<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[x] Preliminary Proxy Statement
[_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-2
The Palladian Trust
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of Each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE>
[Allmerica Letterhead]
ALLMERICA FINANCIAL(R)
Dear Contract Owner:
The Palladian Trust (the "Trust") will hold a special meeting of shareholders on
September 15, 1998.
The attached Notice and Statement Concerning the Special Meeting discuss the
single proposal to be considered at the meeting. The Board of Trustees of the
Trust has approved the hiring of Pilgrim Baxter Analytic Investors, Inc.
("Pilgrim Baxter Analytic") as the new Portfolio Manager for the Growth
Portfolio of the Trust. The Board now submits the Portfolio Manager Agreement
with Pilgrim Baxter Analytic for your consideration and recommends that you vote
"FOR" approval of the agreement.
Because the proposal affects only the Growth Portfolio, only contract owners
such as yourself whose contracts hold an interest in the Growth Portfolio will
vote on the proposal. You are entitled to provide instructions on how to vote
the number of shares of the Growth Portfolio related to your contract as of the
close of business on July 17, 1998.
Please take a few minutes to consider this matter and then exercise your right
to give your instructions by completing, dating, and signing the enclosed voting
instruction form. Included is a self-addressed and postage-paid envelope for
your convenience. To be given effect, your voting instructions must be received
by September 10, 1998.
If you have any questions about these materials, please contact your financial
adviser or Allmerica Financial at (800) 917-1909.
August 1, 1998 Richard M. Reilly
President
Allmerica Financial Life Insurance and
Annuity Company
Vice President
First Allmerica Financial Life Insurance
Company
<PAGE>
THE PALLADIAN TRUST
Growth Portfolio
440 Lincoln Street
Worcester, Massachusetts 01653
Notice of Special Meeting of
Shareholders of the Growth Portfolio
of the Palladian Trust
September 15, 1998
A special meeting of shareholders of the Growth Portfolio of The Palladian Trust
(the "Trust") will be held at 440 Lincoln Street, Worcester, MA 01653 on
September 15, 1998 at 10:00 a.m. for the following purposes:
1. For the Growth Portfolio only: To approve or disapprove a new
Portfolio Manager Agreement, pursuant to which Pilgrim Baxter Analytic
Investors, Inc. ("Pilgrim Baxter Analytic") would serve as Portfolio
Manager to the Growth Portfolio.
2. To transact such other business as may properly come before the
meeting.
By order of the Board of Trustees.
August 1, 1998 George M. Boyd
Secretary
The Palladian Trust
<PAGE>
STATEMENT CONCERNING THE
SPECIAL MEETING OF SHAREHOLDERS OF
THE PALLADIAN TRUST
GROWTH PORTFOLIO
September 15, 1998
The Board of Trustees of The Palladian Trust (the "Trust") solicits your voting
instructions for a special meeting of shareholders of the Growth Portfolio of
the Trust. The Board of Trustees will hold the special meeting on September 15,
1998 at 10:00 a.m. at the Trust's offices at 440 Lincoln Street, Worcester, MA
01653, and at any adjournments of that meeting. The approximate date on which
this statement and the voting instruction form will first be sent to contract
owners is August 1, 1998. The record date for determination of the persons
entitled to vote for purposes of this special meeting was July 17, 1998.
On or about September 1, 1998, the Trust's name will change from "The Palladian
Trust" to "The Fulcrum Trust." The Trust is divided into six Portfolios, and a
different class of Capital Stock is issued with respect to each Portfolio. Five
of the Portfolios are currently operational and available to contract owners.
These Portfolios are: Value Portfolio, Growth Portfolio, International Growth
Portfolio, Strategic Income Portfolio, and Global Interactive/Telecomm
Portfolio. The sixth Portfolio, the Balanced Opportunity Portfolio, has not
commenced operations and its shares are not publicly available.
One Proposal is scheduled for consideration at the special meeting. That
Proposal affects only the Growth Portfolio. Only contract owners who as of the
record date had allocated some or all of their contract fund to the Growth
Portfolio are eligible to vote on this Proposal. This statement refers to these
contract owners as "you" or as "persons having voting rights."
As of the record date, the Growth Portfolio had outstanding shares corresponding
to _________ votes eligible to be cast at the special meeting. The following
entities are the shareholders of record of the Growth Portfolio: (i) the Fulcrum
Separate Account of Allmerica Financial Life Insurance and Annuity Company and
the Fulcrum Separate Account of First Allmerica Financial Life Insurance Company
(collectively, the "Separate Accounts"), which together are the record owners of
_________ shares; and (iii) Palladian Advisors, Inc. ("PAI"), which owns _____
shares.
You are entitled to give instructions on how to vote the number of shares of the
Growth Portfolio corresponding to the part of your contract fund you have
allocated to the Portfolio. Each full share has one vote, and each fractional
share has a proportionate fractional vote. If you abstain, your vote will not be
counted. If you submit a properly executed voting instruction form but omit a
voting choice, Allmerica Financial Life Insurance and Annuity Company and First
Allmerica Financial Life Insurance Company (collectively, "Allmerica") will vote
the shares "FOR" the Proposal. Allmerica will vote Growth Portfolio shares held
in each subaccount for which it does not receive properly executed instruction
forms in the same proportion as it votes Portfolio shares
<PAGE>
held in that subaccount for which it does receive properly executed instruction
forms. In addition, Palladian Advisors, Inc., which formerly served as the
Trust's investment adviser, will vote the Growth Portfolio shares it holds in
the same proportion as all persons having voting rights.
In order for your voting instructions to be effective, the Trust must receive
them by the close of business on September 10, 1998. You may revoke your voting
instructions any time before that date by providing written notice to the Trust
at 440 Lincoln Street, Worcester, Massachusetts 01653. This solicitation is
being made by mail, but it may also be made by facsimile, telephone, or personal
interview. The Growth Portfolio will bear the costs of this solicitation.
The Trust will furnish you, upon request and without charge, a copy of the
Trust's most recent annual report and semi-annual report to shareholders. Please
write to the Trust at 440 Lincoln Street, Worcester, Massachusetts 01653, or
call (800) 917-1909 to request a copy.
MANAGEMENT AND ADMINISTRATION
Allmerica Financial Investment Management Services, Inc. ("AFIMS"), 440 Lincoln
Street, Worcester, Massachusetts 01653, serves as the overall Manager for the
Trust.
