SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. 2 X
Post-Effective Amendment No.
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. X
SAGE LIFE INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
ONE EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 573-1556
Name and Address of Agent for Service: Copies to:
Julie A. Tedesco, Esq. Kimberly J. Smith, Esq.
First Data Investor Services Group, Inc. Sutherland Asbill & Brennan LLP
One Exchange Place 1275 Pennsylvania Avenue, N.W.
Boston, Massachusetts 02109 Washington, D.C. 20004-2404
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of the Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
SAGE LIFE INVESTMENT TRUST
FORM N-1A
Part A
CROSS REFERENCE SHEET
Item No. Caption
Item 1. Cover Page Cover Page
Item 2. Synopsis.........................Not Applicable
Item 3. Condensed Financial Information Not Applicable
Item 4. General Description of Registrant.The Funds; Who May Want to Invest;
Investment Principles and
Risks; Investment Objectives and Policies
Item 5. Management of the Fund.....................Management of the Trust;
Shareholder and Account Policies
Item 5A. Management's Discussion of
Fund Performance Not Applicable
Item 6. Capital Stock and Other Securities......Dividends, Distributions
and Taxes
Item 7. Purchase of Securities Being Offered Net Asset Value; Purchase and
Redemption of Shares
Item 8. Redemption or Repurchase....................Purchase and Redemption of
Shares
Item 9. Pending Legal Proceedings...................Not Applicable
PROSPECTUS for SAGE LIFE INVESTMENT TRUST S&P 500 Equity Index Fund EAFE
Equity Index Fund Money Market Fund
Dated February 1, 1999 This Prospectus
offers shares of the S&P 500 Equity Index Fund and the EAFE Equity Index Fund
(together, the "Index Funds") and the Money Market Fund (together with the Index
Funds, the "Funds" and individually, each a "Fund"), all series of Sage Life
Investment Trust (the "Trust"), an open-end management investment company
currently offering these three series. Shares of the Funds are available to
separate accounts funding certain variable annuity and variable life insurance
contracts (the "Contract(s)") issued by various insurance companies (each an
"Insurer" and collectively, the "Insurers") and to various pension and
profit-sharing plans ("Retirement Plans"). The S&P 500 Equity Index Fund (the
"S&P 500 Fund") seeks to replicate as closely as possible the performance of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index") before
the deduction of fund expenses. The EAFE Equity Index Fund (the "EAFE Fund")
seeks to replicate as closely as possible the performance of the Morgan Stanley
Capital International Europe, Australia, Far East Index (the "EAFE Index")
before the deduction of fund expenses. Special risks are associated with
investments in foreign securities, including currency, political and economic,
regulatory and market risks. The Money Market Fund seeks to provide high current
income consistent with the preservation of capital and liquidity. Although the
Fund seeks to maintain a constant net asset value of $1.00 per share, there can
be no assurance that the Fund can do so on a continuous basis. An investment in
the Fund is not guaranteed. Sage Advisors, Inc. ("Sage" or the "Manager") is the
investment manager of the Funds. State Street Global Advisors ("State Street")
is the investment adviser to the Index Funds and Conning Asset Management
Company ("Conning," and together with State Street, the "Advisers" and each an
"Adviser") is the investment adviser to the Money Market Fund. Please read this
Prospectus carefully before investing and retain it for future reference. It
contains important information about the Funds that you should know and refer to
in deciding whether the Funds' goals are appropriate for your needs. A Statement
of Additional Information (the "SAI"), with the same date, has been filed with
the Securities and Exchange Commission (the "SEC"), and is incorporated herein
by reference. It includes additional information about the Funds. You may
request a free copy of the SAI or make inquiries regarding the Funds by calling
the Trust at 1-877-835-7243 or by writing to Sage Life Investment Trust,
Customer Service Center, 1290 Silas Deane Highway, Wethersfield, Connecticut
06109. In addition, the SEC maintains a Web site (http://www.sec.gov) that
contains the SAI and other information regarding the Funds. THIS PROSPECTUS MUST
BE ACCOMPANIED BY THE CURRENT PROSPECTUS OR DISCLOSURE DOCUMENT FOR THE CONTRACT
IF DELIVERED IN CONNECTION WITH A VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE
POLICY. The Funds' shares are not deposits or obligations of, or guaranteed by,
any financial institution. Shares are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency, and
involve risk, including the possible loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
The Funds 3
Fee Table 3
Description of the Funds............... 4
Who May Want to Invest............... 4
Investment Principles and Risks 5
The Funds in Detail 5
Investment Objectives and Policies 5
Risk Factors and Certain Securities and Investment Practices 7
Portfolio Turnover Rate 13
Net Asset Value 13
Performance Information and Reports 14
Management of the Trust 15
Board of Trustees 15
Investment Manager 15
Investment Advisers 16
Expenses 16
Sub-Administrator 17
Distributor and Distribution Plan 17
Custodian and Transfer Agent 17
Organization of the Trust 17
Year 2000 18
Shareholder and Account Policies 19
Purchase and Redemption of Shares 19
Dividends, Distributions and Taxes 19
Account Services 20
Appendix Describing Indexes 22
THE FUNDS
Fee Table
The following table sets forth certain costs and expenses that an investor
will incur either directly or indirectly as a shareholder of the Funds based on
fees and estimated operating expenses for the current fiscal year. Sage pays all
the Funds' expenses, except brokerage fees, taxes, interest, fees and expenses
of the non-interested Trustees (including counsel fees), Rule 12b-1 fees (if
applicable) and extraordinary expenses (collectively, "Other Expenses" as shown
in the table below). In order to compensate Sage for paying virtually all of the
Funds' expenses, the Funds' management fee may be higher than the investment
advisory fees paid by other investment companies. Most, if not all, such
companies also pay for a portion of the non-investment advisory expenses that
are not paid by such companies' investment advisers. See "Management of the
Trust" for more information. Shares of the Funds are sold without an initial or
contingent deferred sales charge to fund variable annuity contracts and variable
life insurance policies and to various pension and profit-sharing plans. The
table does not reflect Contract charges and expenses. See the prospectus or
disclosure document for the Contract for a description of such charges and
expenses. Additional information regarding each Fund's performance may be
obtained free of charge by requesting a Fund's financial report.
S&P Money 500 EAFE Market Fund Fund Fund Annual Fund Operating Expenses:
(as a percentage of average daily net assets) Management Fees (after waivers*)
0.38% 0.73% 0.48% 12b-1 Fees** 0.25% 0.25% 0.25% Other Expenses*** 0.17% 0.17%
0.17% Total Fund Operating Expenses* 0.55% 0.90% 0.65% * Reflects voluntary
waivers which will remain in effect until notice is given by Sage to the Board
of Trustees of the Trust. See "Management of the Trust." Absent such expense
limitation and fee waivers, the ratio of advisory fees to average net assets for
each Fund would be as follows: the S&P 500 Fund, 0.55%; the EAFE Fund, 0.90%;
and the Money Market Fund, 0.65%. The ratio of total Fund operating expenses to
average net assets for each Fund would be as follows: the S&P 500 Fund, 0.72%;
the EAFE Fund, 1.07%; and the Money Market Fund, 0.82%. ** A Rule 12b-1 Plan
(the "Plan") has been adopted by each Fund; however, no Plan payments will
accrue or be made for the fiscal year ending December 31, 1999. *** "Other
Expenses" for the Funds are based on estimated amounts for the Funds' fiscal
year ending December 31, 1999. Example: You would pay the following expenses on
a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end
of each time period: S&P Money 500 EAFE Market Fund Fund Fund
1 Year $ 6 $ 9 $ 7
3 Years $ 18 $ 29 $ 21
The example is based upon estimated expenses for the current fiscal year.
The example should not be considered as representative of past or future
expenses and actual expenses may be greater or less than those indicated.
Moreover, while the example assumes a 5% annual return, each Fund's performance
will vary and may result in an actual return greater or less than 5%, including
returns, i.e., losses.
Description of the Funds The S&P 500 Fund seeks to replicate as closely as
possible (before the deduction of fund expenses) the total return of the S&P 500
Index, an index emphasizing large-capitalization U.S. common stocks. The Fund
will invest in the common stock of companies included in the S&P 500 Index,
selected on the basis of computer-generated statistical data, that are deemed
representative of the entire S&P 500 Index. The EAFE Fund seeks to replicate as
closely as possible (before the deduction of fund expenses) the total return of
the EAFE Index, a market capitalization-weighted equity index representing the
stock markets that invest primarily in equity securities of business enterprises
organized and domiciled in the regions of Europe, Australia and the Far East or
for which the principal trading market is outside of North America, South
America and Africa. Statistical methods will be employed to replicate the EAFE
Index by buying most of the securities reflected in the EAFE Index. Securities
purchased for the Fund will generally, but not necessarily, be traded on a
foreign securities exchange. The Money Market Fund seeks to provide high current
income consistent with the preservation of capital and liquidity. The Fund
invests in U.S. dollar-denominated debt securities with remaining maturities of
13 months or less which, in accordance with guidelines adopted by the Board of
Trustees, are determined to present minimal credit risk. The Fund maintains an
average dollar-weighted portfolio maturity of 90 days or less. Who May Want to
Invest Shares of the Funds are available to insurance company separate accounts
funding Contracts and may be offered to various Retirement Plans. Each Fund, by
itself, is not a balanced investment plan. Holders of Contracts ("Contract
Owners") should consider their investment objectives and tolerance for risk when
making an investment decision. The Index Funds may be appropriate for investors
who are willing to endure stock market fluctuations in pursuit of potentially
higher long-term returns. The Index Funds invest for growth and do not pursue
income as a primary objective. Over time, stocks, although more volatile, have
shown greater growth potential than other types of securities. In the shorter
term, however, stock prices can fluctuate dramatically in response to market
factors. Each Index Fund is intended to be a long-term investment vehicle and is
not designed to provide investors with a means of speculating on short-term
market movements. Although State Street expects that under normal conditions
each Index Fund will be as fully invested as possible, the Funds may hold
uninvested cash pending the investment of late payments for purchase orders (or
other payments) or during temporary defensive periods. Uninvested cash will not
earn income. The S&P 500 Fund may be appropriate for investors who want to
pursue their investment goals in the U.S. securities market, through
large-capitalization U.S. common stocks as reflected in the S&P 500 Index. The
EAFE Fund may be appropriate for investors who want to pursue their investment
goals in securities markets in the regions of Europe, Australia and the Far
East. By including international investments in their portfolio, investors can
achieve an extra level of diversification and also participate in investment
opportunities around the world. However, there are substantial risks involved
with international investing. The performance of international funds depends
upon currency values, the political and regulatory environment, and overall
economic factors in the countries and regions in which the Fund invests. See
"Risk Factors and Certain Securities and Investment Practices - The EAFE Fund"
in this Prospectus. The Money Market Fund is designed for investors who desire
income, liquidity and stability of principal. The Fund invests its assets
conservatively and, as a result, it will likely not earn as high a return as
other funds that invest in longer term or lower quality debt securities or in
equity securities. Longer term and lower quality securities, however, generally
offer less liquidity, greater market risk and more fluctuation in market value.
Investors who are more aggressive in their investment approach or who desire a
potentially higher rate of return may wish to invest in one of the Index Funds.
Investment Principles and Risks The Index Funds are not managed according to
traditional methods of "active" investment management, which involve the buying
and selling of securities based upon economic, financial and market analysis and
investment judgment. Instead, the Index Funds utilize a "passive" or "indexing"
investment approach and attempt to replicate the investment performance of their
respective indexes through statistical procedures. The value of each Index
Fund's investment varies based on many factors. Stock values fluctuate,
sometimes dramatically, in response to the activities of individual companies
and general economic conditions. Over time, however, stocks have shown greater
long-term growth potential than other types of securities. Economic factors in
the U.S. and in various world markets will also affect stock values, and
therefore impact the value of an investor's investment. The Money Market Fund
invests mostly in short-term debt securities, so rises and falls in interest
rate levels, in general, as well as in the value of the specific instruments
held by the Fund, can affect the Fund's performance. The Fund attempts to
maintain a constant net asset value of $1.00 per share and an investment in the
Fund is not guaranteed. THE FUNDS IN DETAIL Investment Objectives and Policies
The following is a discussion of the various investments of and techniques
employed by the Funds. Additional information about the investment policies of
each Fund appears in the "Risk Factors and Certain Securities and Investment
Practices" section in this Prospectus and in the Funds' SAI. There can be no
assurance that the investment objectives of each Fund will be achieved. The
Funds' Investment Objectives The S&P 500 Fund seeks to replicate as closely as
possible the performance of the S&P 500 Index before the deduction of fund
expenses. The EAFE Fund seeks to replicate as closely as possible the
performance of the EAFE Index before the deduction of fund expenses. The Money
Market Fund seeks to provide high current income consistent with the
preservation of capital and liquidity. The Funds' Investment Policies The S&P
500 Fund. In seeking to replicate the performance of the S&P 500 Index, before
the deduction of fund expenses, State Street will attempt over time to allocate
the Fund's investments among common stocks in approximately the same proportions
as they are represented in the S&P 500 Index. The S&P 500 Index is a well-known
stock market index that includes common stocks of 500 companies from several
industrial sectors representing a significant portion of the market value of all
common stocks publicly traded in the United States, most of which are listed on
the New York Stock Exchange (the "NYSE"). Stocks in the S&P 500 Index are
weighted according to their market capitalization (i.e., the number of shares
outstanding multiplied by the stock's current price). The composition of the S&P
500 Index is determined by Standard & Poor's Corporation ("S&P") and may be
changed from time to time. The S&P 500 Fund is not sponsored, endorsed, sold or
promoted by S&P. S&P makes no representation regarding the advisability of
investing in funds generally or in this Fund (see "Appendix A" for an additional
discussion). The EAFE Fund. The EAFE Index is a market capitalization-weighted
equity index representing the stock markets in the regions of Europe, Australia
and the Far East. In seeking to replicate the performance of the EAFE Index,
before the deduction of fund expenses, State Street will attempt over time to
allocate the Fund's investments among stocks in approximately the same
proportions as they are represented in the EAFE Index. However, not all
companies represented in the EAFE Index will be represented in the Fund at the
same time. The countries currently included in the EAFE Index are: Australia,
Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy,
Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland and the United Kingdom. Stocks are selected for inclusion in the
Fund based on country of origin, market capitalization, yield, volatility and
industry sector. The Adviser will manage the Fund using advanced statistical
techniques to determine which stocks are to be purchased or sold to replicate
the EAFE Index. From time to time, adjustments may be made in the Fund because
of changes in the composition of the EAFE Index, but such changes should be
infrequent. The composition of the EAFE Index may be changed from time to time.
The Fund is not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan
Stanley makes no representation or warranty, express or implied, to the
shareholders of the Fund or any member of the public regarding the advisability
of investing in funds generally or in this Fund particularly, or the ability of
the EAFE Index to track general stock market performance (see "Appendix A" for
an additional discussion). The Money Market Fund seeks to provide high current
income consistent with the preservation of capital and liquidity. The Money
Market Fund may invest in U.S. government securities, obligations of financial
institutions such as certificates of deposit and bankers' acceptances,
commercial paper, adjustable rate securities, Eurodollar securities and shares
of other investment companies. The Fund may purchase securities on a when-issued
and a delayed delivery basis. No more than 10% of the Money Market Fund's net
assets may be invested in illiquid or not readily marketable securities
(including repurchase agreements and time deposits with maturities of more than
seven (7) days). The Money Market Fund is subject to additional diversification
requirements. See the "Risk Factors and Certain Securities and Investment
Practices" section of this Prospectus and "Risk Factors and Certain Securities
and Investment Practices" section of the SAI for more information about the
investment practices of the Fund. The Index Funds Each Index Fund over time
seeks to maintain a correlation between its performance and the performance of
its respective index of 0.95 or higher, before the deduction of fund expenses. A
correlation of 1.00 would indicate perfect correlation, which would be achieved
when the net asset value of a Fund, including the value of its dividends and any
capital gains distributions, increases or decreases in exact proportion to
changes in the respective index. Each Fund's ability to track its index may be
affected by, among other things, transaction costs, administration and other
expenses incurred by the Fund, changes in either the composition of the
respective Fund's index or the assets of the Fund, and the timing and amount of
Fund investor contributions and withdrawals, if any. In the unlikely event that
a high correlation is not achieved, the Board of Trustees will consider
alternatives. Because each Fund seeks to track its respective index, State
Street will not attempt to judge the merits of any particular stock as an
investment. Each Index Fund under normal circumstances, will invest at least 80%
of its total assets in the securities that comprise its respective index. Each
Fund is a diversified fund and no more than 5% of the total assets of each Fund
may be invested in the securities of any one issuer (other than U.S. Government
securities), except that up to 25% of each Fund's total assets may be invested
without regard to this limitation. Each Fund will not invest 25% or more of its
total assets in the securities of issuers in any one industry. In the unlikely
event that a Fund's respective index should concentrate to an extent greater
than that amount, the Fund's ability to achieve its objective may be impaired.
These are fundamental investment policies of each Fund that may not be changed
without shareholder approval. No more than 15% of each Index Fund's net assets
may be invested in illiquid or not readily marketable securities. Each Index
Fund may invest in stock index futures, options on stock index futures and
options on stock indices. These instruments may be considered derivatives.
Derivatives are financial instruments which derive their performance, at least
in part, from the performance of an underlying asset, index or interest rate.
While derivatives can be used effectively in furtherance of a Fund's investment
objective, under certain market conditions they can increase the volatility of a
Fund's net asset value and decrease the liquidity of a Fund's investments. See
the "Risk Factors and Certain Securities and Investment Practices - Stock Index
Futures, Options on Stock Indices and Options on Stock Index Futures Contracts"
section in the Funds' SAI for more information on such instruments. Each Fund
may lend its investment securities and borrow money for temporary or emergency
purposes or to meet redemption requests. See the "Risk Factors and Certain
Securities and Investment Practices" section of this Prospectus and the SAI for
more information about the investment practices of each Fund. Additional
investment policies of each Fund are contained in the SAI. Risk Factors and
Certain Securities and Investment Practices The following pages contain more
detailed information about the types of instruments in which each Fund may
invest, related risks, and strategies the Advisers may employ in pursuit of each
Fund's investment objective. The Advisers may not buy all of these instruments
or use all of these techniques to the full extent permitted, unless they believe
that doing so will help a Fund achieve its goal. Holdings and recent investment
strategies are described in the financial reports of each Fund, which are sent
to Contracts Owners on a semi-annual and annual basis ("shareholder reports").
Risk Factors Because each Index Fund invests primarily in common stocks, each is
subject to market risk (i.e., the possibility that common stock prices will
decline, possibly dramatically, over short or even extended periods). The U.S.
and foreign stock markets tend to be cyclical, with periods when stock prices
generally rise and periods when stock prices generally decline. The EAFE Fund.
The following risks of investing in foreign securities pertain specifically to
the EAFE Fund. Investors should realize that investing in securities of foreign
issuers involves considerations not typically associated with investing in
securities of companies organized and operating in the United States. The value
of the Fund's foreign investments may be adversely affected by changes in
political or social conditions, diplomatic relations, confiscatory taxation,
expropriation, nationalization, currency exchange rates, limitations on the
removal of funds or assets, or imposition of (or changes in) exchange control or
tax regulations in foreign countries. Currency trading costs and higher asset
custody charges may reduce the value of the Fund's investments. In addition,
changes in government administrations or economic or monetary policies in the
United States or abroad could result in appreciation or depreciation of
portfolio securities and could favorably or unfavorably affect the Fund's
operations. Also, the economies of individual foreign nations may differ from
the U.S. economy, whether favorably or unfavorably, in areas such as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position; it may also be more difficult
to obtain and enforce a judgment against a foreign issuer. In general, less
information is publicly available with respect to foreign issuers than is
available with respect to U.S. companies. Most foreign companies are also not
subject to the uniform accounting and financial reporting requirements
applicable to issuers in the United States. Any foreign investments made by the
Fund must be made in compliance with U.S. and foreign currency restrictions and
tax laws restricting the amounts and types of foreign investments. The Fund's
foreign investments may be less liquid and their prices may be more volatile
than comparable investments in securities of U.S. companies. The settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, also may affect Fund liquidity. Finally, there may be less
government supervision and regulation of securities exchanges, brokers and
issuers in foreign countries than in the United States. The Money Market Fund
invests mostly in short-term debt securities, so rises and falls in interest
rate levels, in general, as well as in the value of the specific instruments
held by the Fund, can affect the Fund's performance.
In General
Each Fund's investment objective is not a fundamental policy and may
be changed upon notice to, but without the approval of, each Fund's
shareholders. If there is a change in a Fund's investment objective, the
Fund's shareholders should consider whether the Fund remains an appropriate
investment in light of their then-current needs. For descriptions of each
Fund's investment objective, policies and restrictions, see the "The Funds
in Detail" and the "Risk Factors and Certain Securities and Investment
Practices" sections in this Prospectus and in the SAI. See the "Risk
Factors and Certain Securities and Investment Practices" section in the SAI
for a description of the fundamental policies and investment restrictions
of each Fund that cannot be changed without approval by "the vote of a
majority of the outstanding voting securities" (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of each Fund.
For a description of each Fund's management and expenses, see the
"Management of the Trust" sections in this Prospectus and in the SAI.
Securities and Investment Practices
Asset-Backed Securities. Subject to applicable maturity and credit
criteria, the Money Market Fund may purchase asset-backed securities (i.e.,
securities backed by mortgages, installment sales contracts, credit card
receivables or other assets). The average life of asset-backed securities
varies with the maturities of the underlying instruments which, in the case
of mortgages, have maximum maturities of 40 years. The Fund may purchase
securities that have maturities in excess of the Money Market Fund's
maturity limitations but are deemed to have shorter maturities because the
Money Market Fund can demand payment of the principal of the securities at
least once within the maturity periods permitted on not more than 30 days'
notice (this demand feature is not required if the securities are
guaranteed by the U.S. Government or an agency or instrumentality thereof).
The average life of a mortgage-backed instrument, for example, is likely to
be substantially less than the original maturity of the mortgage pools
underlying the securities as the result of scheduled principal payments and
mortgage prepayments. The rate of such mortgage prepayments, and hence the
life of the certificates, will be primarily a function of current market
rates and current conditions in the relevant housing markets. The
relationship between mortgage prepayment and interest rates may give some
high-yielding mortgage-related securities less potential for growth in
value than conventional bonds with comparable maturities. In addition, in
periods of falling interest rates, the rate of mortgage prepayment tends to
increase. During such periods, the reinvestment of prepayment proceeds by
the Fund will generally be at lower rates than the rates that were carried
by the obligations that have been prepaid. Because of these and other
reasons, an asset-backed security's total return may be difficult to
predict precisely. To the extent that the Money Market Fund purchases
mortgage-related or mortgage-backed securities at a premium, mortgage
prepayments (which may be made at any time without penalty) may result in
some loss of the Money Market Fund's principal investment to the extent of
the premium paid. Bank Obligations. The Money Market Fund may purchase U.S.
dollar-denominated bank obligations, including certificates of deposit,
bankers' acceptances, bank notes, deposit notes and interest-bearing
savings and time deposits, issued by U.S. or foreign banks or savings
institutions having total assets at the time of purchase in excess of
$1 billion. For this purpose, the assets of a bank or savings institution
include the assets of both its domestic and foreign branches. See "Foreign
Securities" for a discussion of the risks associated with investments in
obligations of foreign banks and foreign branches of domestic banks. The
Money Market Fund will invest in the obligations of domestic banks and
savings institutions only if their deposits are federally insured.
Investments by the Money Market Fund in obligations of foreign banks and
foreign branches of domestic banks will not exceed 25% of the Fund's total
assets at the time of investment.
Borrowing. Each Fund may borrow money in amounts up to 5% of the value of its
total assets at the time of such borrowings for temporary purposes, and is
authorized to borrow money in excess of the 5% limit as permitted by the
1940 Act (not to exceed 30% of a Fund's total assets) in order to meet
redemption requests. This borrowing may be unsecured. No Fund will make any
additional purchases of portfolio securities at any time its borrowings
exceed 5% of its assets. The 1940 Act requires each Fund to maintain
continuous asset coverage of 300% of the amount it has borrowed. If the
300% asset coverage should decline as a result of market fluctuations or
other reasons, a Fund may be required to sell some of its portfolio
holdings within three (3) days to reduce the debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. Borrowing may exaggerate the
effect on net asset value of any increase or decrease in the market value
of a Fund. Money borrowed will be subject to interest costs which may or
may not be recovered by an appreciation of the securities purchased. A Fund
may also be required to maintain minimum average balances in connection
with borrowing or to pay a commitment or other fees to maintain a line of
credit; either of these requirements would increase the cost of borrowing
over the stated interest rate. A Fund may, in connection with permissible
borrowings, transfer as collateral securities owned by a Fund.
Derivatives. Each Index Fund may invest in various instruments that are commonly
known as derivatives. Some derivatives, such as mortgage-related and other
asset-backed securities, are in many respects like any other investment,
although they may be more volatile or less liquid than more traditional
debt securities. There are, in fact, many different types of derivatives
and many different ways to use them. There are a range of risks associated
with those uses. Futures and options are commonly used for traditional
hedging purposes in an effort to protect a fund from exposure to adversely
changing interest rates, securities prices or currency exchange rates, and
as a low cost method of gaining positive exposure to a particular
securities market without investing directly in those securities. The Index
Funds will use financial futures, contracts and related options for "bona
fide hedging" purposes, as such term is defined in applicable regulations
of the Commodity Futures Trading Commission. State Street will only use
derivatives for cash management purposes and for hedging the Index Funds'
portfolios. Derivatives will not be used to leverage, or to increase,
portfolio risk above the level that would be achieved using only
traditional investment securities or to acquire exposure to changes in the
value of assets or indexes that by themselves would not be purchased for an
Index Fund.
Securities Index Futures and Related Options. When an Index Fund
receives cash from new investments or holds a portion of its assets in
money market instruments, it may enter into index futures or options in
order to increase its exposure to the market. Strategies an Index Fund
could use to accomplish this include purchasing futures contracts, writing
put options and purchasing call options. When an Index Fund wishes to sell
securities, because of shareholder redemptions or otherwise, it may use
index futures or options to hedge against market risk until the sale can be
completed. These strategies could include selling futures contracts,
writing call options and purchasing put options.
