<PAGE>
No. 333-59093
811-08879
As filed with the Securities and Exchange Commission on April 27, 1999
Form N-1A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [1]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. [2]
(Check appropriate box or boxes)
SUN CAPITAL ADVISERS TRUST
-----------------------------------
(Exact name of registrant as specified in charter)
One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481
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(Address of principal executive office) (Zip Code)
Registrant's Telephone Number, including Area Code: (781) 237-6030
----------------------------------------------------
James M.A. Anderson
Sun Capital Advisers Trust
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
----------------------------------------------------
(Name and address of agent for service)
Copies of communications to:
Christopher P. Harvey, Esq.
Hale and Dorr LLP
60 State Street
Boston, MA 02109
It is proposed that this filing will become effective (check appropriate box):
<TABLE>
<C> <S>
immediately upon filing pursuant to paragraph (b)
----
X on May 1, 1999 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(1)
----
on [date] pursuant to paragraph (a)(1)
----
75 days after filing pursuant to paragraph (a)(2)
----
on [date] pursuant to paragraph (a)(2) of Rule 485
----
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a previously
---- filed post-effective amendment.
</TABLE>
<PAGE>
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[LOGO of Sun Capital Advisers Trust Appears Here]
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Prospectus
May 1, 1999
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Sun Capital Money Market Fund
Sun Capital Investment Grade Bond Fund
Sun Capital Real Estate Fund
Sun Capital Advisers, Inc., a member of the Sun Life Assurance Company
of Canada group of companies, serves as investment adviser
to the Sun Capital funds.
The Securities and Exchange Commission has not approved any fund's shares as
an investment or determined whether this prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
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<PAGE>
Table of Contents
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<TABLE>
<S> <C>
The Funds' Goals and Strategies............................................. 1
Money Market Fund........................................................ 1
Investment Grade Bond Fund............................................... 2
Real Estate Fund......................................................... 3
More About the Funds' Investments........................................... 4
Investment Grade Bond Fund............................................... 4
Real Estate Fund......................................................... 4
The Investment Adviser...................................................... 6
About the Adviser........................................................ 6
Portfolio Managers....................................................... 7
Purchase and Redemption Information......................................... 8
Buying and Redeeming Shares.............................................. 8
Automatic Transactions................................................... 8
Valuation of Shares...................................................... 8
Dividends and Distributions.............................................. 9
Taxes.................................................................... 9
Fund Details................................................................ 9
Financial Highlights ....................................................... 10
Additional Information...................................................... 11
</TABLE>
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<PAGE>
The Funds' Goals And Strategies
. Money Market Fund
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Investment Maximizing current income, consistent with maintaining liquidity
goals and preserving capital. The fund's board may change these goals
without obtaining the approval of the fund's shareholders.
Key The fund invests exclusively in high quality U.S. dollar-
investments denominated money market securities, including those issued by:
and
strategies
. U.S. and foreign banks
. corporate issuers
. the U.S. government and its agencies and instrumentalities
. foreign governments
. multinational organizations such as the World Bank
The fund may invest in all types of money market securities,
including commercial paper, certificates of deposit, bankers'
acceptances, mortgage-backed and asset-backed securities,
repurchase agreements and other short-term debt securities.
Minimum Ratings in a rating agency's two highest short term rating
credit categories or equivalent quality for unrated securities.
quality
Maximum Average dollar weighted portfolio maturity of 90 days or less.
maturity Maturity of 397 days or less for individual securities.
How The adviser selects for the fund's portfolio those securities
investments that appear to offer the best relative value based on an analysis
are of their credit quality, interest rate sensitivity, yields and
selected prices. To take advantage of changing yield differentials, the
fund may overweight securities in particular sectors of the short
term debt market while maintaining overall issuer and sector
diversification.
Principal The fund might not be able to maintain a $1 share price, investors
risks of could lose money and the fund could underperform other money
investing market funds if any of these events occurs:
in the
fund
. The issuer or guarantor of a security owned by the fund defaults
on its payment obligations, becomes insolvent or has its credit
rating downgraded by a rating agency.
. There is a sudden or sharp increase in interest rates.
. The adviser's judgments about the relative values of securities
selected for the fund's portfolio prove to be wrong.
. The value of the fund's U.S. dollar-denominated foreign
securities goes down because of foreign government actions,
political instability or the more limited availability of
accurate information about foreign issuers.
The fund may be appropriate for investors who are looking for:
Who may
want to . liquidity and stability of principal
invest
. a conservative temporary investment
The fund may not be appropriate for investors who:
. need the added security of federal deposit insurance offered by
bank deposits
. are investing for long-term growth
. are looking for a rate of return that consistently exceeds the
rate of inflation
An investment in the fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by
investing in the fund.
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<PAGE>
The Funds' Goals And Strategies
. Investment Grade Bond Fund
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Investment High current income consistent with relative stability of
goals principal. The fund's board may change these goals without
obtaining the approval of the fund's shareholders.
Key The fund invests primarily in investment grade bonds, including
investments those issued by:
and . U.S. and foreign companies, including companies in emerging
strategies market countries
. the U.S. government and its agencies and instrumentalities,
including those that issue mortgage-backed securities
. foreign governments, including those of emerging market
countries
. multinational organizations such as the World Bank
Credit At least 80% of its assets in investment grade securities. Up to
quality 20% of its assets in high yield or junk bonds rated at least B by
one rating agency or unrated bonds of equivalent quality.
Duration Portfolio duration range generally of 3 1/2 to 6 years. (Duration
target is a measure of interest rate sensitivity.) There is no limit on
the maturity or duration of individual securities.
How The adviser selects investments for the fund's portfolio by:
investments . Analyzing the credit quality, yield and investment risk of
are individual securities in order to estimate their relative value
selected and attractiveness.
. Identifying sectors and maturity ranges that appear to be
temporarily underpriced and, therefore, offer favorable yields
given their interest rate sensitivity and other risks.
. Considering whether a particular investment is consistent with
the fund's targets for portfolio duration, maturity
distribution and issuer and sector diversification.
Principal Investors could lose money on their investments in the fund
risks of or the fund could perform less well than other possible
investing investments if any of the following occurs:
in the . Interest rates go up, which will make bond prices go down and
fund reduce the value of the fund's bond portfolio accordingly.
. The issuer of a security owned by the fund defaults on its
payment obligations or has its credit rating downgraded by a
rating agency. This risk is higher for high yield bonds.
. The issuer of a security exercises its right, when interest
rates are falling, to prepay principal earlier than
scheduled, forcing the fund to reinvest in lower yielding
securities. This is known as call or prepayment risk.
. The issuer of a security exercises its right when interest
rates are rising to extend the time for paying principal,
which will lock in a below-market interest rate, increase
the security's duration and reduce the value of the
security. This is known as extension risk.
. Prices of the fund's foreign securities go down because of
foreign government actions, political instability or the more
limited availability of accurate information about foreign
issuers. These risks are accentuated for issuers in emerging
market countries.
. The adviser's judgments about the relative values of
securities selected for the fund's portfolio prove to be
wrong.
. The adviser's hedging strategies are not successful.
Who may The fund may be appropriate for investors who:
want to . want higher potential returns than a money market fund and
invest are willing to accept more risk of price volatility
. are seeking to diversify their investment portfolios
The fund may not be appropriate for investors who:
. are investing for maximum long-term growth or the highest
possible income
. want absolute stability of principal
An investment in the fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government
agency.
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The Funds' Goals and Strategies
. Real Estate Fund
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Investment Primary Long term capital growth Secondary Current income and
goals growth of income. The fund's board may change these goals without
obtaining the approval of the fund's shareholders.
Key The fund invests at least 80% of its assets in securities of real
investmentsestate investment trusts (REITs) and other real estate companies.
and The fund generally focuses its investments in equity REITs, which
strategies invest most of their assets directly in U.S. or foreign real
property, receive most of their income from rents and may also
realize gains by selling appreciated property.
How
investments
are selected
The adviser allocates the fund's investments across various
geographic areas, REIT managers and property types, such as
apartments, retail properties, office buildings, hotels,
industrial properties, health care facilities, correctional
facilities, manufactured housing, golf courses and storage
facilities. The adviser selects securities for the fund's
portfolio by analyzing the fundamental and relative values of
potential REIT investments based on several factors, including:
. The ability of a REIT to grow its funds from operations
internally through increased occupancy and higher rents and
externally through acquisitions and development.
. The quality of a REIT's management, including its ability to buy
properties at reasonable prices and to add value by creative and
innovative property and business management.
. A REIT's cash flows, price/funds from operations ratio, dividend
yield and payment history, price/net asset value ratio and
market price.
. Current or anticipated economic and market conditions, interest
rate changes and regulatory developments.
Principal Investors could lose money on their investments in the fund or the
risks of fund could perform less well than other possible investments if
investing any of the following occurs:
in the . The U.S. or a local real estate market declines due to economic
fund conditions, supply/demand imbalances (e.g., overbuilding and
high vacancy rates) reduced or regulated rents or other causes.
. Interest rates go up. This can affect the availability or cost
of financing for property acquisitions and reduce the value of a
REIT's fixed income investments.
. The values of properties owned by a REIT are hurt by property
tax increases, zoning changes, other governmental actions,
environmental liabilities, natural disasters or increased
operating expenses.
. A REIT in the fund's portfolio is, or is perceived by the market
to be, poorly managed.
. The market for REITs goes down or is less favored than other
stock market sectors or types of investments.
. The adviser's judgments about the relative values of REIT
securities selected for the fund's portfolio prove to be wrong.
Many REITs are small capitalization companies that may experience
more price volatility, be less liquid and have more limited
financial resources than large capitalization companies.
The fund is not diversified, which means that it can invest a
higher percentage of its assets in any one issuer than a
diversified fund. Also, the fund concentrates (invests 25% or more
of its assets) in the real estate group of industries. Being non-
diversified and concentrated may magnify the fund's losses from
adverse events affecting a particular issuer or the real estate
group of industries.
Diversification
and
industry
concentration
Who may The fund may be appropriate for investors who:
want to . are pursuing a long term goal such as investing for retirement
invest . want to allocate part of their investment portfolio to real
estate investments
. are seeking higher long term returns and can accept the risk of
volatility in the stock and real estate markets
The fund may not be appropriate for investors who:
. are pursuing a short term investment goal
. want stability of principal
. are uncomfortable with the risk of price volatility in the stock
and real estate market
An investment in the fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government
agency.
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More About The Funds' Investments
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. Investment Grade Bond Fund
Substantially
all of the
fund's
investments
will be
either
U.S.
dollar-
denominated
or hedged
back into
U.S.
dollars
through
transactions
in
currency
swaps or
other
currency
derivative
contracts.
Permitted investments The fund may invest in all types of fixed
income securities of any maturity or duration, such as:
.bills, notes, bonds
.residential and commercial mortgage-backed securities
.collateralized mortgage and bond obligations
.asset-backed securities
.structured notes and other derivative securities
.convertible securities
.preferred stock and trust certificates
These securities may have all types of interest rate payment and
reset terms, including fixed rate, adjustable rate, zero coupon,
payment in kind and auction rate features.
Credit quality Securities are investment grade if they are rated
in one of the four highest long-term rating categories of a
nationally recognized statistical rating organization, have
received a comparable short-term or other rating or are unrated
securities that the adviser believes are of comparable quality.
Lower credit quality securities are known as high yield bonds or
junk bonds. If a security receives different ratings from multiple
rating organizations, the fund may treat the security as being
rated in the highest rating category received. The fund may choose
not to sell securities that are downgraded, after their purchase,
below the fund's minimum acceptable credit rating. The fund's
credit standards also apply to counterparties on "over-the-
counter" derivative contracts.
. Real Estate Fund
Equity Permissible investments and additional risks Although the fund
securities typically focuses on equity REITs, it may invest without
include restriction in mortgage REITs and in equity securities of other
common U.S. and foreign real estate companies. A mortgage REIT invests
stocks, most of its assets in real estate mortgages and earns most of its
trust income from interest payments. A real estate company is a company
shares, that earns at least 50% of its gross revenues or net profits from
preferred real estate activities or from products or services related to the
stocks and real estate sector. Real estate activities include owning,
debt developing, managing or acting as a broker for real estate.
securities Examples of related products and services include building
convertiblesupplies and mortgage servicing.
into stock
and
warrants.
In selecting investments for the fund, the adviser identifies
securities with significant potential for appreciation relative to
risk and other securities while also analyzing the level of
dividend payments. The adviser uses the same strategy to select
other real estate companies for the fund as it uses to select
REITs. Many of the risks of REIT investing described in "The
Funds' Goals and Strategies" also apply to other real estate
companies.
REITs are subject to the following additional risks:
. A REIT may be unable to obtain financing to fund income and gain
distributions required by federal tax law.
. A REIT may fail to qualify for the federal tax exemption for
distributed income.
. Changes in federal tax law may adversely affect REITs, for
example, by limiting their permissible businesses or
investments.
. Fund shareholders indirectly bear a proportionate share of the
advisory fees and other operating expenses of REITs in the
fund's portfolio in addition to the advisory fees and other
expenses of the fund.
The fund may invest up to 20% of its assets in any of the fixed
income securities in which Investment Grade Bond Fund is permitted
to invest.
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More About The Funds' Investments
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. Investment Grade Bond Fund
. Real Estate Fund
A Derivative contracts Investing in the individual bonds and
derivative sectors considered most attractive by the adviser may not
contract necessarily enable Investment Grade Bond Fund to achieve its
will target duration. This fund may use derivative contracts to
obligate increase or decrease the fund's duration. In addition, Real
or entitle Estate Fund may use derivative contracts to manage the interest
the fund rate risk associated with both its real estate and fixed income
to deliver investments and to stay fully invested in stocks when it has a
or receive significant cash position.
an asset
or a cash
payment
that is
based on
the change
in value
of a
designated
security,
currency
or index.
Even a small investment in derivative contracts can have a large
impact on a fund's interest rate sensitivity and securities
market exposure. Therefore, using derivatives can
disproportionately increase fund losses and reduce opportunities
for gains when interest rates or securities prices are changing.
A fund may not fully benefit from or may lose money on
derivatives if the adviser's expectations in using them prove
incorrect or if changes in their value do not correspond
accurately to changes in the value of the fund's other portfolio
holdings.
Some of the foreign securities purchased by Investment Grade Bond
Fund and Real Estate Fund may be denominated in a foreign
currency, which could decline in value against the U.S. dollar.
Investment Grade Bond Fund generally will, and Real Estate Fund
may, use currency swaps and other currency derivatives to try to
hedge against this risk. However, a fund will probably not be
able to achieve a perfect hedge because of unavoidable
discrepancies between the fund's foreign currency investments and
its currency derivatives. Either fund might perform less well
than a fund that does not hedge against foreign currency risk.
Counterparties to "over-the-counter" derivative contracts present
the same types of credit risk as issuers of fixed income
securities. Derivatives can also make a fund's portfolio less
liquid and harder to value, especially in declining markets.
Borrowing Both Investment Grade Bond Fund and Real Estate Fund
may borrow up to one-third of total assets from banks or through
reverse repurchase agreements. Borrowing could create leverage,
meaning that certain gains or losses could be amplified,
increasing share price movements.
Impact of high portfolio turnover Investment Grade Bond Fund may
engage in active and frequent trading to achieve its principal
investment strategies. Frequent trading increases transaction
costs, which could detract from a fund's performance.
Defensive investing Both Investment Grade Bond Fund and Real
Estate Fund may depart from their principal investment strategies
by taking temporary defensive positions in response to adverse
market, economic or political conditions.
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<PAGE>
THE INVESTMENT ADVISER
================================================================================
Sun
Capital ABOUT THE ADVISER. Sun Capital Advisers, Inc., One Sun Life
Advisers, Executive Park, Wellesley Hills, Massachusetts 02481, is the
Inc. is funds' investment adviser. The funds are the only mutual funds
the funds' managed by the adviser. The adviser is an indirect wholly-owned
investment subsidiary of Sun Life Assurance Company of Canada (Sun Life of
adviser. Canada). The adviser has been providing investment advice and
supervisory services to pension, qualified retirement and profit-
sharing plans of Sun Life of Canada and its affiliates since 1997.
Sun Life of Canada is a diversified financial services
organization with total assets under management at December 31,
1998 of $161 billion. Sun Life of Canada provides a broad range of
financial products and services to individuals and groups located
in Canada, the United States, the United Kingdom and the Asia
Pacific Region.
The adviser provides the funds with investment research and
portfolio management services and manages certain aspects of the
funds' business affairs. For its services, the adviser receives a
fee from each fund equal on an annual basis to a percentage of the
fund's average daily net assets.
The adviser has voluntarily agreed to limit its management fee and
to reimburse each fund's nonmanagement expenses for an indefinite
period. Each fund's total operating expenses will be capped on an
annual basis to the percentages of the fund's average daily net
assets shown in the table below. To the extent that a fund's total
expense ratio falls below its expense limit, the adviser reserves
the right to be reimbursed for management fees waived and fund
expenses paid by it during the prior two fiscal years. The adviser
may modify or eliminate this voluntary expense limit at any time.
Advisory Fees and Total Operating Expenses
<TABLE>
<CAPTION>
Fund Advisory Fee Other Expenses Total Operating Expenses
<S> <C> <C> <C>
Money Market Fund 0.50% 0.15% 0.65%
Investment Grade Bond
Fund 0.60% 0.15% 0.75%
Real Estate Fund 0.95% 0.30% 1.25%
</TABLE>
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<PAGE>
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PORTFOLIO MANAGERS. The adviser has selected the following persons to manage
the investments for the funds.
<TABLE>
<CAPTION>
Fund Fund Positions during past five years
manager(s)
<C> <C> <S>
Investment Grade Bond Fund Richard Vice president, Sun Capital Advisers
and Money Market Fund Gordon, CFA Trust, since 1998. Vice president, Sun
Capital Advisers, Inc., since 1992.
Vice president, U.S. Public Bonds, Sun
Life Assurance Company of Canada,
since 1994. Prior to that, assistant
vice president.
Howard C. Vice president, Sun Capital Advisers
Greene, CFA Trust, since 1998. Vice president, Sun
Capital Advisers, Inc., since 1998.
Vice president, U.S. Equities, Sun
Life Assurance Company of Canada,
since 1999, prior to that, assistant
vice president, U.S. Public Bonds, Sun
Life Assurance Company of Canada,
since 1996. Prior to that, senior
investment officer.
Real Estate Fund John T. Vice president, Sun Capital Advisers
Donnelly, Trust, since 1998. Vice president, Sun
CFA Capital Advisers, Inc., since 1998.
Vice president, U.S. Equities, Sun
Life Assurance Company of Canada,
since 1999. Prior to that, assistant
vice president, U.S. Equities, Sun
Life Assurance Company of Canada,
since 1997, senior investment officer,
U.S. Public Bonds (1994-1997), and
investment officer, Portfolio
Management (1991-1994).
Joseph H. Senior investment analyst, U.S.
Bozoyan Equities, Sun Life Assurance Company
of Canada, since 1997. Prior to that,
senior investment analyst and
investment analyst, U.S. Public Bonds.
Thomas V. Vice president, Sun Capital Advisers,
Pedulla Inc., since 1998. Senior property
investment officer, U.S. Real Estate,
Sun Life Assurance Company of Canada,
since 1999. Prior to that, property
investment officer, U.S. Real Estate,
Sun Life Assurance Company of Canada
since 1995, and senior property
investments analyst.
</TABLE>
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<PAGE>
PURCHASE AND REDEMPTION INFORMATION
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Fund shares Buying and Redeeming Shares. Each fund sells its shares at net
are offered asset value (NAV) directly to separate accounts established and
exclusively maintained by insurance companies for the purpose of funding
to variable contracts. Each fund may suspend the offer of its
insurance shares and reserves the right to reject any specific purchase
company order. A fund may refuse a purchase order if, in the adviser's
separate opinion, the order is of a size that would disrupt the
accounts. management of a fund.
Insurance company separate accounts that accept orders from
contractholders to purchase and redeem fund shares before the
close of trading on the New York Stock Exchange will receive
that day's NAV (which will be calculated as of the close of
trading), provided that the insurance company transmits the
orders to the fund prior to the opening of trading on the
Exchange on the next business day. If the fund receives orders
after the Exchange opens, those orders will receive the next
business day's NAV.
Each fund redeems its shares on any business day. Normally, a
fund forwards redemption proceeds by bank wire to the redeeming
insurance company on the next business day after the fund
receives the redemption instructions. Under unusual
circumstances, a fund may suspend redemptions or postpone
payment for up to seven (7) days or longer, as permitted by
Federal securities laws.
Automatic Transactions. Purchases and redemptions arising out
of an automatic transaction under an insurance contract are
effected when received by the insurance company in the manner
described above. Automatic transactions include investment of
net premiums, payment of death benefits, deduction of fees and
charges, transfers, surrenders, loans, loan repayments,
deductions of interest on loans, lapses, reinstatements and
similar automatic transactions.
Fund shares Valuation of Shares. Each fund offers its shares at the NAV per
are offered share of the fund. Each fund calculates its NAV once daily as
at net of the close of regular trading on the New York Stock Exchange
asset (generally at 4:00 p.m., New York time) on each day the
value. The Exchange is open. If the Exchange closes early, the funds will
separate accelerate the determination of NAV to the closing time. On any
account day an international market is closed and the Exchange is open,
does not a fund will value its foreign securities, if any, at the prior
pay a sales day's close with the current day's exchange rate.
charge to
buy fund
shares.
Each fund values the securities in its portfolio on the basis
of market quotations and valuations provided by independent
pricing services, or at fair value as determined in good faith
according to procedures approved by the board of trustees.
Because international markets may be open on days when U.S.
markets are closed, the value of foreign securities owned by a
fund could change on days when you cannot buy or sell shares. A
fund may value securities at fair value when market quotations
are not available or the adviser believes that available market
quotations do not accurately represent the securities' actual
value. A fund that uses fair value to price securities may
value those securities higher or lower than another fund that
uses market quotations to price the same securities.
The funds Dividends and Distributions. Each fund intends to distribute
distribute all or substantially all of its net capital gain, if any, and
capital net investment income for each taxable year. Investment Grade
gain and Bond Fund and Money Market Fund declare dividends from net
income. investment income daily and pay dividends monthly. Real Estate
Fund declares and pays dividends from net investment income at
least annually. Each fund distributes its net realized capital
gains, if any, at least annually. The funds expect that an
insurance company holding shares on behalf of a contract holder
will elect to reinvest dividends and capital gains in
additional shares of the fund that paid them. Shares purchased
become entitled to dividends as of the first business day
following the date of investment.
Taxes. Shares of the funds are held and owned for federal tax
purposes by life insurance company separate accounts
established in connection with variable contracts, not by the
owners of these variable contracts. Owners of variable
contracts should refer to the prospectuses for these contracts
for a description of the tax consequences of owning and
receiving distributions or other payments relating to these
contracts. Each fund intends to comply with the federal tax
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<PAGE>
================================================================================
diversification and other federal tax requirements with which
it must comply in order for variable contracts to qualify for
the tax treatment described in the applicable variable contract
prospectus. A fund's failure to comply with these requirements
could cause the holder of a variable contract based on a
separate account that invested in whole or in part in that fund
to be subject to current taxation of all income on the contract
unless the Internal Revenue Service permits correction of the
failure, which cannot be assured.
Fund Details
Year 2000 issue. Some computer systems in the financial
services industry will be unable to recognize dates after
December 31, 1999. The funds' securities trades, pricing and
accounting services and other operations could be adversely
affected by the defects in computer systems utilized by the
adviser, custodian and transfer agent. The adviser is taking
steps it believes are reasonably designed to identify any
potential problems with the computer systems it uses. The
funds' other service providers have told the adviser they are
taking comparable steps. The adviser does not believe that the
Year 2000 issue will have a material adverse effect on its
business operations or results of operations.
Investments by Variable Product Separate Accounts in Shares of
the Portfolios. Each fund will sell its shares to separate
accounts established and maintained by insurance companies for
the purpose of funding variable insurance products including
variable annuity contracts and variable life insurance
policies. The variable insurance products may or may not make
investments in all the funds described in this Prospectus.
The interests of owners of different variable insurance
products investing in a fund could conflict due to differences
of tax treatment and other considerations. The Trust currently
does not foresee any disadvantages to investors arising from
the fact that each fund may offer its shares to different
insurance company separate accounts that serve as the
investment medium for their variable annuity and variable life
products. Nevertheless, the Board of Trustees will monitor
events to identify any material irreconcilable conflicts which
may arise, and to determine what action, if any, should be
taken in response to these conflicts. If a conflict were to
occur, one or more insurance companies' separate accounts might
be required to withdraw their investments in one or more funds
and shares of another fund may be substituted. In addition, the
sale of shares may be suspended or terminated if required by
law or regulatory authority or is in the best interests of the
fund's shareholders.
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<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
The financial highlights tables are intended to help you
understand the performance of each fund since inception.
Certain information reflects financial results for a single
share. Total return represents the rate that a shareholder
would have earned (or lost) on a fund share assuming
reinvestment of all dividends and distributions. The
information in the following table was audited by Deloitte &
Touche, LLP, independent accountants, whose report, along with
the funds' financial statements, are included in the annual
report (available upon request).
Selected data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Sun Capital Sun Capital
Money Market Fund Investment Grade Sun Capital
Period Ended Bond Fund Real Estate Fund
December 31, Period Ended Period Ended
1998* December 31, 1998* December 31, 1998*
----------------- ------------------ ------------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $1.000 $10.000 $10.000
------ ------- -------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income
)loss) ............... 0.003 0.034 0.082
Net realized and
unrealized gain (loss)
on investments ....... 0.000 (0.030) (0.152)
------ ------- -------
Total from Investment
Operations ........... 0.003 0.004 (0.070)
------ ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income . (0.003) (0.034) (0.080)
Net realized gains on
investments........... -- -- --
Returns of capital..... -- -- --
------ ------- -------
Total Distributions.... (0.003) 0.034 0.080
------ ------- -------
NET ASSET VALUE, END OF
PERIOD ................ $1.000 $ 9.970 $ 9.850
====== ======= =======
TOTAL RETURN(a) ........ 0.31% 0.04% (0.71)%
====== ======= =======
RATIOS AND SUPPLEMENTAL
DATA:
Net assets, end of
period (000's) ........ $2,510 $10,026 $ 4,930
Ratios to average net
assets:
Gross expenses(b)...... 12.29% 4.10% 7.44%
Net investment
income/(loss) before
fee waiver (b)........ (7.16)% 1.66% 5.97%
Net expenses(b) ....... 0.65% 0.75% 1.25%
Net investment income
after fee waivers(b) . 4.48% 5.01% 12.16%
Portfolio turnover rate
....................... N/A 3% 2%
</TABLE>
------
* For the period from December 7, 1998 (commencement of
operations) to December 31, 1998.
(a) Total Returns are historical and assume changes in share
price, reinvestments of all dividends and distributions,
and no sales charge. Had certain expenses not been reduced
during the period shown, total returns would have been
lower. Total returns for periods of less than one year are
not annualized.
(b) Annualized for periods less than one year.
================================================================================
-10-
<PAGE>
ADDITIONAL INFORMATION
================================================================================
The statement of additional information (SAI) provides more detailed
information about the funds and is incorporated into this prospectus by
reference. You may obtain free copies of the SAI, request other information and
discuss questions about the funds by contacting your agent, or the funds at:
Sun Capital Advisers Trust
One Sun Life Executive Park
Wellesley Hills, MA 02481
Telephone: 1-800-432-1102 x1780
Investment Adviser Administrator,
Custodian
Sun Capital Advisers,
Inc. State Street Bank &
Trust Company
Independent Public
Accountants Legal Counsel
Deloitte & Touche LLP Hale and Dorr LLP
You can review the funds' SAI at the Public Reference Room of the Securities
and Exchange Commission. You can get text-only copies for a fee by writing or
calling:
Securities and Exchange Commission
Public Reference Room
Washington, D.C. 20549-6009.
Telephone: 1-800-SEC-0330
Free from the SEC's Internet website: http://www.sec.gov
Sun Capital Money Market Fund
Sun Capital Investment Grade Bond Fund
Sun Capital Real Estate Fund
Sun Capital Advisers Trust
Investment Company Act file no. 811-08879
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-11-
<PAGE>
Sun Capital Advisers Trust
Sun Capital Money Market Fund
Sun Capital Investment Grade Bond Fund
Sun Capital Real Estate Fund
Statement of Additional Information
May 1, 1999
The statement of additional information is not a prospectus. The funds'
prospectus, dated May 1, 1999, may be obtained by contacting your agent or
the funds at:
Sun Capital Advisers Trust
One Sun Life Executive Park
Wellesley Hills, MA 02481
Telephone: 1-800-432-1102 x1780
<PAGE>
================================================================================
More Information about the Funds' Investments
================================================================================
Investment Strategy and Risks. Each fund's principal investment strategies and
risks, as well as the securities in which each fund typically invests, are
described in the prospectus. Money Market Fund invests exclusively in high
quality U.S. dollar-denominated money market securities. Investment Grade Bond
Fund invests at least 80% of its total assets in investment grade bonds issued
by U.S. and foreign companies, the U.S. Government and its agencies and
instrumentalities, including those that issue mortgage-backed securities,
foreign governments, including those in emerging market countries, and
multinational organizations such as the World Bank. Real Estate Fund invests at
least 80% of its total assets in REITs and other real estate companies. More
information about those securities is provided below.
Investment Grade Bond Fund and Money Market Fund are diversified mutual funds.
This means that with respect to 75% of Investment Grade Bond Fund's total
assets, the fund may not invest more than 5% of its assets in the outstanding
securities of any one issuer, or own more than 10% of the voting securities of
any one issuer, except U.S. government securities or securities of other
investment companies. With respect to Money Market Fund, this means that the
fund may not invest more than 5% of its assets in any one issuer except U.S.
government securities and obligations of domestic banks. Real Estate Fund is not
diversified and may invest without regard to such limits. This means that Real
Estate Fund's net asset value may be more volatile because its portfolio may be
invested in fewer securities and it may be more sensitive to events affecting
the value of these securities. However, Real Estate Fund (and other funds) must
satisfy the diversification tests under Sections 851(b)(3) and 817(h) of the
Internal Revenue Code of 1986, as amended (Code), (see discussion under the
caption, Taxes). Meeting these diversification tests may limit Real Estate
Fund's volatility risk.
Securities in which the funds may invest.
Common Shares. (Real Estate Fund) Common shares represent an equity
- -------------
(ownership) interest in a company or other entity. This ownership interest
often gives a fund the right to vote on measures affecting the company's
organization and operations. Although common shares generally have a history of
long-term growth in value, their prices, particularly those of smaller
capitalization companies, are often volatile in the short-term.
Preferred Shares. (All funds) Preferred shares represent a limited equity
- ----------------
interest in a company or other entity and frequently have debt-like features.
Preferred shares are often entitled only to dividends at a specified rate, and
have a preference over common shares with respect to dividends and on
liquidation of assets. Preferred shares generally have lesser voting rights
than common shares. Because their dividends are often fixed, the value of some
preferred shares fluctuates inversely with changes in interest rates. Money
Market Fund may invest in certain types of preferred shares having debt-like
features to the extent that the preferred shares meet the maturity, quality and
diversification requirements applicable to the fund.
