<PAGE>
[LOGO]
ANNUAL REPORT
DECEMBER 31, 1998
SUN CAPITAL MONEY MARKET FUND
SUN CAPITAL INVESTMENT GRADE BOND FUND
SUN CAPITAL REAL ESTATE FUND
<PAGE>
LETTER FROM THE PRESIDENT
- ----------------------------------------------------------------------
January 29, 1999
Dear Contractholders,
Sun Capital Advisers Trust is pleased to present its first Annual Report.
The Trust commenced operations on December 7, 1998. Presented on the following
pages are the audited financial statements of the Trust for the period ended
December 31, 1998, as well as summaries of the major holdings, investment
performance and market outlook for each of the Money Market Fund, Investment
Grade Bond Fund and the Real Estate Fund.
The year 1998 was one of the most volatile for securities markets in a
decade, and 1999 is not expected to be any less of a challenge for investors. We
hope you are pleased with the Funds that we have established in the short time
the Funds were active in 1998, and we look forward to serving your investment
needs in 1999 using our disciplined investment approach which is designed to add
value over the long term to your Sun Capital Funds' investments.
Sincerely,
[LOGO]
James M.A. Anderson
President
1
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS
- ----------------------------------------------------------------------
MONEY MARKET FUND
At December 31, 1998 this new portfolio had a 7-day yield of 4.48% compared to
the IBC Money Fund average of 4.64%. The Federal Funds rate closed the year at
4.75%, thanks to three consecutive 25 basis point drops commencing September 29.
These moves were precipitated largely by Asian economic problems which led to
financial market dislocations. Yields on short-term Treasury bills in 1998,
which traded in a narrow range slightly above 5% through August, fell
precipitously in September and October to almost 3.50% representing a worldwide
flight to quality. When fears subsided these instruments weakened to the 4.50%
level for the last two months of the year.
The portfolio invests exclusively in high quality U.S. dollar-denominated money
market instruments. At December 31, 1998 investments consisted of U.S.
Government and agency obligations (48%) and A1/P1 commercial paper (52%). The
average dollar weighted maturity of the portfolio, which may not exceed 90 days,
was 51 days at year-end, representing our view that short-term rates will remain
steady to slightly lower over the near term.
TOP TEN HOLDINGS
AT DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% OF NET ASSETS
---------------
<S> <C>
Federal Home Loan Mortgage Corp. 5.03% 2/03/99 19.83%
Federal National Mortgage Assn. 4.95% 3/09/99 19.74%
U.S. Treasury Note 6.38% 7/15/99 7.85%
Associates Corp. of North America 5.14% 2/10/99 4.38%
American General Finance Corp. 5.35% 1/12/99 3.98%
CIT Group, Inc. 5.35% 1/08/99 3.98%
Commercial Credit Co. 5.35% 1/06/99 3.98%
Ford Motor Credit Corp. 5.35% 1/06/99 3.98%
General Electric Capital Corp. 5.07% 3/08/99 3.98%
Texaco Inc. 5.15% 1/11/99 3.98%
</TABLE>
2
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS
- ----------------------------------------------------------------------
INVESTMENT GRADE BOND FUND
For the period from December 7, 1998 (commencement of operations) to December
31, 1998 the Investment Grade Bond Fund posted a total return of .04%. This
compares with a .25% return for the Lehman Brothers Aggregate Bond Index for the
same period.
The year 1998 was most surprising and interesting for the resilience of the
domestic economy and capital markets. Economic and financial crises in Russia,
Asia, and Latin America, coupled with the difficulties of numerous hedge funds,
presented numerous sources of concern to investors. The Federal Reserve halted
the potential global liquidity crisis this past fall by supporting the capital
markets with three quick reductions in the Federal Funds rate to 4.75%. As they
often do, Treasury rates had moved lower well ahead of the Federal Reserve, to
levels below the current Federal Funds rate. They have since risen slightly to
more realistic levels, anticipating that there will be no further moves required
by the Federal Reserve over the near term.
In an interesting dichotomy, the stock market has recently made new record
highs, but bond market investors remain risk averse. This has caused the yield
spreads over treasuries on many corporate bonds to remain at levels more typical
of a recession. This allowed us to begin the Funds investment program at what we
believe to be a very opportunistic entry point for the type of corporate and
mortgage securities deemed most appropriate for this Fund. By year-end, the
portfolio reflected a well diversified mix of securities across and within the
major sectors of the bond market, and the average dollar weighted credit rating
of the portfolio was AA.
Looking forward, the domestic economic consensus outlook is anticipating slower
growth, lower corporate earnings, and inflation remaining below 2% for 1999.