The following persons serve as officers of the Trust. An asterisk ("*")
indicates that the person works for AFIMS or one of its affiliates.
George J. Sullivan, Jr. Chairman and President
Tom N. Dallape Vice President
Stephen W. Bright* Vice President
David J. Mueller* Vice President
Lisa M. Coleman* Vice President
Thomas P. Cunningham* Treasurer
George M. Boyd* Secretary
Joseph W. MacDougall, Jr.* Assistant Secretary
The Trust retains a Portfolio Manager for each Portfolio of the Trust, including
the Growth Portfolio. The Portfolio Manager makes the day-to-day investment
decisions for the Portfolio, subject to the supervision of AFIMS and the Trust's
Board of Trustees. Information about the Portfolio Manager for the Growth
Portfolio appears below in the discussion of the Proposal.
Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston,
Massachusetts 02117, serves as custodian and transfer agent for, and provides
fund accounting services to, the Trust. IBT also provides administrative
assistance to AFIMS in managing the Trust.
PricewaterhouseCoopers L.L.P. and its predecessors have served as independent
accountant for the Trust since the Trust commenced operations in 1996.
<PAGE>
MEETING PROPOSALS
The Trust must receive a proposal intended to be presented at a shareholders
meeting a reasonable time - generally at least 120 days - before the Trust or
Allmerica solicits voting instructions from contract owners. The Trust does not
ordinarily hold annual shareholder meetings. Therefore, the Trust will retain
all proposals it receives, and those proposals will then be eligible to be
considered for distribution with the proxy materials for the next special
meeting.
PROPOSAL
APPROVAL OF A NEW PORTFOLIO MANAGER AGREEMENT
WITH PILGRIM BAXTER ANALYTIC INVESTORS, INC.
TO SERVE AS PORTFOLIO MANAGER
TO THE GROWTH PORTFOLIO
At a Board of Trustees meeting on June 17, 1998, the Board of Trustees (the
"Board") voted to replace Stonehill Capital Management, Inc. ("Stonehill"),
which served as Portfolio Manager for the Growth Portfolio, with Pilgrim Baxter
Analytic Investors, Inc. ("Pilgrim Baxter Analytic"). AFIMS, the overall Manager
of the Trust, has responsibility to monitor and evaluate the Trust's Portfolio
Managers and to recommend changes to the Board of Trustees as appropriate.
Pursuant to these responsibilities, AFIMS recommended this change to the Board
because Pilgrim Baxter Analytic and its affiliates have a better long-term
performance record and more experience advising mutual funds than Stonehill
does. The Board agreed with AFIMS that making this change was in the interest of
contract owners who have invested in the Growth Portfolio.
The Board has approved a Portfolio Manager Agreement with Pilgrim Baxter
Analytic, and Pilgrim Baxter Analytic is now serving as Portfolio Manager of the
Growth Portfolio on an interim basis. For Pilgrim Baxter Analytic to continue to
serve as Portfolio Manager, persons having voting rights must approve the new
Portfolio Manager Agreement. Accordingly, this Proposal submits that agreement
for your approval. If persons having voting rights do approve the agreement, it
will - subject to the federal securities laws and the terms of the agreement -
continue indefinitely if the Board re-approves the agreement annually.
Information about Pilgrim Baxter Analytic Investors, Inc.
Founded in 1970, Pilgrim Baxter Analytic (formerly Analytic - TSA Global Asset
Management, Inc.) is a registered investment adviser located at 700 South Flower
Street, Suite 2400, Los Angeles, California 90017. Pilgrim Baxter Analytic acts
as an investment adviser for banks and thrift institutions, investment
companies, pension and profit sharing plans, trusts, estates and charitable
organizations and corporations. As of June 30, 1998, Pilgrim Baxter Analytic
managed assets of approximately $852 million. Harindra de Silva and Dennis Bein
are primarily responsible for the day-to-day investment management of the Growth
Portfolio. Mr. de Silva is a Chartered Financial Analyst and has served as
President of Pilgrim Baxter Analytic since April 1998. He
<PAGE>
formerly served as Managing Director of Pilgrim Baxter Analytic from 1996 to
1998. From 1986 to 1998, he also served as a Principal of Analysis Group, Inc.,
an economic research firm. While at Analysis Group, Inc., Mr. de Silva was
responsible for providing economic research services to institutional investors
including investment managers, large pension funds, and endowments. Mr. Bein has
been a member of the portfolio management and research team for Pilgrim Baxter
Analytic since August 1995. He also served as a senior associate for Analysis
Group, Inc. from 1990 until this year. Pilgrim Baxter Analytic is a wholly-owned
subsidiary of Pilgrim Baxter & Associates, Ltd. ("PBA"), which is located at 825
Duportail Road, Wayne, Pennsylvania 19087. PBA is itself a wholly-owned
subsidiary of United Asset Management Corporation ("UAM"), a publicly traded
company located at One International Place, Boston, Massachusetts 02110, that
acquired PBA in 1985.
Pilgrim Baxter Analytic uses a proprietary computer model designed to build a
portfolio of stocks that, when viewed as a group, have fundamental
characteristics that Pilgrim Baxter Analytic considers superior to the 500
stocks included in the Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500"). These characteristics include, among others, higher than average
return on equity, earnings growth at a reasonable price, and positive price
momentum over the last six to twelve months. The computer model focuses on the
characteristics of the aggregate portfolio rather than screening for individual
stocks that meet all the desired characteristics. While the Growth Portfolio may
invest in stocks of any company, Pilgrim Baxter Analytic anticipates investing
primarily in stocks of medium to large companies in the S&P 500. These companies
typically have a market capitalization of $15 billion or higher.
In addition to providing institutional advisory services, Pilgrim Baxter
Analytic serves as investment subadviser to several other mutual funds that
invest primarily in stocks. Information about these funds appears in the
following table.
