<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 2000
Securities Act Registration No. 33--66080
Investment Company Act Registration No. 811-7874
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-lA
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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POST-EFFECTIVE AMENDMENT NO. 12 / X /
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and
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT / X /
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OF 1940
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AMENDMENT NO. 14 / X /
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ONE GROUP(R)INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
1111 POLARIS PARKWAY, SUITE B2
COLUMBUS, OHIO 43271-0211
(Address of Principal Executive Offices)
1-800-480-4111
(Registrant's Telephone Number)
MARK S. REDMAN
1111 POLARIS PARKWAY, SUITE B2
COLUMBUS, OHIO 43271-0211
(Name and Address of Agent for Service)
Copies To:
Alan G. Priest, Esquire Jessica K. Ditullio, Esquire
Ropes & Gray Bank One Corporation
One Franklin Square 100 East Broad Street, 5th Floor
1301 K Street, N.W., Suite 800E Columbus, Ohio 43215
Washington, D.C. 20005
Approximate Date of Proposed Public Offering: Immediately upon effectiveness
It is proposed that this filing will become effective (check appropriate box)
___ Immediately upon filing pursuant to paragraph (b)
___ on DATE pursuant to paragraph (b)
_X_ 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)
___ on (DATE) 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.
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ONE GROUP(R) INVESTMENT TRUST
PROSPECTUS ONE GROUP INVESTMENT TRUST BOND PORTFOLIO
MAY 1, 2000 ONE GROUP INVESTMENT TRUST GOVERNMENT BOND PORTFOLIO
ONE GROUP INVESTMENT TRUST BALANCED PORTFOLIO
ONE GROUP INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO
ONE GROUP INVESTMENT TRUST EQUITY INDEX PORTFOLIO
ONE GROUP INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO
ONE GROUP INVESTMENT TRUST MID CAP GROWTH PORTFOLIO
ONE GROUP INVESTMENT TRUST DIVERSIFIED MID CAP PORTFOLIO
ONE GROUP INVESTMENT TRUST MID CAP VALUE PORTFOLIO
The Securities and Exchange
Commission has not approved
or disapproved the shares of any of the Portfolios
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells you
otherwise is committing
a crime.
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TABLE OF CONTENTS
PAGE
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FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE............................ 3
One Group Investment Trust Bond Portfolio................................ 3
One Group Investment Trust Government Bond Portfolio..................... 6
One Group Investment Trust Balanced Portfolio............................ 9
One Group Investment Trust Large Cap Growth Portfolio.................... 12
One Group Investment Trust Equity Index Portfolio........................ 15
One Group Investment Trust Diversified Equity Portfolio.................. 17
One Group Investment Trust Mid Cap Growth Portfolio...................... 20
One Group Investment Trust Diversified Mid Cap Portfolio................. 23
One Group Investment Trust Mid Cap Value Portfolio....................... 26
MORE ABOUT THE PORTFOLIOS................................................... 29
Types of Portfolios...................................................... 29
One Group Investment Trust............................................... 29
Principal Investment Strategies.......................................... 29
Investment Risks......................................................... 32
Investment Policies...................................................... 33
Temporary Defensive Positions............................................ 34
Portfolio Turnover....................................................... 35
SHAREHOLDER INFORMATION..................................................... 36
Pricing of Portfolio Shares.............................................. 36
Purchase of Portfolio Shares............................................. 36
Voting and Meetings...................................................... 36
Redemption of Portfolio Shares........................................... 36
Dividends................................................................ 37
Questions................................................................ 37
Tax Information.......................................................... 37
Qualified Plans.......................................................... 37
MANAGEMENT OF ONE GROUP INVESTMENT TRUST.................................... 38
The Advisor.............................................................. 38
The Portfolio Managers................................................... 38
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
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Fund Summary: Investments, Risk & Performance
ONE GROUP INVESTMENT TRUST BOND PORTFOLIO
WHAT IS THE GOAL OF THE BOND PORTFOLIO?
The Portfolio seeks to maximize total return by investing primarily in a
diversified portfolio of intermediate and long-term debt securities.
WHAT ARE THE BOND PORTFOLIO'S MAIN INVESTMENT STRATEGIES?
The Portfolio invests mainly in investment grade bonds and debt securities.
These include mortgage-backed and asset-backed securities. Banc One Investment
Advisors analyzes four major factors in managing and constructing the Portfolio:
duration, market sector, maturity concentrations, and individual securities.
Banc One Investment Advisors selects individual securities that it believes will
perform well over time. Banc One Investment Advisors is value oriented and
selects individual securities after performing a risk/reward analysis that
includes an evaluation of interest rate risk, credit risk, and structural risk.
For more information about the Bond Portfolio's investment strategies, please
read "More About the Portfolios" and "Principal Investment Strategies."
WHAT IS A "BOND"?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. Government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities, stripped government
securities, and zero coupon obligations.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE BOND PORTFOLIO?
The main risks of investing in the Bond Portfolio and the circumstances likely
to adversely affect your investment are described below. The share price of the
Bond Portfolio and its yield will change every day in response to interest rates
and other market conditions. You may lose money if you invest in the Bond
Portfolio. For additional information on risk, please read "Investment Risks."
Interest Rate Risk. The Portfolio mainly invests in bonds and other
debt securities. These securities will increase or decrease in value
based on changes in interest rates. If rates increase, the value of a
Portfolio's investments generally declines. On the other hand, if rates
fall, the value of the investments generally increases. Your investment
will decline in value if the value of the Portfolio's investments
decreases. Securities with greater interest rate sensitivity and longer
maturities tend to produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of fixed income
securities will not affect cash income generated, but may affect the
value of your investment.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the
Portfolio. Such default could result in losses to the Portfolio. In
addition, the credit quality of securities held by the Portfolio may be
lowered if an issuer's financial condition changes. Lower credit
quality may lead to greater volatility in the price of a security and
in shares of a Portfolio. Lower credit quality also may affect a
security's liquidity and make it difficult for the Portfolio to sell
the security.
Prepayment and Call Risk. As part of its main investment strategy, the
Portfolio invests in mortgage-backed and asset-backed securities. The
issuers of these securities and other callable securities may be able
to repay principal in advance, especially when interest rates fall.
Changes in pre-payment rates affect the
3
<PAGE> 5
return on investment and yield of mortgage and asset-backed securities.
When mortgage and other obligations are pre-paid and when securities
are called, the Portfolio may have to reinvest in securities with a
lower yield. The Portfolio also may fail to recover premiums paid for
the securities, resulting in an unexpected capital loss.
Derivative Risk. The Portfolio invests in securities that may be
considered to be DERIVATIVES. The value of derivative securities is
dependent upon the performance of underlying assets or securities. If
the underlying assets do not perform as expected, the value of the
derivative security and your investment in the Portfolio declines.
Derivatives generally are more volatile and are riskier in terms of
both liquidity and value than traditional investments.
Not FDIC insured. An investment in the Portfolio is not a deposit of
Bank One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
HOW HAS THE BOND PORTFOLIO PERFORMED?
By showing the variability of the Bond Portfolio's performance from year to
year, the chart and table below help show the risk of investing in the
Portfolio. The chart and table reflect that the Bond Portfolio inherited the
financial history of the Pegasus Variable Bond Fund. The returns in the bar
chart and table below DO NOT reflect insurance separate account charges. If
these charges were included, the returns would be lower than shown. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE BOND PORTFOLIO IS NOT NECESSARILY AN
INDICATION OF HOW THE PORTFOLIO WILL PERFORM IN THE FUTURE.
The Bar Chart shows changes in the Portfolio's performance from year to year.
Total returns assume reinvestment of dividends and distributions.
BAR CHART (per calendar year)
[BAR CHART]
8.66% -1.50%
1998 1999
Best Quarter: 4.78% 3Q1998 Worst Quarter: -0.97% 1Q1999
4
<PAGE> 6
The Average Annual Total Return Table shows how the Portfolio's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Portfolio's total returns and are not the same as actual
year-by-year results.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1999)
- ----------------------------------------- -------------------------------------- --------------------------------------
1 YEAR LIFE OF FUND
(SINCE 5/1/97)
<S> <C> <C>
One Group Investment Trust Bond -1.50% 5.67%
Portfolio
6.51%
Lehman Brothers Aggregate Bond Index(1) -0.83%
- ----------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
- -------------
(1) The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole. The performance of the index does
not reflect the deduction of expenses associated with a mutual fund, such as
investment management fees. By contrast, the performance of the Portfolio
reflects the deduction of these expenses.
5
<PAGE> 7
Fund Summary: Investments, Risk & Performance
ONE GROUP INVESTMENT TRUST GOVERNMENT BOND PORTFOLIO
WHAT IS THE GOAL OF THE GOVERNMENT BOND PORTFOLIO?
The Portfolio seeks a high level of current income with liquidity and safety of
principal.
WHAT ARE THE GOVERNMENT BOND PORTFOLIO'S MAIN INVESTMENT STRATEGIES?
The Portfolio limits its investments to securities issued by the U.S. government
and its agencies and instrumentalities (i.e., government bonds) or related to
securities issued by the U.S. government and its agencies and instrumentalities.
The Portfolio mainly invests in government bonds with intermediate to long
remaining maturities including mortgage-backed securities. Banc One Investment
Advisors is value oriented and looks for individual securities that it believes
will perform well over market cycles. The Government Bond Portfolio spreads its
holdings across various security types within the Government market sector. Banc
One Investment Advisors selects individual securities after performing a
risk/reward analysis that includes an evaluation of interest rate risk, credit
risk, and structural risk. For more information about the Government Bond
Portfolio's investment strategies, please read "More About the Portfolios" and
"Principal Investment Strategies."
WHAT IS A "GOVERNMENT BOND"?
A "government bond" is a debt instrument with principal and interest guaranteed
by the U.S. Government or its agencies and instrumentalities, as well as
stripped government securities and mortgage-related and mortgage-backed
securities.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE GOVERNMENT BOND PORTFOLIO?
The main risks of investing in the Government Bond Portfolio and the
circumstances likely to adversely affect your investment are described below.
The share price of the Government Bond Portfolio and its yield will change every
day in response to interest rates and other market conditions. You may lose
money if you invest in the Government Bond Portfolio. For additional information
on risk, please read "Investment Risks."
Interest Rate Risk. The Portfolio mainly invests in bonds and other
debt securities. These securities will increase or decrease in value
based on changes in interest rates. If rates increase, the value of a
Portfolio's investments generally declines. On the other hand, if rates
fall, the value of the investments generally increases. Your investment
will decline in value if the value of the Portfolio's investments
decreases. Securities with greater interest rate sensitivity and longer
maturities tend to produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of fixed income
securities will not affect cash income generated, but may affect the
value of your investment.
Prepayment and Call Risk. As part of its main investment strategy, the
Portfolio invests in mortgage-backed and asset-backed securities. The
issuers of these securities and other callable securities may be able
to repay principal in advance, especially when interest rates fall.
Changes in pre-payment rates affect the return on investment and yield
of mortgage and asset-backed securities. When mortgage and other
obligations are pre-paid and when securities are called, the Portfolio
may have to reinvest in securities with a lower yield. The Portfolio
also may fail to recover premiums paid for the securities, resulting in
an unexpected capital loss.
6
<PAGE> 8
Derivative Risk. The Portfolio invests in securities that may be
considered to be DERIVATIVES. The value of derivative securities is
dependent upon the performance of underlying assets or securities. If
the underlying assets do not perform as expected, the value of the
derivative security and your investment in the Portfolio declines.
Derivatives generally are more volatile and are riskier in terms of
both liquidity and value than traditional investments.
Not FDIC insured. An investment in the Portfolio is not a deposit of
Bank One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
HOW HAS THE GOVERNMENT BOND PORTFOLIO PERFORMED?
By showing the variability of the Government Bond Portfolio's performance from
year to year, the chart and table below help show the risk of investing in the
Portfolio. The returns in the bar chart and table below DO NOT reflect insurance
separate account charges. If these charges were included, the returns would be
lower than shown. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE GOVERNMENT
BOND PORTFOLIO IS NOT NECESSARILY AN INDICATION OF HOW THE PORTFOLIO WILL
PERFORM IN THE FUTURE.
The Bar Chart shows changes in the Portfolio's performance from year to year.
Total returns assume reinvestment of dividends and distributions.
BAR CHART (per calendar year)
[BAR CHART]
16.69% 2.69% 9.67% 7.32% -1.31%
1995 1996 1997 1998 1999
Best Quarter: 5.00% 2Q1995 Worst Quarter: -2.05% 1Q1996
7
<PAGE> 9
The Average Annual Total Return Table shows how the Portfolio's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Portfolio's total returns and are not the same as actual
year-by-year results.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1999)
- -----------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE OF FUND
(SINCE 8/1/94)
<S> <C> <C> <C>
One Group Investment Trust Government -1.31% 6.84% 6.12%
Bond Portfolio
Salomon Brothers 3-7 Year Treasury -2.25% 7.43% 6.85%
Index(1)
Lehman Brothers Government Bond Index(2) -0.43% 7.27% 6.46%
- ----------------------------------------- ------------------- ------------------ --------------------------------------
</TABLE>
(1) The Salomon Brothers 3 to 7 Year Treasury Index is an unmanaged index
comprised of U.S. Government agency and Treasury securities and agency
mortgage-backed securities. The performance of the index does not reflect
the deduction of expenses associated with a mutual fund, such as
investment management fees. By contrast, the performance of the Portfolio
reflects the deduction of these expenses.
(2) The Lehman Brothers Government Bond Index is an unmanaged market weighted
index that encompasses U.S. Treasury and agency securities with maturities
between 5 and 10 years. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management fees. By contrast, the performance of the Portfolio reflects
the deduction of these expenses. The benchmark index for the Government
Bond Portfolio has been changed from the Salomon Brothers 3-7 Year
Treasury Index to the Lehman Brothers Government Bond Index in order to
better represent the investment policies of the Portfolio for comparison
purposes.
8
<PAGE> 10
Fund Summary: Investments, Risk & Performance
ONE GROUP INVESTMENT TRUST BALANCED PORTFOLIO
WHAT IS THE GOAL OF THE BALANCED PORTFOLIO?
The Portfolio seeks to provide total return while preserving capital.
WHAT ARE THE BALANCED PORTFOLIO'S MAIN INVESTMENT STRATEGIES?
The Portfolio invests in a combination of stocks (including both growth and
value securities), fixed income securities and money market instruments. Banc
One Investment Advisors will regularly review the Portfolio's asset allocations
and vary them over time to favor investments that it believes will provide the
most favorable total return. In making asset allocation decisions, Banc One
Investment Advisors will evaluate projections of risk, market and economic
conditions, volatility, yields and expected returns. Because the Portfolio seeks
total return over the long term, Banc One Investment Advisors will not attempt
to time the market. Rather, asset allocation shifts will be made gradually over
time. For more information about the Balanced Portfolio's investment strategies,
please read "More About the Portfolios" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE BALANCED PORTFOLIO?
The main risks of investing in the Balanced Portfolio and the circumstances
likely to adversely affect your investment are described below. The share price
of the Balanced Portfolio and its yield will change every day in response to
interest rates and other market conditions. You may lose money if you invest in
the Balanced Portfolio. For additional information on risk, please read
"Investment Risks."
Market Risk. The Portfolio invests in equity securities (such as
stocks) which are more volatile and carry more risks than some other
forms of investment. The price of equity securities may rise or fall
because of economic or political changes or changes in a company's
financial condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general may decline over
short or extended periods of time. When the value of the Portfolio's
securities goes down, your investment in the Portfolio decreases in
value.
Interest Rate Risk. In connection with the Portfolio's fixed income
strategy, the Portfolio invests in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Portfolio's
investments generally declines. On the other hand, if rates fall, the
value of the investments generally increases. Your investment will
decline in value if the value of the Portfolio's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the
Portfolio. Such default could result in losses to the Portfolio. In
addition, the credit quality of securities held by the Portfolio may be
lowered if an issuer's financial condition changes. Lower credit
quality may lead to greater volatility in the price of a security and
in shares of a Portfolio. Lower credit quality also may affect a
security's liquidity and make it difficult for the Portfolio to sell
the security.
Derivative Risk. The Portfolio invests in securities that may be
considered to be DERIVATIVES. The value of derivative securities is
dependent upon the performance of underlying assets or securities. If
the underlying assets do not perform as expected, the value of the
derivative security and your investment in the Portfolio declines.
Derivatives may be more volatile and are riskier in terms of both
liquidity and value than traditional investments.
9
<PAGE> 11
Prepayment and Call Risk. As part of its fixed income strategy, the
Portfolio invests in mortgage-backed and asset-backed securities. The
issuers of mortgage-backed and asset-backed securities held by the
Portfolio may be able to repay principal in advance, especially when
interest rates fall. Changes in pre-payment rates can affect the return
on investment and yield of mortgage and asset-backed securities. When
mortgage and other obligations are pre-paid and when securities are
called, the Portfolio may have to reinvest in securities with a lower
yield. The Portfolio may also fail to recover premiums paid for the
securities, resulting in an unexpected capital loss.
Not FDIC insured. An investment in the Portfolio is not a deposit of
Bank One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
HOW HAS THE BALANCED PORTFOLIO PERFORMED?
By showing the variability of the Balanced Portfolio's performance from year to
year, the chart and table below help show the risk of investing in the
Portfolio. The returns in the bar chart and table below DO NOT reflect insurance
separate account charges. If these charges were included, the returns would be
lower than shown. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE BALANCED
PORTFOLIO IS NOT NECESSARILY AN INDICATION OF HOW THE PORTFOLIO WILL PERFORM IN
THE FUTURE.
The Bar Chart shows changes in the Portfolio's performance from year to year.
Total returns assume reinvestment of dividends and distributions.
BAR CHART (per calendar year)
[BAR CHART]
20.69% 11.92% 22.90% 19.09% 8.20%
1995 1996 1997 1998 1999
Best Quarter: 11.84% 2Q1997; Worst Quarter: -3.63% 3Q1998
10
<PAGE> 12
The Average Annual Total Return Table shows how the Portfolio's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Portfolio's total returns and are not the same as actual
year-by-year results.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1999)(1)
- ----------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE OF FUND
(SINCE 8/1/94)
<S> <C> <C> <C>
One Group Investment Trust Balanced 8.20% 16.43% 14.79%
Portfolio
S&P 500 Index(2) 21.04% 28.56% 27.39%
Lehman Brothers Intermediate
Government/Corporate Bond Index(3) 0.39% 7.09% 6.59%
Lipper Balanced Funds Index(4) 5.64% 14.32% 13.44%
- ---------------------------------------- ------------------- ------------------ --------------------------------------
</TABLE>
(1) The table above compares the average annual return of the Portfolio, which
holds a mix of stocks, bonds and other debt securities to an unmanaged
broad based index (i.e., the S&P 500 Index) as well as supplemental indices
for the periods indicated.
(2) The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the U.S. stock market. The performance of
the index does not reflect the deduction of expenses associated with a
mutual fund, such as investment management fees. By contrast, the
performance of the Portfolio reflects the deduction of these expenses.
(3) The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged market weighted index which encompasses U.S. Treasury and agency
securities and investment grade corporate and international
(dollar-denominated) bonds, with maturities between 5 and 10 years. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Portfolio reflects the deduction of these
expenses.
(4) The Lipper Balanced Funds Index is an index of funds whose primary
objective is to conserve principal by maintaining at all times a balanced
portfolio of both stocks and bonds. Unlike the indices shown above, the
performance of the index reflects the deduction of expenses associated with
mutual funds, such as investment management fees. These expenses are not
identical to the expenses charged by the Portfolio.
11
<PAGE> 13
Fund Summary: Investments, Risk & Performance
ONE GROUP INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO
WHAT IS THE GOAL OF THE LARGE CAP GROWTH PORTFOLIO?
The Portfolio seeks long-term capital appreciation and growth of income by
investing primarily in equity securities.
WHAT ARE THE LARGE CAP GROWTH PORTFOLIO'S MAIN INVESTMENT STRATEGIES?
The Portfolio invests mainly in equity securities of large, well-established
companies. The weighted average capitalization of companies in which the
Portfolio invests normally will exceed the market median capitalization of the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index").(1) For more
information about the Large Cap Growth Portfolio's investment strategies, please
read "More About the Portfolios" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE LARGE CAP GROWTH PORTFOLIO?
The main risks of investing in the Large Cap Growth Portfolio and the
circumstances likely to adversely affect your investment are described below.
The share price of the Large Cap Growth Portfolio will change every day in
response to market conditions. You may lose money if you invest in the Large Cap
Growth Portfolio. For additional information on risk, please read "Investment
Risks."
Market Risk. The Portfolio invests in equity securities (such as
stocks) that are more volatile and carry more risks than some other
forms of investment. The price of equity securities may rise or fall
because of economic or political changes or changes in a company's
financial condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or large cap growth
stock prices in particular) may decline over short or extended periods
of time. When the value of the Portfolio's securities goes down, your
investment in the Portfolio decreases in value.
Not FDIC insured. An investment in the Portfolio is not a deposit of
Bank One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
- -------------
(1) "S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with One Group Investment
Trust.
12
<PAGE> 14
HOW HAS THE LARGE CAP GROWTH PORTFOLIO PERFORMED?
By showing the variability of the Large Cap Growth Portfolio's performance from
year to year, the chart and table below help show the risk of investing in the
Portfolio. The returns in the bar chart and table below DO NOT reflect insurance
separate account charges. If these charges were included, the returns would be
lower than shown. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE LARGE CAP
GROWTH PORTFOLIO IS NOT NECESSARILY AN INDICATION OF HOW THE PORTFOLIO WILL
PERFORM IN THE FUTURE.
The Bar Chart shows changes in the Portfolio performance from year to year.
Total returns assume reinvestment of dividends and distributions.
BAR CHART (per calendar year)
[BAR CHART]
24.13% 16.67% 31.93% 41.27% 29.26%
1995 1996 1997 1998 1999
Best Quarter: 23.96% 4Q1998; Worst Quarter: -6.79% 3Q1998
13
<PAGE> 15
The Average Annual Total Return Table shows how the Portfolio's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Portfolio's total returns and are not the same as actual
year-by-year results.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1999)
- ----------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE OF FUND
(SINCE 8/1/94)
<S> <C> <C> <C>
One Group Investment Trust Large Cap 29.26% 28.39% 26.07%
Growth Portfolio
S&P 500/BARRA Growth Index(1) 28.25% 33.64% 32.91%
- ---------------------------------------- ------------------- ------------------ --------------------------------------
</TABLE>
(1) The S&P 500/BARRA Growth Index is an unmanaged index representing the
performance of the highest price to book securities in the S&P 500 Index. The
performance of the index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management fees. By contrast, the
performance of the Portfolio reflects the deduction of these expenses.
14
<PAGE> 16
Fund Summary: Investments, Risk & Performance
ONE GROUP INVESTMENT TRUST EQUITY INDEX PORTFOLIO
WHAT IS THE GOAL OF THE EQUITY INDEX PORTFOLIO?
The Portfolio seeks investment results that correspond to the aggregate price
and dividend performance of securities in the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500 Index").(1)
WHAT ARE THE EQUITY INDEX PORTFOLIO'S MAIN INVESTMENT STRATEGIES?
The Portfolio invests mainly in stocks included in the S&P 500 Index. The
Portfolio may also invest in stock index futures and other equity derivatives.
Banc One Investment Advisors attempts to track the performance of the S&P 500
Index to achieve a correlation of 0.95 between the performance of the Portfolio
and that of the S&P 500 Index without taking into account the Portfolio's
expenses. For more information about the Equity Index Portfolio's investment
strategies, please read "More About the Portfolios" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE EQUITY INDEX PORTFOLIO?
The main risks of investing in the Equity Index Portfolio and the circumstances
likely to adversely affect your investment are described below. The share price
of the Equity Index Portfolio will change every day in response to market
conditions. You may lose money if you invest in the Equity Index Portfolio. For
additional information on risk, please read "Investment Risks."
Index Investing. The Portfolio attempts to track the performance of the
S&P 500 Index. Therefore, securities may be purchased, retained and
sold by the Portfolio at times when an actively managed fund would not
do so. If the value of securities that are heavily weighted in the
index changes, you can expect a greater risk of loss than would be the
case if the Portfolio were not fully invested in such securities.
Market Risk. The Portfolio invests in equity securities (such as
stocks) that are more volatile and carry more risks than other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or S&P 500 Index stock prices in
particular) may decline over short or extended periods of time. When
the value of the Portfolio's securities goes down, your investment in
the Portfolio decreases in value.
Derivative Risk. The Portfolio invests in securities that may be
considered to be DERIVATIVES. The value of derivative securities is
dependent upon the performance of underlying assets or securities. If
the underlying assets do not perform as expected, the value of the
derivative security and your investment in the Portfolio declines.
Derivatives generally are more volatile and are riskier in terms of
both liquidity and value than traditional investments
Not FDIC insured. An investment in the Portfolio is not a deposit of
Bank One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
- --------
(1) "S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with One Group Investment
Trust.
15
<PAGE> 17
HOW HAS THE EQUITY INDEX PORTFOLIO PERFORMED?
By showing the variability of the Equity Index Portfolio's performance from year
to year, the chart and table below help show the risk of investing in the
Portfolio. The returns in the bar chart and table below DO NOT reflect insurance
separate account charges. If these charges were included, the returns would be
lower than shown. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE EQUITY INDEX
PORTFOLIO IS NOT NECESSARILY AN INDICATION OF HOW THE PORTFOLIO WILL PERFORM IN
THE FUTURE.
The Bar Chart shows the Portfolio's performance for its first full calendar year
of operations. Total returns assume reinvestment of dividends and distributions.
BAR CHART (per calendar year)
[BAR CHART]
21.11%
1999
Best Quarter: 14.61% 4Q1999 Worst Quarter: -6.09% 3Q1999
The Average Annual Total Return Table shows how the Portfolio's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Portfolio's total returns and are not the same as actual
year-by-year results.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1999)
- -----------------------------------------------------------------------------------------------------------------------
1 YEAR LIFE OF FUND
(SINCE 5/1/98)
<S> <C> <C>
One Group Investment Trust Equity Index 21.11% 19.09%
Portfolio
S&P 500 Index(1) 21.04% 22.22%
- ----------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
(1) The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the U.S. stock market. The performance of the
index does not reflect the deduction of expenses associated with a mutual fund,
such as investment management fees. By contrast, the performance of the
Portfolio reflects the deduction of these expenses.
16
<PAGE> 18
Fund Summary: Investments, Risk & Performance
ONE GROUP INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO
WHAT IS THE GOAL OF THE DIVERSIFIED EQUITY PORTFOLIO?
The Portfolio seeks long term capital growth and growth of income with a
secondary objective of providing a moderate level of current income.
WHAT ARE THE DIVERSIFIED EQUITY PORTFOLIO'S MAIN INVESTMENT STRATEGIES?
The Portfolio invests mainly in common stocks of companies that have good
fundamentals and reasonable valuations with the potential for continued earnings
growth over time. The Portfolio uses a multi-style approach, meaning that it may
invest across different capitalization levels targeting both value and growth
oriented companies. Because the Portfolio seeks return over the long term, Banc
One Investment Advisors will not attempt to time the market. For more
information about the Diversified Equity Portfolio's investment strategies,
please read "More About the Portfolios" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE DIVERSIFIED EQUITY PORTFOLIO?
The main risks of investing in the Diversified Equity Portfolio and the
circumstances likely to adversely affect your investment are described below.
The share price of the Diversified Equity Portfolio will change every day in
response to market conditions. You may lose money if you invest in the
Diversified Equity Portfolio. For additional information on risk, please read
"Investment Risks."
Market Risk. The Portfolio invests in equity securities (such as
stocks) that are more volatile and carry more risks than some other
forms of investment. The price of equity securities may rise or fall
because of economic or political changes or changes in a company's
financial condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general may decline over
short or extended periods of time. When the value of the Portfolio's
securities goes down, your investment in the Portfolio decreases in
value.
Smaller Companies. Investments in smaller, newer companies may be
riskier than investments in larger, more established companies.
Securities of smaller companies tend to be less liquid than securities
of larger companies. In addition, small companies may be more
vulnerable to economic, market, and industry changes. Because economic
events have a greater impact on smaller companies, there may be greater
and more frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your investment in
the Portfolio.
Not FDIC insured. An investment in the Portfolio is not a deposit of
Bank One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
17
<PAGE> 19
HOW HAS THE DIVERSIFIED EQUITY PORTFOLIO PERFORMED?
By showing the variability of the Diversified Equity Portfolio's performance
from year to year, the chart and table below help show the risk of investing in
the Portfolio. The chart and table reflect that the Diversified Equity Portfolio
inherited the financial history of the Pegasus Variable Growth and Value Fund.
The returns in the bar chart and table below DO NOT reflect insurance separate
account charges. If these charges were included, the returns would be lower than
shown. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE DIVERSIFIED EQUITY
PORTFOLIO IS NOT NECESSARILY AN INDICATION OF HOW THE PORTFOLIO WILL PERFORM IN
THE FUTURE.
The Bar Chart shows changes in the Portfolio's performance from year to year.
Total returns assume reinvestment of dividends and distributions.
BAR CHART (per calendar year)
[BAR CHART]
18.75% 26.80% 13.10% 9.13%
1996 1997 1998 1999
Best Quarter: 15.80% 4Q1998; Worst Quarter: -9.92% 3Q1998
18
<PAGE> 20
The Average Annual Total Return Table shows how the Portfolio's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Portfolio's total returns and are not the same as actual
year-by-year results.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1999)
- ----------------------------------------------------------------------------------------------------------------------
1 YEAR LIFE OF FUND
(SINCE 3/30/95)
<S> <C> <C>
One Group Investment Trust Diversified 9.13% 17.88%
Equity Portfolio
S&P SuperComposite 1500 Index(1) 20.25% 28.70%
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
(1) The S&P SuperComposite 1500 Index is an unmanaged index consisting of those
stocks making up the S&P 500, S&P MidCap 400 and S&P SmallCap 600 Indices
representing approximately 87% of the total U.S. equity market capitalization.
The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By contrast,
the performance of the Portfolio reflects the deduction of these expenses
19
<PAGE> 21
Fund Summary: Investments, Risk & Performance
ONE GROUP INVESTMENT TRUST MID CAP GROWTH PORTFOLIO
WHAT IS THE GOAL OF THE MID CAP GROWTH PORTFOLIO?
The Portfolio seeks growth of capital and secondarily, current income by
investing primarily in equity securities.
WHAT ARE THE MID CAP GROWTH PORTFOLIO'S MAIN INVESTMENT STRATEGIES?
The Portfolio invests in securities that have the potential to produce
above-average earnings growth per share over a one-to-three year period. The
Portfolio typically invests in mid-cap companies with market capitalizations of
$500 million to $10 billion. Typically, the Portfolio acquires shares of
established companies with a history of above-average growth, as well as those
companies expected to enter periods of above-average growth. Not all the
securities purchased by the Portfolio will pay dividends. The Portfolio also
invests in smaller companies in emerging growth industries. For more information
about the Mid Cap Growth Portfolio's investment strategies, please read "More
About the Portfolios" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE MID CAP GROWTH PORTFOLIO?
The main risks of investing in the Mid Cap Growth Portfolio and the
circumstances likely to adversely affect your investment are described below.
The share price of the Mid Cap Growth Portfolio will change every day in
response to market conditions. You may lose money if you invest in the Mid Cap
Growth Portfolio. For additional information on risk, please read "Investment
Risks."
Market Risk. The Portfolio invests in equity securities (such as
stocks) that are more volatile and carry more risks than some other
forms of investment. The price of equity securities may rise or fall
because of economic or political changes or changes in a company's
financial condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or mid cap growth
stock prices in particular) may decline over short or extended periods
of time. When the value of the Portfolio's securities goes down, your
investment in the Portfolio decreases in value.
Smaller Companies. Investments in smaller, newer companies may be
riskier than investments in larger, more established companies.
Securities of smaller companies tend to be less liquid than securities
of larger companies. In addition, small companies may be more
vulnerable to economic, market, and industry changes. Because economic
events have a greater impact on smaller companies, there may be greater
and more frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your investment in
the Portfolio.
Not FDIC insured. An investment in the Portfolio is not a deposit of
Bank One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
20
<PAGE> 22
HOW HAS THE MID CAP GROWTH PORTFOLIO PERFORMED?
By showing the variability of the Mid Cap Growth Portfolio's performance from
year to year, the chart and table below help show the risk of investing in the
Portfolio. The returns in the bar chart and table below DO NOT reflect insurance
separate account charges. If these charges were included, the returns would be
lower than shown. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE MID CAP
GROWTH PORTFOLIO IS NOT NECESSARILY AN INDICATION OF HOW THE PORTFOLIO WILL
PERFORM IN THE FUTURE.
The Bar Chart shows changes in the Portfolio's performance from year to year.
Total returns assume reinvestment of dividends and distributions.
BAR CHART (per calendar year)
[BAR CHART]
24.06% 15.67% 29.81% 38.82% 25.42%
1995 1996 1997 1998 1999
Best Quarter: 40.10% 4Q1998; Worst Quarter: -14.67% 3Q1998
21
<PAGE> 23
The Average Annual Total Return Table shows how the Portfolio's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Portfolio's total returns and are not the same as actual
year-by-year results.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1999)
- ----------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE OF FUND
(SINCE 8/1/94)
<S> <C> <C> <C>
One Group Investment Trust Mid Cap 25.42% 26.53% 23.56%
Growth Portfolio
S&P Mid Cap 400/BARRA Growth Index 28.74% 27.80% 27.05%
- ---------------------------------------- ------------------- ------------------ --------------------------------------
</TABLE>
(1) The S&P Mid Cap 400/BARRA Growth Index is an unmanaged index representing
the performance of the highest price to book securities in the S&P Mid Cap 400
Index. The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By contrast,
the performance of the Portfolio reflects the deduction of these expenses.
22
<PAGE> 24
Fund Summary: Investments, Risk & Performance
ONE GROUP INVESTMENT TRUST DIVERSIFIED MID CAP PORTFOLIO
WHAT IS THE GOAL OF THE DIVERSIFIED MID CAP PORTFOLIO?
The Portfolio seeks long term capital growth by investing primarily in equity
securities of companies with intermediate capitalizations.
WHAT ARE THE DIVERSIFIED MID CAP PORTFOLIO'S MAIN INVESTMENT STRATEGIES?
The Portfolio invests mainly in equity securities of mid cap companies. Mid cap
companies are defined as companies with market capitalizations of $500 million
to $10 billion. The Portfolio looks for companies of this size with strong
growth potential, stable market share, and an ability to quickly respond to new
business opportunities. In choosing securities, the Portfolio invests in mid cap
and other companies across different capitalization levels targeting both value
and growth oriented companies. Because the Portfolio seeks return over the long
term, Banc One Investment Advisors will not attempt to time the market. For more
information about the Diversified Mid Cap Portfolio's investment strategies,
please read "More About the Portfolios" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE DIVERSIFIED MID CAP PORTFOLIO?
The main risks of investing in the Diversified Mid Cap Portfolio and the
circumstances likely to adversely affect your investment are described below.
The share price of the Diversified Mid Cap Portfolio will change every day in
response to market conditions. You may lose money if you invest in the
Diversified Mid Cap Portfolio. For additional information on risk, please read
"Investment Risks."
Market Risk. The Portfolio invests in equity securities (such as
stocks) that are more volatile and carry more risks than some other
forms of investment. The price of equity securities may rise or fall
because of economic or political changes or changes in a company's
financial condition. Equity securities also are subject to "stock
market risk" meaning that stock prices in general (or mid cap stock
prices in particular) may decline over short or extended periods of
time. When the value of the Portfolio's securities goes down, your
investment in the Portfolio decreases in value.
Smaller Companies. Investments in smaller, newer companies may be
riskier than investments in larger, more established companies.
Securities of smaller companies tend to be less liquid than securities
of larger companies. In addition, small companies may be more
vulnerable to economic, market, and industry changes. Because economic
events have a greater impact on smaller companies, there may be greater
and more frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your investment in
the Portfolio.
Not FDIC insured. An investment in the Portfolio is not a deposit of
Bank One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
23
<PAGE> 25
HOW HAS THE DIVERSIFIED MID CAP PORTFOLIO PERFORMED?
By showing the variability of the Diversified Mid Cap Portfolio's performance
from year to year, the chart and table below help show the risk of investing in
the Portfolio. The chart and table reflect that the Diversified Mid Cap
Portfolio inherited the financial history of the Pegasus Variable Mid-Cap
Opportunity Fund. The returns in the bar chart and table below DO NOT reflect
insurance separate account charges. If these charges were included, the returns
would be lower than shown. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
DIVERSIFIED MID CAP PORTFOLIO IS NOT NECESSARILY AN INDICATION OF HOW THE
PORTFOLIO WILL PERFORM IN THE FUTURE.
The Bar Chart shows changes in the Portfolio's performance from year to year.
Total returns assume reinvestment of dividends and distributions.
BAR CHART (per calendar year)
[BAR CHART]
24.53% 26.65% 4.91% 10.50%
1996 1997 1998 1999
Best Quarter: 22.38% 4Q1998 Worst Quarter: -20.05% 3Q1998
24
<PAGE> 26
The Average Annual Total Return Table shows how the Portfolio's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Portfolio's total returns and are not the same as actual
year-by-year results.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1999)
- ----------------------------------------------------------------------------------------------------------------------
1 YEAR LIFE OF FUND
(SINCE 3/30/95)
<S> <C> <C>
One Group Investment Trust Diversified
Mid Cap Portfolio 10.50% 15.98%
S&P Mid Cap 400 Index(1) 14.72% 23.24%
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
(1) The S&P Mid Cap 400 Index is an unmanaged index representing the mid-size
company segment of the U.S. market. The performance of the index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management fees. By contrast, the performance of the Portfolio
reflects the deduction of these expenses.
25
<PAGE> 27
Fund Summary: Investments, Risk & Performance
ONE GROUP INVESTMENT TRUST MID CAP VALUE PORTFOLIO
WHAT IS THE GOAL OF THE MID CAP VALUE PORTFOLIO?
The Portfolio seeks capital appreciation with the secondary goal of achieving
current income by investing primarily in equity securities.
WHAT ARE THE MID CAP VALUE PORTFOLIO'S MAIN INVESTMENT STRATEGIES?
The Portfolio invests mainly in equity securities of companies with below-market
average price-to-earnings and price-to-book value ratios and with market
capitalizations of $500 million to $10 billion. In choosing investments, the
Portfolio considers the issuer's soundness and earnings prospects. If Banc One
Investment Advisors thinks that a company's fundamentals are declining or that a
company's ability to pay dividends has been impaired, it may eliminate the
Portfolio's holding of the company's stock. For more information about the Mid
Cap Value Portfolio's investment strategies, please read "More About the
Portfolios" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE MID CAP VALUE PORTFOLIO?
The main risks of investing in the Mid Cap Value Portfolio and the circumstances
likely to adversely affect your investment are described below. The share price
of the Mid Cap Value Portfolio and its yield will change every day in response
to interest rates and other market conditions. You may lose money if you invest
in the Mid Cap Value Portfolio. For additional information on risk, please read
"Investment Risks."
Market Risk. The Portfolio invests in equity securities (such as
stocks) which are more volatile and carry more risks than some other
forms of investment. The price of equity securities may rise or fall
because of economic or political changes or changes in a company's
financial condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or mid cap value
stock prices in particular) may decline over short or extended periods
of time. When the value of the Portfolio's securities goes down, your
investment in the Portfolio decreases in value.
Smaller Companies. The Portfolio's investments in smaller, newer
companies may be riskier than investments in larger, more established
companies. Securities of small companies tend to be less liquid than
securities of larger companies. In addition, small companies may be
more vulnerable to economic, market, and industry changes. Because
economic events have a greater impact on smaller companies, there may
be greater and more frequent changes in their stock price. This may
cause unexpected and frequent decreases in the value of your investment
in the Portfolio.
Not FDIC insured. An investment in the Portfolio is not a deposit of
Bank One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
26
<PAGE> 28
HOW HAS THE MID CAP VALUE PORTFOLIO PERFORMED?
By showing the variability of the Mid Cap Value Portfolio's performance from
year to year, the chart and table below help show the risk of investing in the
Portfolio. The chart and table reflect that the Mid Cap Value Portfolio
inherited the financial history of the Pegasus Variable Intrinsic Value Fund.
The returns in the bar chart and table below DO NOT reflect insurance separate
account charges. If these charges were included, the returns would be lower than
shown. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE MID CAP VALUE PORTFOLIO
IS NOT NECESSARILY AN INDICATION OF HOW THE PORTFOLIO WILL PERFORM IN THE
FUTURE.
The Bar Chart shows changes in the Portfolio performance from year to year.
Total returns assume reinvestment of dividends and distributions.
BAR CHART (per calendar year)
[BAR CHART]
- -3.31% -1.84%
1998 1999
Best Quarter: 11.30% 2Q1999; Worst Quarter: -14.07% 3Q1998
27
<PAGE> 29
The Average Annual Total Return Table shows how the Portfolio's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Portfolio's total returns and are not the same as actual
year-by-year results.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1999)
- ----------------------------------------------------------------------------------------------------------------------
1 YEAR LIFE OF FUND
(SINCE 5/1/97)
<S> <C> <C>
One Group Investment Trust Mid Cap -1.84% 3.99%
Value Portfolio
S&P Mid Cap 400/BARRA Value Index(1) 2.32% 14.64%
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The S&P Midcap 400/BARRA Value Index is an unmanaged index representing
the performance of the lowest price to book securities in the S&P Midcap 400
Index. The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By contrast,
the performance of the Portfolio reflects the deduction of these expenses.
28
<PAGE> 30
MORE ABOUT THE PORTFOLIOS
Each of the nine portfolios described in this Prospectus is a series of One
Group Investment Trust and is managed by Banc One Investment Advisors
Corporation. For more information about One Group Investment Trust and Banc One
Investment Advisors, please read "Management of One Group Investment Trust" and
the Statement of Additional Information.
TYPES OF PORTFOLIOS. The following pages describe investment strategies that are
used in more than one Portfolio. Where indicated, the strategies only apply to
the Bond Portfolios or the Equity Portfolios.
The BOND PORTFOLIOS include:
- One Group Investment Trust Bond Portfolio, and
- One Group Investment Trust Government Bond Portfolio.
The EQUITY PORTFOLIOS include:
- One Group Investment Trust Balanced Portfolio,
- One Group Investment Trust Large Cap Growth Portfolio,
- One Group Investment Trust Equity Index Portfolio,
- One Group Investment Trust Diversified Equity Portfolio,
- One Group Investment Trust Mid Cap Growth Portfolio,
- One Group Investment Trust Diversified Mid Cap Portfolio, and
- One Group Investment Trust Mid Cap Value Portfolio.
- --------------------------------------------------------------------------------
ONE GROUP INVESTMENT TRUST
ALTHOUGH ONE GROUP INVESTMENT TRUST PORTFOLIOS HAVE THE SAME OR SIMILAR
INVESTMENT OBJECTIVES AND INVESTMENT STRATEGIES AS SIMILARLY NAMED FUNDS OF ONE
GROUP(R) MUTUAL FUNDS, ONE GROUP INVESTMENT TRUST PORTFOLIOS:
- - ARE NOT THE SAME FUNDS AS ONE GROUP MUTUAL FUNDS;
- - ARE SMALLER THAN ONE GROUP MUTUAL FUNDS; AND
- - HAVE DIFFERENT PERFORMANCE, FEES AND EXPENSES THAN ONE GROUP MUTUAL
FUNDS.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES
This Prospectus describes nine mutual funds with a variety of investment
objectives. The principal investment strategies that are used to meet each
Portfolio's investment strategy are described in Fund Summaries: Investments,
Risk, & Performance in the front of this prospectus. They are also described
below. There can be no assurance that the Portfolios will achieve their
investment objectives. Please note that each Portfolio may also use strategies
that are not described below, but which are described in the Statement of
Additional Information.
29
<PAGE> 31
FUNDAMENTAL POLICIES
Each Portfolio's investment strategy may involve "fundamental
policies." A policy is fundamental if it cannot be changed
without the consent of a majority of the outstanding shares of
the Portfolio.
THE BOND PORTFOLIOS
Banc One Investment Advisors analyzes four major factors in managing and
constructing the Portfolio: duration, market sector, maturity concentrations,
and individual securities. Rather than attempting to time the market, Banc One
Investment Advisors looks for sectors and securities that it believes will
perform consistently well over time as measured by total return. The Bond
Portfolios attempt to enhance total return by selecting market sectors and
securities that offer risk/reward advantages based on market trends, structural
make-up, and credit trends. Individual securities that are purchased by the
Portfolios are subject to a disciplined risk/reward analysis both at the time of
purchase and on an ongoing basis. This analysis includes an evaluation of
interest rate risk, credit risk, and risks associated with the complex legal and
technical structure of the investment (e.g., asset-backed securities).
ONE GROUP INVESTMENT TRUST BOND PORTFOLIO. The Portfolio invests in all
types of debt securities rated as investment grade, as well as
convertible securities, preferred stock, and loan participations.
- The Portfolio invests at least 65% of its total assets in debt
securities of all types with intermediate to long maturities.
- As a matter of fundamental policy, at least 65% of the
Portfolio's total assets will consist of bonds.
- The Portfolio also may purchase taxable or tax-exempt
municipal securities.
- The Portfolio's average weighted maturity will ordinarily
range between four and twelve years, although the Portfolio
may shorten its weighted average maturity if deemed
appropriate for temporary defensive purposes.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average of all the current maturities
(that is, the term of the securities) of the individual securities in a
Portfolio calculated so as to count most heavily those securities with
the highest dollar value. Average maturity is important to bond
investors as an indication of a Portfolio's sensitivity to changes in
interest rates. Usually, the longer the average maturity, the more
fluctuation in share price you can expect.
ONE GROUP INVESTMENT TRUST GOVERNMENT BOND PORTFOLIO. The Portfolio
limits its investments to securities issued by the U.S. Government and
its agencies and instrumentalities and related to securities issued by
the U.S. government and its agencies and instrumentalities.
- - At least 65% of the Portfolio's total assets will be invested
in debt instruments with principal and interest guaranteed by
the U.S. Government or its agencies and instrumentalities some
of which may be subject to repurchase agreements, and other
securities representing an interest in or secured by mortgages
that are issued or guaranteed by certain U.S. Government
agencies or instrumentalities.
- - The Portfolio's average weighted maturity will ordinarily
range between three and fifteen years, taking into account
expected prepayment of principal on certain investments.
However, the Portfolio's average weighted remaining maturity
may be outside this range if warranted by market conditions.
30
<PAGE> 32
THE EQUITY PORTFOLIOS
The investment strategies utilized by the Equity Portfolios are described in
Fund Summaries; Investments, Risk & Performance and below.
ONE GROUP INVESTMENT TRUST BALANCED PORTFOLIO. The Portfolio invests in
a combination of stocks, fixed income securities and money market
instruments. Normally, the Portfolio will invest:
- between 40% and 75% of total assets in all types of
equity securities (including stock of both large and
small capitalization companies and growth and value
securities). Up to 20% of the equities may be foreign
securities, including American Depositary Receipts.
- between 25% and 60% of total assets in mid to
long-term fixed income securities, including bonds,
notes, and other debt securities. The balance will be
invested in cash equivalents. For more information on
how Banc One Investment Advisors selects fixed income
securities, please read "The Bond Portfolios" above.
ONE GROUP INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO. The Portfolio
invests mainly in equity securities of large, well-established
companies. The weighted average capitalization of companies in which
the Portfolio invests normally will exceed the market median
capitalization of the S&P 500 Index.
- At least 65% of the Portfolio's total assets will be
invested in the equity securities of large,
well-established companies.
ONE GROUP INVESTMENT TRUST EQUITY INDEX PORTFOLIO. The Portfolio
invests in stocks included in the S&P 500 Index. (The Portfolio also
invests in stock index futures and other equity derivatives.) Banc One
Investment Advisors seeks to achieve a correlation of 0.95 between the
performance of the Portfolio and that of the S&P 500 Index. The
Portfolio may hold up to 10% of its total assets in cash or cash
equivalents. (Assets held in margin deposits and segregated accounts
for futures are not considered cash or cash equivalents for purposes
of the 10% limitation).
- The percentage of stock that the Portfolio holds will
be approximately the same percentage that the stock
represents in the S&P 500 Index.
- Banc One Investment Advisors generally picks stock in
the order of their weightings in the S&P 500 Index,
starting with the heaviest weighted stock.
- The Portfolio attempts to achieve a correlation
between the performance of its portfolio and that of
the S&P 500 Index of at least 0.95, without taking
into account Portfolio expenses. Perfect correlation
would be 1.00.
ONE GROUP INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO. The Portfolio
invests mainly in common stocks of companies that have the potential
for continued earnings growth with strong fundamentals and a reasonable
value.
- At least 65% of the Portfolio's total assets will be
invested in equity securities.
- Although the Portfolio may invest up to 35% of the
Portfolio's total assets in U.S. government
securities, other investment grade fixed income
securities, cash, and cash equivalents, the
Portfolio's main investment strategy is to invest in
equity securities.
ONE GROUP INVESTMENT TRUST DIVERSIFIED MID CAP PORTFOLIO. The Portfolio
invests mainly in equity securities of mid capitalization companies.
Mid cap companies are defined as companies with market capitalizations
of $500 million to $10 billion.
- At least 65% of the Portfolio's total assets will be
invested in common and preferred stock, rights,
warrants, convertible securities, and other equity
securities of mid capitalization companies.
- Up to 25% of the Portfolio's total assets may be
invested in foreign securities. Up to 20% of the
Portfolio's total assets may be invested in U.S.
Government Securities, other investment grade
31
<PAGE> 33
fixed income securities, cash, and cash equivalents.
Although the Portfolio may use these strategies more
in the future, the Portfolio's main investment
strategy is to invest in equity securities of mid
capitalization companies.
ONE GROUP INVESTMENT TRUST MID CAP GROWTH PORTFOLIO. The Portfolio
invests in securities of companies that have the potential to produce
above-average earnings growth per share over a one-to-three year
period.
- At least 80% of the Portfolio's total assets will be
invested in equity securities of mid cap companies,
including common stocks and debt securities and
preferred stocks that are convertible to common
stock. Mid cap companies are defined as companies
with market capitalizations of $500 million to $10
billion.
- A portion of the Portfolio's assets will be held in
cash equivalents.
ONE GROUP INVESTMENT TRUST MID CAP VALUE PORTFOLIO. The Portfolio
invests mainly in equity securities of companies with below-market
average price-to-earnings and price-to-book value ratios and mid cap
companies with market capitalizations of $500 million to $10 billion.
- At least 80% of the Portfolio's total assets will be
invested in equity securities, including common stock
and debt securities and preferred stocks that are
convertible into common stock.
- A portion of the Portfolio's assets will be held in
cash equivalents.
INVESTMENT RISKS
The risks associated with investing in the Portfolios are described below and in
Fund Summaries: Investment, Risk & Performance at the front of this prospectus.
For information concerning risks associated with specific types of investments,
please read Appendix A.
FIXED INCOME SECURITIES: Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates. If
rates increase, the value of a Portfolio's investments generally declines. On
the other hand, if rates fall, the value of the investments generally increases.
The value of your investment in a Bond Portfolio (or an Equity Portfolio such as
the Balanced Portfolio that uses bonds as part of its main investment strategy)
will increase and decrease as the value of a Portfolio's investments increases
and decreases. While securities with longer duration and maturities tend to
produce higher yields, they also are subject to greater fluctuations in value
when interest rates change. Usually, changes in the value of fixed income
securities will not affect cash income generated, but may affect the value of
your investment. Fixed income securities also are subject to the risk that the
issuer of the security will be unable to meet its repayment obligation.
DERIVATIVES: The Portfolios may invest in securities that may be considered to
be DERIVATIVES. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity,
and management risks.
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<PAGE> 34
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and
options) that derive their value from the performance of
underlying assets or securities.
SMALL CAPITALIZATION COMPANIES: Investments in smaller, younger companies may be
riskier and more volatile than investments in larger, more established
companies. These companies may be more vulnerable to changes in economic
conditions, specific industry conditions, market fluctuations, and other factors
affecting the profitability of other companies. Because economic events may have
a greater impact on smaller companies, there may be a greater and more frequent
fluctuation in their stock price. This may cause frequent and unexpected
increases or decreases in the value of your investment.
LOWER RATED SECURITIES: The Bond Portfolio may purchase corporate and municipal
bonds that are rated in ANY category. Bonds in the lower investment grade rating
category are considered to have speculative characteristics. Changes in economic
conditions or other circumstances may have a greater effect on the ability of
issuers of these securities to make principal and interest payments than they do
on issuers of higher grade securities. Bonds rated below investment grade are
considered speculative and may be classified as "junk bonds." JUNK BONDS are
considered to be high risk investments. These risks include greater risk of
loss, greater sensitivity to economic changes, valuation difficulties, and
liquidity difficulties. The Bond Portfolio will invest no more than 5% of its
net assets in securities rated below investment grade.
INVESTMENT POLICIES
Each Portfolio's investment objective and the investment policies summarized
below are fundamental. This means that they cannot be changed without the
consent of a majority of the outstanding shares of the Portfolios. The full text
of the fundamental policies can be found in the Statement of Additional
Information.
Each Portfolio may not:
1. Purchase the securities of an issuer if as a result more than
5% of its total assets would be invested in the securities of
that issuer or the Portfolio would own more than 10% of the
outstanding voting securities of that issuer. This does not
include securities issued or guaranteed by the United States,
its agencies or instrumentalities, securities of registered
investment companies, and repurchase agreements involving
these securities. This restriction applies with respect to 75%
of a Portfolio's total assets.
2. Concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular
industry or group of industries. This does not include
obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities and repurchase agreements
involving such securities.
3. Make loans, except that a Portfolio may:
(i) purchase or hold debt instruments in accordance with its
investment objective and policies;
(ii) enter into repurchase agreements; and
(iii) engage in securities lending.
PORTFOLIO QUALITY. Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings to securities (other
than equity securities). Generally, ratings are divided into two main
categories: "Investment Grade Securities" and "Non-Investment Grade Securities."
Although there is always a risk of default, rating agencies believe that issuers
of Investment Grade Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment Grade
Securities. The Portfolios only purchase securities that meet the rating
criteria described below. Banc One Investment Advisors will look at a security's
rating at the time of investment. If the securities are unrated, Banc One
Investment Advisors must determine that they are of comparable quality to rated
securities.
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<PAGE> 35
RATINGS OF THE BOND PORTFOLIOS' SECURITIES
One Group Investment Trust Government Bond Portfolio only may invest in
debt securities rated in any of the three highest investment grade
rating categories.
One Group Investment Trust Bond Portfolio may purchase securities that
meet the following rating criteria;
- corporate and municipal bonds -- rated in any rating
category.
- preferred stock -- rated in any of the four
investment grade rating categories.
- commercial paper - rated in the highest or second
highest rating categories.
RATINGS OF THE EQUITY PORTFOLIOS' SECURITIES
- If a Portfolio invests in municipal bonds, the bonds must be
rated as investment grade.
- Other municipal securities, such as tax-exempt commercial
paper, notes and variable rate demand obligations, must be
rated in one of the two highest investment grade categories at
the time of investment.
- Corporate bonds generally will be rated in one of the three
highest investment grade categories.
- Banc One Investment Advisors reserves the right to invest in
corporate bonds that present attractive opportunities and are
rated in the lowest investment grade category. These corporate
bonds may be riskier than higher rated bonds.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
TEMPORARY DEFENSIVE POSITIONS. To respond to unusual market conditions, the
Portfolios may invest their assets in cash and CASH EQUIVALENTS (see below) for
temporary defensive purposes. These investments may result in a lower yield than
lower-quality or longer term investments and may prevent the Portfolios from
meeting their investment objectives.
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality instruments with
maturities of three months or less on the date they are purchased.
They include securities issued by the U.S. Government, its
agencies and instrumentalities, repurchase agreements (other than
equity repurchase agreements), certificates of deposit, bankers'
acceptances, commercial paper (rated in one of the two highest
rating categories), variable rate master demand notes, and bank
money market deposit accounts.
Bond Portfolios. For temporary defensive purposes as determined by Banc
One Investment Advisors, the Bond Portfolios may invest up to 100% of
their assets in cash equivalents, and may hold a portion of their
assets in cash for liquidity purposes.
Equity Portfolios. For temporary defensive purposes as determined by
Banc One Investment Advisors, the Equity Portfolios (except the Equity
Index Portfolio and Diversified Mid Cap Portfolio), may invest 100% of
their total assets in cash and cash equivalents. The Diversified Mid
Cap Portfolio may invest up to 20% and the Equity Index Portfolio may
invest 10% of their total assets in cash and cash equivalents. (Assets
held in margin deposits and segregated accounts for futures are not
considered cash or cash equivalents for purposes of the 10% limitation
in the Equity Index Portfolio).
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<PAGE> 36
PORTFOLIO TURNOVER. The Portfolios may engage in active and frequent trading of
portfolio securities to achieve their principal investment strategies. Portfolio
turnover may vary greatly from year to year, as well as within a particular
year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Portfolios. The portfolio turnover rate for each Portfolio for the fiscal
year ended December 31, 1999 is shown on the Financial Highlights.
35
<PAGE> 37
SHAREHOLDER INFORMATION
PRICING OF PORTFOLIO SHARES
HOW ARE PORTFOLIO SHARES PRICED? The net asset value or NAV per share for each
Portfolio is determined as of the close of regular trading on the New York Stock
Exchange (usually 4 P.M. Eastern Time), on each day the Portfolios are open for
business. On occasion, the New York Stock Exchange will close before 4 P.M.
Eastern Time. When that happens, the NAV will be calculated as of the time the
New York Stock Exchange closes. The NAV per share is calculated by adding the
value of all securities and other assets of a Portfolio, deducting its
liabilities, and dividing by the number of shares of the Portfolio that are
outstanding.
WHEN ARE THE PORTFOLIOS' BUSINESS DAYS? The Portfolios are open for business on
days that the New York Stock Exchange is open for business. The Portfolios will
be closed on weekends, days on which the New York Stock Exchange is closed, and
the following holidays: New Years Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and
Christmas.
PURCHASE OF PORTFOLIO SHARES
WHO CAN PURCHASE SHARES OF THE PORTFOLIOS? Shares of the Portfolios are sold at
net asset value to SEPARATE ACCOUNTS of insurance companies to fund variable
annuity and variable life contracts. You and other purchasers of variable life
or variable annuity contracts will not own shares of the Portfolios directly.
Rather, all shares will be held by the separate accounts for your benefit and
the benefit of other purchasers of variable annuity and variable life contracts.
All investments in the Portfolios are credited to the shareholder's account in
the form of full or fractional shares of the designated Portfolios. The
Portfolios do not issue share certificates. The interests of different separate
accounts are not always the same and material, irreconcilable conflicts may
arise. The Board of Trustees will monitor events for such conflicts and, should
they arise, will determine what action, if any, should be taken.
ARE THERE LIMITS ON PORTFOLIO PURCHASES? Yes. Initial and subsequent purchase
payments allocated to a specific Portfolio are subject to any limits set by your
variable annuity or variable life contract. For information concerning the
purchase and redemption of shares through your variable annuity or variable life
contract, refer to the literature that you received when you purchased your
variable annuity or variable life contract.
VOTING AND MEETINGS
HOW ARE SHARES OF THE PORTFOLIO VOTED? If required by the SEC, the insurance
company that issued your variable annuity or variable life contract will solicit
voting instructions from you and other purchasers of variable annuity or
variable life contracts with respect to any matters that are presented to a vote
of shareholders. Each Portfolio votes separately on matters relating solely to
that Portfolio or which affect that Portfolio differently. However, all
shareholders will have equal voting rights on matters that affect all
shareholders equally. The holders of each share shall be entitled to one vote
for each share held.
WHEN ARE SHAREHOLDER MEETINGS HELD? One Group Investment Trust does not hold
annual meetings of shareholders but may hold special meetings. Special meetings
are held, for example, to elect or remove Trustees, change a Portfolio's
fundamental investment objectives, or approve an investment advisory contract.
REDEMPTION OF PORTFOLIO SHARES
Separate accounts may redeem shares to make benefit or surrender payments to you
and other purchasers of variable annuity or variable life contracts or for other
reasons described in the Separate Account literature that you received when you
purchased your variable annuity or variable life contract. Redemptions are
processed on any day on which the Portfolios are open for business. Shares are
redeemed at the net asset value next determined after the redemption order, in
proper form, is received by the One Group Investment Trust's transfer agent,
State Street Bank and Trust Company.
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<PAGE> 38
DIVIDENDS
- All dividends are distributed to the separate accounts on a
quarterly basis and will be automatically reinvested in
portfolio shares.
- Dividends are not taxable as current income to you or other
purchasers of variable annuity or variable life insurance
contracts.
QUESTIONS
- Any questions regarding the Portfolios should be directed to
One Group Investment Trust, 1111 Polaris Parkway, Suite B-2,
Columbus, Ohio 43271-0211, 1-800-480-4111. All questions
regarding variable annuities or life insurance contracts
should be directed to the address indicated in the
prospectuses or other literature that you received when you
purchased your variable annuity or variable life product.
TAX INFORMATION Generally, owners of variable annuity and variable life
contracts are not taxed currently on income or gains realized with respect to
such contracts. However, some distributions from such contracts may be taxable
at ordinary income tax rates. In addition, distributions made to an owner who is
younger than 59 1/2 may be subject to a 10% penalty tax. Investors should ask
their own tax advisors for more information on their own tax situation,
including possible state or local taxes.
In order for investors to receive the favorable tax treatment available
to holders of variable annuity and variable life contracts, the separate
accounts underlying such contracts, as well as the Portfolios in which such
accounts invest, must meet certain diversification requirements. Each Portfolio
intends to comply with these requirements. If a Portfolio does not meet such
requirements, income allocable to the contracts would be taxable currently to
the holders of such contracts.
Please refer to the Statement of Additional Information for more
information regarding the tax treatment of the Portfolios. For a discussion of
the tax consequences of variable annuity and variable life contracts, please
refer to the prospectuses or other documents that you received when you
purchased your variable annuity or variable life product.
QUALIFIED PLANS
In the future, shares of the portfolios may also be sold to qualified
pension and retirement plans for the benefit of plan participants. For
information about the purchase and redemption of shares by qualified pension and
retirement plans as well as the tax consequences impacting such plans, refer to
the literature received from your plan administrator.
37
<PAGE> 39
MANAGEMENT OF ONE GROUP INVESTMENT TRUST
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Portfolios
and continuously reviews, supervises and administers each Portfolio's investment
program. Banc One Investment Advisors performs its responsibilities subject to
the supervision of, and policies established by, the Trustees of One Group
Investment Trust. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of December 31, 1999, Banc One
Investment Advisors, an indirect wholly-owned subsidiary of Bank One
Corporation, managed over $127 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each Portfolio. Banc One Investment Advisors is
entitled to a fee, which is calculated daily and paid monthly, of the following
annual percentages of the average daily net assets of each Portfolio:
For the fiscal year ended December 31, 1999, the Portfolios paid advisory fees
at the following rates:
ANNUAL RATE AS
PERCENTAGE OF AVERAGE
PORTFOLIO DAILY NET ASSETS
Government Bond Portfolio .45%
Balanced Portfolio .70%
Large Cap Growth Portfolio .65%
Equity Index Portfolio .28%
Mid Cap Growth Portfolio .65%
Bond Portfolio* .46%
Diversified Equity Portfolio * .68%
Diversified Mid Cap Portfolio* .60%
Mid Cap Value Portfolio* .63%
* On March 31, 1999, the Bond Portfolio, the Diversified Equity Portfolio, the
Diversified Mid Cap Portfolio, and Mid Cap Value Portfolio were substituted for
certain Pegasus Variable Funds. The investment advisory fees include fees paid
to First Chicago NBD Investment Management, an affiliate of Banc One Investment
Advisors, as advisor to the Pegasus Variable Funds.
THE PORTFOLIO MANAGERS
The Bond Portfolios are managed by teams of portfolio managers, research
analysts and fixed income traders. The team works together to establish general
duration and sector strategies for the Portfolio. Each team member makes
recommendations about securities in the Portfolio. The research analysts and
trading personnel support individual security and sector recommendations, while
the portfolio managers select and allocate individual securities in a manner
designed to meet the investment objectives of the Portfolio.
The Equity Portfolios are managed by teams of portfolio managers, research
analysts, and other investment management professionals. For all Equity
Portfolios except the Equity Index Portfolio, each team member makes
recommendations about the securities in a Portfolio. The research analysts
support in-depth industry analysis and recommendations, while the portfolio
managers determine strategy, industry weightings, portfolio holdings, and cash
positions.
38
<PAGE> 40
FINANCIAL HIGHLIGHTS
BOND PORTFOLIO
The Financial Highlights table is intended to help you understand the
Portfolio's performance for the last five years or the period of the Portfolio's
operations, whichever is shorter. Certain information reflects financial results
for a single Portfolio share. The total returns in the table represent the rate
that an investor would have earned or lost on an investment in the Portfolio
(assuming reinvestment of all dividends and distributions). This information for
the Portfolio has been audited by _______________ and other independent
accountants. ____________________ report, along with the Portfolio's financial
statements is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1999*** 1998 1997*
------- ---------- ----------
<S> <C> <C>
NET ASSET VALUE--Beginning of Period $ 10.44 $ 10.00
---------- ----------
Net investment income 0.57 0.37
Net realized and unrealized appreciation (depreciation) 0.31 0.45
---------- ----------
Total from Investment Operations 0.88 0.82
---------- ----------
Distributions:
From net investment income (0.58) (0.37)
From net realized gains from investments (0.01) (0.01)
In excess of realized gains from investment transactions -.- -.-
Tax return of capital -.- -.-
---------- ----------
Total Distributions (0.59) (0.38)
---------- ----------
Net increase (decrease) in net asset value 0.29 0.44
---------- ----------
NET ASSET VALUE--End of Period $ 10.73 $ 10.44
========== ==========
Total Return 8.66% 12.29%**
RATIOS AND SUPPLEMENTAL DATA:
Net assets end of period (000) $ 60,892 $ 34,230
Ratio of expenses to average net assets 0.75% 0.75%**
Ratio of expenses to average net assets
excluding waivers/reimbursements 0.81% 0.77%**
Ratio of net investment income to average net assets 5.36% 5.97%**
Portfolio turnover 14.5% 14.8%**
</TABLE>
* Commenced operations on May 1, 1997.
** Annualized.
*** On March 31, 1999, the One Group Investment Trust Bond Portfolio was
substituted for the Pegasus Variable Bond Fund. Financial highlights for the
period prior to March 31, 1999 represent the Pegasus Variable Bond Fund.
39
<PAGE> 41
FINANCIAL HIGHLIGHTS
GOVERNMENT BOND PORTFOLIO
The Financial Highlights table is intended to help you understand the
Portfolio's performance for the last five years or the period of the Portfolio's
operations, whichever is shorter. Certain information reflects financial results
for a single Portfolio share. The total returns in the table represent the rate
that an investor would have earned or lost on an investment in the Portfolio
(assuming reinvestment of all dividends and distributions). This information for
the Portfolio has been audited by __________________whose report, along with the
Portfolio's financial statements is incorporated by reference in the Statement
of Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD................. $ 10.48 $ 10.15 $ 10.48 $ 9.69
-------- ---------- -------- --------
Net investment income............................. 0.56 0.60 0.59 0.64
Net realized and unrealized
appreciation (depreciation).................... 0.20 0.35 (0.33) 0.94
-------- ---------- -------- --------
Total from Investment Operations..................... 0.76 0.95 0.26 1.58
-------- ---------- -------- --------
Distributions:
From net investment income........................ (0.56) (0.60) (0.59) (0.64)
In excess of net investment income................ (0.01) -- -- --
From net realized gains from investments.......... (0.03) (0.02) -- (0.15)
In excess of realized gains from
investment transactions........................ -- -- -- --
Tax return of capital............................. -- -- -- --
--------- ----------- --------- ---------
Total Distributions.................................. (0.60) (0.62) (0.59) (0.79)
-------- ---------- -------- --------
Net increase (decrease) in net asset value........... 0.16 0.33 (0.33) 0.79
-------- ---------- -------- --------
NET ASSET VALUE--END OF PERIOD....................... $ 10.64 $ 10.48 $ 10.15 $ 10.48
======== ========== ======== ========
Total Return*........................................ 7.32% 9.67% 2.69% 16.69%
RATIOS AND SUPPLEMENTAL DATA:
Net assets end of period (000).................... $ 42,187 $ 22,365 $ 14,622 $ 9,016
Ratio of expenses to average net assets........... 0.75% 0.75% 0.75% 0.75%
Ratio of expenses to average net assets
excluding waivers/reimbursements............... 0.78% 0.88% 1.01% 1.47%
Ratio of net investment income to
average net assets............................. 5.56% 6.06% 6.11% 6.54%
Ratio of net investment income to
average net assets excluding
waivers/reimbursements......................... 5.53% 5.93% 5.85% 5.80%
Portfolio turnover*............................... 40.4% 21.3% 21.3% 34.1%
</TABLE>
* Ratios are annualized for periods of less than one year. Total return
and portfolio turnover are not annualized.