Global economic conditions remain tenuous as Japan's stimulus program has yet to
yield an impact, Latin America is weakening, and the fate of the new Euro is
uncertain. Accordingly, U.S. exports should see further decline. Employment
growth has slowed from average monthly gains of 330,000 to 200,000 jobs during
the past year, which may reduce consumer demand. An additional factor of note is
that the Federal Budget surplus is reducing the volume of new Treasury debt
issuance which could help to hold yields down. If the economy slows and market
volatility subsides, as we expect, interest rates may decline again toward prior
lows, and on a relative basis, corporate and mortgage securities should see
better performance.
<TABLE>
<S> <C> <C> <C>
TOP TEN BOND ISSUERS TOP FIVE INDUSTRIES
AT DECEMBER 31, 1998 AT DECEMBER 31, 1998
- -------------------------------------------------------------------------------------------
% OF NET ASSETS % OF NET ASSETS
--------------- ---------------
U.S. Treasury 14.79% U.S. Govt. & Agency Oblig. 39.10%
Government National Mortgage Assn. 10.24% Electric Utilities 10.20%
Federal Home Loan Bank 7.94% Telecommunications 8.20%
Federal National Mortgage Assn. 6.17% Financial 7.50%
Waste Management, Inc. 3.04% Transportation 7.00%
Associates Corp. of North America 3.02%
News America Holdings, Inc. 2.75%
Sprint Capital Corp. 2.59%
California Infrastructure 2.57%
Development
Finova Capital Corp. 2.52%
</TABLE>
3
<PAGE>
- ----------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN INVESTMENT GRADE BOND
FUND AND THE LEHMAN BROTHERS AGGREGATE BOND INDEX*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LEHMAN AGGREGATE INVESTMENT GRADE BOND FUND
<S> <C> <C>
12/7/98 $10,000.00 $10,000.00
12/14/98 $10,044.72 $10,011.10
12/21/98 $10,014.31 $9,960.60
12/28/98 $9,971.14 $9,913.54
12/31/98 $10,025.04 $10,004.15
</TABLE>
TOTAL RETURN**
<TABLE>
<CAPTION>
LIFE OF
FUND***
-------
<S> <C>
Investment Grade Bond Fund........................ 0.04%
</TABLE>
*The performance data of the index has been prepared from sources and data that
the investment adviser believes to be reliable, but no representation is made as
to their accuracy. The index is unmanaged and has no fees or costs. The Lehman
Brothers Aggregate Bond Index is composed of securities from the Lehman Brothers
Government/Corporate Bond Index, the Mortgage-Backed Securities Index and the
Asset-Backed Securities Index.
**Performance data is historical and includes changes in share price and
reinvestment of income dividends and capital gains distributions. Past
performance does not indicate future results. Performance numbers are net of all
operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower. The value of an investment in the Investment Grade Bond Fund and
the return on the investment will fluctuate and redemption proceeds may be
higher or lower than an investor's original cost. The investment adviser reduced
its management fee and certain other expenses; otherwise returns would have been
lower.
***For the period from December 7, 1998 (commencement of operations) to December
31, 1998.
4
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS
- ----------------------------------------------------------------------
REAL ESTATE FUND
For the period from December 7, 1998 (commencement of operations) to December
31, 1998 the Real Estate Fund posted a total return of (.71%). This compares
with a (2.26%) return for the Morgan Stanley Real Estate Investment Trust Index
for the same period.
At the end of the year, the Fund had roughly 19% of its total assets in
apartment REITs, approximately 41% in office and industrial REITs, and about 32%
in retail REITs with the balance invested in self storage and specialty REITs.
We believe that the prospects for REIT stocks are generally positive for 1999.
In our opinion, the 7% dividend yield carried by the average REIT is likely to
continue, given current payout ratios and underlying real estate fundamentals,
as most property markets appear to be at or near equilibrium. It does not seem
likely that property markets will get overbuilt, as the capital markets are
playing the role of enforcer, by raising the cost of new capital when
construction appears excessive.
We look for moderate capital appreciation for REIT stocks in 1999, keeping pace
with expected funds from operations (FFO) growth in the high single digits. This
assumes no further multiple contraction for REITs, as we believe that current
market valuations already price in relatively pessimistic outlooks, and that FFO
growth expectations are achievable, given the positive underlying real estate
fundamentals.
As we feel that most property markets are at or near equilibrium, we will
continue to closely align the property type weightings of the fund with those of
its benchmark, the Morgan Stanley REIT Index. We will also continue to look for
REITs which fit our strategy of "value added" REITs (those whose management adds
value in different ways, such as creative deal-making abilities, unique
operating strategies, or proven property enhancement abilities), "value" REITs
(those whose stock market value is, we believe, less than the value of the
underlying real estate properties), and geographic plays (those with portfolios
and strategies in what we think are "special" real estate markets).
