<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No.3 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
Amendment No.5
SAGE LIFE INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 535-0534
Name and Address of Agent for Service: With copies to:
Maureen Murphy, Esq. Kimberly J. Smith, Esq.
Sage Advisors, Inc. Sutherland Asbill & Brennan LLP
300 Atlantic St. 3rd Floor 1275 Pennsylvania Avenue, N.W.
Stamford, Connecticut 06901 Washington, D.C. 20004-2404
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ X ] on (May 1, 2000) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (_____) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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PROSPECTUS
for
SAGE LIFE INVESTMENT TRUST
EAFE/(R) /EQUITY INDEX FUND
S&P 500/(R)/ EQUITY INDEX FUND
MONEY MARKET FUND
MAY 1, 2000
EAFE/(R)/ EQUITY INDEX FUND
Seeks to replicate as closely as possible the performance of the Morgan Stanley
Capital International Europe, Australasia, Far East Index before the deduction
of fund expenses. The EAFE/(R) /Index is a capitalization weighted index of
stocks of companies outside the United States.
S&P 500/(R)/ EQUITY INDEX FUND
Seeks to match as closely as possible the performance of the Standard & Poor's
500 Composite Stock Price Index before the deduction of fund expenses. The S&P
500 Index emphasizes stocks of large U.S. companies.
MONEY MARKET FUND
Seeks to provide high current income consistent with the preservation of capital
and liquidity through investment in short-term money market securities.
An investment in the Funds is not a deposit of or obligation of, or guaranteed
by, any financial institution or any bank, and is not insured or guaranteed by,
the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this Prospectus. Any representation to the contrary is
a criminal offense.
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TABLE OF CONTENTS
________________________________________________________________________________
Risk/Return Summary...................................................... 2
Fees and Expenses of the Funds........................................... 6
Additional Investment and Risk Information............................... 7
Management of the Funds.................................................. 12
Distribution Plan........................................................ 13
Pricing of Fund Shares................................................... 13
Purchase and Redemption of Shares........................................ 13
Dividends, Distributions and Taxes....................................... 14
Special Information About the Funds...................................... 14
Financial Highlights..................................................... 15
Appendix A - Description of Indexes...................................... 16
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RISK/RETURN SUMMARY
Investment Objectives
The EAFE Equity Index Fund (the "EAFE Fund") seeks to match, as closely as
possible, the performance of the Morgan Stanley Capital International (MSCI)
EAFE/(R)/ Index (the "EAFE Index") before the deduction of fund expenses.
The S&P 500 Equity Index Fund (the "S&P 500 Fund") seeks to match, 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 Money Market Fund seeks to provide high current income consistent with the
preservation of capital and liquidity.
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.
Principal Investment Strategies of the Funds
The EAFE Fund seeks to be fully invested in a representative sample of stocks
and other equity securities of companies included in the EAFE Index. The EAFE
Index is a widely accepted benchmark of international stock performance. It is
a model, not an actual portfolio. It tracks stocks in 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. The EAFE Index is "capitalization
weighted," which means that a company whose securities have a high market value
will contribute proportionately more to the EAFE Index's performance results
than a company whose securities have a lower market value.
The Fund generally intends to allocate its investments among stocks in
approximately the same proportions as they are represented in the EAFE Index.
For example, if a specific stock represented 2% of the EAFE Index, the Fund
would generally invest 2% of its assets in that company.
The S&P 500 Fund will invest in stocks of companies included in the S&P 500
Index, selected on the basis of computer-generated statistical data. The Fund
generally intends to allocate its investments among common stock in
approximately the same proportions as they are represented in the S&P 500 Index.
To the extent that all 500 stocks cannot be purchased, the Fund will purchase a
representative sample of the stocks listed in the index.
The Money Market Fund seeks to provide high current income consistent with the
preservation of capital and liquidity. The Fund also intends to maintain a
share price of $1.00. The Fund seeks to achieve its objective by investing in
high-quality short-term money market instruments, such as U.S. Government
obligations, certificates of deposit, bankers' acceptances and commercial paper.
The Fund limits its investments to those short-term securities that it
determines present minimal credit risk and meet certain rating requirements.
The Fund maintains an average dollar-weighted portfolio maturity of 90 days or
less.
Principal Risks of the Funds
There is, of course, no guarantee that any Fund will realize its goal. An
investor in the EAFE Fund or the S&P 500 Fund (the "Index Funds") should be
willing to accept greater short-term fluctuation in the value of his or her
investment than he or she would typically experience investing in certain bond
or money-market funds. A Fund by itself does not constitute a balanced
investment program. Diversifying your investments may improve your long-term
investment return and lower the volatility of your overall investment portfolio.
Below we set forth some of the prominent risks associated with investing in
general, with investing in stocks outside the United States and with index
investing. As a passive investment aiming to match its index as closely as
possible, each Index Fund makes no effort to limit its exposure to investment
risk.
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. Index Funds
An investment in the Index Funds could lose money, or an Index Fund's
performance could trail that of other investments. For example:
Market Risk
Stock prices overall could decline over short or even extended periods. What
pervades all investing is the risk that the securities an investor has selected
will not perform well.
Stock markets tend to move in cycles, with periods of rising stock prices and
periods of falling stock prices.
Returns on large companies' stocks could trail the returns from stocks of medium
or small companies. Each type of stock tends to go through cycles of
outperformance and underperformance in comparison to the overall stock market.
In the past, these periods have lasted for several years.
Cash Flow
An Index Fund's ability to meet its goal depends to some extent on the cash flow
in and out of the Index Fund. This is because when a shareholder buys or sells
Index Fund shares, the Index Fund generally has to buy or sell stocks in its
portfolio. Changes in an Index Fund's cash flow affects how closely an Index
Fund's portfolio mirrors its index.
Because of the inflow and outflow of assets in an Index Fund, it may not be able
to mirror its index closely enough to track its performance.
Modeling Risk
An Index Fund runs the risk that its returns will not track its index because
the stocks its adviser has selected do not accurately reflect the index. If the
stocks an Index Fund does not own outperform those that it does, the Index
Fund's results will trail its index. In addition, unlike an index, an Index Fund
has operating expenses. Therefore, while an Index Fund seeks to track its index
as closely as possible, an Index Fund may not be able to match the performance
of its index because it pays expenses to cover the costs of investing.
. EAFE Fund
Foreign Risk
The risks of investing in foreign securities include fluctuations in foreign
exchange rates, future political and economic developments, and the possible
imposition of exchange controls or other foreign governmental laws and
restrictions. In addition, with respect to certain countries, there is the
possibility of expropriation of assets, confiscatory taxation, political or
social instability or diplomatic developments which could adversely affect
investments in these countries.
There may be less publicly available information about a foreign company than
about a U.S. company, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to or as
uniform as those of U.S. companies. Non-U.S. securities markets, while growing
in volume, have, for the most part, substantially less volume than U.S. markets.
Securities of many foreign companies are less liquid and their prices more
volatile than securities of comparable U.S. companies. Transaction costs of
investing in non-U.S. securities markets are generally higher than in the U.S.
There is generally less government supervision and regulation of exchanges,
brokers and issuers than there is in the U.S. The Funds might have greater
difficulty taking appropriate legal action in non-U.S. courts. Non-U.S. markets
also have different clearance and settlement procedures which in some markets
have at times failed to keep pace with the volume of transactions. This may
create substantial delays and settlement failures that could adversely affect a
Fund's performance.
Adverse political, economic or social developments in the countries in which the
Fund has invested could undermine the value of the Fund's investments or prevent
the Fund from realizing its full value.
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The currency of a country in which the Fund invests may fluctuate in value
relative to the U.S. dollar, which could affect the value of the investment
itself to U.S. investors.
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.
. Money Market Fund
An investment in the Money Market Fund could lose money, or the Fund's
performance could trail that of other investments. For example:
Interest Rate Risks
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, that value is not guaranteed and it is still possible to lose money by
investing in the Fund.
The Fund invests mostly in short-term debt securities, so rises and falls in
interest rate levels will affect the Fund's performance. When interest rates go
up, the value of debt securities tends to fall. If your portfolio invests a
significant portion of its assets in debt securities and interest rates rise,
then the value of your investment may decline. Alternatively, when interest
rates go down, the value of debt securities may rise.
The value of the debt securities in which the Fund invests is affected by the
issuer's ability to pay principal and interest on time. The failure of an
issuer to timely pay an obligation may adversely affect the value of your
investment in the Fund.
An investment in the Money Market Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Who May Want to Invest in the Funds
The Funds sell their shares only to separate accounts of various insurance
companies (the "Insurer(s)") and to various pension and profit-sharing plans
("Retirement Plans"). Shares are available through the purchase of various
Retirement Plans and certain variable annuity and variable life insurance
contracts ("Contract(s)") issued by the Insurers. If you are a Contract owner,
the Insurer will allocate your premium payments to the Funds through separate
accounts in accordance with your Contract.
The Retirement Plans and separate accounts of the Insurers are the shareholders
of record of the Funds' shares. Any reference to the shareholder in this
Prospectus technically refers to the Retirement Plans and the Insurers' separate
accounts and not to you, the Contract owner or Retirement Plan participant.
The EAFE Fund may appeal to you if:
. you are a long-term investor
. you are willing to take the chance of losing a portion of your
principal in exchange for the opportunity to potentially earn higher
long-term returns
. you are seeking a simple way to attempt to match the performance of
the EAFE Index over time
. you wish to include exposure to European, Australian and Far East
markets as a portion of your overall investment strategy
. you are willing to accept the heightened risks of investing in foreign
markets
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You may not want to invest in the EAFE Fund if:
. you are seeking a high level of current income
. you are conservative in your investment approach
. you are unwilling to accept the heightened risks of investing in
foreign markets
. you seek to maintain the value of your original investment more than
the potential growth of capital
The S&P 500 Fund may appeal to you if:
. you are a long-term investor
. you are willing to take the chance of losing a portion of your
principal in exchange for the opportunity to potentially earn higher
long-term returns
. you believe the market will favor large capitalization U.S.
companies over small capitalization U.S. companies over the long-
term
. you are seeking a simple way to attempt to match the performance of
the S&P 500 Index over time
You may not want to invest in the S&P 500 Fund if:
. you are seeking a high level of current income
. you are conservative in your investment approach
. you seek to maintain the value of your original investment more than
the potential growth of capital
The Money Market Fund may appeal to you if:
. you are conservative in your investment approach
. you seek stability of principal more than growth of capital
. you participate in a dollar cost averaging program under a Contract
You may not wish to invest in the Money Market Fund if:
. you are aggressive in your investment approach
. you desire a relatively high rate of return
Bar Chart and Performance Table
The Money Market Fund and the S&P 500 Fund commenced operations on February 19,
1999 and the EAFE Fund commenced operations on March 22, 1999. Because the
Funds have been in existence for such a short period of time, no performance
information is being presented to you at this time in this prospectus.
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FEES AND EXPENSES OF THE FUNDS
This table describes the fees and expenses an investor may pay if the investor
buys and holds shares of the Funds.
<TABLE>
<CAPTION>
S&P Money
EAFE 500 Market
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Annual Fund Operating Expenses:
(expenses that are deducted from Fund assets)
Management Fees*................................................. 0.90% 0.55% 0.65%
12b-1 Fees**..................................................... 0.25% 0.25% 0.25%
Other Expenses***................................................ 0.17% 0.17% 0.17%
---- ---- ----
Total Fund Operating Expenses.................................... 1.32% 0.97% 1.07%
Less Fee Waiver.................................................. 0.17% 0.17% 0.17%
Net Fund Operating Expenses...................................... 1.15% 0.80% 0.90%
</TABLE>
* Sage Advisors, Inc., ("Sage") the Funds' investment manager, has entered
into a written agreement with the Funds pursuant to which Sage has agreed
to waive a portion of its management fees for the Funds until April 30,
2001. Without fee waivers, and taking into account the fact that no 12b-1
Fees were paid by the Funds, total expenses for each of the following Funds
during 1999 would have been: EAFE Fund, 1.07%; S&P 500 Fund, 0.72%; and
Money Market Fund, 0.82%.
** A Rule 12b-1 Plan (the "Plan") has been adopted by each Fund, pursuant to
which up to 0.25% may be deducted from Fund assets. however, no Plan
payments accrued or were made during the fiscal year ended December 31,
1999 and none will be made for the fiscal year ending December 31, 2000.
Expense Example
This example is intended to help you compare the cost of investing in the Funds
with the costs of investing in other mutual funds.
The example assumes that the investor invests $10,000 in a Fund for the time
periods indicated and then redeems all of its shares at the end of those
periods. The example also assumes that the investor's investment has a 5%
return each year and that the Fund's operating expenses remain the same.
Although actual costs may be higher or lower, based on these assumptions the
investor's costs would be as follows:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------- -------- ======= ========
<S> <C> <C> <C> <C>
EAFE Fund $117 $365 $633 $1,398
S&P 500 Fund $ 82 $255 $444 $ 990
Money Market Fund $ 92 $287 $498 $1,108
</TABLE>
A Note on Fees
As an indirect investor in the Funds, you would incur various operating costs,
including management expenses. If you are a Contract owner, you will also incur
fees associated with the Contracts you purchase, which are not reflected in the
table and example above. Detailed information about the cost of investing in a
Fund is presented in the accompanying prospectus for the Contracts through which
the Funds' shares are offered to you.