Convertible Securities. (Real Estate Fund; Investment Grade Bond Fund)
- ----------------------
Convertible securities are bonds, preferred shares and other securities that pay
a fixed rate of interest or dividends. However, they offer the buyer the
additional option of converting the security into common stock. The value of
================================================================================
-1-
<PAGE>
================================================================================
convertible securities depends partially on interest rate changes and the credit
quality of the issuer. The value of convertible securities is also sensitive to
company, market and other economic news, and will change based on the price of
the underlying common stock. Convertible securities generally have less
potential for gain than common stock, but also less potential for loss, since
their income provides a cushion against the stock's price declines. However,
because the buyer is also exposed to the risk and reward potential of the
underlying stock, convertible securities generally pay less income than similar
non-convertible securities.
Warrants and Rights. (Real Estate Fund; Investment Grade Bond Fund) Warrants
- -------------------
and rights are securities permitting, but not obligating, their holder to
purchase the underlying equity or fixed income securities at a predetermined
price. Generally, warrants and stock purchase rights do not carry with them the
right to receive dividends on or exercise voting rights concerning the
underlying equity securities. Further, they do not represent any rights in the
assets of the issuer. In addition, the value of warrants and rights does not
necessarily change with the value of the underlying securities, and they become
worthless if they are not exercised on or prior to their expiration date. As a
result, an investment in warrants and rights may entail greater investment risk
than certain other types of investments.
Real Estate Investment Trusts. (Real Estate Fund) REITs are pooled investment
- -----------------------------
vehicles that invest primarily in income producing real estate or real estate
related loans or interests. REITs are generally classified as equity REITs,
mortgage REITs or a combination of equity and mortgage REITs. Equity REITs
invest most of their assets directly in real property and derive income
primarily from the collection of rents. Equity REITs can also realize capital
gains by selling properties that have appreciated in value. Mortgage REITs
invest most of their assets in real estate mortgages and derive income from
interest payments. Like regulated investment companies, such as Real Estate
Fund, REITs are not taxed on income distributed to shareholders if they comply
with several requirements of the Code. Real Estate Fund will indirectly bear its
proportionate share of any expenses (such as operating expenses and advisory
fees) paid by REITs in which it invests in addition to the expenses paid by the
Fund.
Risk Factors Associated with the Real Estate Industry. Although Real Estate
Fund does not invest directly in real estate, it does invest primarily in real
estate equity securities and does concentrate its investments in the real estate
industry, and, therefore, an investment in the fund may be subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible
declines in the value of real estate; risks related to general and local
economic conditions; possible lack of availability of mortgage funds;
overbuilding; extended vacancies of properties; increases in competition,
property taxes and operating expenses; changes in zoning or applicable tax law;
costs resulting from the clean-up of, and liability to third parties for damages
resulting from, environmental problems; casualty or condemnation losses;
uninsured damages from floods, earthquakes or other natural disasters;
limitations on and variations in rents; and changes in interest rates.
In addition, if the fund has rental income or income from the disposition of
real property acquired as a result of a default on securities the fund owns, the
receipt of such income may adversely affect its ability to retain its tax status
as a regulated investment company. Investments by the fund in securities of
companies providing mortgage servicing will be subject to the risks associated
with refinancings and their impact on servicing rights.
================================================================================
-2-
<PAGE>
================================================================================
Risk Factors Associated with Equity and Mortgage REITs. In addition to these
risks, equity REITs may be affected by changes in the value of the underlying
property owned by the trusts, while mortgage REITs may be affected by the
quality of any credit extended. Further, equity and mortgage REITs are dependent
upon management skills and generally may not be diversified. Equity and
mortgage REITs are also subject to heavy cash flow dependency, borrower default
and self-liquidation.
Mortgage REITs are also subject to different combinations of prepayment,
extension, interest rate and other market risks. The real estate mortgages
underlying mortgage REITs are generally subject to a faster rate of principal
repayments in a declining interest rate environment and to a slower rate of
principal repayments in an increasing interest rate environment.
Fixed Income Securities. (All funds) Bonds and other fixed-income instruments
- -----------------------
are used by issuers to borrow money from investors. The issuer pays the
investor a fixed or variable rate of interest, and must repay the amount
borrowed at maturity. Some fixed-income securities, such as zero coupon bonds,
do not pay current interest, but are purchased at a discount from their face
values. Fixed-income securities have varying degrees of quality and varying
levels of sensitivity to changes in interest rates. A decrease in interest
rates will generally result in an increase in the value of a fund's fixed-income
securities, and, conversely, during periods of rising interest rates, the value
of a fund's fixed-income securities will generally decline. Longer-term bonds
are generally more sensitive to interest rate changes than shorter-term bonds.
Changes by recognized agencies in the rating of any fixed-income security and in
the ability of an issuer to make payments of interest and principal will also
affect the value of these investments.
Maturity and Duration. The effective maturity of an individual portfolio
security in which a fund invests is defined as the period remaining until the
earliest date when the fund can recover the principal amount of such security
through mandatory redemption or prepayment by the issuer, the exercise by the
fund of a put option, demand feature or tender option granted by the issuer or a
third party or the payment of the principal on the stated maturity date. The
effective maturity of variable rate securities is calculated by reference to
their coupon reset dates. Thus, the effective maturity of a security may be
substantially shorter than its final stated maturity. Unscheduled prepayments
of principal have the effect of shortening the effective maturities of
securities in general and mortgage-backed securities in particular. Prepayment
rates are influenced by changes in current interest rates and a variety of
economic, geographic, social and other factors and cannot be predicted with
certainty. In general, securities, such as mortgage-backed securities, may be
subject to greater prepayment rates in a declining interest rate environment.
Conversely, in an increasing interest rate environment, the rate of prepayment
may be expected to decrease. A higher than anticipated rate of unscheduled
principal prepayments on securities purchased at a premium or a lower than
anticipated rate of unscheduled prepayments on securities purchased at a
discount may result in a lower yield (and total return) to a fund than was
anticipated at the time the securities were purchased. A fund's reinvestment of
unscheduled prepayments may be made at rates higher or lower than the rate
payable on the original prepaid security thus affecting positively or negatively
the return realized by the fund.
Duration of an individual portfolio security is a measure of the security's
price sensitivity taking into account expected cash flow and prepayments under a
wide range of interest rate scenarios. In computing the duration of its
portfolio, a fund will have to estimate the duration of obligations that are
subject to prepayment or redemption by the issuer taking into account the
influence of interest rates on prepayments and coupon flows. Each fund may use
various techniques to shorten or lengthen the option-adjusted duration of its
portfolio, including the acquisition of debt obligations at a premium or
discount, and the use of mortgage swaps and interest rate swaps, caps, floors
and collars.
================================================================================
-3-
<PAGE>
================================================================================
Ratings Criteria. In general, the ratings of Moody's Investors Service, Inc.
(Moody's), Standard & Poor's Ratings Group (S&P), FitchIBCA and Duff & Phelps
Credit Rating Co. (Duff) represent the opinions of these agencies as to the
credit quality of the securities which they rate. However, these ratings are
relative and subjective and are not absolute standards of quality.
After its purchase by a fund, an issue of securities may cease to be rated or
its rating may be reduced below the minimum required for purchase by the fund.
Neither of these events will necessarily require the adviser, on behalf of a
fund, to sell the securities.
Lower Rated High Yield Fixed Income Securities. (Real Estate Fund; Investment
Grade Bond Fund) Lower rated high yield fixed income securities are those rated
below Baa3 by Moody's, or below BBB-by S&P, FitchIBCA or Duff, or securities
which are unrated and determined by the adviser to be of comparable quality.
Investment Grade Bond Fund may invest in securities rated as low as B- by a
rating agency, which may indicate that the obligations are speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. Lower rated securities are generally referred to as
high yield bonds or junk bonds. See the Appendix attached to this Statement of
Additional Information for a description of the characteristics of the
categories. A fund may invest in eligible unrated securities which, in the
opinion of the adviser, offer comparable risks to those securities which are
rated.
Debt obligations rated in the lower ratings categories, or which are unrated,
involve greater volatility of price and risk of loss of principal and income.
In addition, lower ratings reflect a greater possibility of an adverse change in
financial condition affecting the ability of the issuer to make payments of
interest and principal. The market price and liquidity of lower rated fixed
income securities generally respond to short-term economic, corporate and market
developments to a greater extent than do higher rated securities. These
developments are perceived to have a more direct relationship to the ability of
an issuer of lower rated securities to meet its ongoing debt obligations.
Reduced volume and liquidity in the high yield bond market, or the reduced
availability of market quotations, will make it more difficult to dispose of the
bonds and accurately value a fund's assets. The reduced availability of
reliable, objective data may increase a fund's reliance on management's judgment
in valuing the high yield bonds. To the extent that a fund invests in these
securities, the achievement of the fund's objective will depend more on the
adviser's judgment and analysis than it otherwise would. In addition, high
yield securities in a fund's portfolio may be susceptible to adverse publicity
and investor perceptions, whether or not the perceptions are justified by
fundamental factors. In the past, economic downturns and increases in interest
rates have caused a higher incidence of default by the issuers of lower-rated
securities and may do so in the future, particularly with respect to highly
leveraged issuers.
Credit Risk. Credit risk relates to the ability of the issuer to meet interest
or principal payments or both as they become due. Generally, lower quality,
higher yielding bonds are subject to credit risk to a greater extent than higher
quality, lower yielding bonds.
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting solely from the inverse relationship between
the market value of outstanding fixed-income securities and changes in interest
rates. An increase in interest rates will generally reduce the market value of
fixed-income investments, and a decline in interest rates will tend to increase
their value. In addition, debt securities with longer maturities, which tend to
produce higher yields, are subject to potentially greater capital appreciation
and depreciation than obligations with shorter maturities.
================================================================================
-4-
<PAGE>
================================================================================
Fluctuations in the market value of fixed-income securities subsequent to their
acquisition will not affect the interest payable on those securities, and thus
the cash income from such securities, but will be reflected in the valuations of
those securities used to compute a fund's net asset value.
Call Risk and Extension Risk. Call risk exists when the issuer may exercise its
right to pay principal on an obligation earlier than scheduled which would cause
cash flows to be returned earlier than expected. This typically results when
interest rates have declined, and a fund will suffer from having to reinvest in
lower yielding securities. Extension risk exists when the issuer may exercise
its right to pay principal on an obligation later than scheduled, which would
cause cash flows to be returned later than expected. This typically results when
interest rates have increased, and a fund will suffer from the inability to
invest in higher yield securities.
U.S. Government Securities. (All funds) U.S. government securities include:
- --------------------------
U.S. Treasury obligations and obligations issued or guaranteed by U.S.
government agencies, instrumentalities or sponsored enterprises which are
supported by (a) the full faith and credit of the U.S. Treasury (e.g.,
Government National Mortgage Association (GNMA)), (b) the right of the issuer to
borrow from the U.S. Treasury (e.g., Federal Home Loan Banks), (c) the
discretionary authority of the U.S. Government to purchase certain obligations
of the issuer (e.g., Federal National Mortgage Association (FNMA) and Federal
Home Loan Mortgage Corporation (FHLMC)), or (d) only the credit of the agency
and a perceived "moral obligation" of the U.S. government. No assurance can be
given that the U.S. government will provide financial support to U.S. government
agencies, instrumentalities or sponsored enterprises in the future.
U.S. government securities also include Treasury receipts, zero coupon bonds,
U.S. Treasury inflation-indexed bonds, deferred interest securities and other
stripped U.S. government securities. The interest and principal components of
stripped U.S. government securities are traded independently. The most widely
recognized trading program for such securities is the Separate Trading of
Registered Interest and Principal of Securities Program. U.S. Treasury
inflation-indexed obligations provide a measure of protection against inflation
by adjusting the principal amount for inflation. The semi-annual interest
payments on these obligations are equal to a fixed percentage of the inflation-
adjusted principal amount.
Mortgage-Backed Securities. (All funds) Mortgage-backed securities represent
- --------------------------
participation interests in pools of adjustable and fixed rate mortgage loans
secured by real property.
Unlike conventional debt obligations, mortgage-backed securities provide monthly
payments derived from the monthly interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans. The
mortgage loans underlying mortgage-backed securities are generally subject to a
greater rate of principal prepayments in a declining interest rate environment
and to a lesser rate of principal prepayments in an increasing interest rate
environment. Under certain interest and prepayment scenarios, the fund may fail
to recover the full amount of its investment in mortgage-backed securities
notwithstanding any direct or indirect governmental or agency guarantee. Since
faster than expected prepayments must usually be invested in lower yielding
securities, mortgage-backed securities are less effective than conventional
bonds in "locking" in a specified interest rate. In a rising interest rate
environment, a declining prepayment rate may extend the average life of many
mortgage-backed securities. Extending the average life of a mortgage-backed
security reduces its value and increases the risk of depreciation due to future
increases in market interest rates.
================================================================================
-5-
<PAGE>
================================================================================
The fund's investments in mortgage-backed securities may include conventional
mortgage pass through securities and certain classes of multiple class
collateralized mortgage obligations ("CMOs"). Mortgage pass-through securities
are fixed or adjustable rate mortgage-backed securities that provide for monthly
payments that are a "pass-through" of the monthly interest and principal
payments (including any prepayments) made by the individual borrowers on the
pooled mortgage loans, net of any fees or other amounts paid to any guarantor,
administrator and/or servicer of the underlying mortgage loans. CMOs are issued
in multiple classes, each having different maturities, interest rates, payment
schedules and allocations of principal and interest on the underlying mortgages.
Senior CMO classes will typically have priority over residual CMO classes as to
the receipt of principal and/or interest payments on the underlying mortgages.
The CMO classes in which a fund may invest include but are not limited to
sequential and parallel pay CMOs, including planned amortization class ("PAC")
and target amortization class ("TAC") securities. Sequential pay CMOs apply
payments of principal, including any prepayments, to each class of CMO in the
order of the final distribution date. Thus, no payment of principal is made on
any class until all other classes having an earlier final distribution date have
been paid in full. Parallel pay CMOs apply principal payments and prepayments to
two or more classes concurrently on a proportionate or disproportionate basis.
The simultaneous payments are taken into account in calculating the final
distribution date of each class. Real Estate Fund and Investment Grade Bond Fund
may invest in the most junior class of CMO's (z-tranche) which involves risks
similar to those associated with investing in equity securities.
Different types of mortgage-backed securities are subject to different
combinations of prepayment, extension, interest rate and other market risks.
Conventional mortgage pass through securities and sequential pay CMOs are
subject to all of these risks, but are typically not leveraged. PACs, TACs and
other senior classes of sequential and parallel pay CMOs involve less exposure
to prepayment, extension and interest rate risk than other mortgage-backed
securities, provided that prepayment rates remain within expected prepayment
ranges or "collars." To the extent that the prepayment rates remain within
these prepayment ranges, the residual or support tranches of PAC and TAC CMOs
assume the extra prepayment, extension and interest rate risks associated with
the underlying mortgage assets.
Agency Mortgage Securities. (All funds) The funds may invest in mortgage-
backed securities issued or guaranteed by the U.S. government, foreign
governments or any of their agencies, instrumentalities or sponsored
enterprises. Agencies, instrumentalities or sponsored enterprises of the U.S.
government include but are not limited to GNMA, FNMA and FHLMC. GNMA securities
are backed by the full faith and credit of the U.S. government, which means that
the U.S. government guarantees that the interest and principal will be paid when
due. FNMA securities and FHLMC securities are not backed by the full faith and
credit of the U.S. government; however, these enterprises have the ability to
obtain financing from the U.S. Treasury. There are several types of agency
mortgage securities currently available, including, but not limited to,
guaranteed mortgage pass-through certificates and multiple class securities.
Privately-Issued Mortgage-Backed Securities. (All funds) Mortgage-backed
securities may also be issued by trusts or other entities formed or sponsored by
private originators of and institutional investors in mortgage loans and other
foreign or domestic non-governmental entities (or represent custodial
arrangements administered by such institutions). These private originators and
institutions include domestic and foreign savings and loan associations,
mortgage bankers, commercial banks, insurance companies, investment banks and
special purpose subsidiaries of the foregoing. Privately issued
================================================================================
-6-
<PAGE>
================================================================================
mortgage-backed securities are generally backed by pools of conventional (i.e.,
non-government guaranteed or insured) mortgage loans.
These mortgage-backed securities are not guaranteed by an entity having the
credit standing of GNMA, FNMA or FHLMC. In order to receive a high quality
rating, they normally are structured with one or more types of "credit
enhancement." These credit enhancements fall generally into two categories: (1)
liquidity protection and (2) protection against losses resulting after default
by a borrower and liquidation of the collateral. Liquidity protection refers to
the providing of cash advances to holders of mortgage-backed securities when a
borrower on an underlying mortgage fails to make its monthly payment on time.
Protection against losses resulting after default and liquidation is designed to
cover losses resulting when, for example, the proceeds of a foreclosure sale are
insufficient to cover the outstanding amount on the mortgage. This protection
may be provided through guarantees, insurance policies or letters of credit,
through various means of structuring the transaction or through a combination of
such approaches.
Asset-Backed Securities. (All funds) Asset-backed securities represent
- -----------------------
individual interests in pools of consumer loans, home equity loans, trade
receivables, credit card receivables, and other debt and are similar in
structure to mortgage-backed securities. The assets are securitized either in a
pass-through structure (similar to a mortgage pass-through structure) or in a
pay-through structure (similar to a CMO structure). Asset-backed securities may
be subject to more rapid repayment than their stated maturity date would
indicate as a result of the pass-through of prepayments of principal on the
underlying loans. During periods of declining interest rates, prepayment of
certain types of loans underlying asset-backed securities can be expected to
accelerate. Accordingly, a fund's ability to maintain positions in these
securities will be affected by reductions in the principal amount of the
securities resulting from prepayments, and the fund must reinvest the returned
principal at prevailing interest rates, which may be lower.
Asset-backed securities entail certain risks not presented by mortgage-backed
securities. The collateral underlying asset-backed securities may entail
features that make them less effective as security for payments than real estate
collateral. Debtors may have the right to set off certain amounts owed on the
credit cards or other obligations underlying the asset-backed security, or the
debt holder may not have a first (or proper) security interest in all of the
obligations backing the receivable because of the nature of the receivable or
state or federal laws granting protection to the debtor. Certain collateral may
be difficult to locate in the event of default, and recoveries on depreciated or
damaged collateral may not support payments on these securities. A fund may
invest in any type of asset-backed security if the adviser determines that the
security is consistent with the fund's investment objective and policies.
Structured Securities. (Real Estate Fund; Investment Grade Bond Fund)
- ---------------------
Structured securities include notes, bonds or debentures, the value of the
principal of and/or interest on which is determined by reference to changes in
the value of specific currencies, interest rates, commodities, indices or other
financial indicators (the Reference) or the relative change in two or more
References. The interest rate or the principal amount payable upon maturity or
redemption may be increased or decreased depending upon changes in the
applicable Reference. The terms of the structured securities may provide that
in certain circumstances no principal is due at maturity and, therefore, may
result in the loss of the fund's investment. Structured securities may be
positively or negatively indexed, so that appreciation of the Reference may
produce an increase or decrease in the interest rate or value of the security at
maturity. In addition, the change in interest rate or the value of the security
at maturity may be a multiple of the change in the value of the Reference.
Consequently, leveraged structured
================================================================================
-7-
<PAGE>
================================================================================
securities entail a greater degree of market risk than other types of debt
obligations. Structured securities may also be more volatile, less liquid and
more difficult to accurately price than less complex fixed income investments.
Pay-In-Kind, Delayed Payment and Zero Coupon Bonds. (Real Estate Fund;
- --------------------------------------------------
Investment Grade Bond Fund) These securities are generally issued at a discount
from their face value because actual interest payments are typically postponed
until maturity or after a stated period. The amount of the discount rate varies
depending on factors including the time remaining until maturity, prevailing
interest rates, the security's liquidity and the issuer's credit quality. These
securities also may take the form of debt securities that have been stripped of
their interest payments. The market prices of pay-in-kind, delayed payment and
zero coupon bonds generally are more volatile than the market prices of
securities that pay interest periodically and in cash, and are likely to respond
to a greater degree to changes in interest rates than interest-bearing
securities having similar maturities and credit quality. The fund generally
accrues income on securities that are issued at a discount and/or do not make
current cash payments of interest for tax and accounting purposes, which is
required to be distributed to shareholders. The fund's investments in pay-in-
kind, delayed payment and zero coupon bonds may require the fund to sell certain
of its portfolio securities to generate sufficient cash to satisfy certain
income distribution requirements.
Floating Rate/Variable Rate Notes. (All funds) Some notes a fund may purchase
- ---------------------------------
may have variable or floating interest rates. Variable rates are adjustable at
stated periodic intervals; floating rates are automatically adjusted according
to a specified market rate for such investments, such as the percentage of the
prime rate of a bank, or the 91-day U.S. Treasury Bill rate. These obligations
may be secured by bank letters of credit or other support arrangements. If a
security would not satisfy a fund's credit quality standards without such a
credit support, the entity providing a bank letter or line of credit, guarantee
or loan commitment must meet a fund's credit quality standards.
The absence of an active secondary market for certain variable and floating rate
notes could make it difficult for a fund to dispose of the instruments, and a
fund could suffer a loss if the issuer defaults or there are periods during
which the fund is not entitled to exercise its demand rights. Variable and
floating rate instruments held by a fund will be subject to the fund's
limitation on investments in illiquid securities if a reliable trading market
for the instruments does not exist and the fund cannot demand payment of the
principal amount of such instruments within seven days.
Foreign Securities. (All funds) Each fund may invest in the securities of
- ------------------
corporate and governmental issuers located in or doing business in a foreign
country (foreign issuers). A company is considered to be located in or doing
business in a foreign country if it satisfies at least one of the following
criteria: (i) the equity securities of the company are traded principally on
stock exchanges in one or more foreign countries; (ii) it derives 50% or more of
its total revenue from goods produced, sales made or services performed in one
or more foreign countries; (iii) it maintains 50% or more of its assets in one
or more foreign countries; (iv) it is organized under the laws of a foreign
country; or (v) its principal executive offices are located in a foreign
country.
ADRs, EDRs, IDRs and GDRs. American Depository Receipts (ADRs) (sponsored or
unsponsored) are receipts typically issued by a U.S. bank, trust company or
other entity and evidence ownership of the underlying foreign securities. Most
ADRs are traded on a U.S. stock exchange. Issuers of unsponsored ADRs are not
contractually obligated to disclose material information in the U.S., so there
may not be a correlation between this information and the market value of the
unsponsored ADR. European Depository Receipts (EDRs) and International
Depository Receipts (IDRs) are receipts
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typically issued by a European bank or trust company evidencing ownership of the
underlying foreign securities. Global Depository Receipts (GDRs) are receipts
issued by either a U.S. or non-U.S. banking institution evidencing ownership of
the underlying foreign securities.
Brady Bonds. (Investment Grade Bond Fund) Brady bonds are securities created
through the exchange of existing commercial bank loans to sovereign entities for
new obligations in connection with debt restructurings under a debt
restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas
P. Brady. Brady bonds may be collateralized or uncollateralized, are issued in
various currencies (but primarily the U.S. dollar), and are actively traded in
the over-the-counter secondary market. Certain Brady bonds may be collateralized
as to principal due at maturity by U.S. Treasury zero coupon bonds with a
maturity equal to the final maturity of the bonds, although the collateral is
not available to investors until the final maturity of the bonds. Collateral
purchases are financed by the International Monetary Fund, the International
Bank for Reconstruction and Development (the World Bank) and the debtor nation's
reserves. Although Brady bonds may be collateralized by U.S. government
securities, repayment of principal and interest is not guaranteed by the U.S.
government. In light of the residual risk of Brady bonds and, among other
factors, the history of defaults with respect to commercial bank loans by public
and private entities in countries issuing Brady bonds, investments in Brady
bonds may be viewed as speculative. Brady bonds acquired by a fund might be
subject to restructuring arrangements or to requests for new credit, which may
reduce the value of the Brady bonds held by the fund.
Sovereign Debt Obligations. (All funds) Investment in sovereign debt
obligations involves special risks not present in domestic corporate debt
obligations. The issuer of the sovereign debt or the governmental authorities
that control the repayment of the debt may be unable or unwilling to repay
principal or interest when due, and a fund may have limited recourse in the
event of a default. During periods of economic uncertainty, the market prices of
sovereign debt, and a fund's net asset value, may be more volatile than prices
of U.S. debt obligations. In the past, certain emerging market countries have
encountered difficulties in servicing their debt obligations, withheld payments
of principal and interest and declared moratoria on the payment of principal and
interest on their sovereign debts.
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange, the relative size of the debt service burden, the
sovereign debtor's policy toward principal international lenders and local
political constraints. Sovereign debtors may also be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
to reduce principal and interest arrearages on their debt. The failure of a
sovereign debtor to implement economic policies or repay principal or interest
when due may result in the cancellation of third-party commitments to lend funds
to the sovereign debtor, which may further impair such debtor's ability or
willingness to service its debts.
Obligations of Supranational Entities. (All funds) Each fund may invest in
obligations of supranational entities designated or supported by governmental
entities to promote economic reconstruction or development and of international
banking institutions and related government agencies. Examples include the World
Bank, the Asian Development Bank and the Inter-American Development Bank. Each
supranational entity's lending activities are limited to a percentage of its
total capital (including "callable capital" contributed by its governmental
members at the entity's call), reserves and net income. Participating
governments may not be able or willing to honor their commitments to make
capital contributions to a supranational entity.
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Risks of Foreign Securities. Investments in foreign securities may involve a
greater degree of risk than the risks of domestic securities. There is generally
less publicly available information about foreign companies in the form of
reports and ratings similar to those published about issuers in the United
States. Also, foreign issuers are generally not subject to uniform accounting,
auditing and financial reporting requirements comparable to those applicable to
United States issuers.
To the extent that a fund's foreign securities are denominated in currencies
other than the U.S. dollar, changes in foreign currency exchange rates will
affect the fund's net asset value, the value of dividends and interest earned,
gains and losses realized on the sale of securities, and any net investment
income and gains that the fund distributes to shareholders. Securities
transactions undertaken in some foreign markets may not be settled promptly so
that a fund's foreign investments may be less liquid and subject to the risk of
fluctuating currency exchange rates pending settlement.
Foreign securities may be purchased on over-the-counter markets or exchanges
located in the countries where an issuer's securities are principally traded.
Many foreign markets are not as developed or efficient as those in the United
States. While growing in volume, they usually have substantially less volume
than U.S. markets. Securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Fixed commissions
on foreign exchanges are generally higher than negotiated commissions on United
States exchanges, although a fund will endeavor to achieve the most favorable
net results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States.
In certain foreign countries, there is the possibility of adverse changes in
investment or exchange control regulations, expropriation, nationalization or
confiscatory taxation, limitations on the removal of assets of a fund from a
country, political or social instability, or diplomatic developments. Moreover,
individual foreign economies may differ favorably or unfavorably from the United
States' economy in terms of growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
Dividends, interest, and, in some cases, capital gains earned by a fund on
certain foreign securities may be subject to foreign taxes, thus reducing the
net amount of income or gains available for distribution to the fund's
shareholders.
The above risks may be intensified for investments in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile
than in more developed countries, reflecting the greater uncertainties of
investing in less established markets and economies. Political, legal and
economic structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominantly
based on only a few industries, may be highly vulnerable to changes in local or
global trade conditions, and may suffer from extreme and volatile debt burdens
or inflation rates. Local securities markets may trade a small number of
securities and may be unable to respond effectively to increases in trading
volume, potentially making prompt liquidation of substantial holdings difficult
or impossible at times. A fund may be required to establish special custodial or
other arrangements before making certain
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investments in those countries. Securities of issuers located in these countries
may have limited marketability and may be subject to more abrupt or erratic
price movements.
Bank and Corporate Obligations. (All funds) Commercial paper represents short-
- ------------------------------
term unsecured promissory notes issued in bearer form by banks or bank holding
companies, corporations and finance companies. The commercial paper purchased
by the funds consists of direct U.S. dollar denominated obligations of domestic
or foreign issuers. Bank obligations in which the funds may invest include
certificates of deposit, bankers' acceptances and fixed time deposits.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on
demand by the investor, but may be subject to early withdrawal penalties which
vary depending upon market conditions and the remaining maturity of the
obligation. There are no contractual restrictions on the right to transfer a
beneficial interest in a fixed time deposit to a third party, although there is
no market for such deposits. Bank notes and bankers' acceptances rank junior to
domestic deposit liabilities of the bank and equal to other senior, unsecured
obligations of the bank. Bank notes are not insured by the Federal Deposit
Insurance Corporation or any other insurer. Deposit notes are insured by the
Federal Deposit Insurance Corporation only to the extent of $100,000 per
depositor per bank.
Repurchase Agreements. (All funds) In a repurchase agreement, a fund would buy
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a security for a relatively short period (usually not more than 7 days) subject
to the obligation to sell it back to the repurchase agreement counterparty at a
fixed time and price plus accrued interest. A fund will enter into repurchase
agreements only with member banks of the Federal Reserve System and with
"primary dealers" in U.S. government securities. Repurchase agreements that
mature in more than seven days will be treated as illiquid for purposes of each
fund's 15% limit (10% for Money Market Fund) in illiquid investments.
Securities serving as collateral for each repurchase agreement must be delivered
to the fund's custodian either physically or in book-entry form. The collateral
must be marked to market daily so that each repurchase agreement will be fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, a fund could experience delays in liquidating
the underlying securities while the fund is trying to enforce its rights to the
collateral, possible below normal levels of income, decline in value of the
underlying securities or lack of access to income during this period, as well as
the expense of enforcing its rights.
Reverse Repurchase Agreements. (Real Estate Fund; Investment Grade Bond Fund)
- -----------------------------
A fund may also enter into reverse purchase agreements, which involve the sale
of U.S. government securities held in its portfolio to a counterparty with an
agreement that the fund will buy back the securities at a fixed future date at a
fixed price plus an agreed amount of "interest," which may be reflected in the
repurchase price. Reverse repurchase agreements are considered to be borrowings
by a fund. Reverse repurchase agreements involve the risk that the market value
of securities purchased by a fund with proceeds of the initial sale transaction
may decline below the repurchase price of the securities sold by the fund which
it is obligated to repurchase. A fund will also continue to be subject to the
risk of a
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decline in the market value of the securities sold under the agreements because
it will reacquire those securities upon effecting their repurchase at a fixed
price agreed in advance. A fund will not enter into reverse repurchase
agreements or borrow money, except from banks as a temporary measure for
extraordinary emergency purposes in amounts not to exceed one-third of the
fund's total assets (including the amount borrowed) taken at market value. A
fund will not use leverage to attempt to enhance its return. A fund will not
purchase securities while outstanding borrowings exceed 5% of the fund's total
assets.
Mortgage "Dollar Roll" Transactions. (Investment Grade Bond Fund) The fund may
- -----------------------------------
enter into mortgage "dollar roll" transactions with selected banks and broker-
dealers. Under a dollar roll, the fund sells mortgage-backed securities and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. The fund will only enter
into covered rolls. A "covered roll" is a specific type of dollar roll for
which there is an offsetting cash position or liquid security position. Covered
rolls are not treated as a borrowing or other senior security and will be
excluded from the calculation of a fund's borrowings and other senior
securities. For financial reporting purposes, a fund treats mortgage dollar
rolls as two separate transactions: one involving the purchase of a security
and a separate transaction involving a sale. The fund does not currently intend
to enter into mortgage dollar roll transactions that are accounted for as a
financing.