<TABLE>
<S> <C> <C> <C>
TOP TEN ISSUERS TOP FIVE PROPERTY TYPES
AT DECEMBER 31, 1998 AT DECEMBER 31, 1998
- -------------------------------------------------------------------------------------------
% OF NET ASSETS % OF NET ASSETS
--------------- ---------------
AvalonBay Communities, Inc. 8.14% Office 28.40%
Kimco Realty Corp. 7.15% Apartments 19.30%
Equity Residential Properties Trust 6.92% Shopping Centers 18.70%
Equity Office Properties Trust 6.64% Regional Malls 13.60%
SL Green Realty Corp. 6.54% Warehouse & Industrial 12.20%
Public Storage, Inc. 5.56%
Reckson Associates Realty Corp. 4.62%
CBL & Associates Properties, Inc. 4.57%
Weingarten Realty Investors 4.53%
General Growth Properties, Inc. 4.33%
</TABLE>
5
<PAGE>
- ----------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE REAL ESTATE FUND
AND THE MORGAN STANLEY REIT INDEX*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MORGAN STANLEY REIT INDEX REAL ESTATE FUND
<S> <C> <C>
12/7/98 $10,000.00 $10,000.00
12/14/98 $9,723.00 $9,838.76
12/21/98 $9,687.02 $9,838.94
12/28/98 $9,573.68 $9,719.48
12/31/98 $9,773.77 $9,929.44
</TABLE>
TOTAL RETURN**
<TABLE>
<CAPTION>
LIFE OF
FUND***
-------
<S> <C>
Real Estate Fund.................................. (0.71 )%
</TABLE>
*The performance data of the index has been prepared from sources and data that
the Investment Adviser believes to be reliable, but no representation is made as
to their accuracy. The index is unmanaged and has no fees. The Morgan Stanley
REIT Index is a total-return index comprised of the most actively traded real
estate investment trusts and is designed to be a measure of real estate equity
performance.
**Performance data is historical and includes changes in share price and
reinvestment of income dividends and capital gains distributions. Past
performance does not indicate future results. Performance numbers are net of all
operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower. The value of an investment in the Real Estate Fund and the
return on the investment will fluctuate and redemption proceeds may be higher or
lower than an investor's original cost. The investment adviser reduced its
management fee and certain other expenses; otherwise returns would have been
lower.
***For the period from December 7, 1998 (commencement of operations) to December
31, 1998.
6
<PAGE>
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998 SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000 OMITTED) VALUE
<S> <C> <C>
COMMERCIAL PAPER - 52.1%
American General Finance Corp.
5.35%, 1/12/99........................ $100 $ 100,000
Associates Corp. of North America
5.14%, 2/10/99........................ 110 110,000
CIT Group, Inc.
5.35%, 1/08/99........................ 100 100,000
Coca-Cola Co.
5.16%, 1/15/99........................ 100 99,799
Commercial Credit Co.
5.35%, 1/06/99........................ 100 100,000
Dupont (E. I.) de Nemours & Co.
5.11%, 1/25/99........................ 100 99,659
Export Development Corp.
5.15%, 1/19/99........................ 100 99,743
Ford Motor Credit Corp.
5.35%, 1/06/99........................ 100 100,000
General Electric Capital Corp.
5.07%, 3/08/99........................ 100 100,000
Government of Canada
5.15%, 1/21/99........................ 100 99,714
Province of British Columbia
4.96%, 4/01/99........................ 100 98,760
<CAPTION>
PRINCIPAL
AMOUNT
(000 OMITTED) VALUE
<S> <C> <C>
Texaco, Inc.
5.15%, 1/11/99........................ $100 $ 100,000
Walt Disney Co.
5.00%, 2/19/99........................ 100 99,320
----------------
Total Commercial Paper
(amortized cost $1,306,995)........... 1,306,995
----------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 47.4%
Federal Home Loan Mortgage Corp.
5.03%, 2/03/99........................ 500 497,694
Federal National Mortgage Assn.
4.95%, 3/09/99........................ 500 495,394
U.S. Treasury Note
6.38%, 7/15/99........................ 195 196,915
----------------
Total U.S. Government & Agency
Obligations
(amortized cost $1,190,003)........... 1,190,003
----------------
TOTAL INVESTMENTS - 99.5%
(cost $2,496,998)..................... 2,496,998
Other assets less liabilities - 0.5% 12,655
----------------
NET ASSETS - 100.0%..................... $ 2,509,653
----------------
----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
INVESTMENT GRADE BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998 SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000 OMITTED) VALUE
<S> <C> <C>
ASSET BACKED SECURITIES - 4.8%
California Infrastructure Development
6.42%, 9/25/08........................ $250 $ 257,605
Green Tree Recreational, Equipment &
Consolidated Trust
5.55%, 2/15/18........................ 226 227,255
----------------
Total Asset Backed Securities
(cost $487,478)....................... 484,860
----------------
CORPORATE DEBT OBLIGATIONS - 46.4%
APPLIANCES - 0.6%
Whirlpool Corp.