<TABLE>
<CAPTION>
Size as of Annual Advisory or
Name of Mutual Fund June 30, 1998 Subadvisory Fee Rate
------------------- ------------- --------------------
<S> <C> <C>
PBHG Advisor Enhanced Equity $18 million Subadvisory fee of 0.40% of net assets (paid
Fund by investment adviser, which is paid 0.60% of
net assets)
PBHG Defensive Equity Fund $55 million Subadvisory fee of 0.40% of net assets (paid
by investment adviser, which is paid 0.60% of
net assets)
</TABLE>
The table below lists individuals who serve as directors or as principal
executive officer of Pilgrim Baxter Analytic. The address for each individual is
825 Duportail Road, Wayne, Pennsylvania. None of these individuals serves as an
officer or director of the Trust.
<TABLE>
<CAPTION>
Position with
Name Pilgrim Baxter Analytic Principal Occupation
---- ----------------------- --------------------
<S> <C> <C>
Mike Flinn Director Consultant
The Flinn Company
1325 Fourth Avenue, Suite 1900
Seattle, WA 98101
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Roger G. Clark Chairman of the Board of Directors President
Investment Department
Ensign Peak Advisors
50 East North Temple Street
Salt Lake City, UT 84150
Harindra de Silva President President, Pilgrim Baxter Analytic
</TABLE>
Information About the New Portfolio Manager Agreement
The new Portfolio Manager Agreement with Pilgrim Baxter Analytic, which appears
in full in the Appendix, is substantially identical to the previous agreement
with Stonehill. The new agreement provides generally that the Portfolio Manager
will provide research services and make decisions about the securities in which
the Growth Portfolio will invest. The Portfolio Manager must make investment
decisions for the Growth Portfolio consistent with the Portfolio's investment
objective and policies. The Portfolio Manager must, under the Portfolio Manager
Agreement, comply with applicable laws and regulations. The Portfolio Manager
must also provide information about Portfolio transactions to the Trust's
custodian, and must provide information and reports to the Board of Trustees.
The Portfolio Manager Agreement specifies that the Portfolio Manager must pay
its own expenses and salaries and fees of any officer or trustee of the Trust
who is an officer, director, or employee of the Portfolio Manager. The Portfolio
Manager does not otherwise have responsibility for the Trust's or the
Portfolio's expenses. The Portfolio Manager Agreement imposes liability on a
Portfolio Manager for losses caused by the Portfolio Manager's breach of
fiduciary duty (as limited by certain provisions of the federal securities
laws); willful misfeasance, bad faith, or gross negligence by the Portfolio
Manager; or reckless disregard by the Portfolio Manager of its obligations and
duties under the agreement. The Trust may not recover from the Portfolio Manager
for losses arising from other causes. Subject to the right of any party to the
agreement to terminate it with advance notice and to the federal securities
laws, the agreement will continue if the Board of Trustees re-approves it
annually.
Advisory Fees
Advisory fees will not increase under the new Portfolio Manager Agreement. The
fee structure of the new Portfolio Manager Agreement with Pilgrim Baxter
Analytic is exactly the same as under the old Portfolio Manager Agreement with
Stonehill. In addition, during the first year of the new agreement, advisory
fees for the Growth Portfolio will be subject to a maximum cap of 0.80% of
average daily net assets. The advisory fee schedule is explained in more detail
below.
As explained above, AFIMS serves as the overall manager of the Trust, including
the Growth Portfolio, and the Portfolio Manager handles the day-to-day
investment management of the Growth Portfolio. For these services, the Growth
Portfolio pays an overall management fee, computed and accrued daily and paid
monthly, based on its average daily net assets. The overall fee varies based on
the performance of that Portfolio (after expenses) compared to that of an
appropriate benchmark. The Portfolio Manager receives 80% of the fee, and AFIMS
receives the remaining 20%.
Performance-Based Fee. The Growth Portfolio pays, at the end of each month, a
monthly
<PAGE>
advisory fee equal to a Basic Fee plus or minus an Incentive Fee. (As
explained below, the fee might be reduced if absolute performance is negative.)
The monthly Basic Fee equals one-twelfth of the annual Basic Fee rate of 2.0%
multiplied by average daily net assets over the previous 12 months. The
Incentive Fee rate ranges from -2.0% to +2.0% on an annual basis, depending on a
comparison of the Portfolio's performance (reflecting a deduction of Portfolio
expenses) and the performance of the S&P 500 Composite Stock Price Index (the
"S&P 500") over the past twelve months. (The S&P 500 is widely used to portray
the movement of U.S. stock prices in the aggregate. The stocks included in the
S&P 500 represent, on a market capitalization basis, over 70% of the common
stock of exchange-traded U.S. companies.) The monthly Incentive Fee, like the
monthly Basic Fee, is calculated by multiplying one-twelfth of the Incentive Fee
rate on an annual basis by the average daily net assets over the previous twelve
months. Accordingly, the Total Fee could range from 0.0% to an annual rate of
4.0%, depending on performance.
Performance of both the Growth Portfolio and the S&P 500 is calculated on a
rolling 12-month period (i.e., the previous 12 months, including the month for
which the fee is being calculated). The performance of the Growth Portfolio is
calculated by first determining the change in the Portfolio's net asset value
per share during the period, assuming the reinvestment of distributions during
that period, and then expressing this amount as a percentage of the net asset
value per share at the beginning of the period. Net asset value per share is
calculated by dividing the value of the securities held by the Portfolio plus
any cash or other assets minus all liabilities including accrued advisory fees
and the other expenses, by the total number of shares outstanding at the time.
The performance of the S&P 500 is calculated as the sum of the change in the
level of the S&P 500 during the period, plus the value of any dividends or
distributions made by the companies whose securities comprise the S&P 500
accumulated to the end of the period, and then expressing that amount as a
percentage of the S&P 500 at the beginning of the period.
No Incentive Fee will be paid unless the Growth Portfolio's performance exceeds
the S&P 500 by at least 3 percentage points. The maximum fee will be paid if
performance is 7.5 percentage points higher than the S&P 500. No fee will be
paid at all if performance is 3 percentage points lower than the S&P 500. The
chart below further explains the Incentive Fee at various performance levels.