Swap Agreements. The Index Funds may enter into interest rate, index,
equity and currency exchange rate swap agreements. These transactions would
be entered into in an attempt to obtain a particular return when it is
considered desirable to do so, possibly at a lower cost to the Funds than
if the Funds had invested directly in the asset that yielded the desired
return. Swap agreements are two-party contracts entered into primarily by
institutional investors for periods ranging from a few weeks to more than
one year. In a standard swap transaction, two parties agree to exchange the
returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments, which may be adjusted
for an interest factor. The gross returns to be exchanged or "swapped"
between the parties are generally calculated with respect to a "normal
amount" (i.e., the return on or increase in value of a particular dollar
amount invested at a particular interest rate, in a particular foreign
currency, or in a "basket" of securities representing a particular index).
Forms of swap agreements include interest rate caps, under which, in return
for a premium, one party agrees to make payments to the other to the extent
that interest rates exceed a specified rate, or "cap"; interest rate
floors, under which, in return for a premium, one party agrees to make
payments to the other to the extent that interest rates fall below a
specified level, or "floor"; and interest rate collars, under which a party
sells a cap and purchases a floor or vice versa in an attempt to protect
itself against interest rate movements exceeding given minimum or maximum
levels.
Additional Risks Associated with using Futures and Options. The risk of
loss associated with futures contracts in some strategies can be
substantial (indeed, unlimited) due to both the low margin deposits
required and the extremely high degree of leverage involved in futures
pricing. As a result, a relatively small price movement in a futures
contract may result in an immediate and substantial loss or gain. However,
an Index Fund will not use futures contracts or options for speculative
purposes or to leverage its assets. Accordingly, the primary risks
associated with the use of futures contracts and options by an Index Fund
are:(i) imperfect correlation between the change in market value of the
securities held by the Fund and the prices of futures contracts and
options; (ii) possible lack of a liquid secondary market for a futures
contract and the resulting inability to close a futures position prior to
its maturity date; and (iii) State Street's failing to accurately forecast
the direction or the extent of movements in securities prices or other
market factors, resulting in a possible loss to the Fund. The risk of
imperfect correlation will be minimized by investing only in those
contracts whose behavior is expected to resemble that of an Index Fund's
underlying securities. The risk that an Index Fund will be unable to close
out a futures position will be minimized by entering into transactions on
an exchange with an active and liquid secondary market.
Asset Coverage. In order to assure that futures and related options
are not used by an Index Fund to achieve excessive investment leverage, the
Fund will cover such transactions, as required under applicable
interpretations of the SEC, either by owning the underlying securities,
entering into an off-setting transaction, or by establishing a segregated
account with the Fund's custodian containing cash or liquid portfolio
securities in an amount at all times equal to or exceeding the Fund's
commitment with respect to these instruments or contracts.
Euro-Denominated Securities. The European Monetary Union ("EMU") plans
to implement a new currency unit, the Euro, on January 1, 1999, that is
expected to reshape financial markets, banking systems and monetary
policies in Europe and other parts of the world.
As of January 1, 1999 financial transactions and market information, including
share quotations and company accounts, in participating countries will be
in Euros, and monetary policy for participating countries will be uniformly
managed by a new central bank, the European Central Bank. Since it is not
possible to predict the impact of the Euro on the Funds, this transition
may change the economic environment and behavior of investors and the
Advisers may need to adapt their investment strategies accordingly.
Foreign Securities. The EAFE Fund may invest in the securities of
foreign issuers and The Money Market Fund may invest in U.S.
dollar-denominated foreign securities issued by foreign banks and
companies. There are certain risks and costs involved in investing in
securities of companies and governments of foreign countries, which are in
addition to the usual risks inherent in U.S. investments. Investments in
foreign securities involve higher costs than investments in U.S.
securities, including higher transaction costs as well as the imposition of
additional taxes by foreign governments. In addition, foreign investments
may include additional risks associated with the level of currency exchange
rates, less complete financial information about the issuers, less market
liquidity, and political instability. Future political and economic
developments, the possible imposition of withholding taxes on interest
income, the possible seizure or nationalization of foreign holdings, the
possible establishment of exchange controls, or the adoption of other
governmental restrictions might adversely affect the payment of principal
and interest on foreign obligations. Additionally, foreign banks and
foreign branches of domestic banks may be subject to less stringent reserve
requirements, and to different accounting, auditing and recordkeeping
requirements.
The EAFE Fund may invest in foreign securities in the form of American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
other similar securities. These securities may not be denominated in the
same currency as the securities they represent. ADRs are receipts typically
issued by a United States bank or trust company evidencing ownership of the
underlying foreign securities. EDRs are receipts issued by a European
financial institution evidencing a similar arrangement. Generally, ADRs, in
registered form, are designed for use in the United States securities
markets, and EDRs, in bearer form, are designed for use in the European
securities markets. The EAFE Fund typically will only purchase ADRs which
are listed on a domestic securities exchange or included in the NASDAQ
National Market System. Ownership of unsponsored ADRs may not entitle the
EAFE Fund to financial or other reports from the issuer, to which it would
be entitled as the owner of the sponsored ADRs. Interest or dividend
payments on such securities may be subject to foreign withholding taxes.
Guaranteed Investment Contracts. The Money Market Fund may make limited
investments in guaranteed investment contracts ("GICs") issued by U.S.
insurance companies. Pursuant to such contracts, the Money Market Fund
makes cash contributions to a deposit fund of the insurance company's
general account. The insurance company then credits to the Money Market
Fund on a monthly basis interest which is based on an index that is
guaranteed not to be less than a certain minimum rate. A GIC is normally a
general obligation of the issuing insurance company and not funded by a
separate account. The purchase price paid for a GIC becomes part of the
general assets of the insurance company, and the contract is paid from the
company's general assets. The Money Market Fund will only purchase GICs
from insurance companies which, at the time of purchase, have assets of $1
billion or more and meet quality and credit standards established by the
Adviser pursuant to guidelines approved by the Board of Trustees.
Generally, GICs are not assignable or transferable without the permission
of the issuing insurance companies, and an active secondary market in GICs
does not currently exist. Therefore, GICs will normally be considered
illiquid investments, and will be acquired subject to the Money Market
Fund's limitation on illiquid investments. Illiquid Securities. The Index
Funds will not invest more than 15% of the value of their respective net
assets, and the Money Market Fund will not invest more than 10% of the
value of its net assets, (determined at the time of acquisition) in
securities that are illiquid. If, after the time of acquisition, events
cause this limit to be exceeded, the applicable Fund will take steps to
reduce the aggregate amount of illiquid securities as soon as reasonably
practicable in accordance with policies of the SEC. Repurchase agreements
and time deposits that do not provide for payment within seven (7) days are
subject to this limitation.
Investment Company Securities. The Money Market Fund, in connection with the
management of its daily cash position, may invest in securities issued by
other investment companies which invest in short-term debt securities and
which seek to maintain a $1.00 net asset value per share (i.e., money
market funds). Securities of other investment companies will be acquired
within limits prescribed by the 1940 Act. These limitations, among other
matters, restrict investments in securities of other investment companies
to no more than 10% of the value of a Fund's total assets, with no more
than 5% invested in the securities of any one investment company. As a
shareholder of another investment company, a Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to
the expenses the Money Market Fund bears directly in connection with its
own operations. Money Market Fund Valuation. The Money Market Fund will use
the amortized cost method to determine the value of its portfolio
securities pursuant to Rule 2a-7 under the 1940 Act. The amortized cost
method involves valuing a security at its cost and amortizing any discount
or premium over the period until maturity regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during
which the value, as determined by amortized cost, is higher or lower than
the price which the Money Market Fund would receive if the security were
sold. During these periods, the yield to a shareholder may differ somewhat
from that which could be obtained from a similar fund which utilizes a
method of valuation based upon market prices. Thus, during periods of
declining interest rates, if the use of the amortized cost method resulted
in lower value of the Money Market Fund's portfolio on a particular day, a
prospective investor in that Fund would be able to obtain a somewhat higher
yield than would result from an investment in a fund utilizing solely
market values and existing Fund shareholders would receive correspondingly
less income. The converse would apply during periods of rising interest
rates. Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, the Money Market Fund must maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase
securities having remaining maturities of 397 days or less and invest only
in U.S. dollar denominated eligible securities determined by the Board of
Trustees to be of minimal credit risk and which: (1) have received one of
the two highest short-term ratings by at least two NRSROs, such as "A-1" by
Standard & Poor's Ratings Service ("Standard & Poor's") and "P-1" by
Moody's Investors Service, Inc. ("Moody's"); (2)are single rated and have
received the highest short-term rating by a Nationally Recognized
Statistical Rating Organization ("NRSRO"); or (3)are unrated, but are
determined to be of comparable quality by the Adviser pursuant to
guidelines approved by the Board of Trustees.
Repurchase Agreements. Each Fund may enter into repurchase agreements with
"primary dealers" in U.S. Government securities and member banks of the
Federal Reserve System which furnish collateral at least equal in value or
market price to the amount of their repurchase obligations. In a repurchase
agreement, a Fund purchases a debt security from a seller which undertakes
to repurchase the security at a specified resale price on an agreed future
date (ordinarily a week or less). The resale price generally exceeds the
purchase price by an amount which reflects an agreed-upon market interest
rate for the term of the repurchase agreement. The principal risk is that,
if the seller defaults, a Fund might suffer a loss to the extent that the
proceeds from the sale of the underlying securities and other collateral
held by a Fund are less than the repurchase price. In determining whether
to enter into an agreement, the Advisers will consider all relevant facts
and circumstances, including the creditworthiness of the counterparty.
Securities Lending. Each Fund may lend its investment securities to qualified
institutional investors on either a short- or long-term basis in order to
realize additional income. Loans of securities entered into by a Fund will
be collateralized by cash, letters of credit, or securities issued or
guaranteed by the U.S. Government or its agencies. The collateral will
equal at least 100% of the value of the loaned securities, and such loans
may not exceed 30% of the value of each Fund's net assets. The risks in
lending portfolio securities, as with other extensions of credit, consist
of possible loss of rights in and/or difficulties or delays in recovering
the collateral, should the borrower fail financially. In determining
whether to lend securities, the Advisers will consider all relevant facts
and circumstances, including the creditworthiness of the borrower.
Short-Term Investments. Each Fund may invest in short-term fixed income
securities in order to invest uncommitted cash balances, to maintain
liquidity to meet shareholder redemptions, or, in the case of the Index
Funds, to serve as collateral for the obligations underlying the Funds'
investments in securities index futures or related options. The securities
each Fund may invest in include: obligations issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities, or by any U.S.
state, district or commonwealth and U.S. dollar-denominated bank
obligations, including certificates of deposit, bankers' acceptances, bank
notes, commercial paper, deposit notes, interest-bearing savings and time
deposits, issued by U.S. or foreign banks or savings institutions having
total assets at the time of purchase in excess of $1 billion. For this
purpose, the assets of a bank or savings institution include the assets of
both its domestic and foreign branches. A Fund will invest in the
obligations of domestic banks and savings institutions only if their
deposits are federally insured. Short-term obligations purchased by a Fund
will either (i) have short-term debt ratings at the time of purchase in the
top two categories by one or more unaffiliated NRSROs or be issued by
issuers with such ratings or (ii) if unrated will be of comparable quality
as determined by the Adviser.
With respect to the Money Market Fund, securities (other than U.S. Government
securities) must be rated (generally, by at least two NRSROs) within the
two highest rating categories assigned to short-term debt securities. In
addition, the Money Market Fund (a) will not invest more than 5% of its
total assets in securities rated in the second highest rating category by
such NRSROs and will not invest more than 1% of its total assets in such
securities of any one issuer, and (b)intends to limit investments in the
securities of any single issuer (other than securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities) to not more than
5% of the Fund's total assets at the time of purchase, provided that the
Fund may invest up to 25% of its total assets in the securities of any one
issuer for a period of up to three (3) business days. Unrated and certain
single rated securities (other than U.S. Government securities) may be
purchased by the Money Market Fund, but are subject to a determination by
Conning, in accordance with procedures established by the Board of
Trustees, that the unrated and single rated securities are of comparable
quality to the appropriate rated securities.
Subsequent to its purchase by a Fund, a rated security may cease to be rated or
its rating may be reduced below the minimum rating required for purchase by
the Fund. The Board of Trustees or the relevant Adviser, pursuant to
guidelines established by the Board, will consider such an event in
determining whether the Fund involved should continue to hold or should
dispose of the security in accordance with the interests of the Fund and
applicable regulations of the SEC.
Stripped Securities. The Money Market Fund may purchase participations in trusts
that hold U.S. Treasury and agency securities (such as TIGRs and CATs) and
also may purchase Treasury receipts and other stripped securities, which
represent beneficial ownership interests in either future interest payments
or the future principal payments on U.S. Government obligations. These
instruments are issued at a discount to their "face value" and may
(particularly in the case of stripped mortgage-backed securities) exhibit
greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors.
U.S. Government Securities. Each Fund may purchase U.S. Government
securities, which are obligations issued by, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. Some U.S. Government
securities, such as Treasury bills, notes and bonds, are backed by the full
faith and credit of the United States; others, such as those of the Federal
Home Loan Banks, are backed by the right of the issuer to borrow from the
Treasury; others, such as those of the Federal National Mortgage
Association, are backed by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others, such as
those of the Student Loan Marketing Association, are backed only by the
credit of the agency.
Variable and Floating Rate Securities. The Money Market Fund may purchase
variable and floating rate securities which may have stated maturities in
excess of the Fund's maturity limitations but are deemed to have shorter
maturities because the Fund can demand payment of the principal of the
securities at least once within such periods on not more than 30 days'
notice (this demand feature is not required if the securities are
guaranteed by the U.S. Government or an agency or instrumentality thereof).
These securities may include variable amount master demand notes that
permit the indebtedness to vary in addition to providing for periodic
adjustments in the interest rate. Unrated variable and floating rate
securities will be determined by the Adviser to be of comparable quality at
the time of purchase to rated instruments purchasable by the Money Market
Fund. The absence of an active secondary market, however, could make it
difficult to dispose of the instruments, and the Money Market Fund could
suffer a loss if the issuer defaulted or during periods that the Fund is
not entitled to exercise its demand rights.
When-Issued and Delayed Delivery Securities. Each Fund may purchase securities
on a when-issued or delayed delivery basis. Delivery of and payment for
these securities may take place as long as a month or more after the date
of the purchase commitment. The value of these securities is subject to
market fluctuation during this period and no income accrues to a Fund until
settlement takes place. A Fund maintains with its custodian a segregated
account containing cash or liquid portfolio securities in an amount at
least equal to these commitments.
Portfolio Turnover Rate
The frequency of each Index Fund's transactions (i.e., a Fund's turnover rate)
will vary from year to year depending on market conditions, changes in the
stocks that comprise the relevant index, and a Fund's cash flows. Each
Index Fund's annual portfolio turnover rate is not expected to exceed 80%.
Net Asset Value
Each Fund is open for business each day when the NYSE is open (a "Valuation
Day"). The net asset value per share of each Fund is calculated once
on each Valuation Day as of the close of regular trading on the NYSE
(normally 4:00 p.m., Eastern Time).
Each Fund will not process orders on any day the NYSE is closed. Orders
received on such days will be priced on the next day a Fund computes
its net asset value. As such, investors may experience a delay in
purchasing or redeeming shares of a Fund. Securities in which the EAFE
Fund invests may be listed on foreign exchanges which trade on
Saturdays or other days when the NYSE is closed. Since the EAFE Fund
does not price on these days, the Fund's net asset value may be
significantly affected on days when an investor has no access to the
Fund's assets. The net asset value per share of each Fund is computed
by dividing the value of each Fund's assets, less all liabilities, by
the total number of its shares outstanding. The Index Funds'
securities and other assets are valued primarily on the basis of
market quotations or, if quotations are not readily available, by a
method which the Board of Trustees believes reflects their fair value.
The Money Market Fund uses the amortized cost method of valuing its
portfolio securities to maintain a constant net asset value of $1.00
per share. Under this method of valuation, the Money Market Fund
values its portfolio securities at their cost at the time of purchase
and not at market value, thus minimizing fluctuations in value due to
interest rate changes or market conditions.
PERFORMANCE INFORMATION AND REPORTS
Each Fund's performance may be used from time to time in
advertisements, shareholder reports or other communications
disseminated to existing or prospective shareholders or Contract
Owners. Past performance does not indicate or project future
performance. Performance information may include a Fund's investment
results and/or comparisons of its investment results to the Fund's
respective index or other various unmanaged indexes or results of
other mutual funds with similar investment objectives or investment or
savings vehicles. A Fund's investment results, as used in such
communications, will be calculated on a total return basis or yield in
the manner set forth below. From time to time, fund rankings may be
quoted from various sources, such as Lipper Analytical Services, Inc.,
Value Line and Morningstar Inc.
Each Fund may provide periodic and average annualized "total return"
quotations. A Fund's "total return" refers to the change in the value
of an investment in a Fund over a stated period based on any change in
net asset value per share and including the value of any shares
purchasable with any dividends or capital gains distributed during
such period. Periodic total returns may be annualized. An annualized
total return is a compounded total return which assumes that the total
return is generated over a one-year period, and that all dividends and
capital gains distributions are reinvested. An annualized total return
will be higher than a periodic total return, if the period is shorter
than one year, due to the compounding effect.
The current yield of shares in the Money Market Fund refers to
the net income generated by an investment in the Fund's shares over a
seven-day period (which period will be stated in the advertisement).
This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage
of the investment. "Effective yield" is calculated similarly, but when
annualized, the income earned by an investment in the Fund is assumed
to be reinvested. The "effective yield" will be slightly higher than
the "yield" because of the compounding effect of this assumed
reinvestment.
Quotations of Fund total returns and yields will not reflect
Contract charges and expenses. The prospectus for a Contract will
contain information about performance of the relevant separate account
and Contract. Unlike some bank deposits or other investments which pay
a fixed yield for a stated period of time, the total return or yield
of each Fund will vary depending upon, among other things, the current
market value of the securities held by a Fund and changes in a Fund's
expenses. In addition, during certain periods for which total return
and/or yield quotations may be provided, the Manager, the Advisers
and/or the Funds' other service providers may have voluntarily agreed
to waive portions of their respective fees, or reimburse certain Fund
operating expenses, on a month-to-month basis. Such waivers will have
the effect of increasing a Fund's net income (and therefore its total
return and/or yield) during the period such waivers are in effect.
Shareholders and Contract Owners will receive reports semi-annually
and annually that include each Fund's financial statements, including
listings of investment securities held by a Fund as of those dates.
Each Fund's annual report is audited by the Fund's independent
accountants.
MANAGEMENT OF THE TRUST
Board of Trustees
The affairs of the Funds are managed under the supervision of the
Board of Trustees of the Trust, of which each Fund is a series.
The Trustees meet periodically throughout the year to oversee the
Funds' operations, review contractual arrangements with companies
that provide services to the Funds and review each Fund's
performance. By virtue of the responsibilities assumed by Sage,
neither the Trust nor the Funds require employees. None of the
officers of the Trust devotes full time to the affairs of the
Trust or the Funds. For more information with respect to the
Trustees of the Trust, see the "Management of the Trust" section
in the SAI.
Investment Manager
Sage is the investment manager of each Fund and has
responsibility for the management and administration of each Fund's
affairs, under the supervision of the Board of Trustees of the Trust.
Each Fund's investment portfolio is managed on a day-to-day basis by
the Fund's Adviser under the general oversight of Sage and the Board
of Trustees. Sage is responsible for providing investment management
and administrative services to the Funds, and in the exercise of such
responsibility selects the investment advisers for the Funds and
monitors the Advisers' investment programs and results, reviews
brokerage matters, oversees compliance by the Funds with various
federal and state statutes, and carries out the directives of the
Board of Trustees. Sage monitors and evaluates the Advisers, to assure
that the Advisers are managing the Funds consistently with each Fund's
investment objective, policies, restrictions, applicable laws and
guidelines.
The Manager is responsible for providing the Funds with office
space, office equipment, and personnel necessary to operate and
administer the Funds' business, and also supervise the provisions of
services by third parties such as the Funds' custodian and transfer
agent. Pursuant to a sub-administration agreement, First Data Investor
Services Group, Inc. ("Investor Services Group"), the
sub-administrator to the Funds, assists the Manager in the performance
of its administrative responsibilities to the Funds.
Sage was organized in 1997 and has no prior experience managing
mutual funds. The address of Sage is 300 Atlantic Street, Stamford, CT
06901. It is a wholly-owned subsidiary of Sage Insurance Group, Inc.
Sage Insurance Group, Inc., is the holding company for Sage and
affiliated companies that are in the business of underwriting, issuing
and distributing the variable insurance products of Sage Life
Assurance of America, Inc. a direct, wholly-owned subsidiary of Sage
Insurance Group, Inc. As compensation for its management services to
the Funds, Sage is entitled to receive a fee from each Fund, accrued
daily and paid monthly, equal on an annual basis of the average daily
net assets of each Fund as follows: (i) the S&P 500 Fund, 0.55%; (ii)
the EAFE Fund, 0.90%; and (iii) the Money Market Fund, 0.65%. Sage has
agreed to waive its management fees for the S&P 500 Fund to 0.38%; for
the EAFE Fund to 0.73%; and for the Money Market Fund to 0.48%, until
such time as notice is given by Sage to the Board of Trustees of the
Trust.
The Manager is responsible for and will bear all expenses
relating to: custodian fees; transfer agent fees; pricing costs
(including the daily calculation of net asset value); accounting fees;
legal fees (except extraordinary litigation expenses); expenses of
shareholders' and/or trustees' meetings; bookkeeping expenses related
to shareholder accounts; insurance charges; cost of printing and
mailing shareholder reports and proxy statements; cost of printing and
mailing registration statements and updated prospectuses to current
shareholders; and the fees of any trade association of which the Trust
is a member.
An Insurer may be compensated by the Manager for certain
administrative services for the Funds in connection with the
Contracts issued through separate accounts of such Insurer. Under
these arrangements, the Manager may pay compensation to an
Insurer in an amount based on the assets of the Funds
attributable to Contracts issued through separate accounts of the
Insurer.
Investment Advisers
Sage has retained the services of State Street to serve as
the investment adviser to the Index Funds, and has retained the
services of Conning to serve as the investment adviser to the
Money Market Fund. Pursuant to Investment Sub-Advisory Agreements
between the Manager and each Adviser, the Advisers, under the
supervision of the Manager and the Board of Trustees, manage each
Fund's assets in accordance with each Fund's investment objective
and policies, make investment decisions for each Fund, place
purchase and sales orders on behalf of each Fund, and provide
investment research. As compensation for the Advisers' services
and the related expenses they incur with respect to each Fund,
the Manager pays the applicable Adviser a fee, computed daily and
payable monthly (quarterly with respect to the Money Market
Fund), equal on an annual basis with respect to each Fund's
average daily net assets as follows: (i) the S&P 500 Fund, 0.05%
of the first $50 million of assets under management, 0.04% of the
next $50 million of assets under management, and 0.02% on amounts
in excess of $100 million of assets under management with a
minimum annual fee of $50,000; (ii) the EAFE Fund, 0.15% of the
first $50 million of assets under management, 0.10% of the next
$50 million of assets under management, and 0.08% on amounts in
excess of $100 million of assets under management with a minimum
annual fee of $65,000; and (iii) the Money Market Fund, 0.15% of
the first $100 million of assets under management, 0.10% of the
next $200 million of assets under management, and 0.075% on
amounts in excess of $300 million of assets under management. The
Investment Sub-Advisory Agreements contain provisions relating to
the selection of securities brokers to effect the portfolio
transactions of each Fund. Under those provisions, subject to
applicable law and procedures adopted by the Trustees, an Adviser
may: (1) direct Fund portfolio brokerage to any broker-dealer
affiliates of the Manager or Adviser; (2) pay commissions to
brokers which are higher than might be charged by another
qualified broker to obtain brokerage and/or research services
considered by the Adviser to be useful or desirable for its
investment management of the Funds and/or other advisory accounts
of itself and any investment adviser affiliated with it; and (3)
consider the sales of Contracts and/or shares of the Funds and
any other registered investment companies managed by the Manager
or Adviser and its affiliates by brokers and dealers as a factor
in its selection of brokers and dealers to execute portfolio
transactions for the Funds.
State Street, the Adviser for the Index Funds, located at
Two International Place, Boston, Massachusetts 02110, a division
of State Street Bank and Trust Company, has been providing
institutional investment management services since 1987. As of
September 30, 1998, State Street served as investment adviser to
various institutional clients with aggregate assets under
management of $441 billion. State Street Bank and Trust Company
is a wholly-owned subsidiary of State Street Corporation. State
Street Corporation services financial assets, including custody,
pricing and asset management, for retail and institutional
clients.
Conning, the Adviser for the Money Market Fund, located at
City Place II, 185 Asylum Street, Hartford, CT 06103-4105, has
been providing institutional investment management services since
1982. As of September 30, 1998, Conning manages assets of $28.8
billion. The Adviser is a majority-owned subsidiary of General
American Life Insurance Company.
Expenses
In addition to the fees of the Manager, the Trust is
responsible for the payment of the following, including,
without limitation: fees and expenses of disinterested
Trustees (including any independent counsel to the
disinterested Trustees); brokerage commissions; dealer
mark-ups and other expenses incurred in the acquisition or
disposition of any securities or other investments; costs,
including the interest expense, of borrowing money; fees and
expenses for independent audits and auditors; taxes; and
extraordinary expenses (including extraordinary litigation
and consulting expenses) as approved by a majority of the
disinterested Trustees. Fund specific expenses are paid by
the particular Fund. Expenses of the Trust not attributable
to a particular Fund are allocated to each Fund on the basis
of their relative net assets.