9.10%, 2/01/08........................ 50 59,559
----------------
AUTOMOTIVE - 1.0%
Federal Mogul Corp.
7.50%, 7/01/04........................ 100 100,965
----------------
BROADCASTING/MEDIA - 3.8%
Lenfest Communications, Inc.
8.38%, 11/01/05....................... 100 108,000
News America Holdings, Inc.
8.00%, 10/17/16....................... 250 275,378
----------------
383,378
----------------
ENVIRONMENTAL SERVICES - 3.1%
Waste Management, Inc.
6.63%, 7/15/02........................ 300 304,989
----------------
ELECTRIC UTILITIES - 10.2%
CalEnergy Co., Inc.
8.48%, 9/15/28........................ 100 111,039
Cleveland Electric Illuminating Co.
9.00%, 7/01/23........................ 200 220,150
Connecticut Light & Power Co.
7.25%, 7/01/99........................ 168 168,215
<CAPTION>
PRINCIPAL
AMOUNT
(000 OMITTED) VALUE
<S> <C> <C>
El Paso Electric Co.
9.40%, 5/01/11........................ $217 $ 248,912
Niagara Mohawk Power Corp.
7.88%, 4/01/24........................ 142 142,484
Philadelphia Electric Co.
7.75%, 5/01/23........................ 120 126,540
----------------
1,017,340
----------------
FINANCIAL - 7.5%
Associates Corp. of North America
5.75%, 11/01/03....................... 300 302,691
Case Credit Corp.
6.12%, 8/01/01........................ 200 199,626
Finova Capital Corp.
6.38%, 10/15/00....................... 250 252,637
----------------
754,954
----------------
OIL SERVICES - 1.4%
Petroleum Geo-Services ASA
7.13%, 3/30/28........................ 150 140,159
----------------
RETAIL - 2.1%
Saks, Inc.
8.25%, 11/15/08....................... 200 214,114
----------------
REAL ESTATE - 1.5%
Simon Property Group LP
6.75%, 6/15/05........................ 150 148,845
----------------
TELECOMMUNICATIONS - 8.2%
Cable & Wireless Communication
6.63%, 3/06/05........................ 250 252,017
MCI WorldCom, Inc.
6.40%, 8/15/05........................ 200 207,864
Qwest Communications International, Inc.
7.50%, 11/01/08(1).................... 100 103,875
Sprint Capital Corp.
6.88%, 11/15/28....................... 250 259,825
----------------
823,581
----------------
(continued)
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
8
<PAGE>
INVESTMENT GRADE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998 SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000 OMITTED) VALUE
<S> <C> <C>
TRANSPORTATION - 7.0%
Continental Airlines, Inc.
6.90%, 1/02/18........................ $250 $ 250,995
Union Pacific Corp.
7.00%, 2/01/16........................ 200 204,274
US Airways, Inc.
6.85%, 1/30/18........................ 250 246,253
----------------
701,522
----------------
Total Corporate Debt Obligations
(cost $4,671,411)..................... 4,649,406
----------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 39.1%
Federal Home Loan Bank
6.50%, 12/01/28....................... 505 508,626
9.00%, 11/01/06....................... 123 127,201
12.00%, 4/01/16....................... 141 160,173
Federal National Mortgage Assn.
6.00%, 12/01/13....................... 495 496,239
9.50%, 6/01/03........................ 118 122,209
Government National Mortgage Assn.
6.50%, 12/15/28....................... 505 510,050
7.00%, 2/15/28........................ 505 516,676
U.S. Treasury Bonds
6.63%, 2/15/27........................ 550 650,545
U.S. Treasury Notes
6.25%, 8/31/02........................ 250 262,773
7.00%, 7/15/06........................ 500 569,295
----------------
Total U.S. Government & Agency
Obligations
(cost $3,925,677)..................... 3,923,787
----------------
<CAPTION>
PRINCIPAL
AMOUNT
(000 OMITTED) VALUE
<S> <C> <C>
SHORT TERM INVESTMENTS - 9.8%
COMMERCIAL PAPER - 5.7%
Ford Motor Credit Corp.
6.10%, 1/04/99........................ $302 $ 302,000
General Electric Capital Corp.
5.80%, 1/05/99........................ 100 100,000
Household Finance Corp.
5.20%, 1/04/99........................ 169 169,000
----------------
571,000
----------------
MUTUAL FUNDS - 2.6%
SSGA Money Market Fund.................. 260 259,525
----------------
REPURCHASE AGREEMENT - 1.5%
State Street Repurchase Agreement
4.00%, 1/04/99 (Dated 12/31/98,
collateralized by $115,000 U.S.