Restricted Securities. (All funds) A fund may purchase securities that are not
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registered (restricted securities) under the Securities Act of 1933 (1933 Act),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and which are, therefore, restricted as to their resale. However, a fund will
not invest more than 15% of its net assets (10% for Money Market Fund) in
illiquid investments. The trustees may adopt guidelines and delegate to the
adviser the daily function of determining the monitoring and liquidity of
restricted securities. The trustees, however, will retain oversight as to, and
be ultimately responsible for, the determinations. If the adviser determines,
based upon a continuing review of the trading markets for specific Section 4(2)
paper or Rule 144A securities, that they are liquid, they will not be subject to
the 15% limit (10% for Money Market Fund) in illiquid investments. This
investment practice could have the effect of decreasing the level of liquidity
in the fund if sufficient numbers of qualified institutional buyers are not
interested in purchasing these restricted securities.
Other investment companies. (All funds) Each fund, together with any companies
- ---------------------------
controlled by the fund, may not acquire more than 3% of the total outstanding
securities of any other investment company. A fund may also not invest more
than 5% of its total assets in any one investment company and may not invest
more than 10% of its total assets in the securities of other investment
companies.
Forward Commitment and When-Issued Securities. (All funds) "When-issued"
- ---------------------------------------------
refers to securities whose terms are available and for which a market exists,
but which have not been issued. A fund will engage in when-issued purchases of
securities in order to obtain what is considered to be an advantageous price and
yield at the time of purchase. In when-issued transactions, frequently no
payment is made until delivery is due, often a month or more after the purchase.
In a forward commitment transaction, the fund contracts to purchase or sell
securities for a fixed price at a future date beyond customary settlement time.
When a fund engages in forward commitment and when-issued transactions, it
relies on the other party to consummate the transaction. The failure of the
issuer or other party to consummate the transaction may result in the fund's
losing the opportunity to obtain an advantageous price. The
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purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date a fund enters into an agreement to purchase securities on a when-
issued or forward commitment basis, the fund will segregate in a separate
account cash or liquid securities, of any type or maturity, equal in value to
the fund's commitment. These assets will be valued daily at market, and
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, a fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
Options on Securities and Securities Indices. (Real Estate Fund; Investment
- --------------------------------------------
Grade Bond Fund) A fund may purchase and write (sell) call and put options on
any securities in which it may invest or on any securities index based on
securities in which it may invest. These options may be listed on securities
exchanges or traded in the over-the-counter market. A fund may write covered
put and call options and purchase put and call options to enhance total return,
as a substitute for the purchase or sale of securities, or to protect against
declines in the value of portfolio securities and against increases in the cost
of securities to be acquired.
Writing Covered Options. A call option on securities written by a fund
obligates the fund to sell specified securities to the holder of the option at a
specified price if the option is exercised at any time before the expiration
date. A put option on securities written by a fund obligates the fund to
purchase specified securities from the option holder at a specified price if the
option is exercised at any time before the expiration date. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options requires cash settlement payments and does
not involve the actual purchase or sale of securities. In addition, securities
index options are designed to reflect price fluctuations in a group of
securities or segment of the securities market rather than price fluctuations in
a single security. Writing covered call options may deprive a fund of the
opportunity to profit from an increase in the market price of the securities in
its portfolio. Writing covered put options may deprive a fund of the
opportunity to profit from a decrease in the market price of the securities to
be acquired for its portfolio.
All call and put options written by a fund are covered. A written call option
or put option may be covered by (i) maintaining cash or liquid securities in a
segregated account with a value at least equal to a fund's obligation under the
option, (ii) entering into an offsetting forward commitment and/or (iii)
purchasing an offsetting option or any other option which, by virtue of its
exercise price or otherwise, reduces the fund's net exposure on its written
option position. A written call option on securities is typically covered by
maintaining the securities that are subject to the option in a segregated
account. A fund may cover call options on a securities index by owning
securities whose price changes are expected to be similar to those of the
underlying index.
A fund may terminate its obligations under an exchange traded call or put option
by purchasing an option identical to the one it has written. Obligations under
over-the-counter options may be terminated only by entering into an offsetting
transaction with the counterparty to the option. These purchases are referred
to as "closing purchase transactions."
Purchasing Options. A fund would normally purchase call options in anticipation
of an increase, or put options in anticipation of a decrease ("protective
puts"), in the market value of securities of the type in which it may invest. A
fund may also sell call and put options to close out its purchased options.
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The purchase of a call option would entitle a fund, in return for the premium
paid, to purchase specified securities at a specified price during the option
period. A fund would ordinarily realize a gain on the purchase of a call option
if, during the option period, the value of such securities exceeded the sum of
the exercise price, the premium paid and transaction costs; otherwise the fund
would realize either no gain or a loss on the purchase of the call option.
The purchase of a put option would entitle a fund, in exchange for the premium
paid, to sell specified securities at a specified price during the option
period. The purchase of protective puts is designed to offset or hedge against
a decline in the market value of a fund's portfolio securities. Put options may
also be purchased by a fund for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. A fund would
ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the fund would realize either no
gain or a loss on the purchase of the put option. Gains and losses on the
purchase of put options may be offset by countervailing changes in the value of
the fund's portfolio securities.
A fund's options transactions will be subject to limitations established by each
of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which a fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the adviser. An exchange, board of trade or other trading facility may order
the liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If a fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the fund will not be able to sell the underlying securities or
dispose of assets held in a segregated account until the options expire or are
exercised. Similarly, if a fund is unable to effect a closing sale transaction
with respect to options it has purchased, it would have to exercise the options
in order to realize any profit and will incur transaction costs upon the
purchase or sale of underlying securities.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options). If trading were discontinued, the
secondary market on that exchange (or in that class or series of options) would
cease to exist. However, outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
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A fund's ability to terminate over-the-counter options is more limited than with
exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the trustees.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities markets.
Futures Contracts and Options on Futures Contracts. (Real Estate Fund;
- --------------------------------------------------
Investment Grade Bond Fund) To seek to increase total return or hedge against
changes in interest rates or securities prices, a fund may purchase and sell
futures contracts, and purchase and write call and put options on these futures
contracts. A fund may also enter into closing purchase and sale transactions
with respect to any of these contracts and options. The futures contracts may
be based on various securities (such as U.S. government securities), securities
indices and any other financial instruments and indices. All futures contracts
entered into by the fund are traded on U.S. exchanges or boards of trade that
are licensed, regulated or approved by the Commodity Futures Trading Commission
("CFTC").
Futures Contracts. A futures contract may generally be described as an
agreement between two parties to buy and sell particular financial instruments
for an agreed price during a designated month (or to deliver the final cash
settlement price, in the case of a contract relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities will usually be liquidated in
this manner, a fund may instead make, or take, delivery of the underlying
securities whenever it appears economically advantageous to do so. A clearing
corporation associated with the exchange on which futures contracts are traded
guarantees that, if still open, the sale or purchase will be performed on the
settlement date.
Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that a fund proposes to acquire. When
interest rates are rising or securities prices are falling, a fund can seek to
offset a decline in the value of its current portfolio securities through the
sale of futures contracts. When interest rates are falling or securities prices
are rising, a fund, through the purchase of futures contracts, can attempt to
secure better rates or prices than might later be available in the market when
it effects anticipated purchases.
A fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated rise in
interest rates or a decline in market prices that would adversely affect the
value of the fund's portfolio securities. These futures contracts may
include contracts for the future delivery of securities held by the fund or
securities with characteristics similar to those of the fund's portfolio
securities.
If, in the opinion of the adviser, there is a sufficient degree of correlation
between price trends for a fund's portfolio securities and futures contracts
based on other financial instruments, securities indices
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or other indices, the fund may also enter into such futures contracts as part of
its hedging strategy. Although under some circumstances prices of securities in
a fund's portfolio may be more or less volatile than prices of these futures
contracts, the adviser will attempt to estimate the extent of this volatility
difference based on historical patterns and compensate for any differential by
having the fund enter into a greater or lesser number of futures contracts or by
attempting to achieve only a partial hedge against price changes affecting the
fund's portfolio securities.
When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of a fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.
On other occasions, a fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable market to be less favorable
than prices that are currently available. The fund may also purchase futures
contracts as a substitute for transactions in securities, to alter the
investment characteristics of portfolio securities or to gain or increase its
exposure to a particular securities market.
Options on Futures Contracts. A fund may purchase and write options on futures
for the same purposes as its transactions in futures contracts. The purchase of
put and call options on futures contracts will give a fund the right (but not
the obligation) for a specified price to sell or to purchase, respectively, the
underlying futures contract at any time during the option period. As the
purchaser of an option on a futures contract, the fund obtains the benefit of
the futures position if prices move in a favorable direction but limits its risk
of loss in the event of an unfavorable price movement to the loss of the premium
and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of a fund's assets. By writing a call
option, a fund becomes obligated, in exchange for the premium (upon exercise of
the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that a fund intends to purchase. However,
the fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower than the
exercise price. The loss incurred by the fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series.
There is no guarantee that such closing transactions can be effected. A fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
Other Considerations. A fund will engage in futures and related options
transactions either for bona fide hedging purposes or to seek to increase total
return as permitted by the CFTC. To the extent that a fund is using futures and
related options for hedging purposes, futures contracts will be sold to protect
against a decline in the price of securities that the fund owns or futures
contracts will be purchased to protect the fund against an increase in the price
of securities it intends to purchase. The adviser will determine that the price
fluctuations in the futures contracts and options on futures used
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for hedging purposes are substantially related to price fluctuations in
securities held by the fund or securities or instruments which it expects to
purchase. As evidence of its hedging intent, a fund expects that on 75% or more
of the occasions on which it takes a long futures or option position (involving
the purchase of futures contracts), the fund will have purchased, or will be in
the process of purchasing, equivalent amounts of related securities in the cash
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the fund to do so,
a long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
To the extent that a fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the fund to purchase securities, require the fund to establish a
segregated account consisting of cash or liquid securities in an amount equal to
the underlying value of such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates or securities prices may result
in a poorer overall performance for a fund than if it had not entered into any
futures contracts or options transactions.
Perfect correlation between a fund's futures positions and portfolio positions
will be impossible to achieve. There are no futures contracts based upon
individual securities, except certain U.S. government securities. In the event
of an imperfect correlation between a futures position and a portfolio position
which is intended to be protected, the desired protection may not be obtained
and the fund may be exposed to risk of loss.
Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the fund from closing out
positions and limiting its losses.
Foreign Currency Transactions. (Real Estate Fund; Investment Grade Bond Fund)
- -----------------------------
A fund's foreign currency exchange transactions may be conducted on a spot
(i.e., cash) basis at the spot rate for purchasing or selling currency
prevailing in the foreign exchange market. A fund may also enter into
forward foreign currency exchange contracts to enhance return, to hedge against
fluctuations in currency exchange rates affecting a particular transaction or
portfolio position, or as a substitute for the purchase or sale of a currency or
assets denominated in that currency. Forward contracts are agreements to
purchase or sell a specified currency at a specified future date and price set
at the time of the contract. Transaction hedging is the purchase or sale of
forward foreign currency contracts with respect to specific receivables or
payables of a fund accruing in connection with the purchase and sale of its
portfolio securities quoted or denominated in the same or related foreign
currencies. Portfolio
================================================================================
-17-
<PAGE>
================================================================================
hedging is the use of forward foreign currency contracts to offset portfolio
security positions denominated or quoted in the same or related foreign
currencies. A fund may elect to hedge less than all of its foreign portfolio
positions if deemed appropriate by the adviser.
If a fund purchases a forward contract or sells a forward contract for non-
hedging purposes, it will segregate cash or liquid securities, of any type or
maturity, in a separate account in an amount equal to the value of the fund's
total assets committed to the consummation of the forward contract. The assets
in the segregated account will be valued at market daily and if the value of the
securities in the separate account declines, additional cash or securities will
be placed in the account so that the value of the account will be equal to the
amount of the fund's commitment with respect to such contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. These transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it
may not be possible for the fund to hedge against a devaluation that is so
generally anticipated that the fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates.
The cost to a fund of engaging in foreign currency transactions varies with such
factors as the currency involved, the length of the contract period and the
market conditions then prevailing. Since transactions in foreign currency are
usually conducted on a principal basis, no fees or commissions are involved.
Foreign Currency Options. A foreign currency option provides the option buyer
with the right to buy or sell a stated amount of foreign currency at the
exercise price on a specified date or during the option period. The owner of a
call option has the right, but not the obligation, to buy the currency.
Conversely, the owner of a put option has the right, but not the obligation, to
sell the currency. When the option is exercised, the seller (i.e., writer) of
the option is obligated to fulfill the terms of the sold option. However,
either the seller or the buyer may, in the secondary market, close its position
during the option period at any time prior to expiration.
A call option on a foreign currency generally rises in value if the underlying
currency appreciates in value, and a put option on a foreign currency generally
rises in value if the underlying currency depreciates in value. Although
purchasing a foreign currency option can protect the fund against an adverse
movement in the value of a foreign currency, the option will not limit the
movement in the value of such currency. For example, if a fund was holding
securities denominated in a foreign currency that was appreciating and had
purchased a foreign currency put to hedge against a decline in the value of the
currency, the fund would not have to exercise its put option. Likewise, if a
fund were to enter into a contract to purchase a security denominated in foreign
currency and, in conjunction with that purchase, were to purchase a foreign
currency call option to hedge against a rise in value of the currency, and if
the value of the currency instead depreciated between the date of purchase and
the settlement date, the fund would not have to exercise its call. Instead, the
fund could acquire in the spot market the amount of foreign currency needed for
settlement.
Special Risks Associated with Foreign Currency Options. Buyers and sellers of
foreign currency options are subject to the same risks that apply to options
generally. In addition, there are certain additional risks associated with
foreign currency options. The markets in foreign currency options are
relatively new, and a fund's ability to establish and close out positions on
such options is subject to the maintenance of a liquid secondary market.
Although a fund will not purchase or write such options
================================================================================
-18-
<PAGE>
================================================================================
unless and until, in the opinion of the adviser, the market for them has
developed sufficiently to ensure that the risks in connection with such options
are not greater than the risks in connection with the underlying currency, there
can be no assurance that a liquid secondary market will exist for a particular
option at any specific time. In addition, options on foreign currencies are
affected by most of the same factors that influence foreign exchange rates and
investments generally.
The value of a foreign currency option depends upon the value of the underlying
currency relative to the U.S. dollar. As a result, the price of the option
position may vary with changes in the value of either or both currencies and may
have no relationship to the investment merits of a foreign security. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Available quotation
information is generally representative of very large transactions in the
interbank market and thus may not reflect relatively smaller transactions (i.e.,
less than $1 million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To the extent that
the U.S. option markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the options markets until
they reopen.
Foreign Currency Futures Transactions. By using foreign currency futures
contracts and options on such contracts, the fund may be able to achieve many of
the same objectives as it would through the use of forward foreign currency
exchange contracts. The fund may be able to achieve these objectives possibly
more effectively and at a lower cost by using futures transactions instead of
forward foreign currency exchange contracts.
A foreign currency futures contract sale creates an obligation by the fund, as
seller, to deliver the amount of currency called for in the contract at a
specified future time for a specified price. A currency futures contract
purchase creates an obligation by the fund, as purchaser, to take delivery of an
amount of currency at a specified future time at a specified price. Although
the terms of currency futures contracts specify actual delivery or receipt, in
most instances the contracts are closed out before the settlement date without
the making or taking of delivery of the currency. Closing out of currency
futures contracts is effected by entering into an offsetting purchase or sale
transaction. An offsetting transaction for a currency futures contract sale is
effected by the fund entering into a currency futures contract purchase for the
same aggregate amount of currency and same delivery date. If the price of the
sale exceeds the price of the offsetting purchase, the fund is immediately paid
the difference and realizes a gain, and if the price of the sale is less than
the price of the offsetting purchase, the fund pays the difference and realizes
a loss. Similarly, the closing out of a currency futures contract purchase is
effected by the fund entering into a currency futures contract sale. If the
offsetting sale price exceeds the purchase price, the fund realizes a gain, and
if the offsetting sale price is less than the purchase price, the fund realizes
a loss.
Special Risks Associated with Foreign Currency Futures Contracts and Related
Options. Buyers and sellers of foreign currency futures contracts and related
options are subject to the same risks that apply to the use of futures
generally. In addition, the risks associated with foreign currency futures
contracts and
================================================================================
-19-
<PAGE>
================================================================================
options on futures are similar to those associated with options on foreign
currencies, as described above.
Swaps, Caps, Floors and Collars. (Real Estate Fund; Investment Grade Bond Fund)
- -------------------------------
As one way of managing its exposure to different types of investments, a fund
may enter into interest rate swaps, currency swaps, and other types of swap
agreements such as caps, collars and floors. In a typical interest rate swap,
one party agrees to make regular payments equal to a floating interest rate
times a "notional principal amount," in return for payments equal to a fixed
rate times the same notional amount, for a specified period of time. If a swap
agreement provides for payment in different currencies, the parties might agree
to exchange the notional principal amount as well. Swaps may also depend on
other prices or rates, such as the value of an index or mortgage prepayment
rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right
to receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap
and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from one type of
investment to another. For example, if the fund agreed to exchange payments in
dollars for payments in a foreign currency, the swap agreement would tend to
decrease the fund's exposure to U.S. interest rates and increase its exposure to
foreign currency and interest rates. Caps and floors have an effect similar to
buying or writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a fund's investments and its
share price and yield.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and may have a considerable impact on a
fund's performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. A fund may also suffer losses if
it is unable to terminate outstanding swap agreements or reduce its exposure
through offsetting transactions. A fund will maintain in a segregated account,
cash or liquid securities equal to the net amount, if any, of the excess of the
fund's obligations over its entitlements with respect to swap, cap, collar or
floor transactions.
Temporary Investments. (Real Estate Fund; Investment Grade Bond Fund) For
- ---------------------
temporary and defensive purposes, a fund may invest up to 100% of its total
assets in investment grade short-term fixed income securities, including short-
term U.S. government securities, money market instruments, including negotiable
certificates of deposit, non-negotiable fixed time deposits, bankers'
acceptances,
commercial paper, floating rate notes, and repurchase agreements. A fund may
also hold significant amounts of its assets in cash.
Lending of Securities. (All funds) A fund may lend portfolio securities to
- ---------------------
brokers, dealers, and financial institutions if the loan is secured by cash,
U.S. government securities or other collateral according to applicable
regulatory requirements. A fund may reinvest any cash collateral in short-term
securities and money market funds. When a fund lends portfolio securities,
there is a risk that the borrower may fail to return the securities. As a
result, a fund may incur a loss or, in the
================================================================================
-20-
<PAGE>
================================================================================
event of the borrower's bankruptcy, may be delayed in or prevented from
liquidating the collateral. A fund may not lend portfolio securities having a
total value exceeding one-third of its total assets.
Short-Term Trading and Portfolio Turnover. (All funds) Short-term trading
- -----------------------------------------
means the purchase and subsequent sale of a security after it has been held for
a relatively brief period of time. A fund may engage in short-term trading in
response to stock market conditions, changes in interest rates or other economic
trends and developments, or to take advantage of yield disparities between
various fixed income securities in order to realize capital gains or improve
income. Short-term trading may have the effect of increasing portfolio turnover
rate. A high rate of portfolio turnover (100% or more) involves correspondingly
higher brokerage costs that must be borne directly by the fund and thus
indirectly by the shareholders, reducing the shareholder's return.
Investment Restrictions. Each fund has adopted fundamental investment
restrictions. These restrictions cannot be changed unless the change is
approved by the lesser of (1) 67% or more of the voting securities present at a
meeting, if the holders of more than 50% of the outstanding voting securities of
the affected fund are present or represented by proxy, or (2) more than 50% of
the outstanding voting securities of the affected fund.
These fundamental restrictions provide that a fund may not:
1. Invest 25% or more of its total assets in securities of issuers in any one
industry, except that Real Estate Fund invests 25% or more of its total assets
in the real estate group of industries. The United States government, its
agencies or instrumentalities are not considered industries for this purpose.
2. Borrow money or issue senior securities except to the extent permitted by the
1940 Act.
3. Make loans of securities to other persons, except loans of securities not
exceeding one-third of the fund's total assets, investments in debt obligations
and transactions in repurchase agreements.
4. Underwrite securities of other issuers, except insofar as the fund may be
deemed an underwriter under the Securities Act of 1933, as amended (the "1933
Act") in selling portfolio securities.
5. Purchase, sell or invest in real estate, but each fund subject to its other
investment policies and restrictions may invest in securities of companies that
deal in real estate or are engaged in the real estate business, including real
estate investment trusts, and securities secured by real estate or interests
therein and may hold and sell real estate acquired through default, liquidation
or other distributions of an interest in real estate as a result of the fund's
ownership of such securities.
6. Invest in commodities or commodity futures contracts, excluding transactions
in financial derivative contracts, such as forward currency contracts; financial
futures contracts and options on financial futures contracts; options on
securities, currencies and financial indices; and swaps, caps, floors, collars
and swaptions, as permitted by the fund's prospectus and this statement of
additional information.
7. Make investments that are inconsistent with the status of Investment Grade
Bond Fund and Money Market Fund as diversified funds.
The 1940 Act currently prohibits the funds from issuing senior securities or
borrowing money, except that Real Estate Fund and Investment Grade Bond Fund may
borrow from banks or pursuant to
================================================================================
-21-
<PAGE>
================================================================================
reverse repurchase agreements in an amount not exceeding one-third of total
assets (including the amount borrowed). Each fund is required to reduce the
amount of its borrowings to not more than one-third of total assets within three
days after such borrowings first exceed this one-third limitation.
Additional investment restrictions adopted by the funds, which may be changed by
the trustees, provide that a fund may not:
1. a. Investment Grade Bond Fund Only. With respect to 75% of the fund's
-------------------------------
assets, invest more than 5% of the fund's assets (taken at a market value at the
time of purchase) in the outstanding securities of any single issuer or own more
than 10% of the outstanding voting securities of any one issuer, in each case
other than (1) securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, or (2) securities of other investment companies.
b. Money Market Fund Only. Except with respect to investments in
----------------------
obligations of (a) the U.S. Government, its agencies, authorities or
instrumentalities and (b) domestic banks, purchase any security if, as a result
(i) more than 5% of its assets would be invested in the securities of any one
issuer, or (ii) more than 25% of its assets would be invested in a particular
industry.
2. Invest more than 15% (10% for Money Market Fund) of its net assets (taken at
market value at the time of purchase) in illiquid securities.
3. Make investments for the purpose of exercising control or management.
4. Invest in other investment companies except as permitted under the 1940 Act.
================================================================================
-22-
<PAGE>
The Funds' Management
================================================================================
Trustees and Officers. Each fund's business is managed by the trustees. The
trustees elect each fund's officers who are responsible for the day-to-day
operations of the fund and who execute the investment policies approved by the
trustees. Several of the funds' trustees and officers are also directors and
officers of Sun Life Assurance Company of Canada or the adviser. The table below
provides more information about the funds' trustees and officers.
- --------------------------------------------------------------------------------
Principal occupation
Name, address and age Position with the trust past 5 years
- --------------------------------------------------------------------------------
C. James Prieur* Chairman, Executive President and chief
One Sun Life Executive Park Vice President and operating officer, Sun
Wellesley Hills, MA 02481 Trustee Life Assurance Company
Date of birth: April 21, of Canada since 1999.
1951 Prior to that, senior
vice president and
general manager, U.S.
operations, Sun Life
Assurance Company of
Canada, since 1997, and
vice president,
Investments, U.S.
operations, Sun Life
Assurance Company of
Canada. Chairman, since
1998 and director, Sun
Capital Advisers, Inc.
since 1992.
- --------------------------------------------------------------------------------
Graham E. Jones Trustee Senior vice president,
330 Garfield Street BGK Properties, Inc.,
Santa Fe, NM 87501 since 1994. Chief
Date of birth: January Financial Officer and
21, 1933 Principal, Practice
Management Systems, Inc.
from 1988-95.
- --------------------------------------------------------------------------------
Anthony C. Paddock Trustee Managing Director,
350 Fifth Street, Suite 5713 Empire Valuation
New York, NY 10118 Consultants, Inc., since
Date of birth: July 9, 1996. President, AC
1935 Paddock & Associates,
since 1996. Prior to
that, principal, KPMG
Peat Marwick from
1987-96.
- --------------------------------------------------------------------------------
William N. Searcy Trustee Pension and savings
2330 Shawnee Mission trust officer, Sprint
Parkway Corp., since 1989.
Westwood, KS 66205
Date of birth: September
3, 1946
- --------------------------------------------------------------------------------
================================================================================
-23-
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Principal occupation
Name, address and age Position with the trust past 5 years
- --------------------------------------------------------------------------------
James M.A. Anderson* President, Chief Vice president,
One Sun Life Executive Park Executive Officer and Investments, U.S.
Wellesley Hills, MA 02481 Trustee operations, Sun Life
Date of birth: September Assurance Company of
14, 1949 Canada, since 1998.
Prior to that, vice
president, Securities
Investments, Canada
operations, Sun Life
Assurance Company of
Canada, 1995-98. Prior
to that, vice president,
Mortgage Investments,
Canada operations, Sun
Life Assurance Company
of Canada, 1993-95.
President and director,
Sun Capital Advisers,
Inc. since 1998.
- --------------------------------------------------------------------------------
James F. Alban* Chief Financial Officer Assistant vice president,
One Sun Life Executive Park and Treasurer Sun Capital Advisers,
Wellesley Hills, MA 02481 Inc. since 1998. Audit
Date of birth: January 23, senior manager,
1962 PricewaterhouseCoopers
LLP, 1996-1998. Assistant
vice president, Eaton
Vance Management, 1991-
1996.
- --------------------------------------------------------------------------------
Robert P. Vrolyk* Assistant Treasurer Vice president, Finance,
One Sun Life Executive Park U.S. operations, Sun
Wellesley Hills, MA 02481 Life Assurance Company
Date of birth: April 15, of Canada, since 1993.
1953 Vice president,
treasurer and director,
Sun Capital Advisers,
Inc. since 1998.
- --------------------------------------------------------------------------------
Richard Gordon, CFA* Vice President Vice president, Sun
One Sun Life Executive Park Capital Advisers, Inc.,
Wellesley Hills, MA 02481 since 1992. Vice
Date of birth: July 10, president, U.S. Public
1945 Bonds, Sun Life
Assurance Company of
Canada, since 1994.
Prior to that, assistant
vice president.
- --------------------------------------------------------------------------------
Howard C. Greene, CFA* Vice President Vice president, Sun
One Sun Life Executive Park Capital Advisers, Inc.,
Wellesley Hills, MA 02481 since 1998. Assistant
Date of birth: July 22, vice president, U.S.
1957 Public Bonds, Sun Life
Assurance Company of
Canada, since 1996.
Prior to that, senior
investment officer.
- --------------------------------------------------------------------------------
John T. Donnelly, CFA* Vice President Vice president, Sun
One Sun Life Executive Park Capital Advisers, Inc.,
Wellesley Hills, MA 02481 since 1998. Vice
Date of birth: October president, U.S.
28, 1958 Equities, Sun Life
Assurance Company of
Canada, since 1999.
Prior to that,
assistant vice president,
U.S. Equities, Sun Life
Assurance Company of
Canada, since 1997,
senior investment officer
U.S. Public Bonds (1994-
1997), and investment
officer, portfolio
management (1991-1994).
- --------------------------------------------------------------------------------
================================================================================
-24-
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Principal occupation
Name, address and age Position with the trust past 5 years
- --------------------------------------------------------------------------------
Maura A. Murphy, Esq.* Secretary Senior counsel, U.S.
One Sun Life Executive Park operations, Sun Life
Wellesley Hills, MA 02481 Assurance Company of
Date of birth: February Canada, since 1998.
12, 1960 Prior to that,
securities counsel, New
England Life Insurance
Company, 1994-98. Prior
to that, attorney,
Division of Investment
Management, U.S.
Securities and Exchange
Commission, 1990-94.
- --------------------------------------------------------------------------------
Peter F. Demuth, Esq.* Assistant Secretary Vice president and chief
One Sun Life Executive Park counsel, U.S.
Wellesley Hills, MA 02481 operations, Sun Life
Date of birth: June 4, Assurance Company of
1958 Canada, since 1998.
Prior to that, partner
at the Boston law firm
of Mintz, Levin, Cohn,
Ferris, Glovsky and
Popeo, P.C.
- --------------------------------------------------------------------------------
Christopher P. Harvey, Assistant Secretary Partner, Hale and Dorr
Esq.* LLP, since 1991, counsel
60 State Street to the Trust.
Boston, MA 02109
Date of birth: June 27,
1961
- --------------------------------------------------------------------------------
* An interested person of the funds for purposes of the 1940 Act.
Trustee Compensation. The trust pays the trustees who are not interested
persons of the trust or the adviser for their service as trustees. The
following table sets forth all compensation paid to the trustees as of the
funds' fiscal year ended December 31, 1998. The trustees who are officers or
employees of Sun Life or the adviser are not paid by the trust for their service
as trustees.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Name and position Aggregate Pension or Estimated annual Total
with compensation retirement benefits upon compensation
the trust from the trust benefits accrued retirement from the trust
as part of funds' paid to trustees*
expenses
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Graham B. Jones $ 1,750 0 0 $ 1,750
- ------------------------------------------------------------------------------------------------
Anthony C. Paddock 1,750 0 0 1,750
- ------------------------------------------------------------------------------------------------
William N. Searcy 2,000 0 0 2,000
- ------------------------------------------------------------------------------------------------
</TABLE>
* The trust is the only registered investment company managed by the
adviser.
As of April 21, 1999, the trustees and officers of Sun Capital Advisers Trust
as a group owned less than 1% of the outstanding shares of beneficial interest
in each of the funds.
================================================================================
-25-
<PAGE>
================================================================================
The Investment Adviser. Sun Capital Advisers, Inc., the funds' investment
adviser, is located at One Sun Life Executive Park, Wellesley Hills,
Massachusetts 02481. The adviser is a wholly-owned subsidiary of Sun Life
Assurance Company of Canada (U.S.), which is an indirect wholly-owned subsidiary
of Sun Life Assurance Company of Canada (Sun Life of Canada). Sun Life of Canada
is a mutual life insurance company incorporated pursuant to an Act of Parliament
of Canada in 1865. Sun Life of Canada and its affiliates currently transact
business in Canada, the United States, the United Kingdom, Asia Pacific and
South America. Sun Life of Canada has established a record of financial strength
that has resulted in consistently outstanding ratings from A.M. Best (A++ for
financial strength (highest rating level)), Duff & Phelps (AAA for claims-paying
ability (highest rating level)), Moody's Investors' Service, Inc. (Aa1 for
Canadian currency financial strength (second highest of 21 rating levels) and
Aa2 for foreign currency financial strength (third highest of 21 rating levels)
and Standard & Poor's Ratings Group (AAA for financial strength (highest rating
level)).