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ADDITIONAL INVESTMENT AND RISK INFORMATION
Index Funds in General
An index is a group of securities whose overall performance is used as a
standard to measure investment performance. Index funds are passively managed
and the investment adviser tries to match, as closely as possible, the
performance of a target index by holding either all, or a representative sample,
of the securities in the index. The investment advisers do not buy and sell
securities based on research and analysis. Indexing appeals to many investors
for the following reasons:
(1) indexing provides simplicity because it is a straightforward market-
matching strategy;
(2) index funds generally provide diversification by investing in a wide
variety of companies and industries;
(3) an index fund's performance is generally expected to track that of the
target index (less Fund expenses); and
(4) index funds tend to have lower costs because they do not have many of the
expenses of actively managed funds such as research, and index funds
usually have relatively low trading activity and therefore brokerage
commissions tend to be lower.
Each Index Fund seeks to maintain a correlation between its performance and the
performance of the index it tracks of at least 0.95 (before deduction of fund
expenses). If an Index Fund's return matched that of its index exactly, it
would achieve a correlation of 1.00. Each Index Fund's ability to track its
index may be affected by:
. transaction costs
. expenses incurred by the Fund
. changes in the composition of the index
. flows of cash into and out of the Fund
Principal Investment Strategies
EAFE Fund. The EAFE Index is an index representing the stock markets in the
regions of Europe, Australia and the Far East. The EAFE Index weights stocks
according to their market capitalization, which is the number of shares
outstanding multiplied by the stock's current price. In seeking to replicate
the performance of the EAFE Index, before the deduction of fund expenses, the
Fund's investment sub-adviser, State Street Global Advisors ("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, the Fund may not invest in all companies represented in the EAFE Index
at the same time. Under normal circumstances, the Fund expects to invest at
least 80% of its assets in securities of companies in the EAFE Index. The EAFE
Index currently includes the following countries: 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.
State Street manages the Fund using advanced statistical techniques to determine
which stocks are to be purchased or sold to replicate the EAFE Index. State
Street selects stocks for inclusion in the Fund based on:
. country of origin
. market capitalization
. yield
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. volatility
. industry sector
Morgan Stanley Capital International, Inc. ("MSCI") determines the composition
of the EAFE Index and may change the composition from time to time. The Fund
may make adjustments to its investments because of changes in the composition of
the EAFE Index.
MSCI does not sponsor, endorse, sell or promote the Fund. MSCI 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).
S&P 500 Fund. In seeking to replicate the performance of the S&P 500 Index,
before the deduction of fund expenses, State Street, the Fund's investment sub-
adviser, 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. Under normal circumstances, the Fund will invest at least 80% of its
assets in securities of companies included 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. These stocks represent 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"). The S&P 500 Index weights stocks according to their market
capitalization (i.e., the number of shares outstanding multiplied by the stock's
current price).
State Street manages the Fund using advanced statistical techniques to determine
which stocks are to be purchased or sold to replicate the S&P 500 Index. To the
extent that all 500 stocks cannot be purchased, the Fund will purchase a
represenative sample of the stocks listed in the index. State Street selects
stocks for inclusion in the Fund based on:
. market capitalization
. yield
. volatility
. industry sector
Standard & Poor's Corporation ("S&P") determines the composition of the S&P 500
Index and may change the composition from time to time. The Fund may make
adjustments because of changes in the composition of the S&P 500 Index.
S&P does not sponsor, endorse, sell or promote the S&P 500 Fund. S&P makes no
representation regarding the advisability of investing in funds generally or in
this Fund (see "Appendix A" for an additional discussion).
Money Market Fund. The Money Market Fund's investment sub-adviser, Conning
Asset Management Company ("Conning"), must follow strict rules as to the
investment quality, maturity, diversification and other features of the
securities it purchases for the Money Market Fund. The average remaining
maturity of the securities cannot be greater than 90 days. The remaining
maturity of a security is the period of time until the principal amount must be
repaid.
The Money Market Fund may invest in:
. U.S. Government securities, including Treasuries and bonds and notes
issued by government agencies such as the Federal Home Loan Bank,
Government National Mortgage Association (GNMA or "Ginnie Mae"),
Federal National Mortgage Association (FNMA or "Fannie Mae") and
Student Loan Marketing Association (SLMA or "Sallie Mae")
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. Certificates of deposit, bankers' acceptances and other obligations
issued or guaranteed by bank holding companies and their subsidiaries
. commercial paper and other short-term obligations issued by U.S. and
foreign corporations
. adjustable rate securities
. Eurodollar securities
. shares of other investment companies
Secondary Risks of the Funds
Euro Risk
On January 1, 1999, eleven countries of the European Economic and Monetary Union
(EMU) began implementing a plan to replace their national currencies with a new
currency, the Euro. Full conversion to the Euro is slated to occur by July 1,
2002.
Although it is impossible to predict the impact of the conversion to the Euro on
the Funds, the risks may include:
. changes in the relative strength and value of the U.S. dollar or other
major currencies and
. adverse effects on the business or financial condition of European issuers
that a Fund holds in its portfolio
. that the systems used to purchase and sell Euro-denominated securities may
not work
. uncertainty about how existing financial contracts will be treated after
Euro implementation
. unpredictable effects on trade and commerce generally
These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by a Fund.
Derivatives
The Index Funds may invest, to a limited extent, in stock index futures, options
or foreign currency forwards, which are types of derivatives. The Index Funds
will not use these derivatives for speculative purposes or as leveraged
investments that magnify the gains or losses of an investment. The Index Funds
may, but are not required to, invest in derivatives to keep cash on hand to meet
shareholder redemptions or other needs while simulating full investments in
stocks and to reduce an Index Fund's transaction cost or add value when these
instruments are favorably priced. Risks associated with derivatives include:
. the risk that the derivative will not fully offset the underlying positions
. derivatives used for risk management may not have the intended effects and
may result in losses or missed investment opportunities
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Additional Investments and Techniques
The Funds may also invest in the following investments and use the following
investment techniques.
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. 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.
With respect to the Money Market Fund, short-term securities (other than U.S.
Government securities) must be rated (generally, by at least two Nationally
Recognized Statistical Rating Organizations ("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.
Derivatives. Each Index Fund may invest in various instruments that are commonly
known as derivatives. There are, in fact, many different types of derivatives
and many different ways to use them. Those different uses involve a range of
risks. Mutual funds commonly use futures, options, and foreign currency
forwards, for traditional hedging purposes in an effort to protect themselves
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 may, but are not required to, 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.
Each Index Fund will only use derivatives for cash management purposes and for
hedging its portfolio. The Index Funds will not use derivatives 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 to more quickly invest,
indirectly, in its target universe of securities. Strategies an Index Fund
could
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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. The Index Funds would enter into these
transactions in an attempt to "lock in" 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.
Foreign Securities. The EAFE Fund will 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. See the "Principal Risks of the Funds" section of this Prospectus
for a discussion of related risks.
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. The Fund will only
purchase unrated variable and floating rate securities determined 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.
Defensive Instruments. When adverse market or economic conditions occur, the
Funds may invest temporarily all or a portion of their assets in defensive
investments. These include high grade debt securities, obligations of the U.S.
Government, its agencies or instrumentalities and short-term (maturing in less
than one year) money market instruments, including commercial paper rated A-1 or
better by Standard & Poor's Rating Services ("S&P"), or P-1 or better by
Moody's Investors Service, Inc ("Moodys"). When following a defensive strategy,
an Index Fund will be less likely to achieve its investment objective.
Portfolio Turnover
The annual portfolio turnover rate measures the frequency that an Index Fund
sells and replaces the value of its securities within one year. An annual
portfolio turnover rate of 100% means that an Index Fund sold and purchased
investments equal to the average value of the Index Fund for a given year. High
turnover can increase an Index Fund's transaction costs, thereby lowering its
returns. It may also increase your tax liability. An Index Fund does not have a
target portfolio turnover rate, although changes in its portfolio will tend to
track changes in an Index Fund's index.
-11-
<PAGE>
MANAGEMENT OF THE FUNDS
Board of Trustees
The Funds' shareholders elect a Board of Trustees. The Trustees supervise all
of the Funds' activities.
Investment Manager
Sage, located at 300 Atlantic Street, Stamford, Connecticut 06901, is the
investment manager for each Fund. Sage supervises the performance of
administrative and professional services provided to the Funds by others,
including the Advisers and PFPC Inc. ("PFPC"), the sub-administrator of the
Funds (the "Sub-Administrator"). Sage also pays the fees of the Advisers. As
compensation for its services and the related expenses borne by Sage, each Fund
pays Sage an annual fee based on average daily net assets of each Fund. The
following fees are amounts paid to Sage, that include certain expense
limitations and contractual fee waivers, that will remain in effect until April
30, 2001 for Sage Life Investment Trust (the "Trust"):
. 0.73% for the EAFE Fund (0.90% without fee waivers and expense limitations)
. 0.38% for the S&P 500 Fund (0.55% without fee waivers and expense limitations)
. 0.48% for the Money Market Fund (0.65% without fee waivers and expense
limitations)
Sage may compensate an Insurer for certain administrative services performed for
the Funds in connection with the Contracts, based on the assets of the Fund
attributable to Contracts issued through the 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. As compensation for the
Advisers' services and the related expenses they incur with respect to each
Fund, Sage 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:
. 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
. 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
. 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
State Street, the adviser for the Index Funds, located at Two International
Place, Boston, Massachusetts 02110 is a division of State Street Bank and Trust
Company and has been providing institutional investment management services
since 1987. As of December 31, 1999, State Street served as investment adviser
to various institutional clients with aggregate assets under management of over
$672 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 December 31, 1999,
Conning manages assets of over $73.1 billion. Conning is an indirect majority-
owned subsidiary of Metropolitan Life Insurance Company.
-12-
<PAGE>
DISTRIBUTION PLAN
The shareholders of each Fund have approved a Distribution (12b-1) 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.
The Funds did not make any payments under the Distribution Plans for the fiscal
year ended December 31, 1999. Shareholders will be given prior notice if such
payments are to commence at a future date.
Under each Fund's Distribution Plan a Fund may pay the Funds' distributor, Sage
Distributors, Inc., for various costs actually incurred or paid in connection
with the distribution of a 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, Statements of Additional
Information 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.
PRICING OF FUND SHARES
Each Fund calculates the price of its shares (also known as the "Net Asset
Value" or "NAV") at the close of regular trading on the NYSE (normally 4:00
p.m., Eastern Time) every day the NYSE is open for business The NAV for the
Money Market Fund will not be calculated on national bank holidays.
For the Index Funds, NAV reflects the deduction of each of the Index Fund's
liabilities from the total value of its assets - the market value of the
securities it holds, plus its cash reserves - and dividing the result by the
number of shares outstanding. Note that prices for securities that trade on
foreign exchanges can change significantly on days when the NYSE is closed and a
shareholder cannot buy or sell EAFE Fund shares. Such price changes in the
securities the EAFE Index owns may ultimately affect the price of EAFE Fund
shares when the NYSE reopens.
The Money Market Fund uses the amortized cost method of valuing its portfolio
securities to maintain a constant NAV 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, and amortizes that price over
the life of the investment thus minimizing fluctuations in value due to interest
rate changes or market conditions.
The Index Funds value their securities at the stated market value if price
quotations are available. When price quotations for a particular security are
not readily available, the Funds determine their value by the method that most
accurately reflects their current worth based on procedures adopted by the Board
of Trustees.
PURCHASE AND REDEMPTION OF SHARES
The Funds continuously offer their shares to Insurers and Retirement Plans at
the NAV per share next determined after the Trust or its designated agent
receives and accepts a proper purchase request. 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 Insurers and Retirement Plans are designated
agents of the Funds. The Trust, the Funds and the Funds' distributor reserve
the right to reject any purchase order from any party for shares of any Fund.
The Funds will ordinarily make payment for redeemed shares within seven (7)
business days after the Trust or its designated agent receives and accepts a
proper redemption order. A proper redemption order will contain all the
necessary information and signatures required to process the redemption order.
The redemption price will be the NAV per share next determined after the Trust
or its designated agent receives and accepts the shareholder's request in proper
form.
-13-
<PAGE>
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 Securities and Exchange Commission.
The accompanying Prospectus or disclosure documents for the Contracts or Plan
describes the allocation, transfer and withdrawal provisions of such Contract or
Plan.
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 income dividends
monthly and all capital gains, if any, annually. All dividends and capital gains
distributions paid by a Fund will be automatically reinvested, at net asset
value in that respective Fund. For Contract owners the result of automatic
reinvestment of distributions on a Fund's performance, including the effect of
dividends, is reflected in the cash value of the Contracts you own. Please see
the Contract prospectus accompanying this Prospectus for more information.
Each Fund will be treated as a separate entity for federal income tax purposes.