<TABLE>
<CAPTION>
Percentage Point Difference Between Performance
of the Growth Portfolio (net of expenses including
Basic Fee and Incentive Fee) And Change in Total
Selected Benchmark Index Basic Fee (%) Incentive Fee (%) Advisory Fee
<S> <C> <C> <C>
+7.5 or greater 2.0 2.0 4.0
+6.0 or greater, but less than +7.5 2.0 1.5 3.5
+4.5 or greater, but less than +6.0 2.0 1.0 3.0
+3.0 or greater, but less than +4.5 2.0 0.5 2.5
+1.5 or greater, but less than +3.0 2.0 0.0 2.0
0.0 or greater, but less than +1.5 2.0 -0.5 1.5
- -1.5 or greater, but less than 0.0 2.0 -1.0 1.0
- -3.0 or greater, but less than -1.5 2.0 -1.5 0.5
Less than -3.0 2.0 -2.0 0.0
</TABLE>
Maximum Fee If Performance Is Negative. Notwithstanding the above schedule, if
the absolute performance of the Growth Portfolio (after payment of all expenses,
including the Basic Fee and
<PAGE>
any Incentive Fee) is negative, the monthly advisory fee will be the lesser of
the fee calculated pursuant to the above schedule or the alternative monthly
advisory fee described below. Under certain circumstances, the alternative
monthly advisory fee would result in the Growth Portfolio paying either no
advisory fee or a lower monthly advisory fee than under the performance fee
schedule above. If the Growth Portfolio's performance (after payment of all
expenses including advisory fees) is negative and does not exceed the S&P 500 by
six percentage points (on an annual basis), no monthly advisory fee will be
paid. If the Growth Portfolio's performance (after payment of all expenses
including advisory fees) is negative and does not exceed the selected benchmark
by twelve percentage points but does exceed the S&P 500 by six percentage points
(on an annual basis), the alternate monthly advisory fee will be based on an
annual rate of 1.0% of average daily net assets over the previous 12 months. If,
on the other hand, the performance of the Growth Portfolio (after payment of all
expenses including advisory fees) is negative but exceeds the S&P 500 by twelve
percentage points or more (on an annual basis), the alternative monthly advisory
fee will be based on an annual rate of 2.0% of average daily net assets over the
previous 12 months.
Size of Fee. The Basic Fee payable by the Growth Portfolio is at a rate higher
than the investment advisory fees paid by most other comparable mutual funds. If
the Growth Portfolio outperforms the S&P 500 by three percentage points or more,
the advisory fee payable by the Growth Portfolio may further exceed those paid
by other mutual funds. On the other hand, if the Growth Portfolio underperforms
the S&P 500, the advisory fee paid by the Growth Portfolio may be less than
those paid by other mutual funds. If, during the applicable performance period,
the Growth Portfolio underperforms the S&P 500 by three or more percentage
points, the Growth Portfolio will not pay any advisory fee.
Advisory Fee For First Twelve Full Calendar Months. For the period that began on
the effective date of the Portfolio Manager Agreement with Pilgrim Baxter
Analytic and that ends with the last day of the twelfth full calendar month
after that date, the new Portfolio Manager Agreement specifies that the Growth
Portfolio will pay a monthly advisory fee calculated at an annual rate of 0.80%
of the Portfolio's average daily net assets. However, Pilgrim Baxter Analytic
and AFIMS have agreed that if the Growth Portfolio would have paid less than
0.80% on an annual basis using the incentive fee schedule described above,
Pilgrim Baxter Analytic and AFIMS will limit their fee to that smaller amount.
(Federal securities laws require Pilgrim Baxter Analytic and AFIMS to limit
their fees in this way prior to approval of the new Portfolio Manager Agreement
by persons having voting rights. Pilgrim Baxter Analytic and AFIMS have agreed
voluntarily to continue this limit for the duration of the first year of the
agreement.) As a result, during the first year of the new Portfolio Manager
Agreement, the Growth Portfolio will pay the lesser of (i) the amount the
Portfolio would have paid under the old agreement and (ii) 0.80% of average
daily net assets.
1997 Advisory Fees. During 1997, the Growth Portfolio accrued aggregate advisory
fees of $ 4192, of which the Portfolio Manager received $3354. Advisory fees
were computed in 1997 in exactly the same way they will be computed under the
new Portfolio Manager Agreement with Pilgrim Baxter Analytic.
<PAGE>
Board Consideration
On June 17, 1998, the Board of Trustees met in person to consider AFIMS'
recommendation that Pilgrim Baxter Analytic replace Stonehill as Portfolio
Manager of the Growth Portfolio and to consider the proposed new Portfolio
Manager Agreement with Pilgrim Baxter Analytic. Representatives from Pilgrim
Baxter Analytic made a presentation to the Board, and the Board was provided
with materials about Pilgrim Baxter Analytic, its investment philosophies and
strategies, its key personnel, its other clients, and examples of performance.
The Board considered the terms of the Portfolio Manager Agreement and the fact
that it was substantially identical to the then-existing agreement. The Board
also considered the fairness of the proposed fee; the incentives it provided for
strong performance and the penalty it provided for poor performance; and the
fact that it had exactly the same rate structure as under the previous agreement
with Stonehill. In this regard, the Board received materials comparing the
Growth Portfolio's advisory fees with those of other funds with a similar
investment objective, including both funds connected with variable annuity and
insurance products and funds available to the public.
AFIMS explained to the Board that the Growth Portfolio's performance during the
period Stonehill served as Portfolio Manager had not been as strong as had been
hoped. The Board agreed with AFIMS' recommendation that the greater experience
with mutual funds, better capitalization, and better long-term track record of
Pilgrim Baxter Analytic and its affiliates compared with Stonehill justified
replacing Stonehill with Pilgrim Baxter Analytic as Portfolio Manager of the
Growth Portfolio. The Board concluded that entering into the new Portfolio
Manager Agreement with Pilgrim Baxter Analytic was in the best interests of the
Growth Portfolio and contract owners who had allocated part of their contract
fund to the Portfolio. Accordingly, the Board voted unanimously to terminate the
existing Portfolio Manager Agreement with Stonehill and to approve the new
Portfolio Manager Agreement with Pilgrim Baxter Analytic.
Required Vote
The Trust will adopt the Proposal if a majority of outstanding shares of the
Growth Portfolio vote in favor of it. Federal securities law defines a majority
of outstanding shares of a Portfolio as the lesser of (1) a vote of 67% or more
of the Portfolio's shares whose holders are present or represented by proxy at
the meeting if the holders of more than 50% of all outstanding Portfolio's
shares are present in person or represented by proxy at the meeting, or (2) a
vote of more than 50% of all outstanding Portfolio shares.