The adviser is a Delaware corporation and a registered investment adviser. The
adviser provides investment management and supervisory services to pension and
profit-sharing accounts of Sun Life of Canada. Each fund will offer its shares
to separate accounts that are funding vehicles for variable contracts offered by
Sun Life of Canada and its affiliates and other insurance companies. It is also
expected that the adviser, through certain asset allocation programs offered to
holders of variable contracts offered by Sun Life of Canada and its affiliates,
will have discretion to allocate assets to the funds.
Restrictions on Personal Trading. In order to avoid conflicts with portfolio
trades for the funds, the adviser and the funds have adopted restrictions on
personal securities trading by personnel of the adviser and its affiliates. Some
of the adviser's restrictions include pre-clearance for all personal trades and
a ban on the purchase of initial public offerings by certain personnel. These
restrictions reflect the basic principle that the interests of the funds and
their shareholders come before the interests of personnel of the adviser and its
affiliates.
Terms of Advisory Agreement. Each fund has entered into an investment advisory
agreement with the adviser which was approved by the fund's trustees. Under the
terms of the advisory agreement, the adviser furnishes an investment program for
the fund and determines, subject to the overall supervision and review of the
trustees, which investments should be purchased, held, sold or exchanged and
provides supervision over all aspects of the fund's operations, except those
which are delegated to a custodian, transfer agent or other agent. The adviser
may enter into agreements with Sun Life of Canada to utilize the resources and
personnel of the company.
Each fund bears the cost of its operations not expressly assumed by the adviser
or another service provider. These costs may include, but are not limited to,
(i) charges and expenses for fund accounting, pricing and appraisal services and
related overhead, including, to the extent such services are performed by
personnel of the Adviser, or its affiliates, office space and facilities and
personnel compensation, training and benefits; (ii) charges and expenses of
auditors; (iii) charges and expenses of any custodian, administrator, transfer
agent, plan agent, dividend disbursing agent and registrar appointed by the
Trust; (iv) issue and transfer taxes chargeable to the Trust in connection with
securities transactions to which the Trust is a party; (v) insurance premiums,
interest charges, dues and fees for membership in trade associations and all
taxes and corporate fees payable by the Trust to federal, state or other
governmental agencies; (vi) fees and expenses involved in registering and
maintaining registrations of the Trust and/or its shares with the Commission,
state securities agencies and foreign jurisdictions, including the preparation
of prospectuses and statements of additional information for filing with such
regulatory agencies; (vii) all expenses of shareholders' and Trustees'
================================================================================
-26-
<PAGE>
================================================================================
meetings and of preparing, printing and distributing prospectuses, notices,
proxy statements and all reports to shareholders and to governmental agencies;
(viii) charges and expenses of legal counsel to the Trust and the Trustees; (ix)
if applicable, any distribution fees paid by the Trust in accordance with Rule
12b-1 promulgated by the Commission pursuant to the 1940 Act; (x) compensation
of those Trustees of the Trust who are not affiliated with or interested persons
of the adviser or the Trust (other than as Trustees); (xi) the cost of preparing
and printing share certificates; and (xii) interest on borrowed money, if any.
Each fund pays a fee monthly to the adviser for its advisory services based on a
stated percentage of the average daily net assets of the fund as follows:
-----------------------------------
Money Market Fund 0.50%
-----------------------------------
Investment Grade Bond Fund 0.60%
-----------------------------------
Real Estate Fund 0.95%
-----------------------------------
From time to time, the adviser may reduce its fee or make other arrangements to
limit a fund's expenses to a specified percentage of average daily net assets.
To the extent that a fund's total expense ratio falls below its expense limit,
the adviser reserves the right to be reimbursed for management fees waived and
fund expenses paid by it during the prior two fiscal years. The adviser may
modify or eliminate this voluntary expense at any time. The adviser has
voluntarily agreed to limit its advisory fee and to reimburse each fund's other
expenses for an indefinite period to reduce each fund's total annual operating
expenses to the amounts set forth below.
Fund Total Operating Expenses
---- ------------------------
Money Market Fund 0.65%
Investment Grade Bond Fund 0.75%
Real Estate Fund 1.25%
The adviser may modify or terminate this voluntary expense limit at any time.
For the period ended December 31, 1998, the adviser waived all of the advisory
fees due to it for the period. Absent this fee waiver, the advisory fees would
have been $857, $4,096 and $3,200 for Money Market Fund, Investment Grade Bond
Fund and Real Estate Fund.
Securities held by a fund may also be held by other funds or investment advisory
clients for which the adviser or any of its affiliates provides investment
advice. Because of different investment objectives or other factors, a
particular security may be bought for one or more funds or clients when one or
more are selling the same security. If opportunities for purchase or sale of
securities by the adviser or for other funds or investment advisory clients
arise at or about the same time, transactions in the securities will be made,
insofar as feasible, for the respective funds or clients in a manner deemed
equitable to all of them. To the extent that transactions on behalf of more than
one client of the adviser or its affiliates may increase the demand for
securities being purchased or the supply of securities being sold, there may be
an adverse effect on the price obtained by a fund.
Pursuant to the advisory agreement, the adviser is not liable for any error of
judgment or mistake of law or for any loss suffered by the funds in connection
with the matters to which its respective contract relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the adviser in the performance of its duties or from its reckless disregard of
the obligations and duties under the applicable agreement.
================================================================================
-27-
<PAGE>
================================================================================
Under the advisory agreement, each fund may use the name "Sun Capital" or any
name derived from or similar to this name only for as long as the advisory
agreement or any extension, renewal or amendment of the agreement remains in
effect. If a fund's advisory agreement is no longer in effect, the fund will
cease to use such name or any other name indicating that it is advised by or
otherwise connected with the adviser. In addition, the adviser may grant the
non-exclusive right to use the name "Sun Capital" or any similar name to any
other corporation or entity, including but not limited to any investment company
of which Sun Life of Canada or any subsidiary or affiliate of the company or any
successor to the business of the company or any subsidiary or affiliate of the
company is the investment adviser.
The advisory agreement initially expires on October 31, 2000, and will continue
in effect from year to year for each fund if approved by either the vote of the
fund's shareholders (if a shareholder vote is required) or the trustees,
including a vote of a majority of the trustees who are not parties to the
agreement or "interested persons" of any such party, cast at a meeting called
for such purposes. The advisory agreement may be terminated on 60 days' written
notice by any party or by a vote of a majority of the outstanding voting
securities of the affected fund and will terminate automatically if assigned.
Administrator. State Street Bank & Trust Company, 1776 Heritage Drive, North
Quincy, Massachusetts, 02171, is the funds' administrator. State Street is
responsible for managing the funds' business affairs. State Street's services
include recordkeeping, preparation and filing of documents required to comply
with federal and state securities laws, preparation and filing of tax returns,
supervising the activities of the custodian and transfer and shareholder
servicing agent and other administrative services necessary to conduct the
funds' business. For its services, State Street receives an asset based fee with
breakpoints not to exceed 0.08% of the average net assets of each fund subject
to a minimum fee of $57,500 per fund.
For the period ended December 31, 1998, each of the funds accrued fees, to be
paid in 1999, to the administrator as follows:
<TABLE>
<CAPTION>
Money Market Investment Grade Real Estate
Fund Bond Fund Fund
---- --------- ----
<S> <C> <C> <C>
$399 $399 $399
</TABLE>
Transfer Agent. State Street Bank & Trust Company is the transfer agent for the
funds.
Custodian. Each fund's portfolio securities are held pursuant to a master
custodian agreement between the trust and State Street Bank & Trust Company.
Under the custodian agreement, the custodian performs custody, portfolio and
fund accounting services.
Independent Auditors. The trustees have selected Deloitte & Touche LLP as the
funds' independent auditor. Deloitte & Touche LLP audits and renders opinions on
the funds' annual financial statements and reviews the funds' annual federal
income tax returns.
================================================================================
-28-
<PAGE>
Information About The Trust's History And Organization
================================================================================
Description of the Trust's Shares. The trust is a business trust organized
under Delaware law. The trustees are responsible for the management and
supervision of the funds. The declaration of trust, dated July 13, 1998, permits
the trustees to issue an unlimited number of full and fractional shares of
beneficial interest of the funds, without par value. Under the declaration of
trust, the trustees have the authority to create and classify shares of
beneficial interest in separate series, without further action by shareholders.
As of the date of this statement of additional information, the trustees have
authorized shares only of the funds. Additional series may be added in the
future. The declaration of trust also authorizes the trustees to classify and
reclassify the shares of the funds, or any other series of the trust, into one
or more classes. As of the date of this statement of additional information, the
trustees have not authorized the issuance of additional classes of shares of the
funds.
Each share of a fund represents an equal proportionate interest in the assets
belonging to that fund. When issued, shares are fully paid and nonassessable.
In the event of liquidation of a fund, shareholders are entitled to share pro
rata in the net assets of the fund available for distribution to such
shareholders. Shares of a fund are freely transferable and have no preemptive,
subscription or conversion rights.
In accordance with the provisions of the declaration of trust, the trustees have
initially determined that shares entitle their holders to one vote per share on
any matter on which such shares are entitled to vote. The trustees may determine
in the future, without the vote or consent of shareholders, that each dollar of
net asset value (number of shares owned times net asset value per share) will be
entitled to one vote on any matter on which such shares are entitled to vote.
The rights, if any, of variable contract holders to vote the shares of a fund
are governed by the participating insurance company's variable contract. For
information on the voting rights under a particular variable contract, see the
prospectus offering that variable contract.
Unless otherwise required by the 1940 Act or the declaration of trust, the funds
have no intention of holding annual meetings of shareholders. Shareholders may
remove a trustee by the affirmative vote of at least two-thirds of the trust's
outstanding shares. At any time that less than a majority of the trustees
holding office were elected by the shareholders, the trustees will call a
special meeting of shareholders for the purpose of electing trustees.
Under Delaware law, shareholders of a Delaware business trust are protected from
liability for acts or obligations of the trust to the same extent as
shareholders of a private, for-profit Delaware corporation. In addition, the
declaration of trust expressly provides that the trust has been organized under
Delaware law and that the declaration of trust will be governed by Delaware law.
It is possible that the trust might become a party to an action in another state
whose courts refuse to apply Delaware law, in which case the trust's
shareholders could be subject to personal liability.
To guard against this risk, the declaration of trust (i) contains an express
disclaimer of shareholder liability for acts or obligations of the trust and
provides that notice of this disclaimer may be given in each agreement,
obligation and instrument entered into or executed by the trust or its trustees,
(ii) provides for the indemnification out of trust or fund property of any
shareholders held personally liable for any obligations of the trust or of the
fund and (iii) provides that the trust shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
================================================================================
-29-
<PAGE>
================================================================================
trust and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss beyond his or her investment because of shareholder
liability with respect to a fund is limited to circumstances in which all of the
following factors are present: (1) a court refused to apply Delaware law; (2)
the liability arose under tort law or, if not, no contractual limitation of
liability was in effect; and (3) the fund itself would be unable to meet its
obligations. In the light of Delaware law, the nature of the trust business and
the nature of its assets, the risk of personal liability to a shareholder is
remote.
The declaration of trust further provides that the trust shall indemnify each of
its trustees and officers against liabilities and expenses reasonably incurred
by them, in connection with, or arising out of, any action, suit or proceeding,
threatened against or otherwise involving the trustee or officer, directly or
indirectly, by reason of being or having been a trustee or officer of the trust.
The declaration of trust does not authorize the trust or any fund to indemnify
any trustee or officer against any liability to which he or she would otherwise
be subject by reason of or for willful misfeasance, bad faith, gross negligence
or reckless disregard of such person's duties.
================================================================================
-30-
<PAGE>
More Information About How The Funds Value Their Shares
================================================================================
For purposes of calculating the net asset value (NAV) of the shares of the
funds, the funds use the following procedures.
The funds generally value equity securities traded on a principal exchange or
NASDAQ National Market issues at their last sale price on the day of valuation.
The funds generally value equity securities for which no sales are reported on a
valuation day, and other securities traded over-the-counter, at the last
available bid price.
The funds value debt securities on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally use
electronic data processing techniques (matrix pricing) to value normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.
The funds value short-term debt instruments that have a remaining maturity of 60
days or less at the time of purchase at amortized cost, which approximates
market value.
If market quotations are not readily available or if in the opinion of the
adviser any quotation or market price is not representative of true market
value, the funds may determine the fair value of any security in good faith in
accordance with procedures approved by the trustees.
Money Market Fund utilizes the amortized cost valuation method of valuing
portfolio instruments in the absence of extraordinary or unusual circumstances.
Under the amortized cost method, assets are valued by constantly amortizing over
the remaining life of an instrument the difference between the principal amount
due at maturity and the cost of the instrument to the fund. The trustees will
from time to time review the extent of any deviation of the net asset value, as
determined on the basis of the amortized cost method, from net asset value as
determined on the basis of available market quotations. If any deviation occurs
that may result in unfairness either to new investors or existing shareholders,
the trustees will take such actions as they deem appropriate to eliminate or
reduce this unfairness to the extent reasonably practicable. These actions may
include selling portfolio instruments prior to maturity to realize gains or
losses or to shorten the fund's average portfolio maturity, withholding
dividends, splitting, combining or otherwise recapitalizing outstanding shares
or using available market quotations to determine net asset value per share.
The funds value foreign securities, if any, on the basis of quotations from the
primary market in which they are traded. The fund's custodian translates assets
or liabilities expressed in foreign currencies into U.S. dollars as of the close
of the London exchange (5:00 p.m., London time; 12:00 noon, New York time) on
the date of determining a fund's NAV. If quotations are not readily available,
or the value has been materially affected by events occurring after the closing
of a foreign market, the funds may value their assets by a method that the
trustees believe accurately reflects fair value.
Each fund determines its NAV each business day at the close of regular trading
on the New York Stock Exchange (typically 4:00 p.m. eastern time) by dividing
the fund's net assets by the number of its shares outstanding. On any day an
international market is closed and the New York Stock Exchange is open, any
foreign securities will be valued at the prior day's close with the current
day's exchange rate. Trading of foreign securities may take place on Saturdays
and U.S. business holidays on which a
================================================================================
-31-
<PAGE>
================================================================================
fund's NAV is not calculated. Consequently, a fund's portfolio securities may
trade and the NAV of that fund's shares may be significantly affected on days
when a shareholder has no access to that fund.
Each participating insurance company receives orders from its variable
annuity contract and variable life insurance policy owners to purchase or redeem
shares of the funds each business day. That night, all orders received by that
insurance company on that business day are aggregated, and the insurance company
places a net purchase or redemption order for shares of one or more funds the
morning of the next business day. These orders are normally executed at the NAV
that was computed at the close of the previous business day in order to provide
a match between the variable contract and policy owners' orders to the insurance
companies and the insurance companies' orders to a fund. In some cases, an
insurance company's orders for fund shares may be executed at the NAV next
computed after the order is actually transmitted to a fund.
Redemptions in Kind. Although the funds would not normally do so, each fund has
the right to pay the redemption price of shares of the fund in whole or in part
in portfolio securities as prescribed by the trustees. When the shareholder
sells portfolio securities received in this fashion, a brokerage charge would be
incurred. The fund will value securities for the purpose of making a redemption
payment at the same value used in determining NAV.
================================================================================
-32-
<PAGE>
Taxes
================================================================================
Each fund is treated as a separate entity for federal income tax purposes. Each
fund has elected or intends to elect to be treated, and intends to qualify for
each taxable year, as a separate "regulated investment company" under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). As such and by
complying with the applicable provisions of the Code regarding the sources of
its income, the timing of its distributions, and the diversification of its
assets, each fund will not be subject to Federal income tax on taxable income
(including net realized capital gains) which is distributed to shareholders in
accordance with the timing and other requirements of the Code.
Qualification of a fund for treatment as a regulated investment company under
the Code requires, among other things, that (a) at least 90% of a fund's gross
income for its taxable year, without offset for losses from the sale or other
disposition of stock or securities or other transactions, be derived from
interest, dividends, payments with respect to securities loans and gains from
the sale or other disposition of stock or securities or foreign currencies, or
other income (including but not limited to gains from options, futures, or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies; (b) each fund distribute to its shareholders
for each taxable year (in compliance with certain timing requirements) as
dividends at least 90% of the sum of its taxable and any tax-exempt net
investment income, the excess of net short-term capital gain over net long-term
capital loss and any other net income for that year (except for the excess, if
any, of net long-term capital gain over net short-term capital loss, which need
not be distributed in order for the fund to qualify as a regulated investment
company but is taxed to the fund if it is not distributed); and (c) each fund
diversify its assets so that, at the close of each quarter of its taxable year,
(i) at least 50% of the fair market value of its total (gross) assets is
comprised of cash, cash items, U.S. Government securities, securities of other
regulated investment companies and other securities limited in respect of any
one issuer to no more than 5% of the fair market value of the fund's total
assets and 10% of the outstanding voting securities of such issuer and (ii) no
more than 25% of the fair market value of its total assets is invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies) or of two or more issuers
controlled by the fund and engaged in the same, similar, or related trades or
businesses.
Each fund also intends to comply with the separate diversification requirements
imposed by Section 817(h) of the Code and the regulations thereunder on certain
insurance company separate accounts. These requirements, which are in addition
to the diversification requirements imposed on a fund by the 1940 Act and
Subchapter M of the Code, place certain limitations on assets of each insurance
company separate account used to fund variable contracts. Because Section 817(h)
and those regulations treat the assets of the fund as assets of the related
separate account, these regulations are imposed on the assets of a fund unless a
one year start up period exception is available to each separate account
investing in the fund. Specifically, the regulations provide that, except as
permitted by the "safe harbor" described below, as of the end of each calendar
quarter or within 30 days thereafter no more than 55% of the total assets of a
fund may be represented by any one investment, no more than 70% by any two
investments, no more than 80% by any three investments and no more than 90% by
any four investments. For this purpose, all securities of the same issuer are
considered a single investment, and each U.S. Government agency and
instrumentality is considered a separate issuer. Section 817(h) provides, as a
safe harbor, that a separate account will be treated as being adequately
diversified if the diversification requirements under Subchapter M are satisfied
and no more than 55% of the value of the account's total assets is attributable
to cash and cash items (including receivables), U.S. Government securities and
securities of other regulated investment
================================================================================
-33-
<PAGE>
================================================================================
companies. Failure by a fund to both qualify as a regulated investment company
and satisfy the Section 817(h) requirements would generally cause the variable
contracts to lose their favorable tax status and require a contract holder to
include in ordinary income any income accrued under the contracts for the
current and all prior taxable years. Under certain circumstances described in
the applicable Treasury regulations, inadvertent failure to satisfy the
applicable diversification requirements may be corrected, but such a correction
would require a payment to the Internal Revenue Service based on the tax
contract holders would have incurred if they were treated as receiving the
income on the contract for the period during which the diversification
requirements were not satisfied. Any such failure may also result in adverse tax
consequences for the insurance company issuing the contracts. Failure by a fund
to qualify as a regulated investment company would also subject the fund to
federal and state income taxation of all of its taxable income and gain, whether
or not distributed to shareholders.
If "seed money" contributed to any fund in connection with its organization
exceeds $250,000 or under certain other circumstances, the fund will be subject
to a 4% nondeductible federal excise tax on any amounts required to be but not
distributed under a prescribed formula. The formula requires that a fund
distribute (or be deemed to have distributed) to its shareholders during each
calendar year at least 98% of the fund's ordinary income for the calendar year,
at least 98% of the excess of its capital gains over its capital losses realized
during the one-year period ending on October 31 of such year, and any income or
gain (as so computed) from the prior calendar year that was not distributed for
such year and on which the fund paid no income tax. Each fund intends generally
to seek to avoid liability for this tax.
Dividends from net capital gain are classified as long-term capital gain and
dividends from investment company taxable income are classified as ordinary
income for federal income tax purposes. Redemptions of fund shares are also
potentially taxable transactions. An insurance company should consult its own
tax adviser regarding whether these dividends and share redemption proceeds
received by separate accounts result in federal income tax liability for the
insurance company if they are allocated to reserves for, or used to pay
distributions on, the applicable variable contracts.
Any dividend declared by a fund in October, November or December as of a record
date in such a month and paid the following January will be treated for federal
income tax purposes as received by shareholders on December 31 of the year in
which it is declared.
Any dividend (except a daily dividend) paid by a fund shortly after a
shareholder's purchase of shares will have the effect of reducing the net asset
value per share by the amount of the dividend distribution. Although such
dividends are, in effect, a partial return of the shareholder's purchase price,
they may be characterized as ordinary income or capital gain as described above.
If a fund acquires any equity interest in certain foreign corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, certain rents and royalties, or capital gains) or hold at
least 50% of their assets in investments producing such passive income ("passive
foreign investment companies"), that fund could be subject to Federal income tax
and additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the fund is timely distributed to its shareholders.
The fund would not be able to pass through to its shareholders any credit or
deduction for such a tax. Certain elections may ameliorate these adverse tax
consequences, but any such election could require the applicable fund to
recognize taxable income or gain (subject to tax distribution requirements)
without the concurrent receipt of cash. These investments could also result in
the treatment of associated capital gains as ordinary income. Any fund that is
permitted to invest in foreign corporations may limit and/or manage its holdings
in passive foreign investment companies to minimize its tax liability or
maximize its return from these investments.
================================================================================
-34-
<PAGE>
================================================================================
Foreign exchange gains and losses realized by a fund in connection with certain
transactions involving foreign currency-denominated debt securities, certain
foreign currency futures and options, foreign currency forward contracts,
foreign currencies, or payables or receivables denominated in a foreign currency
are subject to Section 988 of the Code, which generally causes such gains and
losses to be treated as ordinary income and losses and may affect the amount,
timing and character of distributions to shareholders. Any such transactions
that are not directly related to a fund's investment in stock or securities,
possibly including speculative currency positions or currency derivatives not
used for hedging purposes, could under future Treasury regulations produce
income not among the types of "qualifying income" from which the fund must
derive at least 90% of its annual gross income. Income from investments in
commodities, such as gold and certain related derivative instruments, is also
not treated as qualifying income under this test. If the net foreign exchange
loss for a year treated as ordinary loss under Section 988 were to exceed a
fund's investment company taxable income computed without regard to such loss,
the resulting overall ordinary loss for such year would not be deductible by the
fund or its shareholders in future years.
A fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes in
some cases.
Investments in debt obligations that are at risk of default may present special
tax issues for Investment Grade Bond Fund or Real Estate Fund. Tax rules may not
be entirely clear about issues such as when a fund may cease to accrue interest,
original issue discount, or market discount, when and to what extent deductions
may be taken for bad debts or worthless securities, how payments received on
obligations in default should be allocated between principal and income, and
whether exchanges of debt obligations in a workout context are taxable. These
and any other issues will be addressed by a fund, in the event it invests in
such securities, in order to seek to ensure that it distributes sufficient
income to preserve its status as a regulated investment company and does not
become subject to federal income or excise tax.
Each fund that invests in certain pay in-kind securities ("PIKs") (debt
securities whose interest payments may be made either in cash or in-kind), zero
coupon securities, deferred payment securities, or certain increasing rate
securities (and, in general, any other securities with original issue discount
or with market discount if the fund elects to include market discount in income
currently) must accrue income on such investments prior to the receipt of the
corresponding cash payments. However, each fund must distribute, at least
annually, all or substantially all of its net income, including such accrued
income, to shareholders to qualify as a regulated investment company under the
Code and avoid Federal income tax. Therefore, a fund may have to dispose of its
portfolio securities under disadvantageous circumstances to generate cash, or
may have to leverage itself by borrowing the cash, to satisfy distribution
requirements.
Redemptions and exchanges of fund shares (except, generally, shares of the Money
Market Fund) are potentially taxable transactions for shareholders that are
subject to tax. Shareholders should consult their own tax advisers to determine
whether any particular transaction in fund shares is properly treated as a sale
for tax purposes, as the following discussion assumes, and to ascertain its tax
consequences in their particular circumstances. Any loss realized by a
shareholder upon the redemption, exchange or other disposition of shares with a
tax holding period of six months or less will be treated as a long-term capital
loss to the extent of any amounts treated as distributions of long-term capital
gain with respect to such shares. Losses on redemptions or other dispositions of
shares may be disallowed under wash sale rules in the event of other investments
in the same fund
================================================================================
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<PAGE>
================================================================================
(including through automatic reinvestment of dividends and distributions) within
a period of 61 days beginning 30 days before and ending 30 days after a
redemption or other disposition of shares. In such a case, the disallowed
portion of any loss would be included in the federal tax basis of the shares
acquired in the other investments.
Limitations imposed by the Code on regulated investment companies like the funds
may restrict a fund's ability to enter into futures, options and currency
forward transactions.
Certain options, futures and forward foreign currency transactions undertaken by
a fund may cause the fund to recognize gains or losses from marking to market
even though its securities or other positions have not been sold or terminated
and affect the character as long-term or short-term (or, in the case of certain
currency forwards, options and futures, as ordinary income or loss) and timing
of some capital gains and losses realized by the fund. Also, certain of a fund's
losses on its transactions involving options, futures and forward foreign
currency contracts and/or offsetting or successor portfolio positions may be
deferred rather than being taken into account currently in calculating the
fund's taxable income or gains. These transactions may therefore affect the
amount, timing and character of a fund's distributions to shareholders. Certain
of the applicable tax rules may be modified if the fund is eligible and chooses
to make one or more of certain tax elections that may be available. The funds
will take into account the special tax rules (including consideration of
available elections) applicable to options, futures or forward contracts in
order to minimize any potential adverse tax consequences.
The tax rules applicable to dollar rolls, currency swaps and interest rate
swaps, caps, floors and collars may be unclear in some respects, and the funds
may be required to limit participation in such transactions in order to qualify
as regulated investment companies. Additionally, a fund may be required to
recognize gain, but not loss, if an option, collar, futures contract, swap,
short sale or other transaction that is not subject to the market-to-market
rules is treated as a constructive sale of an appreciated financial position in
the fund's portfolio under Section 1259 of the Code. The funds may have to sell
portfolio securities under disadvantageous circumstances to generate cash, or
borrow cash, to satisfy the distribution requirements described above as a
result of participation in some of these transactions and derivatives.
If, as anticipated, each fund qualifies as a regulated investment company under
the Code, it will not be required to pay any Massachusetts income, corporate
excise or franchise taxes or any Delaware corporation income tax.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to the funds and certain aspects of their distributions. The
discussion does not address special tax rules applicable to insurance companies.
Shareholders should consult their own tax advisers as to the Federal, state or
local tax consequences of ownership or redemption of shares of, and receipt of
distributions from, a fund in their particular circumstances.
================================================================================
-36-
<PAGE>
Brokerage Allocation
================================================================================
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the adviser and the officers of
the trust pursuant to recommendations made by the portfolio managers. Orders for
purchases and sales of securities are placed in a manner which, in the opinion
of the adviser, will offer the best price and market for the execution of each
transaction. Purchases of portfolio securities from underwriters may include a
commission or commissions paid by the issuer, and transactions with dealers
serving as market makers reflect a "spread."
In the U.S. and some other countries, debt securities are generally traded on a
net basis through dealers acting for their own account as principals and not as
brokers; no brokerage commissions are payable on these transactions. In other
countries, both debt and equity securities are traded on exchanges at fixed
commission rates. Commissions on foreign transactions are generally higher than
the negotiated commission rates available in the U.S. There is generally less
government supervision and regulation of foreign stock exchanges and broker-
dealers than in the U.S.
Purchases and sales of exchange-traded options and futures will be effected
through brokers who charge a commission for their services.
Each fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed.
To the extent consistent with the foregoing, each fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and to a
lesser extent statistical assistance furnished to the adviser, and their value
and expected contribution to the performance of the fund. It is not possible to
place a dollar value on information and services to be received from brokers and
dealers, since it is only supplementary to the research efforts of the adviser.
The receipt of research information is not expected to reduce significantly the
expenses of the adviser. The research information and statistical assistance
furnished by brokers and dealers may benefit Sun Life of Canada or other
advisory clients of the adviser, and conversely, brokerage commissions and
spreads paid by other advisory clients of the adviser may result in research
information and statistical assistance beneficial to the funds. The funds will
not make commitments to allocate portfolio transactions on any prescribed basis.
While the adviser's officers will be primarily responsible for the allocation of
each fund's brokerage business, the policies and practices of the adviser in
this regard must be consistent with the foregoing, and will at all times be
subject to review by the trustees.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, a fund may
pay to a broker which provides brokerage and research services to the fund an
amount of disclosed commission in excess of the commission which another broker
would have charged for effecting that transaction. This practice is subject to a
good faith determination by the adviser that the price is reasonable in light of
the services provided viewed either in terms of the specific transaction
involved in the adviser's overall duties to the accounts or the policies that
the trustees may adopt from time to time.
================================================================================
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<PAGE>
================================================================================
Other investment advisory clients advised by the adviser may also invest in the
same securities as the funds. When these clients buy or sell the same securities
at substantially the same time, the adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
adviser believes to be equitable to each client, including the funds. In
individual instances, this investment procedure may adversely affect the price
to be paid or received by a fund or the size of the position attainable for it.
On the other hand, to the extent permitted by law, the adviser may aggregate
securities to be sold or purchased for the funds with those to be sold or
purchased for other clients managed by it in order to obtain overall best
execution for its participating clients.
For the period ended December 31, 1998, each of the funds paid brokerage
commissions as follows:
<TABLE>
<CAPTION>
Money Market Investment Grade Real Estate
Fund Bond Fund Fund
---- --------- ----
<S> <C> <C> <C>
$ 0 $ 0 $6,262
</TABLE>
================================================================================
-38-
<PAGE>
Calculation of Performance Information
================================================================================
Yield (except for Money Market Fund). The yield of each fund (except for Money
Market Fund) is computed by dividing net investment income per share determined
for a 30-day period by the net asset value per share on the last day of the
period, according to the following standard formula:
a - b
Yield = 2 ([ ( ------- ) +1]/6/ -1)
cd
Where:
a = dividends and interest earned during the period.
b = net expenses accrued during the period.
c = the average daily number of fund shares outstanding during the
period that would be entitled to receive dividends.
d = the net asset value per share on the last day of the period.
Money Market Fund Yield. For the purposes of calculating yield for the Money
Market Fund, daily income per share consists of interest and discount earned on
the fund's investments less provision for amortization of premiums and
applicable expenses, divided by the number of shares outstanding, but does not
include realized or unrealized appreciation or depreciation.
Yield calculations are based on the value of a hypothetical preexisting account
with exactly one share at the beginning of the seven day period. Yield is
computed by determining the net change in the value of the account during the
base period and dividing the net change by the value of the account at the
beginning of the base period to obtain the base period return. Base period is
multiplied by 365/7 and the resulting figure is carried to the nearest 100th of
a percent. Net change in account value during the base period includes dividends
declared on the original share, dividends declared on any shares purchased with
dividends of that share and any account or sales charges that would affect an
account of average size, but excludes any capital changes. The yield of Money
Market Fund for the seven-day period ended December 31, 1998 was 4.48%.
Effective yield is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical preexisting account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
Effective Yield = [(Base Period Return + 1)/365/7/]-1
The effective yield of Money Market Fund for the seven-day period ended December
31, 1998 was 4.57%.
