliance Department or the General
Counsel.
6
<PAGE>
- --------------------------------------------------------------------------------
IV. PROCEDURES FOR TRADING SECURITIES
- --------------------------------------------------------------------------------
Covered Persons wishing to purchase or sell securities for their own
accounts must follow certain procedures designed to avoid actual or
potential conflicts of interest. These procedures include pre-clearing the
transaction, holding the security for at least the required minimum length
of time, and adhering to a blackout period around Advisory Client trades.
Please note that these procedures do not apply to Exempt Securities and
Exempt Transactions, as described above.
A. Pre-clearance
As a Covered Person, you must submit an Employee Personal Request (an
electronic pre-clearance form), which can be found on the NA intranet site
at home.nacm.com under Trading/Monthly Reports and Forms - CTI iTrade,
-------------
prior to the purchase or sale of securities for your own account or any
accounts over which you have control or have a beneficial interest. In
addition, Investment Personnel must have all transactions approved by the
Chief Investment Officer ("CIO") (or investment partner in the CIO's
absence). Requests received without the required signature will not be
cleared.
You must submit pre-clearance for all personal securities transactions,
unless the transaction qualifies as an Exempt or De Minimis Transaction
(described below). All other purchase or sale transactions, including
transactions in equity securities of up to 1,000 shares or $10,000 that are
not listed on a domestic exchange or have market capitalization of less
than $2 billion, must be pre-cleared prior to execution.
---------------------------------------------------------------------------
Transactions in equity securities under 1000 shares
or $10,000, with a market capitalization of
over $2 billion do not need pre-clearance
---------------------------------------------------------------------------
However, if you are buying 500 shares or less, the security is on NYSE or
the issuer's market capitalization is over $500 million the trade will be
approved even if NA is active in the security.
NA will treat the pre-clearance process as confidential and will not
disclose the information given during the pre-clearance process, except as
required by law or for applicable business purposes.
As a Covered Person, you cannot execute the requested transaction until you
receive authorization from the Compliance Department to do so. Pre-
clearance requests will be processed by the Compliance Department as
quickly as possible. Please remember that pre-clearance approval is not
automatically granted for every trade.
7
<PAGE>
Priority Pre-Clearance Window
Compliance Department personnel will give priority attention to any pre-
clearance request submitted prior to 9:00 a.m. In these cases, you will
normally receive notification of your pre-clearance approval or denial
within 10-15 minutes. Pre-clearance requests submitted after 9:00 a.m.
will be processed in as timely a manner as possible, but other Compliance
Department duties may delay the response for two (2) hours or more
(depending on department priorities) after submission.
Pre-Clearance Period
Pre-clearance must be obtained on the date of the proposed transaction.
Pre-clearance approval for domestic Personal Securities Transactions
effected through a broker-dealer is the day it is pre-cleared up until the
"market open" the next business day (6:30 a.m. PT, except holidays) after
the day that pre-clearance was obtained.
---------------------------------------------------------------------------
If you decide not to execute the transaction on the day your
pre-clearance approval is given, or your entire trade is not
executed, you must request pre-clearance again at
such time as you decide to execute the trade
---------------------------------------------------------------------------
Pre-clearance approval is valid only for the particular security and
quantity indicated on the Form. For example, if you wish to increase the
size of the transaction, you must submit a new pre-clearance request and
receive a new pre-clearance approval. However, you may decrease the size
of the transaction without obtaining new authorization, but should inform
Compliance if this is done.
Failure to obtain pre-clearance for a personal securities transaction is a
serious breach of NA's Code. If you fail to obtain pre-clearance approval
for your personal securities transaction, you will be subject to
disciplinary action, up to and including termination of employment. You
may also be required to cancel the trade and bear any losses that occur.
You may also be required to disgorge any profits realized on the
unauthorized trade and donate them to a charity designated by NA (see
below).
B. Violations
1. Monthly Reporting Violations
You must complete your Personal Security Transaction and Gift Report
("Blueform") via the intranet site by the end of the 10th day of each
month, regardless of whether you had any trading or gift activity for that
month.
8
<PAGE>
---------------------------------------------------------------------------
You must submit your Blueform
by the 10th of every month
---------------------------------------------------------------------------
The Executive Committee member with oversight of your department may grant
exceptions to this requirement for legitimate business or personal reasons.
However, you should make every reasonable effort to submit your report in a
timely manner.
---------------------------------------------------------------------------
if you fail to remit your Blueform on Time,
you will be fined $50 for the first day late &
$10 for each additional day the report is late.
---------------------------------------------------------------------------
2. Trading Violations
Any trading-related violation of this Code, including failure to properly
pre-clear a non-exempt personal trade, etc., will incur the following
sanctions, in addition to disgorging any profits on personal trades that
conflict with NA client transactions:
---------------------------------------------------------------------------
First Violation
---------------
---------------------------------------------------------------------------
. A fine of 0.5% of base salary up to $500;
. Meet with Department Head and the Director of Compliance to
discuss and re-sign the Code of Ethics.
---------------------------------------------------------------------------
Second Violation (within 12 months)
-----------------------------------
---------------------------------------------------------------------------
. A fine of 1% of base salary up to $1,000;
. Meet with Department Head and the Director of Compliance to
discuss and re-sign the Code of Ethics;
. Written warning to personnel file;
---------------------------------------------------------------------------
Third violation (within 12 months)
----------------------------------
---------------------------------------------------------------------------
. A fine of 2% of base salary up to $2,000;
. Meet with Department Head and the Director of Compliance to
discuss and re-sign the Code of Ethics;
. Written warning to personnel file;
. Prohibition from trading personally for a specific period of time
(e.g., 6 months to 1 year) except to close out current positions;
---
. May result in termination of employment with NA.
All fines will be paid to a charity of NA's choice: currently the United
Way. Checks will be submitted to Compliance and forwarded to the selected
charity.
9
<PAGE>
C. Holding Period Restriction
As a general principle, personal securities transactions must be for
investment purposes and not for the purposes of generating short-term
profits. Any profits realized on a sale of a security held less than 60
days will be disgorged, with a check written to a charity of NA's choice,
currently the United Way. Checks will be submitted to Compliance and
forwarded to the selected charity. You may, however, sell a security held
less than 60 days if the security is being sold for no profit.
This holding period restriction does not apply to Exempt Securities or
Exempt Transactions. NA's Director of Compliance or General Counsel may
also grant exceptions to this prohibition in limited circumstances (e.g.,
---
bankruptcy, eviction, personal health emergency, etc.) upon prior written
request.
---------------------------------------------------------------------------
you may not sell a security acquired within the
previous 60 days, unless selling at a loss
---------------------------------------------------------------------------
D. Blackout Period
As a Covered Person, you may not buy or sell equity securities for your
personal accounts if:
. NA has engaged in a transaction in the same or an equivalent
security for an Advisory Client account within the last three (3)
days, or
. the security is on the NA trading blotter or proposed blotter.
In the event you effect a prohibited personal securities transaction within
3 business days before or after an Advisory Client account transaction in
the same or equivalent security, you will be required to close out your
position in the security and disgorge any profit realized from the
transaction to a charity designated by NA. However, if you properly
obtained pre-clearance for a transaction and an Advisory Client account
subsequently transacted in the same security within 3 days of your
transaction, this will not normally result in required disgorgement, unless
otherwise determined by NA's Director of Compliance or General Counsel.
The blackout period does not apply to transactions that qualify as Exempt
Securities or Exempt Transactions.
E. De Minimis Transactions
You are NOT required to pre-clear certain de minimis transactions that meet
the following criteria. However, you must report these transactions on
your monthly Blue Form:
10
<PAGE>
Equity Securities
-----------------
Any purchase or sale transaction of up to 1,000 shares or $10,000
daily in a NYSE-listed security or any security listed on another
domestic exchange (including NASDAQ) with a market capitalization of
at least $2 billion.
Debt Securities
---------------
Any purchase or sale transaction of up to 100 units ($100,000
principal amount) in an issuer with a market capitalization of at
least $2 billion.
---------------------------------------------------------------------------
All de minimis transactions are subject to
the Holding Period restriction
---------------------------------------------------------------------------
F. Initial Public Offerings ("IPOs") & Private Placements
As a Covered Person, you may not engage in a personal securities
transaction in any security in a private placement or IPO without prior
written approval of NA's Director of Compliance or its General Counsel. In
considering such approval, the Director of Compliance or General Counsel
will take into account, among other factors, whether the investment
opportunity is available to and/or should be reserved for an Advisory
Client account, and whether the opportunity is being offered to the Covered
Person by virtue of his or her position.
If you are approved to engage in a personal securities transaction in a
private placement or IPO, you must disclose that investment if you play a
part directly or indirectly in subsequent investment considerations of the
security for an Advisory Client account. In such circumstances, NA's
decision to purchase or sell securities of the issuer shall be subject to
an independent review by an NA Employee with no personal interest in the
issuer. In addition, you may also be required to refrain from trading the
security.
G. Front-Running
As a Covered Person, you may not front-run an order or recommendation, even
if you are not handling the order or the recommendation (and even if the
order or recommendation is for someone other than the Covered Person).
Front-running consists of executing a transaction based on the knowledge of
the forthcoming transaction or recommendation in the same or an underlying
security, or other related securities, within three (3) business days
preceding a transaction on behalf of an Advisory Client.
H. Inside Information
As a Covered Person, you may not use material, non-public information about
any issuer of securities, whether or not such securities are held in the
portfolios of Advisory Clients or suitable for inclusion in such
portfolios, for personal gain or on behalf of an Advisory Client. If you
believe you are in possession of such information, you must contact NA's
Director of
11
<PAGE>
Compliance immediately to discuss the information and the circumstances
surrounding its receipt. This prohibition does not prevent a Covered Person
from contacting officers and employees of issuers or other investment
professionals in seeking information about issuers that is publicly
available. (Refer to NA's Insider Trading Policy attached Appendix I for
----------
more information.)
---------------------------------------------------------------------------
As a Covered Person, you may not use material,
non-public information about any issuer of securities
---------------------------------------------------------------------------
If you have any regarding personal trading, contact the Compliance
Department or the General Counsel.
12
<PAGE>
- --------------------------------------------------------------------------------
V. REPORTS & CERTIFICATIONS REGARDING PERSONAL SECURITIES TRANSACTIONS
- --------------------------------------------------------------------------------
A. Personal Holdings Reports
In order to address potential conflicts of interest that can arise when a
Covered Person acquires or disposes of a security, and to help ensure
compliance with the Code, as a Covered Person, you must submit a Personal
Holdings Report at the time of commencement of employment with NACM or NAS
and annually thereafter with a list of all securities holdings in which you
have a beneficial interest (other than interests in Exempt Securities).
---------------------------------------------------------------------------
You must submit a complete Personal Holdings
Report upon commencement of
employment & annually thereafter
---------------------------------------------------------------------------
B. Monthly Transaction & Gift Reports
As a Covered Person, you must file a Monthly Securities Transaction and
Gift Report ("Blueform") with Compliance by the 10th day of each month for
the previous month (e.g., a September Blue Form would be due by the 10th of
---
October). If you did not execute any securities transactions during the
applicable month, you must still submit a Blue Form indicating that fact.
You file these Reports electronically on the NA Intranet site at
http://home.nacm.com/Compliance. The Compliance Department receives all
Report confirmations via email and stores them in a master database that is
archived annually to CD ROM.
Your Report must contain the following information with respect to each
reportable personal securities transaction. All fields must be completed
in order for your report to be successfully filed:
. Date of transaction;
. Nature of the transaction (purchase, sale or any other type of
acquisition or disposition);
. Security name;
. Security symbol or CUSIP;
. Number of shares/par;
. Principal amount of each security and/or the price at which the
transaction was effected; and
. Name of the broker, dealer or bank with or through whom the
transaction was effected.
13
<PAGE>
Monthly Reports may contain a statement that the report is not to be
construed as an admission that the person filing the report has or had any
direct or indirect beneficial interest in any security described in the
report.
C. Duplicate Brokerage Statements & Confirmations
To assist NA in monitoring compliance with the Code, as a Covered Person,
you must instruct each broker-dealer with whom you maintain an account to
send duplicate copies of all transaction confirmations and statements
directly to NA's Compliance Department. This requirement does not apply to
accounts that are exclusively hold Exempt Securities or are held at a
mutual fund company.
D. Certification of Compliance
As a newly hired Employee, you must certify that you have read, understand
and will comply with the Code.
As a continuing Employee, you must annually certify that you have read,
understand, have complied, and will continue to comply, with the Code.
14
<PAGE>
- --------------------------------------------------------------------------------
VI. POTENTIAL CONFLICT OF INTEREST ISSUES
- --------------------------------------------------------------------------------
Certain activities, while not directly involving personal trading issues,
nonetheless raise similar potential conflict of interest issues and are
appropriate for inclusion in the Code. These monitored activities are as
follows:
A. Service on Boards of Other Companies
As a Covered Person, you are prohibited from serving on the board of
directors of any publicly traded company or organization. In addition, if
you wish to serve on the board of directors of a privately held "for
profit" company, you must first obtain prior written approval from NA's
Director of Compliance or General Counsel. It is not necessary to obtain
approval to serve on the board of directors of entities such as schools,
churches, industry organizations or associations, or similar non-profit
boards.
B. Gifts
As a Covered Person, you may not seek any gift, favor, gratuity, or
preferential treatment from any person or entity that:
. does business with or on behalf of NA;
. is or may appear to be connected with any present or future
business dealings between NA and that person or organization; or
. may create or appear to create a conflict of interest.
You may only accept gifts offered as a courtesy. You must report on your
monthly Blueform all gifts, favors or gratuities valued at $25 more (except
meals valued at less than $50). Non-Employee Trustees only need to report
gifts if values in excess of $100 and the gift is given in connection with
---
the Trustee's affiliation with the NA.
C. Gift Pre-Clearance
You must submit a gift pre-clearance form and obtain prior written approval
for all gifts with a fair market value in excess of $100. Fair market
value applies to the value of the total gift (e.g., if you receive 4
---
tickets valued at $55 a piece, this is considered a gift in valued over
$100 and must be pre-cleared). You must make every reasonable effort to
obtain approval from your direct supervisor and the Compliance Department
prior to accepting anything of value over $100. In the event that pre-
-----
approval is not possible, you must make disclosure as soon as possible
after the gift/event, in any event, no later than on your next Blue Form.
A gift may be denied or required to be returned or reimbursed if you
receive an excessive number of gifts, especially if received from a single
source or if the total dollar value of gifts received during a single year
is deemed excessive.
15
<PAGE>
D. Gift Violations
In the event you fail to properly disclose and/or pre-clear these items,
the Management Committee will require the employee personally to either
donate the fair market value of the item (or the item itself) to charity or
directly reimburse the person or entity responsible for giving the item.
As a Covered Person, you may not offer any gifts, favors or gratuities that
could be viewed as influencing decision-making or otherwise could be
considered as creating a conflict of interest on the part of the recipient.
You must never give or receive gifts or entertainment that would be
controversial to either you or NA, if the information was made public. You
should be aware that certain NA clients might also place restrictions on
gifts you may give to their employees.
---
16
<PAGE>
- --------------------------------------------------------------------------------
VII. VIOLATIONS OF THE CODE
- --------------------------------------------------------------------------------
A violation of this Code is subject to the imposition of such sanctions as
may be deemed appropriate under the circumstances to achieve the purposes
of this Code. NA's Director of Compliance and the Executive Committee will
determine sanctions for violations of the Code. Such sanctions may include
those previously described, as well as others deemed appropriate.
Sanctions for a material violation (i.e., one that involves an actual
conflict or appearance of impropriety) of this Code by a Trustee of the
Funds will be determined by a majority vote of that Fund's Disinterested
Trustees.
If you have any questions about any aspect of the Code, contact the
Director of Compliance.
17
<PAGE>
- --------------------------------------------------------------------------------
VIII. ANNUAL BOARD REVIEW
- --------------------------------------------------------------------------------
The NA management annually prepares a report to the Funds' boards
summarizing existing procedures concerning personal trading (including any
changes in the Code), highlights material violations of the Code requiring
significant corrective action and identifies any recommended changes to
the Code.
18
<PAGE>
- --------------------------------------------------------------------------------
IX. Administration & Construction
- --------------------------------------------------------------------------------
NA's Director of Compliance serves as the "Administrator" of this Code.
The Administrator's duties include:
. Maintenance of a current list of Covered Persons;
. Providing all Employees with a copy of the Code and periodically
informing them of their duties and obligations under the Code;
. Supervising the implementation and enforcement of the terms of
the Code;
. Maintaining or supervising the maintenance of all records and
reports required by the Code;
. Preparing a list of all transactions effected by any Covered
Person during the three (3) day blackout period;
. Determining whether any particular securities transactions should
be exempted pursuant to the provisions of Section III of the
Code;
. Issuing, either personally or with the assistance of counsel, any
interpretation of the Code which would be consistent with the
objectives of the Code;
. Conducting inspections or investigations reasonably required to
detect and report material violations of the Code and provide
recommendations relative to these violations to NA's Management
Committee, or the Board of Trustees of a Fund or any Committee
appointed by them to deal with such information;
. Submitting a quarterly report to the Trustees of each Fund
containing a description of any material violation and action
taken and any other significant information concerning
administration of the Code; and
. Regular reporting on Code compliance to the Executive Committee
and General Counsel.
19
<PAGE>
- --------------------------------------------------------------------------------
X. AMENDMENTS & MODIFICATIONS
- --------------------------------------------------------------------------------
This Code may be amended or modified as deemed necessary by the officers of
the Funds, with the advice of Fund counsel, provided such amendments or
modifications shall be submitted to the Board of Trustees of the Funds for
ratification and approval at the next available meeting. This version of
the Code has been amended taking into account the recent amendments to Rule
17j-1 under the Investment Company Act of 1940. This Code is effective as
of March 20, 2000 to be ratified by the Board of Trustees of the Funds at
its next regularly scheduled meeting.
20
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX I
- --------------------------------------------------------------------------------
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
-------------------------------------
NICHOLAS-APPLEGATE SECURITIES
-----------------------------
POLICIES AND PROCEDURES CONCERNING THE MISUSE
OF MATERIAL NON-PUBLIC INFORMATION
("Insider Trading")
Every employee of Nicholas-Applegate Capital Management, a California Limited
Partnership ("NA") must read and retain a copy of these Policies and Procedures.
Any questions regarding the Policies and Procedures described herein should be
referred to NA's Compliance Department ("Compliance").
- --------------------------------------------------------------------------------
SECTION I. POLICY STATEMENT ON INSIDER TRADING ("Policy Statement")
- --------------------------------------------------------------------------------
NA's Policy Statement applies to every Employee and extends to activities
both within and outside the scope of their duties at NA. NA forbids any
Employee from engaging in any activities that would be considered "insider
trading."
The term "insider trading" is not defined in the federal securities laws,
but generally is understood to prohibit the following activities:
. Trading by an insider, while in possession of material non-public
information;
. Trading by a non-insider, while in possession of material non-
public information, where the information either was disclosed to
the non-insider in violation of an insider's duty to keep it
confidential or was misappropriated;
. Recommending the purchase or sale of securities while in
possession of material non-public information; or
. Communicating material non-public information to others (i.e.,
"tipping").
The elements of insider trading and the penalties for such unlawful conduct
are discussed below. If you have any questions regarding this Policy
Statement you should consult the Compliance Department.
Who is an Insider?
The concept of "insider" is broad and it includes officers, partners and
employees of a company. In addition, a person can be a "temporary insider"
if he or she enters into a special confidential relationship in the conduct
of a company's affairs and, as a result, is given access to information
solely for the company's purposes. A temporary insider can include, among
others, company attorneys, accountants, consultants, bank lending officers,
and the employees of these organizations. In addition, NA and its
Employees may become temporary insiders of a company that NA advises or for
which NA performs other services. According to the U.S. Supreme Court,
before an outsider will be considered a temporary insider for these
purposes, the company
I-1
<PAGE>
must expect the outsider to keep the disclosed non-public information
confidential and the relationship must, at least, imply such a duty.
What is Material Information?
Trading, tipping, or recommending securities transactions while in
possession of inside information is not an actionable activity unless the
information is "material." Generally, information is considered material
if: (i) there is a substantial likelihood that a reasonable investor would
consider it important in making his or her investment decisions or (ii) it
is reasonably certain to have a substantial effect on the price of a
company's securities. Information that should be considered material
includes, but is not limited to:
. dividend changes;
. earnings estimates;
. changes in previously released earnings estimates;
. a joint venture;
. the borrowing of significant funds;
. a major labor dispute, merger or acquisition proposals or
agreements;
. major litigation;
. liquidation problems; and
. extraordinary management developments.
For information to be considered material, it need not be so important that
it would have changed an investor's decision to purchase or sell particular
securities; rather it is enough that it is the type of information on which
reasonable investors rely in making purchase or sale decisions. The
materiality of information relating to the possible occurrence of any
future event would depend on the likelihood that the event will occur and
its significance if it did occur.
Material information does not have to relate to a company's business. For
example, in U.S. v. Carpenter, 791 F.2d 1024 (2d Cir. 1986), aff'd, 484
U.S. 19 (1987) (affirmed without opinion by an evenly divided court with
respect to the charge of insider trading, based on the "misappropriation"
theory), the court considered as material certain information about the
contents of a forthcoming newspaper column that was expected to affect the
market price of a security. In that case, a Wall Street Journal reporter
was found criminally liable for disclosing to others the dates that reports
on various companies would appear in the Journal and whether those reports
would be favorable or not.
What is Non-Public Information?
All information is considered non-public until it has been effectively
communicated to the marketplace. One must be able to point to some fact to
show that the information is generally public. For example, information
found in a report filed with the SEC, or appearing in Dow Jones, Reuters
Economic Services, The Wall Street Journal or other publications of general
circulation would be considered public. Information in bulletins and
research reports disseminated by brokerage firms are also generally
considered to be public information.
I-2
<PAGE>
Basis for Liability
In order to be found liable for insider trading, one must either (i) have a
fiduciary relationship with the other party to the transaction and have
breached the fiduciary duty owed to that other party, or (ii) have
misappropriated material non-public information from another person.
Fiduciary Duty Theory
---------------------
Insider trading liability may be imposed on the theory that the
insider breached a fiduciary duty to a company. In 1980, the U.S.
Supreme Court held that there is no general duty to disclose before
trading on material non-public information, and that such a duty
arises only where there is a fiduciary relationship. That is, there
must be an existing relationship between the parties to the
transaction such that one party has a right to expect that the other
party would either (a) disclose any material non-public information,
if appropriate or permitted to do so, or (b) refrain from trading on
such material non-public information. Chiarella v. U.S., 445 U.S. 222
(1980).
In Dirks v. SEC, 463 U.S. 646 (1983), the U.S. Supreme Court stated
alternative theories under which non-insiders can acquire the
fiduciary duties of insiders: (a) they can enter into a confidential
relationship with the company through which they gain the information
(e.g., attorneys, accountants, etc.), or (b) they can acquire a
fiduciary duty to the company's shareholders as "tippees" if they were
aware, or should have been aware, that they had been given
confidential information by an insider that violated his or her
fiduciary duty to the company's shareholders by providing such
information to an outsider.
However, in the "tippee" situation, a breach of duty occurs only where
the insider personally benefits, directly or indirectly, from the
disclosure. Such benefit does not have to be pecuniary, and can be a
gift, a reputational benefit that will translate into future earnings,
or even evidence of a relationship that suggests a quid pro quo.
Misappropriation Theory
-----------------------
Another basis for insider trading liability is the "misappropriation"
theory. Under the misappropriation theory, liability is established
when trading occurs as a result of, or based upon, material non-public
information that was stolen or misappropriated from any other person.
In U.S. v. Carpenter, supra, the court held that a columnist for The
Wall Street Journal had defrauded the Journal when he obtained
information that was to appear in the Journal and used such
information for trading in the securities markets. The court held
that the columnist's misappropriation of information from his employer
was sufficient to give rise to a duty to disclose such information or
abstain from trading thereon, even though the columnist owed no direct
fiduciary duty to the issuers of the securities described in the
column or to purchasers or sellers of such securities in the
marketplace. Similarly, if information is given to an analyst on a
confidential basis and the analyst uses that information for trading
purposes, liability could arise under the misappropriation theory.
I-3
<PAGE>
Penalties for Insider Trading
Penalties for trading on, or communicating material non-public information
are severe, both for individuals involved in such unlawful conduct and
their employers. A person can be subject to some or all of the penalties
below even if he or she did not personally benefit from the violation.
Penalties include:
. Civil injunctions;
. Criminal penalties for individuals of up to $1 million and for
"non-natural persons" of up to $2.5 million plus, for
individuals, a maximum jail term from five to ten years;
. Private rights of actions for disgorgement of profits;
. Civil penalties for the person who committed the violation of up
to three times the profit gained or loss avoided, whether or not
the person actually benefited;
. Civil penalties for the employer or other controlling person of
up to the greater of $1 million per violation or three times the
amount of the profit gained or loss avoided, as a result of each
violation; and
. A permanent bar, pursuant to the SEC's administrative
jurisdiction, from association with any broker, dealer,
investment company, investment adviser, or municipal securities
dealer.
In addition, any violation of this Policy Statement can be expected to
result in serious sanctions by NA, including dismissal of the persons
involved.
- --------------------------------------------------------------------------------
SECTION II. PROCEDURES TO IMPLEMENT NA'S POLICY STATEMENT
- --------------------------------------------------------------------------------
The following procedures have been established to aid NA's Employees in
avoiding insider trading, and to aid NA in preventing, detecting and
imposing sanctions against insider trading. Every Employee of NA must
follow these procedures or risk serious sanctions, as described above. If
you have any questions about these procedures you should consult with the
Director of Compliance.
Identifying Insider Information
Before trading for yourself or others, including for any client accounts
managed by NA, in the securities of a company about which you may have
potential insider information, or revealing such information to others or
making a recommendation based on such information, you should ask yourself
the following questions.
. Is the information material?
. Is this information that an investor would consider important in
making an investment decision?
. Is this information that would substantially affect the market price
of the securities if generally disclosed?
. Is the information non-public?
I-4
<PAGE>
. To whom has this information been provided?
. Has the information been effectively communicated to the marketplace
by being published in The Wall Street Journal or other publications of
general circulation, or has it otherwise been made available to the
public?
If, after consideration of the above, you believe that the information is
material and non-public, or if you have questions as to whether the
information may be material and non-public, you should take the following
steps.
. Report the matter immediately to Compliance and disclose all
information that you believe may bear on the issue of whether the
information you have is material and non-public;
. Refrain from purchasing or selling securities with respect to
such information on behalf of yourself or others, including for
client accounts managed by NA; and
. Refrain from communicating the information inside or outside NA,
other than to Compliance.
After Compliance has reviewed the issue, you will be instructed to continue
the prohibitions against trading, tipping, or communication, or you will be
allowed to trade and communicate the information. In appropriate
circumstances, our Director of Compliance will consult with our General
Counsel as to the appropriate course of action.
Personal Securities Trading
All Employees of NA must adhere to NA's Code of Ethics and Conduct ("Code")
with respect to:
. securities transactions effected for their own account,
. accounts over which they have a direct or indirect beneficial
interest, and
. accounts over which they exercise any direct or indirect
influence.
Please refer to NA's Code as necessary. In accordance with the Code,
Employees are required to obtain prior written approval from Compliance for
all personal securities transactions (unless otherwise exempt under the
Code) and to submit to Compliance a Monthly Securities Transaction and Gift
Report ("Blueform") concerning all equity securities transactions as
required by NA's Code.
Restricting Access to Material Non-Public Information
Information in your possession that you identify, or that has been
identified to you as material and non-public, must not be communicated to
anyone, except as provided above. In addition, you should make certain
that such information is secure. For example, files containing material
non-public information should be sealed and inaccessible and access to
computer files containing material non-public information should be
restricted by means of a password or other similar restriction.
I-5
<PAGE>
Resolving Issues Concerning Insider Trading
If, after consideration of the items set forth above, doubt remains as to
whether information is material or non-public, or if there is any
unresolved question as to the applicability or interpretation of the
foregoing procedures, or as to the propriety of any action, please discuss
such matters with our Director of Compliance before trading or
communicating the information in question to anyone.
Supervisory Procedures
NA's Compliance Department is critical to the implementation and
maintenance of these Policies and Procedures against insider trading. The
supervisory procedures set forth below are designed to detect and prevent
insider trading.
Prevention of Insider Trading
-----------------------------
In addition to the pre-approval and monthly reporting procedures
specified in the Code concerning personal securities transactions, the
following measures have been implemented to prevent insider trading by
NA's Employees.
1. All Employees of NA will be provided with a copy of these Policies
and Procedures regarding insider trading.
2. Compliance will, as deemed necessary, conduct educational seminars
to familiarize Employees with NA's Policies and Procedures. Such
educational seminars will target, in particular, persons in
sensitive areas of NA who may receive inside information more
often than others;
3. Compliance will answer questions regarding NA's Policies and
Procedures;
4. Compliance will resolve issues of whether information received by
an Employee of NA is material and non-public;
5. Compliance will review these Policies and Procedures on a regular
basis and update as necessary;
6. Whenever it has been determined that an Employee of NA has
possession of material non-public information, Compliance will (i)
implement measures to prevent dissemination of such information,
and (ii) restrict Employees from trading in the securities by
placing such securities on NA's Restricted List; and
7. Upon the request of any Employee, Compliance will review and any
requests for clearance to trade in specified securities and either
approve or disapprove.
Detection of Insider Trading
----------------------------
To detect insider trading, Compliance will:
1. Review the personal securities transaction reports filed by each
Employee, including subsequent monthly review of all personal
securities transactions;
2. Review the trading activity of client accounts managed by NA;
3. Review the trading activity of NA's own accounts, if any; and
I-6
<PAGE>
4. Coordinate the review of such reports with other appropriate
Employees of NA when Compliance has reason to believe inside
information has been provided to certain Employees.
Reports to Management
---------------------
Promptly upon learning of a potential violation of NA's Policies and
Procedures, Compliance will prepare a confidential written report to
management, providing full details and recommendations for further
action. In addition, Compliance will prepare reports to management,
when appropriate, setting forth:
1. A summary of existing procedures to prevent and detect insider
trading;
2. Full details of any investigation, either internal or by a
regulatory agency, of any suspected insider trading and the
results of such investigation;
3. An evaluation of the current procedures and any recommendations
for improvement; and
4. A description of NA's continuing education program regarding
insider trading, including the dates of any seminars since the
last report to management.
In response to such report, management will determine whether any
changes to the Policies and Procedures might be appropriate.
I-7
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX II
- --------------------------------------------------------------------------------
EXAMPLES OF BENEFICIAL OWNERSHIP
--------------------------------
. Securities held by an Access Person for their own benefit, regardless of
the form in which held;
. Securities held by others for an Access Person's benefit, such as
securities held by custodians, brokers, relatives, executors or
administrators;
. Securities held by a pledgee for an Access Person's account;
. Securities held by a trust in which an Access Person has an income or
remainder interest, unless the Access Person's only interest is to receive
principal (a) if some other remainderman dies before distribution or (b) if
some other person can direct by will a distribution of trust property or
income to the Access Person;
. Securities held by an Access Person as trustee or co-trustee, where the
Access Person or any member of their immediate family (i.e., spouse,
children or their descendants, stepchildren, parents and their ancestors,
and stepparents, in each case treating a legal adoption as a blood
relationship) has an income or remainder interest in the trust;
. Securities held by a trust of which the Access Person is the settlor, if
the Access Person has the power to revoke the trust without obtaining the
consent of all the beneficiaries;
. Securities held by a general or limited partnership in which an Access
Person is either the general partner of such partnership or a controlling
partner of such entity (e.g., Access Person owns more than 25% of the
----
partnership's general or limited partnership interests);
. Securities held by a personal holding company controlled by an Access
Person alone or jointly with others;
. Securities held in the name of an Access Person's spouse - unless legally
separated or divorced;
. Securities held in the name of minor children of an Access Person or in the
name of any relative of an Access Person or of their spouse (including an
adult child) who is presently sharing the Access Person's home;
. Securities held in the name of any person other than an Access Person and
those listed in above, if by reason of any contract, understanding,
relationship, agreement, or other arrangement the Access Person obtains
benefits equivalent to those of ownership; and
. Securities held in the name of any person other than an Access Person ,
even though the Access Person does not obtain benefits equivalent to those
of ownership (as described above), if the Access Person can vest or re-vest
title in himself.
II-1
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX III
- --------------------------------------------------------------------------------
QUICK REFERENCE GUIDE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION PRE- REPORT BLACK-OUT HOLDING TRADING FINE DISGORGEMENT
- ----------- CLEAR PERIOD PERIOD APPLIES REQUIRED
("Blue Form")
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Exempt Securities:
Open-end mutual funds, US Gov't
securities, BAs, CDs, CP, Muni bonds NO NO NO NO N/A N/A
and stock indices
- ------------------------------------------------------------------------------------------------------------------------------
Exempt Transactions:
No control or influence, non-voluntary,
automatic dividend reinvestment plan,
exercise of pro-rata rights issue, NO NO NO NO N/A N/A
options or futures on commodities,
currencies or interest rates
- ------------------------------------------------------------------------------------------------------------------------------
De Minimis Transactions:
1,000 shares or $10,000 and NYSE or
other listed domestic exchange, NO YES NO YES YES YES
including NASDAQ, and market cap = $2
billion (daily limit)
- ------------------------------------------------------------------------------------------------------------------------------
= 500 shares, NYSE, or market cap =
$500 million YES YES NO YES YES YES
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: This information is provided as a summary only. You are responsible to
ensure your personal securities trading complies with the Code. Please refer to
the Code for further details. If you have any questions, please contact
Compliance.
III-1
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX IV
- --------------------------------------------------------------------------------
Exempt Indices
- --------------------------------------------------------------------------------
The following are exempt from the 60-day minimum hold rule and are exempt from
--------------
pre-clearance:
. S&P 500 Index
. S&P 100 Index
. S&P Mid Cap Index (400 Issues)
. S&P Small Cap Index (600 Issues)
. NASDAQ 100 Index
. Russell 2000 Index
. Wilshire Small Cap Index (250 Issues)
. EUROTOP 100 Index
. Financial Times Stock Exchange (FT-SE) 100 Index
. Japan Index (210 Issues)
. NYSE Composite Index (2400 Issues)
. PHLX National OTC Index (100 Issues)
. Standard & Poor's Depository Receipts (SPDRs)
. Standard & Poor's Mid Cap 400 Depository Receipts (Mid Cap SPDRs)
. Gold/Silver Index Options
. World Equity Benchmark Shares (WEBS)
. JP Morgan Commodity Indexed Preferred Securities, Series A (Symbol JPO)
. Dow Jones Industrials Diamonds (DIA)
. NASDAQ 100 Shares (QQQ)
The Director of Compliance may approve any other Index on a case-by-case basis.