Treasury Bond, 10.75%, 8/15/05, with a
value of $158,125).................... 152 152,000
----------------
Total Short Term Investments
(amortized cost $982,525)............. 982,525
----------------
TOTAL INVESTMENTS - 100.1%
(cost $10,067,091).................... 10,040,578
Other assets less
liabilities - (0.1%).................. (14,525)
----------------
NET ASSETS - 100.0%..................... $ 10,026,053
----------------
----------------
</TABLE>
(1) Exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At December 31, 1998 these
securities amounted to $103,875 or 1.0% of net assets.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
9
<PAGE>
REAL ESTATE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998 SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS - 99.7%
APARTMENTS - 19.3%
AvalonBay Communities, Inc.............. 11,724 $ 401,547
BRE Properties, Inc..................... 8,431 208,667
Equity Residential Properties Trust..... 8,439 341,252
----------
951,466
----------
DIVERSIFIED - 2.0%
Franchise Finance Corp. of America...... 4,084 98,016
----------
OFFICE - 28.4%
Equity Office Properties Trust.......... 13,649 327,576
Highwoods Properties, Inc............... 5,688 146,466
Mack-Cali Realty Corp................... 6,235 192,506
Reckson Associates Realty Corp.......... 10,270 227,866
SL Green Realty Corp.................... 14,908 322,385
Spieker Properties, Inc................. 5,256 181,989
----------
1,398,788
----------
REGIONAL MALLS - 13.6%
CBL & Associates Properties, Inc........ 8,735 225,472
General Growth Properties, Inc.......... 5,638 213,539
Macerich Co............................. 4,627 118,567
Simon Property Group, Inc............... 3,954 112,689
----------
670,267
----------
<CAPTION>
SHARES VALUE
<S> <C> <C>
SHOPPING CENTERS - 18.7%
Developers Diversified Realty Corp...... 8,133 $ 144,361
IRT Property Co......................... 20,154 201,540
Kimco Realty Corp....................... 8,886 352,663
Weingarten Realty Investors............. 5,000 223,125
----------
921,689
----------
STORAGE - 5.5%
Public Storage, Inc..................... 10,138 274,360
----------
WAREHOUSE &
INDUSTRIAL - 12.2%
CenterPoint Properties Corp............. 6,037 204,126
First Industrial Realty Trust, Inc...... 4,080 109,395
ProLogis Trust.......................... 9,211 191,128
Weeks Corp.............................. 3,494 98,487
----------
603,136
----------
TOTAL INVESTMENTS - 99.7%
(cost $4,994,949)..................... 4,917,722
Other assets less liabilities - 0.3% 12,575
----------
NET ASSETS - 100.0%..................... $4,930,297
----------
----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
10
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUN CAPITAL SUN CAPITAL SUN CAPITAL
MONEY MARKET INVESTMENT GRADE REAL ESTATE
FUND BOND FUND FUND
------------- ----------------- ------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at
value (cost $2,496,998,
$10,067,091 and $4,994,949,
respectively).................. $2,496,998 $10,040,578 $4,917,722
Cash............................. 3,730 898 22,667
Interest receivable.............. 8,205 140,408 --
Dividends receivable............. -- -- 32,160
Receivable due from adviser...... 19,093 18,785 17,646
Receivable for investment
securities sold................ -- -- 14,444
Other assets..................... 8,987 35,952 17,977
------------- ----------------- ------------
Total assets..................... 2,537,013 10,236,621 5,022,616
------------- ----------------- ------------
LIABILITIES
Payable for investment securities
purchased...................... -- 152,544 14,311
Distribution payable............. -- -- 40,008
Payable to affiliate............. 9,285 37,143 18,572
Accrued expenses................. 18,075 20,881 19,428
------------- ----------------- ------------
Total liabilities................ 27,360 210,568 92,319
------------- ----------------- ------------
NET ASSETS......................... $2,509,653 $10,026,053 $4,930,297
------------- ----------------- ------------
------------- ----------------- ------------
COMPOSITION OF NET ASSETS
Paid-in capital.................. $2,509,680 $10,052,211 $5,006,999
Undistributed net investment
income (loss).................. -- -- 525
Accumulated net realized gain
(loss) on investments.......... (27) 355 --
Net unrealized appreciation
(depreciation) of
investments.................... -- (26,513) (77,227)
------------- ----------------- ------------
$2,509,653 $10,026,053 $4,930,297
------------- ----------------- ------------
------------- ----------------- ------------
Shares of beneficial interest
outstanding.................... 2,509,680 1,005,238 500,721
------------- ----------------- ------------
------------- ----------------- ------------
Net asset value, offering price
and redemption price per share
(net assets/shares of
beneficial interest
outstanding)................... $ 1.00 $ 9.97 $ 9.85
------------- ----------------- ------------
------------- ----------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
11
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 7, 1998
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998 SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUN CAPITAL SUN CAPITAL SUN CAPITAL
MONEY MARKET INVESTMENT GRADE REAL ESTATE
FUND BOND FUND FUND
------------- ----------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest......................... $ 8,795 $ 39,336 $ 1,938
Dividends........................ -- -- 43,202
------------- -------- ------------
Total investment income.......... 8,795 39,336 45,140