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<PAGE> 42
FINANCIAL HIGHLIGHTS
BALANCED PORTFOLIO
The Financial Highlights table is intended to help you understand the
Portfolio's performance for the last five years or the period of the Portfolio's
operations, whichever is shorter. Certain information reflects financial results
for a single Portfolio share. The total returns in the table represent the rate
that an investor would have earned or lost on an investment in the Portfolio
(assuming reinvestment of all dividends and distributions). This information for
the Portfolio has been audited ______________ whose report, along with the
Portfolio's financial statements is incorporated by reference in the Statement
of Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD................. $ 13.19 $ 11.93 $ 11.24 $ 9.81
---------- ---------- -------- --------
Net investment income............................. 0.39 0.39 0.34 0.36
Net realized and unrealized appreciation
(depreciation)................................. 2.14 2.31 0.98 1.64
---------- ---------- -------- --------
Total from Investment Operations..................... 2.53 2.70 1.32 2.00
---------- ---------- -------- --------
Distributions:
From net investment income........................ (0.39) (0.39) (0.34) (0.36)
From net realized gains from investments.......... (0.19) (1.05) (0.23) (0.21)
In excess of realized gains from
investment transactions........................ -- -- (0.04) --
Tax return of capital............................. -- -- (0.02) --
----------- ----------- -------- ---------
Total Distributions.................................. (0.58) (1.44) (0.63) (0.57)
---------- ---------- -------- --------
Net increase (decrease) in net asset value........... 1.95 1.26 0.69 1.43
---------- ---------- -------- --------
NET ASSET VALUE--END OF PERIOD....................... $ 15.14 $ 13.19 $ 11.93 $ 11.24
========== ========== ======== ========
Total Return*........................................ 19.09% 22.90% 11.92% 20.69%
RATIOS AND SUPPLEMENTAL DATA:
Net assets end of period (000).................... $ 102,845 $ 41,446 $ 14,883 $ 5,455
Ratio of expenses to average
net assets..................................... 1.00% 1.00% 1.00% 1.00%
Ratio of expenses to average net
assets excluding waivers/reimbursements........ 1.00% 1.15% 1.44% 1.96%
Ratio of net investment income to
average net assets............................. 2.66% 3.24% 3.27% 3.66%
Ratio of net investment income to
average net assets excluding
waivers/reimbursements......................... 2.66% 3.07% 2.83% 2.70%
Portfolio turnover*............................... 32.1% 60.9% 64.8% 66.3%
</TABLE>
* Ratios are annualized for periods of less than one year. Total return
and portfolio turnover are not annualized.
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<PAGE> 43
FINANCIAL HIGHLIGHTS
LARGE CAP GROWTH PORTFOLIO
The Financial Highlights table is intended to help you understand the
Portfolio's performance for the last five years or the period of the Portfolio's
operations, whichever is shorter. Certain information reflects financial results
for a single Portfolio share. The total returns in the table represent the rate
that an investor would have earned or lost on an investment in the Portfolio
(assuming reinvestment of all dividends and distributions). This information for
the Portfolio has been audited by ___________________whose report, along with
the Portfolio's financial statements is incorporated by reference in the
Statement of Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD................. $ 17.21 $ 13.67 $ 12.12 $ 9.99
---------- ---------- -------- --------
Net investment income............................. 0.06 0.10 0.16 0.20
Net realized and unrealized appreciation
(depreciation)................................. 7.03 4.25 1.86 2.20
---------- ---------- -------- --------
Total from Investment Operations..................... 7.09 4.35 2.02 2.40
---------- ---------- -------- --------
Distributions:
From net investment income........................ (0.06) (0.10) (0.16) (0.20)
From net realized gains from investments.......... (1.61) (0.71) (0.30) (0.07)
In excess of realized gains from
investment transactions........................ -- -- (0.01) --
Tax return of capital............................. -- -- -- --
----------- ----------- --------- ---------
Total Distributions.................................. (1.67) (0.81) (0.47) (0.27)
---------- ---------- -------- --------
Net increase (decrease) in net asset value........... 5.42 3.54 1.55 2.13
---------- ---------- -------- --------
NET ASSET VALUE--END OF PERIOD....................... 22.63 $ 17.21 $ 13.67 $ 12.12
========== ========== ======== ========
Total Return*........................................ 41.27% 31.93% 16.67% 24.13%
RATIOS AND SUPPLEMENTAL DATA:
Net assets end of period (000).................... $ 202,035 $ 99,628 $ 42,893 $ 16,119
Ratio of expenses to average net assets........... 0.93% 1.00% 0.98% 0.90%
Ratio of expenses to average net assets
excluding waivers/reimbursements............... 0.93% 1.00% 1.16% 1.64%
Ratio of net investment income to
average net assets............................. 0.32% 0.69% 1.29% 2.02%
Ratio of net investment income to
average net assets excluding
waivers/reimbursements......................... 0.32% 0.69% 1.11% 1.28%
Portfolio turnover*............................... 61.0% 34.4% 38.7% 37.4%
</TABLE>
* Ratios are annualized for periods of less than one year. Total return
and portfolio turnover are not annualized.
42
<PAGE> 44
FINANCIAL HIGHLIGHTS
EQUITY INDEX PORTFOLIO
The Financial Highlights table is intended to help you understand the
Portfolio's performance for the last five years or the period of the Portfolio's
operations, whichever is shorter. Certain information reflects financial results
for a single Portfolio share. The total returns in the table represent the rate
that an investor would have earned or lost on an investment in the Portfolio
(assuming reinvestment of all dividends and distributions). This information for
the Portfolio has been audited by ________________________whose report, along
with the Portfolio's financial statements is incorporated by reference in the
Statement of Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1999 1998*
<S> <C> <C>
NET ASSET VALUE--Beginning of Period $ 10.00
---------
Net investment income 0.08
---------
Net realized and unrealized appreciation (depreciation) 0.97
---------
Total from Investment Operations 1.05
---------
Distributions:
From net investment income (0.08)
From net realized gains from investments -.-
In excess of realized gains from investment transactions -.-
Tax return of capital -.-
------
Total Distributions (0.08)
---------
Net increase (decrease) in net asset value 0.97
NET ASSET VALUE--End of Period $ 10.97
---------
Total Return** 10.52%
RATIOS AND SUPPLEMENTAL DATA:
Net assets end of period (000) $ 14,481
Ratio of expenses to average net assets 0.55%**
Ratio of expenses to average net asset
excluding waivers/reimbursements 1.13%**
Ratio of net investment income to average net assets 1.45%**
Ratio of net investment income to average net assets
excluding waivers/reimbursements 0.87%**
Portfolio turnover** 2.3%
</TABLE>
* Initial public offering was May 1, 1998.
** Ratios are annualized for periods of less than one year. Total return
and portfolio turnover are not annualized.
43
<PAGE> 45
FINANCIAL HIGHLIGHTS
DIVERSIFIED EQUITY PORTFOLIO
The Financial Highlights table is intended to help you understand the
Portfolio's performance for the last five years or the period of the Portfolio's
operations, whichever is shorter. Certain information reflects financial results
for a single Portfolio share. The total returns in the table represent the rate
that an investor would have earned or lost on an investment in the Portfolio
(assuming reinvestment of all dividends and distributions). This information for
the Portfolio has been audited by ________________and other independent
accountants. ______________report, along with the Portfolio's financial
statements is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1999*** 1998 1997 1996 1995*
------- ---- ---- ---- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE--Beginning of Period $ 16.22 $ 13.19 $ 11.63 $ 10.00
-------- -------- --------- --------
Net investment income 0.11 0.13 0.15 0.13
-------- -------- --------- --------
Net realized and unrealized
appreciation (depreciation) 2.00 3.38 2.02 1.63
-------- -------- --------- --------
Total from Investment Operations 2.11 3.51 2.17 1.76
-------- -------- --------- --------
Distributions:
From net investment income (0.12) (0.13) (0.14) (0.13)
From net realized gains from investments (0.41) (0.35) (0.47) -.-
In excess of realized gains from
investment transactions -.- -.- -.- -.-
Tax return of capital -.- -.- -.- -.-
-------- -------- --------- --------
Total Distributions (0.53) (0.48) (0.61) (0.13)
-------- -------- --------- --------
Net increase (decrease) in net asset value 1.58 3.03 1.56 1.63
-------- -------- --------- --------
NET ASSET VALUE--End of Period $ 17.80 $ 16.22 $ 13.19 $ 11.63
======== ======== ========= ========
Total Return 13.10% 26.80% 18.75% 22.75%**
RATIOS AND SUPPLEMENTAL DATA:
Net assets end of period (000) $ 59,560 $ 38,705 $ 8,603 $ 3,754
Ratio of expenses to average net assets 0.95% 0.93% 0.85% 0.85%**
Ratio of expenses to average net assets
excluding waivers/reimbursements 1.02% 1.10% 2.27% 4.93%**
Ratio of net investment income to
average net assets 0.69% 0.93% 1.35% 1.78%**
Portfolio turnover 43.2% 31.1% 46.8% 17.5%**
</TABLE>
* Commenced operations in March 30, 1995.
** Annualized.
*** On March 31, 1999, the One Group Investment Trust Diversified Equity
Portfolio was substituted for the Pegasus Variable Growth and Value Fund.
Financial highlights for the period prior to March 31, 1999 represent the
Pegasus Variable Growth and Value Fund.
44
<PAGE> 46
FINANCIAL HIGHLIGHTS
MID CAP GROWTH PORTFOLIO
The Financial Highlights table is intended to help you understand the
Portfolio's performance for the last five years or the period of the Portfolio's
operations, whichever is shorter. Certain information reflects financial results
for a single Portfolio share. The total returns in the table represent the rate
that an investor would have earned or lost on an investment in the Portfolio
(assuming reinvestment of all dividends and distributions). This information for
the Portfolio has been audited by ____________________whose report, along with
the Portfolio's financial statements is incorporated by reference in the
Statement of Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD................. $ 14.21 $ 12.11 $ 11.52 $ 9.70
---------- ---------- -------- --------
Net investment income (loss)...................... (0.03) (0.03) 0.18 0.04
Net realized and unrealized
appreciation (depreciation).................... 5.95 3.63 1.62 2.29
---------- ---------- -------- --------
Total from Investment Operations..................... 5.92 3.60 1.80 2.33
---------- ---------- -------- --------
Distributions:
From net investment income........................ -- -- (0.19) (0.04)
From net realized gains from investments.......... (1.38) (1.48) (0.78) (0.47)
In excess of realized gains from
investment transactions........................ (0.03) -- (0.24) --
Tax return of capital............................. (0.20) (0.02) -- --
---------- ---------- --------- ---------
Total Distributions.................................. (1.61) (1.50) (1.21) (0.51)
---------- ---------- -------- --------
Net increase (decrease) in net asset value........... 4.31 2.10 0.59 1.82
---------- ---------- -------- --------
NET ASSET VALUE--END OF PERIOD....................... $ 18.52 $ 14.21 $ 12.11 $ 11.52
========== ========== ======== ========
Total Return*........................................ 38.82% 29.81% 15.67% 24.06%
RATIOS AND SUPPLEMENTAL DATA:
Net assets end of period (000).................... $ 92,674 $ 50,707 $ 22,339 $ 6,685
Ratio of expenses to average net assets........... 0.97% 1.10% 1.06% 0.90%
Ratio of expenses to average net assets
excluding waivers/reimbursements............... 0.97% 1.11% 1.40% 2.78%
Ratio of net investment income to
average net assets............................. (0.25%) (0.25%) 1.85% 0.46%
Ratio of net investment income to
average net assets excluding
waivers/reimbursements......................... (0.25%) (0.26%) 1.51% (1.42%)
Portfolio turnover*............................... 87.7% 175.6% 326.9% 193.3%
</TABLE>
* Ratios are annualized for periods of less than one year. Total return
and portfolio turnover are not annualized.
45
<PAGE> 47
FINANCIAL HIGHLIGHTS
DIVERSIFIED MID CAP PORTFOLIO
The Financial Highlights table is intended to help you understand the
Portfolio's performance for the last five years or the period of the Portfolio's
operations, whichever is shorter. Certain information reflects financial results
for a single Portfolio share. The total returns in the table represent the rate
that an investor would have earned or lost on an investment in the Portfolio
(assuming reinvestment of all dividends and distributions). This information for
the Portfolio has been audited by _____________________ and other independent
accountants._____________________ report, along with the Portfolio's financial
statements is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1999*** 1998 1997 1996 1995*
------- -------- -------- --------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE--Beginning of Period $ 14.38 $ 13.46 $ 11.02 $ 10.00
-------- -------- --------- --------
Net investment income (loss) (0.01) 0.01 0.03 0.05
Net realized and unrealized
appreciation (depreciation) 0.70 3.55 2.67 1.02
-------- -------- --------- --------
Total from Investment Operations 0.69 3.56 2.70 1.07
-------- -------- --------- --------
Distributions:
From net investment income -.- (0.01) (0.03) (0.05)
From net realized gains from
investments (0.31) (2.63) (0.23) -.-
In excess of realized gains
from investment transactions -.- -.- -.- -.-
Tax return of capital -.- -.- -.- -.-
-------- -------- --------- --------
Total Distributions (0.31) (2.64) (0.26) (0.05)
-------- -------- --------- --------
Net increase (decrease) in
net asset value 0.38 0.92 2.44 1.02
-------- -------- --------- --------
NET ASSET VALUE--End of Period $ 14.76 $ 14.38 $ 13.46 $ 11.02
======== ======== ========= ========
Total Return 4.91% 26.65% 24.53% 14.20%**
RATIOS AND SUPPLEMENTAL DATA:
Net assets end of period (000) $ 18,160 $ 11,668 $ 9,216 $ 4,972
Ratio of expenses to average net assets 0.95% 0.91% 0.85% 0.85%**
Ratio of expenses to average net assets
excluding waivers/reimbursements 1.52% 1.49% 2.11% 4.64%**
Ratio of net investment income
(loss) to average net assets (0.10)% 0.04% 0.28% 0.67%**
Portfolio turnover 26.2% 80.7% 37.4% 32.1%
</TABLE>
* Commenced operations on March 30, 1995.
** Annualized.
*** On March 31, 1999, the One Group Investment Trust Diversified Mid Cap
Portfolio was substituted for the Pegasus Variable Mid-Cap Opportunity Fund.
Financial highlights for the period prior to March 31, 1999 represent the
Pegasus Variable Mid-Cap Opportunity Fund.
46
<PAGE> 48
FINANCIAL HIGHLIGHTS
MID CAP VALUE PORTFOLIO
The Financial Highlights table is intended to help you understand the
Portfolio's performance for the last five years or the period of the Portfolio's
operations, whichever is shorter. Certain information reflects financial results
for a single Portfolio share. The total returns in the table represent the rate
that an investor would have earned or lost on an investment in the Portfolio
(assuming reinvestment of all dividends and distributions). This information for
the Portfolio has been audited by __________________and other independent
accountants. __________________report, along with the Portfolio's financial
statements is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1999*** 1998 1997*
------- ---- -----
<S> <C> <C> <C>
NET ASSET VALUE--Beginning of Period $ 11.53 $ 10.00
-------- --------
Net investment income 0.21 0.12
Net realized and unrealized appreciation (depreciation) (0.58) 1.57
-------- --------
Total from Investment Operations (0.37) 1.69
-------- --------
Distributions:
From net investment income (0.21) (0.12)
From net realized gains from investments (0.20) (0.04)
In excess of realized gains from investment transactions (0.05) -.-
Tax return of capital -.- -.-
-------- --------
Total Distributions (0.46) (0.16)
-------- --------
Net increase (decrease) in net asset value (0.83) 1.53
-------- --------
NET ASSET VALUE--End of Period $ 10.70 $ 11.53
======== ========
Total Return (3.31%) 25.26%**
RATIOS AND SUPPLEMENTAL DATA:
Net assets end of period (000) $ 22,501 $ 13,926
Ratio of expenses to average net assets 0.95% 0.95%**
Ratio of expenses to average net assets
excluding waivers/reimbursements 1.27% 1.22%**
Ratio of net investment income to average net assets 1.90% 1.83%**
Portfolio turnover 39.3% 19.6%**
</TABLE>
* Commenced operations on May 1, 1997.
** Annualized.
*** On March 31, 1999, the One Group Investment Trust Mid Cap Value Portfolio
was substituted for the Pegasus Variable Intrinsic Value Fund. Financial
highlights for the period prior to March 31, 1999 represent the Pegasus Variable
Intrinsic Value Fund.
47
<PAGE> 49
APPENDIX A
INVESTMENT PRACTICES
The Portfolios invest in a variety of securities and employ a number of
investment techniques. Each security and technique involves certain risks. What
follows is a list of some of the securities and techniques which may be utilized
by the Portfolios, as well as the risks inherent in their use. Equity securities
are subject mainly to market risk. Fixed income securities are primarily
influenced by market, credit and prepayment risks, although certain securities
may be subject to additional risks. For a more complete discussion, see the
Statement of Additional Information. Following the table is a more complete
discussion of risk.
<TABLE>
<CAPTION>
PORTFOLIO NAME PORTFOLIO CODE
- -------------- --------------
<S> <C>
ONE GROUP INVESTMENT TRUST BOND PORTFOLIO 1
ONE GROUP INVESTMENT TRUST GOVERNMENT BOND PORTFOLIO 2
ONE GROUP INVESTMENT TRUST BALANCED PORTFOLIO 3
ONE GROUP INVESTMENT TRUST MID CAP GROWTH PORTFOLIO 4
ONE GROUP INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO 5
ONE GROUP INVESTMENT TRUST EQUITY INDEX PORTFOLIO 6
ONE GROUP INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO 7
ONE GROUP INVESTMENT TRUST DIVERSIFIED MID CAP PORTFOLIO 8
ONE GROUP INVESTMENT TRUST MID CAP VALUE PORTFOLIO 9
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT PORTFOLIO CODE RISK TYPE
- ---------- -------------- ---------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, 1-9 Market
bonds, STRIPS, and CUBES.
Treasury Receipts: TRS, TIGRs, and CATS. 1-9 Market
U.S. Government Agency Securities: Securities 1-9 Market
issued by agencies and instrumentalities of Credit
the U.S. Government. These include Ginnie Mae,
Fannie Mae, and Freddie Mac.
Certificates of Deposit: Negotiable instruments with a stated 1, 3-9 Market
maturity. Credit
Time Deposits: Non-negotiable receipts issued by a bank in 1, 3-9 Liquidity
exchange for the deposit of funds. Credit
Market
Common Stock: Shares of ownership of a company. 3-9 Market
Repurchase Agreements: The purchase of a security and the 1-9 Credit
simultaneous commitment to return the security to the seller at Market
an agreed upon price on an agreed upon date. This is treated as Liquidity
a loan.
Reverse Repurchase Agreement: The sale of a security and the 1-9 Market
simultaneous commitment to buy the security back at an agreed Leverage
upon price on an agreed upon date. This is treated as a
borrowing by a Portfolio.
</TABLE>
48
<PAGE> 50
<TABLE>
<CAPTION>
INSTRUMENT PORTFOLIO CODE RISK TYPE
- ---------- -------------- ---------
<S> <C> <C>
Securities Lending: The lending of up to 331/3% of the Portfolio's 1-9 Credit
total assets. In return, the Portfolio will receive cash, other securities, Market
and/or letters of credit. Leverage
When-Issued Securities and Forward Commitments: Purchase or 1-9 Market
contract to purchase securities at a fixed price for delivery at Leverage
a future date. Liquidity
Credit
Investment Company Securities: Shares of other mutual funds, 1-9 Market
including money market funds of One Group(R) Mutual Funds and shares of other
money market funds for which Banc One Investment Advisors or its affiliates
serve as investment advisor or administrator.
Banc One Investment Advisors will waive certain fees when investing in funds or
portfolios for which it serves as investment advisor.
Convertible Securities: Bonds or preferred stock that convert to 1, 3-9 Market
common stock. Credit
Call and Put Options: A call option gives the buyer the right to 1-9 Management
buy, and obligates the seller of the option to sell, a security Liquidity
at a specified price. A put option gives the buyer the right to Credit
sell, and obligates the seller of the option to buy, a security Market
at a specified price. The Portfolios will sell only covered call and Leverage
secured put options.
Futures and Related Options: A contract providing for the future 1-9 Management
sale and purchase of a specified amount of a specified security, Market
class of securities, or an index at a specified time in the Credit
future and at a specified price. Liquidity
Leverage
Real Estate Investment Trusts ("REITs"): Pooled investment 3-9 Liquidity
vehicles which invest primarily in income producing real estate Management
or real estate related loans or interest. Market
Regulatory
Tax
Pre-payment
Bankers' Acceptances: Bills of exchange or time drafts drawn on 1, 3-9 Credit
and accepted by a commercial bank. Maturities are generally six Liquidity
months or less. Market
Commercial Paper: Secured and unsecured short-term promissory 1, 3-9 Credit
notes issued by corporations and other entities. Maturities Liquidity
generally vary from a few days to nine months. Market
Foreign Securities: Stocks issued by foreign companies, as well Market
as commercial paper of foreign issuers and obligations of 1, 3-9 Political
foreign banks, overseas branches of U.S. banks and supranational Liquidity
entities. The Equity Portfolios may also invest in American Depositary Foreign Investment
Receipts, Global Depositary Receipts, and American Depositary Securities.
Restricted Securities: Securities not registered under the 1-9 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
Variable and Floating Rate Instruments: Obligations with Credit
interest rates which are reset daily, weekly, quarterly or some 1, 3-9 Liquidity
other period and which may be payable to the Portfolio on demand. Market
Warrants: Securities, typically issued with preferred stock or 3, 5-8 Market
bonds, that give the holder the right to buy a proportionate Credit
amount of common stock at a specified price.
Preferred Stock: A class of stock that generally pays a dividend 1, 3-9 Market
at a specified rate and has preference over common stock
in the payment of dividends and in liquidation.
</TABLE>
49
<PAGE> 51
<TABLE>
<CAPTION>
INSTRUMENT PORTFOLIO CODE RISK TYPE
- ---------- -------------- ---------
<S> <C> <C>
Mortgage-Backed Securities: Debt obligations secured by real 1-3, 8 Pre-payment
estate loans and pools of loans. These include collateralized Market
mortgage obligations ("CMOs"), Real Estate Mortgage Investment Credit
Conduits ("REMICs") and Stripped Mortgage-Backed Securities ("SMBS").
Corporate Debt Securities: Corporate bonds and non-convertible 1, 3, 5 Market
debt securities. Credit
Demand Features: Securities that are subject to puts and standby 1, 3, 5 Market
commitments to purchase the securities at a fixed price (usually Liquidity
with accrued interest) within a fixed period of time following Management
demand by a Portfolio.
Asset-Backed Securities: Securities secured by company 1, 3, 8 Pre-payment
receivables, home equity loans, truck and auto loans, leases, Market
credit card receivables and other securities backed by other Credit
types of receivables or other assets. Regulatory
Mortgage Dollar Rolls: A transaction in which a Portfolio sells 1-3, 8 Pre-payment
securities for delivery in a current month and simultaneously Market
contracts with the same party to repurchase similar but not Regulatory
identical securities on a specified future date.
Adjustable Rate Mortgage Loans ("ARMs"): Loans in a mortgage 1-3 Pre-payment
pool which provide for a fixed initial mortgage interest rate Market
for a specified period of time, after which the rate may be Credit
subject to periodic adjustments. Regulatory
Swaps, Caps and Floors: A Portfolio may enter into these transactions 1-9 Management
to manage its exposure to changing interest rates and other Credit
factors. Swaps involve an exchange of obligations by two Liquidity
parties. Caps and floors entitle a purchaser to a principal Market
amount from the seller of the cap or floor to the extent
that a specified index exceeds or falls below a predetermined
interest rate or amount.
New Financial Products: New options and futures contracts and 1-9 Management
other financial products continue to be developed and the Portfolios Credit
may invest in such options, contracts and products. Market
Liquidity
Structured Instruments: Debt securities issued by agencies and 1-9 Market
instrumentalities of the U.S. government, banks, municipalities, Liquidity
corporations and other businesses whose interest and/or Management
principal payments are indexed to foreign currency exchange Credit
rates, interest rates, or one or more other referenced indices. Foreign Investment
Municipal Securities: Securities issued by a state or political 1-3 Market
subdivision to obtain funds for various public purposes. Credit
Municipal securities include private activity bonds and Political
industrial development bonds, as well as General Obligation Tax
Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue
Anticipation Notes, Project Notes, other short-term tax-exempt
obligations, municipal leases, and obligations of municipal
housing authorities and single family revenue bonds.
Index Shares; Ownership interests in unit investment trusts and other 3-9 Market
pooled investment vehicles that hold a portfolio of securities or stocks
designed to track the price performance and dividend yield of a partcular
index such as Standard & Poor's Depository Receipts ("SPDRs") and
Nasdaq 100's. The Equity Index Portfolio invests only in SPDRs.
Obligations of Supranational Agencies: Obligations of 3, 8 Credit
supranational agencies who are chartered to promote economic Foreign Investment
development and are supported by various governments
and governmental agencies.
Zero-Coupon Debt Securities: Bonds and other debt that pay no 1-3, 8 Credit
interest, but are issued at a discount from their value at Market
maturity. When held to maturity, their entire return equals the Zero Coupon
difference between their issue price and their maturity value.
</TABLE>
50
<PAGE> 52
<TABLE>
<CAPTION>
INSTRUMENT PORTFOLIO CODE RISK TYPE
- ---------- -------------- ---------
<S> <C> <C>
Zero-Fixed-Coupon Debt Securities: Zero coupon debt securities 1-3, 8 Credit
which convert on a specified date to interest bearing debt Market
securities. Zero Coupon
Stripped Mortgage-Backed Securities: Derivative multi-class 1-3 Pre-payment
mortgage securities which are usually structured with two Market
classes of shares that receive different proportions of the Credit
interest and principal from a pool of mortgage assets. These Regulatory
include IOs and POs.
Inverse Floating Rate Instruments: Floating rate debt 1-3 Market
instruments with interest rates that reset in the opposite Leverage
direction from the market rate of interest to which the inverse Credit
floater is indexed.
Loan Participations and Assignments: Participations in, or 1, 3 Credit
assignments of all or a portion of loans to corporations or to Political
governments, including governments of the less developed Liquidity
countries ("LDC's"). Foreign Investment
Market
Fixed Rate Mortgage Loans: Investments in fixed rate mortgage 1-3 Credit
loans or mortgage pools which bear simple interest at fixed Pre-payment
annual rates and have original terms ranging from 5 to 40 years. Regulatory
Market
Short-Term Funding Agreements: Investments in short-term funding 1, 3 Credit
agreements issued by banks and highly rated U.S. insurance Liquidity
companies such as Guaranteed Investment Contracts ("GIC's") and Market
Bank Investment Contracts ("BIC's").
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Portfolios may fluctuate, as will the value
of your investment in the Portfolios. Certain investments are more susceptible
to these risks than others.
- - Credit Risk. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to
honor a financial obligation. Credit risk is generally higher for
non-investment grade securities. The price of a security can be
adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
- - Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also
may be embedded directly in the characteristics of other securities.
Hedged. When a derivative (a security whose value is based on
another security or index) is used as a hedge against an
opposite position that the Portfolio also holds, any loss
generated by the derivative should be substantially offset by
gains on the hedged investment, and vice versa. While hedging
can reduce or eliminate losses, it can also reduce or eliminate
gains. Hedges are sometimes subject to imperfect matching
between the derivative and underlying security, and there can
be no assurance that a Portfolio's hedging transactions will be
effective.
Speculative. To the extent that a derivative is not used as a
hedge, the Portfolio is directly exposed to the risks of that
derivative. Gains or losses from speculative positions in a
derivative may be substantially greater than the derivative's
original cost.
- - Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally
prevail in the market. The seller may have to lower the price, sell
other securities instead or forego an investment opportunity, any of
which could have a negative effect on Portfolio
51
<PAGE> 53
management or performance. This includes the risk of missing out on an
investment opportunity because the assets necessary to take advantage
of it are tied up in less advantageous investments.
- - Management Risk. The risk that a strategy used by a Portfolio's
management may fail to produce the intended result. This includes the
risk that changes in the value of a hedging instrument will not match
those of the asset being hedged. Incomplete matching can result in
unanticipated risks.
- - Market Risk. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for
it, or less than it was worth at an earlier time. Market risk may
affect a single issuer, industry, sector of the economy or the market
as a whole. There is also the risk that the current interest rate may
not accurately reflect existing market rates. For fixed income
securities, market risk is largely, but not exclusively, influenced by
changes in interest rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in
values. Finally, key information about a security or market may be
inaccurate or unavailable. This is particularly relevant to investments
in foreign securities.
- - Political Risk. The risk of losses attributable to unfavorable
governmental or political actions, seizure of foreign deposits, changes
in tax or trade statutes, and governmental collapse and war.
- - Foreign Investment Risk. The risk associated with higher transaction
costs, delayed settlements, currency controls and adverse economic
developments. This also includes the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates may
erode or reverse any gains produced by foreign currency denominated
investments and may widen any losses. Exchange rate volatility also my
affect the ability of an issuer to repay U.S. dollar denominated debt,
thereby increasing credit risk.
- - Pre-Payment Risk. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage or asset-backed security occurs either significantly sooner or
later than expected. Changes in pre-payment rates can result in greater
price and yield volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other obligations are
pre-paid, a Portfolio may have to reinvest in securities with a lower
yield. Further, with early prepayment, a Portfolio may fail to recover
any premium paid, resulting in an unexpected capital loss.
- - Tax Risk. The risk that the issuer of the securities will fail to
comply with certain requirements of the Internal Revenue Code, which
could cause adverse tax consequences.
- - Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a lender has when a borrower defaults on
loans. These laws include restrictions on foreclosures, redemption
rights after foreclosure, Federal and state bankruptcy and debtor
relief laws, restrictions on "due on sale" clauses, and state usury
laws.
- - Zero Coupon Risk. The market prices of securities structured as zero
coupon or pay-in-kind securities are generally affected to a greater
extent by interest rate changes. These securities tend to be more
volatile than securities which pay interest periodically.
52
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If you want more information about the Portfolios, the following documents are
free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Portfolios'
investments is available in the Portfolios' annual and semi-annual reports to
shareholders. In each Portfolio's annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Portfolio's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Portfolios and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the
semi-annual/annual reports or the SAI, request other information or discuss your
questions about the Portfolios by calling 1 800-480-4111 or by writing the
Portfolios at:
One Group(R)Investment Trust
1111 Polaris Parkway, Suite B-2
Columbus, Ohio 43271-0211
You can also review and copy the Portfolios' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090). You can
also get reports and other information about the Portfolios from the EDGAR
Database on the SEC's web site at http://www.sec.gov. Copies of this information
may be obtained, after paying a copying charge, by electronic request at the
following E-mail address: [email protected] or by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009.
VARIABLE ANNUITY AND LIFE INSURANCE CONTRACTS: This prospectus is for use with
variable life insurance contracts and variable annuity contracts. All questions
regarding variable annuity contracts or variable life insurance contracts should
be directed to the address in the prospectus or other materials that you
received when you purchased your variable annuity or variable life product.
(Investment Company Act File No. 811-7874)
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STATEMENT OF ADDITIONAL INFORMATION
ONE GROUP(R)INVESTMENT TRUST
ONE GROUP INVESTMENT TRUST BOND PORTFOLIO (THE "BOND PORTFOLIO")
ONE GROUP INVESTMENT TRUST GOVERNMENT BOND PORTFOLIO (THE "GOVERNMENT BOND
PORTFOLIO")
ONE GROUP INVESTMENT TRUST BALANCED PORTFOLIO (THE "BALANCED PORTFOLIO")
ONE GROUP INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO (THE "LARGE CAP GROWTH
PORTFOLIO")
ONE GROUP INVESTMENT TRUST EQUITY INDEX PORTFOLIO (THE "EQUITY INDEX
PORTFOLIO")
ONE GROUP INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO
(THE "DIVERSIFIED EQUITY PORTFOLIO")
ONE GROUP INVESTMENT TRUST DIVERSIFIED MID CAP PORTFOLIO
(THE "DIVERSIFIED MID CAP PORTFOLIO")
ONE GROUP INVESTMENT TRUST MID CAP GROWTH PORTFOLIO (THE "MID CAP GROWTH
PORTFOLIO")
ONE GROUP INVESTMENT TRUST MID CAP VALUE PORTFOLIO
(THE "MID CAP VALUE PORTFOLIO")
(EACH A "PORTFOLIO," AND COLLECTIVELY THE "PORTFOLIOS")
May 1, 2000
This Statement of Additional Information is not a Prospectus, but
supplements and should be read with the Prospectus dated May 1, 2000 for the
Portfolios (the "Prospectus"). This Statement of Additional Information is
incorporated in its entirety into the Prospectus. The Annual Report for the
Portfolios for the fiscal year ended December 31, 1999 is incorporated by
reference into this Statement of Additional Information. A copy of the Annual
Report and the Prospectus is available without charge by writing to One Group
Investment Trust (the "Trust") at 1111 Polaris Parkway, P.O. Box 710211,
Columbus, Ohio 43271-0211 or by calling toll free at 1-800-480-4111.
<PAGE> 56
<TABLE>
<S> <C>
PAGE
THE TRUST .........................................................................................................
INVESTMENT OBJECTIVES AND POLICIES.................................................................................. 3
Additional Information on Portfolio Investments..................................................................... 3
Asset-Backed Securities....................................................................................... 3
Bank Obligations.............................................................................................. 3
Commercial Paper.............................................................................................. 4
Common Stock.................................................................................................. 4
Convertible Securities........................................................................................ 4
Demand Features............................................................................................... 4
Foreign Investments........................................................................................... 5
Risk Factors.................................................................................................. 5
Futures and Options Trading................................................................................... 5
Futures Contracts........................................................................................... 6
Limitations on the Use of Futures Contracts................................................................. 7
Risk Factors in Futures Transactions........................................................................ 8
Options Contracts........................................................................................... 9
Writing (Selling) Covered Calls............................................................................. 9
Purchasing Call Options..................................................................................... 11
Purchasing Put Options...................................................................................... 11
Secured Puts................................................................................................ 11
Straddles and Spreads....................................................................................... 11
Risk Factors in Options Transactions........................................................................ 11
Limitations on the Use of Options........................................................................... 12
Government Securities......................................................................................... 12
High Yield/High Risk Securities/Junk Bonds.................................................................... 13
Index Shares
Investment Company Securities................................................................................. 14
Loan Participations and Assignments........................................................................... 14
Mortgage-Related Securities................................................................................. 15
Mortgage-Backed Securities (CMOs and REMICs)................................................................ 15
Mortgage Dollar Rolls....................................................................................... 16
Stripped Mortgage Backed Securities......................................................................... 17
Adjustable Rate Mortgage Loans.............................................................................. 18
Risk Factors of Mortgage-Related Securities................................................................. 18
Municipal Securities.......................................................................................... 21
Risk Factors in Municipal Securities........................................................................ 22
PERCs.......................................................................................................... 23
Preferred Stock............................................................................................... 23
Real Estate Investment Trusts ("REITs")....................................................................... 24
Repurchase Agreements......................................................................................... 24
Reverse Repurchase Agreements................................................................................. 25
Restricted Securities......................................................................................... 25
Securities Lending............................................................................................ 26
Short-term Funding Agreements................................................................................. 26
Structured Instruments........................................................................................ 27
Swaps, Caps and Floors........................................................................................ 28
Treasury Receipts............................................................................................. 30
U.S. Treasury Obligations..................................................................................... 30
</TABLE>
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<TABLE>
<S> <C>
PAGE
Variable and Floating Rate Instruments........................................................................ 30
Limitations on the Use of Variable and Floating Rate Notes.................................................... 30
Warrants...................................................................................................... 31
When-Issued Securities and Forward Commitments ............................................................... 31
Investment Restrictions.......................................................................................... 32
Portfolio Turnover............................................................................................... 33
Additional Tax Information Concerning All Portfolios............................................................. 34
VALUATION. ......................................................................................................... 36
Valuation of the Portfolios......................................................................................... 36
ADDITIONAL INFORMATION REGARDING THE
CALCULATION OF PER SHARE NET ASSET VALUE............................................................................ 36
Additional Purchase and Redemption Information...................................................................... 37
MANAGEMENT OF THE TRUST............................................................................................. 37
Trustees & Officers................................................................................................. 37
Investment Advisor.................................................................................................. 41
Codes of Ethics..................................................................................................... 44
Portfolio Transactions.............................................................................................. 46
Administrator....................................................................................................... 47
Sub-Administrators.................................................................................................. 50
Custodian, Sub-Custodian, and Transfer Agent........................................................................ 50
Experts ......................................................................................................... 51
ADDITIONAL INFORMATION.............................................................................................. 52
Description of Shares............................................................................................... 52
Shareholder and Trustee Liability................................................................................... 53
Shareholders........................................................................................................ 53
Calculation of Performance Data..................................................................................... 56
Administrative Services Plan........................................................................................ 57
Miscellaneous....................................................................................................... 58
FINANCIAL STATEMENTS
Appendix A - Description of Ratings
</TABLE>
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THE TRUST
One Group Investment Trust (formerly called The One Group Investment Trust) (the
"Trust") is an open-end management investment company. The Trust was formed as a
Massachusetts business trust on June 7, 1993. The Trust consists of nine series
of units of beneficial interest ("Shares") each representing interests in one of
the following separate investment portfolios:
1. Bond Portfolio (formerly called the Bond Fund)
2. Government Bond Portfolio (formerly called the Government Bond
Fund)
3. Balanced Portfolio (formerly called the Asset Allocation Fund)
4. Mid Cap Growth Portfolio (formerly called the Growth
Opportunities Fund)
5. Large Cap Growth Portfolio (formerly called the Large Company
Growth Fund)
6. Equity Index Portfolio (formerly called the Equity Index Fund)
7. Diversified Equity Portfolio (formerly called the Value Growth
Fund)
8. Diversified Mid Cap Portfolio (formerly called the Mid Cap
Opportunities Fund)
9. Mid Cap Value Portfolio (formerly called the Mid Cap Value
Fund)
For ease of reference, this Statement of Additional Information sometimes refers
to the portfolios as the BOND PORTFOLIOS and the EQUITY PORTFOLIOS.
The BOND PORTFOLIOS include:
1. Bond Portfolio, and
2. Government Bond Portfolio.
The EQUITY PORTFOLIOS include:
1. Balanced Portfolio,
2. Mid Cap Growth Portfolio,
3. Large Cap Growth Portfolio,
4. Equity Index Portfolio,
5. Diversified Equity Portfolio,
6. Diversified Mid Cap Portfolio, and
7. Mid Cap Value Portfolio.
All of the Portfolios are diversified, as defined under the Investment Company
Act of 1940, as amended, (the "1940 Act").
Substitution of One Group Investment Trust Portfolios for Pegasus Variable
Funds. On March 31, 1999, the following portfolios of the Trust were substituted
for the following Pegasus Variable Funds in separate accounts maintained by
Hartford Life and Annuity Insurance Company:
ONE GROUP INVESTMENT TRUST PORTFOLIO PEGASUS VARIABLE FUND
1. Bond Portfolio 1. Bond Fund
2. Large Cap Growth Portfolio 2. Growth Fund
3. Diversified Mid Cap Portfolio 3. Mid-Cap Opportunity Fund
4. Mid Cap Value Portfolio 4. Intrinsic Value Fund
5. Diversified Equity Portfolio 5. Growth and Value Fund
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With the exception of the Large Cap Growth Portfolio, the Pegasus Variable Funds
are the surviving funds for accounting purposes. The Pegasus Variable Bond Fund,
the Pegasus Variable Mid-Cap Opportunity Fund, the Pegasus Variable Intrinsic
Value Fund, and the Pegasus Growth and Value Fund are referred to as the
"Predecessor Funds" in this Statement of Additional Information. Individual
Predecessor Funds are identified in this Statement of Additional Information by
reference to the applicable One Group Investment Trust Portfolio.
Much of the information in this Statement of Additional Information
expands upon subjects discussed in the Prospectus. You should not invest in the
Portfolios without first reading the Prospectus.
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<PAGE> 60
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement each Portfolio's investment objective and
policies as described in the Prospectus. Additional details about each
Portfolio's investment objectives and policies is contained in the Prospectus
under "Fund Summary: Investments, Risk & Performance," "More About the
Portfolios" and Appendix A - Investment Practices.
ADDITIONAL INFORMATION ON PORTFOLIO INVESTMENTS
ASSET-BACKED SECURITIES
Asset-backed securities include securities secured by company receivables, home
equity loans, truck and auto loans, leases, or credit card receivables.
Asset-Backed Securities also include other securities backed by other types of
receivables or other assets. These securities are generally pass-through
securities, which means that principal and interest payments on the underlying
securities (less servicing fees) are passed through to shareholders on a pro
rata basis.
Prepayment Risks. The issuers of asset-backed securities may be able to repay
principal in advance if interest rates fall. Also, the underlying assets (for
example, the underlying credit card debt) may be refinanced or paid off prior to
maturity during periods of declining interest rates. If asset-backed securities
are pre-paid, a Portfolio may have to reinvest the proceeds from these
securities at a lower rate. In addition, potential market gains on a security
subject to prepayment risk may be more limited than potential market gains on a
comparable security that is not subject to prepayment risk. Under certain
prepayment rate scenarios, a Portfolio may fail to recover any premium paid on
asset-backed securities.
BANK OBLIGATIONS
Bank obligations include bankers' acceptances, certificates of deposit, and time
deposits. The Portfolios (other than the Government Bond Portfolio) may invest
in bank obligations.
Bankers' Acceptances are negotiable drafts or bills of exchange typically drawn
by an importer or exporter to pay for specific merchandise. These drafts are
"accepted" by a bank, meaning, in effect, that the bank unconditionally agrees
to pay the face value of the instrument on maturity. To be eligible for purchase
by a Portfolio, a bankers' acceptance must be guaranteed by domestic and foreign
banks and savings and loan associations having, at the time of investment, total
assets in excess of $1 billion (as of the date of their most recently published
financial statements).
Certificates of Deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return. To be eligible for investment, a
certificate of deposit must be issued by domestic and foreign branches of U.S.
commercial banks which are members of the Federal Reserve System or the deposits
of which are insured by the Federal Deposit Insurance Corporation, and in
certificates of deposit of domestic savings and loan associations the deposits
of which are insured by the Federal Deposit Insurance Corporation if, at the
time of purchase, such institutions have total assets in excess of $1 billion
(as of the date of their most recently published financial statements).
Certificates of deposit may also include those issued by foreign banks outside
the United States with total assets at the time of purchase in excess of the
equivalent of $1 billion.
The Portfolios may also invest in Eurodollar certificates of deposit. Eurodollar
certificates of deposit are U.S. dollar-denominated certificates of deposit
issued by branches of foreign and domestic banks located outside the United
States. The Portfolios may also invest in Yankee Certificates of Deposit. Yankee
Certificates of Deposits are certificates of deposit issued by a U.S. branch of
a foreign bank denominated in U.S. dollars and held in the United States. The
Portfolios may also invest in obligations (including banker's acceptances and
certificates of deposit) denominated in foreign currencies (see "Foreign
Investments").
Time Deposits are interest-bearing non-negotiable deposits at a bank or a
savings and loan association that have a specific maturity date. A time deposit
earns a specific rate of interest over a definite period of time. Time deposits
cannot be traded on the secondary market. Time deposits that exceed seven days
and include a withdrawal penalty are considered to be illiquid. Demand Deposits
are funds deposited in a commercial bank or a savings and loan association
which, without prior notice to the bank, may be withdrawn generally by
negotiable draft. Time and demand deposits will be maintained only at banks or
savings and loan associations from which a Portfolio could purchase certificates
of deposit.
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COMMERCIAL PAPER
Commercial paper consists of promissory notes issued by corporations.
Although these notes are generally unsecured, the Portfolios may also purchase
secured commercial paper. Except as noted below with respect to variable amount
master demand notes, issues of commercial paper normally have maturities of less
than nine months and fixed rates of return. The Portfolios only purchase
commercial paper that meet the following criteria.
Bond Portfolio. The Bond Portfolio may purchase commercial paper
consisting of issues rated at the time of purchase in the highest or
second highest rating category by at least one Nationally Recognized
Statistical Rating Organization ("NRSRO") (such as A-2 or better by
Standard & Poor's Corporation ("S&P"), P-2 or better by Moody's
Investors Service, Inc. ("Moody's") or F2 or better by Fitch IBCA
("Fitch")) or if unrated, determined by Banc One Investment Advisors
Corporation ("Banc One Investment Advisors") to be of comparable
quality.
Equity Portfolios. The Equity Portfolios may purchase commercial paper
consisting of issues rated at the time of purchase in the highest or
second highest rating category by at least one NRSRO (such as A-2 or
better by S&P, P-2 or better by Moody's or F2 or better by Fitch) or
if unrated, determined by Banc One Investment Advisors to be of
comparable quality.
COMMON STOCK
Common stock represents a share of ownership in a company and usually carries
voting rights and earns dividends. Unlike preferred stock, common stock
dividends are not fixed but are declared at the discretion of the issuer's board
of directors.
CONVERTIBLE SECURITIES
Convertible securities are similar to both fixed income and equity securities.
Convertible securities may be issued as bonds or preferred stock. Because of the
conversion feature, the market value of convertible securities tends to move
together with the market value of the underlying stock. As a result, the
Portfolios base selection of convertible securities, to a great extent, on the
potential for capital appreciation that may exist in the underlying stock. The
value of convertible securities is also affected by prevailing interest rates,
the credit quality of the issuer, and any call provisions.
DEMAND FEATURES
The Bond Portfolio, the Balanced Portfolio, and the Large Cap Growth Portfolio
may invest in securities that are subject to puts and standby commitments
("Demand Features"). A Demand Feature allows a Portfolio to sell securities at
their principal amount (usually with accrued interest) within a fixed period
(usually seven days) following a demand by the Portfolio. The Demand Feature may
be issued by the issuer of the underlying securities, a dealer in the securities
or by another third party, and may not be transferred separately from the
underlying security. The underlying securities subject to a put may be sold at
any time at market rates. The Portfolios expect that they will acquire puts only
where the puts are available without the payment of any direct or indirect
consideration. However, if advisable or necessary, a premium may be paid for put
features. A premium paid will reduce the yield otherwise payable on the
underlying security.
Under a "Stand-By Commitment," a dealer agrees to purchase, at a Portfolio's
option, specified securities at a specified price. A Portfolio will acquire
these commitments only to aid portfolio liquidity and does not intend to
exercise the demand feature for trading purposes. Stand-by commitments may also
be referred to as put options. Each Portfolio will generally limit its
investments in stand-by commitments to 25% of its total assets.
The Portfolios engage in put transactions to maintain flexibility and liquidity,
to permit them to meet redemption requests and to remain as fully invested as
possible.
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FOREIGN INVESTMENTS
Some of the Portfolios ) may invest in certain obligations or securities of
foreign issuers. Possible investments include equity securities of foreign
entities, obligations of foreign branches of U.S. banks and of foreign banks,
including, without limitation, Eurodollar Certificates of Deposit, Eurodollar
Time Deposits, Eurodollar Banker's Acceptances, Canadian Time Deposits and
Yankee Certificates of Deposits, and investments in Canadian Commercial Paper,
foreign securities and Europaper.
The Equity Portfolios may purchase sponsored and unsponsored American Depositary
Receipts ("ADRs"). Sponsored ADRs are listed on the New York Stock Exchange;
unsponsored ADRs are not. Therefore, there may be less information available
about the issuers of unsponsored ADRs than the issuers of sponsored ADRs.
Unsponsored ADRs are restricted securities.
RISK FACTORS OF FOREIGN INVESTMENTS
Political and Exchange Risks. Foreign investments involve investment risks that
differ in some respects from those related to investments in obligations of U.S.
domestic issuers. Such risks include future adverse political and economic
developments, the possible imposition of withholding taxes on interest or other
income, possible seizure, nationalization or expropriation of foreign deposits,
the possible establishment of exchange controls or taxation at the source,
greater fluctuations in value due to changes in exchange rates, or the adoption
of other foreign governmental restrictions which might adversely affect the
payment of principal and interest on such obligations.
Higher Transaction Costs. Foreign investments may entail higher custodial fees
and sales commissions than domestic investments.
Accounting and Regulatory Differences. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those respecting domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks are not
regulated by U.S. banking authorities and may be subject to less stringent
reserve requirements than those applicable to domestic branches of U.S. banks.
In addition, foreign banks generally are not bound by the accounting, auditing,
and financial reporting standards comparable to those applicable to U.S. banks.
Currency Risk. Foreign securities are typically denominated in foreign
currencies. The value of a Portfolio's investments in securities denominated in
foreign currencies will be affected by: (i) changes in currency exchange rates;
(ii) the relative strength of the foreign currencies and the U.S. dollar, and
(iii) exchange control regulations. Changes in the foreign currency exchange
rates also may affect the value of dividends and interest earned, gains and
losses realized on the sale of securities, and net investment income and gains.
Limitations on the Use of Foreign Investments. With respect to all Portfolios
other than the Balanced Portfolio, investments in all types of foreign
obligations or securities will not exceed 25% of the net assets of a Portfolio.
With respect to the Balanced Portfolio, up to 20% of the equity securities may
be foreign securities, including American Depositary Receipts.
FUTURES AND OPTIONS TRADING
The Portfolios may enter into futures contracts, options, options on futures
contracts and stock index futures contracts and options thereon for the purposes
of remaining fully invested, reducing transaction costs, or managing interest
rate risk.
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FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security, class of securities,
or an index at a specified future time and at a specified price. A stock index
futures contract is a bilateral agreement where two parties agree to take or
make delivery of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of trading of the
contracts and the price at which the futures contract is originally struck.
Futures contracts which are standardized as to maturity date and underlying
financial instrument are traded on national futures exchanges. Futures exchanges
and trading are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission ("CFTC"), a U.S. government agency.
Although the terms of most futures contracts call for actual delivery and
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold," or "selling" a contract previously
"purchased") in an identical contract to terminate the position. The acquisition
of put and call options on futures contracts will, respectively, give a
Portfolio the right (but not the obligation), for a specified price, to sell or
to purchase the underlying futures contract, upon exercise of the option, at any
time during the option period. Brokerage commissions are incurred when a futures
contract is bought or sold.
When making futures trades, the Portfolios are required to make a good faith
margin deposit in cash or government securities with a broker or custodian to
initiate and maintain open positions in futures contracts. A margin deposit is
intended to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish deposit requirements which
are higher than the exchange minimums. Initial margin deposits on futures
contracts are customarily set at levels much lower than the prices at which the
underlying securities are purchased and sold, typically ranging upward from less
than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, payment of additional
"variation" margin will be required. Conversely, change in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Portfolios expect to earn
interest income on their margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers" or
"speculators." Hedgers use the futures markets primarily to offset unfavorable
changes in the value of securities otherwise held for investment purposes or
expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from fluctuations in the
prices of underlying securities. The Portfolios intend to enter into futures
contracts, options on futures contracts, index futures and options thereon that
are traded on an exchange regulated by the CFTC if, to the extent that these
futures and options are not for "bona fide hedging purposes" (as defined by the
CFTC), the aggregate initial margin and premiums on these positions (excluding
the amount by which options are in the money) do not exceed 5% of the
Portfolio's total assets at current value. A Portfolio, however, may invest more
than this amount for bona fide hedging purposes, and also may invest more than
that amount if it obtains authority to do so from the CFTC without rendering the
Portfolio a commodity pool operator or adversely affecting its status as an
investment company under Federal securities laws.
A Portfolio may buy and sell futures contracts and related options to manage its
exposure to changing interest rates and security prices. When interest rates are
expected to rise or market values of portfolio securities are expected to fall,
a Portfolio can seek through the sale of futures contracts to offset a decline
in the value of its portfolio securities. When interest rates are expected to
fall or market values are expected to rise, a Portfolio, through the purchase of
these contracts, can attempt to secure better rates or prices for the Portfolio
than might later be available in the market when it makes anticipated purchases.
Although techniques other than the sale and purchase of futures contracts could
be used to control the Portfolios' exposure to market fluctuations, the use of
futures contracts may be a more effective means of managing this exposure. While
the Portfolios will incur commission expenses in both opening and closing out
futures positions, these costs may be lower than transaction costs that would be
incurred in the purchase and sale of the underlying securities.
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A Portfolio's ability to effectively use futures trading depends on several
factors. First, price correlation between the futures contracts and their
underlying reference security or index may not be perfect. Second, it is
possible that a lack of liquidity for futures contracts could exist in the
secondary market, resulting in an inability to close a futures position prior to
its maturity date. Third, the purchase of a futures contract involves the risk
that a Portfolio could lose more than the original margin deposit required to
initiate a futures transaction.
LIMITATIONS ON THE USE OF FUTURES CONTRACTS
Except for bona fide hedging purposes, none of the Portfolios will enter into
futures contract transactions if immediately after the transaction, the sum of
its initial margin deposits and premiums on open contracts exceeds 5% of the
market value of the respective Portfolio's total assets. None of the Portfolios
will enter into futures contracts if the value of the futures contracts held
would exceed 25% of the applicable Portfolio's total assets.
The Portfolios restrict their futures contract trading as follows:
1. The Portfolios will not engage in transactions in futures contracts for
speculative purposes;
2. The Portfolios will not market themselves to the public as commodity pools
or otherwise as vehicles for trading in the commodities futures or
commodity options markets;
3. The Portfolios will disclose to all prospective Shareholders the purpose of
and limitations on their commodity futures trading;
4. The Portfolios will submit to the CFTC special calls for information.
Accordingly, registration as a commodities pool operator with the CFTC is
not required.
In addition to the margin restrictions discussed above, transactions in futures
contracts may involve the segregation of funds in a segregated account pursuant
to requirements imposed by the SEC. Under those requirements, where a Portfolio
has a long position in a futures contract, it may be required to establish a
segregated account (not with a futures commission merchant or broker) containing
cash or certain liquid assets equal to the purchase price of the contract (less
any margin on deposit). For a short position in futures or forward contracts
held by a Portfolio, those requirements may mandate the establishment of a
segregated account (not with a futures commission merchant or broker) with cash
or certain liquid assets that, when added to the amounts deposited as margin,
equal the market value of the instruments underlying the futures contracts (but
are not less than the price at which the short positions were established).
However, segregation of assets is not required if a Portfolio "covers" a long
position. For example, instead of segregating assets, a Portfolio, when holding
a long position in a futures contract, could purchase a put option on the same
futures contract with a strike price as high or higher than the price of the
contract held by the Portfolio. In addition, where a Portfolio takes short
positions, or engages in sales of call options, it need not segregate assets if
it "covers" these positions. For example, where a Portfolio holds a short
position in a futures contract, it may cover by owning the instruments
underlying the contract. The Portfolios may also cover such a position by
holding a call option permitting it to purchase the same futures contract at a
price no higher than the price at which the short position was established.
Where a Portfolio sells a call option on a futures contract, it may cover either
by entering into a long position in the same contract at a price no higher than
the strike price of the call option or by owning the instruments underlying the
futures contract. A Portfolio could also cover this position by holding a
separate call option permitting it to purchase the same futures contract at a
price no higher than the strike price of the call option sold by the Portfolio.
In certain circumstances, entry into a futures contract that substantially
eliminates risk of loss and the opportunity for gain in an "appreciated
financial position" will also accelerate gain to the Portfolios.
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RISK FACTORS IN FUTURES TRANSACTIONS
Liquidity. Positions in futures contracts may be closed out only on an exchange
which provides a secondary market for such futures. However, there can be no
assurance that a liquid secondary market will exist for any particular futures
contract at any specific time. Thus, it may not be possible to close a futures
position. In the event of adverse price movements, a Portfolio would continue to
be required to make daily cash payments to maintain the required margin. In
these situations, if a Portfolio has insufficient cash, it may have to sell
portfolio securities to meet daily margin requirements even though it may be
disadvantageous to do so. In addition, a Portfolio may be required to deliver
the instruments underlying futures contracts it holds. The inability to close
options and futures positions could also adversely impact the Portfolio's
ability to effectively hedge these positions. The Portfolios will minimize the
risk that they will be unable to close out a futures contract by only entering
into futures contracts which are traded on national futures exchanges and for
which there appears to be a liquid secondary market.
Risk of Loss. The risk of loss in trading futures contracts in some strategies
can be substantial, due both to the low margin deposits required, and the
extremely high degree of leverage involved in futures pricing. Because the
deposit requirements in the futures markets are less onerous than margin
requirements in the securities market, there may be increased participation by
speculators in the futures market which may also cause temporary price
distortions. A relatively small price movement in a futures contract may result
in immediate and substantial loss (as well as gain) to the investor. For
example, if at the time of purchase, 10% of the value of the futures contract is
deposited as margin, a subsequent 10% decrease in the value of the futures
contract would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then closed out. Thus,
a purchase or sale of a futures contract may result in losses in excess of the
amount invested in the contract. However, because the futures strategies engaged
in by the Portfolios typically are for risk management purposes, Banc One
Investment Advisors does not believe that the Portfolios are subject to the
risks of loss frequently associated with futures transactions. Each Portfolio
would presumably have sustained comparable losses if, instead of the futures
contract, it had invested in the underlying financial instrument and sold it
after the decline.
Correlation Risk. A Portfolio's use of futures transactions involves the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. A
Portfolio could also lose money on futures contracts and also experience a
decline in value of its portfolio securities. There is also the risk of loss by
a Portfolio of margin deposits in the event of bankruptcy of a broker with whom
the Portfolio has an open position in a futures contract or related option.
Price Fluctuations. Most futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. The daily
limit establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses.
Some futures strategies, including selling futures, buying puts and writing
covered calls, may reduce a Portfolio's exposure to price fluctuations. Other
strategies, including buying futures, and buying calls, tend to increase market
exposure. Futures and options may be combined with each other in order to adjust
the risk and return characteristics of the overall portfolio. A Portfolio
expects to enter into these transactions to manage a return or spread on a
particular investment or portion of its assets, to protect against any increase
in the price of securities a Portfolio anticipates purchasing at a later date,
or for other risk management strategies.
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OPTIONS CONTRACTS
The Portfolios may use options on securities or futures contracts as a hedging
device. An option gives the buyer the right (but not the obligation) to purchase
a futures contract or security at a specified price (also called the STRIKE
price). A CALL OPTION gives the buyer the "right to purchase" a security at a
specified price (the exercise price) at any time until a certain date (the
expiration date). So long as the obligation of the writer of a call option
continues, the writer may be assigned an exercise notice by the broker-dealer
through whom the option was sold, requiring the writer to deliver the underlying
security against payment of the exercise price. This obligation terminates upon
the expiration of the call option, or such earlier time at which the writer
effects a closing purchase transaction by repurchasing an option identical to
that previously sold. To secure the writer's obligation to deliver the
underlying security in the case of a call option, subject to the rules of the
Options Clearing Corporation, a writer is required to deposit in escrow the
underlying security or other assets in accordance with these rules.
A PUT OPTION gives the buyer the right to sell the underlying futures contract
or security. The seller (or "writer") of a put option must purchase futures
contracts or securities at a strike price if the option is exercised. In the
case of a call option, the seller must sell the futures contract or security in
the underlying futures contract or security at the strike price if the option is
exercised.
A NAKED OPTION is an option written by a party who does not own the underlying
futures contract or security. A COVERED OPTION is an option written by a party
who does own the underlying position. The initial purchase (sale) of an option
is an "opening transaction." In order to close out an option position, the
Portfolio may enter into a "closing transaction". This involves the sale
(purchase) of an option contract on the same security with the same exercise
price and expiration date as the option contract originally opened.
A call option on a futures contract or security is said to be "in-the-money" if
the strike price is below current market levels and "out-of-the-money" if the
strike price is above current market levels. A put option is "in-the-money" if
the strike price is above current market levels, and "out-of-the-money" if the
strike price is below current market levels.
Options have limited life spans, usually tied to the delivery or settlement date
of the underlying futures contract or security. Some options, however, expire
significantly in advance of such dates. An option that is "out-of-the-money" and
not offset by the time it expires becomes worthless. On certain exchanges
"in-the-money" options are automatically exercised on their expiration date, but
on others unexercised options simply become worthless after their expiration
date. Options usually trade at a premium (referred to as the "time value" of the
option) above their intrinsic value (the difference between the market price for
the underlying futures contract or equity security and the strike price). As an
option nears its expiration date, the market value and the intrinsic value move
into parity as the time value diminishes.
Increased market volatility generally increases the value of options by
increasing the probability of favorable market swings, putting outstanding
options "in-the-money." Although purchasing options is a limited risk trading
approach, significant losses can be incurred by doing so.
WRITING (SELLING) COVERED CALLS
The Portfolios may write (sell) covered call options and purchase options to
close out options previously written by the Portfolio. The Portfolios' purpose
in writing covered call options is to generate additional premium income. This
premium income will serve to enhance a Portfolio's total return and will reduce
the effect of any price decline of the security involved in the option.
Generally, the Portfolios will write covered call options on securities which,
in the opinion of Banc One Investment Advisors are not expected to make any
major price moves in the near future but which, over the long term, are deemed
to be attractive investments for the Portfolio. The Portfolios will write only
covered call options. This means that a Portfolio will only write a call option
on a security which a Portfolio already owns.
Portfolio securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with each
Portfolio's investment objectives. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk (in
contrast to the writing of naked options, which a Portfolio will not do), but
capable of enhancing the Portfolio's total return. When writing a covered call
option, a Portfolio, in return for the premium, gives up the opportunity for
profit from a price increase in the underlying security above the exercise
price, but conversely retains the risk of loss should the price of the security
decline. Unlike one who owns securities not subject to an option, a Portfolio
has no control
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over when it may be required to sell the underlying securities, since it may be
assigned an exercise notice at any time prior to the expiration of its
obligation as a writer. Thus, the security could be "called away" at a price
substantially below the fair market value of the security. If a call option
which a Portfolio has written expires, a Portfolio will realize a gain in the
amount of the premium; however, such gain may be offset by a decline in the
market value of the underlying security during the option period. If the call
option is exercised, a Portfolio will realize a gain or loss from the sale of
the underlying security. The security covering the call will be maintained in a
segregated account of the Portfolio's custodian. The Portfolios do not consider
a security covered by a call to be "pledged" as that term is used in each
Portfolio's policy which limits the pledging or mortgaging of its assets.
The premium received is the market value of an option. The premium each
Portfolio will receive from writing a call option will reflect, among other
things, the current market price of the underlying security, the relationship of
the exercise price to the market price, the historical price volatility of the
underlying security, and the length of the option period. Once the decision to
write a call option has been made, Banc One Investment Advisors, in determining
whether a particular call option should be written on a particular security,
will consider the reasonableness of the anticipated premium and the likelihood
that a liquid secondary market will exist for those options. The premium
received by a Portfolio for writing covered call options will be recorded as a
liability in the Portfolio's statement of assets and liabilities. This liability
will be adjusted daily to the option's current market value, which will be the
latest sale price at the time at which the net asset value per Share of the
Portfolio is computed (close of the New York Stock Exchange), or, in the absence
of such sale, the latest asked price. The liability will be extinguished upon
expiration of the option, the purchase of an identical option in the closing
transaction, or delivery of the underlying security upon the exercise of the
option.
Generally, a Portfolio, in order to avoid the exercise of an option sold by it,
will be able to cancel its obligation under the option by entering into a
closing purchase transaction, if available, unless selling (in the case of a
call option) or purchasing (in the case of a put option) the underlying
securities is determined to be in a Portfolio's best interest. A closing
purchase transaction consists of a Portfolio purchasing an option having the
same terms as the option sold by a Portfolio, and has the effect of cancelling a
Portfolio's position as a seller. The premium which a Portfolio will pay in
executing a closing purchase transaction may be higher (or lower) than the
premium received when the option was sold, depending in large part upon the
relative price of the underlying security at the time of each transaction. To
the extent options sold by a Portfolio are exercised and a Portfolio delivers
securities to the holder of a call option, a Portfolio's turnover rate will
increase, which would cause a Portfolio to incur additional brokerage expenses.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security from being called, or
to permit the sale of the underlying security. Furthermore, effecting a closing
transaction permits a Portfolio to write another call option on the underlying
security with either a different exercise price or expiration date or both. If a
Portfolio desires to sell a particular security from its portfolio on which it
has written a call option it will seek to effect a closing transaction prior
to, or concurrently with, the sale of the security. There is, of course, no
assurance that a Portfolio will be able to effect such closing transactions at a
favorable price. If a Portfolio cannot enter into a closing transaction, it may
be required to hold a security that it might otherwise have sold, in which case
it would continue to be at market risk on the security. This could result in
higher transaction costs. A Portfolio will pay transaction costs in connection
with the writing of options to close out previously written options. Such
transaction costs are normally higher than those applicable to purchases and
sales of portfolio securities.
Call options written by a Portfolio will normally have expiration dates of less
than nine months from the date written. The exercise price of the options may be
below, equal to, or above the current market values of the underlying securities
at the time the options are written. From time to time, a Portfolio may purchase
an underlying security for delivery in accordance with an exercise notice of a
call option assigned to it, rather than delivering the security from its
portfolio. In such cases, additional costs will be incurred.
A Portfolio will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more than the premium received from the
writing of the option. Because increases in the market price of a call option
will generally reflect increases in the market price of the underlying security,
any loss resulting from the repurchase of a call option is likely to be offset
in whole or in part by appreciation of the underlying security owned by the
Portfolio.
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PURCHASING CALL OPTIONS
The Portfolios may purchase call options to hedge against an increase in the
price of securities that the Portfolio wants ultimately to buy. Such hedge
protection is provided during the life of the call option because the Portfolio,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the Portfolio
might have realized had it bought the underlying security at the time it
purchased the call option. If paying a premium for a call option, together with
a price movement in the underlying security, is such that exercise of the option
would not be profitable to the Portfolio, loss of the premium may be offset by a
decrease in the acquisition cost of securities by the Portfolio.
PURCHASING PUT OPTIONS
The Portfolios may also purchase put options to protect their portfolio holdings
in an underlying security against a decline in market value. Hedge protection is
provided during the life of the put option since the Portfolio, as holder of the
put option, is able to sell the underlying security at the put exercise price
regardless of any decline in the underlying security's market price. For a put
option to be profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the premium and
transaction costs. By using put options in this manner, the Portfolio will
reduce any profit it might otherwise have realized from appreciation of the
underlying security by the premium paid for the put option and by transaction
costs. However, any loss of premium may be offset by an increase in the value of
the Portfolio's securities.
SECURED PUTS
The Portfolios may write secured puts. For the secured put writer, substantial
depreciation in the value of the underlying security would result in the
security being "put to" the writer at the strike price of the option which may
be substantially greater than the fair market value of the security. If a
secured put option expires unexercised, the writer realizes a gain in the amount
of the premium.
STRADDLES AND SPREADS
The Portfolios also may engage in straddles and spreads. In a straddle
transaction, a Portfolio either buys a call and a put or sells a call and a put
on the same security. In a spread, the Portfolio purchases and sells a call or a
put. The Portfolio will sell a straddle when Banc One Investment Advisors
believes the price of a security will be stable. The Portfolio will receive a
premium on the sale of the put and the call. A spread permits the Portfolio to
make a hedged investment that the price of a security will increase or decline.
RISK FACTORS IN OPTIONS TRANSACTIONS
Risk of Loss. When it purchases an option, a Portfolio runs the risk of losing
its entire investment in the option in a relatively short period of time, unless
the Portfolio exercises the option or enters into a closing sale transaction
with respect to the option during the life of the option. If the price of the
underlying security does not rise (in the case of a call) or fall (in the case
of a put) to an extent sufficient to cover the option premium and transaction
costs, a Portfolio will lose part or all of its investment in the option. This
contrasts with an investment by a Portfolio in the underlying securities,
because the Portfolio may continue to hold its investment in those securities
notwithstanding the lack of a change in price of those securities. In addition,
there may be imperfect or no correlation between the changes in market value of
the securities held by the Portfolios and the prices of the options.
Judgement of Advisor. The successful use of the options strategies depends on
the ability of Banc One Investment Advisors to assess interest rate and market
movements correctly and to accurately calculate the fair price of the option.
The effective use of options also depends on a Portfolio's ability to terminate
option positions at times when Banc One Investment Advisors deems it desirable
to do so. A Portfolio will take an option position only if Banc One Investment
Advisors believes there is a liquid secondary market for the option, however,
there is no assurance that a Portfolio will be able to effect closing
transactions at any particular time or at an acceptable price.
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Liquidity. If a secondary trading market in options were to become unavailable,
a Portfolio could no longer engage in closing transactions. Lack of investor
interest might adversely affect the liquidity of the market for particular
options or series of options. A marketplace may discontinue trading of a
particular option or options generally. In addition, a market could become
temporarily unavailable if unusual events, such as volume in excess of trading
or clearing capability, were to interrupt normal market operations. A
marketplace may at times find it necessary to impose restrictions on particular
types of options transactions, which may limit a Portfolio's ability to realize
its profits or limit its losses.
Market Restrictions. Disruptions in the markets for the securities underlying
options purchased or sold by a Portfolio could result in losses on the options.
If trading is interrupted in an underlying security, the trading of options on
that security is normally halted as well. As a result, a Portfolio as purchaser
or writer of an option will be unable to close out its positions until option
trading resumes, and it may be faced with losses if trading in the security
reopens at a substantially different price. In addition, the Options Clearing
Corporation ("OCC") or other options markets may impose exercise restrictions.
If a prohibition on exercise is imposed at the time when trading in the option
has also been halted, a Portfolio as purchaser or writer of an option will be
locked into its position until one of the two restrictions has been lifted. If a
prohibition on exercise remains in effect until an option owned by a Portfolio
has expired, the Portfolio could lose the entire value of its option.
Foreign Investment Risks. Special risks are presented by internationally-traded
options. Because of time differences between the United States and the various
foreign countries, and because different holidays are observed in different
countries, foreign option markets may be open for trading during hours or on
days when U.S. markets are closed. As a result, option premiums may not reflect
the current prices of the underlying interest in the United States.
LIMITATIONS ON THE USE OF OPTIONS.
Each Portfolio will limit the writing of put and call options to 25% of its net
assets. Some Portfolios may enter into over-the-counter option transactions.
There will be an active over-the-counter market for such options which will
establish their pricing and liquidity. The Portfolios will only enter into these
option transactions with broker/dealers who have a minimum net worth of
$20,000,000.
GOVERNMENT SECURITIES
The Portfolios invest in securities issued by agencies and instrumentalities of
the U.S. Government. Not all securities issued by U.S. Government agencies and
instrumentalities are backed by the full faith and credit of the U.S. Treasury.
- - Obligations of certain agencies and instrumentalities of the U.S.
government, such as the Government National Mortgage Association ("Ginnie
Mae") and the Export-Import Bank, are supported by the full faith and
credit of the U.S. Treasury;
- - Others, such as the Federal National Mortgage Association ("Fannie Mae"),
are supported by the right of the issuer to borrow from the Treasury;
- - Others are supported by the discretionary authority of the U.S. government
to purchase the agency's obligations; and
- - Still others, such as the Federal Farm Credit Banks and the Federal Home
Loan Mortgage Corporation ("Freddie Mac") are supported only by the credit
of the instrumentality.