If you have any questions regarding the above, please contact the Compliance
Department.
IV-1
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX V
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NEW HIRES:
Please complete, sign & return the following 4 pages to the Compliance
Department within 5 days of your DATE OF HIRE
------
You are not permitted to execute any Personal
Trades until these certificates are filed.
ANNUAL RECERTIFICATION (PRESENT EMPLOYEES):
You are required to complete, sign & return the following 4 pages to the
Compliance Department by the annual due date (stated in renewal packet). If it
is received after that date you will incur a fine as follows - $50 for the first
day late & $10 every day after that.
All fines are written & sent to the United Way.
You will also be restricted from trading until these
certificates are received in Compliance (only if late).
Thank you
V-1
<PAGE>
- --------------------------------------------------------------------------------
Nicholas-Applegate Institutional Funds
Nicholas-Applegate Securities
Nicholas-Applegate Capital Management
CERTIFICATE OF COMPLIANCE
___________________________________
Name (please print)
This is to certify that the Code of Ethics and Conduct ("Code"), updated as of
March 2000, is available for my review on the intranet site (home.nacm.com) for
the year 2000. I have read and understand the Code. I certify that I will comply
with these policies and procedures during the course of my employment by NACM or
NAS. Moreover, I agree to promptly report to the Director of Compliance any
violation, or possible violation of this Code, of which I become aware.
I understand that a violation of this Code will be grounds for disciplinary
action or dismissal and may also be a violation of federal and/or state
securities laws.
____________________________________
Signature
____________________________________
Date
- --------------------------------------------------------------------------------
V-2
<PAGE>
- --------------------------------------------------------------------------------
Nicholas-Applegate Capital Management
Nicholas-Applegate Securities
INSIDER TRADING POLICY
{Appendix I}
CERTIFICATE OF COMPLIANCE
____________________________________
Name (please print)
This is to certify that I have read and understand the policies and procedures
of NA's Insider Trading Policy (the "Policy"), updated as of March 2000, and
available for my review on the intranet site (home.nacm.com) for the year 2000.
I certify that I will comply with these policies and procedures during the
course of my employment with NA. Moreover, I agree to promptly report to the
Director of Compliance any violation, or possible violation, of the Policy of
which I became aware.
I understand that violation of the Policy will be grounds for disciplinary
action or dismissal and may also be a violation of federal and/or state
securities laws.
____________________________________
Signature
____________________________________
Date
- --------------------------------------------------------------------------------
V-3
<PAGE>
PERSONAL HOLDINGS REPORT
As required in Section V of the NA's Code of Ethics ("Code"), please provide a
list of all Securities (except Exempt Securities) in which you have a beneficial
interest, including those in accounts of your immediate family and all
Securities in non-client accounts for which you make investment decisions.
1. List all Securities that are:
a) personally owned; or
b) in which a beneficial interest is held by you, your spouse, minor
child, or any other member of your immediate household;
c) any trust or estate of which you or your spouse is a trustee, other
fiduciary or beneficiary, or of which your minor child is a
beneficiary; or
d) any person for whom you direct or effect transactions under a power of
attorney or otherwise.
TABLE A
-------
<TABLE>
<CAPTION>
NAME OF SECURITY Type Security. HOLDINGS HOLDINGS RELATIONSHIP. Disclaimer of Beneficial
# of Shares Principal Amount Interest.
($).
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
</TABLE>
* If none, write NONE.
*NOTE: Continue listing as necessary on additional sheets. (You may attach a
copy of a broker statement listing the information - if so, indicate by writing
"See attached.")
If you are a present employee (new employees continue to Table B)
- -------------------------------
2. Have you, during the past 12 months, requested prior clearance of and filed
monthly reports for all applicable securities transactions as required by
the Code?
Yes No
--------- ---------
If "No", has the transaction been discussed with the Compliance Department?
Yes No
----------------------------
______________
/1/ Insert the following symbol as pertinent to indicate the type of security
held: C-common stock, P-preferred stock, O-option, W-warrant and D-debt
security.
/2/ To be completed only for debt securities.
/3/ Insert a, b, c, or d as explained above, to describe your interest in
these securities.
/4/ Mark x to indicate that the reporting or recording of this securities
holding shall not be construed as an admission that you have any direct or
indirect beneficial interest in these securities. Please see Appendix II
for a list of examples of beneficial interest.
V-4
<PAGE>
If not, please advise the Compliance Department in writing separately of
any securities transactions not pre-cleared or reported.
3. Have you filed monthly reports for all reportable securities transactions
as required by the Code?
Yes No
-----------------------------------
In addition, Nicholas-Applegate requires all employees to disclose all
brokerage accounts in their name, any spouse's account, any children's
account or any other account over which the employee has control or is a
beneficiary.
TABLE B
-------
<TABLE>
<CAPTION>
Name of Broker Account Number Name(s) on Account
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
=================================================================================================
</TABLE>
* If none, write NONE.
I certify that the statements made by me on this form are true, complete and
correct to the best of my knowledge and belief and are made in good faith.
- --------------------------- ____________________________________
Date Signature
V-5
<PAGE>
EFFECTIVE MARCH 1, 2000
CODE OF ETHICS
T. ROWE PRICE ASSOCIATES, INC.
AND ITS AFFILIATES
<PAGE>
CODE OF ETHICS
OF
T. ROWE PRICE ASSOCIATES, INC.
AND ITS AFFILIATES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL POLICY STATEMENT......................................................... 1-1
Purpose and Scope of Code of Ethics............................................ 1-1
Who is Subject to the Code..................................................... 1-1
Price Associates' Status as a Fiduciary........................................ 1-2
What the Code Does Not Cover................................................... 1-2
Compliance with the Code....................................................... 1-2
Questions Regarding the Code................................................... 1-2
STANDARDS OF CONDUCT OF PRICE ASSOCIATES AND ITS EMPLOYEES....................... 2-1
Allocation of Client Brokerage................................................. 2-1
Antitrust 2-1; 8-1
Compliance with Copyright Laws................................................. 2-1
Computer Security.............................................................. 2-1; 7-1
Conflicts of Interest.......................................................... 2-1
Relationships with Profitmaking Enterprises.................................. 2-1
Service with Nonprofitmaking Enterprises..................................... 2-2
Relationships with Financial Service Firms................................... 2-2
Investment Clubs............................................................. 2-2
Confidentiality 2-3
Internal Operating Procedures and Planning................................... 2-3
Clients, Fund Shareholders, and TRP Brokerage Customers...................... 2-3
Investment Advice............................................................ 2-3
Investment Research.......................................................... 2-4
Understanding as to Clients' Accounts and Company Records
at time of Employee Termination............................................. 2-4
Corporate Responsibility....................................................... 2-4; 5-1
Employment of Former Government Employees...................................... 2-5
Employment Practices........................................................... 2-5
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Equal Opportunity............................................................ 2-5
Harassment................................................................... 2-5
Drug and Alcohol Abuse....................................................... 2-5
Past and Current Litigation.................................................... 2-6
Financial Reporting............................................................ 2-6
Health and Safety in the Workplace............................................. 2-6
Illegal Payments............................................................... 2-6
Marketing and Sales Activities................................................. 2-6
Policy Regarding Acceptance and Giving of Gifts and Gratuities................. 2-6
Receipt of Gifts............................................................. 2-7
Giving of Gifts.............................................................. 2-7
Additional Requirements for the Giving of Gifts in Connection with the
Broker/Dealer............................................................... 2-7
Entertainment................................................................ 2-8
Research Trips............................................................... 2-9
Political Activities........................................................... 2-9
Protection of Corporate Assets................................................. 2-10
Quality of Services............................................................ 2-10
Record Retention............................................................... 2-10
Referral Fees.................................................................. 2-10
Release of Information to the Press............................................ 2-10
Responsibility to Report Violations............................................ 2-10
Service as Trustee, Executor or Personal Representative........................ 2-11
Speaking Engagements and Publications.......................................... 2-11
Trading in Securities with Inside Information.................................. 2-11; 3-1
STATEMENT OF POLICY ON MATERIAL, INSIDE (NON-PUBLIC) INFORMATION................. 3-1
STATEMENT OF POLICY ON SECURITIES TRANSACTIONS................................... 4-1
STATEMENT OF POLICY ON CORPORATE RESPONSIBILITY.................................. 5-1
STATEMENT OF POLICY WITH RESPECT TO COMPLIANCE WITH COPYRIGHT LAWS............... 6-1
STATEMENT OF POLICY WITH RESPECT TO COMPUTER SECURITY AND RELATED ISSUES......... 7-1
STATEMENT OF POLICY ON COMPLIANCE WITH ANTITRUST LAWS............................ 8-1
</TABLE>
<PAGE>
CODE OF ETHICS
OF
T. ROWE PRICE ASSOCIATES, INC.
AND ITS AFFILIATES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Access Persons................................................................... 4-3
Activities, Political............................................................ 2-9
Alcohol Abuse.................................................................... 2-5
Allocation of Client Brokerage................................................... 2-1
Antitrust........................................................................ 2-1; 8-1
Approved Company Rating Changes.................................................. 4-11
Assets, Protection of Corporate.................................................. 2-10
Association of Investment Management and Research ("AIMR")....................... 2-6
Brokerage Accounts............................................................... 4-11; 4-12
Chinese Wall..................................................................... 3-6
Client Brokerage, Allocation of.................................................. 2-1
Client Limit Orders.............................................................. 4-16
Code of Ethics, Compliance with.................................................. 1-2
Code of Ethics, Purpose and Scope of............................................. 1-1
Code of Ethics, Questions Regarding.............................................. 1-2
Code of Ethics, Who is Subject to................................................ 1-1
Co-Investment by Employees with Client Investment Partnerships................... 4-14
Computer Security................................................................ 2-1; 7-1
Conduct, Standards of, Price Associates and its Employees........................ 2-1
Confidentiality.................................................................. 2-3
Confidentiality of Computer Systems Activities and Information................... 7-1
Conflicts of Interest............................................................ 2-1
Copyright Laws, Compliance with.................................................. 2-1; 6-1
Corporate Assets, Protection of.................................................. 2-10
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Corporate Responsibility......................................................... 2-4; 5-1
Drug Abuse....................................................................... 2-5
Employee Co-Investment with Client Investment Partnerships....................... 4-14
Employees, Standards of Conduct.................................................. 2-1
Employment of Former Government Employees........................................ 2-5
Employment Practices............................................................. 2-5
Entertainment.................................................................... 2-8
Equal Opportunity................................................................ 2-5
Exchange - Traded Index Options.................................................. 4-16
Executor, Service as............................................................. 2-11
Fees, Referral................................................................... 2-10
Fiduciary, Price Associates' Status as a......................................... 1-2
Financial Reporting.............................................................. 2-6
Financial Service Firms, Relationships with...................................... 2-2
Front Running.................................................................... 4-1
General Policy Statement......................................................... 1-1
Gifts, Giving.................................................................... 2-7
Gifts, Receipt of................................................................ 2-7
Government Employees, Employment of Former....................................... 2-5
Harassment....................................................................... 2-5
Health and Safety in the Workplace............................................... 2-6
Illegal Payments................................................................. 2-6
Information, Release to the Press................................................ 2-10
Initial Public Offerings......................................................... 4-9
Inside Information, Trading in Securities with................................... 2-11
Interest, Conflicts of........................................................... 2-1
Internet, Access to.............................................................. 7-2
Investment Clubs................................................................. 2-2; 4-14
Investment Personnel............................................................. 4-3
Large Company Exemption for Securities Transactions.............................. 4-15
Margin Accounts.................................................................. 4-15
Marketing and Sales Activities................................................... 2-6
Non-Access Persons............................................................... 4-4
Nonprofitmaking Enterprises, Service with........................................ 2-2
Options and Futures.............................................................. 4-16
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Payments, Illegal................................................................ 2-6
Personal Securities Holdings, Disclosure of by Access Persons.................... 4-18
Personal Representative, Service as.............................................. 2-11
Political Activities............................................................. 2-9
Press, Release of Information to the............................................. 2-10
Price Associates, Standards of Conduct........................................... 2-1
Price Associates' Stock, Transactions in......................................... 4-5
Prior Clearance of Securities Transactions (other than Price Associates' stock).. 4-8
Private Placement, Investment In................................................. 4-10
Private Placement Memoranda...................................................... 3-7
Profitmaking Enterprises, Relationships with..................................... 2-1
Protection of Corporate Assets................................................... 2-10
Publications..................................................................... 2-11
Quality of Services.............................................................. 2-10
Questions Regarding the Code..................................................... 1-2
Rating Changes, Approved Company................................................. 4-11
Record Retention................................................................. 2-10
Referral Fees.................................................................... 2-10
Release of Information to the Press.............................................. 2-10
Reporting, Financial............................................................. 2-6
Reporting, Price Associates' Stock Transactions.................................. 4-6
Reporting, Securities Transactions (other than Price Associates' stock).......... 4-12
Research Trips................................................................... 2-9
Responsibility, Corporate........................................................ 2-4; 5-1
Restricted List.................................................................. 3-7
Retention, Record................................................................ 2-10
Safety and Health in the Workplace............................................... 2-6
Securities Transactions, Reporting of (other than Price Associates' stock)....... 4-12
Services, Quality of............................................................. 2-10
Short Sales...................................................................... 4-17
Sixty (60) Day Rule.............................................................. 4-17
Software Programs, Application of Copyright Law.................................. 7-5
Speaking Engagements............................................................. 2-11
Standards of Conduct of Price Associates and its Employees....................... 2-1
Statement, General Policy........................................................ 1-1
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Temporary Workers, Application of Code to........................................ 1-1; 4-2
Termination of Employment........................................................ 2-4
Trading Activity................................................................. 4-15
Trips, Research.................................................................. 2-9
Trustee, Service as.............................................................. 2-11
Violations, Responsibility to Report............................................. 2-10
Watch List....................................................................... 3-6
</TABLE>
<PAGE>
CODE OF ETHICS
OF
T. ROWE PRICE ASSOCIATES, INC.
AND ITS AFFILIATES
GENERAL POLICY STATEMENT
Purpose and Scope of Code of Ethics. In recognition of T. Rowe Price
Associates, Inc.'s ("Price Associates") commitment to maintain the highest
standards of professional conduct and ethics, the firm's Board of Directors has
adopted this Code of Ethics ("Code") composed of Standards of Conduct and the
following Statements of Policy ("Statements"):
1. Statement of Policy on Material, Inside (Non-Public) Information
2. Statement of Policy on Securities Transactions
3. Statement of Policy on Corporate Responsibility
4. Statement of Policy with Respect to Compliance with Copyright Laws
5. Statement of Policy with Respect to Computer Security and Related Issues
6. Statement of Policy on Compliance with Antitrust Laws
The purpose of this Code is to help preserve our most valuable asset - the
reputation of Price Associates and its employees.
Who is Subject to the Code. Price Associates, its subsidiaries and their
officers, directors and employees are all subject to the Code, as are all Rowe
Price-Fleming International, Inc. ("RPFI") and T. Rowe Fleming Asset Management
Limited ("TRFAM") personnel (officers, directors, and employees) who are
stationed in Baltimore. In addition, the following persons are also subject to
the Code:
1. All temporary workers hired on the Price Associates payroll ("TRPA
Temporaries");
2. All agency temporaries, whose assignments at Price Associates exceed four
weeks or whose cumulative assignments exceed eight weeks over a twelve-
month period;
3. All independent or agency-provided consultants whose assignments exceed
four weeks or whose cumulative assignments exceed eight weeks over a
twelve-month period and whose work is closely related to the ongoing work
of Price Associates' employees (versus project work that stands apart from
ongoing work); and
4. Any contingent worker whose assignment is more than casual in nature or who
will be exposed to the kinds of information and situations that would
create conflicts on matters covered in the Code.
<PAGE>
Price Associates' Status as a Fiduciary. The primary responsibility of Price
Associates as an investment adviser is to render to its clients on a
professional basis unbiased and continuous advice regarding their investments.
As an investment adviser, Price Associates has a fiduciary relationship with all
of its clients, which means that it has an absolute duty of undivided loyalty,
fairness and good faith toward its clients and mutual fund shareholders and a
corresponding obligation to refrain from taking any action or seeking any
benefit for itself which would, or which would appear to, prejudice the rights
of any client or shareholder or conflict with his or her best interests.
What the Code Does Not Cover. The Code was not written for the purpose of
covering all policies, rules and regulations to which employees may be subject.
As an example, T. Rowe Price Investment Services, Inc. ("Investment Services")
is a member of the National Association of Securities Dealers, Inc. ("NASD")
and, as such, is required to maintain written supervisory procedures to enable
it to supervise the activities of its registered representatives and associated
persons to ensure compliance with applicable securities laws and regulations,
and with the applicable rules of the NASD and its regulatory subsidiary, NASD
Regulation, Inc. ("NASDR").
Compliance with the Code. Strict compliance with the provisions of this Code is
considered a basic condition of employment with the firm. An employee may be
required to surrender any profit realized from a transaction which is deemed to
be in violation of the Code. In addition, any breach of the Code may constitute
grounds for disciplinary action, including dismissal from employment. Employees
may appeal to the Management Committee any ruling or decision rendered with
respect to the Code.
Questions Regarding the Code. Questions regarding the Code should be referred
as follows:
1. Standards of Conduct of Price Associates and its Employees: the
Chairperson of the Ethics Committee or the Director of Human Resources.
2. Statement of Policy on Material, Inside (Non-Public) Information: Legal
Department.
3. Statement of Policy on Securities Transactions: The Chairperson of the
Ethics Committee or his or her designee.
4. Statement of Policy on Corporate Responsibility: Corporate Responsibility
Committee.
5. Statement of Policy with Respect to Compliance with Copyright Laws: Legal
Department.
6. Statement of Policy with Respect to Computer Security and Related Issues:
Legal Department.
7. Statement of Policy on Compliance with Antitrust Laws: Legal Department.
March, 2000
<PAGE>
STANDARDS OF CONDUCT OF PRICE ASSOCIATES AND ITS EMPLOYEES
Allocation of Client Brokerage. The firm's policies with respect to the
allocation of client brokerage are set forth in Part II of Form ADV, Price
Associates' registration statement filed with the Securities and Exchange
Commission ("SEC"). It is imperative that all employees -- especially those who
are in a position to make recommendations regarding brokerage allocation, or who
are authorized to select brokers who will execute securities transactions on
behalf of our clients -- read and become fully knowledgeable concerning our
policies in this regard. Any questions regarding our firm's allocation of
client brokerage should be addressed to the Chairperson of the Brokerage Control
Committee.
Antitrust. The U.S. antitrust laws are designed to ensure fair competition and
preserve the free enterprise system. Some of the most common antitrust issues
with which an employee may be confronted are in the areas of pricing (adviser
fees) and trade association activity. To ensure its employees' understanding of
these laws, Price Associates has adopted a Statement of Policy on Compliance
with Antitrust Laws. All employees should read and understand this Statement.
(See page 8-1).
Compliance with Copyright Laws. To protect Price Associates and its employees,
Price Associates has adopted a Statement of Policy with Respect to Compliance
with Copyright Laws. All employees should read and understand this Statement
(see page 6-1).
Computer Security. Computer systems and programs play a central role in Price
Associates' operations. To establish appropriate computer security to minimize
potential for loss or disruptions to our computer operations, Price Associates
has adopted a Statement of Policy with Respect to Computer Security and Related
Issues. All employees should read and understand this Statement (see page 7-1).
Conflicts of Interest. A direct or indirect interest in a supplier, creditor,
debtor or competitor may conflict with the interests of Price Associates. All
employees must avoid placing themselves in a "compromising position" where their
interests may be in conflict with those of Price Associates or its clients.
Relationships with Profitmaking Enterprises. A conflict may occur when an
employee of Price Associates is also employed by another firm, directly or
as a consultant or independent contractor; has a direct financial interest
in another firm; has an immediate family financial interest in another
firm; or is a director, officer or partner of another firm.
Employees of our firm sometimes serve as directors, officers, partners, or
in other capacities with profitmaking enterprises not related to Price
Associates or its mutual funds. Employees are generally prohibited from
serving as officers or directors of corporations which are approved or are
likely to be approved for purchase in our firm's client accounts.
An employee may not accept outside employment that would require him or her
to become registered (or dually registered) as a representative of an
unaffiliated broker/dealer, investment adviser, or an insurance broker or
company. An employee may also not become independently registered as an
investment adviser.
<PAGE>
An employee who is contemplating obtaining another interest or relationship
that might conflict or appear to conflict with the interests of Price
Associates, such as accepting employment with or an appointment as a
director, officer or partner of an outside profitmaking enterprise must
receive the prior approval of the Ethics Committee. Upon review by the
Ethics Committee, the employee will be advised in writing of the
Committee's decision. Decisions by the Ethics Committee regarding outside
directorships in profitmaking enterprises will be reviewed by the
Management Committee before becoming final. Outside business interests
that will not conflict or appear to conflict with the interests of the firm
need not be reviewed by the Ethics Committee, but must be approved by the
Employee's supervisor.
Certain employees may serve as directors or as members of Creditors
Committees or in similar positions for non-public, for-profit entities in
connection with their professional activities at Price Associates. An
employee must obtain the permission of the Management Committee before
accepting such a position and must relinquish the position if the entity
becomes publicly held, unless otherwise determined by the Management
Committee.
Service with Nonprofitmaking Enterprises. Price Associates encourages its
employees to become involved in community programs and civic affairs.
However, employees should not permit such activities to affect the
performance of their job responsibilities. Approval by the Chairperson of
the Ethics Committee must be obtained before an employee accepts a position
as a trustee or member of the Board of Directors of any non-profit
organization.
Relationships with Financial Service Firms. In order to avoid any actual
or apparent conflicts of interest, employees are prohibited from investing
in or entering into any relationship, either directly or indirectly, with
corporations, partnerships, or other entities which are engaged in business
as a broker, a dealer, an underwriter, and/or an investment adviser. As
described above, this prohibition extends to registration and/or licensure
with an unaffiliated firm. This prohibition, however, is not meant to
prevent employees from purchasing publicly traded securities of
broker/dealers, investment advisers or other companies engaged in the
mutual fund industry. Of course, all such purchases are subject to prior
clearance and reporting procedures, as applicable. This policy does not
preclude an employee from engaging an outside investment adviser to manage
his or her assets.
If any member of an employee's immediate family is employed by, has a
partnership interest in, or has an equity interest of .5% or more in a
broker/dealer, investment adviser or other company engaged in the mutual
fund industry, the relationship must be reported to the Ethics Committee.
Investment Clubs. Access Persons (defined on p. 4-3 of the Code) must
receive the prior approval of the Chairperson of the Ethics Committee
before forming or participating in a stock or investment club.
Transactions in which Access Persons have beneficial ownership or control
(see p. 4-4) through investment clubs are subject to the firm's Statement
of Policy on Securities Transactions. Non-Access Persons (defined on p. 4-
4) do not have to receive prior approval to form or participate in a stock
or investment club and need only obtain prior clearance of transactions in
Price Associates' stock. As described on p. 4-16, an exemption from prior
clearance for an Access Person (except for transactions in Price
Associates' stock) is generally available if the Access Person has
beneficial ownership solely by virtue of his
<PAGE>
or her spouse's participation in the club and has no investment control or
input into decisions regarding the club's securities transactions.
Confidentiality. The exercise of confidentiality extends to four major areas of
our operations: internal operating procedures and planning; clients, fund
shareholders and TRP Brokerage customers; investment advice; and investment
research. The duty to exercise confidentiality applies not only when an
employee is with the firm, but also after he or she terminates employment with
the firm.
Internal Operating Procedures and Planning. During the years we have been
in business, a great deal of creative talent has been used to develop
specialized and unique methods of operations and portfolio management. In
many cases, we feel these methods give us an advantage over our
competitors, and we do not want these ideas disseminated outside our firm.
Accordingly, employees should be guarded in discussing our business
practices with outsiders. Any requests from outsiders for specific
information of this type should be cleared with your supervisor before it
is released.
Also, from time to time management holds meetings with employees in which
material, non-public information concerning the firm's future plans is
disclosed. Employees should never discuss confidential information with,
or provide copies of written material concerning the firm's internal
operating procedures or projections for the future to, unauthorized persons
outside the firm.
Clients, Fund Shareholders, and TRP Brokerage Customers. In many
instances, when clients subscribe to our services, we ask them to disclose
fully their financial status and needs. This is done only after we have
assured them that every member of our organization will hold this
information in strict confidence. It is essential that we respect their
trust. A simple rule for employees to follow is that the names of our
clients, fund shareholders, or TRP Brokerage customers or any information
pertaining to their investments must never be divulged to anyone outside
the firm, not even to members of their immediate families, and must never
be used as a basis for personal trades over which the employee has
beneficial interest or control.
Investment Advice. Because of the fine reputation our firm enjoys, there
is a great deal of public interest in what we are doing in the market.
There are two major considerations that dictate why we must not provide
investment "tips":
$ From the point of view of our clients, it is not fair to give other
people information which clients must purchase.
$ From the point of view of the firm, it is not desirable to create an
outside demand for a stock when we are trying to buy it for our
clients, as this will only serve to push the price up. The reverse is
true if we are selling.
In light of these considerations, employees must never disclose to
outsiders our buy and sell recommendations, securities we are considering
for future investment, or the portfolio holdings of our clients or mutual
funds.
<PAGE>
The practice of giving investment advice informally to members of your
immediate family should be restricted to very close relatives. Any
transactions resulting from such advice are subject to the prior approval
(Access Persons only) and reporting requirements (Access Persons and Non-
Access Persons) of the Statement of Policy on Securities Transactions.
Under no circumstances should an employee receive compensation directly or
indirectly (other than from Price Associates or an affiliate) for rendering
advice to either clients or non-clients.
Investment Research. Any report circulated by a research analyst is
confidential in its entirety and should not be reproduced or shown to
anyone outside of our organization, except our clients where appropriate.
Understanding as to Clients' Accounts and Company Records at Time of
Employee Termination. The accounts of clients, mutual fund shareholders,
and TRP Brokerage customers are the sole property of Price Associates.
This applies to all clients for whom Price Associates acts as investment
adviser, regardless of how or through whom the client relationship
originated and regardless of who may be the counselor for a particular
client. At the time of termination of employment with Price Associates, an
employee must: (1) surrender to Price Associates in good condition any and
all materials, reports or records (including all copies in his or her
possession or subject to his or her control) developed by him or her or any
other person which are considered confidential information of Price
Associates (except copies of any research material in the production of
which the employee participated to a material extent); and (2) refrain from
communicating, transmitting or making known to any person or firm any
information relating to any materials or matters whatsoever which are
considered by Price Associates to be confidential.
Employees must use care in disposing of any confidential records or
correspondence. Confidential material that is to be discarded should be torn up
or, if a quantity of material is involved, you should contact Document
Management for instructions regarding proper disposal.
Corporate Responsibility. As a major institutional investor with a fiduciary
duty to its clients, including its mutual fund shareholders, Price Associates
has adopted a Statement of Policy on Corporate Responsibility (see page 5-1).
The purpose of this Statement is to establish formal standards and procedures to
guide Price Associates with respect to its responsibilities to deal with matters
of corporate and social responsibilities which may affect the companies in which
client assets are invested.
Employment of Former Government Employees. Federal laws and regulations govern
the employment of former employees of the U.S. Government and its agencies,
including the SEC. In addition, certain states have adopted similar statutory
restrictions. Finally, certain states and municipalities which are clients of
Price Associates have imposed contractual restrictions in this regard. Before
any action is taken to discuss employment by Price Associates of a former
government employee, guidance must be obtained from the Legal Department.
Employment Practices
Equal Opportunity. Price Associates is committed to the principles of
Equal Employment. We believe our continued success depends on talented
people, without regard to race, color,
<PAGE>
religion, national origin, gender, age, disability, sexual orientation,
Vietnam era military service or any other classification protected by
federal, state or local laws.
This commitment to Equal Opportunity covers all aspects of the employment
relationship including recruitment, application and initial employment,
promotion and transfer, selection for training opportunities, wage and
salary administration, and the application of service, retirement, and
employee benefit plan policies.
All members of T. Rowe Price staff are expected to comply with the spirit
and intent of our Equal Employment Opportunity Policy.
If you feel you have not been treated in accordance with this policy,
contact your immediate supervisor, your manager or a Human Resources
Representative. No retaliation will be taken against any employee who
reports an incident of alleged discrimination.
Harassment. Price Associates intends to provide employees a workplace free
from any form of harassment. This includes sexual harassment which, banned
by and punishable under the Civil Rights Act of 1964, may result from
unwelcome advances, requests for favors or any verbal or physical conduct
of a sexual nature. Such actions or statements may or may not be
accompanied by explicit or implied promises of preferential treatment or
negative consequences in connection with one's employment. Harassment
might include uninvited sex-oriented conversations, touching, comments,
jokes, suggestions or innuendos. This type of behavior can create a
stressful, intimidating and offensive atmosphere; it may adversely affect
morale and work performance.
Any employee who feels offended by the action or comments of another, or
any employee who has observed such behavior, should report the matter, in
confidence, to his or her immediate supervisor. If that presents a
problem, report the matter to the Director of Human Resources or another
person in the Human Resources Department. All complaints will be
investigated immediately and confidentially. Any employee who has behaved
in a reprehensible manner will be subject to disciplinary action in keeping
with the gravity of the offense.
Drug and Alcohol Abuse. Price Associates has adopted a Statement of
Policy, available from Human Resources, to maintain a drug-free workplace
and prevent alcohol abuse. This policy fosters a safe, healthful and
productive environment for its employees and customers and protects Price
Associates' property, equipment, operations and reputation in the community
and the industry.
Past and Current Litigation. As a condition of employment, each new employee is
required to answer a questionnaire regarding past and current civil and criminal
actions and certain regulatory matters. Price Associates uses the information
obtained through these questionnaires to answer questions asked on federal and
state registration forms and for insurance and bonding purposes. Each employee
is responsible for keeping answers on the questionnaire current. If an employee
becomes party to any proceeding that could lead to his or her conviction for any
felony or misdemeanor (other than traffic or other minor offenses) or becomes
the subject of a regulatory action by the SEC, a state, a foreign government or
any domestic or foreign self-regulatory organization relating to securities or
investment activities, he or she should notify the Legal Department promptly.
<PAGE>
Financial Reporting. Price Associates' records are maintained in a manner that
provides for an accurate record of all financial transactions in conformity with
generally accepted accounting principles. No false or deceptive entries may be
made and all entries must contain an appropriate description of the underlying
transaction. All reports, vouchers, bills, invoice, payroll and service records
and other essential data must be accurate, honest and timely and should provide
an accurate and complete representation of the facts.
Health and Safety in the Workplace. Price Associates recognizes its
responsibility to provide employees a safe and healthful workplace and proper
facilities to help them do their jobs effectively.
Illegal Payments. State, federal and foreign laws prohibit the payment of
bribes, kickbacks, inducements or other illegal gratuities or payments by or on
behalf of Price Associates. Price Associates, through its policies and
practices, is committed to comply fully with these laws. The Foreign Corrupt
Practices Act makes it a crime to corruptly give, promise or authorize payment,
in cash or in kind, for any service to a foreign official or political party in
connection with obtaining or retaining business. If an employee is solicited to
make or receive an illegal payment, he or she should contact the Legal
Department.
Marketing and Sales Activities. All written and oral marketing materials and
presentations (including performance data) must be in compliance with applicable
SEC, NASD, and Association of Investment Management and Research ("AIMR")
requirements. All advertisements, sales literature and other written marketing
materials (whether they be for the Price Funds, non-Price funds, or various
advisory or brokerage services) must be reviewed and approved by the advertising
section of the Legal Department prior to use. All performance data distributed
outside the firm, including total return and yield information, must be obtained
from the Performance Group before distribution.
Policy Regarding Acceptance and Giving of Gifts and Gratuities. The firm, as
well as its employees and members of their families, should not accept or give
gifts that might in any way create or appear to create a conflict of interest or
interfere with the impartial discharge of our responsibilities to clients or
place our firm in a difficult or embarrassing position. Such gifts would
include gratuities or other accommodations from or to business contacts,
brokers, securities salespersons, approved companies, suppliers, clients, or any
other individual or organization with whom our firm has a business relationship,
but would not include certain types of business entertainment as described later
in this section.
Receipt of Gifts. Personal contacts may lead to gifts which are offered on
a friendship basis and may be perfectly proper. It must be remembered,
however, that business relationships cannot always be separated from
personal relationships and that the integrity of a business relationship is
always susceptible to criticism in hindsight where gifts are received.
Under no circumstances may employees accept gifts from any business or
business contact in the form of cash or cash equivalents. Gift
certificates may only be accepted if used; they may not be converted to
cash except for nominal amounts not consumed when the gift certificate is
used.
There may be an occasion where it might be awkward to refuse a token non-
cash expression of appreciation given in the spirit of friendship. In such
cases, the value of all gifts received
<PAGE>
from a business contact should not exceed $100 in any twelve-month period.
The value of a gift directed to the members of a department as a group may
be divided by the number of the employees in that Department. Gifts
received which are unacceptable according to this policy must be returned
to the givers.
Giving of Gifts. An employee may never give a gift to a business contact
in the form of cash or cash equivalents, including gift certificates.
Token gifts may be given to business contacts, but the aggregate value of
all such gifts given to the business contact may not exceed $100 in any
twelve-month period without the permission of the Chairperson of the Ethics
Committee. If an employee believes that it would be appropriate to give a
gift with a value exceeding $100 to a business contact in a specific
situation, he or she must submit a written request to the Chairperson of
the Ethics Committee. The request should specify:
X the name of the giver;
X the name of the intended recipient and his or her employer;
X the nature of the gift and its monetary value;
X the nature of the business relationship; and
X the reason the gift is being given.
NASD regulations prohibit exceptions to the $100 limit for gifts given in
connection with Investment Services= business. Baltimore/Legal Compliance
will retain a record of all such gifts.
Additional Requirements for the Giving of Gifts in Connection with the
Broker/Dealer. NASD Conduct Rule 3060 imposes stringent reporting
requirements for gifts given to any principal, employee, agent or similarly
situated person where the gift is in connection with Investment Services=
business with the person's employer. Examples of gifts that fall under
this rule would include any gift given to an employee of a company to which
our firm provides investment products such as mutual funds (e.g., many
401(k) plans) or to which we are marketing investment products. Under this
NASD rule, gifts may not exceed $100 (without exception) and persons
associated with Investment Services, including its registered
representatives, must report each such gift.