The Board recommends that you vote FOR this Proposal.
OTHER MATTERS
Neither the Board of Trustees nor Allmerica is currently aware of any other
matters to be considered at the special meeting.
<PAGE>
APPENDIX
The Portfolio Manager Agreement with Pilgrim Baxter Analytic Investors, Inc.
discussed in the Proposal appears below.
<PAGE>
GROWTH PORTFOLIO
PORTFOLIO MANAGER AGREEMENT
---------------------------
Agreement, made this 1st day of August, 1998, among The Palladian Trust (the
"Trust"), a Massachusetts business trust; Allmerica Financial Investment
Management Services, Inc. (the "Manager"), a Massachusetts corporation; and
Pilgrim Baxter Analytic Investors, Inc. (the "Portfolio Manager"), a California
corporation.
WHEREAS, the Trust is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Manager and the Portfolio Manager are both registered as investment
advisers under the Investment Advisers Act of 1940; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate portfolios with each such portfolio representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Manager has entered into a management agreement with the Trust,
pursuant to which the Manager will provide, among other services, advice with
respect to the selection and monitoring of portfolio managers to handle the
day-to-day investment management of certain portfolios; and
WHEREAS, the Trust and the Manager desire to retain the Portfolio Manager to
provide investment advisory services to the Growth Portfolio of the Trust (the
"Portfolio"), and the Portfolio Manager is willing to render such services.
Therefore, the parties agree as follows:
1. Appointment. The Trust hereby appoints the Portfolio Manager to provide
-----------
investment advisory services with respect to the Portfolio for the period and on
the terms set forth in this Agreement, subject to the direction of the Board of
Trustees of the Trust (the "Board of Trustees"). The Portfolio Manager accepts
such appointment and agrees to render the services described herein for the
compensation provided in paragraph 13.
2. Services of the Portfolio Manager.
---------------------------------
(a) Subject to the supervision of the Board of Trustees, the Portfolio
Manager will provide day-to-day investment management of the Portfolio. The
Portfolio Manager will provide investment research and conduct a continuous
program of evaluation, investment, sales, and reinvestment of the Portfolio's
assets by determining the securities and other investments that shall be
purchased, entered into, sold, closed, or exchanged for the Portfolio, when
these transactions should be executed, and what portion of the assets of the
Portfolio should be held in the various securities and other investments in
which it may invest. The Portfolio Manager is hereby authorized to execute and
perform such services on behalf of the Portfolio. To the extent permitted by the
investment policies of the Portfolio, the Portfolio Manager shall make decisions
<PAGE>
for the Portfolio as to foreign currency matters and make determinations as to,
and execute and perform, foreign currency exchange contracts on behalf of the
Portfolio. The Portfolio Manager will provide the services under this Agreement
in accordance with the Portfolio's investment objective or objectives, policies,
and restrictions as stated in the Trust's registration statement under the
Securities Act of 1933 and the 1940 Act as filed with the Securities and
Exchange Commission ("SEC") and amended from time to time (the "Registration
Statement"). Manager shall promptly provide Portfolio Manager with the most
current effective version of such Registration Statement if any amendments or
supplements to the Registration Statement are filed with the SEC.
(b) The Portfolio Manager will use reasonable efforts to manage the
Portfolio so that it will (1) qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and (2) comply with the
diversification requirements of Section 817(h) of the Internal Revenue Code and
regulations issued thereunder. In managing the Portfolio in accordance with
these requirements, the Portfolio Manager shall be entitled to receive and act
upon advice of counsel to the Trust or counsel to the Manager.
(c) On occasions when the Portfolio Manager deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as any other
investment advisory clients, the Portfolio Manager may, to the extent permitted
by applicable laws and regulations, including, but not limited to Section 17(d)
of the 1940 Act, but shall not be obligated to, aggregate the securities to be
so sold or purchased with those of its other clients. In such event, allocation
of the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Portfolio Manager in a manner that is fair and
equitable in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust and to such other clients.
(d) In connection with the purchase and sale of securities for the
Portfolio, the Portfolio Manager will arrange for the transmission to the
custodian for the Trust on a daily basis, such confirmation, trade tickets, and
other documents and information as may be reasonably necessary to enable the
custodian to perform its administrative and recordkeeping responsibilities with
respect to the Portfolio. With respect to portfolio securities to be purchased
or sold through the Depository Trust Company, the Portfolio Manager will arrange
for the automatic transmission of the confirmation of such trades to the Trust's
custodian. The Portfolio Manager will provide to the Manager copies of the
documents and information sent to the custodian and the Depository Trust Company
as requested by the Manager.
(e) The Portfolio Manager will provide reasonable assistance to the
custodian or recordkeeping agent for the Trust in determining, consistent with
the procedures and policies stated in the Registration Statement, the value of
any portfolio securities or other assets of the Portfolio for which the
custodian or recordkeeping agent seeks assistance or review from the Portfolio
Manager.
(f) The Portfolio Manager shall regularly report to the Board of Trustees
on the investment program for the Portfolio, and will furnish the Board of
Trustees such periodic and special reports as the Board may reasonably request.
(g) The Portfolio Manager shall make its officers and employees available
to the Board of
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Trustees, officers of the Trust, and officers of the Manager for consultation
and discussions regarding the investment program for the Portfolio at such times
as the Board of Trustees, officers or Manager may reasonably request.
3. Broker-Dealer Selection. The Portfolio Manager is responsible for decisions
-----------------------
to buy and sell securities and other investments for the Portfolio,
broker-dealer selection, and negotiation of brokerage commission rates. The
Portfolio Manager's primary consideration in effecting a security transaction
will be to obtain the best execution for the Portfolio. Subject to such policies
as the Board of Trustees may determine and consistent with Section 28(e) of the
Securities Exchange Act of 1934, the Portfolio Manager shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Portfolio to pay a
broker-dealer for effecting a portfolio investment transaction in excess of the
amount of commission another broker-dealer would have charged for effecting that
transaction, if the Portfolio Manager determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Portfolio Manager's overall responsibilities with
respect to the Portfolio and to its other clients as to which it exercises
investment discretion.