Sub-Administrator
Investor Services Group, a subsidiary of First Data
Corporation, located at 53 State Street, Boston, Massachusetts
02109, serves as each Fund's sub-administrator pursuant to a
Sub-Administration Agreement with the Manager. Under the terms of
the Sub-Administration Agreement, Investor Services Group
generally assists in all aspects of the Funds' operations, other
than providing investment advice, subject to the overall
authority of the Board of Trustees. Pursuant to the terms of the
Sub-Administration Agreement the Manager has agreed to pay
Investor Services Group a monthly fee at the annual rate of 0.05
of 1% of the value of the Trust's monthly net assets up to
aggregate assets of $2 million, 0.04 of 1% of the Trust's monthly
net assets up to aggregate assets of the next $2 million, and
0.03 of 1% of the Trust's monthly average net assets greater than
$4 million. In addition, the Manager has agreed to pay Investor
Services Group for fund accounting services an annual fee of
$27,500 per Fund on Trust assets up to $50 million; $30,000 per
Fund on Trust assets of the next $50 million, and $36,000 per
Fund on Trust assets greater than $100 million. Additionally,
Investor Services Group is paid certain out-of-pocket fees and
other special services fees for providing services for the
operation of the Funds.
Distributor and Distribution Plan
Sage Distributors, Inc. (the "Distributor"), a wholly-owned
subsidiary of Sage Insurance Group, Inc., serves as the
distributor of each Fund's shares. The principal business address
of the Distributor is 300 Atlantic Street, Stamford, Connecticut
06901.
The shareholders of each Fund have approved a Distribution
Plan for the Funds which authorizes payments by the Funds in
connection with the distribution of shares at an annual rate of
up to 0.25% of a Fund's average daily net assets. Under each
Fund's Distribution Plan the Fund may pay the Distributor for
various costs actually incurred or paid in connection with the
distribution of the Fund's shares and/or servicing of shareholder
accounts. Such costs include the costs of financing activities
primarily intended to result in the sale of the Funds' shares,
such as the costs (1) of printing and mailing the Funds'
prospectuses, SAIs and shareholder reports to prospective
shareholders and Contract Owners; (2) relating to the Funds'
advertisements, sales literature and other promotional materials;
(3) of obtaining information and providing explanations to
shareholders and Contract Owners regarding the Funds; (4) of
training sales personnel and of personal service; and/or
(5) maintenance of shareholders' and Contract Owners' accounts
with respect to each Fund's shares attributable to such accounts.
The Distributor, in turn, may compensate Insurers or others for
such activities. No payments will be made by the Funds under the
12b-1 Plans for the fiscal year ending December 31, 1999.
Shareholders will be given prior notice if such payments are to
commence at a future date.
The Distribution Plan may be terminated at any time. The
Board of Trustees will evaluate the appropriateness of the
Distribution Plan and any payments made thereunder on a
continuous basis.
Custodian and Transfer Agent
The Bank of New York, located at One Wall Street, New
York, New York 10286, serves as custodian of the assets of
the Funds and Investor Services Group, located at 53 State
Street, Boston, Massachusetts 02109, serves as the transfer
agent for the Funds.
Organization of the Trust
The Trust was organized on January 9, 1998, as a
business trust under the laws of the State of Delaware. Each
Fund is a separate series of the Trust. The Trust offers
shares of beneficial interest of each Fund at a par value
$0.001 per share. The shares of each Fund are offered
through this Prospectus. No series of shares of the Trust
has any preference over any other series. All shares, when
issued, will be fully paid and non-assessable. The Board of
Trustees has the authority to create additional series
without obtaining shareholder approval. The Insurers (or
affiliates thereof) and the Retirement Plans will be the
Funds' sole shareholders of record, and pursuant to the 1940
Act, such shareholders may be deemed to be in control of the
Funds. As of the date of this Prospectus, Sage Insurance
Group, Inc., and/or affiliates thereof, control the Funds
because they are the sole shareholders of each Fund. When a
shareholders' meeting occurs, each Insurer (and the
Retirement Plans, to the extent required by applicable law
and/or the terms of the applicable Retirement Plans)
solicits and accepts voting instructions from its Contract
Owners (or participants) who have allocated or transferred
monies for an investment in the Funds as of the record date
of the meeting. Each shareholder then votes a Fund's shares
that are attributable to its interests in the Fund, and any
other Fund shares which it is entitled to vote, in
proportion to the voting instructions received.
The shares of each Fund are entitled to one vote for
each dollar of net asset value, and fractional shares are
entitled to fractional votes. The shares of each Fund have
non-cumulative voting rights, so the vote of more than 50%
of a Fund's shares can elect 100% of the Trustees. Shares of
each Fund are entitled to vote separately to approve
investment advisory agreements or changes in investment
restrictions, but shares of all Funds vote together in the
election of Trustees or in the selection of the independent
accountants. Each Fund is also entitled to vote separately
on any other matter that affects solely that Fund, but will
otherwise vote together with all shares of the other Funds
on all other matters on which shareholders are entitled to
vote. The Trust is not required, and does not intend, to
hold regular annual shareholder meetings, but may hold
special meetings for consideration of proposals requiring
shareholder approval. It is the intention of the Trust not
to hold annual shareholder meetings. The Trustees may call a
special meeting of shareholders for action by shareholder
vote as may be required by the 1940 Act, the Declaration of
Trust or the By-laws of the Trust. In addition, the Trust
will call a special meeting of shareholders for the purpose
of voting upon the question of removal of a Trustee or
Trustees, if requested to do so by the holders of at least
10% of the Trust's outstanding shares.
The Funds are available through separate accounts
relating to both variable annuity and variable life
insurance contracts and to certain Retirement Plans, each in
accordance with section 817(h) of the Internal Revenue Code
of 1986, as amended (the "Code"). The Funds do not currently
foresee any disadvantages to Contract Owners arising from
offering their shares to variable annuity and variable life
insurance policy separate accounts and Retirement Plans
simultaneously, and the Board of Trustees continuously
monitors events for the existence of any material
irreconcilable conflict between or among Contract Owners and
Retirement Plans. Material conflicts could result from, for
example, (i) changes in state insurance laws; (ii) changes
in federal income tax laws; or (iii) differences in voting
instructions between those given by variable life owners and
by variable annuity owners. If a material irreconcilable
conflict arises, as determined by the Board of Trustees, one
or more separate accounts may withdraw their investment in a
Fund. This could possibly require a Fund to sell portfolio
securities at disadvantageous prices. Each Insurer will bear
the expenses of establishing separate portfolios for its
variable annuity and variable life insurance separate
accounts if such action becomes necessary; however, ongoing
expenses that are ultimately borne by Contract Owners will
likely increase due to the loss of economies of scale
benefits that can be provided to separate accounts with
substantial assets.
Year 2000
As the year 2000 approaches, an issue has emerged
regarding how existing application software programs and
operating systems can accommodate this data value. Failure
to adequately address this issue could have potentially
serious repercussions. The Manager is in the process of
working with the Funds service providers to prepare for
year 2000. Based on information currently available, the
Manager does not expect that it or the Funds will incur
significant operating expenses or be required to incur
material costs to be year 2000 compliant. Although the
Manager does not anticipate that the year 2000 issue will
have a material impact on its or the Funds ability to
provide service at anticipated levels, there can be no
assurance that the steps taken in preparation for the year
2000 will be sufficient to avoid any adverse impact on the
Funds.
The Manager and its affiliates have addressed Year 2000
issues and have completed the necessary transition work. The
Manager is in the process of confirming with each of the
service providers to the Funds that their systems are
addressing Year 2000 compliance on a timely basis. If
systems of service providers are not available or
malfunction because of Year 2000 problems, then the Funds
would experience substantial delays in performing certain
functions (for example, processing purchase and sales
transactions). The Manager does not currently anticipate
that the service providers will be unable to perform these
functions, or be unable to conduct business, due to the Year
2000 transition.
SHAREHOLDER AND ACCOUNT POLICIES
Purchase and Redemption of Shares
Shares of the Funds are continuously offered to
Insurers and Retirement Plans at the net asset value per
share next determined after a proper purchase request has
been received and accepted by the Trust. Each Insurer (or
Retirement Plan) submits purchase and redemption orders to
the Trust based on allocation instructions for premium
payments, transfer instructions and surrender or partial
withdrawal requests which are furnished to the Insurer by
such Contract Owners (or by participants). The Trust, the
Funds and the Distributor reserve the right to reject any
purchase order from any party for shares of any Fund.
Payment for redeemed shares will ordinarily be made
within seven (7) business days after a proper redemption
order has been received and accepted by the Trust. A proper
redemption order will contain all the necessary information
and signatures required to process the redemption order. The
redemption price will be the net asset value per share next
determined after the Trust receives and accepts the
shareholder's request in proper form. Each Fund may suspend
the right of redemption or postpone the date of payment
during any period when trading on the NYSE is restricted, or
the NYSE is closed for other than weekends and holidays;
when an emergency makes it not reasonably practicable for a
Fund to dispose of its assets or calculate its net asset
value; or as permitted by the SEC.
The accompanying Prospectus for the Insurer's variable
annuity or variable life insurance policy or disclosure
document describes the allocation, transfer and withdrawal
provisions of such annuity or policy.
Dividends, Distributions and Taxes
Each Fund distributes substantially all of its net
income and capital gains to shareholders each year. Each
Index Fund distributes capital gains and income dividends
annually and the Money Market Fund distributes capital gains
and income dividends, if any, monthly. All dividends and
capital gains distributions paid by a Fund will be
automatically reinvested, at net asset value in that
respective Fund.
Each Fund will be treated as a separate entity for
federal income tax purposes. Each Fund intends to qualify as
a "regulated investment company" under the Code. As a
regulated investment company each Fund will not be subject
to U.S. Federal income tax on its investment company taxable
income and net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any,
that it distributes to shareholders. Each Fund intends to
distribute to its shareholders, at least annually,
substantially all of its investment company taxable income
and net capital gains, and therefore, does not anticipate
incurring a Federal income tax liability.
For a discussion of the impact on Contract Owners of
income taxes an Insurer may owe as a result of (i) its
ownership of shares of the Funds, (ii) its receipt of
dividends and distributions thereon, and (iii) its gains
from the purchase and sale thereof, reference should be made
to the Prospectus for the Contracts accompanying this
Prospectus.
The Code and Treasury Department regulations
promulgated thereunder require that mutual funds that are
offered through insurance company separate accounts must
meet certain diversification requirements to preserve the
tax-deferral benefits provided by the variable contracts
which are offered in connection with such separate accounts.
The Advisers intend to diversify each Fund's investments in
accordance with those requirements. The foregoing is only a
brief summary of important tax law provisions that affect
each Fund. Other Federal, state or local tax law provisions
may also affect each Fund and their operations. Anyone who
is considering allocating, transferring or withdrawing
monies held under a variable contract to or from a Fund
should consult a qualified tax adviser.
Account Services
Contract Owners should direct any inquiries to Sage by
calling 1-877-835-7243 or by writing to Sage Life Assurance
of America, Inc., Customer Service Center, 1290 Silas Deane
Highway, Wethersfield, Connecticut 06109. All shareholder
inquiries should be directed to the Trust at 1-877-835-7243
or by writing to Sage Life Investment Trust, Customer
Service, 1290 Silas Deane Highway, Wethersfield, Connecticut
06109.
Investment Manager and Administrator of the Funds
SAGE ADVISORS, INC.
Investment Adviser of the Index Funds
STATE STREET GLOBAL ADVISORS
Investment Adviser of the Money Market Fund
CONNING ASSET MANAGEMENT COMPANY
Sub-Administrator and Transfer Agent
FIRST DATA INVESTOR SERVICES GROUP, INC.
Distributor
SAGE DISTRIBUTORS, INC.
Custodian
THE BANK OF NEW YORK
Independent Accountants
ERNST & YOUNG, L.L.P.
Counsel
SUTHERLAND ASBILL & BRENNAN LLP
...............................................................................
No person has been authorized to give any information
or to make any representation other than those contained in
the Funds' Prospectus, its SAI or the Funds' approved sales
literature in connection with the offering of the Funds'
shares and, if given or made, such other information or
representations must not be relied on as having been
authorized by a Fund. This Prospectus does not constitute an
offer in any state in which, or to any person to whom, such
offer may not lawfully be made.
...............................................................................
APPENDIX A
DESCRIBING INDEXES
The S&P 500 Fund: The Fund is not sponsored, endorsed,
sold or promoted by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("S&P"). S&P
makes no representation or warranty, express or implied, to
the owners of the Fund or any member of the public regarding
the advisability of investing in securities generally or in
the Fund particularly or the ability of the S&P 500 Index to
trace general stock market performance. S&P's only
relationship to the licensee is the licensing of certain
trademarks and trade names of S&P and of the S&P 500 Index
which is determined, composed and calculated by S&P without
regard to the Trust or the Fund. S&P has no obligation to
take the needs of the Trust or the owners of the Fund into
consideration in determining, composing or calculating the
S&P 500 Index. S&P is not responsible for and has not
participated in the determination of the prices and amount
of the Fund or the timing of the issuance or sale of the
Fund or in the determination or calculation of the equation
by which the Fund is to be converted into cash. S&P has no
obligation or liability in connection with the
administration, marketing or trading of the Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY
LICENSEE, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGE.
"Standard & Poor's," "S&P," "S&P 500," "Standard &
Poor's 500," and "500" are trademarks of the McGraw-Hill
Companies, Inc. and have been licensed for use by the
licensee. The Fund is not sponsored, endorsed, sold or
promoted by S&P and S&P's makes no representation regarding
the advisability of investing in the Fund.
The EAFE Fund:
The Fund is not sponsored, endorsed, sold or promoted
by Morgan Stanley. Morgan Stanley makes no representation or
warranty, express or implied, to the owners of the Fund or
any member of the public regarding the advisability of
investing in funds generally or in the Fund particularly or
the ability of the EAFE Index to track general stock market
performance. Morgan Stanley is the licenser of certain
trademarks, service marks and trade names of Morgan Stanley
and of the EAFE Index which is determined, composed and
calculated by Morgan Stanley without regard to the issuer of
the Fund or the Fund itself. Morgan Stanley has no
obligation to take the needs of the issuer of the Fund or
the owners of the Fund into consideration in determining,
composing or calculating the EAFE Index. Morgan Stanley is
not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of
the Fund to be issued or in the determination or calculation
of the equation by which the Fund is redeemable for cash.
Morgan Stanley has no obligation or liability to owners of
the Fund in connection with the administration, marketing or
trading of the Fund.
ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR
INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDICES
FROM SOURCES WHICH MORGAN STANLEY CONSIDERS RELIABLE,
NEITHER MORGAN STANLEY NOR ANY OTHER PARTY GUARANTEES THE
ACCURACY AND/OR THE COMPLETENESS OF THE INDICES OR ANY DATA
INCLUDED THEREIN. NEITHER MORGAN STANLEY NOR ANY OTHER PARTY
MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY THE LICENSEE, LICENSEE'S CUSTOMERS AND
COUNTERPARTIES, OWNERS OF THE FUNDS, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE INDICES OR ANY DATA INCLUDED
THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR
FOR ANY OTHER USE. NEITHER MORGAN STANLEY NOR ANY OTHER
PARTY MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND MORGAN
STANLEY HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE INDICES OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN
STANLEY OR ANY OTHER PARTY HAVE ANY LIABILITY FOR ANY
DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY
OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
The EAFE Index is the exclusive property of Morgan Stanley. Morgan Stanley
Capital International is a
service mark of Morgan Stanley and has been licensed for use by Sage Advisors,
Inc.
SAGE LIFE INVESTMENT TRUST
FORM N-1A
Part B
CROSS REFERENCE SHEET
Item No. Caption
Item 10. Cover Page...................................... Cover Page
Item 11. Table of Contents...................................Cover Page
Item 12. General Information and History...........Not Applicable
Item 13. Investment Objectives and Policies.......Investment Restrictions; Risk
Factors and Certain Securities and Investment Practices
Item 14. Management of the Fund.......................Management of the Trust
Item 15. Control Persons and Principal
Holders of Securities........................Management of the Trust
Item 16. Investment Advisory and
Other Services.........................Management of the Trust
Item 17. Brokerage Allocation and
Other Practices..............Investment Restrictions; Risk Factors and Certain
Securities and Investment Practices; Determination of Net Asset value;
Portfolio Transactions and
Brokerage Commissions
Item 18. Capital Stock and Other Securities........Investment Restrictions;
Risk Factors and Certain
Securities and Investment Practices
Item 19. Purchase, Redemption and
Pricing of Securities Being Offered..Determination of Net Asset Value
Item 20. Tax Status..................................Distributions and Taxes
Item 21. Underwriters.......................Determination of Net Asset Value
Item 22. Calculation of Performance Data............Performance Information
Item 23. Financial Statements................................Not Applicable
SAGE LIFE INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
for
S&P 500 Equity Index Fund
EAFE Equity Index Fund
Money Market Fund
Dated February 1, 1999
Sage Life Investment Trust (the "Trust") is currently
comprised of three series: S&P 500 Equity Index Fund ("S&P
500 Fund") and EAFE Equity Index Fund ("EAFE Fund")
(together, the "Index Funds") and the Money Market Fund
(together with the Index Funds, the "Funds" and each
individually, a "Fund"). The shares of the Funds are
described herein. Capitalized terms not otherwise defined
herein shall have the same meaning as in the Fund's
Prospectus.
Shares of the Funds are available through the purchase
of certain variable annuity and variable life insurance
contracts ("Contract(s)") issued by various insurance
companies (each, an "Insurer" or collectively, the
"Insurers") and are offered to various pension and
profit-sharing plans ("Retirement Plans"). The investment
manager and administrator of the Funds is Sage Advisors,
Inc. (the "Manager" or "Sage"). The investment adviser of
the Index Funds is State Street Global Advisors ("State
Street"), a division of State Street Bank and Trust Company,
and the investment adviser of the Money Market Fund is
Conning Asset Management Company ("Conning" and, together
with State Street, the "Advisers"). The Trust's distributor
is Sage Distributors, Inc. (the "Distributor").
The Prospectus for the Funds is dated February 1, 1999.
The Prospectus provides the basic information an investor
should know about a Fund before investing and may be
obtained without charge by calling the Trust at
1-800-877-835-7243. This Statement of Additional Information
(the "SAI") is not a prospectus and is intended to provide
additional information regarding the activities and
operations of the Funds and should be read in conjunction
with the Funds' Prospectus. This SAI is not an offer of
shares of any Fund for which an investor has not received a
Fund's Prospectus.
Table of Contents
Investment Restrictions 2
Risk Factors and Certain Securities and Investment Practices 3
Portfolio Transactions and Brokerage Commissions 11
Performance Information 12
Determination of Net Asset Value 14
Management of the Trust 15
Organization of the Trust 20
Distributions and Taxes 20
INVESTMENT RESTRICTIONS The following investment
restrictions are "fundamental policies" of each Fund and may
not be changed without the approval of a "majority of the
outstanding voting securities" of each Fund. "Majority of
the outstanding voting securities" under the Investment
Company Act of 1940, as amended (the "1940 Act"), and as
used in this SAI and the Prospectus, means, with respect to
a Fund, the lesser of (i) 67% or more of the outstanding
voting securities of the Fund present at a meeting, if the
holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy
or (ii) more than 50% of the outstanding voting securities
of the Fund.
As a matter of fundamental policy, no Fund may:
(1) issue senior securities, mortgage or pledge assets,
or borrow money, except (a) a Fund may borrow from banks in
amounts up to 30% of its total assets (including the amount
borrowed); (b) a Fund may obtain such short-term credits as
may be necessary for the clearance of purchases and sales of
portfolio securities; and (c) an Index Fund may engage in
futures and options transactions as permitted by the 1940
Act and enter into collateral arrangements relating thereto;
(2) underwrite securities issued by other persons
except insofar as the Trust or a Fund may technically be
deemed an underwriter under the Securities Act of 1933, as
amended (the "1933 Act"), in selling a portfolio security;
(3) make loans to other persons except: (a) through the
lending of a Fund's portfolio securities and provided that
any such loans not exceed 30% of a Fund's total assets
(taken at market value); or (b) through the use of
repurchase agreements or the purchase of short-term
obligations;
(4) purchase or sell commodities or real estate
(including limited partnership interests but excluding
securities secured by real estate or interests therein) in
the ordinary course of business (except that the Index Funds
may engage in futures and options transactions as permitted
by the 1940 Act and enter into collateral arrangements
relating thereto, and each Fund may hold and sell, for the
Fund's portfolio, real estate acquired as a result of a
Fund's ownership of securities);
(5) concentrate its investments in any particular
industry (excluding U.S. Government securities), but if it
is deemed appropriate for the achievement of a Fund's
investment objective, up to 25% of its total assets may be
invested in any one industry;
(6) purchase the securities of any one issuer if as a
result more than 5% of the value of its total assets would
be invested in the securities of such issuer or a Fund would
own more than 10% of the outstanding voting securities of
such issuer, except that up to 25% of the value of a Fund's
total assets may be invested without regard to these
limitations, and provided that there is no limitation with
respect to investments in U.S. Government securities.
Additional non-fundamental investment restrictions
adopted by each Fund, which may be changed by the Board of
Trustees, provide that no Fund may:
(i) purchase any security or evidence of interest
therein on margin, except that such short-term credit as may
be necessary for the clearance of purchases and sales of
securities may be obtained, and except that deposits of
initial deposit and variation margin may be made in
connection with the purchase, ownership, holding or sale of
futures; and
(ii) invest for the purpose of exercising control or management.
There will be no violation of any investment
restriction if that restriction is complied with at the time
the relevant action is taken notwithstanding a later change
in market value of an investment or in net or total assets.
RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES
Investment Objectives
The investment objective of each Fund is described in
the Funds' Prospectus. There can, of course, be no assurance
that any Fund will achieve its investment objective.
Investment Practices
This section contains supplemental information
concerning certain types of securities and other instruments
in which one or more of the Funds may invest, the investment
policies and portfolio strategies that the Funds may
utilize, and certain risks attendant to such investments,
policies and strategies.
Money Market Fund. Rule 2a-7 under the 1940 Act
provides that in order to value its portfolio using the
amortized cost method, the Money Market Fund must maintain a
dollar-weighted average portfolio maturity of 90 days or
less, purchase securities having remaining maturities of 397
days or less and invest only in U.S. dollar denominated
eligible securities determined by the Board of Trustees to
be of minimal credit risk and which: (1) have received one
of the two highest short-term ratings by at least two
Nationally Recognized Statistical Rating Organizations
("NRSROs"), such as "A-1" by Standard & Poor's Ratings
Service ("Standard & Poor's") and "P-1" by Moody's Investors
Service, Inc. ("Moody's"); (2) are single rated and have
received the highest short-term rating by an NRSRO; or
(3) are unrated, but are determined to be of comparable
quality by Conning pursuant to guidelines approved by the
Board of Trustees.
In addition, the Money Market Fund will not invest more
than 5% of its total assets in the securities (including the
securities collateralizing a repurchase agreement) of a
single issuer, except that the Fund may invest in U.S.
Government securities or repurchase agreements that are
collateralized by U.S. Government securities without any
such limitation. Furthermore, the limitation does not apply
with respect to conditional and unconditional puts issued by
a single issuer, provided that with respect to 75% of the
Money Market Fund's assets, no more than 10% of the Fund's
total assets are invested in securities issued or guaranteed
by the issuer of the put. Investments in rated securities
not rated in the highest category by at least two rating
organizations (or one rating organization if the instrument
was rated by only one such organization), and unrated
securities not determined by the Board of Trustees to be
comparable to those rated in the highest rating category,
will be limited to 5% of the Fund's total assets, with
investment in any one such issuer being limited to no more
than the greater of 1% of the Fund's total assets or $1
million.
Pursuant to Rule 2a-7, the Board of Trustees has established
procedures designed to stabilize, to the extent reasonably possible, the
price per share of the Money Market Fund, as computed for the purpose of
sales and redemptions, at $1.00 per share. Such procedures include review
of the Money Market Fund's portfolio holdings by the Board of Trustees, at
such intervals as it may deem appropriate, to determine whether the asset
value of the Fund calculated by using available market quotations deviates
from $1.00 per share based on amortized cost. The extent of any deviation
will be examined by the Board of Trustees. If such deviation exceeds 1/2 of
1%, the Board of Trustees will promptly consider what action, if any, will
be initiated. In the event the Board of Trustees determines that a
deviation exists that may result in material dilution or other unfair
results to investors or existing shareholders, the Board of Trustees will
take such corrective action as it regards as necessary and appropriate.
Bank Obligations. Bank obligations which a Fund may
purchase include, but are not limited to, the following:
certificates of deposits, time deposits, Eurodollar and
Yankee dollar obligations, bankers' acceptances, commercial
paper, bank deposit notes and other promissory notes,
including floating or variable rate obligations issued by
U.S. or foreign bank holding companies and their bank
subsidiaries, branches and agencies. Certificates of deposit
are issued against funds deposited in an eligible bank
(including its domestic and foreign branches, subsidiaries
and agencies), are for a definite period of time, earn a
specified rate of return and are normally negotiable. A
bankers' acceptance is a short-term draft drawn on a
commercial bank by a borrower, usually in connection with a
commercial transaction. The borrower is liable for payment,
as is the bank, which unconditionally guarantees to pay the
draft at its face amount on the maturity date. Eurodollar
obligations are U.S. dollar obligations issued outside the
United States by domestic or foreign entities. Yankee dollar
obligations are U.S. dollar obligations issued inside the
United States by foreign entities. Bearer deposit notes are
obligations of a bank, rather than a bank holding company.
Similar to certificates of deposit, deposit notes represent
bank level investments and, therefore, are senior to all
holding company corporate debt, except certificates of
deposit. All investments in bank obligations are limited to
the obligations of financial institutions having more than
$1 billion in total assets at the time of purchase.
Commercial Paper. Commercial paper includes short-term
(usually from 1 to 270 days) unsecured promissory notes
issued by corporations in order to finance their current
operations, and variable demand notes and variable rate
master demand notes issued by domestic and foreign bank
holding companies, corporations and financial institutions.
A variable amount master demand note represents a direct
borrowing arrangement involving periodically fluctuating
rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant
to which the lender may determine to invest varying amounts.
Investments by a Fund in commercial paper will consist of
issues rated at the time A-1 and/or P-1 by Standard & Poor's
or Moody's. In addition, the Funds may acquire unrated
commercial paper and corporate bonds that are determined by
the Adviser at the time of purchase to be of comparable
quality to rated instruments that may be acquired by such
Fund as previously described (see "Money Market Fund" herein
for a discussion of certain investment limitations).