The NASD reporting requirement is normally met when an item is ordered
electronically from the Corporate Gift website. If a gift is obtained from
another source, it must be reported to Baltimore/Legal Compliance. The
report to Baltimore Legal/Compliance must include:
X the name of the giver;
X the name of the recipient and his or her employer;
X the nature of the gift and its monetary value;
X the nature of the business relationship; and
X the date the gift was given.
<PAGE>
Entertainment. Our firm's $100 limit on the acceptance and giving of gifts
not only applies to gifts of merchandise, but also covers the enjoyment or
use of property or facilities for weekends, vacations, trips, dinners, and
the like. However, this limitation does not apply to dinners, sporting
events and other activities which are a normal part of a business
relationship. To illustrate this principle, the following examples are
provided:
First Example: The head of institutional research at brokerage firm
"X" (whom you have known and done business with for a number of years)
invites you and your wife to join her and her husband for dinner and
afterwards a theatrical production.
Second Example: You are going to New York for a weekend with your
wife. You wish to see a recent Broadway hit, but are told it is sold
out. You call a broker friend who works at company "X" to see if he
can get tickets for you. The broker says yes and offers you two
tickets free of charge.
Third Example: You have been invited by a vendor to a multi-day
excursion to a resort where the primary focus is entertainment as
opposed to business. The vendor has offered to pay your travel and
lodging for this trip.
In the first example, it would be proper for you to accept the invitation.
With respect to the second example, it would not be proper to solicit a
person doing business with the firm for free tickets to any event. You
could, however, accept the tickets if you pay for them at their fair value
or, if greater, at the cost to the broker.
With respect to the third example, trips of substantial value, such as
multi-day excursions to resorts, hunting locations or sports events, where
the primary focus is entertainment as opposed to business activities, would
not be considered a normal part of a business relationship. Generally,
such invitations may not be accepted unless our firm or the employee pays
for the cost of the excursion and the employee has obtained approval from
his or her Division Head.
The same principles apply if an employee wishes to entertain a business contact.
Inviting business contacts and, if appropriate, their guests, to an occasional
meal, sporting event, the theater, or comparable entertainment is acceptable as
long as it is neither so frequent nor so extensive as to raise any question of
propriety. If an employee wishes to pay for a business guest=s transportation
(e.g., airfare) and/or accommodations as part of business entertainment, he or
she must first receive the permission of the Chairperson of the Ethics
Committee.
Research Trips. Occasionally, brokers or portfolio companies invite employees
of our firm to attend or participate in research conferences, tours of portfolio
companies' facilities, or meetings with the management of such companies. These
invitations may involve traveling extensive distances to and from the sites of
the specified activities and may require overnight lodging. Employees may not
accept any such invitations until approval has been secured from their Division
heads. As a general rule, such invitations should only be accepted after a
determination has been made that the proposed activity constitutes a valuable
research opportunity which will be of primary benefit to our clients. All
travel expenses to and from the sites of the activities, and the expenses of any
overnight
<PAGE>
lodging, meals or other accommodations provided in connection with such
activities, should be paid for by our firm except in situations where the costs
are considered to be insubstantial and are not readily ascertainable. Employees
may not accept reimbursement from brokers or portfolio companies for: travel and
hotel expenses; speaker fees or honoraria for addresses or papers given before
audiences; or consulting services or advice they may render. Likewise, employees
may neither request nor accept loans or personal services from brokers or
portfolio companies.
Political Activities. Employees are encouraged to participate and vote in all
federal, state and local elections. All officers and directors of Price
Associates are required to disclose certain Maryland local and state political
contributions on a semi-annual basis (a Political Contribution Questionnaire is
sent to officers and directors each January and July).
No political contribution of corporate funds, direct or indirect, to any
political candidate or party, or to any other organization that might use the
contribution for a political candidate or party, or use of corporate property,
services or other assets may be made without the written approval of the Legal
Department. These prohibitions cover not only direct contributions but also
indirect assistance or support of candidates or political parties through
purchase of tickets to special dinners or other fund raising events, or the
furnishing of any other goods, services or equipment to political parties or
committees.
Protection of Corporate Assets. All employees are responsible for taking
measures to ensure that Price Associates' assets are properly protected. This
responsibility not only applies to our business facilities, equipment and
supplies, but also to intangible assets such as proprietary, research or
marketing information, corporate trademarks and servicemarks, and copyrights.
Quality of Services. It is a continuing policy of Price Associates to provide
investment products and services which: (1) meet applicable laws, regulations
and industry standards; (2) are offered to the public in a manner which ensures
that each client/shareholder understands the objectives of each investment
product selected; and (3) are properly advertised and sold in accordance with
all applicable SEC, state and NASD rules and regulations.
The quality of Price Associates' investment products and services and operations
affects our reputation, productivity, profitability and market position. Price
Associates' goal is to be a quality leader and to create conditions that allow
and encourage all employees to perform their duties in an efficient, effective
manner.
Record Retention. Under various federal and state laws and regulations, Price
Associates is required to produce, maintain and retain various records,
documents and other written (including electronic) communications. Each
employee is responsible for adhering to Price Associates' record maintenance and
retention policies.
Referral Fees. Federal securities laws strictly prohibit the payment of any
type of referral fee unless certain conditions are met. This would include any
compensation to persons who refer clients or shareholders to us (e.g., brokers,
registered representatives or any other persons) either directly in cash, by fee
splitting, or indirectly by the providing of gifts or services (including the
allocation of brokerage). No arrangements should be entered into obligating
Price Associates or any employee to pay a referral fee unless approved by the
Legal Department.
<PAGE>
Release of Information to the Press. All requests for information from the
media concerning T. Rowe Price Associates' corporate affairs, mutual funds,
investment services, investment philosophy and policies, and related subjects
should be referred to the Public Relations Department for reply. Investment
professionals who are contacted directly by the press concerning a particular
fund's investment strategy or market outlook may use their own discretion, but
are advised to check with the Public Relations Department if they do not know
the reporter or feel it may be inappropriate to comment on a particular matter.
Responsibility to Report Violations. Every employee who becomes aware of a
violation of this Code is encouraged to report, on a confidential basis, the
violation to his or her supervisor. If the supervisor appears to be involved in
the wrongdoing, the report should be made to the next level of supervisory
authority or to the Director of the Human Resources Department. Upon
notification of the alleged violation, the supervisor is obligated to advise the
Legal Department.
It is Price Associates' policy that no adverse action will be taken against any
employee who reports a violation in good faith.
Service as Trustee, Executor or Personal Representative. Employees may serve as
trustees, co-trustees, executors or personal representatives for the estates of
or trusts created by close family members. Employees may also serve in such
capacities for estates or trusts created by nonfamily members. However, if an
Access Person expects to be actively involved in an investment capacity in
connection with an estate or trust created by a nonfamily member, he or she must
first be granted permission by the Ethics Committee. If an employee serves in
any of these capacities, securities transactions effected in such accounts will
be subject to the prior approval (Access Persons only) and reporting
requirements (Access Persons and Non-Access Persons) of our Statement of Policy
on Securities Transactions.
If any employees presently serve in any of these capacities for nonfamily
members, they should report these relationships in writing to the Ethics
Committee.
Speaking Engagements and Publications. Employees are often asked to accept
speaking engagements on the subject of investments, finance, or their own
particular specialty with our organization. This is encouraged by the firm, as
it enhances our public relations, but you should obtain approval from the head
of your Division before you accept such requests. You may also accept an offer
to teach a course or seminar on investments or related topics (for example, at a
local college) in your individual capacity with the approval of the head of your
Division and provided the course is in compliance with the Guidelines found in
Investment Services= Compliance Manual.
Before making any commitment to write or publish any article or book on a
subject related to investments or your work at Price Associates, approval should
be obtained from your Division head.
Trading in Securities with Inside Information. The purchase or sale of
securities while in possession of material, inside information is prohibited by
state and federal laws. Information is considered inside and material if it has
not been publicly disclosed and is sufficiently important that it would affect
the decision of a reasonable person to buy, sell or hold stock in a company,
including Price Associates' stock. Under no circumstances may an employee
transmit such information to any other person, except to other employees who are
required to be kept informed on the subject. All employees should read and
understand the Statement of Policy on Material, Inside (Non-Public) Information
(see page 3-1).
March, 2000
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
ON
MATERIAL, INSIDE (NON-PUBLIC) INFORMATION
Introduction. "Insider trading" is a top enforcement priority of the Securities
and Exchange Commission. In 1988, the Insider Trading and Securities Fraud
Enforcement Act (the "Act") was signed into law. This Act has had a far
reaching impact on all public companies and especially those engaged in the
securities brokerage or investment advisory industries, including directors,
executive officers and other controlling persons of such companies. While the
Act does not provide a statutory definition of "insider trading," it contained
major changes to the previous law. Specifically, the Act:
Written Procedures. Requires SEC-registered brokers, dealers and investment
advisers to establish, maintain and enforce written policies and procedures
reasonably designed to prevent the misuse of material, non-public information
by such persons.
Civil Penalties. Imposes severe civil penalties on brokerage firms,
investment advisers, their management and advisory personnel and other
"controlling persons" who fail to take adequate steps to prevent insider
trading and illegal tipping by employees and other "controlled persons."
Persons who directly or indirectly control violators, including entities such
as Price Associates and their officers and directors, face penalties to be
determined by the court in light of the facts and circumstances, but not to
exceed the greater of $1,000,000 or three times the amount of profit gained
or loss avoided as a result of the violation.
Criminal Penalties. Provides as penalties for criminal securities law
violations:
$ Maximum jail term -- from five to ten years;
$ Maximum criminal fine for individuals -- from $100,000 to $1,000,000;
$ Maximum criminal fine for entities -- from $500,000 to $2,500,000.
Private Right of Action. Establishes a statutory private right of action on
behalf of contemporaneous traders against insider traders and their
controlling persons.
Bounty Payments. Authorizes the SEC to award bounty payments to persons who
provide information leading to the successful prosecution of insider trading
violations. Bounty payments are at the discretion of the SEC, but may not
exceed 10% of the penalty imposed.
Purpose of Statement of Policy. The purpose of this Statement of Policy
("Statement") is to comply with the Act's requirement to establish, maintain,
and enforce written procedures designed to prevent insider trading. This
Statement explains: (i) the general legal prohibitions and sanctions regarding
insider trading; (ii) the meaning of the key concepts underlying the
prohibitions; (iii) the obligations of each employee of Price Associates in the
event he or she comes into possession of material, non-public information; and
(iv) the firm's educational program regarding insider trading. Price Associates
has also adopted a Statement of Policy on Securities Transactions (see page 4-
1), which requires both Access Persons (see p. 4-3) and Non-Access Persons (see
p. 4-4) to obtain prior clearance with respect to their transactions in Price
Associates' stock and requires Access Persons
<PAGE>
to obtain prior clearance with respect to all pertinent securities transactions.
In addition, both Access Persons and Non-Access Persons are required to report
such transactions on a timely basis to the firm.
The Basic Insider Trading Prohibition. The "insider trading" doctrine under
federal securities laws generally prohibits any person (including investment
advisers) from:
$ tradibg ading in a security while in possession of material, non-public
information regarding the issuer of the security;
$ tipping such information to others;
$ recommending the purchase or sale of securities while in possession of
such information;
$ assisting someone who is engaged in any of the above activities.
Thus, "insider trading" is not limited to insiders of the company whose
securities are being traded. It can also apply to non-insiders, such as
investment analysts, portfolio managers and stockbrokers. In addition, it is not
limited to persons who trade. It also covers persons who tip material, non-
public information or recommend transactions in securities while in possession
of such information.
Policy of Price Associates on Insider Trading. It is the policy of Price
Associates and its affiliates to forbid any of their officers, directors, or
employees, while in possession of material, non-public information, from trading
securities or recommending transactions, either personally or in its proprietary
accounts or on behalf of others (including mutual funds and private accounts),
or communicating material, non-public information to others in violation of
federal securities laws.
"Need to Know" Policy. All information regarding planned, prospective or ongoing
securities transactions must be treated as confidential. Such information must
be confined, even within the firm, to only those individuals and departments who
must have such information in order for Price Associates to carry out its
engagement properly and effectively. Ordinarily, these prohibitions will
restrict information to only those persons who are involved in the matter.
Transactions Involving Price Associates' Stock. Officers, directors and
employees are reminded that they are "insiders" with respect to Price Associates
since Price Associates is a public company and its stock is traded in the over-
the-counter market. It is therefore important that employees not discuss with
family, friends or other persons any matter concerning Price Associates which
might involve material, non-public information, whether favorable or
unfavorable.
Sanctions. Penalties for trading on material, non-public information are severe,
both for the individuals involved in such unlawful conduct and their employers.
An employee of Price Associates who violates the insider trading laws can be
subject to some or all of the penalties described below, even if he or she does
not personally benefit from the violation:
$ Injunctions;
$ Treble damages;
$ Disgorgement of profits;
$ Criminal fines;
$ Jail sentences;
<PAGE>
$ Civil penalties for the person who committed the violation (which would,
under normal circumstances, be the employee and not the firm) of up to
three times the profit gained or loss avoided, whether or not the
individual actually benefitted; and
$ Civil penalties for Price Associates (and other persons, such as
managers and supervisors, who are deemed to be controlling persons) of
up to the greater of $1,000,000 or three times the amount of the profit
gained or loss avoided.
In addition, any violation of this Statement can be expected to result in
serious sanctions being imposed by Price Associates, including dismissal of the
person(s) involved.
Basic Concepts of Insider Trading. The four critical concepts in insider
trading cases are: (1) fiduciary duty/misappropriation, (2) materiality, (3)
non-public, and (4) possession. Each concept is discussed below.
Fiduciary Duty/Misappropriation. In two decisions, Dirks v. SEC and Chiarella
v. United States, the United States Supreme Court held that insider trading and
tipping violate the federal securities law if the trading or tipping of the
information results in a breach of duty of trust or confidence.
A typical breach of duty arises when an insider, such as a corporate officer,
purchases securities of his or her corporation on the basis of material, non-
public information. Such conduct breaches a duty owed to the corporation's
shareholders. The duty breached, however, need not be to shareholders to
support liability for insider trading; it could also involve a breach of duty to
a client, an employer, employees, or even a personal acquaintance. For example,
courts have held that if the insider receives a personal benefit (either direct
or indirect) from the disclosure, such as a pecuniary gain or reputational
benefit, that would be enough to find a fiduciary breach.
The concept of who constitutes an "insider" is broad. It includes officers,
directors and employees of a company. In addition, a person can be a "temporary
insider" if he or she enters into a confidential relationship in the conduct of
a company's affairs and, as a result, is given access to information solely for
the company's purpose. A temporary insider can include, among others, a
company's attorneys, accountants, consultants, and bank lending officers, as
well as the employees of such organizations. In addition, any person may become
a temporary insider of a company if he or she advises the company or provides
other services, provided the company expects such person to keep any material,
non-public information disclosed confidential.
Court decisions have held that under a "misappropriation" theory, an outsider
(such as an investment analyst) may be liable if he or she breaches a duty to
anyone by: (1) obtaining information improperly, or (2) using information that
was obtained properly for an improper purpose. For example, if information is
given to an analyst on a confidential basis and the analyst uses that
information for trading purposes, liability could arise under the
misappropriation theory. Similarly, an analyst who trades in breach of a duty
owed either to his or her employer or client may be liable under the
misappropriation theory. For example, the Supreme Court upheld the
misappropriation theory when a lawyer received material, non-public information
from a law partner who represented a client contemplating a tender offer, where
that lawyer used the information to trade in the securities of the target
company.
The situations in which a person can trade while in possession of material, non-
public information without breaching a duty are so complex and uncertain that
the only safe course is not to trade, tip
<PAGE>
or recommend securities while in possession of material, non-public information.
Materiality. Insider trading restrictions arise only when the information that
is used for trading, tipping or recommendations is "material." The information
need not be so important that it would have changed an investor's decision to
buy or sell; rather, it is enough that it is the type of information on which
reasonable investors rely in making purchase, sale, or hold decisions.
Resolving Close Cases. The Supreme Court has held that, in close cases,
doubts about whether or not information is material should be resolved in
favor of a finding of materiality. You should also be aware that your
judgment regarding materiality may be reviewed by a court or the SEC with the
20-20 vision of hindsight.
Effect on Market Price. Any information that, upon disclosure, is likely to
have a significant impact on the market price of a security should be
considered material.
Future Events. The materiality of facts relating to the possible occurrence
of future events depends on the likelihood that the event will occur and the
significance of the event if it does occur.
Illustrations. The following list, though not exhaustive, illustrates the
types of matters that might be considered material: a joint venture, merger
or acquisition; the declaration or omission of dividends; the acquisition or
loss of a significant contract; a change in control or a significant change
in management; a call of securities for redemption; the borrowing of a
significant amount of funds; the purchase or sale of a significant asset; a
significant change in capital investment plans; a significant labor dispute
or disputes with subcontractors or suppliers; an event requiring a company to
file a current report on Form 8-K with the SEC; establishment of a program to
make purchases of the company's own shares; a tender offer for another
company's securities; an event of technical default or default on interest
and/or principal payments; advance knowledge of an upcoming publication that
is expected to affect the market price of the stock.
These illustrations are equally applicable to Price Associates as a public
company and should serve as examples of the types of matters that employees
should not discuss with persons outside the firm. Remember, even though you
may have no intent to violate any federal securities law, an offhand comment
to a friend might be used unbeknownst to you by such friend to effect
purchases or sales of Price Associates' stock. If such transactions were
discovered and your friend were prosecuted, your status as an informant or
"tipper" would directly involve you in the case.
Non-Public Vs. Public Information. Any information which is not "public" is
deemed to be "non-public." Just as an investor is permitted to trade on the
basis of information that is not material, he or she may also trade on the basis
of information that is public. Information is considered public if it has been
disseminated in a manner making it available to investors generally. An example
of non-public information would include material information provided to a
select group of analysts but not made available to the investment community at
large. Set forth below are a number of ways in which non-public information may
be made public.
Disclosure to News Services and National Papers. The U.S. stock exchanges
require exchange-traded issuers to disseminate material, non-public
information about their companies to: (1) the national business and
financial newswire services (Dow Jones and Reuters); (2) the
<PAGE>
national service (Associated Press); and (3) The New York Times and The Wall
Street Journal.
Local Disclosure. An announcement by an issuer in a local newspaper might be
sufficient for a company that is only locally traded, but might not be
sufficient for a company that has a national market.
Information in SEC Reports. Information contained in reports filed with the
SEC will be deemed to be public.
Information in Brokerage Reports. Information published in bulletins and
research reports disseminated by brokerage firms will, as a general matter,
be deemed to be public.
If Price Associates is in possession of material, non-public information with
respect to a security before such information is disseminated to the public
(i.e., such as being disclosed in one of the public media described above),
Price Associates and its employees must wait a sufficient period of time after
the information is first publicly released before trading or initiating
transactions to allow the information to be fully disseminated.
Concept of Possession. It is important to note that the SEC takes the position
that the law regarding insider trading prohibits any person from trading in a
security in violation of a duty of trust and confidence while in possession of
material, non-public information regarding the security. This is in contrast to
trading on the basis of the material, non-public information. To illustrate
the problems created by the use of the "possession" standard, as opposed to the
"caused" standard, the following three examples are provided:
First, if the investment committee to a Price mutual fund were to obtain
material, non-public information about one of its portfolio companies from a
Price equity research analyst, that fund would be prohibited from trading in
the securities to which that information relates. The prohibition would last
until the information is no longer material or non-public.
Second, if the investment committee to a Price mutual fund obtained material,
non-public information about a particular portfolio security but continued to
trade in that security, then the committee members, Price Associates, and
possibly management personnel might be liable for insider trading violations.
Third, even if the investment committee to the Fund does not come into
possession of the material, non-public information known to the equity
research analyst, if it trades in the security, it may have a difficult
burden of proving to the SEC or to a court that it was not in possession of
such information.
Tender Offers. Tender offers are subject to particularly strict regulation
under the securities laws. Specifically, trading in securities which are the
subject of an actual or impending tender offer by a person who is in possession
of material, non-public information relating to the offer is illegal, regardless
of whether there was a breach of fiduciary duty. Under no circumstances should
you trade in securities while in possession of material, non-public information
regarding a potential tender offer.
Procedures to be Followed When Receiving Material, Non-Public Information.
<PAGE>
Whenever an employee comes into possession of material, non-public information,
he or she should immediately contact the Legal Department and refrain from
disclosing the information to anyone else, including persons within Price
Associates, unless specifically advised to the contrary.
Specifically, employees may not:
$ Trade in securities to which the material, non-public information relates;
$ Disclose the information to others;
$ Recommend purchases or sales of the securities to which the information
relates.
If the Legal Department determines that the information is material and non-
public, it will decide whether to:
$ Place the security on a Watch List ("Watch List") and restrict the flow of
the information to others within Price Associates in order to allow Price
Associates' investment personnel to continue their ordinary investment
activities. This procedure is commonly referred to as a Chinese Wall; or
$ Place the security on a Restricted List ("Restricted List") in order to
prohibit trading in the security by both clients and employees.
The Watch List is highly confidential and should, under no circumstances, be
disseminated to anyone except authorized personnel in the Legal Department. The
Restricted List is also highly confidential and should, under no circumstances,
be disseminated to anyone outside Price Associates.
The employee whose possession of or access to inside information has caused the
inclusion of an issuer on the Watch List may never trade or recommend the trade
of the securities of that issuer without the specific prior approval of the
Legal Department.
If an employee receives a private placement memorandum and the existence of the
private offering and/or the contents of the memorandum is material and non-
public, the employee should contact the Legal Department for a determination of
whether the issuer should be placed on the Watch or Restricted List.
Specific Procedures Relating to the Safeguarding of Inside Information.
To ensure the integrity of the Chinese Wall, and the confidentiality of the
Restricted List, it is important that all employees take the following steps to
safeguard the confidentiality of material, non-public information:
$ Do not discuss confidential information in public places such as
elevators, hallways or social gatherings;
$ To the extent practical, limit access to the areas of the firm where
confidential information could be observed or overheard to employees with
a business need for being in the area;
<PAGE>
$ Avoid using speaker phones in areas where unauthorized persons may
overhear conversations;
$ Where appropriate, maintain the confidentiality of client identities by
using code names or numbers for confidential projects;
$ Exercise care to avoid placing documents containing confidential
information in areas where they may be read by unauthorized persons and
store such documents in secure locations when they are not in use; and
$ Destroy copies of confidential documents no longer needed for a project.
Price Associates has adopted specific written procedures, Procedures
Pertaining to the Administration of the Statement of Policy on Material, Inside
(Non-Public) Information ("Procedures") to deal with those situations where
employees of the firm are in possession of material, non-public information with
respect to securities which may be in or are being considered for inclusion in
the portfolios of clients managed by other areas of the firm and when tender
offer financing information is received. These Procedures also describe the
procedures for managing relationship conflicts in the municipal area. These
Procedures have been designed to isolate and keep confidential material, non-
public information known to one investment group or employee from the remainder
of the firm. They are considered a part of this Statement and will be
distributed to all appropriate personnel.
Education Program. While the probability of research analysts and portfolio
managers being exposed to material, non-public information with respect to
companies considered for investment by clients is greater than that of other
employees, it is imperative that all employees have a full understanding of this
Statement, particularly since the insider trading restrictions also apply to
transactions in the stock of Price Associates.
To ensure that all employees are properly informed of and understand Price
Associates' policy with respect to insider trading, the following program has
been adopted.
Initial Review for New Employees. All new employees will be given a copy of
the Code, which includes this Statement, at the time of their employment and
will be required to certify that they have read it. A representative of the
Legal Department will review the Statement with each new portfolio manager,
research analyst, and trader, as well as with any person who joins the firm
as a vice president of Price Associates, promptly after his or her
employment.
Distribution of Statement. Any time this Statement is materially revised,
copies will be distributed to all employees.
Annual Review with Research Analysts, Counselors and Traders. A
representative of the Legal Department will review this Statement at least
annually with portfolio managers, research analysts, and traders.
<PAGE>
Annual Confirmation of Compliance. All employees will be asked to confirm
their understanding of and adherence to this Statement on an annual basis.
Questions. If you have any questions with respect to the interpretation or
application of this Statement, you are encouraged to discuss them with your
immediate supervisor or the Legal Department.
March, 2000
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
ON
SECURITIES TRANSACTIONS
BACKGROUND INFORMATION.
Legal Requirement. In accordance with the requirements of the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940 and the Insider Trading and Securities Fraud
Enforcement Act of 1988, T. Rowe Price Associates, Inc. ("Price Associates")
and the mutual funds ("TRPA Funds") which it manages have adopted this
Statement of Policy on Securities Transactions ("Statement"). Both Rowe
Price-Fleming International, Inc. ("RPFI") and T. Rowe Fleming Asset
Management Limited ("TRFAM") have also adopted Statements of Policy on
Securities Transactions. Funds sponsored and managed by Price Associates or
RPFI will be referred to as the "Price Funds."
Price Associates' Fiduciary Position. As an investment adviser, Price
Associates is in a fiduciary position which requires it to act with an eye
only to the benefit of its clients, avoiding those situations which might
place, or appear to place, the interests of Price Associates or its
officers, directors and employees in conflict with the interests of clients.
Purpose of Statement. The Statement was developed to help guide Price
Associates' employees and independent directors and the independent
directors of the Price Funds in the conduct of their personal investments
and to:
. eliminate the possibility of a transaction occurring that the
Securities and Exchange Commission or other regulatory bodies would
view as illegal, such as Front Running (see definition below);
. avoid situations where it might appear that Price Associates or the
Price Funds or any of their officers, directors or employees had
personally benefited at the expense of a client or fund shareholder or
taken inappropriate advantage of their fiduciary positions; and
. prevent, as well as detect, the misuse of material, non-public
information.
Employees and the independent directors of Price Associates and the Price
Funds are urged to consider the reasons for the adoption of this Statement.
Price Associates' and the Price Funds' reputations could be adversely
affected as the result of even a single transaction considered questionable
in light of the fiduciary duties of Price Associates and the independent
directors of the Price Funds.
Front Running. Front Running is illegal. It is generally defined as the
purchase or sale of a security by an officer, director or employee of an
investment adviser or mutual fund in anticipation of and prior to the
adviser effecting similar transactions for its clients in order to take
advantage of or avoid changes in market prices effected by client
transactions.
<PAGE>
PERSONS SUBJECT TO STATEMENT. The provisions of this Statement apply as
described below to the following persons and entities. Each person and entity
is classified as either an Access Person or a Non-Access Person as described
below. The provisions of this Statement may also apply to an Access Person's or
Non-Access Person's spouse, minor children, and certain other relatives, as
further described on page 4-4 of this Statement. Access Persons are subject to
all provisions of this Statement. Non-Access Persons are subject to the general
principles of the Statement and its reporting requirements, but are exempt from
prior clearance requirements except for transactions in Price Associates' stock.
The persons and entities covered by this Statement are:
Price Associates. Price Associates, each of its subsidiaries and their
retirement plans, and the Price Associates Employee Partnerships.
Personnel. Each officer, inside director and employee of Price Associates
and its subsidiaries, including T. Rowe Price Investment Services, Inc., the
principal underwriter of the Price Funds.
Certain Temporary Workers. These workers include:
. All temporary workers hired on the Price Associates payroll ("TRPA
Temporaries");
. All agency temporaries whose assignments at Price Associates exceed
four weeks or whose cumulative assignments exceed eight weeks over a
twelve-month period;
. All independent or agency-provided consultants whose assignments exceed
four weeks or whose cumulative assignments exceed eight weeks over a
twelve-month period and whose work is closely related to the ongoing
work of Price Associates' employees (versus project work that stands
apart from ongoing work); and
. Any contingent worker whose assignment is more than casual in nature or
who will be exposed to the kinds of information and situations that
would create conflicts on matters covered in the Code.
RPFI Personnel. As stated in the first paragraph, a Statement of Policy on
Securities Transactions has been adopted by RPFI. Under that Statement, all
RPFI personnel (officers, directors and employees) stationed in Baltimore
will be subject to this Statement.
TRFAM Personnel. As stated in the first paragraph, a Statement of Policy on
Securities Transactions has been adopted by TRFAM. Under that Statement,
all TRFAM personnel (officers, directors, and employees) stationed in
Baltimore will be subject to this Statement.
Retired Employees. Retired employees of Price Associates who continue to
receive investment research information from Price Associates.
INDEPENDENT DIRECTORS OF PRICE ASSOCIATES AND THE PRICE FUNDS. The independent
directors of Price Associates include those directors of Price Associates who
are neither officers nor employees of Price Associates. The independent
directors of the Price Funds include those directors of the Price Funds who are
not deemed to be "interested persons" of Price Associates.
<PAGE>
Although subject to the general principles of this Statement, including the
definition of "beneficial ownership," independent directors are subject only to
modified reporting requirements. The independent directors of the Price Funds
are exempt from prior clearance requirements. The independent directors of
Price Associates are exempt from the prior clearance requirements except for
Price Associates' stock.
ACCESS PERSONS. Certain persons and entities are classified as "Access Persons"
under the Code. The term "Access Person" means:
. Price Associates;
. any officer (vice president or above) or director (excluding
independent directors) of Price Associat es or the Price Funds;
. any employee of Price Associates or the Price Funds who, in connection
with his or her regular functions or duties, makes, participates in, or
obtains or has access to information regarding the purchase or sale of
securities by a Price Fund or other advisory client, or whose functions
relate to the making of any recommendations with respect to the
purchases or sales; or
. any person in a control relationship to Price Associates or a Price
Fund who obtains or has access to information concerning
recommendations made to a Price Fund or other advisory client with
regard to the purchase or sale of securities by the Price Fund or
advisory client.
All Access Persons are notified of their status under the Code.
Investment Personnel. An Access Person is further identified as "Investment
Personnel" if, in connection with his or her regular functions or duties,
he or she "makes or participates in making recommendations regarding the
purchase or sale of securities" by a Price Fund or other advisory client.
The term "Investment Personnel" includes, but is not limited to:
. those employees who are authorized to make investment decisions or to
recommend securities transactions on behalf of the firm's clients
(investment counselors and members of the mutual fund advisory
committees);
. research and credit analysts; and
. traders who assist in the investment process.
All Investment Personnel are deemed Access Persons under the Code. All
Investment Personnel are notified of their status under the Code.
Investment Personnel are prohibited from investing in initial public
offerings.
NON-ACCESS PERSONS. Persons who do not fall within the definition of Access
Persons are deemed "Non-Access Persons".
<PAGE>
QUESTIONS ABOUT THE STATEMENT. You are urged to seek the advice of the
Chairperson of the Ethics Committee when you have questions as to the
application of this Statement to individual circumstances.
TRANSACTIONS SUBJECT TO STATEMENT. Except as provided below, the provisions of
this Statement apply to transactions that fall under either one of the following
two conditions:
First, you are a "beneficial owner" of the security under the Rule 16a-1 of the
Securities Exchange Act of 1934 ("Exchange Act"), as defined below.
Second, if you control or direct securities trading for another person or
entity, those trades are subject to this Statement even if you are not a
beneficial owner of the securities. For example, if you have an exercisable
trading authorization of an unrelated person's or entity's brokerage account, or
are directing another person's or entity's trades, those transactions will be
subject to this Statement to the same extent your personal trades would be,
unless exempted as described below.
Definition of Beneficial Owner. A "beneficial owner" is any person who, directly
or indirectly, through any contract, arrangement, understanding, relationship,
or otherwise, has or shares in the opportunity, directly or indirectly, to
profit or share in any profit derived from a transaction in the security.
A person has beneficial ownership in:
. securities held by members of the person's immediate family sharing the
same household, although the presumption of beneficial ownership may be
rebutted;
. a person's interest in securities held by a trust, which may include
both trust beneficiaries or trustees with investment control;
. a person's right to acquire securities through the exercise or
conversion of any derivative security, whether or not presently exercisable ;
. a general partner's proportionate interest in the portfolio securities
held by a general or limited partnership;
. certain performance-related fees other than an asset-based fee,
received by any broker, dealer, bank, insurance company, investment company,
investment adviser, investment manager, trustee or person or entity performing a
similar function; and
. a person's right to dividends that is separated or separable from the
underlying securities. Otherwise, right to dividends alone shall not represent
beneficial ownership in the securities.
A shareholder shall not be deemed to have beneficial ownership in the portfolio
securities held by a corporation or similar entity in which the person owns
securities if the shareholder is not a controlling shareholder of the entity and
does not have or share investment control over the entity's portfolio.
<PAGE>
Requests for Exemptions. If you have beneficial ownership of a security, any
transaction involving that security is presumed to be subject to the relevant
requirements of this Statement, unless you have no control over the transaction.
Such a situation may arise, for example, if you have delegated investment
authority to an independent investment adviser, or your spouse has an
independent trading program in which you have no input. Similarly, if your
spouse has investment control over, but no beneficial ownership in, an unrelated
account, an exemption may be appropriate.
If you are involved in an investment account for a family situation, trust,
partnership, corporation, etc., which you feel should not be subject to the
Statement's relevant prior approval and/or reporting requirements, you should
submit a written request for clarification or exemption to Baltimore
Legal/Compliance (Attn. D. Jones). Any such request for clarification or
exemption should name the account, your interest in the account, the persons or
firms responsible for its management, and the basis upon which the exemption is
being claimed. Exemptions are not self-executing; any exemption must be granted
through Baltimore Legal/Compliance.
TRANSACTIONS IN STOCK OF PRICE ASSOCIATES. Because Price Associates is a public
company, ownership of its stock subjects its officers, inside and independent
directors, and employees to special legal requirements under the Federal
securities laws. Each officer, director and employee is responsible for his or
her own compliance with these requirements. In connection with these legal
requirements, Price Associates has adopted the following rules and procedures:
Independent Directors of Price Funds. The independent directors of the
Price Funds are prohibited from owning the stock of Price Associates.
Quarterly Earnings Report. Generally, all employees and independent
directors of Price Associates must refrain from initiating transactions in
Price Associates' stock in which they have a beneficial interest from the
sixth trading day following the end of the quarter (or such other date as
management shall from time to time determine) until the third trading day
following the public release of earnings. Employees and independent
directors will be notified in writing through the Office of the Secretary of
Price Associates ("Secretary") from time to time as to the controlling
dates.