------------- -------- ------------
EXPENSES
Investment Advisory fee.......... 857 4,096 3,200
Custody and Fund Accounting...... 373 594 531
Audit............................ 12,800 13,300 13,300
Legal............................ 2,500 2,500 2,500
Printing......................... 1,000 1,000 1,000
Administration................... 399 399 399
Registration..................... 695 2,780 1,390
Transfer agency.................. 308 308 308
Trustees fees.................... 1,834 1,833 1,833
Insurance........................ 298 1,191 595
------------- -------- ------------
Total expenses................... 21,064 28,001 25,056
------------- -------- ------------
Less: Waiver of advisory fees.... (857) (4,096) (3,200)
Reimbursement of operating
expenses.................. (19,093) (18,785) (17,646)
------------- -------- ------------
Net expenses..................... 1,114 5,120 4,210
------------- -------- ------------
Net investment income............ 7,681 34,216 40,930
------------- -------- ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on
investment transactions........ (27) 355 (397)
Net unrealized appreciation
(depreciation) of
investments.................... -- (26,513) (77,227)
------------- -------- ------------
Net realized and unrealized gain
(loss) on investments.......... (27) (26,158) (77,624)
------------- -------- ------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS............. $ 7,654 $ 8,058 $(36,694)
------------- -------- ------------
------------- -------- ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
12
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM DECEMBER 7, 1998
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998 SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUN CAPITAL SUN CAPITAL SUN CAPITAL
MONEY MARKET INVESTMENT GRADE REAL ESTATE
FUND BOND FUND FUND
------------- ----------------- ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income............ $ 7,681 $ 34,216 $ 40,930
Net realized gain (loss) on
investment transactions........ (27) 355 (397)
Net unrealized appreciation
(depreciation) of
investments.................... -- (26,513) (77,227)
------------- ----------------- ------------
Net increase (decrease) in net
assets from operations......... 7,654 8,058 (36,694)
------------- ----------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............ (7,681) (34,216) (40,008)
SHARE TRANSACTIONS
Net proceeds from sales.......... 2,462,000 9,987,996 4,976,999
Net proceeds from reinvestment of
distributions.................. 7,680 34,215 --
Cost of shares redeemed.......... -- -- --
------------- ----------------- ------------
Net increase in net assets from
share transactions............. 2,469,680 10,022,211 4,976,999
------------- ----------------- ------------
Total increase in net assets..... 2,469,653 9,996,053 4,900,297
NET ASSETS
Beginning of period.............. 40,000 30,000 30,000
------------- ----------------- ------------
End of period (including
undistributed net investment
income of $0, $0 and $525,
respectively).................. $2,509,653 $10,026,053 $4,930,297
------------- ----------------- ------------
------------- ----------------- ------------
SHARES OF BENEFICIAL INTEREST
Shares sold...................... 2,462,000 998,807 497,721
Shares issued to shareholders
from reinvestment of
distributions.................. 7,680 3,431 --
Shares redeemed.................. -- -- --
------------- ----------------- ------------
Net Increase..................... 2,469,680 1,002,238 497,721
------------- ----------------- ------------
------------- ----------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
13
<PAGE>
FINANCIAL HIGHLIGHTS
SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
SUN CAPITAL
SUN CAPITAL INVESTMENT GRADE SUN CAPITAL
MONEY MARKET FUND BOND FUND REAL ESTATE FUND
PERIOD ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, 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 ASSET VALUE, END OF PERIOD..... $1.000 $ 9.970 $ 9.850
------ ------- -------
------ ------- -------
TOTAL RETURN(B).................... 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:
Net expenses(a).................. 0.65% 0.75% 1.25%
Gross expenses(a)................ 12.29% 4.10% 7.44%
Net investment income(a)......... 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) Annualized for periods less than one year.
(b) 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.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
NOTE A -- ORGANIZATION
Sun Capital Advisers Trust (the "Trust") is registered under the Investment
Company Act of 1940 as amended (the "1940 Act") as an open-end management
investment company. The Trust was established as a Delaware business trust under
the laws of Delaware by an Agreement and Declaration of Trust dated July 13,
1998. It is currently comprised of three funds (each referred to as a "Fund"),
which are offered only to qualified pension and retirement plans and variable
annuity and variable life insurance separate accounts established by insurance
companies to fund variable annuity contracts and variable life insurance
policies. The Funds are the Sun Capital Money Market Fund ("Money Market Fund"),
Sun Capital Investment Grade Bond Fund ("Investment Grade Bond Fund"), and the
Sun Capital Real Estate Fund ("Real Estate Fund"). Each of the Funds, other than
the Real Estate Fund, is classified as a diversified fund under the 1940 Act.
The Funds commenced operations on December 7, 1998.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements.