Short-Term Instruments. When an Index Fund experiences large
cash inflows through the sale of shares, and desirable
equity securities that are consistent with the Fund's
investment objective are unavailable in sufficient
quantities or at attractive prices, the Fund may hold
short-term investments for a limited time pending
availability of such equity securities. Short-term
instruments consist of: (i) short-term obligations issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities or by any U.S. state; (ii) other
short-term debt securities rated AA or higher by Standard &
Poor's or Aa or higher by Moody's or, if unrated, of
comparable quality in the opinion of the Adviser; (iii)
commercial paper; (iv) bank obligations, including
negotiable certificates of deposit, time deposits and
bankers' acceptances; and (v) repurchase agreements. At the
time an Index Fund invests in commercial paper, bank
obligations or repurchase agreements, the issuer or the
issuer's parent must have outstanding debt rated AA or
higher by Standard & Poor's or Aa or higher by Moody's or
outstanding commercial paper or bank obligations rated A-1
by Standard & Poor's or Prime-1 by Moody's; or, if no such
ratings are available, the instrument must be of comparable
quality in the opinion of the Adviser.
Euro-Denominated
Securities. On January 1, 1999, the European Monetary Union
("EMU") plans to implement a new currency unit, the Euro,
which is expected to reshape financial markets, banking
systems and monetary policies in Europe and other parts of
the world. The countries initially expected to convert to
the Euro include Austria, Belgium, France, Germany,
Luxembourg, the Netherlands, Ireland, Finland, Italy,
Portugal and Spain.
Beginning January 1, 1999, financial transactions and
market information, including share quotations and company
accounts, in participating countries will be in Euros.
Approximately 46% of the stock exchange capitalization of
the total European market may be reflected in Euros, and
participating governments will issue their bonds in Euros.
Monetary policy for participating countries will be
uniformly managed by a new central bank, the European
Central Bank (the "ECB").
Although it is not possible to predict the impact of
the Euro on the Funds, the transition may change the
economic environment and behavior of investors, particularly
in European markets. In addition, investors may begin to
view those countries participating in the EMU as a single
entity. The Advisers may need to adapt investment strategies
accordingly. The process of implementing the Euro also may
adversely affect financial markets world-wide and may result
in changes in the relative strength and value of the U.S.
dollar or other major currencies, as well as possible
adverse tax consequences as a result of currency conversions
to the Euro. Until the Euro develops its reputation and the
ECB gains experience in managing monetary policy, it will be
difficult to predict the strengths and weaknesses of the
Euro.
Foreign Securities. The Money Market Fund may invest in
U.S. dollar-denominated foreign securities issued by foreign
banks and companies and the EAFE Fund may invest in foreign
securities of all types and in American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and other
similar securities. These securities may not be denominated
in the same currency as the securities they represent. ADRs
are receipts typically issued by a United States bank or
trust company evidencing ownership of the underlying foreign
securities. EDRs are receipts issued by a European financial
institution evidencing a similar arrangement. Generally,
ADRs, in registered form, are designed for use in the United
States securities markets, and EDRs, in bearer form, are
designed for use in the European securities markets. The
EAFE Fund typically will only purchase ADRs which are listed
on a domestic securities exchange or included in the NASDAQ
National Market System. Certain such institutions issuing
ADRs may not be sponsored by the issuer. Issuers of ADRs in
unsponsored programs may not provide the same shareholder
information in the U.S. that a sponsored depositary is
required to provide under its contractual arrangements with
the issuer. Ownership of unsponsored ADRs may not entitle
the Fund to financial or other reports from the issuer, to
which it would be entitled as the owner of the sponsored
ADRs.
Income and gains on foreign securities may be subject
to foreign withholding taxes. Investors should consider
carefully the substantial risks involved in securities of
companies and governments of foreign nations, which are in
addition to the usual risks inherent in domestic
investments. There may be less publicly available
information about foreign companies comparable to the
reports and ratings published about companies in the United
States. Foreign companies are not generally subject to
uniform accounting, auditing and financial reporting
standards, and auditing practices and requirements may not
be comparable to those applicable to United States
companies. Foreign markets have substantially less volume
than the New York Stock Exchange and securities of some
foreign companies are less liquid and more volatile than
securities of comparable United States companies. Commission
rates in foreign countries, which are generally fixed rather
than subject to negotiation as in the United States, are
likely to be higher. In many foreign countries there is less
government supervision and regulation of stock exchanges,
brokers, and listed companies than in the United States.
Investments in companies domiciled in developing
countries may be subject to potentially higher risks than
investments in developed countries. These risks include:
(i)less social, political and economic stability; (ii)the
small current size of the markets for such securities and
the currently low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price
volatility; (iii)certain national policies which may
restrict the EAFE Fund's investment opportunities, including
restrictions on investment in issuers or industries deemed
sensitive to national interest; (iv)foreign taxation; and
(v)the absence of developed legal structures governing
private or foreign investment or allowing for judicial
redress for injury to private property.
State Street endeavors to buy and sell foreign
currencies on as favorable a basis as practicable. Some
price spread on currency exchange (to cover service charges)
may be incurred, particularly when the EAFE Fund changes
investments from one country to another or when proceeds of
the sale of Fund shares in U.S. dollars are used for the
purchase of securities in foreign countries. Also, some
countries may adopt policies which may prevent or restrict
the EAFE Fund from transferring cash out of the country or
withhold portions of interest and dividends at the source.
There is the possibility of expropriation, nationalization
or confiscatory taxation, withholding and other foreign
taxes on income or other amounts, foreign exchange controls
(which may include suspension of the ability to transfer
currency from a given country), default in foreign
government securities, political or social instability or
diplomatic developments that could affect investments in
securities of issuers in foreign nations. The EAFE Fund may
be affected either unfavorably or favorably by fluctuations
in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by
indigenous economic and political developments. Changes in
foreign currency exchange rates will influence values within
the EAFE Fund from the perspective of U.S. investors, and
may also affect the value of dividends and interest earned,
gains and losses realized on the sale of securities, and net
investment income and gains, if any, to be distributed to
shareholders by the EAFE Fund. The rate of exchange between
the U.S. dollar and other currencies is determined by the
forces of supply and demand in the foreign exchange markets.
These forces are affected by the international balance of
payments and other economic and financial conditions,
government intervention, speculation and other factors.
State Street will attempt to avoid unfavorable consequences
and to take advantage of favorable developments in
particular nations where, from time to time, in placing the
EAFE Fund's investments.
Guaranteed Investment Contracts. The Money Market Fund
may make limited investments in guaranteed investment
contracts ("GICs") issued by U.S. insurance companies.
Pursuant to such contracts, a Fund makes cash contributions
to a deposit fund of the insurance company's general
account. The insurance company then credits to the Fund on a
monthly basis interest which is based on an index that is
guaranteed not to be less than a certain minimum rate. A GIC
is normally a general obligation of the issuing insurance
company and not funded by a separate account. The purchase
price paid for a GIC becomes part of the general assets of
the insurance company, and the contract is paid from the
company's general assets. The Money Market Fund will only
purchase GICs from insurance companies which, at the time of
purchase, have assets of $1 billion or more. Generally, GICs
are not assignable or transferable without the permission of
the issuing insurance companies, and an active secondary
market in GICs does not currently exist. Therefore, GICs
will normally be considered illiquid investments, and will
be acquired subject to the limitation on illiquid
investments.
Illiquid Securities. The Funds may invest in illiquid
securities which, historically, include illiquid securities
that are subject to contractual or legal restrictions on
resale because they have not been registered under the
1933 Act, securities which are otherwise not readily
marketable and repurchase agreements having a maturity of
longer than seven (7) days. Securities which have not been
registered under the 1933 Act are referred to as private
placements or restricted securities and are purchased
directly from the issuer or purchased in the secondary
market. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within
seven (7) days. A mutual fund might also have to register
such restricted securities in order to dispose of them
resulting in additional expense and delay. In recent years,
however, a large institutional market has developed for
certain securities that are not registered under the
1933 Act, including repurchase agreements, commercial paper,
foreign securities, municipal securities and corporate bonds
and notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can
be readily resold or on an issuer's ability to honor a
demand for repayment. The fact that there are contractual or
legal restrictions on resale of such investments to the
general public or to certain institutions may not be
indicative of their liquidity.
The Securities and Exchange Commission (the "SEC") has
adopted Rule 144A, which allows a broader institutional
trading market for securities otherwise subject to
restriction on their resale to the general public. Rule 144A
establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain
securities to qualified institutional buyers. The Advisers
will monitor the liquidity of Rule 144A securities in the
Funds' portfolios under the supervision of the Board of
Trustees. In reaching liquidity decisions, the Advisers will
consider, among other things, the following factors: (i) the
frequency of trades and quotes for the security; (ii) the
number of dealers and other potential purchasers wishing to
purchase or sell the security; (iii) dealer undertakings to
make a market in the security; and (iv)the nature of the
security and of the marketplace trades (i.e., the time
needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer).
Investment Company Securities. The Money Market Fund
may invest in securities issued by other investment
companies. As a shareholder of another investment company,
the Money Market Fund would bear its pro rata portion of the
other investment company's expenses, including advisory
fees. These expenses would be in addition to the expenses
the Money Market Fund bears directly in connection with its
own operations. The Money Market Fund currently intends to
limit its investments in securities issued by other
investment companies so that, as determined immediately
after a purchase of such securities is made: (i)not more
than 5% of the value of the Fund's total assets will be
invested in the securities of any one investment company;
(ii)not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment
companies as a group; and (iii)not more than 3% of the
outstanding voting stock of any one investment company will
be owned by the Fund or by the Trust as a whole.
Lending of Portfolio Securities. By lending its
securities, a Fund can increase its income by continuing to
receive interest on the loaned securities as well as by
either investing the cash collateral in short-term
securities or obtaining yield in the form of interest paid
by the borrower when U.S. Government obligations are used as
collateral. There may be risks of delay in receiving
additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should
the borrower of the securities fail financially. A Fund will
adhere to the following conditions whenever its securities
are loaned: (i)the Fund must receive at least 100 percent
cash collateral or equivalent securities from the borrower;
(ii) the borrower must increase this collateral whenever the
market value of the securities including accrued interest
rises above the level of the collateral; (iii) the Fund must
be able to terminate the loan at any time; (iv) the Fund
must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned
securities, and any increase in market value; (v) the Fund
may pay only reasonable custodian fees in connection with
the loan; and (vi) voting rights on the loaned securities
may pass to the borrower; provided, however, that if a
material event adversely affecting the investment occurs,
the Board of Trustees must terminate the loan and regain the
right to vote the securities.
Stock Index Futures, Options on Stock Index Futures
Contracts and Stock Indices. The Index Funds may purchase
and sell stock index futures, options on stock indices, and
options on stock index futures contracts as a hedge against
movements in the equity markets.
Stock Index Futures Contracts. A stock index futures
contract is an agreement in which one party agrees to
deliver to the other an amount of cash equal to a specific
dollar amount times the difference between the value of a
specific stock index at the close of the last trading day of
the contract and the price at which the agreement is made.
No physical delivery of securities is made. These
investments will be made by an Index Fund solely for cash
management purposes, and if they are economically
appropriate to the reduction of risks involved in the
management of the Fund.
At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial
deposit would be approximately 1 1/2% to 5% of a contract's
face value. Daily thereafter, the futures contract is valued
and the payment of variation margin may be required, since
each day the Fund must maintain margin that reflects any
decline or increase in the contract's value.
U.S. futures contracts have been designed by exchanges
which have been designated "contracts markets" by the
Commodity Futures Trading Commission ("CFTC"), and must be
executed through a futures commission merchant, or brokerage
firm, which is a member of the relevant contract market.
Futures contracts trade on a number of exchange markets,
and, through their clearing corporations, the exchanges
guarantee performance of the contracts as between the
clearing members of the exchange.
There are several risks associated with the use of
futures by the Index Funds as hedging devices. One risk
arises because of the imperfect correlation between
movements in the price of the futures and movements in the
stock indices which are the subject of the hedge. The price
of the future may move more than or less than the stock
index being hedged. If the price of the futures moves less
than the value of the stock indices which are the subject of
the hedge, the hedge will not be fully effective but, if the
value of the stock indices being hedged has moved in an
unfavorable direction, the Fund would be in a better
position than if it had not hedged at all. If the value of
the stock index being hedged has moved in a favorable
direction, this advantage will be partially offset by the
loss on the futures. If the price of the futures moves more
than the value of the stock index, the Fund involved will
experience either a loss or gain on the futures which will
not be completely offset by movements in the price of the
instruments which are the subject of the hedge. To
compensate for the imperfect correlation of movements in the
value of the stock index being hedged and movements in the
price of futures contracts, the Fund may buy or sell futures
contracts in a greater dollar amount than the value of the
stock index being hedged if the volatility over a particular
time period of the prices of such instruments has been
greater than the volatility over such time period of the
futures, or if otherwise deemed to be appropriate by the
Adviser. Conversely, the Index Funds may buy or sell fewer
futures contracts if the volatility over a particular time
period of the value of the stock index being hedged is less
than the volatility over such time period of the futures
contract being used, or if otherwise deemed to be
appropriate by the Adviser.
In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in the futures and the indices being hedged, the
price of futures may not correlate perfectly with movements
in the cash market due to certain market distortions. Rather
than meeting additional margin deposit requirements,
investors may close futures contracts through off-setting
transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect
to financial futures contracts, the liquidity of the futures
market depends on participants entering into off-setting
transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery,
liquidity in the futures market could be reduced thus
producing distortions. Third, from the point of view of
speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in
the futures market may also cause temporary price
distortions. Due to the possibility of price distortion in
the futures market, and because of the imperfect correlation
between the movements in the cash market and movements in
the price of futures, a correct forecast of general market
trends by the Adviser may still not result in a successful
hedging transaction over a short time frame. Successful use
of futures by the Funds is also subject to the Adviser's
ability to predict correctly movements in the direction of
the market.
Positions in futures may be closed out only on an
exchange or board of trade which provides a secondary market
for such futures. Although the Index Funds intend to
purchase or sell futures only on exchanges or boards of
trade where there appear to be active secondary markets,
there is no assurance that a liquid secondary market on any
exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may
not be possible to close a futures investment position, and
in the event of adverse price movements, a Fund would
continue to be required to make daily cash payments of
variation margin. In such circumstances, an increase in the
value of the hedged index, if any, may partially or
completely offset losses on the futures contract. However,
as described above, there is no guarantee that the value of
the hedged index will in fact correlate with the price
movements in the futures contract and thus provide an offset
on a futures contract.
Further, it should be noted that the liquidity of a
secondary market in a futures contract may be adversely
affected by "daily price fluctuation limits" established by
commodity exchanges which limit the amount of fluctuation in
a futures contract price during a single trading day. Once
the daily limit has been reached in the contract, no trades
may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house
equipment failures, government intervention, insolvency of a
brokerage firm or clearing house or other disruptions of
normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover
excess variation margin payments.
Options on Stock Index Futures Contracts. The Index
Funds may purchase and write call and put options on stock
index futures contracts. The Index Funds may use such
options on futures contracts in connection with their
hedging strategies in lieu of purchasing and selling the
underlying futures or purchasing and writing options
directly on the underlying indices. For example, the Index
Funds may purchase put options or write call options on
stock index futures.
Like the buyer or seller of a futures contract, the
holder, or writer, of an option has the right to terminate
its position prior to the scheduled expiration of the option
by selling, or purchasing an option of the same series, at
which time the person entering into the closing transaction
will realize a gain or loss. A Fund will be required to
deposit initial margin and variation margin with respect to
put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described
above.
Investments in futures options involve some of the same
considerations that are involved in connection with
investments in futures contracts (for example, the existence
of a liquid secondary market). In addition, the purchase or
sale of an option also entails the risk that changes in the
value of the underlying futures contract will not correspond
to changes in the value of the option purchased. Depending
on the pricing of the option compared to either the futures
contract upon which it is based or value of the specific
stock index, an option may or may not be less risky than
ownership of the futures contract. In general, the market
prices of options can be expected to be more volatile than
the market prices on the underlying futures contracts.
Compared to the purchase or sale of futures contracts,
however, the purchase of call or put options on futures
contracts may frequently involve less potential risk to a
Fund because the maximum amount at risk is the premium paid
for the options (plus transaction costs).
Options on Stock Indices. An option on a stock index
gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of that stock
index is greater than, in the case of a call option, or less
than, in the case of a put option, the exercise price of the
option. This amount of cash is equal to such difference
between the closing price of the index and the exercise
price of the option expressed in dollars times a specified
multiple. The writer of the option is obligated, in return
for the premium received, to make delivery of this amount.
All settlements of options on stock indices are in cash, and
gain or loss depends on general movements in the stocks
included in the index rather than price movements in
particular stocks.
Options on securities indices entail certain risks. The
absence of a liquid secondary market to close out options
positions on securities indices may occur, although an Index
Fund generally will only purchase or write such an option if
the Adviser believes the option can be closed out. Use of
options on securities indices also entails the risk that
trading in such options may be interrupted if trading in
certain securities included in the index is interrupted. A
Fund will not purchase such options unless the Adviser
believes the market is sufficiently developed such that the
risk of trading in such options is no greater than the risk
of trading in options on securities. Price movements in a
Fund's portfolio may not correlate precisely with movements
in the level of an index and, therefore, the use of options
on indices cannot serve as a complete hedge. Because options
on securities indices require settlement in cash, the
Adviser may be forced to liquidate an Index Fund's portfolio
securities to meet settlement obligations.
Stripped Securities. The Money Market Fund may acquire
U.S. Government obligations and their unmatured interest
coupons that have been separated ("stripped") by their
holder, typically a custodian bank or investment brokerage
firm. Having separated the interest coupons from the
underlying principal of the U.S. Government obligations, the
holder will resell the stripped securities in custodial
receipt programs with a number of different names, including
"Treasury Income Growth Receipts" ("TIGRs") and
"Certificates of Accrual on Treasury Securities" ("CATS").
The stripped coupons are sold separately from the underlying
principal, which is usually sold at a deep discount because
the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to
periodic interest (cash) payments. The underlying U.S.
Treasury bonds and notes themselves are held in book-entry
form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are
ostensibly owned by the bearer or holder), in trust on
behalf of the owners. Counsel to the underwriters of these
certificates or other evidences of ownership of U.S.
Treasury securities have stated that, in their opinion,
purchasers of the stripped securities most likely will be
deemed the beneficial holders of the underlying U.S.
Government obligations for federal tax and securities
purposes. The Trust is not aware of any binding legislative,
judicial or administrative authority on this issue.
Only instruments which are stripped by the issuing
agency will be considered U.S. Government obligations.
Securities such as CATS and TIGRs which are stripped by
their holder do not qualify as U.S. Government obligations.
Within the past several years, the Treasury Department
has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial
ownership of particular interest coupon and principal
payments or Treasury securities through the Federal Reserve
book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known
as "STRIPS" or "Separate Trading of Registered Interest and
Principal of Securities." Under the STRIPS program, a fund
is able to have its beneficial ownership of zero coupon
securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates
or other evidences of ownership of the underlying U.S.
Treasury securities.
U.S. Government Obligations. Obligations issued or
guaranteed by U.S. Government agencies or instrumentalities
may or may not be backed by the "full faith and credit" of
the United States. In the case of securities not backed by
the full faith and credit of the United States, a Fund must
look principally to the federal agency issuing or
guaranteeing the obligation for ultimate repayment, and may
not be able to assert a claim against the United States
itself in the event the agency or instrumentality does not
meet its commitments. U.S. Government obligations that are
not backed by the full faith and credit of the United States
include, but are not limited to, obligations of the
Tennessee Valley Authority, the Federal Home Loan Mortgage
Corporation, the U.S. Postal Service and the Export-Import
Bank of the United States, each of which has the right to
borrow from the U.S. Treasury to meet its obligations and
obligations of the Federal Farm Credit System and the
Federal Home Loan Banks, whose obligations may be satisfied
only by the individual credits of the issuing agency.
Securities which are backed by the full faith and credit of
the United States include obligations of the Government
National Mortgage Association and the Farmers Home
Administration.
Variable and Floating Rate Instruments. Debt
instruments may be structured to have variable or floating
interest rates. Variable and floating rate obligations
purchased by the Money Market Fund may have stated
maturities in excess of the Fund's maturity limitation if
the Fund can demand payment of the principal of the
instrument at least once during such period on not more than
30 days' notice (this demand feature is not required if the
instrument is guaranteed by the U.S. Government or an agency
thereof). These instruments may include variable amount
master demand notes that permit the lender under the note to
determine the amount of the credit given (with predetermined
ranges), in addition to providing for periodic adjustments
in the interest rates. The Adviser will consider the earning
power, cash flows and other liquidity ratios of the issuers
and guarantors of such instruments and, if the instrument is
subject to a demand feature, will continuously monitor their
financial ability to meet payment on demand. Where necessary
to ensure that a variable or floating rate instrument is
equivalent to the quality standards applicable to the Money
Market Fund, the issuer's obligation to pay the principal of
the instrument will be backed by an unconditional bank
letter or line of credit, guarantee or commitment to lend.
The Money Market Fund will invest in variable and floating
rate instruments only when the Adviser deems the investment
to involve minimal credit risk, pursuant to standards
adopted by the Board of Trustees.
When-Issued and Delayed Delivery Securities. The Funds
may purchase securities on a when-issued or delayed delivery
basis. For example, delivery of and payment for these
securities can take place a month or more after the date of
the purchase commitment. The purchase price and the interest
rate payable, if any, on the securities are fixed on the
purchase commitment date or at the time the settlement date
is fixed. The value of such securities is subject to market
fluctuation and no interest accrues to a Fund until
settlement takes place. At the time a Fund make a commitment
to purchase securities on a when-issued or delayed delivery
basis, it will record the transaction, reflect the value
each day of such securities in determining its net asset
value and, if applicable, calculate the maturity for the
purposes of average maturity from that date. At the time of
settlement a when-issued security may be valued at less than
the purchase price. To facilitate such acquisitions, a Fund
will maintain with the Fund's custodian a segregated account
with liquid assets, consisting of cash, U.S. Government
securities or other appropriate securities, in an amount at
least equal to such commitments. On delivery dates for such
transactions, the Fund will meet its obligations from
maturities or sales of the securities held in the segregated
account and/or from cash flows. If a Fund chooses to dispose
of the right to acquire a when-issued security prior to its
acquisition, it could, as with the disposition of any other
Fund obligation, incur a gain or loss due to market
fluctuation.
Yields and Ratings. The yields on certain obligations,
including the money market instruments in which each Fund
may invest (such as commercial paper and bank obligations),
are dependent on a variety of factors, including general
money market conditions, conditions in the particular market
for the obligation, the financial condition of the issuer,
the size of the offering, the maturity of the obligation and
the ratings of the issue. The ratings of Standard & Poor's,
Moody's, Duff & Phelps Credit Rating Co., Thomson Bank
Watch, Inc., and other NRSROs represent their respective
opinions as to the quality of the obligations they undertake
to rate. Ratings, however, are general and are not absolute
standards of quality. Consequently, obligations with the
same rating, maturity and interest rate may have different
market prices.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS The
Advisers are responsible for decisions to buy and sell
securities, futures contracts and options on such securities
and futures for the Funds, the selection of brokers, dealers
and futures commission merchants to effect transactions and
the negotiation of brokerage commissions, if any.
Broker-dealers may receive brokerage commissions on Fund
transactions, including options, futures, and options on
futures transactions, and the purchase and sale of
underlying securities upon the exercise of options.
Purchases and sales of certain portfolio securities on
behalf of a Fund are frequently placed by an Adviser with
the issuer or a primary or secondary market-maker for these
securities on a net basis, without any brokerage commission
being paid by the Fund. Trading does, however, involve
transaction costs. Transactions with dealers serving as
market-makers reflect the spread between the bid and asked
prices. Transaction costs may also include fees paid to
third parties for information as to potential purchasers or
sellers of securities. Purchases of underwritten issues may
be made which will include an underwriting fee paid to the
underwriter.
Each Adviser seeks to evaluate the overall
reasonableness of the brokerage commissions paid (to the
extent applicable) in placing orders for the purchase and
sale of securities for the Fund or Funds it advises, taking
into account such factors as price, commission (negotiable
in the case of national securities exchange transactions),
if any, size of order, difficulty of execution and skill
required of the executing broker-dealer through familiarity
with commissions charged on comparable transactions, as well
as by comparing commissions paid by the Fund to reported
commissions paid by others. The Advisers review on a routine
basis commission rates, execution and settlement services
performed, making internal and external comparisons.
Each Adviser is authorized, consistent with Section
28(e) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), when placing portfolio transactions for a
Fund with a broker to pay a brokerage commission (to the
extent applicable) in excess of that which another broker
might have charged for effecting the same transaction based
on the receipt of research, market or statistical
information. The term "research, market or statistical
information" includes, but is not limited to, advice as to
the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of
securities or purchasers or sellers of securities; and
furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts.
Consistent with the policy stated above, and such other
policies as the Board of Trustees may determine, an Adviser
may consider sales of shares of a Fund or a Contract as a
factor in the selection of broker-dealers to execute
portfolio transactions. An Adviser may make such allocations
if commissions are comparable to those charged by
nonaffiliated, qualified broker-dealers for similar
services. Higher commissions may be paid to firms that
provide research services to the extent permitted by law. An
Adviser may use this research information in managing a
Fund's assets, as well as the assets of other clients.
Except for implementing the policies stated above,
there is no intention to place portfolio transactions with
particular brokers or dealers or groups thereof. In
effecting transactions in over-the-counter securities,
orders are placed with the principal market-makers for the
security being traded unless, after exercising care, it
appears that more favorable results are available otherwise.
Although certain research, market and statistical
information from brokers and dealers can be useful to the
Funds and to the Advisers, it is the opinion of the Manager
that such information is only supplementary to an Adviser's
own research efforts, since the information must still be
analyzed, weighed and reviewed by the Adviser's staff. Such
information may be useful to an Adviser in providing
services to clients other than the Funds, and not all such
information is used by Advisers in connection with the
Funds. Conversely, such information provided to the Advisers
by brokers and dealers through whom other clients of the
Advisers effect securities transactions may be useful to the
Advisers in providing services to the Funds.