Prior Clearance. Employees and independent directors of Price Associates
are required to obtain clearance prior to effecting any proposed transaction
(including gifts and transfers) involving shares of Price Associates' stock
owned beneficially or through the Employee Stock Purchase Plan. Requests
for prior clearance must be in writing on the form entitled, "Notification
of Proposed Transaction" (available from Corporate Records Department) and
be submitted to the Secretary who is responsible for processing and
maintaining the records of all such requests. This would include sales of
stock purchased through Price Associates Employee Stock Purchase Plan
("ESPP"). Purchases effected through the ESPP are automatically reported to
the Secretary. Receiving prior clearance does not relieve employees and
independent directors of Price Associates from conducting their personal
securities transactions in full compliance with the Code, including its
prohibition on trading while in possession of material, inside information.
Transactions in Price Associates' stock are subject to the 60-Day Rule
except for transactions effected through the ESPP and certain options
exercises. See p. 4-18.
======================================================================
======================================================================
<PAGE>
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All employees and independent directors of Price Associates must
obtain prior clearance of any transaction involving Price Associates'
stock from the Office of the Secretary of Price Associates.
======================================================================
Initial Disclosure of Holdings. Each new employee must report to the
Secretary any shares of Price Associates' stock of which he or she has
beneficial ownership no later than 10 days after his or her starting date of
employment.
Dividend Reinvestment Plans. Purchases of Price Associates' stock owned
outside of the ESPP and effected through a dividend reinvestment plan need
not receive prior clearance if the Secretary's office has been previously
notified by the employee that he or she will be participating in that plan.
Reporting of transactions effected through that plan need only be made
quarterly, except that employees who are subject to Section 16 of the
Securities Exchange Act of 1934 reporting must report such transactions
monthly.
Effectiveness of Prior Clearance. Prior clearance of transactions in Price
Associates' stock is effective for five (5) business days from and including
the date the clearance is granted, unless (i) advised to the contrary by the
Secretary prior to the proposed transaction, or (ii) the person receiving
the approval comes into possession of material, non-public information
concerning the firm. If the proposed transaction in Price Associates' stock
is not executed within this time period, a new clearance must be obtained.
Reporting of Disposition of Proposed Transaction. Covered persons must
notify the Secretary of the disposition (whether the proposed transaction
was effected or not) of each transaction involving shares of Price
Associates' stock owned directly within two business days of its execution,
or within seven business days of the date of prior clearance, if not
executed.
Insider Reporting and Liability. Under current rules, certain officers,
directors and 10% stockholders of a publicly traded company ("Insiders") are
subject to the requirements of Section 16. Insiders include the directors
and certain managing directors of Price Associates.
SEC Reporting. There are three reporting forms which insiders are required
to file with the SEC to report their purchase, sale and transfer
transactions in, and holdings of, Price Associates' stock. Although the
Secretary will provide assistance in complying with these requirements as an
accommodation to insiders, it remains the legal responsibility of each
insider to assure that the applicable reports are filed in a timely manner.
. Form 3. The initial ownership report by an insider is required to
be filed on Form 3. This report must be filed within ten days after
a person becomes an insider (i.e., is elected as a director or
appointed as managing director) to report all current holdings of
Price Associates' stock. Following the election or appointment of
an insider, the Secretary will deliver to the insider a Form 3 for
appropriate signatures and will file such Form with the SEC.
. Form 4. Any change in the insider's ownership of Price
Associates' stock must be reported on a Form 4 unless eligible for
deferred reporting on year-end Form 5. The Form 4 is due by the
10th day following the end of the month in which the
<PAGE>
ownership change occurred. Following receipt of the Notice of
Disposition of the proposed transaction, the Secretary will
deliver to the insider a Form 4, as applicable, for appropriate
signatures and will file such Form with the SEC.
. Form 5. Any transaction or holding which is exempt from
reporting on Form 4, such as option exercises, small purchases of
stock, gifts, etc. may be reported on a deferred basis on Form 5
within 45 days after the end of the calendar year in which the
transaction occurred. No Form 5 is necessary if all transactions
and holdings were previously reported on Form 4.
Liability for Short-Swing Profits. Under Federal securities laws,
profit realized by certain officers, as well as directors and 10%
stockholders of a company (including Price Associates) as a result of
a purchase and sale (or sale and purchase) of stock of the company
within a period of less than six months must be returned to the firm
upon request.
Office of Thrift Supervision ("OTS") Reporting. Price Associates is the
holding company of T. Rowe Price Savings Bank, which is regulated by the
OTS. OTS regulations require that the Managing Directors of Price
Associates, as well as any vice president in charge of any Price
Associates' affiliate, file reports regarding their personal holdings of
the stock of Price Associates and of the stock of any non-affiliated
savings banks or savings and loan holding companies. Although the Secretary
will provide assistance in complying with these requirements as an
accommodation, it remains the responsibility of each person required to
file such reports to ensure that such reports are filed in a timely manner.
PRIOR CLEARANCE REQUIREMENTS (OTHER THAN PRICE ASSOCIATES' STOCK) FOR ACCESS
PERSONS.
All Access Persons must obtain prior clearance before directly or indirectly
initiating, recommending, or in any way participating in, the purchase or sale
of a security in which the Access Person has, or by reason of such transaction
may acquire, any beneficial interest or which he or she controls, unless
exempted below. Non-Access Persons are not required to obtain prior clearance
before engaging in any securities transactions, except for transaction in Price
Associates' stock.
=====================================================================
All employees and independent directors of Price Associates must
obtain prior clearance of any transaction involving Price Associates'
stock from the Office of the Secretary of Price Associates.
=====================================================================
Where required, prior clearance must be obtained regardless of whether the
transaction is effected through TRP Brokerage or through an unaffiliated
broker/dealer. Receiving prior clearance does not relieve Access Persons from
conducting their personal securities transactions in full compliance with the
Code, including its prohibition on trading while in possession of material,
inside information, and with applicable law, including the prohibition on Front
Running (see page 4-1 for definition of Front Running). Please note that the
prior clearance procedures do not check compliance with the 60-Day Rule (p. 4-
17).
<PAGE>
TRANSACTIONS (OTHER THAN IN PRICE ASSOCIATES' STOCK) EXEMPT FROM PRIOR
CLEARANCE. The following transactions are exempt from the prior clearance
requirements:
Mutual Funds and Variable Insurance Products. Purchases or redemptions
of shares of any open-end investment companies, including the Price
Funds, and variable insurance products.
Unit Investment Trusts. Purchases or sales of shares in unit investment
trusts.
U.S. Government Obligations. Purchases or sales of direct obligations of
the U.S. Government.
Pro Rata Distributions. Purchases effected by the exercise of rights
issued pro rata to all holders of a class of securities or the sale of
rights so received.
Mandatory Tenders. Purchases and sales of securities pursuant to a
mandatory tender offer.
Spousal Payroll Deduction Plans. Purchases by an Access Person's spouse
pursuant to a payroll deduction plan, provided the Compliance Department
has been previously notified by the Access Person that the spouse will
be participating in the payroll deduction plan.
Exercise of Stock Option of Corporate Employer by Spouse. Transactions
involving the exercise by an Access Person's spouse of a stock option
issued by the corporation employing the spouse.
Dividend Reinvestment Plans. Purchases effecte d through an established
Dividend Reinvestment Plan ("DRP"), provided the Compliance Department
is first notified by the Access Person that he or she will be
participating in the DRP. An Access Person's purchase of share(s) of the
issuer to initiate participation in the DRP or an Access Person's
purchase of shares in addition to those purchased with dividends (a
"Connected Purchase") and any sale of shares from the DRP must receive
prior clearance.
Systematic Investment Plans. Purchases effected through a systematic
investment plan involving the automatic investment of a set dollar
amount on predetermined dates, provided the Compliance Department has
been previously notified by the Access Person that he or she will be
participating in the plan. An Access Person's purchase of securities of
the issuer to initiate participation in the plan and any sale of shares
from such a plan must receive prior clearance.
Inheritances. The acquisition of securities through inheritance.
Gifts. The giving of or receipt of a security as a gift.
<PAGE>
PROCEDURES FOR OBTAINING PRIOR CLEARANCE (OTHER THAN PRICE ASSOCIATES' STOCK)
FOR ACCESS PERSONS. All Access Persons should follow the procedures set forth
below before engaging in the transactions described.
Procedures For Obtaining Prior Clearance For Initial Public Offerings
("IPOs"):
Non-Investment Personnel. Access Persons who are not Investment
Personnel ("Non-Investment Personnel") may purchase securities that are
the subject of an IPO only if prior written approval has been obtained
from the Chairperson of the Ethics Committee or his or her designee
("Designee"), which may include N. Morris, S. McCafferty or A. Brooks.
An IPO is an offering of securities registered under the Securities Act
of 1933 when the issuer of the securities, immediately before the
registration, was not subject to certain reporting requirements of the
Securities Exchange Act of 1934.
In considering such a request for approval, the Chairperson will
determine whether the proposed transaction presents a conflict of
interest with any of the firm's clients or otherwise violates the Code.
The Chairperson will also determine whether the following conditions
have been met:
1. The purchase is made through the Non-Investment Personnel's regular
broker;
2. The number of shares to be purchased is commensurate with the normal
size and activity of the Non-Investment Personnel's account; and
3. The transaction otherwise meets the requirements of the NASD's rules
on free riding and withholding.
Non-Investment Personnel will not be permitted to purchase shares in an IPO
if any of the firm's clients are prohibited from doing so. Therefore, Non-
Investment Personnel must check with the Equity Trading Desk the day the
offering is priced before purchasing in the IPO. This prohibition will
remain in effect until the firm's clients have had the opportunity to
purchase in the secondary market once the underwriting is completed --
commonly referred to as the aftermarket.
Investment Personnel. Investment Personnel may not purchase securities
in an IPO.
Non-Access Persons. Although Non-Access Persons are not required to
receive prior clearance before purchasing shares in an IPO, any Non-
Access Person who is a registered representative of Investment Services
should be aware that NASD rules may restrict his or her ability to buy
shares in a "hot issue," which is a new issue that trades at a premium
in the secondary market whenever that trading commences.
Procedures For Obtaining Prior Clearance For Private Placements. Access
Persons may not invest in a private placement of securities, including the
purchase of limited partnership interests, unless prior written approval has
been obtained from the Chairperson of the Ethics Committee or a Designee. In
considering such a request for approval, the Chairperson will determine
whether the investment opportunity (private placement) should be reserved
for the firm's clients, and whether the opportunity is being offered to the
Access Person by virtue of his or her position with the firm. The
Chairperson will also secure, if appropriate, the approval
<PAGE>
of the proposed transaction from the chairperson of the applicable
investment steering committee.
Continuing Obligation. An Access Person who has received approval to
invest in a private placement of securities and who, at a later date,
anticipates participating in the firm's investment decision process
regarding the purchase or sale of securities of the issuer of that
private placement on behalf of any client, must immediately disclose
his or her prior investment in the private placement to the Chairperson
of the Ethics Committee and to the chairperson of the appropriate
investment steering committee.
Procedures For Obtaining Prior Clearance For All Other Securities
Transactions. Requests for prior clearance by Access Persons for all other
securities transactions requiring prior clearance may be made orally, in
writing, or by electronic mail (e-mail address "Personal Trades," which
appears under "Trades" in the electronic mail address book) to the Equity
Trading Department of Price Associates, which will be responsible for
processing and maintaining the records of all such requests. All requests
must include the name of the security, the number of shares or amount of
bond involved, whether a foreign security is involved, and the nature of the
transaction, i.e., whether the transaction is a purchase, sale or short
sale. Responses to all requests will be made by the Trading Department
documenting the request and its approval/disapproval.
Requests will normally be processed on the same day; however, additional
time may be required for prior clearance of transactions in foreign
securities.
Effectiveness of Prior Clearance. Prior clearance of a securities
transaction is effective for three (3) business days from and including the
date the clearance is granted, regardless of the time of day when clearance
is granted. If the proposed securities transaction is not executed within
this time, a new clearance must be obtained
REASONS FOR DISALLOWING ANY PROPOSED TRANSACTION. A proposed securities
transaction will be disapproved by the Trading Department and/or the Chairperson
of the Ethics Committee if:
Pending Client Orders. Orders have been placed by Price Associates or
RPFI to purchase or sell the security.
Purchases and Sales Within Seven (7) Calendar Days. The security has been
purchased or sold by any client of Price Associates or, in the case of a
foreign security, for any client of either Price Associates or RPFI,
within seven calendar days immediately prior to the date of the proposed
transaction. For example, if a client transaction occurs on Monday, an
Access Person may not purchase or sell that security until Tuesday of the
following week. If all clients have eliminated their holdings in a
particular security, the seven-day restriction is not applicable to an
Access Person's transactions in that security.
Approved Company Rating Changes. A change in the rating of an approved
company as reported in the firm's Daily Research News has occurred within
seven (7) calendar days immediately prior to the date of the proposed
transaction. Accordingly, trading would not be permitted until the eighth
(8) calendar day.
<PAGE>
Securities Subject to Internal Trading Restrictions. The security is
limited or restricted by Price Associates or RPFI as to purchase or sale
for client accounts.
Requests for Waivers of Prior Clearance Denials. If an Access Person's request
for prior clearance has been denied, he or she may apply to the Chairperson of
the Ethics Committee for a waiver. All such requests must be in writing and must
fully describe the basis upon which the waiver is being requested. Waivers are
not routinely granted.
BROKERAGE CONFIRMATIONS AND PERIODIC ACCOUNT STATEMENTS. All Access Persons and
Non-Access Persons must request broker-dealers executing their transactions to
send to the attention of Compliance, Legal Department, T. Rowe Price Associates,
Inc., P.O. Box 17218, Baltimore, Maryland 21297-1218 a duplicate confirmation
with respect to each and every reportable transaction, including Price
Associates' stock, and a copy of all periodic statements for all securities
accounts in which the Access Person or Non-Access Person is considered to have
beneficial ownership and/or control (see Page 4-4 for a discussion of beneficial
ownership and control concepts).
NOTIFICATION OF BROKER/DEALER ACCOUNTS. All Access Persons and Non-Access
Persons must give written notice to Baltimore Legal/Compliance before opening or
trading in a securities account with any broker/dealer, including TRP Brokerage.
New Employees. New employees must give written notice to Baltimore
Legal/Compliance of any existing securities accounts maintained with any
broker/dealer when joining the firm (no later than 10 days after the
starting date).
Officers, Directors and Registered Representatives of Investment Services.
The NASD requires each associated person of T. Rowe Price Investment
Services, Inc. to:
. Obtain approval from Investment Services (request should be in writing
and be directed to Baltimore Legal/Compliance) before opening or placing
the initial trade in a securities account with any broker/dealer; and
. Provide the broker/dealer with written notice of his or her association
with Investment Services.
TRANSACTION REPORTING REQUIREMENTS (OTHER THAN PRICE ASSOCIATES' STOCK
TRANSACTIONS). All Access Persons and Non-Access Persons must report all
securities transactions unless the transaction is exempted from reporting below.
Transactions Exempt From Reporting. The following transactions are exempt
from the reporting requirements:
Mutual Funds and Variable Insurance Products. The purchase or redemption
of shares of any open-end investment companies, including the Price
Funds, and variable insurance products, except that any employee who
serves as the president or executive vice president of a Price Fund must
report his or her beneficial ownership or control of shares in that Fund
to Baltimore Legal/Compliance through electronic mail to Dottie Jones.
<PAGE>
Stock Splits and Similar Acquisitions. The acquisition of additional
shares of existing corporate holdings through the reinvestment of income
dividends and capital gains in mutual funds, stock splits, stock
dividends, exercise of rights, exchange or conversion.
U.S. Government Obligations. Purchases or redemptions of direct
obligations of the U.S. Government.
Dividend Reinvestment Plans. The purchase of securities with dividends
effected through an established DRP. If, however, a Connected Purchase
or a sale must receive prior clearance (see p. 4-9), that transaction
must also be reported.
Transactions That Must Be Reported. Other than the transactions specified
above as exempt, all Access Persons and Non-Access Persons are required to
file a report of the following securities transactions:
Cleared Transactions. Any transaction that is subject to the prior
clearance requirements, including purchases in initial public offerings
and private placement transactions. Although Non-Access Persons are not
required to receive prior clearance for securities transactions (other
than Price Associates' stock), they must report any transaction that
would have been required to be prior cleared by an Access Person.
Unit Investment Trusts. The purchase or sale of shares of a Unit
Investment Trust.
Pro Rata Distributions. Purchase effected by the exercise of rights
issued pro rata to all holders of a class of securities or the sale of
rights so received.
Inheritances. Acquisition of securities through inheritance.
Gifts. Acquisition or disposition of securities by gift.
Mandatory Tenders. Purchases and sales of securities pursuant to a
mandatory tender offer.
Spousal Payroll Deduction Plans/Spousal Stock Option. Transactions
involving the purchase or exchange of securities by the spouse of an
Access Person or Non-Access Person pursuant to a payroll deduction plan
or the exercise by the spouse of an Access Person or Non-Access Person
of a stock option issued by the spouse's employer. Reporting of spousal
payroll deduction plan transactions need only be made quarterly;
reporting of a spousal Stock Option exercise must be made within ten
days of the exercise.
Systematic Investment Plans. Transactions involving the purchase of
securities by an Access Person or Non-Access Person pursuant to a
systematic investment plan. Reporting of Systematic Investment Plan
transactions need only be made quarterly.
Report Form. If the executing broker/dealer provides a confirmation or
similar statement directly to Baltimore Legal/Compliance, you do not need to
make a further report. All other transactions must be reported on the form
designated "T. Rowe Price Associates, Inc.
<PAGE>
Employee's Report of Securities Transactions," a supply of which is
available from Baltimore Legal/Compliance.
When Reports are Due. You must report a securities transaction within ten
(10) days after the trade date or within (10) days after the date on which
you first gain knowledge of the transaction (for example, a bequest) if this
is later. Reporting of transactions involving either systematic investment
plans or the purchase of securities by a spouse pursuant to a payroll
deduction plan, however, may be reported quarterly.
TRANSACTION REPORTING REQUIREMENTS FOR THE INDEPENDENT DIRECTORS OF PRICE
ASSOCIATES AND THE INDEPENDENT DIRECTORS OF THE PRICE FUNDS. The independent
directors of Price Associates and the independent directors of the Price Funds
are subject to the same reporting requirements as Access Persons and Non-Access
Persons except that reports need only be filed quarterly. Specifically: (1) a
report for each securities transaction must be filed with Baltimore/Legal
Compliance no later than ten (10) days after the end of the calendar quarter in
which the transaction was effected; and (2) a report must be filed for each
quarter, regardless of whether there have been any reportable transactions.
Baltimore/Legal Compliance will send the independent directors of Price
Associates and the Price Funds a reminder letter and reporting form
approximately ten days prior to the end of each calendar quarter.
MISCELLANEOUS RULES REGARDING PERSONAL SECURITIES TRANSACTIONS. These rules vary
in their applicability depending upon whether you are an Access Person.
The following rules apply to all Access Persons and Non-Access Persons and,
where indicated, to the independent directors of Price Associates and the Price
Funds.
Dealing with Clients. Access Persons, Non-Access Persons and the independent
directors of Price Associates and the Price Funds may not, directly or
indirectly, sell to or purchase from a client any security. This prohibition
does not preclude the purchase or redemption of shares of any mutual fund
that is a client of Price Associates.
Client Investment Partnerships.
Co-Investing. Access Persons and Non-Access Persons, including employee
partnerships, and the independent directors of Price Associates and the
Price Funds are not permitted to co-invest in client investment
partnerships of Price Associates, RPFI, or their affiliates, such as
Strategic Partners, Threshold, and International Partners.
Direct Investment. The independent directors of the Price Funds are not
permitted to invest as limited partners in client investment
partnerships of Price Associates, RPFI, or their affiliates.
Investment Clubs. These restrictions vary depending upon the person's
status, as follows:
Non-Access Persons. A Non-Access Person may form or participate in a
stock or investment club without approval of the Chairperson of the
Ethics Committee. Only transactions in Price Associates' stock are
subject to prior clearance requirements. Club transactions must be
reported just as the Non-Access Person's individual trades are reported.
<PAGE>
Access Persons. An Access Person may not form or participate in a stock
or investment club unless prior written approval has been obtained from
the Chairperson of the Ethics Committee. All transactions by such a
stock or investment club in which an Access Person has beneficial
ownership or control are subject to the same prior clearance and
reporting requirements applicable to an individual Access Person's
trades. However, if the Access Person has beneficial ownership solely by
virtue of his or her spouse's participation in the club and has no
investment control or input into decisions regarding the club's
securities transactions, he or she may request the waiver of prior
clearance requirements of the club's transactions (except for
transactions in Price Associates' stock) from the Chairperson of the
Ethics Committee as part of the approval process.
Margin Accounts. While brokerage margin accounts are discouraged, you may
open and maintain margin accounts for the purchase of securities provided
such accounts are with brokerage firms with which you maintain a regular
brokerage account.
Trading Activity. You are discouraged from engaging in a pattern of
securities transactions which either:
. Is so excessively frequent as to potentially impact your ability to
carry out your assigned responsibilities, or
. Involves securities positions that are disproportionate to your net
assets.
At the discretion of the Chairperson of the Ethics Committee, written
notification of excessive trading may be sent to your supervisor.
The following rules apply only to Access Persons:
Large Company Exemption. Although subject to prior clearance, transactions
involving securities in certain large companies, within the parameters set
by the Ethics Committee (the "Exempt List"), will be approved under normal
circumstances, as follows:
Transactions Involving Exempt List Securities. This exemption applies to
transactions involving no more than $20,000 or the nearest round lot
(even if the amount of the transaction marginally exceeds $20,000) per
security per week in securities of companies with market capitalizations
of $5 billion or more, unless the rating on the security as reported in
the firm's Daily Research News has been changed to a 1 or a 5 within the
seven (7) calendar days immediately prior to the date of the proposed
transaction. If such a rating change has occurred, the exemption is not
available.
Transactions Involving Options on Exempt List Securities. Access Persons
may not purchase uncovered put options or sell uncovered call options
unless otherwise permitted under the "Options and Futures" discussion on
p. 4-16. Otherwise, in the case of options on an individual security on
the Exempt List (if it has not had a prohibited rating change), an
Access Person may trade the greater of 5 contracts or sufficient option
contracts to control $20,000 in the underlying security; thus an Access
Person may trade 5 contracts even if this permits the Access Person to
control more than $20,000 in the underlying security. Similarly, the
Access Person may trade more than
<PAGE>
5 contracts as long as the number of contracts does not permit him or
her to control more than $20,000 in the underlying security.
These parameters are subject to change by the Ethics Committee.
Exchange-Traded Index Options. Although subject to prior clearance, an
Access Person's transactions involving exchange-traded index options, within
the parameters set by the Ethics Committee, will be approved under normal
circumstances. Generally, an Access Person may trade the greater of 5
contracts or sufficient contracts to control $20,000 in the underlying
securities; thus an Access Person may trade 5 contracts even if this permits
the Access Person to control more than $20,000 in the underlying securities.
Similarly, the Access Person may trade more than 5 contracts as long as the
number of contracts does not permit him or her to control more than $20,000
in the underlying security.
These parameters are subject to change by the Ethics Committee.
Client Limit Orders. The Equity Trading Desk may approve an Access Person's
proposed trade even if a limit order has been entered for a client for the
same security, if:
. The Access Person's trade will be entered as a market order; and
. The client's limit order is 10% or more away from the market at the
time of approval of the Access Person's trade.
Options and Futures. Please consult the specific section on Exchange-Traded
Index Options (p. 4-16) for transactions in those options.
============================================================================
Before engaging in options and future transactions, Access Persons should
understand the impact that the 60-Day Rule may have upon their ability to
close out a position with a profit (see page 4-17).
============================================================================
Options and Futures on Securities and Indices Not Held by Price
Associates' or RPFI's Clients. There are no specific restrictions with
respect to the purchase, sale or writing of put or call options or any
other option or futures activity, such as multiple writings, spreads and
straddles, on securities of companies (and options or futures on such
securities) which are not held by any of Price Associates' or RPFI's
clients.
Options on Securities of Companies Held by Price Associates' or RPFI's
Clients. With respect to options on securities of companies which are
held by any of Price Associates' or RPFI's clients, it is the firm's
policy that an Access Person should not profit from a price decline of a
security owned by a client (other than an Index account). Therefore, an
Access Person may: (i) purchase call options and sell covered call
options and (ii) purchase covered put options and sell put options. An
Access Person may not purchase uncovered put options or sell uncovered
call options, even if the issuer of the underlying securities is
included on the Exempt List, unless purchased in connection with other
options on the same security as part of a straddle, combination or
spread strategy which is designed to result in a profit to the Access
Person if the underlying security rises in or does not change in value.
The purchase, sale and exercise
<PAGE>
of options are subject to the same restrictions as those set forth with
respect to securities, i.e., the option should be treated as if it were
the common stock itself.
Other Options and Futures Held by Price Associates' or RPFI's Clients.
Any other option or futures transaction with respect to domestic or
foreign securities held by any of Price Associates' clients or with
respect to foreign securities held by RPFI's clients will be approved or
disapproved on a case-by-case basis after due consideration is given as
to whether the proposed transaction or series of transactions might
appear to or actually create a conflict with the interests of any of
Price Associates' or RPFI's clients. Such transactions include
transactions in futures and options on futures involving financial
instruments regulated solely by the CFTC.
Short Sales. Short sales by Access Persons are subject to prior clearance.
In addition, Access Persons may not sell any security short which is owned
by any client of Price Associates or RPFI, except that short sales may be
made "against the box" for tax purposes. A short sale "against the box" is
one in which the seller owns an amount of securities equivalent to the
number he or she sells short. All short sales, including short sales against
the box, are subject to the 60-Day Rule described below.
The 60-Day Rule. Access Persons are prohibited from profiting from the
purchase and sale or sale and purchase of the same (or equivalent)
securities within 60 calendar days. An "equivalent" security means any
option, warrant, convertible security, stock appreciation right, or similar
right with an exercise or conversion privilege at a price related to the
subject security, or similar securities with a value derived from the value
of the subject security. Thus, for example, the rule prohibits options
transactions on or short sales of a security within 60 days of its purchase.
In addition, the rule applies regardless of the Access Person's other
holdings of the same security or whether the Access Person has split his or
her holdings into tax lots. For example, if an Access Person buys 100 shares
of XYZ stock on March 1, 1998 and another 100 shares of XYZ stock on March
1, 2000, he or she may not sell any shares of XYZ stock at a profit for 60
days following March 1, 2000. The 60-Day Rule "clock" restarts each time the
Access Person trades in that security.
Exemptions from the 60-Day Rule. The 60-Day Rule does not apply to:
. any transaction by a Non-Access Person except for transactions in
Price Associates' stock not exempted below;
. any transaction exempt from prior clearance (see p. 4-8);
. the purchase and sale or sale and purchase of exchange traded
index options;
. any transaction in Price Associates' stock effected through the
ESPP; and
. the exercise of "in the money" Price Associates' stock options
and the subsequent sale of the derivative shares.
Prior clearance procedures do not check compliance with the 60-Day Rule
when considering a trading request. Access Persons are responsible for
checking their compliance with this rule before entering a trade.
<PAGE>
Access Persons may request a waiver from the 60-Day Rule. Such requests
should be directed in writing to the Chairperson of the Ethics
Committee. These waivers are not routinely granted.
Investments in Non-Listed Securities Firms. Access Persons may not purchase
or sell the shares of a broker/dealer, underwriter or federally registered
investment adviser unless that entity is traded on an exchange or listed as
a NASDAQ stock or permission is given under the Private Placement Procedures
(see p. 4-10).
OWNERSHIP REPORTING REQUIREMENTS - ONE-HALF OF ONE PERCENT OWNERSHIP. If an
employee or an independent director of Price Associates or an independent
director of the Price Funds owns more than 1/2 of 1% of the total outstanding
shares of a public or private company, he or she must immediately report in
writing such fact to Baltimore Legal/Compliance, providing the name of the
company and the total number of such company's shares beneficially owned.
DISCLOSURE OF PERSONAL SECURITIES HOLDINGS BY ACCESS PERSONS. Upon commencement
of employment, appointment or promotion (no later than 10 days after the
starting date), each Access Person must disclose in writing all current
securities holdings in which he or she is considered to have beneficial
ownership and control ("Securities Holdings Report") (see page 4-4 for
definition of the term Beneficial Owner). The form to provide the Securities
Holding Report will be provided upon commencement of employment, appointment or
promotion and should be submitted to Baltimore Legal/Compliance.
All Investment Personnel and Managing Directors are also required to file a
Securities Holding Report on an annual basis, in conjunction with the annual
verification process. Effective January 2001, this requirement will be extended
to all Access Persons, pursuant to federal law.
CONFIDENTIALITY OF RECORDS. Price Associates makes every effort to protect the
privacy of all persons and entities in connection with their Securities Holdings
Reports and Reports of Securities Transactions.
SANCTIONS. Strict compliance with the provisions of this Statement is considered
a basic provision of association with Price Associates and the Price Funds. The
Ethics Committee and Baltimore Legal/Compliance are primarily responsible for
administering this Statement. In fulfilling this function, the Ethics Committee
will institute such procedures as it deems reasonably necessary to monitor each
person's and entity's compliance with this Statement and to otherwise prevent
and detect violations.
Violations by Access Persons, Non-Access Persons and Directors of Price
Associates. Upon discovering a material violation of this Statement by any
person or entity other than an independent director of a Price Fund, the
Ethics Committee will impose such sanctions as it deems appropriate and as
are approved by the Management Committee or the Board of Directors
including, inter alia, a letter of censure or suspension, a fine, a
suspension of trading privileges or termination of employment and/or
officership of the violator. In addition, the violator may be required to
surrender to Price Associates, or to the party or parties it may designate,
any profit realized from any transaction that is in violation of this
Statement. All material violations of this Statement shall be reported to
the Board of Directors of Price
<PAGE>
Associates and to the Board of Directors of any Price Fund with respect to
whose securities such violations may have been involved.
Violations by Independent Directors of Price Funds. Upon discovering a
material violation of this Statement by an independent director of a Price
Fund, the Ethics Committee shall report such violation to the Board on which
the director serves. The Price Fund Boards will impose such sanctions as
they deem appropriate.
Violations by Baltimore Employees of RPFI or TRFAM. Upon discovering a
material violation of this Statement by a Baltimore-based employee of RPFI
or TRFAM, the Ethics Committee shall report such violation to the Board of
Directors of RPFI or TRFAM, as appropriate. A material violation by a
Baltimore-based employee of RPFI shall also be reported to the Board of
Directors of any RPFI Fund with respect to whose securities such violations
may have been involved.
March, 2000
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
ON
CORPORATE RESPONSIBILITY
Price Associates' Fiduciary Position. As an investment adviser, T. Rowe Price
Associates, Inc. ("Price Associates") is in a fiduciary relationship with each
of its clients. This fiduciary duty obligates Price Associates to act with an
eye only to the benefit of its clients. Accordingly, when managing its client
accounts (whether private counsel clients, mutual funds, limited partnerships,
or otherwise), Price Associates' primary responsibility is to optimize the
financial returns of its clients consistent with their objectives and investment
program.
Definition of Corporate Responsibility Issues. Concern over the behavior of
corporations has been present since the Industrial Revolution. Each generation
has focused its attention on specific issues. Concern over the abuses of the
use of child labor in the 1800's was primarily addressed by legislative action
which mandated corporate America to adhere to new laws restricting and otherwise
governing the employment of children. In other instances, reform has been
achieved through shareholder action -- namely, the adoption of shareholder
proposals. The corporate responsibility issues most often addressed during the
past decade have involved:
. Ecological issues, including toxic hazards and pollution of the air
and water;
. Employment practices, such as the hiring of women and minority groups;
. Product quality and safety;
. Advertising practices;
. Animal testing;
. Military and nuclear issues; and
. International politics and operations, including the world debt
crisis, infant formula, and child labor laws.
Corporate Responsibility Issues in the Investment Process. Price Associates
recognizes the legitimacy of public concern over the behavior of business with
respect to issues of corporate responsibility. Price Associates' policy is to
carefully review the merits of such issues that pertain to any issuer which is
held in a client portfolio or which is being considered for investment. Price
Associates believes that a corporate management's record of identifying and
resolving issues of corporate responsibility is a legitimate criteria for
evaluating the investment merits of the issuer. Enlightened corporate
responsibility can enhance a issuer's long term prospects for business success.
The absence of such a policy can have the converse effect.
<PAGE>
Corporate Responsibility Committee. Since 1971, Price Associates has had a
Corporate Responsibility Committee, which is responsible for:
. Reviewing and establishing positions with respect to corporate
responsibility issues that are presented in the proxy statements of
portfolio companies; and
. Reviewing questions and inquiries received from clients and mutual
fund shareholders pertaining to issues of corporate responsibility.
Questions Regarding Corporate Responsibility. Should an employee have any
questions regarding Price Associates' policy with respect to a corporate
responsibility issue or the manner in which Price Associates has voted or
intends to vote on a proxy matter, he or she should contact a member of the
Corporate Responsibility Committee or Price Associates' Proxy Administrator.
March, 2000
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
WITH RESPECT TO COMPLIANCE WITH COPYRIGHT LAWS
Purpose of Statement of Policy. To protect the interests of Price Associates
and its employees, Price Associates has adopted this Statement of Policy with
Respect to Compliance with Copyright Laws ("Statement" to: (1) inform its
employees regarding the legal principles governing copyrights, trademarks, and
service marks; and (2) ensure that Price Associates' various copyrights,
trademarks, and service marks are protected from infringement.
Definition of Trademark, Service Mark, and Copyright
Trademark. A trademark is normally a word, phrase, or symbol used to
identify and distinguish a product or a company. For example, Kleenex is a
trademark for a particular brand of facial tissues.
Service Mark. A service mark is normally a word, phrase, or symbol used to
identify and distinguish a service or the provider of a service. For
example, Invest With Confidence is a registered service mark which
identifies and distinguishes the mutual fund management services offered by
Price Associates. The words "trademark" and "service mark" are often used
interchangeably, but as a general rule a trademark is for a tangible
product, whereas a service mark is for an intangible good or service.
Because most of Price Associates' business activities involve providing
services (e.g., investment management; transaction processing and account
maintenance; information, etc.), most of Price Associates' registered marks
are service marks.