Each Fund has qualified and intends to continue to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), in order to be relieved of federal income tax on that part of its net
investment income and realized capital gains it distributes to shareholders. To
qualify, each Fund must meet certain relatively complex income and
diversification tests. The loss of such status would result in a Fund being
subject to federal income tax on its taxable income and gains.
Federal tax regulations require that mutual funds offered through insurance
company separate accounts must meet certain additional diversification
requirements to preserve the tax-deferral benefits provided by the variable
contracts. The Advisers intend to diversify each Fund's investments in
accordance with those requirements. The Insurers' prospectuses for variable
annuities and variable life insurance policies describe the federal income tax
treatment of distributions from such contracts to Contract owners.
The foregoing is only a summary of important federal tax law provisions that can
affect each Fund. Other federal, state, or local tax law provisions may also
affect each Fund and its operations.
Because each investor's tax circumstances are unique and because the tax laws
are subject to change, we recommend that you consult your tax advisor about your
investment.
SPECIAL INFORMATION ABOUT THE FUNDS
The Funds offer their shares to both variable annuity and variable life
insurance policy separate accounts and to various Retirement Plans. The
Trustees do not anticipate that this arrangement will disadvantage any Contract
owners. The Fund's Board of Trustees monitors events for the existence of any
material irreconcilable conflict between or among Contract owners and Plans. If
a material irreconcilable conflict arises, one or more separate accounts may
withdraw their investment in the Fund. This could possibly force a Fund to sell
portfolio securities at unfavorable prices. Each Insurer will bear the expenses
of establishing separate portfolios for 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 the economies of scale benefits that can be provided to mutual
funds with substantial assets.
-14-
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Funds'
financial performance for the period ended December 31, 1999. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Funds assuming reinvestment of all dividends and
distributions. This information has been audited by Ernst & Young LLP
independent auditors, whose report along with the Funds' financial statements is
included in the Annual Report, which is available upon request.
<TABLE>
<CAPTION>
EAFE S&P 500 Money Market
Equity Index Equity Index Fund*
Fund** Fund*
------------ ------------ ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $ 10.00 $ 1.00
------------ ------------ ------------
Operations:
Net investment income 0.08 0.08 0.04
Net realized and unrealized gain on investments and 2.25 1.79 -
foreign currency transactions
------------ ------------ ------------
Total from Investment Operations 2.33 1.87 0.04
------------ ------------ ------------
Distributions to Shareholders:
Dividends from net investment income (0.07) (0.08) (0.04)
Distributions from net realized gain on investments (0.02) (0.03) -
------------ ------------ ------------
Total Distributions (0.09) (0.11) (0.04)
------------ ------------ ------------
Net Asset Value, End of Period $ 12.24 $ 11.76 $ 1.00
============ ============ ============
Total Return** 23.30% 18.72% 4.03%
Ratios/Supplemental Data:*
Net Assets, end of period (in thousands) $ 24,667 $ 5,967 $ 2,086
Ratio of Net Investment Income to Average Net Assets
Before waiver/reimbursement of investment advisory fees 0.86% 0.66% 4.43%
After waiver/reimbursement of investment advisory fees 1.03% 0.83% 4.60%
Ratio of Expenses to Average Net Assets
Before waiver/reimbursement of investment advisory fees 1.07% 0.72% 0.82%
After waiver/reimbursement of investment advisory fees 0.90% 0.55% 0.65%
Portfolio Turnover 10% 3% N/A
</TABLE>
* The S&P 500 Equity Index Fund and Money Market Fund commenced operations on
February 19, 1999.
** The EAFE Equity Index Fund commenced operations on March 22, 1999.
* All ratios have been annualized.
** Total investment return is calculated assuming an initial investment made at
net asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period and redemption on the last
day of the period. Total investment return is not annualized.
-15-
<PAGE>
APPENDIX A
DESCRIPTION OF INDEXES
The EAFE Fund
MSCI does not sponsor, endorse, sell, or promote the Fund. Neither MSCI nor any
other party makes a 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. MSCI is the licenser of
certain trademarks, service marks and trade names of MSCI and of the EAFE Index
which is determined, composed and calculated by MSCI without regard to the
issuer of the Fund or the Fund itself. MSCI 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. MSCI 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. MSCI has no obligation or
liability to owners of the Fund in connection with the administration, marketing
or trading of the Fund.
Although MSCI shall obtain information for inclusion in or use in the
calculations of the indices from sources which MSCI considers reliable, neither
MSCI nor any other party guarantees the accuracy and/or the completeness of the
indices or any data included therein. Neither MSCI 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 thereunder for any other use. Neither MSCI
nor any other party makes any express or implied warranties, and MSCI 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 MSCI 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 MSCI. MSCI is a service mark of MSCI
and has been licensed for use by Sage Advisors, Inc.
The S&P 500 Fund
Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies,
Inc. ("S&P") does not sponsor, endorse, sell, or promote the Fund. 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 Sage 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 to
results to be obtained by license, owners of the Fund, or any other person or
entity from 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 the foregoing, in
no event
-16-
<PAGE>
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 damages.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of the McGraw-Hill Companies, Inc. and have been licensed
for use by Sage. S&P does not sponsor, endorse, sell or promote the Fund and S&P
makes no representation regarding the advisability of investing in the Fund.
-17-
<PAGE>
Additional information about the Funds' investments will be available in the
Funds' annual and semiannual reports to shareholders. In the Funds' annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected each Index Fund's performance during its
last fiscal year.
You can find more detailed information about each Fund in the current Statement
of Additional Information, dated May 1, 2000 which we have filed electronically
with the SEC and which is incorporated by reference. To receive your free copy
of the Statement of Additional Information, the annual or semiannual report, or
if you have questions about investing in the Fund, write to or call us at:
Sage Life Investment Trust
Customer Service Center
1290 Silas Deane Highway
Wetherfield, Connecticut 06109
1-877-835-7243 (collect)
You can find reports and other information about the Funds online at
www.sagelife.com or on the SEC website (http://www.sec.gov). In addition you can
- ----------------
get copies of this information, after payment of a duplicating fee, by writing
to the Public Reference Section of the SEC, Washington, D.C. 20549-6009.
Information about the Funds, including the Statement of Additional Information,
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. For information on the Public Reference Room, call the SEC at 1-202-942-
8090. In order to assist you in obtaining this information, the following is the
Funds' registration number under the Investment Company Act of 1940: 811-
08623.
-18-
<PAGE>
SAGE LIFE INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
for
EAFE Equity Index Fund
S&P 500 Equity Index Fund
Money Market Fund
Dated May 1, 2000
Sage Life Investment Trust (the "Trust") is currently comprised of three
series: EAFE Equity Index Fund ("EAFE Fund") and S&P 500 Equity Index Fund ("S&P
500 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 May 1, 2000. 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
<TABLE>
<CAPTION>
<S> <C>
Investment Restrictions....................................... 2
Risk Factors and Certain Securities and Investment Practices.. 3
Portfolio Transactions and Brokerage Commissions.............. 14
Performance Information....................................... 16
Determination of Net Asset Value.............................. 18
Management of the Trust....................................... 18
Organization of the Trust..................................... 28
Distributions and Taxes....................................... 30
Financial Statements.......................................... 32
</TABLE>
<PAGE>
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.
2
<PAGE>
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.
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
3
<PAGE>
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.
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. 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.
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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.
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
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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
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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 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 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 and time deposits having a maturity of longer than seven (7) days.
No more than 15% of each Index Fund's net assets may be invested in illiquid or
not readily marketable securities. No more than 10% of the Money Market Fund's
net assets may be invested in illiquid or not readily marketable securities.
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. 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 the policies of the SEC.
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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 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). 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.
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
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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.
Stock Index Futures, Options on Stock Index Futures Contracts and Stock Indices.
The Index Funds may, but are not required to, 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. 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.
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
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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.
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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.
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 offsetting
transaction, or by establishing a segregated account with the Fund's custodian
containing cash or liquid securities in an amount at all times equal to or
exceeding the Fund's commitment with respect to these instruments or contracts.
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
11
<PAGE>
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 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 interest coupons are sold
separately from the underlying principal. The Money Market Fund may purchase
either stripped interest coupons or stripped principal payments. These
instruments are issued at a discount to their "face value." Stripped principal
payments are 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. Stripped securities 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. 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.
12
<PAGE>
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. Each Fund may purchase U.S. Government obligations,
which are obligations issued by, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. 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
13
<PAGE>
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
14
<PAGE>
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 will be allocated among
clients in a manner deemed fair and reasonable by the respective Adviser. There
is no specific formula for allocating such transactions. 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.
For the period ended December 31, 1999 the total brokerage commissions
attributable to each Fund are set forth below.
<TABLE>
<CAPTION>
==================================
Period ended
------------
FUND 12/31/99
---- --------
<S> <C>
==================================
EAFE Fund** $ 13,735
----------------------------------
S&P 500 Fund* $ 1,550
----------------------------------
Money Market Fund* $ 0
----------------------------------
TOTALS $ 15,285
==================================
</TABLE>
* Commenced operations February 19, 1999.
** Commenced operations March 22, 1999.
15
<PAGE>
PERFORMANCE INFORMATION
Standard Performance Information
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.
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.
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.
16
<PAGE>
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. For the seven
day period ended December 31, 1999, the Money Market Fund had a yield of 5.53%
and an effective yield of 5.69%.
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
Based upon the foregoing calculations, the average annual total return for the
S&P 500 Fund for the period February 19, 1999 (commencement of operations),
through December 31, 1999 was 18.72%. The average annual total return for the
EAFE Fund for the period March 22, 1999 (commencement of operations), through
December 31, 1999 was 23.30%.
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
17
<PAGE>
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 is responsible for overseeing and monitoring the
management of the Funds. 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.
18
<PAGE>
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, * Trustee and Chairman of Sheldon, Scowby Associates, Inc.,
300 Atlantic Street, Suite 302 Chairman of consulting firm (January 2000 - Present); President
Stamford, CT 06901 the Board (July 1997 - January 1998) and Director (July 1997 -
DOB - 01/39 present), Sage Insurance Group, Inc., financial services
holding company; President (January 1997 - February
1998) and Chairman (February 1998 - January 2000);
Sage Life Assurance of America, Inc., insurance
company; President and CEO, Sage Management
Services USA, Inc., management services company
(June 1996 - January 2000 ); 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, * Trustee and Director (since January 1997), President and CEO
300 Atlantic Street, Suite 302 President (since February 1998), Sage Insurance Group, Inc.,
Stamford, CT 06901 financial services holding company; Director (since
DOB - 10/65 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, Trustee Managing Director, Partner and Director, Philo Smith
10 Field Road & Co., investment management company (July 1988 -
Cos Cob, CT 06807 present).
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C>
DOB - 06/60
Trustee Executive Vice President, Independent Financial
Rosemary L. Hendrickson, Marketing Group, Inc., financial services company
3911 S.W. ViewPoint Terrace (January 1989 - April 1998).
Portland, OR 97201
DOB - 12/38
Geoffrey A. Thompson, Trustee Formerly Principal, Kohlberg & Co., investment
279 Old Black Point Road management company (November 1996 - April 1999);
Niantic, CT 06357 Partner, Norman Broadbent, executive recruiting firm
DOB - 10/40 (May 1995 - February 1996); President, Nordman
Grimm, executive recruiting firm (January 1994 - May
1995).
Mitchell R. Katcher, Vice President Senior Executive Vice President, Sage Investment
300 Atlantic Street, Suite 302 Group, Inc., financial services holding company
Stamford, CT 06901 (December 1997 - present); Director, Chief Actuary
DOB - 08/53 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).
George Graner, Treasurer Section Manager of PFPC Inc. (12/99 - Present);
3200 Horizon Drive Section Manager of First Data Investor Services
King Of Prussia, PA 19406 Group, financial reporting unit (6/99 - 12/99);
DOB - 11/69 Section Manager of FPS Services, Inc., accounting
services unit (6/92 - 6/99).
James F. Renz, Assistant Vice President, Sage Life Assurance of America, Inc.,
300 Atlantic Street, Suite 301 Treasurer insurance company (September 1997 - present);
Stamford, CT 06901 Treasurer and CFO, Sage Distributors, Inc., broker-
DOB - 12/62 dealer (January 1998 - present); Manager, Swiss Re
Life and Health Insurance Company, reinsurance
company (October 1987 - August 1997).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Marc Schuman Secretary Vice President of PFPC Inc. (12/9 9- Present);
3200 Horizon Drive Counsel of First Data Investor Services Group (6/99
King of Prussia, PA 19406 - 12/99); Vice President and Associate General
DOB - 12/60 Counsel of Salomon Smith Barney (8/97 - 6/99);
various law firms (4/87 - 6/99).
Maureen M. Murphy Assistant Securities Attorney, Sage Life Assurance of America,
300 Atlantic Street, Suite 302 Secretary Inc., insurance company (October 1999 - Present;
Stamford, CT 06901 Attorney Update Legal Staffing, November 1998 -
DOB - 8/59. October 1999; Associate, Blazzard, Grodd &
Hasenauer, P.C., law firm (September 1995 -
September 1998); Senior Counsel, Chancellor Capital
Management, Inc., investment management firm, (May
1983 - January 1995).