VALUATION OF INVESTMENTS
Securities for which exchange quotations are readily available are valued at the
last sales price, or, if no sales occurred on that day, at the last quoted bid
price. Certain fixed income securities are valued by a dealer or by a pricing
service based upon a computerized matrix system, which considers market
transactions and dealer supplied valuations. Short-term securities maturing in
60 days or less are valued at cost plus earned discount to maturity (amortized
cost), which approximates market value. Securities for which current market
quotations are not readily available are stated at fair value as determined in
good faith under the direction of the Board of Trustees.
In accordance with Rule 2a-7 of the 1940 Act, the Money Market Fund values its
securities initially at cost, and thereafter, securities are assumed to have a
constant amortization to maturity of any discount or premium. Amortized cost
approximates fair value.
INVESTMENT TRANSACTIONS AND INCOME
Investment security transactions are accounted for as of trade date. Dividend
income is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized gains and losses from security transactions are
determined on the basis of identified cost for both financial statement and
federal tax purposes.
FEDERAL INCOME TAXES
Each Fund is treated as a separate entity for Federal tax purposes. Each Fund
has qualified and intends to elect and continue to qualify each year to be
treated as a regulated investment company under Subchapter M of the Internal
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
Revenue Code, as amended. By so qualifying, the Funds will not be subject to
Federal income taxes to the extent that they distribute all of their taxable
income, including realized capital gains, for the fiscal year. In addition, by
distributing during each calendar year substantially all of their net investment
income, capital gains and certain other amounts, if any, the Funds will not be
subject to a Federal excise tax.
A portion of the dividend income recorded by Real Estate Fund is from
distributions by publicly traded REITs, and such distributions for tax purposes
may also consist of capital gains and return of capital. The actual return of
capital and capital gains portions of such distributions will be determined by
formal notifications from the REITs subsequent to the calendar year-end.
Distributions received from the REITs that are determined to be a return of
capital are recorded by the Fund as a reduction to the cost basis of the
securities held.
REPURCHASE AGREEMENTS
In connection with transactions in repurchase agreements, the Trust's custodian
takes possession of the underlying collateral securities, the value of which at
least equals 102% of the principal amount of the repurchase transaction. The
value of the collateral is marked-to-market on a daily basis to ensure the
adequacy of the collateral. In the event of default the Funds have the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. There is the risk that the collateral may be insufficient to meet
the obligation in the event of default.
WHEN ISSUED SECURITIES AND FORWARD COMMITMENTS
The Funds may purchase or sell securities on a when issued or forward commitment
basis. These transactions are arrangements in which the Funds purchase and sell
securities with payment and delivery scheduled for a future time. Settlement
dates may be a month or more after entering into these transactions and such
transactions may involve a risk of loss if the value of the underlying security
declines prior to the settlement date. The price of the underlying securities
and the date when these securities will be delivered and paid for are fixed at
the time the transaction is negotiated. This may increase the risk if the other
party involved in the transaction fails to deliver and causes the Funds to
subsequently invest at less advantageous prices and yields. In connection with
such purchases the Funds maintain cash or liquid assets in an amount equal to
purchase commitments for such underlying securities until settlement date and
for sales commitments the Funds maintain equivalent deliverable securities as
"cover" for the transaction. Unsettled commitments are valued at current market
value of the underlying security. Daily fluctuations in the value of such
contracts are recorded as unrealized gains or losses. The Funds will not enter
into such agreements for the purpose of investment leverage.
EXPENSES
Expenses directly attributable to a Fund are charged to that Fund. Expenses not
directly attributable to a particular Fund are allocated evenly among the
affected Funds, allocated among the Funds on the basis of relative net assets,
or otherwise allocated among the Funds as the Trustees may direct or approve.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
The Money Market Fund and Investment Grade Bond Fund declare dividends daily
from net investment income, if any. The Real Estate Fund distributes its net
investment income, if any, annually. Each Fund distributes its net realized
capital gains, if any, at least annually. Income and capital gain distributions
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles.
NOTE C -- INVESTMENT ADVISORY AND OTHER RELATED PARTY AGREEMENTS
INVESTMENT ADVISORY AGREEMENT
Sun Capital Advisers, Inc. ("Adviser") is the investment adviser to all Funds of
the Trust under an investment advisory agreement with the Trust dated November
4, 1998. The Adviser is a wholly-owned subsidiary of Sun Life Assurance Company
of Canada (U.S.) ("Sun Life (U.S.)"), which is an indirect wholly owned
subsidiary of Sun Life Assurance Company of Canada ("Sun Life of Canada").
As compensation for all services rendered, facilities provided and expenses paid
or assumed by the Adviser under the advisory agreement, the Trust pays
compensation monthly to the Adviser at the following annual rates based on the
average daily net assets of each Fund taken separately: 0.50% of average daily
net assets for the Money Market Fund; 0.60% of the average daily net assets for
the Investment Grade Bond Fund; 0.95% of the average daily net assets for the
Real Estate Fund.