Copyright. In order to protect the authors and owners of books, articles,
drawings, music, or computer programs and software, the U.S. copyright law
makes it a crime to reproduce, in any manner, any copyrighted material
without the express written permission of the author or publisher. Under
current law, all original works are copyrighted at the moment of creation;
it is no longer necessary to register a copyright. Copyright infringements
may result in judgments of actual damages (i.e., the cost of additional
subscriptions), as well as punitive damages, which can be as high as
$100,000 per infringement.
Registered Trademarks and Service Marks. Once Price Associates has registered a
trademark or service mark with the U.S. Patent and Trademark Office, it has the
exclusive right to use that mark. In order to preserve rights to a registered
trademark or service mark, Price Associates must (1) use the mark on a
continuous basis and in a manner consistent with the Certificate of
Registration; (2) place an encircled "R" ((R)) next to the mark in the first, or
most prominent, occurrence in all publicly distributed media; and (3) take
action against any party infringing upon the mark.
Establishing a Trademark or Service Mark. The Legal Department has the
responsibility to register and maintain all trademarks and service marks and
protect them against any infringement. If Price Associates or a subsidiary
wishes to utilize a particular word, phrase, or symbol as a trademark or service
mark, the Legal Department must be notified as far in advance as possible so
that a search may be conducted to determine if the proposed mark has already
been registered or
<PAGE>
used by another entity. Until clearance is obtained from the Legal Department,
no new mark should be used. This procedure has been adopted to ensure that Price
Associates does not unknowingly infringe upon another company's mark. Once a
proposed mark is cleared for use, it must be accompanied by the abbreviations
"TM" or "SM," as appropriate, until it has been registered. All trademarks and
service marks which have been registered with the U.S. Patent and Trademark
Office must be accompanied by an encircled "R" when used in any public document.
These symbols need only accompany the mark in the first or most prominent place
it is used in each publicly circulated document. Subsequent use of the same
trademark or service mark in such material does not need to be marked. The Legal
Department maintains a written summary of all Price Associates' registered and
pending trademarks and service marks. All registered and pending trademarks and
service marks are also listed in the T. Rowe Price Style Guide. If you have any
questions regarding the status of a trademark or service mark, you should
contact the Legal Department.
Infringement of Price Associates' Registered Marks. If an employee notices that
another entity is using a mark similar to one which Price Associates has
registered, the Legal Department should be notified immediately so that
appropriate action can be taken to protect Price Associates' interests in the
mark.
Reproduction of Articles and Similar Materials for Internal Distribution, or for
Distribution to Shareholders, Clients and Others Outside the Firm. In general,
the reproduction of copyrighted material is a federal offense. Exceptions under
the "fair use" doctrine include reproduction for scholarly purposes, criticism,
or commentary, which ordinarily do not apply in a business environment.
Occasional copying of a relatively small portion of a newsletter or magazine to
keep in a file, circulate to colleagues with commentary, or send to a client
with commentary is generally permissible under the "fair use" doctrine. Written
permission from the author or publisher must be obtained by any employee wishing
to reproduce copyrighted material for internal or external distribution,
including distribution via the Internet or the T. Rowe Price Associates'
intranet. It is the responsibility of each employee to obtain permission to
reproduce copyrighted material. Such permission must be in writing and
forwarded to the Legal Department. If the publisher will not grant permission
to reproduce copyrighted material, then the requestor must purchase from the
publisher either additional subscriptions to the periodical or the reprints of
specific articles. The original article or periodical may be circulated as an
alternative to purchasing additional subscriptions or reprints.
Personal Computer Software Programs. Software products and on-line information
services purchased for use on Price Associates' personal computers are generally
copyrighted material and may not be reproduced without proper authorization from
the software vendor. See the T. Rowe Price Associates, Inc. Statement of Policy
With Respect to Computer Security and Related Issues for more information.
March, 2000
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY WITH RESPECT TO
COMPUTER SECURITY AND RELATED ISSUES
PURPOSE OF STATEMENT OF POLICY. The central and critical role of computer
systems in our firm's operations underscores the importance of ensuring the
integrity of these systems. The data stored on our firm's computers, as well as
the specialized software programs and systems developed for the firm's use, are
extremely valuable assets and very confidential.
This Statement of Policy ("Statement") establishes a comprehensive computer
security program which has been designed to:
. prevent the unauthorized use of or access to our firm's computer
systems (collectively the "Systems"), including the firm's electronic
mail ("e-mail") and voice mail systems;
. prevent breaches in computer security;
. maintain the integrity of confidential information; and
. prevent the introduction of computer viruses into our Systems that
could imperil the firm's operations.
In addition, the Statement describes various issues that arise in connection
with the application of U.S. Copyright Law to computer software.
Any material violation of this Statement may lead to sanctions, which may
include dismissal of the employee or employees involved.
CONFIDENTIALITY OF SYSTEMS ACTIVITIES AND INFORMATION. Systems activities and
information stored on our firm's computers (including e-mail and voice mail) may
be subject to monitoring by firm personnel or others. All such information,
including messages on the firm's e-mail and voice mail systems, are records of
the firm and the sole property of the firm. The firm reserves the right to
monitor, access, and disclose for any purpose all information, including all
messages sent, received, or stored through the Systems. The use of the firm's
computer Systems is for the transaction of firm business and is for authorized
users only. All firm policies apply to the use of the Systems. See Employee
Handbook.
By using the firm's Systems, you agree to be bound by this Statement and consent
to the access to and disclosure of all information, including e-mail and voice
mail messages, by the firm. Employees do not have any expectation of privacy in
connection with the use of the Systems, or with the transmission, receipt, or
storage of information in the Systems.
Information entered into our firm's computers but later deleted from the Systems
may continue to be maintained permanently on our firm's back-up tapes.
Employees should take care so that they do not create documents or
communications that might later be embarrassing to them or to our firm. This
policy applies to e-mail and voice mail, as well to any other communication on a
System.
<PAGE>
SECURITY ADMINISTRATION. Enterprise Security in T. Rowe Price Investment
Technologies, Inc. ("TRPIT") is responsible for identifying security needs and
overseeing the maintenance of computer security, including Internet-related
security issues.
AUTHORIZED SYSTEMS USERS. In general, access to any type of System is
restricted to authorized users who need access in order to support their
business activities. Access for mainframe, LAN and external Systems must be
requested on a "Systems Access Request" form. A hard copy can be printed from
the Enterprise Security intranet site or obtained from Enterprise Security.
Access requests and changes must be approved by the appropriate supervisor or
manager in the user's department.
AUTHORIZED APPLICATION USERS. Access to specific computer applications (i.e.,
Finance, Retirement Plan Services systems, etc.) can also be requested. Many
application systems have an additional level of security, such as extra
passwords. If a user wants access to an application or data that is outside the
normal scope of his or her business activity, additional approval may be
required from the "Owner" of such application or data. The "Owner" is the
employee who is responsible for making judgments and decisions on behalf of the
firm with regard to the application or data, including the authority to decide
who may have access.
USER-IDS, PASSWORDS, AND OTHER SECURITY ISSUES. Once a request for access is
approved, a unique "User-ID" will be assigned the user. Each User-ID has a
password that must be kept confidential by the user. For most systems,
passwords must be changed on a regular schedule and Enterprise security has the
authority to determine the password policy. User-IDs and passwords may not be
shared. Users can be held accountable for work performed with their User-IDs.
Personal computers must not be left logged on and unattended unless screen
savers with passwords or software-based keyboard locks are utilized. Enterprise
Security recommends that GroupWise e-mail accounts be password protected.
EXTERNAL COMPUTER SYSTEMS. Our data processing environment includes access to
data stored not only on our firm's computers, but also on external systems, such
as DST. Although the security practices governing these outside systems are
established by the providers of these external systems, requests for access to
such systems should be directed to Enterprise Security. User-IDs and passwords
to these systems must be kept confidential by the user.
ACCESS TO THE INTERNET AND OTHER ON-LINE SERVICES. Access to the Internet
(including, but not limited to, e-mail, remote FTP, Telnet, World Wide Web,
Gopher, remote administration, secure shell, and using IP tunneling software to
remotely control Internet servers) presents special security considerations due
to the world-wide nature of the connection and the security weaknesses present
in Internet protocols and services. The firm can provide authorized employees
and other staff with access to Internet e-mail and other Internet services (such
as the World Wide Web) through a direct connection from the firm's network.
Access to the Internet or Internet services from our firm's computers, including
the firm's e-mail system, is permitted only for legitimate business purposes.
Such access must be requested through Enterprise Security, approved by the
employee's supervisor, and provided only through firm approved connections. All
firm policies apply to the use of the Internet or Internet services. See
Employee Handbook.
Use of Internet. In accordance with firm policies, employees are
prohibited from accessing inappropriate sites, including, but not limited
to, adult and gambling sites. Firm personnel
<PAGE>
monitor Internet use for visits to inappropriate sites and for
inappropriate use. Should employees have questions regarding what
constitutes an inappropriate site or inappropriate use, they should discuss
it first with their manager who may refer the question to Human Resources.
Inappropriate use of the Internet, or accessing inappropriate sites, may
lead to sanctions, which may include dismissal of the employee or employees
involved.
Dial-Out Access. Using a modem or an Internet connection on a firm
computer housed at any of the firm's offices to access an Internet service
provider using one's home or personal account is prohibited, unless this
account is being used by authorized personnel to service Price Associates'
connection to the Internet. When Internet access is granted, the employee
will be asked to reaffirm his or her understanding of this Statement.
Unauthorized modems are not permitted. Dial-out access that circumvents the
Internet firewall or proxy server, except by authorized personnel in the
business of Price Associates, is prohibited.
On-line Services. Access to America OnLine ("AOL"), CompuServe, or other
commercial on-line service providers is not permitted from a firm computer
except for a legitimate business purpose approved by the employee's
supervisor and with software obtained through the Help Desk at x4357
(select menu option 1).
Participation on Bulletin Boards. Because communications by our firm or
any of its employees on on-line service bulletin boards are subject to
federal, state and NASD advertising regulations, unsupervised participation
can result in serious securities violations. Certain designated employees
have been authorized to use AOL to monitor and respond to inquiries about
our firm and its investment services and products. Any employee other than
those assigned to this special group must first receive the authorization
of a member of the Board of T. Rowe Price Investment Services, Inc. and the
Legal Department before initiating or responding to a message on any
computer bulletin board relating to the firm, a Price Fund or any
investment or brokerage option or service. This policy applies whether or
not the employee intends to disclose his or her relationship to the firm,
whether or not our firm sponsors the bulletin board, and whether or not the
firm is the principal focus of the bulletin board.
E-mail Use. Access to the firm's e-mail system is permitted only for
legitimate business purposes. All firm policies apply to the use of e-
mail. Firm personnel may monitor e-mail usage for inappropriate use.
Should employees have questions regarding what constitutes inappropriate
use, they should discuss it first with their manager who may refer the
question to Human Resources. Inappropriate use of e-mail may lead to
sanctions, which may include dismissal of the employee or employees
involved.
E-mail services, other than those provided or approved by Price Associates,
may not be used for business purposes. In addition, accessing e-mail
services not provided or approved by Price Associates from firm equipment
for any reason could allow the introduction of viruses or malicious code
into the network, or lead to the compromise of confidential data.
Employees should understand that e-mail sent through the Internet is not
secure and could be intercepted by a third party.
<PAGE>
DIAL-IN ACCESS. The ability to access our firm's computer Systems from a remote
location is also limited to authorized users. Phone numbers used to access our
firm's computer Systems are confidential. A security system that uses a one-
time password or other strong authentication method must be employed when
accessing our firm's network from a remote computer. Authorization for remote
access can be requested by completing a "Systems Access Request" form. Any
employee who requires remote access should contact the Help Desk at x4357
(select menu option 1) for desktop setup.
VIRUS PROTECTION. A computer virus is a program designed to damage or impair
software or data on a computer system. Software from any outside source may
contain a computer virus or similar malicious code. Types of carriers and
transmission methods increase daily and currently include diskettes, CDs, file
downloads, executables, and e-mail attachments. A comprehensive malicious code
prevention and control program is in place throughout Price Associates. This
program provides policy and procedures for anti-virus controls on all systems.
More information about the anti-virus program can be found on the TRPIT
Intranet.
Introducing a virus or similar malicious code into the Price Associates Systems
by engaging in prohibited actions, such as downloading non-business related
software, or by failing to implement recommended precautions, such as updating
virus scanning software on remote machines, may lead to sanctions, which may
include dismissal of the employee or employees involved.
Virus Scanning Software. As part of the TRPIT's anti-virus program, virus
scanning software is installed on the majority of applicable platforms.
This software is designed to detect and eradicate malicious code and
viruses. All desktop computers have the corporate standard anti-virus
scanning software installed and running. This software is installed and
configured by the Distributed Processing Support Group and runs constantly.
Virus scanning software updates are automatically distributed to the
desktops as they become available. Desktop virus scanning software can
also be used by the employee to scan diskettes, CDs, directories, and
attachments "on demand". Contact the Help Desk at x4357 (select menu
option 3) for assistance.
E-mail. An e-mail anti-virus gateway scans the content of inbound and
outbound e-mail for viruses. Infected e-mail and attachments will be
cleaned when possible and quarantined when not cleanable. Updating of the
e-mail gateway anti-virus software and pattern files is done automatically.
Portable and Remote Computers. Laptops and other computers that remotely
access the TRPIT network are also required to have the latest anti-virus
software and pattern files. It is the responsibility of each user to
ensure that his or her portable computer's anti-virus software is regularly
updated. The Help Desk has instructions available. Contact the Help Desk
at x4357 (select menu option 3) to obtain further information.
Downloading or Copying. The user of a PC with a modem or with an Internet
connection has the ability to connect to other computers or on-line
services outside of the firm's network and there may be business reasons to
download or copy software from those sources. Downloading or copying
software, which includes documents, graphics, programs and other computer-
based materials, from any outside source is not permitted unless it is for
a legitimate business purpose because downloads and copies could introduce
viruses and malicious code into the Systems.
<PAGE>
Other Considerations. Users must log off the System each night. Unless
the user logs off, virus software on each workstation cannot pick up the
most current virus scanning downloads or the most current software updates
for the user's System. Employees must call the Help Desk at x4357 (select
menu option 3) when viruses are detected so that it can ensure that
appropriate tracking and follow-up take place. Do not forward any "virus
warning" mail received to other staff until you have contacted the Help
Desk, since many of these warnings are hoaxes. When notified that a user
has received "virus warning" mail, the Help Desk will contact Enterprise
Security, whose personnel will check to determine the validity of the virus
warning.
APPLICATION OF U.S. COPYRIGHT LAW TO SOFTWARE PROGRAMS. Software products and
on-line information services purchased for use on Price Associates' personal
computers are generally copyrighted material and may not be reproduced without
proper authorization from the software vendor. This includes the software on
CDs or diskettes, any program manuals or documentation, and data or software
retrievable from on-line information systems. Unauthorized reproduction of such
material or information, or downloading or printing such material, is a federal
offense, and the software vendor can sue to protect the developer's rights. In
addition to criminal penalties such as fines and imprisonment, civil damages can
be awarded in excess of $50,000.
GUIDELINES FOR USING PERSONAL COMPUTER SOFTWARE
Acquisition and Installation of Software. Only Distributed Processing
Support Group approved and installed software is authorized. Any software
program that is to be used by an employee of Price Associates in connection
with the business of the firm must be ordered through the Help Desk at
x4357 (select menu option 1) and installed by the Distributed Processing
Support Group of TRPIT.
Licensing. Software residing on firm LAN servers will be either: (1)
maintained at an appropriate license level for the number of users, or (2)
made accessible only for those for whom it is licensed.
Original CDs, Diskettes and Copies. In most cases, software is installed
by the Distributed Processing Support Group and original software CDs and
diskettes are not provided to the user. In the event that original CDs or
diskettes are provided, they must be stored properly to reduce the
possibility of damage or theft. CDs and diskettes should be protected from
extreme heat, cold, and contact with anything that may act as a magnet or
otherwise damage them. Employees may not make additional copies of
software or software manuals obtained through the firm.
Recommendations, Upgrades, and Enhancements. All recommendations regarding
computer hardware and software programs are to be forwarded to the Help
Desk at x4357 (select menu option 1), which will coordinate upgrades and
enhancements.
QUESTIONS REGARDING THIS STATEMENT. Any questions regarding this Statement
should be directed to Enterprise Security in TRPIT.
March, 2000
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
ON
COMPLIANCE WITH ANTITRUST LAWS
Purpose
To protect the interests of the company and its employees, Price Associates
has adopted this Statement of Policy on Compliance with Antitrust Laws
("Statement") to:
(1) Inform employees about the legal principles governing prohibited
anticompetitive activity in the conduct of Price Associates' business;
and
(2) Establish guidelines for contacts with other members of the investment
management industry to avoid violations of the antitrust laws.
The Basic Anticompetitive Activity Prohibition
Section 1 of the Sherman Antitrust Act (the "Act") prohibits agreements,
understandings, or joint actions between companies that constitute a "restraint
of trade," i.e., reduce or eliminate competition.
This prohibition is triggered only by an agreement or action among two or
more companies; unilateral action never violates the Act. To constitute an
illegal agreement, however, an understanding does not need to be formal or
written. Comments made in conversations, casual comments at meetings, or even
as little as "a knowing wink," as one case says, may be sufficient to establish
an illegal agreement under the Act.
The agreed upon action must be anticompetitive. Some actions are "per se"
anticompetitive, while others are judged according to a "rule of reason."
. Some activities have been found to be so inherently anticompetitive
that a court will not even permit the argument that they have a
procompetitive component. Examples of such per se illegal activities
are agreements between competitors to fix prices or divide up markets
in any way, such as exclusive territories.
. Other joint agreements or activities will be examined by a court using
the rule of reason approach to see if the procompetitive results of
the arrangement outweigh the anticompetitive effects. Permissible
agreements among competitors may include a buyers' cooperative, or a
syndicate of buyers for an initial public offering of securities. In
rare instances, an association of sellers (such as ASCAP) may be
permissible.
<PAGE>
There is also an exception for joint activity designed to influence
government action. Such activity is protected by the First Amendment to the
U.S. Constitution. For example, members of an industry may agree to lobby
Congress jointly to enact legislation that may be manifestly anticompetitive.
Penalties for Violating the Sherman Act
A charge that the Act has been violated can be brought as a civil or a
criminal action. Civil damages can include treble damages, plus attorneys fees.
Criminal penalties for individuals can include fines of up to $350,000 and three
years in jail, and $100 million or more for corporations.
Situations in Which Antitrust Issues May Arise
To avoid violating the Act, any agreement with other members of the
investment management industry regarding which securities to buy or sell and
under what circumstances we buy or sell them, or about the manner in which we
market our mutual funds and investment and retirement services, must be made
with the prohibitions of the Act in mind.
Trade Association Meetings and Activities. A trade association is a group
of competitors who join together to share common interests and seek common
solutions to common problems. Such associations are at a high risk for
anticompetitive activity and are closely scrutinized by regulators.
Attorneys for trade associations, such as the Investment Company Institute,
are typically present at meetings of members to assist in avoiding
violations.
Permissible Activities:
. Discussion of how to make the industry more competitive.
. An exchange of information or ideas that have procompetitive or
competitively neutral effects, such as: methods of protecting the
health or safety of workers; methods of educating customers and
preventing abuses; and information regarding how to design and
operate training programs.
. Collective action to petition government entities.
Activities to be Avoided:
. Any discussion or direct exchange of current information about
prices, salaries, fees, or terms and conditions of sales. Even if
such information is publicly available, problems can arise if the
information available to the public is difficult to compile or
not as current as that being exchanged.
Exception: A third party consultant can, with appropriate
safeguards, collect, aggregate and disseminate some of this
information, such as salary information.
. Discussion of future business plans, strategies, or arrangements
that might be considered to involve competitively sensitive
information.
. Discussion of specific customers, markets, or territories.
<PAGE>
. Negative discussions of service providers that could give rise to
an inference of a joint refusal to deal with the provider (a
"boycott").
Investment-Related Discussions
Permissible Activities: Buyers or sellers with a common economic
interest may join together to facilitate securities transactions that
might otherwise not occur, such as the formation of a syndicate to buy
in a private placement or initial public offering of a issuer's stock,
or negotiations among creditors of an insolvent or bankrupt company.
Competing investment managers are permitted to serve on creditors
committees together and engage in other similar activities in
connection with bankruptcies and other judicial proceedings.
Activities to be Avoided: It is important to avoid anything that
suggests involvement with any other firm in any threats to "boycott"
or "blackball" new offerings, including making any ambiguous statement
that, taken out of context, might be misunderstood to imply such joint
action. Avoid careless or unguarded comments that a hostile or
suspicious listener might interpret as suggesting prohibited
coordinated behavior between T. Rowe Price and any other potential
buyer.
Example: After an Illinois municipal bond default where the
state legislature retroactively abrogated some of the
bondholders' rights, several investment management complexes
organized to protest the state's action. In doing so, there was
arguably an implied threat that members of the group would
boycott future Illinois municipal bond offerings. Such a boycott
would be a violation of the Act. The investment management
firms' action led to an 18-month Department of Justice
investigation. Although the investigation did not lead to any
legal action, it was extremely expensive and time consuming for
the firms and individual managers involved.
<PAGE>
If you are present when anyone outside of T. Rowe Price suggests that
two or more investors with a grievance against an issuer coordinate
future purchasing decisions, you should immediately reject any such
suggestion. As soon as possible thereafter, you should notify the
Legal Department, which will take whatever further steps are
necessary.
Benchmarking. Benchmarking is the process of measuring and comparing an
organization's processes, products and services to those of industry
leaders for the purpose of adopting innovative practices for improvement.
. Because benchmarking usually involves the direct exchange of
information with competitors, it is particularly subject to the
risk of violating the antitrust laws.
. The list of issues that may and should not be discussed in the
context of a trade association also applies in the benchmarking
process.
. All proposed benchmarking agreements must be reviewed by the T.
Rowe Price Legal Department before T. Rowe Price agrees to
participate in such a survey.
March, 2000
<PAGE>
Exhibit 16(d)
DRAFT
CODE OF ETHICS
1. Purposes
--------
This Code of Ethics (the "Code") has been adopted by the Directors of J.P.
Morgan Investment Management Inc. (the "Adviser"), in accordance with Rule 17j-
1(c) promulgated under the Investment Company Act of 1940, as amended (the
"Act"). Rule 17j-1 under the Act generally proscribes fraudulent or manipulative
practices with respect to purchases or sales of securities held or to be
acquired by investment companies, if effected by associated persons of such
companies. The purpose of this Code is to adopt provisions reasonably necessary
to prevent Access Persons from engaging in any unlawful conduct as set forth in
Rule 17j-1(b) as follows:
(b) It is unlawful for any affiliated person of or principal underwriter
for a Fund, or any affiliated person of an investment adviser of or principal
underwriter for a Fund, in connection with the purchase or sale, directly or
indirectly, by the person of a Security Held or to be Acquired by the Fund:
(i) To employ any device, scheme or artifice to defraud the Fund;
(ii) To make any untrue statement of a material fact to the Fund or omit
to state a material fact necessary in order to make the statements made to the
Fund, in light of the circumstances under which they are made, not misleading;
(iii) To engage in any act, practice, or course of business that operates
or would operate as a fraud or deceit on the Fund; or
(iv) To engage in any manipulative practice with respect to the Fund.
2. Definitions
-----------
(a) "Access Person" means any director, officer, general partner or
Advisory Person of the Adviser.
(b) "Administrator" means Morgan Guaranty Trust Company.
(c) "Advisory Person" means (i) any employee of the Adviser or the
Administrator (or any company in a control relationship to the Adviser) who, in
connection with his or her regular functions or duties, makes, participates in,
or obtains information regarding the purchase or sale of securities for a Fund,
or whose functions relate to the making of any recommendations with respect to
such purchases or sales; and (ii) any natural person in a control relationship
to the Adviser who obtains information concerning recommendations regarding the
purchase or sale of securities by a Fund.
(d) "Beneficial ownership" shall be interpreted in the same manner as it
would be under Exchange Act Rule 16a-1(a)(2)in determining whether a person is
subject to the provisions of Section 16 of the Securities Exchange Act of
<PAGE>
1934 and the rules and regulations thereunder.
(e) "Control" has the same meaning as in Section 2(a)(9) of the Act.
(f) "Covered Security" shall have the meaning set forth in Section
2(a)(36) of the Act, except that it shall not include shares of open-end funds,
direct obligations of the United States Government, bankers' acceptances, bank
certificates of deposit, commercial paper and high quality short-term debt
instruments, including repurchase agreements.
(g) "Fund" means an Investment Company registered under the Investment
Company Act of 1940.
(h) "Initial Public Offering" means an offering of Securities registered
under the Securities Act of 1933, the issuer of which, immediately before the
registration, was not subject to the reporting requirements of Sections 13 or
15(d) of the Securities Exchange Act.
(i) "Limited Offering" means an offering that is exempt from registration
under the Securities Act pursuant to Section 4(2) or Section 4(6) or pursuant to
Rule 504, Rule 505, or Rule 506 under the Securities Act.
(j) "Purchase or sale of a Covered Security" includes, among other things,
the writing of an option to purchase or sell a Covered Security.
(k) "Security Held or to be Acquired" by a Adviser means: (i) any Covered
Security which, within the most recent 15 days, is or has been held by a Fund or
other client of the Adviser or is being or has been considered by the Adviser
for purchase by a Fund or other client of the Adviser; and (ii) any option to
purchase or sell, and any security convertible into or exchangeable for, a
Covered Security.
3. Statement of Principles
-----------------------
It is understood that the following general fiduciary principles
govern the personal investment activities of Access Persons:
(a) the duty to at all times place the interests of shareholders and other
clients of the Adviser first;
(b) the requirement that all personal securities transactions be conducted
consistent with this Code of Ethics and in such a manner as to avoid any actual
or potential conflict of interest or any abuse of an individual's position of
trust and responsibility;
(c) the fundamental standard that Investment Personnel may not take
inappropriate advantage of their position; and
(d) all personal transactions must be oriented toward investment, not
short-term or speculative trading.
It is further understood that the procedures, reporting and recordkeeping
requirements set forth below are hereby adopted and certified by the Adviser as
reasonably necessary to prevent Access Persons from violating the provisions of
this Code of Ethics.
4. Procedures to be followed regarding Personal Investments by Access Persons
--------------------------------------------------------------------------
(a) Pre-clearance requirement. Each Access Person must obtain prior
written approval from his or her group head (or designee) and from the Adviser's
trading desk before transacting in any Covered Security. For details regarding
transactions in mutual funds, see Section 4(e).
(b) Brokerage transaction reporting requirement. Each Access Person
working in the United States must maintain all of his or her accounts and the
accounts of any person of which he or she is deemed to be a beneficial owner
<PAGE>
with a broker designated by the Adviser and must direct such broker to provide
broker trade confirmations to the Adviser's legal/compliance department, unless
an exception has been granted by the Adviser's legal/compliance department. Each
Access Person to whom an exception to the designated broker requirement has been
granted must instruct his or her broker to forward all trade confirms and
monthly statements to the Adviser's legal/compliance department. Access Persons
located outside the United States are required to provide details of each
brokerage transaction of which he or she is deemed to be the beneficial owner,
to the Adviser's legal/compliance group, within the customary period for the
confirmation of such trades in that market.
(c) Initial public offerings (new issues). Access Persons are prohibited
from participating in Initial Public Offerings, whether or not J.P. Morgan or
any of its affiliates is an underwriter of the new issue, while the issue is in
syndication.
(d) Minimum investment holding period. Each Access Person is subject to a
60-day minimum holding period for personal transactions in Covered Securities.
An exception to this minimum holding period requirement may be granted in the
case of hardship as determined by the legal/compliance department.
(e) Mutual funds. Each Access Person must pre-clear transactions in shares
of closed-end Funds with the Adviser's trading desk, as they would with any
other Covered Security. See Section 4(a). Each Access Person must obtain pre-
clearance from his or her group head(or designee) before buying or selling
shares in an open-end Fund or a sub-advised Fund managed by the Adviser if such
Access Person or the Access Person's department has had recent dealings or
responsibilities regarding such mutual fund.
(f) Limited offerings. An Access Person may participate in a limited
offering only with written approval of such Access Person's group head (or
designee) and with advance notification to the Adviser's compliance group.
(g) Blackout periods. Access Persons are subject to blackout periods 7
calendar days before and after the trade date of a Covered Security where such
Access Person initiated a trade order for the Covered Security for any of their
client Accounts.
(h) Prohibitions. Short sales are generally prohibited. Transactions in
options, rights, warrants, or other short-term securities and in futures
contracts (unless for bona fide hedging) are prohibited, except for purchases of
options on widely traded indices specified by the Adviser's compliance group if
made for investment purposes.
(i) Securities of J.P. Morgan. No Access Person may buy or sell any
security issued by J.P. Morgan from the 27th of each March, June, September, and
December until the first full business day after earnings are released in the
following month. All transactions in securities issued by J.P. Morgan must be
pre-cleared with the Adviser's compliance group and executed through an approved
trading area. Transactions in options and short sales of J.P. Morgan stock are
prohibited.
(j) Certification requirements. In addition to the reporting requirements
detailed in Sections 6 below, each Access Person, no later than 30 days after
becoming an Access Person, must certify to the Adviser's compliance group that
he or she has complied with the broker requirements in Section 4(b).
5. Other Potential Conflicts of Interest
-------------------------------------
(a) Gifts. No employee of the Adviser or the Administrator may (i)accept
gifts, entertainment, or favors from a client, potential client, supplier, or
potential supplier of goods or services to the Adviser or the Administrator
unless what is given is of nominal value and refusal to accept it would be
discourteous or otherwise harmful to the Adviser or Administrator; (ii)provide
excessive gifts or entertainment to clients or potential clients; and (iii)
offer bribes, kickbacks, or similar inducements.
<PAGE>
(b) Outside Business Activities. The prior consent of the Chairman of the
Board of J.P. Morgan, or his or her designee, is required for an officer of the
Adviser or Administrator to engage in any business-related activity outside of
the Adviser or Administrator, whether the activity is intermittent or
continuing, and whether or not compensation is received. For example, such
approval is required such an officer to become:
-An officer, director, or trustee of any corporation (other than a
nonprofit corporation or cooperative corporation owning the building in
which the officer resides);
-A member of a partnership (other than a limited partner in a
partnership established solely for investment purposes);
-An executor, trustee, guardian, or similar fiduciary advisor (other
than for a family member).
6. Reporting Requirements
-----------------------
(a) Every Access Person must report to the Adviser:
(i) Initial Holding Reports. No later than 10 days after the person
becomes an Access Person, the following information: (A) the title,
number of shares and principal amount of each Covered Security in
which the Access Person had any direct or indirect beneficial
ownership when the person became an Access Person; (B) the name of any
broker, dealer or bank with whom the Access Person maintained an
account in which any Covered Securities were held for the direct or
indirect benefit of the Access Person as of the date the person became
an Access Person; and (C) the date that the report is submitted by the
Access Person.
(ii) Quarterly Transaction Reports. No later than 10 days after the
end of a calendar quarter, with respect to any transaction during the
quarter in a Covered Security in which the Access Person had any
direct or indirect beneficial ownership: (A) the date of the
transaction, the title, the interest rate and maturity date (if
applicable), the number of shares and principal amount of each Covered
Security involved; (B) the nature of the transaction; (C) the price of
the Covered Security at which the transaction was effected; (D) the
name of the broker, dealer or bank with or through which the
transaction was effected; and (E) the date that the report is
submitted by the Access Person.
(iii) New Account Report. No later than 10 days after the calendar
quarter, with respect to any account established by the Access Person
in which any Covered Securities were held during the quarter for the
direct or indirect benefit of the Access Person: (A) the name of the
broker, dealer or bank with whom the Access Person established the
account; (B) the date the account was established; and (C) the date
that the report is submitted by the Access Person.
(iv) Annual Holding Report. Annually, the following information
(which information must be current as of a date no more than 30 days
before the report is submitted): (A) the title, number of shares and
principal amount of each Covered Security in which the Access Person
had any direct or indirect beneficial ownership; (B) the name of any
broker, dealer or bank with whom the Access Person maintains an
account in which any Covered Securities are held for the direct or
indirect benefit of the Access Person: and (C) the date that the
report is submitted by the Access Person.
(b) Exceptions from the Reporting Requirements.
(i) Notwithstanding the provisions of Section 6(a), no Access Person
shall be required to make:
A. a report with respect to transactions effected for any
account over which such person does not have any direct or
indirect influence or control;
<PAGE>
B. a Quarterly Transaction Report under Section 6(a)(ii) if the
report would duplicate information contained in broker trade
confirmations or account statements received by the Adviser
with respect to the Access Person no later than 10 days
after the calendar quarter end, if all of the information
required by Section 6(a)(ii) is contained in the broker
trade confirmations or account statements, or in the records
of the Adviser.
(c) Each Access Person shall promptly report any transaction which is, or
might appear to be, in violation of this Code. Such report shall
contain the information required in quarterly reports filed pursuant
to Section 6(a)(ii).
(d) All reports prepared pursuant to this Section 6 shall be filed with
the appropriate compliance personnel designated by the Adviser and
reviewed in accordance with procedures adopted by such personnel.
(e) The Adviser will identify all Access Persons who are required to file
reports pursuant to this Section 6 and will inform them of their
reporting obligation.
(f) The Adviser no less frequently than annually shall furnish to a Fund's
board of directors for their consideration a written report that:
(a) describes any issues under this Code of Ethics or related
procedures since the last report to the board of directors,
including, but limited to, information about material
violations of the Code or procedures and sanctions imposed
in response to the material violations; and
(b) certifies that the Adviser has adopted procedures reasonably
necessary to prevent Access Persons from violating this Code
of Ethics.
7. Recordkeeping Requirements
--------------------------
The Adviser must at its principal place of business maintain records in the
manner and extent set out in this Section of this Code and must make
available to the Securities and Exchange Commission (SEC) at any time and
from time to time for reasonable, periodic, special or other examination:
(a) A copy of its code of ethics that is in effect, or at any time
within the past five years was in effect, must be maintained in
an easily accessible place;
(b) A record of any violation of the code of ethics, and of any
action taken as a result of the violation, must be maintained in
an easily accessible place for at least five years after the end
of the fiscal year in which the violation occurs;
(c) A copy of each report made by an Access Person as required by
Section 6(a) including any information provided in lieu of a
quarterly transaction report, must be maintained for at least
five years after the end of the fiscal year in which the report
is made or the information is provided, the first two years in an
easily accessible place.
(d) A record of all persons, currently or within the past five years,
who are or were required to make reports as Access Persons or who
are or were responsible for reviewing these reports, must be
maintained in an easily accessible place.