</TABLE>
The following table shows the amount of compensation paid by the Trust
during the period ended December 31, 1999 to the persons who served as Trustees
during such period:
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or Total
Retirement Estimated Compensation
Name of Compensation Benefits Accrued Annual Benefits from
Person from the as Part of upon Fund Complex
and Position Trust Fund Expenses Retirement Paid to Trustee*
------------ ----- ------------- ---------- ---------------
<S> <C> <C> <C> <C>
James A. Amen $9,000 None None $9,000
Trustee
Rosemary L. Hendrickson $9,000 None None $9,000
Trustee
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Geoffrey A. Thompson $9,000 None None $9,000
Trustee
</TABLE>
_______________________
* No Trustee receives any compensation from any mutual fund affiliated
with the Manager other than the Trust.
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, PFPC Inc. ("PFPC ") or one of their affiliates receive no
compensation or expense reimbursement from the Trust.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 2000 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).
Listed below are the names and addresses of those shareholders and accounts
who, as of March 31, 2000, owned of record or beneficially 5% or more of the
shares of any Fund.
Persons or organizations owning 25% or more of the outstanding shares of a
Fund may be presumed to "control" (as that term is defined in the 1940 Act) a
Fund. As a result, these persons or organizations could have the ability to
approve or reject those matters submitted to the shareholders of such Fund for
their approval.
EAFE Equity Fund:
Shareholder Percentage Owned
Sage Life Limited 99.97%
Sage Centre, 10 Fraser St.
Johannesburg, 2001
Republic of South Africa
S&P 500 EQUITY FUND:
Shareholder Percentage Owned
Sage Life Limited 99.14%
Sage Centre, 10 Fraser St.
Johannesburg, 2001
Republic of South Africa
22
<PAGE>
MONEY MARKET FUND:
Shareholder Percentage Owned
Finplan Holdings, Inc. 99.85%
c/o McCarthy, Fingar et al.
11 Martine Ave., 12/th/ Floor
White Plains, NY 10606
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.
Sage was organized in 1997. 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 indirect,
wholly-owned subsidiary of Sage Insurance Group, Inc.
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, PFPC, the sub-administrator to the Funds, assists the Manager in the
performance of its administrative responsibilities to the Funds. The Manager
compensates PFPC for these services.
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.
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 before any fee waiver
at the following rates: EAFE Fund 0.90%; S&P 500 Fund 0.55% and Money Market
Fund 0.65%. Sage has agreed to waive a portion of its management fees for the
Funds until April 30, 2001. With such waivers, the Funds will pay the following
management fees to Sage: EAFE Fund - 0.73%, S&P 500 Fund - 0.38% and Money
Market Fund - 0.48%.
23
<PAGE>
For the period ended December 31, 1999, Sage earned and voluntarily waived
the amounts indicated below with respect to its management services to the EAFE
Fund, S&P 500 Fund and Money Market Fund.
<TABLE>
<CAPTION>
======================================================================
Gross Management Net
Management Fees Management
FUND Fees Earned Waived Fees Received
======================================================================
<S> <C> <C> <C>
EAFE Fund** $147,509 $27,371 $120,138
- ----------------------------------------------------------------------
S&P 500 Fund* $ 25,731 $ 7,813 $ 17,918
- ----------------------------------------------------------------------
Money Market Fund* $ 11,635 $ 2,989 $ 8,646
- ----------------------------------------------------------------------
TOTALS $184,875 $38,173 $146,702
- ----------------------------------------------------------------------
</TABLE>
* Commenced operations February 19, 1999.
** Commenced operations March 22, 1999.
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 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 and administration 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; index licensing fees; 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.
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
24
<PAGE>
("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 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.
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.
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, equal on an annual basis with respect to
each Fund's average daily net assets at the following rate:
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.
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.
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.
For the period ended December 31, 1999, the Manager paid the applicable
Adviser the amounts indicated below pursuant to the relevant Sub-Advisory
Agreements:
25
<PAGE>
<TABLE>
<CAPTION>
=============================================================
Advisory Fees
FUND Sub-Adviser Paid
=============================================================
<S> <C> <C>
EAFE Fund** State Street Global Advisors $52,580
-------------------------------------------------------------
S&P 500 Fund* State Street Global Advisors $42,329
-------------------------------------------------------------
Money Market Conning Asset Management $ 2,673
Fund* Company
-------------------------------------------------------------
</TABLE>
* Commenced operations February 19, 1999.
** Commenced operations March 22, 1999.
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 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.
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.
26
<PAGE>
Distributor and Distribution Plan
Sage Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary of
Sage Insurance Group, Inc., serves as the distributor (principal underwriter) 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 were made by the Funds under the 12b-1 Plans for the period
ended 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.
Sub-Administrator
PFPC Inc., located at 3200 Horizon Drive, King of Prussia, PA 19406,
serves as each Fund's sub-administrator pursuant to a Sub-Administration
Agreement with the Manager.
As the sub-administrator, PFPC is obligated on a continuous basis to
provide such administrative services as the Manager and the Board of Trustees
reasonably deem necessary for the proper administration of the Funds. PFPC will
generally assist in all aspects of the Funds' operations; supply and maintain
office facilities (which may be in PFPC'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.
Under the terms of the Sub-Administration Agreement, PFPC 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 PFPC a monthly
fee at the
27
<PAGE>
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 PFPC 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, PFPC is paid certain out-of-pocket fees and other special
services fees for providing services for the operation of the Funds.
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.
PFPC, located at 4400 Computer Drive, Westborough, Massachusetts 01581,
serves as transfer agent of the Trust. Under its transfer agency agreement with
the Trust, PFPC 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
Sutherland Asbill & Brennan LLP, 1275 Pennsylvania Avenue, N.W.,
Washington, DC 20004-2415, serves as Counsel to the Trust.
Independent Auditors
Ernst & Young LLP, Two Commerce Square, 2001 Market Street, Suite 4000,
Philadelphia, Pennsylvania 19103, serves as independent auditors of the Trust
and the Funds. The financial statements of the Trust, as of December 31, 1999,
incorporated by reference into the Prospectus and in this SAI, have been audited
by Ernst & Young LLP.
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 three separately managed
portfolios. The Trust is a diversified, open-end investment management company.
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
28
<PAGE>
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 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. 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.
Code of Ethics
The Trust, the Manager and the Distributor are each governed by a Code of
Ethics that has been approved and adopted by the Board of Trustees of the Trust.
This Code is subject to periodic review by the Board of Trustees in order to
remain compliant with the requirements under Rule 17j-1 of the 1940 Act. The
Code significantly restricts the personal investing activities of directors and
officers of the Manager, the Investment Adviser and the Distributor and
employees of the Manager,
29
<PAGE>
the Investment Adviser and the Distributor with access to information about
recent portfolio transactions. Among other provisions, the Code requires that
such directors, officers and employees with access to information about the
purchase or sale of portfolio securities obtain preclearance before executing
personal trades. Each of the Advisers has also adopted a Code of Ethics that is
subject to periodic review by the Board of 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 qualifies 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.
To qualify as a regulated investment company, a Fund must meet several
requirements. These requirements include the following: (1) at least 90% of the
Fund's gross income must be derived from dividends, interest, payments with
respect to securities loans, gains from the sale or disposition of stock,
securities or foreign currencies or other income (including gains from the sale
or disposition of stock, securities or foreign currencies or other income
(including gain from options, futures or forward contracts) derived in
connection with the Fund's investment business, (2) at the close of each quarter
of the Fund's taxable year, (a) at least 50% of the value of the Fund's assets
must consist of cash, United States Government securities, securities of other
regulated investment companies and other securities (limited generally with
respect to any one issuer to not more that 5% of the total assets of the Fund
and not more than 10% of the outstanding voting securities of such issuer) (b)
not more than 25% of the value of the Fund's assets may be invested in the
securities of any one issuer (other than United States Government securities or
securities of other regulated investment companies) or of two or more issuers
which the Fund controls and which are determined to be engaged in similar or
related trade or businesses and (3) at least 90% of the Fund's net income
(consisting) of net investment income and net short-term capital gain) must be
distributed to its shareholders. If a Fund fails to qualify as a regulated
investment company, the Fund will be subject to federal, and possibly state,
corporate taxes on its taxable income and gains, distributions to its
30
<PAGE>
shareholders will be taxed as ordinary income to the extent of the Fund's
available earnings and profits and Contract Owners could lose the benefit of tax
deferral on distributions made to the separate accounts.
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.
Because the Funds are offered through insurance company separate accounts,
each Fund intends to also comply with the diversification requirements impose by
section 817(h) of the Code and the regulations thereunder. These requirements,
which are in addition to the diversification requirements mentioned above, place
certain limitations on the proportion of each Fund's assets that may be
represented by any single investment (which includes all securities of the same
issuer). For the purposes of section 817(h), all securities of the same issuer,
all interests in the same real property project, and all interest 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 governments and its agencies, instrumentalities and
political subdivisions all will be considered securities issued by the same
issuer. If a Fund failed to comply with the diversification requirements of
section 817 (h) of the Code and the regulations thereunder Contract Owners could
be subject to current tax on distributions made to separate accounts of
participating insurance companies.
Generally, a regulated investment company must distribute substantially all
of its ordinary income and capital gains in accordance with a calendar year
distribution requirement in order to avoid a nondeductible 4% excise tax.
However, the excise tax does not apply to a fund whose only shareholders are
certain tax exempt trusts or segregated asset accounts of life insurance
companies held in connection with variable contracts. In order to avoid this
excise tax, the Funds intend to qualify for this exemption or to make its
distributions in accordance with the calendar year.
Foreign Investments - The EAFE Fund is authorized to invest in foreign
securities and may be required to pay witholding, income or other taxes to
foreign governments or U.S. possessions. Foreign tax witholding from dividends
and interest, if any, is generally at a rate between 10% and 35%. The investment
return of any Fund that invests in foreign securities of currencies is reduced
by these foreign taxes. The Contract Owners effectively bear the cost of any
foreign taxes but will not be able to claim a foreign tax credit or deduction
for these foreign taxes. Tax conventions between certain countries and the
United States may reduce or eliminate these foreign taxes, however, and foreign
countries generally do not impose taxes on capital gains in respect of
investments by foreign investors.
The EAFE Fund may invest in securities of "passive foreign investment
companies" ("PFICs"). A PIFC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of passive income. A fund investing in securities of PFICs may be
subject to U.S. Federal income taxes and interest charges, which would reduce
the investment return of a Fund making such investments. The Contract Owners
would effectively bear the cost of these taxes and interest changes. In certain
cases, a Fund may be eligible to make certain elections with respect to
securities of PFICs which could reduce taxes and interest charges payable by the
Fund. However, a Fund's intention to qualify annually as a regulated investment
company may limit a Funds elections with respect to PFIC securities and no
assurance can be given that such elections can or will be made.
31
<PAGE>
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.
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.
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.
Financial Statements
The audited financial statements and notes thereto for each Fund, contained
in the Annual Report to Shareholders dated December 31, 1999, are incorporated
by reference into this Statement of Additional Information and have been audited
by Ernst & Young LLP, independent auditors, whose report also appears in the
Annual Report and is also incorporated by reference herein.
32
<PAGE>
33
<PAGE>
34
<PAGE>
Investment Manager and Administrator of the Funds
-------------------------------------------------
SAGE ADVISORS, INC.
Investment Sub-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
------------------------------------
PFPC INC.
Distributor
-----------
SAGE DISTRIBUTORS, INC.
Custodian
---------
THE BANK OF NEW York
Independent Accountants
-----------------------
ERNST & YOUNG LLP
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.
35
<PAGE>
SAGE LIFE INVESTMENT TRUST
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Declaration of Trust is incorporated herein by reference
to Exhibit 1 to Initial Registration Statement on January
30, 1998.
(b) The Registrant's By-laws are incorporated herein by
reference to Exhibit 1 to the Initial Registration
Statement on January 30, 1998.
(c) Not Applicable.
(d) (1) Form of Investment Management Agreement between the
Registrant and Sage Advisors, Inc. is incorporated
herein by reference to Exhibit 5(a) to Pre-Effective
Amendment No. 1 as filed on November 16, 1998.
(2) Form of Sub-Advisory Agreement between State Street
Global Advisors and Sage Advisors, Inc. is
incorporated herein by reference to Exhibit 5(b) to
Pre-Effective Amendment No. 1 as filed on November
16, 1998.
(3) Form of Sub-Advisory Agreement between Conning Asset
Management Company and Sage Advisors, Inc. is
incorporated herein by reference to Exhibit 5(c) to
Pre-Effective Amendment No. 3 as filed on January 29,
1999.
(e) (1) Form of Distribution Agreement between the Registrant
and Sage Distributors, Inc. is incorporated herein by
reference to Exhibit 6(a) to Pre-Effective No. 1 as
filed on November 16, 1998.
(2) Participation Agreement by and among the Trust, Sage
Life Assurance of America, Inc. and the Distributor
is incorporated by reference to Exhibit 6(b) to Pre-
Effective Amendment No. 1 as filed on November 16,
1998.
(f) Not Applicable.