No assurance can be given that the U.S. government would provide financial
support to U.S. government-sponsored agencies or instrumentalities if it is not
obligated to do so by law. A Portfolio will invest in the obligations of these
agencies or instrumentalities only when Banc One Investment Advisors believes
that the credit risk is minimal. For information on mortgage-related securities
issued by certain agencies or instrumentalities of the U.S. government, see
"Investment Objectives and Policies--Mortgage-Related Securities" in this
Statement of Additional Information.
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HIGH YIELD/HIGH RISK SECURITIES/JUNK BONDS
The Diversified Mid Cap Portfolio may invest in convertible securities that are
rated below investment grade by the primary rating agencies (BB or lower by S&P
and BA or lower by Moody's). Such convertible securities may be structured as
bonds or preferred stock that convert to common stock. The Bond Portfolio may
invest up to 5% of its net assets in corporate and municipal bonds that are
rated below investment grade. Terms used to describe securities that are rated
below investment grade include "high yield securities," "lower rated bonds,"
"non-investment grade bonds," "below investment grade bonds" and "junk bonds."
These securities are considered to be high risk investments. The risks include
the following:
Greater Risk of Loss. There is a greater risk that issuers of lower rated
securities will default than issuers of higher rated securities. Issuers of
lower rated securities may be less creditworthy, highly indebted,
financially distressed, or bankrupt. These issuers are more vulnerable to
real or perceived economic changes, political changes or adverse industry
developments. If an issuer fails to pay principal or interest, the
Portfolio would experience a decrease in income and a decline in the market
value of their investments. The Portfolio may also incur additional
expenses in seeking recovery from the issuer.
Sensitivity to Interest Rate and Economic Changes. The income and market
value of lower-rated securities may fluctuate more than higher rated
securities. Although non-investment grade securities tend to be less
sensitive to interest rate changes than investment grade securities,
non-investment grade securities are more sensitive to short-term corporate,
economic and market developments. During periods of economic uncertainty
and change, the market price of the investments in lower-rated securities
may be volatile.
Valuation Difficulties. It is often more difficult to value lower rated
securities than higher rated securities. If an issuer's financial condition
deteriorates, accurate financial and business information may be limited or
unavailable. In addition, the lower rated investments may be thinly traded
and there may be no established secondary market. Because of the lack of
market pricing and current information for investments in lower rated
securities, valuation of such investments is much more dependent on
judgment than is the case with higher rated securities.
Liquidity. There may be no established secondary or public market for
investments in lower rated securities. As a result, a Portfolio that
invests in lower rated securities may be required to sell investments at
substantial losses or retain them indefinitely even where an issuer's
financial condition is deteriorating.
High Yield Bond Market. Unlike investment grade securities (including
securities which were investment grade when issued but have fallen below
investment grade), the track record for bond default rates on new issues of
non-investment grade bonds is relatively short. It may be that future
default rates on new issues of non-investment grade securities will be more
widespread and higher than in the past, especially if economic conditions
deteriorate.
Credit Quality. Credit quality of non-investment grade securities can
change suddenly and unexpectedly, and even recently-issued credit ratings
may not fully reflect the actual risks posed by a particular high-yield
security.
New Legislation. Future legislation may have a possible negative impact on
the market for high yield, high risk bonds. As an example, in the late
1980's, legislation required federally-insured savings and loan
associations to divest their investments in high yield, high risk bonds.
New legislation, if enacted, could have a material negative effect on a
Portfolio's investments in lower rated securities.
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INDEX SHARES
Certain of the Portfolios may invest in Index Shares. Index Shares are ownership
interests in unit investment trusts and other pooled investment vehicles that
hold a portfolio of securities or stocks designed to track the price performance
and dividend yield of a specified index. Index shares include Standard & Poor's
Depository Receipts ("SPDRS") and Nasdaq-100 Trusts (Nasdaq-100s). SPDRs invest
in a securities portfolio that includes substantially all of the common stocks
(in substantially the same weights) as the common stocks included in a
particular Standard & Poor's Index such as the S&P 500. Nasdaq-100s invest in a
securities portfolio that includes substantially all of the securities of the
Nasdaq-100 index. SPDRs and Nasdaq-100s are traded on the American Stock
Exchange, but may not be redeemed. The results of SPDRs and Nasdaq-100s will not
match the performance of the designated index due to reductions in the
performance attributable to transaction and other expenses, including fees paid
by the SPDR or Nasdaq-100s to service providers. SPDRs distribute dividends on a
quarterly basis.
Index Shares are not actively managed. Rather, an Index Share's objective is to
track the performance of a specified index. Therefore, securities may be
purchased, retained and sold at times when an actively managed trust would not
do so. As a result, you can expect greater risk of loss (and a correspondingly
greater prospect of gain) from changes in the value of securities that are
heavily weighted in the index than would be the case if the Index Share was not
fully invested in such securities.
A Portfolio will limit its investments in any one Index Share to 5% of the
Portfolio's total assets and 3% of the outstanding voting securities of the
Index Share. Moreover, a Portfolio's investments in Index Shares will not exceed
10% of the Portfolio's total assets, when aggregated with all other investments
in investment companies.
INVESTMENT COMPANY SECURITIES
The Portfolios may invest up to 5% of their total assets in the securities of
any one investment company (another mutual fund), but may not own more than 3%
of the outstanding securities of any one investment company or invest more than
10% of their total assets in the securities of other investment companies. Other
investment company securities may include securities of a money market fund of
One Group(R) Mutual Funds and securities of other money market funds for which
Banc One Investment Advisors or its affiliate serves as investment advisor or
administrator. Because other investment companies employ an investment advisor,
such investments by the Portfolios may cause Shareholders to bear duplicate
fees. Banc One Investment Advisors will waive its fee attributable to Portfolio
assets invested in funds advised by Banc One Investment Advisors. Banc One
Investment Advisors will also waive its fees attributable to the assets of any
Portfolio invested in any investment company if required by the laws of any
state in which shares of the Trust are sold.
LOAN PARTICIPATIONS AND ASSIGNMENTS
Some of the Portfolios may invest in fixed and floating rate loans ("Loans").
Loans are typically arranged through private negotiations between borrowers
(which may be corporate issuers or issuers of sovereign debt obligations) and
one or more financial institutions ("Lenders"). Generally, the Portfolios invest
in Loans by purchasing Loan Participations ("Participations") or assignments of
all or a portion of Loans ("Assignments") from third parties.
Typically, a Portfolio will have a contractual relationship only with the Lender
and not with the borrower when it purchases a Participation. In contrast, a
Portfolio has direct rights against the borrower on the Loan when it purchases
an Assignment. Because Assignments are arranged through private negotiations
between potential assignees and potential assignors, however, the rights and
obligations acquired by a Portfolio as the purchaser of an Assignment may differ
from, and be more limited than, those held by the assigning Lender.
Limitations on Investments in Loan Participations and Assignments. Loan
participants and assignments may be illiquid. As a result, a Portfolio will
invest no more than 15% of its net assets in these investments. If a government
entity is a borrower on a Loan, the Portfolio will consider the government to be
the issuer of a Participation or Assignment for purposes of the Portfolio's
fundamental investment policy that it will not invest 25% or more of its total
assets in securities of issuers conducting their principal business activities
in the same industry (i.e., foreign government).
Risk Factors of Loan Participations and Assignments. A Portfolio may have
difficulty disposing of Assignments and Participations because to do so it will
have to assign such securities to a third party. Because there is no liquid
market for such securities, the Portfolios anticipate that such securities could
be sold only to a limited number of institutional investors. The lack of a
liquid secondary market may have an adverse impact on the value of such
securities and a Portfolio's ability to dispose of particular Assignments or
Participations when necessary to meet a Portfolio's liquidity needs in response
to a specific economic
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event such as a deterioration in the creditworthiness of the borrower. The lack
of a liquid secondary market for Assignments and Participations also may make it
more difficult for a Portfolio to assign a value to those securities when
valuing the Portfolio's securities and calculating its net asset value.
MORTGAGE-RELATED SECURITIES
Mortgage-Backed Securities (CMOs and REMICs). Mortgage-backed securities include
collateralized mortgage obligations ("CMOs") and Real Estate Mortgage Investment
Conduits ("REMICs"). (A REMIC is a CMO that qualifies for special tax treatment
under the Code and invests in certain mortgages principally secured by interests
in real property and other permitted investments).
Mortgage-backed securities represent pools of mortgage loans assembled for sale
to investors by:
- - various governmental agencies such as Ginnie Mae;
- - government-related organizations such as Fannie Mae and Freddie Mac;
- - nongovernmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers, and private mortgage insurance companies.
(Non-governmental mortgage securities cannot be treated as U.S. government
securities for purposes of investment policies).
There are a number of important differences among the agencies and
instrumentalities of the U.S. government that issue mortgage-related securities
and among the securities that they issue.
Ginnie Mae Securities. Mortgage-related securities issued by Ginnie Mae
include Ginnie Mae Mortgage Pass-Through Certificates which are guaranteed
as to the timely payment of principal and interest by Ginnie Mae. Ginnie
Mae's guarantee is backed by the full faith and credit of the United
States. Ginnie Mae is a wholly-owned U.S. government corporation within the
Department of Housing and Urban Development. Ginnie Mae certificates also
are supported by the authority of Ginnie Mae to borrow funds from the U.S.
Treasury to make payments under its guarantee.
Fannie Mae Securities. Mortgage-related securities issued by Fannie Mae
include Fannie Mae Guaranteed Mortgage Pass-Through Certificates which are
solely the obligations of Fannie Mae and are not backed by or entitled to
the full faith and credit of the United States. Fannie Mae is a
government-sponsored organization owned entirely by private stock-holders.
Fannie Mae Certificates are guaranteed as to timely payment of the
principal and interest by Fannie Mae.
Freddie Mac Securities. Mortgage-related securities issued by Freddie Mac
include Freddie Mac Mortgage Participation Certificates. Freddie Mac is a
corporate instrumentality of the United States, created pursuant to an Act
of Congress, which is owned entirely by Federal Home Loan Banks. Freddie
Mac Certificates are not guaranteed by the United States or by any Federal
Home Loan Bank and do not constitute a debt or obligation of the United
States or of any Federal Home Loan Bank. Freddie Mac Certificates entitle
the holder to timely payment of interest, which is guaranteed by Freddie
Mac. Freddie Mac guarantees either ultimate collection or timely payment of
all principal payments on the underlying mortgage loans. When Freddie Mac
does not guarantee timely payment of principal, Freddie Mac may remit the
amount due on account of its guarantee of ultimate payment of principal at
any time after default on an underlying mortgage, but in no event later
than one year after it becomes payable.
CMOs and guaranteed REMIC pass-through certificates ("REMIC Certificates")
issued by Fannie Mae, Freddie Mac, Ginnie Mae and private issuers are types of
multiple class pass-through securities. Investors may purchase beneficial
interests in REMICs, which are known as "regular" interests or "residual"
interests. The BOND PORTFOLIO does not currently 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 "Mortgage Assets"). The obligations of Fannie Mae, Freddie Mac or Ginnie
Mae under their respective guaranty of the REMIC Certificates are obligations
solely of Fannie Mae, Freddie Mac or Ginnie Mae, respectively.
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Ginnie Mae REMIC Certificates. Ginnie Mae guarantees the full and timely
payment of interest and principal on each class of securities (in
accordance with the terms of those classes as specified in the related
offering circular supplement). The Ginnie Mae guarantee is backed by the
full faith and credit of the United States of America.
Fannie Mae REMIC Certificates. 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.
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 participation 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."
REMIC Certificates issued by Fannie Mae, Freddie Mac and Ginnie Mae are treated
as U.S. government securities for purposes of investment policies.
CMOs and REMIC Certificates provide for the redistribution of cash flow to
multiple classes. Each class of CMOs or REMIC Certificates, often referred to as
a "tranche," is issued at a specific adjustable or fixed interest rate and must
be fully retired no later than its final distribution date. This reallocation of
interest and principal results in the redistribution of prepayment risk across
to different classes. This allows for the creation of bonds with more or less
risk than the underlying collateral exhibits. Principal prepayments on the
mortgage loans or the Mortgage Assets underlying the CMOs or REMIC Certificates
may cause some or all of the classes of CMOs or REMIC Certificates to be retired
substantially earlier than their final distribution dates. Generally, interest
is paid or accrues on all classes of CMOs or REMIC Certificates on a monthly
basis.
The principal of and interest on the Mortgage Assets may be allocated among the
several classes of CMOs or REMIC Certificates in various ways. In certain
structures (known as "sequential pay" CMOs or REMIC Certificates), payments of
principal, including any principal prepayments, on the Mortgage Assets generally
are applied to the classes of CMOs or REMIC Certificates in the order of their
respective final distribution dates. Thus, no payment of principal will be made
on any class of sequential pay CMOs or REMIC Certificates until all other
classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs and REMIC Certificates include, among others,
"parallel pay" CMOs and REMIC Certificates. Parallel pay CMOs or REMIC
Certificates are those which are structured to apply principal payments and
prepayments of the Mortgage Assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.
A wide variety of REMIC Certificates may be issued in the parallel pay or
sequential pay structures. These securities include accrual certificates (also
known as "Z-Bonds"), which only accrue interest at a specified rate until all
other certificates having an earlier final distribution date have been retired
and are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay REMIC
Certificates which generally require that specified amounts of principal be
applied on each payment date to one or more classes of REMIC Certificates (the
"PAC Certificates"), even though all other principal payments and prepayments of
the Mortgage Assets are then required to be applied to one or more other classes
of the certificates. The scheduled principal payments for the PAC Certificates
generally have the highest priority on each payment date after interest due has
been paid to all classes entitled to receive interest currently. Shortfalls, if
any, are added to the amount of principal payable on the next payment date. The
PAC Certificate payment schedule is taken into account in calculating the final
distribution date of each class of PAC. In order to create PAC tranches, one or
more tranches generally must be created that absorb most of the volatility in
the underlying Mortgage Assets. These tranches tend to have market prices and
yields that are much more volatile than the PAC classes. The Z-Bonds in which
the Portfolios may invest may bear the same non-credit-related risks as do
other types of Z-Bonds. Z-Bonds in which the Portfolio may invest will not
include residual interest.
Mortgage Dollar Rolls. Some of the Portfolios may enter into Mortgage Dollar
Rolls. In a Mortgage Dollar Role transaction, the Portfolios sell securities for
delivery in the current month and simultaneously contract with the same
counterparty to repurchase similar (same type, coupon and maturity) but not
identical securities on a specified future date. When a Portfolio enters into
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mortgage dollar rolls, the Portfolio will hold and maintain a segregated account
until the settlement date. The segregated account will contain cash or liquid,
high grade debt securities in an amount equal to the purchase price that the
Portfolio is required to pay. The Portfolios benefit from a mortgage dollar roll
to the extent of:
- - the difference between the price received for the securities sold and the
lower price for the future purchase (often referred to as the "drop"); and
- - fee income plus the interest earned on the cash proceeds of the securities
sold until the settlement date of the future purchase.
Unless such benefits exceed the amount of income, capital appreciation or gains
on the securities sold as part of the mortgage dollar roll, the investment
performance of the Portfolios will be less than what the performance would have
been without the use of mortgage dollar rolls. The benefits of mortgage dollar
rolls may depend upon Banc One Investment Advisors' ability to predict mortgage
prepayments and interest rates. There is no assurance that mortgage dollar rolls
can be successfully employed. The Portfolios currently intend to enter into
mortgage dollar rolls that are accounted for as a financing transaction. For
purposes of diversification and investment limitations, mortgage dollar rolls
are considered to be mortgage-backed securities.
Stripped Mortgage Backed Securities. Stripped Mortgage Backed Securities
("SMBS") are derivative multi-class mortgage securities. SMBS are usually
structured with two classes that receive different proportions of the interest
and principal distributions from a pool of mortgage assets. A common type of
SMBS will have one class receiving all of the interest from the mortgage assets
("IOs"), while the other class will receive all of the principal ("POs").
Mortgage IOs receive monthly interest payments based upon a notional amount that
declines over time as a result of the normal monthly amortization and
unscheduled prepayments of principal on the associated mortgage POs.
In addition to the risks applicable to Mortgage-Related Securities in general,
SMBS are subject to the following additional risks:
Prepayment/Interest Rate Sensitivity. SMBS are extremely sensitive to
changes in prepayments and interest rates. Even though these securities
have been guaranteed by an agency or instrumentality of the U.S.
government, under certain interest rate or prepayment rate scenarios, the
Portfolios may lose money on investments in SMBS.
Interest Only SMBS. Changes in prepayment rates can cause the return on
investment in IOs to be highly volatile. Under extremely high prepayment
conditions, IOs can incur significant losses.
Principal Only SMBS. POs are bought at a discount to the ultimate principal
repayment value. The rate of return on a PO will vary with prepayments,
rising as prepayment increase and falling as prepayments decrease.
Generally, the market value of these securities is unusually volatile in
response to changes in interest rates.
Yield Characteristics. Although SMBS may yield more than other
mortgage-backed securities, their cash flow patterns are more volatile and
there is a greater risk that any premium paid will not be fully recouped.
Banc One Investment Advisors will seek to manage these risks (and potential
benefits) by investing in a variety of such securities and by using certain
analytical and hedging techniques.
A Portfolio may only invest in SMBS issued or guaranteed by the U.S. government,
its agencies or instrumentalities. Although the market for SMBS is increasingly
liquid, certain SMBS may not be readily marketable and will be considered
illiquid for purposes of the Portfolios' limitations on investments in illiquid
securities.
Adjustable Rate Mortgage Loans. The Bond Portfolio, the Government Bond
Portfolio, and the Balanced Portfolio may invest in adjustable rate mortgage
loans ("ARMS"). ARMs eligible for inclusion in a mortgage pool will generally
provide for a fixed initial mortgage interest rate for a specified period of
time. Thereafter, the interest rates (the "Mortgage Interest Rates") may be
subject to periodic adjustment based on changes in the applicable index rate
(the "Index Rate"). The adjusted rate would be equal to the Index Rate plus a
gross margin, which is a fixed percentage spread over the Index Rate established
for each ARM at the time of its origination.
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Adjustable interest rates can cause payment increases that some borrowers may
find difficult to make. However, certain ARMs may provide that the Mortgage
Interest Rate may not be adjusted to a rate above a maximum rate or below a
minimum rate. Certain ARMs may also be subject to limitations on the maximum
amount by which the Mortgage Interest Rate may adjust for any single adjustment
period (the "Maximum Adjustment"). Other ARMs ("Negatively Amortizing ARMs") may
provide for limitations on changes in the monthly payment on such ARMs.
Limitations on monthly payments can result in monthly payments which are greater
or less than the amount necessary to amortize a Negatively Amortizing ARM by its
maturity at the Mortgage Interest Rate in effect in any particular month. In the
event that a monthly payment is not sufficient to pay the interest accruing on a
Negatively Amortizing ARM, any excess interest is added to the principal balance
of the loan, causing negative amortization and will be repaid through future
monthly payments. It may take borrowers under Negatively Amortizing ARMs longer
periods of time to achieve equity and may increase the likelihood of default by
such borrowers. In the event that a monthly payment exceeds the sum of the
interest accrued at the applicable Mortgage Interest Rate and the principal
payment which would have been necessary to amortize the outstanding principal
balance over the remaining term of the loan, the excess (or "accelerated
amortization") further reduces the principal balance of the ARM. Negatively
Amortizing ARMs do not provide for the extension of their original maturity to
accommodate changes in their Mortgage Interest Rate. As a result, unless there
is a periodic recalculation of the payment amount (which there generally is),
the final payment may be substantially larger than the other payments. These
limitations on periodic increases in interest rates and on changes in monthly
payment protect borrowers from unlimited interest rate and payment increases.
Certain adjustable rate mortgage loans may provide for periodic adjustments of
scheduled payments in order to amortize fully the mortgage loan by its stated
maturity. Other adjustable rate mortgage loans may permit their stated maturity
to be extended or shortened in accordance with the portion of each payment that
is applied to interest as affected by the periodic interest rate adjustments.
There are two main categories of indices which provide the basis for rate
adjustments on ARMs: those based on U.S. Treasury securities and those derived
from a calculated measure such as a cost of funds index or a moving average of
mortgage rates. Commonly utilized indices include the one-year, three-year and
five-year constant maturity Treasury bill rates, the three-month Treasury bill
rate, the 180-day Treasury bill rate, rates on longer-term Treasury securities,
the 11th District Federal Home Loan Bank Cost of Funds, the National Median Cost
of Funds, the one-month, three-month, six-month or one-year London Interbank
Offered Rate ("LIBOR"), the prime rate of a specific bank, or commercial paper
rates. Some indices, such as the one-year constant maturity Treasury rate,
closely mirror changes in market interest rate levels. Others, such as the 11th
District Federal Home Loan Bank Cost of Funds index, tend to lag behind changes
in market rate levels and tend to be somewhat less volatile. The degree of
volatility in the market value of the Portfolio's portfolio and therefore in the
net asset value of the Portfolio's shares will be a function of the length of
the interest rate reset periods and the degree of volatility in the applicable
indices.
In general, changes in both prepayment rates and interest rates will change the
yield on Mortgage-Backed Securities. The rate of principal prepayments with
respect to ARMs has fluctuated in recent years. As is the case with fixed
mortgage loans, ARMs may be subject to a greater rate of principal prepayments
in a declining interest rate environment. For example, if prevailing interest
rates fall significantly, ARMs could be subject to higher prepayment rates than
if prevailing interest rates remain constant because the availability of fixed
rate mortgage loans at competitive interest rates may encourage mortgagors to
refinance their ARMs to "lock-in" a lower fixed interest rate. Conversely, if
prevailing interest rates rise significantly, ARMs may prepay at lower rates
than if prevailing rates remain at or below those in effect at the time such
ARMs were originated. As with fixed rate mortgages, there can be no certainty as
to the rate of prepayments on the ARMs in either stable or changing interest
rate environments. In addition, there can be no certainty as to whether
increases in the principal balances of the ARMs due to the addition of deferred
interest may result in a default rate higher than that on ARMs that do not
provide for negative amortization. Other factors affecting prepayment of ARMs
include changes in mortgagors' housing needs, job transfers, unemployment,
mortgagors' net equity in the mortgage properties and servicing decisions.
RISKS FACTORS OF MORTGAGE-RELATED SECURITIES.
Guarantor Risk. There can be no assurance that the U.S. government would provide
financial support to Fannie Mae, Freddie Mac or Ginnie Mae if necessary in the
future. Although certain mortgage-related securities are guaranteed by a third
party or otherwise similarly secured, the market value of the security, which
may fluctuate, is not so secured.
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Interest Rate Sensitivity. If a Portfolio purchases a mortgage-related security
at a premium, that portion may be lost if there is a decline in the market value
of the security whether resulting from changes in interest rates or prepayments
in the underlying mortgage collateral. As with other interest-bearing
securities, the prices of such securities are inversely affected by changes in
interest rates. However, though the value of a mortgage-related security may
decline when interest rates rise, the converse is not necessarily true because
in periods of declining interest rates the mortgages underlying the securities
are prone to prepayment. For this and other reasons, a mortgage-related
security's stated maturity may be shortened by unscheduled prepayments on the
underlying mortgages and, therefore, it is not possible to predict accurately
the security's return to the Portfolios. In addition, regular payments received
on mortgage-related securities include both interest and principal. No assurance
can be given as to the return the Portfolios of the Trust will receive when
these amounts are reinvested.
Market Value. The market value of the Portfolio's adjustable rate
Mortgage-Backed Securities may be adversely affected if interest rates rise
faster than the rates of interest payable on these securities or by the
adjustable rate mortgage loans underlying the securities. Furthermore,
adjustable rate Mortgage-Backed Securities or the mortgage loans underlying
these securities may contain provisions limiting the amount by which rates may
be adjusted upward and downward and may limit the amount by which monthly
payments may be increased or decreased to accommodate upward and downward
adjustments in interest rates.
Prepayments. Adjustable rate Mortgage-Backed Securities have less potential for
capital appreciation than fixed rate Mortgage-Backed Securities because their
coupon rates will decline in response to market interest rate declines. The
market value of fixed rate Mortgage-Backed Securities may be adversely affected
by increases in interest rates and, because of the risk of unscheduled principal
prepayments, may benefit less than other fixed rate securities of similar
maturity from declining interest rates. Finally, to the extent Mortgage-Backed
Securities are purchased at a premium, mortgage foreclosures and unscheduled
principal prepayments may result in some loss of the Portfolio's principal
investment to the extent of the premium paid. On the other hand, if these
securities are purchased at a discount, both a scheduled payment of principal
and an unscheduled prepayment of principal will increase current and total
returns and will accelerate the recognition of income.
Yield Characteristics. The yield characteristics of Mortgage-Backed Securities
differ from those of traditional fixed income securities. The major differences
typically include more frequent interest and principal payments, usually
monthly, and the possibility that prepayments of principal may be made at any
time. Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. As with fixed rate mortgage loans, adjustable rate
mortgage loans may be subject to a greater prepayment rate in a declining
interest rate environment. The yields to maturity of the Mortgage-Backed
Securities in which the Portfolios invest will be affected by the actual rate of
payment (including prepayments) of principal of the underlying mortgage loans.
The mortgage loans underlying these securities generally may be prepaid at any
time without penalty. In a fluctuating interest rate environment, a predominant
factor affecting the prepayment rate on a pool of mortgage loans is the
difference between the interest rates on the mortgage loans and prevailing
mortgage loan interest rates (giving consideration to the cost of any
refinancing). In general, if mortgage loan interest rates fall sufficiently
below the interest rates on fixed rate mortgage loans underlying mortgage
pass-through securities, the rate of prepayment would be expected to increase.
Conversely, if mortgage loan interest rates rise above the interest rates on the
fixed rate mortgage loans underlying the mortgage pass-through securities, the
rate of prepayment may be expected to decrease.
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MUNICIPAL SECURITIES
Municipal Securities are issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as:
1. bridges,
2. highways,
3. roads,
4. schools,
5. water and sewer works, and
6. other utilities.
Other public purposes for which Municipal Securities may be issued include:
1. refunding outstanding obligations,
2. obtaining funds for general operating expenses and
3. obtaining funds to lend to other public institutions and facilities.
In addition, certain debt obligations known as "private activity bonds" may be
issued by or on behalf of municipalities and public authorities to obtain funds
to provide
1. water, sewage and solid waste facilities,
2. qualified residential rental projects,
3. certain local electric, gas and other heating or cooling facilities,
4. qualified hazardous waste facilities,
5. high-speed intercity rail facilities,
6. governmentally-owned airports, docks and wharves and mass
transportation facilities,
7. qualified mortgages,
8. student loan and redevelopment bonds;
9. and bonds used for certain organizations exempt from Federal income
taxation.
Certain debt obligations known as "industrial development bonds" under prior
Federal tax law may have been issued by or on behalf of public authorities to
obtain funds to provide:
1. privately operated housing facilities,
2. sports facilities,
3. industrial parks,
4. convention or trade show facilities,
5. airport, mass transit, port or parking facilities,
6. air or water pollution control facilities,
7. sewage or solid waste disposal facilities, and
8. facilities for water supply.
Other private activity bonds and industrial development bonds issued to fund the
construction, improvement, equipment or repair of privately-operated industrial,
distribution, research, or commercial facilities may also be Municipal
Securities, but the size of such issues is limited under current and prior
Federal tax law. The aggregate amount of most private activity bonds and
industrial development bonds is limited (except in the case of certain types of
facilities) under federal tax law by an annual "volume cap." The volume cap
limits the annual aggregate principal amount of such obligations issued by or on
behalf of all governmental instrumentalities in the state.
The two principal classifications of Municipal Securities consist of "general
obligation" and "limited" (or revenue) issues. General obligation bonds are
obligations involving the credit of an issuer possessing taxing power and are
payable from the issuer's general unrestricted revenues and not from any
particular fund or source. The characteristics and method of enforcement of
general obligation bonds vary according to the law applicable to the particular
issuer, and payment may be dependent upon
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appropriation by the issuer's legislative body. Limited obligation bonds 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 or other
specific revenue source. Private activity bonds and industrial development bonds
generally are revenue bonds and thus not payable from the unrestricted revenues
of the issuer. The credit and quality of these bonds is generally related to the
credit of the bank selected to provide the letter of credit underlying the
bonds. Payment of principal of and interest on industrial development revenue
bonds is the responsibility of the corporate user (and any guarantor).
The Portfolios may also acquire "moral obligation" issues, which are normally
issued by special purpose authorities, and in other tax-exempt investments
including pollution control bonds and tax-exempt commercial paper. Each
Portfolio that may purchase municipal securities may purchase:
1. Short-term tax-exempt General Obligations Notes,
2. Tax Anticipation Notes,
3. Bond Anticipation Notes,
4. Revenue Anticipation Notes,
5. Project Notes, and
6. Other forms of short-term tax-exempt loans.
Such notes are issued with a short-term maturity in anticipation of the receipt
of tax funds, the proceeds of bond placements, or other revenues. Project Notes
are issued by a state or local housing agency and are sold by the Department of
Housing and Urban Development. While the issuing agency has the primary
obligation with respect to its Project Notes, they are also secured by the full
faith and credit of the United States through agreements with the issuing
authority which provide that, if required, the Federal government will lend the
issuer an amount equal to the principal of and interest on the Project Notes.
There are, of course, variations in the quality of Municipal Securities, both
within a particular classification and between classifications. Also, the yields
on Municipal Securities depend upon a variety of factors, including:
- - general money market conditions,
- - coupon rate,
- - the financial condition of the issuer,
- - general conditions of the municipal bond market,
- - the size of a particular offering,
- - the maturity of the obligations, and
- - the rating of the issue.
The ratings of Moody's and S&P represent their opinions as to the quality of
Municipal Securities. However, ratings are general and are not absolute
standards of quality. Municipal Securities with the same maturity, interest rate
and rating may have different yields while Municipal Securities of the same
maturity and interest rate with different ratings may have the same yield.
Subsequent to its purchase by a Portfolio, an issue of Municipal Securities may
cease to be rated or its rating may be reduced below the minimum rating required
for purchase by the Portfolio. Banc One Investment Advisors will consider such
an event in determining whether the Portfolio should continue to hold the
obligations.
Municipal securities may include obligations of municipal housing authorities
and single-family mortgage revenue bonds. Weaknesses in Federal housing subsidy
programs and their administration may result in a decrease of subsidies
available for payment of principal and interest on housing authority bonds.
Economic developments, including fluctuations in interest rates and increasing
construction and operating costs, may also adversely impact revenues of housing
authorities. In the case of some housing authorities, inability to obtain
additional financing could also reduce revenues available to pay existing
obligations. Single-family mortgage revenue bonds are subject to extraordinary
mandatory redemption at par in whole or in part from the proceeds derived from
prepayments of underlying mortgage loans and also from the unused proceeds of
the issue within a stated period which may be within a year from the date of
issue.
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Municipal leases are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities. Municipal
leases may be considered to be illiquid. They may take the form of a lease, an
installment purchase contract, a conditional sales contract, or a participation
interest in any of the above. The Board of Trustees is responsible for
determining the credit quality of unrated municipal leases, on an ongoing basis,
including an assessment of the likelihood that the lease will not be canceled.
RISK FACTORS IN MUNICIPAL SECURITIES
Tax Risk. The Code imposes certain continuing requirements on issuers of
tax-exempt bonds regarding the use, expenditure and investment of bond
proceeds and the payment of rebates to the United States of America.
Failure by the issuer to comply after the issuance of tax-exempt bonds with
certain of these requirements could cause interest on the bonds to become
includable in gross income retroactive to the date of issuance.
Housing Authority Tax Risk. The exclusion from gross income for Federal
income tax purposes for certain housing authority bonds depends on
qualification under relevant provisions of the Code and on other provisions
of Federal law. These provisions of Federal law contain requirements
relating to the cost and location of the residences financed with the
proceeds of the single-family mortgage bonds and the income levels of
tenants of the rental projects financed with the proceeds of the
multi-family housing bonds. Typically, the issuers of the bonds, and other
parties, including the originators and servicers of the single-family
mortgages and the owners of the rental projects financed with the
multi-family housing bonds, covenant to meet these requirements. However,
there is no assurance that the requirements will be met. If such
requirements are not met:
- the interest on the bonds may become taxable, possibly retroactively
from the date of issuance;
- the value of the bonds may be reduced;
- you and other Shareholders may be subject to unanticipated tax
liabilities;
- a Portfolio may be required to sell the bonds at the reduced value;
- it may be an event of default under the applicable mortgage;
- the holder may be permitted to accelerate payment of the bond; and
- the issuer may be required to redeem the bond.
In addition, if the mortgage securing the bonds is insured by the Federal
Housing Administration ("FHA"), the consent of the FHA may be required
before insurance proceeds would become payable.
Information Risk. Information about the financial condition of issuers of
Municipal Securities may be less available than about corporations having a
class of securities registered under the Securities Exchange Act of 1934.
State and Federal Laws. An issuer's obligations under its Municipal
Securities are subject to the provisions of bankruptcy, insolvency, and
other laws affecting the rights and remedies of creditors. These laws may
extend the time for payment of principal or interest, or restrict the
Portfolio's ability to collect payments due on Municipal Securities.
Litigation and Current Developments. The power or ability of an issuer to
meet its obligations for the payment of interest on and principal of its
Municipal Securities may be materially adversely affected by litigation or
other conditions. Such litigation or conditions may from time to time have
the effect of introducing uncertainties in the market for tax-exempt
obligations or certain segments thereof, or may materially affect the
credit risk with respect to particular bonds or notes. Adverse economic,
business, legal or political developments might affect all or a substantial
portion of a Portfolio's Municipal Securities in the same manner.
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New Legislation. From time to time, proposals have been introduced before
Congress that would restrict or eliminate the Federal income tax exemption
for interest on tax exempt bonds, and similar proposals may be introduced
in the future. The Supreme Court has held that Congress has the
constitutional authority to enact such legislation. It is not possible to
determine what effect the adoption of these proposals could have on (i) the
availability of Municipal Securities for investment by the Portfolios, and
(ii) the value of the investment portfolios of the Portfolios.
LIMITATIONS ON THE USE OF MUNICIPAL SECURITIES
The Portfolios which invest in Municipal Securities may do so either by
purchasing them directly or by purchasing certificates of accrual or similar
instruments evidencing direct ownership of interest payments or principal
payments, or both, on Municipal Securities, provided that, in the opinion of
counsel to the initial seller of each certificate or instrument, any discount
accruing on the certificate or instrument that is purchased at a yield not
greater than the coupon rate of interest on the related Municipal Securities
will to the same extent as interest on such Municipal Securities be exempt from
Federal income tax and state income tax (where applicable) and not treated as a
preference item for individuals for purposes of the Federal alternative minimum
tax.
The Portfolios which invest in Municipal Securities may also do so by purchasing
from banks participation interests in all or part of specific holdings of
Municipal Securities. Such participation may be backed in whole or in part by an
irrevocable letter of credit or guarantee of the selling bank. The selling bank
may receive a fee from the Portfolio in connection with the arrangement. A
Portfolio will not purchase participation interests unless it receives an
opinion of counsel or a ruling of the Internal Revenue Service that interest
earned by it on Municipal Securities in which it holds such participation
interest is exempt from Federal income tax and state income tax (where
applicable) and not treated as a preference item for individuals for purposes of
the Federal alternative minimum tax.
NEW FINANCIAL PRODUCTS
New options and futures contracts and other financial products, and various
combinations thereof, continue to be developed. These various products may be
used to adjust the risk and return characteristics of each Portfolio's
investments. These various products may increase or decrease exposure to
security prices, interest rates, commodity prices, or other factors that affect
security values, regardless of the issuer's credit risk. If market conditions do
not perform as expected, the performance of each Portfolio would be less
favorable than it would have been if these products were not used. In addition,
losses may occur if counterparties involved in transactions do not perform as
promised. These products may expose the Portfolio to potentially greater return
as well as potentially greater risk of loss than more traditional fixed income
investments.
PERCS*
The Equity Portfolios may invest in Preferred Equity Redemption Cumulative Stock
("PERCS"). PERCS are preferred stock which convert to common stock after a
specified period of time, usually three years, and are considered the equivalent
of equity by the ratings agencies. PERCs are mandatorily convertible into common
stock. However, PERCS may be called at any time at an initial call price that
reflects a substantial premium to the stock's issue price. PERCS offer a higher
dividend than that available on the common stock, but in exchange the investors
agree to the company placing a cap on the potential price appreciation. The call
price declines daily in an amount that reflects the incremental dividend that
holders enjoy. PERCS are listed on an exchange where the common stock is listed.
*PERCS is a registered trademark of Morgan Stanley, which does not sponsor and
is in no way affiliated with One Group Investment Trust.
PREFERRED STOCK
Preferred stock is a class of stock that generally pays dividends at a specified
rate and has preference over common stock in the payment of dividends and
liquidation. Preferred stock generally does not carry voting rights. As with all
equity securities, the price of preferred stock fluctuates based on changes in a
company's financial condition and on overall market and economic conditions.
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REAL ESTATE INVESTMENT TRUSTS ("REITS")
Certain of the Portfolios may invest in equity interests or debt obligations
issued by REITs. REITs are pooled investment vehicles which invest primarily in
income producing real estate or real estate related loans or interest. REITs are
generally classified as equity REITs, mortgage REITs or a combination of equity
and mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling property that has appreciated in
value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. Similar to
investment companies, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. A Portfolio will
indirectly bear its proportionate share of expenses incurred by REITs in which a
Portfolio invests in addition to the expenses incurred directly by a Portfolio.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. Other possible risks include failing to qualify for tax free
pass-through of income under the Code and failing to maintain their exemption
from registration under the Act.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investment in such loans will gradually
align themselves to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investment in REITs involves risks similar to those associated with investing in
small capitalization companies. These risks include:
- limited financial resources
- infrequent or limited trading
- more abrupt or erratic price movements than larger company securities
Historically, small capitalization stocks, such as REITs, have been more
volatile in price than the larger capitalization stocks included in the S&P
Index of 500 Common Stocks.
REPURCHASE AGREEMENTS
Under the terms of a repurchase agreement, a Portfolio would acquire securities
from a seller, subject to the seller's agreement to repurchase such securities
at a mutually agreed-upon date and price. The repurchase price would generally
equal the price paid by the Portfolio plus interest negotiated on the basis of
current short-term rates, which may be more or less than the rate on the
underlying portfolio securities. The seller under a repurchase agreement will be
required to maintain the value of collateral held pursuant to the agreement at
not less than the repurchase price (including accrued interest).
If the seller defaults on its repurchase obligation or becomes insolvent, the
Portfolio holding such obligation would suffer a loss to the extent that the
proceeds from a sale of the underlying portfolio securities were less than the
repurchase price under the agreement, or to the extent that the disposition of
such securities by the Portfolio were delayed pending court action.
Additionally, there is no controlling legal precedent under U.S. law and there
may be no controlling legal precedents under the laws of certain foreign
jurisdictions confirming that a Portfolio would be entitled, as against a claim
by such seller or its receiver or trustee in bankruptcy, to retain the
underlying securities. However, with respect to repurchase agreements subject to
U.S. law, the Board of Trustees of the Trust believes that, under the regular
procedures normally in effect for custody of a Portfolio's securities subject to
repurchase agreements and under Federal laws, a court of competent jurisdiction
would rule in favor of the Trust if presented with the question. Securities
subject to repurchase agreements will be held by the Trust's custodian or
another qualified custodian or in
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the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered by the SEC to be loans by a Portfolio under the 1940 Act.
Repurchase Agreement Counterparties. Repurchase counterparties include
Federal Reserve member banks with assets in excess of $1 billion and
registered broker dealers which Banc One Investment Advisors deems
creditworthy under guidelines approved by the Board of Trustees.
REVERSE REPURCHASE AGREEMENTS
Portfolios may borrow money for temporary purposes by entering into reverse
repurchase agreements. Under these agreements, a Portfolio would sell portfolio
securities to financial institutions such as banks and broker-dealers, and agree
to repurchase them at a mutually agreed-upon date and price. A Portfolio would
enter into reverse repurchase agreements only to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions. At the time
a Portfolio entered into a reverse repurchase agreement, it would establish a
segregated custodial account. The Portfolio would deposit assets (such as cash
or liquid securities) that have a value equal to the repurchase price (including
accrued interest). The Portfolio would monitor the account to ensure that such
equivalent value was maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Portfolio may decline below
the price at which the Portfolio is obligated to repurchase the securities.
Reverse repurchase agreements are considered by the SEC to be borrowings by a
Portfolio under the 1940 Act.
RESTRICTED SECURITIES
Some of the Portfolios may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933 and other restricted securities. Section 4(2) commercial paper is
restricted as to disposition under federal securities law and is generally sold
to institutional investors, such as the Portfolios, who agree that they are
purchasing the paper for investment purposes and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) commercial paper is normally resold to other institutional
investors like the Portfolios through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) commercial paper, thus
providing liquidity. The Portfolios believe that Section 4(2) commercial paper
and possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Portfolios intend,
therefore, to treat restricted securities that meet the liquidity criteria
established by the Board of Trustees, including Section 4(2) commercial paper
and Rule 144A Securities, as determined by Banc One Investment Advisors, as
liquid and not subject to the investment limitation applicable to illiquid
securities.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a SEC Staff position set forth in the adopting
release for Rule 144A under the Securities Act of 1933 ("Rule 144A"). Rule 144A
is a nonexclusive safe-harbor for certain secondary market transactions
involving securities subject to restrictions on resale under federal securities
laws. Rule 144A provides an exemption from registration for resales of otherwise
restricted securities to qualified institutional buyers. Rule 144A was expected
to further enhance the liquidity of the secondary market for securities eligible
for resale. The Portfolios believe that the Staff of the SEC has left the
question of determining the liquidity of all restricted securities to the
Trustees. The Trustees have directed Banc One Investment Advisors to consider
the following criteria in determining the liquidity of certain restricted
securities:
- the frequency of trades and quotes for the security;
- the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
- dealer undertakings to make a market in the security; and
- the nature of the security and the nature of the marketplace trades.
Certain Section 4(2) commercial paper programs cannot rely on Rule 144A because,
among other things, they were established before the adoption of the rule.
However, the Trustees may determine for purposes of the Trust's liquidity
requirements that an issue of 4(2) commercial paper is liquid if the following
conditions, which are set forth in a 1994 SEC no-action letter and Guidelines
adopted by the Trust's Board of Trustees, are met:
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- The 4(2) paper must not be traded flat or in default as to principal
or interest;
- The 4(2) paper must be rated in one of the two highest rating
categories by a least two NRSROs, or if only one NRSRO rates the
security, by that NRSRO, or if unrated, is determined by Banc One
Investment Advisors to be of equivalent quality; and
- Banc One Investment Advisors must consider the trading market for the
specific security, taking into account all relevant factors, including
but not limited, to whether the paper is the subject of a commercial
paper program that is administered by an issuing and paying agent bank
and for which there exists a dealer willing to make a market in that
paper, or is administered by a direct issuer pursuant to a direct
placement program; and
- Banc One Investment Advisors shall monitor the liquidity of the 4(2)
commercial paper purchased and shall report to the Board of Trustees
promptly if any such securities are no longer determined to be liquid.
If such determination causes a Portfolio to hold more than 15% of its
net assets in illiquid securities, the Board of Trustees shall
consider what action, if any, should be taken on behalf of the Trust,
unless Banc One Investment Advisors is able to dispose of illiquid
assets in an orderly manner in an amount that reduces the Portfolio's
holdings of illiquid assets to less than 15% of its net assets; and
- Banc One Investment Advisors shall report to the Board of Trustees on
the appropriateness of the purchase and retention of liquid restricted
securities under these Guidelines no less frequently than quarterly.
SECURITIES LENDING
To generate additional income, each of the Portfolios may lend up to 33 1/3% of
the securities in which they are invested pursuant to agreements requiring that
the loan be continuously secured by collateral equal at all times to at least
100% of the market value plus accrued interest on the securities lent.
Collateral may include cash, securities of the U.S. government or its agencies,
shares of an investment trust or mutual fund, letters of credit or any
combination of such collateral. The Portfolios receive payments from the
borrowers equivalent to the dividends and interest which would have been earned
on the securities lent while simultaneously seeking to earn interest on the
investment of cash collateral in U.S. government securities, shares of an
investment trust or mutual fund, commercial paper, repurchase agreements,
variable and floating rate instruments, restricted securities, asset-backed
securities, and the other types of investments permitted by the applicable
Portfolio's prospectus. Collateral is marked to market daily to provide a level
of collateral at least equal to the market value plus accrued interest of the
securities lent. 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 will only be made to borrowers deemed by Banc One
Investment Advisors to be of good standing under guidelines established by the
Trust's Board of Trustees and when, in the judgment of Banc One Investment
Advisors, the consideration which can be earned currently from such securities
loans justifies the attendant risk. Loans are subject to termination by the
Portfolios or the borrower at any time, and therefore are not considered to be
illiquid investments.
SHORT-TERM FUNDING AGREEMENTS
To enhance yield, some of the Portfolios may make limited investments in
short-term funding agreements issued by banks and highly rated U.S. insurance
companies. Short-term funding agreements issued by insurance companies are
sometimes referred to as Guaranteed Investment Contracts ("GICs"), while those
issued by banks are referred to as Bank Investment Contracts ("BICs"). Pursuant
to these agreements, a Portfolio makes cash contributions to a deposit account
at a bank or insurance company. The bank or insurance company then credits to
the Portfolio on a monthly basis guaranteed interest at either a fixed, variable
or floating rate. These contracts are general obligations of the issuing bank or
insurance company (although they may be the obligations of an insurance company
separate account) and are paid from the general assets of the issuing entity.
A Portfolio will purchase short-term funding agreements only from banks and
insurance companies which, at the time of purchase, are rated in one of the
three highest rating categories and have assets of $1 billion or more.
Generally, there is no active secondary market in short-term funding agreements.
Therefore, short-term funding agreements may be considered by the Portfolio to
be illiquid investments. To the extent that a short-term funding agreement is
determined to be illiquid, such
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agreements will be acquired by the Portfolio only if, at the time of purchase,
no more than 15% of the Portfolio's net assets will be invested in short-term
funding agreements and other illiquid securities.
STRUCTURED INSTRUMENTS
Structured instruments are debt securities issued by agencies of the U.S.
government (such as Ginnie Mae, Fannie Mae, and Freddie Mac), banks,
corporations, and other business entities whose interest and/or principal
payments are indexed to certain specific foreign currency exchange rates,
interest rates, or one or more other reference indices. Structured instruments
frequently are assembled in the form of medium-term notes, but a variety of
forms are available and may be used in particular circumstances. Structured
instruments are commonly considered to be derivatives.
The terms of structured instruments provide that their principal and/or interest
payments are adjusted upwards or downwards to reflect changes in the reference
index while the structured instruments are outstanding. In addition, the
reference index may be used in determining when the principal is redeemed. As a
result, the interest and/or principal payments that may be made on a structured
product may vary widely, depending on a variety of factors, including the
volatility of the reference index and the effect of changes in the reference
index on principal and/or interest payments.
While structured instruments may offer the potential for a favorable rate of
return from time to time, they also entail certain risks. Structured instruments
may be less liquid than other debt securities, and the price of structured
instruments may be more volatile. If the value of the reference index changes in
a manner other than that expected by Banc One Investment Advisors, principal
and/or interest payments on the structured instrument may be substantially less
than expected. In addition, although structured instruments may be sold in the
form of a corporate debt obligation, they may not have some of the protection
against counterparty default that may be available for publicly traded debt
securities (i.e., the existence of a trust indenture). In that case, the risks
of default associated with structured instruments may be similar to those
associated with swap contracts. See "Swaps, Caps and Floors."
The Portfolios will invest only in structured securities that are consistent
with each Portfolio's investment objective, policies and restrictions and Banc
One Investment Advisors' outlook on market conditions. In some cases, depending
on the terms of the reference index, a structured instrument may provide that
the principal and/or interest payments may be adjusted below zero; however, a
Portfolio will not invest in structured instruments if the terms of the
structured instrument provide that the Portfolio may be obligated to pay more
than its initial investment in the structured instrument, or to repay any
interest or principal that has already been collected or paid back.
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Structured instruments that are registered under the Federal securities laws may
be treated as liquid. However, many structured instruments may not be registered
under the Federal securities laws. In that event, a Portfolio's ability to
resell such a structured instrument may be more limited than its ability to
resell other Portfolio securities. The Portfolio will treat these instruments as
illiquid, and will limit its investments in these instruments to no more than
15% of its net assets, when combined with all other illiquid investments of the
Portfolio.
SWAPS, CAPS AND FLOORS
The Portfolios may enter into swaps, caps, and floors (collectively, "Swap
Contracts") on various securities (such as U.S. government securities),
securities indexes, interest rates, prepayment rates, foreign currencies or
other financial instruments or indexes, in order to protect the value of the
Portfolio from interest rate fluctuations and to hedge against fluctuations in
the floating rate market in which the Portfolio's investments are traded. The
Portfolios may enter into these transactions to manage their exposure to
changing interest rates and other market factors or for non-hedging purposes.
Some transactions may reduce each Portfolio's exposure to market fluctuations
while others may tend to increase market exposure. Although different from
options, futures and options on futures, swap contracts are used by the
Portfolios for similar purposes (i.e., risk management and hedging) and
therefore, expose the Portfolios to generally the same risks and opportunities
as those investments.
Swap contracts typically involve an exchange of obligations by two sophisticated
parties. For example, in an interest rate swap, the Portfolio may exchange with
another party their respective rights to receive interest, such as an exchange
of fixed rate payments for floating rate payments.
Currency swaps involve the exchange of respective rights to make or receive
payments in specified currencies. Mortgage swaps are similar to interest rate
swaps in that they represent commitments to pay and receive interest. The
notional principal amount, however, is tied to a reference pool or pools of
mortgages.
Caps and floors are variations on swaps. The purchase of a cap entitles the
purchaser to receive a principal amount from the party selling the cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of an interest rate floor entitles the purchaser to receive
payments on a notional principal amount from the party selling the floor to the
extent that a specified index falls below a predetermined interest rate or
amount. Caps and floors are similar in many respects to over-the-counter options
transactions, and may involve investment risks that are similar to those
associated with options transactions and options on futures contracts.
Because swap contracts are individually negotiated, they remain the obligation
of the respective counterparties, and there is a risk that a counterparty will
be unable to meet its obligations under a particular swap contract. If a
counterparty defaults on a swap contract with a Portfolio, the Portfolio may
suffer a loss. To address this risk, each Portfolio will usually enter into
interest rate swaps on a net basis, which means that the two payment streams
(one from the Portfolio to the counterparty, one to the Portfolio from the
counterparty) are netted out, with the Portfolio receiving or paying, as the
case may be, only the net amount of the two payments.
Interest rate swaps do not involve the delivery of securities, other underlying
assets, or principal, except for the purposes of collateralization as discussed
below. Accordingly, the risk of loss with respect to interest rate swaps entered
into on a net basis would be limited to the net amount of the interest payments
that the Portfolio is contractually obligated to make. If the other party to an
interest rate swap defaults, the Portfolio's risk of loss consists of the net
amount of interest payments that a Portfolio is contractually entitled to
receive. In addition, the Portfolio may incur a market value adjustment on
securities held upon the early termination of the swap. To protect against
losses related to counterparty default, the Portfolios may enter into swaps that
require transfers of collateral for changes in market value.
In contrast, currency swaps and other types of swaps may involve the delivery of
the entire principal value of one designated currency or financial instrument in
exchange for the other designated currency or financial instrument. Therefore,
the entire principal value of such swaps may be subject to the risk that the
other party will default on its contractual delivery obligations.
In addition, because swap contracts are individually negotiated and ordinarily
non-transferable, there also may be circumstances in which it would be
impossible for a Portfolio to close out its obligations under the swap contract
prior to its maturity. Under these circumstances, the Portfolio might be able to
negotiate another swap contract with a different counterparty to offset the risk
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associated with the first swap contract. Unless the Portfolio is able to
negotiate such an offsetting swap contract, however, the Portfolio could be
subject to continued adverse developments, even after Banc One Investment
Advisors determines that it would be prudent to close out or offset the first
swap contract.
The Portfolios will not enter into any mortgage swap, interest rate swap, cap or
floor transaction unless the unsecured commercial paper, senior debt, or the
claims paying ability of the other party thereto is rated in one of the top two
rating categories by at least one NRSRO, or if unrated, determined by Banc One
Investment Advisors to be of comparable quality.
The use of swaps involves investment techniques and risks different from and
potentially greater than those associated with ordinary Portfolio securities
transactions. If Banc One Investment Advisors is incorrect in its expectations
of market values, interest rates, or currency exchange rates, the investment
performance of the Portfolios would be less favorable than it would have been if
this investment technique were not used. In addition, in certain circumstances
entry into a swap contract that substantially eliminates risk of loss and the
opportunity for gain in an "appreciated financial position" will accelerate gain
to the Portfolios.
The Staff of the SEC is presently considering its position with respect to
swaps, caps and floors as senior securities. Pending a determination by the
Staff, the Portfolios will either treat swaps, caps and floors as being subject
to their senior securities restrictions or will refrain from engaging in swaps,
caps and floors. Once the Staff has expressed a position with respect to swaps,
caps and floors, the Portfolios intend to engage in swaps, caps and floors, if
at all, in a manner consistent with such position. To the extent the net amount
of an interest rate or mortgage swap is held in a segregated account, consisting
of cash or liquid, high grade debt securities, the Portfolios and Banc One
Investment Advisors believe that swaps do not constitute senior securities under
the Investment Company Act of 1940 and, accordingly, will not treat them as
being subject to each Portfolio's borrowing restrictions. The net amount of the
excess, if any, of each Portfolio's obligations over its entitlements with
respect to each interest rate swap will be accrued on a daily basis and an
amount of cash or liquid securities having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated account by the
Portfolios' Custodian. The Bond Portfolios generally will limit their
investments in swaps, caps and floors to 25% of their total assets.
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TREASURY RECEIPTS
The Portfolios may purchase interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury notes and U.S.
Treasury bonds into a special account at a custodian bank. Receipts include:
- - Treasury Receipts ("TRS"),
- - Treasury Investment Growth Receipts ("TIGRS"), and
- - Certificates of Accrual on Treasury Securities ("CATS").
U.S. TREASURY OBLIGATIONS
The Portfolios may invest in bills, notes and bonds issued by the U.S. Treasury
and separately traded interest and principal component parts of those
obligations that are transferable through the Federal book-entry system known as
Separately Traded Registered Interest and Principal Securities ("STRIPS") and
Coupon Under Book Entry Safekeeping ("CUBES"). The Portfolios also may invest in
Inflation Indexed Treasury Obligations.
Variable And Floating Rate Instruments
Certain obligations purchased by the Portfolios may carry variable or floating
rates of interest, may involve a conditional or unconditional demand feature and
may include variable amount master demand notes.
VARIABLE AMOUNT MASTER DEMAND NOTES are demand notes that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate according to the terms of the instrument. Because master demand
notes are direct lending arrangements between a Portfolio and the issuer, they
are not normally traded. Although there is no secondary market in the notes, a
Portfolio may demand payment of principal and accrued interest. While the notes
are not typically rated by credit rating agencies, issuers of variable amount
master demand notes (which are normally manufacturing, retail, financial,
brokerage, investment banking and other business concerns) must satisfy the same
criteria as set forth above for commercial paper. Banc One Investment Advisors
will consider the earning power, cash flow, and other liquidity ratios of the
issuers of such notes and will continuously monitor their financial status and
ability to meet payment on demand. In determining average weighted portfolio
maturity, a variable amount master demand note will be deemed to have a maturity
equal to the period of time remaining until the principal amount can be
recovered from the issuer through demand.
The Portfolios, subject to their investment objective policies and restrictions,
may acquire Variable And Floating Rate Instruments. A variable rate instrument
is one whose terms provide for the adjustment of its interest rate on set dates
and which, upon adjustment, can reasonably be expected to have a market value
that approximates its par value. A floating rate instrument is one whose terms
provide for the adjustment of its interest rate whenever a specified interest
rate changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value. These instruments are frequently not
rated by credit rating agencies; however, unrated variable and floating rate
instruments purchased by a Portfolio will be determined by Banc One Investment
Advisors under guidelines established by the Trust's Board of Trustees to be of
comparable quality at the time of purchase to rated instruments eligible for
purchase under the Portfolio's investment policies. In making these
determinations, Banc One Investment Advisors will consider the earning power,
cash flow and other liquidity ratios of the issuers of these instruments (these
issuers include financial, merchandising, bank holding and other companies) and
will continuously monitor their financial condition. There may be no active
secondary market with respect to a particular variable or floating rate
instrument purchased by a Portfolio. The absence of an active secondary market
could make it difficult for the Portfolio to dispose of the variable or floating
rate instrument involved in the event the issuer of the instrument defaulted on
its payment obligations, and the Portfolio could, for this or other reasons,
suffer a loss to the extent of the default. Variable or floating rate
instruments may be secured by bank letters of credit or other assets. A
Portfolio will purchase a variable or floating rate instrument to facilitate
portfolio liquidity or to permit investment of the Portfolio's assets at a
favorable rate of return.
Limitations on the Use of Variable and Floating Rate Notes. Variable
and floating rate instruments for which no readily available market exists will
be purchased in an amount which, together with securities with legal or
contractual restrictions on
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resale or for which no readily available market exists (including repurchase
agreements providing for settlement more than seven days after notice), exceeds
15% of the Portfolio's net assets only if these instruments are subject to a
demand feature that will permit the Portfolio to demand payment of the principal
within seven days after demand by the Portfolio. There is no limit on the extent
to which a Portfolio may purchase demand instruments that are not illiquid. If
not rated, these instruments must be found by Banc One Investment Advisors under
guidelines established by the Trust's Board of Trustees, to be of comparable
quality to instruments that are rated high quality. A rating may be relied upon
only if it is provided by a nationally recognized statistical rating
organization that is not affiliated with the issuer or guarantor of the
instruments. For a description of ratings, see the Appendix.
WARRANTS
Warrants are securities, typically issued with preferred stock or
bonds, that give the holder the right to buy a proportionate amount of common
stock at a specified price, usually at a price higher than the market price at
the time of issuance of the warrant. The right may last for a period of years or
indefinitely.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Portfolios may purchase securities on a "when-issued" and forward
commitment basis. When a Portfolio agrees to purchase securities, the
Portfolio's custodian will set aside cash or liquid portfolio securities equal
to the amount of the commitment in a separate account. The Portfolios may
purchase securities on a when-issued basis when deemed by Banc One Investment
Advisors to present attractive investment opportunities. When-issued securities
are purchased for delivery beyond the normal settlement date at a stated price
and yield, thereby involving the risk that the yield obtained will be less than
that available in the market at delivery. The Portfolios generally will not pay
for these securities or earn interest on them until received. Although the
purchase of securities on a when-issued basis is not considered to be
leveraging, it has the effect of leveraging. When Banc One Investment Advisors
purchases a when-issued security, the Custodian will set aside cash or liquid
securities to satisfy the purchase commitment. In this case, a Portfolio may be
required subsequently to place additional assets in the separate account to
assure that the value of the account remains equal to the amount of the
Portfolio's commitment. The Portfolio's net assets may fluctuate to a greater
degree when it sets aside portfolio securities to cover purchase commitments
than when it sets aside cash. In addition, when a Portfolio engages in
"when-issued" transactions, it relies on the seller to complete the trade.
Failure of the seller to do so may result in the Portfolio's incurring a loss or
missing the opportunity to obtain a price considered to be advantageous.
In a forward commitment transaction, the Portfolios contract to
purchase securities for a fixed price at a future date beyond customary
settlement time. The Portfolios are required to hold and maintain in a
segregated account until the settlement date, cash, U.S. government securities
or liquid high-grade debt obligations in an amount sufficient to meet the
purchase price. Alternatively, the Portfolios may enter into offsetting
contracts for the forward sale of other securities that they own. The purchase
of securities on a when-issued or forward commitment basis involves a risk of
loss if the value of the security to be purchased declines prior to the
settlement date.
LIMITATIONS ON THE USE OF WHEN ISSUED SECURITIES AND FORWARD
COMMITMENTS. No Portfolio intends to purchase "when-issued" securities for
speculative purposes but only for the purpose of acquiring portfolio securities.
Because a Portfolio will set aside cash or liquid portfolio securities to
satisfy its purchase commitments in the manner described, the Portfolio's
liquidity and the ability of Banc One Investment Advisors to manage the
Portfolio might be affected in the event its commitments to purchase when-issued
securities ever exceeded 40% of the value of its assets. Commitments to purchase
when-issued securities will not, under normal market conditions, exceed 25% of a
Portfolio's total assets, and a commitment will not exceed 90 days. A Portfolio
may dispose of a when-issued security or forward commitment prior to settlement
if Banc One Investment Advisors deems it appropriate to do so.
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INVESTMENT RESTRICTIONS
The following investment restrictions are "fundamental policies" of
each Portfolio. The investment objectives of each Portfolio (which can be found
in response to the first question in each of the Risk/Return Summaries) are also
"fundamental policies." Fundamental policies cannot be changed with respect to a
Portfolio without the consent of the holders of a majority of the Portfolio's
outstanding shares. The term "majority of the outstanding shares" means the vote
of (i) 67% or more of the Portfolio's shares present at a meeting, if more than
50% of the outstanding shares of the Portfolio are present or represented by
proxy, or (ii) more than 50% of the Portfolio's outstanding shares, whichever is
less.
Each Portfolio may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities and
repurchase agreements involving such securities) if as a result more than 5% of
the total assets of the Portfolio would be invested in the securities of such
issuer or the Portfolio would own more than 10% of the outstanding voting
securities of such issuer. This restriction applies to 75% of the Portfolio's
assets. For purposes of this limitation, a security is considered to be issued
by the government entity whose assets and revenues guarantee or back the
security. With respect to private activity bonds or industrial development bonds
backed only by the assets and revenues of a nongovernmental user, such user
would be considered the issuer.
2. Purchase any securities which would cause more than 25% of the total
assets of the Portfolio to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that this limitation does not apply to investments in the obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities and
repurchase agreements involving such securities. For purposes of this limitation
(i) utility companies will be divided according to their services, for example,
gas, gas transmission, electric and telephone will each be considered a separate
industry; and (ii) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of their parents.
3. Make loans, except that a Portfolio may (i) purchase or hold debt
instruments in accordance with its investment objectives and policies; (ii)
enter into repurchase agreements; and (iii) engage in securities lending as
described in the Prospectus and in the Statement of Additional Information.
4. Purchase securities on margin or sell securities short.
5. Underwrite the securities of other issuers except to the extent that
a Portfolio may be deemed to be an underwriter under certain securities laws in
the disposition of "restricted securities."
6. Purchase or sell commodities or commodity contracts, except that the
Portfolios may purchase or sell financial futures contracts for bona fide
hedging and other permissible purposes.
7. Purchase participations or other direct interests in oil, gas or
mineral exploration or development programs (although investments by the
Portfolios in marketable securities of companies engaged in such activities are
not hereby precluded).
8. Invest in any issuer for purposes of exercising control or
management.
9. Purchase securities of other investment companies except as
permitted by the Investment Company Act of 1940 and the rules and regulations
thereunder.
10. Purchase or sell real estate (however, each Portfolio may, to the
extent appropriate to its investment objective, purchase securities secured by
real estate or interests therein or securities issued by companies investing in
real estate or interests therein).
11. Borrow money or issue senior securities, except that each Portfolio
may borrow from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of its total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the
32
<PAGE> 90
lesser of the dollar amounts borrowed or 10% of the value of the Portfolio's
total assets at the time of its borrowing. A Portfolio will not purchase
securities while its borrowings (including reverse repurchase agreements) in
excess of 5% of its total assets are outstanding. The foregoing percentages will
apply at the time of the purchase of a security.
The following investment restrictions are non-fundamental except as
noted otherwise and therefore can be changed by the Board of Trustees without
prior shareholder approval.
No Portfolio may invest in illiquid securities in an amount exceeding,
in the aggregate, 15% of the Portfolio's net assets. An illiquid security is a
security which cannot be disposed of promptly (within seven days) and in the
usual course of business without a loss, and includes repurchase agreements
maturing in excess of seven days, time deposits with a withdrawal penalty,
non-negotiable instruments and instruments for which no market exists.
The foregoing percentages apply at the time of purchase of a security.
Banc One Investment Advisors shall report to the Board of Trustees promptly if
any of a Portfolio's investments are no longer determined to be liquid or if the
market value of Portfolio assets has changed if such determination or change
causes a Portfolio to hold more than 15% of its net assets in illiquid
securities in order for the Board of Trustees to consider what action, if any,
should be taken on behalf of the Trust, unless Banc One Investment Advisors is
able to dispose of illiquid assets in an orderly manner in an amount that
reduces the Portfolio's holdings to less than 15% of its net assets.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Portfolio is calculated by
dividing the lesser of purchases or sales of portfolio securities for the year
by the monthly average value of the portfolio securities. The calculation
excludes all securities whose maturities at the time of acquisition were one
year or less. The Portfolio turnover rates for the years ended December 31, 1999
and 1998 for the following Portfolios were as follows:
<TABLE>
<CAPTION>
PORTFOLIO 1999 1998
--------- ---- ----
<S> <C> <C> <C>
Government Bond Portfolio 56.52% 40.4%
Balanced Portfolio 34.65% 32.1%
Large Cap Growth Portfolio 78.54% 61.0%
Mid Cap Growth Portfolio 148.15% 87.7%
Equity Index Portfolio 0.36% 2.3%*
Bond Portfolio 7.48% NA**
Diversified Mid Cap Portfolio 58.77% NA**
Mid Cap Value Portfolio 198.81% NA**
Diversified Equity Portfolio 81.65% NA**
</TABLE>
*NOT ANNUALIZED
** The Portfolio turnover rates for the Predecessor Funds of
the Bond Portfolio, the Diversified Mid Cap Portfolio, the Mid
Cap Value Portfolio and the Diversified Equity Portfolio are
shown in the following table.
33
<PAGE> 91
The Portfolio turnover rates for the year ended December 31, 1998 for
the Predecessor Funds of the Bond Portfolio, the Diversified Mid Cap Portfolio,
the Mid Cap Value Portfolio, and the Diversified Equity Portfolio were as
follows:
<TABLE>
<CAPTION>
PORTFOLIO 1998
--------- ----
<S> <C> <C>
Bond Portfolio 14.5%
Diversified Mid Cap Portfolio 26.2%
Mid Cap Value Portfolio 39.3%
Diversified Equity Portfolio 43.2%
</TABLE>
Higher turnover rates will generally result in higher brokerage
expenses. Portfolio turnover may vary greatly from year to year as well as
within a particular year.
ADDITIONAL TAX INFORMATION CONCERNING THE PORTFOLIOS
It is the policy of each Portfolio to meet the requirements necessary
to qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By following such
policy, each Portfolio expects to eliminate or reduce to a nominal amount the
federal income taxes to which it may be subject.
In order to qualify as a regulated investment company, each Portfolio
must, among other things, (1) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock or securities, foreign currencies or
other income (including gains from options, futures or forward contracts)
derived with respect to its business of investing in stock, securities or
currencies, and (2) diversify its holdings so that at the end of each quarter of
its taxable year (i) at least 50% of the market value of the Portfolio's assets
is represented by cash or cash items, United States Government securities,
securities of other regulated investment companies, and other securities
limited, in respect of any one issuer, to an amount not greater than 5% of the
value of the Portfolio's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than United States
Government securities or the securities of other regulated investment companies)
or of two or more issuers that the Portfolio controls and that are engaged in
the same, similar, or related trades or businesses. These requirements may limit
the range of the Portfolio's investments. If a Portfolio qualifies as a
regulated investment company, it will not be subject to federal income tax on
the part of its income distributed to shareholders, provided the Portfolio
distributes during its taxable year at least (a) 90% of its investment company
taxable income, and (b) 90% of the excess of (i) its tax-exempt interest income
less (ii) certain deductions attributable to that income. Each Portfolio intends
to make sufficient distributions to Shareholders to meet this requirement.
For a discussion of the tax consequences of variable annuity contracts,
refer to the prospectuses or other documents you received when you purchased
your variable life or variable annuity contracts. Variable annuity contracts
purchased through insurance company separate accounts provide for the
accumulation of all earnings from interest, dividends, and capital appreciation
without current federal income tax liability for the owner. Depending on the
variable annuity or variable life contract, distributions from the contract may
be subject to ordinary income tax and, in addition, on distributions before age
59 1/2, a 10% penalty tax. Only the portion of a distribution attributable to
income on the investment in the contract is subject to federal income tax.
Investors should consult with competent tax advisors for a more complete
discussion of possible tax consequences in a particular situation.
In addition to the diversification requirements applicable to all
regulated investment companies discussed above, section 817(h) of the Code
imposes certain diversification standards on the underlying assets of variable
annuity contracts held in the Portfolios. The Code provides that a variable
annuity contract shall not be treated as an annuity contract for any period (and
any subsequent period) for which the investments are not, in accordance with
regulations prescribed by the Treasury Department, adequately diversified.
Disqualification of the variable annuity contract as an annuity contract would
result in immediate imposition of federal income tax on variable annuity
contract owners with respect to earnings allocable to the contract. This
liability would generally arise prior to the receipt of payments under the
contract. Section 817(h)(2) of the Code is a safe harbor provision which
provides that variable annuity contracts meet the diversification requirements
if, as of the close of each quarter, the underlying assets meet the
diversification standards for a regulated investment company and no more than
fifty-five percent
34
<PAGE> 92
(55%) of the total assets consists of cash, cash items, U.S. Government
securities and securities of other regulated investment companies.
The Treasury Department has issued Regulations (Treas. Reg. 1.817-5),
that establish diversification requirements for the investment portfolios
underlying variable annuity contracts. The Regulations amplify the
diversification requirements for variable annuity contracts set forth in Section
817(h) of the Code and provide an alternative to the safe harbor provision
described above. Under the Regulations, an investment portfolio will be deemed
adequately diversified if (i) no more than 55 percent of the value of the total
assets of the portfolio is represented by any one investment; (ii) no more than
70 percent of such value is represented by any two investments; (iii) no more
than 80 percent of such value is represented by any three investments; and (iv)
no more than 90 percent of such value is represented by any four investments.