4. Employees. In rendering the services required under this Agreement, the
---------
Portfolio Manager may, from time to time, employ such person or persons as it
believes necessary to assist it in carrying out its obligations under this
Agreement. The Portfolio Manager shall be responsible for making reasonable
inquiries and for reasonably ensuring that:
(i) no employee of the Portfolio Manager who provides investment advice to the
Trust:
(a) has been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, or involving violations
of Sections 1341, 1342, or 1343 of Title 18, United States Code; or
(b) has been found by any state regulatory authority, within the last ten
(10) years, to have violated or to have acknowledged violation of any provision
of any state insurance law involving fraud, deceit, or knowing
misrepresentation; or
(c) has been found by any federal or state regulatory authorities, within
the last ten (10) years, to have violated or to have acknowledged violation of
any provisions of federal or state securities laws involving fraud, deceit, or
knowing misrepresentation; and
(ii) no employee of the Portfolio Manager is ineligible by reason of Section 9
of the 1940 Act to serve as an employee of an investment adviser to an
investment company.
5. Conformity with Applicable Law. The Portfolio Manager, in the performance
------------------------------
of its duties and obligations under this Agreement, shall act in conformity with
the Registration Statement and with the instructions and directions of the Board
of Trustees and will conform to, and comply with, the requirements of the 1940
Act and all other applicable federal and state laws and regulations.
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<PAGE>
6. Exclusivity. The services of the Portfolio Manager under this Agreement are
-----------
not deemed exclusive, and the Portfolio Manager, or any affiliate thereof, shall
be free to render similar services to other investment companies and other
clients and to engage in other activities, so long as its services hereunder are
not materially impaired thereby.
7. Documents. The Trust has delivered copies of each of the following
---------
documents to the Portfolio Manager and will promptly deliver to it all future
amendments and supplements thereto, if any:
(a) the Trust's Declaration of Trust and its by-laws;
(b) the Registration Statement; and
(c) the prospectus and statement of additional information of the Trust as
currently in effect and as amended and supplemented from time to time.
8. Records. The Portfolio Manager agrees to maintain and to preserve records
-------
relating to the Trust as required by the 1940 Act. The Portfolio Manager further
agrees that all records which it maintains for the Trust are the property of the
Trust and it will promptly surrender any of such records upon request.
9. Disclosure by Portfolio Manager. The Portfolio Manager will not disclose or
-------------------------------
use any records or information obtained pursuant to this Agreement (excluding
investment research and investment advice) in any manner whatsoever except as
required to carry out its duties as investment adviser or in the ordinary course
of business in connection with placing orders for the purchase and sale of
securities, and will keep confidential any information obtained from the Trust
pursuant to this Agreement, and disclose such information only if the Board of
Trustees has authorized such disclosure, or if such disclosure is expressly
required by applicable federal or state law or regulations or regulatory
authorities having the requisite authority.
10. Disclosure about Portfolio Manager. The Portfolio Manager will cooperate
----------------------------------
with the Trust and the Manager by providing and reviewing information relating
to the Portfolio Manager and the Portfolio for use in the Registration
Statement, shareholder reports and other documents. The Portfolio Manager
represents and warrants that it is a duly registered investment adviser under
the Investment Advisers Act of 1940 and a duly registered investment adviser in
all states in which the Portfolio Manager is required to be registered.
11. Compliance. The Portfolio Manager agrees that it shall promptly notify the
----------
Manager and the Trust in the event that:
(a) the SEC has censured the Portfolio Manager; placed limitations upon its
activities, functions or operations; suspended or revoked its registration as an
investment adviser; or commenced proceedings or an investigation that may result
in any of these actions; or
(b) the Portfolio Manager has a reasonable basis for believing that the
Portfolio has ceased to qualify or might not qualify as a regulated investment
company under Subchapter M of the
4
<PAGE>
Internal Revenue Code; or
(c) the Portfolio Manager has a reasonable basis for believing that the
Portfolio has ceased to comply or might not comply with the diversification
provisions of Section 817(h) of the Internal Revenue Code or the regulations
thereunder; or
(d) the Portfolio Manager has actual knowledge that a material fact that is
not contained in the Registration Statement or prospectus for the Trust, or any
amendment or supplement thereto, or that any statement contained therein that
has become untrue or misleading in any material respect.
12. Expenses. During the term of this Agreement, the Portfolio Manager will pay
--------
all expenses incurred by it in connection with its activities under this
Agreement, including all rent and other expenses involved in providing office
space and equipment required by the Portfolio Manager and the salaries and
expenses of all personnel of the Portfolio Manager. The Portfolio Manager
further agrees to pay all salaries, fees and expenses of any officer or trustee
of the Trust who is an officer, director or employee of the Portfolio Manager or
any of its affiliates. Nothing in this Agreement shall require the Portfolio
Manager to bear the expenses of the Trust or Manager, including but not limited
to the following expenses:
(a) Fees of the Manager;
(b) Charges for audits by the Trust's independent public accountants;
(c) Charges of the Trust's transfer agent, registrar, and/or dividend
disbursing agent;
(d) Charges of the Trust's custodian and/or accountant;
(e) Costs of obtaining quotations for calculating the value of each
Portfolio's net assets;
(f) Costs of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors, or employees of
the Portfolio Manager or any of its affiliates;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase and sale
of portfolio securities for the Trust;
(j) Costs, including the interest expense, of borrowing by the Trust;
(k) Costs and/or fees incident to meetings of the Trust's shareholders, the
preparation and mailings of prospectuses, reports, proxy statements and other
communications by the Trust to its shareholders, the filing of reports with
regulatory bodies, the maintenance of the Trust's existence, and the
registration of shares with federal and state securities or insurance
authorities;
5
<PAGE>
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the Trust;
(n) Trustees' fees and expenses of Trustees who are not officers,
directors, or employees of the Portfolio Manager or any affiliates;
(o) Trust's pro rata portion of the fidelity bond required by Section 17(g)
of the 1940 Act, or other insurance premiums;
(p) Membership dues for any association of which the Trust is a member;
(q) Extraordinary expenses of the Trust as may arise, including expenses
incurred in connection with litigation, proceedings, other claims against the
Trust (unless the Portfolio Manager is responsible for such expenses under
paragraph 14 of this Agreement), and the legal obligations of the Trust to
indemnify its trustees, officers, employees, shareholders, distributors, and
agents with respect to such claims; and
(r) Organizational and offering expenses of the Trust and, if applicable,
reimbursement (with interest) of underwriting discounts and commissions.