(g) Form of Custodian Agreement between Registrant and The
Bank of New York is incorporated herein by reference to
Exhibit 8 to Pre-Effective Amendment No. 2 as filed on
January 25, 1999.
(h) (1) Parti Form of Transfer Agency Agreement between
Registrant and The Bank of New York is herein by
reference to Exhibit 8 to Pre-Effective Amendment No.
2 as filed on January 25, 1999.
(2) Form of Sub-Administration Agreement between
Registrant and First Data Investor Services Group,
Inc. is incorporated. Herein by reference to Exhibit
9(b) to Pre-Effective Amendment No. 1 as filed on
November 16, 1998.
(i) (1) Opinion of Counsel is incorporated herein by
reference to Pre-Effective Amendment No. 3 as filed
on January 29, 1999.
(2) Consent of Counsel is filed herein.
(3) Power of attorney is incorporated herein by
reference to Exhibit
1
<PAGE>
(i) (3) to Pre-Effective Amendment No. 3 as filed on
January 29, 1999.
Item 23. Exhibits
(j) Consent of Independent Auditors filed herewith.
(k) Not Applicable
(l) Purchase Agreement.
(m) Form of 12b-1 Plan is incorporated herein by reference to
Exhibit 15 to Pre-Effective Amendment No. 1 as filed on
November 16, 1998.
(n) Not Applicable.
(o) Not Applicable.
(p) (1) Form of Code of Ethics for Registrant, Sage
Distributors, Inc. and Sage Advisors, Inc. filed
herewith
(2) Form of Code of Ethics for State Street Global
Advisors, filed herewith
(3) Form of Code of Ethics for Conning Asset Management,
filed herewith
Item 24. Persons Controlled by or Under Common Control with Registrant
Finplan Holdings, Inc., and Sage Variable Annuity Account A
Sage Life Limited and Sage Variable Annuity Account A
Item 25. 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 incorporated herein as Exhibit 6(b) from Pre-
Effective Amendment No. 1.
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
2
<PAGE>
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 26. 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.
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:
<TABLE>
<CAPTION>
Name Business or other Connections of Principal Execution Officers of
State Street Corporation
<S> <C>
Tenly Albright, Director; Chairman of Western Resources, Inc.
I. MacAllister Booth, 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 F. Dorehshori, Chairman, President & Chief Executive Officer, Houghton Mifflin Company.
David Gruber, Director; Chairman and chief Executive Officer of the Wyman-Gordon Company.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
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 Raytheon 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.
Richard Sergel President and Chief Executive Officer, New England Electric System
Diana Walsh, Director; President of Wellesley College.
Robert Weissman Chairman and Chief Executive Officer, IMS Heath, Incorporated.
</TABLE>
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:
<TABLE>
<CAPTION>
Name Business or other Connections of Principal Executive Officers of
Conning Asset Management
<S> <C>
John Clinton, Connecticut Surety Corporation; Haks; Hobbs; Paradigm Health
Executive Vice President; Corporation; and Paula Financial.
James L. Lipscomb, Citizens Budget Commission of New York and Citizens Housing and
President & CEO Planning Council (New York).
Gary A. Beller, Citizens Crime Commission of New York; Lenox Hill Neighborhood House;
Chairman of the Board and SSRM Holdings.
Richard A. Liddy, Director Brown Shoe; Energizer and Ameren Corporation; Ralston Purina; St. Louis
Art Museum; and the United Way.
</TABLE>
Item 27. 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;
Mitchell Katcher - Director;
James F. Bronsdon - President;
4
<PAGE>
James Renz - CFO/Treasurer
Lincoln B. Yersin - Senior VP, Sales Manager Manager
(c) Not Applicable.
Item 28. 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) PFPC Inc.
3200 Horizon Drive
King of Prussia, PA 19406
(records relating to function as Administrator and Transfer
Agent to the Funds)
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not Applicable.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that this
Post-Effective Amendment No. 3 to the Registration Statement meets the
requirements for effectiveness pursuant to Rule 485(b) of the Securities Act of
1933, as amended, and the Registrant has duly caused this Post-Effective
Amendment No. 3 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Stamford and the State of
Connecticut on the 28th day of April 2000.
SAGE LIFE INVESTMENT TRUST
By: /s/ Robin I. Marsden
----------------------------------
Robin I. Marsden
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Chairman and Trustee April 28, 2000
_______________________________
Ronald S. Scowby*
/s/ Robin I. Marsden President and Trustee April 28, 2000
_______________________________
Robin I. Marsden
/s/ George Graner Treasurer April 28, 2000
_______________________________
George Graner
Trustee April 28, 2000
_______________________________
James A. Amen*
/s/ Rosemary L. Hendrickson Trustee April 28, 2000
_______________________________
Rosemary L. Hendrickson
Trustee April 28, 2000
_______________________________
Geoffrey A. Thompson*
</TABLE>
*James F. Brondson signed on behalf of each of the above individuals pursuant
to a power of attorney.
6
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
(i) (2) Consent of Counsel
(j) Consent of Independent Accountants
(p) (1) Form of Code of Ethics for the Trust, Sage Distributors, Inc. and
Sage Advisors, Inc.
(p) (2) Form of Code of Ethics for State Street Global Advisors
(p) (3) Form of Code of Ethics for Conning Asset Management
7
<PAGE>
Exhibit (j)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the caption "Financial
Highlights" in the Prospectus and "Independent Auditors" and "Financial
Statements" in the Statement of Additional Information and to the incorporation
by reference in this Post-Effective Amendment No. 3 to the Registration
Statement (Form N-1A) (No. 333-45293) of Sage Life Investment Trust of our
report dated February 4, 2000, included in the 1999 Annual Report to
shareholders.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
April 25, 2000
8
<PAGE>
Exhibit (i) (2)
Consent of Sutherland Asbill & Brennan LLP
We consent to the reference to our firm under the heading "Counsel and
Independent Accountants" in the Statement of Additional Information included in
Post-Effective Amendment No. 3 to the Registration Statement on Form N-1A for
Sage Life Investment Trust (File No. 333-45293). In giving this consent, we do
not admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Washington, D.C.
April 25, 2000
Sutherland Asbill & Brennan LLP
By: /s/ Kimberly J. Smith
---------------------
Kimberly J. Smith
9
<PAGE>
Exhibit (p) (1)
SAGE LIFE INVESTMENT TRUST
Code of Ethics
- --------------------------------------------------------------------------------
In order to ensure that personnel associated with Sage Life Investment
Trust (the "Trust") comply with requirements of Section 17(j) of the Investment
Company Act of 1940, as amended (the "Act"), and of Rule 17j-1 thereunder, the
Trust has adopted the Code of Ethics (the "Code") set forth below. Personnel
associated with the Trust include, but are not limited to, persons employed by
Sage Advisors, Inc. (the "Manager"); the sub-investment advisers to the Trust's
portfolios (each a "Sub-adviser" and, together the "Sub-advisers"); and Sage
Distributors, Inc. (the "Distributor").
This Code of Ethics is based on the principles that (i) Access Persons (as
such term is hereinafter defined) owe a fiduciary duty to, among others, the
shareholders of the Trust to conduct their personal transactions in securities
in a manner which neither interferes with Trust portfolio transactions nor
otherwise takes unfair or inappropriate advantage of an Access Person's
relationship to the Trust; (ii) in complying with this fiduciary duty, Access
Persons owe shareholders the highest duty of trust and fair dealing; and (iii)
Access Persons must, in all instances, place the interests of the shareholders
of the Trust ahead of the Access Person's own personal interests or the
interests of others.
I. Definitions
-----------
(A) "Access Person" means (1) any Trustee or officer of the Trust; (2) any
director, officer or general partner of the Manager or any Sub-adviser; (3)
any director or officer of the Distributor who in the ordinary course of
his or her business makes, participates or obtains information regarding
the purchase or sale of securities for the Trust; or (4) any Advisory
Person (as such term is hereinafter defined).
(B) "Advisory Person" means (1) any employee of the Manager or any Sub-adviser
or of any company in a control relationship to the Manager or any Sub-
adviser, who, in connection with his or her regular functions or duties,
makes, participates in or obtains information regarding the purchase or
sale of a Security (as such term is hereinafter defined) by the Trust, or
whose functions relate to the making of any recommendations with respect to
such purchases or sales; and (2) any natural person in a control
relationship to the Manager or any Sub-adviser who obtains information
concerning recommendations made to the Trust with regard to the purchase or
sale of a Security.
10
<PAGE>
(C) A Security is "being considered for purchase or sale" when a recommendation
to purchase or sell a Security has been made and communicated or, with
respect to the person making the recommendation, when such person seriously
considers making such a recommendation.
(D) A Security is "being purchased or sold" by the Trust from the time when a
purchase or sale program has been communicated to the person who places the
buy and sell orders for the Trust until the time when such program has been
fully completed or terminated.
(E) "Beneficial ownership" shall be interpreted in the same manner as it would
be in determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder from time to time in effect, except that the
determination of direct or indirect beneficial ownership shall apply to all
Securities which an Access Person has or acquires. As a general matter,
"beneficial ownership" will be attributed to an Access Person in all
instances where the Access Person (i) possesses the ability to purchase or
sell the Securities (or the ability to direct the disposition of the
Securities); (ii) possesses voting power (including the power to vote or to
direct the voting over such Securities) or (iii) receives any benefits
substantially equivalent to those of ownership.
(F) "Control" shall have the same meaning as that set forth in Section 2(a)(9)
of the Act. Section 2(a)(9) provides that "control" means the power to
exercise a controlling influence over the management or policies of a
company, unless such power is solely the result of an official position
with such company.
(G) "Designated Supervisory Person" is the person appointed by vote of the
Board of Trustees to act in such capacity.
(H) "Disinterested Trustee" means a Trustee of the Trust who is not an
"interested person" of the Trust within the meaning of Section 2(a)(19) of
the Act.
(I) "IPO" means an offering of securities registered under the Securities Act
of 1933, as amended (the "1933 Act"), the issues of which, immediately
before the registration, was not subject to the reporting requirements of
Sections 13 or 15(d) of the Securities Exchange Act of 1934.
(J) "Limited Offering" means an offering that is exempt from registration under
the 1933 Act.
(K) "Purchase or sale of a Security" includes, inter alia, the writing of an
----- ----
option to purchase or sell a Security.
11
<PAGE>
(L) "Security" shall have the meaning set forth in Section 2(a)(36) of the Act,
except that it shall not include securities issued by the government of the
United States, short-term debt securities which are "government securities"
within the meaning of Section 2(a)(16) of the Act, shares of registered
open-end investment companies, bankers' acceptances, bank certificates of
deposit, commercial paper and other money market instruments, or such other
securities as may be excepted under the provisions of Rule 17j-1 under the
Act as in effect from time to time.
(M) "Security held or to be acquired" by the Trust means any Security which,
within the most recent fifteen (15) days, (i) is or has been held by the
Trust, or (ii) is being or has been considered by the Trust or the Manager
or a Sub-adviser for purchase by the Trust.
A person who normally only assists in the preparation of public reports, or
receives public reports but receives no information about current
recommendations or trading, is neither an Advisory Person nor an Access Person.
A single instance or infrequent, inadvertent instances of obtaining knowledge
does not make one either then or for all times an Advisory Person. Under the
definition of "Advisory Person" the phrase "makes...the purchase or sale" means
someone who places orders or otherwise arranges transactions. An Advisory
Person or Access Person of the Trust does not include an employee, director,
officer or general partner of the Manager, any Sub-adviser or the Distributor
where such company has adopted pursuant to Section VI hereof a code of ethics
satisfactory to the Board of Trustees of the Trust which contains provisions
reasonably necessary to prevent its Advisory Persons from engaging in any act,
practice or course of business prohibited by Rule 17j-1(a) under the Act and
which subjects such persons to securities transactions pre-clearance
requirements and securities transaction reporting requirements, so long as such
person complies with Section VI of this Code.
II. Exempted Transactions
---------------------
The prohibitions of Section III of this Code shall not apply to the
following transactions by Access Persons:
(1) Purchases or sales effected for any account over which the Access
Person has no direct or indirect influence or control.
(2) Purchases or sales of Securities which are not eligible for
purchase or sale by the Trust, as determined by reference to the
Act and regulations thereunder, the investment objectives and
policies and investment restrictions of the Trust, undertakings
made to regulatory authorities, and other policies adopted from
time to time by the Trust.
12
<PAGE>
(3) Purchases or sales which are nonvolitional on the part of the
Access Person or the Trust, including purchases or sales upon
exercise of puts or calls written by the Access Person and sales
from a margin account pursuant to a bona fide margin call.
(4) Purchases which are either made solely with the dividend proceeds
received in a dividend reinvestment plan or are part of an
automatic payroll deduction plan, whereby an employee purchases
Securities issued by an employer.
(5) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities, to
--- ----
the extent such rights were acquired from such issuer, and sales
of such rights so acquired.
(6) Transactions which appear to present no reasonable likelihood of
harm to the Trust, which are otherwise in accordance with Rule
17j-1 under the Act, and which the Designated Supervisory Person
or his designee has authorized in advance.