For purposes of these Regulations all securities of the same issuer, all
interests in the same real estate project and all interests in the same
commodity are treated as a single investment. The Code provides that for
purposes of determining whether or not the diversification standards imposed on
the underlying assets of variable annuity contracts by Section 817(h) of the
Code have been met, "each United States government agency or instrumentality
shall be treated as a separate issuer."
Treasury regulations provide that a variable annuity contract will be
able to look through to the assets held by a Portfolio for the purpose of
meeting the diversification test if the Portfolio meets certain requirements.
Each Portfolio will be managed in such a manner as to comply with the
diversification requirements and to allow the variable annuity contracts to be
treated as owning a proportionate share of such Portfolio's assets. It is
possible that in order to comply with the diversification requirements, less
desirable investment decisions may be made which would affect the investment
performance of such Portfolio.The Code generally imposes a non-deductible excise
tax on regulated investment companies that do not distribute in each calendar
year (regardless of whether they otherwise have a non-calendar taxable year) an
amount equal to 98% of their "ordinary income" (as defined) for the calendar
year plus 98% of their "capital gain net income" (as defined) for the 1-year
period ending on October 31 of such calendar year. The balance, if any, of such
income must be distributed during the next calendar year. If distributions
during a calendar year were less than the required amount, a particular
Portfolio would be subject to a non-deductible excise tax equal to 4% of the
deficiency. A Portfolio is exempt from this excise tax if at all times during
the calendar year each shareholder in the Portfolio was either a trust described
in Section 401(a) of the Code and exempt from tax under section 501(a) of the
Code or a segregated asset account of a life insurance company held in
connection with variable contracts.
35
<PAGE> 93
The above discussion of the federal income tax treatment of the
Portfolios assumes that all the insurance company accounts holding shares of a
Portfolio are either segregated asset accounts underlying variable contracts as
defined in Section 817(d) of the Code or the general account of an insurance
company as defined in Section 816 of the Code. Additional tax consequences may
apply to holders of variable contracts investing in a Portfolio if any of those
contracts are not treated as annuity, endowment or life insurance contracts.
VALUATION
VALUATION OF THE PORTFOLIOS
Securities traded on a securities exchange are valued at the last
quoted sale price on the principal exchange, or if no sale, at their fair value
as determined in good faith under consistently applied procedures authorized by
the Board of Trustees. Securities traded only in the over-the-counter (OTC)
market are valued at the last quoted sale price, or if there is no sale, at the
mean of the last quoted bid and ask prices provided by an independent pricing
agent. Corporate debt securities and debt securities of U.S. issuers, including
municipal securities, are valued by a combination of daily quotes and matrix
evaluations provided by an independent pricing service approved by the Board of
Trustees. Inactive securities that have little or no trading activity are
evaluated by the independent pricing services by obtaining dealer quotes.
Futures contracts and options thereon traded on a commodities exchange or board
of trade are valued at the last sales price at the close of trading, or if there
was no sale, at the mean of the latest quoted bid and ask prices. Securities for
which either reliable market quotations are not readily available or for which
the pricing agent does not provide a valuation that in the judgment of the
Portfolio's investment adviser, represents fair value, shall each be valued in
accordance with procedures authorized by the Board of Trustees.
The Portfolios may invest in repurchase agreements with institutions
that Banc One Investment Advisors has determined are creditworthy. Each
repurchase agreement is recorded at cost. The value of a foreign security is
determined in its national currency as of the close of trading on the foreign
exchange or other principal market on which it is traded, which value is then
converted into its U.S. Dollar equivalent at the foreign exchange rate reported
by the independent pricing agent as of the close of the London Exchange.
SECURITY VALUATION SPECIFICS
- - U.S. Government Securities, Mortgage Pools, Collateralized Mortgage
Obligations, Asset Backed Securities, Corporate Bonds, and Municipal
Securities shall be valued by an independent pricing vendor. A mean of the
latest bid and ask quotations or the last sale in the case of a listed bond
shall be used to evaluate the security. Fixed income securities with less
than 61 days to maturity shall be valued at amortized cost.
- - Securities for which the primary market is a foreign exchange shall be
valued at the last available quoted sale price on said exchange for the
current day or, if traded on the London Exchange and are not part of the
FTSE 100, the securities will receive the mid-market close. Quotations of
foreign securities shall be converted into the U.S. dollar equivalent using
a spot currency value provided by an independent pricing vendor.
- - Securities for which readily available market quotations are not available
or for which the pricing agent provides a valuation that in the judgment of
the Trust's Pricing Committee does not represent a fair value, shall be
valued in accordance with the Trust's "Securities Valuation Procedures."
ADDITIONAL INFORMATION REGARDING THE CALCULATION OF PER SHARE NET ASSET VALUE
The net asset value of each Portfolio is determined and its Shares are
priced as of the times specified in the Portfolios' Prospectus. The net asset
value per Share of each Portfolio is calculated by determining the value of the
interest in the securities and other assets of the Portfolio, less liabilities
and dividing such amount by the number of Shares of the Portfolio outstanding.
36
<PAGE> 94
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Portfolios are sold continuously to insurance company
separate accounts. The Portfolios may suspend the right of redemption or
postpone the date of payment for Shares during any period when (a) trading on
the New York Stock Exchange (the "Exchange") is restricted by applicable rules
and regulations of the Securities and Exchange Commission, (b) the Exchange is
closed for other than customary weekend and holiday closings, (c) the Securities
and Exchange Commission has by order permitted such suspension, or (d) an
emergency exists as determined by the Securities and Exchange Commission.
MANAGEMENT OF THE TRUST
TRUSTEES & OFFICERS
Overall responsibility for management of the Trust rests with the Board
of Trustees of the Trust who were elected by the Shareholders of the Trust. The
Trustees are responsible for making major decisions about each Portfolio's
investment objectives and policies, but delegate the day-to-day administration
of the Portfolios to the officers of the Trust. There are currently eight
Trustees, all of whom, except John F. Finn, are not "interested persons" of the
Trust within the meaning of that term under the 1940 Act. The Trustees of the
Trust, their addresses, their ages, and principal occupations during the past
five years are set forth below.
37
<PAGE> 95
<TABLE>
<CAPTION>
POSITION
HELD WITH
NAME AND ADDRESS AGE THE TRUST PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- ---------------- --- --------- -----------------------------------------------
<S> <C> <C> <C>
Peter C. Marshall 57 Trustee From November, 1993 to present, President, DCI
DCI Marketing, Inc. Marketing, Inc.
2727 W. Good Hope Rd.
Milwaukee, WI 53209
Charles I. Post 72 Trustee From July, 1986 to present, self employed as a
7615 4th Avenue West consultant.
Bradenton, FL 34209
Frederick W. Ruebeck 60 Trustee From June, 1988 to present, Director of
Eli Lilly & Company Investments, Eli Lilly and Company.
Lilly Corporate Center
307 East McCarty
Indianapolis, IN 46258
Robert A. Oden, Jr. 53 Trustee From 1995 to present, President, Kenyon College;
Office of the President from 1989 to 1995, Headmaster, The Hotchkiss
Ransom Hall School.
Kenyon College
Gambier, OH 43022
*John F. Finn 52 Trustee Since 1975, President of Gardner, Inc.
President (wholesale distributor to outdoor
Gardner, Inc. power equipment industry)
1150 Chesapeake Ave.
Columbus, Ohio 43212
Marilyn McCoy 51 Trustee Vice President of Administration
Northwestern University and Planning, Northwestern
Office of the Vice President University (1985 to present).
Administration Planning Trustee of Pegasus Variable Funds
633 Clark St. Crown 2-112 since 1996.
Evanston, IL 60208
Julius L. Pallone 69 Trustee President, J.L. Pallone Associates
J.L. Pallone Associates (1994 to present). Trustee of
3000 Town Center Pegasus Variable Funds since 1987.
Suite 732
Southfield, MI 48075
Donald L. Tuttle 65 Trustee Vice President (1995 to present)
Association for Investment and Senior Vice President (1992 to
Management and Research 1995), Association for Investment
PO Box 3668 Management and Research. Trustee
560 Ray C. Hunt Drive of Pegasus Variable Funds since 1993.
Charlottesville, VA 22903
</TABLE>
*John F. Finn is an "interested person" as that term is defined in the
Investment Company Act of 1940.
The Trustees of the Portfolios receive fees and expenses for each meeting of the
Board of Trustees attended. The Compensation Table below sets forth the total
compensation to the Trustees from the Trust for the fiscal year ended December
31, 1999.
38
<PAGE> 96
<TABLE>
<CAPTION>
COMPENSATION TABLE
NAME OF PERSON, AGGREGATE PENSION OR ESTIMATED ANNUAL TOTAL COMPENSATION
POSITION COMPENSATION RETIREMENT BENEFITS UPON FROM THE PORTFOLIO
FROM THE BENEFITS ACCRUED RETIREMENT COMPLEX(1)
PORTFOLIOS(2) AS PART OF
PORTFOLIO
EXPENSES
<S> <C> <C> <C> <C>
Peter C. Marshall, $3,250 NA NA $80,750
Trustee
Charles I. Post, Trustee $3,250 NA NA $75,000
Frederick W. Ruebeck, $3,250(3) NA NA $76,250
Trustee
Robert A. Oden, Jr., $3,250 NA NA $76,250
Trustee
John F. Finn, Trustee $3,250(4) NA NA $76,250
Marilyn McCoy, $2,500(5) NA NA $70,250
Trustee
Julius L. Pallone, $2,500(6) NA NA $70,250
Trustee
Donald L. Tuttle, $2,500(7) NA NA $70,250
Trustee
</TABLE>
(1) "Portfolio Complex" comprises the 9 Portfolios of the Trust, as well
as the Funds of One Group)(R) Mutual Funds as of December 31, 1999.
Compensation for the "Portfolio Complex" is for the fiscal year ended
December 31, 1999.
(2) Pursuant to a Deferred Compensation Plan for Trustees of One Group
Investment Trust (the "Plan") adopted at the November 19, 1998 Board
of Trustee's meeting, the Trustees may defer all or a part of their
compensation payable by the Trust. Under the Plan, the Trustees may
specify Class I Shares of one or more funds of One Group Mutual Funds
to be used to measure the performance of a Trustee's deferred
compensation account. A Trustee's deferred compensation account will
be paid at such times as elected by the Trustee subject to certain
mandatory payment provisions in the Plan (e.g., death of a Trustee).
(3) Includes $3,250 of deferred compensation.
(4) Includes $3,250 of deferred compensation.
(5) Includes $2,500 of deferred compensation.
(6) Includes $2,500 of deferred compensation.
(7) Includes $1,500 of deferred compensation.
39
<PAGE> 97
The officers of the Portfolios receive no compensation directly from the
Portfolios for performing the duties of their offices. The officers of the
Trust, their addresses, ages and principal occupations during the past five
years are shown below:
<TABLE>
<CAPTION>
POSITION(S) HELD
NAME AND ADDRESS AGE WITH THE TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ---------------- --- -------------- ----------------------------------------
<S> <C> <C> <C>
Mark A. Beeson 42 President Mr. Beeson has served as Senior Managing Director of Banc
1111 Polaris Parkway, Suite B2 One Investment Advisors Corporation since August, 1994.
Columbus, Ohio 43240 Mr. Beeson has also served as Chief Executive Officer
and President of One Group Administrative Services, Inc.
since October 26, 1999.
Robert L. Young 37 Vice President Mr. Young has served as Managing Director of Banc One
1111 Polaris Parkway, Suite B2 and Treasurer Investment Advisors Corporation since December, 1996.
Columbus, Ohio 43240 Prior to that, Mr. Young was a senior audit manager of
Deloitte & Touche until December, 1996. Previously, Mr. Young
also worked for Dayton, Power & Light as the Director of
Internal Audit. Mr. Young has also served as Vice President and
Treasurer of One Group Administrative Services, Inc. since
October 26, 1999.
Mark S. Redman 45 Secretary Mr. Redman has been an employee of BISYS Fund Services, Inc.
1111 Polaris Parkway, Suite B2 since 1989. He has also served as President of The One Group
Columbus, Ohio 43240 Services Company since November, 1997 and as an officer of The
One Group Services Company from June, 1995 to November, .
Gary R. Young 30 Assistant Mr. Young has served as a Director of Mutual Fund Administration
1111 Polaris Parkway, Suite B2 Treasurer and for Banc One Investment Advisors Corporation since December,
Columbus, Ohio 43240 Assistant 1998. Prior to that, Mr. Young was Vice President and Manager
Secretary of the Mutual Fund Accounting, Custody and Financial
Administration Group at First Chicago NBD Investment Management
Company. He has also worked for One Group Administrative
Services, Inc. since January 1, 2000.
Jessica K. Ditullio 37 Assistant Ms. Ditullio has served as an attorney in the law department
Bank One Corporation Secretary of Bank One Corporation since August, 1990.
100 East Broad Street
Columbus, Ohio 43215
Nancy E. Fields 50 Assistant Ms. Fields has served as Project Manager at Banc One Investment
1111 Polaris Parkway, Suite B2 Secretary Advisors Corporation since July, 1999. Prior to that, Ms. Fields
Columbus, Ohio 43240 served as Vice President with the Ohio Bankers Association
` from January, 1998 until July, 1999. Prior to that, Ms. Fields
was Vice President of BISYS Fund Services, Inc. Ms. Fields has
also worked for One Group Administrative Services, Inc. since
January 1, 2000.
Michael V. Wible 37 Assistant Mr. Wible has served as an attorney in the law department of
Bank One Corporation Secretary Bank One Corporation since September, 1994.
100 East Broad Street
Columbus, Ohio 43215
James F. Laird, Jr. 42 Vice President Mr. Laird was elected Vice President-General Manager of Nationwide
Three Nationwide Plaza and Assistant Advisory Services, Inc., on April 5, 1995. Prior to being elected
Columbus, Ohio 43215 Treasurer General Manager, Mr.Laird served as Treasurer of Nationwide
Advisory Services, Inc. since November, 1987.
</TABLE>
40
<PAGE> 98
<TABLE>
<CAPTION>
POSITION(S) HELD
NAME AND ADDRESS AGE WITH THE TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ---------------- --- -------------- ----------------------------------------
<S> <C> <C> <C>
Karen R. Tackett 32 Vice President Since August, 1998, Ms. Tackett has been Director Strategic
Three Nationwide Plaza and Assistant Development of Nationwide Advisory Services, Inc. From March, 1996
Columbus, Ohio 43215 Secretary until July, 1998, Ms. Tackett was Accounting Manager for Nationwide
Advisory Services, Inc. Prior to that, Ms. Tackett was Audit
Manager and held various other positions with
PricewaterhouseCoopers LLP (formerly Coopers & Lybrand, L.L.P.)
</TABLE>
All officers listed above are "interested persons" of the Portfolios as defined
in the Investment Company Act of 1940.
INVESTMENT ADVISOR
Investment advisory services to each of the Portfolios are provided by
Banc One Investment Advisors. Banc One Investment Advisors makes the investment
decisions for the assets of the Portfolios and continuously reviews, supervises
and administers the Portfolio's investment program, subject to the supervision
of, and policies established by, the Trustees. The Portfolios' shares are not
sponsored, endorsed or guaranteed by, and do not constitute obligations or
deposits of any bank affiliate of Banc One Investment Advisors and are not
insured by the FDIC or issued or guaranteed by the U.S. Government or any of its
agencies.
As of December 31, 1999, Banc One Investment Advisors, an indirect
wholly-owned subsidiary of Bank One Corporation, a bank holding company located
in the state of Illinois, managed over $127 billion in assets. Bank One
Corporation has affiliate banking organizations in Arizona, Colorado, Florida,
Illinois, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Texas, Utah,
West Virginia and Wisconsin. In addition, Bank One Corporation has several
affiliates that engage in data processing, venture capital, investment and
merchant banking, and other diversified services including trust management,
investment management, brokerage, equipment leasing, mortgage banking, consumer
finance, and insurance.
Banc One Investment Advisors represents a consolidation of the
investment advisory staffs of a number of bank affiliates of Bank One
Corporation, which have considerable experience in the management of open-end
management investment company portfolios, including One Group Mutual Funds (an
open-end management investment company which consists of 54 separate Funds as of
December 31, 1999, some of which have similar names as the Portfolios of the
Trust and are managed similarly to such Portfolios) since 1985.
All investment advisory services are provided to the Portfolios by Banc
One Investment Advisors pursuant to an Amended and Restated Investment Advisory
Agreement dated February 17, 1999 (the "Advisory Agreement"). Unless sooner
terminated, the Advisory Agreement will continue in effect until August 31,
2000, and will continue in effect as to a particular Portfolio indefinitely if
such continuance is approved at least annually by the Trust's Board of Trustees
or by vote of a majority of the outstanding Shares of such Portfolio (as defined
under "ADDITIONAL INFORMATION-- Miscellaneous" in this Statement of Additional
Information), and a majority of the Trustees who are not parties to the
respective investment advisory agreements or interested persons (as defined in
the Investment Company Act of 1940) of any party to the respective investment
advisory agreements by votes cast in person at a meeting called for such
purpose. The Advisory Agreement may be terminated as to a particular Portfolio
at any time on 60 days' written notice without penalty by:
1. the Trustees,
---
2. vote of a majority of the outstanding Shares of that Portfolio, or
---
3. the Portfolio's Advisor, as the case may be.
---
The Advisory Agreement also terminates automatically in the event of any
assignment, as defined in the Investment Company Act of 1940.
41
<PAGE> 99
The Advisory Agreement provides that Banc One Investment Advisors shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the performance of the Advisory
Agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith, or gross negligence on the part of the Advisor in the
performance of its duties, or from reckless disregard by it of its duties and
obligations under the Advisory Agreement.
Banc One Investment Advisors is entitled to a fee, which is calculated
daily and paid monthly, at the following percentages of the average daily net
assets of each Portfolio:
NAME OF PORTFOLIO PERCENTAGE
- ----------------- ----------
Bond Portfolio 0.60%
Government Bond Portfolio 0.45%
Balanced Portfolio 0.70%
Mid Cap Growth Portfolio 0.65%
Large Cap Growth Portfolio 0.65%
Equity Index Portfolio 0.30%
Diversified Equity Portfolio 0.74%
Diversified Mid Cap Portfolio 0.74%
Mid Cap Value Portfolio. 0.74%
Banc One Investment Advisors has voluntarily agreed to waive all or
part of its fees in order to limit the Portfolios' total operating expenses on
an annual basis to not more than the following percentages of the average daily
net assets of each of the Portfolios:
NAME OF PORTFOLIO PERCENTAGE
- ----------------- ----------
Bond Portfolio 0.75%
Government Bond Portfolio 0.75%
Balanced Portfolio 1.00%
Mid Cap Growth Portfolio 1.10%
Large Cap Growth Portfolio 1.00%
Equity Index Portfolio 0.55%
Diversified Equity Portfolio 0.95%
Diversified Mid Cap Portfolio 0.95%
Mid Cap Value Portfolio 0.95%
These fee waivers are voluntary and may be terminated at any time.
For the fiscal years ended December 31, 1999, 1998, and 1997, the following
Portfolios paid investment advisory fees as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
1999 1998 1997
---- ---- ----
PORTFOLIO NET WAIVED NET WAIVED NET WAIVED
- --------- --- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C>
Government Bond Portfolio $ 247,016 -- $ 128,907 $ 9,393 $ 78,818 $ 23,446
Balanced Portfolio $ 1,016,442 -- $ 490,270 $ 2,862 $ 189,332 $ 44,906
Mid Cap Growth Portfolio $ 677,449 -- $ 431,700 $ -- $ 233,609 $ 4,114
Large Cap Growth Portfolio $ 1,821,847 -- $ 948,112 $ -- $ 458,066 $ 1,114
</TABLE>
42
<PAGE> 100
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Equity Index Portfolio $ 86,991 $10,237 $ -- $ 15,432 NA* NA*
Bond Portfolio $221,899** $55,226** NA*** NA*** NA*** NA***
Diversified Mid Cap Portfolio $100,907** $ 0** NA*** NA*** NA*** NA***
Mid Cap Value Portfolio $129,307** $ 795** NA*** NA*** NA*** NA***
Diversified Equity Portfolio $340,573** $ 8,591** NA*** NA*** NA*** NA***
</TABLE>
* The Equity Index Portfolio commenced operations on May 1, 1998.
** For the period from the substitution until December 31, 1999.
*** No fees were paid to Banc One Investment Advisors Corporation prior to the
substitution of the Predecessor Funds on March 31, 1999.
Prior to March 31, 1999, First Chicago NBD Investment Management Company
("FCNIMCO") provided investment management services to the Predecessor Funds of
the Bond Portfolio, the Diversified Mid Cap Portfolio, the Mid Cap Value
Portfolio, and the Diversified Equity Portfolio. FCNIMCO was an indirect
subsidiary of Bank One Corporation and an affiliate of Banc One Investment
Advisors. For the fiscal years ended December 31, 1999, 1998, and 1997, the
following Portfolios paid investment advisory fees to FCNIMCO as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
1999* 1998 1997
----- ---- ----
PORTFOLIO NET WAIVED NET WAIVED NET WAIVED
- --------- --- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C>
Bond Portfolio $ 57,476 $ 3,259 $ 164,396 $ 26,975 $59,313 $ 2,899
Diversified Mid Cap Portfolio $ 6,879 $ 19,137 $ 5,234 $ 82,956 $ 2,396 $ 58,356
Mid Cap Value Portfolio $ 16,041 $ 16,043 $ 50,740 $ 57,553 $20,834 $ 17,342
Diversified Equity Portfolio $ 82,912 $ 4,958 $ 263,173 $ 33,240 $96,428 $ 37,901
</TABLE>
*For the period from January 1, 1999 until the substitution on March 31, 1999.
43
<PAGE> 101
CODE OF ETHICS
The Trust and Banc One Investment Advisors have adopted codes of ethics
under Rule 17j-1 of the Investment Company Act of 1940. The Trust's code of
ethics includes policies which require "access persons" (as defined in Rule
17j-1) to: (i) place the interest of Trust Shareholders first; (ii) conduct
personal securities transactions in a manner that avoids any actual or potential
conflict of interest or any abuse of a position of trust and responsibility; and
(iii) refrain from taking inappropriate advantage of his or her position with
the Trust or with a Portfolio. The Trust's code of ethics prohibits any access
person from: (i) employing any device, scheme or artifice to defraud the Trust
or a Portfolio; (ii) making to the Trust any untrue statement of a material fact
or omit to state to the Trust or a Portfolio a material fact necessary in order
to make the statements made, in light of the circumstances under which they are
made, not misleading; (iii) engaging in any act, practice, or course of business
which operates or would operate as a fraud or deceit upon the Trust or a
Portfolio; or (iv) engaging in any manipulative practice with respect to the
Trust or a Portfolio. The Trust's code of ethics permits personnel subject to
the code to invest in securities, including securities that may be purchased or
held by a Portfolio so long as such investment transactions are not in
contravention of the above noted policies and prohibitions.
Banc One Investment Advisors' code of ethics requires that all
employees must: (i) place the interest of the accounts which are managed by Banc
One Investment Advisors first; (ii) conduct all personal securities transactions
in a manner that is consistent with the code of ethics and the individual
employee's position of trust and responsibility; and (iii) refrain from taking
44
<PAGE> 102
inappropriate advantage of their position. Banc One Investment Advisors' code of
ethics permits personnel subject to the code to invest in securities including
securities that may be purchased or held by a Portfolio subject to certain
restrictions. However, all employees are required to preclear securities trades
(except for certain types of securities such as mutual fund shares and U.S.
government securities).
45
<PAGE> 103
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Agreement, Banc One Investment Advisors
determines, subject to the general supervision of the Board of Trustees of the
Portfolios and in accordance with each Portfolio's investment objective and
restrictions, which securities are to be purchased and sold by each such
Portfolio and which brokers are to be eligible to execute its portfolio
transactions. Purchases and sales of portfolio securities with respect to the
Bond Portfolios usually are principal transactions in which portfolio securities
are purchased directly from the issuer or from an underwriter or market maker
for the securities. Purchases from underwriters of portfolio securities include
a commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers may include the spread between the bid and
asked price. Transactions on stock exchanges (other than certain foreign stock
exchanges) involve the payment of negotiated brokerage commissions. Transactions
in the over-the-counter market are generally principal transactions with
dealers. With respect to the over-the-counter market, the Portfolios, where
possible, will deal directly with the dealers who make a market in the
securities involved except in those circumstances where better price and
execution are available elsewhere. While Banc One Investment Advisors generally
seeks competitive spreads or commissions, the Portfolios may not necessarily pay
the lowest spread or commission available on each transaction, for reasons
discussed below. During each of the past three fiscal years, the brokerage
commissions paid by the Portfolios were as follows:
<TABLE>
<CAPTION>
PORTFOLIO AGGREGATE BROKERAGE COMMISSIONS
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio $ 98,922 $ 47,608 $ 34,413
Large Cap Growth Portfolio $ 370,126 $ 109,720 $ 40,915
Equity Index Portfolio $ 7,831 $ 6,217 NA*
Diversified Equity Portfolio $ 114,909 $ 76,844 $ 46,091
Mid Cap Growth Portfolio $ 256,852 $ 92,962 $ 125,008
Diversified Mid Cap Portfolio $ 28,237 $ 21,501 $ 19,787
Mid Cap Value Portfolio $ 118,892 $ 17,896 $ 16,891
</TABLE>
* The Equity Index Portfolio commenced operations of May 1, 1998.
As of December 31, 1999, the following Portfolios held investments in securities
of their regular broker-dealers as follows:
<TABLE>
<CAPTION>
SHARES OR
PORTFOLIO SECURITY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Portfolio Goldman Sachs Group, 7.20%, 03/01/07 300,000 288,310.80
Morgan Stanley Dean Witter, & Co. 12,980 1,852,895.00
Morgan Stanley Group, 6.50%, 03/30/01 200,000 199,424.80
====================================================================================================
Mid Cap Growth Portfolio Legg Mason, Inc. 12,000 435,000.00
====================================================================================================
Large Cap Growth Portfolio Morgan Stanley Dean Witter, & Co. 12,300 1,755,825.00
====================================================================================================
Equity Index Portfolio Merrill Lynch & Co. 1,000 83,500.00
State Street Corp. 400 29,225.00
====================================================================================================
Diversified Equity Portfolio Morgan Stanley Dean Witter, & Co. 8,340 1,190,535.00
====================================================================================================
Bond Portfolio Goldman Sachs Group, 6.25%, 02/01/03 500,000 485,082.00
====================================================================================================
</TABLE>
46
<PAGE> 104
Allocation of transactions, including their frequency, to various
dealers is determined by Banc One Investment Advisors with respect to the
Portfolios based on its best judgment and in a manner deemed fair and reasonable
to Shareholders. The primary consideration is prompt execution of orders in an
effective manner at the most favorable price. Subject to this consideration,
dealers who provide supplemental investment research to Banc One Investment
Advisors may receive orders for transactions by the Portfolios. Information so
received is in addition to and not in lieu of services required to be performed
by Banc One Investment Advisors and does not reduce the advisory fees payable to
Banc One Investment Advisors. Such information may be useful to Banc One
Investment Advisors in serving both the Portfolios and other clients and,
conversely, supplemental information obtained by the placement of business of
other clients may be useful to Banc One Investment Advisors in carrying out its
obligations to the Portfolios.
The Portfolios will not execute portfolio transactions through,
acquire portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with Banc One Investment Advisors or
its affiliates except as may be permitted under the Investment Company Act of
1940, and will not give preference to correspondents of Bank One Corporation
subsidiary banks with respect to such transactions, securities, savings
deposits, repurchase agreements, and reverse repurchase agreements.
Investment decisions for each Portfolio are made independently from
those for the other Portfolios or any other investment company or account
managed by Banc One Investment Advisors. Any such other investment company or
account may also invest in the same securities as the Portfolios. When a
purchase or sale of the same security is made at substantially the same time on
behalf of a given Portfolio and another Portfolio, investment company or account
the transaction will be averaged as to price, and available investments
allocated as to amount, in a manner which Banc One Investment Advisors believes
to be equitable to the Portfolio(s) and such other investment company or
account. In some instances, this investment procedure may adversely affect the
price paid or received by a Portfolio or the size of the position obtained by a
Portfolio. To the extent permitted by law, Banc One Investment Advisors may
aggregate the securities to be sold or purchased by it for a Portfolio with
those to be sold or purchased by it for other Portfolios or for other investment
companies or accounts in order to obtain best execution. As provided by the
Advisory Agreement, in making investment recommendations for the Portfolios,
Banc One Investment Advisors will not inquire or take into consideration whether
an issuer of securities proposed for purchase or sale by the Portfolios is a
customer of Banc One Investment Advisors or its parent or subsidiaries or
affiliates and, in dealing with its commercial customers, Banc One Investment
Advisors and its parent, subsidiaries, and affiliates will not inquire or take
into consideration whether securities of such customers are held by the
Portfolios.
ADMINISTRATOR
Effective January 1, 2000, One Group Administrative Services, Inc.,
1111 Polaris Parkway, Columbus, Ohio 43240 began serving as administrator for
the Trust ("One Group Administrative Services" or the "Administrator"). One
Group Administrative Services is an affiliate of Banc One Investment Advisors,
the advisor of the Trust, and an indirect wholly-owned subsidiary of Bank One
Corporation.
The Administrator assists in supervising all operations of each
Portfolio to which it serves (other than those performed under the Advisory
Agreement, the Custodian Agreement and the Transfer Agency Agreement for that
Portfolio). Under the Administration Agreement, the Administrator has agreed to
maintain the necessary office space for the Portfolios, to price the Portfolio
securities of each Portfolio it serves and compute the net asset value and net
income of the Portfolios on a daily basis, to maintain each Portfolio's
financial accounts and records, and to furnish certain other services required
by the Portfolios with respect to each Portfolio. The Administrator prepares
annual and semi-annual reports to the Securities and Exchange Commission,
prepares federal and state tax returns, and generally assists in all aspects of
the Trust's operations other than those performed under the Advisory Agreement,
the Custodian Agreement and the Transfer Agency Agreement. Under the
47
<PAGE> 105
Administration Agreement, the Administrator may, at its expense, subcontract
with any entity or person concerning the provision of services under the
Administration Agreement.
Unless sooner terminated, the Administration Agreement between the
Trust and One Group Administrative Services will continue in effect through
November 1, 2000. The Administration Agreement thereafter shall be renewed
automatically for successive one year terms, unless written notice not to renew
is given by the non-renewing party to the other party at least sixty days prior
to the expiration of the then-current term. The Administration Agreement may be
terminated with respect to the Trust only upon mutual agreement of the parties
to the Administration Agreement and for cause (as defined in the Administration
Agreement) by the party alleging cause, on not less than sixty days' notice by
the Board of Trustees or by One Group Administrative Services.
The Administrator is entitled to a fee for its services, which is
calculated daily and paid monthly, at the annual rates specified below:
For all Portfolios except the Equity Index Portfolio:
- .18% on the first $250 million in Trust assets (except for the
Equity Index Portfolio)
- .14% on Trust assets in excess of $250 million (other than assets
in the Equity Index Portfolio)
For the Equity Index Portfolio:
- .14% on Equity Index Portfolio assets.
The Administration Agreement provides that the Administrator shall not
be liable for any error of judgment or mistake of law or any loss suffered by
the Portfolios in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith,
or gross negligence in the performance of its duties, or from the reckless
disregard by it of its obligations and duties thereunder.
Prior to January 1, 2000, Nationwide Advisory Services, Inc. Three
Nationwide Plaza, Columbus, Ohio 43215 ("NAS") served as Administrator to each
Portfolio pursuant to an administration agreement with the Trust. (NAS is a
wholly-owned subsidiary of Nationwide Life Insurance Company, which in turn is a
wholly-owned subsidiary of Nationwide Financial Services, Inc., a holding
company of the Nationwide Insurance Enterprise).
For the fiscal years ended December 31, 1999, 1998, and 1997, the
following Portfolios paid administration fees to NAS as follows:
<TABLE>
<CAPTION>
FISCAL YEAR END DECEMBER 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Government Bond Portfolio $ 97,129 $ 69,649 $ 42,036
Balanced Portfolio $ 255,799 $ 158,161 $ 64,914
Mid Cap Growth Portfolio $ 184,404 $ 151,830 $ 86,256
Large Cap Growth Portfolio $ 493,954 $ 330,612 $ 169,132
Equity Index Portfolio $ 45,373 $ 7,202 NA*
Bond Portfolio $ 102,154*** NA** NA**
Diversified Mid Cap Portfolio $ 29,922*** NA** NA**
Diversified Equity Portfolio $ 102,928*** NA** NA**
Mid Cap Value Portfolio $ 38,209*** NA** NA**
</TABLE>
48
<PAGE> 106
* The Equity Index Portfolio commenced operations on May 1, 1998.
** FCNIMCO and BISYS Fund Services, Inc. ("BISYS") rather than NAS served as
co-administrators to the Predecessor Funds of the Bond Portfolio, the
Diversified Mid Cap Portfolio, the Mid Cap Value Portfolio, and the
Diversified Equity Portfolio for the fiscal years ended December 31, 1997
and December 31, 1998.
*** Includes amounts paid to NAS as subadministrator for the period January 1,
1999 through March 31, 1999.
FCNIMCO and BISYS served as co-administrators to the Predecessor Funds of the
Bond Portfolio, the Diversified Mid Cap Portfolio, the Mid Cap Value Portfolio,
and the Diversified Equity Portfolio. For the fiscal years ended December 31,
1999, 1998 and 1997, the following Portfolios paid investment administration
fees to FCNIMCO and BISYS as follows:
49
<PAGE> 107
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
1999* 1998 1997
----- ---- ----
PORTFOLIO NET WAIVED NET WAIVED NET WAIVED
- --------- --- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C>
Bond Portfolio $ 71,764 $-- $ $23,329
Diversified Mid Cap Portfolio 22,048 $-- $ $15,188
Mid Cap Value Portfolio 27,073 $-- $ $ 9,544
Diversified Equity Portfolio $ 74,103 $-- $ $33,582
</TABLE>
For the period from January 1, 1999 until the substitution of the Predecessor
Funds on March 31, 1999.
SUB-ADMINISTRATORS
For the period beginning November 14, 1998 and ending March 31, 1999,
NAS served as sub-administrator to the Predecessor Funds and received fees equal
to 0.15% of the average net assets of the Predecessor Funds from the Predecessor
Funds' administrator.
The Board of Trustees of the Trust approved a Sub-Administration
Agreement between Banc One Investment Advisors and NAS that was effective on
April 1, 1999. Under the contract, Banc One Investment Advisors was entitled to
a fee equal to 0.05% of the average net assets of the Trust. For the period from
April 1, 1999 through December 31, 1999, Banc One Investment Advisors received
fees for subadministration equal to $311,456,.64. The contract terminated on
December 31, 1999 with the termination of the administration agreement between
the Trust and NAS.
CUSTODIANS, SUB-CUSTODIAN AND TRANSFER AGENT
Custodian. State Street Bank and Trust Company ("State Street"), P.O.
Box 8500, Boston, MA 02266-8500 acts as custodian for the Portfolios under a
Custodian Agreement with the Trust (the "Custodian Agreement"). Under the
Custodian Agreement, State Street:
(i) maintains a separate account or accounts in the name of each
Portfolio;
(ii) makes receipts and disbursements of money on behalf of each
Portfolio;
(iii) collects and receives all income and other payments and
distributions on account of the Portfolios' portfolio securities;
responds to correspondence from security brokers and others
relating to its duties; and
(iv) makes periodic reports to the Board of Trustees concerning the
Portfolios' operations.
State Street may, at its own expense, open and maintain a sub-custody account or
accounts on behalf of the Trust, provided that State Street shall remain liable
for the performance of all of its duties under the Custodian Agreement.
NBD Bank ("NBD"), an indirect wholly-owned subsidiary of Bank One Corporation,
served as Custodian for the Predecessor Funds pursuant to a custodian agreement.
50
<PAGE> 108
Sub-Custodian. Bank One Trust Company, N.A. (the "Sub-Custodian")
serves as Sub-Custodian in connection with the Trust's securities lending
activities, pursuant to a Subcustodian Agreement, dated as of June 11, 1998
between the Trust, State Street and Bank One Trust Company and a Securities
Lending Agreement, dated as of June 15, 1998 between the Trust, Banc One
Investment Advisors, and the Sub-Custodian. The Sub-Custodian is an indirect
subsidiary of Bank One Corporation and an affiliate of Banc One Investment
Advisors. The Sub-Custodian is entitled to a fee from the Trust, which is
calculated on an annual basis and accrued daily, equal to:
- .05% of the value of collateral received from the Borrower for
each securities loan of U.S. Government and Agency Securities;
and
- .10% of the value of collateral received from the Borrower for
each loan of equities and corporate bonds.
Use of Depositories. Rules adopted under the Investment Company Act of
1940 permit the Portfolios to maintain their securities and cash in the custody
of certain eligible banks and securities depositories.
Transfer Agent. State Street Bank and Trust Company ("State Street"),
225 Franklin Street, Boston, Massachusetts 02110, serves as Transfer Agent for
each Portfolio pursuant to a Transfer Agency and Service Agreement with the
Trust (the "Transfer Agency Agreement"). Under the Transfer Agency Agreement,
State Street has agreed to perform the customary services of a transfer agent
and dividend disbursing agent including issuing and redeeming Shares of the
Portfolios, maintaining Shareholder accounts, and preparing and mailing account
statements and activity statements to Shareholders.
EXPERTS
Independent Public Accountants.The financial statements for the fiscal year
ended December 31, 1999 have been audited by __________________________, 100
East Broad Street, Columbus, Ohio 43215 , independent public accountants to the
Trust, as indicated in their reports with respect thereto, and are incorporated
herein by reference, in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
The financial statements for the Predecessor Funds for the fiscal year ended
December 31, 1998 have been audited by the predecessor auditors for such
Predecessor Funds.
Fund Counsel. The law firm of Ropes & Gray, One Franklin Square, 1301 K Street,
N.W., Suite 800 East, Washington, D.C. 20005-3333 is counsel to the Trust.
51
<PAGE> 109
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
The Trust is a Massachusetts business trust. The Trust's Declaration of Trust
was filed with the Secretary of State of the Commonwealth of Massachusetts on
June 7, 1993 and authorizes the Board of Trustees to issue an unlimited number
of Shares, which are units of beneficial interest, without par value. The
Trust's Declaration of Trust authorizes the Board of Trustees to establish one
or more series of Shares of the Trust. The Trust presently includes nine series
of Shares which represent interests in the following Portfolios:
1. Bond Portfolio
2. Government Bond Portfolio
3. Balanced Portfolio
4. Mid Cap Growth Portfolio
5. Large Cap Growth Portfolio
6. Equity Index Portfolio
7. Diversified Equity Portfolio
8. Diversified Mid Cap Portfolio
9. Mid Cap Value Portfolio
The Declaration of Trust may not be amended without the affirmative
vote of a majority of the outstanding shares of the Trust, except that the
Trustees may amend the Declaration of the Trust without the vote or consent of
shareholders to:
(1) designate series of the Trust;
(2) change the name of the Trust; or
(3) supply any omission, cure, correct, or supplement any ambiguous,
defective, or inconsistent provision or to conform the Declaration of Trust to
the requirements of applicable federal and state laws or regulations if they
deem it necessary.
Shares are fully paid and non-assessable, except as set forth below.
When a majority is required, it means the lesser of 67% or more of the shares
present at a meeting when the holders of more than 50% of the outstanding shares
are present or represented by proxy, or more than 50% of the outstanding shares.
Shares have no subscription or preemptive rights and only those conversion or
exchange rights as the Board of Trustees may grant in its discretion. When
issued for payment as described in the Prospectus and this Statement of
Additional Information, the Trust's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
Shares of a Portfolio are entitled to receive the assets available for
distribution belonging to the Portfolio, and a proportionate distribution, based
upon the relative asset values of the respective Portfolios, of any general
assets not belonging to any particular Portfolio which are available for
distribution.
Rule 18f-2 under the Investment Company Act of 1940 provides that any
matter required to be submitted to the holders of the outstanding voting
securities of an investment company, such as the Trust, shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding Shares of each Portfolio affected by the matter. For purposes of
determining whether the approval of a majority of the outstanding Shares of a
Portfolio is required in connection with a matter, a Portfolio is deemed to be
affected by a matter unless it is clear that the interests of each Portfolio in
the matter are identical, or that the matter does not affect any interest of the
Portfolio. Under Rule 18f-2, the approval of an investment advisory agreement or
any change in investment policy would be effectively acted upon with respect to
a Portfolio only if approved by a majority of the outstanding Shares of the
Portfolio. However, Rule 18f-2 also provides that the ratification of
independent public accountants, the approval of principal underwriting
contracts, and the election of Trustees may be effectively acted upon by
Shareholders of the Trust voting without regard to series.
52
<PAGE> 110
The Trust may suspend the right of redemption only under the following
unusual circumstances:
(i) when the New York Stock Exchange is closed (other than weekends and
holidays) or trading is restricted;
(ii) when an emergency exists, making disposal of portfolio
securities or the valuation of net assets not reasonably practicable; or
(iii) during any period when the Securities and Exchange Commission has
by order permitted a suspension of redemption for the protection of
shareholders.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, holders of units of beneficial interest in a
business trust may, under certain circumstances, be held personally liable as
partners for the obligations of the Trust. However, the Trust's Declaration of
Trust provides that Shareholders shall not be subject to any personal liability
for the obligations of the Trust, and that every written agreement, obligation,
instrument, or undertaking made by the Trust shall contain a provision to the
effect that the Shareholders are not personally bound thereunder. The
Declaration of Trust provides for indemnification out of the trust property of
any Shareholder held personally liable solely by reason of his 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 Trust
itself would be unable to meet its obligations.
The Declaration of Trust states further that no Trustee, officer, or
agent of the Trust shall be personally liable in connection with the
administration or preservation of the assets of the trust or the conduct of the
Trust's business; nor shall any Trustee, officer, or agent be personally liable
to any person for any action or failure to act except for his own bad faith,
willful misfeasance, gross negligence, or reckless disregard of his duties. The
Declaration of Trust also provides that all persons having any claim against the
Trustees or the Trust shall look solely to the assets of the Trust for payment.
SHAREHOLDERS
All Shares of the Portfolios will be purchased by insurance company
separate accounts to fund variable annuity and variable life contracts
("Insurance Contracts"). For information concerning the purchase and redemption
of Shares by Separate Accounts, you should refer to the prospectus or other
documents that you received when you purchased your variable life or variable
insurance contract.
As of February 10, 2000, the Trust believes that no Shareholder owned
beneficially more than 25% of the outstanding shares of any Portfolio of the
Trust.
53
<PAGE> 111
5% SHAREHOLDERS
In addition, as of February 10, 2000, the following persons were the owners of
more than 5% of the outstanding Shares of the following Portfolios:
<TABLE>
<CAPTION>
PERCENT TYPE OF
NAME AND ADDRESS PORTFOLIO OWNERSHIP OWNERSHIP
- ---------------- --------- --------- ---------
<S> <C> <C> <C>
HARTFORD LIFE & ANNUITY Bond Portfolio 75.49% Record
SEPARATE ACCOUNT SIX
C/O CAROL LEWIS C-4
200 HOPMEADOW ST
WEATOGUE CT 06089-9793
NATIONWIDE LIFE & ANNUITY INSURANCE Bond Portfolio 19.63% Record
NWVA-C
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
NATIONWIDE LIFE & ANNUITY INSURANCE Government Bond Portfolio 97.67% Record
NWVA-C
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
NATIONWIDE LIFE & ANNUITY INSURANCE Balanced Portfolio 99.47% Record
NWVA-C
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
NATIONWIDE LIFE & ANNUITY INSURANCE Large Cap Growth Portfolio 91.23% Record
NWVA-C
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
HARTFORD LIFE & ANNUITY Large Cap Growth Portfolio 7.67% Record
SEPARATE ACCOUNT SIX
C/O CAROL LEWIS C-4
200 HOPMEADOW ST
WEATOGUE CT 06089-9793
NATIONWIDE LIFE & ANNUITY INSURANCE Equity Index Portfolio 97.55% Record
NWVA-C
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
HARTFORD LIFE & ANNUITY Diversified Equity Portfolio 84.61% Record
SEPARATE ACCOUNT SIX
C/O CAROL LEWIS C-4
200 HOPMEADOW ST
WEATOGUE CT 06089-9793
NATIONWIDE LIFE & ANNUITY INSURANCE Diversified Equity Portfolio 13.37% Record
NWVA-C
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
NATIONWIDE LIFE & ANNUITY INSURANCE Mid Cap Growth Portfolio 99.06% Record
NWVA-C
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
</TABLE>
54
<PAGE> 112
<TABLE>
<S> <C> <C> <C>
HARTFORD LIFE & ANNUITY Diversified Mid Cap Portfolio 79.65% Record
SEPERATE ACCOUNT SIX
C/O CAROL LEWIS C-4
200 HOPMEADOW ST
WEATOGUE CT 06089-9793
NATIONWIDE LIFE & ANNUITY INSURANCE Diversified Mid Cap Portfolio 18.13% Record
NWVA-C
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
HARTFORD LIFE & ANNUITY Mid Cap Value Portfolio 88.60% Record
SEPARATE ACCOUNT SIX
C/O CAROL LEWIS C-4
200 HOPMEADOW ST
WEATOGUE CT 06089-9793
NATIONWIDE LIFE & ANNUITY INSURANCE Mid Cap Value Portfolio 11.15% Record
NWVA-C
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
</TABLE>
55
<PAGE> 113
As of February 10, 2000, the Trust believes that the trustees and
officers of the Trust, as a group, owned less than 1% of the shares of any
Portfolio of the Trust.
CALCULATION OF PERFORMANCE DATA
The Portfolios may quote their performance in various ways. All
performance information supplied by the Portfolios in advertising is historical
and is not intended to indicate future returns. The Portfolios' share prices,
yields and total returns fluctuate in response to market conditions and other
factors, and the value of Portfolio shares when redeemed may be more or less
than their original cost.
From time to time, Banc One Investment Advisors and/or Administrator
may voluntarily waive all or a portion of their respective fee(s) and absorb
certain expenses for the Portfolios. Performance information contained in
advertisements includes the effect of deducting a Portfolio's expenses, but may
not include charges and expenses attributable to the variable annuity, variable
life or pension/retirement plan through which you have made your investment (a
"Funding Vehicle"). Because the Portfolios' shares may only be purchased through
a Funding Vehicle, you should carefully review your insurance contracts for
information on fees and expenses associated with the Funding Vehicle through
which your shares have been purchased. Excluding such fees and expenses from the
Portfolios' performance quotations has the effect of increasing the performance
quoted.
A Portfolio's respective total return and average annual total return
are determined by calculating the change in the value of a hypothetical $1,000
investment in a Portfolio for each of the periods shown. Total return for a
Portfolio is computed by determining the average annual compounded rate of
return over the applicable period that would equate the initial amount invested
to the ending redeemable value of the investment. The ending redeemable value
includes dividends and capital gain distributions reinvested at net asset value.
The resulting percentages indicate the positive or negative investment results
that an investor would have experienced from changes in net asset value and
reinvestment of dividends and distributions.
Performance will fluctuate from time to time and is not necessarily
representative of future results. Accordingly, a Portfolio's performance may not
provide for comparison with bank deposits or other investments that pay a fixed
return for a stated period of time. Performance is a function of a Portfolio's
quality, composition, and maturity, as well as expenses allocated to the
Portfolio.
Statistical and performance information compiled and maintained by CDA
Technologies, Inc. ("CDA") and Interactive Data Corporation may also be used.
CDA is a performance evaluation service that maintains a statistical data base
of performance, as reported by a diverse universe of independently-managed
mutual funds. Interactive Data Corporation is a statistical access
service that maintains a database of various industry indicators, such as
historical and current price/earning information and individual stock and fixed
income security price and return information.
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H. 15), may also be used. Current rate information on municipal debt
obligations of various durations, as reported daily by the Bond Buyer, may also
be used. The Bond Buyer is published daily and is an industry-accepted source
for current municipal bond market information.
Comparative information on the Consumer Price Index may also be
included. This Index, as prepared by the U.S. Bureau of Labor Statistics, is the
most commonly used measure of inflation. It indicates the cost fluctuations of a
representative group of consumer goods. It does not represent a return on
investment. From time to time, all of the Portfolios may quote actual total
return performance in advertising and other types of literature compared to
results reported by the Dow Jones Industrial Average.
The Dow Jones Industrial Average is an industry-accepted unmanaged
index of generally conservative securities used for measuring general market
performance. The performance reported will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The index does
not take into account any brokerage commissions or other fees.
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<PAGE> 114
The Portfolios may also promote the yield and/or total return performance and
use comparative performance information computed by and available from certain
industry and general market research and publications, such as Lipper Analytical
Services, Inc.
The Portfolios may quote actual yield and/or total return performance
in advertising and other types of literature compared to the performance of
various indices and investments for which reliable performance data is
available, as well as averages, performance rankings or other information
prepared by recognized mutual fund statistical services or alternative financial
products available to prospective investors. The performance comparisons may
include the average return of various bank instruments, some of which may carry
certain return guarantees offered by leading banks and thrifts as monitored by
Bank Rate Monitor, and those of corporate bond and government security price
indices of various durations.
The average annual total return for the one year ended December 31,
1999 and for the life of each Portfolio was as follows:
<TABLE>
<CAPTION>
DATE
PORTFOLIO
COMMENCED
ONE YEAR LIFE OPERATION
-------- ---- ---------
<S> <C> <C> <C>
Bond Portfolio -1.50% 5.67% 5/1/97
Government Bond Portfolio -1.31% 6.12% 8/1/94
Balanced Portfolio 8.20% 14.79% 8/1/94
Mid Cap Growth Portfolio 25.42% 23.56% 8/1/94
Large Cap Growth Portfolio 29.26% 26.07% 8/1/94
Equity Index Portfolio 21.11% 19.09% 5/1/98
Diversified Equity Portfolio 9.13% 17.88% 3/30/95
Diversified Mid Cap Portfolio 10.50% 15.98% 3/30/95
Mid Cap Value Portfolio -1.84% 3.99% 5/1/97
</TABLE>
The 30 day yield as of 12/31/99 for the Portfolios listed below was as
follows:
30 Day Yield @ 12/31/99
Bond Portfolio 6.33%
Government Bond Portfolio 6.17%
Balanced Portfolio 2.66%
ADMINISTRATIVE SERVICES PLAN
On November 17, 1999, a majority of the disinterested Trustees of the
Trust approved an Administrative Services Plan (the "Plan") and authorized any
officer of the Trust to execute and deliver, in the name and on behalf of the
Portfolios, written agreements in substantially the form presented to the Board
of Trustees of the Trust ("Servicing Agreements") with insurance companies and
other entities which are shareholders of record or which have a servicing
relationship ("Service Organization") with the beneficial owners of a class of a
Portfolio's shares of beneficial interest ("Shares"). Such Servicing Agreements
must provide that the Service Organizations are required to provide
administrative support services to their customers who own Shares of record or
beneficially. In consideration for providing such services, a Service
Organization will receive a fee, computed
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daily and paid monthly, of up to the annual rate of 0.25% of the average daily
net assets of the Portfolio owned beneficially by its customers. Any bank, trust
company, thrift institution, broker-dealer, insurance company or other financial
institution is eligible to become a Service Organization and to receive fees
under the Plan. All expenses incurred by a Portfolio with respect to its Shares
in connection with the Servicing Agreements and the implementation of the Plan
shall be borne entirely by the holders of Shares of that Portfolio.
The Plan further provides that the Trustees shall review, at least
quarterly, a written report of the amounts expended pursuant to the Plan and the
purposes for which such expenditures were made. Unless sooner terminated, the
Plan shall continue until November 31, 2000, and thereafter, shall continue
automatically for successive annual periods provided such continuance is
approved at least annually by a majority of the Board of Trustees, including a
majority of the Disinterested Trustees.
MISCELLANEOUS
The Trust is not required to hold a meeting of Shareholders for the
purpose of annually electing Trustees except that:
(i) the Trust is required to hold a Shareholders' meeting for the
election of Trustees at such time as less than a majority of the Trustees
holding office have been elected by Shareholders, and
(ii) if, as a result of a vacancy on the Board of Trustees, less than
two-thirds of the Trustees holding office have been elected by the Shareholders,
that vacancy may only be filled by a vote of the Shareholders. In addition,
Trustees may be removed from office by a written consent signed by the holders
of Shares representing two-thirds of the outstanding Shares of the Trust at a
meeting duly called for that purpose. This meeting shall be held upon the
written request of the holders of Shares representing not less than 20% of the
outstanding Shares of the Trust. Except as set forth above, the Trustees may
continue to hold office and may appoint successor Trustees.
As used in the Portfolios' Prospectus and in this Statement of
Additional Information, "assets belonging to a Portfolio" means the
consideration received by the Trust upon the issuance or sale of Shares in that
Portfolio, together with all income, earnings, profits, and proceeds derived
from the investment thereof, including any proceeds from the sale, exchange, or
liquidation of such investments, and any funds or payments derived from any
reinvestment of such proceeds, and any general assets of the Trust not readily
identified as belonging to a particular Portfolio that are allocated to that
Portfolio by the Board of Trustees. The Board of Trustees may allocate such
general assets in any manner it deems fair and equitable. It is anticipated that
the factor that will be used by the Board of Trustees in making allocations of
general assets to particular Portfolios will be the relative net assets of the
respective Portfolios at the time of allocation. Each Portfolio's direct
liabilities and expenses will be charged to the assets belonging to that
Portfolio. Each Portfolio will also be charged in proportion to its relative net
assets for the general liabilities and expenses of the Trust. The timing of
allocations of general assets and general liabilities and expenses of the Trust
to particular Portfolios will be determined by the Board of Trustees of the
Trust and will be in accordance with generally accepted accounting principles.
Determinations by the Board of Trustees of the Trust as to the timing of the
allocation of general liabilities and expenses and as to the timing and
allocable portion of any general assets with respect to a particular Portfolio
are conclusive.
As used in the Portfolios' Prospectuses and in this Statement of
Additional Information, a "vote of a majority of the outstanding Shares" of the
Trust, a particular Portfolio, or a particular class of Shares of a Portfolio,
means the affirmative vote of the lesser of (a) more than 50% of the outstanding
Shares of the Trust, such Portfolio, or such class of Shares of such Portfolio,
or (b) 67% or more of the Shares of the Trust, such Portfolio, or such class of
Shares of such Portfolio present at a meeting at which the holders of more than
50% of the outstanding Shares of the Trust, such Portfolio, or such class of
Shares of such Portfolio are represented in person or by proxy.
The Trust is registered with the Securities and Exchange Commission as
a management investment company. Such registration does not involve supervision
by the Commission of the management or policies of the Trust.
The Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement filed with the
Securities and Exchange Commission. Copies of such information may be obtained
from the Commission upon payment of the prescribed fee.
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The Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer, or other person is authorized to
give any information or make any representation other than those contained in
the Prospectus and Statement of Additional Information.
FINANCIAL STATEMENTS
The financial statements of the Trust are incorporated by reference
into this Statement of Additional Information. The financial statements for the
fiscal year ended December 31, 1999 have been audited by ______________,
independent public accountants to the Trust, as indicated in their reports with
respect thereto, and are incorporated hereby reference in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
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APPENDIX A--DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funding, is outstanding and safety is just below risk-free U.S.
Treasury obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors
are very small.
D-2 Good certainty of timely payment. Liquidity facts and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk
factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues as
to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service. Operating factors and
market access may be subject to a high degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest payments.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher
rating categories. However, the capacity to meet financial commitments
is satisfactory.
A-3 Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on
the obligation.
A-1
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B Regarded as having significant speculative characteristics.
The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to
meet its financial commitment on the obligation.
A-2
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C Currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the
obligation.
D In payment default. The D rating category is used when
payments on an obligation are not made on the date due
even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments
will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition or
the taking of a similar action if payments on an
obligation are jeopardized.
FITCH'S IBCA ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F1+ possess
a particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
F3 Adequate capacity for timely repayment, but more susceptible to
adverse changes in business, economic or financial conditions than for
obligations in higher categories.
B Capacity for timely repayment is susceptible to adverse changes in
business, economic or financial conditions.
C High risk of default or which are currently in default.
MOODY'S INVESTORS SERVICE ("MOODY'S")
Prime-1 Superior ability for repayment.
Prime-2 Strong ability for repayment.
Prime-3 Acceptable ability for repayment. The effect of industry
characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes
in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity
is maintained.
Not Prime Does not fall within any of the Prime rating categories.
A-3
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DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial
strength. Typically they will be major financial
institutions with highly valuable and defensible
business franchises, strong financial fundamentals, and
a very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength.
Typically, they will be important institutions with
valuable and defensible business franchises, good
financial fundamentals, and an attractive and stable
operating environment.
C These banks possess good intrinsic financial strength.
Typically, they will be institutions with valuable and
defensible business franchises. These banks will
demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than
average financial fundamentals within an unstable
operating environment.
D These banks possess adequate financial strength, but may
be limited by one or more of the following factors: a
vulnerable or developing business franchise; weak
financial fundamentals; or an unstable operating
environment.
E These banks possess very weak intrinsic financial
strength, require periodic outside support or suggest an
eventual need for outside assistance. Such institutions
may be limited by one or more of the following factors:
a business franchise of questionable value; financial
fundamentals that are seriously deficient in one or more
respects; or a highly unstable operating environment.
DESCRIPTION OF TAXABLE BOND RATINGS
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's
capacity to meet its financial commitment on the
obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB Exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the
obligation.
A-4
<PAGE> 122
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB Less vulnerable to nonpayment than other speculative issues.
However, such issues face major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
B More vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC Currently vulnerable to nonpayment, and dependent upon favorable
business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not
likely to have the capacity to meet its financial commitment on the
obligation.
CC Currently highly vulnerable to nonpayment.
C Used to cover a situation where a bankruptcy petition has been filed
or similar action has been taken, but payments on this obligation
are being continued.
D In payment default. Used when payments on an obligation are not made
on the date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be made
during such grace period. Also used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an
obligation are jeopardized.
MOODY'S
INVESTMENT GRADE
Aaa Best quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest payments are
protected by a large, or an exceptionally stable, margin and
principal is secure.
Aa High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may
be greater, or there may be other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.
A These bonds 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 which suggest a susceptibility to impairment
sometime in the future.
Baa These bonds are considered 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.
A-5
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NON-INVESTMENT GRADE
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded
during good and bad times over the future.
B These bonds lack the characteristics of a desirable investment
(i.e., potentially low assurance of timely interest and principal
payments or maintenance of other contract terms over any long period
of time may be small).
Caa Bonds in this category have poor standing and may be in default.
These bonds carry an element of danger with respect to principal and
interest payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. C is the lowest rating.
C The lowest rated class of bonds, and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real
investment standing.
FITCH
INVESTMENT GRADE
AAA Highest rating category. The obligor's capacity for timely repayment
of principal and interest is extremely strong.
AA The obligor's capacity for timely repayment is very strong.
A Bonds and preferred stock considered to be investment grade and of
high credit quality. The obligor's ability for timely repayment is
strong. However, adverse changes in business, economic, or financial
conditions are more likely to affect the capacity for timely
repayment than obligations in higher rated categories.
BBB The obligor's capacity for timely repayment of principal and
interest is adequate. However, adverse changes in business, economic
or financial conditions and circumstances are more likely to affect
the capacity for timely repayment than for obligations in higher
rated categories.
B The obligor's capacity for timely repayment of principal and
interest is uncertain. Timely repayment of principal and interest is
not sufficiently protected against adverse changes in business,
economic or financial conditions and these obligations are far more
speculative than those in higher rated categories.
CCC Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, economic, or financial conditions and these
obligations are far more speculative than those in higher rated
categories.
CC Obligations which are highly speculative or which have a high risk
of default.
C Obligations which are currently in default.
A-6
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DESCRIPTION OF INSURANCE RATINGS
MOODY'S
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional
financial security. While the financial strength of these companies
is likely to change, such changes as can be visualized are most
unlikely to impair their fundamentally strong position.
Aa These insurance companies offer excellent financial security.
Together with the Aaa group, they constitute what are generally
known as high grade companies. They are rated lower than Aaa
companies because long-term risks appear somewhat larger.
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa Insurance companies rated in this category offer adequate financial
security. However, certain protective elements may be lacking or may
be characteristically unreliable over any great length of time.
Ba Insurance companies rated in this category offer questionable
financial security. Often the ability of these companies to meet
policyholder obligations may be very moderate and thereby not well
safeguarded in the future.
B Insurance companies rated in this category offer poor financial
security. Assurance of punctual payment of policyholder obligations
over any long period of time is small.
Caa Insurance companies rated in this category offer very poor financial
security. They may be in default on their policyholder obligations
or there may be present elements of danger with respect to punctual
payment of policyholder obligations and claims.
Ca Insurance companies rated in this category offer extremely poor
financial security. Such companies are often in default on their
policyholder obligations or have other marked shortcomings.
C Insurance companies rated in this category are the lowest rated
class of insurance company and can be regarded as having extremely
poor prospects of ever offering financial security.
S & P
An insurer rated "BBB" or higher is regarded as having financial security
characteristics that outweigh any vulnerabilities, and is highly likely to have
the ability to meet financial commitments.
AAA EXTREMELY STRONG financial security characteristics. "AAA" is the
highest Insurer Financial Strength Rating assigned by Standard &
Poor's.
AA VERY STRONG financial security characteristics, differing only
slightly from those rated higher.
A STRONG financial security characteristics, but is somewhat more
likely to be affected by adverse business conditions than are
insurers with higher ratings.
A-7
<PAGE> 125
BBB GOOD financial security characteristics, but is more likely to be
affected by adverse business conditions than are higher rated
insurers.
An insurer rated "BB" or lower is regarded as having vulnerable characteristics
that may outweigh its strength. "BB" indicates the least degree of vulnerability
within the range; "CC" the highest.
BB MARGINAL financial security characteristics. Positive attributes
exist, but adverse business conditions could lead to insufficient
ability to meet financial commitments.
B WEAK financial security characteristics. Adverse business conditions
will likely impair its ability to meet financial commitments.
CCC VERY WEAK financial security characteristics, and is dependent on
favorable business conditions to meet financial commitments.
CC EXTREMELY WEAK financial security characteristics and is likely not
to meet some of its financial commitments.
R An insurer rated "R" has experienced a REGULATORY ACTION regarding
solvency. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
NR NOT RATED, which implies no opinion about the insurer's financial
security.
Plus (+)
or
minus (-) Following ratings from "AA" to "CCC" show relative standing within
the major rating categories.
A-8
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DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S
MIG1 & VMIG1 Short-term municipal securities rated MIG1 or VMIG1 are
of the best quality. They have strong protection from
established cash flows, superior liquidity support or
demonstrated broad-based access to the market for
refinancing.
MIG2 & VMIG2 These short-term municipal securities rated are
of high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG3 & VMIG3 Favorable quality. All security elements are
accounted for, but the undeniable strength of the
preceding grades is lacking. Liquidity and cash flow
protection may be narrow and marketing access for
refinancing is likely to be less well established.
MIG4 & VMIG4 This denotes adequate quality protection commonly
regarded as required of an investment security is
present and although not distinctly or predominantly
speculative, there is a specific risk.
SG This denotes speculative quality.
S&P
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
SP-1 Strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S
aaa Top-quality preferred stock. This rating indicates good
asset protection and the least risk of dividend
impairment within the universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that
there is a reasonable assurance the earnings and asset
protection will remain relatively well maintained in the
foreseeable future.
a Upper-medium grade preferred stock. While risks are
judged to be somewhat greater than in the "aaa" and "aa"
classifications, earnings and asset protection are,
nevertheless, expected to be maintained at adequate
levels.
baa Medium-grade preferred stock, neither highly protected
nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any
great length of time.
ba Considered to have speculative elements and its future
cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded
during adverse periods. Uncertainty of position
characterizes preferred stocks in this class.
A-9
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b Lacks the characteristics of a desirable investment.
Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be
small.
caa Likely to be in arrears on dividend payments. This
rating designation does not purport to indicate the
future status of payments.
ca Speculative in a high degree and is likely to be in
arrears on dividends with little likelihood of eventual
payments.
c Lowest rated class of preferred or preference stock.
Issues so rated can thus be regarded as having extremely
poor prospects of ever attaining any real investment
standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely
strong capacity to pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay
preferred stock obligations is very strong, although not
as overwhelming as for issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to
the adverse effects of changes in circumstances and
economic conditions.
BBB Backed by an adequate capacity to pay the preferred
stock obligations. Whereas the issuer normally exhibits
adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to
lead to a weakened capacity to make payments for a
preferred stock in this category than for issues in the
"A" category.
BB, B, CCC Regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay preferred stock
obligations. BB indicates the lowest degree of
speculation and CCC the highest. While such issues will
likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CC In arrears on dividends or sinking fund payments,
but that is currently paying.
C Nonpaying issue.
D Nonpaying issue with the issuer in default on debt
instruments.
N.R. No rating has been requested, insufficient information
on which to base a rating, or Standard & Poor's does not
rate a particular type of obligation as a matter of
policy.
Plus (+) or
minus (-) To provide more detailed indications of preferred stock
quality, ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative
standing within the major rating categories.
A-10
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DESCRIPTION OF MUNICIPAL BOND RATINGS
(INCLUDING FOREIGN, MORTGAGE AND ASSET-BACKED SECURITIES)
S&P
INVESTMENT GRADE
AAA The highest rating. The rating indicates an extremely
strong capacity to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The
obligor's capacity to meet its financial commitment is
very strong.
A These bonds are somewhat more susceptible to the adverse
effects of changes in circumstances and economic
conditions than debt in higher rated categories.
However, capacity to meet its financial commitment on
the obligation is still strong.
BBB Exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to meet
its financial commitment on the obligations.
SPECULATIVE GRADE
BB Less vulnerable to non-payment than other speculative
issues. However, these bonds face major ongoing
uncertainties or exposure to adverse business, financial
or economic conditions which could lead to inadequate
capacity to meet financial commitment on the
obligations.
B More vulnerable to non-payment than obligations rated
BB, but currently has the capacity to meet its financial
commitment on the obligation. Adverse business,
financial or economic conditions will likely impair
capacity or willingness to meet its financial commitment
on the obligation.
CCC Currently vulnerable to non-payment, and is dependent
upon favorable business, financial, and economic
conditions to meet its financial commitment on the
obligation. In the event of adverse business, financial,
or economic conditions, not likely to have the capacity
to meet its financial commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a
bankruptcy petition has been filed, or similar action
has been taken, but payments on this obligation are
being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
A-11
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MOODY'S
INVESTMENT GRADE
Aaa Best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large, or
an exceptionally stable, margin and principal is secure.
Aa High quality by all standards. Margins of protection may
not be as large as in Aaa securities, fluctuation of
protective elements may be greater, or there may be
other elements present that make the long-term risks
appear somewhat larger than in Aaa securities.
A These bonds 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 which suggest a susceptibility to impairment
sometime in the future.
Baa These bonds are considered 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.
NON-INVESTMENT GRADE
Ba These bonds have speculative elements; their future
cannot be considered as well assured. The protection of
interest and principal payments may be very moderate and
thereby not well safeguarded during good and bad times
over the future.
B These bonds lack the characteristics of a desirable
investment (i.e., potentially low assurance of timely
interest and principal payments or maintenance of other
contract terms over any long period of time may be
small).
Caa Bonds in this category have poor standing and may be in
default. These bonds carry an element of danger with
respect to principal and interest payments.
Ca Speculative to a high degree and could be in default or
have other marked shortcomings. Ca is the lowest rating.
DESCRIPTION OF SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and
interest will be paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of
principal and interest is strong, the relative degree is
not as high as for issues rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible
to adverse developments than obligations with higher
ratings, capacity to service principal and interest in a
timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
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PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Amended and Restated Declaration of Trust dated January 5,
2000 is filed herewith.
(b) Bylaws of One Group Investment Trust as revised February 16,
2000 are filed herewith
(c) RIGHTS OF SHAREHOLDERS.
THE FOLLOWING PORTIONS OF REGISTRANT'S AMENDED AND RESTATED
DECLARATION OF TRUST FILED AS EXHIBIT (A) HERETO, DEFINE THE
RIGHTS OF SHAREHOLDERS:
SECTION 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES,
ETC. No Shareholder as such shall be subject to any personal
liability whatsoever to any Person in connection with Trust
Property or the acts, obligations or affairs of the Trust. No
Trustee, officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever to any Person,
other than the Trust or its Shareholders, in connection with
Trust Property or the affairs of the Trust, save only that
arising from bad faith, willful misfeasance, gross negligence
or reckless disregard for his or her duty to, such Person; and
all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature arising in connection
with the affairs of the Trust. If any shareholder, Trustee,
officer, employee or agent, as such, of the Trust is made a
party to any suit or proceeding to enforce any such liability,
he or she shall not, on account thereof, be held to any
personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and
liabilities to which such Shareholder may become subject by
reason of his or her being or having been a Shareholder, and
shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him or her in connection with
any such claim or liability. The rights accruing to a
Shareholder under this Section 5.1 shall not exclude any other
right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the
Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided
herein.
SECTION 6.1. BENEFICIAL INTEREST. The interest of the
beneficiaries hereunder shall be divided into transferable
shares of beneficial interest, without par value, of the
following classes or series, or such others as may be
authorized by the Trustees pursuant to Section 6.9:
One Group(R)Investment Trust Government Bond
Portfolio
One Group(R)Investment Trust Balanced Portfolio
One Group(R)Investment Trust Mid Cap Growth Portfolio
One Group(R)Investment Trust Large Cap Growth
Portfolio
One Group(R)Investment Trust Equity Index Portfolio
One Group(R)Investment Trust Bond Portfolio
One Group(R)Investment Trust Diversified Equity
Portfolio
One Group(R)Investment Trust Diversified Mid Cap
Portfolio
One Group(R)Investment Trust Mid Cap Value Portfolio
<PAGE> 131
The number of shares of beneficial interest authorized
hereunder is unlimited. All Shares issued hereunder including,
without limitation, Shares issued in connection with a
dividend in Shares or a split of Shares, shall be fully paid
and non-assessable.