(e) A copy of each report required by 6(f) above must be maintained
for at least five years after the end of the fiscal year in which
it is made, the first two years in an easily accessible place.
(f) A record of any decision and the reasons supporting the decision
to approve the acquisition by Access Persons of securities under
Section 4(f) above, for at least five years after the end
<PAGE>
of the fiscal year in which the approval is granted.
8. Sanctions
---------
Upon discovering a violation of this Code, the Directors of the Adviser may
impose such sanctions as they deem appropriate, including, inter alia, financial
----- ----
penalty, a letter of censure or suspension or termination of the employment of
the violator.
<PAGE>
Exhibit 16(e)
COMPLIANCE
TCW [LOGO]
EMPLOYEE POLICY
March 2000
- --------------------------------------------------------------------------------
I. INTRODUCTION
------------
The TCW Group, Inc. is the parent of several companies which act as investment
adviser or manager of investment companies, corporate pension funds, other
institutions and individuals. As used in this Code of Ethics, "TCW" refers to
The TCW Group, Inc., all of its subsidiaries and affiliated partnerships that
are investment advisers registered with the Securities and Exchange Commission,
and Trust Company of the West.
This Code of Ethics is based on the principle that the officers, directors and
employees of TCW owe a fiduciary duty to, among others, TCW's clients. In light
of this fiduciary duty, you should conduct yourself in all circumstances in
accordance with the following general principles:
. You must at all times place the interests of TCW's clients before your
own interests.
. You must conduct all of your personal investment transactions
consistent with this Code and in such a manner as to avoid any actual
or potential conflict of interest or any abuse of your position of
trust and responsibility.
. You should adhere to the fundamental standard that investment advisory
personnel should not take inappropriate advantage of their positions
to their personal benefit.
Although it is sometimes difficult to determine what behavior is necessary or
appropriate to adhere to these general principles, this Code contains several
guidelines for proper conduct. However, the effectiveness of TCW's policies
regarding ethics depends on the judgment and integrity of its employees rather
than on any set of written rules. Accordingly, you must be sensitive to the
general principles involved and to the purposes of the Code in addition to the
specific guidelines and examples set forth below. If you are uncertain as to
whether a real or apparent conflict exists in any particular situation between
your interests and those of TCW's clients, you should consult the Chief
Compliance Officer immediately.
II. PERSONAL INVESTMENT TRANSACTIONS POLICY
---------------------------------------
Laws and ethical standards impose on TCW and its employees duties to avoid
conflicts of interest between their personal investment transactions and
transactions TCW makes on behalf of its customers. In view of the sensitivity of
this issue, it is important to avoid even the appearance of impropriety. The
following personal investment transaction policies are designed to reduce the
possibilities for such conflicts and or inappropriate appearances, while at the
same time preserving reasonable flexibility and privacy in personal securities
transactions.
C1
<PAGE>
Except as otherwise noted, TCW's restrictions on personal investment
transactions apply to all Covered Persons. "Covered Persons" include all TCW
directors, officers and employees, except directors who (i) do not devote
substantially all working time to the activities of TCW, and (ii) do not have
access to information about the day-to-day investment activities of TCW. Every
employee should consider himself or herself a Covered Person unless otherwise
specifically exempted by the Approving Officers or unless he or she falls within
a class exempted by the Approving Officers. In addition, this policy governs
your investments in securities. "Securities" include any interest or instrument
commonly known as a security, including stocks, bonds, options, warrants,
financial commodities, other derivative products and interests in privately
placed offerings and limited partnerships.
General Principles Regarding Securities Transactions of Covered Persons and TCW
Directors
No Covered Person or TCW director may purchase or sell, directly or indirectly,
for his or her own account, or any account in which he or she may have a
beneficial interest:
. Any security (or related option or warrant) that to his or her
knowledge TCW is buying or selling for its clients, until such buying
or selling is completed or canceled.
. Any security (or related option or warrant) that to his or her
knowledge is under active consideration for purchase or sale by TCW
for its clients.
The term "beneficial interest" is defined by rules of the SEC. Generally, under
the SEC rules, a person is regarded as having a beneficial interest in
securities held in the name of:
. A husband, wife or a minor child;
. A relative sharing the same house;
. Anyone else if the Covered Person:
(i) obtains benefits substantially equivalent to ownership of the
securities;
(ii) can obtain ownership of the securities immediately or at some
future time; or
(iii) can vote or dispose of the securities.
C2
<PAGE>
If you act as a fiduciary with respect to funds and accounts managed outside of
TCW (for example, if you act as the executor of an estate for which you make
investment decisions), you will have a beneficial interest in the assets of that
fund or account. Accordingly, any securities transactions you make on behalf of
that fund or account will be subject to the general trading restrictions set
forth above. You should review the restrictions on your ability to act as a
fiduciary outside of TCW set forth under "Outside Activities -- Outside
Fiduciary Appointments".
Preclearance Procedures
Each Covered Person must obtain preclearance for any personal investment
transaction in a security if such Covered Person has, or as a result of the
transaction acquires, any direct or indirect beneficial ownership in the
security. Preclearance is not necessary for exempt securities or Outside
Fiduciary Accounts. "Exempt securities" are securities (or securities obtained
in transactions) described on page C6. "Outside Fiduciary Accounts" are certain
fiduciary accounts outside of TCW for which you have received TCW's approval to
act as fiduciary and which TCW has determined qualify to be treated as Outside
Fiduciary Accounts under this Personal Investment Transactions Policy. Separate
certification procedures will apply for securities transactions executed on
behalf of Outside Fiduciary Accounts in lieu of preclearance.
You must obtain preclearance for all non-exempt securities transactions by
completing and signing the Request for Personal Investment Transactions Approval
Form provided for that purpose by TCW and by obtaining the signature of Andrew
McManus, the TCW Personal Investment Transactions Administrator and, for foreign
offices, the additional signatories designated on the form. You will be required
to make certain certifications each time you trade a security, including that
you have no knowledge that would violate the general trading principles set
forth above. See Exhibit C-A for a sample copy of the Request for Personal
Investment Transactions Approval Forms for domestic and foreign preclearance are
attached. Since the form may change over time, you should ask Andrew McManus or
his designee for supplies of the current form. The form is also available on
Westnet, TCW's intranet site.
You must complete an approved securities transaction by the end of the business
day following the day that you obtain preclearance. If the transaction is not
completed within these time requirements, you must obtain a new preclearance,
including one for any uncompleted portion of the transaction. Post-approval is
not permitted under this Code of Ethics. If TCW determines that you completed a
- -------------
trade before approval or after the clearance expires, you will be considered to
be in violation of the Code.
C3
<PAGE>
Note that preclearance will ordinarily be given on the day you request it unless
(a) you are located in a U.S. office and are seeking to buy a foreign security
that must be precleared through a foreign office, or (b) you are located in a
foreign office and your request reaches the U.S. office at a time when Andrew
McManus is not on duty or cannot obtain all of the required U.S. clearances
because of the time of receipt. Preclearance for these requests will ordinarily
be given on the next business day.
Trading Restrictions
In addition to the more general restrictions discussed above, TCW has adopted
other restrictions on personal investment transactions. Except as otherwise
noted below, the trading restrictions do not apply to Outside Fiduciary
Accounts.
No Covered Person may:
. Enter into an uncovered short sale.
. Write an uncovered option.
. Acquire any non-exempt security in an initial public offering (IPO).
(Remember- under NASD rules, you may also be prohibited from
participating in any public offering that is a "hot issue.")
. Purchase or sell, directly or indirectly, for his or her own account
or for any account in which he or she may have a beneficial interest
(including through an Outside Fiduciary Account), any security that is
subject to a firm-wide restriction or a department restriction by his
or her department.
No Investment Personnel may:
. Purchase securities offered in a private placement (other than those
sponsored by TCW) except with the prior approval of the Approving
Officers. "Investment Personnel" include any portfolio manager or
securities analyst or securities trader who provide information or
advice to a portfolio manager or who help execute a portfolio
manager's decisions. "Approving Officers" are (i) one of Alvin Albe or
Marc Stern and (ii) one of Michael Cahill or Hilary Lord. In
---
considering approval, the Approving Officers will take into
consideration whether the investment opportunity you have been offered
should be reserved for TCW's clients and whether the opportunity is
being offered to you by virtue of your position with TCW. If you or
your department want to purchase on behalf of a TCW client the
security of an issuer or its affiliate where you have a beneficial
interest (including through an Outside Fiduciary Account) in the
securities of that issuer through
C4
<PAGE>
a private placement, you must first disclose your interest to an
Approving Officer. In such event, the Approving Officers will
independently review the proposed investment decision. Written records
of any such circumstance should be sent to Hilary Lord.
No portfolio manager who manages a registered investment company or any
associated securities analyst or securities trader may:
. Profit from the purchase or sale, or sale and purchase, of the same
(or equivalent) securities within 60 calendar days. Securities
analysts or securities traders who provide information and advice to
any portfolio manager who manages a registered investment company or
who help execute the portfolio manager's decisions are also subject to
this short-term trading restriction. Because of TCW's portfolio
management support structure, securities analysts and traders should
assume that they are subject to this trading restriction unless they
have received confirmation to the contrary from the Chief Compliance
Officer. Note that a person's status or duties may change which could
result in him or her subsequently being subject to this trading
restriction. If you have any questions resulting from such a change,
you should consult with the Chief Compliance Officer. You should also
note that this prohibition would effectively limit the utility of
options trading and short sales of securities and could make
legitimate hedging activities less available. Any profits realized on
such short term trades will have to be disgorged.
No portfolio manager may:
. Purchase or sell any security for his or her own account or any
Outside Fiduciary Account for a period of seven days before that
security is bought or sold on behalf of any TCW client for which the
portfolio manager serves as portfolio manager. Violation of this
prohibition will require reversal of the transaction and any resulting
profits will be subject to disgorgement.
. Purchase any security for his or her own account or any Outside
Fiduciary Account for a period of seven days after that security is
sold or sell any security for his or her own account or any Outside
Fiduciary Account for a period of seven days after that security is
bought on behalf of any TCW client for which the portfolio manager
serves as portfolio manager. In addition, any portfolio manager who
manages a registered investment company may not purchase or sell any
security for his or her own account or any Outside Fiduciary Account
for the period of seven days after that security is bought or sold on
behalf of registered investment company for which the portfolio
manager serves as investment manager. Violation of these prohibitions
will require reversal of the transaction and any resulting profits
will be subject to disgorgement.
C5
<PAGE>
Any profits subject to disgorgement will be given to a charity selected by TCW
or under TCW's direction.
Securities or Transactions Exempt From Personal Investment Transactions Policy
The following securities or transactions are exempt from some aspects of the
personal investment transactions policy:
(a) U.S. Government Securities.
(b) Bank Certificates of Deposit.
(c) Bankers' Acceptances.
(d) Commercial Paper or other high quality short-term debt instruments
(investment grade, maturity not greater than one year).
(e) Shares in open-end investment companies (mutual funds).
(f) Securities purchased on behalf of an Covered Person for an account
over which the Covered Person has no direct or indirect influence or
control.
(g) Securities purchased through an automatic dividend reinvestment plan.
(h) Security purchases effected upon the exercise of rights issued by the
issuer pro rata to all holders of a class of its securities, to the
extent such rights were acquired from such issuer, and sales of such
rights so acquired.
(i) Stock index futures and nonfinancial commodities (e.g., pork belly
contracts).
(j) Interests in TCW-sponsored limited partnerships or other TCW-sponsored
private placements.
(k) Securities acquired in connection with the exercise of an option. The
purchase or writing (sale) of an option is not an exempt transaction.
It is not necessary to preclear personal transactions for any exempt securities
or transactions. However, it still is necessary to report such securities (other
than securities exempt under clauses (a), (b), (c), (d), (e) or (f) above) in
the quarterly transaction reports or annual securities holdings list. Personal
investment transactions in exempt securities are still subject to TCW's policy
on inside information.
C6
<PAGE>
Reporting of Transactions
I. Covered Persons
Quarterly Reports. All Covered Persons must file with the Compliance Department
- -----------------
quarterly reports of personal investment transactions (Exhibit C-B) by the 10th
day of January, April, July and October or, if that day is not a business day,
then the first business day thereafter. In each quarterly report, the Covered
Person must report all personal investment transactions in which he or she has a
---
beneficial interest and which were transacted during the quarter other than
transactions in U.S. government securities, bank certificates of deposit,
bankers' acceptances, commercial paper, high quality short-term debt instruments
or shares of open-end mutual funds. Every Covered Person must file a quarterly
------------------------------------------
report when due even if such person made no purchases or sales of securities
- ----------------------------------------------------------------------------
during the period covered by the report. You are charged with the responsibility
- ---------------------------------------
for making the quarterly reports. Any effort by TCW to facilitate the reporting
process does not change or alter that responsibility.
The report must be on the form provided by TCW. Since the form may change over
time, you should ask Andrew McManus or his designee for supplies of the current
form.
Broker Statements and Trade Confirmations. All Covered Persons are required to
- -----------------------------------------
direct brokers of accounts in which they have a beneficial interest to supply to
TCW, on a timely basis, duplicate copies of trade confirmations and copies of
periodic broker account statements. This requirement does not apply to Outside
Fiduciary Accounts. To maximize the protection of your privacy, you should
direct your brokers to send this information to:
Trust Company of the West
P.O. Box 71940
Los Angeles, CA 90017
II. Officers of TCW Investment Management Company and All TCW Investment
Personnel
Officers of TCW Investment Management Company and all TCW Investment Personnel
are required to file the following reports in addition to those above.
Initial Holdings Reports. All TCW Investment Personnel and "Access Persons" of
- ------------------------
TCW Investment Management Company (the investment adviser to TCW managed mutual
funds), are required to submit an Initial Holdings Report listing all securities
---
in which the person has a beneficial interest other than U.S. government
securities, bank certificates of deposit, bankers' acceptances, commercial
paper, high quality short-term debt instruments or shares of mutual funds within
10 days of becoming either TCW Investment Personnel or an Access Person of TCW
- -------
Investment Management
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Company. An "Access Person" of TCW Investment Management Company is either a
Director, President, Executive Vice President, Managing Director or Senior Vice
President of the company.
Annual Holdings Reports. All TCW Investment Personnel and "Access Persons" of
- -----------------------
TCW Investment Management Company are required to file an Annual Holdings Report
which provides a listing of all securities in which the person a beneficial
---
interest as of December 31 of the preceding year, other than U.S. government
securities, bank certificates of deposit, bankers' acceptances, commercial
paper, high quality short-term debt securities or shares of mutual funds.
See the reference table below for a summary of reporting requirements.
REPORTING REQUIREMENTS REFERENCE TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
If you are a "Covered Person" Then you must file:
[all TCW directors, officers and (1) Personal Investment
employees]. Transactions Approval Form
prior to trading;
(2) Quarterly Reports;
(3) Broker Statements and Trade
Confirmations; and
(4) an Annual Compliance
Certification.
- --------------------------------------------------------------------------------
If you are considered TCW "Investment In addition to the requirements for
Personnel" [portfolio manager, securities "Covered Person", you must file:
analyst or a securities trader]. (1) an Initial Holdings Report;
and
(2) an Annual Holdings Report.
- --------------------------------------------------------------------------------
If you are an "Access Person" of TCW In addition to the requirements for
Investment Management Company "Covered Person", you must file:
[Director, President, Executive Vice (1) an Initial Holdings Report;
and
President, Managing Director or Senior (2) an Annual Holdings Report.
Vice President].
- --------------------------------------------------------------------------------
</TABLE>
If you have any questions about the Personal Investment Transactions Policy,
call Andrew McManus, Hilary Lord or Michael Cahill.
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III. POLICY STATEMENT ON INSIDER TRADING
-----------------------------------
The professionals and staff of TCW occasionally come into possession of
material, non-public information (often called "inside information "). Various
federal and state laws, regulations and court decisions, as well as general
ethical and moral standards, impose certain duties with respect to the use of
this inside information. The violation of these duties could subject both TCW
and the individuals involved to severe civil and criminal penalties and the
resulting damage to reputation. TCW views seriously any violation of this policy
statement. Violations constitute grounds for disciplinary sanctions, including
dismissal.
Within an organization or affiliated group of organizations, courts may
attribute one employee's knowledge of inside information to another employee or
group that later trades in the affected security, even if there had been no
actual communication of this knowledge. Thus, by buying or selling a particular
security in the normal course of business, TCW personnel other than those with
actual knowledge of inside information could inadvertently subject TCW to
liability. Alternatively, someone obtaining inside information in a legitimate
set of circumstances may inadvertently restrict the legitimate trading
activities of other persons within the company.
The risks in this area can be significantly reduced through the conscientious
use of a combination of trading restrictions and information barriers designed
to confine material non-public information to a given individual, group or
department (so-called "Chinese Walls "). One purpose of this Policy Statement is
to establish a workable procedure for applying these techniques in ways that
offer significant protection to TCW and its personnel, while providing
flexibility to carry on TCW's investment management activities on behalf of our
clients.
See the attached Reference Table if you have any questions on this Policy or who
to consult in certain situations.
TCW Policy on Insider Trading
Trading Prohibition - No officer, director or employee of TCW may buy or sell a
security (or a related option or warrant) in a company, either for themselves or
on behalf of others, while in possession of material, non-public information
about the company. This means that you may not buy or sell securities for
yourself or anyone, including your spouse, a relative, friend, or client any you
may not recommend that anyone else buy or sell a security of a company on the
basis of inside information regarding that company.
Communication Prohibition - No officer, director or employee of TCW may
communicate material, non-public information to others who have no official need
to know. This is known as "tipping",
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which is also a violation of the insider trading laws, even if the "tipper" did
not personally benefit. Therefore, you should not discuss such information
acquired on the job with your spouse or with friends, relatives, clients, or
anyone else outside of TCW except on a need-to-know basis relative to your
duties at TCW. If you convey material non-public information to another person,
even inadvertently, it is possible that the other person if he or she trades on
such information would violate insider trading laws. This is known as "tippee
liability". You should remember that you may obtain material, non-public
information about entities sponsored by TCW, like its mutual funds.
What is Material Information?
Information is "material" when a reasonable investor would consider it important
in making an investment decision. Generally, this is information whose
disclosure could reasonably be expected to have an effect on the price of a
company's securities. The general test is whether a reasonable investor would
consider it important in deciding whether or not to buy or sell a security in
the company. The information could be positive or negative.
Whether something is material must be evaluated relative to the company in whose
securities a trade is being considered -- a multi-million dollar contract may be
immaterial to Boeing but material to a smaller capitalization company. Some
examples of material information are: dividend changes, earnings results,
changes in previously released earnings estimates, significant merger, joint
venture or acquisition proposals or agreements, stock buy back proposals, tender
offers, rights offerings, new product releases or schedule changes, significant
accounting write-offs or charges, credit rating changes, changes in capital
structure (e.g. stock splits), accounting changes, major technological
discoveries or break throughs, major capital investment plans, major contract
awards or cancellations, governmental investigations, major litigation or
disposition of litigation, liquidity problems, and extraordinary management
developments or changes.
Material information may also relate to the market for a company's securities.
Information about a significant order to purchase or sell securities may, in
some contexts, be deemed material. Similarly, pre-publication information
regarding reports to be issued in the financial press may also be deemed
material. For example, the Supreme Court upheld the criminal convictions of
insider traders who capitalized on pre-publication information about the Wall
Street Journal's "Heard on the Street" column.
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Since there is no clear or "bright line" definition of what is material,
assessments sometimes require a fact specific inquiry. For this reason, if you
have questions about whether information is material, please direct them to the
Director of Research or your Department Head and, if further inquiry is desired
or required, the Chief Compliance Officer or the General Counsel.
What is Non-Public Information?
Information is "public" when it has been disseminated broadly to investors in
the marketplace. Tangible evidence of dissemination is the best indication that
the information is public. For example, information is public after it has
become available to the general public through a public filing with the SEC or
some other governmental agency, the Dow Jones "tape", release by Standard &
Poors or Reuters or publication in the Wall Street Journal or some other
publication of general circulation. Information remains non-public until a
reasonable time elapses after it is disseminated. While there is no specific
rule, generally trading 24 hours after the public dissemination of information
would not be prohibited (though the wait period may be shorter where a press
release is involved).
What are Some Examples of How TCW Personal Could Obtain Inside Information and
What You Should Do in These Cases?
In the context of TCW's business, the following are some examples of how a
person could come into possession of insider information:
(a) Board of Directors Seats
TCW officers, directors and employees are sometimes asked to sit on the Board of
Directors of public companies - sometimes in connection with their duties at TCW
and sometimes not. These public companies will generally have restrictions on
their Board members' trading in the companies' securities except during
specified "window periods" following the public dissemination of financial
information. As noted elsewhere in the Code of Ethics, service as a director of
a non-TCW company requires approval and, if approval is given, it will be
subject to the implementation of procedures to safeguard against potential
conflicts of interest or insider trading, such as Chinese Wall procedures or
placing the securities on a restricted list. Cases of fund managers sitting on
Boards of public companies have been highlighted in the press and have
underlined that the effect of inadequate safeguards could be to inadvertently
render securities "illiquid" in the hands of TCW. In order to mitigate against
this risk, anyone sitting on a board of public company should consider the
Chinese Wall Procedures below as applicable to them and should abide by them. If
the Board seat is held in connection with TCW clients and there is some
legitimate need to communicate the information, the Chief Compliance Officer or
General Counsel should be contacted to determine whether to redefine the scope
of the Chinese Wall or place the securities on restricted status.
(b) Deal-Specific Information
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Under certain circumstances, an employee may receive insider information for a
legitimate purpose in the context of a transaction in which a TCW entity or
account is a potential participant. This "deal-specific information" may be used
by the department to which it was given for the purpose for which it was given.
Generally, if a confidentiality agreement is to be signed, it should be assumed
that insider information is included. However, even in the absence of a
confidentiality agreement, insider information may be received. This type of
information may be given in connection with TCW's making a direct investment in
a company in the form of equity or debt; it may also involve a purchase by TCW
of a debt or equity security in a secondary transaction or in the form of a
participation. This type of situation typically arises in mezzanine financings,
loan participations, bank debt financings, venture capital financing, purchases
of distressed securities, oil and gas investments and purchases of substantial
blocks of stock from insiders. You should remember that even though the
investment for which the deal-specific information is being received may not be
a publicly traded security, the company may have other classes of publicly
traded securities that are publicly traded and the receipt of the information by
TCW can affect the ability of other parts of the organization to trade in those
securities. For the foregoing reasons, if you are to receive any deal-specific
information on a company with any class of publicly traded securities, please
contact the TCW product attorney for your area, who will then obtain the
necessary preclearance from the Chief Compliance Officer or the General Counsel.
(c) Creditors' Committees
On occasion an investment may go into default and TCW is a significant
participant. In that case, TCW may be asked to participate on a Creditors'
Committee. Creditors' Committees are often involved in intensive negotiations
involving restructuring, work-outs, recapitalizations and other significant
events that would affect the company and are given access to insider
information. TCW's sitting on such a committee could substantially affect its
ability to trade in securities in the company and, therefore, before sitting on
any Creditors' Committee, you must first get the approval of the Chief
Compliance Officer or the General Counsel.
(d) Information about TCW Products
Persons involved with the management of limited partnerships, trusts and mutual
funds (closed-end and open-end) which themselves issue securities could come
into possession of material information about those funds that is not generally
known to their investors or the public and that could be considered inside
information. For example, plans with respect to dividends could be considered
insider information and buying or selling securities in a TCW product with
knowledge that there will be an imminent change in dividends would be a
violation of the policy. Another example would be if there were to be a large
scale buying or selling program or a sudden shift in allocation that was not
generally known, this could be considered inside information. However, normal
portfolio decisions or securities trading in the ordinary course would not
normally be considered inside information.
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Persons involved with management of these funds and, in particular, portfolio
managers and investment personnel, but also support and administrative personnel
should be sensitive to the fact that they have access to such information.
Department Heads for each product area and the head of mutual funds for TCW are
responsible for notifying the Chief Compliance Officer of this type of inside
information so she can impose appropriate restrictions, and advise her when the
information becomes public or stale, so that the restriction can be removed.
(e) Contacts with Public Companies
For TCW, contacts with public companies represent an important part of our
research efforts. TCW makes investment decisions on the basis of the firm's
conclusions formed through such contacts and analysis of publicly available
information. Difficult legal issues arise, however, when, in the course of these
contacts, a TCW employee becomes aware of material, non public information. This
could happen, for example, if a company's Chief Financial Officer prematurely
discloses quarterly results to an analyst or an investor relations
representative makes a selective disclosure of adverse news to a handful of
investors. In such situations, TCW must make a judgment as to its further
conduct. If an issue arises in this area, a research analysts notes could become
subject to scrutiny and they have become increasingly the target of plaintiffs'
attorneys in securities class actions.
This area is one of particular concern to the investment business and,
unfortunately, it is one with a great deal of legal uncertainty. In a notable
1983 case, the U.S. Supreme Court recognized explicitly the important role of
analysts to ferret out and analyze information as necessary for the preservation
of a healthy market. It also recognized that questioning of corporate officers
and insiders is an important part of this information gathering process. The
Court thus framed narrowly the situations in which analysts receiving insider
information would be required to "disclose or abstain" from trading (generally
where the corporate insider was disclosing for an improper purpose, such as
personal benefit, and the analyst knows it). However, the Securities and
Exchange Commission has declared publicly its disfavor with the case and since
then has brought enforcement proceedings indicating that they will take strict
action against What they see as "selective disclosures" by corporate insiders to
securities analysts, even where the corporate insider was getting no personal
benefit and was trying to correct market misinformation. Thus, the status of
company-to-analyst contacts has been characterized as "a fencing match on a
tightrope" and a noted securities professor has said that the tightrope is now
electrified.
Because of this uncertainty, caution is the recommended course of action. If an
analyst receives what he or she believes is insider information and if you feel
you received it in violation of a corporate insider's fiduciary duty or for his
personal benefit, you should make reasonable efforts to achieve public
dissemination of the information and restrict trading until then. The Director
of Research or your Department Head should be contacted if you have questions or
doubts and they will contact the Chief Compliance Officer or General Counsel if
required.
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What is the Effect of Receiving Inside Information?
The person actually receiving the inside information is subject to the trading
and communication prohibitions discussed above. However, since TCW is a company,
questions arise as to how widely that information is to be attributed throughout
the company. Naturally, the wider the attribution, the greater the restriction
will be on other persons and departments within the company. Therefore, anyone
receiving insider information should be aware that the consequences can extend
well beyond themselves or even their departments.
In the event of receipt of insider information by an employee, the company will
generally adopt one of two postures: (1) place a "firm wide restriction" on
securities in the affected company which would bar any purchases or sales of the
securities by any department or person within TCW, whether for a client or
personal account (absent specific approval); or (2) establish a "Chinese Wall
around the individual or a select group or department. In these cases, those
persons falling within the Chinese Wall would be subject to the trading
prohibition and, except for need-to-how communications to others within the
Chinese Wall, the communication prohibition discussed above. The breadth of the
Chinese Wall and the persons included within it would have to be determined on a
case-by-case basis. In these circumstances, the Chinese Wall procedures are
designed to "isolate" the inside information and access to it by an individual
or select group in order to allow the remainder of the company not to be
affected by it. In any case where a Chinese Wall is imposed, the Chinese Wall
procedures discussed below must be strictly observed.
Does TCW Monitor Trading Activities?
The Compliance Department conducts reviews of securities trading in securities
identified to it as securities in which TCW may be deemed to possess insider
information. The Compliance Department surveys transactions effected by the
Company, its employees and its client accounts for the purpose of, among other
things, identifying transactions that may violate laws against insider trading
and, when necessary, investigating such trades.
Penalties and Enforcement by SEC and Private Litigants
The Director of Enforcement of the SEC has said that the SEC pursues all cases
of insider trading regardless of the size of transaction and regardless of the
persons involved. Updated and improved detection, tracking and surveillance
technique in the past few years have strengthened enforcement efforts by the SEC
as well as the stock exchanges. This surveillance is done routinely in many
cases or can be based on informants in specific cases.
Penalties for violations are severe for both the individual and possibly his or
her employer. These could include:
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. giving up all profits made (or losses avoided) trebled.
. fines of up to $1 million
. jail up to 10 years
. civil lawsuits by shareholders of the company in question.
The regulators, the market and TCW view violations seriously.
What You Should do if You do if You Have a Question About Inside Information?
Before executing any trade for yourself or others, including clients of TCW, you
must consider whether you have access to material, non-public information. If
you believe you have received oral or written material, non-public information,
you should discuss the situation immediately with the Chief Compliance Officer
or the General Counsel. You should not discuss the information with anyone else
within or outside TCW. The Chief Compliance Officer will, with the assistance of
counsel as required, determine whether the information is of a nature requiring
restrictions on use and dissemination and when any restrictions should be
lifted.
TCW's Chinese Wall Procedures
"Before I built a wall I 'd ask to know what was I walling in or walling out."
Robert Frost, Mending Wall ( 1914)
The Securities and Exchange Commission has long recognized that procedures
designed to isolate material non-public information to specific individuals or
groups can be a legitimate means of curtailing attribution of knowledge of this
inside information to an entire company. These types of procedures are typical
in multi-service broker- dealer investment banking firms and are known as
"Chinese Wall procedures". In those situations where TCW believes insider
information can be isolated, the following Chinese Wall procedures would apply.
These Chinese Wall procedures are designed to "quarantine" or "isolate" the
individuals or select group of persons within the Chinese Wall.
Identification of the Walled-In Individual or Group
The persons subject to the Chinese Wall procedures will be identified by name or
group designation. If the Chinese Wall procedures are applicable simply because
of someone serving on a Board of Directors of a public company in a personal
capacity, it is likely that the Chinese Wall will apply exclusively to that
individual, although in certain circumstances it may be appropriate to expand
the wall. Where the information is received as a result of being on a Creditors'
Committee, serving On a Board in a capacity related to TCW's investment
activities or receipt of deal-specific information, the walled in group will
generally refer to the product management group associated with the deal and, in
some cases, related groups or groups that are highly interactive with that
group. Determination of the breadth of the Chinese Wall is fact-specific and
must be made by the Chief
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Compliance Officer or the General Counsel. Therefore, as noted above, it is
important to advise them if you come into possession of material, non-public
information.
Isolation of Information
Fundamental to the concept of a Chinese Wall is that the inside formation be
effectively quarantined to the walled-in group. The two basic procedures that
must be followed to accomplish this are as follows:
(a) Restrictions on Communications
Communications regarding the inside information or the subject company should
only be held with persons within the walled-in group on a need-to-know basis or
with the General Counsel or Chief Compliance Officer. Communications should be
discreet and should not be held in the halls, in the lunchroom or on cellular
phones. In some cases it may be appropriate to use code names for the subject
company as a precautionary measure. If persons outside the group are aware of
your access to information and ask you about the target company, they should be
told simply that you are not at liberty to discuss it. On occasion, it may be
desirable to discuss the matter with someone at TCW outside the group. No such
communications should be held without first receiving the prior clearance of the
Chief Compliance Officer or the General Counsel. In such case, the person
outside the group and possibly his or her entire department, will thereupon be
designated as "inside the wall" and will be subject to all the Chinese Wall
restrictions in this memo.
(b) Restrictions on Access to Information
The files, computers and offices where confidential information is physically
stored should generally be made inaccessible to persons not within the walled-in
group. In certain circumstances, there is adequate and physical segregation of
the group whereby access would be very limited. However, in other cases where
there is less physical segregation between the group and others, additional
precautionary measures should be taken to make sure that any confidential
non-public information is kept in files securely and not generally accessible.
Trading Activities by Persons Within the Wall
Persons within the Chinese Wall are prohibited from buying or selling securities
in the subject company, whether on behalf of TCW, clients or in personal
transactions. This restriction would not apply in the following two cases: (1)
Where the affected persons have received deal-specific information, the persons
are permitted to use the information to consummate the deal for which it
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was given; and (2) In connection with a liquidation of a client account in full,
the security in the affected account may be liquidated if the client has
specifically instructed TCW to liquidate the account in its entirety and if no
confidential information has been shared with the client. In this circumstance,
TCW would attribute the purchase or sale as having been effected at the
direction of the client rather than pursuant to TCW's discretionary authority
and TCW would be acting merely in an executory capacity - again, assuming no
confidential information has been shared with the client. The liquidating
portfolio manager should confirm to the Compliance Department in connection with
such a liquidation that no confidential information has been shared with the
client.
Note that if the transaction permitted under paragraph (a) is a secondary trade
(versus a direct company issuance), counsel should be consulted to determine
disclosure obligations to the counterpart of the insider information in our
possession.
Termination of Chinese Wall Procedures
When the information has been publicly disseminated and a reasonable time has
elapsed, or if the information has become stale, the Chinese Wall procedures
with respect to the information can generally be eliminated. This is
particularly tree where the information was received in an isolated circumstance
such as an inadvertent disclosure to an analyst or receipt of deal-specific
information. However, persons who by reason of an ongoing relationship or
position with the company are more exposed to the receipt of such information on
a frequent basis (for example, being a member of the Board of Directors or on a
Creditors' Committee) would ordinarily be subject to the Chinese Wall procedures
on a continuing basis and may be permitted to trade only during certain "window
periods" when the company permits such "access" persons to trade.
It will be the responsibility of each Group Head to ensure that members of his
or her group are abiding by these Chinese Wall procedures in every instance.
REFERENCE TABLE
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
IF YOU HAVE A QUESTION ABOUT.... YOU SHOULD CONTACT
- --------------------------------------------------------------------------------
</TABLE>
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<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Whether information is "material" or First: The Director of Research or
"non-public" your Department Head. If further inquiry
is needed or desired, Chief Compliance
Officer or General Counsel
- --------------------------------------------------------------------------------
Taking a Board of Directors Seat General Counsel or Chief Compliance
(Pre-approval is required) Officer
- --------------------------------------------------------------------------------
Obtaining deal-specific information TCW attorney responsible for product or
(preclearance is required) Chief Compliance Officer or General
Counsel.