(7) Transactions which the Disinterested Trustees, after
consideration of all the facts and circumstances, determine to
have not been fraudulent, deceptive or manipulative as to the
Trust.
III. Prohibited Purchases and Sales
------------------------------
(A) No Access Person shall, in connection with the purchase or sale,
directly or indirectly, by such person of a Security held or to be
acquired by the Trust:
(1) employ any device, scheme or artifice to defraud the Trust;
(2) make to the Trust any untrue statement of a material fact or omit
to state to the Trust a material fact necessary in order to make
the statements made, in light of the circumstances under which
they are made, not misleading;
(3) engage in any act, practice or course of business which operates
or would operate as a fraud or deceit upon the Trust; or
13
<PAGE>
(4) engage in any manipulative practice with respect to the
Trust.
(B) In this connection, subject to the exceptions stated in Section
II of this Code, it shall be impermissible for any Access Person to
purchase or sell, directly or indirectly, any Security (or any option
to purchase or sell such Security) in which he or she had, or by
reason of such transaction acquires, any direct or indirect beneficial
ownership and which he or she knows or should have known at the time
of such purchase or sale:
(1) is being considered for purchase or sale by the Trust; or
(2) is being purchased or sold by the Trust.
14
<PAGE>
IV. Pre-Clearance for IPO's and Limited Offerings
---------------------------------------------
(A) Advisory Persons must obtain approval from the Designated Supervisory
Person of the Trust before directly or indirectly acquiring beneficial
ownership in any securities in an IPO or a Limited Offering.
V. Reporting
(A) All Access Persons (unless specifically exempted under the provisions
of this Code) shall file with the Designated Supervisory Person a
written report with respect to such Person's transactions in
connection with any Security within:
(1) 10 days after becoming an Access Person (an "Initial Report");
(2) 10 days of the end of each calendar quarter (a "Quarterly
Report"); and
(3) 30 days after the end of the Trust's fiscal year (an "Annual
Report").
(B) A Disinterested Trustee of the Trust need only report a transaction
if, at the time of that transaction, such Trustee knew or, in the
ordinary course of fulfilling his or her official duties as a Trustee,
should have known, that during the 15-day period immediately preceding
or following the date of the transaction by the Trustee, such Security
is or was purchased or sold by the Trust or was being considered by
the Trust or the Manager or Sub-adviser for purchase or sale by the
Trust. (The "should have known" standard implies no duty of inquiry,
does not presume that there should have been any deduction or
extrapolation from discussions or memoranda dealing with tactics to be
employed in meeting the Trust's investment objectives, or that any
knowledge is to be imputed because of prior knowledge of the Trust's
portfolio holdings, market considerations or the Trust's investment
policies, objectives and restrictions.)
(C) The requirement to file an Initial or Annual report is not conditioned
on any particular transaction or series of transactions. The Initial
Report and Annual Report shall contain the following information: (for
an Initial Report, such information must be current as of a date no
more than 10 days after the person became an Access Person. For an
Annual Report, such information must be current as of a date
15
<PAGE>
no more than 30 days before the Annual Report is submitted.)
(1) The title, number of shares, and principal amount of each
Security in which the person filing the report had any direct or
indirect Beneficial Ownership;
(2) The name of any broker, dealer, or bank with whom the person
filing the report maintains an account that contains any
Securities that are held for the direct or indirect benefit of
the person filing the report; and
(3) The date of the Annual Report.
(D) An Access Person that is required to file a Quarterly Report may
satisfy this requirement by providing the Designated Supervisory
Person with copies of confirmations and periodic (monthly/quarterly)
brokerage account statements; provided, however, that information
provided by the Access Person in lieu of the Quarterly Report must
contain the information otherwise required by the Quarterly Report.
(E) Every Quarterly Report shall be made not later than 10 days after the
end of the calendar quarter in which the transaction to which the
report relates was effected, and shall contain the following
information:
(1) The date of the transaction, the title, interest rate and
maturity date (if applicable), the number of shares and the
principal amount of each Security involved;
(2) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition), including information
sufficient to establish any exemption listed in Sections II(2)-
(7) which is relied upon;
(3) The price at which the transaction was effected;
(4) The name of the broker, dealer or bank with or through whom the
transaction was effected; and
(5) The date of the Quarterly Report.
For periods in which no transactions covered under the Code were
effected, the Quarterly Report shall contain a representation to that
effect.
16
<PAGE>
(F) The making of any report required hereunder shall not be construed as
an admission by the person making such report that he or she has any
direct or indirect beneficial ownership in the Security to which the
report relates, and the existence of any report shall not be construed
as an admission that any event reported on constitutes a violation of
Section III(A) hereof.
VI. Review and Enforcement
----------------------
(A) Review
------
(1) Each report described above or, in lieu of the Quarterly Report,
the information described in Section (V)(D), shall be delivered
to the appropriate Designated Supervisory Person. The Designated
Supervisory Person shall cause the reported personal Securities
transactions to be compared with completed and contemplated
portfolio transactions of the Trust to determine whether any
transactions (each a "Reviewable Transaction") listed in Section
----------------------
III may have occurred. Such review shall be conducted within 14
days of the end of each quarter or as soon as practicable
thereafter. The Designated Supervisory Person shall maintain such
records of this review as may be required under Rule 17j-1, as
such rule may be amended from time to time.
(2) If the Designated Supervisory Person determines that a Reviewable
Transaction may have occurred, he or she shall then determine
whether a violation of this Code may have occurred, taking into
account all the exemptions provided under Section II. Before
making any determination that a violation has been committed by
an individual, the Designated Supervisory Person shall give such
person an opportunity to supply additional information regarding
the transaction in question.
(B) Enforcement
-----------
(1) If the Designated Supervisory Person determines that a violation
of this Code may have occurred, he or she shall promptly report
the possible violation to the Trustees of the Trust, who, with
the exception of any person whose transaction is under
consideration, shall take such actions as they consider
appropriate, including imposition of any sanctions that they
17
<PAGE>
consider appropriate, which sanctions may include, among others,
a letter of censure, suspension of the right to trade for his or
her own account or suspension or termination of the employment of
the violator.
(2) No person shall participate in a determination of whether he or
she has committed a violation of this Code or in the imposition
of any sanction against himself or herself. If a Securities
transaction of the Designated Supervisory Person is under
consideration, a Trustee or other officer of the Trust designated
for the purpose by the vote of the Trustees of the Trust, shall
act in all respects in the manner prescribed herein for the
Designated Supervisory Person.
VII. Alternate Code of Ethics
------------------------
(A) The Manager, each Sub-adviser and the Distributor shall be bound by
the requirements of this Code of Ethics of the Trust, except that the
Manager, any Sub-adviser, or the Distributor shall:
(1) Submit to the Board of Trustees of the Trust (the "Board") for
its review a copy of each Code of Ethics applicable to persons
involved with the management of the Trust adopted by such entity
pursuant to Rule 17j-1 under the Act; and
(2) Promptly submit any proposed material amendments to such Code to
the Board for its approval.
(B) In the event a Manager, any Sub-adviser or the Distributor submits a
Code of Ethics which it has adopted and is approved by the Board, the
Manager, any Sub-adviser or the Distributor, as the case may be,
shall:
(1) Promptly furnish to the Board upon request at any time and no
less frequently than once during each fiscal year of the Trust,
copies of any reports made pursuant to such Code by any person
who would, except for the provisions of the final paragraph of
Section I hereof, be defined as an Advisory Person or Access
Person as to the Trust; and
(2) Immediately furnish to the Trust, without request, all material
information regarding any violation of such Code by any person
who would, except for the
18
<PAGE>
provisions of the final paragraph of Section I hereof, be defined
as an Advisory Person or Access Person as to the Trust.
VIII. Records
-------
(A) The Trust shall maintain records in the manner and to the extent
set forth below, which records may be maintained on microfilm
under the conditions described in Rule 31a-2(f)(1) under the Act
and shall be available for appropriate examination by
representatives by the Securities and Exchange Commission.
(1) A copy of this Code and any other Code which is, or at any
time within the past five years has been, in effect shall be
preserved in an easily accessible place.
(2) A record of any violation of this Code and of any action
taken as a result of such violation shall be preserved in an
easily accessible place for a period of not less than five
years following the end of the fiscal year in which the
violation occurs.
(3) A copy of each report made pursuant to this Code, including,
copies of the information described in Section (V)(D), by
any Access Person shall be preserved by the Trust for a
period of not less than five years from the end of the
fiscal year in which it is made, the first two years in an
easily accessible place.
(4) A list of all persons who are, or within the past five years
have been, required to make reports pursuant to this Code
shall be maintained in an easily accessible place.
(5) A copy of any decision by the Trust, and the reasoning
behind such decision, to approve the acquisition of
securities described in Section III (C) for a period of not
less than five years from the end of the fiscal year, in
which such decision is made, the first two years in an
easily accessible place.
(B) Confidentiality
---------------
All reports of Securities transactions and any other information
filed with the Trust pursuant to this Code shall be treated as
confidential, except as regards appropriate
19
<PAGE>
examinations by representatives of the Securities and Exchange
Commission.
IX. Amendment; Interpretation of Provisions
----------------------------------------
The Trustees may from time to time amend this Code or adopt such
interpretations of this Code as they deem appropriate.
20
<PAGE>
Exhibit (p) (2)
Code of Ethics - Table of Contents
<TABLE>
<S> <C>
Statement of General Principles............................ 1
Applicability of Code to Employees of Non-US Offices....... 1
What is the Code of Ethics................................. 2
Section 1 - Definitions.................................... 2
Section 2 - Exempted Transactions.......................... 6
Section 3 - Prohibitions
A. Prohibited Purchases and Sales:
Portfolio Managers............................. 6
Investment Persons and Reporting
Associates.................................... 8
Approved Lists................................. 9
B. Additional Prohibited Activities............... 9
Section 4 - Preclearance
A. Preclearance of Securities Transactions... 13
B. Short-term Trading........................ 13
Section 5 - Reporting...................................... 14
Section 6 - Annual Certification........................... 15
Section 7 - Exemptive Relief............................... 15
Section 8 - Violations and Sanctions....................... 15
Section 9 - Issues Forum................................... 16
</TABLE>
21
<PAGE>
Code Of Ethics
State Street Global Advisors
("SSgA")
Statement of General Principles
In addition to any particular duties or restrictions set forth in the SSgA
Code of Ethics (the "Code"), every employee of the Adviser must adhere to
the following general principles:
I. Since our clients have entrusted us with their assets, we must, at all
times, place the interests of these clients first. These clients
include shareholders in mutual funds which we advise, participants in
the State Street Bank and Trust Company collective investment vehicles
and those clients for whom we manage discretionary accounts.
II. Transactions executed for the employee's personal account must be
conducted in a manner consistent with this Code and in such a manner
as to avoid any actual or perceived conflict of interest or any abuse
of the employee's position of trust and responsibility.
III. Employees are encouraged to make investment decisions regarding their
personal accounts with a long term view. Short-term trading is
strongly discouraged.
IV. Employees must not take inappropriate advantage of their position.
Applicability of Code to Employees of Non-US Offices
Employees of the Adviser's Non-US offices are subject to the terms of the
Code. In addition, however, such employees remain subject to any local laws
and regulations affecting personal investments, investments on behalf of
customers and other activities governed by the Code. It is the
responsibility of each employee to adhere to such regulations. In the event
of any inconsistency between local law or regulation and the terms of this
Code, the employee must adhere to the highest applicable standard.
22
<PAGE>
What is the Code of Ethics?
The Code of Ethics, hereafter referred to as the "Code", is the policy statement
that State Street Global Advisors has adopted which primarily governs personal
securities transactions of its employees. It is designed to ensure that
employees conduct their personal securities transactions in a manner which does
not create an actual or potential conflict of interest to the bank's business or
fiduciary responsibilities. In addition, the Code establishes standards that
prohibit the trading in or recommending of securities based upon material, non-
public information or the tipping of such information to others.
The SSgA Risk Management and Compliance Department oversees overall compliance
with the Code. Failure to comply with the Code could result in company imposed
sanctions, and possible criminal and civil liability, depending on the
circumstances.
Section 1 - Definitions
A. "Access Person" or "Investment Personnel" as defined by SEC Rule 17j-1
means "any Portfolio Manager, Investment Person or Reporting Associate of
State Street Global Advisors or of such other divisions as determined by
the Adviser from time to time, and any other employee of the Adviser
designated as an Access Person by the Compliance Officer by virtue of his
or her stature within the organization."
The following Access Person levels have been established by the SSgA Boston
office. The levels reflect the minimum requirements of the Code of Ethics.
The local Compliance Officer, at his or her discretion, can impose higher
standards in their local environment.
1. "Portfolio Manager" (Level 1) means "the persons identified by the
Adviser, as the portfolio manager or back-up portfolio manager of a
Fund."
2. "Investment Person" (Level 2) means "any director, officer or employee
of the Adviser who, in connection with his or her regular functions or
duties, makes, participates in, or obtains information regarding the
purchase or sale of a Security by a Fund prior to or contemporaneous
with such purchase or sale, or whose functions relate to the making of
any recommendations with respect to such purchase or sale."