SECTION 6.2. RIGHTS OF SHAREHOLDERS. The ownership of
the Trust Property of every description and the right to
conduct any business hereinbefore described are vested
exclusively in the Trustees, and the Shareholders shall have
no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to
call for any partition or division of any property, profits,
rights or interests of the Trust, nor can they be called upon
to assume any losses of the Trust or suffer an assessment of
any kind by virtue of their ownership of Shares. The Shares
shall be personal property giving only the rights in the
Declaration specifically set forth. The Shares shall not
entitle the holder to preference, pre-emptive, appraisal,
conversion or exchange rights, except as the Trustees may
determine with respect to any series of Shares.
SECTION 6.3. TRUST ONLY. It is the intention of the
Trustees to create only the relationship of Trustee and
beneficiary between the Trustees and each Shareholder from
time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock
association, corporation, bailment or any form of legal
relationship other than a Trust. Nothing in the Declaration
shall be construed to make the Shareholders, either by
themselves or with the Trustees, partners or members of a
joint stock association.
SECTION 6.4. ISSUANCE OR SHARES. The Trustees, in
their discretion, may, from time to time without vote of
Shareholders, issue Shares, in addition to the then issued and
outstanding Shares and Shares held in the treasury to such
party or parties and for such amount and type of
consideration, including cash or property, at such time or
times (including, without limitation, each business day in
accordance with the determination of net asset value per Share
as set forth in Section 8.3 hereof), and on such terms as the
Trustees may deem best, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in
connection with the assumption of liabilities) and businesses.
In connection with any issuance of Shares, the Trustees may
issue fractional Shares. The Trustees may from time to time
divide or combine the Shares into a greater or lesser number
without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be
accepted for, and Shares shall be redeemed as, whole shares
and/or 1/1,000ths of a Share or integral multiples thereof.
SECTION 6.5. REGISTER OF SHARES; SHARE CERTIFICATES.
A register will be kept at the principal office of the Trust
or at an office of the Transfer Agent which shall contain the
names and addresses of the Shareholders and the number of
Shares held by them respectively and a record of all transfers
thereof. Such register shall be conclusive as to who are the
holders of the Shares and who shall be entitled to receive
dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled
to receive payment of any dividend or distribution, nor to
have notice given to him or her as herein or in the Bylaws
provided, until he or she has given his or her address to the
Transfer Agent or such other officer or agent of the Trustees
as shall keep the said register for entry thereon. It is not
contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the
issuance of Share certificates and promulgate appropriate
rules and regulations as to their use.
SECTION 6.6. TRANSFER OF SHARES. Shares shall be
transferable on the records of the Trust only by the
recordholder thereof or by his or her agent thereunto duly
<PAGE> 132
authorized in writing, upon delivery to the Trustees or the
Transfer Agent of a duly executed instrument of transfer,
together with such evidence of the genuineness of each such
election and authorization and of other matters as may
reasonably be required. Upon such delivery, the transfer shall
be recorded on the register of the Trust. Until such record is
made, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereunder and neither
the Trustees nor any Transfer Agent or registrar nor any
officer, employee or agent of the Trust shall be affected by
any notice of the proposed transfer.
Any person becoming entitled to any Shares in
consequence of the death, bankruptcy, or incompetence of any
Shareholder, or otherwise by operation of law, shall be
recorded on the register of Shares as the holder of such
Shares upon production of the proper evidence thereof to the
Trustees or the Transfer Agent, but until such record is made,
the Shareholder of record shall be deemed to be the holder of
such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer,
employee or agent of the Trust shall be affected by notice of
the proposed transfer.
SECTION 6.7. NOTICES. Any and all notices to which
any Shareholder may be entitled and any and all communications
shall be deemed duly served or given if mailed, postage
prepaid, addressed to any Shareholder of record at his or her
last known address as recorded on the register of the Trust.
SECTION 6.8. VOTING POWERS. The Shareholders shall
have power to vote only (i) for the election of Trustees as
provided in Section 2.2 hereof or as required by Section 16(a)
of the 1940 Act; (ii) with respect to any investment advisory
or management contract as provided in Section 4.1; (iii) with
respect to termination of the Trust as provided in Section
9.2; (iv) with respect to any amendment of the Declaration to
the extent and as provided in Section 9.3.; (v) with respect
to any merger, consolidation or sale of assets as provided in
Section 9.4; (vi) with respect to incorporation of the Trust
to the extent and as provided in Section 9.5.; (vii) to the
same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or
claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or
the Shareholders; and (viii) with respect to such additional
matters relating to the Trust as may be required by the
Declaration, the Bylaws, the 1940 Act or any registration of
the Trust with the Commission (or any successor agency) or any
state, or as the Trustees may consider necessary or desirable.
Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional
Share shall be entitled to proportionate fractional vote,
except that Shares held in the treasury of the Trust shall not
be voted and that the Trustees may, in conjunction with the
establishment of any series of Shares, establish conditions
under which the several series shall have separate voting
rights or no voting rights. There shall be no cumulative
voting in the election of Trustees. Until Shares are issued,
the Trustees may exercise all rights of Shareholders and may
take any action required by law, the Declaration or the Bylaws
to be taken by Shareholders. The Bylaws may include further
provisions for Shareholders' votes and meetings and related
matters.
SECTION 6.9. SERIES DESIGNATION. The Trustees, in
their discretion, may authorize the division of Shares into
additional series, and the different series shall be
established and designated, and the variations in the relative
rights and preferences as between the different series shall
be fixed and determined by the Trustees, provided that all
Shares shall be identical, except that there may be variations
so fixed and determined between different series as to
investment objective, purchase price, right of redemption and
the price, terms and manner of redemption, special and
relative rights as to dividends and on liquidation, conversion
rights, and conditions under which the several series shall
<PAGE> 133
have separate voting rights. All references to Shares in the
Declaration shall be deemed to be shares of any or all series
as the context may require.
If the Trustees shall divide the shares of the Trust
into two or more series, the following provisions shall be
applicable:
(a) The number of authorized shares and the number of
shares of each series that may be issued shall be unlimited.
The Trustees may classify or reclassify any unissued shares or
any shares previously issued and reacquired of any series into
one or more series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the
same or some other series), reissue for such consideration and
on such terms as they may determine, or cancel any shares of
any series reacquired by the Trust at their discretion from
time to time.
(b) The power of the Trustees to invest and reinvest
the Trust Property shall be governed by Section 3.2 of this
Declaration with respect to the nine existing series which
represents the interests in the assets of the Trust
immediately prior to the establishment of any additional
series and the power of the Trustees to invest and reinvest
assets applicable to any such additional series shall be as
set forth in the instrument of the Trustees establishing such
series, which is hereinafter described.
(c) All consideration received by the Trust for the
issue or sale of shares of a particular series, together with
all assets in which such consideration is invested or
reinvested, all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to
that series for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any
particular series, the Trustees shall allocate them among any
one or more of the series established and designated from time
to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. Each such allocation
by the Trustees shall be conclusive and binding upon the
shareholders of all series for all purposes.
(d) The assets belonging to each particular series
shall be charged with the liabilities of the Trust in respect
of that series and all expenses, costs, charges and reserves
attributable to that series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are
not readily identifiable as belonging to any particular series
shall be allocated and charged by the Trustees to and among
any one or more of the series established and designated from
time to time in such manner and on such basis as the Trustees,
in their sole discretion, deem fair and equitable. Each
allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon
the holders of all series for all purposes. The Trustees shall
have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income
and which items as capital; and each such determination and
allocation shall be conclusive and binding upon the
shareholders.
(e) The power of Trustees to pay dividends and make
distributions shall be governed by Section 8.2 of this
Declaration with respect to the nine existing series which
represents the interests in the assets of the Trust
immediately prior to the establishment of any additional
series. With respect to any other series, dividends and
distributions on shares of a particular series may be paid
with such frequency as the Trustees may determine, which may
be daily or otherwise, pursuant to a standing resolution or
<PAGE> 134
resolutions adopted only once or with such frequency as the
Trustees may determine, to the holders of shares of that
series, from such of the income and capital gains, accrued or
realized, from the assets belonging to that series, as the
Trustees may determine, after providing for actual and accrued
liabilities belonging to that series. All dividends and
distributions on shares of a particular series shall be
distributed pro rata to the holders of that series in
proportion to the number of shares of that series held by all
such holders at the date and time of record established for
the payment of such dividends or distributions.
The establishment and designation of any series of
shares shall be effective upon the execution by a majority of
the then Trustees of an instrument setting forth such
establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such
instrument. At any time that there are no shares outstanding
of any particular series previously established and
designated, the Trustees may, by an instrument executed by a
majority of their number, abolish that series and the
establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an
amendment to this Declaration.
SECTION 7.1. REDEMPTIONS. In case any Shareholder at
any time desires to dispose of his or her Shares, he or she
may deposit his or her certificate or certificates therefor,
duly endorsed in blank or accompanied by an instrument of
transfer executed in blank, or if the Shareholder has no
certificates, a written request or other such form of request
as the Trustees may from time to time authorized, at the
office of the Transfer Agent or at the office of any bank or
trust company, either in or outside of Massachusetts, which is
a member of the Federal Reserve System and which the said
Transfer Agent has designated in writing for that purpose,
together with an irrevocable offer in writing in a form
acceptable to the Trustees to sell the Shares represented
thereby to the Trust at the net asset value thereof per Share,
determined as provided in Section 8.1 thereof, next after such
deposit. Payment for said Shares shall be made to the
Shareholder within seven (7) days after the date on which the
deposit is made, unless: (i) the date of payment is postponed
pursuant to Section 7.2 hereof, or (ii) the receipt, or
verification of receipt, of the purchase price for the Shares
to be redeemed is delayed, in either of which event payment
may be delayed beyond seven (7) days.
SECTION 7.2. SUSPENSION OF RIGHT OF REDEMPTION. The
Trust may declare a suspension of the right of redemption or
postpone the date of payment or redemption for the whole or
any part of any period (i) during which the New York Stock
Exchange is closed other than customary weekend and holiday
closing; (ii) during which trading on the New York Stock
Exchange is restricted; (iii) during which an emergency exists
as a result of which disposal by the Trust of securities owned
by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its
net assets; or (iv) during any other period when the
Commission may for the protection of security holders of the
Trust by order permit suspension of the right of redemption or
postponement of the date of payment or redemption; provided
that applicable rules and regulations of the Commission shall
govern as to whether the conditions prescribed in (ii), (iii),
or (iv) exist. Such suspension shall take effect at such time
as the Trust shall specify, but not later than the close of
business on the business day next following the declaration of
suspension, and thereafter there shall be no right of
redemption until the Trust shall declare the suspension at an
end, except that the suspension shall terminate in any event
on the first day on which said stock exchange shall have
reopened or the period specified in (ii) or (iii) shall have
expired (as to which, in the absence of an official ruling by
the Commission, the determination of the Trust shall be
conclusive). In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his or her
request for redemption or receive payment based on the net
asset value existing after the termination of the suspension.
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SECTION 7.3. REDEMPTION OF SHARES; DISCLOSURE OF
HOLDING. If the Trustees shall, at any time and in good faith,
be of the opinion that direct or indirect ownership of Shares
or other securities of the Trust has or may become
concentrated in any Person to an extent which would disqualify
the Trust as a regulated investment company under the Internal
Revenue Code, then the Trustees shall have the power by lot or
other means deemed equitable by them (i) to call for
redemption by any such Person of a number, or principal
amount, of Shares or other securities of the Trust sufficient
to maintain or bring the direct or indirect ownership of
Shares or other securities of the Trust into conformity with
the requirements for such qualification; and (ii) to refuse to
transfer or issue Shares or other securities of the Trust to
any Person whose acquisition of the Shares or other securities
of the Trust in question would result in such
disqualification. The redemption shall be effected at the
redemption price and in the manner provided in Section 7.1.
The holders of Shares or other securities of the
Trust shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership
of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal
Revenue Code, or to comply with the requirements of any other
authority.
SECTION 7.4. REDEMPTIONS OF ACCOUNTS OF LESS THAN
$500. The Trustees shall have the power at any time to redeem
Shares of any Shareholder at a redemption price determined in
accordance with Section 7.1, if at such time the aggregate net
asset value of the Shares in such Shareholder's account is
less than $500. A Shareholder will be notified that the value
of his or her account is less than $500 and allowed thirty
(30) days to make an additional investment before redemption
is processed.
SECTION 8.1. NET ASSET VALUE. For all purposes under
this Declaration of Trust, the net asset value shall be
determined by the Trustees as soon as possible after the close
of the New York Stock Exchange on each business day upon which
such Exchange is open, such net asset value to become
effective one hour after such close and remain in effect until
the next determination of such net asset value becomes
effective; provided, however, that the Trustees may in their
discretion make a more frequent determination of the net asset
value which shall become effective one hour after the time as
of which such net asset value is determined.
Such net asset value shall be determined in the following
manner:
(a) All securities listed on any recognized Exchange
shall be appraised at the quoted closing sale prices and in
the even that there was no sale of any particular security on
such day the quoted closing bid price thereof shall be used,
or if any such security was not quoted on such day or if the
determination of the net asset value is being made as of a
time other than the close of the New York Stock Exchange, then
the same shall be appraised in such manner as shall be deemed
by the Trustees to reflect its fair value.
All other securities and assets of the Trust,
including cash, prepaid and accrued items, and dividends
receivable, shall be appraised in such manner as shall be
deemed by the Trustees to reflect their fair value.
(b) From the total value of the Trust Property as so
determined shall be deducted the liabilities of the Trust,
including reserves for taxes, and such expenses and
liabilities of the Trust as may be determined by the Trustees
to be accrued liabilities.
<PAGE> 136
(c) The resulting amount shall represent the net
asset value of the Trust Property. The net asset value of a
share of any class shall be the result of the division of the
net asset value of the underlying assets of that class by the
number of shares of that class outstanding. The net asset
value of the Trust Property and shares as so determined shall
be final and conclusive.
SECTION 8.2. DISTRIBUTIONS TO SHAREHOLDERS. The
Trustees shall from time to time distribute ratably among the
Shareholders such proportion of the net profits, surplus
(including paid-in surplus), capital, or assets held by the
Trustees as they may deem proper. Such distribution may be
made in cash or property (including without limitation any
type of obligations of the Trust or any assets thereof), and
the Trustees may distribute ratably among the Shareholders
additional Shares issuable hereunder in such manner, at such
times, and on such terms as the Trustees may deem proper. Such
distributions may be among the Shareholders of record at the
time of declaring a distribution or among the Shareholders of
record at such later date as the Trustees shall determine. The
Trustees may always retain from the net profits such amount s
they may deem necessary to pay the debts or expenses of the
Trust or to meet obligations of the Trust, or as they may deem
desirable to use in the conduct of its affairs or to retain
for future requirements or extensions of the business. The
Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related
plans as the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains
for Federal Income Tax purposes may vary from the computation
thereof on the books, the above provisions shall be
interpreted to give the Trustees the power in their discretion
to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts
sufficient to enable the Trust to avoid or reduce liability
for taxes.
SECTION 8.3. DETERMINATION OF NET INCOME. The term
"net income" with respect to a class of shares is hereby
defined as the gross earnings of the class, excluding gains on
sales of securities and stock dividends received, less the
expenses of the Trust allocated to the class by the Trustees
in such manner as they determine to be fair and equitable or
otherwise chargeable to the class. The expenses shall include
(1) taxes attributable to the income of the Trust exclusive of
gains on sales, and (2) other charges properly deductible for
the maintenance and administration of the Trust; but there
shall not be deducted from gross or net income any losses on
securities, realized or unrealized. The Trustees shall
otherwise have full discretion to determine which items shall
be treated as income and which items as capital and their
determination shall be binding upon the Beneficiaries.
SECTION 8.4. POWER TO MODIFY FOREGOING PROCEDURES.
Notwithstanding any of the foregoing provisions of this
Article VIII, the Trustees may prescribe, in their absolute
discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the
declaration and payment of dividends and distributions s they
may deem necessary or desirable. Without limiting the
generality of the foregoing, the Trustees may establish
additional series of Shares in accordance with Section 6.9.
SECTION 9.2. TERMINATION OF TRUST. (a) The Trust must
be terminated:
(i) by the affirmative vote of the holders of not
less than two-thirds of the Shares outstanding and entitled to
vote at any meeting of Shareholders, or (ii) by an instrument
in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of not less than
two-thirds of such Shares, or by such other vote as may be
established by the Trustees with respect to any series of
Shares, or (iii) by the Trustees by written notice to the
Shareholders.
<PAGE> 137
Upon the termination of the Trust:
(i) The Trust shall carry on no business except for
the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the
affairs of the Trust and all of the powers of the Trustees
under this Declaration shall continue until the affairs of the
Trust shall have been wound up, including the power to fulfill
or discharge the contracts of the Trust, collect its assets,
sell, convey, assign, exchange, transfer or otherwise dispose
of all or any part of the remaining Trust Property to one or
more persons at public or private sale for consideration which
may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay its liabilities, and to
do all other acts appropriate to liquidate its business;
provided that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the
Trust Property shall require Shareholder approval in
accordance with Section 9.4 hereof.
(iii) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements, as they deem necessary
for their protection, the Trustees may distribute the
remaining Trust Property, in cash or in kind or partly each,
among the Shareholders according to their respective rights.
(iv) After termination of the Trust and distribution
to the Shareholders as herein provided, a majority of the
Trustees shall execute and lodge among the records of the
Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged
from all further liabilities and duties hereunder, and the
rights and interests of all Shareholders shall thereupon
cease.
SECTION 9.3. AMENDMENT PROCEDURE. (a) This
Declaration may be amended by a Majority Shareholder Vote or
by any instrument in writing, without a meeting, signed by a
majority of the Trustees and consented to by the holders of
not less than a majority of the Shares outstanding and
entitled to vote. The Trustees may also amend this Declaration
without the vote or consent of Shareholders to designate
series in accordance with Section 6.9 hereof, to change the
name of the Trust, to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this
Declaration to the requirements of applicable federal laws or
regulations or the requirements of the regulated investment
company provisions of the Internal Revenue Code, but the
Trustees shall not be liable for failing to do so.
(b) No amendments may be made under this Section 9.3
which would change any rights with respect to any Shares of
the Trust by reducing the amount payable thereon upon
liquidation of the Trust or by diminishing or eliminating any
voting rights pertaining thereto, except with the vote or
consent of the holders of two-thirds of the Shares outstanding
and entitled to vote, or by such other vote as may be
established by the Trustees with respect to any series of
Shares. Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from
personal liability of the Shareholders, Trustees, officers,
employees and agents of the Trust or to permit assessments
upon Shareholders.
(c) A certificate signed by a majority of the
Trustees setting forth an amendment and reciting that it was
duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, and
executed by a majority of the
<PAGE> 138
Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
SECTION 9.4. MERGER, CONSOLIDATION AND SALE OF
ASSETS. The Trust may merge or consolidate with any other
corporation, association, trust or other organization or may
sell, lease or exchange all or substantially all of the Trust
Property, including its goodwill, upon such terms and
conditions and for such consideration when and as authorized
at any meeting of Shareholders called for the purpose by
affirmative vote of the holders of not less than two-thirds of
the Shares outstanding and entitled to vote, or by an
instrument or instruments in writing without a meeting,
consented to by the holders of not less than two-thirds of
such Shares, or by such other vote as may be established by
the Trustees with respect to any series of Shares; provided,
however, that, if such merger, consolidation, sale, lease or
exchange is recommended by the Trustees, the vote or written
consent of the holders of a majority of Shares outstanding and
entitled to vote, or by such other vote as may be established
by the Trustees with respect to any series of Shares, shall be
sufficient authorization; and any such merger, consolidation,
sale, lease or exchange shall be deemed for all purposes to
have been accomplished under and pursuant to the statutes of
the Commonwealth of Massachusetts.
SECTION 9.5. INCORPORATION. With the approval of the
holders of a majority of the Shares outstanding and entitled
to vote, or by such other vote as may be established by the
Trustees with respect to any series of Shares, the Trustees
may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction
or any other trust, partnership, association or other
organization to take over all of the Trust Property or to
carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer
the Trust Property to any such corporation, trust, association
or organization in exchange for the shares or securities
thereof or otherwise, and to lend money to, subscribe for the
shares or securities of, and enter into any contracts with any
such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire
shares or any other interest. The Trustees may also cause a
merger or consolidation between the Trust or any successor
thereto and any such corporation, trust, partnership,
association or other organization if and to the extent
permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts,
partnerships, associations or other organizations and selling,
conveying or transferring a portion of the Trust Property to
such organization or entities.
ARTICLE X
REPORTS TO SHAREHOLDERS
-----------------------
The Trustees shall at least semi-annually submit to
the Shareholders a written financial report of the
transactions of the Trust, including financial statements
which shall at least annually be certified by independent
public accountants.
<PAGE> 139
THE FOLLOWING PORTIONS OF REGISTRANT'S BYLAWS FILED AS EXHIBIT
(b) HERETO, DEFINE THE RIGHTS OF SHAREHOLDERS:
ARTICLE III
SHAREHOLDERS
SECTION 1. MEETINGS. There is no requirement that the
Trustees have annual meetings of the Shareholders. In the
event the Trustees determine to have an annual meeting of the
Shareholders, it shall be held at such place within or without
the Commonwealth of Massachusetts on such day and at such time
as the Trustees shall designate. Special meetings of the
Shareholders may be called at any time by a majority of the
Trustees and shall be called by any Trustee upon written
request of Shareholders holding in the aggregate not less than
ten percent (10%) of the outstanding Shares having voting
rights, such request specifying the purpose or purposes for
which such meeting is to be called. Any such meeting shall be
held within or without the Commonwealth of Massachusetts on
such day and at such time as the Trustees shall authorize. The
holders of a majority of outstanding Shares present in person
or by proxy shall constitute a quorum at any meeting of the
Shareholders.
SECTION 2. NOTICE OF MEETINGS. Notice of all meetings
of the Shareholders, stating the time, place and purpose of
the meeting, shall be given by the Trustees by mail to each
Shareholder at his address as recorded on the register of the
Trust, mailed at least ten (10) days and not more than sixty
(60) days before the meeting. Only the business stated in the
notice of the meeting shall be considered at such meeting. Any
adjourned meeting may be held as adjourned without further
notice. No notice need by given to any Shareholder who shall
have failed to inform the Trust of his current address or if a
written waiver of notice, executed before or after the meeting
by the Shareholder or his attorney thereunto authorized, is
filed with the records of the meeting.
SECTION 3. RECORD DATE FOR MEETINGS. For the purpose
of determining the Shareholders who are entitled to notice of
and to vote at any meeting, or to participate in any
distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for
such period, not exceeding thirty (30) days, as the Trustees
may determine; or without closing the transfer books the
Trustees may fix a date not more than sixty (60) days prior to
the date of any meeting of Shareholders or distribution or
other action as a record date for the determination of the
persons to be treated as Shareholders of record for such
purposes, except for dividend payments which shall be governed
by the Declaration.
SECTION 4. PROXIES. At any meeting of Shareholders,
any holder of Shares entitled to vote thereat may vote by
proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Secretary,
or with such other officer or agent of the Trust as the
Trustees may direct, for verification prior to the time at
which such vote shall be taken. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name
of one or more Trustees or one or more of the officers of the
Trust. Only Shareholders of record shall be entitled to vote.
Each full Share shall be entitled to one vote and fractional
Shares shall be entitled to a vote of such fraction. When any
Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such
Share, but if more than one of them shall be present at such
meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such
vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its
exercise, and the
<PAGE> 140
burden of proving invalidity shall rest on the challenger. If
the holder of any such Share is a minor or a person of unsound
mind, and subject to guardianship or to the legal control of
any other person as regards the change or management of such
Share, he may vote by his guardian or such other person
appointed or having such control, and such vote may be given
in person or by proxy.
SECTION 5. INSPECTION OF RECORDS. The records of the
Trust shall be open to inspection by Shareholders to the same
extent as is permitted shareholders of a Massachusetts
business corporation or as required by the 1940 Act.
SECTION 6. ACTION WITHOUT MEETINGS. Any action which
may be taken by Shareholders may be taken without a meeting if
a majority of Shareholders entitled to vote on the matter (or
such larger proportion thereof as shall be required by law,
the Declaration or these Bylaws for approval of such matter)
consent to the action in writing and the written consents are
filed with the records of the meetings of Shareholders. Such
consent shall be treated for all purposes as a vote taken at a
meeting of Shareholders.
(d)(1) Amended and Restated Investment Advisory Agreement dated
February 17, 1999 by and between One Group Investment Trust
and Banc One Investment Advisors Corporation is incorporated
by reference to Post Effective Amendment No. 11 to
Registrant's registration statement on Form N-1A filed on
March 26, 1999.
(e) None
(f) Deferred Compensation Plan for Trustees of The One Group
Investment Trust is incorporated by reference to
Post-Effective Amendment No. 10 to the Registrant's
registration statement on Form N-1A, filed on January 27,
1999.
(g)(1) Custodian Agreement with State Street Bank and Trust Company,
is incorporated by reference to Pre-Effective Amendment No. 1
to the Registrant's registration statement on Form N-1A, filed
on May 26, 1994.
(g)(2) Subcustodian Agreement for The One Group Investment Trust
between State Street Bank and Trust Company, Bank One Trust
Company, N.A. and the Registrant dated as of June 11, 1998 is
incorporated by reference to Post-Effective Amendment No. 8 to
the Registrant's registration statement on Form N-1A, filed
October 7, 1998.
(h)(1) Transfer Agency and Service Agreement dated as of January 1,
2000 between One Group Investment Trust and State Street Bank
and Trust Company is filed herewith.
(h)(2) Amended and Restated Fund Participation Agreement dated as of
February 17, 1999 by and among Nationwide Life and Annuity
Insurance Company, One Group Investment Trust, and Nationwide
Advisory Services, Inc. is incorporated by reference to Post
Effective Amendment No. 11 to the Registrant's registration
statement on Form N-1A filed on March 26, 1999.
(h)(3) Administration Agreement effective as of January 1, 2000
between One Group Investment Trust and One Group
Administrative Services, Inc. is filed herewith.
(h)(4) Amendment to Amended and Restated Fund Participation Agreement
effective as of January 1, 2000 among Nationwide Life and
Annuity Insurance Company, One Group Investment Trust, and One
Group Administrative Services, Inc. is filed herewith.
<PAGE> 141
(h)(5) Securities Lending Agreement for The One Group Investment
Trust between the Registrant, Banc One Investment Advisors
Corporation, and Bank One Trust Company, N.A. dated as of June
15, 1998 is incorporated by reference to Post-Effective
Amendment No. 8 to the Registrant's registration statement on
Form N-1A, filed October 7, 1998.
(h)(6) Form of Amendment to Exhibit A to Securities Lending Agreement
for the One Group Investment Trust between the Registrant,
Banc One Investment Advisors Corporation, and Bank One Trust
Company, N.A. is incorporated by reference to Post Effective
Amendment No. 11 to Registrant's registration statement on
Form N-1A filed on March 26, 1999.
(h)(7) Participation Agreement effective as of March 31, 1999 among
One Group Investment Trust, Nationwide Advisory Services,
Inc., Nationwide Investors Services, Inc., Banc One Investment
Advisors Corporation, and Hartford Life and Annuity Insurance
Company is filed herewith.
(h)(8) Amendment to Participation Agreement effective as of January
1, 2000 among Hartford Life and Annuity Insurance Company, One
Group Investment Trust, Banc One Investment Advisors
Corporation, and One Group Administrative Services, Inc. is
filed herewith.
(h)(9) Fund Participation Agreement effective as of August 2, 1999
among American General Annuity Insurance Company, One Group
Investment Trust, Banc One Investment Advisors Corporation,
Nationwide Advisory Services, Inc., and Nationwide Investors
Services, Inc. is filed herewith.
(h)(10) Amendment to Fund Participation Agreement effective as of
January 1, 2000 among American General Annuity Insurance
Company, One Group Investment Trust, Banc One Investment
Advisors Corporation, and One Group Administrative Services,
Inc. is filed herewith.
(h)(11) Fund Participation Agreement effective as of August 2, 1999
among PFL Life Insurance Company, One Group Investment Trust,
Banc One Investment Advisors Corporation, Nationwide Advisory
Services, Inc., and Nationwide Investors Services, Inc. is
filed herewith.
(h)(12) Amendment to Fund Participation Agreement effective as of
January 1, 2000 among PFL Life Insurance Company, One Group
Investment Trust, Banc One Investment Advisors Corporation,
and One Group Administrative Services, Inc. is filed herewith.
(h)(13) Resignation Letter, dated December 28, 1999 of Nationwide
Advisory Services, Inc. and Nationwide Investors Services,
Inc. is filed herewith.
(i) Opinion of Ropes & Gray is filed herewith.
(j)(1) Consent of Ropes & Gray is filed herewith.
(k) None
(l) None
(m) None
<PAGE> 142
(n) None
Copies of powers of attorney of Registrant's trustees and officers
whose names are signed to this Registration Statement pursuant to
said powers of attorneys are filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
As of the effective date of this Registration Statement, there are no
persons controlled or under common control with the Registrant.
ITEM 25. INDEMNIFICATION
Limitation of Liability and Indemnification provisions for Trustees,
Shareholders, officers, employees and agents of Registrant are set forth in
Article V, Sections 5.1 through 5.3 of the Amended and Restated Declaration of
Trust.
SECTION 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES,
ETC. No Shareholder as such shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or the acts,
obligations or affairs of the Trust. No Trustee, officer, employee or
agent of the Trust shall be subject to any personal liability
whatsoever to any Person, other than the Trust or its Shareholders, in
connection with Trust Property or the affairs of the Trust, save only
that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his or her duty to, such Person; and all such
Persons shall look solely to the Trust Property for satisfaction of
claims of any nature arising in connection with the affairs of the
Trust. If any shareholder, Trustee, officer, employee or agent, as
such, of the Trust is made a party to any suit or proceeding to enforce
any such liability, he or she shall not, on account thereof, be held to
any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities to
which such Shareholder may become subject by reason of his or her being
or having been a Shareholder, and shall reimburse such Shareholder for
all legal and other expenses reasonably incurred by him or her in
connection with any such claim or liability. The rights accruing to a
Shareholder under this Section 5.1 shall not exclude any other right to
which such Shareholder may be lawfully entitled, nor shall anything
herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
SECTION 5.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee,
officer, employee or agent of the Trust shall be liable to the Trust,
its Shareholders, or to any Shareholder, Trustee, officer, employee or
agent thereof for any action or failure to act (including without
limitation the failure to compel in any way any former or acting
Trustee to redress any breach of trust) except for his or her own bad
faith, willful misfeasance, gross negligence or reckless disregard of
his or her duties.
SECTION 5.3. MANDATORY INDEMNIFICATION
(a) Subject to the exceptions and limitations contained in
paragraph (b) below:
(i) Every person who is, or has been a Trustee or officer of
the Trust shall be indemnified by the Trust against all liability and
against all expenses reasonably incurred or paid by him or her in
connection with any claims, action, suit or proceeding in which he or
she becomes involved as a party or otherwise by virtue of his or her
being or having been a Trustee or officer and against amounts paid or
incurred by him or her in the settlement thereof.
(ii) The words "claim", "action", "suit" or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without limitations,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
<PAGE> 143
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or the Shareholders by
reason of a final adjudication by the court or other body before which
the proceeding was brought that he or she engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office;
(ii) with respect to any matter as to which he or she shall
have been finally adjudicated not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of
the Trust;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraphs (b)(i) or
(b)(ii) resulting in payment by a Trustee or officer, unless there has
been either a determination that such Trustee or officer did not engage
in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office by
the court or other body approving the settlement or other disposition
or a reasonable determination, based upon a review of readily available
facts (as opposed to a full trial-type inquiry) that he or she did not
engage in such conduct:
(A) by vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the Disinterested
Trustees then in office act on the matter); or
(B) by written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a Person who has ceased to
be such Trustee or officer and shall inure to the benefit of the heirs,
executors and administrators of such Person. Nothing contained herein
shall affect any rights to indemnification to which personnel other
than Trustees and officers may be entitled by contract or otherwise
under law.
(d) Expenses of preparation and presentation of a defense to any
claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 5.3 shall be advanced by the Trust prior
to final disposition thereof upon receipt of any undertaking by or on
behalf of the recipient to repay such amount if it is ultimately
determined that he or she is not entitled to indemnification under this
Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses
arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter) or an independent legal counsel in a written
opinion, shall determine, based upon a review of readily available
facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the recipient ultimately will be found entitled to
indemnification.
As used in this Section 5.3, a "Disinterested Trustee" is one
(i) who is not an "Interested Person" of the Trust (including anyone
who has been exempted from being an "Interested Person" by any rule,
regulation or order of the Commission), and (ii) against whom none of
such actions, suits or other proceedings or another action, suit or
other proceeding on the same or similar grounds is then or had been
pending.
Agents and employees of the Trust who are not Trustees or
officers of the Trust may be indemnified under the same standards and
procedures set forth in this Section 5.3, in the discretion of the
Board.
<PAGE> 144
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
Banc One Investment Advisors Corporation (the "Advisor") performs
investment advisory services for all of the Portfolios of One Group
Investment Trust. As of December 31, 1999, the Advisor, an indirect
wholly-owned subsidiary of Bank One Corporation, a bank holding
company located in the state of Illinois, managed over $127 billion
in assets. Bank One Corporation has affiliate banking organizations in
Arizona, Colorado, Florida, Illinois, Indiana, Kentucky, Louisiana,
Michigan, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. In
addition, Bank One Corporation has several affiliates that engage in
data processing, venture capital, investment and merchant banking, and
other diversified services including trust management, investment
management, brokerage, equipment leasing, mortgage banking, consumer
finance, and insurance.
To the knowledge of Registrant, none of the directors or officers of
the Advisor, except as set forth herein, is or has been, at any time
during the past two calendar years, engaged in any other business,
profession, vocation or employment of a substantial nature. Set forth
below are the names and principal businesses of the directors of the
Advisor who are engaged in any other business, profession, vocation or
employment of a substantial nature.
<PAGE> 145
BANC ONE INVESTMENT ADVISORS CORPORATION
<TABLE>
<CAPTION>
POSITION WITH
BANC ONE INVESTMENT OTHER SUBSTANTIAL TYPE OF
ADVISORS CORPORATION OCCUPATION BUSINESS
- -------------------- ----------------- --------
<S> <C> <C>
David J. Kundert Chairman, Bank One Trust Investment
Chairman & CEO Company, NA Management
100 East Broad Street
Columbus, Ohio 43215
Peter W. Atwater Former Treasurer, Bank One Corporation Banking
Chief Operating Officer 100 East Broad Street
Columbus, Ohio 43215
Mark A. Beeson President, One Group Administrative Services, Inc. Investment
Senior Managing Director 1111 Polaris Parkway, Suite B2 Advisor,
Columbus, Ohio 43271-0211 Mutual Fund
Administration
Gary J. Madich, CFA Senior Managing Director Investment
Senior Managing Director Banc One Investment Advisors Corporation Advisor
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43271-0211
Richard R. Jandrain Senior Managing Director Investment
Senior Managing Director Banc One Investment Advisors Corporation Advisor
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43271-0211
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Trust Agreements, Bylaws and Minute Books:
Alan G. Priest
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005-3333
Records relating to investment advisory services:
Banc One Investment Advisors Corporation
1111 Polaris Parkway, Suite B2
Columbus, OH 43271-0211
All other Accounts and Records:
One Group Administrative Services, Inc.
1111 Polaris Parkway, Suite B2
Columbus, OH 43271-0211, Attention: Mark A. Beeson
<PAGE> 146
ITEM 29. MANAGEMENT SERVICES
All management-related service contracts entered into by Registrant are
discussed in Parts A and B of this Registration Statement.
ITEM 30. UNDERTAKINGS
None
[SIGNATURE PAGES FOLLOW]
<PAGE> 147
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS
AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THERETO DULY AUTHORIZED, IN THE CITY OF WASHINGTON, DISTRICT OF
COLUMBIA ON THE 24th DAY OF FEBRUARY, 2000.
ONE GROUP(R) INVESTMENT TRUST (Registrant)
/S/MARK A. BEESON*
-------------------------
By: Mark A. Beeson
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
THE REGISTRATION STATEMENT OF ONE GROUP(R) INVESTMENT TRUST HAS BEEN SIGNED
BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE 24th DAY OF
FEBRUARY, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ PETER C. MARSHALL* Trustee February 24, 2000
- --------------------------------------------
Peter C. Marshall
/S/ CHARLES I. POST* Trustee February 24, 2000
- --------------------------------------------
Charles I. Post
/S/ FREDERICK W. RUEBECK* Trustee February 24, 2000
- --------------------------------------------
Frederick W. Ruebeck
/S/ ROBERT A. ODEN JR.* Trustee February 24, 2000
- --------------------------------------------
Robert A. Oden Jr.
/S/ JOHN F. FINN* Trustee February 24, 2000
- --------------------------------------------
John F. Finn
/S/ MARILYN MCCOY* Trustee February 24, 2000
- --------------------------------------------
Marilyn McCoy
/S/ JULIUS L. PALLONE* Trustee February 24, 2000
- --------------------------------------------
Julius L. Pallone
/S/ DONALD L. TUTTLE* Trustee February 24, 2000
- --------------------------------------------
Donald L. Tuttle
PRINCIPAL EXECUTIVE OFFICER/PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER
/s/ Mark A. Beeson President February 24, 2000
- --------------------------------------------
Mark A. Beeson
/s/ Robert L. Young Vice President and February 24, 2000
- -------------------------------------------- Treasurer
Robert L. Young
</TABLE>
<PAGE> 148
*By /S/ALAN PRIEST
Alan Priest
Attorney-in-fact, pursuant to powers of attorney filed herewith.
<PAGE> 149
POWER OF ATTORNEY
-----------------
Frederick W. Ruebeck, whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa
Albertelli, each individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
The One Group Investment Trust (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all instruments and/or documents pertaining to the
federal registration of the shares of the Trust, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Trust any and all amendments to the Trust's Registration Statement as
filed with the Securities and Exchange Commission under said Acts, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: May 21, 1998
/s/Frederick W. Ruebeck
-----------------------
Frederick W. Ruebeck
<PAGE> 150
POWER OF ATTORNEY
-----------------
John F. Finn, whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group
Investment Trust (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
instruments and/or documents pertaining to the federal registration of the
shares of the Trust, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign in the name and on behalf of
the undersigned as a director and/or officer of the Trust any and all amendments
to the Trust's Registration Statement as filed with the Securities and Exchange
Commission under said Acts, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Dated: May 27, 1998
/s/John F. Finn
---------------
John F. Finn
<PAGE> 151
POWER OF ATTORNEY
Charles I. Post, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group
Investment Trust (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
instruments and/or documents pertaining to the federal registration of the
shares of the Trust, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign in the name and on behalf of
the undersigned as a director and/or officer of the Trust any and all amendments
to the Trust's Registration Statement as filed with the Securities and Exchange
Commission under said Acts, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Dated: May 21, 1998
/s/Charles I. Post
------------------
Charles I. Post
<PAGE> 152
POWER OF ATTORNEY
-----------------
Peter C. Marshall, whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa
Albertelli, each individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
The One Group Investment Trust (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all instruments and/or documents pertaining to the
federal registration of the shares of the Trust, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Trust any and all amendments to the Trust's Registration Statement as
filed with the Securities and Exchange Commission under said Acts, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: May 21, 1998
/s/Peter C. Marshall
--------------------
Peter C. Marshall
<PAGE> 153
POWER OF ATTORNEY
-----------------
Robert A. Oden, Jr., whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa
Albertelli, each individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
The One Group Investment Trust (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all instruments and/or documents pertaining to the
federal registration of the shares of the Trust, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Trust any and all amendments to the Trust's Registration Statement as
filed with the Securities and Exchange Commission under said Acts, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: May 21, 1998
/s/Robert A. Oden, Jr.
----------------------
Robert A. Oden, Jr.
<PAGE> 154
POWER OF ATTORNEY
-----------------
Marilyn McCoy, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, her true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable One Group
Investment Trust (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
instruments and/or documents pertaining to the federal registration of the
shares of the Trust, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign in the name and on behalf of
the undersigned as a director and/or officer of the Trust any and all amendments
to the Trust's Registration Statement as filed with the Securities and Exchange
Commission under said Acts, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Dated: May 19, 1999
/s/Marilyn McCoy
----------------
Marilyn McCoy
<PAGE> 155
POWER OF ATTORNEY
-----------------
Julius L. Pallone, whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa
Albertelli, each individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
One Group Investment Trust (the "Trust"), to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of any and all instruments and/or documents pertaining to the federal
registration of the shares of the Trust, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director and/or officer of the Trust
any and all amendments to the Trust's Registration Statement as filed with the
Securities and Exchange Commission under said Acts, and the undersigned does
hereby ratify and confirm all that said attorneys and agents, or either of them,
shall do or cause to be done by virtue thereof.
Dated: May 19, 1999
/s/Julius L. Pallone
--------------------
Julius L. Pallone
<PAGE> 156
POWER OF ATTORNEY
-----------------
Donald L. Tuttle, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable One Group
Investment Trust (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
instruments and/or documents pertaining to the federal registration of the
shares of the Trust, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign in the name and on behalf of
the undersigned as a director and/or officer of the Trust any and all amendments
to the Trust's Registration Statement as filed with the Securities and Exchange
Commission under said Acts, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Dated: May 19, 1999
/s/Donald L. Tuttle
-------------------
Donald L. Tuttle
<PAGE> 157
POWER OF ATTORNEY
-----------------
Robert L. Young, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable One Group
Investment Trust (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
instruments and/or documents pertaining to the federal registration of the
shares of the Trust, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign in the name and on behalf of
the undersigned as a director and/or officer of the Trust any and all amendments
to the Trust's Registration Statement as filed with the Securities and Exchange
Commission under said Acts, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Dated: January 18, 2000
/s/ Robert L. Young
-------------------
Robert L. Young
<PAGE> 158
POWER OF ATTORNEY
Mark A. Beeson, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable One Group
Investment Trust (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
instruments and/or documents pertaining to the federal registration of the
shares of the Trust, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign in the name and on behalf of
the undersigned as a director and/or officer of the Trust any and all amendments
to the Trust's Registration Statement as filed with the Securities and Exchange
Commission under said Acts, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Dated: January 18, 2000
/s/Mark A. Beeson
-----------------
Mark A. Beeson
<PAGE> 159
LIST OF EXHIBITS
(a) Amended and Restated Declaration of Trust dated January 1, 2000.
(b) Bylaws of One Group Investment Trust as revised February 16, 2000.
(h)(1) Transfer Agency and Service Agreement dated as of January 1, 2000
between One Group Investment Trust and State Street Bank and Trust
Company.
(h)(3) Administration Agreement effective as of January 1, 2000 between One
Group Investment Trust and One Group Administrative Services, Inc.
(h)(4) Amendment to Amended and Restated Fund Participation Agreement
effective as of January 1, 2000 among Nationwide Life and Annuity
Insurance Company, One Group Investment Trust, and One Group
Administrative Services, Inc.
(h)(7) Participation Agreement effective as of March 31, 1999 among One Group
Investment Trust, Nationwide Advisory Services, Inc., Nationwide
Investors Services, Inc., Banc One Investment Advisors Corporation, and
Hartford Life and Annuity Insurance Company.
(h)(8) Amendment to Participation Agreement effective as of January 1, 2000
among Hartford Life and Annuity Insurance Company, One Group Investment
Trust, Banc One Investment Advisors Corporation, and One Group
Administrative Services, Inc.
(h)(9) Fund Participation Agreement effective as of August 2, 1999 among
American General Annuity Insurance Company, One Group Investment Trust,
Banc One Investment Advisors Corporation, Nationwide Advisory Services,
Inc., and Nationwide Investors Services, Inc.
(h)(10) Amendment to Fund Participation Agreement effective as of January 1,
2000 among American General Annuity Insurance Company, One Group
Investment Trust, Banc One Investment Advisors Corporation, and One
Group Administrative Services, Inc.
(h)(11) Fund Participation Agreement effective as of August 2, 1999 among One
Group Investment Trust, Banc One Investment Advisors Corporation,
Nationwide Advisory Services, Inc., Nationwide Investors Services,
Inc., and PFL Life Insurance Company
(h)(12) Amendment to Fund Participation Agreement effective as of January 1,
2000 among PFL Life Insurance Company, One Group Investment Trust, Banc
One Investment Advisors Corporation, and One Group Administrative
Services, Inc.
(h)(13) Resignation Letter, dated December 28, 1999 of Nationwide Advisory
Services, Inc. and Nationwide Investors Services, Inc.
(i) Opinion of Ropes & Gray.
(j)(1) Consent of Ropes & Gray.
<PAGE> 1
ITEM 23(a)
AMENDED AND RESTATED DECLARATION OF TRUST DATED JANUARY 1, 2000
<PAGE> 2
AMENDED AND RESTATED
DECLARATION OF TRUST
ONE GROUP(R) INVESTMENT TRUST
WHEREAS, the Trustees desire to establish a trust for the investment and
reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided:
NOW THEREFORE, the Trustees hereby declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of holders, from time to time, of the shares of beneficial
interest issued hereunder and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
--------------------
SECTION 1.1. NAME. The name of the trust created hereby is "One
Group(R)Investment Trust."
SECTION 1.2. DEFINITIONS. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "ADMINISTRATOR" means the party other than the Trust, to the contract
described in Section 4.3 hereof.
(b) "BYLAWS" means the Bylaws referred to in Section 3.9 hereof, as from
time to time amended.
(c) The terms "COMMISSION," "INTERESTED PERSON," and "MAJORITY
SHAREHOLDER VOTE" (the 67% or 50% requirement of the third sentence of Section
2(a)(42) of the 1940 Act, whichever may be applicable) have the meanings given
them in the 1940 Act, except to the extent that the Trustees have otherwise
defined "Majority Shareholder Vote" in conjunction with the establishment of any
series of shares.
(d) "DECLARATION" means this Declaration of Trust as amended from time
Ito time. Reference in this Declaration of trust to "DECLARATION," "HEREOF," and
"HEREUNDER" shall be deemed to refer to this Declaration rather than the article
or section in which such words appear.
(e) "DISTRIBUTOR" means the party, other than the Trust, to the contract
described in Section 4.2 hereof.
(f) "INVESTMENT ADVISER" means the party, other than the Trust, to the
contract described
<PAGE> 3
in Section 4.1 hereof.
(g) The "1940 ACT" means the Investment Company Act of 1940 and the rules
and regulations thereunder, as amended from time to time.
(h) "PERSON" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
(i) "SHAREHOLDER" means a record owner of outstanding Shares.
(j) "SHARES" means the units of interest into which the beneficial
interest in the Trust shall be divided from time to time, including the shares
of any and all series which may be established by the Trustees, and includes
fractions of Shares as well as whole Shares.
(k) "TRANSFER AGENT" means the party, other than the Trust, to the
contract described in Section 4.4 hereof.
(l) The "TRUST" means One Group(R)Investment Trust.
(m) The "TRUST PROPERTY" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(n) The "TRUSTEES" means the persons who have signed this Declaration, so
long as they shall continue in office in accordance with the terms hereof, and
all other person who may from time to time be duly elected, qualified and
serving as Trustees in accordance with the provisions hereof, and reference
herein to a Trustees or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
--------
SECTION 2.1. NUMBER OF TRUSTEES. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three (3) nor more than fifteen (15), except that the
number of Trustees may be one (1) prior to the commencement of public sale of
Trust Shares.
SECTION 2.2. ELECTION AND TERM. Except for the Trustees named herein or
appointed to fill vacancies pursuant to Section 2.4 hereof, the Trustees shall
be elected by the Shareholders at an annual meeting or at a special meeting of
Shareholders. There is no requirement that the Trustees have an annual meeting
of the Shareholders. In the event the Trustees determine to have an annual of
special meeting of the Shareholders, it shall be held at such time and place and
<PAGE> 4
in such manner as the Bylaws shall provide notwithstanding anything in this
section to the contrary. Except in the event of resignations or removals
pursuant to Section 2.3 hereof, each Trustee shall hold office until the next
meeting of shareholders and until his or her successor is elected and qualified
to serve as Trustee.
SECTION 2.3. RESIGNATION AND REMOVAL. Any Trustee may resign his or her
trust (without need for prior or subsequent accounting) by an instrument in
writing signed by him or her and delivered to the other Trustees and such
resignation shall be effective upon such delivery, or at a later date according
to the terms of the instrument. Any of the Trustees may be removed (provided the
aggregate number of Trustees after such removal shall not be less than the
number of required by Section 2.1 hereof) with cause, by the action of
two-thirds of the remaining Trustees. Upon the resignation or removal of a
Trustee, or his or her otherwise ceasing to be a Trustee, he or she shall
execute and deliver such documents as the remaining Trustees shall require for
the purpose of conveying to the Trust or the remaining Trustees any Trust
Property held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, his or her legal representative shall
execute and deliver on his or her behalf such documents as the remaining
Trustees shall require as provided in the preceding sentence.
SECTION 2.4. VACANCIES. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul this
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining Trustees shall fill
such vacancy by the appointment of such other person as they in their discretion
shall see fit, made by a written instrument signed by a majority of the
Trustees. Any such appointment shall not become effective, however, until the
person named in the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 2.4, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
A written instrument certifying the existence of such vacancy by a majority of
the Trustees shall be conclusive evidence of the existence of such vacancy.
SECTION 2.5. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his or her power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall less than two (2) Trustees, personally exercise the powers granted to
the Trustees under the Declaration except as herein otherwise expressly
provided.
<PAGE> 5
ARTICLE III
POWERS OF TRUSTEES
------------------
SECTION 3.1. GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations and maintains offices both
within and without the Commonwealth of Massachusetts, in any and all state of
the United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any determination as
to what is in the interest of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of the Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
SECTION 3.2. INVESTMENTS. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise acquire,
hold, pledge, sell, assign, transfer, exchange, distribute, lend or otherwise
deal in or dispose of negotiable or non-negotiable instruments, obligations,
evidences or indebtedness, certificates of deposit or indebtedness, commercial
paper, repurchase agreements, and other securities of any kind, including,
without limitation, those issued, guaranteed or sponsored by any and all Persons
including, without limitation, states, territories and possessions of the United
States, the District of Columbia and any of the political subdivisions, agencies
or instrumentalities thereof, and by United States Government or its agencies or
instrumentalities, or international instrumentalities, or by any bank or savings
institution, or by any corporation or organization organized under the laws of
the United States or of any state, territory or possession thereof, and of
corporations or organizations organized under foreign laws, or in "when issued"
contracts for any such securities, or retain Trust assets in cash and from time
to time change the investments of the assets of the Trust; and to exercise any
and all rights, powers and privileges or ownership or interest in respect of any
and all such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto, with
power to designate one or more persons, firms, associations or corporations to
exercise any of said rights, powers and privileges in respect of any said
instruments.
<PAGE> 6
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
SECTION 3.3 LEGAL TITLE. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person as nominee, on such terms as the Trustees may determine, provided
that the interest of the Trust therein is appropriately protected. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee, he or she shall automatically cease
to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyance documents have been executed and
delivered.
SECTION 3.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII, and IX and Section
6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the Trust whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
by the laws of the Commonwealth of Massachusetts governing business
corporations.
SECTION 3.5. BORROWING MONEY; LENDING TRUST ASSETS. The Trustees shall
have power to borrow money or otherwise obtain credit to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets of the
Trust, to endorse, guarantee, or undertake the performance of any obligations,
contract or engagement of any other Person and to lend Trust assets.
SECTION 3.6. DELEGATION; COMMITTEES. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
SECTION 3.7. COLLECTION AND PAYMENT. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
SECTION 3.8. EXPENSES. The Trustees shall have the power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes
<PAGE> 7
of the Declaration, and to pay reasonable compensation from the funds of the
Trust to themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees.
SECTION 3.9. MANNER OF ACTION; BYLAWS. Except as otherwise provided
herein or in the Bylaws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of a majority of the
Trustees (unless a higher proportion is required by law). The Trustees may adopt
Bylaws not inconsistent with this Declaration to provide for the conduct of the
business of the Trust and may amend or repeal such Bylaws to the extent such
power is not reserved to the Shareholders.
SECTION 3.10. MISCELLANEOUS POWERS. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committee which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted by any such person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) to the extent permitted by law, indemnify any person with whom
the Trust has dealings, including the Investment Adviser, Distributor,
Administrator, Transfer Agent and selected dealers, to such extent as the
Trustees shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the fiscal year of the Trust and the method
by which its accounts shall be kept; and (i) adopt a seal for the Trust, but the
absence of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
SECTION 3.11. PRINCIPAL TRANSACTIONS. Except in transactions permitted by
the 1940 Act or any rule or regulation thereunder, or any order of exemption
issued by the Commission, the Trustees shall not, on behalf of the Trust, buy
any securities (other than Shares) from or sell any securities (other than
Shares) to, or lend any assets of the Trust to, any Trustee or officer of the
Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with the Investment Adviser, Distributor,
Administrator or Transfer Agent or with any Interested Person of such Person;
but the Trust may employ any such Person, or firm or company in which such
Person is an Interested Person, as broker, legal counsel, registrar, transfer
agent, dividend disbursing agent or custodian upon customary terms.
SECTION 3.12. TRUSTEES AND OFFICERS AS SHAREHOLDERS. Except as
hereinafter provided, no
<PAGE> 8
officer, Trustee or member of the Advisory Board of the Trust, and no member,
officer, director or trustee of the Investment Adviser or of the Distributor and
no Investment Adviser or Distributor of the Trust, shall take long or short
positions in the securities issued by the Trust.
(1) The foregoing provision shall not prevent the Distributor from
purchasing from the Trust Shares if such purchases are limited (except for
reasonable allowances for clerical errors, delays and errors of transmission and
cancellation of orders) to purchases for the purpose of filling orders for
Shares received by the Distributor and provided that orders to purchase from the
Trust are entered with the Trust or the Custodian promptly upon receipt by the
Distributor or purchase orders for Shares, unless the Distributor is otherwise
instructed by its customer.
(2) The foregoing provision shall not prevent the Distributor from
purchasing Shares as agent for the account of the Trust.
(3) The foregoing provision shall not prevent the purchase from the Trust
or from the Distributor of Shares by any officer, Trustee or member of the
Advisory Board of the Trust or by any member, officer, director or trustee of
the Investment Adviser or of the Distributor at a price not lower than the net
asset value of the Shares at the moment of such purchase, provided that any such
sales are only to be made pursuant to a uniform offer described in the Trust's
current prospectus.
(4) The foregoing provision shall not prevent the Investment Adviser, the
Distributor, or any of their officers, directors or trustees from purchasing
Shares prior to the effective date of the Registration Statement relating to the
Shares under the Securities Act of 1933, as amended.
SECTION 3.13. LITIGATION. The Trustees shall have the power to engage in
and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust to pay or to satisfy
any debts, claims or expenses incurred in connection therewith, including those
of litigation, and such power shall include without limitation the power of the
Trustees or any appropriate committee thereof, in the exercise of their or its
good faith business judgment, to dismiss any action, suit, proceeding, dispute,
claim, or demand, derivative or otherwise, brought by any person, including a
Shareholder in its own name or the name of the Trust, whether or not the Trust
or any of the Trustees may be named individually therein or the subject matter
arises by reason of business for or on behalf of the Trust.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, ADMINISTRATOR
----------------------------------------------
AND TRANSFER AGENT
------------------
SECTION 4.1. INVESTMENT ADVISER. Subject to a Majority Shareholder Vote,
the Trustees may, in their discretion, from time to time enter into an
investment advisory or management contract whereby the other party to such
contract shall undertake to furnish the Trust such management, investment
advisory, statistical and research facilities and services, promotional
<PAGE> 9
activities, and such other facilities and services, if any, as the Trustees
shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may, in their discretion, determine. Notwithstanding
any provisions of the Declaration, the Trustees may authorize the Investment
Adviser (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales, loans or exchanges of
portfolio securities of the Trust on behalf of the Trustees or may authorize any
officer, employee of Trustee to effect such purchases, sales, loans or exchanges
pursuant to recommendations of the Investment Adviser (and all without further
action by the Trustees). Any such purchases, sales, loans and exchanges shall be
deemed to have been authorized by all of the Trustees.
SECTION 4.2. DISTRIBUTOR. The Trustees may, in their discretion, from
time to time enter into a contract providing for the sale of Shares of the Trust
at the net asset value per Share (as described in Article VIII hereof), whereby
the Trust may either agree to sell the Shares to the other party to the contract
or appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article IV or
the Bylaws; and such contract may also provide for the repurchase or sale of
Shares of the Trust by such other party as principal or as agent of the Trust
and may provide that such other party may enter into selected dealer agreements
with registered securities dealers to further the purpose of the distribution or
repurchase of the Shares.
SECTION 4.3. ADMINISTRATOR. The trustees may, in their discretion, from
time to time enter into an administrative services agreement whereby the other
party to such contract shall provide facilities, equipment, and personnel to
carry out certain administrative services for the operation of the business and
affairs of the Trust and each of its separate series. The contract shall have
such terms and conditions as the Trustees may, in their discretion, determine
not inconsistent with the Declaration or the Bylaws. Such services may be
provided by one or more Persons.
SECTION 4.4. TRANSFER AGENT. The Trustees may, in their discretion, from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such terms
and conditions as the Trustees may, in their discretion, determine not
inconsistent with the Declaration or the Bylaws. Such services may be provided
by one or more Persons.
SECTION 4.5. PARTIES TO CONTRACT. Any contract of the character described
in Sections 4.1, 4.2, 4.3, and 4.4 of this Article IV or any Custodian contract,
as described in the Bylaws, may be entered into with any Person, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence of
any such relationship; nor shall any Person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract, when entered into, was not
inconsistent with the provisions of this Article IV or the Bylaws. The
<PAGE> 10
same Person may be the other party to contracts entered into pursuant to
Sections 4.1, 4.2, 4.3 and 4.4 above or Custodian contracts, and any individual
may be financially interested or otherwise affiliated with Persons who are
parties to any or all of the contracts mentioned in this Section 4.5.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS
----------------------------------------
TRUSTEES AND OTHERS
-------------------
SECTION 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder as such shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs of
the Trust. No Trustee, officer, employee or agent of the Trust shall be subject
to any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his or her duty to, such Person; and all such Persons
shall look solely to the Trust Property for satisfaction of claims of any nature
arising in connection with the affairs of the Trust. If any shareholder,
Trustee, officer, employee or agent, as such, of the Trust is made a party to
any suit or proceeding to enforce any such liability, he or she shall not, on
account thereof, be held to any personal liability. The Trust shall indemnify
and hold each Shareholder harmless from and against all claims and liabilities
to which such Shareholder may become subject by reason of his or her being or
having been a Shareholder, and shall reimburse such Shareholder for all legal
and other expenses reasonably incurred by him or her in connection with any such
claim or liability. The rights accruing to a Shareholder under this Section 5.1
shall not exclude any other right to which such Shareholder may be lawfully
entitled, nor shall anything herein contained restrict the right of the Trust to
indemnify or reimburse a Shareholder in any appropriate situation even though
not specifically provided herein.
SECTION 5.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee or agent thereof for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
his or her own bad faith, willful misfeasance, gross negligence or reckless
disregard of his or her duties.
SECTION 5.3. MANDATORY INDEMNIFICATION
(a) Subject to the exceptions and limitations contained in paragraph (b)
below:
(i) Every person who is, or has been a Trustee or officer of the Trust
shall be indemnified by the Trust against all liability and against all expenses
reasonably incurred or paid by him or her in connection with any claims, action,
suit or proceeding in which he or she becomes involved as a party or otherwise
by virtue of his or her being or having been a Trustee
<PAGE> 11
or officer and against amounts paid or incurred by him or her in the settlement
thereof.
(ii) The words "claim", "action", "suit" or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitations, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust or the Shareholders by reason of
a final adjudication by the court or other body before which the proceeding was
brought that he or she engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office;
(ii) with respect to any matter as to which he or she shall have been
finally adjudicated not to have acted in good faith in the reasonable belief
that his or her action was in the best interest of the Trust;
(iii) in the event of a settlement or other disposition not involving a
final adjudication as provided in paragraphs (b)(i) or (b)(ii) resulting in
payment by a Trustee or officer, unless there has been either a determination
that such Trustee or officer did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office by the court or other body approving the settlement or other
disposition or a reasonable determination, based upon a review of readily
available facts (as opposed to a full trial-type inquiry) that he or she did not
engage in such conduct:
(A) by vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter); or
(B) by written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Trustee or officer may now or hereafter be entitled, shall
continue as to a Person who has ceased to be such Trustee or officer and shall
inure to the benefit of the heirs, executors and administrators of such Person.
Nothing contained herein shall affect any rights to indemnification to which
personnel other than Trustees and officers may be entitled by contract or
otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 5.3 shall be advanced by the Trust prior to final disposition thereof
upon receipt of any undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he or she is not entitled to
indemnification under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security
<PAGE> 12
or the Trust shall be insured against losses arising out of any such advances;
or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 5.3, a "Disinterested Trustee" is one (i) who is
not an "Interested Person" of the Trust (including anyone who has been exempted
from being an "Interested Person" by any rule, regulation or order of the
Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.
Agents and employees of the Trust who are not Trustees or officers of the
Trust may be indemnified under the same standards and procedures set forth in
this Section 5.3, in the discretion of the Board.
SECTION 5.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be obligated
to give any bond or other security for the performance of any of his or her
duties hereunder.
SECTION 5.5. NO DUTY OF INVESTIGATION: NOTICE IN TRUST INSTRUMENTS, ETC.
No purchaser, lender, Transfer Agent or other Person dealing with the Trustees
or any other officer, employee or agent of the Trust shall be bound to make any
inquiry concerning the validity of any transaction purporting to be made by the
Trustees or by said officer, employee or agent or be liable for the application
of money or property paid, loaned, or delivered to or on the order of the
Trustees or of said officer, employee or agent. Every obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking, and
every other act or thing whatsoever executed in connection with the Trust shall
be conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under the Declaration or in their capacity as
officers, employees or agents of the Trust. Every written obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking made
or issued by the Trustees shall recite that the same is executed or made by them
not individually, but as Trustees under the Declaration, and that the
obligations of any such instrument are not binding upon any of the Trustees or
Shareholders, individually, but bind only the Trust estate, and may contain any
further recital which they or he or she may deem appropriate, but the omission
of such recital shall not operate to bind the Trustees individually. The
Trustees shall at all times maintain insurance for the protection of the Trust
Property, its Shareholders, Trustees, officers, employees and agents in such
amount as the Trustees shall deem adequate to cover possible tort liability, and
other such insurance as the Trustees in their sole judgment shall deem
advisable.
SECTION 5.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust shall, in the performance of his or her duties, be fully
and completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of
<PAGE> 13
account or other records of the Trust, upon an opinion of counsel, or upon
reports made to the Trust by any of its officers or employees of the Trust,
regardless of whether such counsel or expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
-----------------------------
SECTION 6.1. BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest,
without par value, of the following classes or series, or such others as may be
authorized by the Trustees pursuant to Section 6.9:
One Group(R)Investment Trust Government Bond Portfolio
One Group(R)Investment Trust Balanced Portfolio
One Group(R)Investment Trust Mid Cap Growth Portfolio
One Group(R)Investment Trust Large Cap Growth Portfolio
One Group(R)Investment Trust Equity Index Portfolio
One Group(R)Investment Trust Bond Portfolio
One Group(R)Investment Trust Diversified Equity Portfolio
One Group(R)Investment Trust Diversified Mid Cap Portfolio
One Group(R)Investment Trust Mid Cap Value Portfolio
The number of shares of beneficial interest authorized hereunder is unlimited.
All Shares issued hereunder including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be fully paid
and non-assessable.
SECTION 6.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust Property
of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust, nor can they be called
upon to assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights in the Declaration specifically set forth. The Shares
shall not entitle the holder to preference, pre-emptive, appraisal, conversion
or exchange rights, except as the Trustees may determine with respect to any
series of Shares.
SECTION 6.3. TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a Trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the
<PAGE> 14
Trustees, partners or members of a joint stock association.
SECTION 6.4. ISSUANCE OR SHARES. The Trustees, in their discretion, may,
from time to time without vote of Shareholders, issue Shares, in addition to the
then issued and outstanding Shares and Shares held in the treasury to such party
or parties and for such amount and type of consideration, including cash or
property, at such time or times (including, without limitation, each business
day in accordance with the determination of net asset value per Share as set
forth in Section 8.3 hereof), and on such terms as the Trustees may deem best,
and may in such manner acquire other assets (including the acquisition of assets
subject to, and in connection with the assumption of liabilities) and
businesses. In connection with any issuance of Shares, the Trustees may issue
fractional Shares. The Trustees may from time to time divide or combine the
Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole shares and/or 1/1,000ths
of a Share or integral multiples thereof.
SECTION 6.5. REGISTER OF SHARES; SHARE CERTIFICATES. A register will be
kept at the principal office of the Trust or at an office of the Transfer Agent
which shall contain the names and addresses of the Shareholders and the number
of Shares held by them respectively and a record of all transfers thereof. Such
register shall be conclusive as to who are the holders of the Shares and who
shall be entitled to receive dividends or distributions or otherwise to exercise
or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or distribution, nor to have notice given to him or her
as herein or in the Bylaws provided, until he or she has given his or her
address to the Transfer Agent or such other officer or agent of the Trustees as
shall keep the said register for entry thereon. It is not contemplated that
certificates will be issued for the Shares; however, the Trustees, in their
discretion, may authorize the issuance of Share certificates and promulgate
appropriate rules and regulations as to their use.
SECTION 6.6. TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the recordholder thereof or by his or her agent
thereunto duly authorized in writing, upon delivery to the Trustees or the
Transfer Agent of a duly executed instrument of transfer, together with such
evidence of the genuineness of each such election and authorization and of other
matters as may reasonably be required. Upon such delivery, the transfer shall be
recorded on the register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any Transfer Agent or registrar
nor any officer, employee or agent of the Trust shall be affected by any notice
of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer, employee or agent
of the Trust shall be
<PAGE> 15
affected by notice of the proposed transfer.
SECTION 6.7. NOTICES. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Shareholder of record at his or her
last known address as recorded on the register of the Trust.
SECTION 6.8. VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.2 hereof or as
required by Section 16(a) of the 1940 Act; (ii) with respect to any investment
advisory or management contract as provided in Section 4.1; (iii) with respect
to termination of the Trust as provided in Section 9.2; (iv) with respect to any
amendment of the Declaration to the extent and as provided in Section 9.3.; (v)
with respect to any merger, consolidation or sale of assets as provided in
Section 9.4; (vi) with respect to incorporation of the Trust to the extent and
as provided in Section 9.5.; (vii) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders; and (viii) with
respect to such additional matters relating to the Trust as may be required by
the Declaration, the Bylaws, the 1940 Act or any registration of the Trust with
the Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. Each whole Share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional Share shall
be entitled to proportionate fractional vote, except that Shares held in the
treasury of the Trust shall not be voted and that the Trustees may, in
conjunction with the establishment of any series of Shares, establish conditions
under which the several series shall have separate voting rights or no voting
rights. There shall be no cumulative voting in the election of Trustees. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and may
take any action required by law, the Declaration or the Bylaws to be taken by
Shareholders. The Bylaws may include further provisions for Shareholders' votes
and meetings and related matters.
SECTION 6.9. SERIES DESIGNATION. The Trustees, in their discretion, may
authorize the division of Shares into additional series, and the different
series shall be established and designated, and the variations in the relative
rights and preferences as between the different series shall be fixed and
determined by the Trustees, provided that all Shares shall be identical, except
that there may be variations so fixed and determined between different series as
to investment objective, purchase price, right of redemption and the price,
terms and manner of redemption, special and relative rights as to dividends and
on liquidation, conversion rights, and conditions under which the several series
shall have separate voting rights. All references to Shares in the Declaration
shall be deemed to be shares of any or all series as the context may require.
If the Trustees shall divide the shares of the Trust into two or more
series, the following provisions shall be applicable:
(a) The number of authorized shares and the number of shares of each
series that may
<PAGE> 16
be issued shall be unlimited. The Trustees may classify or reclassify any
unissued shares or any shares previously issued and reacquired of any series
into one or more series that may be established and designated from time to
time. The Trustees may hold as treasury shares (of the same or some other
series), reissue for such consideration and on such terms as they may determine,
or cancel any shares of any series reacquired by the Trust at their discretion
from time to time.
(b) The power of the Trustees to invest and reinvest the Trust Property
shall be governed by Section 3.2 of this Declaration with respect to the nine
existing series which represents the interests in the assets of the Trust
immediately prior to the establishment of any additional series and the power of
the Trustees to invest and reinvest assets applicable to any such additional
series shall be as set forth in the instrument of the Trustees establishing such
series, which is hereinafter described.
(c) All consideration received by the Trust for the issue or sale of
shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors, and shall be so recorded upon the books of account of the Trust.
In the event that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular series, the Trustees shall allocate them among any one or more of
the series established and designated from time to time in such manner and on
such basis as they, in their sole discretion, deem fair and equitable. Each such
allocation by the Trustees shall be conclusive and binding upon the shareholders
of all series for all purposes.
(d) The assets belonging to each particular series shall be charged with
the liabilities of the Trust in respect of that series and all expenses, costs,
charges and reserves attributable to that series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular series shall be allocated and
charged by the Trustees to and among any one or more of the series established
and designated from time to time in such manner and on such basis as the
Trustees, in their sole discretion, deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the shareholders.
(e) The power of Trustees to pay dividends and make distributions shall
be governed by Section 8.2 of this Declaration with respect to the nine existing
series which represents the interests in the assets of the Trust immediately
prior to the establishment of any additional series. With respect to any other
series, dividends and distributions on shares of a particular series may be paid
with such frequency as the Trustees may determine, which may be daily or
otherwise,
<PAGE> 17
pursuant to a standing resolution or resolutions adopted only once or with such
frequency as the Trustees may determine, to the holders of shares of that
series, from such of the income and capital gains, accrued or realized, from the
assets belonging to that series, as the Trustees may determine, after providing
for actual and accrued liabilities belonging to that series. All dividends and
distributions on shares of a particular series shall be distributed pro rata to
the holders of that series in proportion to the number of shares of that series
held by all such holders at the date and time of record established for the
payment of such dividends or distributions.