- --------------------------------------------------------------------------------
Sitting on a Creditors Committee Chief Compliance Officer or General
(Pre-approval is required) Counsel
- --------------------------------------------------------------------------------
Inside information on TCW commingled Department Head for product area or for
funds (e.g. partnerships, masts, mutual funds (who will notify Chief
mutual funds) Compliance Officer)
- --------------------------------------------------------------------------------
Contacts with a public company First: The Director of Research or your
Department Head. If further inquiry is
needed or desired, Chief Compliance
Officer or General Counsel
- --------------------------------------------------------------------------------
This Policy in general Chief Compliance Officer or General
Counsel
- --------------------------------------------------------------------------------
Setting up a Chinese Wall Chief Compliance Officer or General
Counsel
- --------------------------------------------------------------------------------
Who is "within" or "outside" a Chief Compliance Officer or General
Chinese Wall Counsel
- --------------------------------------------------------------------------------
Restricted Securities List Chief Compliance Officer or General
Counsel
- --------------------------------------------------------------------------------
Terminating a Chinese Wall Chief Compliance Officer or General
Counsel
- --------------------------------------------------------------------------------
</TABLE>
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Certain Operational Procedures in Connection With Enforcement of Insider
Information and Insider Trading Policies
The following are certain operational procedures that will be followed to ensure
communication of insider trading policies to TCW's employees and enforcement
thereof by the Company.
(a) Education and Training
New Employees - The policy is in the Employee Handbook as pan of the TCW Code of
Ethics. Each new employee receives the Handbook from Human Resources. Human
Resources will have each new employee certify that he or she: agrees to abide by
the Code of Ethics (including the policy on insider trading). Each new employee
is required to view a Compliance orientation tape which discusses, among other
things, the policy.
Existing Employees - There will be an annual Compliance session which at least
all officers are required to attend in person or by viewing a video. The policy
on insider information and trading will be discussed at that session. Each
employee will be required to annually certify that he has read and understands
the term of the Code of Ethics for TCW (including the policy on insider
trading).
(b) Maintenance of Restricted List
TCW will maintain a list of the securities for which TCW is generally limited
firm-wide from engaging in transactions - the Restricted List. This list is
maintained by the Personal Securities Administrator, who distributes it to the
following personnel in all TCW offices: all traders, portfolio managers,
analysts, investment control, securities clearance, as well as certain other
individuals. This list is issued whenever there is an addition, deletion or
modification, as well as periodically if there have been no changes. In some
cases, the list may note a partial restriction, e.g. restricted as to purchase,
restricted as to sale, or restricted as to a particular group or person. The
Personal Securities Administrator maintains an annotated copy of the list which
explains why each item is on it, and has a section giving the history of every
item that has been deleted. This Annotated List is distributed to the General
Counsel and the Chief Compliance Officer, as well as any additional persons
which either of them may approve. In addition, there is a Limited Annotated List
that only shows the securities on the list because of the Special Credits
Products and this list is distributed to the General Counsel at Oaktree.
The Restricted List is updated whenever there is a change, which the Personal
Securities Administrator has confirmed should be added with the General Counsel,
the Chief Compliance
Officer, or in certain cases the in-house attorney who handles the Special
Credits/Section 13D issues.
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The Chief Compliance Officer or General Counsel or someone one of them
designates must approve any exemption, which is then documented by the Personal
Securities Administrator.
(c) Maintenance of Watch List
TCW will maintain a Watch List of those companies for which it has material
non-public information and it has instituted a Chinese Wall. This list will be
restricted in distribution to the Chief Compliance Officer and her staff and the
General Counsel, and such other persons as the Chief Compliance Officer or
General Counsel approve. It will be used for the purpose of surveillance as
described below. The list contains information such as the contact person that
resulted in the security's being put on the list, the group(s) subject to the
Chinese Wall, when a security is put on the list or taken off when it should be
reviewed to see if it can be taken off (e.g. when confidentiality agreement
expires), why the security was added and deleted, and whether there is a
confidentiality agreement. See sample attached.
(d) Surveillance
The Compliance Department will periodically review trading in accounts in shares
of companies on the Watch List by TCW personnel, whether on behalf of clients or
in personal trading, and by TCW in its proprietary accounts. If the Chief
Compliance Officer determines that there has been any unusual trading that
warrants further investigation, she will coordinate a review. If any impropriety
is found, the Chief Compliance Officer will report it to the General Counsel and
the President of The TCW Group, Inc., and such other persons as she may deem
appropriate.
(e) Consent to Service on Boards of Directors and Creditors' Committees
In order to monitor situations where material, non-public information may become
available by reason of a board position, employees are required to obtain
consent for accepting positions on non-TCW boards of directors. See Code of
Ethics. Similarly, consent is required for employees to sit on Creditors'
Committees. See Policy Statement and Procedures on Insider Information and
Insider Trading. The General Counsel or Chief Compliance Officer will grant any
such approvals and it will be documented by the Personal Securities
Administrator.
IV GIFTS, PAYMENTS, AND PREFERENTIAL TREATMENT
-------------------------------------------
Gifts Received by Employees
No employee should solicit, receive, or participate in any arrangement leading
to a gift to himself or herself, relatives, or friends, or any business in which
any of them have a substantial interest, in
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consideration of past, present or prospective business conducted with TCW. As a
general rule, you should not accept gifts of more than de minimis value from
present or prospective clients, providers of goods or services or others with
which TCW has dealings. While there is no absolute definition of de minimis, you
should exercise good judgment to assure that no gift that is excessive in value
is accepted. You should immediately report any offer of an improper gift to
Hilary Lord.
The term "gift" includes, but is not limited to, substantial favors, money,
credit, special discounts on goods or services, free services, loans of goods or
money, excessive entertainment events, trips, hotel expenses, excessive
entertainment food or beverages, or anything else of value. Gifts to an
employee's immediate family are included in this policy. The receipt of cash
gifts by employees is absolutely prohibited.
If you believe that you cannot reject or return a gift without potentially
damaging friendly relations between a third party and TCW, you should report the
gift and its estimated dollar value in writing to Hilary Lord, who may require
that the gift be donated to charity.
Gifts and Entertainment Given by Employees
It is acceptable for you to give gifts or favors of nominal value to the extent
they are appropriate and suitable under the circumstances, meet the standards of
ethical business conduct, and involve no element of concealment. Entertainment
that is reasonable and appropriate for the circumstances is an accepted practice
to the extent that it is both necessary and incidental to the performance of
TCW's business.
Political Contributions
It is the policy of TCW to comply fully with federal and state election campaign
laws. You are responsible for monitoring your own political contributions to be
certain that they comply with all applicable laws.
Other Codes of Ethics
You should be aware that sometimes a client imposes more stringent codes of
ethics than those set forth above. If you are subject to a client's code of
ethics, you should abide by it.
V OUTSIDE ACTIVITIES
------------------
Outside Employment
Each employee is expected to devote his or her full time and ability to TCW's
interests during regular working hours and such additional time as may be
properly required. TCW discourages employees from holding outside employment,
including consulting. If you are considering taking outside
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employment, you must submit a written request to your Department Head. The
request must include the name of the business, type of business, type of work to
be performed, and the days and hours that the work will be performed. If your
Department Head approves your request, it will be submitted to Alvin Albe for
final approval.
An employee may not engage in outside employment that: (a) interferes, competes,
or conflicts with the interest of TCW; (b) encroaches on normal working time or
otherwise impairs performance; (c) implies TCW's sponsorship or support of an
outside organization; or (d) reflects directly or indirectly adversely on TCW.
Corporate policy prohibits outside employment in the securities brokerage
industry. Employees must abstain from negotiating, approving or voting on any
transaction between TCW and any outside organization with which they are
affiliated, whether as a representative of TCW or the outside organization
except in the ordinary course of their providing services for TCW and on a fully
disclosed basis.
If you have an approved second job, you are not eligible to receive compensation
during an absence from work which is the result of an injury on the second job
and outside employment will not be considered an excuse for poor job
performance, absenteeism, tardiness or refusal to work overtime. Should any of
these situations occur, approval may be withdrawn.
Any other outside activity or venture that is not covered by the foregoing, but
that may raise questions, should be cleared with Alvin Albe.
Service as Director
No officer, portfolio manager, investment analyst or securities trader may serve
as a director or in a similar capacity of any non-TCW company or institution,
whether or not it is part of your role at TCW, without prior approval of the
Approving Officers. You do not need approval to serve on the board of a private
family corporation for your family or any charitable, professional, civic or
nonprofit entities that are not clients of TCW and have no business relations
with TCW. If you receive approval, it will be subject to the implementation of
procedures to safeguard against potential conflicts of interest, such as Chinese
Wall procedures or placing securities of the company on a restricted list. TCW
may withdraw approval if senior management concludes that withdrawal is in TCW's
interest. Also, if you serve in a director capacity which does not require
approval but circumstances later change which would require such approval (e.g.
the company enters into business relations with TCW or becomes a client), you
must then get approval. See the attached sample of a Report on Outside
Directorships which you should use to seek any approval (Exhibit C-F).
Fiduciary Appointments
No employee may accept appointments as executor, trustee, guardian, conservator,
general partner or other fiduciary, or any appointment as a consultant in
connection with fiduciary or active money
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management matters, without the prior approval of the Approving Officers. This
policy does not apply to appointments involving personal estates or service on
the board of a charitable, civic, or nonprofit company where the Access Person
does not act as an investment adviser for the entity's assets. If TCW grants you
approval to act as a fiduciary for an account outside TCW, it may determine that
the account qualifies as an Outside Fiduciary Account. Securities traded by you
as a fiduciary will be subject to the TCW Personal Investment Transactions
Policy.
Compensation, Consulting Fees and Honorariums
If you have received proper approval to serve in an outside organization or to
engage in other outside employment, you may retain all compensation paid for
such service unless otherwise provided by the terms of the approval. You should
report the amount of this compensation to Alvin Albe. You may not retain
compensation received for services on boards of directors or as officers of
corporations where you serve in the course of your employment activities with
TCW. You may also retain honorariums received by you for publications, public
speaking appearances, instruction courses at educational institutions, and
similar activities. You should direct any questions concerning the permissible
retention of compensation to Alvin Albe.
Participation in Public Affairs
TCW encourages its employees to support community activities and political
processes. Normally, voluntary efforts take place outside of regular business
hours. If voluntary efforts require corporate time, you should obtain prior
approval from Alvin Albe. If you wish to accept an appointive office, or run for
elective office, you must first obtain approval from Alvin Albe. You must
campaign for an office on your own time and may not use TCW property or services
for such purposes without proper reimbursement to TCW.
In all cases, employees participating in political activities do so as
individuals and not as representatives of TCW. To prevent any interpretation of
sponsorship or endorsement by TCW, you should not use either the TCW name or its
address in material you mail or funds you collect, nor, except as necessary
biographical information, should TCW be identified in any advertisements or
literature.
Serving as Treasurer of Clubs, Churches, Lodges
An employee may act as treasurer of clubs, churches, lodges, or similar
organizations. However, you should keep funds belonging to such organizations in
separate accounts and not commingle them in any way with the your personal funds
or TCW's funds.
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VI. OTHER EMPLOYEE CONDUCT
----------------------
Personal Financial Responsibility
It is important that employees properly manage their personal finances,
particularly in matters of credit. Imprudent personal financial management may
affect job performance and lead to more serious consequences for employees in
positions of trust. In particular, you are not permitted to borrow from clients,
or from providers of goods or services with whom TCW deals, except those who
engage in lending in the usual course of their business and then only on terms
offered to others in similar circumstances, without special treatment. This
prohibition does not preclude borrowing from individuals related to you by blood
or marriage.
Taking Advantage of a Business Opportunity that Rightfully Belongs to TCW
Employees must not take for their own advantage an opportunity that rightfully
belongs to TCW. Whenever TCW has been actively soliciting a business
opportunity, or the opportunity has been offered to it, or TCW's funds,
facilities or personnel have been used in pursuing the opportunity, that
opportunity rightfully belongs to TCW and not to employees who may be in a
position to divert the opportunity for their own benefits.
Examples of improperly taking advantage of a corporate opportunity
include:
. Selling information to which an employee has access because of
his/her position.
. Acquiring any real or personal property interest or right when
TCW is known to be interested in the property in question.
. Receiving a commission or fee on a transaction which would
otherwise accrue to TCW.
. Diverting business or personnel from TCW.
Corporate Property or Services
Employees are not permitted to act as principal for either themselves or their
immediate families in the supply of goods, properties, or services to TCW,
unless approved by Alvin Albe. Purchase or acceptance of corporate property or
use of the services of other employees for personal purposes are also
prohibited. This would include the use of inside counsel for personal legal
advice absent approval from the General Counsel or use of outside counsel for
personal legal advice at TCW's expense.
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Use of TCW Stationery
It is inappropriate for employees to use official corporate stationery for
either personal correspondence or other non-job-related purposes.
Giving Advice to Clients
TCW cannot practice law or provide legal advice. You should avoid statements
that might be interpreted as legal advice. You should refer questions in this
area to Michael Cahill. You should also avoid giving clients advice on tax
matters, the preparation of tax returns, or investment decisions, except as may
be appropriate in the performance of an official fiduciary or advisory
responsibility, or as otherwise required in the ordinary course of your duties.
VII. CONFIDENTIALITY
---------------
All information relating to past, current and prospective clients is highly
confidential and is not to be discussed with anyone outside the organization
under any circumstance. One of the most sensitive and difficult areas in TCW's
daily business activities involves information regarding investment plans or
programs and possible or actual securities transactions by TCW.
Consequently, all employees will be required to sign and adhere to a
Confidentiality Agreement (Exhibit C-G).
VIII. EXEMPTIVE RELIEF
----------------
The Approving Officers, consisting of (i) one of Alvin Albe or Marc Stern and
---
(ii) one of Michael Cahill or Hilary Lord, will review and consider any proper
request of an Covered Person for relief or exemption from any remedy,
restriction, limitation or procedure contained in this Code of Ethics which is
claimed to cause a hardship for such Covered Person or which may involve an
unforeseen or involuntary situation where no abuse is involved. Exemptions of
any nature may be given on a specific basis or a class basis, as the Approving
Officers determine. The Approving Officers may also grant exemption from Covered
Person status to any person or class of persons it determines do not warrant
such status. Under appropriate circumstances, the Approving Officers may
authorize a personal transaction involving a security subject to actual or
prospective purchase or sale for TCW clients, where the personal transaction
would be very unlikely to affect a highly institutional market, where the TCW
officer or employee is not in possession of Inside Information, or for other
reasons sufficient to satisfy the Approving Officers that the transaction does
not represent a conflict of interest, involve the misuse of inside information
or convey the appearance of impropriety. The Approving Officers shall meet on an
ad hoc basis, as deemed necessary upon written request by an
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Access Person, stating the basis for his or her request for relief. The
Approving Officers' decision is solely within their complete discretion.
IX. SANCTIONS
---------
Upon discovering a violation of this Code, TCW may impose such sanctions as it
deems appropriate, including, but not limited to, a reprimand (orally or in
writing), a reversal of any improper transaction and disgorgement of the profits
from the transaction, demotion, and suspension or termination of employment.
X. ANNUAL COMPLIANCE CERTIFICATION
-------------------------------
TCW will require all Covered Persons and TCW directors to certify annually that
(i) they have read and understand the terms of this Code of Ethics and recognize
the responsibilities and obligations incurred by their being subject to this
Code, and (ii) they are in compliance with the requirements of this Code,
including but not limited to the personal investment transactions policies
contained in this Code (Exhibit C-E).
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CODE OF ETHICS
EMPLOYEE CERTIFICATION
I have read and understand the terms of the Code of Ethics of The TCW
Group, Inc. dated March 2000, as amended. I recognize the responsibilities and
obligations incurred by me as a result of my being subject to this Code of
Ethics. I hereby agree to abide by the Code of Ethics.
_________________________________ _________________________
(Signature) (Date)
_________________________________
(Print name)
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EXHIBITS
Request for Personal Investment Transactions Approval
Quarterly Report of Personal Investment Transactions
Initial Holdings Report
Annual Holdings Report
Annual Compliance Certification
Report on Outside Directorships and Officerships
Confidentiality Agreement
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Exhibit 16(f)
CRAMER ROSENTHAL MCGLYNN, LLC
("CRM")
Code of Ethics
and
Standards of Professional Conduct
reprinted from the
Association for Investment Management and Research
publication for
The Institute of Chartered Financial Analysts
All portfolio managers, analysts and other employees who make investment
recommendations are expected to comply with this Code of Ethics and these
Standards of Professional Conduct.
Revised November 1, 1999
Page 1 of 9
<PAGE>
CODE OF ETHICS
A financial analyst should conduct himself/1/ with integrity and dignity and act
in an ethical manner in his dealing with the public, clients, customers,
employers, employees, and fellow analysts.
A financial analyst should conduct himself and should encourage others to
practice financial analysis in a professional and ethical manner that will
reflect credit on himself and his profession.
A financial analyst should act with competence and should strive to maintain and
improve his competence and that of others in the profession.
A financial analyst should use proper care and exercise independent professional
judgment.
______________________
/1/ Masculine pronouns, used throughout the Code and Standards to simplify
sentence structure, shall apply to all persons, regardless of sex.
Page 2 of 9
<PAGE>
STANDARDS OF PROFESSIONAL CONDUCT
I. Obligation to Inform Employer of Code and Standards
The financial analyst shall inform his employer, through his direct
supervisor, that the analyst is obligated to comply with the Code of Ethics and
Standards of Professional Conduct, and is subject to disciplinary sanctions for
violations thereof. He shall deliver a copy of the Code and Standards to his
employer if the employer does not have a copy.
II. Compliance with Governing Laws and Regulations and the Code and Standards
A. Required Knowledge and Compliance
The financial analyst shall maintain knowledge of and shall comply
with all applicable laws, rules, and regulations of any government,
governmental agency, and regulatory organization governing his
professional, financial, or business activities, as well as with these
Standards of Professional Conduct and the accompanying Code of Ethics.
B. Prohibition Against Assisting Legal and Ethical Violations
The financial analyst shall not knowingly participate in, or assist,
any acts in violation of any applicable law, rule, or regulation of any
government, governmental agency, or regulatory organization governing his
professional, financial, or business activities, nor any act which would
violate any provision of these Standards of Professional Conduct or the
accompanying Code of Ethics.
C. Prohibition Against Use of Material Nonpublic Information
The financial analyst shall comply with all laws and regulations relating
to the use and communication of material nonpublic information. The
financial analyst's duty is generally defined as to not trade while in
possession of, nor communicate, material nonpublic information in breach of
a duty, or if the information is misappropriated.
Duties under the standard include the following: (1) If the analyst
acquires such information as a result of a special or confidential
relationship with the issuer or others, he shall not communicate the
information (other that within the relationship), or take investment
action on the basis of such information, if it violates that
relationship. (2) If the analyst is not in a special or confidential
relationship with the issuer or others, he shall not communicate or
act on material nonpublic information if he knows, or should have
known, that such information (a) was disclosed to him, or would
result, in a breach of a duty, or (b) was misappropriated.
If such a breach of duty exists, the analyst shall make reasonable efforts
to achieve public dissemination of such information.
Page 3 of 9
<PAGE>
D. Responsibilities of Supervisors
A financial analyst with supervisory responsibility shall exercise
reasonable supervision over those subordinate employees subject to his
control, to prevent any violation such persons of applicable statues,
regulations, or provisions of the Code of Ethics or Standards of
Professional Conduct. In so doing the analyst is entitled to rely upon
reasonable procedures established by his employer.
III. Research Reports, Investment Recommendations and Actions
A. Reasonable Basis and Representations
1. The financial analyst shall exercise diligence and thoroughness
in making an investment recommendations to others or in taking an
investment action for others.
2. The financial analyst shall have a reasonable and adequate basis
for such recommendations and actions, supported by appropriate
research and investigation.
3. The financial analyst shall make reasonable and diligent efforts
to avoid any material misrepresentation in any research report or
investment recommendation.
4. The financial analyst shall maintain appropriate records to
support the reasonableness of such recommendations and actions.
B. Research Reports
1. The financial analyst shall use reasonable judgment as to the
inclusion of relevant factors in research reports.
2. The financial analyst shall distinguish between facts and
opinions in research reports.
3. The financial analyst shall indicate the basic characteristics of
the investment involved when preparing for general public
distribution a research report that is not directly related to a
specific portfolio or client.
C. Portfolio Investment Recommendations and Actions
Page 4 of 9
<PAGE>
1. The financial analyst shall, when making an investment
recommendation or taking an investment action for a specific
portfolio or client, consider its appropriateness and suitability
for such portfolio or client. In considering such matters, the
financial analyst shall take into account (a) the needs and
circumstances of the client, (b) the basic characteristics of the
investment involved, and (c) the basic characteristics of the
total portfolio. The financial analyst shall use reasonable
judgment to determine the applicable relevant factors.
2. The financial analyst shall distinguish between facts and
opinions in the presentation of investment recommendations.
3. The financial analyst shall disclose to clients and prospective
clients the basic format and general principals of the investment
processes by which securities are selected and portfolios are
constructed and shall promptly disclose to clients any changes
that might significantly affect those processes.
D. Prohibition Against Plagiarism
The financial analyst shall not, when presenting material to his
employer, associates, customers, clients, or the general public, copy
or use in substantially the same form, material prepared by other
persons without acknowledging its use and identifying the name of the
author or publisher of such material. The analyst may, however, use
without acknowledgment factual information published by recognized
financial and statistical reporting services or similar sources.
E. Prohibition Against Misrepresentation of Services
The financial analyst shall not make any statements, orally or in
writing, which misrepresent (1) the services that the analyst or his
firm is capable of performing for the client, (2) the qualifications
of such analyst or his firm, and/or (3) the expected performance of
any investment.
The financial analyst shall not make, orally or in writing, explicitly
or implicitly, any assurances about or guarantees of any investment or
its return except communication of accurate information as to the
terms of the investment instrument and the issuer's obligations under
the instrument.
F. Performance Presentation Standards
Page 5 of 9
<PAGE>
1. The financial analyst shall not make any statements, orally or in
writing, which misrepresent the investment performance that the
analyst or his firm has accomplished or can reasonably be
expected to achieve.
2. If an analyst communicates directly or indirectly individual or
firm performance information to a client or prospective client,
or in a manner intended to be received by a client or prospective
client ("Performance Information"), the analyst shall make every
reasonable effort to ensure that such Performance Information is
a fair, accurate, and complete presentation of such performance.
3. The financial analyst shall inform his employer about the
existence and content of the Association for Investment
Management and Research's Performance Presentation Standards, and
this Standard III F, and shall encourage his employer to adopt
and use the Performance Presentation Standards.
4. If Performance Information complies with the Performance
Presentation Standards, the analyst shall be presumed to be in
compliance with III F 2 above.
5. An analyst presenting Performance Information may use the
following legend on the Performance Information presentation, but
only if the analyst has made every reasonable effort to ensure
that such presentation is in compliance with the Performance
Presentation Standards in all material respects:
"This report has been prepared and presented in compliance with
the Performance Presentation Standards of the Association for
Investment Management and Research."
G. Fair Dealing with Customers and Clients
The financial analyst shall act in a matter consistent with his
obligation to deal fairly with all customers and clients when (1)
disseminating investment recommendations, (2) disseminating
materials changes in prior investment advice, and (3) taking
investment action.
IV. Priority of Transactions
The financial analyst shall conduct himself in such a manner that
transactions for his customers, clients, and employer have priority over
transactions in securities or other investments
Page 6 of 9
<PAGE>
of which he is the beneficial owner, and so that transactions in securities or
other investments in which he has such beneficial ownership do not operate
adversely to their interests. If an analyst decides to make a recommendation
about the purchase or sale of a security or other investment, he shall give his
customers, clients, and employer adequate opportunity to act on this
recommendation before acting on his own behalf.
For purposes of these Standards of Professional Conduct, a financial
analyst is a "beneficial owner" if he directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or shares a
direct or indirect pecuniary interest in the securities or the investment.
V. Disclosure of Conflicts
The financial analyst, when making investment recommendations, or taking
investment actions, shall disclose to his customers and clients any material
conflict or interest relating to him and any material beneficial ownership of
the securities or other investments involved that could reasonably be expected
to impair his ability to render unbiased and objective advice.
The financial analyst shall disclose to his employer all matters that could
reasonably be expected to interfere with his duty to the employer, or with his
ability to render unbiased and objective advice.
The financial analyst shall also comply with all requirements as to
disclosure of conflicts of interest imposed by law and by rules and regulations
of organizations governing his activities and shall comply with any prohibitions
on his activities if a conflict of interest exists.
VI. Compensation
A. Disclosure of Additional Compensation Arrangements
The financial analyst shall inform his customers, clients, and
employer of compensation or other benefit arrangements in connection
with his services to them which are in addition to compensation from
them for such services.
B. Disclosure of Referral Fees
The financial analyst shall make appropriate disclosure to a
prospective client or customer of any consideration paid or other
benefit delivered to others for recommending his services to that
prospective client or customer.
C. Duty to Employer
The financial analyst shall not undertake independent practice which
could result in compensation or other benefit in competition with his
employer unless he has
Page 7 of 9
<PAGE>
received written consent from both his employer and the person for
whom he undertakes independent employment.
VII. Relationships with Others
A. Preservation of Confidentiality
A financial analyst shall preserve the confidentiality of
information communicated by the client concerning matters within the
scope of the confidential relationship, unless the financial analyst
receives information concerning illegal activities on the part of
the client.
B. Maintenance of Independence and Objectivity
The financial analyst, in relationships and contacts with an issuer
of securities, whether individually or as a member of a group, shall
use particular care and good judgment to achieve and maintain
independence and objectivity.
C. Fiduciary Duties
The financial analyst, in relationships with clients, shall use
particular care in determining applicable fiduciary duty and shall
comply with such duty as to those persons and interests to whom it
is owed.
VIII. Use of Professional Designation
The qualified financial analyst may use, as applicable, the professional
designation "Member of the Association for Investment Management and Research,"
"Member of the Financial Analysts Federation," and "Member of the Institute of
Chartered Financial Analysts," and is encouraged to do so, but only in a
dignified and judicious manner. The use of the designations may be accompanied
by an accurate explanation (1) of the requirements that have been met to obtain
the designation, and (2) of the Association for Investment Management and
Research, the Financial Analysts Federation, and the Institute of Chartered
Financial Analysts, as applicable.
The Chartered Financial Analyst may use the professional designation
"Chartered Financial Analyst," or the abbreviation "CFA," and is encouraged to
do so, but only in a dignified and judicious manner. The use of the designation
may be accompanied by an accurate explanation (1) of the requirements that have
been met to obtain the designation, and (2) of the Association for Investment
Management and Research and the Institute of Chartered Financial Analysts.
IX. Professional Misconduct
Page 8 of 9
<PAGE>
The financial analyst shall not (1) commit a criminal act that upon
conviction materially reflects adversely on his honesty, trustworthiness, or
fitness as a financial analyst in other respects, or (2) engage in conduct
involving dishonesty, fraud, deceit, or misrepresentation.
Page 9 of 9
<PAGE>
INVESTMENT ADVISER CODE OF ETHICS CONCERNING
PERSONAL SECURITIES TRANSACTIONS SUMMARY
Cramer Rosenthal McGlynn, LLC
Revised March 4, 1999
---------------------
The following summary is intended to assist you in understanding what is
prohibited and what is permissible, as more fully detailed in the Code.
1. Portfolio Managers, Assistant Portfolio Managers and employees with
ownership that exceeds 5% of the outstanding shares of the company being traded,
are prohibited from purchasing or selling any security that he/she knows has to
have been purchased, sold, or considered within the last 7 days. This rule is
subject to the client portfolios that he/she oversees as manager. You are also
prohibited from purchasing or selling any security which you know is being
considered for purchase or sale by any of our advised mutual funds or clients or
which you know has been considered for such action within the last 7 days.
Transactions in stocks for which the market capitalization of the company is
greater than $500 million are generally exempt from this prohibition and may
therefore be "bunched" or aggregated with orders of the funds or client
portfolios. Executed bunched transactions will be reviewed by the compliance
department to ensure all clients received best execution during the course of
that trading day. In the event a client received a poorer price than an employee
during the day, the best execution will be awarded to the client. However,
"bunching" would not be permitted if the aggregate order, including orders from
"proprietary" accounts would exceed 20% of the anticipated daily volume of the
company's stock. In addition, any "proprietary" account which uses a "directed"
broker may be required to wait until 2 p.m. in order to execute a trade
requested during that day. All employee trades that are not bunched with
clients' will not be executed until all open orders are completed for the
clients. Once completed, the employee's trade will be executed immediately,
providing the employee is in compliance with the 60-day rule. If a stock is not
executed during the day requested, you must resubmit your request on the
following day. Transactions in shares of unaffiliated mutual funds, government
securities and money market instruments are also generally exempt.
Notwithstanding these general exemptions, the SEC has full authority to review
all transactions to determine whether there has been any violation of federal
securities laws.
2. You are prohibited from revealing any information regarding an actual
or proposed securities trade by any of our clients except in the normal course
of your duties as CRM director, officer or employee.
3. A portfolio manager who intends to purchase a security in a mutual
fund must first disclose any interest he/she has in the security to the Chief
Investment Officer and to the officers of the mutual fund. Your interest can
take the form of (a) ownership of any securities issued by the same issuer, (b)
a contemplated trade by you of such securities, (c) any position you hold with
the issuer or its affiliates, or (d) any present or proposed business
relationship between the issuer or its affiliates and you or any entity in which
you have a significant interest. In general, this disclosure requirement does
not apply to stocks for which the market capitalization of the company is
greater than $500 million.
Page 1 of 15
<PAGE>
4. You are prohibited from purchasing any security in an IPO.
5. You are prohibited from purchasing any security in a private placement
without the prior approval of CRM's Investment Compliance Committee, and you
must disclose any authorized investment in a private placement if you play any
part in a subsequent consideration of an investment in securities of the issuer.
6. You are prohibited from engaging in short-term trading (within 60
days), and will be required to disgorge any profits realized on any short-term
trade. Exceptions to this prohibition must be approved in advance by two members
of CRM's Investment Compliance Committee.
7. You are prohibited from engaging in personal securities transactions
(public or private in nature) without the prior written approval of CRM's
Investment Compliance Committee.
8. This Code applies to all directors, officers and employees of CRM. It
also covers trading by your spouse, minor children and adult members of your
household and any account where you have a direct or indirect beneficial
interest, influence or control. A new employee has a 30-day waiver to the
bunching rule on any position purchased prior to the employee's official start
date at CRM. During this period, the employee is still subject to filling out
the normal trade approval form even with this exemption. Following this 30-day
period, any restrictions to trading due to the bunching rule would apply.
9. Certain transactions may be permitted under The Policy and Procedures
for Allocation and Aggregation of Trades of Securities, which was implemented on
June 1, 1996, and revised on January 1, 1998, and any successive policy and
procedures concerning the same ("Allocation Procedures"). Any transactions
implemented under the Allocation Procedures supersede this Code of Ethics.
Page 2 of 15
<PAGE>
INVESTMENT ADVISER CODE OF ETHICS
CONCERNING PERSONAL SECURITIES TRANSACTIONS
-------------------------------------------
This Code of Ethics applies with respect to
Cramer Rosenthal McGlynn, LLC's activities as
an investment adviser to separately managed accounts and to investment
companies.
1. Purposes
--------
Rule 17j-1 under the Investment Company Act of 1940, as amended (the "1940
Act") generally proscribes fraudulent or manipulative practices with respect to
purchases or sales of securities held or to be acquired by investment companies,
if effected by associated persons of such companies. Section 204A of the
Investment Advisers Act of 1940, as amended ("Advisers Act"), requires every
registered investment adviser to establish, maintain and enforce written
policies and procedures reasonably designed to prevent the misuse of material,
nonpublic information by such investment adviser or any person associated with
such investment adviser.
The purpose of this Code of Ethics is to provide regulations and procedures
consistent with the 1940 Act and Rule 17j-1, designed to give effect to the
general prohibitions set forth in Rule 17j-1(a), as follows:
(a) It shall be unlawful for any affiliated person of or principal
underwriter for a registered investment company, or any affiliated
person of an investment adviser of or principal underwriter for a
registered investment company, in connection with the purchase or
sale, directly or indirectly, by such person of a security held or to
be acquired, as defined in this section, by such registered investment
company --
(1) To employ any device, scheme or artifice to defraud such
registered investment company,
(2) To make to such registered investment company any untrue
statement of a material fact or omit to state to such registered
investment company a material fact necessary in order to make the
statements made, in light of the circumstances under which they
are made, not misleading,
Page 3 of 15
<PAGE>
(3) To engage in any act, or course of business which operates or
would operate as a fraud or deceit upon any such registered
investment company, or
(4) To engage in any manipulative practice with respect to such
registered investment company.
In addition, this Code of Ethics sets forth procedures to deter the misuse of
material nonpublic information, in Appendix I hereto.
The provisions of this Investment Adviser Code of Ethics Concerning
Personal Securities Transactions and the attached Policy Statement on Insider
Trading are in addition to and not a substitute for the Code of Ethics and The
Standards of Professional Conduct of the Institute of Chartered Financial
Analysts which shall apply to all portfolio managers, analysts and other
employees who make investment recommendations.
2. Definitions
-----------
(a) "Adviser" means Cramer Rosenthal McGlynn LLC.
(b) "Fund" means any registered investment company for which the Adviser
serves as investment adviser or sub-adviser.
(c) "Access person" means any director, officer or Advisory person of the
Adviser.
(d) "Advisory person" means (i) any employee of the Adviser or of any
company in a control relationship to the Adviser, who, in connection
with his or her regular functions or duties, makes, participates in,
or obtains information regarding the purchase or sale or a security by
the Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and (ii) any
natural person in control relationship to the Adviser who obtains
information concerning recommendations made to the Fund with regard to
the purchase or sale of a security.
(e) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated and, with respect to the person making the
recommendation, when such person seriously considers making such a
recommendation.
(f) "Beneficial ownership" shall be interpreted with reference to the
definition contained in the provisions of Section 16 of the Securities
Exchange Act of 1934, as amended ("Exchange Act") and the rules and
regulations thereunder, as such provisions may be interpreted by the
Securities and Exchange Commission ("SEC"), except that the
determination of direct or indirect beneficial ownership shall apply
to all securities which an access person has or acquires.
(g) "Control" shall have the meaning set forth in Section 2(a)(9) of the
1940 Act.
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<PAGE>
(h) "Proprietary Accounts" means certain general accounts and pension
accounts of the officers and employees of Advisers, either in their
name or on their behalf.
(i) "Public Accounts" means the Funds and any outside private accounts for
which Adviser serves as investment adviser and in which Adviser (and
persons associated with Adviser) has no ownership interest, direct or
indirect (other than as a shareholder of the Funds).
(j) "Purchase or sale of a security" includes, inter alia, the writing of
----------
an option to purchase or sell a security.