In certain instances there may be securities which are
suitable for a Fund as well as for one or more of an
Adviser's other clients. Investment decisions for a Fund and
for the relevant Adviser's other clients are made with a
view to achieving their respective investment objectives. It
may develop that a particular security is bought or sold for
only one client even though it might be held by, or bought
or sold for, other clients. Likewise, a particular security
may be bought for one or more clients when one or more
clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive
investment advice from the same investment adviser,
particularly when the same security is suitable for the
investment objectives of more than one client. When two or
more clients are simultaneously engaged in the purchase or
sale of the same security, the securities are allocated
among clients in a manner believed to be equitable to each.
It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as
far as a Fund is concerned. However, it is believed that the
ability of a Fund to participate in volume transactions will
produce better executions for the Funds.
PERFORMANCE INFORMATION
Standard Performance Information
From time to time, quotations of the Funds'
performances may be included in advertisements, sales
literature or shareholder reports. Fund performance does not
reflect Contract fees and expenses. Yield of the Money
Market Fund. The Money Market Fund will prepare a current
quotation of yield from time to time. The yield quoted will
be the simple annualized yield for an identified seven
calendar day period. The yield calculation will be based on
a hypothetical account having a balance of exactly one share
at the beginning of the seven-day period. The base period
return will be the change in the value of the hypothetical
account during the seven-day period, including dividends
declared on any shares purchased with dividends on the
shares but excluding any capital changes. The Fund may also
prepare an effective annual yield computed by compounding
the unannualized seven-day period return as follows: by
adding 1 to the unannualized seven-day period return,
raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result.
EFFECTIVE YIELD = [(base period return + 1) 365/7] - 1
The Money Market Fund's yield will fluctuate, and
annualized yield quotations are not a representation by the
Fund as to what an investment in the Fund will actually
yield for any given period. Actual yields will depend on
changes in interest rates generally during the period in
which the investment in the Money Market Fund is held, and
on the quality, length of maturity and type of instruments
in the Fund's portfolio and its operating expenses.
Total Returns of the Index Funds. The Index Funds may
quote their average annual total return figures and/or
aggregate total return figures. A Fund's "average annual
total return" figures are computed according to a formula
prescribed by the SEC. The formula can be expressed as
follows:
P (1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
investment made at the beginning of a 1-, 5- or 10-year
period at the end of a 1-, 5- or 10-year period (or
fractional portion thereof), assuming reinvestment of all
dividends and distributions A Fund's aggregate total return
figures represent the cumulative change in the value of an
investment in the Fund for the specified period and are
computed according to the following formula:
AGGREGATE TOTAL RETURN = ERV - P
P
Where: P = a hypothetical initial payment of $10,000
ERV = Ending Redeemable Value of a hypothetical $10,000
investment made at the beginning of
a 1-, 5- or 10-year period at the end of a 1-, 5- or 10-year period (
or fractional portion thereof),
assuming reinvestment of all dividends and distributions.
Each Fund's performance will vary from time to time
depending upon market conditions, the composition of its
portfolio and its operating expenses. Consequently, any
given performance quotation should not be considered
representative of a Fund's performance for any specified
period in the future. In addition, because the performance
will fluctuate, it may not provide a basis for comparing an
investment in a Fund with certain bank deposits or other
investments that pay a fixed yield for a stated period of
time.
Comparison of Fund Performance
Comparison of the quoted non-standardized performance
of various investments is valid only if performance is
calculated in the same manner. Since there are different
methods of calculating performance, investors should
consider the effect of the methods used to calculate
performance when comparing performance of the Funds with
performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to
current or prospective shareholders, each Fund also may
compare these figures to the performance of other mutual
funds tracked by mutual fund rating services or to unmanaged
indices which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and
management costs.
Evaluations of the Funds' performance made by
independent sources may also be used in advertisements
concerning the Funds. Sources for the Funds' performance
information could include the following: Barron's, Business
Week, Changing Times, Consumer Digest, Financial Times,
Financial World, Forbes, Fortune, Investor's Daily, Lipper
Analytical Services, Inc.'s Mutual Fund Performance
Analysis, Money, Morningstar Inc., New York Times, Personal
Investing News, Personal Investor, Success, The Kiplinger's
Magazine, U.S. News and World Report, Value Line, Wall
Street Journal, Weisenberger Investment Companies Services
and Working Women.
DETERMINATION OF NET ASSET VALUE
A Fund's shares are purchased and redeemed at the net
asset value per share. The net asset value per share of each
Fund is calculated on each day, Monday through Friday,
except days on which the NYSE is closed. The NYSE is
currently scheduled to be closed on the following holidays:
New Year's Day, Martin Luther King Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day, and on the preceding
Friday or subsequent Monday when a holiday falls on a
Saturday or Sunday, respectively.
Each Funds' net asset value per share is determined as
of the close of regular trading on the NYSE, normally
4:00 p.m., Eastern Time, by taking the value of all assets
of each Fund, subtracting its liabilities, dividing by the
number of shares outstanding and adjusting to the nearest
cent. Index Funds. In the calculation of each Index Fund's
net asset value: (1)a portfolio security listed or traded
on a stock exchange or quoted by NASDAQ is valued at its
last sale price on that exchange or market (if there were no
sales that day, the security is valued at the mean of the
closing bid and asked prices; if there were no asked prices
quoted on that day, the security is valued at the closing
bid price); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are
valued at the mean of the current bid and asked prices (if
there were no asked prices quoted on that day, the security
is valued at the closing bid price); (3)U.S. Government
obligations and other debt instruments having 60 days or
less remaining until maturity are valued at amortized cost;
(4) debt instruments having more than 60 days remaining
until maturity are valued at the highest bid price obtained
from a dealer maintaining an active market in that security
or on the basis of prices obtained from a pricing service
approved as reliable by the Board of Trustees; and (5)all
other investment assets, including restricted and not
readily marketable securities, are valued by the Fund under
procedures established by and under the general supervision
and responsibility of the Board of Trustees designed to
reflect in good faith the fair value of such securities.
MANAGEMENT OF THE TRUST
The Board of Trustees of the Trust meets throughout the
year to oversee the activities of the Funds. In addition,
the Trustees review contractual arrangements with companies
that provide services to the Funds and review the Funds'
performance.
The Trustees and officers of the Trust and their
principal occupations during the past five years are set
forth below. Their titles may have varied during that
period. An asterisk (*) indicates those Trustees who are
"interested persons" (as defined in the 1940 Act) of the
Trust.
Trustees and Officers
<TABLE>
<CAPTION>
Position Held Principal Occupations
Name, Address and Age with the Trust During Past 5 Years
<S> <C> <C>
Ronald S. Scowby, 59* Trustee and President (July 1997 January 1998) and Director (July
300 Atlantic Street, Suite 302 Chairman of 1997 present), Sage Insurance Group, Inc., financial
Stamford, CT 06901 the Board services holding company; President (January 1997
February 1998) and Chairman (February 1998 present),
Sage Life Assurance of America, Inc., insurance company;
President and CEO, Sage Management Services USA, Inc.,
management services company (June 1996 present);
Principal, Sheldon Scowby Resources, management
consulting (July 1995 June 1996); Executive Vice
President, Mutual of America Life Insurance, insurance
company (June 1991 July 1995); President and CEO,
Mutual of America Financial Services, Inc., insurance
company (June 1991 July 1995).
Robin I. Marsden, 33* Trustee and Director (since January 1997), President and CEO (since
300 Atlantic Street, Suite 302 President February 1998), Sage Insurance Group, Inc., financial
Stamford, CT 06901 services holding company; Director (since January 1997),
President and CEO (since February 1998), Sage Life
Assurance of America, Inc., insurance company; Director,
President and CEO, Sage Advisors, Inc., investment
adviser (January 1998 present); Investments Director,
Sage Life Holdings Limited, financial services holding
company (November 1994 January 1998); Partner,
Deloitte & Touche, management consulting (January 1989
October 1994).
James A. Amen, 38 Trustee Managing Director, Partner and Director, Philo Smith &
10 Field Road Co., investment management company (July 1988 present).
Cos Cob, CT 06807
Rosemary L. Hendrickson, 59 Trustee Executive Vice President, Independent Financial
3911 S.W. ViewPoint Terrace Marketing Group, Inc., financial services company
Portland, OR 97201 (January 1989 April 1998).
Geoffrey A. Thompson, 57 Trustee Principal, Kohlberg & Co., investment management company
279 Old Black Point Road (November 1996 present); Partner, Norman Broadbent,
Niantic, CT 06357 executive recruiting firm (May 1995 February 1996);
President, Nordman Grimm, executive recruiting firm
(January 1994 May 1995).
Mitchell R. Katcher, 45 Vice President Senior Executive Vice President, Sage Investment Group,
300 Atlantic Street, Suite 302 Inc., financial services holding company (December 1997
Stamford, CT 06901 present); Director, Chief Actuary and CFO, Sage Life
Assurance of America, Inc., insurance company (February
1997 present); Director, Treasurer and CFO, Sage
Advisors, Inc. (January 1998 present); Executive Vice
President, Golden American, life insurance company (July
1993 February 1997); Consultant, Tillinghast,
actuarial consulting firm (June 1991 July 1993).
Richard H. Rose, 43 Treasurer Vice President Division Manager, First Data Investor
53 State Street Services Group, Inc. (May 1994 present); Senior Vice
Boston, MA 02109 President, The Boston Company Advisors, Inc. (February
1988 May 1994).
James F. Renz, 35 Assistant Vice President, Sage Life Assurance of America, Inc.,
300 Atlantic Street, Suite 301 Treasurer insurance company (September 1997 present); Treasurer
Stamford, CT 06901 and CFO, Sage Distributors, Inc., broker-dealer (January
1998 present); Manager, Swiss Re Life and Health
Insurance Company, reinsurance company (October 1987
August 1997).
Julie A. Tedesco, 40 Secretary Counsel, First Data Investor Services Group, Inc. (May
53 State Street 1994 present); Assistant Counsel, The Boston Company
Boston, MA 02109 Advisors Inc. (July 1992 May 1994).
James F. Bronsdon, 42 Assistant Vice President Legal and Compliance, Sage Life Assurance
300 Atlantic Street, Suite 302 Secretary of America, Inc., insurance company (June 1997
Stamford, CT 06901 present); President and CEO, Sage Distributors, Inc.,
broker-dealer (January 1998 present); Secretary, Sage
Advisors, Inc. (August 1998 present); Associate
Counsel, Berkshire Life Insurance Company, insurance
company (July 1990 June 1997).
</TABLE>
The following table estimates the amount of
compensation to be paid by the Trust during its fiscal year
ending December 31, 1999 to the persons who are to serve as
Trustees during such period:
<TABLE>
<CAPTION>
COMPENSATION TABLE
<S> <C> <C> <C> <C>
Pension Total
Estimated Retirement Estimated Compensation
Name of Compensation Benefits Accrued Annual Benefits from the Trust and
Person from the as Part of upon Fund Complex
and Position Trust* Fund Expenses Retirement Paid to Trustee**
Ronald S. Scowby $ 0 None None $ 0
Trustee and
Chairman of the Board
Robin I. Marsden $ 0 None None $ 0
Trustee and President
James A. Amen $ 9,500 None None $ 9,500
Trustee
Rosemary L. Hendrickson $ 9,500 None None $ 9,500
Trustee
Geoffrey A. Thompson $ 9,500 None None $ 9,500
Trustee
</TABLE>
* The estimated compensation information is furnished
for the fiscal year ended December 31, 1999 and assumes that
each Trustee attends all Board Meetings and an Audit
Committee Meeting.
** No Trustee receives any compensation from any mutual fund
affiliated with the Manager,
other than the Trust.
As of December 31, 1998 the Trustees and officers of the Trust owned
in the aggregate less than
1% of the shares of any Fund or of the Trust (all series taken together).
The Trust pays each Trustee who is not an employee of
the Manager or an Adviser or one of their affiliates an
annual retainer fee of $3,000 and $1,500 for each meeting of
the Board of Trustees attended, and reimburses each Trustee
for certain travel and other out-of-pocket expenses incurred
in connection with attending such meetings. In addition,
each Trustee who is a member of the Audit Committee will
receive a fee of $500 for each Audit Committee Meeting
attended. Trustees and officers of the Trust who are
employed by the Manager, an Adviser, Distributor, Investor
Services Group or one of their affiliates receive no
compensation or expense reimbursement from the Trust.
Investment Manager
Sage Advisors, Inc., the manager of the Funds, has its principal business
offices located at 300
Atlantic Street, Suite 302, Stamford, Connecticut 06901.
Pursuant to a Management Agreement with the Trust, the
Manager, subject to the supervision of the Board of
Trustees, and in conformity with the stated policies of the
Funds, will provide overall management to each Fund in
accordance with each Fund's investment objective,
restrictions and policies as stated in the Funds' Prospectus
and SAI filed with the SEC, as the same may be amended from
time to time. The management services provided to the Funds
are not exclusive under the terms of the Management
Agreement and the Manager is free to render management or
investment advisory services to others, but has no current
plans to do so.
The Manager bears all expenses in connection with the
services it renders under the Management Agreement including
the costs and expenses payable to the Advisers pursuant to
the Investment Sub-Advisory Agreement between the Manager
and each Adviser.
The Management Agreement provides that absent willful
misfeasance, bad faith, gross negligence or reckless
disregard of its duty ("Disabling Conduct"), the Manager
will not be liable for any error of judgment or mistake of
law or for losses sustained by a Fund in connection with the
matters relating to the Management Agreement. However, the
Management Agreement provides that no Fund is waiving any
rights it may have which cannot be waived. The Management
Agreement also provides indemnification for the Manager and
it directors, officers, employees and controlling persons
for any conduct that does not constitute Disabling Conduct.
The Management Agreement is terminable without penalty
on sixty (60) days' written notice by the Manager or by the
Trust when authorized by the Board of Trustees, as to a
Fund, or a majority, as defined in the 1940 Act, of the
outstanding shares of such Fund. The Management Agreement
will automatically terminate in the event of its assignment,
as defined in the 1940 Act and rules thereunder. The
Management Agreement provides that, unless terminated, it
will remain in effect for two years following the date of
the Agreement and thereafter from year to year, so long as
such continuance of the Management Agreement is approved
annually by the Board of Trustees or a vote by a majority of
the outstanding shares of the Trust and in either case, by a
majority vote of the Trustees who are not interested persons
of the Trust within the meaning of the 1940 Act
("Disinterested Trustees") cast in person at a meeting
called specifically for the purpose of voting on the
continuance.
Investment Advisers
The investment adviser for the Index Funds is State
Street Global Advisors, a division of State Street Bank and
Trust Company, with principal offices located at Two
International Place, Boston, Massachusetts 02110. State
Street Bank and Trust Company is a wholly-owned subsidiary
of State Street Corporation. The investment adviser for the
Money Market Fund is Conning Asset Management Company, with
principal offices located at City Place II, 185 Asylum
Street, Hartford, Connecticut 06103-4105.
Under the terms of the Investment Sub-Advisory
Agreements between Sage and each Adviser (the "Sub-Advisory
Agreements"), State Street Global Advisors manages the Index
Funds and Conning manages the Money Market Fund, subject to
the supervision and direction of Sage and the Board of
Trustees. Each Adviser will: (i) act in strict conformity
with the Trust's Declaration of Trust, the 1940 Act and the
Investment Advisers Act of 1940, as the same may from time
to time be amended; (ii) manage the relevant Fund or Funds
in accordance with the Funds' investment objectives,
restrictions and policies; (iii) make investment decisions
for the relevant Fund or Funds; and (iv) place purchase and
sales orders for securities and other financial instruments
on behalf of the Fund or Funds it advises. Sage and each
Adviser bear all expenses in connection with the performance
of their services under the Management Agreement and the
Advisory Agreements, respectively. The Funds bear certain
other expenses incurred in their operation, including:
interest, brokerage fees and commissions, if any; fees of
the Board of Trustees who are not officers, directors or
employees of Sage, the Distributor or any of their
affiliates; certain insurance premiums; outside auditing and
certain legal expenses; and certain extraordinary expenses.
The Advisory Agreements provide indemnification for the
Advisers and their trustees, officers, employees and
controlling persons for any conduct that does not constitute
Disabling Conduct. The Advisory Agreements permit the
Advisers to act as investment advisers to others, provided
that whenever a Fund and one or more other portfolios of or
investment companies advised by the Advisers have available
funds for investment, investments suitable and appropriate
for each will be allocated in a manner believed to be
equitable to each entity. In some cases, this procedure may
adversely affect the size of the position obtainable for a
Fund.
Each Advisory Agreement is terminable without penalty
on sixty (60) days' written notice by the Manager, the
Adviser or the Board of Trustees, or by vote of a majority,
as defined in the 1940 Act, of the outstanding shares of the
applicable Fund. Each Advisory Agreement will automatically
terminate in the event of its assignment, as defined in the
1940 Act, and rules thereunder. Each Advisory Agreement
provides that, unless terminated, it will remain in effect
for two years following the date of the Agreement and
thereafter from year to year, so long as such continuance of
the Advisory Agreement is approved annually by the Board of
Trustees or a vote by a majority of the outstanding shares
of the applicable Fund and in either case, by a majority
vote of the Disinterested Trustees cast in person at a
meeting called specifically for the purpose of voting on the
continuance of the Advisory Agreements.
Distribution Plan
The shareholders of each Fund have approved
Distribution Plans for each Fund which authorize payments by
each Fund in connection with the distribution of its shares
at an annual rate of up to 0.25% of each Fund's average
daily net assets. Under each Fund's Distribution Plan the
Fund may pay the Distributor for various costs actually
incurred or paid in connection with the distribution of each
Fund's shares and/or servicing of shareholder accounts. Such
costs include the costs of financing activities primarily
intended to result in the sale of the Funds' shares, such as
the costs (1) of printing and mailing the Funds'
prospectuses, SAIs and shareholder reports to prospective
shareholders and Contract Owners; (2) relating to the Funds'
advertisements, sales literature and other promotional
materials; (3) of obtaining information and providing
explanations to shareholders and Contract Owners regarding
the Funds; (4) of training sales personnel and of personal
service; and/or (5)maintenance of shareholder and Contract
Owner accounts with respect to each Fund's shares
attributable to such accounts. The Distributor, in turn, may
compensate Insurers or others for such activities.
The Distributor will not seek payment by the Funds for
distribution expenses incurred with respect to any Fund
during the fiscal year ending December 31, 1999. The
Distributor will provide advance notice to Contract Owners,
Retirement Plans and Insurance Companies, prior to seeking
reimbursement of future expenses.
Sub-Administrator
Investor Services Group, 53 State Street, Boston,
Massachusetts 02109, serves as the sub-administrator of the
Funds. As the sub-administrator, Investor Services Group is
obligated on a continuous basis to provide such
administrative services as the Manager and the Board of
Trustees reasonably deems necessary for the proper
administration of the Funds. Investor Services Group will
generally assist in all aspects of the Funds' operations;
supply and maintain office facilities (which may be in
Investor Services Group's own offices), statistical and
research data, data processing services, clerical,
accounting, bookkeeping and recordkeeping services
(including without limitation the maintenance of such books
and records as are required under the 1940 Act and the rules
thereunder, except as maintained by other agents), internal
auditing, executive and administrative services, and
stationery and office supplies; prepare reports to
shareholders or investors; prepare and file tax returns;
supply financial information and supporting data for reports
to and filings with the SEC; supply supporting documentation
for meetings of the Board of Trustees; provide monitoring
reports and assistance regarding compliance with the Trust's
Declaration of Trust and By-laws, the Funds' investment
objectives, restrictions and policies and with federal
securities laws; arrange for appropriate insurance coverage;
calculate net asset values, net income and realized capital
gains or losses; and negotiate arrangements with, and
supervise and coordinate the activities of, agents and
others to supply services.
Custodian and Transfer Agent
The Bank of New York, One Wall Street, New York, New York 10286, serves as
custodian for the Funds. As
custodian, The Bank of New York holds the Funds' assets.
Investor Services Group, 53 State Street, Boston,
Massachusetts 02109, serves as transfer agent of the Trust.
Under its transfer agency agreement with the Trust, Investor
Services Group maintains the shareholder account records for
the Funds, handles certain communications between
shareholders and the Funds and distributes any of the Funds'
dividends and distributions.
Counsel and Independent Accountants
Sutherland Asbill & Brennan LLP, 1275 Pennsylvania
Avenue, N.W., Washington, DC 20004-2404, serves as Counsel
to the Trust. Ernst & Young, L.L.P., 787 Seventh Avenue, New
York, New York 10019, acts as independent accountants of the
Trust and the Funds.
ORGANIZATION OF THE TRUST
The Trust is a Delaware business trust established
under a Declaration of Trust dated January 9, 1998, and
currently consists of four separately managed portfolios.
The capitalization of the Trust consists solely of an
unlimited number of shares of beneficial interest with a par
value of $0.001 per share of each Fund. The Board of
Trustees may establish additional funds (with different
investment objectives, restrictions and fundamental
policies) at any time in the future. The establishment and
offering of additional funds will not alter the rights of
the Trust's shareholders. When issued, shares are fully
paid, non-assessable, redeemable and freely transferable.
Shares do not have preemptive rights or subscription rights.
In any liquidation of a Fund, each shareholder is entitled
to receive his pro rata share of the net assets of that
Fund.
Under the Declaration of Trust, the Trust is not
required to hold annual meetings of each Fund's shareholders
to elect Trustees or for other purposes. It is not
anticipated that the Trust will hold shareholder meetings
unless required by law or the Declaration of Trust. In this
regard, the Trust will be required to hold a meeting to
elect Trustees to fill any existing vacancies on the Board
if, at any time, fewer than a majority of the Trustees have
been elected by the shareholders of the Trust. In addition,
the Declaration of Trust provides that the holders of not
less than two-thirds of the outstanding shares of the Trust
may remove persons serving as Trustee either by declaration
in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting for the purpose of
considering the removal of persons serving as Trustee if
requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust. To the
extent required by applicable law, the Trustees shall assist
shareholders who seek to remove any person serving as
Trustee.
The Trust's shares do not have cumulative voting
rights, so that the holders of more than 50% of the
outstanding shares may elect the entire Board of Trustees,
in which case, the holders of the remaining shares would not
be able to elect any Trustees.
DISTRIBUTIONS AND TAXES
Distributions
All dividends and capital gains distributions paid by a
Fund will be automatically reinvested, at net asset value,
in additional shares of the respective Fund, unless
otherwise indicated. There is no fixed dividend rate, and
there can be no assurance that any Fund will pay any
dividends or realize any capital gains. However, the Index
Funds currently intend to pay dividends and capital gains
distribution, if any, on an annual basis. The Money Market
Fund currently intends to accrue dividends daily and to pay
them monthly; and to pay capital gains distributions, if
any, on an annual basis.
As a regulated investment company, each Fund will not
be subject to U.S. Federal income tax on its investment
company taxable income and net capital gains (the excess of
net long-term capital gains over net short-term capital
losses), if any, that it distributes to its shareholders,
that is, the Insurers' separate accounts. Each Fund intends
to distribute, at least annually, substantially all of its
investment company taxable income and net capital gains and,
therefore, does not anticipate incurring Federal income tax
liability.
Taxation
Each Fund expects to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). As qualified under
Subchapter M, a Fund is not subject to Federal income tax on
that part of its investment company taxable income that it
distributes to its Contract Owners and Retirement Plans.
Taxable income consists generally of net investment income,
net gains from certain foreign currency transactions, and
net short-term capital gain, if any, and any net capital
gain (the excess of net long-term capital gain over net
short-term capital loss). It is each Fund's intention to
distribute all such income and gains to shareholders.
Shares of each Fund are offered to various insurance
company separate accounts and through various Retirement
Plans. Under the Code, an insurance company pays no tax with
respect to income of a qualifying separate account when the
income is properly allocable to the value of eligible
variable annuity or variable life insurance contracts.
Section 817(h) of the Code and the regulations
thereunder impose "diversification" requirements on each
Fund. Each Fund intends to comply with the diversification
requirements. These requirements are in addition to the
diversification requirements imposed on each Fund by
Subchapter M and the 1940 Act. The 817(h) requirements place
certain limitations on the assets of each separate account
that may be invested in securities of a single issuer. These
limitations apply to each Fund's assets that may be invested
in securities of a single issuer. Specifically, the
regulations provide that, except as permitted by a "safe
harbor" described below, as of the end of each calendar
quarter or within 30 days thereafter, no more than 55% of a
Fund's total assets may be represented by any one
investment, no more than 70% by any two investments, no more
than 80% by any three investments, and no more than 90% by
any four investments.
Section 817(h) provides, as a safe harbor, that a
separate account will be treated as being adequately
diversified if the diversification requirements under
Subchapter M are satisfied and no more than 55% of the value
of the account's total assets are cash and cash items,
government securities, and securities of other regulated
investment companies. For purposes of Section 817(h), all
securities of the same issuer, all interests in the same
real property project, and all interests in the same
commodity are treated as a single investment. In addition,
each U.S. Government agency or instrumentality is treated as
a separate issuer, while the securities of a particular
foreign government and its agencies, instrumentalities, and
political subdivisions will be considered securities issued
by the same issuer. Failure of a Fund to satisfy the
Section 817(h) requirements would result in taxation of the
applicable separate accounts, the insurance companies
variable life policies and variable annuity contracts, and
tax consequences to the holders thereof.
The foregoing is only a brief summary of important tax
law provisions that affect the Funds. Other Federal, state
or local tax law provisions may also affect the Funds and
their operations. Anyone who is considering allocating,
transferring or withdrawing monies from a Retirement Plan or
monies held under a variable contract to or from a Fund
should consult a qualified tax adviser.
Backup Withholding
Each Fund may be required to withhold U.S. Federal
income tax at the rate of 31% of all taxable distributions
payable to shareholders who fail to provide the Fund with
their correct TIN or to make required certifications, or who
have been notified by the Internal Revenue Service that they
are subject to backup withholding. Corporate shareholders
and certain other shareholders specified in the Code
generally are exempt from such backup withholding. Backup
withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. Federal
income tax liability.
Investment Manager and Administrator of the Funds
SAGE ADVISORS, INC.