The establishment and designation of any series of shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such instrument. At any
time that there are no shares outstanding of any particular series previously
established and designated, the Trustees may, by an instrument executed by a
majority of their number, abolish that series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
ARTICLE VII
REDEMPTIONS
-----------
SECTION 7.1. REDEMPTIONS. In case any Shareholder at any time desires to
dispose of his or her Shares, he or she may deposit his or her certificate or
certificates therefor, duly endorsed in blank or accompanied by an instrument of
transfer executed in blank, or if the Shareholder has no certificates, a written
request or other such form of request as the Trustees may from time to time
authorized, at the office of the Transfer Agent or at the office of any bank or
trust company, either in or outside of Massachusetts, which is a member of the
Federal Reserve System and which the said Transfer Agent has designated in
writing for that purpose, together with an irrevocable offer in writing in a
form acceptable to the Trustees to sell the Shares represented thereby to the
Trust at the net asset value thereof per Share, determined as provided in
Section 8.1 thereof, next after such deposit. Payment for said Shares shall be
made to the Shareholder within seven (7) days after the date on which the
deposit is made, unless: (i) the date of payment is postponed pursuant to
Section 7.2 hereof, or (ii) the receipt, or verification of receipt, of the
purchase price for the Shares to be redeemed is delayed, in either of which
event payment may be delayed beyond seven (7) days.
SECTION 7.2. SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closing; (ii)
during which trading on the New York Stock Exchange is restricted; (iii) during
which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets; or
(iv) during any other period when the Commission may for the protection of
security holders of the Trust by order permit suspension of the right of
redemption or postponement of the date of payment or redemption; provided that
<PAGE> 18
applicable rules and regulations of the Commission shall govern as to whether
the conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall
take effect at such time as the Trust shall specify, but not later than the
close of business on the business day next following the declaration of
suspension, and thereafter there shall be no right of redemption until the Trust
shall declare the suspension at an end, except that the suspension shall
terminate in any event on the first day on which said stock exchange shall have
reopened or the period specified in (ii) or (iii) shall have expired (as to
which, in the absence of an official ruling by the Commission, the determination
of the Trust shall be conclusive). In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his or her request for redemption
or receive payment based on the net asset value existing after the termination
of the suspension.
SECTION 7.3. REDEMPTION OF SHARES; DISCLOSURE OF HOLDING. If the Trustees
shall, at any time and in good faith, be of the opinion that direct or indirect
ownership of Shares or other securities of the Trust has or may become
concentrated in any Person to an extent which would disqualify the Trust as a
regulated investment company under the Internal Revenue Code, then the Trustees
shall have the power by lot or other means deemed equitable by them (i) to call
for redemption by any such Person of a number, or principal amount, of Shares or
other securities of the Trust sufficient to maintain or bring the direct or
indirect ownership of Shares or other securities of the Trust into conformity
with the requirements for such qualification; and (ii) to refuse to transfer or
issue Shares or other securities of the Trust to any Person whose acquisition of
the Shares or other securities of the Trust in question would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in Section 7.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other authority.
SECTION 7.4. REDEMPTIONS OF ACCOUNTS OF LESS THAN $500. The Trustees
shall have the power at any time to redeem Shares of any Shareholder at a
redemption price determined in accordance with Section 7.1, if at such time the
aggregate net asset value of the Shares in such Shareholder's account is less
than $500. A Shareholder will be notified that the value of his or her account
is less than $500 and allowed thirty (30) days to make an additional investment
before redemption is processed.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE
--------------------------------
NET INCOME AND DISTRIBUTIONS
----------------------------
SECTION 8.1. NET ASSET VALUE. For all purposes under this Declaration of
Trust, the net asset value shall be determined by the Trustees as soon as
possible after the close of the New York Stock Exchange on each business day
upon which such Exchange is open, such net asset
<PAGE> 19
value to become effective one hour after such close and remain in effect until
the next determination of such net asset value becomes effective; provided,
however, that the Trustees may in their discretion make a more frequent
determination of the net asset value which shall become effective one hour after
the time as of which such net asset value is determined.
Such net asset value shall be determined in the following manner:
(a) All securities listed on any recognized Exchange shall be appraised
at the quoted closing sale prices and in the even that there was no sale of any
particular security on such day the quoted closing bid price thereof shall be
used, or if any such security was not quoted on such day or if the determination
of the net asset value is being made as of a time other than the close of the
New York Stock Exchange, then the same shall be appraised in such manner as
shall be deemed by the Trustees to reflect its fair value.
All other securities and assets of the Trust, including cash, prepaid and
accrued items, and dividends receivable, shall be appraised in such manner as
shall be deemed by the Trustees to reflect their fair value.
(b) From the total value of the Trust Property as so determined shall be
deducted the liabilities of the Trust, including reserves for taxes, and such
expenses and liabilities of the Trust as may be determined by the Trustees to be
accrued liabilities.
(c) The resulting amount shall represent the net asset value of the Trust
Property. The net asset value of a share of any class shall be the result of the
division of the net asset value of the underlying assets of that class by the
number of shares of that class outstanding. The net asset value of the Trust
Property and shares as so determined shall be final and conclusive.
SECTION 8.2. DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from time
to time distribute ratably among the Shareholders such proportion of the net
profits, surplus (including paid-in surplus), capital, or assets held by the
Trustees as they may deem proper. Such distribution may be made in cash or
property (including without limitation any type of obligations of the Trust or
any assets thereof), and the Trustees may distribute ratably among the
Shareholders additional Shares issuable hereunder in such manner, at such times,
and on such terms as the Trustees may deem proper. Such distributions may be
among the Shareholders of record at the time of declaring a distribution or
among the Shareholders of record at such later date as the Trustees shall
determine. The Trustees may always retain from the net profits such amount s
they may deem necessary to pay the debts or expenses of the Trust or to meet
obligations of the Trust, or as they may deem desirable to use in the conduct of
its affairs or to retain for future requirements or extensions of the business.
The Trustees may adopt and offer to Shareholders such dividend reinvestment
plans, cash dividend payout plans or related plans as the Trustees shall deem
appropriate.
Inasmuch as the computation of net income and gains for Federal Income
Tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary
<PAGE> 20
dividends and as capital gains distributions, respectively, additional amounts
sufficient to enable the Trust to avoid or reduce liability for taxes.
SECTION 8.3. DETERMINATION OF NET INCOME. The term "net income" with
respect to a class of shares is hereby defined as the gross earnings of the
class, excluding gains on sales of securities and stock dividends received, less
the expenses of the Trust allocated to the class by the Trustees in such manner
as they determine to be fair and equitable or otherwise chargeable to the class.
The expenses shall include (1) taxes attributable to the income of the Trust
exclusive of gains on sales, and (2) other charges properly deductible for the
maintenance and administration of the Trust; but there shall not be deducted
from gross or net income any losses on securities, realized or unrealized. The
Trustees shall otherwise have full discretion to determine which items shall be
treated as income and which items as capital and their determination shall be
binding upon the Beneficiaries.
SECTION 8.4. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions s they may deem necessary or desirable.
Without limiting the generality of the foregoing, the Trustees may establish
additional series of Shares in accordance with Section 6.9.
ARTICLE IX
DURATION; TERMINATION OF TRUST
------------------------------
AMENDMENT; MERGERS; ETC.
------------------------
SECTION 9.1. DURATION. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
SECTION 9.2. TERMINATION OF TRUST. (a) The Trust must be terminated:
(i) by the affirmative vote of the holders of not less than two-thirds of
the Shares outstanding and entitled to vote at any meeting of Shareholders, or
(ii) by an instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of not less than two-thirds of such
Shares, or by such other vote as may be established by the Trustees with respect
to any series of Shares, or (iii) by the Trustees by written notice to the
Shareholders.
Upon the termination of the Trust:
(i) The Trust shall carry on no business except for the purpose of
winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust and
all of the powers of the Trustees under this Declaration shall continue until
the affairs of the Trust shall
<PAGE> 21
have been wound up, including the power to fulfill or discharge the contracts of
the Trust, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property to one or
more persons at public or private sale for consideration which may consist in
whole or in part of cash, securities or other property of any kind, discharge or
pay its liabilities, and to do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange, transfer or
other disposition of all or substantially all the Trust Property shall require
Shareholder approval in accordance with Section 9.4 hereof.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly each,
among the Shareholders according to their respective rights.
(iv) After termination of the Trust and distribution to the Shareholders
as herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease.
SECTION 9.3. AMENDMENT PROCEDURE. (a) This Declaration may be amended by
a Majority Shareholder Vote or by any instrument in writing, without a meeting,
signed by a majority of the Trustees and consented to by the holders of not less
than a majority of the Shares outstanding and entitled to vote. The Trustees may
also amend this Declaration without the vote or consent of Shareholders to
designate series in accordance with Section 6.9 hereof, to change the name of
the Trust, to supply any omission, to cure, correct or supplement any ambiguous,
defective or inconsistent provision hereof, or if they deem it necessary to
conform this Declaration to the requirements of applicable federal laws or
regulations or the requirements of the regulated investment company provisions
of the Internal Revenue Code, but the Trustees shall not be liable for failing
to do so.
(b) No amendments may be made under this Section 9.3 which would change
any rights with respect to any Shares of the Trust by reducing the amount
payable thereon upon liquidation of the Trust or by diminishing or eliminating
any voting rights pertaining thereto, except with the vote or consent of the
holders of two-thirds of the Shares outstanding and entitled to vote, or by such
other vote as may be established by the Trustees with respect to any series of
Shares. Nothing contained in this Declaration shall permit the amendment of this
Declaration to impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Trust or to permit assessments
upon Shareholders.
(c) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
SECTION 9.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may
merge or
<PAGE> 22
consolidate with any other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of the Trust Property,
including its goodwill, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Shareholders called for
the purpose by affirmative vote of the holders of not less than two-thirds of
the Shares outstanding and entitled to vote, or by an instrument or instruments
in writing without a meeting, consented to by the holders of not less than
two-thirds of such Shares, or by such other vote as may be established by the
Trustees with respect to any series of Shares; provided, however, that, if such
merger, consolidation, sale, lease or exchange is recommended by the Trustees,
the vote or written consent of the holders of a majority of Shares outstanding
and entitled to vote, or by such other vote as may be established by the
Trustees with respect to any series of Shares, shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have been accomplished under and pursuant to the
statutes of the Commonwealth of Massachusetts.
SECTION 9.5. INCORPORATION. With the approval of the holders of a
majority of the Shares outstanding and entitled to vote, or by such other vote
as may be established by the Trustees with respect to any series of Shares, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction or any other trust, partnership,
association or other organization to take over all of the Trust Property or to
carry on any business in which the Trust shall directly or indirectly have any
interest, and to sell, convey and transfer the Trust Property to any such
corporation, trust, association or organization in exchange for the shares or
securities thereof or otherwise, and to lend money to, subscribe for the shares
or securities of, and enter into any contracts with any such corporation, trust,
partnership, association or organization in which the Trust holds or is about to
acquire shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling, conveying
or transferring a portion of the Trust Property to such organization or
entities.
ARTICLE X
REPORTS TO SHAREHOLDERS
-----------------------
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.
<PAGE> 23
ARTICLE XI
MISCELLANEOUS
-------------
SECTION 11.1. FILING. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Each amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that such action was duly taken in a manner
provided herein, and unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective upon its filing. A restated Declaration, integrating into a single
instrument all of the provisions of the Declaration which are then in effect and
operative, may be executed from time to time by a majority of the Trustees and
shall, upon filing with the Secretary of the Commonwealth of Massachusetts, be
conclusive evidence of all amendments contained herein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
SECTION 11.2. RESIDENT AGENT. The name of the Trust's resident agent is
One Group(R) Investment Trust, c/o CT Corporation System, and its post office
address is 2 Oliver Street, Boston, Massachusetts 02109.
SECTION 11.3. GOVERNING LAW. This Declaration is executed by the Trustees
and delivered with reference to the laws of the Commonwealth of Massachusetts,
and the rights of all parties and the validity and construction of every
provision hereof shall be subject to and construed according to the laws of said
State.
SECTION 11.4. COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall sufficiently evidenced by any such original counterpart.
SECTION 11.5. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any Bylaws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.
<PAGE> 24
SECTION 11.6. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of the Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed never to have constituted a part of the
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of the Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
SECTION 11.7. INDEX AND HEADING FOR REFERENCE ONLY. The Index and heading
preceding the text, articles and sections hereof have been inserted for
convenience and reference only and shall not be construed to affect the meaning,
construction, or effect of this Declaration.
IN WITNESS WHEREOF, the undersigned Trustees have hereunto set their
hands this 1st day of January, 2000.
Address: 1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
/s/John F. Finn
---------------
John F. Finn
Trustee
/s/Peter C. Marshall
--------------------
Peter C. Marshall
Trustee
/s/Marilyn McCoy
----------------
Marilyn McCoy
Trustee
/s/Robert A. Oden, Jr.
----------------------
Robert A. Oden, Jr.
Trustee
<PAGE> 25
/s/Julius L. Pallone
--------------------
Julius L. Pallone
Trustee
/s/Charles I. Post
------------------
Charles I. Post
Trustee
/s/Frederick W. Ruebeck
-----------------------
Frederick W. Ruebeck
Trustee
/s/Donald L. Tuttle
-------------------
Donald L. Tuttle
Trustee
<PAGE> 1
Item 23(b)
Bylaws of One Group Investment Trust as revised February 16, 2000
<PAGE> 2
BY LAWS
OF
ONE GROUP(R) INVESTMENT TRUST
ARTICLE I
TERMS
The terms "COMMISSION," "DECLARATION," "INVESTMENT ADVISER," "MAJORITY
SHAREHOLDER VOTE," "1940 ACT," "SHAREHOLDER," "SHARES," "TRANSFER AGENT,"
"TRUST," "TRUST PROPERTY," and "TRUSTEES" have the respective meaning given them
in the Declaration of Trust of One Group(R) Investment Trust dated June 7, 1993,
as amended from time to time.
ARTICLE II
OFFICES
SECTION 1. PRINCIPAL OFFICE. Until changed by the Trustees, the
registered office of the Trust in the Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk. In addition, the Trust shall maintain
outside the Commonwealth of Massachusetts a principal office at 1111 Polaris
Parkway, Columbus, Ohio.
SECTION 2. OTHER OFFICES. The Trust may have offices in such other
places without as well as within the Commonwealth of Massachusetts as the
Trustees may from time to time determine.
ARTICLE III
SHAREHOLDERS
SECTION 1. MEETINGS. There is no requirement that the Trustees have
annual meetings of the Shareholders. In the event the Trustees determine to have
an annual meeting of the Shareholders, it shall be held at such place within or
without the Commonwealth of Massachusetts on such day and at such time as the
Trustees shall designate. Special meetings of the Shareholders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Shareholders holding in the aggregate not less than ten
percent (10%) of the outstanding Shares having voting rights, such request
specifying the purpose or purposes for which such meeting is to be called. Any
such meeting shall be held within or without the Commonwealth of Massachusetts
on such day and at such time as the Trustees shall authorize. The holders of a
majority of outstanding Shares present in person or by proxy shall constitute a
quorum at any meeting of the Shareholders.
<PAGE> 3
SECTION 2. NOTICE OF MEETINGS. Notice of all meetings of the
Shareholders, stating the time, place and purpose of the meeting, shall be given
by the Trustees by mail to each Shareholder at his address as recorded on the
register of the Trust, mailed at least ten (10) days and not more than sixty
(60) days before the meeting. Only the business stated in the notice of the
meeting shall be considered at such meeting. Any adjourned meeting may be held
as adjourned without further notice. No notice need by given to any Shareholder
who shall have failed to inform the Trust of his current address or if a written
waiver of notice, executed before or after the meeting by the Shareholder or his
attorney thereunto authorized, is filed with the records of the meeting.
SECTION 3. RECORD DATE FOR MEETINGS. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days, as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date not more than sixty (60) days
prior to the date of any meeting of Shareholders or distribution or other action
as a record date for the determination of the persons to be treated as
Shareholders of record for such purposes, except for dividend payments which
shall be governed by the Declaration.
SECTION 4. PROXIES. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy shall
be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or one or more of the officers of the Trust.
Only Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the change or management of such Share,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.
SECTION 5. INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation or as required by the 1940
Act.
SECTION 6. ACTION WITHOUT MEETINGS. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these Bylaws for approval of such matter)
consent to the action in writing and the written consents are filed with
2
<PAGE> 4
the records of the meetings of Shareholders. Such consent shall be treated for
all purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than by regular or stated meetings shall be held whenever called by the
President or by any one of the Trustees, at the time being in office. Notice of
the time and place of each meeting other than regular or stated meetings shall
be given by the Secretary or an Assistant Secretary or by the officer or Trustee
calling the meeting and shall be mailed to each Trustee at least two days before
the meeting, or shall be telegraphed, cabled, or telefaxed to each Trustee at
his business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be waived by any Trustee. Notice of a meeting
need not be given to any Trustee if a written Notice of a waiver of notice,
executed by him before or after the meeting, is filed with the records of the
meeting, or to any Trustee who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him. A notice or waiver of
notice need not specify the purpose of any meeting. The Trustees may meet by
means of a telephone conference circuit or similar communications equipment by
means of which all persons participating in the meeting can hear each other,
which telephone conference meeting shall be deemed to have been held at a place
designated by the Trustees at the meeting. Participation in a telephone
conference meeting shall constitute presence in person at such meeting. Any
action required or permitted to be taken at any meeting of the Trustees may be
taken by the Trustees without a meeting if a majority of the Trustees consent to
the action in writing (unless a higher proportion is required by law) and the
written consents are filed with the records of the Trustees' meetings. Such
consents shall be treated as a vote for all purposes.
SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the Trustees
shall be present in person at any regular or special meeting of the Trustees in
order to constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration or these Bylaws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) to hold office at the pleasure
of the Trustees, which shall have the power to conduct the current and ordinary
business of the Trust while the Trustees are not in session, including the
purchase and sale of securities and the designation of securities to be
delivered
3
<PAGE> 5
upon redemption of Shares of the Trust, and such other powers of the Trustees as
the Trustees may, from time to time, delegate to them except those powers which
by law, the Declaration or these Bylaws they are prohibited from delegating. The
Trustees may also elect from their own number other Committees from time to
time, the number composing such Committees and powers conferred upon the same
(subject to the same limitations with respect to the Executive Committee) and
the term of membership on such Committees to be determined by the Trustees. The
Trustees may designate a chairman of any such Committee. In the absence of such
designation the Committee may elect its own chairman.
SECTION 2. MEETING, QUORUM AND MANNER OF ACTING. The Trustees may (1)
provide for stated meetings of any Committees, (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (4) authorize the making of decisions to exercise specified
powers by written action of the requisite number of members of a Committee
without a meeting and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and kept in the offices of the Trust.
ARTICLE VI
OFFICERS
SECTION 1. EXECUTIVE OFFICERS. The Board of Trustees may choose a
Chairman of the Board and a Vice Chairman of the Board from among the Trustees,
and shall choose a President, a Secretary and a Treasurer who need not be
Trustees. The Board of Trustees shall designate as principal executive officer
of the Trust either the Chairman of the Board, the Vice Chairman of the Board,
or the President. The Board of Trustees may choose an Executive Vice President,
one or more Senior Vice Presidents, one or more Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers, none of whom need be
a Trustee. Any two or more of the above-mentioned offices, except those of
President and a Vice President, may be held, by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity if
such instrument be required by law, by the Declaration of Trust, by the Bylaws
or by resolution of the Board of Trustees to be executed by any two or more
officers. Each such officer, shall hold office until his successor shall have
been duly chosen and qualified, or until he shall have resigned or shall have
been removed. Any vacancy in any of the above offices may be filled for the
unexpired portion of the term of the Board of Trustees at any regular or special
meeting.
SECTION 2. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Chairman of the
Board, if one be elected, shall preside at all meetings of the Board of Trustees
and of the shareholders at which he is present. He shall have and may exercise
such powers as are, from time to time, assigned to him by the Board of Trustees.
The Vice Chairman of the Board, if one be elected,
4
<PAGE> 6
shall, when present and in the absence of the Chairman of the Board, preside at
all meetings of the shareholders and Trustees, and he shall perform such other
duties as may from time to time be assigned to him by the Board of Trustees or
as may be required by law.
SECTION 3. PRESIDENT. In the absence of the Chairman or Vice Chairman
of the Board, the President shall preside at all meetings of the shareholders at
which the President is present; and in general, shall perform all duties
incident to the office of a president of a trust, and such other duties, as from
time to time, may be assigned to him by the Board.
SECTION 4. VICE PRESIDENTS. The Vice President or Vice Presidents,
including any Executive or Senior Vice President or Presidents, at the request
of the President or in President's absence or during the President's inability
or refusal to act, shall perform the duties and exercise the functions of the
President, and when so acting shall have the powers of the President. If there
be more than one Vice President, the Board may determine which one or more of
the Vice Presidents shall perform any of such duties or exercise any of such
functions, or if such determination is not made by the Board, the President may
make such determination. The Vice President or Vice Presidents shall have such
other powers and perform such other duties as may be assigned by the Board, the
Chairman of the Board, or the President.
SECTION 5. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall:
keep the minutes of the meetings of the shareholders, of the Board and of any
committees, in books provided for the purpose; shall see that all notices are
duly given in accordance with the provisions of these Bylaws or as required by
law; be custodian of the records of the Trust; see that the corporate seal is
affixed to all documents the execution of which, on behalf of the Trust, under
its seal, is duly authorized, and when so affixed may attest the same; and in
general perform all duties incident to the office of a secretary of a trust, and
such other duties as, from time to time, may be assigned to him by the Board,
the Chairman of the Board, or the President.
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board, the President or the Chairman
of the Board, shall, in the absence of the Secretary or in the event of the
Secretary's inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the President may from time to time prescribe.
SECTION 6. TREASURER AND ASSISTANT TREASURERS. The Treasurer shall:
have charge of and be responsible for all funds, securities, receipts and
disbursements of the Trust, and shall deposit, or cause to be deposited the name
of the Trust, all moneys or other valuable effects in such banks, trust
companies or other depositories as shall, from time to time, be selected by the
Board; render to the President, the Chairman of the Board and to the Board,
whenever requested, an account of the financial condition of the Trust; and in
general, perform all the duties incident to the office of a treasurer of a
trust, and such other duties as may be assigned to him by the Board, the
President or the Chairman of the Board.
The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board, the President or the
Chairman of the Board shall, in the absence of the Treasurer or in the event of
the Treasurer's inability or refusal to act, perform the duties
5
<PAGE> 7
and exercise the powers of the Treasurer and shall perform other duties and have
such other powers as the President may from time to time prescribe.
SECTION 7. SUBORDINATE OFFICERS. The Board may from time to time
appoint such subordinate officers as it may deem desirable. Each such officer
shall hold office for such period and perform such duties as the Board, the
President or the Chairman of the Board may prescribe. The Board may, from time
to time, authorize any committee or officer to appoint and remove subordinate
officers and prescribe the duties thereof.
SECTION 8. REMOVAL. Any officer or agent of the Trust may be removed by
Board whenever, in its judgment, the best interests of the Trust will be served
thereby, but such removal shall be without prejudice to the contractual rights,
if any, of the person so removed.
SECTION 9. COMPENSATION OF OFFICERS AND TRUSTEES. Subject to any
applicable provisions of the Declaration, the compensation of the officers and
Trustees shall be fixed from time to time by the Trustees or, in the case of
officers, by any Committee or officer upon whom such power may be conferred by
the Trustees. No officer shall be prevented from receiving such compensation as
such officer by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of January in
each year and shall end on the last day of December in each year, provided,
however, that the Trustees may from time to time change the fiscal year.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration or these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein shall be deemed equivalent thereto. A notice shall be deemed to have
been telegraphed, cabled or wirelessed for the purposes of these Bylaws when it
has been delivered to a representative of any telegraph, cable or wireless
company with instruction that it be telegraphed, cabled or wirelessed. Any
notice shall be deemed to be given at the time when the same shall be mailed,
telegraphed, cabled or telefaxed.
6
<PAGE> 8
ARTICLE X
CUSTODIAN
SECTION 1. APPOINTMENT AND DUTIES. The Trustees shall at all times
employ a bank or trust company having a capital, surplus and undivided profits
of at least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements, if
any, as may be contained in the Declaration, these Bylaws and the 1940 Act:
(1) to hold the securities owned by the Trust and deliver the same
upon written order;
(2) to receive and receipt for any monies due to the Trust and
deposit the same in its own banking department or elsewhere as
the Trustees may direct; and
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such subcustodian, shall be a bank or trust company organized under
the laws of the United States or one of the states thereof and having capital,
surplus and undivided profits of at least five million dollars ($5,000,000).
SECTION 2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders an the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
SECTION 3. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to
such rules, regulations and orders an the Commission may adopt, the Trustees may
direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
7
<PAGE> 9
SECTION 4. PROVISIONS OF CUSTODIAN CONTRACT. The following provisions
shall apply to the employment of a custodian pursuant to this Article X and to
any contract entered into with the custodian so employed:
(a) The Trustees shall cause to be delivered to the custodian all
securities owned by the Trust or to which it may become
entitled, and shall order the same to be delivered by the
custodian only upon completion of a sale, exchange, transfer,
pledge, or other disposition thereof, and upon receipt by the
custodian of the consideration therefor or a certificate of
deposit or a receipt of an issuer or of its Transfer Agent,
all as the Trustees may generally or from time to time require
or approve, or to a successor custodian; and the Trustees
shall cause all funds owned by the Trust or to which it may
become entitled to be paid to the custodian, and shall order
the same disbursed only for investment against delivery of the
securities acquired, or in payment of expenses, including
management compensation, and liabilities of the Trust,
including distributions to Shareholders, or to a successor
custodian; provided, however, that nothing herein shall
prevent delivery of securities for examination to the broker
selling the same in accord with the "street delivery" custom
whereby such securities are delivered to such broker in
exchange for a delivery receipt exchanged on the same day for
an uncertified check of such broker to be presented on the
same day for certification.
(b) In case of the resignation, removal or inability to serve of
any such custodian, the Trust shall promptly appoint another
bank or trust company meeting the requirements of this Article
X as successor custodian. The agreement with the custodian
shall provide that the retiring custodian shall, upon receipt
of notice of such appointment, deliver the funds and property
of the Trust in its possession to and only to such successor,
and that pending appointment of a successor custodian, or a
vote of the Shareholders to function without a custodian, the
custodian shall not deliver funds and property of the Trust to
the Trust, but may deliver them to a bank or trust company, of
its own selection, having an aggregate capital, surplus and
undivided profits (as shown in its last published report) of
at least $5,000,000, as the property of the Trust to be held
under terms similar to those on which they were held by the
retiring custodian.
ARTICLE XI
INDEMNIFICATION
The Trust shall provide any indemnification required by applicable law
and as set forth in the Declaration.
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<PAGE> 10
ARTICLE XII
AMENDMENTS
These Bylaws, or any of them, may be altered, amended or repealed, or
new Bylaws may be adopted (a) by Majority Shareholder Vote, or (b) by the
Trustees, provided, however, that no Bylaw may be amended, adopted or repealed
by the Trustees if such amendment, adoption or repeal requires, pursuant to law,
the Declaration or these Bylaws, a vote of the Shareholders or if such
amendment, adoption or repeal changes or affects the provisions of Sections 1
and 4 of Article X, or the provisions of this Article XII.
As revised February 16, 2000.
9
<PAGE> 1
Item 23(h)(1)
Transfer Agency and Service Agreement
dated as of January 1, 2000
between One Group Investment Trust and
State Street Bank and Trust Company
<PAGE> 2
TRANSFER AGENCY AND SERVICE AGREEMENT
Between
ONE GROUP(R) INVESTMENT TRUST
And
STATE STREET BANK AND TRUST COMPANY
<PAGE> 3
TABLE OF CONTENTS
PAGE
1. Terms of Appointment and Duties...................................1
2. Fund Participation Agreements.....................................4
3. Fees and Expenses.................................................4
4. Representations and Warranties of the Transfer Agent..............5
5. Representations and Warranties of the Fund........................5
6. Wire Transfer Operating Guidelines................................6
7. Data Access and Proprietary Information...........................8
8. Indemnification..................................................10
9. Standard of Care.................................................11
10. Year 2000........................................................11
11. Confidentiality .................................................11
12. Covenants of the Fund and the Transfer Agent.....................12
13. Termination of Agreement.........................................13
14. Assignment and Third Party Beneficiaries.........................14
15. Subcontractors...................................................15
16. Miscellaneous....................................................15
17. Additional Funds.................................................17
18. Limitations of Liability of the Trustees and Shareholders........17
<PAGE> 4
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1ST day of January, 2000, by and between ONE GROUP(R)
INVESTMENT TRUST, a Massachusetts business trust, having its principal office
and place of business at 1111 Polaris Parkway, Suite B2, Columbus, Ohio 43240
(the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company having its principal office and place of business at 225 Franklin
Street, Boston, Massachusetts 02110 (the "Transfer Agent").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, the Fund currently offers shares in nine (9) series, such series shall
be named in the attached Schedule A which may be amended by the parties from
time to time (each such series, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
SECTION 17, being herein referred to as a "Portfolio", and collectively as the
"Portfolios");
WHEREAS, the Portfolios are available to act as investment vehicles for separate
accounts (the "Separate Accounts") established by insurance companies
("Insurance Companies") for contract owners of variable life insurance policies
and variable annuity contracts ("Variable Insurance Products");
WHEREAS, the Insurance Companies shall maintain separate records for each
Separate Account on their respective record-keeping system, which record shall
reflect all shares (as defined below) purchased and redeemed, including the date
and price for all transactions, and share balances;
WHEREAS, the Insurance Companies shall maintain on behalf of each Separate
Account a single master account with the Transfer Agent ("Omnibus Account") in
each Portfolio and each such account shall be in the name of that Separate
Account, as the record owner of shares (as defined below) owned by such Separate
Account;
WHEREAS, the Omnibus Accounts shall be shareholders as defined below; and
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Transfer
Agent as its transfer agent, dividend disbursing agent, and agent in connection
with certain other activities, and the Transfer Agent desires to accept such
appointment.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
l. TERMS OF APPOINTMENT AND DUTIES
1.1 Transfer Agency Services. Subject to the terms and conditions set forth
in this Agreement, the Fund, on behalf of the Portfolios, hereby
employs and appoints the Transfer Agent to act as, and the Transfer
Agent agrees to act as its transfer agent for the Fund's authorized and
issued shares of beneficial interest, ("Shares"), dividend disbursing
agent and agent in connection with any accumulation, open-account or
similar plan
<PAGE> 5
provided to the shareholders of each of the respective Portfolios of
the Fund ("Shareholders") and set out in the currently effective
prospectus and statement of additional information ("prospectus") of
the Fund on behalf of the applicable Portfolio, including without
limitation any periodic investment plan or periodic withdrawal program.
In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Transfer Agent, the Transfer Agent agrees that it
will perform the following services:
(a) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof to the
Custodian of the Fund authorized pursuant to the Declaration of Trust
of the Fund (the "Custodian");
(b) Pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
(c) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof to the
Custodian and redemption proceeds to the applicable Separate Account;
(d) In respect to the transactions in items (a), (b) and (c) above, the
Transfer Agent shall execute transactions directly with Insurance
Companies which have entered Fund Participation Agreements with the
Fund as identified by the Fund;
(e) At the appropriate time as and when it receives monies paid to it
by the Custodian with respect to any redemption, pay over or cause to
be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(f) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(g) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio, to the
extent such dividends are not required to be reinvested in additional
Portfolio Shares;
(h) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(i) Record the issuance of Shares of the Fund and maintain pursuant to
SEC Rule 17Ad-10(e) a record of the total number of Shares of the Fund
which are authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Transfer Agent shall also provide the Fund
on a regular basis with the total number of Shares which are authorized
and issued and outstanding and shall have no obligation, when recording
the issuance of Shares, to monitor the issuance of such Shares or to
take cognizance of any laws relating to the issue or sale of such
Shares, which functions shall be the sole responsibility of the Fund,
provided however, that the Transfer Agent shall
2
<PAGE> 6
only record the issuance of Shares to Separate Accounts of Insurance
Companies which have been identified by the Fund as having signed Fund
Participation Agreements with the Fund.
1.2 Additional Services. In addition to, and neither in lieu nor in
contravention of, the services set forth in the above paragraph, the
Transfer Agent shall perform the following services:
(a) Other Customary Services. Perform the customary services of a
transfer agent and dividend disbursing agent, including but not limited
to: maintaining all Shareholder accounts, preparing Shareholder meeting
lists, preparing and filing U.S. Treasury Department Forms 1099 and
other appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders, preparing
and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder account
information.
(b) Control Book (also known as "Super Sheet"). Maintain a daily record
and produce a daily report for the Fund of all transactions and
receipts and disbursements of money and securities and deliver a copy
of such report for the Fund for each business day to the Fund or its
designee no later than 9:00 AM Eastern Time, or such earlier time as
the Fund may reasonably require, on the next business day.
(c) "Blue Sky" Reporting. In the event that the Fund notifies the
Transfer Agent in writing that a Portfolio's Share must be registered
under State Blue Sky laws, the responsibility of the Transfer Agent for
the Fund's Blue Sky State registration status is solely limited to the
initial establishment of transactions subject to Blue Sky compliance by
the Fund and providing a system which will enable the Fund to monitor
the total number of Shares sold in each State.
(d) National Securities Clearing Corporation (the "NSCC"). (i) accept
and effectuate the registration and maintenance of accounts through
Networking and the purchase, redemption, transfer and exchange of
shares in such accounts through Fund/SERV (Networking and Fund/SERV
being programs operated by the NSCC on behalf of NSCC's participants,
including the Fund), in accordance with instructions transmitted to and
received by the Transfer Agent by transmission from NSCC on behalf of
Insurance Companies which have been established by, or in accordance
with the instructions of authorized persons, as hereinafter defined, on
the dealer file maintained by the Transfer Agent; (ii) issue
instructions to Fund's banks for the settlement of transactions between
the Fund and NSCC (acting on behalf of its Insurance Company
3
<PAGE> 7
participants); (iii) provide account and transaction information from
the affected Fund's records on DST Systems, Inc. computer system TA2000
("TA2000 System") in accordance with NSCC's Networking and Fund/SERV
rules for those broker-dealers; and (iv) maintain Shareholder accounts
on TA2000 System through Networking.
(e) New Procedures. New procedures as to who shall provide certain of
these services in Section 1 may be established in writing from time to
time by agreement between the Fund and the Transfer Agent. The Transfer
Agent may at times perform only a portion of these services and the
Fund or its agent may perform these services on the Fund's behalf.
2. FUND PARTICIPATION AGREEMENTS.
The Fund may enter into Fund Participation Agreements (each, a "Fund
Participation Agreement" collectively, the "Fund Participation
Agreements") with Insurance Companies which intend to use the
Portfolios as investment vehicles for Variable Insurance Products. The
Transfer Agent shall process orders for purchases and redemptions in
accordance with Schedule 2.1 entitled "Fund Participation Procedures",
as may be agreed upon and amended by the Transfer Agent and the Fund
from time to time ("Schedule 2.1")
3. FEES AND EXPENSES
3.1 Fee Schedule. For the performance by the Transfer Agent pursuant to
this Agreement, the Fund agrees to pay the Transfer Agent an annual
base fee for each cusip as set forth in the attached fee schedule
("Schedule 3.1"). Such fees and out-of-pocket expenses and advances
identified under SECTION 3.2 below may be changed from time to time
subject to mutual written agreement between the Fund and the Transfer
Agent.
3.2 Out-of-Pocket Expenses. In addition to the fee paid under SECTION 3.1
above, the Fund agrees to reimburse the Transfer Agent for reasonable
out-of-pocket expenses, including but not limited to confirmation
statements, investor statements, postage, forms, telephone, microfilm,
microfiche, fedwire charges, transcripts, records retention, or
advances incurred by the Transfer Agent for the items set out in
Schedule 3.1 attached hereto. In addition, any other expenses incurred
by the Transfer Agent at the request or with the consent of the Fund,
will be reimbursed by the Fund.
3.3 Postage. Postage for mailing of dividends, proxies, Fund reports and
other mailings to all shareholder accounts shall be advanced to the
Transfer Agent by the Fund at least seven (7) days prior to the mailing
date of such materials.
3.4 Invoices. The Fund agrees to pay all fees and reimbursable expenses
within thirty (30) days following the receipt of the respective billing
notice, except for any fees or expenses which are subject to good faith
dispute. In the event of such a dispute, the Fund may only withhold
that portion of the fee or expense subject to the good faith dispute.
The Fund
4
<PAGE> 8
shall notify the Transfer Agent in writing within thirty-one (31)
calendar days following the receipt of each billing notice if the Fund
is disputing any amounts in good faith. If the Fund does not provide
such notice of dispute within the required time, the billing notice
will be deemed accepted by the Fund.
4. REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
4.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
4.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
4.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
4.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
4.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
4.6 The Transfer Agent shall maintain at a location other than its normal
location appropriate redundant facilities for operational back-up in
the event of a power failure, disaster or other interruption. The
Transfer Agent shall continuously back up the Fund's files and data,
including the Shareholder and Fund records, and shall store the back-up
files in a secure manner at a location other than its normal location,
so that, in the event of a power failure, disaster or other
interruption at such normal location, the Fund's files and data,
including the Shareholder and Fund records, will be maintained intact
and will enable the Transfer Agent to perform under this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
5.1 It is a business trust duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
5.2 It is empowered under applicable laws and by its Declaration of Trust
and By-Laws to enter into and perform this Agreement.
5
<PAGE> 9
5.3 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
5.4 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940, as amended.
5.5 A registration statement under the Securities Act of 1933, as amended
is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made,
with respect to all Shares of the Fund being offered for sale.
5.6 At this time, no state securities laws filings are required by the
Fund. In the event that state securities law filings are required, the
Fund shall make appropriate state securities law filings and will
continue to make filings with respect to all Shares of the Fund being
offered for sale.
6. WIRE TRANSFER OPERATING GUIDELINES/ARTICLES 4A OF THE UNIFORM
COMMERCIAL CODE
6.1 The Transfer Agent is authorized to promptly debit the appropriate Fund
account(s) upon the receipt of a payment order in compliance with the
selected security procedure (the "Security Procedure") chosen for funds
transfer and in the amount of money that the Transfer Agent has been
instructed to transfer. The Transfer Agent shall execute payment orders
in compliance with the Security Procedure and with the Fund
instructions on the execution date provided that such payment order is
received by the customary deadline for processing such a request,
unless the payment order specifies a later time. All payment orders and
communications received after this the customary deadline will be
deemed to have been received the next business day.
6.2 The Fund acknowledges that the Security Procedure it has designated on
the Fund Selection Form was selected by the Fund from security
procedures offered by the Transfer Agent. The Fund shall restrict
access to confidential information relating to the Security Procedure
to authorized persons as communicated to the Transfer Agent in writing.
The Fund must notify the Transfer Agent immediately if it has reason to
believe unauthorized persons may have obtained access to such
information or of any change in the Fund's authorized personnel. The
Transfer Agent shall verify the authenticity of all Fund instructions
according to the Security Procedure.
6.3 The Transfer Agent shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the
account number, the account number shall take precedence and govern.
6
<PAGE> 10
6.4 The Transfer Agent reserves the right to decline to process or delay
the processing of a payment order which (a) is in excess of the
collected balance in the account to be charged at the time of the
Transfer Agent's receipt of such payment order; (b) if initiating such
payment order would cause the Transfer Agent, in the Transfer Agent's
reasonable judgement, to exceed any volume, aggregate dollar, network,
time, credit or similar limits which are applicable to the Transfer
Agent; or (c) if the Transfer Agent, in good faith, is unable to
satisfy itself that the transaction has been properly authorized.
6.5 The Transfer Agent shall use reasonable efforts to act on all
authorized requests to cancel or amend payment orders received in
compliance with the Security Procedure provided that such requests are
received in a timely manner affording the Transfer Agent reasonable
opportunity to act. However, the Transfer Agent assumes no liability if
the request for amendment or cancellation cannot be satisfied.
6.6 The Transfer Agent shall assume no responsibility for failure to detect
any erroneous payment order provided that the Transfer Agent complies
with the payment order instructions as received and the Transfer Agent
complies with the Security Procedure. The Security Procedure is
established for the purpose of authenticating payment orders only and
not for the detection of errors in payment orders.
6.7 The Transfer Agent shall assume no responsibility for lost interest
with respect to the refundable amount of any unauthorized payment
order, unless the Transfer Agent is notified of the unauthorized
payment order within thirty (30) days of notification by the Transfer
Agent of the acceptance of such payment order. In no event (including
failure to execute a payment order) shall the Transfer Agent be liable
for special, indirect or consequential damages, even if advised of the
possibility of such damages.
6.8 When the Fund initiates or receives Automated Clearing House credit and
debit entries pursuant to these guidelines and the rules of the
National Automated Clearing House Association and the New England
Clearing House Association, the Transfer Agent will act as an
Originating Depository Financial Institution and/or receiving
depository Financial Institution, as the case may be, with respect to
such entries. Credits given by the Transfer Agent with respect to an
ACH credit entry are provisional until the Transfer Agent receives
final settlement for such entry from the Federal Reserve Bank. If the
Transfer Agent does not receive such final settlement, the Fund agrees
that the Transfer Agent shall receive a refund of the amount credited
to the Fund in connection with such entry, and the party making payment
to the Fund via such entry shall not be deemed to have paid the amount
of the entry.
6.9 Confirmation of Transfer Agent's execution of payment orders shall
ordinarily be provided within twenty four (24) hours notice of which
may be delivered through the Transfer Agent's proprietary information
systems, or by facsimile or call-back. Fund must report any objections
to the execution of an order within thirty (30) days.
7
<PAGE> 11
7. DATA ACCESS AND PROPRIETARY INFORMATION
7.1 The Fund acknowledges that the databases, computer programs, screen
formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Transfer Agent as
part of the Fund's ability to access certain Fund-related data
("Customer Data") maintained by the Transfer Agent on databases under
the control and ownership of the Transfer Agent or other third party
("Data Access Services") constitute copyrighted, trade secret, or other
proprietary information (collectively, "Proprietary Information") of
substantial value to the Transfer Agent or other third party. In no
event shall Proprietary Information be deemed Customer Data. The Fund
agrees to treat all Proprietary Information as proprietary to the
Transfer Agent and further agrees that it shall not divulge any
Proprietary Information to any person or organization except as may be
provided hereunder or except when the failure to disclose may subject
the Fund to civil or criminal contempt proceeding or is required by
law. Without limiting the foregoing, the Fund agrees for itself and its
employees and agents to:
(a) Use such programs and databases (i) solely on the Fund's computers,
or (ii) solely from equipment at the location agreed to between the
Fund and the Transfer Agent and (iii) solely in accordance with the
Transfer Agent's applicable user documentation;
(b) Refrain from copying or duplicating in any way (other than in the
normal course of performing processing on the Fund's computer(s)), the
Proprietary Information;
(c) Refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained,
to inform in a timely manner of such fact and dispose of such
information in accordance with the Transfer Agent's instructions;
(d) Refrain from causing or allowing information transmitted from the
Transfer Agent's computer to the Fund's terminal to be retransmitted to
any other computer terminal or other device except as expressly
permitted by the Transfer Agent (such permission not to be unreasonably
withheld);
(e) Allow the Fund to have access only to those authorized transactions
as agreed to between the Fund and the Transfer Agent; and
(f) Honor all reasonable written requests made by the Transfer Agent to
protect at the Transfer Agent's expense the rights of the Transfer
Agent in Proprietary Information at common law, under federal copyright
law and under other federal or state law.
8
<PAGE> 12
7.2 Proprietary Information shall not include all or any portion of any of
the foregoing items that: (i) are or become publicly available without
breach of this Agreement; (ii) are released for general disclosure by a
written release by the Transfer Agent; or (iii) are already in the
possession of the receiving party at the time of receipt without
obligation of confidentiality or breach of this Agreement.
7.3 The Fund acknowledges that its obligation to protect the Transfer
Agent's Proprietary Information is essential to the business interest
of the Transfer Agent and that the disclosure of such Proprietary
Information in breach of this Agreement would cause the Transfer Agent
immediate, substantial and irreparable harm, the value of which would
be extremely difficult to determine. Accordingly, the parties agree
that, in addition to any other remedies that may be available in law,
equity, or otherwise for the disclosure or use of the Proprietary
Information in breach of this Agreement, the Transfer Agent shall be
entitled to seek and obtain a temporary restraining order, injunctive
relief, or other equitable relief against the continuance of such
breach.
7.4 If the Fund notifies the Transfer Agent that any of the Data Access
Services do not operate in material compliance with the most recently
issued user documentation for such services, the Transfer Agent shall
endeavor in a timely manner to correct such failure. Organizations from
which the Transfer Agent may obtain certain data included in the Data
Access Services are solely responsible for the contents of such data
and the Fund agrees to make no claim against the Transfer Agent arising
out of the contents of such third-party data, including, but not
limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER
PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE
PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE TRANSFER AGENT EXPRESSLY
DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7.5 If the transactions available to the Fund include the ability to
originate electronic instructions to the Transfer Agent in order to:
(i) effect the transfer or movement of cash or Shares; or (ii) transmit
Shareholder information or other information, then in such event the
Transfer Agent shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further
inquiry as long as such instruction is undertaken in conformity with
security procedures established by the Transfer Agent from time to
time.
7.6 Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this SECTION 7. The obligations of this
Section shall survive any earlier termination of this Agreement.
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<PAGE> 13
8. INDEMNIFICATION
8.1 The Transfer Agent shall not be responsible for, and the Fund shall
indemnify and hold the Transfer Agent harmless from and against, any
and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to:
(a) All actions of the Transfer Agent or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such
actions are taken in good faith and without negligence or willful
misconduct;
(b) The Fund's lack of good faith, negligence or willful misconduct;
(c) The reliance upon, and any subsequent use of or action taken or
omitted, by the Transfer Agent, or its agents or subcontractors on: (i)
any information, records, documents, data, stock certificates or
services, which are received by the Transfer Agent or its agents or
subcontractors by machine readable input, facsimile, CRT data entry,
electronic instructions or other similar means authorized by the Fund,
and which have been prepared, maintained or performed by the Fund or
any other person or firm on behalf of the Fund including but not
limited to any previous transfer agent or registrar; (ii) any
instructions or requests of the Fund or any of its officers; (iii) any
instructions or opinions of legal counsel with respect to any matter
arising in connection with the services to be performed by the Transfer
Agent under this Agreement which are provided to the Transfer Agent
after consultation with such legal counsel; or (iv) any paper or
document, reasonably believed to be genuine, authentic, or signed by
the proper person or persons;
(d) The offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be
registered or in violation of any stop order or other determination or
ruling by any federal or any state agency with respect to the offer or
sale of such Shares;
(e) The negotiation and processing of any checks including without
limitation for deposit into the Fund's demand deposit account at the
Custodian maintained by the Transfer Agent;
(f) Upon the Fund's request entering into any agreements required by
the National Securities Clearing Corporation for the transmission of
Fund or Shareholder data through the NSCC clearing systems; or
(g) The overdraw of the Funds' demand deposit accounts at the Custodian
maintained by the Transfer Agent due to late payment or no payment for
Shares purchased by (i) Shareholders or (ii) agents of either
Shareholders or the Fund.
8.2 In order that the indemnification provisions contained in this SECTION
8 shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Transfer
10
<PAGE> 14
Agent, the Transfer Agent shall promptly notify the Fund of such
assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Transfer Agent in the defense of such claim or to
defend against said claim in its own name or in the name of the
Transfer Agent. The Transfer Agent shall in no case confess any claim
or make any compromise in any case in which the Fund may be required to
indemnify the Transfer Agent except with the Fund's prior written
consent.
9. STANDARD OF CARE
The Transfer Agent shall at all times act in good faith and agrees to
use its best efforts within reasonable limits to insure the accuracy of
all services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to
errors, including encoding and payment processing errors, unless said
errors are caused by its negligence, bad faith, or willful misconduct
or that of its employees or agents. The parties agree that any encoding
or payment processing errors shall be governed by the above and the
Fund agrees as between the Fund and the Transfer Agent that the
Standard of Care created under Section 4-209 of the Uniform Commercial
Code is superseded by SECTION 9 of this Agreement.
10. YEAR 2000
The Transfer Agent will take reasonable steps to ensure that its
products (and those of its third-party suppliers) reflect the available
technology to offer products that are Year 2000 ready, including, but
not limited to, century recognition of dates, calculations that
correctly compute same century and multi century formulas and date
values, and interface values that reflect the date issues arising
between now and the next one-hundred years, and if any changes are
required, the Transfer Agent will make the changes to its products in a
commercially reasonable time frame and will require third-party
suppliers to do likewise; provided if such changes are required as a
result of problems other than problems associated solely with the
Transfer Agent's systems utilized under this Agreement, such changes
will be made at a price agreed upon by the parties based only upon the
Fund's pro rata share of such costs and fees spread out over all of the
Transfer Agent's affected customers. Notwithstanding the foregoing, if
any such changes are required pursuant to SECTION 10 of this Agreement
solely because of the Transfer Agent's systems utilized under this
Agreement to perform the Transfer Agent's services hereunder, the Fund
will not be required to pay a fee or out-of-pocket expenses to the
Transfer Agent for such changes.
11
<PAGE> 15
11. CONFIDENTIALITY
11.1 The Transfer Agent and the Fund agree that they will not, at any time
during the term of this Agreement or after its termination, reveal,
divulge, or make known to any person, firm, corporation or other
business organization, any customers' lists, trade secrets, cost
figures and projections, profit figures and projections, or any other
secret or confidential information whatsoever, whether of the Transfer
Agent or of the Fund, used or gained by the Transfer Agent or the Fund
during performance under this Agreement. The Fund and the Transfer
Agent further covenant and agree to retain all such knowledge and
information acquired during and after the term of this Agreement
respecting such lists, trade secrets, or any secret or confidential
information whatsoever in trust for the sole benefit of the Transfer
Agent or the Fund and their successors and assigns. In the event of
breach of the foregoing by either party, the remedies provided by
SECTION 7.3 shall be available to the party whose confidential
information is disclosed. The above prohibition of disclosure shall not
apply to the extent that the Transfer Agent must disclose such data to
its sub-contractor or Fund agent for purposes of providing services
under this Agreement.
11.2 In the event that any requests or demands are made for the inspection
of the Shareholder records of the Fund, other than request for records
of Shareholders pursuant to standard subpoenas from state or federal
government authorities (i.e., divorce and criminal actions), the
Transfer Agent will notify the Fund in advance of disclosure and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Transfer Agent expressly reserves the right, however,
to exhibit the Shareholder records to any person whenever it is advised
by counsel that it may be held liable for the failure to exhibit the
Shareholder records to such person or if required by law or court
order.
12. COVENANTS OF THE FUND AND THE TRANSFER AGENT
--------------------------------------------
12.1 The Fund shall promptly furnish to the Transfer Agent the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Transfer Agent and the
execution and delivery of this Agreement; and
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
12.2 The Transfer Agent hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of
stock certificates, check forms and facsimile signature imprinting
devices, if any; and for the preparation or use, and for keeping
account of, such certificates, forms and devices.
12
<PAGE> 16
12.3 The Transfer Agent shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable.
To the extent required by Section 31 of the Investment Company Act of
1940, as amended, and the Rules thereunder, the Transfer Agent agrees
that all such records prepared or maintained by the Transfer Agent
relating to the services to be performed by the Transfer Agent
hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to the Fund on and in
accordance with its request.
13. TERMINATION OF AGREEMENT
13.1 Term. The initial term of this Agreement (the "Initial Term") shall be
one year from the date first stated above unless terminated pursuant to
the provisions of this SECTION 13. Unless a terminating party gives
written notice to the other party one hundred and twenty (120) days
before the expiration of the Initial Term this Agreement will renew
automatically from year to year ("Renewal Term"). One hundred and
twenty (120) days before the expiration of the Initial Term or a
Renewal Term the parties to this Agreement will agree upon a Fee
Schedule for the upcoming Renewal Term.
13.2 Early Termination. Notwithstanding anything contained in this Agreement
to the contrary, should the Fund desire to move any of its services
provided by the Transfer Agent hereunder to a successor service
provider prior to the expiration of the then current Initial or Renewal
Term, or without the required notice period, the Transfer Agent shall
make a good faith effort to facilitate the conversion on such prior
date, however, there can be no guarantee that the Transfer Agent will
be able to facilitate a conversion of services on such prior date. In
connection with the foregoing, should services be converted to a
successor service provider, or if the Fund is liquidated or its assets
merged or purchased or the like with another entity which does not
utilize the services of the Transfer Agent, the fees payable to the
Transfer Agent shall be calculated as if the services had remained with
the Transfer Agent until the expiration of the then current Initial or
Renewal Term and calculated at the asset and/or Shareholder account
levels, as the case may be, on the date notice of termination was given
to the Transfer Agent, and the payment of fees to the Transfer Agent as
set forth herein shall be accelerated to the date prior to the
conversion or termination of services. SECTION 13.2 shall not apply if
the Transfer Agent is terminated for cause under SECTION 13.7 of this
Agreement.
13.3 Expiration of Term. After the expiration of the Initial Term or Renewal
Term whichever currently in effect, should either party exercise its
right to terminate, all reasonable out-of-pocket expenses or costs
associated with the movement of records and material will be borne by
the Fund. Additionally, the Transfer Agent reserves the right to charge
for any other reasonable expenses associated with such termination.
Payment of such expenses or costs shall be in accordance with SECTION
3.4 of this Agreement and reported to Fund for approval in advance for
amounts greater than $5,000.00.
13
<PAGE> 17
13.4 Confidential Information. Upon termination of this Agreement, each
party shall return to the other party all copies of confidential or
proprietary materials or information received from such other party
hereunder, other than materials or information required to be retained
by such party under applicable laws or regulations.
13.5 Unpaid Invoices. The Transfer Agent may terminate this Agreement
immediately upon an unpaid invoice payable by the Fund to the Transfer
Agent being outstanding for more than ninety (90) days, except with
respect to any amount subject to a good faith dispute within the
meaning of SECTION 3.4 of this Agreement; provided, however, the
Transfer Agent shall provide a ten (10) day notice hereunder before
termination under SECTION 13.5.
13.6 Bankruptcy. Either party hereto may terminate this Agreement by notice
to the other party, effective at any time specified therein, in the
event that (a) the other party ceases to carry on its business or (b)
an action is commenced by or against the other party under Title 11 of
the United States Code or a receiver, conservator or similar officer is
appointed for the other party and such suit, conservatorship or
receivership is not discharged within thirty (30) days.
13.7 Cause. If either of the parties hereto becomes in default in the
performance of its duties or obligations hereunder, and such default
has a material effect on the other party, then the nondefaulting party
may give notice to the defaulting party specifying the nature of the
default in sufficient detail to permit the defaulting party to identify
and cure such default. If the defaulting party fails to cure such
default within thirty (30) days of receipt of such notice, or within
such longer period of time as the parties may agree is necessary for
such cure, then the nondefaulting party may terminate this Agreement
upon notice of not less than thirty (30) days to the defaulting party.
14. ASSIGNMENT AND THIRD PARTY BENEFICIARIES.
14.1 Except as provided in SECTION 15.1 below neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party. Any attempt to do so in
violation of this Section shall be void. Unless specifically stated to
the contrary in any written consent to an assignment, no assignment
will release or discharge the assignor from any duty or responsibility
under this Agreement.
14.2 Except as explicitly stated elsewhere in this Agreement, nothing under
this Agreement shall be construed to give any rights or benefits in
this Agreement to anyone other than the Transfer Agent and the Fund,
and the duties and responsibilities undertaken pursuant to this
Agreement shall be for the sole and exclusive benefit of the Transfer
Agent and the Fund. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and
assigns.
14
<PAGE> 18
14.3 This Agreement does not constitute an agreement for a partnership or
joint venture between the Transfer Agent and the Fund. Other than as
provided in SECTION 15.1 neither party shall make any commitments with
third parties that are binding on the other party without the other
party's prior written consent.
15. SUBCONTRACTORS
15.1 The Transfer Agent may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston Financial
Data Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(2) of the
Securities Exchange Act of 1934, as amended, (ii) a BFDS subsidiary
duly registered as a transfer agent or (iii) a BFDS affiliate duly
registered as a transfer agent; provided, however, that the Transfer
Agent shall be fully responsible to the Fund for the acts and omissions
of BFDS or its subsidiary or affiliate as it is for its own acts and
omissions.
15.2 Nothing herein shall impose any duty upon the Transfer Agent in
connection with or make the Transfer Agent liable for the actions or
omissions to act of unaffiliated third parties such as by way of
example and not limitation, Airborne Services, Federal Express, United
Parcel Service, the U.S. Mails, the NSCC and telecommunication
companies, provided, if the Transfer Agent selected such company, the
Transfer Agent shall have exercised due care in selecting the same.
16. MISCELLANEOUS
16.1 Amendment. This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a
resolution of the Board of Trustees of the Fund.
16.2 Massachusetts Law to Apply. This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of
The Commonwealth of Massachusetts.
16.3 Force Majeure. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond
its control, or other causes reasonably beyond its control, such party
shall not be liable for damages to the other for any damages resulting
from such failure to perform or otherwise from such causes.
16.4 Consequential Damages. Neither party to this Agreement shall be liable
to the other party for consequential damages under any provision of
this Agreement or for any consequential damages arising out of any act
or failure to act hereunder.
15
<PAGE> 19
16.5 Survival. All provisions regarding indemnification, warranty,
liability, and limits thereon, and confidentiality and/or protections
of proprietary rights and trade secrets shall survive for a period of
three years after the termination of this Agreement.
16.6 Severability. If any provision or provisions of this Agreement shall be
held invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
16.7 Priorities Clause. In the event of any conflict, discrepancy or
ambiguity between the terms and conditions contained in this Agreement
and any Schedules or attachments hereto, the terms and conditions
contained in this Agreement shall take precedence.
16.8 Waiver. No waiver by either party or any breach or default of any of
the covenants or conditions herein contained and performed by the other
party shall be construed as a waiver of any succeeding breach of the
same or of any other covenant or condition.
16.9 Merger of Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written.
16.10 Counterparts. This Agreement may be executed by the parties hereto on
any number of counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
16.11. Reproduction of Documents. This Agreement and all schedules, exhibits,
attachments and amendments hereto may be reproduced by any
photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process. The parties hereto each agree
that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether
or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and
that any enlargement, facsimile or further reproduction shall likewise
be admissible in evidence.
16.12 Notices. All notices and other communications as required or permitted
hereunder shall be: (a) by facsimile followed by mail or (b) in writing
and sent by first class mail, postage prepaid, addressed as follows or
to such other address or addresses of which the respective party shall
have notified the other.
16
<PAGE> 20
(i) If to State Street Bank and Trust Company, to:
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
1250 Hancock Street
Quincy, Massachusetts 02169
Attention: Legal Department
Facsimile: (617) 483-5850
(ii) If to the Fund, to:
One Group(R)Investment Trust
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attention: Mark A. Beeson
Facsimile: (614) 213-6331
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to the attached Schedule A with respect to which it desires to
have the Transfer Agent render services as transfer agent under the
terms hereof, it shall so notify the Transfer Agent in writing, and if
the Transfer Agent agrees in writing to provide such services, such
series of Shares shall become a Portfolio hereunder.
18. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
The names "One Group(R) Investment Trust" and "Trustees of One Group(R)
Investment Trust" refer respectively to the Trust created and the
Trustees, as trustees but not individually or personally, acting from
time to time under a Declaration of Trust dated June 7, 1993 to which
reference is hereby made and a copy of which is on file at the office
of the Secretary of The Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of One Group(R) Investment Trust
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders
or representatives of the Trust personally, but bind only the assets of
the Trust, and all persons dealing with any series of shares of the
Trust must look solely to the assets of the Trust belonging to such
series for the enforcement of any claims against the Trust.
17
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
ONE GROUP(R)INVESTMENT TRUST
BY: /s/ Mark A. Beeson
----------------------------------
ATTEST:
/s/ Nancy E. Fields
- ---------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
----------------------------------
Vice Chairman
ATTEST:
/s/ Steve Cesso
- ---------------------
18
<PAGE> 22
SCHEDULE A
One Group(R) Investment Trust Bond PortfoliO
One Group(R) Investment Trust Government Bond PortfoliO
One Group(R) Investment Trust Balanced Portfolio
One Group(R) Investment Trust Large Cap Growth PortfoliO
One Group(R) Investment Trust Equity Index Portfolio
One Group(R) Investment Trust Diversified Equity PortfoliO
One Group(R) Investment Trust Mid Cap Growth Portfolio
One Group(R) Investment Trust Diversified Mid Cap PortfoliO
One Group(R) Investment Trust Mid Cap Value Portfolio
ONE GROUP(R)INVESTMENT TRUST STATE STREET BANK AND TRUST COMPANY
BY: /s/ Mark A. Beeson BY: /s/ Ronald E. Logue
-------------------------------- ------------------------------
<PAGE> 23
SCHEDULE 2.1
FUND PARTICIPATION PROCEDURES
Dated January 1, 2000
1. On each Business Day, the Insurance Companies designated by the Fund
shall receive, on behalf of and as agent of the Fund(s), Instructions
(as hereinafter defined) from the Separate Accounts. Instructions shall
mean as to each Portfolio (i) orders by a Separate Account for the
purchases of Shares, and (ii) requests by a Separate Account for the
redemption of Shares; in each case based on the Separate Account's
receipt of purchase orders and redemption requests by contract owners
in proper form by the time required by the term of the variable
insurance product, but not later than the time of day at which the net
asset value of a Portfolio is calculated, as described from time to
time in that Portfolio's prospectus. Each Business Day on which the
Insurance Company receives Instructions shall be a "Trade Date".
2. On the next succeeding Business Day following the Trade Date on which
the Insurance Companies accepted Instructions for the purchase and
redemption of Shares, (TD+1), each Insurance Company shall notify the
Transfer Agent of the net amount of such purchases or redemptions, as
the case may be, for each of the Separate Accounts. In the case of net
purchases by any Separate Account, each Insurance Company shall
transmit the aggregate purchase price for Shares by wire transfer to
the Transfer Agent on (TD+1). The Transfer Agent shall promptly notify
the Fund's administrator in the event that the Transfer Agent does not
receive the aggregate purchase amount for Shares by 2:00 p.m. Eastern
Time on (TD+1) and act in accordance with instructions received from
the Fund. In the case of net redemptions by any Separate Account, each
Insurance Company shall instruct the Transfer Agent to transmit the
aggregate redemption proceeds for Shares by wire transfer to the
Separate Accounts on (TD+1).
3. The Transfer Agent shall process orders for purchases and redemptions
if such orders are received by the Transfer Agent by 10:00 a.m. Eastern
Time. In the event that such orders are received after 10:00 a.m., the
Transfer Agent shall promptly notify the Fund's administrator and act
in accordance with instructions received from the Fund. All proceeds
for redemptions shall be transmitted by the Transfer Agent to the
applicable Separate Account so that such proceeds are received no later
than 2:00 p.m. Eastern Time.
ONE GROUP(R)INVESTMENT TRUST STATE STREET BANK AND TRUST COMPANY
BY: /s/ Mark A. Beeson BY: /s/ Ronald E. Logue
------------------ --------------------------------
<PAGE> 24
SCHEDULE 3.1
FEES
Dated: January 1, 2000 through December 31, 2002.
ANNUAL SERVICE FEES: Fees are billable on a monthly basis at the rate of 1/12 of
the annual fee.
Cusip Base Fee $6,000.00
OVERDRAFTS: Overdrafts in the Fund's demand deposit accounts at the Custodian
maintained by the Transfer Agent shall be subject to a charge of 50 basis points
the ("Overdraft Charge") over the Federal Funds Effective Rate in effect at the
relevant time of reference thereto, that appears on the Bloomberg Page BTMM, as
quoted by Garvin Guy Butler, as of 9:30 a.m. (New York time), as the "Federal
Funds Ask Rate" or if unavailable, by any other federal funds broker of
recognized standing as determined by the Custodian, when such overdrafts occur.
Upon payment of the Overdraft Charge to the Transfer Agent, the Transfer Agent
shall forward such funds to the Custodian; it being understood that the Fund
shall not be required to pay any additional overdraft charges to the Custodian
under this Agreement.
These fees will be subject to an annual Cost of Living Adjustment based on the
Consumer Price Index for Urban Wage Earners and Clerical Workers, for the Boston
area, as published bimonthly by the United States Department of Labor
Statistics, or, in the event that publication of such Index is terminated, any
successor or substitute index, appropriately adjusted, acceptable to both
parties.
OUT-OF-POCKET EXPENSES: Out-of-Pocket expenses include, but are not limited to:
confirmation statements, Investor Statements, postage, forms, audio response,
telephone, records retention, fed wire charges, transcripts, micro film, micro
fiche, and expenses incurred at the specific direction of the Fund.
ONE GROUP(R)INVESTMENT TRUST STATE STREET BANK AND TRUST COMPANY
BY: /s/ MARK A. BEESON BY: /s/ Ronald E. Logue
--------------------------- --------------------------------------
<PAGE> 1
Item 23(h)(3)
Administration Agreement
effective as of January 1, 2000
between One Group Investment Trust and
One Group Administrative Services, Inc.
<PAGE> 2
ADMINISTRATION AGREEMENT
------------------------
THIS AGREEMENT is made effective as of the 1st day of January, 2000, by
and between One Group(R) Investment Trust, a Massachusetts business trust (the
"Trust"), having its principal place of business at 1111 Polaris Parkway,
Columbus, Ohio 43240, and One Group Administrative Services, Inc. (the
"Administrator"), a Delaware corporation having its principal place of business
at 1111 Polaris Parkway, Columbus, Ohio 43240.
BACKGROUND INFORMATION
A. The Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), currently consisting of nine series
of shares of beneficial interest ("Shares");
B. The Trust is available to act as an investment vehicle for
separate accounts (the "Separate Accounts") established for
variable life insurance policies and variable annuity
contracts ("Variable Insurance Products"); and
C. The Trust desires to retain the Administrator to furnish
management, administrative, and fund accounting services to
each series of the Trust, all as now or hereafter may be
identified on Schedule A hereto as such Schedule may be
amended from time to time ("Portfolios").
STATEMENT OF AGREEMENT
The Trust and the Administrator hereby acknowledge the accuracy of the
foregoing Background Information and hereby agree as follows:
ARTICLE 1. RETENTION OF THE ADMINISTRATOR. The Trust hereby retains the
Administrator to act as the administrator of the Portfolios and to furnish the
Portfolios with the management, administrative, and fund accounting services as
set forth in Article 2 and Article 3 below. The Administrator hereby accepts
such employment to perform the duties set forth below. The Administrator shall,
for all purposes herein, be deemed to 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 and shall not be deemed an agent of the Trust.
ARTICLE 2. MANAGEMENT AND ADMINISTRATIVE SERVICES. Subject to the
direction and control of the Board of Trustees of the Trust (the "Trustees"),
the Administrator shall perform or supervise the performance by others of
administrative services in connection with the operations of the Portfolios,
except those performed by the investment advisor for the Portfolios under its
Investment Advisory Agreement, the custodian for the Portfolios under its
Custodian Agreement, and the Transfer Agent for the Portfolios under its
Transfer Agency Agreement.
1
<PAGE> 3
Without limiting the generality of the foregoing, the Administrator
shall:
(a) Provide all necessary office facilities (which may be in the
offices of the Administrator or an affiliate), equipment, and
personnel for handling the affairs of the Portfolios;
(b) Subject to supervision by counsel to the Trust, prepare
amendments to, file, and maintain the Trust's governing
documents, including the Declaration of Trust, the Bylaws, and
minutes of meetings of shareholders;
(c) prepare agenda and compile board materials for all Trustee
meetings and review, file, and maintain minutes of meetings of
Trustees;
(d) provide individuals reasonably acceptable to the Trust's
Trustees to serve as officers of the Trust, who will be
responsible for the management of certain of the Trust's
affairs as determined by the Trust's Trustees;
(e) subject to supervision by counsel to the Trust, prepare,
review, and file the Trust's Registration Statement (on Form
N-1A or any replacement therefor), periodic supplements to the
Registration Statement, and proxy materials with the
Securities and Exchange Commission (the "Commission");
(f) prepare and file periodic reports to shareholders and the
Commission on Form N-SAR or any replacement forms therefor;
(g) prepare and file Notices to the Commission required pursuant
to Rule 24f-2 of the 1940 Act;
(h) compile data for, assist the Trust or its designee in the
preparation of, and file, all of the Portfolios' federal and
state tax returns and required tax filings other than those
required to be made by the Portfolios' custodian and transfer
agent;
(i) arrange for and coordinate the layout and printing of
prospectuses, statements of additional information,
semi-annual and annual reports to shareholders, and proxy
materials;
(j) prepare, with the assistance of the Trust's investment
advisor, communications to shareholders;
(k) coordinate the mailing of prospectuses, notices, proxy
statements, proxies, semi-annual and annual reports to
shareholders, and other reports to Trust shareholders, and
supervise and facilitate the proxy solicitation process for
all shareholder meetings, including the tabulation of
shareholder votes;
(l) prepare for and conduct shareholder meetings, if necessary;
(m) examine and review the operations and performance of the
various organizations providing services to the Trust or any
Portfolio of the Trust, including, without limitation, the
Trust's investment advisor, custodian, sub-advisor, transfer
agent, outside legal counsel, independent public accountants,
and other entities providing services to the Trust, and at the
request of the Trustees, report to the Trustees on the
performance of such organizations;
2
<PAGE> 4
(n) prepare, negotiate, and administer contracts on behalf of the
Trust with, among others, the Trust's investment advisor,
custodian, and transfer agent;
(o) prepare, negotiate, and provide the services specified for the
Administrator under fund participation agreements ("Fund
Participation Agreements") between the Trust, the
Administrator, the investment advisor, the transfer agent, and
insurance companies desiring to utilize the Portfolios as the
investment vehicle for their Variable Insurance Products;
(p) calculate contractual Trust expenses and control all
disbursements for the Trust, and as appropriate compute the
Trust's yields, total return, expense ratios, portfolio
turnover rate and, if required, portfolio average
dollar-weighted maturity;
(q) calculate performance data of the Portfolios for dissemination
to information services covering the investment company
industry;
(r) assist with the design, development, and operation of
Portfolios for the Trust, including new classes, investment
objectives, policies and structure;
(s) monitor the Trust's compliance with Section 817 and Sections
851 through 855 of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, so as to
enable the Trust to comply with the diversification
requirements applicable to investments of variable contracts
and to maintain its status as a "regulated investment
company;"
(t) monitor the Trust's compliance with the Trust's registration
statement and the 1940 Act and the regulations issued
thereunder;
(u) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Trust
in accordance with the requirements of Rules 17g-1 and
17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Trust's Trustees; and
(v) perform all administrative services and functions of the Trust
and each Portfolio to the extent administrative services and
functions are not provided to the Trust or such Portfolio
pursuant to the Trust's or such Portfolio's investment
advisory agreement, custodian agreement, and transfer agent
agreement.