Total Return. Each fund's total return is computed by finding the average
annual compounded rate of return over the indicated period that would equate the
initial amount invested to the ending redeemable value according to the
following formula:
T = /N/(SQUARE ROOT) ERV/P - 1
================================================================================
-39-
<PAGE>
================================================================================
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 the indicated period.
This calculation assumes that all dividends and distributions are reinvested at
net asset value on the reinvestment dates during the period. The "distribution
rate" is determined by annualizing the result of dividing the declared dividends
of a fund during the period stated by the net asset value at the end of the
period.
The average annual total return for each fund for the one-year period, five-year
period and ten-year period since inception to December 31, 1998 was as
follows:
<TABLE>
<CAPTION>
Period 5-Year Period 10-Year Period
Ended Ended Ended Inception to
Fund 12/31/98(1) 12/31/98 12/31/98 12/31/98 (1)
---- ---------- -------- -------- ------------
<S> <C> <C> <C> <C>
Money Market Fund 4.48% N/A N/A 4.48%
Investment Grade Bond Fund 0.61% N/A N/A 0.61%
Real Estate Fund (10.30)% N/A N/A (10.30)%
</TABLE>
(1) Inception of each fund was December 7, 1998.
In addition to average annual total returns, a fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total returns may be quoted as a percentage or
as a dollar amount, and may be calculated for a single investment, a series of
investments, and/or a series of redemptions, over any time period.
Total returns and yields quoted for the funds include each fund's expenses, but
may not include charges and expenses attributable to any particular insurance
product. Since shares of the funds may be purchased only through variable
annuity contracts and variable life insurance policies, you should carefully
review the prospectus of the insurance product you have chosen for information
on relevant charges and expenses. Excluding these charges from quotations of
each fund's performance has the effect of increasing the performance quoted. You
should bear in mind the effect of these charges when comparing a fund's
performance to that of other mutual funds.
From time to time, in reports and promotional literature, a fund's yield and
total return will be compared to indices of mutual funds and other relevant
broad based indices.
Performance rankings and ratings reported periodically in national financial
publications such as Money Magazine, Forbes, Business Week, The Wall Street
Journal, Micropal, Inc., Morningstar, Stanger's and Barron's, etc. will also be
utilized. A fund's promotional and sales literature may make reference to the
fund's "beta." Beta reflects the market-related risk of the fund by showing how
responsive the fund is to the market.
The performance of a fund is not fixed or guaranteed. Performance quotations
should not be considered to be representations of performance of a fund for any
period in the future. The performance of a fund is a function of many factors
including its earnings, expenses and number of outstanding shares. Fluctuating
market conditions; purchases, sales and maturities of portfolio securities;
sales and redemptions of shares of beneficial interest; and changes in operating
expenses are all examples of items that can increase or decrease a fund's
performance.
Financial Statements
Each fund's audited financial statements for the fiscal year ended
December 31, 1998 from the funds' annual reports filed with the SEC on February
26, 1999 are incorporated by reference into this statement of additional
information. Those financial statements, including the financial highlights in
the prospectuses, have been audited by Deloitte & Touche LLP, independent public
accountants, as indicated in their report with respect to the financial
statements and are included in reliance upon the authority of Deloitte & Touche
LLP as experts in accounting and auditing in giving their report.
================================================================================
-40-
<PAGE>
SUN CAPITAL ADVISERS TRUST
PART C. OTHER INFORMATION
Item 23. EXHIBITS
(a) Agreement and Declaration of Trust, dated July 13, 1998/1/
(b) By-Laws, dated July 13, 1998/1/
(c) Not Applicable
(d) Investment Advisory Agreement/2/
(e) Not Applicable
(f) Not Applicable
(g) Custody Agreement*
(h)(1) Administration Agreement*
(h)(2) Transfer Agency and Shareholder Service Agreement*
(i) Opinion and Consent of Counsel/2/
(j) Consent of Certified Public Accountants*
(k) Not Applicable
(l)(1) Share Purchase Agreement for Money Market Fund/2/
(l)(2) Share Purchase Agreement for Sun Capital Real Estate Fund/2/
(l)(3) Share Purchase Agreement for Sun Capital Investment Grade Bond
Fund/2/
(m) Not Applicable
(n) Financial Data Schedule*
(o) Not Applicable
(p)(1) Power of Attorney (Anderson, Jones, Paddock, Prieur, Searcy)/2/
(p)(2) Power of Attorney (James F. Alban)*
* Filed herewith.
/1/ Filed as an exhibit to Registrant's Registration Statement on July 15, 1998
and incorporated by reference herein.
/2/ Filed as an exhibit to Pre-effective Amendment No. 1 on November 5, 1998
and incorporated by reference herein.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT
The Registrant was organized by an affiliate of Sun Life Assurance Company of
Canada primarily to provide a funding vehicle for assets received by various
separate accounts of Sun Life Assurance Company of Canada and its affiliated
insurance companies. Shares held by these separate accounts will generally be
voted as directed by the owners of variable contracts participating in these
separate accounts.
1
<PAGE>
Item 25. INDEMNIFICATION
Except as noted, there is no contract, arrangement or statute under which any
trustee or officer of the Registrant is indemnified.
Under the Agreement and Declaration of Trust, dated July 13, 1998, establishing
the Registrant as a trust under Delaware law, Article IV, Section 3 provides
indemnification for the Registrant's trustees and officers except that no
trustee or officer will be indemnified against any liability of which the
trustee or officer would otherwise be subject by reason of or for willful
misfeasance, bad faith, gross negligence or reckless disregard of such person's
duties.
Registrant's trustees and officers are insured under a standard investment
company errors and omissions insurance policy covering loss incurred by reason
of negligent errors and omissions committed in their capacities as such.
Trustees and officers of the Registrant who are directors, officers or employees
of the adviser may be entitled to indemnification in their capacities as
directors, officers or employees of the adviser.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
All of the information required by this item is set forth in the Form ADV of the
Registrant's investment adviser, Sun Capital Advisers, Inc. The following
sections of the Form ADV are incorporated herein by reference:
(a) Items 1 and 2 of Part 2; and
(b) Item 6, Business Background, of each Schedule D.
Item 27. PRINCIPAL UNDERWRITERS
None.
Item 28. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other documents required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and the Rules promulgated thereunder are
maintained by the Registrant, in whole or in part, at its principal executive
office at One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481, or
at the offices of Registrant's custodian and transfer agent.
Item 29. MANAGEMENT SERVICES
Not applicable.
2
<PAGE>
Item 30. UNDERTAKINGS
Not applicable.
3
<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 it
meets all of the requirements for effectiveness of this registration statement
under Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-effective Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Town of Wellesley, the Commonwealth of
Massachusetts, on the 26th day of April, 1999.
SUN CAPITAL ADVISERS TRUST
By: /s/ James M.A. Anderson
--------------------------------
James M.A. Anderson
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-effective Amendment No. 1 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------------------------- ----------------------- --------------
<S> <C> <C>
/s/ C. James Prieur* Trustee April 26, 1999
- ----------------------------
C. James Prieur
/s/ James M.A. Anderson Chief Executive April 26, 1999
- ---------------------------- Officer and Trustee
James M.A. Anderson
/s/ James F. Alban* Chief Financial Officer April 26, 1999
- ----------------------------
James F. Alban
/s/ Graham E. Jones* Trustee April 26, 1999
- ----------------------------
Graham E. Jones
/s/ Anthony C. Paddock* Trustee April 26, 1999
- ----------------------------
Anthony C. Paddock
/s/ William N. Searcy* Trustee April 26, 1999
- ----------------------------
William N. Searcy
*By: /s/ James M.A. Anderson
-----------------------
James M.A. Anderson
Power-of-Attorney
</TABLE>
4
<PAGE>
Exhibit Index
-------------
Exhibit
Number
- ------
(g) Custody Agreement
(h)(1) Administration Agreement
(h)(2) Transfer Agency and Shareholder Service Agreement
(j) Consent of Certified Public Accountants
(n) Financial Data Schedules
(p)(2) Power of Attorney (James F. Alban)
1
<PAGE>
Exhibit G
Custodian Agreement
This Agreement between Sun Capital Advisers Trust, a Delaware business
trust (the "FUND") and State Street Bank and Trust Company, a Massachusetts
trust company (THE CUSTODIAN"),
Witnesseth:
Whereas, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
Whereas, the Fund intends that this Agreement be applicable to the series
listed on
Schedule I to this Agreement (the "INITIAL PORTFOLIOS") (the Initial Portfolios,
together with all other series subsequently established by the Fund and made
subject to this Agreement in accordance with Section 18, are referred to herein
as the "PORTFOLIO(S)");
Now Therefore, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
Section 1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("DOMESTIC SECURITIES") and securities it desires to be held outside the United
States ("FOREIGN SECURITIES"). The Fund on behalf of the Portfolio(s) agrees to
deliver to the Custodian all securities and cash of the Portfolios, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by the Portfolio(s) from time to time,
and the cash consideration received by it for such new or treasury shares of
beneficial interest of the Fund representing interests in the Portfolios
("SHARES") as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of a Portfolio held or received by the Portfolio
and not delivered to the Custodian.
Upon receipt of "PROPER INSTRUCTIONS" (as such term is defined in Section 6
hereof), the Custodian shall on behalf of the applicable Portfolio(s) from time
to time employ one or more sub-custodians located in the United States, but only
in accordance with an applicable vote by the Board of Trustees of the Fund (the
"BOARD") on behalf of the applicable Portfolio(s), and provided that the
Custodian shall have no more or less responsibility or liability to the Fund on
account of any actions or omissions of any sub-custodian so employed than any
such sub-custodian has to the Custodian. The Custodian may employ as sub-
custodian for the Fund's foreign securities on behalf of the applicable
Portfolio(s) the foreign banking institutions and foreign securities
depositories designated in Schedules A and B hereto but only in accordance with
the applicable provisions of Sections 3 and 4.
1
<PAGE>
Section 2. Duties of the Custodian with Respect to Property of the Fund Held
-----------------------------------------------------------------
By the Custodian in the United States
-------------------------------------
Section 2.1 Holding Securities. The Custodian shall hold and physically
------------------
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to Section
2.8 in a clearing agency which acts as a securities depository or in a book-
entry system authorized by the U.S. Department of the Treasury (each, a "U.S.
SECURITIES SYSTEM") and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent ("DIRECT PAPER") which
is deposited and/or maintained in the Direct Paper System of the Custodian (the
"DIRECT PAPER SYSTEM") pursuant to Section 2.9.
Section 2.2 Delivery of Securities. The Custodian shall release and
----------------------
deliver domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("DIRECT PAPER SYSTEM ACCOUNT") only upon
receipt of Proper Instructions on behalf of the applicable Portfolio, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.8 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Portfolio or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.7 or into the name or nominee name of any sub-custodian
appointed pursuant to Section 1; or for exchange for a different
number of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in any such
--------
case, the new securities are to be delivered to the Custodian;
2
<PAGE>
7) Upon the sale of such securities for the account of the Portfolio, to
the broker or its clearing agent, against a receipt, for examination
in accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to receiving
payment for such securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, but only against receipt of adequate collateral as agreed
--- ----
upon from time to time by the Custodian and the Fund on behalf of the
Portfolio, which may be in the form of cash or obligations issued by
the United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the Custodian will
not be held liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowing by the Fund
on behalf of the Portfolio requiring a pledge of assets by the Fund on
behalf of the Portfolio, but only against receipt of amounts borrowed;
--- ----
12) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "EXCHANGE
ACT") and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the
3
<PAGE>
rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding
account deposits in connection with transactions by the Portfolio of
the Fund;
14) Upon receipt of instructions from the transfer agent for the Fund (the
"TRANSFER AGENT") for delivery to such Transfer Agent or to the
holders of Shares in connection with distributions in kind, as may be
described from time to time in the then-currently effective prospectus
and statement of additional information of the Fund related to the
Portfolio (the "PROSPECTUS"), in satisfaction of requests by holders
of Shares for repurchase or redemption; and
15) For any other proper purpose, but only upon receipt of, in addition to
--- ----
Proper Instructions from the Fund on behalf of the applicable
Portfolio, a copy of a resolution of the Board or of the Executive
Committee thereof signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary thereof (a "CERTIFIED
RESOLUTION"), specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper trust purpose, and naming
the person or persons to whom delivery such securities shall be made.
Section 2.3 Registration of Securities. Domestic securities held by the
--------------------------
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, unless the Fund has authorized in writing the appointment of a
------
nominee to be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.7 or in the name or nominee name of
any sub-custodian appointed pursuant to Section 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Agreement shall
be in "street name" (i.e., a third party's name) or other good delivery form.
If, however, the Fund directs the Custodian to maintain securities in a third
party's name, the Custodian's obligation to timely collect income due the Fund
on such securities and to notify the Fund of relevant corporate actions
including, without limitation, pendency of calls, maturities, tender or exchange
offers shall be solely to exercise its best efforts.
Section 2.4 Bank Accounts. The Custodian shall open and maintain a
-------------
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended (the "1940 ACT"). Funds held by the
Custodian for a Portfolio may be deposited by it to its credit as Custodian in
the Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable; provided,
--------
however, that every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act and that each such bank or trust company and the
funds to be deposited with each such bank or trust
4
<PAGE>
company shall on behalf of each applicable Portfolio be approved by vote of a
majority of the Board. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only in that
capacity.
Section 2.5 Collection of Income. Subject to the provisions of
--------------------
Section 2.3, the Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer domestic securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent thereof
and shall credit such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the responsibility of
the Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or data as may
be necessary to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Portfolio is properly entitled.
Section 2.6 Payment of Fund Monies. Upon receipt of Proper Instructions
----------------------
on behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of title
to such options, futures contracts or options on futures contracts to
the Custodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under the
1940 Act to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b) in the case of
a purchase effected through a U.S. Securities System, in accordance
with the conditions set forth in Section 2.8 hereof; (c) in the case
of a purchase involving the Direct Paper System, in accordance with
the conditions set forth in Section 2.9; (d) in the case of repurchase
agreements entered into between the Fund on behalf of the Portfolio
and the Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio of
securities owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from the
Portfolio or (e) for transfer to a time deposit account of the Fund in
any bank, whether domestic or foreign; such transfer may be effected
5
<PAGE>
prior to receipt of a confirmation from a broker and/or the applicable
bank pursuant to Proper Instructions from the Fund as defined herein;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued as set forth in
Section 5 hereof;
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of
the Portfolio: interest, taxes, management, accounting, transfer agent
and legal fees, and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares declared pursuant to the
governing documents of the Fund;
6) For payment to the lender of securities of the amount of dividends
received in respect of the securities sold short;
7) For any other proper purpose, but only upon receipt of, in addition to
--- ----
Proper Instructions from the Fund on behalf of the Portfolio, a copy
of a Certified Resolution specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper *[trust/corporate] purpose, and
naming the person or persons to whom such payment is to be made.
Section 2.7 Appointment of Agents. The Custodian may at any time or
---------------------
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; provided, however, that the
--------
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
Section 2.8 Deposit of Fund Assets in U.S. Securities Systems. The
-------------------------------------------------
Custodian may deposit and/or maintain securities owned by a Portfolio in a
clearing agency registered with the United States Securities and Exchange
Commission (the "SEC") under Section 17A of the Exchange Act , which acts as a
securities depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively referred
to herein as "U.S. SECURITIES SYSTEM" in accordance with applicable Federal
Reserve Board and SEC rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented in an
account of the Custodian in the U.S. Securities System (the "U.S.
SECURITIES SYSTEM ACCOUNT") which account shall not include any assets
of the Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
6
<PAGE>
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. Securities
System that such securities have been transferred to the U.S.
Securities System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the
account of the Portfolio. The Custodian shall transfer securities sold
for the account of the Portfolio upon (i) receipt of advice from the
U.S. Securities System that payment for such securities has been
transferred to the U.S. Securities System Account, and (ii) the making
of an entry on the records of the Custodian to reflect such transfer
and payment for the account of the Portfolio. Copies of all advices
from the U.S. Securities System of transfers of securities for the
account of the Portfolio shall identify the Portfolio, be maintained
for the Portfolio by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund on behalf
of the Portfolio confirmation of each transfer to or from the account
of the Portfolio in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions in the U.S.
Securities System for the account of the Portfolio;
4) The Custodian shall provide the Fund with any report obtained by the
Custodian on the U.S. Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Section 15 hereof;
6) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the Portfolio
for any loss or damage to the Portfolio resulting from use of the U.S.
Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be entitled
to be subrogated to the rights of the Custodian with respect to any
claim against the U.S. Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if and
to the extent that the Portfolio has not been made whole for any such
loss or damage.
7
<PAGE>
Section 2.9 Fund Assets Held in the Custodian's Direct Paper System.
-------------------------------------------------------
The Custodian may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will
be effected in the absence of Proper Instructions from the Fund on
behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in the Direct Paper
System Account, which account shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities sold
for the account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio,
in the form of a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets reflecting
each day's transaction in the Direct Paper System for the account of
the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on its system of internal accounting control as the Fund
may reasonably request from time to time.
Section 2.10 Segregated Account. The Custodian shall upon receipt of
------------------
Proper Instructions on behalf of each applicable Portfolio establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-
dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar organization or
8
<PAGE>
organizations, regarding escrow or other arrangements in connection with
transactions by the Portfolio, (ii) for purposes of segregating cash or
government securities in connection with options purchased, sold or written by
the Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the Portfolio
with the procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies and (iv) for other proper
trust purposes, but only, in the case of clause (iv), upon receipt of, in
--- ----
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a copy of a Certified Resolution setting forth the purpose or
purposes of such segregated account and declaring such purpose(s) to be a proper
trust purpose.
Section 2.11 Ownership Certificates for Tax Purposes. The Custodian
---------------------------------------
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
Section 2.12 Proxies. The Custodian shall, with respect to the domestic
-------
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting materials
and all notices relating to such securities.
Section 2.13 Communications Relating to Portfolio Securities. Subject to
-----------------------------------------------
the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund
for each Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Portfolio desires to take action with respect
to any tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
Section 3. The Custodian as Foreign Custody Manager of the Portfolios
----------------------------------------------------------
Section 3.1 Definitions. The following capitalized terms shall have the
-----------
indicated meanings:
"COUNTRY RISK" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment;
9
<PAGE>
economic and financial infrastructure (including any Mandatory Securities
Depositories operating in the country); prevailing or developing custody and
settlement practices; and laws and regulations applicable to the safekeeping and
recovery of Foreign Assets held in custody in that country.
"ELIGIBLE FOREIGN CUSTODIAN" has the meaning set forth in section (a)(1) of
Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the U.S. Securities and Exchange Commission (the "SEC")), or a foreign
branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the
requirements of a custodian under Section 17(f) of the 1940 Act, except that the
term does not include Mandatory Securities Depositories.
"FOREIGN ASSETS" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"FOREIGN CUSTODY MANAGER" has the meaning set forth in section (a)(2) of Rule
17f-5.
"MANDATORY SECURITIES DEPOSITORY" means a foreign securities depository or
clearing agency meeting the requirements of an Eligible Foreign Custodian (as
defined in Rule 17f-5), that, either as a legal or practical matter, must be
used if the Fund, on the Portfolios' behalf, determines to place Foreign Assets
in a country outside the United States (i) because required by law or
regulation; (ii) because securities cannot be withdrawn from such foreign
securities depository or clearing agency; or (iii) because maintaining or
effecting trades in securities outside the foreign securities depository or
clearing agency is not consistent with prevailing or developing custodial or
market practices.
Section 3.2 Delegation to the Custodian as Foreign Custody Manager. The
------------------------------------------------------
Fund, by resolution adopted by the Board, hereby delegates to the Custodian with
respect to the Portfolios, subject to Section (b) of Rule 17f-5, the
responsibilities set forth in this Section 3 with respect to Foreign Assets of
the Portfolios held outside the United States, and the Custodian hereby accepts
such delegation, as Foreign Custody Manager with respect to the Portfolios.
Section 3.3 Countries Covered. The Foreign Custody Manager shall be
-----------------
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A to this Agreement, which list of countries may be amended
from time to time by the Fund with the Agreement of the Foreign Custody Manager.
The Foreign Custody Manager shall list on Schedule A the Eligible Foreign
Custodians selected by the Foreign Custody Manager to maintain the assets of the
Portfolios, which list of Eligible Foreign Custodians may be amended from time
to time in the sole discretion of the Foreign Custody Manager. Mandatory
Securities Depositories are listed on Schedule B to this Contract, which
Schedule B may be amended from time to time by the Foreign Custody Manager. The
Foreign Custody Manager will provide amended versions of Schedules A and B in
accordance with Section 3.7 hereof.
10
<PAGE>
Upon the receipt by the Foreign Custody Manager of Proper Instructions to
open an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund on behalf of the Portfolios of the
applicable account opening requirements for such country, the Foreign Custody
Manager shall be deemed to have been delegated by the Board on behalf of the
Portfolios responsibility as Foreign Custody Manager with respect to that
country and to have accepted such delegation. Following the receipt of Proper
Instructions directing the Foreign Custody Manager to close the account of a
Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody
Manager in a designated country, the delegation by the Board on behalf of the
Portfolios to the Custodian as Foreign Custody Manager for that country shall be
deemed to have been withdrawn and the Custodian shall immediately cease to be
the Foreign Custody Manager of the Portfolios with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Sixty days (or such other period as to which the parties agree in writing)
after receipt of any such notice by the Fund, the Custodian shall have no
further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.
Section 3.4 Scope of Delegated Responsibilities.
-----------------------------------
3.4.1. Selection of Eligible Foreign Custodians. Subject to the
----------------------------------------
provisions of this Section 3, the Portfolios' Foreign Custody Manager may place
and maintain the Foreign Assets in the care of the Eligible Foreign Custodian
selected by the Foreign Custody Manager in each country listed on Schedule A, as
amended from time to time. In performing its delegated responsibilities as
Foreign Custody Manager to place or maintain Foreign Assets with an Eligible
Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign
Assets will be subject to reasonable care, based on the standards applicable to
custodians in the country in which the Foreign Assets will be held by that
Eligible Foreign Custodian, after considering all factors relevant to the
safekeeping of such assets, including, without limitation the factors specified
in Rule 17f-5(c)(1).
3.4.2. Contracts With Eligible Foreign Custodians. The Foreign Custody
------------------------------------------
Manager shall determine that the contract (or the rules or established practices
or procedures in the case of an Eligible Foreign Custodian that is a foreign
securities depository or clearing agency) governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
3.4.3. Monitoring. In each case in which the Foreign Custody Manager
----------
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system to
monitor at intervals reasonable under the circumstance the initial and
continuing appropriateness of (i) maintaining the Foreign Assets with such
Eligible Foreign Custodian and (ii) the contract governing the custody
arrangements
11
<PAGE>
established by the Foreign Custody Manager with the Eligible Foreign Custodian
(or the rules or established practices and procedures in the case of an Eligible
Foreign Custodian selected by the Foreign Custody Manager which is a foreign
securities depository or clearing agency that is not a Mandatory Securities
Depository). In the event the Foreign Custody Manager determines that the
custody arrangements with an Eligible Foreign Custodian it has selected are no
longer appropriate, the Foreign Custody Manager shall notify the Board in
accordance with Section 3.7 hereunder.
Section 3.5 Guidelines for the Exercise of Delegated Authority. It
--------------------------------------------------
shall not be the responsibility of the Foreign Custody Manager to consider
Country Risk as part of its delegated responsibilities pursuant to this
Agreement The Fund and the Custodian each expressly acknowledge that the
Foreign Custody Manager shall not be delegated any responsibilities under this
Section 3 with respect to Mandatory Securities Depositories.
Section 3.6 Standard of Care as Foreign Custody Manager of the
--------------------------------------------------
Portfolios. In performing the responsibilities delegated to it, the Foreign
- ----------
Custody Manager agrees to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would exercise. The Foreign
Custody Manager agrees to promptly notify the Board if the Foreign Custody
Manager believes it cannot perform its duties as set forth herein in accordance
with the foregoing standard of care, either generally or with respect to a
specific country set forth on Schedule A.
Section 3.7 Reporting Requirements. The Foreign Custody Manager shall
----------------------
report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian
and the placement of such Foreign Assets with another Eligible Foreign Custodian
by providing to the Board amended Schedules A or B. Amended Schedules A and B
and such reports of material change shall be provided to the Board no later than
the regularly scheduled quarterly Board meeting next following the event to be
reported. If the Foreign Custody Manger determines, in the exercise of its duty
as Foreign Custody Manager, that any matter should be reported prior to such a
Board meeting, it shall direct such report to the Fund's secretary. The Foreign
Custody Manager shall make written reports notifying the Board of any other
material change in the foreign custody arrangements of the Portfolios described
in this Section 3 after the occurrence of the material change.
Section 3.8 Representations with Respect to Rule 17f-5. The Foreign
------------------------------------------
Custody Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the
Board has determined that it is reasonable for the Board to rely on the
Custodian to perform the responsibilities delegated pursuant to this Agreement
to the Custodian as the Foreign Custody Manager of the Portfolios.
Section 3.9 Effective Date and Termination of the Custodian as Foreign
----------------------------------------------------------
Custody Manager. The Board's delegation to the Custodian as Foreign Custody
- ---------------
Manager of the Portfolios shall be effective as of the date of execution of this
Agreement and shall remain in
12
<PAGE>
effect until terminated at any time, without penalty, by written notice from the
terminating party to the non-terminating party. Termination will become
effective sixty (60) days (or such other date to which the parties may agree in
writing) after receipt by the non-terminating party of such notice. The
provisions of Section 3.3 hereof shall govern the delegation to and termination
of the Custodian as Foreign Custody Manager of the Portfolios with respect to
designated countries.
Section 4. Duties of the Custodian with Respect to Property of the
-------------------------------------------------------
Portfolios Held Outside of the United States
--------------------------------------------
Section 4.1 Definitions. Capitalized terms in this Section 4 shall have
-----------
the following meanings:
"FOREIGN SECURITIES SYSTEM" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"FOREIGN SUB-CUSTODIAN" means a foreign banking institution serving as an
Eligible Foreign Custodian.
Section 4.2 Holding Securities. The Custodian shall identify on its
------------------
books as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the records of the
----------------
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in
which the account is maintained, the Custodian shall require that securities so
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
Section 4.3 Foreign Securities Systems. Except as may otherwise be
--------------------------
agreed in writing by the Fund and the Custodian, foreign securities shall be
maintained in a Foreign Securities System in a designated country only through
arrangements implemented by the Foreign Sub-Custodian in such country pursuant
to the terms of this Agreement.
Section 4.4 Transactions in Foreign Custody Account.
---------------------------------------
4.4.1. Delivery of Foreign Securities. The Custodian or a Foreign Sub-
------------------------------
Custodian shall release and deliver foreign securities of the Portfolios held by
such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon
receipt of Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Portfolios in
accordance with commercially reasonable market practice in the
country where such foreign
13
<PAGE>
securities are held or traded, including, without limitation: (A)
delivery against expectation of receiving later payment; or (B) in
the case of a sale effected through a Foreign Securities System in
accordance with the rules governing the operation of the Foreign
Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other similar
offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign securities are
called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of
the Custodian (or the name of the respective Foreign Sub-Custodian
or of any nominee of the Custodian or such Foreign Sub-Custodian) or
for exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units;
(vi) to brokers, clearing banks or other clearing agents for examination
or trade execution in accordance with market custom; provided that
--------
in any such case the Foreign Sub-Custodian shall have no
responsibility or liability for any loss arising from the delivery
of such securities prior to receiving payment for such securities
except as may arise from the Foreign Sub-Custodian's own negligence
or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or temporary
securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by the
Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper purpose, but only upon receipt of, in addition
--- ----
to Proper Instructions, a copy of a Certified Resolution specifying
the foreign securities to be delivered, setting forth the purpose
for which such delivery is to be made,
14
<PAGE>
declaring such purpose to be a proper trust purpose, and naming the
person or persons to whom delivery of such securities shall be made.
4.4.2. Payment of Portfolio Monies. Upon receipt of Proper
---------------------------
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out, or direct the respective Foreign Sub-
Custodian or the respective Foreign Securities System to pay out, monies of a
Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio, unless
otherwise directed by Proper Instructions, by (A) delivering money
to the seller thereof or to a dealer therefor (or an agent for such
seller or dealer) against receipt of Foreign Assets; or (B) in the
case of a purchase effected through a Foreign Securities System, in
accordance with the rules governing the operation of such Foreign
Securities System;
(ii) in connection with the conversion, exchange or surrender of foreign
securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees under
this Agreement, legal fees, accounting fees, and other operating
expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Portfolio, including transactions executed with or
through the Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vii) in connection with the borrowing or lending of foreign securities;
and
(viii) for any other proper purpose, but only upon receipt of, in addition
to Proper Instructions, a copy of a Certified Resolution specifying
the amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper trust
purpose, and naming the person or persons to whom such payment is to
be made.
4.4.3. Market Conditions; Mandatory Securities Depositories.
----------------- ---------------------------------
Notwithstanding any provision of this Agreement to the contrary, settlement and
payment for Foreign Assets received for the account of the Portfolios and
delivery of Foreign Assets maintained for the account of the Portfolios may be
effected in accordance with the customary established securities trading or
processing practices and procedures in the country or market in which the
transaction occurs, including, without limitation, delivering Foreign Assets to
the purchaser thereof or to a dealer
15
<PAGE>
therefor (or an agent for such purchaser or dealer) with the expectation of
receiving later payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to the Board the information with respect to
custody and settlement practices in countries in which the Custodian employs a
Foreign Sub-Custodian, including without limitation information relating to
Foreign Securities Systems, described on Schedule C hereto at the time or times
set forth on such Schedule. The Custodian may revise Schedule C from time to
time, provided that no such revision shall result in the Board being provided
with substantively less information than had been previously provided hereunder.
The Custodian shall provide to the Board (and, in accordance with Proper
Instructions, its duly-authorized agents) reports advising the Fund promptly
after any change in the foreign custody arrangements of the Fund involving a
Mandatory Securities Depository. The Custodian will act in accordance with
Proper Instructions with respect to the liquidation or other withdrawal of
Foreign Assets from a Mandatory Securities Depository.
In the event that the Custodian shall in the future offer review or other
information services or shall accept, under Rule 17f-5, delegated
responsibility, with respect to Mandatory Securities Depositories other than as
set forth herein, it agrees that it shall notify the Fund thereof and negotiate
in good faith with the Fund with respect thereto.
Section 4.5 Registration of Foreign Securities. The foreign securities
----------------------------------
maintained in the custody of a Foreign Sub-Custodian (other than bearer
securities) shall be registered in the name of the applicable Portfolio or in
the name of the Custodian or in the name of any Foreign Sub-Custodian or in the
name of any nominee of the foregoing, and the Fund on behalf of such Portfolio
agrees to hold any such nominee harmless from any liability as a holder of
record of such foreign securities. The Custodian or a Foreign Sub-Custodian
shall not be obligated to accept securities on behalf of a Portfolio under the
terms of this Agreement unless the form of such securities and the manner in
which they are delivered are in accordance with reasonable market practice.