LIMITATIONS
The Adviser has voluntarily agreed to reduce its advisory fee and to reimburse
each Fund's other expenses to reduce each Fund's total annual operating expenses
to 0.65%, 0.75% and 1.25% of average daily net assets for the Money Market Fund,
Investment Grade Bond Fund and Real Estate Fund, respectively. The Adviser may
modify or terminate this voluntary expense limit at any time. For the period
ended December 31, 1998, the Adviser voluntarily waived all investment advisory
fees and reimbursed the Funds for other operating expenses in the amounts of
$19,093, $18,785 and $17,646 for the Money Market Fund, Investment Grade Bond
Fund, and Real Estate Fund, respectively. To the extent that a fund's total
expense ratio falls below the expense limit stated above in future years, the
Adviser reserves the right to be reimbursed for management fees waived and fund
expenses paid by it during the prior two fiscal years.
TRUSTEES' COMPENSATION
Trustees' fees are paid by the Trust to each independent trustee of the Trust.
The Trust pays no compensation directly to its Trustees or officers who are
affiliated with the Adviser, Sun Life (U.S.) or Sun Life of Canada, all of whom
receive remuneration for their services to the Trust from the Adviser, Sun Life
(U.S.) or Sun Life of Canada. Certain officers and Trustees of the Trust are
officers and directors of the Adviser, Sun Life (U.S.) or Sun Life of Canada.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
NOTE D -- INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities, for each Fund for the period ended December 31, 1998 were
as follows:
<TABLE>
<CAPTION>
NON- NON-
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT
PURCHASES PURCHASES SALES SALES
------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Investment Grade Bond Fund............................... $5,318,108 $3,926,453 $ 154,773 $ 0
Real Estate Fund......................................... 5,043,769 0 48,423 0
</TABLE>
Purchases and sales, including maturities, of short-term securities by the Money
Market Fund for the period ended December 31, 1998 were $2,811,515 and $320,135,
respectively.
The identified cost for federal income tax purposes of investments owned by each
Fund and their respective gross unrealized appreciation and depreciation at
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
IDENTIFIED GROSS UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Money Market Fund................................. $ 2,496,998 $ 0 $ (0) $ 0
Investment Grade Bond Fund........................ 10,067,091 16,631 (43,144) (26,513)
Real Estate Fund.................................. 4,993,082 30,870 (106,230) (75,360)
</TABLE>
The aggregate cost of each Fund's investments was substantially the same for
book and Federal income tax purposes at December 31, 1998.
- --------------------------------------------------------------------------------
YEAR 2000 (UNAUDITED)
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
failure of 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.
18
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of Sun Capital Advisers Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Sun Capital Money Market Fund, Sun Capital
Investment Grade Bond Fund and Sun Capital Real Estate Fund (each a portfolio of
Sun Capital Advisers Trust) (the "Trust") as of December 31, 1998, the related
statements of operations and statement of changes in net assets and financial
highlights for the period from December 7, 1998 (commencement of operations) to
December 31, 1998. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
December 31, 1998 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
respective Funds comprising the Trust at December 31, 1998, the results of its
operations, the changes in its net assets and its financial highlights for the
period then ended in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
February 4, 1999
19
<PAGE>
SUN CAPITAL ADVISERS TRUST
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
GRAHAM E. JONES, TRUSTEE
ANTHONY C. PADDOCK, TRUSTEE
WILLIAM N. SEARCY, JR., TRUSTEE
C. JAMES PRIEUR, CHAIRMAN, EXECUTIVE V.P. AND TRUSTEE
JAMES M.A. ANDERSON, PRESIDENT, CEO AND TRUSTEE
JAMES F. ALBAN, TREASURER AND CFO
ROBERT P. VROLYK, ASSISTANT TREASURER
RICHARD GORDON, VICE PRESIDENT
HOWARD C. GREENE, VICE PRESIDENT
JOHN T. DONNELLY, VICE PRESIDENT
MAURA A. MURPHY, SECRETARY
PETER F. DEMUTH, ASSISTANT SECRETARY
CHRISTOPHER P. HARVEY, ASSISTANT SECRETARY
INVESTMENT ADVISER
SUN CAPITAL ADVISERS, INC.
ONE SUN LIFE EXECUTIVE PARK
WELLESLEY HILLS, MA 02481
INDEPENDENT PUBLIC ACCOUNTANTS
DELOITTE & TOUCHE LLP
125 SUMMER STREET
BOSTON, MA 02110
ADMINISTRATOR, CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MA 02110
LEGAL COUNSEL
HALE AND DORR LLP
60 STATE STREET
BOSTON, MA 02109
This report must be preceded or accompanied by a prospectus for Sun Capital
Advisers Trust which includes more information about charges and expenses.
Please read the prospectus carefully before you invest or send money.