The Administrator shall perform such other administrative services for
the Trust that are mutually agreed upon by the parties from time to time.
ARTICLE 3. FUND ACCOUNTING SERVICES. Subject to the direction and
control of the Trustees, the Administrator shall perform or supervise the
performance by others of fund accounting services in connection with the
operations of the Portfolios, except those performed by the investment advisor
for the Portfolios under its Investment Advisory Agreement, the custodian for
the Portfolios under its Custodian Agreement, and the Transfer Agent for the
Portfolios under its Transfer Agency Agreement. Without limiting the generality
of the foregoing, the Administrator shall:
3
<PAGE> 5
(a) prepare and maintain the following books and records of each Portfolio
pursuant to Rule 31a-1 under the Investment Company Act of 1940 (the
"Rule"):
(1) Journals containing an itemized daily record in detail of all
purchases and sales of securities, all receipts and
disbursements of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(2) General and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, including
interest accrued and interest received, as required by
subsection (b)(2)(i) of the Rule;
(3) Separate ledger accounts required by subsection (b)(2)(ii) and
(iii) of the Rule; and
(4) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8) of the
Rule.
(b) Perform the following accounting services daily for each Portfolio:
(l) calculate the net asset value per share utilizing prices
obtained from the sources described in subsection 3(b)(2)
below;
(2) obtain security prices from independent pricing services, or
if such quotes are unavailable, sources identified in pricing
guidelines adopted by the Trustees;
(3) verify and reconcile with the Portfolio's custodian all daily
trade activity;
(4) compute, as appropriate, each Portfolio's net income and
capital gains, dividend payables, dividend factors, 7-day
yields, 7-day effective yields, 30-day yields, distribution
yields, and weighted average portfolio maturity;
(5) review daily the net asset value calculation and dividend
factor (if any) for each Portfolio prior to release to
Separate Accounts, and check and confirm the net asset values
and dividend factors for reasonableness and deviations;
(6) Determine unrealized appreciation and depreciation on
securities held in variable net asset value Portfolios;
(7) Amortize premiums and accrete discounts on securities
purchased at a price other than face value, if requested by
the Trust;
(8) Update fund accounting system to reflect rate changeson
variable interest rate instruments;
(9) Post Portfolio transactions to appropriate categories;
4
<PAGE> 6
(10) Accrue expenses of each Portfolio;
(11) Determine the outstanding receivables and payables for all (1)
security trades, (2) Portfolio share transactions and (3)
income and expense accounts;
(12) Provide accounting reports in connection with the Trust's
regular annual audit and other audits and examinations by
regulatory agencies; and
(13) Provide such periodic reports as the parties shall agree upon,
as set forth in a separate schedule.
(c) perform the following additional accounting services for each
Portfolio:
(1) Provide monthly a download (and hard copy thereof) of the
financial statements described below, upon request of the
Trust. The download will include the following items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(2) Provide accounting information for the following:
(a) federal and state income tax returns and federal
excise tax returns;
(b) the Trust's semi-annual reports to the Commission on
Form N-SAR;
(c) the Trust's annual, semi-annual and quarterly (if
any) shareholder reports;
(d) registration statements on Form N-1A and other
filings relating to the registration of shares;
(e) monitoring of the Trust's status as a regulated
investment company under Subchapter M of the Internal
Revenue Code, as amended;
(f) annual audit by the Trust's auditors; and
(g) examinations performed by the Commission.
(3) Calculate declaration of income/capital gain distributions in
compliance with income/excise tax distribution requirements
and ensure that such distributions are not "preferential"
under the Internal Revenue Code.
(4) Report to the Trust with weekly market pricing of securities
in any Portfolios which are money market funds, with the
comparison to amortized cost valuations.
The Administrator may provide additional special reports upon the request of the
Trust or a Portfolio's investment advisor, which may result in an additional
charge, the amount of which shall be agreed upon between the parties.
5
<PAGE> 7
ARTICLE 4. ALLOCATION OF CHARGES AND EXPENSES.
----------------------------------
(A) THE ADMINISTRATOR. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Trust as well as all Trustees of the
Trust who are officers or employees of the Administrator or any affiliated
company of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Trust retained by the Trustees of the Trust
to perform services on behalf of the Trust.
(B) THE TRUST. The Trust assumes and shall pay or cause to be paid all
other expenses of the Trust not otherwise allocated herein, including, without
limitation, organization costs, taxes, fees and expenses for legal and auditing
services, fees and expenses of pricing services used to value securities of the
One Group Investment Trust Equity Index Portfolio, transfer agency fees and
expenses, the expenses of preparing (including typesetting), printing and
mailing reports, prospectuses, statements of additional information, proxy
solicitation material and notices to existing shareholders, all expenses
incurred in connection with issuing and redeeming shares, the costs of custodial
services, the cost of initial and ongoing registration of the shares under
Federal and state securities laws, fees and out-of-pocket expenses of Trustees
who are not officers or employees of the Administrator or the Investment Advisor
to the Trust or any affiliated company of the Administrator or the Investment
Advisor, insurance, interest, brokerage costs, litigation and other
extraordinary or nonrecurring expenses, and all fees and charges of investment
advisors to the Trust.
ARTICLE 5. COMPENSATION OF THE ADMINISTRATOR.
(A) ADMINISTRATION FEE. In consideration of the services rendered, the
facilities furnished and the expenses assumed by the Administrator pursuant to
this Agreement, the Trust shall pay the Administrator compensation at an annual
rate specified in Schedule A attached hereto. Such compensation shall be
calculated and accrued daily, and paid to the Administrator on the first
business day of each month, or at such time(s) as the Administrator shall
request and the parties hereto shall agree. The Trust shall also reimburse the
Administrator for its reasonable out-of-pocket expenses, including the travel
and lodging expenses incurred by officers and employees of the Administrator in
connection with attendance at Trustee meetings. If this Agreement terminates
before the last day of a month, the Administrator's compensation for that part
of the month in which this Agreement is in effect shall be prorated according to
the proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to the Administrator, the
value of net assets of a particular Portfolio shall be computed in the manner
described in the Trust's Declaration of Trust or in the Prospectus or Statement
of Additional Information for the computation of the Trust's net assets in
connection with the determination of the net asset value of the Trust's shares.
6
<PAGE> 8
(B) SURVIVAL OF COMPENSATION RIGHTS. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 6. LIMITATION OF LIABILITY OF THE ADMINISTRATOR. The duties of
the Administrator shall be confined to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance, bad
faith or negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable law which cannot be waived or modified
hereby. Any person, even though also an employee, or agent of the Administrator,
who may be or become an officer, Trustee, employee or agent of the Trust or the
Portfolios shall be deemed, when rendering services to the Trust or the
Portfolios, or acting on any business of that party, to be rendering such
services to or acting solely for that party and not as a partner, employee, or
agent or one under the control or direction of the Administrator even though
paid by it.
So long as the Administrator acts in good faith and with due diligence
and without negligence, the Trust assumes full responsibility and shall
indemnify the Administrator, its employees, agents, directors, officers and
nominees and hold them harmless from and against any and all actions, suits and
claims, whether groundless or otherwise, and from and against any and all
losses, damages, costs, charges, reasonable counsel fees and disbursements,
payments, expenses and liabilities (including reasonable investigation expenses)
arising directly or indirectly out of the Administrator's actions taken or
nonactions with respect to the performance of services hereunder. The indemnity
and defense provisions set forth herein shall indefinitely survive the
termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Trust may be asked to indemnify or hold the
Administrator harmless, the Trust shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Trust, but failure to do so in good faith shall not affect the rights
hereunder.
The Trust shall be entitled to participate at its own expense or, if it
so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Trust elects to assume the defense
of any such claim, the defense shall be conducted by counsel chosen by the Trust
and satisfactory to the Administrator, whose approval shall not be unreasonably
withheld. In the event that the Trust elects to assume the defense of any suit
and retain counsel, the Administrator shall bear the fees and expenses of any
additional counsel
7
<PAGE> 9
retained by it. If the Trust does not elect to assume the defense of a suit, it
will reimburse the Administrator for the reasonable fees and expenses of any
counsel retained by the Administrator.
The Administrator may apply to the Trust at any time for instructions
and may consult counsel for the Trust or its own counsel and with accountants
and other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
The Administrator shall be protected in acting upon any document which
it reasonably believes to be genuine and to have been signed or presented by the
proper person or persons. The Administrator will not be held to have notice of
any change of authority of any officers, employees or agents of the Trust until
receipt of written notice thereof from the Trust.
ARTICLE 7. ACTIVITIES OF THE ADMINISTRATOR. The services of the
Administrator rendered to the Trust are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that directors, officers, employees
and shareholders of the Trust are or may be or become interested in the
Administrator, as officers, employees or otherwise and that partners, officers
and employees of the Administrator and its counsel are or may be or become
similarly interested in the Trust, and that the Administrator may be or become
interested in the Trust as an owner of a Variable Insurance Contract or
otherwise.
ARTICLE 8. TERM. This Agreement shall become effective as of the date
first written above (or, if a particular Portfolio is not in existence on the
date, on the date an amendment to Schedule A to this Agreement relating to that
Portfolio is executed) and shall continue until November 1, 2000, and unless
sooner terminated as provided herein, thereafter shall be renewed automatically
for successive one-year terms, unless written notice not to renew is given by
the non-renewing party to the other party at least 60 days prior to the
expiration of the then-current term.
Notwithstanding the foregoing, this Agreement may be terminated at any
time by mutual agreement of the parties hereto or for "cause." For purposes of
this Agreement, "cause" shall mean (a) willful misfeasance, bad faith, gross
negligence or reckless disregard of the party to be terminated; (b) a final,
unappealable judicial, regulatory or administrative ruling or order in which the
party to be terminated has been found guilty of criminal or unethical behavior
in the conduct of its business; (c) financial difficulties on the part of the
party to be terminated which is evidenced by the authorization or commencement
of, or involvement by way of pleading, answer, consent, or acquiescence in, a
voluntary or involuntary case under Title 11 of the United States Code, as from
time to time in effect, or any applicable law of any jurisdiction relating to
the liquidation or reorganization of debtors or the modification or alteration
of the rights of creditors; or (d) any circumstance which substantially impairs
the performance of the obligations and duties, as contemplated herein.
If, for any reason other than "cause" as defined above, the
Administrator is replaced as administrator and fund accountant, or if a third
party is added to perform all or a part of the
8
<PAGE> 10
services provided by Administrator under this Agreement, then the Trust shall
make a one-time cash payment, as liquidated damages, to the Administrator equal
to the balance due the Administrator for the remainder of the term of this
Agreement, assuming for purposes of calculation of the payment that the asset
level of the Trust on the date Administrator is replaced, or a third party is
added, will remain constant for the balance of the contract term.
ARTICLE 9. ASSIGNMENT. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
the Administrator may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder. The
Administrator shall not, however, be relieved of any of its obligations under
this Agreement by the appointment of such subcontractor and provided further,
that the Administrator shall be responsible, to the extent provided in Article 6
hereof, for all acts of such subcontractor as if such acts were its own. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
ARTICLE 10. AMENDMENTS. This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the vote of a
majority of the Trustees of the Trust, and (ii) by the vote of a majority of the
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a Trustees meeting called for the
purpose of voting on such approval.
For special cases, the parties hereto may amend such procedures set
forth herein as may be appropriate or practical under the circumstances, and the
Administrator may conclusively assume that any special procedure which has been
approved by the Trust does not conflict with or violate any requirements of its
Declaration of Trust or then current prospectuses, or any rule, regulation or
requirement of any regulatory body.
ARTICLE 11. CERTAIN RECORDS. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Trust shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Trust and will be made available
to or surrendered promptly to the Trust on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Trust and follow the Trust's
instructions as to permitting or refusing such inspection; provided that the
Administrator may exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do so.
ARTICLE 12. DEFINITIONS OF CERTAIN TERMS. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Commission.
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<PAGE> 11
ARTICLE 13. NOTICE. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if delivered to the other
party at the following address: 1111 Polaris Parkway, Columbus, Ohio 43240, or
at such other address as a party may from time to time specify in writing to the
other party pursuant to this Section.
ARTICLE 14. GOVERNING LAW AND MATTERS RELATING TO THE TRUST AS A
MASSACHUSETTS BUSINESS TRUST. This Agreement shall be construed and the
provisions hereof interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts. The names "One Group(R) Investment Trust" and
"Trustees of One Group(R) Investment Trust" refer respectively to the Trust
created and the Trustees, as trustees but not individually or personally, acting
from time to time under a Declaration of Trust dated June 7, 1993 to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of the Commonwealth of Massachusetts and elsewhere as required by law,
and to any and all amendments thereto so filed or hereafter filed. The
obligations of `One Group Investment Trust' entered into in the name or on
behalf thereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind only
the assets of the Trust, and all persons dealing with any series of shares of
the Trust must look solely to the assets of the Trust belonging to such series
for the enforcement of any claims against the Trust.
[Signature Pages Follow]
10
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
ONE GROUP INVESTMENT TRUST
By: /s/ Mark A. Beeson
---------------------------------
Title: PRESIDENT
ONE GROUP ADMINISTRATIVE SERVICES, INC.
By: /s/ Robert L. Young
---------------------------------
Title: Vice PRESIDENT
11
<PAGE> 13
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF JANUARY 1, 2000
BETWEEN
ONE GROUP INVESTMENT TRUST
AND
ONE GROUP ADMINISTRATIVE SERVICES, INC.
Portfolios: This Agreement shall apply to the following Portfolios:
One Group Investment Trust Bond Portfolio
One Group Investment Trust Government Bond Portfolio
One Group Investment Trust Balanced Portfolio
One Group Investment Trust Large Cap Growth Portfolio
One Group Investment Trust Equity Index Portfolio
One Group Investment Trust Diversified Equity Portfolio
One Group Investment Trust Mid Cap Growth Portfolio
One Group Investment Trust Diversified Mid Cap Portfolio
One Group Investment Trust Mid Cap Value Portfolio
Fees: Pursuant to Article 5, in consideration of services rendered and expenses
assumed pursuant to this Agreement, the Trust will pay the Administrator on the
first business day of each month, or at such time(s) as the Administrator shall
request and the parties hereto shall agree, a fee computed daily at the annual
rates specified below:
For all Portfolios except the One Group Investment Trust Equity Index Portfolio:
- .18% on the first $250 million in Trust assets (except for the
One Group Investment Trust Equity Index Portfolio)
- .14% on Trust assets in excess of $250 million (other than
assets in the One Group Investment Trust Equity Index
Portfolio)
For the One Group Investment Trust Equity Index Portfolio:
- .14% on One Group Investment Trust Equity Index Portfolio
assets.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Schedule
A as of the day and year first above written.
ONE GROUP INVESTMENT TRUST
By: /s/ Mark A. Beeson
---------------------------
Title: President
ONE GROUP ADMINISTRATIVE SERVICES, INC.
By: /s/ Robert L. Young
---------------------------
Title: Vice President
12
<PAGE> 1
Item 23(h)(4)
Amendment to Amended and Restated Fund Participation Agreement
effective as of January 1, 2000
among Nationwide Life and Annuity Insurance Company,
One Group Investment Trust, and
One Group Administrative Services, Inc.
<PAGE> 2
AMENDMENT TO AMENDED AND RESTATED FUND PARTICIPATION AGREEMENT
This Amendment to the Amended and Restated Fund Participation Agreement
is made effective as of January 1, 2000 among Nationwide Life and Annuity
Insurance Company (the "Company"), One Group(R) Investment Trust (the "Trust"),
and One Group Administrative Services, Inc., a Delaware corporation (the
"Services Company").
BACKGROUND INFORMATION
1. The Trust, the Company, and Nationwide Advisory Services, Inc. entered
into an Amended and Restated Fund Participation Agreement effective as
of February 17, 1999 (the "Participation Agreement") in order to permit
the Company to utilize the Trust as an investment vehicle for certain
variable insurance products;
2. Effective January 1, 2000, Nationwide Advisory Services, Inc. will no
longer serve as administrator to the Trust; and
3. In order to reflect the replacement of Nationwide Advisory Services,
Inc. and the appointment of the Services Company as administrator, the
parties wish to amend the Participation Agreement.
STATEMENT OF AGREEMENT
The parties hereby acknowledge the accuracy of the foregoing Background
Information and hereby agree as follows:
Section 1. DEFINITION OF TERMS. Unless otherwise defined herein, all
capitalized terms shall have the meaning ascribed to them in the Participation
Agreement.
Section 2. AMENDMENT TO REFLECT THE APPOINTMENT OF THE SERVICES COMPANY
AS ADMINISTRATOR. In order to reflect the replacement of Nationwide Advisory
Services, Inc. as administrator by the Services Company, all references to
"Nationwide Advisory Services, Inc." in the Participation Agreement are hereby
changed to "One Group Administrative Services, Inc." By execution of this
Amendment, the Services Company agrees to be bound by and perform the duties and
obligations specified for the Administrator in the Participation Agreement
effective January 1, 2000. Notwithstanding the foregoing, the Services Company
shall not be liable for losses, claims, damages, liabilities or litigation
arising from the acts or omissions of Nationwide Advisory Services, Inc.
Section 3. CONFORMING AMENDMENTS TO SECTIONS 3 AND 4. Sections 3 and 4
of the Participation Agreement are hereby deleted in their entirety and the
following new Sections 3 and 4 are substituted in their place:
3. The Trust or its designee will provide closing net asset
value, dividend and capital gain information at the close of
trading each business day to Nationwide. "Business day" shall
mean any day on which the New York Stock Exchange is open for
trading and on which the Trust
1
<PAGE> 3
calculates net asset value for each Fund as set forth in the
Trust's prospectus and Statement of Additional Information.
Nationwide will use this data to calculate unit values, which
will in turn be used to process that same business day's
Variable Account unit value. The Variable Account processing
will be done the same evening, and orders for purchases or
redemptions will be placed by Nationwide no later than 10:00
a.m. Eastern Time the morning of the following business day;
provided, however, that Nationwide will use its best efforts
to place such orders no later than 9:30 a.m. Eastern Time the
morning of the following business day. Orders will be sent
directly to the Trust or its designated Transfer Agent.
Payment for purchases will be wired to a custodial account
designated by the Trust or the designated Transfer Agent no
later than 2:00 p.m. Eastern Time and payment for redemptions
will be wired to an account designated by Nationwide so as to
coincide with the order for Trust shares. Provided Nationwide
places the orders within the time period specified above, the
Trust or its designated Transfer Agent will execute the orders
at the net asset value as determined as of the close of
trading on the prior day. Dividends and capital gains
distributions shall be reinvested in additional shares at the
ex-date net asset value. Notwithstanding the above, the Trust
or its designee shall not be held responsible for providing
Nationwide with net asset value, dividend and capital gain
information when the New York Stock Exchange is closed, when
an emergency exists making the valuation of net assets not
reasonably practicable, or during any period when the
Securities and Exchange Commission ("SEC") has by order
permitted the suspension of pricing shares for the protection
of shareholders.
4. All expenses incident to the performance by the Trust under
this Agreement shall be the responsibility of the Trust, but
in no event shall such expenses be the responsibility of
Nationwide or the Variable Account. The Trust shall pay the
cost of registration of Fund shares with the SEC. The Trust
shall pay for and distribute to Nationwide, proxy materials,
periodic Trust reports to existing shareholders and other
material the Trust may require to be sent to existing Contract
owners. The Trust will pay the mailing expenses of Nationwide
for distributing such proxy material, reports and other
material to existing Contract owners, who are the beneficial
shareholders of the Trust. The Trust shall pay the cost of
qualifying Fund shares in states where required. For
prospectuses provided by Nationwide to its existing owners of
Contracts in order to update disclosure as required by the
1933 Act and/or the 1940 Act, the Trust shall bear the cost of
typesetting to provide the Trust prospectus to Nationwide. In
the event that the Variable Account prospectus and the Trust
prospectus are printed together in one document form, the
Trust's share of the printing cost for such disclosure
document will be equal to the total cost of printing the
disclosure documents multiplied by the ratio of the total
number of pages in the Trust's prospectus to the total number
of pages in the disclosure document, with Nationwide paying
the rest. The Trust will provide Nationwide with a copy of the
Statement of Additional Information suitable for duplication.
Notwithstanding anything to the contrary, the Trust shall not
pay any costs of typesetting, printing, and distributing the
Trust's prospectuses, proxy materials, periodic Trust reports
to shareholders, and other material to prospective Contract
owners; it being understood that Nationwide shall be
responsible for such costs.
Section 4. NOTICES. Section 13 of the Participation Agreement is hereby
amended by replacing the address for the Trust and the Administrator with the
following:
If to the Trust:
One Group Investment Trust
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attn: Fund President
If to the Administrator:
2
<PAGE> 4
One Group Administrative Services, Inc.
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attention: President
Section 5. MISCELLANEOUS. Except as otherwise set forth herein, the
Participation Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment effective as of January 1, 2000.
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
By: /s/ Joseph P.
-------------
Its Vice President - Product and Market Compliance
ONE GROUP(R)INVESTMENT TRUST
By: /s/ Mark A. Beeson
------------------
Its President
ONE GROUP ADMINISTRATIVE SERVICES, INC.
By: /s/ Robert L. Young
-------------------
Its VP
3
<PAGE> 1
Item 23(h)(7)
Participation Agreement
effective as of March 31, 1999
among One Group Investment Trust,
Nationwide Advisory Services, Inc.,
Nationwide Investors Services, Inc.,
Banc One Investment Advisors Corporation, and
Hartford Life and Annuity Insurance Company
<PAGE> 2
PARTICIPATION AGREEMENT
Among
ONE GROUP(R)INVESTMENT TRUST,
NATIONWIDE ADVISORY SERVICES, INC.,
NATIONWIDE INVESTORS SERVICES, INC.,
BANC ONE INVESTMENT ADVISORS CORPORATION,
and
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
1
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE I. Trust Shares 5
ARTICLE II. Representations and Warranties 7
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements; Voting 8
ARTICLE IV. Sales Material and Information 10
ARTICLE V. Diversification 12
ARTICLE VI. Potential Conflicts 12
ARTICLE VII. Indemnification 14
ARTICLE VIII. Applicable Law 21
ARTICLE IX. Termination 22
ARTICLE X. Notices 24
ARTICLE XI. Miscellaneous 25
SCHEDULE A Separate Accounts and Contracts 29
SCHEDULE B Participating Portfolios 30
2
<PAGE> 4
PARTICIPATION AGREEMENT
AMONG
ONE GROUP(R) INVESTMENT TRUST,
NATIONWIDE ADVISORY SERVICES, INC.,
NATIONWIDE INVESTORS SERVICES, INC.,
BANC ONE INVESTMENT ADVISORS CORPORATION,
AND
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
THIS AGREEMENT, made and entered into effective as of the 31st day of
March, 1999 by and among HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(hereinafter the "Company"), a Connecticut corporation, on its 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") and ONE GROUP INVESTMENT TRUST, a business trust established
under the laws of the state of Massachusetts (hereinafter the "Trust"); and
NATIONWIDE ADVISORY SERVICES, INC., an Ohio corporation (hereinafter the
"Administrator"); and NATIONWIDE INVESTORS SERVICES, INC., an Ohio corporation
(hereinafter the "Transfer Agent") and BANC ONE INVESTMENT ADVISORS CORPORATION,
an Ohio corporation (hereinafter the "Adviser").
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as 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 Insurance Products"); and
WHEREAS, insurance companies desiring to utilize the Trust as an
investment vehicle under their Variable Insurance Products are required to enter
into participation agreements with the Trust and the Administrator (the
"Participating Insurance Companies"); and
WHEREAS, shares of the Trust are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
3
<PAGE> 5
WHEREAS, the Trust intends to offer shares of the series set forth on
Schedule B (each such series hereinafter referred to as a "Portfolio") as may be
amended from time to time by mutual agreement of the parties hereto, under this
Agreement to the Accounts of the Company specified on Schedule A; and
WHEREAS, the Trust has obtained an order from the Securities and
Exchange Commission, granting the Trust 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 Trust to be sold to
and held by Variable Annuity Product separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Trust 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
WHEREAS, the Adviser is the investment adviser of the Portfolios of the
Trust; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
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, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Products; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless exempt from such registration;
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Variable Insurance Products and
the Trust is authorized to sell such shares to each such Account at net asset
value.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Trust, the Administrator, the Transfer Agent, and the Adviser agree as
follows:
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ARTICLE I. TRUST SHARES
1.1. The Trust agrees to make available for purchase by the Company
shares of the Portfolios and shall execute orders placed for each Account on a
daily basis at the net asset value next computed after receipt by the Trust or
its designee of such order. For purposes of this Section 1.1, the Company shall
be the designee of the Trust for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Trust; provided that
the Trust receives notice of such order by 9:30 a.m. (local time where the Trust
processes orders) on the next following Business Day. Notwithstanding the
foregoing, the Company shall use its best efforts to provide the Trust with
notice of such orders by 9:00 a.m. 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 Trust calculates its net asset value pursuant to the rules of
the Securities and Exchange Commission, as set forth in the Trust's prospectus
and statement of additional information. Notwithstanding the foregoing, the
Board of Trustees of the Trust (hereinafter the "Board") may refuse to permit
the Trust 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.
1.2. The Trust agrees that shares of the Trust will be sold only to
Participating Insurance Companies for their Variable Insurance Products and, in
the Trust's discretion, to qualified pension and retirement plans. No shares of
any Portfolio will be sold to the general public.
1.3. The Trust and the Transfer Agent agree to redeem for cash, on the
Company's request, any full or fractional shares of the Trust held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Trust or its designee of the request for
redemption. For purposes of this Section 1.3, the Company shall be the designee
of the Trust for receipt of requests for redemption from each Account and
receipt by such designee shall constitute receipt by the Trust; provided that
the Transfer Agent receives notice of such request for redemption on the next
following Business Day in accordance with the timing rules described in Section
1.1.
1.4. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Trust shall be made in
accordance with the provisions of such prospectus. The Accounts of the Company,
under which amounts may be invested in the Trust are listed on Schedule A
attached hereto and incorporated herein by reference, as such Schedule A may be
amended from time to time by mutual written agreement of all of the parties
hereto. The Company will give the Trust and the Advisor
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concurrent written notice of its intention to make available in the future, as a
funding vehicle under the Contracts, any other investment company.
1.5. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares and
dollar amount of each Portfolio to be purchased or redeemed. In the event of net
purchases, the Company shall pay for Portfolio shares on the next Business Day
after an order to purchase Portfolio shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. In the event of net redemptions, the Portfolio shall pay the redemption
proceeds in federal funds transmitted by wire on the next Business Day after an
order to redeem Portfolio shares is made in accordance with the provisions of
Section 1.3 hereof. Notwithstanding the foregoing, if the payment of redemption
proceeds on the next Business Day would require the Portfolio to dispose of
Portfolio securities or otherwise incur substantial additional costs, and if the
Portfolio has determined to settle redemption transactions for all shareholders
on a delayed basis, proceeds shall be wired to the Company within seven (7) days
and the Portfolio shall notify in writing the person designated by the Company
as the recipient for such notice of such delay by 3:00 p.m. Eastern Time on the
same Business Day that the Company transmits the redemption order to the
Portfolio.
1.6. Issuance and transfer of the Trust's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.7. The Administrator shall use its best efforts to furnish same day
notice by 6:00 p.m. in its local time zone (by wire or telephone, followed by
written confirmation) to the Company of any dividends or capital gain
distributions payable on the Trust's shares. The Company hereby elects to
receive all such 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 dividends and capital
gain distributions in cash. The Trust shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.8. The Administrator shall make the net asset value per share of each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6:30 p.m.
Eastern Time. In the event that the Administrator is unable to meet the 6:30
p.m. time stated immediately above, then the Administrator shall provide the
Company with additional time to notify the Administrator of purchase or
redemption orders pursuant to Sections 1.1 and 1.3, respectively, above. Such
additional time shall be equal to the additional time that the Administrator
takes to make the net asset values available to the Company; provided, however,
that notification must be made by 11:00 a.m. Eastern Time on the Business Day
such order is to be executed, regardless of when net asset value is made
available.
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1.9. If the Administrator provides materially incorrect share net asset
value information through no fault of the Company, the Company shall be entitled
to an adjustment with respect to the Trust shares purchased or redeemed to
reflect the correct net asset value per share as subsequently determined by the
Administrator. The determination of the materiality of any net asset value
pricing error shall be based on the SEC's recommended guidelines regarding such
errors. The correction of any such errors shall be made at the Company level
pursuant to the SEC's recommended guidelines. Any material error in the
calculation or reporting of net asset value per share, dividend or capital gain
information shall be reported promptly upon discovery to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts which offer the Portfolios (the "Contracts") are or will be registered
unless exempt and that it will maintain such registration under the 1933 Act and
the regulations thereunder to the extent required by the 1933 Act and that the
Contracts will be issued and sold in compliance with all applicable federal and
state laws and regulations. The Company further represents and warrants that it
is an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established each Account prior to any
issuance or sale thereof as a segregated asset account under the Connecticut
Insurance Code and the regulations thereunder and has registered or, prior to
any issuance or sale of the Contracts, will register and will maintain the
registration of each Account as a unit investment trust in accordance with and
to the extent required by the provisions of the 1940 Act and the regulations
thereunder, unless exempt therefrom, to serve as a segregated investment account
for the Contracts. The Company shall amend its registration statement for its
contracts under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its Contracts.
2.2. The Trust represents and warrants that Trust shares sold pursuant
to this Agreement shall be registered under the 1933 Act and the regulations
thereunder to the extent required by the 1933 Act, duly authorized for issuance
in accordance with the laws of the State of Massachusetts and sold in compliance
with all applicable federal and state securities laws and regulations and that
the Trust is and shall remain registered under the 1940 Act and the regulations
thereunder to the extent required by the 1940 Act. The Trust 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 Trust 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 Trust.
2.3. The Trust, the Administrator and the Adviser represent that the
Trust is currently qualified as a Regulated Investment Company under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code") and that each
will make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that each will notify the Company
immediately upon having a reasonable
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basis for believing that the Trust has ceased to so qualify or that the Trust
might not so qualify in the future.
2.4. The Company represents that each Account is and will continue to
be a "segregated account" under applicable provisions of the Code and that each
Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Trust immediately upon having a reasonable
basis for believing that the Account or Contract has ceased to be so treated or
that they might not be so treated in the future.
2.5. The Trust represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Trust
undertakes to have a majority of the disinterested members of the Board,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Trust 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.
2.7. The Trust represents that the Trust is duly organized and validly
existing under the laws of State of Massachusetts and that the Trust does and
will comply in all material respects with the 1940 Act.
2.8. The Administrator and Transfer Agent each represents and warrants
that it complies with all applicable federal and state laws and regulations and
that it will perform its obligations for the Trust and the Company in compliance
with the laws and regulations of its state of domicile and any applicable state
and federal laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Trust are covered by a blanket fidelity
bond or similar coverage, in an amount equal to the greater of $5 million or any
amount required by applicable federal or state law or regulation. The aforesaid
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
ARTICLE III. PROSPECTUSES: REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS, VOTING
3.1 The Trust shall provide the Company with as many printed copies of
the Trust's current prospectus as the Company may reasonably request. The
Administrator will provide the Company with a copy of the Statement of
Additional Information suitable for duplication. If requested by the Company in
lieu of providing printed copies the Trust shall provide camera-ready film or
computer diskettes containing the Trust'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
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prospectus and/or statement of additional information for the Trust is amended
during the year) to have the prospectus for the Contracts and the Trust's
prospectus printed together in one document or separately. The Company may elect
to print the Trust's prospectus and/or its statement of additional information
in combination with other Trust companies' prospectuses and statements of
additional information.
3.2(a). Except as otherwise provided in this Section 3.2, all expenses
of preparing, setting in type and printing and distributing Trust prospectuses
and statements of additional information shall be the expense of the Company.
For prospectuses and statements of additional information provided by the
Company to its existing owners of Contracts in order to update disclosure as
required by the 1933 Act and/or the 1940 Act, the cost of setting in type,
printing and distributing shall be borne by the Trust. If the Company chooses to
receive camera-ready film or computer diskettes in lieu of receiving printed
copies of the Trust's prospectus and/or statement of additional information, the
Trust shall bear the cost of typesetting to provide the Trust's prospectus
and/or statement of additional information to the Company in the format in which
the Trust is accustomed to formatting prospectuses and statements of additional
information, respectively, and the Company shall bear the expense of adjusting
or changing the format to conform with any of its prospectuses and/or statements
of additional information. In such event, the Trust 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 Contracts, and y is the Trust's per
unit cost of printing the Trust's prospectuses. The same procedures shall be
followed with respect to the Trust's statement of additional information. The
Trust shall not pay any costs of typesetting, printing and distributing the
Trust's prospectus and/or statement of additional information to prospective
Contract owners.
3.2(b). The Trust, at its expense, shall provide the Company with
copies of the Annual Report and Semi-Annual Reports (the "Reports") in such
quantity as the Company shall reasonably require for distributing to Contract
owners. The Trust, at its expense, shall provide the Contract owners designated
by the Company with copies of its proxy statements and other communications
(except for prospectuses, and statements of additional information, and which
are covered in Section 3.2(a) above and Reports) to shareholders. The Trust
shall not pay any costs of distributing proxy-related materials, Reports, and
other communications to prospective Contract owners.
3.2(c). The Company agrees to provide the Trust or its designee with
such information as may be reasonably requested by the Trust to assure that the
Trust's expenses do not include the cost of typesetting, printing or
distributing any of the foregoing documents other than those actually
distributed to existing Contract owners.
3.2(d). The Trust shall pay no fee or other compensation to the Company
under this Agreement, except that if the Trust or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Trust may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Trust in writing.
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3.2(e) All expenses, including expenses to be borne by the Trust
pursuant to Section 3.2 hereof, incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust 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 Trust, in
accordance with applicable state laws prior to their sale. The Trust shall bear
the expenses for the cost of registration and qualification of the Trust's
shares.
3.3. The Trust's statement of additional information shall be
obtainable from the Trust, the Administrator, the Company or such other person
as the Trust may designate.
3.4. If and to the extent required by law the Company shall with
respect to proxy material distributed by the Trust to Contract Owners designated
by the Company to whom voting privileges are required to be extended:
(i) solicit voting instructions from Contract owners;
(ii) vote the Trust shares in accordance with instructions
received from Contract owners; and
(iii) vote Trust shares for which no instructions have been
received in the same proportion as Trust 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 Trust shares held in any
segregated asset account in its own right, to the
extent permitted by law.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust, the Adviser or their designee, drafts of the separate accounts
prospectuses and statements of additional information and each piece of sales
literature or other promotional material prepared by the Company or any person
contracting with the Company to prepare such material in which the Trust, the
Adviser or the Administrator is described, at least ten Business Days prior to
its use. No such material shall be used if the Trust, the Adviser, the
Administrator or their designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. Neither the Company nor any person contracting with the Company to
prepare sales literature or other promotional material shall give any
information or make any representations or statements on behalf of the Trust or
concerning the Trust in
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connection with the sale of the Contracts other than the information or
representations contained in the registration statement or Trust prospectus, as
such registration statement or Trust prospectus may be amended or supplemented
from time to time, or in reports to shareholders or proxy statements for the
Trust, or in sales literature or other promotional material approved by the
Trust or its designee, except with the permission of the Trust or its designee.
4.3. The Adviser shall furnish, or shall cause to be furnished, to the
Company or its designee, each piece of sales literature or other promotional
material prepared by the Trust in which the Company or its Accounts, are
described at least ten Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.4. Neither the Trust, the Administrator, the Transfer Agent, nor the
Adviser shall give any information or make any representations on behalf of the
Company or concerning the Company, each Account, or the Contracts, other than
the information or representations contained in a registration statement or
prospectus for the Contracts, as such registration statement or prospectus may
be amended or supplemented from time to time, or in published reports or
solicitations for voting instruction 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 Trust will provide to the Company at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, applications for exemptions, requests
for no-action letters, and all amendments to any of the above, that relate to
the Trust or its shares, promptly after the filing of such document with the
Securities and Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Trust, upon the Trust's request,
at least one complete copy of all registration statements, prospectuses,
statements of additional information, 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 an Account or Contract,
contemporaneously with the filing of such documents with the Securities and
Exchange Commission or other regulatory authorities.
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: 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,
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reprints or excerpts of any other advertisement, sales literature, or published
article), and educational or training materials or other communications
distributed or made generally available to some or all agents or employees.
ARTICLE V. DIVERSIFICATION
5.1. The Trust and the Adviser represent and warrant that, at all
times, the Trust will 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 the Trust ceases to
so qualify, it will take all reasonable steps (a) to notify Company of such
event and (b) to adequately diversify the Trust so as to achieve compliance
within the grace period afforded by Regulation 817-5.
ARTICLE VI. POTENTIAL CONFLICTS
6.1. The Board will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. 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 annuity contract owners and variable life
insurance contract 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.
6.2. The Company will report any potential or existing material
irreconcilable conflict of which it is aware to the Administrator. Upon receipt
of such report, the Administrator shall report the potential or existing
material irreconcilable conflict to the Board. The Administrator shall also
report to the Board on a quarterly basis whether the Company has reported any
potential or existing material irreconcilable conflicts during the previous
calendar quarter. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.
6.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, 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 trustees), take whatever steps
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are necessary to remedy 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 Trust or any Portfolio and reinvesting such assets in
a different investment medium, including (but not limited to) another Portfolio
of the Trust, 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. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take remedial
action in the event of a Board determination of an irreconcilable material
conflict and the cost of such remedial action, and these responsibilities will
be carried out with a view only to the interests of Contract owners.
6.4. 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 Trust's election, to withdraw the affected Account's
investment in the Trust 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. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take remedial
action in the event of a Board determination of an irreconcilable material
conflict and the cost of such remedial action, and these responsibilities will
be carried out with a view only to the interests of Contract owners.
6.5. For purposes of Sections 6.3 through 6.4 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 Trust be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 6.3 through 6.4 to
establish a new funding medium for the Contracts 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.
6.6. 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 (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Trust 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, to the extent such rules are
applicable.
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6.7. Each of the Company and the Adviser shall 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 them by the
provisions hereof and in the Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Board. Without limiting the generality of the foregoing or the Company's
obligations under Section 6.2, the Company shall provide a report to the Board
no later than January 15th of each year indicating whether any material
irreconcilable conflicts have arisen during the prior fiscal year of the Trust.
All reports received by the Board of potential or existing conflicts, and all
Board action with regard to determining the existence of a conflict, notifying
Participating Insurance Companies of a conflict, and determining whether any
proposed action adequately remedies a conflict, shall be properly recorded in
the minutes of the Board or other appropriate records, and such minutes or other
records shall be made available to the Securities and Exchange Commission upon
request.
ARTICLE VII. INDEMNIFICATION
7.1. INDEMNIFICATION BY THE COMPANY
7.1 (a). The Company agrees to indemnify and hold harmless the Trust,
the Administrator, the Transfer Agent, the Adviser, and each member of their
respective Boards and officers and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.1) 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 Trust's shares or the Contracts 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 or prospectus
for the Contracts or contained in the Contracts or
sales literature for the Contracts (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 Trust for use in the
registration statement or prospectus for the
Contracts or in the Contracts or sales literature (or
any amendment or supplement) or
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otherwise for use in connection with the sale of the
Contracts or Trust 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
Trust not supplied by the Company, or persons under
its control and other than statements or
representations authorized by the Trust) or unlawful
conduct of the Company or persons under its control,
with respect to the sale or distribution of the
Contracts or Trust 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 Trust 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 Trust
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 Section 7.1(b) and 7.1(c) hereof.
7.1(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
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
7.1(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
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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 as own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
Indemnified Party named in the action. After notice from the Company to such
Indemnified 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 shall not be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof
other than reasonable costs of investigation.
7.1(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 Trust shares or the Contracts or the operation of
the Trust.
7.2. INDEMNIFICATION BY ADMINISTRATOR
7.2(a). The Administrator 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
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Administrator) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(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 Trust (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 Trust
or the Administrator by or on behalf of the Company,
the Adviser, the Transfer Agent, Counsel for the
Trust , the independent public accountant to the
Trust , or any person or entity that is not acting as
agent for or controlled by the Administrator for use
in the registration statement or prospectus for the
Trust or in sales literature (or any amendment
16
<PAGE> 18
or supplement) or otherwise for use in connection
with the sale of the Contracts or Portfolio shares;
or
(ii) 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 Contracts, 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 Administrator; or
(iii) arise as a result of any failure by the Administrator
to provide the services and furnish the materials
under the terms of this Agreement; or
(iv) arise out of or result from any material breach of
any representation and/or warranty made by the
Administrator in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Administrator; as limited by and in
accordance with the provisions of Section 7.2(b) and
7.2(c) hereof.
7.2(b). The Administrator 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.
7.2(c). The Administrator 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 Administrator 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 Administrator
of any such claim shall not relieve the Administrator 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 Administrator will be
entitled to participate, at its own expense, in the defense thereof. The
Administrator also shall be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnified Party named in the action. After notice from the
Administrator to such Indemnified Party of the Administrator's election to
assume the defense thereof, the Indemnified Party shall bear
17
<PAGE> 19
the fees and expenses of any additional counsel retained by it, and the
Administrator will not be liable to such Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.2(d). The Company agrees promptly to notify the Administrator 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 Contracts or the
operation of each Account in which the Portfolios are made available.
7.3. INDEMNIFICATION BY THE ADVISER
7.3(a). The Adviser agrees to indemnify and hold harmless the Company
and 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 purposes of
this Section 7.3) 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, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements:
(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 Trust (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
Adviser or the Trust by or on behalf of the Company,
the Administrator, the Transfer Agent, Counsel for
the Trust, the independent public accountant to the
Trust, or any person or entity that is not acting as
agent for or controlled by the Adviser for use in the
registration statement or prospectus for the Trust or
in sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of
the Contracts or Portfolio shares; or
(ii) 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 Contracts, or any
amendment thereof or supplement thereto, or the
omission or
18
<PAGE> 20
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 Adviser; or
(iii) arise as a result of any failure by the Adviser to
provide the services and furnish the materials under
the terms of this Agreement; or
(iv) 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 Section 7.3(b) and 7.3(c) hereof.
7.3(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 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.
7.3(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 Indemnified Party
named in the action. After notice from the Adviser to such Indemnified 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 Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other then reasonable costs
of investigation.
7.3(d). The Company agrees to promptly notify the Adviser of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in
19
<PAGE> 21
connection with this Agreement, the issuance or sale of the Contracts, with
respect to the operation of each Account, or the sale or acquisition of shares
of the Trust.
7.4. INDEMNIFICATION BY THE TRUST
7.4(a). The Trust agrees to indemnify and hold harmless the Company and
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 purposes of
this Section 7.4) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(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 Trust (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 the Trust by
or on behalf of the Adviser, the Company, the
Transfer Agent, or the Administrator for use in the
registration statement or prospectus for the Trust or
in sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of
the Contracts or Portfolio shares; or
(ii) 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 Contracts, 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 Trust; or
(iii) arise as a result of any failure by the Trust to
provide the services and furnish the materials under
the terms of this Agreement; or
20
<PAGE> 22
(iv) arise out of or result from any material breach of
any representation and/or warranty made by the Trust
in this Agreement or arise out of or result from any
other material breach of this Agreement by the Trust;
as limited by and in accordance with the provisions
of Section 7.4(b) and 7.4(c) hereof.
7.4(b). The Trust 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 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.
7.4(c). The Trust 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 Trust 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 Trust of any
such claim shall not relieve the Trust 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 Trust will be entitled to participate, at
its own expense, in the defense thereof. The Trust also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Trust to such Indemnified Party of
the Trust'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
Trust will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other then reasonable costs
of investigation.
7.4(d). The Company agrees to promptly notify the Trust 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 Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
7.5. INDEMNIFICATION BY TRANSFER AGENT
7.5(a). The Transfer Agent 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
(collectively, the "Indemnified Parties" for purposes of this Section 7.5)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Transfer Agent) or litigation
(including legal and other expenses) to which the Indemnified Parties may
21
<PAGE> 23
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements:
(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 Trust (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 Trust
or the Transfer Agent by or on behalf of the Company,
the Adviser, the Administrator, Counsel for the
Trust, the independent public accountant to the
Trust, or any person or entity that is not acting as
agent for or controlled by the Transfer Agent for use
in the registration statement or prospectus for the
Trust or in sales literature (or any amendment or
supplement) or otherwise for use in connection with
the sale of the Contracts or Portfolio shares; or
(ii) 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 Contracts, 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 Transfer Agent; or
(iii) arise as a result of any failure by the Transfer
Agent to provide the services and furnish the
materials under the terms of this Agreement; or
(iv) arise out of or result from any material breach of
any representation and/or warranty made by the
Transfer Agent in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Transfer Agent; as limited by and in
accordance with the provisions of Section 7.5(b) and
7.5(c) hereof.
7.5(b). The Transfer Agent shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed
22
<PAGE> 24
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.
7.5(c). The Transfer Agent 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 Transfer Agent 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 Transfer Agent
of any such claim shall not relieve the Transfer Agent 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 Transfer Agent will be
entitled to participate, at its own expense, in the defense thereof. The
Transfer Agent also shall be entitled to assume the defense thereof, with
counsel satisfactory to the Indemnified Party named in the action. After notice
from the Transfer Agent to such Indemnified Party of the Transfer Agent'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 Transfer
Agent will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.5(d). The Company agrees promptly to notify the Transfer Agent 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 Contracts or the
operation of each Account in which the Portfolios are made available.
ARTICLE VIII. APPLICABLE LAW
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Massachusetts.
8.2. 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
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
23
<PAGE> 25
ARTICLE IX. TERMINATION
9.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon
six-months advance written notice delivered to the
other parties; or
(b) termination by the Company by written notice to the
Trust, the Adviser, the Transfer Agent and the
Administrator 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 Contracts. Reasonable advance
notice of election to terminate shall be furnished by
the Company, said termination to be effective ten
(10) days after receipt of notice unless the Trust
makes available a sufficient number of shares to
reasonably meet the requirements of the Account
within said ten (10) day period; or
(c) termination by the Company upon written notice to the
Trust, the Adviser, the Transfer Agent and the
Administrator 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 medium of the Contracts issued or to be
issued by the Company. The terminating party shall
give prompt notice to the other parties of its
decision to terminate; or
(d) termination by the Company upon written notice to the
Trust, the Adviser and the Administrator 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
(e) termination by the Company upon written notice to the
Trust, the Adviser, the Transfer Agent and the
Administrator with respect to any Portfolio in the
event that such Portfolio fails to meet the
diversification requirements specified in Article V
hereof; or
(f) termination by either the Trust, the Adviser, the
Transfer Agent or the Administrator by written notice
to the Company, if either one or more of the Trust,
the Adviser, the Transfer Agent, or the
Administrator, shall determine, in its or their sole
judgment exercised in good faith, that the Company
and/or their affiliated companies has suffered a
material adverse change in its business,
24
<PAGE> 26
operations, financial condition or prospects since
the date of this Agreement or is the subject of
material adverse publicity, provided that the Trust,
the Adviser, the Transfer Agent or the Administrator
will give the Company sixty (60) days' advance
written notice of such determination of its intent to
terminate this Agreement, and provided further that
after consideration of the actions taken by the
Company and any other changes in circumstances since
the giving of such notice, the determination of the
Trust, the Adviser, the Transfer Agent or the
Administrator shall continue to apply on the 60th day
since giving of such notice, then such 60th day shall
be the effective date of termination; or
(g) termination by the Company by written notice to the
Trust, the Adviser, the Transfer Agent and the
Administrator, if the Company shall determine, in its
sole judgment exercised in good faith, that either
the Trust, the Adviser, the Transfer Agent or the
Administrator 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, provided that
the Company will give the Trust, the Adviser, the
Transfer Agent and the Administrator sixty (60) days'
advance written notice of such determination of its
intent to terminate this Agreement, and provided
further that after consideration of the actions taken
by the Trust, the Adviser, the Transfer Agent or the
Administrator and any other changes in circumstances
since the giving of such notice, the determination of
the Company shall continue to apply on the 60th day
since giving of such notice, then such 60th day shall
be the effective date of termination; or
(h) termination by the Trust, the Adviser, the Transfer
Agent or the Administrator by written notice to the
Company, if the Company gives the Trust, the Adviser,
the Transfer Agent and the Administrator the written
notice specified in Section 1.4 hereof and at the
time such notice was given there was no notice of
termination outstanding under any other provision of
this Agreement; provided, however any termination
under this Section 9.1(h) shall be effective sixty
(60) days after the notice specified in Section 1.4
was given; or
(i) termination by any party upon the other party's
breach of any representation in Article 2 or any
material provision of this Agreement, which breach
has not been cured to the satisfaction of the
terminating party within ten (10) days after written
notice of
25
<PAGE> 27
such breach is delivered to the Trust or the Company,
as the case may be; or
(j) termination by the Trust, the Adviser, the Transfer
Agent or Administrator by written notice to the
Company in the event an Account or Contract is not
registered (unless exempt from registration) or sold
in accordance with applicable federal or state law or
regulation, or the Company fails to provide
pass-through voting privileges as specified in
Section 3.4.
9.2 EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Trust shall at the option of the Company, continue to make
available additional shares of the Trust pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts") unless such
further sale of Trust shares is proscribed by law, regulation or applicable
regulatory body, or unless the Trust determines that liquidation of the Trust
following termination of this Agreement is in the best interests of the Trust
and its shareholders. Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to direct reallocation of investments in
the Trust, redemption of investments in the Trust and/or investment in the Trust
upon the making of additional purchase payments under the Existing Contracts.
The parties agree that this Section 9.2 shall not apply to any terminations
under Article VI and the effect of such Article VI terminations shall be
governed by Article VI of this Agreement.
9.3. The Company shall not redeem Trust shares attributable to the
Contracts (as distinct from Trust 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 SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust, the Adviser and the
Administrator the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Trust and the Adviser) 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 Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Trust or the Adviser 30 days notice of its intention to do so.
ARTICLE X. NOTICES
Any notice shall be sufficiently given when 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.
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<PAGE> 28
If to the Trust:
One Group Investment Trust
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: James F. Laird, Jr.
If to the Administrator:
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: Karen Tackett, Director Strategic Development
If to the Transfer Agent:
Nationwide Investors Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
Attn.: Karen Tackett
If to the Adviser:
Banc One Investment Advisors Corporation
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43271-0211
Attn: Mark A. Beeson
If to the Company: With a copy to:
Hartford Life and Annuity Hartford Life and Annuity
Insurance Co. Insurance Co.
200 Hopmeadow Street 200 Hopmeadow Street
Simsbury, Connecticut 06070 Simsbury, Connecticut 06070
Attn: Tom Marra Attn: Lynda Godkin, General Counsel
ARTICLE XI. MISCELLANEOUS
11.1. All persons dealing with the Trust must look solely to the
property of the Trust for the enforcement of any claims against the Trust as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Trust. Each of the
Company, the Adviser, the Transfer Agent and the Administrator acknowledges and
agrees that, as provided by the Trust's Amended and Restated Declaration of
Trust, the shareholders, trustees, officers, employees and other
27
<PAGE> 29
agents of the Trust and as Portfolios shall not personally be bound by or liable
for matters set forth hereunder, nor shall resort be had to their private
property for the satisfaction of any obligation or claim hereunder. The Trust's
Amended and Restated Declaration of Trust is on file with the Secretary of State
of Massachusetts.
11.2. 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 Contracts 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.
11.3. 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.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
11.6. 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 (and
other parties hereto) reasonable access to its books and records in connection
with any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
11.7. 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.
11.8. 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, with advance written notice to
the other parties hereto, assign this Agreement or any rights or obligations
hereunder to any affiliate of or company under common control with the Adviser
if such assignee is duly licensed and registered to perform the obligations of
the Adviser under this Agreement.
11.9. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee upon request, copies of the following reports:
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<PAGE> 30
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report
(prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of each
fiscal year;
(b) the Company's June 30th quarterly statements
(statutory), as soon as practical and in any event
within 45 days following such period;
(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or
policyholders, as soon as practical after the
delivery thereof to stockholders;
(d) any registration statement (without exhibits) and
financial reports the Company filed with the
Securities and Exchange Commission or any state
insurance regulator, as soon as practical after the
filing thereof; and
(e) any other public report submitted to the Company by
independent accountants in connection with any
annual, interim or special audit made by them of the
books of the Company, as soon as practical after the
receipt thereof.
11.10 The names "One Group(R) Investment Trust" and `Trustees of One Group(R)
Investment Trust" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated June 7, 1993 to which reference is hereby made and a
copy of which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of `One Group Investment
Trust' entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with any series of Shares of the Trust must look solely to the assets of the
Trust belonging to such series for the enforcement of any claims against the
Trust.
[SIGNATURE PAGES FOLLOW]
29
<PAGE> 31
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in as name and on its behalf by its duly authorized
representative effective as of the date specified above.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY on behalf of Itself and each of its
Accounts named in Schedule A hereto, as amended from time to time
By: /s/ PETER CUMMINS
---------------------------------
Peter Cummins
Its: Senior Vice President
ONE GROUP(R)INVESTMENT TRUST
By: /s/ James F. Laird, Jr.
---------------------------------
James F. Laird, Jr.
Its: President and Treasurer
NATIONWIDE ADVISORY SERVICES, INC.
By: /s/ Christopher A. Cray
---------------------------------
Christopher A. Cray
Its: Treasurer
NATIONWIDE INVESTORS SERVICES, INC.
By: /s/ Christopher A. Cray
---------------------------------
Christopher A. Cray
Its: Treasurer
BANC ONE INVESTMENT ADVISORS CORPORATION
By: /s/ Mark A. Beeson
---------------------------------
Mark A. Beeson
Its: Senior Managing Director
30
<PAGE> 32
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Name of Separate Account and Date Established Contract Form Numbers
by Board of Directors Funded by Separate Account
- ----------------------------------------------------------------------------------------
<S> <C>
Hartford Life And Annuity Insurance Company
Separate Account Six ("Separate Account Six") HL VA 94
- ----------------------------------------------------------------------------------------
ICMG Registered Variable Life
Separate Account One ("Separate Account One") GVL-95
- -----------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 33
SCHEDULE B
PARTICIPATING LIFE INVESTMENT TRUST PORTFOLIOS
----------------------------------------------
SEPARATE ACCOUNT SIX
One Group Investment Trust Bond Portfolio
One Group Investment Trust Large Cap Growth Portfolio
One Group Investment Trust Diversified Mid Cap Portfolio
One Group Investment Trust Diversified Equity Portfolio
One Group Investment Trust Mid Cap Value Portfolio
SEPARATE ACCOUNT ONE
One Group Investment Trust Government Bond Portfolio
One Group Investment Trust Bond Portfolio
One Group Investment Trust Balanced Portfolio
One Group Investment Trust Large Cap Growth Portfolio
One Group Investment Trust Equity Index Portfolio
One Group Investment Trust Mid Cap Growth Portfolio
One Group Investment Trust Diversified Mid Cap Portfolio
One Group Investment Trust Diversified Equity Portfolio
One Group Investment Trust Mid Cap Value Portfolio
32
<PAGE> 1
ITEM 23(h)(8)
AMENDMENT TO PARTICIPATION AGREEMENT
EFFECTIVE AS OF JANUARY 1, 2000
AMONG HARTFORD LIFE AND ANNUITY INSURANCE COMPANY,
ONE GROUP INVESTMENT TRUST,
BANC ONE INVESTMENT ADVISORS CORPORATION, AND
ONE GROUP ADMINISTRATIVE SERVICES, INC.
<PAGE> 2
AMENDMENT TO PARTICIPATION AGREEMENT
This Amendment to the Participation Agreement is made effective as of
January 1, 2000 among Hartford Life and Annuity Insurance Company (the
"Company"), One Group(R) Investment Trust (the "Trust"), Banc One Investment
Advisors Corporation (the "Adviser"), and One Group Administrative Services,
Inc., a Delaware corporation (the "Services Company").
BACKGROUND INFORMATION
1. The Trust, the Company, Nationwide Advisory Services, Inc.,
Nationwide Investors Services, Inc. ("Nationwide Investors"),
and the Adviser entered into a Participation Agreement
effective as of March 31, 1999 (the "Participation Agreement")
in order to permit the Company to utilize the Trust as an
investment vehicle for certain variable insurance products;
2. Effective January 1, 2000, Nationwide Advisory Services, Inc.
and Nationwide Investors will no longer serve as administrator
and transfer agent, respectively to the Trust; and
3. In order to reflect the replacement of Nationwide Advisory
Services, Inc. and Nationwide Investors and the appointment of
the Services Company as administrator, the parties wish to
amend the Participation Agreement.
STATEMENT OF AGREEMENT
The parties hereby acknowledge the accuracy of the foregoing Background
Information and hereby agree as follows:
Section 1. DEFINITION OF TERMS. Unless otherwise defined herein, all
capitalized terms shall have the meaning ascribed to them in the Participation
Agreement.
Section 2. AMENDMENT TO REFLECT THE APPOINTMENT OF SERVICES COMPANY AS
ADMINISTRATOR. In order to reflect the replacement of Nationwide Advisory
Services, Inc. as administrator by the Services Company, all references to
"Nationwide Advisory Services, Inc." in the Participation Agreement are hereby
changed to "One Group Administrative Services, Inc." By execution of this
Amendment, the Services Company agrees to be bound by and perform the duties and
obligations specified for the Administrator in the Participation Agreement
effective January 1, 2000. Notwithstanding the foregoing, the Services Company
shall not be liable for losses, claims, damages, liabilities or litigation
arising from the acts or omissions of Nationwide Advisory Services, Inc.
Section 3. AMENDMENT TO REFLECT THE REPLACEMENT OF NATIONWIDE
INVESTORS. In order to reflect that Nationwide Investors no longer provides
transfer agency services to the Trust, all references to "Nationwide Investors
Services, Inc." and "Transfer Agent" shall be deleted from the Participation
Agreement, including, without limitation, Section 7.5 of the Participation
Agreement.
1
<PAGE> 3
Section 4. CONFORMING AMENDMENT TO SECTIONS 1.1 AND 1.3. Sections 1.1
and 1.3 of the Participation Agreement are hereby deleted in their entirety and
the following new Sections 1.1 and 1.3 are substituted in their place:
"1.1. The Trust agrees to make available for purchase by the
Company shares of the Portfolios and shall execute orders placed for
each Account on a daily basis at the net asset value next computed
after receipt by the Trust or its designee of such order. For purposes
of this Section 1.1, the Company shall be the designee of the Trust for
receipt of such orders from each Account and receipt by such designee
shall constitute receipt by the Trust; provided that the Trust's
designated transfer agent receives notice of such order by 9:30 a.m.
(local time where the Trust processes orders) on the next following
Business Day. Notwithstanding the foregoing, the Company shall use its
best efforts to provide the Trust's designated transfer agent with
notice of such orders by 9:00 a.m. 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 Trust calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission,
as set forth in the Trust's prospectus and statement of additional
information. Notwithstanding the foregoing, the Board of Trustees of
the Trust (hereinafter the "Board") may refuse to permit the Trust 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 Trust agrees to redeem for cash, on the Company's
request, any full or fractional shares of the Trust held by the
Company, executing such requests on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the
request for redemption. For purposes of this Section 1.3, the Company
shall be the designee of the Trust for receipt of requests for
redemption from each Account and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust's designated
transfer agent receives notice of such request for redemption on the
next following Business Day in accordance with the timing rules
described in Section 1.1."
Section 5. NOTICES. ARTICLE X is hereby amended by replacing the
address for the Trust, the Administrator, and the Adviser with the following:
If to the Trust:
One Group Investment Trust
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attn: Fund President
If to the Administrator:
One Group Administrative Services, Inc.
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attention: President
If to the Adviser:
Banc One Investment Advisors Corporation
1111 Polaris Parkway, Suite B2
2
<PAGE> 4
Columbus, Ohio 43240
Attention: Peter W. Atwater
Section 6. MISCELLANEOUS. Except as otherwise set forth herein, the
Participation Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment effective as of January 1, 2000.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
on behalf of Itself and each of its Accounts named in
Schedule A to the Participation Agreement, as amended from time to time
By: /s/
------------------------------
Its:
ONE GROUP(R)INVESTMENT TRUST
By: /s/ MARK A. BEESON
-----------------------------
Its: President
ONE GROUP ADMINISTRATIVE SERVICES, INC.
By: /s/ ROBERT L. YOUNG
-----------------------------
Its: Vice President
BANC ONE INVESTMENT ADVISORS CORPORATION
By: /s/ PETER W. ATWATER
----------------------------
Its Chief Operating Officer
3
<PAGE> 1
ITEM 23(h)(9)
FUND PARTICIPATION AGREEMENT
EFFECTIVE AS OF AUGUST 2, 1999
AMONG AMERICAN GENERAL ANNUITY INSURANCE COMPANY,
ONE GROUP INVESTMENT TRUST,
BANC ONE INVESTMENT ADVISORS CORPORATION,
NATIONWIDE ADVISORY SERVICES, INC., AND
NATIONWIDE INVESTORS SERVICES, INC.
<PAGE> 2
FUND PARTICIPATION AGREEMENT
----------------------------
This Fund Participation Agreement (the "Agreement"), effective as of
the 2nd day of August, 1999, is made by and among American General Annuity
Insurance Company ("Company"), One Group(R) Investment Trust (the "Trust"), the
Trust's investment advisor, Banc One Investment Advisors Corporation (the
"Adviser"), the Trust's administrator, Nationwide Advisory Services, Inc. (the
"Administrator"), and the Trust's transfer agent, Nationwide Investors Services,
Inc. (the "Transfer Agent").
WHEREAS, the Trust engages in business as an open-end
management investment company and is available to act as 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 Insurance Products");
WHEREAS, insurance companies desiring to utilize the Trust
as an investment vehicle under their Variable Insurance Products
are required to enter into participation agreements with the
Trust and the Administrator (the "Participating Insurance
Companies");
WHEREAS, shares of the Trust are divided into several series
of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of
which may be made available for Variable Insurance Products of
Participating Insurance Companies;
WHEREAS, the Trust intends to offer shares of the series set
forth on Schedule B (each such series hereinafter referred to as
a "Portfolio") as may be amended from time to time by mutual
agreement of the parties hereto under this Agreement to the
accounts of the Company specified on Schedule A (hereinafter
referred to individually as an "Account"; collectively, the
"Accounts")
WHEREAS, the Trust has obtained an order from the Securities
and Exchange Commission, granting the Trust 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 Trust to be sold to and
held by Variable Insurance Product separate accounts of both
affiliated and unaffiliated insurance companies (hereinafter the
"Shared Funding Exemptive Order");
WHEREAS, the Trust 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");
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;
WHEREAS, the Adviser is the investment adviser of the
Portfolios of the Trust;
WHEREAS, the Company has registered certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, to the extent permitted by applicable insurance
laws and regulations, the Company intends to purchase shares in
the Portfolios on behalf of each Account to fund certain of the
aforesaid Variable Insurance Products and the Trust is authorized
to sell such shares to each such Account at net asset value.
NOW, THEREFORE, in consideration of their mutual promises,
the Company, the Trust, the Adviser, the Administrator, and the
Transfer Agent agree as follows:
-1-
<PAGE> 3
ARTICLE 1
THE CONTRACTS
-------------
1. The Company represents that it has established each of the Accounts specified
on Schedule A as a separate account under Texas law, and has registered each
such Account as a unit investment trust under the 1940 Act to serve as an
investment vehicle for variable annuity contracts and/ or variable life
contracts offered by the Company (the "Contracts"). The Contracts provide for
the allocation of net amounts received by the Company to separate divisions of
the Account for investment in the shares of the Portfolios. Selection of a
particular division is made by the Contract owner who may change such selection
from time to time in accordance with the terms of the applicable Contract. The
Company agrees to make every reasonable effort to market its Contracts. In
marketing its Contracts, the Company will comply with all applicable state or
Federal laws.
ARTICLE 2
TRUST SHARES
------------
2.1 The Trust agrees to make available for purchase by the Company
shares of the Portfolios and shall execute orders placed for each Account on a
daily basis at the net asset value next computed after receipt by the Trust or
its designee of such order. For purposes of this Section 2.1, the Company shall
be the designee of the Trust for receipt of such orders from the Account and
receipt by such designee shall constitute receipt by the Trust; provided that
the Transfer Agent receives notice of such order by 10:00 a.m. Eastern Time on
the next following Business Day ("Trade Date plus 1"). Notwithstanding the
foregoing, the Company shall use its best efforts to provide the Transfer Agent
with notice of such orders by 9:30 a.m. Eastern Time on Trade Date plus 1.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Trust calculates its net asset value pursuant to
the rules of the Securities and Exchange Commission, as set forth in the Trust's
prospectus and statement of additional information. Notwithstanding the
foregoing, the Board of Trustees of the Trust (hereinafter the "Board") may
refuse to permit the Trust 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.
2.2. The Trust agrees that shares of the Trust will be sold only to
Participating Insurance Companies for their Variable Insurance Products and, in
the Trust's discretion, to qualified pension and retirement plans. No shares of
any Portfolio will be sold to the general public.
2.3. The Trust and the Transfer Agent agree to redeem for cash, on the
Company's request, any full or fractional shares of the Trust held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Trust or its designee of the request for
redemption. For purposes of this Section 2.3, the Company shall be the designee
of the Trust for receipt of requests for redemption from each Account and
receipt by such designee shall constitute receipt by the Trust; provided that
the Transfer Agent receives notice of such request for redemption on Trade Date
plus 1 in accordance with the timing rules described in Section 2.1.
2.4. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Trust shall be made in
accordance with the provisions of such prospectus. The Accounts of the Company,
under which amounts may be invested in the Trust are listed on Schedule A
attached hereto and incorporated herein by reference, as such Schedule A may be
amended from time to time by mutual written agreement of all of the parties
hereto. The Company will give the Trust and the Adviser concurrent written
notice of its intention to make available in the future, as a funding vehicle
under the Contracts, any other investment company.
-2-
<PAGE> 4
2.5. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares and
dollar amount of each Portfolio to be purchased or redeemed. In the event of net
purchases, the Company shall pay for Portfolio shares on Trade Date plus 1.
Payment shall be in federal funds transmitted by wire. In the event of net
redemptions, the Portfolio shall pay the redemption proceeds in federal funds
transmitted by wire by 2:00 p.m. Eastern Time on Trade Date plus 1.
Notwithstanding the foregoing, if the payment of redemption proceeds on the next
Business Day would require the Portfolio to dispose of Portfolio securities or
otherwise incur substantial additional costs, and if the Portfolio has
determined to settle redemption transactions for all shareholders on a delayed
basis, proceeds shall be wired to the Company within seven (7) days and the
Portfolio shall notify in writing the person designated by the Company as the
recipient for such notice of such delay by 3:00 p.m.Eastern Time on Trade Date
plus 1.
2.6. Issuance and transfer of the Trust's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
2.7. The Administrator shall use its best efforts to furnish same day
notice by 5:00 p.m. Eastern Time (by wire or telephone, followed by written
confirmation) to the Company of any dividends or capital gain distributions
payable on the Trust's shares. The Company hereby elects to receive all such
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 dividends and capital gain distributions
in cash. The Trust shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
2.8. The Administrator shall make the net asset value per share of each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6:30 p.m.
Eastern Time. In the event that the Administrator is unable to meet the 6:30
p.m. time stated immediately above, then the Administrator shall provide the
Company with additional time to notify the Administrator of purchase or
redemption orders pursuant to Sections 2.1 and 2.3, respectively, above. Such
additional time shall be equal to the additional time that the Administrator
takes to make the net asset values available to the Company.
2.9. If the Administrator provides materially incorrect share net asset
value information through no fault of the Company, the Company shall be entitled
to an adjustment with respect to the Trust shares purchased or redeemed to
reflect the correct net asset value per share as subsequently determined by the
Administrator. The determination of the materiality of any net asset value
pricing error shall be based on the Trust's policy for correction of pricing
errors (the "Pricing Policy"). The Company shall correct such error in its
records and in the records prepared by it for Contract owners in accordance with
information provided by the Administrator. Any material error in the calculation
or reporting of net asset value per share, dividend or capital gain information
shall be reported promptly upon discovery to the Company.
ARTICLE 3
PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS, VOTING
------------------------------------------------------------------
3.1 The Trust shall provide the Company with as many printed copies of
the Trust's current prospectus as the Company may reasonably request. The
Administrator will provide the Company with a copy of the statement of
additional information suitable for duplication. If requested by the Company, in
lieu of providing printed copies, the Trust shall provide camera-ready film or
computer diskettes containing the Trust's prospectus and statement of additional
information in order for the Company once each year (or more frequently if the
prospectus and/or statement of additional information for the Trust is amended
during the year) to have the prospectus for the Contracts and the Trust's
prospectus printed together in one document or separately. The Company may elect
to print the Trust's prospectus and/or its statement of additional
-3-
<PAGE> 5
information in combination with other investment companies' prospectuses and
statements of additional information.
3.2(a). Except as otherwise provided in this Section 3.2, all expenses
of preparing, setting in type and printing and distributing Trust prospectuses
and statements of additional information shall be the expense of the Company.