Section 4.6 Bank Accounts. The Custodian shall identify on its books as
-------------
belonging to the Fund cash (including cash denominated in foreign currencies)
deposited with the Custodian. Where the Custodian is unable to maintain, or
market practice does not facilitate the maintenance of, cash on the books of the
Custodian, a bank account or bank accounts opened and maintained outside the
United States on behalf of a Portfolio with a Foreign Sub-Custodian shall be
subject only to draft or order by the Custodian or such Foreign Sub-Custodian,
acting pursuant to the terms of this Agreement to hold cash received by or from
or for the account of the Portfolio.
16
<PAGE>
Section 4.7 Collection of Income. The Custodian shall use reasonable
--------------------
commercial efforts to promptly collect all income and other payments with
respect to the Foreign Assets held hereunder to which the Portfolios shall be
entitled and shall credit such income, as collected, to the applicable
Portfolio. In the event that extraordinary measures are required to collect such
income, the Fund and the Custodian shall consult as to such measures and as to
the compensation and expenses of the Custodian relating to such measures.
Section 4.8 Shareholder Rights. With respect to the foreign securities
------------------
held pursuant to this Agreement, the Custodian will use reasonable commercial
efforts to facilitate the exercise of voting and other shareholder rights,
subject always to the laws, regulations and practical constraints that may exist
in the country where such securities are issued. The Fund acknowledges that
local conditions, including lack of regulation, onerous procedural obligations,
lack of notice and other factors may, in certain countries, have the effect of
severely limiting the ability of the Fund to exercise shareholder rights.
Section 4.9 Communications Relating to Foreign Securities. The
---------------------------------------------
Custodian shall transmit promptly to the Fund written information (including,
without limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith) received by the Custodian via the
Foreign Sub-Custodians from issuers of the foreign securities being held for the
account of the Portfolios. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund written information so received by
the Custodian from issuers of the foreign securities whose tender or exchange is
sought or from the party (or its agents) making the tender or exchange offer.
The Custodian shall not be liable for any untimely exercise of any tender,
exchange or other right or power in connection with foreign securities or other
property of the Portfolios at any time held by it unless (i) the Custodian or
the respective Foreign Sub-Custodian is in actual possession of such foreign
securities or property and (ii) the Custodian receives Proper Instructions with
regard to the exercise of any such right or power, and both (i) and (ii) occur
at least three business days prior to the date on which the Custodian is to take
action to exercise such right or power
Section 4.10 Liability of Foreign Sub-Custodians and Foreign Securities
----------------------------------------------------------
Systems. Each agreement pursuant to which the Custodian employs as a Foreign
- -------
Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian
to exercise reasonable care in the performance of its duties and, to the extent
possible, to indemnify, and hold harmless, the Custodian from and against any
loss, damage, cost, expense, liability or claim arising out of or in connection
with the Foreign Sub-Custodian's performance of such obligations. At the Fund's
election, the Portfolios shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Portfolios have not been made whole for any such loss,
damage, cost, expense, liability or claim.
Section 4.11 Tax Law. The Custodian shall have no responsibility or
-------
liability for any obligations now or hereafter imposed on the Fund or the
Portfolios or the Custodian as custodian of the Portfolios (i.e., other than its
general business presence in any jurisdiction) by the tax law
17
<PAGE>
of the United States or of any state or political subdivision thereof. With
respect to jurisdictions other than the United States, the sole responsibility
of the Custodian with regard to such tax law shall be to use reasonable efforts
to (a) notify the Fund of the obligations imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of such jurisdictions, including
responsibility for withholding and other taxes, assessment or other governmental
charges, certifications and government reporting and (b) perform such
ministerial steps as are required to collect any tax refund, to ascertain the
appropriate rate of tax withholding and to provide such documents as may be
required to enable each Portfolio to receive appropriate tax treatment under
applicable tax laws and any applicable treaty provisions. The Custodian, in
performance of its duties under this Section, shall be entitled to treat each
Portfolio as a Delaware business trust which is a "registered investment
company" under the laws of the United States, and it shall be the duty of the
Fund to inform the Custodian of any change in the organization, domicile or, to
the extent within the knowledge of the Fund, other relevant facts concerning tax
treatment of the Fund and further to inform the Custodian if the Fund or any
Portfolio is or becomes the beneficiary of any special ruling or treatment not
applicable to the general nationality and category of entity of which the Fund
is a part under general laws and treaty provisions. The Custodian shall be
entitled to rely on any information supplied by the Fund. The Custodian may
engage reasonable professional advisors disclosed to the Fund by the Custodian,
which may include attorneys, accountants or financial institutions in the
regular business of investment administration and may rely upon advice received
therefrom.
Section 4.12 Conflict. If the Custodian is delegated the responsibilities
--------
of Foreign Custody Manager pursuant to the terms of Section 3 hereof, in the
event of any conflict between the provisions of Sections 3 and 4 hereof, the
provisions of Section 3 shall prevail.
Section 4.13 Direction as to Special Sub-Custodians. Upon receipt by the
--------------------------------------
Custodian of Proper Instructions, the Custodian shall, on behalf of one or more
of the Portfolios, appoint one or more banks, trust companies or other entities
described in such Proper Instructions (and not part of the Custodian's then-
current network of sub-custodian banks) to be a Sub-Custodian for the purpose of
effecting any transaction(s) described in such Proper Instructions (each such
entity a "Special Sub-Custodian"). Each such duly-appointed Special Sub-
Custodian shall be listed on Schedule B hereto. In connection with the
appointment of any Special Sub-Custodian, the Custodian shall enter into an
agreement with the Special Sub-Custodian the form of which shall be approved by
the Fund. The Custodian shall not be liable to, and shall be kept indemnified
by, the Fund for any loss, damage or expense suffered or incurred by such Fund,
any Portfolio or the Custodian, resulting from the actions or omissions of a
Special Sub-Custodian. The Custodian shall not be foreign custody manager under
Rule 17f-5 for any Special Sub-Custodian.
Section 5. Payments for Sales or Repurchases or Redemptions of Shares
----------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent and deposit into the account of the appropriate Portfolio such
payments as are received for Shares thereof issued or sold from time to time by
the Fund. The Custodian will provide timely
18
<PAGE>
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose, the Custodian shall,
upon receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance
with such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
Section 6. Proper Instructions
-------------------
Proper Instructions as used throughout this Agreement means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in accordance with
Section 2.10.
Section 7. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to
--------
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board.
19
<PAGE>
Section 8. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a copy of a Certified Resolution as conclusive
evidence (a) of the authority of any person to act in accordance with such
resolution or (b) of any determination or of any action by the Board as
described in such resolution, and such resolution may be considered as in full
force and effect until receipt by the Custodian of written notice to the
contrary.
Section 9. Duties of Custodian with Respect to the Books of Account and
------------------------------------------------------------
Calculation of Net Asset Value and Net Income
---------------------------------------------
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board to keep the books of account of each
Portfolio and/or compute the net asset value per Share of the outstanding Shares
of each Portfolio or, if directed in writing to do so by the Fund on behalf of
each Portfolio, shall itself keep such books of account and/or compute such net
asset value per Share of each Portfolio. Such computation shall be made in
accordance with (1) the provisions of the Fund's Declaration of Trust and By-
laws, as they may from time to time be amended and delivered to the Custodian,
(2) the votes of the Board of Trustees of the Fund at the time in force and
applicable, as they may from time to time be delivered to the Custodian, (3)
Proper Instructions, (4) the relevant Portfolio's Prospectus, and (5) the
Fund's pricing procedures, as they may from time to time be delivered to the
Custodian.
If so directed, the Custodian shall also calculate daily the net income of
each Portfolio as described in such Portfolio's Prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such net income and,
if instructed in writing by an officer of the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income among its various
components. The calculation of the daily income of each Portfolio shall be made
at the time or times described from time to time in such Portfolio's Prospectus.
The Custodian shall submit to all regulatory and administrative bodies
having jurisdiction over the Fund or the Custodian, as the case may be, whether
at present or in the future, any information, reports, or other property of the
Fund or the Custodian, respectively, which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
The Custodian shall not disclose or use any records or other property of the
Fund it has prepared by reason of this Agreement in any manner except as
expressly authorized herein or directed by the Fund and shall keep confidential
any information obtained by reason of this Agreement.
In the event of an act, omission, error or delay relating to the calculation of
any net asset value per Share of a Portfolio which leads to losses, costs or
expenses to such Portfolio for which a
20
<PAGE>
party to the Agreement may be liable, the Fund, the applicable Portfolio and the
parties will consult and make good faith efforts to reach agreement on what
actions should be taken in order to mitigate any loss suffered by the Fund or
such Portfolio or its present or former shareholders, in order that each party's
exposure to liability shall be reduced to the extent possible after taking into
account all relevant factors and alternatives.
Section 10. Records
-------
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Agreement in such
manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund, include certificate numbers in such
tabulations.
Section 11. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the SEC and with respect to any
other requirements thereof.
Section 12. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a U.S. Securities
System or a Foreign Securities System, relating to the services provided by the
Custodian under this Agreement; such reports, shall be of sufficient scope and
in sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so state.
21
<PAGE>
Section 13. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian and as set forth in a fee
schedule attached to and made a part of this Agreement..
Section 14. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled
to rely on and may act upon advice of counsel (who may be counsel for the Fund)
on all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. The Custodian shall be without liability to
the Fund and the Portfolios for any loss, liability, claim or expense resulting
from or caused by anything which is (A) part of Country Risk (as defined in
Section 3 hereof), including without limitation nationalization, expropriation,
currency restrictions, or acts of war, revolution, riots or terrorism, or (B)
part of the "prevailing country risk" of the Portfolios, as such term is used in
SEC Release Nos. IC-22658; IS-1080 (May 12, 1997) or as such term or other
similar terms are now or in the future interpreted by the SEC or by the staff of
the Division of Investment Management thereof.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses beyond the commercially reasonable
care of the Custodian or communications disruptions, work stoppages, natural
disasters, or other similar events or acts; (ii) errors by the Fund or the
Investment Advisor in their instructions to the Custodian provided such
instructions have been in accordance with this Agreement; (iii) the insolvency
of or acts or omissions by a Securities System; (iv) any delay or failure of any
broker, agent or intermediary, central bank or other commercially prevalent
payment or clearing system to deliver to the Custodian's sub-custodian or agent
securities purchased or in the remittance or payment made in connection with
securities sold; (v) any delay or failure of any company, corporation, or other
body in charge of registering or transferring securities in the name of the
Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or any
consequential losses arising out of such delay or failure to transfer
22
<PAGE>
such securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or
any other country, or political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign Sub-
Custodian (as defined in Section 4 hereof) to the same extent as set forth with
respect to sub-custodians generally in this Agreement.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct
and except taxes based on the income of the Custodian, any property at any time
held for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
Section 15. Effective Period, Termination and Amendment
-------------------------------------------
This Agreement shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
--------
however that the Custodian shall not with respect to a Portfolio act under
Section 2.8 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board has approved the initial use
of a particular Securities System by such Portfolio, as required by Rule 17f-4
under the 1940 Act and that the Custodian shall not with respect to a Portfolio
act under Section 2.9 hereof in the absence of receipt of an initial certificate
of the Secretary or an Assistant Secretary that the Board has approved the
initial use of the Direct Paper System by such Portfolio; provided further,
-------- -------
23
<PAGE>
however, that the Fund shall not amend or terminate this Agreement in
contravention of any applicable federal or state regulations, or any provision
of the Fund's Declaration of Trust, and further provided, that the Fund on
behalf of one or more of the Portfolios may at any time by action of its Board
(i) substitute another bank or trust company for the Custodian by giving notice
as described above to the Custodian, or (ii) immediately terminate this
Agreement in the event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Agreement, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements incurred through the date of termination.
Section 16. Successor Custodian
-------------------
If a successor custodian for one or more Portfolios shall be appointed by
the Board, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities of each applicable Portfolio then held by it hereunder
and shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a Certified Resolution, deliver at the office of
the Custodian and transfer such securities, funds and other properties in
accordance with such resolution.
In the event that no written order designating a successor custodian or
Certified Resolution shall have been delivered to the Custodian on or before the
date when such termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of
its own selection, having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of each
applicable Portfolio and all instruments held by the Custodian relative thereto
and all other property held by it under this Agreement on behalf of each
applicable Portfolio, and to transfer to an account of such successor custodian
all of the securities of each such Portfolio held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such
24
<PAGE>
securities, funds and other properties and the provisions of this Agreement
relating to the duties and obligations of the Custodian shall remain in full
force and effect.
Section 17. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Agreement, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Agreement as
may in their joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
--------
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Fund's Declaration of
Trust. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
Section 18. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to the Initial Portfolios with respect to which it desires to have the
Custodian render services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
Section 19. Massachusetts Law to Apply
--------------------------
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
Section 20. Prior Agreements
----------------
This Agreement supersedes and terminates, as of the date hereof, all prior
Agreements between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
Section 21. Notices.
-------
Any notice, instruction or other instrument required to be given hereunder
may be delivered in person to the offices of the parties as set forth herein
during normal business hours or delivered prepaid registered mail or by telex,
cable or telecopy to the parties at the following addresses or such other
addresses as may be notified by any party from time to time.
25
<PAGE>
To the Fund: Sun Capital Advisers Trust
One Sun Life Executive Park
SC 3527
Wellesley Hills, Massachusetts 02481
Attention: Susan Walsh
Telephone: (781) 446-1805
Telecopy: (781) 239-1682
To the Custodian: State Street Bank and Trust Company
150 Newport Avenue, AFB4
North Quincy, Massachusetts 02171
Attention: Janine L. Cohen
Telephone: (617) 985-6173
Telecopy: (617) 985-8992
Such notice, instruction or other instrument shall be deemed to have been
served in the case of a registered letter at the expiration of five business
days after posting, in the case of cable twenty-four hours after dispatch and,
in the case of telex, immediately on dispatch and if delivered outside normal
business hours it shall be deemed to have been received at the next time after
delivery when normal business hours commence and in the case of cable, telex or
telecopy on the business day after the receipt thereof. Evidence that the
notice was properly addressed, stamped and put into the post shall be conclusive
evidence of posting.
Section 22. Reproduction of Documents
-------------------------
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm, micro-
card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
26
<PAGE>
Section 23. Shareholder Communications Election
-----------------------------------
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the
Fund to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
YES [X] The Custodian is authorized to release the Fund's name, address,
and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
Section 24. Year 2000.
---------
State Street will take reasonable steps to ensure that its products (and
those of its third-party suppliers) reflect the available state of the art
technology to offer products that are Year 2000 compliant, including, but not
limited to, century recognition of dates, calculations that correctly compute
same-century and multi-century formulas and date values, and interface values
that reflect the date issues arising between now and the next one hundred years.
If any changes are required, State Street will make the changes to its products
at no cost to the Fund and in a commercially reasonable time frame and will
require third-party suppliers to do likewise.
Section 25. Declaration of Trust.
--------------------
A copy of the Fund's Declaration of Trust is on file with the Secretary
of State of The State of Delaware and notice is hereby given that this Agreement
has been executed on behalf of the Fund by an officer of the Fund in such
capacity and not individually. It is agreed that obligations of the Fund
hereunder shall not be binding personally upon any of the Trustees,
shareholders, officers, agents or employees of the Fund, but shall bind only the
trust property of the Fund as provided in the Declaration of Trust. No
Portfolio of the Fund shall be liable for the obligations of any other Portfolio
of the Fund. No obligations of the Fund that relate to a particular Portfolio
----------------------------------------------------------------
shall be attributable to or affect any other Portfolio of the Fund but shall
- ----------------------------------------------------------------------------
only relate to the particular Portfolio.
- ---------------------------------------
27
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of October 30, 1998.
Sun Capital Advisers Trust Fund Signature Attested To By:
By: /s/ Robert P. Vrolyk By: /s/ Maura A. Murphy
------------------------------- ---------------------------------
Name: Robert P. Vrolyk Name: Maura A. Murphy
----------------------------- -------------------------------------
Title: Treasurer Title: Secretary
---------------------------- -------------------------------------
State Street Bank and Trust Company Signature Attested to By:
By: /s/ Ronald E. Logue By: /s/ Thomas M. Lenz
------------------------------- ---------------------------------
Name: Ronald E. Logue Name: Thomas M. Lenz
---------------------------- -------------------------------
Title: Executive Vice President Title: Vice President
---------------------------- ------------------------------
28
<PAGE>
SCHEDULE I
Sun Capital Money Market Fund
Sun Capital Investment Grade Bond Fund
Sun Capital Real Estate Fund
29
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
<S> <C> <C>
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain British Bank of the Middle East (as delegate of The --
Hongkong and Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale de Banque --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano S.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
<S> <C> <C>
Canada Canada Trustco Mortgage Company ---
Chile Citibank, N.A. --
People's Republic of China The Hongkong and Shanghai Banking Corporation --
Limited, Shanghai and Shenzhen branches
Colombia Cititrust Colombia S.A. --
Sociedad Fiduciaria
Croatia Privredna Banka Zagreb d.d --
Cyprus Barclays Bank Plc. --
Cyprus Offshore Banking Unit
Czech Republic Ceskoslovenska Obchodni --
Banka, A.S.
--
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
<S> <C> <C>
Finland Merita Bank Limited --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A. The Bank of Greece,
System for Monitoring Transactions in
Securities in Book-Entry Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Budapest Rt. --
Iceland Icebank Ltd.
India Deutsche Bank AG --
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
<S> <C> <C>
Israel Bank Hapoalim B.M. --
Italy Banque Paribas --
Ivory Coast Societe Generale de Banques --
en Cote d'Ivoire
Jamaica Scotiabank Jamaica Trust and Merchant --
Bank Ltd.
Japan The Daiwa Bank, Limited Japan Securities Depository Center
The Fuji Bank, Limited
Jordan British Bank of the Middle East --
(as delegate of The Hongkong and Shanghai Banking
Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of Korea The Hongkong and Shanghai Banking
Corporation Limited
Lativia JSC Hansabank-Latvija --
Lebanon British Bank of the Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
<S> <C> <C>
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank --
Malaysia Berhad
Mauritius The Hongkong and Shanghai --
Banking Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc
Namibia (via) Standard Bank of South Africa --
The Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group --
(New Zealand) Limited
Norway Christiania Bank og --
Kreditkasse
Oman British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
<S> <C> <C>
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
Poland Citibank (Poland) S.A. --
Bank Polska Kasa Opieki S.A.
Portugal Banco Comercial Portugues --
Romania ING Bank N.V. --
Russia Credit Suisse First Boston AO, Moscow --
(as delegate of Credit Suisse
First Boston, Zurich)
Singapore The Development Bank --
of Singapore Limited
Slovak Republic Ceskoslovenska Obchodna --
Banka, A.S.
Slovenia Banka Creditanstalt d.d. --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander, S.A. --
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
<S> <C> <C>
Sri Lanka The Hongkong and Shanghai --
Banking Corporation Limited
Swaziland Standard Bank Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AG --
Taiwan - R.O.C. Central Trust of China --
Thailand Standard Chartered Bank --
Trinidad & Tobago Republic Bank Limited --
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
Ottoman Bank
Ukraine ING Bank, Ukraine --
United Kingdom State Street Bank and Trust Company, --
London Branch
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
<S> <C>
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited
Euroclear (The Euroclear System)/State Street/London Limited
Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
</TABLE>
37
<PAGE>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<S> <C>
Country Mandatory Depositories
Argentina Caja de Valores S.A.
Austrialia Austraclear Limited
Reserve Bank Information and Transfer System
Austria Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium Caisse Interprofessionnelle de Depot et de Virement de
Titres S.A.
Banque Nationale de Belgique
Brazil Companhia Brasileira de Liquidacao e Custodia
(CBLC)
Bolsa de Valores de Rio de Janeiro
All SSB clients presently use CBLC
Central de Custodia e de Liquidacao Financeira de
Bulgaria Central Depository AD
Bulgarian National Bank
Canada The Canadian Depository for Securities Limited
People's Republic of China Shanghai Securities Central Clearing and Registration
Corporation
Shenzhen Securities Central Clearing Co., Ltd.
Croatia Ministry of Finance
National Bank of Croatia
Czech Republic Stredisko cennych papiru
</TABLE>
*Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
10/02/98
38
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<S> <C>
Country Mandatory Depositories
Czech National Bank
Denmark Vaedipapircentralen (the Danish Securities Center)
Egypt Misr Company for Clearing, Settlement, and Central
Depository
Estonia Eesti Vaartpaberite Keskdepositoorium
Finland The Finnish Central Securities Depository
France Societe Interprofessionnelle pour la Compensation
des Valeurs Mobilieres (SICOVAM)
Germany Deutsche Borse Clearing AG
Greece The Central Securities Depository
(Apothetirion Titlon AE)
Hong Kong The Central Clearing and Settlement System
Central Money Markets Unit
Hungary The Central Depository and Clearing House
(Budapest) Ltd. (KELER)
[Mandatory for Gov't Bonds only; SSB does not use for
other securities]
India The National Securities Depository Limited
Indonesia Bank Indonesia
Ireland Central Bank of Ireland
Securities Settlement Office
Israel The Tel Aviv Stock Exchange Clearing House Ltd.
Bank of Israel
Italy Monte Titoli S.p.A.
Banca d'Italia
</TABLE>
*Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
10/02/98
39
<PAGE>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<S> <C>
Country Mandatory Depositories
Jamaica The Jamaican Central Securities Depository
Japan Bank of Japan Net System
Kenya Central Bank of Kenya
Republic of Korea Korea Securities Depository Corporation
Latvia The Latvian Central Depository
Lebanon The Custodian and Clearing Center of Financial
Instruments for Lebanon and the Middle East (MIDCLEAR)
S.A.L.
The Central Bank of Lebanon
Lithuania The Central Securities Depository of Lithuania
Malaysia The Malaysian Central Depository Sdn. Bhd.
Bank Negara Malaysia,
Scripless Securities Trading and Safekeeping System
Mauritius The Central Depository & Settlement Co. Ltd.
Mexico S.D. INDEVAL, S.A. de C.V. (Instituto para el
Deposito de Valores)
Morocco Maroclear
The Netherlands Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. (NECIGEF)
De Nederlandsche Bank N.V.
New Zealand New Zealand Central Securities Depository Limited
Norway Verdipapirsentralen (the Norwegian Registry of
Securities)
Oman Muscat Securities Market
Pakistan Central Depository Company of Pakistan Limited
</TABLE>
*Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
10/02/98
40
<PAGE>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<S> <C>
Country Mandatory Depositories
Peru Caja de Valores y Liquidaciones S.A.
(CAVALI)
Philippines The Philippines Central Depository, Inc.
The Registry of Scripless Securities
(ROSS) of the Bureau of the Treasury
Poland The National Depository of Securities
(Krajowy Depozyt Papierow WartoNciowych)
Central Treasury Bills Registrar
Portugal Central de Valores Mobiliarios (Central)
Romania National Securities Clearing, Settlement and
Depository Co.
Bucharest Stock Exchange Registry Division
Singapore The Central Depository (Pte) Limited
Monetary Authority of Singapore
Slovak Republic Stredisko Cennych Papierov
National Bank of Slovakia
Slovenia Klirinsko Depotna Druzba d.d.
South Africa The Central Depository Limited
Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.
Banco de Espana,
Central de Anotaciones en Cuenta
Sri Lanka Central Depository System
(Pvt) Limited
</TABLE>
*Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
10/02/98
41
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<S> <C>
Country Mandatory Depositories
Sweden Vardepapperscentralen AB
(the Swedish Central Securities Depository)
Switzerland Schweizerische Effekten - Giro AG
Taiwan - R.O.C. The Taiwan Securities Central Depository Co., Ltd.
Thailand Thailand Securities Depository Company Limited
Tunisia Societe Tunisienne Interprofessionelle de
Compensation et de Depot de Valeurs Mobilieres
Central Bank of Tunisia
Tunisian Treasury
Turkey Takas ve Saklama Bankasi A.S.
(TAKASBANK)
Central Bank of Turkey
Ukraine The National Bank of Ukraine
United Kingdom The Bank of England,
The Central Gilts Office and
The Central Moneymarkets OFfice
Uruguay Central Bank of Uruguay
Venezuela Central Bank of Venezuela
Zambia Lusaka Central Depository Limited
Bank of Zambia
</TABLE>
*Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
10/02/98
42
<PAGE>
SCHEDULE C
MARKET INFORMATION
Publication/Type of Information Brief Description
- ------------------------------- -----------------
(Frequency)
The Guide to Custody in World Markets An overview of
- ------------------------------------- safekeeping and
(annually) settlement practices
and procedures in
each market in which
State Street
Bank and Trust
Company offers
custodial services.
Global Custody Network Review Information relating
- ----------------------------- to the operating
(annually) history andstructure
of depositories and
subcustodians
located in the
markets in which
State Street Bank
and Trust Company
offers custodial
services, including
transnational
depositories.
Global Legal Survey With respect to
- ------------------- each market in
(annually) which State Street
Bankand Trust
Company offers
custodial services,
opinionsrelating to
whether local law
restricts (i) access
of a fund's
independent public
accountants to books
and records of a
Foreign Sub-
Custodian or Foreign
Securities System,
(ii) the Fund's
ability to recover
in the event of
bankruptcy or
insolvency of a
Foreign Sub-
Custodian or Foreign
Securities System,
(iii) the Fund's
ability to recover
in the event of a
loss by a Foreign
Sub-Custodian or
Foreign Securities
System, and (iv) the
ability to a foreign
investor to convert
cash and cash
equivalents to U.S.
dollars.
Subcustodian Agreements Copies of the
- ----------------------- subcustodian
(annually) contracts State
Street Bank and
Trust Company has
entered into with
each subcustodian in
the markets in which
State Street Bank
and Trust Company
offers subcustody
services to its US
mutual fund clients.
Network Bulletins (weekly): Developments of
interest to
investors in the
markets in which
State Street Bank
and Trust Company
offers custodial
services.
Foreign Custody Advisories (as necessary): With respect to
markets in which
State Street Bank
and Trust Company
offers custodial
services which
exhibit special
custody risks,
developments which
may impact State
Street's ability to
deliver expected
levels of services.
43
<PAGE>
STATE STREET BANK AND TRUST COMPANY
GLOBAL CUSTODY AND ACCOUNTING FEE SCHEDULE
FOR
SUN CAPITAL ADVISERS TRUST
I. GLOBAL CUSTODY
Maintain custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions in local and base
currency. Withhold foreign taxes. File foreign tax reclaims. Monitor
corporate actions. Report portfolio positions.
<TABLE>
<CAPTION>
HOLDING HOLDINGS HOLDING HOLDINGS
CHARGES IN AND CHARGES IN AND
BASIS POINTS TRANSACTION BASIS POINTS TRANSACTION
COUNTRY (ANNUAL FEE) CHARGES COUNTRY (ANNUAL FEE) CHARGES
==========================================================================================
<S> <C> <C> <C> <C> <C>
Argentina 45.0 $125 Luxembourg 35.0 $100
Australia 5.0 $ 25 Malaysia 15.0 $ 50
Austria 15.0 $ 25 Mauritus 45.0 $125
Bangladesh 45.0 $125 Mexico 15.0 $ 50
Belgium 15.0 $ 50 Morocco 35.0 $100
Bolivia* 45.0 $125 Namibia 45.0 $125
Botswana 35.0 $100 Netherlands 15.0 $ 50
Brazil 35.0 $100 New Zealand 5.0 $ 25
Canada 5.0 $ 25 Norway 15.0 $ 50
Chile 45.0 $125 Pakistan 45.0 $125
China 35.0 $100 Peru 45.0 $125
Colombia 45.0 $125 Philippines 15.0 $ 50
Cyprus 45.0 $125 Poland 45.0 $125
Czech Republic 35.0 $100 Portugal 15.0 $ 50
Denmark 5.0 $ 25 Russia* 50.0 $300
Ecuador* 35.0 $100 Singapore 15.0 $ 50
Egypt 35.0 $100 Slovakia* 45.0 $125
Euroclear 5.0 $ 25 South Africa 5.0 $ 25
Finland 15.0 $ 50 South Korea 45.0 $125
France 5.0 $ 25 Spain 15.0 $ 50
Germany 5.0 $ 25 Sri Lanka 35.0 $100
Ghana 35.0 $100 Sweden 15.0 $ 50
Greece $125 Switzerland 5.0 $ 25
Hong Kong 15.0 $ 50 Taiwan 35.0 $100
Hungary 45.0 $125 Thailand 15.0 $ 50
India 45.0 $125 Trinidad & 35.0 $100
Tobago*
Indonesia 15.0 $ 50 Tunisia* 45.0 $125
Ireland 15.0 $ 50 Turkey 35.0 $100
Israel 35.0 $100 United Kingdom 5.0 $ 25
Italy 5.0 $ 25 Uruguay 45.0 $125
Jamaica* 45.0 $125 USA 1.5 SSB repos or
Euros-$7;
DTC/Fed/PTC
Book Entry-
$12;
All other-$25
Japan 5.0 $ 25 Venezuela 45.0 $125
Jordan 45.0 $125 Zambia 35.0 $100
Kenya 35.0 $100 Zimbabwe 35.0 $100
- ------------------------------------------------------------------------------------------
</TABLE>
* Not 17f-5 eligible at this time.
44
<PAGE>
II. MULTICURRENCY ACCOUNTING
Maintain investment ledgers in local and base currency, provide selected
portfolio transactions, position and income reports. Maintain general ledger
and capital stock accounts in compliance with GAAP (FAS 52). Prepare daily
trial balance. Calculate net asset value daily. Provide selected general
ledger reports in multicurrency detail. Securities yield or market value
quotations will be provided to State Street via State Street's Automated Pricing
System (See Section III) or by the fund.
Portfolios with U.S. Holdings Only $3,000 per month/portfolio
Global Portfolios $4,000 per month/portfolio
III. NAVIGATOR AUTOMATED PRICING
<TABLE>
<CAPTION>
<S> <C>
Monthly Base Charge $375.00
Monthly Quote Charge:
Municipal Bonds via Kenny/S&P or Muller Data $16.00
Corporate, Municipal, Convertible, Government Bonds
and Adjustable Rate Preferred Stocks Via IDSI $13.00
Government, Corporate Bonds via Kenny/S&P or Muller $11.00
Government, Corporate and Convertible
Bonds via Merrill Lynch $11.00
Foreign Bonds via Extel $10.00
Options, Futures and Private Placements $6.00
Listed Equities (including International) and OTC Equities $6.00
</TABLE>
For billing purposes, the monthly quote charge will be based on the number of
positions in the portfolio at month end.
IV. SPECIAL SERVICES
Fees for activities of a non-recurring nature such as fund consolidations or
reorganizations, extraordinary security shipments and the preparation of special
reports will be subject to negotiation. Fees for SEC yield calculation, fund
administration activities, self directed securities lending transactions, SaFiRe
financial reporting, multiple class and core/feeder accounting, and other
special items will be negotiated separately.
45
<PAGE>
V. OUT-OF-POCKET EXPENSES
A billing for the recovery of applicable out-of-pocket expenses will be made as
of the end of each month. Out-of-pocket expenses include, but are not limited
to the following:
<TABLE>
<S> <C>
- - Telephone - Transfer Fees
- - Wire Charges ($5.25 in and $5 out) - Price Waterhouse Audit Letter
- - Postage and Insurance - Federal Reserve Fee for Return
- - Courier Service Check items over $2,500 ($4.25 each)
- - Duplicating - GNMA Transfer ($15 each)
- - Legal Fees - PTC Deposit/Withdrawal for same
- - Supplies Related to Fund Records day turnaround ($50 each)
- - Rush Transfer ($8 each) - Subcustodian charges
- - Items held in Street name over record
date at request of trader ($50 each)
</TABLE>
VI. PAYMENT
. The above fees will be charged against the fund's custodian checking account
five (5) days after the invoice is mailed to the fund's offices.