Investment Adviser to the Index Funds
STATE STREET GLOBAL ADVISERS
Investment Sub-Adviser of the Money Market Fund
CONNING ASSET MANAGEMENT COMPANY
Sub-Administrator and Transfer Agent
FIRST DATA INVESTOR SERVICES GROUP, INC.
Distributor
SAGE DISTRIBUTORS, INC.
Custodian
THE BANK OF NEW YORK
Independent Accountants
ERNST & YOUNG, L.L.P.
Counsel
SUTHERLAND ASBILL & BRENNAN LLP
No person has been authorized to give any information
or to make any representations other than those contained in
the Funds' Prospectus, the SAI or the Trust's approved sales
literature in connection with the offering of the Funds'
shares and, if given or made, such other information or
representations must not be relied on as having been
authorized by the Trust. Neither the Prospectus nor this SAI
constitutes an offer in any state in which, or to any person
to whom, such offer may not lawfully be made.
SAGE LIFE INVESTMENT TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A.........Not Applicable
Included in Part B.........Not Applicable
(b) Exhibits:
Exhibit
Number Description
1. ................. Declaration of Trust is incorporated herein by
reference to Exhibit 1 as filed in the Initial Registration Statement on
January 30, 1998.
2. ................. The Registrant's By-laws are incorporated herein by
reference to Exhibit 1 as filed in the Initial Registration Statement on
January 30, 1998.
3. ................ Not Applicable
4. ................ Not Applicable
5 (a).............. Form of Investment Management Agreement between the
Funds and Sage Advisors,Inc. is incorporated herein as Exhibit 5(a) to
Pre-Effective Amendment No. 1 as filed on November 16,
1998.
(b)................. Form of Sub-Advisory Agreement between
State Street Global Advisors and Sage Advisors, Inc. is incorporated herein as
Exhibit 5(b) to Pre-Effective Amendment No. 1 as filed on November 16, 1998.
(c)................. Form of Sub-Advisory Agreement between Conning Asset
Management Company and Sage Advisors, Inc. is incorporated herein as Exhibit
5(c) to Pre-Effective Amendment No. 1 as filed on
November 16, 1998.
6 (a) ............... Form of Distribution Agreement between Registrant and
Sage Distributors, Inc.is incorporated herein as Exhibit 6(a) to Pre-Effective
No. 1 as filed on November 16, 1998.
(b).................Participation Agreement by and among the Trust, Sage Life
Assurance of America, Inc.and the Distributor is incorporated herein as Exhibit
6(b) to Pre-Effective Amendment No. 1 as filed on November 16, 1998.
7. ................... Not Applicable
Exhibit
Number Description
8. ................... Form of Custodian Agreement between Registrant and
The Bank of New York is filed herein as Exhibit 8.
9(a)................. Form of Transfer Agency Agreement between Registrant
and First Data Investor Services Group, Inc. is incorporated herein as Exhibit
9(a) to Pre-Effective Amendment No. 1 as filed on
November 16, 1998.
(b)................. Form of Sub-Administration Agreement between
Registrant and First Data Investor Services Group, Inc. is incorporated herein
as Exhibit 9(b) to Pre-Effective Amendment No. 1 as filed on November 16, 1998.
10. ................ Opinion and Consent of Counsel is filed herein as
Exhibit 10.
11. ................. Not Applicable
12. ................ Not Applicable
13. ................. Not Applicable
14. ................. Not Applicable
15. .................. Form of 12b-1 Plan for the Funds is filed herein as
Exhibit 15.
16. ................ Not Applicable
17. ................. Not Applicable
18. ................ Not Applicable
Item 25. Persons Controlled by or Under Common Control
with Registrant Not applicable. When the Registrant
commences operations all of the outstanding shares of each
portfolio will be owned by Sage Life Assurance of America,
Inc. or an affiliate thereof. Item 26. Number of Holders of
Securities None. When the Registrant commences operations
all of the outstanding shares of each portfolio will be held
by Sage Life Assurance of America, Inc. or an affiliate
thereof. Item 27. Indemnification Reference is made to the
following documents: Registrant's Declaration of Trust and
By-laws as filed on January 30, 1998, and the Participation
Agreement by and among Sage Life Assurance of America, Inc.
and the Distributor as filed herein as Exhibit 6(b). Insofar
as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "1933 Act") may be
permitted to Trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant understands that in the opinion of
the Securities and Exchange Commission such indemnification
is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
Trustee, officer, or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment
Adviser Sage Advisors, Inc. ("Sage") serves as investment
manager to each Fund of the Trust. Sage is a wholly-owned
subsidiary of Sage Insurance Group, Inc. State Street Global
Advisors serves as the investment adviser to the S&P 500
Equity Index Fund and the EAFE Equity Index Fund (the "Index
Funds"). State Street Global Advisors has been providing
institutional investment management services since 1987.
Conning Asset Management Company ("Conning") serves as the
investment adviser to the Money Market Fund and has been
providing institutional investment services since 1982. To
the knowledge of the Trust, none of the directors or
officers of State Street Global Advisors or Conning is or
has been at any time in the past two fiscal 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 and officers of
Conning and State Street Global Advisors who are or during
the past two fiscal years have been engaged in any other
business, profession, vocation or employment of a
substantial nature. The individuals from Conning may be
contacted at c/o City Place II, 185 Asylum Street, Hartford,
CT 06103-1131 and the individuals from State Street Global
Advisors may be contacted at c/o State Street Corporation,
225 Franklin Street, Boston, Massachusetts 02110.
NAME, PRINCIPAL OCCUPATION AND OTHER INFORMATION
STATE STREET CORPORATION:
The individuals listed below serve in a directorship
and/or executive capacity for the following entities with
their respective address at the location of the Adviser:
Tenley Albright, Director; Chairman of Western Resources,
Inc. Joseph Baute, Director; formerly Chairman of Markem
Corporation. I. MacAllister Booth, Director; retired
Chairman, President and Chief Executive Officer of the
Polaroid Corporation. James Cash, Jr., Director; The James
E. Robinson Professor of Business Administration at Harvard
Business School. Truman Casner, Director; Partner of Ropes &
Gray. Nader Dareshori, Director; Chairman, President and
Chief Executive Officer of Houghton Mifflin Company. David
Gruber, Director; Chairman and chief Executive Officer of
the Wyman-Gordon Company. Arthur Goldstein, Director;
Chairman and Chief Executive Officer of Ionics,
Incorporated. Charles Kaye, Director; Chairman of
Transportation Investments, Incorporated. John Kuchaski,
Director; Chairman and Chief Executive Officer of EG&G, Inc.
Charles LaMantia, Director; President and Chief Executive
Officer of Arthur D. Little, Inc. David Perini, Director;
Chairman of Perini Corporation. Dennis Picard, Director;
Chairman and Chief Executive Officer of the Rayrheon
Company. Alfred Poe, Director; Chief Executive Officer of
Menu Direct. Bernard Reznicek, Director; President, Premier
Group; retired Chairman and Chief Executive Officer of
Boston Edison. Diana Walsh, Director; President of Wellesley
College. CONNING: The individuals listed below serve in a
directorship and/or executive capacity for the following
entities with their respective address at the location of
the Adviser: John Clinton, Senior Vice President; Anderson
and Anderson Insurance Brokers, Inc.; Connecticut Surety
Corporation; Environmental Warranty, Inc.; The Galtney Group
Inc.; Investors Insurance Holding Corporation; Paradigm
Health Corporation; and Paula Financial. William Frields,
Senior Vice President; General American Life Insurance
Company Employees Federal Credit Union. Leonard Rubenstein,
Chairman and Chief Executive Officer; BHIF America Sequros
de Vida S.A.; and Genral American Charitable Foundation.
Maurice Slayton, President; Cox Insurance Holdings, PLC; GAN
National Insurance Company; GAN North America Insurance
Company; Medspan Inc.; and PennCorp. Financial Group, Inc.
David Vignolo, Vice President; BHIF America Sequros de Vida
S.A. Item 29. Principal Underwriters (a) None. (b) The
following are the Directors and officers of Sage
Distributors, Inc. with the following business address of
300 Atlantic Street, Suite 302, Stamford, CT 06901: Robin
Marsden - Director; Trustee/President of Registrant Mitchell
Katcher - Director; Vice President of Registrant Ronald
Scowby - Director; Trustee/Chairman of Registrant James F.
Bronsdon - President; Assistant Treasurer of Registrant
James Renz - CFO/Treasurer/Assistant Secretary; Assistant
Treasurer of Registrant (c) Not Applicable. Item 30.
Location of Accounts and Records All accounts books and
other documents required to be maintained by Registrant by
Section 31(a) of the Investment Company Act of 1940 and the
Rules thereunder will be maintained at the offices of: (1)
State Street Global Advisors Two International Place Boston,
Massachusetts 02110 (records relating to function as
investment adviser to the Index Funds) (2) Conning Asset
Management Company City Place II 185 Asylum Street Hartford,
CT 06103-4105 (records relating to function as investment
adviser to the Money Market Fund) (3) Sage Distributors,
Inc. 300 Atlantic Street, Suite 302 Stamford, CT 06901
(records relating to function as distributor to the Funds)
(4) First Data Investor Services Group, Inc. One Exchange
Place Boston, MA 02109 (records relating to function as
Administrator and Transfer Agent to the Funds) Item 31.
Management Services Not Applicable. Item 32. Undertakings
(a) Not Applicable. (b) The Registrant will furnish each
person to whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge. (c) Registrant hereby undertakes
to call a meeting of its shareholders for the purpose of
voting upon the question of removal of a trustee or trustees
of Registrant when requested in writing to do so by the
holders of at least 10% of Registrant's outstanding shares.
Registrant undertakes further, in connection with the
meeting, to comply with the provisions of Section 16(c) of
the Investment Company Act of 1940, as amended, relating to
communications with the shareholders of certain common-law
trusts.
SIGNATURES Pursuant to the requirements of the
Securities Act of 1933, as amended and the Investment
Company Act of 1940, as amended, the Registrant, SAGE LIFE
INVESTMENT TRUST, has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, all in the City of
Stamford, in the state of Connecticut, on the 22nd day of
January, 1999. SAGE LIFE INVESTMENT TRUST
/s/ Robin I. Marsden Robin I. Marsden President The
undersigned hereby constitutes and appoints James Bronsdon,
Kimberly J. Smith, Stephen E. Roth, Gail A. Hanson and Julie
A. Tedesco and each of them, with full power to act without
the other, her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for her
and in her name, place and stead, in any and all capacities
(until revoked in writing) to sign any and all amendments to
the Registration Statement for Sage Life Investment Trust
(including post-effective amendments and amendments
thereto), and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the
Securities and Exchange Commission granting unto said
attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing
ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue
of this power of attorney.
WITNESS our hands on the date set forth below. Pursuant
to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement and
the above Power of Attorney has been signed below by the
following persons in the capacities and on the dates
indicated.
<TABLE>
<S> <C> <C> <C>
Signature Title Date
/s/Ronald S. Scowby Chairman and Trustee January 22, 1999 Ronald S. Scowby
/s/Robin I. Marsden President and Trustee January 22, 1999 Robin I. Marsden
/s/Richard H. Rose Treasurer January 22, 1999 Richard H. Rose
/s/ James A. Amen Trustee January 22, 1999 James A. Amen
/s/Rosemary L. Hendrickson Trustee January 22, 1999
Rosemary L. Hendrickson
/s/ Geoffrey A. Thompson Trustee January 22, 1999
Geoffrey A. Thompson
</TABLE>
Power-of-attorney
The undersigned hereby constitutes and appoints James
Bronsdon, Kimberly J. Smith, Stephen E. Roth, Gail A. Hanson
and Julie A. Tedesco and each of them, with full power to
act without the other, her true and lawful attorney-in-fact
and agent, with full power of substitution and
resubstitution, for her and in her name, place and stead, in
any and all capacities (until revoked in writing) to sign
any and all amendments to the Registration Statement for
Sage Life Investment Trust (including post-effective
amendments and amendments thereto), and to file the same,
with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission
granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and
every act and thing ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his
or her substitute or substitutes, may lawfully do or cause
to be done by virtue of this power of attorney. WITNESS as
of the 15th day of July, 1998.
/s/James A. Amen
James A. Amen
Trustee
/s/Rosemary L. Hendrickson
Rosemary L. Hendrickson
Trustee
/s/Geoffrey A. Thompson
Geoffrey A. Thompson
Trustee
/s/Robin I. Marsden
Robin I. Marsden
Trustee
/s/Ronald S. Scowby
Ronald S. Scowby
Trustee
Exhibit Index
Exhibit No. Exhibit
8 Form of Custodian Agreement between Registrant and The Bank of New
York.
EXHIBIT 8
FORM OF CUSTODY AGREEMENT Agreement made as of this day
of , 1998, between *, a Delaware business trust organized
and existing under the laws of the State of Delaware, having
its principal office and place of business at **
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a
New York corporation authorized to do a banking business,
having its principal office and place of business at One
Wall Street, New York, New York 10286 (hereinafter called
the "Custodian").
W I T N E S S E T H : that for and in consideration of
the mutual promises hereinafter set forth, the Fund and the
Custodian agree as follows:
ARTICLE I DEFINITIONS Whenever used in this Agreement,
the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
1. "Authorized Persons" shall be deemed to include any
person, whether or not such person is an officer or employee
of the Fund, duly authorized by the Board of Trustees of the
Fund to execute any Certificate, instruction, notice or
other instrument on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to
time.
2. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and
federal agency securities, its successor or successors and
its nominee or nominees. 3. "Call Option" shall mean an
exchange traded option with respect to Securities other than
Stock Index Options, Futures Contracts, and Futures Contract
Options entitling the holder, upon timely exercise and
payment of the exercise price, as specified therein, to
purchase from the writer thereof the specified underlying
Securities.
4. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is actually
received by the Custodian and signed on behalf of the Fund
by any two Authorized Persons, and the term Certificate
shall also include Instructions.
5. "Clearing Member" shall mean a registered
broker-dealer which is a clearing member under the rules of
O.C.C. and a member of a national securities exchange
qualified to act as a custodian for an investment company,
or any broker-dealer reasonably believed by the Custodian to
be such a clearing member.
6. "Collateral Account" shall mean a segregated account
so denominated which is specifically allocated to a Series
and pledged to the Custodian as security for, and in
consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in
paragraph 8 of Article V herein, or (b) any receipt
described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European
Currency Unit or any other composite unit consisting of the
aggregate of specified amounts of specified Currencies as
such unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and
payment of the exercise price, as specified therein, to
purchase from the writer thereof the specified underlying
Securities (excluding Futures Contracts) which are owned by
the writer thereof and subject to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful
currency of any country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust
Company ("DTC"), a clearing agency registered with the
Securities and Exchange Commission, its successor or
successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person
authorized to act as a depository under the Investment
Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified
copy of a resolution of the Fund's Board of Trustees
specifically approving deposits therein by the Custodian.
11. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities including,
without limitation, U.S. Treasury Bills, U.S. Treasury
Notes, U.S. Treasury Bonds, domestic bank certificates of
deposit, and Eurodollar certificates of deposit, during a
specified month at an agreed upon price.
12. "Futures Contract" shall mean a Financial Futures Contract and/or Stock
Index Futures Contracts.
13. "Futures Contract Option" shall mean an option with respect to a Futures
Contract.
14. "FX Transaction" shall mean any transaction for the purchase by one party
of an agreed amount in one
Currency against the sale by it to the other party of an agreed amount in
another Currency.
15. "Instructions" shall mean instructions communications transmitted by
electronic or
telecommunications media including S.W.I.F.T., computer-to-computer interface,
dedicated transmission
line, facsimile transmission signed by an Authorized Person and tested telex.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.
17. "Money Market Security" shall be deemed to include, without limitation,
certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as
to interest and principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to the same and bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal funds on the same day as such
purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency
registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees. 19. "Option" shall mean a
Call Option, Covered Call Option, Stock Index Option and/or a Put Option. 20.
"Oral Instructions" shall mean verbal instructions actually received by the
Custodian from an Authorized Person or from a person reasonably believed by the
Custodian to be an Authorized Person. 21. "Put Option" shall mean an exchange
traded option with respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying Securities, to sell such
Securities to the writer thereof for the exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to which
the Fund sells Securities
and agrees to repurchase such Securities at a described or specified date and
price.
23. "Security" shall be deemed to include, without limitation, Money Market
Securities, Call Options, Put Options, Stock Index Options, Stock Index Futures
Contracts, Stock Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, common stocks
and other securities having characteristics similar to common stocks, preferred
stocks, debt obligations issued by state or municipal governments and by public
authorities, (including, without limitation, general obligation bonds, revenue
bonds, industrial bonds and industrial development bonds), bonds, debentures,
notes, mortgages or other obligations, and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase, sell or subscribe
for the same, or evidencing or representing any other rights or interest
therein, or any property or assets.
24. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the Fund listed on
Appendix B hereto as
amended from time to time.
26. "Shares" shall mean the shares of beneficial interest of the Fund, each of
which is, in the case of
a Fund having Series, allocated to a particular Series.
27. "Stock Index Futures Contract" shall mean a bilateral agreement pursuant to
which the parties agree
to take or make delivery of an amount of cash equal to a specified dollar amoun
times the difference
between the value of a particular stock index at the close of the last business
ay of the contract and
the price at which the futures contract is originally struck.
28. "Stock Index Option" shall mean an exchange traded option entitling the
holder, upon timely
exercise, to receive an amount of cash determined by reference to the difference
between the exercise
price and the value of the index on the date of exercise.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian
of the Securities and money at any time owned by the Fund during the period
of this Agreement. 2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set
forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the
Custodian all Securities and all money owned by it, at any time during the
period of this Agreement, and shall specify with respect to such Securities
and money the Series to which the same are specifically allocated. The
Custodian shall segregate, keep and maintain the assets of the Series
separate and apart. The Custodian will not be responsible for any
Securities and money not actually received by it. The Custodian will be
entitled to reverse any credits made on the Fund's behalf where such
credits have been previously made and money is not finally collected. The
Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit A hereto,
approving, authorizing and instructing the Custodian on a continuous and
on-going basis to deposit in the Book-Entry System all Securities eligible
for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities and deliveries and returns of Securities
collateral. Prior to a deposit of Securities specifically allocated to a
Series in the Depository, the Fund shall deliver to the Custodian a
certified resolution of the Board of Trustees of the Fund, substantially in
the form of Exhibit B hereto, approving, authorizing and instructing the
Custodian on a continuous and ongoing basis until instructed to the
contrary by a Certificate actually received by the Custodian to deposit in
the Depository all Securities specifically allocated to such Series
eligible for deposit therein, and to utilize the Depository to the extent
possible with respect to such Securities in connection with its performance
hereunder, including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities, and deliveries and
returns of Securities collateral. Securities and money deposited in either
the Book-Entry System or the Depository will be represented in accounts
which include only assets held by the Custodian for customers, including,
but not limited to, accounts in which the Custodian acts in a fiduciary or
representative capacity and will be specifically allocated on the
Custodian's books to the separate account for the applicable Series. Prior
to the Custodian's accepting, utilizing and acting with respect to Clearing
Member confirmations for Options and transactions in Options for a Series
as provided in this Agreement, the Custodian shall have received a
certified resolution of the Fund's Board of Trustees, substantially in the
form of Exhibit C hereto, approving, authorizing and instructing the
Custodian on a continuous and on-going basis, until instructed to the
contrary by a Certificate actually received by the Custodian, to accept,
utilize and act in accordance with such confirmations as provided in this
Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in
the name of each Series, and shall credit to the separate account for each
Series all money received by it for the account of the Fund with respect to
such Series. Money credited to a separate account for a Series shall be
disbursed by the Custodian only:
(a) as hereinafter provided; (b) pursuant to Certificates setting
forth the name and address of the person to whom the payment is to be made,
the Series account from which payment is to be made and the purpose for
which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series
basis, of all transfers to or from the account of the Fund for a Series,
either hereunder or with any co-custodian or sub-custodian appointed in
accordance with this Agreement during said day. Where Securities are
transferred to the account of the Fund for a Series, the Custodian shall
also by book-entry or otherwise identify as belonging to such Series a
quantity of Securities in a fungible bulk of Securities registered in the
name of the Custodian (or its nominee) or shown on the Custodian's account
on the books of the Book-Entry System or the Depository. At least monthly
and from time to time, the Custodian shall furnish the Fund with a detailed
statement, on a per Series basis, of the Securities and money held by the
Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are
issued or issuable only in bearer form, except such Securities as are held
in the Book-Entry System, shall be held by the Custodian in that form; all
other Securities held hereunder may be registered in the name of the Fund,
in the name of any duly appointed registered nominee of the Custodian as
the Custodian may from time to time determine, or in the name of the
Book-Entry System or the Depository or their successor or successors, or
their nominee or nominees. The Fund agrees to furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of its registered
nominee or in the name of the Book-Entry System or the Depository any
Securities which it may hold hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of
such Series physically segregated at all times from those of any other
person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or
through the use of the Book-Entry System or the Depository with respect to
Securities held hereunder and therein deposited, shall with respect to all
Securities held for the Fund hereunder in accordance with preceding
paragraph 4:
(a) collect all income, dividends and distributions due or payable;
(b) give notice to the Fund and present payment and collect the amount
payable upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice of such
call appears in one or more of the publications listed in Appendix C
annexed hereto, which may be amended at any time by the Custodian without
the prior notification or consent of the Fund; (c) present for payment and
collect the amount payable upon all Securities which mature; (d) surrender
Securities in temporary form for definitive Securities; (e) execute, as
custodian, any necessary declarations or certificates of ownership under
the Federal Income Tax Laws or the laws or regulations of any other taxing
authority now or hereafter in effect; (f) hold directly, or through the
Book-Entry System or the Depository with respect to Securities therein
deposited, for the account of a Series, all rights and similar securities
issued with respect to any Securities held by the Custodian for such Series
hereunder; and (g) deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information (including,
without limitation, notices of tender offers and exchange offers, pendency
of calls, maturities of Securities and expiration of rights) relating to
Securities held pursuant to this Agreement which are actually received by
the Custodian, such proxies and other similar materials to be executed by
the registered owner (if Securities are registered otherwise than in the
name of the Fund), but without indicating the manner in which proxies or
consents are to be voted. 6. Upon receipt of a Certificate and not
otherwise, the Custodian, directly or through the use of the Book-Entry
System or the Depository, shall: (a) execute and deliver to such persons as
may be designated in such Certificate proxies, consents, authorizations,
and any other instruments whereby the authority of the Fund as owner of any
Securities held by the Custodian hereunder for the Series specified in such
Certificate may be exercised; (b) deliver any Securities held by the
Custodian hereunder for the Series specified in such Certificate in
exchange for other Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege and receive and hold hereunder specifically allocated to such
Series any cash or other Securities received in exchange; (c) deliver any
Securities held by the Custodian hereunder for the Series specified in such
Certificate to any protective committee, reorganization committee or other
person in connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any corporation, and
receive and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or documents
as may be issued to it to evidence such delivery; (d) make such transfers
or exchanges of the assets of the Series specified in such Certificate, and
take such other steps as shall be stated in such Certificate to be for the
purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Fund; and
(e) present for payment and collect the amount payable upon Securities not
described in preceding paragraph 5(b) of this Article which may be called
as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have
received a Certificate from the Fund stating, that any such instruments or
certificates are available. The Fund shall deliver to the Custodian such a
Certificate no later than the business day preceding the availability of
any such instrument or certificate. Prior to such availability, the
Custodian shall comply with Section 17(f) of the Investment Company Act of
1940, as amended, in connection with the purchase, sale, settlement,
closing-out or writing of Futures Contracts, Options, or Futures Contract
Options by making payments or deliveries specified in Certificates received
by the Custodian in connection with any such purchase, sale, writing,
settlement or closing-out upon its receipt from a broker, dealer, or
futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or futures commission merchants with respect to such Futures
Contracts, Options, or Futures Contract Options, as the case may be,
confirming that such Security is held by such broker, dealer or futures
commission merchant, in book-entry form or otherwise, in the name of the
Custodian (or any nominee of the Custodian) as custodian for the Fund,
provided, however, that notwithstanding the foregoing, payments to or
deliveries from the Margin Account, and payments with respect to Securities
to which a Margin Account relates, shall be made in accordance with the
terms and conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall,
notwithstanding any provision in this Agreement to the contrary, make
payment for any Futures Contract, Option, or Futures Contract Option for
which such instruments or such certificates are available only against the
delivery to the Custodian of such instrument or such certificate, and
deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by
the Custodian of payment therefor. Any such instrument or certificate
delivered to the Custodian shall be held by the Custodian hereunder in
accordance with, and subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than
a purchase of an Option, a Futures Contract, or a Futures Contract Option,
the Fund shall deliver to the Custodian (i) with respect to each purchase
of Securities which are not Money Market Securities, a Certificate, and
(ii) with respect to each purchase of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c)
the number of shares or the principal amount purchased and accrued
interest, if any; (d) the date of purchase and settlement; (e) the purchase
price per unit; (f) the total amount payable upon such purchase; (g) the
name of the person from whom or the broker through whom the purchase was
made, and the name of the clearing broker, if any; and (h) the name of the
broker to whom payment is to be made. The Custodian shall, upon receipt of
Securities purchased by or for the Fund, pay to the broker specified in the
Certificate out of the money held for the account of such Series the total
amount payable upon such purchase, provided that the same conforms to the
total amount payable as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any
Reverse Repurchase Agreement, the Fund shall deliver to the Custodian (i)
with respect to each sale of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each sale of Money
Market Securities, a Certificate or Oral Instructions, specifying with
respect to each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale; (e) the sale price per unit; (f)
the total amount payable to the Fund upon such sale; (g) the name of the
broker through whom or the person to whom the sale was made, and the name
of the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the
Certificate against payment of the total amount payable to the Fund upon
such sale, provided that the same conforms to the total amount payable as
set forth in such Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund
shall deliver to the Custodian a Certificate specifying with respect to
each Option purchased: (a) the Series to which such Option is specifically
allocated; (b) the type of Option (put or call); (c) the name of the issuer
and the title and number of shares subject to such Option or, in the case
of a Stock Index Option, the stock index to which such Option relates and
the number of Stock Index Options purchased; (d) the expiration date; (e)
the exercise price; (f) the dates of purchase and settlement; (g) the total
amount payable by the Fund in connection with such purchase; (h) the name
of the Clearing Member through whom such Option was purchased; and (i) the
name of the broker to whom payment is to be made. The Custodian shall pay,
upon receipt of a Clearing Member's statement confirming the purchase of
such Option held by such Clearing Member for the account of the Custodian
(or any duly appointed and registered nominee of the Custodian) as
custodian for the Fund, out of money held for the account of the Series to
which such Option is to be specifically allocated, the total amount payable
upon such purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable as set
forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to each such sale: (a) the Series to
which such Option was specifically allocated; (b) the type of Option (put
or call); (c) the name of the issuer and the title and number of shares
subject to such Option or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Stock Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement;
(g) the total amount payable to the Fund upon such sale; and (h) the name
of the Clearing Member through whom the sale was made. The Custodian shall
consent to the delivery of the Option sold by the Clearing Member which
previously supplied the confirmation described in preceding paragraph 1 of
this Article with respect to such Option against payment to the Custodian
of the total amount payable to the Fund, provided that the same conforms to
the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Call
Option: (a) the Series to which such Call Option was specifically
allocated; (b) the name of the issuer and the title and number of shares
subject to the Call Option; (c) the expiration date; (d) the date of
exercise and settlement; (e) the exercise price per share; (f) the total
amount to be paid by the Fund upon such exercise; and (g) the name of the
Clearing Member through whom such Call Option was exercised. The Custodian
shall, upon receipt of the Securities underlying the Call Option which was
exercised, pay out of the money held for the account of the Series to which
such Call Option was specifically allocated the total amount payable to the
Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such
Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the name of
the issuer and the title and number of shares subject to the Put Option;
(c) the expiration date; (d) the date of exercise and settlement; (e) the
exercise price per share; (f) the total amount to be paid to the Fund upon
such exercise; and (g) the name of the Clearing Member through whom such
Put Option was exercised. The Custodian shall, upon receipt of the amount
payable upon the exercise of the Put Option, deliver or direct the
Depository to deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund as set forth
in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series to which such Stock Index Option was
specifically allocated; (b) the type of Stock Index Option (put or call);
(c) the number of Options being exercised; (d) the stock index to which
such Option relates; (e) the expiration date; (f) the exercise price; (g)
the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be
received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Covered Call Option: (a) the Series for which such Covered Call Option
was written; (b) the name of the issuer and the title and number of shares
for which the Covered Call Option was written and which underlie the same;
(c) the expiration date; (d) the exercise price; (e) the premium to be
received by the Fund; (f) the date such Covered Call Option was written;
and (g) the name of the Clearing Member through whom the premium is to be
received. The Custodian shall deliver or cause to be delivered, in exchange
for receipt of the premium specified in the Certificate with respect to
such Covered Call Option, such receipts as are required in accordance with
the customs prevailing among Clearing Members dealing in Covered Call
Options and shall impose, or direct the Depository to impose, upon the
underlying Securities specified in the Certificate specifically allocated
to such Series such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon prior
written notification to the Fund, at any time to refuse to issue any
receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall
promptly deliver to the Custodian a Certificate instructing the Custodian
to deliver, or to direct the Depository to deliver, the Securities subject
to such Covered Call Option and specifying: (a) the Series for which such
Covered Call Option was written; (b) the name of the issuer and the title
and number of shares subject to the Covered Call Option; (c) the Clearing
Member to whom the underlying Securities are to be delivered; and (d) the
total amount payable to the Fund upon such delivery. Upon the return and/or
cancellation of any receipts delivered pursuant to paragraph 6 of this
Article, the Custodian shall deliver, or direct the Depository to deliver,
the underlying Securities as specified in the Certificate against payment
of the amount to be received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name
of the issuer and the title and number of shares for which the Put Option
is written and which underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Fund; (f) the date
such Put Option is written; (g) the name of the Clearing Member through
whom the premium is to be received and to whom a Put Option guarantee
letter is to be delivered; (h) the amount of cash, and/or the amount and
kind of Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; and (i) the
amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for
such Series. The Custodian shall, after making the deposits into the
Collateral Account specified in the Certificate, issue a Put Option
guarantee letter substantially in the form utilized by the Custodian on the
date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation
to issue any Put Option guarantee letter or similar document if it is
unable to make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option
was written; (b) the name of the issuer and title and number of shares
subject to the Put Option; (c) the Clearing Member from whom the underlying
Securities are to be received; (d) the total amount payable by the Fund
upon such delivery; (e) the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be withdrawn from the
Collateral Account for such Series and (f) the amount of cash and/or the
amount and kind of Securities, specifically allocated to such Series, if
any, to be withdrawn from the Senior Security Account. Upon the return
and/or cancellation of any Put Option guarantee letter or similar document
issued by the Custodian in connection with such Put Option, the Custodian
shall pay out of the money held for the account of the Series to which such
Put Option was specifically allocated the total amount payable to the
Clearing Member specified in the Certificate as set forth in such
Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Stock Index Option: (a) the Series for which such Stock Index Option
was written; (b) whether such Stock Index Option is a put or a call; (c)
the number of options written; (d) the stock index to which such Option
relates; (e) the expiration date; (f) the exercise price; (g) the Clearing
Member through whom such Option was written; (h) the premium to be received
by the Fund; (i) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited
in the Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in the Collateral Account for such Series; and
(k) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Margin Account,
and the name in which such account is to be or has been established. The
Custodian shall, upon receipt of the premium specified in the Certificate,
make the deposits, if any, into the Senior Security Account specified in
the Certificate, and either (1) deliver such receipts, if any, which the
Custodian has specifically agreed to issue, which are in accordance with
the customs prevailing among Clearing Members in Stock Index Options and
make the deposits into the Collateral Account specified in the Certificate,
or (2) make the deposits into the Margin Account specified in the
Certificate.