23
<PAGE>
3. "Reporting Associate" (Level 3) means "any director, officer or
employee of the Adviser who, in connection with his or her regular
functions or duties, obtains information regarding the purchases or
sales of Securities made by a Fund, either prior to or subsequent to
any such purchases or sales."
4. "Level 4 Person" (Level 4) means any individual who has no contact
with information regarding purchases or sales of Securities made by a
Fund in his or her regular functions or duties. However, such
individual is subject to the Statement of General Principles and the
antifraud provisions (Section 3B(1)) of the Code.
B. "Adviser" means "State Street Global Advisors" and any other investment
advisory division of State Street Bank and Trust Company, "State Street
Global Advisors, Inc." and any subsidiary thereof, "State Street Brokerage"
and "State Street Banque, S.A." and such other entities as from time to
time designated by the Compliance Officer.
C. "Associated Portfolio" means with respect to an Access Person any Portfolio
in the fund group for which such person acts as a Portfolio Manager,
Investment Person or Reporting Associate (e.g., accounts for which the
Access Person is Portfolio Manager, designated Back-up Portfolio Manager).
D. "Beneficial Ownership" shall be interpreted in the same manner as it would
be in determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 and the rules and regulations
thereunder, except that the determination of direct or indirect Beneficial
Ownership shall apply to all Securities which an Access Person has or
acquires other than those Securities which are acquired through dividend
reinvestment.
Beneficial Ownership generally extends to accounts in the name of:
. the Access Person;
. the Access Person's spouse;
. the Access Person's minor children;
. the Access Person's adult children living in the Access Person's home;
and
24
<PAGE>
. any other relative whose investments the Access Person directs
(regardless of whether he or she resides in the Access Person's home).
Beneficial Ownership also includes accounts of another person or entity if
by reason of any contract, understanding, relationship, agreement or other
arrangement the Access Person obtains therefrom benefits substantially
equivalent to those of ownership. Access Persons should contact the local
Compliance Officer regarding any questions they may have concerning
Beneficial Ownership.
E. "Compliance Officer" shall mean "the person identified by the State Street
Global Advisors division of the Adviser, from time to time, as the local
Compliance Officer of SSgA."
F. "Control" means the power to exercise a controlling influence over an
account.
G. "Fund" or "Funds" means "any mutual fund, bank collective fund, common
trust fund, separate account or other type of account advised or sub-
advised by the Adviser."
H. "Portfolio" means "any investment portfolio of a Fund."
I. "Purchase or sale of a Security" includes, among other things, the writing
of an option to purchase or sell a Security.
J. "Security" shall have the meaning set forth in Section 2(a)(36) of the 1940
Act. This definition of "Security" includes, but is not limited to: any
note, stock, treasury stock, bond, debenture, evidence of indebtedness,
certificate of interest or participation in any profit-sharing agreement,
any put, call, straddle, option or privilege on any Security or on any
group or index of Securities, or any put, call, straddle, option or
privilege entered into on a national securities exchange relating to
foreign currency.
Further, for the purpose of this Code, "Security" shall include any
commodities contracts as defined in Section 2(a)(1)(A) of the Commodity
Exchange Act. This definition includes but is not limited to futures
contracts on equity indexes.
"Security" shall not include securities issued by the government of the
United States, or, with respect to Access Persons employed in the Non-US
offices, the government of the country in which such office is located,
bankers' acceptances, bank certificates of deposit, commercial paper and
shares of registered open-end investment companies (e.g., open-end
25
<PAGE>
mutual funds, or the equivalent such as SICAVs). Any question as to
whether a particular investment constitutes a "Security" should be
referred to the local Compliance Officer.
K. "Seven Day Blackout"
. Portfolio Manager - The Code prohibits a portfolio manager from
buying or selling a security within seven calendar days after it
is traded in a portfolio he or she manages.
. Access Person - who has access to the fundamental research in his or
her area, is also restricted from buying or selling a security
that is added to, removed from, or has had a rating change to an
approved stock list. (See Section 3 -"Approved Lists" for
additional detail.)
L. "Short-term Trading" means buying and selling or selling and buying
the same security within a 60 day period.
Section 2 - Exempted Transactions
The prohibitions of Section 3A of this Code shall not apply to:
A. Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control (e.g.,
assignment of management discretion in writing to another party). If
management authority is ceded to a person in the same household
(spouse, dependent children or other individual living in the same
household as the Access Person, then preclearance requirements still
have to be met.)
B. Purchases or sales which receive the prior approval of counsel to the
Adviser or the Compliance Officer.
C. Purchases or sales by an Access Person other than a Portfolio Manager
which are categorized as de minimis through the Preclearance Procedure
described in Section 3A(1).
D. Acquisition of a Security due to dividend reinvestment or similar
automatic periodic investment process or through the exercise of
rights, warrants or tender offers. However, these transactions should
be reported by Level 1-3 Access Persons in their quarterly reporting
once acknowledgement of the transaction is received.
26
<PAGE>
Section 3 - Prohibitions
A. Prohibited Purchases and Sales
Portfolio Managers: (Level 1) Access Persons
1. Portfolio Manager shall not, for his or her own personal account (or
for an account in which he or she has Beneficial Ownership/1/):
a. purchase a Security that is being purchased or sold or is being
considered for purchase or sale in any Associated Portfolio; or
b. sell a Security that is being purchased or sold or is being
considered for purchase or sale in any Associated Portfolio./2/
A Security is "being considered for purchase or sale" when a
recommendation to purchase or sell a Security has been made and
communicated and, with respect to the person making the recommendation,
when such person seriously considers making such a recommendation.
Here is an example of this prohibition:
This morning, Access Person "A" overhears Portfolio Manager "B"
------------
planning to purchase shares of XYZ for the stock Fund which he manages.
"A" hastily purchases shares of XYZ for her personal account. Portfolio
Manager "B" places the buy order for the stock in the afternoon. "A"
-------------
would be front-running the Fund, and would be subjected to sanctions
and criminal penalties.
2. No Portfolio Manager shall, for his or her own personal account (or for
an account in which he or she has Beneficial Ownership):
_____________________
/1/ Please see Section 1D of the COde for definition of "Beneficial Ownership."
/2/ This "front-running" prevention rule is designed to prevent personal gain
based upon the investment activities or recommended investment activities of any
of the Associated Portfolios.
27
<PAGE>
a. sell any Security until seven (7) full calendar days have elapsed
since the most recent purchase or sale of that Security by any
Associated Portfolio; or
b. purchase any Security until seven (7) full calendar days have
elapsed since the most recent purchase or sale of that Security
from any Associated Portfolio./3/
Here is an example of this prohibition:
Yesterday, Portfolio Manager "A" sold 100 shares of XYZ from the Fund
which he manages. Today, back-up Portfolio Manager "B", who manages a
different Fund within the same investment group, decides to purchase 50
shares of XYZ for his own personal account. Because trading occurred
within 7 days of the most recent fund transaction it is a direct
violation of the black-out requirement, therefore, subjecting the
manager to sanctions.
Investment Persons and Reporting Associates: (Level 2 & 3) Access Persons
1. No Access Person (other than Portfolio Managers) shall, for his or her
own personal account or for an account in which he or she has
Beneficial Ownership/4/):
a. purchase a Security that is being purchased or sold or is being
considered for purchase or sale in any Fund unless the transaction
is considered de minimis as noted above in Section 2C Exempted
Transactions; or
b. sell a Security that is being purchased or sold or is being
considered for purchase or sale in any Fund unless the
____________________
/3/ This black-out requirement is designed to prevent personal gain based upon
the investment activities of any of the Associated Portfolios. A Portfolio
Manager may not trade the same as security as an Associated Portfolio until
seven full calender days have elapsed since the Portfolio trade (the seven days
do not include the day of the Portfolio trade).
/4/ Please see Section 1D of the Code for definition of "Beneficial Ownership."
28
<PAGE>
transaction is considered de minimis as noted above in Section 2C
Exempted Transactions./5/
A Security is "being considered for purchase or sale" when a
recommendation to purchase or sell a Security has been made and
communicated and, with respect to the person making the recommendation,
when such person seriously considers making such a recommendation.
Approved Lists
Personal securities transactions in a security that is added to or
removed from an approved stock list are prohibited for a period of
seven days after the addition, removal or change in rating of the
security. The same seven day restriction applies following any change
to the short or long term investment rating. Furthermore, the Access
Person is restricted from sharing this information with others who do
not have the same access levels.
(Currently, this list is maintained by the Global Fundamental Research
Group. There may be other lists or groups that this restriction
applies. See your local Compliance Officer for additional information.)
B. Additional Prohibited Activities
1. Neither an employee of the Adviser nor any Access Person shall, in
connection with the purchase or sale (directly or indirectly) by the
Adviser, of a Security held or to be acquired by a Fund:
a. employ any device, scheme or artifice to defraud a Fund;
b. make any material misstatement to a Fund or omit any material fact
in any statement to a Fund where such omission would tend to make
the statement misleading;
___________________
/5/ This "front-running" prevention rule is designed to prevent personal gain
based upon the investment activities or recommended investment activities of any
of the Associated Portfolios.
29
<PAGE>
c. engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon a Fund; or
d. engage in any manipulative practice with respect to a Fund.
The above prohibited activities shall at all times include, but shall
not be limited to, the following:
(i) purchasing or selling securities on the basis of material/6/
non-public/7/ information;
(ii) purchasing or selling, knowingly, directly or indirectly,
securities in such a way as to compete personally in the
market with a Fund, or acting personally in such a way as to
injure a Fund's transactions;
(iii) using knowledge of securities transactions by a Fund,
including securities being considered for purchase or sale,
to profit personally, directly or indirectly, by the market
effect of such transactions.
(iv) engaging in short selling and options trading of State Street
securities (except to the extent such options are issued by
the Corporation as part of an employee's compensation.)
2. Each of the following activities by an Access Person or Investment
Personnel Level 1-4 shall be prohibited:
_____________________
/6/ Material Information: information the discrimination of which would have a
substantial impact on the market price of the company's securities, or is likely
to be considered important by reasonable investors in determining whether to
trade in such securities. Examples of the type of information that might be
"material" would include the following: earnings estimates or changes in
previously released earnings estimates, merger or acquisition proposals, major
litigation, significant contracts, dividend changes, extraordinary management
developments.
/7/ Non-public Information: information that has not been generally disclosed to
the investing public. Information found in a report filed with a local
regulatory agency, such as the SEC, or appearing in publications of wide
circulation would be considered public.
30
<PAGE>
a. purchasing Securities in an initial public offering unless:
(i) the Access Person has a right to purchase the Security due to
the Access Person's pre-existing status as a policy holder or
depositor with respect to such Security or as a shareholder of
a related company; or,
(ii) the right to purchase is awarded by lottery or other non-
discretionary method by the issuer.
b. participation in a private offering (e.g., offerings of securities
not registered with a local regulatory agency, such as the SEC,
stocks of privately held companies, private placements and non-
publicly traded limited partnerships) without prior written consent
from an SSgA Compliance Officer by use of the form attached here as
Appendix E;
c. participation in a private offering and failing to disclose any
subsequent conflicts of interests to the Compliance Officer. An
example of this would be a portfolio manager purchasing a private
offering (with approval as detailed in 2(b) above) and then causing
a portfolio which he or she manages to purchase the same private
offering without disclosing this conflict of interest.
d. using any derivative, or using any evasive tactic, to avoid the
restrictions of this Code;
e. serving as a director of the following without prior written
consent of State Street Global Advisors' Area Executive and notice
to the Compliance Officer:
. a publicly traded company other than State Street Corporation or
its subsidiaries or its affiliates; or
31
<PAGE>
. any company the Securities of which are owned by a Fund,
f. accepting or receiving, either directly or indirectly, from any
organization or employee thereof with which we conduct a business
relationship (e.g., customers or vendors) a gratuity or anything of
value in excess of one hundred (US $100) dollars per individual per
calendar year. A gratuity includes a gift of any type.
The purpose of this gratuity restriction is to allow only proper and
customary business amenities. Amenities considered permissible include
the following:
. occasional meals, social gatherings or meetings conducted for
business purposes; or
. gifts in the nature of promotional materials, such as a pen,
calendar, umbrella or the like, which are inscribed with the
giver's name or a business message.
Amenities considered not to be permissible include, but are not
limited to, the following:
. transportation expenditures, such as airfare or rental car; or
. hotel or other lodging accommodation expenditures
32
<PAGE>
Section 4 - Preclearance
A. Preclearance of Securities Transactions
In order to monitor this Section 4A, Adviser requires each Access Person to
comply with the Personal Securities Transaction Preclearance Procedure
attached hereto as Appendix C.
. Preclearance must be obtained after 10:00 a.m. EST (or at such
local time as is designated by each Non-US office) of the day on
which the Access Person proposes to trade.
. Such preclearance is good until midnight of the day it is granted
in the location of the primary exchange where the security is
traded. It is also allowable to order a market trade electronically
up to this time deadline. Any order not executed on the day of
preclearance must be re-submitted for preclearance before being
executed on a subsequent day (e.g., "good-'til-canceled" or "limit"
orders must receive preclearance every day that the order is open).