. Fees will be charged on an accumulated basis for the 1/st/ year by 1/12/th/
(i.e. 1/12/th/ for month one, 2/12/th/ for month two, etc.) each month for
the three start-up funds listed below. There after, the full fee schedule
will take effect for the below named funds. Subsequent funds will be charged
the full schedule from inception.
Sun Capital Money Market Fund
Sun Capital Investment Grade Bond Fund
Sun Capital Real Estate Fund
FUND NAME STATE STREET
By: /s/ Robert P. Vrolyk By: /s/ Kathleen C. Cuocolo
Title: Treasurer Title: Senior Vice President
Date: December 1, 1998 Date: November 13, 1998
46
<PAGE>
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
----------------------------------------------------
AGREEMENT between Sun Capital Advisers Trust (the "Customer") and State
Street Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets of
the Customer pursuant to a certain Custodian Agreement (the "Custodian
Agreement") dated as of November 30, 1998;
WHEREAS, State Street has developed and utilizes proprietary accounting and
other systems, including State Street's proprietary Multicurrency HORIZON/SM/
Accounting System, in its role as custodian of the Customer, and maintains
certain Customer-related data ("Customer Data") in databases under the control
and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to the Customer certain Data Access
Services solely for the benefit of the Customer, and intends to provide
additional services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this Agreement, State
------
Street hereby agrees to provide the Customer with access to State Street's
Multicurrency HORIZON/SM/ Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports and information, solely on computer hardware,
system software and telecommunication links as listed in Attachment B (the
"Designated Configuration") of the Customer, or certain third party service
providers to the Customer approved by State Street such as independent auditors,
investment advisors or investment managers, or other service providers
("Investment Advisors"), solely with respect to the Customer or on any
designated substitute or back-up equipment configuration with State Street's
written consent, such consent not to be unreasonably withheld.
b. Data Access Services. State Street agrees to make available to the
--------------------
Customer the Data Access Services subject to the terms and conditions of this
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of the Customer to originate
electronic instructions to State Street on behalf of the Customer in order to
(i) effect the transfer or movement of cash or securities held under custody by
State Street or (ii) transmit accounting or other information (such transactions
are referred to herein as "Client
47
<PAGE>
Originated Electronic Financial Instructions"), and (iii) access data for the
purpose of reporting and analysis, shall be deemed to be Data Access Services
for purposes of this Agreement.
c. Additional Services. State Street may from time to time agree to make
-------------------
available to the Customer additional Systems that are not described in the
attachments to this Agreement. In the absence of any other written agreement
concerning such additional systems, the term "System" shall include, and this
Agreement shall govern, the Customer's access to and use of any additional
System made available by State Street and/or accessed by the Customer.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Customer acknowledge that in connection with the Data
Access Services provided under this Agreement, the Customer will have access,
through the Data Access Services, to Customer Data and to functions of State
Street's proprietary systems; provided, however that in no event will the
Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Location. The System and the Data
-----------------------------------------
Access Services shall be used and accessed solely on and through the Designated
Configuration at the offices of the Customer or the Investment Advisor located
in Wellesley, Massachusetts ("Designated Location").
b. Designated Configuration; Trained Personnel. State Street shall be
-------------------------------------------
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and the Customer agree
that each will engage or retain the services of trained personnel to enable both
parties to perform their respective obligations under this Agreement. State
Street agrees to use commercially reasonable efforts to maintain the System so
that it remains serviceable, provided, however, that State Street does not
guarantee or assure uninterrupted remote access use of the System. State Street
shall take commercially reasonable measures to maintain back-up services and
facilities so as to enable it to resume the provision of services hereunder and,
to the extent technologically possible, recover lost or damaged Customer data
within a commercially reasonable time frame following the occurrence of an event
which results in the interruption or suspension of service.
c. Scope of Use. The Customer will use the System and the Data Access
------------
Services only for the processing of securities transactions, the keeping of
books of account for the Customer and accessing data for purposes of reporting
and analysis. The Customer shall not, and shall cause its employees and agents
not to (i) permit any third party to use the System or the Data Access Services,
(ii) sell, rent, license or otherwise use the System or the Data Access Services
in the operation of a service bureau or for any purpose other than as expressly
authorized under this Agreement, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle without the prior
written consent of State Street, (iv) allow access to the
48
<PAGE>
System or the Data Access Services through terminals or any other computer or
telecommunications facilities located outside the Designated Locations, (v)
allow or cause any information (other than portfolio holdings, valuations of
portfolio holdings, and other information reasonably necessary for the
management or distribution of the assets of the Customer) transmitted from State
Street's databases, including data from third party sources, available through
use of the System or the Data Access Services to be redistributed or
retransmitted to another computer, terminal or other device for other than use
for or on behalf of the Customer or (vi) modify the System in any way, including
without limitation, developing any software for or attaching any devices or
computer programs to any equipment, system, software or database which forms a
part of or is resident on the Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned
---------------
System shutdown, the Customer's access to services performed by the System or to
Data Access Services at the Designated Location may be transferred to a
different location only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, the Customer may use any back-up site
included in the Designated Configuration or any other back-up site agreed to by
State Street, which agreement will not be unreasonably withheld. The Customer
may secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. Title. Title and all ownership and proprietary rights to the System,
-----
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street, the
---------------
Customer shall not modify, enhance or otherwise create derivative works based
upon the System, nor shall the Customer reverse engineer, decompile or otherwise
attempt to secure the source code for all or any part of the System.
g. Security Procedures. The Customer shall comply with data access
-------------------
operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
from time to time by State Street for use of the System on a remote basis and to
access the Data Access Services. The Customer shall have access only to the
Customer Data and authorized transactions agreed upon from time to time by State
Street and, upon a material breach by Customer of such operating standards or
security procedures, and upon notice from State Street, the Customer shall
discontinue remote use of the System and access to Data Access Services;
provided, that, in such event, State Street shall, for a period not less than
180 days (or such other shorter period specified by the Customer) after such
discontinuance, assume responsibility to provide accounting services under the
terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect the use of
-----------
the System and the Data Access Services by the Customer and the Investment
Advisor to ensure compliance with this
49
<PAGE>
Agreement. The on-site inspections shall be upon prior written notice to the
Customer and the Investment Advisor and at reasonably convenient times and
frequencies so as not to result in an unreasonable disruption of the Customer's
or the Investment Advisor's business.
4. PROPRIETARY INFORMATION
a. Proprietary Information. The Customer acknowledges and State Street
-----------------------
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information made available to the Customer by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to the Customer and
excluding any and all Customer data provided by the Customer to State Street
shall be deemed proprietary and confidential information of State Street
(hereinafter "Proprietary Information"). The Customer agrees that it will hold
such Proprietary Information in the strictest confidence and secure and protect
it in a manner consistent with its own procedures for the protection of its own
confidential information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the Proprietary
Information to satisfy its obligations hereunder. The Customer further
acknowledges that State Street shall not be required to provide the Investment
Advisor with access to the System unless it has first received from the
Investment Advisor an undertaking with respect to State Street's Proprietary
Information in the form of Attachment C to this Agreement. The Customer shall
use all commercially reasonable efforts to assist State Street in identifying
and preventing any unauthorized use, copying or disclosure of the Proprietary
Information or any portions thereof or any of the logic, formats or designs
contained therein.
b. Cooperation. Without limitation of the foregoing, the Customer shall
-----------
advise State Street immediately in the event the Customer learns or has reason
to believe that any person to whom the Customer has given access to the
Proprietary Information, or any portion thereof, has violated or intends to
violate the terms of this Agreement, and the Customer will, at its expense, co-
operate with State Street in seeking injunctive or other equitable relief in the
name of the Customer or State Street against any such person.
c. Injunctive Relief. The Customer acknowledges that the disclosure of
-----------------
any Proprietary Information will immediately give rise to continuing irreparable
injury to State Street inadequately compensable in damages at law. State Street
shall be entitled to obtain immediate injunctive relief against the breach or
threatened breach of any of the foregoing undertakings, in addition to any other
legal remedies which may be available.
d. Survival. The provisions of this Section 4 shall survive the termination
--------
of this Agreement.
50
<PAGE>
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. The Customer agrees
-------------------------------------------------
that any liability of State Street to the Customer or any third party arising
out of State Street's provision of Data Access Services or the System under this
Agreement shall be limited to the amount paid by the Customer in custody fees
during the preceding 24 months. In no event shall State Street be liable to the
Customer or any other party for any special, indirect, punitive or consequential
damages even if advised of the possibility of such damages. No action,
regardless of form, arising out of this Agreement may be brought by the Customer
more than two years after the Customer has knowledge that the cause of action
has arisen.
b. Limited Warranties. State Street warrants that it owns all rights to
------------------
the Systems necessary to enter into this Agreement. NO OTHER WARRANTIES,
WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY
STATE STREET.
c. Third-Party Data. Organizations from which State Street may obtain
----------------
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and the Customer, the
-----------------------
Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System and
the conformity thereof with any requirements of law.
e. Force Majeure. Neither party shall be liable for any costs or
-------------
damages due to delay or nonperformance under this Agreement arising out of any
cause or event beyond such party's control, including without limitation,
cessation of services hereunder or any damages resulting therefrom to the other
party, or the Customer as a result of work stoppage, power or other mechanical
failure, computer virus beyond the commercially reasonable care of the party,
natural disaster, governmental action, or communication disruption.
f. YEAR 2000. STATE STREET WILL TAKE REASONABLE STEPS TO ENSURE THAT THE
----------
SYSTEM REFLECTS THE AVAILABLE STATE OF THE ART TECHNOLOGY TO OFFER PRODUCTS THAT
ARE YEAR 2000 COMPLIANT, INCLUDING, BUT NOT LIMITED TO, CENTURY RECOGNITION OF
DATES, CALCULATIONS THAT CORRECTLY COMPUTE SAME CENTURY AND MULTI- CENTURY
FORMULAS AND DATE VALUES, AND INTERFACE VALUES THAT REFLECT THE DATE ISSUES
ARISING BETWEEN NOW AND THE NEXT ONE HUNDRED YEARS. IF ANY CHANGES ARE REQUIRED,
STATE STREET WILL MAKE THE CHANGES TO ITS PRODUCTS AT NO COST TO CUSTOMER AND IN
A COMMERCIALLY REASONABLE TIME FRAME AND WILL REQUIRE THIRD-PARTY SUPPLIERS TO
DO LIKEWISE.
g. European Monetary Unit. State Street is engaged in commercially
-----------------------
reasonable efforts consistent with industry norms to create systems and
procedures which will enable it to
51
<PAGE>
process cash transactions in both the Euro and the underlying national currency
denominations by January 1, 1999. State Street's schedule for conversion to the
Euro and other preparations for the European Economic and Monetary Union ("EMU")
may be substantially affected by significant events or decisions made by various
participants, institutions, entities or nations involved in the introduction of
the EMU and the Euro.
6. INDEMNIFICATION
a. The Customer agrees to indemnify and hold State Street harmless
from any loss, damage or expense including reasonable attorney's fees, (a
"loss") suffered by State Street arising from (i) the negligence or willful
misconduct in the use by the Customer of the Data Access Services or the System,
including any loss incurred by State Street resulting from a security breach at
the Designated Location or committed by the Customer's employees or agents or
the Investment Advisor and (ii) any loss resulting from incorrect Client
Originated Electronic Financial Instructions. State Street shall be entitled to
rely on the validity and authenticity of Client Originated Electronic Financial
Instructions without undertaking any further inquiry as long as such instruction
is undertaken in conformity with security procedures established by State Street
from time to time.
b. State Street shall indemnify and hold harmless the Customer from
all loss, cost damage and expense, including reasonable fees and expenses for
counsel, incurred or suffered by it to the extent resulting from any claims or
copyright, trademark or other intellectual property infringement as a result of
the Customer's using the System. To the extent State Street is required to
indemnify any such losses under this section 6b., such indemnification shall be
subject to, and count towards, the liability limitation contained in Section 5
hereof.
7. FEES
Fees and charges for the use of the System and the Data Access Services and
related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Agreement, including, without
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by the Customer. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated
--------
State Street training facility or at the Designated Location, to the Customer's
personnel as reasonably requested from time to time by the Customer in
connection with the use of the System on the Designated Configuration. The
Customer agrees that it will set aside, during regular business hours or at
other times agreed upon by both parties, sufficient time to enable all operators
of the System and
52
<PAGE>
the Data Access Services, designated by the Customer, to receive the training
offered by State Street pursuant to this Agreement.
b. Installation and Conversion. State Street shall be responsible for the
---------------------------
technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. The Customer shall have the following responsibilities
in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the timely
acquisition and maintenance of the hardware and software that
attach to the Designated Configuration in order to use the Data
Access Services at the Designated Location.
(ii) State Street and the Customer each agree that they will assign
qualified personnel to actively participate during the
Installation and Conversion phase of the System implementation to
enable both parties to perform their respective obligations under
this Agreement.
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the
support services set out in Attachment D to this Agreement.
10. TERM OF AGREEMENT
a. Term of Agreement. This Agreement shall become effective on the date of
-----------------
its execution by State Street and shall remain in full force and effect until
terminated as herein provided.
b. Termination of Agreement. Either party may terminate this Agreement (i)
------------------------
for any reason by giving the other party at least one-hundred and eighty days'
prior written notice in the case of notice of termination by State Street to the
Customer or thirty days' notice in the case of notice from the Customer to State
Street of termination; or (ii) immediately for failure of the other party to
comply with any material term and condition of the Agreement by giving the other
party written notice of termination. In the event the Customer shall cease
doing business, shall become subject to proceedings under the bankruptcy laws
(other than a petition for reorganization or similar proceeding) or shall be
adjudicated bankrupt, this Agreement and the rights granted hereunder shall, at
the option of State Street, immediately terminate with notice to the Customer.
This Agreement shall in any event terminate as to any Customer within 90 days
after the termination of the Custodian Agreement applicable to such Customer.
c. Termination of the Right to Use. Upon termination of this Agreement for
-------------------------------
any reason, any right to use the System and access to the Data Access Services
shall terminate and the
53
<PAGE>
Customer shall immediately cease use of the System and the Data Access Services.
Immediately upon termination of this Agreement for any reason, the Customer
shall return to State Street all copies of documentation and other Proprietary
Information in its possession; provided, however, that in the event that either
party terminates this Agreement or the Custodian Agreement for any reason other
than the Customer's breach, State Street shall provide the Data Access Services
for a period of time and at a price to be agreed upon by the parties.
11. MISCELLANEOUS
a. Assignment; Successors. This Agreement and the rights and obligations
----------------------
of the Customer and State Street hereunder shall not be assigned by either party
without the prior written consent of the other party, except that State Street
may assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.
b. Survival. All provisions regarding indemnification, warranty, liability
--------
and limits thereon, and confidentiality and/or protection of proprietary rights
and trade secrets shall survive the termination of this Agreement.
c. Entire Agreement. This Agreement and the attachments hereto constitute
----------------
the entire understanding of the parties hereto with respect to the Data Access
Services and the use of the System and supersedes any and all prior or
contemporaneous representations or agreements, whether oral or written, between
the parties as such may relate to the Data Access Services or the System, and
cannot be modified or altered except in a writing duly executed by the parties.
This Agreement is not intended to supersede or modify the duties and liabilities
of the parties hereto under the Custodian Agreement or any other agreement
between the parties hereto except to the extent that any such agreement
specifically refers to the Data Access Services or the System. No single waiver
of any right hereunder shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of this Agreement shall be
------------
held to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
e. Governing Law. This Agreement shall be interpreted and construed in
-------------
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.
55
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of November 30, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
Title: Executive Vice President
Date: November 30, 1998
SUN CAPITAL ADVISERS TRUST
By: /s/ Robert P. Vrolyk
Title: Treasurer
Date: November 30, 1998
55
<PAGE>
ATTACHMENT A
Multicurrency HORIZON/SM/ Accounting System
System Product Description
--------------------------
[TO BE REVISED BASED ON SYSTEMS PURCHASED]
I. The Multicurrency HORIZON/SM/ Accounting System is designed to provide lot
-----------------------------------------------
level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3) reconciliation of daily
activity with the trial balance, and 4) appropriate automated feeding mechanisms
to (i) domestic and international settlement systems, (ii) daily, weekly and
monthly evaluation services, (iii) portfolio performance and analytic services,
(iv) customer's internal computing systems and (v) various State Street provided
information services products.
II. GlobalQuest/R/ is designed to provide customer access to the following
--------------
information maintained on The Multicurrency HORIZON/SM/ Accounting System: 1)
cash transactions and balances; 2) purchases and sales; 3) income receivables;
4) tax refund receivables; 5) daily priced positions; 6) open trades; 7)
settlement status; 8) foreign exchange transactions; 9) trade history, and 10)
daily, weekly and monthly evaluation services.
III. HORIZON/R/ Gateway. HORIZON/R/ Gateway provides customers with the
------------------
ability to (i) generate reports using information maintained on the
Multicurrency HORIZON/R/ Accounting System which may be viewed or printed at the
customer's location; (ii) extract and download data from the Multicurrency
HORIZON/R/ Accounting System; and (iii) access previous day and historical data.
The following information which may be accessed for these purposes: 1) holdings;
2) holdings pricing; 3) transactions, 4) open trades; 5) income; 6) general
ledger and 7) cash.
IV. SaFiRe\SM\. SaFiRe\SM\ is designed to provide the customer with the
------
ability to prepare its own financial reports by permitting the customer to
access customer information maintained on the Multicurrency HORIZON/R/
Accounting System, to organize such information in a flexible reporting format
and to have such reports printed on the customer's desktop or by its printing
provider.
V. STATE STREET INTERCHANGE. STATE STREET INTERCHANGE IS AN OPEN INFORMATION
------------------------
DELIVERY ARCHITECTURE WHEREIN PROPRIETARY COMMUNICATION PRODUCTS, DATA FORMATS
AND WORKSTATION TOOLS ARE REPLACED BY INDUSTRY STANDARDS AND IS DESIGNED TO
ENABLE THE CONNECTION OF STATE STREET'S NETWORK TO CUSTOMER NETWORKS, THEREBY
FACILITATING THE SHARING OF INFORMATION.
56
<PAGE>
ATTACHMENT B
DESIGNATED CONFIGURATION
[to be added]
57
<PAGE>
ATTACHMENT C
UNDERTAKING
The undersigned understands that in the course of its employment as
Investment Advisor to Sun Capital Advisers Trust (the "Customer") it will have
access to State Street Bank and Trust Company's ("State Street") Multicurrency
HORIZON/SM/ Accounting System and other information systems (collectively, the
"System").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation and other information made available to the undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
SUN CAPITAL ADVISERS, INC.
By: /s/ Robert P. Vrolyk
Title: Treasurer
Date: December 1, 1998
58
<PAGE>
ATTACHMENT D
SUPPORT
During the term of this Agreement, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Customer Designated Persons may contact State
-----------------
Street's Multicurrency HORIZON/SM/ Help Desk and Customer Assistance Center
between the hours of 8 a.m. and 6 p.m. (Eastern time) on all business days for
the purpose of obtaining answers to questions about the use of the System, or to
report apparent problems with the System. From time to time, the Customer shall
provide to State Street a list of persons, not to exceed five in number, who
shall be permitted to contact State Street for assistance (such persons being
referred to as "the Customer Designated Persons").
b. Technical Support. State Street will provide technical support to
-----------------
assist the Customer in using the System and the Data Access Services. The total
amount of technical support provided by State Street shall not exceed 10
resource days per year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical support, including
during installation and testing, is subject to the fees and other terms set
forth in the Fee Schedule.
c. Maintenance Support. State Street shall use commercially reasonable
-------------------
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Customer any
-------------------
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Customer and shall offer the Customer reasonable
training on the enhancement. Charges for system enhancements shall be as
provided in the Fee Schedule. State Street retains the right to charge for
related systems or products that may be developed and separately made available
for use other than through the System.
e. Custom Modifications. In the event the Customer desires custom
--------------------
modifications in connection with its use of the System, the Customer shall make
a written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to support
---------------------
the Customer's use of the System: (i) for use on any computer equipment or
telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Customer has modified the System in
breach of this Agreement.
59
<PAGE>
Exhibit (h)(1)
[_] ADMINISTRATION AGREEMENT
Agreement dated as of November 30, 1998, by and between State Street
Bank and Trust Company, a Massachusetts trust company (the "Administrator"), and
Sun Capital Advisers Trust (the "Trust").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust desires to retain the Administrator to furnish
certain administrative services to the Trust, and the Administrator is willing
to furnish such services, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Trust hereby appoints the Administrator to act as administrator
with respect to the Trust for purposes of providing certain administrative
services for the period and on the terms set forth in this Agreement. The
Administrator accepts such appointment and agrees to render the services stated
herein.
The Trust will initially consist of the portfolio(s) and/or class(es)
of shares (each an "Investment Fund") listed in Schedule A to this Agreement.
In the event that the Trust establishes one or more additional Investment Funds
with respect to which it wishes to retain the Administrator to act as
administrator hereunder, the Trust shall notify the Administrator in writing.
Upon written acceptance by the Administrator, such Investment Fund shall become
subject to the provisions of this Agreement to the same extent as the existing
Investment Funds, except to the extent that such provisions (including those
relating to the compensation and expenses payable by the Trust and its
Investment Funds) may be modified with respect to each additional Investment
Fund in writing by the Trust and the Administrator at the time of the addition
of the Investment Fund.
2. DELIVERY OF DOCUMENTS
The Trust will promptly deliver to the Administrator copies of each of
the following documents and all future amendments and supplements, if any:
a. The Trust's Declaration of Trust;
<PAGE>
b. The Trust's currently effective registration statement under
the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act and the Trust's Prospectus(es) and Statement(s) of
Additional Information relating to all Investment Funds and all
amendments and supplements thereto as in effect from time to
time;
c. Certified copies of the resolutions of the Board of Trustees
of the Trust (the "Board") authorizing (1) the Trust to enter
into this Agreement and (2) certain individuals on behalf of the
Trust to (a) give instructions to the Administrator pursuant to
this Agreement and (b) sign checks and pay expenses;
d. A copy of any investment advisory agreements between the
Trust and its investment adviser; and
e. Such other certificates, documents or opinions which the
Administrator may, in its reasonable discretion, deem necessary
or appropriate in the proper performance of its duties.
3. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator represents and warrants to the Trust that:
a. It is a Massachusetts trust company, duly organized and
existing under the laws of The Commonwealth of Massachusetts;
b. It has the corporate power and authority to carry on its
business in The Commonwealth of Massachusetts;
c. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement;
d. No legal or administrative proceedings have been instituted
or threatened which would impair the Administrator's ability to
perform its duties and obligations under this Agreement; and
e. Its entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or
obligation of the Administrator or any law or regulation
applicable to it.
4. REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to the Administrator that:
a. It is a business trust, duly organized, existing and in good
standing under the laws of the State of Delaware;
<PAGE>
b. It has the corporate power and authority under applicable
laws and by its Declaration of Trust and by-laws to enter into
and perform this Agreement;
c. All requisite proceedings have been taken to authorize it to
enter into and perform this Agreement;
d. It is an investment company properly registered under the
1940 Act;
e. A registration statement under the 1933 Act and the 1940 Act
has been filed and will be effective and remain effective during
the term of this Agreement;
f. No legal or administrative proceedings have been instituted
or threatened which would impair the Trust's ability to perform
its duties and obligations under this Agreement;
g. Its entrance into this Agreement will not cause a material
breach or be in material conflict with any other agreement or
obligation of the Trust or any law or regulation applicable to
it; and
h. As of the close of business on the date of this Agreement,
the Trust is authorized to issue shares of beneficial interest.
5. ADMINISTRATION SERVICES
The Administrator shall provide the following services, in each case,
subject to the control, supervision and direction of the Trust and the review
and comment by the Trust's auditors and legal counsel and in accordance with
procedures which may be established from time to time between the Trust and the
Administrator:
a. Oversee the determination and publication of the Trust's net
asset value in accordance with the Trust's policy as adopted from
time to time by the Board;
b. Oversee the maintenance by the Trust's custodian of certain
books and records of the Trust as required under Rule 31a-1(b) of
the 1940 Act;
c. Prepare the Trust's federal, state and local income tax
returns for review by the Trust's independent accountants and
filing by the Trust's treasurer;
<PAGE>
d. Review the calculation and accrual, submit for approval by
officers of the Trust, and arrange for payment of the Trust's
expenses;
e. Prepare for review and approval by officers of the Trust
financial information for the Trust's semi-annual and annual
reports, proxy statements and other communications required or
otherwise to be sent to insurance company separate accounts and
other qualified plans owning shares of the Trust (the "Separate
Accounts") and, at the direction of the Trust, to underlying
variable annuity contract owners or participants ("Contract
Owners") of the Separate Accounts, and arrange for the printing
and dissemination of such reports and communications to Separate
Accounts and, at the direction of the Trust, to Contract Owners;
f. Prepare for review by an officer of and legal counsel for
the Trust the Trust's periodic financial reports required to be
filed with the Securities and Exchange Commission ("SEC") on Form
N-SAR and financial information required by Form N-1A and such
other reports, forms or filings as may be mutually agreed upon;
g. Prepare reports relating to the business and affairs of the
Trust as may be mutually agreed upon including reports concerning
the number of shares outstanding, brokerage allocation and the
information required to be presented to the Trust's Board under
Rule 17e-1 of the 1940 Act and not otherwise prepared by the
Trust's investment adviser, custodian, legal counsel or
independent accountants;
h. Make such reports and recommendations to the Board
concerning the performance of the independent accountants as the
Board may reasonably request;
i. Make such reports and recommendations to the Board
concerning the performance and fees of the Trust's custodian and
transfer and dividend disbursing agent ("Transfer Agent") as the
Board may reasonably request or deems appropriate;
j. Oversee and review calculations of fees paid to the Trust's
investment adviser, custodian and Transfer Agent;
k. Consult with the Trust's officers, independent accountants,
legal counsel, custodian and Transfer Agent in establishing the
accounting policies of the Trust;
l. Respond to, or refer to the Trust's officers or Transfer
Agent, inquiries of the Separate Accounts or Contract Owners
relating to the Trust;
<PAGE>
m. Provide periodic testing of portfolios to assist the Trust's
investment adviser in complying with Internal Revenue Code
mandatory qualification requirements under Section 817(h) of
Subchapter L and Subchapter M, the requirements of the 1940 Act
and regulations thereunder and Trust prospectus limitations as
may be mutually agreed upon in writing;
n. Review and provide assistance on communications with
Separate Accounts and Contract Owners;
o. Maintain copies of the Trust's charter and by-laws;
p. File annual and semi-annual shareholder reports with the
appropriate regulatory agencies; review text of "President's
letters" to shareholders and "Management's Discussion of Trust
Performance" (which shall also be subject to review by the
Trust's legal counsel);
q. Cooperate and assist the Trust with respect to routine
regulatory examinations and provide copies of reports maintained
by the Administrator in response to such examinations.
<PAGE>
The Administrator shall provide the office facilities and the personnel required
by it to perform the services contemplated herein.
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Administrator shall receive from the Trust such compensation for
the Administrator's services provided pursuant to this Agreement as may be
agreed to from time to time in a written fee schedule approved by the parties
and initially set forth in the Fee Schedule to this Agreement. The fees are
accrued daily and billed monthly and shall be due and payable upon receipt of
the invoice. In the event this Agreement commences or terminates other than on
the first or last day respectively of any month, the fee for services performed
for part of the month shall be prorated according to the proportion which such
part bears to the full monthly period. In addition, the Trust shall reimburse
the Administrator for its out-of-pocket costs incurred in connection with this
Agreement.
The Trust agrees promptly to reimburse the Administrator for any
equipment and supplies specially ordered by or for the Trust through the
Administrator and for any other expenses not contemplated by this Agreement that
the Administrator may incur on the Trust's behalf, in each instance at the
Trust's request or with the Trust's consent.
The Trust will bear all expenses that are incurred in its operation
and not specifically assumed by the Administrator. Expenses of the Trust to be
borne by the Trust, include, but are not limited to: organizational expenses;
cost of services of its independent accountants and its outside legal and tax
counsel (including such counsel's review of the Trust's registration statement,
proxy materials, federal and state tax qualification as a regulated investment
company and any reports and materials prepared by the Administrator under this
Agreement); cost of any services contracted for by the Trust directly from
parties other than the Administrator; cost of trading operations and brokerage
fees, commissions and transfer taxes in connection with the purchase and sale of
securities for the Trust; investment advisory fees; taxes, insurance premiums
and other fees and expenses applicable to its operation; costs incidental to any
meetings of shareholders including, but not limited to, legal and accounting
fees, proxy filing fees and the
<PAGE>
out-of-pocket costs of preparation, printing and mailing of any proxy materials;
costs incidental to Board meetings, including fees and expenses of Board
members; the salary and expenses of any officer, director\trustee or employee of
the Trust; out-of-pocket costs incidental to the preparation, printing and
distribution of the Trust's registration statements and any amendments thereto
and shareholder reports; cost of typesetting and printing of prospectuses; out-
of-pocket cost of preparation and filing of the Trust's tax returns, Form N-1A
or N-2 and Form N-SAR, and all notices, registrations and amendments associated
with applicable federal and state tax and securities laws; all applicable
registration fees and filing fees required under federal and state securities
laws; the Trust's fidelity bond and directors' and officers' liability insurance
premiums; and cost of independent pricing services used in computing the Trust's
net asset value.
The Administrator is authorized to and may employ or associate with such
person or persons as the Administrator may deem desirable to assist it in
performing its duties under this Agreement; provided, however, that the
compensation of such person or persons shall be paid by the Administrator and
that the Administrator shall be as fully responsible to the Trust for the acts
and omissions of any such person or persons as it is for its own acts and
omissions.
<PAGE>
7. INSTRUCTIONS AND ADVICE
At any time, the Administrator may apply to any officer of the Trust
for instructions and may consult with its own legal counsel or outside counsel
for the Trust or the independent accountants for the Trust at the expense of the
Trust, with respect to any matter arising in connection with the services to be
performed by the Administrator under this Agreement. The Administrator shall
not be liable, and shall be indemnified by the Trust, for any action taken or
omitted by it in good faith in reliance upon any such instructions or advice or
upon any paper or document believed by it to be genuine and to have been signed
by the proper person or persons. The Administrator shall not be held to have
notice of any change of authority of any person until receipt of written notice
thereof from the Trust. Nothing in this paragraph shall be construed as
imposing upon the Administrator any obligation to seek such instructions or
advice, or to act in accordance with such advice when received.