For prospectuses and statements of additional information provided by the
Company to its existing owners of Contracts in order to update disclosure as
required by the 1933 Act and/or the 1940 Act, the cost of setting in type,
printing and distributing shall be borne by the Trust. If the Company chooses to
receive camera-ready film or computer diskettes in lieu of receiving printed
copies of the Trust's prospectus and/or statement of additional information, the
Trust shall bear the cost of typesetting to provide the Trust's prospectus
and/or statement of additional information to the Company in the format in which
the Trust is accustomed to formatting prospectuses and statements of additional
information, respectively, and the Company shall bear the expense of adjusting
or changing the format to conform with any of its prospectuses and/or statements
of additional information. In such event, the Trust 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 Contracts, and y is the Trust's per
unit cost of printing the Trust's prospectuses. The same procedures shall be
followed with respect to the Trust's statement of additional information. The
Trust shall not pay any costs of typesetting, printing and distributing the
Trust's prospectus and/or statement of additional information to prospective
Contract owners.
3.2(b). The Trust, at the Company's expense, shall provide the Company
with copies of Annual and Semi-Annual Reports (the "Reports") in such quantity
as the Company shall reasonably require for distributing to Contract owners. The
Trust, at its expense, shall provide the Contract owners designated by the
Company with copies of its proxy statements and other communications to
shareholders (except for prospectuses and statements of additional information,
and which are covered in Section 3.2(a) above, and Reports). The Trust shall not
pay any costs of distributing Reports and other communications to prospective
Contract owners.
3.2(c). The Company agrees to provide the Trust or its designee with
such information as may be reasonably requested by the Trust to assure that the
Trust's expenses do not include the cost of typesetting, printing or
distributing any of the foregoing documents other than those actually
distributed to existing Contract owners.
3.2(d). The Trust shall pay no fee or other compensation to the Company
under this Agreement, except that if the Trust or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Trust may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Trust in writing.
3.2(e) All expenses, including expenses to be borne by the Trust
pursuant to Section 3.2 hereof, incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust 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 Trust, in
accordance with applicable state laws prior to their sale. The Trust shall bear
the expenses for the cost of registration and qualification of the Trust's
shares.
3.3. If and to the extent required by law, the Company shall with
respect to proxy material distributed by the Trust to Contract owners designated
by the Company to whom voting privileges are required to be extended:
(i) solicit voting instructions from Contract owners;
(ii) vote the Trust shares in accordance with instructions
received from Contract owners; and
(iii) vote Trust shares for which no instructions have been
received in the same proportion as Trust 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-
-4-
<PAGE> 6
through voting privileges for variable contract owners. The Company
reserves the right to vote Trust shares held in any segregated asset
account in its own right, to the extent permitted by law.
ARTICLE 4
SALES MATERIAL AND INFORMATION
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust, the Adviser or their designee, drafts of the separate accounts
prospectuses and statements of additional information and each piece of sales
literature or other promotional material prepared by the Company or any person
contracting with the Company to prepare such material in which the Trust, the
Adviser or the Administrator is described, at least ten Business Days prior to
its use. No such material shall be used if the Trust, the Adviser, the
Administrator or their designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. Neither the Company nor any person contracting with the Company to
prepare sales literature or other promotional material shall give any
information or make any representations or statements on behalf of the Trust or
concerning the Trust in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or Trust
prospectus, as such registration statement or Trust prospectus may be amended or
supplemented from time to time, or in reports to shareholders or proxy
statements for the Trust, or in sales literature or other promotional material
approved by the Trust or its designee, except with the permission of the Trust
or its designee.
4.3. The Adviser shall furnish, or shall cause to be furnished, to the
Company or its designee, each piece of sales literature or other promotional
material prepared by the Trust in which the Company or its Accounts, are
described at least ten Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.4. Neither the Trust, the Administrator, the Transfer Agent, nor the
Adviser shall give any information or make any representations on behalf of the
Company or concerning the Company, each Account, or the Contracts, other than
the information or representations contained in a registration statement or
prospectus for the Contracts, as such registration statement or prospectus may
be amended or supplemented from time to time, or in published reports or
solicitations for voting instruction 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 Trust will provide to the Company at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, applications for exemptions, requests
for no-action letters, and all amendments to any of the above, that relate to
the Trust or its shares, promptly after the filing of such document with the
Securities and Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Trust, upon the Trust's request,
at least one complete copy of all registration statements, prospectuses,
statements of additional information, 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 an Account or Contract,
contemporaneously with the filing of such documents with the Securities and
Exchange Commission or other regulatory authorities.
4.7. For purposes of this Article 4, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: 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
-5-
<PAGE> 7
other advertisement, sales literature, or published article), and educational or
training materials or other communications distributed or made generally
available to some or all agents or employees.
4.8 The Company and its agents shall make no representations concerning
the Trust except those contained in the then-current prospectus and Statement of
Additional Information of the Trust and in current printed sales literature of
the Trust.
ARTICLE 5
ADMINISTRATIVE SERVICES TO CONTRACT OWNERS
------------------------------------------
5. Administrative services to Contract owners shall be the
responsibility of the Company and shall not be the responsibility of the Trust,
the Transfer Agent, the Adviser or the Administrator. The Trust and the
Administrator recognize that the Company will be the sole shareholder of Trust
shares issued pursuant to the Contracts.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
------------------------------
6.1. The Trust represents that it believes, in good faith, that each
Portfolio is currently qualified as a regulated investment companies 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 of the Trust and
that it will notify the Company immediately upon having a reasonable basis for
believing that a Portfolio has ceased to so qualify or that it might not so
qualify in the future.
6.2. The Company represents that it believes, in good faith, that the
Contracts will at all times be treated as annuity contracts under applicable
provisions of the Code, and that it will make every effort to maintain such
treatment and that it will notify the Trust immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
6.3.The Trust represents that it believes, in good faith, that the
Funds will at all times comply with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code, and that it will make every effort to maintain the Trust's' compliance
with such diversification requirements, and that it will notify the Company
immediately upon having a reasonable basis for believing that a Fund has ceased
to so qualify or that a Fund might not so qualify in the future.
6.4 . The Company represents and warrants that the interests of the
Contracts are or will be registered unless exempt and that it will maintain such
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act and that the Contracts will be issued and sold in
compliance with all applicable federal and state laws and regulations. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established each Account prior to any issuance or sale thereof as a
segregated asset account under the Texas Insurance Code and the regulations
thereunder and has registered or, prior to any issuance or sale of the
Contracts, will maintain the registration of each Account as a unit investment
trust in accordance with and to the extent required by the provisions of the
1940 Act and the regulations thereunder, unless exempt therefrom, to serve as a
segregated investment account for the Contracts. The Company shall amend its
registration statement for its contracts under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
Contracts.
6.5. The Company represents that it believes, in good faith, that the
Variable Account is a "segregated asset account" and that interests in the
Variable Account are offered exclusively through the purchase of a "variable
contract," within the meaning of such terms under Section 1.817-5(f) (2) of the
regulations under the Code, and that it will make every effort to continue to
meet such definitional requirements, and that it will notify the Trust
immediately upon having a reasonable basis for believing that such requirements
have ceased to be met or that they might not be met in the future.
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<PAGE> 8
6.6. The Trust represents and warrants that it is and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Trust in an amount no 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. Such bond shall include coverage for larceny and
embezzlement and shall be issued by a relevant bonding company. The Trust will
notify the Company immediately upon having a reasonable basis for believing that
a Portfolio no longer has the coverage required by this Section 6.6.
6.7. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other entities dealing with the
money or securities of the Trust are and shall continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Trust, in an amount not less than five million dollars ($5,000,000). Such bond
shall include coverage for larceny and embezzlement and 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 Trust immediately upon having a reasonable basis
for believing that the Company no longer has the coverage required by this
Section 6.7.
6.8. The Trust represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Trust
undertakes to have a majority of the disinterested members of the Board,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
6.9. The Adviser, the Administrator and Transfer Agent each represents
and warrants that it complies with all applicable federal and state laws and
regulations and that it will perform its obligations for the Trust and the
Company in compliance with the laws and regulations of its state of domicile and
any applicable state and federal laws and regulations.
ARTICLE 7
STATEMENTS AND REPORTS
----------------------
7.1 The Administrator or its designee shall provide the Company within
five (5) business days after the end of each month a monthly statement of
account confirming all transactions made during that month in the Account.
7.2 The Trust and Administrator agree to provide the Company no later
than March 1 of each year with the investment advisory and other expenses of the
Trust incurred during the Trust's most recently completed fiscal year, to permit
the Company to fulfill its prospectus disclosure obligations under the SEC's
variable annuity fee table requirements.
ARTICLE 8
POTENTIAL CONFLICTS
-------------------
8.1.The Board will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. 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 annuity contract owners and variable life
insurance contract 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.
8.2. The Company will report in writing any potential or existing
material irreconcilable conflict of which it is aware to the Administrator. Upon
receipt of such report, the Administrator shall report the potential
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<PAGE> 9
or existing material irreconcilable conflict to the Board. The Administrator
shall also report to the Board on a quarterly basis whether the Company has
reported any potential or existing material irreconcilable conflicts during the
previous calendar quarter. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.
8.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, 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 trustees), take whatever steps are necessary to remedy 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 Trust or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Trust, 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. No charge
or penalty will be imposed as a result of such withdrawal. The Company agrees
that it bears the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and the cost of such
remedial action, and these responsibilities will be carried out with a view only
to the interests of Contract owners.
8.4. 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 Trust's election, to withdraw the affected Account's
investment in the Trust 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. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take remedial
action in the event of a Board determination of an irreconcilable material
conflict and the cost of such remedial action, and these responsibilities will
be carried out with a view only to the interests of Contract owners.
8.5. For purposes of Sections 8.3 through 8.4 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 Trust be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 8.3 through 8.4 to
establish a new funding medium for the Contracts 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.
8.6. 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 (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Trust 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, to the extent such rules are
applicable.
8.7. Each of the Company and the Adviser shall 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 them by the
provisions hereof and in the Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Board. Without limiting the generality of the foregoing or the Company's
obligations under Section 8.2, the Company shall provide to the Administrator a
written report to the Board no later than January 15th of each year indicating
whether any material irreconcilable conflicts have arisen during the prior
fiscal year of the Trust. All reports received by the Board of potential or
existing conflicts, and all Board action with regard to determining the
existence of a
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<PAGE> 10
conflict, notifying Participating Insurance Companies of a conflict, and
determining whether any proposed action adequately remedies a conflict, shall be
properly recorded in the minutes of the Board or other appropriate records, and
such minutes or other records shall be made available to the Securities and
Exchange Commission upon request.
ARTICLE 9
INDEMNIFICATION
---------------
9.1. INDEMNIFICATION BY THE COMPANY
9.1(a). The Company agrees to indemnify and hold harmless the Trust,
the Administrator, the Transfer Agent, the Adviser, and each member of their
respective Boards and officers and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 9.1) 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 Trust's shares or the Contracts 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 or prospectus for the Contracts or
contained in the Contracts or sales literature for the Contracts
(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 Trust for use in the registration statement or
prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Trust 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
Trust not supplied by the Company, or persons under its control
and other than statements or representations authorized by the
Trust) or unlawful conduct of the Company or persons under its
control, with respect to the sale or distribution of the
Contracts or Trust 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
Trust 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 Trust 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 Section 9.1(b) and 9.1(c)
hereof.
9.1(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
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<PAGE> 11
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 or duties under this Agreement.
9.1(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 as own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
Indemnified Party named in the action. After notice from the Company to such
Indemnified 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 shall not be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof
other than reasonable costs of investigation.
9.1(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 Trust shares or the Contracts or the operation of
the Trust.
9.2. INDEMNIFICATION BY ADMINISTRATOR
9.2(a). The Administrator 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
(collectively, the "Indemnified Parties" for purposes of this Section 9.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Administrator) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(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
Trust (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 Trust or the
Administrator by or on behalf of the Company, the Adviser, the
Transfer Agent, Counsel for the Trust , the independent public
accountant to the Trust , or any person or entity that is not
acting as agent for or controlled by the Administrator for use in
the registration statement or prospectus for the Trust or in
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Portfolio
shares; or
(ii) 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 Contracts, 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 Administrator; or
(iii) arise as a result of any failure by the Administrator to
provide the services and furnish the materials under the terms of
this Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Administrator in this
Agreement or arise out of or result from any other material
breach of this
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<PAGE> 12
Agreement by the Administrator; as limited by and in accordance
with the provisions of Section 9.2(b) and 9.2(c) hereof.
9.2(b). The Administrator 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.
9.2(c). The Administrator 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 Administrator 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 Administrator
of any such claim shall not relieve the Administrator 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 Administrator will be
entitled to participate, at its own expense, in the defense thereof. The
Administrator also shall be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnified Party named in the action. After notice from the
Administrator to such Indemnified Party of the Administrator'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 Administrator will
not be liable to such Indemnified Party under this Agreement for any legal or
other expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof other than reasonable costs of
investigation.
9.2(d). The Company agrees promptly to notify the Administrator 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 Contracts or the
operation of each Account in which the Portfolios are made available.
9.3. INDEMNIFICATION BY THE ADVISER
9.3(a). The Adviser agrees to indemnify and hold harmless the Company
and 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 purposes of
this Section 9.3) 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, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements:
(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
Trust (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 Adviser or
the Trust by or on behalf of the Company, the Administrator, the
Transfer Agent, Counsel for the Trust, the independent public
accountant to the Trust, or any person or entity that is not
acting as agent for or controlled by the Adviser for use in the
registration statement or prospectus for the Trust or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Portfolio shares;
or
(ii) 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 Contracts, 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 Adviser; or
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<PAGE> 13
(iii) arise as a result of any failure by the Adviser to provide
the services and furnish the materials under the terms of this
Agreement; or
(iv) 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 Section 9.3(b) and 9.3(c)
hereof.
9.3(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 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.
9.3(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 Indemnified Party
named in the action. After notice from the Adviser to such Indemnified 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 Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other then reasonable costs
of investigation.
9.3(d). The Company agrees to promptly notify the Adviser 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 Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
9.4. INDEMNIFICATION BY THE TRUST
9.4(a). The Trust agrees to indemnify and hold harmless the Company and
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 purposes of
this Section 9.4) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(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
Trust (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 the Trust by or on
behalf of the Adviser, the Company, the Transfer Agent, or the
Administrator for use in the registration statement or prospectus
for the Trust or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Contracts or Portfolio shares; or
(ii) 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 Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material fact
required to be stated
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<PAGE> 14
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 Trust; or
(iii) arise as a result of any failure by the Trust to provide
the services and furnish the materials under the terms of this
Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Trust; as limited by and in
accordance with the provisions of Section 9.4(b) and 9.4(c)
hereof.
9.4(b). The Trust 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 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.
9.4(c). The Trust 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 Trust 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 Trust of any
such claim shall not relieve the Trust 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 Trust will be entitled to participate, at
its own expense, in the defense thereof. The Trust also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Trust to such Indemnified Party of
the Trust'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
Trust will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other then reasonable costs
of investigation.
9.4(d). The Company agrees to promptly notify the Trust 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 Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
9.5. INDEMNIFICATION BY TRANSFER AGENT
9.5(a). The Transfer Agent 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
(collectively, the "Indemnified Parties" for purposes of this Section 9.5)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Transfer Agent) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(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 Trust
(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 Trust or the Transfer Agent by or on behalf of the Company, the
Adviser, the Administrator, Counsel for the Trust, the independent
public accountant to the Trust, or any person or entity that is not
acting as agent for or controlled by the Transfer Agent for use in the
registration statement or prospectus for the Trust or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Portfolio shares; or
-13-
<PAGE> 15
(ii) 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 Contracts, 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 Transfer Agent; or
(iii) arise as a result of any failure by the Transfer Agent to
provide the services and furnish the materials under the terms of
this Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Transfer Agent in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Transfer Agent; as limited by and
in accordance with the provisions of Section 9.5(b) and 9.5(c)
hereof.
9.5(b). The Transfer Agent 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.
9.5(c). The Transfer Agent 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 Transfer Agent 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 Transfer Agent
of any such claim shall not relieve the Transfer Agent 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 Transfer Agent will be
entitled to participate, at its own expense, in the defense thereof. The
Transfer Agent also shall be entitled to assume the defense thereof, with
counsel satisfactory to the Indemnified Party named in the action. After notice
from the Transfer Agent to such Indemnified Party of the Transfer Agent'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 Transfer
Agent will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
9.5(d). The Company agrees promptly to notify the Transfer Agent 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 Contracts or the
operation of each Account in which the Portfolios are made available.
ARTICLE 10
APPLICABLE LAW
--------------
10.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Massachusetts.
10.2. 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
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE 11
TERMINATION
-----------
11.1. This Agreement shall continue in full force and effect until the
first to occur of:
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<PAGE> 16
(a) termination by any party for any reason upon ninety days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Trust,
the Adviser, the Transfer Agent and the Administrator 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 Contracts. Reasonable advance notice of election to terminate
shall be furnished by the Company, said termination to be effective
ten (10) days after receipt of notice unless the Trust makes available
a sufficient number of shares to reasonably meet the requirements of
the Account within said ten (10) day period; or
(c) termination by the Company upon written notice to the Trust,
the Adviser, the Transfer Agent and the Administrator 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 medium of the Contracts issued or to be issued
by the Company. The terminating party shall give prompt notice to the
other parties of its decision to terminate; or
(d) termination by the Company upon written notice to the Trust,
the Adviser and the Administrator 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
(e) termination by the Company upon written notice to the Trust,
the Adviser, the Transfer Agent and the Administrator with respect to
any Portfolio in the event that such Portfolio fails to meet the
diversification requirements specified in Section 6.3 hereof; or
(f) termination by either the Trust, the Adviser, the Transfer
Agent or the Administrator by written notice to the Company, if either
one or more of the Trust, the Adviser, the Transfer Agent, or the
Administrator, shall determine, in its or their sole judgment
exercised in good faith, that the Company and/or their 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, provided
that the Trust, the Adviser, the Transfer Agent or the Administrator
will give the Company sixty (60) days' advance written notice of such
determination of its intent to terminate this Agreement, and provided
further that after consideration of the actions taken by the Company
and any other changes in circumstances since the giving of such
notice, the determination of the Trust, the Adviser, the Transfer
Agent or the Administrator shall continue to apply on the 60th day
since giving of such notice, then such 60th day shall be the effective
date of termination; or
(g) termination by the Company by written notice to the Trust,
the Adviser, the Transfer Agent and the Administrator, if the Company
shall determine, in its sole judgment exercised in good faith, that
either the Trust, the Adviser, the Transfer Agent or the Administrator
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, provided that the
Company will give the Trust, the Adviser, the Transfer Agent and the
Administrator sixty (60) days' advance written notice of such
determination of its intent to terminate this Agreement, and provided
further that after consideration of the actions taken by the Trust,
the Adviser, the Transfer Agent or the Administrator and any other
changes in circumstances since the giving of such notice, the
determination of the Company shall continue to apply on the 60th day
since giving of such notice, then such 60th day shall be the effective
date of termination; or
(h) termination by the Trust, the Adviser, the Transfer Agent or
the Administrator by written notice to the Company, if the Company
gives the Trust, the Adviser, the Transfer Agent and the Administrator
the written notice specified in Section 2.4 hereof and at the time
such notice was given there was no notice of termination outstanding
under any other provision of this Agreement; provided, however any
termination under this Section 11.1(h) shall be effective sixty (60)
days after the notice specified in Section 2.4 was given; or
(i) termination by any party upon the other party's breach of any
representation in Article 6 or a any material provision of this
Agreement, which breach has not been cured to the satisfaction of the
-15-
<PAGE> 17
terminating party within ten (10) days after written notice of such
breach is delivered to the Trust or the Company, as the case may be;
or
(j) termination by the Trust, the Adviser, the Transfer Agent or
Administrator by written notice to the Company in the event an Account
or Contract is not registered (unless exempt from registration) or
sold in accordance with applicable federal or state law or regulation,
or the Company fails to provide pass-through voting privileges as
specified in Section 3.3.
11.2 EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Trust shall at the option of the Company, continue to make
available additional shares of the Trust pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts") unless such
further sale of Trust shares is proscribed by law, regulation or applicable
regulatory body, or unless the Trust determines that liquidation of the Trust
following termination of this Agreement is in the best interests of the Trust
and its shareholders. Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to direct reallocation of investments in
the Trust, redemption of investments in the Trust and/or investment in the Trust
upon the making of additional purchase payments under the Existing Contracts.
The parties agree that this Section 11.2 shall not apply to any terminations
under Article 8 and the effect of such Article 8 terminations shall be governed
by Article 8 of this Agreement.
11.3. The Company shall not redeem Trust shares attributable to the
Contracts (as distinct from Trust 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 SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust, the Adviser and the
Administrator the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Trust and the Adviser) 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 Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Trust or the Adviser 30 days notice of its intention to do so.
ARTICLE 12
NOTICES
-------
Any notice shall be sufficiently given when 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 Trust:
One Group Investment Trust
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: James F. Laird, Jr.
If to the Administrator:
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: Karen Tackett, Director Strategic Development
If to the Transfer Agent:
Nationwide Investors Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
-16-
<PAGE> 18
Attn.: Karen Tackett
If to the Adviser:
Banc One Investment Advisors Corporation
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43271-0211
Attn: Mark A. Beeson
If to the Company:
American General Annuity Insurance Company
2929 Allen Parkway, A40-04
Houston, Texas 77019
Attn: General Counsel
ARTICLE 13
MISCELLANEOUS
13.1. All persons dealing with the Trust must look solely to the
property of the Trust for the enforcement of any claims against the Trust as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Trust. Each of the
Company, the Adviser, the Transfer Agent and the Administrator acknowledges and
agrees that, as provided by the Trust's Amended and Restated Declaration of
Trust, the shareholders, trustees, officers, employees and other agents of the
Trust and the Portfolios shall not personally be bound by or liable for matters
set forth hereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder. The Trust's Amended and
Restated Declaration of Trust is on file with the Secretary of State of
Massachusetts.
13.2. 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 Contracts 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.
13.3. 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.
13.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13.6. 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 (and
other parties hereto) reasonable access to its books and records in connection
with any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
13.7. 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.
13.8. 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, with advance written
notice to the other parties hereto, assign this Agreement or any rights or
obligations hereunder to any affiliate of or
-17-
<PAGE> 19
company under common control with the Adviser if such assignee is duly licensed
and registered to perform the obligations of the Adviser under this Agreement.
13.9. The Company shall furnish, or shall cause to be furnished, to
the Trust or its designee upon request, copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under generally
accepted accounting principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of each fiscal year;
(b) the Company's June 30th quarterly statements (statutory), as
soon as practical and in any event within 45 days following such
period;
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports the Company filed with the Securities and Exchange Commission
or any state insurance regulator, as soon as practical after the
filing thereof; and
(e) any other public report submitted to the Company by
independent accountants in connection with any annual, interim or
special audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
13.10 The names "One Group(R) Investment Trust" and `Trustees of One
Group(R) Investment Trust" refer respectively to the Trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated June 7, 1993 to which reference is
hereby made and a copy of which is on file at the office of the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of `One
Group Investment Trust' entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
[SIGNATURE PAGES FOLLOW]
-18-
<PAGE> 20
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
By: /s/ BRUCE R. ABRAMS
--------------------
Title: Executive VP - Marketing
ONE GROUP INVESTMENT TRUST
By: /s/ JAMES F. LAIRD, JR.
-----------------------
Title: President
BANC ONE INVESTMENT ADVISORS CORPORATION
By: /s/ MARK A. BEESON
------------------
Title: Senior Managing Director
NATIONWIDE ADVISORY SERVICES, INC.
By: /s/ CHRISTOPHER A. CRAY
------------------------
Title: Treasurer
NATIONWIDE INVESTORS SERVICES, INC.
By: /s/ JAMES F. LAIRD, JR.
-----------------------
Title: VP - General Manager
-19-
<PAGE> 21
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
-------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
<S> <C>
Name of Separate Account and Date Form Numbers
Established by Board of Directors Funded by Separate Account
- ---------------------------------------------------------------------------------------------
CONTRACT FORM NOS:
------------------
A.G. Separate Account A, November 9, 1994 VA124-99R
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
-20-
<PAGE> 22
SCHEDULE B
----------
PORTFOLIOS OF THE TRUST
- -----------------------
One Group Investment Trust Bond Portfolio
One Group Investment Trust Government Bond Portfolio
One Group Investment Trust Balanced Portfolio
One Group Investment Trust Large Cap Growth Portfolio
One Group Investment Trust Equity Index Portfolio
One Group Investment Trust Diversified Equity Portfolio
One Group Investment Trust Mid Cap Growth Portfolio
One Group Investment Trust Diversified Mid Cap Portfolio
One Group Investment Trust Mid Cap Value Portfolio
-21-
<PAGE> 1
ITEM 23(h)(10)
AMENDMENT TO FUND PARTICIPATION AGREEMENT
EFFECTIVE AS OF JANUARY 1, 2000
AMONG AMERICAN GENERAL ANNUITY INSURANCE COMPANY,
ONE GROUP INVESTMENT TRUST,
BANC ONE INVESTMENT ADVISORS CORPORATION,
AND ONE GROUP ADMINISTRATIVE SERVICES, INC.
<PAGE> 2
AMENDMENT TO FUND PARTICIPATION AGREEMENT
This Amendment to the Fund Participation Agreement is made effective as
of January 1, 2000 among American General Annuity Insurance Company (the
"Company"), One Group(R) Investment Trust (the "Trust"), Banc One Investment
Advisors Corporation (the "Adviser"), and One Group Administrative Services,
Inc., a Delaware corporation (the "Services Company").
BACKGROUND INFORMATION
1. The Trust, the Company, Nationwide Advisory Services, Inc., Nationwide
Investors Services, Inc. ("Nationwide Investors"), and the Adviser entered
into a Fund Participation Agreement effective as of August 2, 1999 (the
"Participation Agreement") in order to permit the Company to utilize the
Trust as an investment vehicle for certain variable insurance products;
2. Effective January 1, 2000, Nationwide Advisory Services, Inc. and
Nationwide Investors will no longer serve as administrator and transfer
agent, respectively to the Trust; and
3. In order to reflect the replacement of Nationwide Advisory Services, Inc.
and Nationwide Investors and the appointment of the Services Company as
administrator, the parties wish to amend the Participation Agreement.
STATEMENT OF AGREEMENT
The parties hereby acknowledge the accuracy of the foregoing Background
Information and hereby agree as follows:
Section 1. DEFINITION OF TERMS. Unless otherwise defined herein, all
capitalized terms shall have the meaning ascribed to them in the Participation
Agreement.
Section 2. AMENDMENT TO REFLECT THE APPOINTMENT OF THE SERVICES COMPANY
AS ADMINISTRATOR. In order to reflect the replacement of Nationwide Advisory
Services, Inc. as administrator by the Services Company, all references to
"Nationwide Advisory Services, Inc." in the Participation Agreement are hereby
changed to "One Group Administrative Services, Inc." By execution of this
Amendment, the Services Company agrees to be bound by and perform the duties and
obligations specified for the Administrator in the Participation Agreement
effective January 1, 2000. Notwithstanding the foregoing, the Services Company
shall not be liable for losses, claims, damages, liabilities or litigation
arising from the acts or omissions of Nationwide Advisory Services, Inc.
Section 3. AMENDMENT TO REFLECT THE REPLACEMENT OF NATIONWIDE
INVESTORS. In order to reflect that Nationwide Investors no longer provides
transfer agency services to the Trust, all references to "Nationwide Investors
Services, Inc." and "Transfer Agent" shall be deleted from the Participation
Agreement, including, without limitation, Section 9.5 of the Participation
Agreement.
1
<PAGE> 3
Section 4. CONFORMING AMENDMENTS TO SECTIONS 2.1 AND 2.3. Sections 2.1
and 2.3 of the Participation Agreement are hereby deleted in their entirety and
the following new Sections 2.1 and 2.3 are substituted in their place:
"2.1 The Trust agrees to make available for purchase by the
Company shares of the Portfolios and shall execute orders placed
for each Account on a daily basis at the net asset value next
computed after receipt by the Trust or its designee of such
order. For purposes of this Section 2.1, the Company shall be the
designee of the Trust for receipt of such orders from the Account
and receipt by such designee shall constitute receipt by the
Trust; provided that the Trust's designated transfer agent
receives notice of such order by 10:00 a.m. Eastern Time on the
next following Business Day ("Trade Date plus 1").
Notwithstanding the foregoing, the Company shall use its best
efforts to provide the Trust's designated transfer agent with
notice of such orders by 9:30 a.m. Eastern Time on Trade Date
plus 1. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the
Securities and Exchange Commission, as set forth in the Trust's
prospectus and statement of additional information.
Notwithstanding the foregoing, the Board of Trustees of the Trust
(hereinafter the "Board") may refuse to permit the Trust 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.
2.3 The Trust agrees to redeem for cash, on the Company's
request, any full or fractional shares of the Trust held by the
Company, executing such requests on a daily basis at the net
asset value next computed after receipt by the Trust or its
designee of the request for redemption. For purposes of this
Section 2.3, the Company shall be the designee of the Trust for
receipt of requests for redemption from each Account and receipt
by such designee shall constitute receipt by the Trust; provided
that the Trust's designated transfer agent receives notice of
such request for redemption on Trade Date plus 1 in accordance
with the timing rules described in Section 2.1."
Section 5. NOTICES. Article 12 is hereby amended by replacing the
address for the Trust, the Administrator, and the Adviser with the following:
If to the Trust:
One Group Investment Trust
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attn: Fund President
If to the Administrator:
One Group Administrative Services, Inc.
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attention: President
2
<PAGE> 4
If to the Adviser:
Banc One Investment Advisors Corporation
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attention: Peter W. Atwater
Section 6. MISCELLANEOUS. Except as otherwise set forth herein, the
Participation Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment effective as of January 1, 2000.
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
By: /S/ BRUCE R. ABRAMS
-------------------
Its: EVP
ONE GROUP(R)INVESTMENT TRUST
By: /S/ MARK A. BEESON
------------------
Its: President
ONE GROUP ADMINISTRATIVE SERVICES, INC.
By: /S/ ROBERT L. YOUNG
-------------------
Its Vice President
BANC ONE INVESTMENT ADVISORS CORPORATION
By: /S/ PETER W. ATWATER
--------------------
Its: Chief Operating Officer
3
<PAGE> 1
ITEM 23(h)(11)
FUND PARTICIPATION AGREEMENT
EFFECTIVE AS OF AUGUST 2, 1999
AMONG ONE GROUP INVESTMENT TRUST,
BANC ONE INVESTMENT ADVISORS CORPORATION,
NATIONWIDE ADVISORY SERVICES, INC.,
NATIONWIDE INVESTORS SERVICES, INC., AND
PFL LIFE INSURANCE COMPANY
<PAGE> 2
FUND PARTICIPATION AGREEMENT
Among
ONE GROUP(R)INVESTMENT TRUST, BANC ONE INVESTMENT ADVISORS CORPORATION
NATIONWIDE ADVISORY SERVICES, INC., NATIONWIDE INVESTORS SERVICES, INC.
and
PFL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into effective as of the second day of
August 1999, by and among PFL LIFE INSURANCE COMPANY, (hereinafter the
"Company"), an Iowa corporation, on its own behalf and on behalf of each
segregated asset 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"; collectively, the "Accounts"), ONE GROUP INVESTMENT TRUST, a business
trust organized under the laws of Massachusetts (hereinafter the "Trust"), BANC
ONE INVESTMENT ADVISORS CORPORATION, an Ohio corporation (hereinafter the
"Adviser"), NATIONWIDE ADVISORY SERVICES, INC., an Ohio corporation (hereinafter
the "Administrator") and NATIONWIDE INVESTORS SERVICES, INC., an Ohio
corporation (hereinafter the "Transfer Agent").
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products"); and
WHEREAS, insurance companies desiring to utilize the Trust as an
investment vehicle under their Variable Insurance Products are required to enter
into participation agreements with the Trust and the Administrator (hereinafter
the "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available for Variable Insurance Products of Participating Insurance Companies;
and
WHEREAS, the Trust intends to offer shares of the series set forth on
Schedule B (each such series hereinafter referred to as a "Portfolio") as may be
amended from time to time by mutual agreement of the parties hereto, under this
Agreement to the Account(s); and
WHEREAS, the Trust has obtained an order from the Securities and
Exchange Commission, granting the Trust 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 Trust to be sold to
and held by Variable Insurance Product separate accounts of both affiliated and
unaffiliated insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and its shares
are registered under the Securities Act of 1933, as amended (the "1933 Act");
and
WHEREAS, the Adviser is duly registered as an investment adviser under
the federal Investment Advisers Act of 1940 (the "Advisers Act") and any
applicable state securities law; and
WHEREAS, the Adviser is the investment adviser of the Portfolios of the
Trust; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts ("Contracts") under the 1933 Act;
and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and
1
<PAGE> 3
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Variable Insurance Products and
the Trust is authorized to sell such shares to unit investment trusts such as
each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Trust, the Adviser, the Administrator, and the Transfer Agent agree as
follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to make available for purchase by the Company
shares of the Portfolio and shall execute orders placed for each Account on a
daily basis at the net asset value next computed after receipt by the Trust or
its designee of such order. For purposes of this Section 1.1, the Company shall
be the designee of the Trust for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Trust; provided that
the Transfer Agent receives notice of such order by 10:00 a.m. Eastern Time on
the next following Business Day ("Trade Date plus 1"). Notwithstanding the
following, the Company shall use its best efforts to provide the Transfer Agent
with notice of such orders by 9:30 a.m. Eastern Time on Trade Date plus 1. The
Administrator shall fax a confirmation of each trade by 1:00 Eastern Time on
Trade Date plus 1. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Trust calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission, as set
forth in the Trust's prospectus and statement of additional information.
Notwithstanding the foregoing, the Board of Trustees of the Trust (hereinafter
the "Board") may refuse 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.
1.2. The Trust agrees that shares of the Trust will be sold only to
Participating Insurance Companies for their Variable Insurance Products and, in
the Trust's discretion, to qualified pension and retirement plans. No shares of
any Portfolio will be sold to the general public.
1.3. The Trust and the Transfer Agent agree to redeem for cash, on the
Company's request, any full or fractional shares of the Trust held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Trust or its designee of the request for
redemption. For purposes of this Section 1.3, the Company shall be the designee
of the Trust for receipt of requests for redemption from each Account and
receipt by such designee shall constitute receipt by the Trust; provided that
the Trust receives notice of such request for redemption on Trade Date plus 1 in
accordance with the timing rules described in Section 1.1.
1.4. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Trust shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the Contracts with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, shall be invested in the Trust, in such
other Trusts advised by the Adviser as may be mutually agreed to in writing by
the parties hereto, or in the Company's general account, provided that such
amounts may also be invested in an investment company other than the Trust if
(a) such other investment company, or series thereof, has investment objectives
or policies that are substantially different from the investment objectives and
policies of all the Portfolios of the Trust; or (b) the Company gives the Trust
45 days written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts; or (c) such other investment
company was available as a funding vehicle for the Contracts prior to the date
of this Agreement and the Company so informs the Trust prior to their signing
this Agreement (a list of such funds appearing on Schedule C to this Agreement);
or (d) the Trust consents to the use of such other investment company.
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1.5. The Company will place orders to purchase or redeem shares
separately for each Portfolio. Each order shall describe the net amount of
shares and dollar amount of each Portfolio to be purchased or redeemed. In the
event of net purchases, the Company shall pay for Portfolio shares on Trade Date
plus 1. Payment shall be in federal funds transmitted by wire which will be sent
or received no later than 2:00 p.m. Eastern Time. For purposes of Section 2.10
and 2.11, upon receipt by the Trust of the federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Trust. In the event of net redemptions, the Portfolio
shall pay the redemption proceeds in federal funds transmitted by wire on the
next Business Day after an order to redeem Portfolio shares is made in
accordance with the provisions of Section 1.3 hereof. Notwithstanding the
foregoing, if the payment of redemption proceeds on the next Business Day would
require the Portfolio to dispose of Portfolio securities or otherwise incur
substantial additional costs, and if the Portfolio has determined to settle
redemption transactions for all shareholders on a delayed basis, proceeds shall
be wired to the Company within seven (7) days and the Portfolio shall notify in
writing the person designated by the Company as the recipient for such notice of
such delay by 3:00 p.m. Eastern Time on Trade Date plus 1.
1.6. Issuance and transfer of the Trust's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.7. The Administrator shall furnish same day notice by 5:00 p.m. in
its local time zone (by wire or telephone, followed by written confirmation) to
the Company of any income, dividends or capital gain distributions payable on
the Trust's shares. Such dividends shall be declared and paid in accordance with
policies established by the Board of Trustees as amended from time to time. The
Administrator shall notify the Company of any amendment to the Trust's dividend
policy within a reasonable time after such amendment. 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 Trust shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.8. The Administrator 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 5:30 p.m. Eastern Time. In the event that the
Administrator is unable to meet the 6:30 Eastern Timestated immediately above,
then the Administrator shall provide the Company with additional time to notify
the Administrator of purchase or redemption orders pursuant to Sections 1.1 and
1.3, respectively, above. Such additional time shall be equal to the additional
time that the Administrator takes to make the net asset values available to the
Company; provided, however, that notification must be made by 11:00 a.m.Eastern
Time on the Business Day such order is to be executed, regardless of when net
asset value is made available.
1.9. If the Administrator provides materially incorrect share net asset
value information through no fault of the Company, the Company shall be entitled
to an adjustment with respect to the Trust shares purchased or redeemed to
reflect the correct net asset value per share as subsequently determined by the
Administrator. The determination of the materiality of any net asset value
pricing error shall be based on the Trust's policy for correction of pricing
errors (the "Pricing Policy"). The Company shall correct such error in its
records and in the records prepared by it for Contract owners in accordance with
information provided by the Administrator. Any material error in the calculation
or reporting of net asset value per share, dividend or capital gain information
shall be reported promptly upon discovery to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable Federal and State laws
and that the sale of the Contracts 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 and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section 508A.1 of the Iowa Insurance Code and has registered or, prior to
any issuance or sale of the Contracts, will register and will maintain the
registration of each Account as a
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unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts. The Company shall amend
its registration statement for its contracts under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
Contracts.
2.2. The Trust represents and warrants that Trust shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance in accordance with any applicable laws of the state of Massachusetts
and sold in compliance with all applicable federal and state securities laws and
that the Trust is and shall remain registered under the 1940 Act. The Trust
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 Trust 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 Trust.
2.3. The Trust, the Administrator and the Adviser represent that each
Portfolio is currently qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code of 1986, as amended, (the "Code") and
that each will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that each will notify
the Company immediately upon having a reasonable basis for believing that the
Trust has ceased to so qualify or that the Trust might not so qualify in the
future.
2.4. The Company represents that the Contracts are currently treated as
endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Trust immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might not be so
treated in the future. The Company further represents that the Account(s) are
eligible to purchase shares of the Trust.
2.5. The Trust represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Trust
undertakes to have a board of trustees, a majority of whom are not interested
persons of the Trust, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Trust 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.
2.7. The Trust represents that it is lawfully organized and validly
existing under the laws of Massachusetts and that it does and will comply in all
material respects with the 1940 Act.
2.8. 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 the Adviser shall perform its obligations for the Trust
in compliance in all material respects with any applicable state and federal
securities laws.
2.9. The Administrator and the Transfer Agent each represents and
warrants that each complies with all applicable federal and state laws and
regulations and that each will perform its obligations for the Trust and the
Company in compliance with the laws and regulations of its state of domicile and
any applicable state and federal laws and regulations.
2.10. The Trust represents and warrants that it is and shall continue
to be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Trust in an amount no 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. Such bond shall include coverage for larceny
and embezzlement and shall be issued by a relevant bonding company.
2.11. 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 Trust are covered by a blanket fidelity
bond or similar coverage for the benefit of the Trust, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. 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 Trust in the
event that such coverage no longer applies.
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ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Trust shall provide the Company with as many printed copies of
the Trust's current prospectus and Statement of Additional Information as the
Company may reasonably request. If requested by the Company in lieu thereof, the
Trust shall provide camera-ready film containing the Trust'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 Trust is amended
during the year) to have the prospectus for the Contracts and the Trust's
prospectus printed together in one document. The Company may print the Trust's
prospectus and/or its Statement of Additional Information in combination with
other fund companies' prospectuses and statements of additional information.
3.2(a). Except as otherwise provided in this Section 3.2, all expenses
of printing and distributing Trust prospectuses and Statements of Additional
Information shall be the expense of the Company. For prospectuses and Statements
of Additional Information provided by the Company to its existing owners of
Contracts in order to update disclosure annually as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Trust. If the
Company chooses to receive camera-ready film in lieu of receiving printed copies
of the Trust's prospectus, the Trust will reimburse the Company in an amount
equal to the product of A and B where A is the number of such prospectuses
distributed to owners of the Contracts, and B is the Trust's per unit cost of
typesetting and printing the Trust's prospectus. The same procedures shall be
followed with respect to the Trust's Statement of Additional Information. The
Trust shall not pay any costs of typesetting, printing and distributing the
Trust's prospectus and/or statement of additional information to prospective
Contract owners.
3.2(b). The Trust, at the Company's expense, shall provide the Company
with copies of Annual and Semi-Annual Reports (the "Reports") in such quantity
as the Company shall reasonably require for distributing to Contract owners. The
Trust, at its expense, shall provide the Contract owners designated by the
Company with copies of its proxy statements and other communications to
shareholders (except for prospectuses and statements of additional information,
and which are covered in Section 3.2(a) above, and Reports). The Trust shall not
pay any costs of distributing Reports and other communications to prospective
Contract owners.
3.2(c). The Company agrees to provide the Trust or its designee with
such information as may be reasonably requested by the Trust to assure that the
Trust'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 Contracts.
3.2(d). The Trust shall pay no fee or other compensation to the Company
under this Agreement, except that if the Trust or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Trust may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Trust in writing.
3.2(e) All expenses, including expenses to be borne by the Trust
pursuant to Section 3.2 hereof, incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust 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 Trust, in
accordance with applicable state laws prior to their sale. The Trust shall bear
the expenses for the cost of registration and qualification of the Trust's
shares.
3.3. If and to the extent required by law, the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Trust shares in accordance with instructions
received from Contract owners; and
(iii) vote Trust shares for which no instructions have been
received in a particular Account in the same proportion as Trust
shares of such portfolio for which instructions have been received in
that separate account, 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
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Company reserves the right to vote Trust shares held in any segregated
asset account in its own right, to the extent permitted by law.
3.4. The Trust will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Trust will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Trust is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Trust 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.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust, the Adviser, the Administrator or their designee, drafts of the Account
prospectuses and statements of additional information and each piece of sales
literature or other promotional material in which the Trust, the Adviser or the
Administrator is described, at least fifteen Business Days prior to its use. No
such material shall be used if the Trust, the Adviser, the Administrator or
their designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
4.2. The Company and its designees shall not give any information or
make any representations or statements on behalf of the Trust or concerning the
Trust in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Trust shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Trust,
or in sales literature or other promotional material approved by the Trust or
its designee, except with the permission of the Trust or its designee
4.3. The Adviser 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 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. Neither The Trust, the Administrator, the Transfer Agent nor the
Adviser shall give any information or make any representations on behalf of the
Company or concerning the Company, each Account, or the Contracts other than the
information or representations contained in a registration statement or
prospectus for the Contracts, as such registration statement and prospectus 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 Trust 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 Trust or its shares, promptly
after the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Trust at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, 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
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
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 Trust: 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), and educational or training materials or
other communications distributed or made generally available to some or all
agents or employees.
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ARTICLE V. DIVERSIFICATION
5.1. The Trust 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 the Trust
ceases to so qualify, it will take all reasonable steps (a) to notify Company of
such event and (b) to adequately diversify the Trust so as to achieve compliance
within the grace period afforded by Regulation 1.817-5.
ARTICLE VI. POTENTIAL CONFLICTS
6.1. The Board will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. 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 annuity contract owners and variable life
insurance contract 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.
6.2. The Company will report in writing any potential or existing
material irreconcilable conflict of which it is aware to the Administrator. Upon
receipt of such report, the Administrator shall report the potential or existing
material irreconcilable conflict to the Board. The Administrator shall also
report to the Board on a quarterly basis whether the Company has reported any
potential or existing material irreconcilable conflicts during the previous
calendar quarter. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.
6.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, 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 trustees), take whatever steps are necessary to remedy 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 Trust or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Trust, 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. No charge
or penalty will be imposed as a result of such withdrawal. The Company agrees
that it bears the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and the cost of such
remedial action, and these responsibilities will be carried out with a view only
to the interests of Contract owners.
6.4. 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 Trust's election, to withdraw the affected Account's
investment in the Trust 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. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take remedial
action in the event of a Board determination of an irreconcilable material
conflict and the cost of such remedial action, and these responsibilities will
be carried out with a view only to the interests of Contract owners.
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6.5. For purposes of Sections 6.3 through 6.4 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 Trust be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 8.3 through 8.4 to
establish a new funding medium for the Contracts 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.
6.6. 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 (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Trust 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, to the extent such rules are
applicable.
6.7. Each of the Company and the Adviser shall 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 them by the
provisions hereof and in the Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Board. Without limiting the generality of the foregoing or the Company's
obligations under Section 6.2, the Company shall provide to the Administrator a
written report to the Board in writing no later than January 15th of each year
indicating whether any material irreconcilable conflicts have arisen during the
prior fiscal year of the Trust. All reports received by the Board of potential
or existing conflicts, and all Board action with regard to determining the
existence of a conflict, notifying Participating Insurance Companies of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded in the minutes of the Board or other
appropriate records, and such minutes or other records shall be made available
to the Securities and Exchange Commission upon request.
ARTICLE VII. INDEMNIFICATION
7.1. INDEMNIFICATION BY THE COMPANY
7.1 (a). The Company agrees to indemnify and hold harmless the Trust,
the Administrator, the Transfer Agent, the Adviser, and each member of their
respective Boards and officers and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.1) 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 Trust's shares or the Contracts 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 or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (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 Trust for use in the registration statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Trust 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 Trust
not supplied by the Company, or persons under its control and other
than statements or representations authorized by the Trust) or
unlawful conduct of the Company or persons under its control, with
respect to the sale or distribution of the Contracts or Trust shares;
or
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(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 Trust
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 Trust 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 Section 7.1(b) and 7.1(c) hereof.
7.1(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
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
7.1(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 as own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
Indemnified Party named in the action. After notice from the Company to such
Indemnified 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 shall not be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof
other than reasonable costs of investigation.
7.1(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 Trust shares or the Contracts or the operation of
the Trust.
7.2. INDEMNIFICATION BY ADMINISTRATOR
7.2(a). The Administrator 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
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Administrator) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(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 Trust
(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
9
<PAGE> 11
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 Trust or the Administrator by or on
behalf of the Company, the Adviser, the Transfer Agent, Counsel for
the Trust, the independent public accountant to the Trust, or any
person or entity that is not acting as agent for or controlled by the
Administrator for use in the registration statement or prospectus for
the Trust or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Portfolio shares; or
(ii) 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
Contracts, 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 Administrator; or
(iii) arise as a result of any failure by the Administrator to
provide the services and furnish the materials under the terms of this
Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Administrator in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Administrator; as limited by and in accordance
with the provisions of Section 7.2(b) and 7.2(c) hereof.
7.2(b). The Administrator 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.
7.2(c). The Administrator 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 Administrator 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 Administrator
of any such claim shall not relieve the Administrator 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 Administrator will be
entitled to participate, at its own expense, in the defense thereof. The
Administrator also shall be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnified Party named in the action. After notice from the
Administrator to such Indemnified Party of the Administrator'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 Administrator will
not be liable to such Indemnified Party under this Agreement for any legal or
other expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.2(d). The Company agrees promptly to notify the Administrator 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 Contracts or the
operation of each Account in which the Portfolios are made available.
7.3. INDEMNIFICATION BY THE ADVISER
7.3(a). The Adviser agrees to indemnify and hold harmless the Company
and 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 purposes of
this Section 7.3) 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
10
<PAGE> 12
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(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 Trust
(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 Adviser or the Trust by or on behalf of the Company, the
Administrator, the Transfer Agent, Counsel for the Trust, the
independent public accountant to the Trust, or any person or entity
that is not acting as agent for or controlled by the Adviser for use
in the registration statement or prospectus for the Trust or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Portfolio shares; or
(ii) 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
Contracts, 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 Adviser; or
(iii) arise as a result of any failure by the Adviser to provide
the services and furnish the materials under the terms of this
Agreement; or
(iv) 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 Section 7.3(b) and 7.3(c) hereof.
7.3(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 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.
7.3(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 Indemnified Party
named in the action. After notice from the Adviser to such Indemnified 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 Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other then reasonable costs
of investigation.
7.3(d). The Company agrees to promptly notify the Adviser 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 Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
11
<PAGE> 13
7.4. INDEMNIFICATION BY THE TRUST
7.4(a). The Trust agrees to indemnify and hold harmless the Company and
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 purposes of
this Section 7.4) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(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 Trust
(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 the
Trust by or on behalf of the Adviser, the Company, the Transfer Agent,
or the Administrator for use in the registration statement or
prospectus for the Trust or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Portfolio shares; or
(ii) 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
Contracts, 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 Trust; or
(iii) arise as a result of any failure by the Trust to provide
the services and furnish the materials under the terms of this
Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Trust; as limited by and in accordance with the
provisions of Section 7.4(b) and 7.4(c) hereof.
7.4(b). The Trust 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 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.
7.4(c). The Trust 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 Trust 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 Trust of any
such claim shall not relieve the Trust 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 Trust will be entitled to participate, at
its own expense, in the defense thereof. The Trust also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Trust to such Indemnified Party of
the Trust'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
Trust will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other then reasonable costs
of investigation.
12
<PAGE> 14
7.4(d). The Company agrees to promptly notify the Trust 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 Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
7.5. INDEMNIFICATION BY TRANSFER AGENT
7.5(a). The Transfer Agent 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
(collectively, the "Indemnified Parties" for purposes of this Section 7.5)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Transfer Agent) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(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 Trust
(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 Trust or the Transfer Agent by or on behalf of the Company, the
Adviser, the Administrator, Counsel for the Trust, the independent
public accountant to the Trust, or any person or entity that is not
acting as agent for or controlled by the Transfer Agent for use in the
registration statement or prospectus for the Trust or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Portfolio shares; or
(ii) 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
Contracts, 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 Transfer Agent; or
(iii) arise as a result of any failure by the Transfer Agent to
provide the services and furnish the materials under the terms of this
Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Transfer Agent in this
Agreement or arise out of or result from any other material breach of
his Agreement by the Transfer Agent; as limited by and in accordance
with the provisions of Section 7.5(b) and 7.5(c) hereof.
7.5(b). The Transfer Agent 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.
7.5(c). The Transfer Agent 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 Transfer Agent 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 Transfer Agent
of any such claim shall not relieve the Transfer Agent 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 Transfer Agent will be
entitled to participate, at its own expense, in the defense thereof.
13
<PAGE> 15
The Transfer Agent also shall be entitled to assume the defense thereof, with
counsel satisfactory to the Indemnified Party named in the action. After notice
from the Transfer Agent to such Indemnified Party of the Transfer Agent'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 Transfer
Agent will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.5(d). The Company agrees promptly to notify the Transfer Agent 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 Contracts or the
operation of each Account in which the Portfolios are made available.
ARTICLE VIII. APPLICABLE LAW
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Massachusetts.
8.2. 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 and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE IX. TERMINATION
9.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by ninety (90) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Trust,
the Adviser, the Transfer Agent and the Administrator 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 Contracts; or
(c) termination by the Company by written notice to the Trust,
the Adviser, the Transfer Agent, and the Administrator 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 Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to the Trust,
the Adviser, the Transfer Agent, and the Administrator 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 Trust may fail to so qualify; or
(e) termination by the Company by written notice to the Trust,
the Adviser, the Transfer Agent, and the Administrator with respect to
any Portfolio in the event that such Portfolio fails to meet the
diversification requirements specified in Article V hereof; or
(f) termination by either the Trust, the Adviser, the Transfer
Agent or the Administrator by written notice to the Company, if either
one or more of the Trust, the Adviser, the Transfer Agent or the
Administrator respectively, shall determine, in their sole judgment
reasonably exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in its
business or financial condition or is the subject of material adverse,
provided that the Trust, the Adviser, the Transfer Agent or the
Administrator will give the Company sixty (60) days' advance written
notice of such determination of its intent to terminate this
Agreement, and provided further that after consideration of the
actions taken by the Company and any other changes in circumstances
since the giving of such notice, the determination of the Trust, the
Adviser, the Transfer Agent or the Administrator shall continue to
apply on the 60th day since giving of such notice, then such 60th day
shall be the effective date of termination; or
14
<PAGE> 16
(g) termination by the Company by written notice to the Trust,
the Adviser, the Transfer Agent or the Administrator if the Company
shall determine, in its sole judgment reasonably exercised in good
faith, that either the Trust , the Adviser, the Transfer Agent or the
Administrator has suffered a material adverse change in its business
or financial condition or is the subject of material adverse publicity
and such material adverse change or material adverse publicity will
have a material adverse impact upon the business and operations of the
Company provided that the Company will give the Trust, the Adviser,
the Transfer Agent and the Administrator sixty (60) days' advance
written notice of such determination of its intent to terminate this
Agreement, and provided further that after consideration of the
actions taken by the Trust, the Adviser, the Transfer Agent or the
Administrator and any other changes in circumstances since the giving
of such notice, the determination of the Company shall continue to
apply on the 60th day since giving of such notice, then such 60th day
shall be the effective date of termination; or
(h) termination by the Trust , the Advisor, the Transfer Agent,
or the Administrator by written notice to the Company, if the Company
gives the Trust and the Underwriter the written notice specified in
Section 1.4(b) hereof and at the time such notice was given there was
no notice of termination outstanding under any other provision of this
Agreement; provided, however any termination under this Section 9.1(h)
shall be effective forty five (45) days after the notice specified in
Section 1.4(b) was given.
9.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Trust shall at the option of the Company, continue to make
available additional shares of the Trust pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts") unless such
further sale of Trust shares is proscribed by law, regulation or applicable
regulatory body, or unless the Trust determines that liquidation of the Trust
following termination of this Agreement is in the best interests of the Trust
and its sharesholders.. Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Trust,
redeem investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 9.2 shall not apply to any terminations under Article VI and
the effect of such Article VI terminations shall be governed by Article VI of
this Agreement.
9.3 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust 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 SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and the Adviser) 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 Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Trust or
the Underwriter 90 days notice of its intention to do so.
ARTICLE X. NOTICES
Any notice shall be sufficiently given when 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 Trust:
One Group Investment Trust
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: James F. Laird, Jr.
15
<PAGE> 17
If to the Administrator:
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: Karen Tackett, Director Strategic Development
If to the Transfer Agent:
Nationwide Investors Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
Attn.: Karen Tackett
If to the Adviser:
Banc One Investment Advisors Corporation
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43271-0211
Attn: Mark A. Beeson
If to the Company:
PFL Life Insurance Company
4333 Edgewood Road, N E
Cedar Rapids, Iowa 52499-0001
Attention: Financial Markets Division, Legal Department
ARTICLE XI MISCELLANEOUS
11.1 All persons dealing with the Trust must look solely to the
property of the Trust for the enforcement of any claims against the Trust as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Trust.
11.2 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 Contracts 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.
11.3 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.
11.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5 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.
11.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, 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.
16
<PAGE> 18
11.7 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.
11.8. 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 under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement. The Company shall
promptly notify the Trust and the Adviser of any change in control of the
Company.
11.9. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under generally
accepted accounting principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP, if
any), as soon as practical and in any event within 45 days after the
end of each quarterly period:
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as practical
after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special audit
made by them of the books of the Company, as soon as practical after
the receipt thereof.
11.10 The names "One Group(R) Investment Trust" and `Trustees of One
Group(R) Investment Trust" refer respectively to the Trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated June 7, 1993 to which reference is
hereby made and a copy of which is on file at the office of the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of `One
Group Investment Trust' entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
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<PAGE> 19
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 below.
PFL LIFE INSURANCE COMPANY
By: /s/ RONALD L. ZIEGLER
---------------------
Title: VICE PRESIDENT AND ACTUARY
--------------------------
ONE GROUP INVESTMENT TRUST
By: /s/ KAREN R. TACKETT
--------------------
Title: VICE PRESIDENT AND ASST. TREASURER
----------------------------------
BANC ONE INVESTMENT ADVISORS CORPORATION
By: /s/ MARK A. BEESON
------------------
Title: SENIOR MANAGING DIRECTOR
------------------------
NATIONWIDE ADVISORY SERVICES, INC.
By: /s/ JAMES F. LAIRD, JR.
-----------------------
Title: VICE PRESIDENT GENERAL MANAGER
------------------------------
NATIONWIDE INVESTORS SERVICES, INC.
By: /s/ CHRISTOPHER A. CRAY
-----------------------
Title: TREASURER
---------
18
<PAGE> 20
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
-------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Name of Separate Account and Date Established by Board of Form Numbers
Directors Funded by Separate Account
- ------------------------------------------------------------------------------------------------------------------
CONTRACT FORM NOS:
------------------
PFL Retirement Builder Variable Annuity Account AV288-101-985-796 (may vary by state)
- ------------------------------------------------------------------------------------------------------------------
AVI200 1 998 (may vary by state)
March 29, 1996
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 21
SCHEDULE B
- ----------
PORTFOLIOS OF THE TRUST
One Group Investment Trust Bond Portfolio
One Group Investment Trust Government Bond Portfolio
One Group Investment Trust Balanced Portfolio
One Group Investment Trust Large Cap Growth Portfolio
One Group Investment Trust Equity Index Portfolio
One Group Investment Trust Diversified Equity Portfolio
One Group Investment Trust Mid Cap Growth Portfolio
One Group Investment Trust Diversified Mid Cap Portfolio
One Group Investment Trust Mid Cap Value Portfolio
20
<PAGE> 22
SCHEDULE C
OTHER INVESTMENT COMPANIES AND FUNDS
Variable Insurance Products Fund (VIP)
VIP Money Market Portfolio
VIP High Income Portfolio
VIP Equity-Income Portfolio
VIP Growth Portfolio
VIP Overseas Portfolio
VIP High Income Portfolio (Service Class)
Variable Insurance Products Fund II (VIP II)
VIP II Investment Grade Bond Portfolio
VIP II Asset Manager Portfolio
VIP II Asset Manager: Growth Portfolio
VIP II Contrafund Portfolio
VIP II Index 500 Portfolio
Variable Insurance Products Fund III (VIP III)
VIP III Balanced Portfolio
VIP III Growth Opportunities Portfolio
VIP III Growth & Income Portfolio
VIP III Mid Cap Portfolio
VIP III Growth Opportunities Portfolio
(Service Class)
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. Government Securities Fund
AIM V.I. Growth & Income Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund
Dreyfus Money Market Portfolio
Dreyfus Small Company Stock Portfolio
MFS Variable Insurance Trust
MFS Emerging Growth Series
MFS Foreign & Colonial Emerging
Markets Equity Series
MFS Research Series
MFS Total Return Series
MFS Utilities Series
Oppenheimer Variable Account Funds
Oppenheimer Global Securities Fund
Oppenheimer Growth Fund
Oppenheimer Growth & Income Fund
Oppenheimer High Income Fund
Oppenheimer Strategic Bond Fund
Oppenheimer Multiple Strategies Fund
WRL Series Fund, Inc.
WRL VKAM Emerging Growth
WRL Janus Global
WRL Janus Growth
Evergreen Variable Trust
Evergreen VA Fund
Evergreen VA Foundation Fund
Evergreen VA Growth and Income Fund
Evergreen VA Global Leaders Fund
Evergreen VA International Growth Fund
Federated Insurance Series
Federated High Income Bond Fund II
Mentor Variable Investment Products
Mentor VIP Capital Growth
Mentor VIP Growth
Mentor VIP High Income
Putnam Variable Trust
Putnam VT Global Growth Fund
Putnam VT Money Market Fund
Putnam VT New Value Fund
Templeton Variable Product Series Fund
Templeton Asset Allocation Fund
Templeton International Fund
Franklin Small Cap Investments Fund
One Group(R)Investment Trust
One Group(R)Investment Trust Bond Portfolio
One Group(R)Investment Trust Government
Bond Portfolio
One Group(R)Investment Trust Balanced
Portfolio
One Group(R)Investment Trust Large Cap
Growth Portfolio
One Group(R)Investment Trust Equity
Index Portfolio
One Group(R)Investment Trust Diversified
Equity Portfolio
One Group(R)Investment Trust Mid Cap
Growth Portfolio
One Group(R)Investment Trust Diversified
Mid Cap Portfolio
One Group(R)Investment Trust Mid Cap
Value Portfolio
21
<PAGE> 1
ITEM 23(h)(12)
AMENDMENT TO FUND PARTICIPATION AGREEMENT
EFFECTIVE AS OF JANUARY 1, 2000
AMONG PFL LIFE INSURANCE COMPANY,
ONE GROUP INVESTMENT TRUST,
BANC ONE INVESTMENT ADVISORS CORPORATION,
AND ONE GROUP ADMINISTRATIVE SERVICES, INC.
<PAGE> 2
AMENDMENT TO FUND PARTICIPATION AGREEMENT
This Amendment to the Fund Participation Agreement is made effective as
of January 1, 2000 among PFL Life Insurance Company (the "Company"), One
Group(R) Investment Trust (the "Trust"), Banc One Investment Advisors
Corporation (the "Adviser"), and One Group Administrative Services, Inc., a
Delaware corporation (the "Services Company").
BACKGROUND INFORMATION
1. The Trust, the Company, Nationwide Advisory Services, Inc., Nationwide
Investors Services, Inc. ("Nationwide Investors"), and the Adviser
entered into a Fund Participation Agreement effective as of August 2,
1999 (the "Participation Agreement") in order to permit the Company to
utilize the Trust as an investment vehicle for certain variable
insurance products;
2. Effective January 1, 2000, Nationwide Advisory Services, Inc. and
Nationwide Investors will no longer serve as administrator and transfer
agent, respectively to the Trust; and
3. In order to reflect the replacement of Nationwide Advisory Services,
Inc. and Nationwide Investors and the appointment of the Services
Company as administrator, the parties wish to amend the Participation
Agreement.
STATEMENT OF AGREEMENT
The parties hereby acknowledge the accuracy of the foregoing Background
Information and hereby agree as follows:
Section 1. DEFINITION OF TERMS. Unless otherwise defined herein, all
capitalized terms shall have the meaning ascribed to them in the Participation
Agreement.
Section 2. AMENDMENT TO REFLECT THE APPOINTMENT OF THE SERVICES COMPANY
AS ADMINISTRATOR. In order to reflect the replacement of Nationwide Advisory
Services, Inc. as administrator by the Services Company, all references to
"Nationwide Advisory Services, Inc." in the Participation Agreement are hereby
changed to "One Group Administrative Services, Inc." By execution of this
Amendment, the Services Company agrees to be bound by and perform the duties and
obligations specified for the Administrator in the Participation Agreement
effective January 1, 2000. Notwithstanding the foregoing, the Services Company
shall not be liable for losses, claims, damages, liabilities or litigation
arising from the acts or omissions of Nationwide Advisory Services, Inc.
Section 3. AMENDMENT TO REFLECT THE REPLACEMENT OF NATIONWIDE INVESTORS
In order to reflect that Nationwide Investors no longer provides transfer agency
services to the Trust, all references to "Nationwide Investors Services, Inc."
and "Transfer Agent" shall be deleted from the Participation Agreement,
including, without limitation, Section 7.5 of the Participation Agreement.
1
<PAGE> 3
Section 4. CONFORMING AMENDMENTS TO SECTIONS 1.1 AND 1.3. Sections 1.1
and 1.3 of the Participation Agreement are hereby deleted in their entirety and
the following new Sections 1.1 and 1.3 are substituted in their place:
"1.1. The Trust agrees to make available for purchase by the Company
shares of the Portfolio and shall execute orders placed for each
Account on a daily basis at the net asset value next computed after
receipt by the Trust or its designee of such order. For purposes of
this Section 1.1, the Company shall be the designee of the Trust for
receipt of such orders from each Account and receipt by such designee
shall constitute receipt by the Trust; provided that the Trust's
designated transfer agent receives notice of such order by 10:00 a.m.
Eastern Time on the next following Business Day ("Trade Date plus 1").
Notwithstanding the following, the Company shall use its best efforts
to provide the Trust's designated transfer agent with notice of such
orders by 9:30 a.m. Eastern Time on Trade Date plus 1. The
Administrator shall provide information (electronically or by fax)
concerning each trade by 1:00 Eastern Time on Trade Date plus 1.
"Business Day" shall mean any day on which the New York Stock Exchange
is open for trading and on which the Trust calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission,
as set forth in the Trust's prospectus and statement of additional
information. Notwithstanding the foregoing, the Board of Trustees of
the Trust (hereinafter the "Board") may refuse 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 Trust agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Trust held by the Company, executing
such requests on a daily basis at the net asset value next computed
after receipt by the Trust or its designee of the request for
redemption. For purposes of this Section 1.3, the Company shall be the
designee of the Trust for receipt of requests for redemption from each
Account and receipt by such designee shall constitute receipt by the
Trust; provided that the Trust's designated transfer agent receives
notice of such request for redemption on Trade Date plus 1 in
accordance with the timing rules described in Section 1.1."
Section 5. NOTICES. ARTICLE X is hereby amended by replacing the
address for the Trust, the Administrator, and the Adviser with the following:
If to the Trust:
One Group Investment Trust
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attn: Fund President
If to the Administrator:
One Group Administrative Services, Inc.
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attention: President
2
<PAGE> 4
If to the Adviser:
Banc One Investment Advisors Corporation
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attention: Peter W. Atwater
Section 6. MISCELLANEOUS. Except as otherwise set forth herein, the
Participation Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment effective as of January 1, 2000.
PFL LIFE INSURANCE COMPANY
By: /s/ WILLIAM L. BUSLER
---------------------
Its: President
ONE GROUP(R)INVESTMENT TRUST
By: /s/ MARK A. BEESON
------------------
Its: President
ONE GROUP ADMINISTRATIVE SERVICES, INC.
By: /s/ ROBERT L. YOUNG
-------------------
Its: Vice President
BANC ONE INVESTMENT ADVISORS CORPORATION
By: /s/ PETER W. ATWATER
--------------------
Its: Chief Operating Officer
3
<PAGE> 1
ITEM 23(h)(13)
RESIGNATION LETTER,
DATED DECEMBER 28, 1999
OF NATIONWIDE ADVISORY SERVICES, INC. AND
NATIONWIDE INVESTORS SERVICES, INC.
<PAGE> 2
December 28, 1999
Board of Trustees of One Group Investment Trust
c/o Alan R. Priest
Ropes & Gray
1301 K Street, NW
Suite 800 East
Washington, DC 20005
Subject: One Group(R)Investment Trust -
RESIGNATION OF NATIONWIDE ADVISORY SERVICES, INC. AND
NATIONWIDE INVESTORS SERVICES, INC.
-----------------------------------------------------
Dear Alan:
The purpose of this letter is to document the termination of the
Amended and Restated Administrative Services Agreement, dated as of February 17,
1999 between One Group Investment Trust (the "Trust") and Nationwide Advisory
Services, Inc. (the "Administration Agreement") and the Transfer and Dividend
Agent Agreement, dated May 20, 1994 between the Trust and Nationwide Investors
Services, Inc. ("Nationwide Investors"). In August, 1999, Nationwide Advisory
Services, Inc. ("Nationwide") and Nationwide Investors notified the Trust that
they are discontinuing the business of providing administrative and transfer
agent services to unaffiliated registered investment companies. As a result,
Nationwide and Nationwide Investors will resign as administrator and transfer
agent and the Administration Agreement and the Transfer Agent Agreement will
terminate without penalty effective as of the end of business December 31, 1999.
In order to document the mutual agreement of the parties to the termination of
the agreements, please have the Trust execute this letter below.
Sincerely,
Nationwide Advisory Services, Inc.
By: /s/ JAMES F. LAIRD, JR.
-----------------------
Title: VICE PRESIDENT AND GENERAL MANAGER
----------------------------------
Nationwide Investors Services, Inc.
By: /s/ JAMES F. LAIRD, JR.
-----------------------
Title: VICE PRESIDENT AND GENERAL MANAGER
----------------------------------
ACCEPTED:
One Group Investment Trust
By: /s/ Mark A. Beeson
----------------------
Title: PRESIDENT
-------------------
Date: 1/3/00
-------------------
<PAGE> 1
Item 23(i)
Opinion of Ropes & Gray
<PAGE> 2
February 24, 2000
One Group(R) Investment Trust
1111 Polaris Parkway
P.O. Box 710211
Columbus, Ohio 43271
Ladies and Gentlemen:
You have informed us that you intend to file a Rule 485(a) Post-Effective
Amendment to your Registration Statement under the Investment Company Act
of 1940, as amended, with the Securities and Exchange Commission (the
"Commission") for the purpose of updating the Trust's financial information.
We have examined your Amended and Restated Agreement and Declaration of
Trust, as further amended, as on file at the office of the Secretary of The
Commonwealth of Massachusetts. We are familiar with the actions taken by your
Trustees to authorize the issue and sale from time to time of your units of
beneficial interest ("Shares") at not less than the public offering price of
such shares and have assumed that the Shares have been issued and sold in
accordance with such action. We have also examined a copy of your Code of
Regulations and such other documents as we have deemed necessary for the
purposes of this opinion.
Based on the foregoing, we are of the opinion that the Shares being
registered have been duly authorized and when sold will be legally issued,
fully paid and non-assessable.
The Trust is an entity of the type commonly known as "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Trust or its Trustees. The Declaration of Trust provides for indemnification
out of the property of the Trust for all loss and expense of any shareholder of
the Trust held personally liable solely by reason of his being or having been a
shareholder. Thus, the risk of a shareholder incurring financial loss on
account of being a shareholder is limited to circumstances in which the Trust
itself would be unable to meet its obligations.
We consent to this opinion accompanying the Post-Effective Amendment No.
12 when
<PAGE> 3
One Group(R) Investment Trust
February 24, 2000
Page 2
filed with the Commission.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
<PAGE> 1
Item 23(j)(1)
Consent of Ropes & Gray
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our
firm under the caption "Legal Counsel" included in or made a part of
Post-Effective Amendment No. 12 to the Registration Statement of One Group (R)
Investment Trust on Form N-1A (Nos. 33-66080 and 811-7874) under the Securities
Act of 1933, as amended.
/s/ Ropes & Gray
ROPES & GRAY
Washington, D.C.
February 24, 2000