. Preclearance of any registered open-end investment company is not
required.
. The Lotus Notes preclearance process must be used in sites where
available consistent with policies established from time to time by
Risk Management and Compliance.
B. Short-term Trading
In order to monitor short-term trading activity, each Access Person is
required to identify on Appendix C whether he or she has traded in the
proposed security within the past 60 days. Short -term trades will be
monitored and reported to management to ensure that Access Persons are
adhering to SSgA's long- term investment philosophy generally.
- --------------------
See Appendix F for additional information on preclearance.
33
<PAGE>
Section 5 - Reporting
A. Every Access Person who is identified and notified by the Compliance Officer
as having to comply with this Section shall:
1. upon such notification, provide the Compliance Officer with disclosure of
all personal Securities holdings as described in Appendix A within 10
calendar days of employment and annually) thereafter, except that the
requirement of this Section 5A(1) shall only apply to Portfolio Managers
and Investment Persons (Access Person Level 1 and 2); and
2. report to the Compliance Officer the information described in Section 5C
with respect to transactions in any Security in which such Access Person
has, or by reason of such transaction acquires, any direct or indirect
Beneficial Ownership in the Security.
B. Quarterly reports required under this Section shall be made not later than
nine (9) days after the end of each calendar quarter (calendar quarters are
March 31, June 30, September 30 and December 31).
Access Persons will be reminded quarterly of this obligation by a notice, but
it is incumbent upon each Access Person to report to the Compliance Officer
within the nine-day (9-day) reporting period whether he or she did or did not
effect such transactions.
C. Access Persons are required to notify any brokers, dealers, investment
advisers, banks and other financial institutions with whom they have their
securities trading accounts to forward duplicate confirms of any and all of
their trades and periodic account statements containing trading activity to
the Compliance Officer and may use the form letter attached as Appendix B to
notify such financial institutions.
D. Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or she has
any direct or indirect Beneficial Ownership in the Security to which the
report relates.
- ------------------------------
See definition of "Security" and "Beneficial Ownership" for additional
information.
34
<PAGE>
E. Access Persons transacting in Securities, as defined in Section 1J. of
the Code, contained in self directed pension brokerage accounts, self
managed brokerage accounts (SMBA) or 401(k) retirement accounts are
included in any reporting or preclearance requirements.
F. Investment in the State Street Stock Fund through the State Street 401k
plan do not require regular preclearance or reporting. Although
transactions in the State Street Stock Fund do not need to be reported,
as they are not defined as a Security, employees trading in the State
Street Stock Fund should be aware that these transactions are subject
to the insider trading restrictions contained in the Code of Ethics and
State Street's Standard of Conduct.
G. Access Persons are prohibited from engaging in short selling and
options trading of State Street securities (except to the extent such
options are issued by the Corporation as part of an employee's
compensation).
H. State Street options granted in conjunction with an employee's
compensation do not need to be precleared or reported if exercised at
first opportunity as dictated by Global Human Resources. Options
exercised on any other date are subject to preclearance and reporting
requirements.
Section 6 - Annual Certification
All Access Persons and Non Access Persons must certify annually that he or
she has read, understands and recognizes that he or she is subject to the
Code. In addition, all Access Persons and Non Access Persons must certify
annually that he or she has complied with the Code and has disclosed and
reported all personal securities transactions required to be disclosed or
reported.
Section 7 - Exemptive Relief
An Access Person who believes that aspects of the Code impose a particular
hardship or unfairness upon them with respect to a particular transaction
or situation, without conferring a corresponding benefit toward the goals
of the Code, may appeal to the Compliance Officer for relief from Code
provision(s) relating to a particular transaction or ongoing activity or
reporting requirement.
35
<PAGE>
If relief is granted, the Compliance Officer may impose alternative
controls or requirements. Any relief granted in this regard shall apply
only to the Access Person who had sought relief and no other Access Person
may rely on such individual relief unless specifically authorized by their
local Compliance Officer. If circumstances warrant, the Compliance Officer
may submit the anonymous request to the Code of Ethics Committee for input.
Section 8 - Violations and Sanctions
The Code of Ethics Committee is presented with the facts and circumstances
of a violation on an anonymous basis by the Compliance Officer on a
quarterly basis. The Code of Ethics Committee is charged with reviewing
violations of the Code and imposing sanctions by a majority vote.
Upon discovering a violation of this Code, its policies or procedures, the
directors of a Fund, the Adviser, or the Committee may impose such
sanctions as it deems appropriate, including, among other things, the
following:
. a letter of censure to the violator;
. a monetary fine levied on the violator;
. suspension of the employment of the violator;
. termination of the employment of the violator;
. civil referral to the SEC or other civil regulatory authorities determined by
the Board of the Fund, the Adviser or other appropriate entity; or
. criminal referral -- determined by the Board of the Fund, the Adviser or
other appropriate entity.
The Access Person is given an opportunity to appeal a Committee decision if
he/she is believes there are extenuating facts and circumstances of which the
Committee and Compliance were unaware.
36
<PAGE>
Section 9 - Issues Forum
If you have a concern or question, you can voice this concern, i.e., issue or
personal complaint on an anonymous basis by submitting it in writing to:
State Street Global Advisors
Attention: Compliance Officer
P.O. Box 9185
Boston, MA 02209
37
<PAGE>
Exhibit (p) (3)
CONNING ASSET MANAGEMENT COMPANY
CODE OF ETHICS
Code of Ethics; Employee Security Transactions
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Conning Asset Management Company (CAM) has adopted a Code of Ethics to specify
and prohibit certain types of personal securities transactions deemed to create
a conflict of interest. The Code of Ethics establishes reporting requirements
and preventative procedures pursuant to the provisions of Rule 204-2 of the
Advisers Act and Rule 17j-1(b)(1) under the Investment Company Act.
Definitions. The following definitions are applicable to terms used in
CAM's Code of Ethics:
(a) "Access Person" means any director, officer or Advisory Person of
CAM.
(b) "Advisory Person" means any employee of CAM who, in connection
with his or her regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of securities by CAM's
advisory clients or whose functions relate to any recommendations with
respect to such purchases or sales.
(c) "Investment Personnel" means an employee of CAM who, in
connection with his or her regular functions or duties, makes or
participates in making recommendations regarding the purchase or sale of
securities of an advisory client (i.e. portfolio managers, securities
analysts and traders).
(d) "Portfolio Manager" means any person or persons with the direct
responsibility and authority to make investment decisions affection an
advisory client's portfolio.
Questions regarding your classification should be directed to the
Compliance Officer.
(e) "Beneficial Ownership" of a security means any security in which
you, your spouse, your dependent children, or any person that shares your
household has voting or investment power over that security.
(f) "Compliance Officer" means the individual(s) designated by CAM
with the primary responsibility for monitoring compliance with applicable
laws, regulations, and requirements promulgated by self regulatory
organizations.
(g) "Covered Security" means all securities as defined in section
2(a)(36) of the Investment Company Act of 1940 excluding direct obligations
of the United States Government, banker's acceptances bank certificates of
deposit, commercial paper, repurchase agreements, and shares issued by
open-end investment companies.
(h) "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933 the issuer of which,
immediately before the registration was not subject to the reporting
requirements of the Securities Exchange Act of 1934.
(i) "Personal Securities Account" means any securities account
maintained with a bank, broker or dealer in which you have a beneficial or
controlling interest (such as a family account) or where you exercise
investment discretion over the account or provide investment advice with
respect to that account.
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General Principles. In conducting personal investment activities, each
employee shall adhere to the highest ethical standards and shall at all times:
(a) place the interests of CAM's advisory clients before his or her
personal interests;
(b) conduct all personal securities transactions in a manner
consistent with this Code of Ethics, so as to avoid any actual or potential
conflicts of interest, or an abuse of position of trust and responsibility;
(c) not take any inappropriate advantage of his or her position with
or on behalf of CAM's advisory clients.
Restrictions on Personal Investment Activities. The following rules govern
the personal securities transactions of Access Persons, Advisory Persons and
Investment Personnel as applicable:
Personal Trading Information
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. No later than 10 days after becoming an Access Person, all Access
Persons must complete an "Initial Holdings Report" obtained from
the Compliance Officer. The "Initial Holdings Report" must
include (i) the title, number of shares and principal amount of
each Covered Security Beneficially Owned by the Acess Person,
(ii) all Personal Securities Accounts of the Access Person and
(iii) the date the "Initial Holdings Report" is submitted by the
Access Person.
. Duplicate confirmations and statements of Access Persons'
Personal Securities Accounts that hold or are used to transact
Covered Securities must be sent directly to the Compliance
Department by the bank, broker or dealer on a timely basis.
. On a quarterly basis, Access Persons will be requested to review
the completeness and accuracy of (i) Personal Securities Account
information and (ii) Covered Securities held or transacted
outside of a Personal Securities Account as reported to the
Compliance Officer. The Access Person must provide any additions,
deletions or changes to such information to the Compliance
Officer by no later than 10 days after the end of the calendar
quarter.
. On at least an annual basis, Access Persons will be requested to
sign a statement confirming the completeness and accuracy of all
information reported through the above procedures.
. A person need not report information in accordance with the above
procedures with respect to transactions effected for, and Covered
Securities held in, any account over which the person does not
have direct or indirect influence or control.
. All trading and holdings information will be reviewed under the
direction of the Compliance Officer and will be compared against
Conning & Company's Restricted List. The Compliance Officer
maintains the names of individuals responsible for reviewing
trading and holdings information.
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Pre-Clearance of Trades.
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Personal transactions by any Access Person in the following securities
must be approved by the Compliance Officer prior to execution:
. securities of companies in the insurance, insurance related, and HMO
industries;
. securities of investment companies affiliated with CAM (excluding the
purchase of a variable insurance contract or annuity which is invested
in a registered separate account);
. securities offered in a private placement; and
. securities issued by any of CAM's advisory clients.
Investment Personnel of any of CAM's investment company clients registered
under the Investment Company Act of 1940 must obtain approval from the
Compliance Officer before directly or indirectly acquiring beneficial ownership
in:
. any securities in an Initial Public Offering (IPO); and
. any securities offered in a limited offering such as a private
placement exempt from registration as well as offerings that are not
public.
. The Compliance Officer will review all proposed investments on a case-
by-case basis. In deciding whether to approve an investment, the
Compliance Officer will consider potential conflicts that may cause
CAM or its Investment Personnel to violate their fiduciary obligations
to CAM's advisory clients. The Compliance Officer will retain a record
of any approvals of direct or indirect acquisition by Investment
Personnel of a beneficial interest in securities in an IPO or limited
offering.
Error! Bookmark not defined. Other Personal Investment Restrictions.
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From time to time, Access Persons may be prohibited from trading other
securities in which they have positions due to potential conflict of interest
situations.
An approval received from the Compliance Officer is valid only on the day
on which it was issued.
If, for its advisory client, CAM decides to purchase securities of an
issuer, the securities of which have been previously acquired by a Portfolio
Manager, the decision to purchase the securities for the advisory client is
subject to an independent review by an Advisory Person with no personal interest
in the issuer.
Personal transactions in securities issued by Conning Corporation shall be
governed by the "Insider Trading and Reporting Policy of Conning Corporation"--
a copy is included in the "Appendix" of CAM's Compliance Manual).
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Error! Bookmark not defined. Blackout Periods
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. An Access Person who knows that an actively-managed CAM advisory
client has traded in a Covered Security, has a pending "buy" or
"sell" order for a Covered Security, or intends to trade in or
place an order to "buy" or "sell" a Covered Security, shall not
Transact in that Covered Security during the Restricted Period.
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For purposes of this blackout policy, the phrase:
. "actively managed CAM advisory client" means an account or
portfolio over which CAM has investment discretion and excludes
accounts that are managed pursuant to a passive investment
formula (e.g., index funds).
. "business day" means any day on which the national securities
markets are open for trading.
. "Restricted Period" means the day of and five (5) business days
before and after the day of a trade, entry of an order to "buy"
or "sell" the Covered Security on behalf of the client, or the
date on which an Access Person intends to engage in such
transactions on behalf of a CAM client.
. "Transact" in a Covered Security means a transaction in which the
Access Person acquires or divests (i) any direct or indirect
Beneficial Ownership of the Covered Security, (ii) any position
covering a long or short-sale of the Covered Security, or (iii)
any derivative of the Covered Security such as an option to
purchase or sell such security or any security that is
exchangeable for or convertible into such security.
Error! Bookmark not defined. Exemptions. The above restrictions and
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procedures do not apply to:
. transactions effected in personal accounts in which the only
security holdings are mutual funds;
. transactions effected in accounts in which an outside investment
manager has full discretion and the Access Person cannot
participate in or be informed about investment decisions until
after the transactions are effected;
. transactions that are non-volitional on the part of the Access
Person or CAM client, such as mergers, recapitalizations, and
automatic dividend reinvestment plans; and
. transactions that are effected upon the exercise of rights issued
by an issuer on a pro-rata basis to all holders of a class of
securities.
In all cases, CAM reserves the right to reverse or cancel for cause any
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trade at the individual's expense without prior notification to the individual.
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