8. LIMITATION OF LIABILITY AND INDEMNIFICATION
The Administrator shall be responsible for the performance of only
such duties as are set forth in this Agreement and, except as otherwise provided
under Section 6, shall have no responsibility for the actions or activities of
any other party, including other service providers. The Administrator shall
have no liability for any error of judgment or mistake of law or for any loss or
damage resulting from the performance or nonperformance of its duties hereunder
unless solely caused by or resulting from the negligence or willful misconduct
of the Administrator, its officers or employees. The Administrator shall not be
liable for any special, indirect, incidental, or consequential damages of any
kind whatsoever (including, without limitation, attorneys' fees) under any
provision of this Agreement or for any such damages arising out of any act or
failure to act hereunder. In any event, the Administrator's liability under
this Agreement shall be limited to two times its total annual compensation
earned and fees paid under this Agreement and the Custodian Agreement between
the Trust and State Street Bank and Trust Company during the preceding twelve
months for any liability or loss suffered by the Trust including, but not
limited to, any liability relating to qualification of the Trust as a regulated
investment company or any liability relating to the Trust's compliance with any
federal or state tax or securities statute, regulation or ruling.
The Administrator shall not be responsible or liable for any failure
or delay in performance of its obligations under this Agreement to the extent
arising out of or caused, directly or indirectly, by circumstances reasonably
beyond its control, including without limitation, work stoppage, power or other
mechanical failure, natural disaster, governmental action or communication
disruption.
The Trust shall indemnify and hold the Administrator harmless from all
loss, cost, damage and expense, including reasonable fees and expenses for
counsel, incurred by the Administrator resulting from any claim, demand, action
or suit in connection with the Administrator's acceptance of this Agreement, any
action or omission by it in the performance of its duties hereunder, or as a
result of acting upon any instructions reasonably believed by it to have been
duly authorized by the Trust, provided that this indemnification shall not apply
to actions or omissions of the Administrator, its officers or employees in cases
of its or their own negligence or willful misconduct.
<PAGE>
The Administrator shall indemnify and hold harmless the Trust, its
investment adviser and their respective officers, directors, trustees and
shareholders from all loss, cost, damage and expense, including reasonable fees
and expenses for counsel, incurred or suffered by any of them to the extent
resulting from any negligence or willful misconduct of the Administrator, its
officers or employees; provided, however, that the Administrator shall not be
required to provide indemnification for any special, indirect, incidental, or
consequential damages of any kind. In the event that the Administrator is
required to provide indemnification under this Section 8, its liability shall be
subject to the same overall limit set forth above (i.e., two times its total
annual compensation earned and fees paid under this Agreement and the Custodian
Agreement between the Trust and State Street Bank and Trust Company during the
preceding twelve months.)
The indemnification contained herein shall survive the termination of
this Agreement.
9. CONFIDENTIALITY
The Administrator agrees that, except as otherwise required by law or
in connection with any required disclosure to a banking or other regulatory
authority, it will keep confidential all records and information in its
possession relating to the Trust or its shareholders or shareholder accounts and
will not disclose the same to any person except at the request or with the
written consent of the Trust.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
Except to the extent otherwise provided herein, the Trust assumes full
responsibility for complying with all securities, tax, commodities and other
laws, rules and regulations applicable to it.
The Administrator agrees to create and maintain such records relating
to its obligations hereunder as are required by the 1940 Act. The Administrator
agrees that all records which it maintains for the Trust shall at all times
remain the property of the Trust, shall be readily accessible during normal
business hours, and shall be promptly surrendered upon the termination of the
Agreement or otherwise on written request. The Administrator further agrees
that all records which it maintains for the Trust pursuant to Rule 31a-1 under
the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under
the 1940 Act unless any such records are earlier surrendered as provided above.
Records shall be surrendered in usable machine-readable form.
11. SERVICES NOT EXCLUSIVE
The services of the Administrator to the Trust are not to be deemed
exclusive, and the Administrator shall be free to render similar services to
others. The Administrator shall be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Trust
from time to time, have no authority to act or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
<PAGE>
12. TERM, TERMINATION AND AMENDMENT
This Agreement shall become effective on the date of its execution and
shall remain in full force and effect for a period of two years from the
effective date and shall automatically continue in full force and effect after
such initial term unless either party terminates this Agreement in its entirety
or as to any Investment Fund by written notice to the other party at least sixty
(60) days prior to the expiration of the initial term. Either party may
terminate this Agreement in its entirety or as to any Investment Fund at any
time after the initial term upon at least sixty (60) days' prior written notice
to the other party. Not withstanding the foregoing, the Trust may terminate this
Agreement at any time upon sixty (60) days' written notice to the Administrator
in the event of a material breach of the Administrator's obligations hereunder,
which breach, if able to be cured, has not been cured by the expiration of such
sixty (60) day period, or in the event any of the representations or warranties
of the Administrator should no longer be true and accurate. Termination of this
Agreement with respect to any given Investment Fund shall in no way affect the
continued validity of this Agreement with respect to any other Investment Fund.
Upon termination of this Agreement, the Trust shall pay to the Administrator
such compensation and any reimbursable expenses as may be due under the terms
hereof as of the date of such termination, including reasonable out-of-pocket
expenses associated with such termination. This Agreement may be modified or
amended from time to time by mutual written agreement of the parties hereto.
<PAGE>
13. NOTICES
Any notice or other communication authorized or required by this
Agreement to be given to either party shall be in writing and deemed to have
been given when delivered in person or by confirmed facsimile, or posted by
certified mail, return receipt requested, to the following address (or such
other address as a party may specify by written notice to the other): if to the
Trust: Sun Capital Advisers Trust, One Sun Life Executive Park, SC 3527,
Wellesley Hills, MA 02181, Attn: Susan Walsh, fax: (781) 239-1682; if to the
Administrator: State Street Bank and Trust Company, 1776 Heritage Drive, AFB-2,
North Quincy, Massachusetts 02171, Attn: Fund Administration Legal Department,
fax: 617-537-2578.
14. NON-ASSIGNABILITY
This Agreement shall not be assigned by either party hereto without
the prior consent in writing of the other party, except that the Administrator
may assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by or under common control with
the Administrator.
15. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of
the Trust and the Administrator and their respective successors and permitted
assigns.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties
hereto with respect to the subject matter hereof and supersedes all previous
representations, warranties or commitments regarding the services to be
performed hereunder whether oral or in writing.
17. WAIVER
The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver nor shall it
deprive such party of the right thereafter to insist upon strict adherence to
that term or any term of this Agreement. Any waiver must be in writing signed
by the waiving party.
18. SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, the
balance of the Agreement shall remain in effect, and if any provision is
inapplicable to any person or circumstance it shall nevertheless remain
applicable to all other persons and circumstances.
<PAGE>
19. GOVERNING LAW
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
20. REPRODUCTION OF DOCUMENTS
THIS AGREEMENT AND ALL SCHEDULES, EXHIBITS, ATTACHMENTS AND AMENDMENTS
HERETO MAY BE REPRODUCED BY ANY PHOTOGRAPHIC, PHOTOSTATIC, MICROFILM, MICRO-
CARD, MINIATURE PHOTOGRAPHIC OR OTHER SIMILAR PROCESS. THE PARTIES HERETO
ALL/EACH AGREE THAT ANY SUCH REPRODUCTION SHALL BE ADMISSIBLE IN EVIDENCE AS THE
ORIGINAL ITSELF IN ANY JUDICIAL OR ADMINISTRATIVE PROCEEDING, WHETHER OR NOT THE
ORIGINAL IS IN EXISTENCE AND WHETHER OR NOT SUCH REPRODUCTION WAS MADE BY A
PARTY IN THE REGULAR COURSE OF BUSINESS, AND THAT ANY ENLARGEMENT, FACSIMILE OR
FURTHER REPRODUCTION OF SUCH REPRODUCTION SHALL LIKEWISE BE ADMISSIBLE IN
EVIDENCE.
21. YEAR 2000
The Administrator will take reasonable steps to ensure that its
products (and those of its third-party suppliers) reflect the available state of
the art technology to offer products that are Year 2000 compliant, including but
not limited to, century recognition of dates, calculations that correctly
compute same century and multi-century formulas and date values, and interface
values that reflect the date issues arising between now and the next one hundred
years. If any changes are required, the Administrator will make the changes to
its products at no cost to the Trust and in a commercially reasonable time frame
and will require third-party suppliers to do likewise.
22. DECLARATION OF TRUST
A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The State of Delaware, and notice is hereby given that
this Agreement has been executed on behalf of the Trust by an officer of the
trust in such capacity and not individually. It is agreed that obligations of
the Trust hereunder shall not be binding personally upon any of the Trustees,
shareholders, officers, agents or employees of the Trust, but shall bind only
the trust property of the Trust as provided in the Declaration of Trust. No
Investment Fund of the Trust shall be liable for the obligations of any other
Investment Fund of the Trust. No obligations of the Trust that relate to a
particular Investment Fund shall be attributable to or affect any other
Investment Fund of the Trust but shall only relate to the particular Investment
Fund.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
SUN CAPITAL ADVISERS TRUST
By: /s/ Robert P. Vrolyk
Name: Robert P. Vrolyk
Title: Treasurer
STATE STREET BANK AND TRUST COMPANY
By: /s/ Kathleen C. Cuocolo
Name: Kathleen C. Cuocolo
----------------------
Title: Senior Vice President
----------------------
<PAGE>
SUN CAPITAL ADVISERS TRUST
ADMINISTRATION AGREEMENT
SCHEDULE A
LISTING OF INVESTMENT FUNDS AND AUTHORIZED SHARES
<TABLE>
<CAPTION>
Investment Fund Authorized Shares
--------------- -----------------
<S> <C>
Sun Capital Real Estate Fund Indefinite Number
Sun Capital Investment Grade Bond Fund Indefinite Number
Sun Capital Money Market Fund Indefinite Number
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
- --------------------------------------------------------------------------------
FUND ADMINISTRATION COMPLEX FEE SCHEDULE
FOR
SUN CAPITAL ADVISERS TRUST
================================================================================
I. FEES FOR FUND ADMINISTRATION SERVICES:
The following fees schedule is for the Sun Capital Advisers Trust.
Average Assets Expressed in Basis Points: 1/100 of 1%
-------------- --------------------------------------
First $75 Million/Fund 8.00
Second $75 Million/Fund 6.00
Third $75 Million/Fund 4.00
Thereafter 2.00
Minimum/Fund $57,500
The minimum fee per fund will be applied at the rate of 1/12th in month one
($399/fund), 2/12ths in month two increasing incrementally per month until
the full minimum is in effect in month twelve.
Fund Fees:
---------
Fees will be calculated by multiplying each Avenge Asset Break Point in the
above schedule by the number of Funds in each series to determine the break
points used in the schedule. Total net assets of all Funds in each series
will be used to calculate the fee by multiplying the net assets of the
Funds by the basis point fees in the above schedule. The minimum will be
calculated by multiplying the minimum fee by the number of Funds in each
series to arrive at the total minimum fee. The greater of the basis points
or the minimum will be accrued to each Fund based on the prorata total net
asset value of each Fund in the series.
Administration services include Treasurer's office support, Financial
Reporting, Compliance and Tax Reporting.
II. Multiple Classes of Shares
An additional $10,000 annual fee will be applied for each class of shares,
excluding the initial class of shares, if more than one class of shares is
operational in a Fund.
III. OUT OF POCKET EXPENSES - Include, But May Not Be Limited To:
. Audit fees and other professional fees
. Printing for shareholder reports and SEC filings
. Postage
. Supplies related to Fund records
. Travel and lodging for Board and Operations meetings
. Preparation of financial statements other than Annual and Semi-Annual
Reporting, $3,000 per financial report.
IV. SPECIAL ARRANGEMENTS
Fees for activities of a non-recurring nature such as reorganizations,
and/or preparation of special reports will be subject to negotiation.
V. TERM OF THE CONTRACT
The parties agree that this fee schedule shall remain in effect for an
initial period of two years from the date on which the funds commence
operations. After the initial term, the agreement will continue from year
to year until it is revised as a result of negotiations initiated by either
party.
SUN CAPITAL ADVISERS TRUST STATE STREET BANK AND TRUST
By: /s/ Robert P. Vrolyk By: /s/ Kathleen C. Cuocolo
----------------------- -------------------------
Title: Treasurer Title: Senior Vice President
-------------------- ----------------------
Date: December 1, 1998 Date: November 13, 1998
--------------------- -----------------------
<PAGE>
Exhibit (h)(2)
[ ] TRANSFER AGENCY AND SERVICE AGREEMENT
between
SUN CAPITAL ADVISERS TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Terms of Appointment; Duties of the Bank.......................... 1
2. Fees and Expenses................................................. 3
3. Representations and Warranties of the Bank........................ 3
4. Representations and Warranties of the Fund........................ 4
5. Data Access and Proprietary Information........................... 4
6. Indemnification................................................... 6
7. Standard of Care.................................................. 7
8. Covenants of the Fund and the Bank................................ 7
9. Termination of Agreement.......................................... 8
10. Additional Funds.................................................. 8
11. Assignment........................................................ 8
12. Amendment......................................................... 9
13. Massachusetts Law to Apply........................................ 9
14. Force Majeure..................................................... 9
15. Consequential Damages............................................. 9
16. Merger of Agreement............................................... 9
17. Limitations of Liability of the Trustees or Shareholders;
Portfolios ...................................................... 9
18. Counterparts...................................................... 10
19. Reproduction of Documents......................................... 10
20. Year 2000 Compliance.............................................. 10
</TABLE>
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made as of the 30th day of November, 1998, by and between SUN CAPITAL
ADVISERS TRUST , a Delaware business trust (the "Fund"), and STATE STREET BANK
AND TRUST COMPANY, a Massachusetts trust company (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund offers shares in the separate series listed on Schedule I
attached hereto (the "Initial Portfolios"), the Initial Portfolios, together
with all other series subsequently established by the Fund and made subject to
this Agreement in accordance with Article 10, being herein referred to as a
"Portfolio", and collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as its
transfer agent, dividend disbursing agent, and agent in connection with certain
other activities, and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
l. Terms of Appointment; Duties of the Bank
----------------------------------------
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund,
on behalf of the Portfolios, hereby employs and appoints the Bank to act
as, and the Bank agrees to act as its transfer agent for the Fund's
authorized and issued shares of beneficial interest, $ 0.001 par value,
("Shares") and dividend disbursing agent for the shareholders of each of
the respective Portfolios of the Fund ("Shareholders") and set out in the
currently effective prospectus and statement of additional information
("prospectus") of the Fund on behalf of the applicable Portfolio.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation thereof
to the Custodian of the Fund authorized pursuant to the Declaration
of Trust of the Fund (the "Custodian");
<PAGE>
(ii) Pursuant to purchase orders, issue the appropriate number
of Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof to the
Custodian;
(iv) [Reserved.]
(v) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay over or
cause to be paid over in the appropriate manner such monies as
instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the applicable
Portfolio;
(viii) [Reserved.]
(ix) Maintain records of account for and advise the Fund and
its Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number of
shares of the Fund which are authorized, based upon data provided to
it by the Fund, and issued and outstanding. The Bank shall also
provide the Fund on a regular basis with the total number of shares
which are authorized and issued and outstanding and shall have no
obligation, when recording the issuance of shares, to monitor the
issuance of such shares or to take cognizance of any laws relating to
the issue or sale of such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i) perform
the customary services of a transfer agent and dividend disbursing agent,
including but not limited to: maintaining all Shareholder accounts,
preparing Shareholder meeting lists, preparing and mailing confirmation
forms and statements of account to
<PAGE>
Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder account
information.
(c) [Reserved.]
(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement between the
Fund on behalf of each Portfolio and the Bank per the attached service
responsibility schedule. The Bank may at times perform only a portion of
these services and the Fund or its agent may perform these services on the
Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing between
the Fund and the Bank.
2. Fees and Expenses
-----------------
2.1 For the performance by the Bank pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Bank a fee as set
forth in the fee schedule attached hereto, which may be amended from time
to time by the parties. Such fees and out-of-pocket expenses and advances
identified under Section 2.2 below may be changed from time to time
subject to mutual written agreement between the Fund and the Bank.
2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees on
behalf of each of the Portfolios to reimburse the Bank for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, tabulating proxies, records
storage, or advances incurred by the Bank for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by the
Bank at the request or with the consent of the Fund, will be reimbursed by
the Fund on behalf of the applicable Portfolio.
2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within five days following the receipt of the
respective billing notice. Postage for mailing of dividends, Fund reports
and other mailings to all Shareholder accounts shall be advanced to the
Bank by the Fund at least seven (7) days prior to the mailing date of such
materials.
3. Representations and Warranties of the Bank
------------------------------------------
The Bank represents and warrants to the Fund that:
<PAGE>
3.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
3.6 It is duly registered as a transfer agent under Section 17A(c)(2) of the
Securities and Exchange Act of 1934, as amended ("Section 17A(c)(2)").
4. Representations and Warranties of the Fund
------------------------------------------
The Fund represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good standing
under the laws of the State of Delaware.
4.2 It is empowered under applicable laws and by its Declaration of Trust and
By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Declaration of Trust and By-
Laws have been taken to authorize it to enter into and perform this
Agreement.
4.4 It is an open-end and diversified management investment company registered
under the Investment Company Act of 1940, as amended.
4.5 The Fund's registration statement under the Securities Act of 1933, as
amended, with respect to each of the Portfolios, is currently effective
and will remain effective, and appropriate state securities law filings
have been made and will continue to be made, with respect to all Shares of
the Fund being offered for sale.
5. Data Access and Proprietary Information
---------------------------------------
5.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability to
access certain Fund-related data ("Customer
<PAGE>
Data") maintained by the Bank on data bases under the control and
ownership of the Bank or other third party ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the Bank
or other third party. In no event shall Proprietary Information be deemed
Customer Data. The Fund agrees to treat all Proprietary Information as
proprietary to the Bank and further agrees that it shall not divulge any
Proprietary Information to any person or organization except as may be
provided hereunder. Without limiting the foregoing, the Fund agrees for
itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated in
writing by the Bank and solely in accordance with the Bank's applicable
user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained, to
inform the Bank in a timely manner of such fact and dispose of such
information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing the data acquired hereunder from
being retransmitted to any other computer facility or other location,
except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized transactions
pertaining to the Fund;
(f) to honor all reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary Information at
common law, under federal copyright law and under other federal or state
law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 5. The obligations of this Section shall
survive any earlier termination of this Agreement.
5.2 The Bank warrants that the Data Access Services will operate in material
compliance with the most recently issued user documentation for such
services. If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently
issued user documentation for such services, the Bank shall endeavor in a
timely manner to correct such failure. Organizations from which the Bank
may obtain certain data included in the Data Access Services are solely
responsible for the contents of
<PAGE>
such data and the Fund agrees to make no claim against the Bank arising
out of the contents of such third-party data, including, but not limited
to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS
AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON
AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES
EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
5.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement of cash or Shares or (ii) transmit Shareholder information or
other information, then in such event the Bank shall be entitled to rely
on the validity and authenticity of such instruction without undertaking
any further inquiry as long as such instruction is undertaken in
conformity with security procedures established by the Bank from time to
time.
6. Indemnification
---------------
6.1 The Bank shall not be responsible for, and the Fund shall on behalf of the
applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability to the extent arising out of or
attributable to:
(a) All actions of the Bank or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are taken
in good faith and without negligence or willful misconduct.
(b) The Fund's negligence, willful misconduct, or lack of good faith
which arise out of the breach of any representation or warranty of the
Fund hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors of
information, records, documents or services which (i) are received by the
Bank or its agents or subcontractors, and (ii) have been prepared,
maintained or performed by the Fund or any other person or firm on behalf
of the Fund including but not limited to any previous transfer agent or
registrar.
(d) The reasonable reliance on, or the carrying out by the Bank or its
agents or subcontractors of, any instructions or requests of the Fund on
behalf of the applicable Portfolio.
<PAGE>
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or
in violation of any stop order or other determination or ruling by any
federal agency or any state with respect to the offer or sale of such
Shares in such state.
(f) The negotiation and processing by the Bank of checks not made payable
to the order of the Bank, the Fund, the Fund's management company,
transfer agent or distributor or the retirement account custodian or
trustee for a plan account investing in Shares, which checks are tendered
to the Bank for the purchase of Shares (i.e., checks made payable to
prospective or existing Shareholders, such checks are commonly known as
"third party checks").
6.2 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Bank
under this Agreement, and the Bank and its agents or subcontractors shall
not be liable and shall be indemnified by the Fund on behalf of the
applicable Portfolio for any action taken or omitted by it in reasonable
reliance upon such instructions or upon the opinion of such counsel. The
Bank, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document, reasonably believed to be genuine and
to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided the Bank or
its agents or subcontractors by machine readable input, telex, CRT data
entry or other similar means authorized by the Fund, and shall not be held
to have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper manual
or facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.
6.3 In order that the indemnification provisions contained in this Section 6
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in any case in
which the Fund may be required to indemnify the Bank except with the
Fund's prior written consent.
<PAGE>
7. Standard of Care
----------------
The Bank shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct or that of its
employees.
8. Covenants of the Fund and the Bank
----------------------------------
8.1 The Fund shall on behalf of each of the Portfolios promptly furnish to the
Bank the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
8.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account of, such certificates,
forms and devices.
8.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared
or maintained by the Bank relating to the services to be performed by the
Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules,
and will be surrendered promptly to the Fund on and in accordance with its
request.
8.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
8.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
<PAGE>
9. Termination of Agreement
------------------------
9.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
9.2 Should the Fund exercise its right to terminate, all reasonable out-of-
pocket expenses associated with the movement of records and material will
be borne by the Fund on behalf of the applicable Portfolio(s).
10. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to the Initial Portfolios with respect to which it desires to
have the Bank render services as transfer agent under the terms hereof, it
shall so notify the Bank in writing, and if the Bank agrees in writing to
provide such services, such series of Shares shall become a Portfolio
hereunder.
11. Assignment
----------
11.1 Except as provided in Section 11.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
11.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
11.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc.,
a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(2), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(2) or (iii) a
BFDS affiliate duly registered as a transfer agent pursuant to Section
17A(c)(2); provided, however, that, in each case, the Bank shall be as
fully responsible to the Fund for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
12. Amendment
---------
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Board of
Trustees of the Fund.
<PAGE>
13. Massachusetts Law to Apply
--------------------------
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of
Massachusetts.
14. Force Majeure
-------------
In the event either party is reasonably unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control,
or other causes reasonably beyond its control, such party shall not be
liable for damages to the other for any damages to the extent resulting
from such failure to perform or otherwise from such causes.
15. Consequential Damages
---------------------
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
16. Merger of Agreement
-------------------
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
17. Limitations of Liability of the Trustees and Shareholders; Portfolios
---------------------------------------------------------------------
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the State of Delaware, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust as Trustees
and not individually and that the obligations of this instrument are not
binding upon any of the Trustees or Shareholders individually but are
binding only upon the assets and property of the Fund. No Portfolio shall
be responsible for the obligations of any other Portfolio.
18. Counterparts
------------
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
<PAGE>
19. Reproduction of Documents
-------------------------
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties
hereto all/each agree that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not
such reproduction was made by a party in the regular course of business,
and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
20. Year 2000
---------
The Bank will take reasonable steps to ensure that its products (and those
of its third-party suppliers) reflect the available technology to offer
products that are Year 2000 compliant, including, but not limited to,
century recognition of dates, calculations that correctly compute same
century and multi-century formulas and date values, and interface values
that reflect the data issues arising between now and the next one hundred
years. If any changes are required, the Bank will make the changes to its
products at no cost to the Fund and in a commercially reasonable time
frame and will require third-party suppliers to do likewise.
(Remainder of page left intentionally blank)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
SUN CAPITAL ADVISERS TRUST
BY: /s/ Robert P. Vrolyk
----------------------------------
Name: Robert P. Vrolyk
Title: Treasurer
ATTEST:
/s/ Maura A. Murphy
- ----------------------------
Name: Maura A. Murphy
Title: Secretary
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
----------------------------------
Ronald E. Logue
Executive Vice President
ATTEST:
/s/ Thomas M. Lenz
- -----------------------------
Thomas M. Lenz
Vice President
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
<TABLE>
<CAPTION>
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
<S> <C>
1. Receives orders for the purchase Yes
of Shares.
2. Issue Shares and hold Shares in Yes
Shareholders accounts.
3. Receive redemption requests. Yes
4. Effect transactions 1-3 above N/A
directly with broker-dealers.
5. Pay over monies to redeeming Yes
Shareholders.
6. Effect transfers of Shares. Yes
7. Prepare and transmit dividends Yes
and distributions.
8. Issue Replacement Certificates. N/A
9. Reporting of abandoned property. Yes
10. Maintain records of account. Yes
11. Maintain and keep a current and N/A
accurate control book for each
issue of securities.
12. Mail proxies. N/A
13. Mail Shareholder reports. N/A
14. Mail prospectuses to current N/A
Shareholders.
15. Withhold taxes on U.S. resident N/A
and non-resident alien accounts.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
<S> <C>
16. Prepare and file U.S. Treasury N/A
Department forms.
17. Prepare and mail account and Yes
confirmation statements for
Shareholders.
18. Provide Shareholder account Yes
information.
19. Blue sky reporting. N/A
</TABLE>
* Such services are more fully described in Section 1.2 (a), (b) and (c) of the
Agreement.
SUN CAPITAL ADVISERS TRUST
BY: /s/ Robert P. Vrolyk
------------------------------------
Name: Robert P. Vrolyk
Title: Treasurer
ATTEST:
/s/ Maura A. Murphy
- -----------------------------
Name: Maura A. Murphy
Title: Secretary
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
-----------------------------
Ronald E. Logue
Executive Vice President
ATTEST:
/s/ Thomas M. Lenz
- -----------------------------
Name: Thomas M. Lenz
Title: Vice President
<PAGE>
SCHEDULE I
Sun Capital Money Market Fund
Sun Capital Investment Grade Bond Fund
Sun Capital Real Estate Fund
<PAGE>
sPAGE>
STATE STREET CORP.
-----------------
TRANSFER AGENT OPERATIONS FEE SCHEDULE
--------------------------------------
I. ACCOUNT SERVICE FEE
FUND MONTHLY MAINTENANCE
FUND MONTHLY MAINTENANCE
1 - 10 Portfolios $ 250.00
Next 11 - 20 Portfolios $ 150.00
Next 21 - 30 Portfolios $ 100.00
Next after 31 Portfolios $ 50.00
II. ACTIVITY BASED FEES
TRADE PROCESSING (PER TRADE)
All transactions including purchases, redemptions, exchanges, transfers,
and dividends:
MANUAL $4.80
AUTOMATED $2.00
III. OUT OF POCKET EXPENSES
Out of pocket expenses include, but are not limited to: Custom system
enhancements, telecommunication charges, mailing costs, and expenses incurred at
the specific direction of the fund.
IV. AUTHORIZATION
Sun Capital Advisers Trust State Street Corp.
By /s/ Robert P. Vrolyk By /s/ Kathleen Cuocolo
---------------------------- ------------------------------
Title Treasurer Title Senior Vice President
------------------------- ---------------------------
Date December 1, 1998 Date November 13, 1998
-------------------------- ----------------------------
<PAGE>
EXHIBIT J
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post Effective Amendment No 1 to Registration
Statement Nos. 333-59093; 811-08879 of Sun Capital Advisers Trust on Form N-1A
of our report dated February 4, 1999, appearing in the Prospectus, which is a
part of this Registration Statement, and to the references to us under the
heading "Additional Information" in such Prospectus and "Independent Auditors"
in the Statement of Additional Information which are a part of this Registration
Statement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April _, 1999
1
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned officer of Sun Capital Advisers Trust, a Delaware
business trust, do hereby constitute and appoint James M.A. Anderson, Peter F.
Demuth, Maura A. Murphy and C. James Prieur, and each of them acting singly, to
be my true, sufficient and lawful attorneys, with full power to each of them and
each of them acting singly, to sign for me, in my name and the capacities
indicated below, the Registration Statement on Form N-1A of Sun Capital Advisers
Trust and any and all amendments to said Registration Statement to be filed by
Sun Capital Advisers Trust under the Investment Company Act of 1940, as amended,
and under the Securities Act of 1933, as amended, with respect to the offering
of its shares of beneficial interest, and any and all other documents and papers
relating thereto, and generally to do all such things in my name and on behalf
of me in the capacities indicated to enable Sun Capital Advisers Trust to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended, and thereunder, hereby ratifying and confirming my signature
as it may be signed by said attorneys or each of them to any and all amendments
to said Registration Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on this 12th day of April,
1999.
/s/ James F. Alban
------------------
James F. Alban
Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001065698
<NAME> SUN CAPITAL ADVISERS TRUST
<SERIES>
<NUMBER> 1
<NAME> SUN CAPITAL REAL ESTATE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 4,940,389
<RECEIVABLES> 64,250
<ASSETS-OTHER> 17,977
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,022,616
<PAYABLE-FOR-SECURITIES> 14,311
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 78,008
<TOTAL-LIABILITIES> 92,319
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,006,999
<SHARES-COMMON-STOCK> 500,721
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 525
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (77,227)
<NET-ASSETS> 4,930,297
<DIVIDEND-INCOME> 43,202
<INTEREST-INCOME> 1,938
<OTHER-INCOME> 0
<EXPENSES-NET> 4,210
<NET-INVESTMENT-INCOME> 40,930
<REALIZED-GAINS-CURRENT> (397)
<APPREC-INCREASE-CURRENT> (77,227)
<NET-CHANGE-FROM-OPS> (36,694)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (40,008)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 497,721
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (36,694)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25,056
<AVERAGE-NET-ASSETS> 4,914,457
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> (0.15)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.08)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.85
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001065698
<NAME> SUN CAPITAL ADVISERS TRUST
<SERIES>
<NUMBER> 2
<NAME> SUN CAPITAL INVESTMENT GRADE BOND FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 10,041,476
<RECEIVABLES> 159,193
<ASSETS-OTHER> 35,952
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,236,621
<PAYABLE-FOR-SECURITIES> 152,544
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 58,024
<TOTAL-LIABILITIES> 210,568
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,052,211
<SHARES-COMMON-STOCK> 1,005,238
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 355
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (26,513)
<NET-ASSETS> 10,026,053
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 39,336
<OTHER-INCOME> 0
<EXPENSES-NET> 5,120
<NET-INVESTMENT-INCOME> 34,216
<REALIZED-GAINS-CURRENT> 355
<APPREC-INCREASE-CURRENT> (26,513)
<NET-CHANGE-FROM-OPS> 8,058
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (34,216)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 998,807
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 3,431
<NET-CHANGE-IN-ASSETS> 8,058
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28,001
<AVERAGE-NET-ASSETS> 9,966,161
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> (0.03)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.03)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.97
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001065698
<NAME> SUN CAPITAL ADVISERS TRUST
<SERIES>
<NUMBER> 3
<NAME> SUN CAPITAL MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 2,496,998
<RECEIVABLES> 27,298
<ASSETS-OTHER> 8,987
<OTHER-ITEMS-ASSETS> 3,730
<TOTAL-ASSETS> 2,537,013
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27,360
<TOTAL-LIABILITIES> 27,360
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,509,680
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (27)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,509,653
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,795
<OTHER-INCOME> 0
<EXPENSES-NET> 1,114
<NET-INVESTMENT-INCOME> 7,681
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7,654
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,681)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,462,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 7,680
<NET-CHANGE-IN-ASSETS> 2,469,680
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21,064
<AVERAGE-NET-ASSETS> 2,501,346
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