13. Compensation.
------------
(a) For the services provided and the expenses borne by the Portfolio
Manager pursuant to this Agreement, the Trust will pay the Portfolio Manager 80%
of the Initial Monthly Advisory Fee or the Monthly Advisory Fee, as those terms
are defined in this paragraph, whichever is applicable.
(b) For the period beginning with the effective date of this Agreement and
ending with the last day of the twelfth full calendar month thereafter, the
Portfolio will pay at the end of each month, an advisory fee calculated at an
annual rate of 0.80% of the Portfolio's average daily net assets (the "Initial
Monthly Advisory Fee").
(c) For the period beginning with the first day of the thirteenth full
calendar month after the effective date of this Agreement and continuing through
the remainder of the term of this Agreement, the Portfolio will pay at the end
of each month, an advisory fee (the "Monthly Advisory Fee"). The Monthly
Advisory Fee equals the Basic Fee (as defined in paragraph 13(d) below) plus the
Incentive Fee (as defined in paragraph 13(e) below) and adjusted, if so
required, by paragraph 13(h) below.
(d) The Basic Fee equals one-twelfth of 2% multiplied by the Portfolio's
average daily net assets for the previous 12 months (including the month for
which the fee is being calculated).
(e) The Incentive Fee equals: (i) one-twelfth of the Annual Incentive Fee
set forth in the chart below based on the difference between the Performance of
the Portfolio and the
6
<PAGE>
Performance of the Benchmark, as those terms are defined in paragraphs 13(f) and
13(g) below; (ii) multiplied by the Portfolio's average daily net assets for the
previous 12 months (including the month for which the fee is being calculated).
- --------------------------------------------------------------------------------
Percentage Point Difference Between Performance of the Portfolio Annual
and Performance of the Benchmark Incentive
Fee (%)
- --------------------------------------------------------------------------------
+7.5 or greater 2.0%
- --------------------------------------------------------------------------------
+6.0 or greater, but less than +7.5 1.5
- --------------------------------------------------------------------------------
+4.5 or greater, but less than +6.0 1.0
- --------------------------------------------------------------------------------
+3.0 or greater, but less than +4.5 0.5
- --------------------------------------------------------------------------------
+1.5 or greater, but less than +3.0 0.0
- --------------------------------------------------------------------------------
0.0 or greater, but less than +1.5 -0.5
- --------------------------------------------------------------------------------
- -1.5 or greater, but less than 0.0 -1.0
- --------------------------------------------------------------------------------
- -3.0 or greater, but less than -1.5 -1.5
- --------------------------------------------------------------------------------
Less than -3.0 -2.0
- --------------------------------------------------------------------------------
(f) The Performance of the Portfolio will be calculated by first
determining the change in the Portfolio's net asset value per share during the
previous twelve months (including the month for which the fee is being computed)
assuming the reinvestment of distributions during that period, and then
expressing this amount as a percentage of the net asset value per share at the
beginning of the period. Net asset value per share is calculated by dividing the
value of the securities held by the Portfolio plus any cash or other assets
minus all liabilities including accrued advisory fees and the other expenses, by
the total number of shares outstanding at the time. The Performance of the
Portfolios shall be calculated in accordance with SEC rules.
(g) The Performance of the Benchmark will be calculated by first
determining the change in the level of the Benchmark during the previous twelve
months (including the month for which the fee is being computed) plus the value
of any cash dividends or distributions made by the companies whose securities
comprise the Benchmark accumulated to the end of the period, and then expressing
this amount as a percentage of the Benchmark at the beginning of the period. The
Performance of the Benchmark shall be calculated in accordance with SEC rules.
The Benchmark is the Standard & Poors 500 Index. If the Benchmark ceases to be
published, changes in any material respect or otherwise becomes impracticable to
use for purposes of the Incentive Fee, the Monthly Advisory Fee will equal the
Basic Fee (with no incentive adjustment) until such time as the Board of
Trustees approves a substitute Benchmark.
(h) Notwithstanding paragraphs 13(a)-13(g) above, if the Performance of a
Portfolio (minus payment of all expenses, including the Basic Fee and any
Incentive Fee) is negative and does not exceed the Performance of the Benchmark
by six percentage points, then the Monthly Advisory Fee will equal zero.
Notwithstanding paragraphs 13(a)-13(g) above, if the Performance
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<PAGE>
of a Portfolio (minus payment of all expenses, including the Basic Fee and any
Incentive Fee) is negative, exceeds the Performance of the Benchmark by six
percentage points, but does not exceed the Performance of the Benchmark by
twelve percentage points, then the Monthly Advisory Fee will not be greater than
one-twelfth of 1% of the Portfolio's average daily net assets for the previous
12 months (including the month for which the fee is being calculated).
Notwithstanding paragraphs 13(a)-13(g) above, if the Performance of a Portfolio
(minus payment of all expenses, including the Basic Fee and any Incentive Fee)
is negative and exceeds the Performance of the Benchmark by twelve percentage
points, then the Monthly Advisory Fee will not be greater than one-twelfth of 2%
of the Portfolio's average daily net assets for the previous 12 months
(including the month for which the fee is being calculated).
14. Liability and Indemnification. The Portfolio Manager, the Manager and the
-----------------------------
Trust each may rely on information reasonably believed by it to be accurate and
reliable. The Portfolio Manager shall not be liable to the Trust or its
shareholders for any loss suffered by the Trust as the result of any negligent
act or error of judgment of the Portfolio Manager in connection with the matters
to which this Agreement relates, except a loss resulting from a breach by the
Portfolio Manager of its fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act) or
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. The Trust shall indemnify the
Portfolio Manager and hold it harmless from all cost, damage and expense,
including reasonable expenses for legal counsel, incurred by the Portfolio
Manager resulting from actions for which it is relieved of responsibility by
this paragraph. The Portfolio Manager shall indemnify the Trust and hold it
harmless from all cost, damage and expense, including reasonable expenses for
legal counsel, incurred by the Trust resulting from (i) a breach by the
Portfolio Manager of its fiduciary duty with respect to compensation for
services paid by the Trust (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act);
(ii) willful misfeasance, bad faith or gross negligence by the Portfolio Manager
in the performance of its duties under this Agreement; or (iii) reckless
disregard by the Portfolio Manager of its obligations and duties under this
Agreement.