11. Whenever a Stock Index Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Stock Index Option: (a) the Series for which such Stock Index Option
was written; (b) such information as may be necessary to identify the Stock
Index Option being exercised; (c) the Clearing Member through whom such
Stock Index Option is being exercised; (d) the total amount payable upon
such exercise, and whether such amount is to be paid by or to the Fund; (e)
the amount of cash and/or amount and kind of Securities, if any, to be
withdrawn from the Margin Account; and (f) the amount of cash and/or amount
and kind of Securities, if any, to be withdrawn from the Senior Security
Account for such Series; and the amount of cash and/or the amount and kind
of Securities, if any, to be withdrawn from the Collateral Account for such
Series. Upon the return and/or cancellation of the receipt, if any,
delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the money held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing
Member specified in the Certificate the total amount payable, if any, as
specified therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in
order to liquidate its position as a writer of an Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
the Option being purchased: (a) that the transaction is a Closing Purchase
Transaction; (b) the Series for which the Option was written; (c) the name
of the issuer and the title and number of shares subject to the Option, or,
in the case of a Stock Index Option, the stock index to which such Option
relates and the number of Options held; (d) the exercise price; (e) the
premium to be paid by the Fund; (f) the expiration date; (g) the type of
Option (put or call); (h) the date of such purchase; (i) the name of the
Clearing Member to whom the premium is to be paid; and (j) the amount of
cash and/or the amount and kind of Securities, if any, to be withdrawn from
the Collateral Account, a specified Margin Account, or the Senior Security
Account for such Series. Upon the Custodian's payment of the premium and
the return and/or cancellation of any receipt issued pursuant to paragraphs
6, 8 or 10 of this Article with respect to the Option being liquidated
through the Closing Purchase Transaction, the Custodian shall remove, or
direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option. 13. Upon the expiration, exercise or
consummation of a Closing Purchase Transaction with respect to any Option
purchased or written by the Fund and described in this Article, the
Custodian shall delete such Option from the statements delivered to the
Fund pursuant to paragraph 3 of Article III herein, and upon the return
and/or cancellation of any receipts issued by the Custodian, shall make
such withdrawals from the Collateral Account, and the Margin Account and/or
the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to
such Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being
entered; (b) the category of Futures Contract (the name of the underlying
stock index or financial instrument); (c) the number of identical Futures
Contracts entered into; (d) the delivery or settlement date of the Futures
Contract(s); (e) the date the Futures Contract(s) was (were) entered into
and the maturity date; (f) whether the Fund is buying (going long) or
selling (going short) on such Futures Contract(s); (g) the amount of cash
and/or the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the broker,
dealer, or futures commission merchant through whom the Futures Contract
was entered into; and (i) the amount of fee or commission, if any, to be
paid and the name of the broker, dealer, or futures commission merchant to
whom such amount is to be paid. The Custodian shall make the deposits, if
any, to the Margin Account in accordance with the terms and conditions of
the Margin Account Agreement. The Custodian shall make payment out of the
money specifically allocated to such Series of the fee or commission, if
any, specified in the Certificate and deposit in the Senior Security
Account for such Series the amount of cash and/or the amount and kind of
Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian
in accordance with the terms and conditions of the Margin Account
Agreement. (b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with respect to
an outstanding Futures Contract, shall be received and dealt with by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a Certificate specifying:
(a) the Futures Contract and the Series to which the same relates; (b) with
respect to a Stock Index Futures Contract, the total cash settlement amount
to be paid or received, and with respect to a Financial Futures Contract,
the Securities and/or amount of cash to be delivered or received; (c) the
broker, dealer, or futures commission merchant to or from whom payment or
delivery is to be made or received; and (d) the amount of cash and/or
Securities to be withdrawn from the Senior Security Account for such
Series. The Custodian shall make the payment or delivery specified in the
Certificate, and delete such Futures Contract from the statements delivered
to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to
the Custodian a Certificate specifying: (a) the items of information
required in a Certificate described in paragraph 1 of this Article, and (b)
the Futures Contract being offset. The Custodian shall make payment out of
the money specifically allocated to such Series of the fee or commission,
if any, specified in the Certificate and delete the Futures Contract being
offset from the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein, and make such withdrawals from the Senior Security
Account for such Series as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by
the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
5. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying:
(a) the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date
of the agreement between the Fund and such futures commission merchant
entered pursuant to Rule 17f-6 under the Investment Company Act 1940, as
amended. Each delivery of such a Certificate by the Fund shall constitute
(x) a representation and warranty by the Fund that the Rule 17f-6 agreement
has been duly authorized, executed and delivered by the Fund and the
futures commission merchant and complies with Rule 17f-6, and (y) an
agreement by the Fund that the Custodian shall not be liable for the acts
or omissions of any such futures commission merchant.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to
which such Option is specifically allocated; (b) the type of Futures
Contract Option (put or call); (c) the type of Futures Contract and such
other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option purchased; (d) the expiration date;
(e) the exercise price; (f) the dates of purchase and settlement; (g) the
amount of premium to be paid by the Fund upon such purchase; (h) the name
of the broker or futures commission merchant through whom such option was
purchased; and (i) the name of the broker, or futures commission merchant,
to whom payment is to be made. The Custodian shall pay out of the money
specifically allocated to such Series, the total amount to be paid upon
such purchase to the broker or futures commissions merchant through whom
the purchase was made, provided that the same conforms to the amount set
forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by the Fund
pursuant to paragraph 1
hereof, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) Series to which such Futures
Contract Option was specifically allocated; (b) the type of Futures
Contract Option (put or call); (c) the type of Futures Contract and such
other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund
upon such sale; and (h) the name of the broker or futures commission
merchant through whom the sale was made. The Custodian shall consent to the
cancellation of the Futures Contract Option being closed against payment to
the Custodian of the total amount payable to the Fund, provided the same
conforms to the total amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant
to paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to
the Custodian a Certificate specifying: (a) the Series to which such
Futures Contract Option was specifically allocated; (b) the particular
Futures Contract Option (put or call) being exercised; (c) the type of
Futures Contract underlying the Futures Contract Option; (d) the date of
exercise; (e) the name of the broker or futures commission merchant through
whom the Futures Contract Option is exercised; (f) the net total amount, if
any, payable by the Fund; (g) the amount, if any, to be received by the
Fund; and (h) the amount of cash and/or the amount and kind of Securities
to be deposited in the Senior Security Account for such Series. The
Custodian shall make, out of the money and Securities specifically
allocated to such Series, the payments, if any, and the deposits, if any,
into the Senior Security Account as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Futures Contract Option: (a) the Series for which such Futures
Contract Option was written; (b) the type of Futures Contract Option (put
or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the expiration date; (e) the exercise price; (f) the
premium to be received by the Fund; (g) the name of the broker or futures
commission merchant through whom the premium is to be received; and (h) the
amount of cash and/or the amount and kind of Securities, if any, to be
deposited in the Senior Security Account for such Series. The Custodian
shall, upon receipt of the premium specified in the Certificate, make out
of the money and Securities specifically allocated to such Series the
deposits into the Senior Security Account, if any, as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a
call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract
Option was specifically allocated; (b) the particular Futures Contract
Option exercised; (c) the type of Futures Contract underlying the Futures
Contract Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option was exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net total
amount, if any, payable by the Fund upon such exercise; and (g) the amount
of cash and/or the amount and kind of Securities to be deposited in the
Senior Security Account for such Series. The Custodian shall, upon its
receipt of the net total amount payable to the Fund, if any, specified in
such Certificate make the payments, if any, and the deposits, if any, into
the Senior Security Account as specified in the Certificate. The deposits,
if any, to be made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Option was
specifically allocated; (b) the particular Futures Contract Option
exercised; (c) the type of Futures Contract underlying such Futures
Contract Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option is exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net total
amount, if any, payable by the Fund upon such exercise; and (g) the amount
and kind of Securities and/or cash to be withdrawn from or deposited in,
the Senior Security Account for such Series, if any. The Custodian shall,
upon its receipt of the net total amount payable to the Fund, if any,
specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits to and/or withdrawals from the Margin Account, if
any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical
to a previously written Futures Contract Option described in this Article
in order to liquidate its position as a writer of such Futures Contract
Option, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a)
the Series to which such Option is specifically allocated; (b) that the
transaction is a closing transaction; (c) the type of Futures Contract and
such other information as may be necessary to identify the Futures Contract
underlying the Futures Option Contract; (d) the exercise price; (e) the
premium to be paid by the Fund; (f) the expiration date; (g) the name of
the broker or futures commission merchant to whom the premium is to be
paid; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for such Series.
The Custodian shall effect the withdrawals from the Senior Security Account
specified in the Certificate. The withdrawals, if any, to be made from the
Margin Account shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or
purchased by the Fund and described in this Article, the Custodian shall
(a) delete such Futures Contract Option from the statements delivered to
the Fund pursuant to paragraph 3 of Article III herein and, (b) make such
withdrawals from and/or in the case of an exercise such deposits into the
Senior Security Account as may be specified in a Certificate. The deposits
to and/or withdrawals from the Margin Account, if any, shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to
Article VI hereof.
10. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying:
(a) the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date
of the agreement between the Fund and such futures commission merchant
entered pursuant to Rule 17f-6 under the Investment Company Act 1940, as
amended. Each delivery of such a Certificate by the Fund shall constitute
(x) a representation and warranty by the Fund that the Rule 17f-6 agreement
has been duly authorized, executed and delivered by the Fund and the
futures commission merchant and complies with Rule 17f-6, and (y) an
agreement by the Fund that the Custodian shall not be liable for the acts
or omissions of any such futures commission merchant
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the
Series for which such short sale was made; (b) the name of the issuer and
the title of the Security; (c) the number of shares or principal amount
sold, and accrued interest or dividends, if any; (d) the dates of the sale
and settlement; (e) the sale price per unit; (f) the total amount credited
to the Fund upon such sale, if any, (g) the amount of cash and/or the
amount and kind of Securities, if any, which are to be deposited in a
Margin Account and the name in which such Margin Account has been or is to
be established; (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in a Senior Security Account, and (i)
the name of the broker through whom such short sale was made. The Custodian
shall upon its receipt of a statement from such broker confirming such sale
and that the total amount credited to the Fund upon such sale, if any, as
specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue
a receipt or make the deposits into the Margin Account and the Senior
Security Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to each such closing-out: (a) the Series for which such transaction
is being made; (b) the name of the issuer and the title of the Security;
(c) the number of shares or the principal amount, and accrued interest or
dividends, if any, required to effect such closing-out to be delivered to
the broker; (d) the dates of closing-out and settlement; (e) the purchase
price per unit; (f) the net total amount payable to the Fund upon such
closing-out; (g) the net total amount payable to the broker upon such
closing-out; (h) the amount of cash and the amount and kind of Securities
to be withdrawn, if any, from the Margin Account; (i) the amount of cash
and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account; and (j) the name of the broker through whom the
Fund is effecting such closing-out. The Custodian shall, upon receipt of
the net total amount payable to the Fund upon such closing-out, and the
return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the money held
for the account of the Fund to the broker the net total amount payable to
the broker, and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund
shall deliver to the Custodian a Certificate, or in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate or Oral
Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in
connection with such Reverse Repurchase Agreement and specifically
allocated to such Series; (c) the broker or dealer through or with whom the
Reverse Repurchase Agreement is entered; (d) the amount and kind of
Securities to be delivered by the Fund to such broker or dealer; (e) the
date of such Reverse Repurchase Agreement; and (f) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in a Senior Security Account for such Series in
connection with such Reverse Repurchase Agreement. The Custodian shall,
upon receipt of the total amount payable to the Fund specified in the
Certificate or Oral Instructions make the delivery to the broker or dealer,
and the deposits, if any, to the Senior Security Account, specified in such
Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money
Market Security, a Certificate or Oral Instructions to the Custodian
specifying: (a) the Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total amount payable by the Fund
in connection with such termination; (c) the amount and kind of Securities
to be received by the Fund and specifically allocated to such Series in
connection with such termination; (d) the date of termination; (e) the name
of the broker or dealer with or through whom the Reverse Repurchase
Agreement is to be terminated; and (f) the amount of cash and/or the amount
and kind of Securities to be withdrawn from the Senior Securities Account
for such Series. The Custodian shall, upon receipt of the amount and kind
of Securities to be received by the Fund specified in the Certificate or
Oral Instructions, make the payment to the broker or dealer, and the
withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall
deliver or cause to be delivered to the Custodian a Certificate specifying
with respect to each such loan: (a) the Series to which the loaned
Securities are specifically allocated; (b) the name of the issuer and the
title of the Securities, (c) the number of shares or the principal amount
loaned, (d) the date of loan and delivery, (e) the total amount to be
delivered to the Custodian against the loan of the Securities, including
the amount of cash collateral and the premium, if any, separately
identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution
to which the loan was made upon receipt of the total amount designated as
to be delivered against the loan of Securities. The Custodian may accept
payment in connection with a delivery otherwise than through the Book-Entry
System or Depository only in the form of a certified or bank cashier's
check payable to the order of the Fund or the Custodian drawn on New York
Clearing House funds and may deliver Securities in accordance with the
customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and
return of Securities: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities to be returned, (c) the number of shares or the principal amount
to be returned, (d) the date of termination, (e) the total amount to be
delivered by the Custodian (including the cash collateral for such
Securities minus any offsetting credits as described in said Certificate),
and (f) the name of the broker, dealer, or financial institution from which
the Securities will be returned. The Custodian shall receive all Securities
returned from the broker, dealer, or financial institution to which such
Securities were loaned and upon receipt thereof shall pay, out of the money
held for the account of the Fund, the total amount payable upon such return
of Securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for
which such deposit or withdrawal is to be made and the amount of cash
and/or the amount and kind of Securities specifically allocated to such
Series to be deposited in, or withdrawn from, such Senior Security Account
for such Series. In the event that the Fund fails to specify in a
Certificate the Series, the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities to be deposited
by the Custodian into, or withdrawn from, a Senior Securities Account, the
Custodian shall be under no obligation to make any such deposit or
withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing
Member in whose name, or for whose benefit, the account was established as
specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with
in accordance with the terms and conditions of the Margin Account
Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral
Account described herein. In accordance with applicable law the Custodian
may enforce its lien and realize on any such property whenever the
Custodian has made payment or delivery pursuant to any Put Option guarantee
letter or similar document or any receipt issued hereunder by the
Custodian. In the event the Custodian should realize on any such property
net proceeds which are less than the Custodian's obligations under any Put
Option guarantee letter or similar document or any receipt, such deficiency
shall be a debt owed the Custodian by the Fund within the scope of Article
XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities
are held specifying as of the close of business on the previous business
day: (a) the name of the Margin Account; (b) the amount and kind of
Securities held therein; and (c) the amount of money held therein. The
Custodian shall make available upon request to any broker, dealer, or
futures commission merchant specified in the name of a Margin Account a
copy of the statement furnished the Fund with respect to such Margin
Account.
6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any
Series, the Custodian shall furnish the Fund with a statement with respect
to such Collateral Account specifying the amount of cash and/or the amount
and kind of Securities held therein. No later than the close of business
next succeeding the delivery to the Fund of such statement, the Fund shall
furnish to the Custodian a Certificate specifying the then market value of
the Securities described in such statement. In the event such then market
value is indicated to be less than the Custodian's obligation with respect
to any outstanding Put Option guarantee letter or similar document, the
Fund shall promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to eliminate such
deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Trustees of the Fund, certified by the Secretary or any
Assistant Secretary, either (i) setting forth with respect to the Series
specified therein the date of the declaration of a dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and
the total amount payable to the Dividend Agent and any sub-dividend agent
or co-dividend agent of the Fund on the payment date, or (ii) authorizing
with respect to the Series specified therein the declaration of dividends
and distributions on a daily basis and authorizing the Custodian to rely on
Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment thereof,
the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders
of record as of that date and the total amount payable to the Dividend
Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall pay
out of the money held for the account of each Series the total amount
payable to the Dividend Agent and any sub-dividend agent or co-dividend
agent of the Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying: (a) the Series, the number of
Shares sold, trade date, and price; and (b) the amount of money to be
received by the Custodian for the sale of such Shares and specifically
allocated to the separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian shall
credit such money to the
separate account in the name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described in the
foregoing provisions of this Article, the Custodian shall pay, out of the
money held for the account of such Series, all original issue or other
taxes required to be paid by the Fund in connection with such issuance upon
the receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder
in connection with a redemption of any Shares, it shall furnish to the
Custodian a Certificate specifying: (a) the number and Series of Shares
redeemed; and (b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption
and that such Shares are in good form for redemption, the Custodian shall
make payment to the Transfer Agent out of the money held in the separate
account in the name of the Series the total amount specified in the
Certificate issued pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of
any Shares, whenever any Shares are redeemed pursuant to any check
redemption privilege which may from time to time be offered by the Fund,
the Custodian, unless otherwise instructed by a Certificate, shall, upon
receipt of an advice from the Fund or its agent setting forth that the
redemption is in good form for redemption in accordance with the check
redemption procedure, honor the check presented as part of such check
redemption privilege out of the money held in the separate account of the
Series of the Shares being redeemed.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the money held
by the Custodian in the separate account for such Series shall be
insufficient to pay the total amount payable upon a purchase of Securities
specifically allocated to such Series, as set forth in a Certificate or
Oral Instructions, or which results in an overdraft in the separate account
of such Series for some other reason, or if the Fund is for any other
reason indebted to the Custodian with respect to a Series, including any
indebtedness to The Bank of New York under the Fund's Cash Management and
Related Services Agreement (except a borrowing for investment or for
temporary or emergency purposes using Securities as collateral pursuant to
a separate agreement and subject to the provisions of paragraph 2 of this
Article), such overdraft or indebtedness shall be deemed to be a loan made
by the Custodian to the Fund for such Series payable on demand and shall
bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to time, such
rate to be adjusted on the effective date of any change in such prime
commercial lending rate but in no event to be less than 6% per annum. In
addition, the Fund hereby agrees that the Custodian shall have a continuing
lien, security interest, and security entitlement in and to any property
including any investment property or any financial asset specifically
allocated to such Series at any time held by it for the benefit of such
Series or in which the Fund may have an interest which is then in the
Custodian's possession or control or in possession or control of any third
party acting in the Custodian's behalf. The Fund authorizes the Custodian,
in its sole discretion, at any time to charge any such overdraft or
indebtedness together with interest due thereon against any balance of
account standing to such Series' credit on the Custodian's books. In
addition, the Fund hereby covenants that on each Business Day on which
either it intends to enter a Reverse Repurchase Agreement and/or otherwise
borrow from a third party, or which next succeeds a Business Day on which
at the close of business the Fund had outstanding a Reverse Repurchase
Agreement or such a borrowing, it shall prior to 9 a.m., New York City
time, advise the Custodian, in writing, of each such borrowing, shall
specify the Series to which the same relates, and shall not incur any
indebtedness not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the
Custodian) from which it borrows money for investment or for temporary or
emergency purposes using Securities held by the Custodian hereunder as
collateral for such borrowings, a notice or undertaking in the form
currently employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount of
collateral. The Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such borrowing: (a) the Series to which
such borrowing relates; (b) the name of the bank, (c) the amount and terms
of the borrowing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be
entered into, (e) the date on which the loan becomes due and payable, (f)
the total amount payable to the Fund on the borrowing date, (g) the market
value of Securities to be delivered as collateral for such loan, including
the name of the issuer, the title and the number of shares or the principal
amount of any particular Securities, and (h) a statement specifying whether
such loan is for investment purposes or for temporary or emergency purposes
and that such loan is in conformance with the Investment Company Act of
1940 and the Fund's prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of
the total amount of the loan payable, provided that the same conforms to
the total amount payable as set forth in the Certificate. The Custodian
may, at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein
given the lending bank by virtue of any promissory note or loan agreement.
The Custodian shall deliver such Securities as additional collateral as may
be specified in a Certificate to collateralize further any transaction
described in this paragraph. The Fund shall cause all Securities released
from collateral status to be returned directly to the Custodian, and the
Custodian shall receive from time to time such return of collateral as may
be tendered to it. In the event that the Fund fails to specify in a
Certificate the Series, the name of the issuer, the title and number of
shares or the principal amount of any particular Securities to be delivered
as collateral by the Custodian, the Custodian shall not be under any
obligation to deliver any Securities.