(k) "Security" shall have the meaning set forth in Section 2(a)(36) of the
1940 Act, except that it shall not include shares of registered open-
end investment companies not managed by the Adviser, securities issued
or guaranteed as to principal and interest by the Government of the
United States, short term debt securities which are "government
securities" within the meaning of Section 2(a)(16) of the 1940 Act,
bankers' acceptances, bank certificates of deposit, commercial paper
and such other money market instruments as designated by the Board of
Directors of the Adviser.
3. Prohibited Purchases and Sales
------------------------------
(a) No access person shall purchase or sell, directly or indirectly, any
security in which he or she has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership and which he or
she knows or should have known: at the time of such purchase or sale
(i) is being considered for purchase or sale by the Public Accounts,
within 7 days or
(ii) is being purchased or sold by the Public Accounts within 7 days.
Transactions in stocks for which the market capitalization of the
company is greater than $500 million are generally exempt from this
prohibition and may therefore be "bunched" or aggregated with orders
of the funds or client portfolios. However, "bunching" would not be
permitted if the aggregate order, including orders from "proprietary"
accounts would exceed 20% of the anticipated daily volume of the
company's stock. In addition, any "proprietary" account which uses a
"directed" broker may be required to wait until 2 p.m. in order to
execute a trade requested during that day. If a stock is not executed
during the day requested, you must resubmit your request on the
following day. Transactions in shares of unaffiliated mutual funds,
government securities and money market instruments are also generally
exempt. Notwithstanding these general exemptions, the SEC has full
authority to review all transactions to determine whether there has
been any violation of federal securities laws.
Page 5 of 15
<PAGE>
(b) No access person shall reveal to any other person (except in the
normal course of his or her duties on behalf of the Adviser) any
information regarding securities transactions by the Public Accounts
or consideration by the Public Accounts or the Adviser of any such
securities transaction.
(c) No access person shall recommend any securities transaction by the
Public Accounts without having disclosed his or her interest, if any,
in such securities or the issuer thereof, including without
limitation, (i) his or her direct or indirect beneficial ownership of
any securities of such issuer, (ii) any contemplated transaction by
such person in such securities, (iii) any position with such issuer or
its affiliates, and (iv) any present or proposed business relationship
between such issuer or its affiliates, on the one hand, and such
person or any party in which such person has a significant interest,
on the other; provided, however, that in the event the interest of
such access person in such securities or issuer is not material to his
or her personal net worth or any contemplated transaction by such
person in such securities cannot reasonably be expected to have a
material adverse effect on any such transaction by the Public Accounts
or on the market for the securities generally, such access person
shall not be required to disclose his or her interest in the
securities or issuer thereof in connection with any such
recommendation.
(d) No access person shall acquire any securities in an initial public
offering.
(e) No access person shall acquire any securities in a private placement
without the prior approval of the Adviser's Investment Compliance
Committee. Any authorized investment in a private placement must be
disclosed by such access person when he or she plays any part in a
Public Account's subsequent consideration of an investment in
securities of the issuer, and any decision by the Fund or a portfolio
manager on behalf of the Public Accounts to purchase securities of the
issuer will be subject to an independent review by personnel of the
Adviser with no personal interest in the issuer.
(f) No access person shall profit in the purchase and sale, or sale and
purchase, of the same (or equivalent) securities within 60 calendar
days without prior approval of the Investment Compliance Committee.
Any profits realized on any unauthorized short-term trade shall be
disgorged.
(g) No access person shall purchase or sell any security for his or her
own account without obtaining the prior written approval of the
transaction by the Investment Compliance Committee. This approval will
be acquired by filling out a trade pre-clearance form and giving it to
the compliance coordinator. He will then check the 60 and 7 day rules
for compliance purposes. After approval of Head Trader, a member of
the Compliance Committee will then review the trade. Then the trading
desk will execute the trade.
(h) The Investment Compliance Committee shall maintain a Restricted List
containing the names of all issuers that shall be deemed Restricted
for any reason. This list will be distributed to all employees and to
the Director of Trading on a regular basis. The securities so listed
may not be purchased and/or sold for any client or by any employee.
From time to time there may be certain
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<PAGE>
securities on the Restricted List for which the Adviser is deemed an
insider. In those cases, the firm will operate under the issuer's
Insider Trading Policy and rules. Further, all such transactions may
need to be pre-cleared in writing by the issuer's counsel to the
Adviser's Investment Compliance Committee. Once approved, all trades
for the Adviser's clients, if any, are executed prior to those of any
employee.
4. Exempted Transactions
---------------------
The prohibitions of Section 3 of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the access
person has no direct or indirect influence or control.
(b) Purchases which are part of an automatic dividend reinvestment plan.
(c) Purchases which are part of a systematic withdrawal from a bank
account (e.g., a monthly investment in a mutual fund.
(d) Purchase effected upon the exercise of rights issued by an issuer pro
rate to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired.
5. Reporting
---------
(a) Every access person must direct his or her broker to provide the
Investment Compliance Committee with duplicate copies of all trading
statements.
(b) Every access person shall report to the Investment Compliance
Committee, the information described in Section 5(c) of this Code with
respect to transactions in any security that does not require pre-
approval by CRM's Investment Compliance Committee in which such access
person has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership in the security; provided, however, that
an access person shall not be required to make a report with respect
to transactions effected for any account over which such person does
not have any direct or indirect influence.
(c) Every report (the Personal Securities Transaction Report) shall be
made not later than 10 calendar days after the trade date in which the
transaction to which the report relates was effected, and shall
contain the following information:
(i) The date of the transaction, the title and the number of shares
or the par value of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) The price at which the transaction was effected; and
Page 7 of 15
<PAGE>
(d) Any such report may contain a statement that the report shall not
be construed as an admission by the person making such report
that he or she has any direct or indirect beneficial ownership in
the security to which the report relates. A copy of the Adviser's
Securities Trading Compliance Policy is attached hereto as
Appendix II.
6. Sanctions
---------
Upon discovering a violation of this Code, the Investment Compliance
Committee of the Adviser may impose such sanctions as it deems appropriate,
including, inter alia, a letter of censure or suspension or termination of
the employment of the violator. All material violations of this Code and
any sanctions imposed with respect thereto shall be reported periodically
to the Board of Managers of the Company and Board of Trustees of any Fund
which the Company serves as Adviser.
7. Insider Trading
---------------
The Board of Directors of the Adviser has adopted a policy statement on
insider trading and conflicts of interest (the "Policy Statement"), a copy
of which is attached hereto as Appendix I. All access persons are required
by this Code to read and familiarize themselves with their responsibilities
under the Policy Statement. All access persons shall sign a copy of the
Policy Statement, and the Investment Compliance Committee, shall maintain a
copy of each executed Policy Statement. The adviser has implemented a
Securities Trading Compliance Policy attached hereto as Appendix II. All
employees are required to comply with the procedures outlined in this
policy.
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<PAGE>
POLICY STATEMENT ON INSIDER TRADING SUMMARY
The following summary is intended to assist you in understanding what is
prohibited and what is permissible, as more fully detailed in the Policy.
1. You are prohibited from trading securities while in possession of
material, non-public information. You may not trade, either
personally or on behalf of others, including clients, while in
possession of such insider information, and you may not
communicate such information to others.
2. The Policy applies to all directors, officers and employees of
CRM, and also covers trading by your spouse, minor children and
adult members of your household.
3. Information is "material" when there is a substantial likelihood
that a reasonable investor would consider it important in making
his investment decisions. Generally, this is information whose
disclosure will have a substantial effect on the price of a
company's securities, such as earnings results, dividend changes
or proposed mergers or acquisitions.
4. Information is "non-public" when it has not been disseminated
broadly to investors in the marketplace.
5. Before executing any trade for yourself or others, including
clients, you should determine whether you have access to
material, non-public information. If you think you do, you should
do the following:
* Report the information and proposed trade immediately to the
chief investment officer(s).
* Do not purchase or sell the securities on behalf of yourself or
others, including clients.
* Do not communicate the information to anyone other than the
chief compliance officer.
* After the Investment Compliance Committee has reviewed the
issue, CRM, will determine whether the information is material
and non-public and, if so, what action should be taken.
6. You should be particularly careful when you have contact with, or
obtain non-public information about, public companies.
7. You should also exercise particular caution any time you become
aware of non-public information regarding a tender offer.
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<PAGE>
APPENDIX I
Cramer Rosenthal McGlynn, LLC.
Policy Statement on Insider Trading
The following policies have been established to aid employees and other persons
associated with CRM in avoiding "insider trading". All employees and other
persons must follow these policies or risk serious sanction, including
dismissal, substantial personal liability and criminal penalties. If an employee
or other person has a question about these procedures, such person should
contact CRM's Investment Compliance Committee.
I. Description of Insider Trading
The term "insider trading" is not defined in the federal securities laws,
but generally is used to refer to the use of material non-public
information to trade in securities (whether or not someone is an "insider")
and to communications of material non-public information to others.
While the law concerning "insider trading" is not static, it is generally
understood that the law prohibits:
* trading by an insider while in possession of material non-public
information; or
* trading by an non-insider while in possession of material non-public
information, where the information was either disclosed to the non-
insider in violation of an insider's duty to keep it confidential or
was misappropriated; or
* communicating material non-public information to others.
The elements of "insider trading" and the penalties for such unlawful
conduct are discussed below:
A. Who is an Insider?
The concept of "insider" is broad. It includes all employees of a
company. In addition, a person can be a "temporary insider" if he/she
enters into a special confidential relationship in the conduct of a
company's affairs and as a result is given access to information
solely for the company's purposes. A temporary insider can include,
among others, a company's attorneys, accountant, consultants, bank
lending officers and the employees of such organizations. In addition,
an employee of CRM may become a temporary insider for a company it
advises or for which it performs other services. According to the
Supreme Court, the company
Page 10 of 15
<PAGE>
must expect an outsider to keep the disclosed non-public information
confidential and the relationship must at least imply such a duty
before the outsider will be considered an insider.
B. What is Material Information?
Trading on inside information is not a basis for liability unless the
information is material. "Material information" is generally defined
as information for which there is a substantial likelihood that a
reasonable investor would consider it important in making his/her
investment decisions or information that is reasonably certain to have
a substantial effect on the price of a company's securities.
Information that employees should consider material includes but it
not limited to: dividend changes, earnings estimates, changes in
previously released earnings estimates, significant merger or
acquisition proposals or agreements, major litigation, liquidation
problems and extraordinary management developments.
Material information does not have to relate to a company's business.
For example, in Carpenter v. U.S. 108 U.S. 316 (1987), the Supreme
Court considered as material certain information about the contents of
a forthcoming newspaper column that was expected to affect the market
price of a security. In that case, a reporter for The Wall Street
---------------
Journal was found criminally liable for disclosing to others the dates
-------
that reports on various companies would appear in The Wall Street
---------------
Journal and whether those reports would be favorable or not.
-------
C. What is Non-Public Information?
Information is non-public until it has been effectively communicated
to the marketplace. One must be able to point to some fact to show
that the information is generally public. For example, information
found in a report filed with the Securities and Exchange Commission,
or appearing in Dow Jones, Reuters Economic Services, The Wall Street
------------------------------------------
Journal or other publications of general circulation would be
-------
considered public.
D. Penalties
Penalties for trading on or communicating material non-public
information are severe, both for individuals involved in such unlawful
conduct and their employers. A person can be subject to some or all of
the penalties below even if he/she does not personally benefit from
the violation. Penalties include:
* civil injunctions;
* treble damages;
* disgorgement of profits;
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<PAGE>
* jail sentences;
* fines for the person who committed the violation of up to three
times the profit gained or loss avoided, whether or not the
person actually benefited; and
* fines for the employer or other controlling person of up to the
greater of $1,000,000 or three times the profit gained or loss
avoided.
In addition, any violations or this Policy Statement on Insider
Trading will be subject to the sanctions described in Section VI. of
the Code.
II. Identifying Inside Information
Before an employee enters into a transaction in the securities of a company
about which he/she may have potential inside information, the following
questions must be resolved:
A. Is the information material? Is this information that an investor
would consider important in making his/her investment decision? Is
this information that would substantially affect the market price of
the securities if generally disclosed?
B. Is the information non-public? To whom has this information been
provided? Has the information been effectively communicated to the
marketplace by being published in Reuters Economic Services, The Wall
-----------------------------------
Street Journal or other publications of general circulation?
--------------
If, after consideration of the above, the employee believes that the
information is material and non-public, or if he/she has any questions as
to whether the information is material and non-public, the employee must
take the following steps:
* report the matter immediately to the Investment Compliance Committee;
* refrain from purchasing or selling the securities in a personal
securities transaction or on behalf of others, including CRM's client
accounts;
* refrain form communicating the information inside or outside CRM,
other than to the Investment Compliance Committee; and
* after the Investment Compliance Committee has reviewed the issue, the
employee will be instructed to continue the prohibitions against
trading and communications, or will be allowed to trade on and
communicate the information.
III. Restricting Access to Material Non-Public Information
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<PAGE>
Information in the possession of any employee that may be considered
identified as material and non-public may not be communicated to anyone,
including persons within CRM, except as provided in Section II.B. above. In
addition, care should be taken so that such information is secure. For
example, files containing material non-public information should be sealed
and access to computer files containing material non-public information
should be restricted.
IV. Resolving Issues Concerning Insider Trading
If, after consideration of the items set forth in Section II.B. above,
doubt remains as to whether information is material or non-public, or if
there is any unresolved question as to the applicability or interpretation
of the foregoing procedures or as to the propriety of any action, it must
be discussed with the Chief Investment Officer(s) before trading on or
communicating the information to anyone.
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<PAGE>
APPENDIX II
SECURITIES TRADING COMPLIANCE POLICY
All employees/shareholders of Cramer Rosenthal McGlynn, LLC. ("CRM") shall
maintain accounts on CRM's system. All employees are encouraged to conduct all
securities trades through CRM's trading department for themselves and their
immediate family [one's spouse and dependents (including parents if the employee
provides a majority of support) and any trades in which the employee has a
direct or indirect beneficial interest (such as a beneficiary of a trust)]. All
trades (whether placed through our trading desk or done independently) shall be
approved in advance, in writing, by a member of CRM's Investment Compliance
Committee using the Company's Pre-Clearance form.. In addition, all employees
must have copies of monthly statements sent directly to CRM's Investment
Compliance Committee.
All employees shall complete and execute a quarterly certificate which states
that the employee has complied with all of the securities trading policies of
CRM including making the required disclosures. A form of such certificate is
also attached.
Stock purchases and sales in corporations in which any Cramer Rosenthal McGlynn,
LLC, Officer or family member is an Officer or Director, or owns greater than a
4.9% interest are specifically restricted and must be approved in advance by two
members of CRM's Investment Compliance Committee. A list of restricted as well
as a list showing the companies in which CRM holds a 4.9% or interest or greater
are circulated periodically.
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<PAGE>
SECURITIES TRADING COMPLIANCE CERTIFICATE
The undersigned employee has been provided with a copy of Cramer Rosenthal
McGlynn, LLC's Code of Ethics Concerning Personal Securities Transactions,
Policy Statement on Insider Trading and the Securities Trading Compliance Policy
and hereby acknowledges that for the quarter ended ________________, 199 , the
employee is in full compliance with such policy including but not limited to
having made all the required disclosures to the Investment Compliance Committee.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________
PRINT OR TYPE NAME
_______________________
SIGNATURE
______________________________
PRINT OR TYPE TITLE
______________________________
DATE
Page 15 of 15
<PAGE>
Exhibit 16(g)
MAS FUNDS
(THE "FUND")
AND
MILLER ANDERSON & SHERRERD, LLP
("MAS")
AND
MAS FUND DISTRIBUTION, INC.
("MASDI")
CODE OF ETHICS
--------------
1. Purposes
--------
This Code of Ethics has been adopted by the Fund, MAS and MASDI, the
principal underwriter of the Funds, in accordance with Rule 17j-1 under the
Investment Company Act of 1940, as amended (the "Act"). Rule 17j-1 under the Act
generally proscribes fraudulent or manipulative practices with respect to
purchases or sales of securities held or to be acquired by investment companies,
if effected by affiliated persons (as defined under the Act) of such companies.
Specifically, Rule 17j-1 provides that it is unlawful for any affiliated person
of or principal underwriter for a registered investment company, or any
affiliated person of an investment adviser of or principal underwriter for a
registered investment company, in connection with the purchase or sale, directly
or indirectly, by such person of a security held or to be acquired by such
registered investment company:
(a) To employ any device, scheme or artifice to defraud such registered
investment company;
(b) To make to such registered investment company any untrue statement of
a material fact or omit to state to such registered investment company
a material fact necessary in order to make the statements made, in
light of the circumstances under which they are made, not misleading;
(c) To engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any such registered
investment company; or
(d) To engage in any manipulative practice with respect to such registered
investment company.
While Rule 17j-1 is designed to protect only the interests of the Fund and
its stockholders, MAS applies the policies and procedures described in this Code
of Ethics to all employees of MAS to protect the interests of its non-Fund
clients as well (hereinafter, where appropriate, non-Fund clients of MAS are
referred to as "Advisory Clients" and any reference to an Advisory Client(s)
relates only to the activities of employees of MAS).
1
<PAGE>
The purpose of this Code of Ethics is to (i) ensure that Access Persons
conduct their personal securities transactions in a manner which does not (a)
create an actual or potential conflict of interest with the Fund's or an
Advisory Client's portfolio transactions, (b) place their personal interests
before the interests of the Fund and its stockholders or an Advisory Client or
(c) take unfair advantage of their relationship to the Fund or an Advisory
Client and (ii) provide policies and procedures consistent with the Act and Rule
17j-1 designed to give effect to the general prohibitions set forth in Rule
17j-l.
Among other things, the procedures set forth in this Code of Ethics require
that all (i) Access Persons review this Code of Ethics at least annually, (ii)
Access Persons, unless excepted by Sections 8(d) or (e) of this Code of Ethics,
report transactions in Covered Securities, (iii) Access Persons refrain from
engaging in certain transactions, and (iv) employees of MAS pre-clear with the
appropriate trading desk any transactions in Covered Securities.
2. Definitions
-----------
(a) "Access Person" means any director, officer or Advisory Person of the
Fund or of MAS, and any director or officer of MASDI, who, in the
ordinary course of business, makes, participates in or obtains
information regarding the purchase or sale of Covered Securities by
the Fund.
(b) "Advisory Person" means any employee of the Fund, or of MAS (or of any
company in a control relationship to the Fund or MAS), who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale
of Covered Securities by the Fund or an Advisory Client, or whose
functions relate to the making of any recommendations with respect to
such purchases or sales.
(c) "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions
of Section 16 of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder, except that the determination of
direct or indirect beneficial ownership shall apply to all securities
which an Access Person has or acquires.
(d) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the Act.
(e) "Compliance Department" means the MAS Compliance Department.
(f) "Covered Security" means a security as defined in Section 2(a)(36) of
the Act, except that it does not include: (i) shares of registered
open-end investment companies, (ii) direct obligations of the
Government of the United States, and (iii) bankers' acceptances, bank
certificates of deposit, commercial paper, and high quality short-term
debt instruments, including repurchase agreements.
(g) "Disinterested Director" means a director of the Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19)
of the Act.
2
<PAGE>
(h) "Purchase or sale (or sell)" with respect to a Covered Security means
any acquisition or disposition of a direct or indirect beneficial
interest in a Covered Security, including, inter alia, the writing or
buying of an option to purchase or sell a Covered Security.
(i) "Security held or to be acquired" means (i) any Covered Security
which, within the most recent 15 days, is or has been held by the Fund
or an Advisory Client, or is being or has been considered by the Fund
or an Advisory Client or MAS for purchase by the Fund or an Advisory
Client; and (ii) any option to purchase or sell, and any security
convertible into or exchangeable for, a Covered Security described in
this paragraph.
3. Prohibited Transactions
-----------------------
(a) No Access Person or employee of MAS shall purchase or sell any Covered
Security which to his or her actual knowledge at the time of such
purchase or sale:
(i) is being considered for purchase or sale by the Fund or an
Advisory Client; or
(ii) is being purchased or sold by the Fund or an Advisory Client.
(b) No employee of MAS shall purchase or sell a Covered Security while
there is a pending "buy" or "sell" order in the same or a related
security for a Fund or an Advisory Client until that order is executed
or withdrawn.
(c) No Advisory Person shall purchase or sell a Covered Security within
seven calendar days before or after any portfolio(s) of the Fund over
which such Advisory Person exercises investment discretion or an
Advisory Client over which the Advisory Person exercises investment
discretion purchases or sells the same or a related Covered Security.
Any profits realized or unrealized by the Advisory Person on a
prohibited purchase or sale within the proscribed period shall be
disgorged to a charity.
(d) No employee of MAS shall profit from the purchase and sale or sale and
purchase of the same (or equivalent) Covered Security within 60
calendar days. Any profits realized on such purchase or sale shall be
disgorged to a charity.
(e) No Access Person or employee of MAS shall purchase any securities in
an initial public offering.
(f) No employee of MAS shall purchase privately-placed securities unless
such purchase is pre-approved by the Compliance Department. Any such
person who has previously purchased privately-placed securities must
disclose such purchases to the Compliance Department before such
person participates in a Fund's or an Advisory Client's subsequent
consideration of an investment in
3
<PAGE>
the securities of the same or a related issuer. Upon such disclosure,
the Compliance Department shall appoint another person with no
personal interest in the issuer, to conduct an independent review of
such Fund's or such Advisory Client's decision to purchase securities
of the same or a related issuer.
(g) No Access Person or employee of MAS shall recommend the purchase or
sale of any Covered Securities to a Fund or to an Advisory Client
without having disclosed to the Compliance Department his or her
interest, if any, in such Covered Securities or the issuer thereof,
including without limitation (i) his or her direct or indirect
beneficial ownership of any securities of such issuer, (ii) any
contemplated purchase or sale by such person of such securities, (iii)
any position with such issuer or its affiliates, and (iv) any present
or proposed business relationship between such issuer or its
affiliates, on the one hand, and such person or any party in which
such person has a significant interest, on the other; provided,
however, that in the event the interest of such person in such
securities or the issuer thereof is not material to his or her
personal net worth and any contemplated purchase or sale by such
person in such securities cannot reasonably be expected to have a
material adverse effect on any such purchase or sale by a Fund or an
Advisory Client or on the market for the securities generally, such
person shall not be required to disclose his or her interest in the
securities or the issuer thereof in connection with any such
recommendation.
(h) No Access Person or employee of MAS shall reveal to any other person
(except in the normal course of his or her duties on behalf of a Fund
or an Advisory Client) any information regarding the purchase or sale
of any Covered Security by a Fund or an Advisory Client or
consideration of the purchase or sale by a Fund or an Advisory Client
of any such Covered Security.
4. Pre-Clearance of Covered Securities Transactions and Permitted Brokerage
------------------------------------------------------------------------
Accounts
--------
No employee of MAS shall purchase or sell Covered Securities without prior
written authorization from the appropriate trading desk. Pre-clearance of a
purchase or sale shall be valid and in effect only for the business day in which
such pre-clearance is given; provided, however, that the approval of an
unexecuted purchase or sale is deemed to be revoked when the employee becomes
aware of facts or circumstances that would have resulted in the denial of
approval of the approved purchase or sale were such facts or circumstances made
known to the MAS trading desk at the time the proposed purchase or sale was
originally presented for approval. MAS requires all of its employees to maintain
their personal brokerage accounts at a broker/dealer affiliated with Morgan
Stanley Dean Witter (hereinafter, a "Morgan Stanley Account"). Outside personal
brokerage accounts are permitted only under very limited circumstances and only
with express written approval by the Compliance Department. The Compliance
Department has implemented procedures reasonably designed to monitor purchases
and sales effected pursuant to the aforementioned pre-clearance procedures.
5. Exempted Transactions
---------------------
4
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(a) The prohibitions of Section 3 and Section 4 of this Code of Ethics
shall not apply to:
(i) Purchases or sales effected in any account over which an Access
Person or an employee of MAS has no direct or indirect influence
or control;
(ii) Purchases or sales which are non-volitional;
(iii) Purchases which are part of an automatic dividend reinvestment
plan; or
(iv) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities and
sales of such rights so acquired, but only to the extent such
rights were acquired from such issuer.
(b) Notwithstanding the prohibitions of Sections 3(a), (b) and (c) of this
Code of Ethics, the Compliance Department or MAS trading desk, as
appropriate, may approve a purchase or sale of a Covered Security by
employees of MAS which would appear to be in contravention of the
prohibitions in Sections 3(a), (b) and (c) if it is determined that
(i) the facts and circumstances applicable at the time of such
purchase or sale do not conflict with the interests of the Fund or an
Advisory Client, or (ii) such purchase or sale is only remotely
potentially harmful to the Fund or an Advisory Client because it would
be very unlikely to affect a highly institutional market, or because
it is clearly not related economically to the securities to be
purchased, sold or held by the Fund or Advisory Client, and (iii) the
spirit and intent of this Code of Ethics is met.
6. Restrictions on Receiving Gifts
-------------------------------
No employee of MAS shall receive any gift or other consideration in
merchandise, service or otherwise of more than de minimis value from any person,
firm, corporation, association or other entity that does business with or on
behalf of the Fund or an Advisory Client.
7. Service as a Director
---------------------
No employee of MAS shall serve on the board of directors of a
publicly-traded company without prior written authorization from the Compliance
Department. Approval will be based upon a determination that the board service
would not conflict with the interests of the Fund and its stockholders or an
Advisory Client.
5
<PAGE>
8. Reporting
---------
(a) Unless excepted by Section 8(d) or (e) of this Code of Ethics, each
Access Person must disclose all personal holdings in Covered
Securities to the Compliance Department for its review no later than
10 days after becoming an Access Person and annually thereafter. The
initial and annual holdings reports must contain the following
information:
(i) The title, number of shares and principal amount of each Covered
Security in which the Access Person has any direct or indirect
beneficial ownership;
(ii) The name of any broker, dealer or bank with or through whom the
Access Person maintained an account in which any securities were
held for the direct or indirect benefit of the Access Person;
and
(iii) The date the report was submitted to the Compliance Department
by the Access Person.
(b) Unless excepted by Section 8(d) or (e) of this Code of Ethics, each
Access Person and each employee of MAS must report to the Compliance
Department for its review within 10 days of the end of a calendar
quarter the information described below with respect to transactions
in Covered Securities in which such person has, or by reason of such
transactions acquires any direct or indirect beneficial interest:
(i) The date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of each Covered Security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) The price of the Covered Security at which the purchase or sale
was effected;
(iv) The name of the broker, dealer or bank with or through which the
purchase or sale was effected; and
(v) The date the report was submitted to the Compliance Department
by such person.
(c) Unless excepted by Section 8(d) or (e) of this Code of Ethics, each
Access Person and each employee of MAS must report to the Compliance
Department for its review within 10 days of the end of a calendar
quarter the information described below with respect to any account
established by such person in which any securities were held during
the quarter for the direct or indirect benefit of such person:
6
<PAGE>
(i) The name of the broker, dealer or bank with whom the account was
established;
(ii) The date the account was established; and
(iii) The date the report was submitted to the Compliance Department
by such person.
(d) An Access Person will not be required to make any reports described in
Sections 8(a), (b) or (c) above for any account over which the Access
Person has no direct or indirect influence or control. An Access
Person or an employee of MAS will not be required to make the annual
holdings report under Section 8(a) and the quarterly transactions
report under Section 8(b) with respect to purchases or sales effected
for, and Covered Securities held in: (i) a Morgan Stanley Account,
(ii) an account in which the Covered Securities were purchased
pursuant to a dividend reinvestment plan (up to an amount equal to the
cash value of a regularly declared dividend, but not in excess of this
amount), or (iii) an account for which the Compliance Department
receives duplicate trade confirmations and quarterly statements.
(e) A Disinterested Director of the Fund, who would be required to make a
report solely by reason of being a Fund director, is not required to
make initial and annual holdings reports. Additionally, such
Disinterested Director need only make a quarterly transactions report
for a purchase or sale of Covered Securities if he or she, at the time
of that transaction, knew or, in the ordinary course of fulfilling his
or her official duties as a Disinterested Director of the Fund, should
have known that, during the 15-day period immediately preceding or
following the date of the Covered Securities transaction by him or
her, such Covered Security is or was purchased or sold by the Fund or
was being considered for purchase or sale by the Fund.
(f) The reports described in Sections 8(a), (b) and (c) above may contain
a statement that the reports shall not be construed as an admission by
the person making such reports that he or she has any direct or
indirect beneficial ownership in the Covered Securities to which the
reports relate.
9. Annual Certifications
---------------------
All Access Persons and employees of MAS must certify annually that they
have read, understood and complied with the requirements of this Code of Ethics
and recognize that they are subject to this Code of Ethics by signing the
certification attached hereto as Exhibit A.
10. Board Review
------------
The management of the Fund and representatives or officers of MAS and, with
respect to the Fund, MASDI, shall each provide the Fund's Board of Directors, at
least annually, with the following:
7
<PAGE>
(a) a summary of existing procedures concerning personal investing and any
changes in the procedures made during the past year;
(b) a description of any issues arising under this Code of Ethics or
procedures since the last such report, including, but not limited to,
information about material violations of this Code of Ethics or
procedures and sanctions imposed in response to material violations;
(c) any recommended changes in the existing restrictions or procedures
based upon the Fund's or MAS's experience under this Code of Ethics,
evolving industry practices or developments in applicable laws and
regulations; and
(d) a certification (attached hereto as Exhibits B and C, as appropriate)
that each has adopted procedures reasonably necessary to prevent its
Access Persons from violating this Code of Ethics.
11. Sanctions
---------
Upon discovering a violation of this Code of Ethics, the Board of Directors
of the Fund or the Executive Committee of MAS, as the case may be, may impose
such sanctions as it deems appropriate.
12. Recordkeeping Requirements
--------------------------
The management of the Fund and representatives or officers of MAS and, with
respect to the Funds, MASDI, each shall maintain, as appropriate, the following
records for a period of five years, the first two years in an easily accessible
place, and shall make these records available to the Securities and Exchange
Commission or any representative of such during an examination of the Fund or of
MAS:
(a) a copy of this Code of Ethics or any other Code of Ethics which was in
effect at any time within the previous five years;
(b) a record of any violation of this Code of Ethics during the previous
five years, and of any action taken as a result of the violation;
(c) a copy of each report required by Section 8 of this Code of Ethics,
including any information provided in lieu of each such report;
(d) a record of all persons, currently or within the past five years, who
are or were subject to this Code of Ethics and who are or were
required to make reports under Section 8 of this Code of Ethics;
8
<PAGE>
(e) a record of all persons, currently or within the past five years, who
are or were responsible for reviewing the reports required under
Section 8 of this Code of Ethics; and
(f) a record of any decision, and the reasons supporting the decision, to
approve the acquisition of securities described in Sections 3(e) and
(f) of this Code of Ethics.
The effective date of this Code of Ethics is February 24, 2000.
-----------------
9
<PAGE>
EXHIBIT A
MAS FUNDS
(THE "FUND")
AND
MILLER ANDERSON & SHERRERD, LLP
("MAS")
AND
MAS FUND DISTRIBUTION, INC.
("MASDI")
CODE OF ETHICS
--------------
ANNUAL CERTIFICATION
--------------------
I hereby certify that I have read and understand the Code of Ethics (the
"Code") which has been adopted by the Fund, MAS and MASDI and recognize that it
applies to me and agree to comply in all respects with the policies and
procedures described therein. Furthermore, I hereby certify that I have complied
with the requirements of the Code in effect, as amended, for the year ended
December 31, ____, and that all of my reportable transactions in Covered
Securities were executed and reflected accurately in a Morgan Stanley Account
(as defined in the Code) or that I have attached a report that satisfies the
annual holdings disclosure requirement as described in Section 8(a) of the Code.
Date: , Name:
---------------------- --------- --------------------------------
Signature:
---------------------------
10
<PAGE>
EXHIBIT B
MILLER ANDERSON & SHERRERD, LLP ("MAS")
ANNUAL CERTIFICATION UNDER RULE 17j-1
OF THE INVESTMENT COMPANY ACT OF 1940
-------------------------------------
Pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended
(the "1940 Act") and pursuant to the Code of Ethics for MAS, MAS Funds and MAS
Fund Distribution, Inc., MAS hereby certifies to the Board of Trustees of MAS
Funds that MAS has adopted procedures reasonably necessary to prevent Access
Persons (as defined in the Code of Ethics) from violating the Code of Ethics.
Date:_________________ By:__________________________________
Name: Paul A. Frick
Title: Compliance Officer
11
<PAGE>
EXHIBIT C
MAS FUND DISTRIBUTION, INC.
("MASDI")
ANNUAL CERTIFICATION UNDER RULE 17j-1
OF THE INVESTMENT COMPANY ACT OF 1940
-------------------------------------
Pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended
(the "1940 Act") and pursuant to the Code of Ethics for MASDI, MAS Funds and
Miller Anderson & Sherrerd, LLP, MASDI hereby certifies to the Board of Trustees
of MAS Funds that MASDI has adopted procedures reasonably necessary to prevent
Access Persons (as defined in the Code of Ethics) from violating the Code of
Ethics.
Date:_________________ By:__________________________________
Name: Paul A. Frick
Title: Compliance Officer
12
<PAGE>
Exhibit 17(a)
POWER OF ATTORNEY
We, the undersigned, hereby severally constitute and appoint Richard M. Reilly,
Joseph W. MacDougall, Jr., George M. Boyd and Gregory D. Sheehan, and each of
them singly, our true and lawful attorneys, with full power to them and each of
them, to sign for us, and in our names and in any and all capacities, any and
all amendments, including post-effective amendments, to the Registration
Statement on Form N-1A of Allmerica Investment Trust and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys and each of
them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys or any of them may lawfully do or cause
to be done by virtue hereof. Witness our hands on the date set forth below.
Signature Title Date
- --------- ----- ----
_____________________ Chairman of the Board and Trustee ______________
John F. O'Brien
_____________________ President, Chief Executive Officer ______________
Richard M. Reilly and Trustee
_____________________ Treasurer (Principal Accounting Officer) ______________
Paul T. Kane
_____________________ Trustee ______________
P. Kevin Condron
_____________________ Trustee ______________
Cynthia A. Hargadon
_____________________ Trustee ______________
Gordon Holmes
_____________________ Trustee ______________
John P. Kavanaugh
_____________________ Trustee ______________
Bruce E. Langton
_____________________ Trustee ______________
Attiat F. Ott
/s/ Paul D. Paganucci Trustee March 29, 2000
- --------------------- --------------
Paul D. Paganucci
_____________________ Trustee --------------
Ranne P. Warner