15. Continuation and Termination. This Agreement shall take effect on the date
----------------------------
first written above, and shall continue in effect, unless sooner terminated as
provided herein, for 119 days thereafter, and provided that the Agreement is
approved by a majority of the outstanding voting shares of the Portfolio by the
end of such 119th day, shall continue for two years from the date of this
Agreement and shall continue from year to year thereafter so long as such
continuance is specifically approved at least annually (i) by the vote of a
majority of the Board of Trustees; or (ii) by vote of a majority of the
outstanding voting shares of the Portfolio; provided, further, in either event
that continuance is also approved by the vote of a majority of the Board of
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of the Trust, the Manager or the Portfolio Manager cast
in person at a meeting called for the purpose of voting on such approval. This
Agreement may be terminated (i) by the Trust at any time, without the payment of
any penalty, by vote of a majority of the entire Board of Trustees or by a vote
of a majority of the outstanding voting shares of the Portfolio, on sixty (60)
days' written notice to the Manager and the Portfolio Manager, (ii) by the
Manager at any time, without the payment of any penalty, on ninety (90) days'
written notice to the Trust and the Portfolio Manager, or (iii) by the
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<PAGE>
Portfolio Manager at any time, without the payment of any penalty, on ninety
(90) days' written notice to the Trust and the Manager. This Agreement will
automatically and immediately terminate in the event of its "assignment" (as
defined in the 1940 Act).
16. Independent Contractor. The Portfolio Manager shall for all purposes herein
----------------------
be deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Trustees from time to time, have
no authority to act for or represent the Trust in any way or otherwise be deemed
its agent.
17. Use of Name. It is understood that the words "Palladian," "Fulcrum Fund" and
-----------
"Fulcrum Trust", any derivative thereof and any design associated with those
words (collectively, the "Words and Designs") are the valuable property of the
Trust, and that the Portfolio Manager shall have the right to use the Words and
Designs only with the approval of the Trust. Upon termination of this Agreement,
the Portfolio Manager shall promptly discontinue all use of the Words and
Designs.
18. Sales Literature. The Manager agrees to furnish to the Portfolio Manager all
----------------
sales literature which refers to the Portfolio Manager prior to use thereof and
not to use such sales literature if the Portfolio Manager reasonably objects in
writing five business days (or such other time as may be mutually agreed) after
receipt thereof. Sales literature may be furnished to the Portfolio Manager by
first class mail, overnight delivery service, facsimile transmission equipment,
or hand delivery.
19. Notice. Notices of any kind to be given to the Trust shall be in writing and
------
shall be duly given if sent by first class mail or delivered to the Trust at 440
Lincoln Street, Worcester, MA 01653, or at such other address or to such
individual as shall be specified by the Trust (with proper notice to the Manager
and the Portfolio Manager). Notices of any kind to be given to the Manager shall
be in writing and shall be duly given if sent by first class mail or delivered
to the Manager at 440 Lincoln Street, Worcester, MA 01653, or at such other
address or to such individual as shall be specified by the Manager (with proper
notice to the Trust and the Portfolio Manager). Notices of any kind to be given
to the Portfolio Manager shall be in writing and shall be duly given if sent by
first class mail or delivered to the Portfolio Manager at 825 Duportail Road,
Wayne, PA 19087, or at such other address or to such individual as shall be
specified by the Portfolio Manager (with proper notice to the Trust and the
Manager).
20. Obligation. A copy of the Trust's Agreement and Declaration of Trust is on
----------
file with the Secretary of the Commonwealth of Massachusetts. Notice is hereby
given that this Agreement has been executed on behalf of the Trust by a trustee
of the Trust in his or her capacity as trustee and not individually. The
obligations of this Agreement shall only be binding upon the assets and property
of the Trust and shall not be binding upon any trustee, officer, or shareholder
of the Trust individually.
21. Counterparts. This Agreement may be executed in one or more counterparts,
------------
each of which shall be deemed to be an original.
22. Applicable law. This Agreement shall be governed by the laws of
--------------
Massachusetts, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of 1940, or any
rules or order of the SEC thereunder.
9
<PAGE>
23. Severability. If any provision of this Agreement shall be held or made
------------
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
24. Captions. The captions of this Agreement are included for convenience only
--------
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first above
written.
The Palladian Trust
By:
- ------------------------ -----------------------------
Attest George M. Boyd
Secretary
Allmerica Financial Investment
Management Services, Inc.
By:
- ------------------------ -----------------------------
Attest Name:
Title:
Pilgrim Baxter Analytic Investors, Inc.
By:
- ------------------------ -----------------------------
Attest Name:
Title:
11
<PAGE>
Voting Instruction Form
For The Special Meeting Of Shareholders Of The Palladian Trust
September 15, 1998
GROWTH PORTFOLIO
John Doe
123 Main Street
New York, NY 10001
Contract No: _________
Dear Contract Owner:
Allmerica Financial Life Insurance and Annuity Company and First Allmerica
Financial Life Insurance Company (collectively, "Allmerica") and the Board of
Trustees of The Palladian Trust (the "Trust") solicit your voting instructions
and recommend a vote "FOR" the Proposal below. Allmerica will vote the
appropriate number of Growth Portfolio shares pursuant to the instructions you
give. If you sign and return this instruction form but do not make a choice,
Allmerica will vote "FOR".
Allmerica - for the purpose of voting on the Proposal in the agenda set forth in
the Notice and Statement Concerning the Special Meeting of Shareholders of The
Palladian Trust at the special shareholder meeting to be held on September 15,
1998 or at any adjournment - is hereby instructed to vote the Growth Portfolio
shares as to which I am entitled to give instructions as follows:
PROPOSAL FOR AGAINST ABSTAIN
--- ------- -------
Approval of Portfolio Manager Agreement with [_] [_] [_]
Pilgrim Baxter Analytic Investors, Inc.
PLEASE MARK YOUR CHOICE LIKE THIS: X
SIGNATURE____________________DATE__________ Please sign your name
as it appears on the
SIGNATURE____________________DATE__________ top of this instruction
card. If you own a
contract jointly, each
owner should sign. If
a contract is held in a
fiduciary capacity, the
fiduciary should sign
and indicate his or her
fiduciary capacity.