ARTICLE XV
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Fund in
order for the Fund to transmit Instructions to the Custodian (the
"Software"), the Custodian grants to such Fund a personal, nontransferable
and nonexclusive license to use the Software solely for the purpose of
transmitting Instructions to, and receiving communications from, the
Custodian in connection with its account(s). The Fund shall use the
Software solely for its own internal and proper business purposes, and not
in the operation of a service bureau, and agrees not to sell, reproduce,
lease or otherwise provide, directly or indirectly, the Software or any
portion thereof to any third party without the prior written consent of the
Custodian. The Fund acknowledges that the Custodian and its suppliers have
title and exclusive proprietary rights to the Software, including any trade
secrets or other ideas, concepts, know how, methodologies, or information
incorporated therein and the exclusive rights to any copyrights, trademarks
and patents (including registrations and applications for registration of
either) or statutory or legal protections available with respect thereof.
The Fund further acknowledges that all or a part of the Software may be
copyrighted or trademarked (or a registration or claim made therefor) by
the Custodian or its suppliers. The Fund shall not take any action with
respect to the Software inconsistent with the foregoing acknowledgments,
nor shall the Fund attempt to decompile, reverse engineer or modify the
Software. The Fund may not copy, sell, lease or provide, directly or
indirectly, any of the Software or any portion thereof to any other person
or entity without the Custodian's prior written consent. The Fund may not
remove any statutory copyright notice, or other notice including the
software or on any media containing the Software. The Fund shall reproduce
any such notice on any reproduction of the Software and shall add statutory
copyright notice or other notice to the Software or media upon the Bank's
request. Custodian agrees to provide reasonable training, instruction
manuals and access to Custodian's "help desk" in connection with the Fund's
user support necessary to use of the Software. At the Fund's request,
Custodian agrees to permit reasonable testing of the Software by the Fund.
2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications
services, necessary for it to utilize the Software and transmit
Instructions to the Custodian. The Custodian shall not be responsible for
the reliability, compatibility with the Software or availability of any
such equipment or services or the performance or nonperformance by any
nonparty to this Custody Agreement.
3. The Fund acknowledges that the Software, all data bases made
available to the Fund by utilizing the Software (other than data bases
relating solely to the assets of the Fund and transactions with respect
thereto), and any proprietary data, processes, information and
documentation (other than which are or become part of the public domain or
are legally required to be made available to the public) (collectively, the
"Information"), are the exclusive and confidential property of the
Custodian. The Fund shall keep the Information confidential by using the
same care and discretion that the Fund uses with respect to its own
confidential property and trade secrets and shall neither make nor permit
any disclosure without the prior written consent of the Custodian. Upon
termination of this Agreement or the Software license granted hereunder for
any reason, the Fund shall return to the Custodian all copies of the
Information which are in its possession or under its control or which the
Fund distributed to third parties. The provisions of this Article shall not
affect the copyright status of any of the Information which may be
copyrighted and shall apply to all Information whether or not copyrighted.
4. The Custodian reserves the right to modify, at its own expense, the
Software from time to time without prior notice and the Fund shall install
new releases of the Software as the Custodian may direct. The Fund agrees
not to modify or attempt to modify the Software without the Custodian's
prior written consent. The Fund acknowledges that any modifications to the
Software, whether by the Fund or the Custodian and whether with or without
the Custodian's consent, shall become the property of the Custodian.
5. The Custodian and its manufacturers and suppliers make no
warranties or representations of any kind with regard to the Software or
the method(s) by which the Fund may transmit Instructions to the Custodian,
express or implied, including but not limited to any implied warranties of
merchantability or fitness for a particular purpose.
6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED
STATES LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES
RESELL, DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE
(IN ANY FORM) IN OR TO ANY OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE
SOFTWARE TO THE FUND OUTSIDE THE UNITED STATES, THE SOFTWARE WAS EXPORTED
FROM THE UNITED STATES IN ACCORDANCE WITH EXPORT ADMINISTRATIVE
REGULATIONS. DIVERSION CONTRARY TO U.S. LAWS PROHIBITED. The Fund hereby
authorizes Custodian to report its name and address to government agencies
to which Custodian is required to provide such information by law.
7. Where the method for transmitting Instructions by the Fund involves
an automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian
shall not be liable for any failure to act pursuant to such Instructions,
the Fund may not claim that such Instructions were received by the
Custodian, and the Fund shall deliver a Certificate by some other means.
8. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to
ensure that only persons duly authorized by the Fund transmit such
Instructions to the Custodian. The Fund will cause all persons transmitting
Instructions to the Custodian to treat applicable user and authorization
codes, passwords and authentication keys with extreme care, and irrevocably
authorizes the Custodian to act in accordance with and rely upon
Instructions received by it pursuant hereto. (b) The Fund hereby
represents, acknowledges and agrees that it is fully informed of the
protections and risks associated with the various methods of transmitting
Instructions to the Custodian and that there may be more secure methods of
transmitting instructions to the Custodian than the method(s) selected by
the Fund. The Fund hereby agrees that the security procedures (if any) to
be followed in connection with the Fund's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of
its particular needs and circumstances.
9. The Fund hereby represents, warrants and covenants to the Custodian
that this Agreement has been duly approved by a resolution of its Board of
Trustees, and that its transmission of Instructions pursuant hereto shall
at all times comply with the Investment Company Act.
10. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours
after the earliest of (i) discovery thereof, (ii) the Business Day on which
discovery should have occurred through the exercise of reasonable care and
(iii) in the case of any error, the date of actual receipt of the earliest
notice which reflects such error, it being agreed that discovery and
receipt of notice may only occur on a business day. The Custodian shall
promptly advise the Fund whenever the Custodian learns of any errors,
omissions or interruption in, or delay or unavailability of, the Fund's
ability to send Instructions.
11. Custodian will indemnify and hold harmless the Fund with respect
to any liability, damages, loss or claim incurred by or brought against
Fund by reason any claim or infringement against any patent, copyright,
license or other property right arising out or by reason of the Fund's use
of the Software in the form provided under this Section. Custodian at its
own expense will defend such action or claim brought against Fund to the
extent that it is based on a claim that the Software in the form provided
by Custodian infringes any patents, copyrights, license or other property
right, provided that Custodian is provided with reasonable written notice
of such claim, provided that the Fund has not settled, compromised or
confessed any such claim without the Custodian's written consent, in which
event Custodian shall have no liability or obligation hereunder, and
provided Fund cooperates with and assists Custodian in the defense of such
claim. Custodian shall have the right to control the defense of all such
claims, lawsuits and other proceedings. If, as a result of any claim of
infringement against any patent, copyright, license or other property
right, Custodian is enjoined from using the Software, or if Custodian
believes that the System is likely to become the subject of a claim of
infringement, Custodian at its option may in its sole discretion either (a)
at its expenses procure the right for the Fund to continue to use the
Software, or (b), replace or modify the Software so as to make it
non-infringing, or (c) may discontinue the license granted herein upon
written notice to Customer.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Securities for which the primary market is
outside the United States ("Foreign Securities") and other assets, the
foreign banking institutions and foreign securities depositories and
clearing agencies designated on Schedule I hereto ("Foreign
Sub-Custodians"). The Fund may designate any additional foreign
sub-custodian with which the Custodian has an agreement for such entity to
act as the Custodian's agent, as its sub-custodian and any such additional
foreign sub-custodian shall be deemed added to Schedule I. Upon receipt of
a Certificate from the Fund, the Custodian shall cease the employment of
any one or more Foreign Sub-Custodians for maintaining custody of the
Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from
Schedule I.
2. Each delivery of a Certificate to the Custodian in connection with
a transaction involving the use of a Foreign Sub-Custodian shall constitute
a representation and warranty by the Fund that its Board of Trustees, or
its third party foreign custody manager as defined in Rule 17f-5 under the
Investment Company Act of 1940, as amended, if any, has determined that use
of such Foreign Sub-Custodian satisfies the requirements of such Investment
Company Act of 1940 and such Rule 17f-5 thereunder.
3. The Custodian shall identify on its books as belonging to each
Series of the Fund the Foreign Securities of such Series held by each
Foreign Sub-Custodian. At the election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian with respect to any claims by
the Fund or any Series against a Foreign Sub-Custodian as a consequence of
any loss, damage, cost, expense, liability or claim sustained or incurred
by the Fund or any Series if and to the extent that the Fund or such Series
has not been made whole for any such loss, damage, cost, expense, liability
or claim.
4. Upon request of the Fund, the Custodian will, consistent with the
terms of the applicable Foreign Sub-Custodian agreement, use reasonable
efforts to arrange for the independent accountants of the Fund to be
afforded access to the books and records of any Foreign Sub-Custodian
insofar as such books and records relate to the performance of such Foreign
Sub-Custodian under its agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as
mutually agreed upon, statements in respect of the securities and other
assets of each Series held by Foreign Sub-Custodians, including but not
limited to an identification of entities having possession of each Series'
Foreign Securities and other assets, and advices or notifications of any
transfers of Foreign Securities to or from each custodial account
maintained by a Foreign Sub-Custodian for the Custodian on behalf of the
Series.
6. The Custodian shall transmit promptly to the Fund all notices,
reports or other written information received pertaining to the Fund's
Foreign Securities, including without limitation, notices of corporate
action, proxies and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any
Series and delivery of securities maintained for the account of such Series
may be effected in accordance with the customary or established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivery of securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with
the expectation of receiving later payment for such securities from such
purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or relating
to any actions or omissions of any Foreign Sub-Custodian the sole
responsibility and liability of the Custodian shall be to take appropriate
action at the Fund's expense to recover such loss or damage from the
Foreign Sub-Custodian. It is expressly understood and agreed that the
Custodian's sole responsibility and liability shall be limited to amounts
so recovered from the Foreign Sub-Custodian.
ARTICLE XVII
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund
shall promptly deliver to the Custodian a Certificate or Oral Instructions
specifying with respect to such FX Transaction: (a) the Series to which
such FX Transaction is specifically allocated; (b) the type and amount of
Currency to be purchased by the Fund; (c) the type and amount of Currency
to be sold by the Fund; (d) the date on which the Currency to be purchased
is to be delivered; (e) the date on which the Currency to be sold is to be
delivered; and (f) the name of the person from whom or through whom such
currencies are to be purchased and sold. Unless otherwise instructed by a
Certificate or Oral Instructions, the Custodian shall deliver, or shall
instruct a Foreign Sub-Custodian to deliver, the Currency to be sold on the
date on which such delivery is to be made, as set forth in the Certificate,
and shall receive, or instruct a Foreign Sub-Custodian to receive, the
Currency to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as
the Currency to be purchased, as specified in the Certificate or Oral
Instructions, the Custodian or a Foreign Sub-Custodian may arrange for such
deliveries and receipts to be made in accordance with the customs
prevailing from time to time among brokers or dealers in Currencies, and
such receipt and delivery may not be completed simultaneously. The Fund
assumes all responsibility and liability for all credit risks involved in
connection with such receipts and deliveries, which responsibility and
liability shall continue until the Currency to be received by the Fund has
been received in full.
3. Any FX Transaction effected by the Custodian in connection with
this Agreement may be entered with the Custodian, any office, branch or
subsidiary of The Bank of New York Company, Inc., or any Foreign
Sub-Custodian acting as principal or otherwise through customary banking
channels. The Fund may issue a standing Certificate with respect to FX
Transaction but the Custodian may establish rules or limitations concerning
any foreign exchange facility made available to the Fund. The Fund shall
bear all risks of investing in Securities or holding Currency. Without
limiting the foregoing, the Fund shall bear the risks that rules or
procedures imposed by a Foreign Sub-Custodian or foreign depositories,
exchange controls, asset freezes or other laws, rules, regulations or
orders shall prohibit or impose burdens or costs on the transfer to, by or
for the account of the Fund of Securities or any cash held outside the
Fund's jurisdiction or denominated in Currency other than its home
jurisdiction or the conversion of cash from one Currency into another
currency. The Custodian shall not be obligated to substitute another
Currency for a Currency (including a Currency that is a component of a
Composite Currency Unit) whose transferability, convertibility or
availability has been affected by such law, regulation, rule or procedure.
Neither the Custodian nor any Foreign Sub-Custodian shall be liable to the
Fund for any loss resulting from any of the foregoing events.
ARTICLE XVIII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI,
neither the Custodian nor its nominee shall be liable for any loss or
damage, including counsel fees, resulting from its action or omission to
act or otherwise, either hereunder or under any Margin Account Agreement,
except for any such loss or damage arising out of its own negligence or
willful misconduct. In no event shall the Custodian be liable to the Fund
or any third party for special, indirect or consequential damages or lost
profits or loss of business, arising under or in connection with this
Agreement, even if previously informed of the possibility of such damages
and regardless of the form of action. The Custodian may, with respect to
questions of law arising hereunder or under any Margin Account Agreement,
apply for and obtain the advice and opinion of counsel to the Fund, or of
its own counsel, at the expense of the Fund, and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity
with such advice or opinion. The Custodian shall be liable to the Fund for
any loss or damage resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:
(a) the validity of the issue of any Securities purchased, sold, or written
by or for the Fund, the legality of the purchase, sale or writing thereof,
or the propriety of the amount paid or received therefor; (b) the legality
of the sale or redemption of any Shares, or the propriety of the amount to
be received or paid therefor; (c) the legality of the declaration or
payment of any dividend by the Fund; (d) the legality of any borrowing by
the Fund using Securities as collateral; (e) the legality of any loan of
portfolio Securities, nor shall the Custodian be under any duty or
obligation to see to it that any cash collateral delivered to it by a
broker, dealer, or financial institution or held by it at any time as a
result of such loan of portfolio Securities of the Fund is adequate
collateral for the Fund against any loss it might sustain as a result of
such loan. The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall be
the sole responsibility of the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer or financial
institution to which portfolio Securities of the Fund are lent pursuant to
Article X of this Agreement makes payment to it of any dividends or
interest which are payable to or for the account of the Fund during the
period of such loan or at the termination of such loan, provided, however,
that the Custodian shall promptly notify the Fund in the event that such
dividends or interest are not paid and received when due; or (f) the
sufficiency or value of any amounts of money and/or Securities held in any
Margin Account, Senior Security Account or Collateral Account in connection
with transactions by the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer, futures commission
merchant or Clearing Member makes payment to the Fund of any variation
margin payment or similar payment which the Fund may be entitled to receive
from such broker, dealer, futures commission merchant or Clearing Member,
to see that any payment received by the Custodian from any broker, dealer,
futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the
Fund until the Custodian actually receives and collects such money directly
or by the final crediting of the account representing the Fund's interest
at the Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable
for ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to Securities
held in the Depository, unless the Custodian shall have actually received
timely notice from the Depository. In no event shall the Custodian have any
responsibility or liability for the failure of the Depository to collect,
or for the late collection or late crediting by the Depository of any
amount payable upon Securities deposited in the Depository which may mature
or be redeemed, retired, called or otherwise become payable. However, upon
receipt of a Certificate from the Fund of an overdue amount on Securities
held in the Depository the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall not be
under any obligation to appear in, prosecute or defend any action, suit or
proceeding in respect to any Securities held by the Depository which in its
opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be furnished as often
as may be required.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution
by the Transfer Agent of the Fund of any amount paid by the Custodian to
the Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount if the Securities upon which such
amount is payable are in default, or if payment is refused after due demand
or presentation, unless and until (i) it shall be directed to take such
action by a Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking
institutions as Depository or Depositories, as Sub-Custodian or
Sub-Custodians, or as Co-Custodian or Co-Custodians including, but not
limited to, banking institutions located in foreign countries, of
Securities and money at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in an agreement
executed by the Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or
by any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (b) to
ascertain whether any transactions by the Fund, whether or not involving
the Custodian, are such transactions as may properly be engaged in by the
Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all out-of-pocket expenses and such compensation as
may be agreed upon from time to time between the Custodian and the Fund.
The Custodian may charge such compensation and any expenses with respect to
a Series incurred by the Custodian in the performance of its duties
pursuant to such agreement against any money specifically allocated to such
Series. Unless and until the Fund instructs the Custodian by a Certificate
to apportion any loss, damage, liability or expense among the Series in a
specified manner, the Custodian shall also be entitled to charge against
any money held by it for the account of a Series such Series' pro rata
share (based on such Series, net asset value at the time of the charge to
the aggregate net asset value of all Series at that time) of the amount of
any loss, damage, liability or expense, including counsel fees, for which
it shall be entitled to reimbursement under the provisions of this
Agreement. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses
of sub-custodians and foreign branches of the Custodian incurred in
settling outside of New York City transactions involving the purchase and
sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and
reasonably believed by the Custodian to be a Certificate. The Custodian
shall be entitled to rely upon any Oral Instructions actually received by
the Custodian hereinabove provided for. The Fund agrees to forward to the
Custodian a Certificate or facsimile thereof confirming such Oral
Instructions in such manner so that such Certificate or facsimile thereof
is received by the Custodian, whether by hand delivery, telecopier or other
similar device, or otherwise, by the close of business of the same day that
such Oral Instructions are given to the Custodian. The Fund agrees that the
fact that such confirming instructions are not received, or that contrary
instructions are received, by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions hereby
authorized by the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions given to the
Custodian hereunder concerning such transactions provided such instructions
reasonably appear to have been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by
the Custodian to be given in accordance with the terms and conditions of
any Margin Account Agreement. Without limiting the generality of the
foregoing, the Custodian shall be under no duty to inquire into, and shall
not be liable for, the accuracy of any statements or representations
contained in any such instrument or other notice including, without
limitation, any specification of any amount to be paid to a broker, dealer,
futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books
and records shall be prepared and maintained as required by the Investment
Company Act of 1940, as amended, and other applicable securities laws and
rules and regulations. The Fund, or the Fund's authorized representatives,
shall have access to such books and records during the Custodian's normal
business hours. Upon the reasonable request of the Fund, copies of any such
books and records shall be provided by the Custodian to the Fund or the
Fund's authorized representative, and the Fund shall reimburse the
Custodian its expenses of providing such copies. Upon reasonable request of
the Fund, the Custodian shall provide in hard copy or on micro-film,
whichever the Custodian elects, any records included in any such delivery
which are maintained by the Custodian on a computer disc, or are similarly
maintained, and the Fund shall reimburse the Custodian for its expenses of
providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by
the Custodian on the system of internal accounting control of the
Book-Entry System, the Depository or O.C.C., and with such reports on its
own systems of internal accounting control as the Fund may reasonably
request from time to time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands
whatsoever, including attorney's fees, howsoever arising or incurred
because of or in connection with this Agreement, including the Custodian's
payment or non-payment of checks pursuant to paragraph 6 of Article XIII as
part of any check redemption privilege program of the Fund, except for any
such liability, claim, loss and demand arising out of the Custodian's own
negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI and XVII the Custodian
may deliver and receive Securities, and receipts with respect to such
Securities, and arrange for payments to be made and received by the
Custodian in accordance with the customs prevailing from time to time among
brokers or dealers in such Securities. When the Custodian is instructed to
deliver Securities against payment, delivery of such Securities and receipt
of payment therefor may not be completed simultaneously. The Fund assumes
all responsibility and liability for all credit risks involved in
connection with the Custodian's delivery of Securities pursuant to
instructions of the Fund, which responsibility and liability shall continue
until final payment in full has been received by the Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Custodian.
ARTICLE XIX
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date
of giving of such notice. In the event such notice is given by the Fund, it
shall be accompanied by a copy of a resolution of the Board of Trustees of
the Fund, certified by the Secretary or any Assistant Secretary, electing
to terminate this Agreement and designating a successor custodian or
custodians, each of which shall be a bank or trust company having not less
than $2,000,000 aggregate capital, surplus and undivided profits. In the
event such notice is given by the Custodian, the Fund shall, on or before
the termination date, deliver to the Custodian a copy of a resolution of
the Board of Trustees of the Fund, certified by the Secretary or any
Assistant Secretary, designating a successor custodian or custodians. In
the absence of such designation by the Fund, the Custodian may designate a
successor custodian which shall be a bank or trust company having not less
than $2,000,000 aggregate capital, surplus and undivided profits. Upon the
date set forth in such notice this Agreement shall terminate, and the
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and money then owned by the Fund and held by it as Custodian,
after deducting all fees, expenses and other amounts for the payment or
reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon
the date specified in the notice of termination of this Agreement and upon
the delivery by the Custodian of all Securities (other than Securities held
in the Book-Entry System which cannot be delivered to the Fund) and money
then owned by the Fund be deemed to be its own custodian and the Custodian
shall thereby be relieved of all duties and responsibilities pursuant to
this Agreement, other than the duty with respect to Securities held in the
Book Entry System which cannot be delivered to the Fund to hold such
Securities hereunder in accordance with this Agreement.
ARTICLE XX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Authorized Persons of the Fund under its seal, setting forth the
names and the signatures of the present Authorized Persons. The Fund agrees
to furnish to the Custodian a new Certificate in similar form in the event
that any such present Authorized Person ceases to be an Authorized Person
or in the event that other or additional Authorized Persons are elected or
appointed. Until such new Certificate shall be received, the Custodian
shall be fully protected in acting under the provisions of this Agreement
upon Oral Instructions or signatures of the Authorized Persons as set forth
in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently given
if addressed to the Custodian and mailed or delivered to it at its offices
at 90 Washington Street, New York, New York 10286, or at such other place
as the Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its office at the
address for the Fund first above written, or at such other place as the
Fund may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as
this Agreement and approved by a resolution of the Board of Trustees of the
Fund.
5. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund without
the written consent of the Custodian, or by the Custodian without the
written consent of the Fund, authorized or approved by a resolution of the
Fund's Board of Trustees.
6. This Agreement shall be construed in accordance with the laws of
the State of New York without giving effect to conflict of laws principles
thereof. Each party hereby consents to the jurisdiction of a state or
federal court situated in New York City, New York in connection with any
dispute arising hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument. IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be executed by their respective
officers, thereunto duly authorized and their respective seals to be
hereunto affixed, as of the day and year first above written. * [SEAL]
By:_______________________ Attest: _______________________ THE BANK OF NEW
YORK [SEAL] By:_______________________ Name: Title: Attest:
_______________________
APPENDIX A I, , President and I, , of *, a Delaware business trust
(the "Fund"), do hereby certify that: The following persons have been duly
authorized in conformity with the Fund's Declaration of Trust and By-Laws
to execute any Certificate, instruction, notice or other instrument on
behalf of the Fund, and the signatures set forth opposite their respective
names are their true and correct signatures: Name Position Signature
____________________ ___________________ ____________________
APPENDIX B
SERIES
APPENDIX C I, _________________, a Vice President with THE BANK OF NEW
YORK do hereby designate the following publications: The Bond Buyer
Depository Trust Company Notices Financial Daily Card Service JJ Kenney
Municipal Bond Service London Financial Times New York Times Standard &
Poor's Called Bond Record Wall Street Journal
EXHIBIT A CERTIFICATION The undersigned, , hereby certifies that he or
she is the duly elected and acting of *, a Delaware business trust (the
"Fund"), and further certifies that the following resolution was adopted by
the Board of Trustees of the Fund at a meeting duly held on , 1998, at
which a quorum was at all times present and that such resolution has not
been modified or rescinded and is in full force and effect as of the date
hereof. RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of ,
1998, (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to deposit in the Book-Entry System, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities collateral. IN
WITNESS WHEREOF, I have hereunto set my hand and the seal of *, as of the
day of , 1998.
[SEAL] EXHIBIT B CERTIFICATION The undersigned, , hereby certifies
that he or she is the duly elected and acting of *, a Delaware business
trust (the "Fund"), and further certifies that the following resolution was
adopted by the Board of Trustees of the Fund at a meeting duly held on ,
1998, at which a quorum was at all times present and that such resolution
has not been modified or rescinded and is in full force and effect as of
the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund dated as
of , 1998, (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary to deposit in the
Depository, as defined in the Custody Agreement, all securities eligible
for deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Depository to the extent
possible in connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of securities
collateral. IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
*, as of the day of , 1998.
[SEAL] EXHIBIT B-1 CERTIFICATION The undersigned, , hereby certifies
that he or she is the duly elected and acting of *, a Delaware business
trust (the "Fund"), and further certifies that the following resolution was
adopted by the Board of Trustees of the Fund at a meeting duly held on ,
1998, at which a quorum was at all times present and that such resolution
has not been modified or rescinded and is in full force and effect as of
the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund dated as
of , 1998, (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary to deposit in the
Participants Trust Company as Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to utilize the
Participants Trust Company to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral. IN WITNESS WHEREOF, I have
hereunto set my hand and the seal of *, as of the day of , 1998.
[SEAL] EXHIBIT C CERTIFICATION The undersigned, , hereby certifies
that he or she is the duly elected and acting of *, a Delaware business
trust (the "Fund"), and further certifies that the following resolution was
adopted by the Board of Trustees of the Fund at a meeting duly held on ,
1998, at which a quorum was at all times present and that such resolution
has not been modified or rescinded and is in full force and effect as of
the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund dated as
of , 1998, (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary, to accept, utilize
and act with respect to Clearing Member confirmations for Options and
transaction in Options, regardless of the Series to which the same are
specifically allocated, as such terms are defined in the Custody Agreement,
as provided in the Custody Agreement. IN WITNESS WHEREOF, I have hereunto
set my hand and the seal of *, as of the day of , 1998.
[SEAL] EXHIBIT D The undersigned, , hereby certifies that he or she is
the duly elected and acting of *, a Delaware business trust (the "Fund"),
further certifies that the following resolutions were adopted by the Board
of Trustees of the Fund at a meeting duly held on , 1998, at which a quorum
was at all times present and that such resolutions have not been modified
or rescinded and are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody
Agreement between The Bank of New York and the Fund dated as of , 1998 (the
"Custody Agreement") is authorized and instructed on a continuous and
ongoing basis to act in accordance with, and to rely on Instructions (as
defined in the Custody Agreement). RESOLVED, that the Fund shall establish
access codes and grant use of such access codes only to Authorized Persons
of the Fund as defined in the Custody Agreement, shall establish internal
safekeeping procedures to safeguard and protect the confidentiality and
availability of user and access codes, passwords and authentication keys,
and shall use Instructions only in a manner that does not contravene the
Investment Company Act of 1940, as amended, or the rules and regulations
thereunder. IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
*, as of the day of , 1998.
[SEAL]
