<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON September 16, 1996
File No. 33-64875
File No. 811-7445
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 1 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 2 /X/
SEI ASSET ALLOCATION TRUST
(Exact Name of Registrant as Specified in Charter)
c/o The CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, including Area Code (610) 254-1000
DAVID G. LEE
C/O SEI CORPORATION
680 E. SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087
(Name and Address of Agent for Service)
Copies to:
RICHARD W. GRANT, ESQUIRE JOHN H. GRADY, JR., ESQUIRE
Morgan, Lewis & Bockius LLP Morgan, Lewis & Bockius LLP
2000 ONE LOGAN SQUARE 1800 M STREET, NW
PHILADELPHIA, PENNSYLVANIA 19103 WASHINGTON, DC 20036
It is proposed that this filing will become effective (check appropriate box)
__ immediately upon filing pursuant to paragraph (b)
__ on [date] pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)
__ on [date] pursuant to paragraph (a)(1) of Rule 485
X 75 days after filing pursuant to paragraph (a)(2)
- --
Pursuant to the provisions of Rule 24f-2 under the Investment Act of 1940, an
indefinite number of units of beneficial interest is being registered by this
Registration Statement.
<PAGE> 2
SEI ASSET ALLOCATION TRUST
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PART A -
Item 1. Cover Page Cover Page
Item 2. Synopsis Fund Expenses; Indirect Expenses
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Fund Expenses; Indirect Expenses; Investment Objectives and
Policies of the Funds; General Investment Policies of the Funds;
Portfolio Turnover of the Funds; Risk Factors of the Funds;
Investment Limitations of the Funds; Investment Goals of the
Underlying Portfolios; Investment Objectives and Policies of the
Underlying Portfolios; General Investment Policies of the
Underlying Portfolios; Risk Factors of the Underlying Portfolios;
Fundamental Limitations of the Underlying Portfolios
Item 5. Management of the Trust General Information -- The Adviser and Manager of the Funds;
Distribution and Shareholder Servicing; The Advisers and Sub-
Advisers to the Underlying Portfolios; Transfer Agent;
Performance; General Information -- The Trust; Trustees of the
Trust
Item 5A. Management's Discussion of Fund *
Performance
Item 6. Capital Stock and Other Securities Voting Rights; Reporting; Shareholder Inquiries; Dividends;
Counsel and Independent Accountants; Custodian and Wire
Agent; Taxes
Item 7. Purchase of Securities Being Offered Purchase and Redemption of Shares
Item 8. Redemption or Repurchase Purchase and Redemption of Shares
Item 9. Pending Legal Proceedings *
PART B -
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History The Trust
Item 13. Investment Objectives and Policies Description of Permitted Investments of the Underlying
Portfolios; Description of Ratings; Investment Limitations of the
Funds; Investment Limitations of the Underlying Portfolios
Item 14. Management of the Registrant The Manager
Item 15. Control Persons and Principal *
Holders of Securities
Item 16. Investment Advisory and Other The Manager; The Investment Adviser to the Funds;
Services The Advisers and Sub-Advisers to the Underlying Portfolios;
Experts
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Securities Description of Shares
Item 19. Purchase, Redemption, and Pricing Purchase and Redemption of Shares
of Securities Being Offered
Item 20. Tax Status Taxes
Item 21. Underwriters Distribution
Item 22. Calculation of Yield Quotations Performance
Item 23. Financial Statements *
</TABLE>
<PAGE> 3
PART C -
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
* Not Applicable
ii
<PAGE> 4
PRELIMINARY PROSPECTUS DATED SEPTEMBER 16, 1996
SUBJECT TO COMPLETION
SEI ASSET ALLOCATION TRUST
DECEMBER 1, 1996
- --------------------------------------------------------------------------------
DIVERSIFIED CONSERVATIVE INCOME FUND
DIVERSIFIED CONSERVATIVE FUND
DIVERSIFIED GLOBAL MODERATE GROWTH FUND
DIVERSIFIED MODERATE GROWTH FUND
DIVERSIFIED GLOBAL GROWTH FUND
DIVERSIFIED GLOBAL STOCK FUND
DIVERSIFIED U.S. STOCK FUND
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely information about the above-referenced
Funds. Please read this Prospectus carefully before investing, and keep it on
file for future reference.
A Statement of Additional Information dated December 1, 1996, has been filed
with the Securities and Exchange Commission ("SEC") and may be obtained upon
request and without charge by writing the Distributor, SEI Financial Services
Company (the "Distributor"), at 680 East Swedesford Road, Wayne, Pennsylvania
19087-1658, or by calling 1-800-342-5734. The Statement of Additional
Information is incorporated into this Prospectus by reference.
SEI Asset Allocation Trust (the "Trust") is an open-end management investment
company consisting of the following seven separate diversified investment
portfolios (each a "Fund" and, together, the "Funds"): Diversified Conservative
Income Fund, Diversified Conservative Fund, Diversified Global Moderate Growth
Fund, Diversified Moderate Growth Fund, Diversified Global Growth Fund (formerly
the Diversified Growth Fund), Diversified Global Stock Fund and Diversified U.S.
Stock Fund. Each Fund offers investors a convenient means of investing in shares
of certain mutual funds (the "Underlying Portfolios") managed by SEI Financial
Management Corporation ("SFM" or the "Adviser") within certain predetermined
percentage ranges. Each Fund offers two classes of shares, Class A Shares and
Class D Shares. Class A Shares are offered primarily to tax-advantaged and other
retirement accounts. Class D Shares are offered primarily to tax-advantaged and
other retirement accounts through banks, broker-dealers and other financial
institutions that have entered into arrangements with the Distributor to sell
Class D Shares to their customers. Class D Shares differ from Class A Shares
primarily in the allocation of certain distribution, shareholder servicing and
transfer agent expenses, and in the range and types of shareholder services
offered to investors. This Prospectus offers Class D Shares of the Funds.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE FUNDS INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OF AMENDMENT. A
REGISTRATION STATEMENT RELATING TO, AMONG OTHER THINGS, THIS PROSPECTUS HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SECURITIES OF THE
FUNDS REFERENCED IN THIS PROSPECTUS MAY NOT BE SOLD NOR MAY OFFERS TO BUY
SUCH SECURITIES BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF
SECURITIES REFERENCED HEREIN IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION
OR SALE WOULD BE UNLAWFUL PRIOR TO SUCH REGISTRATION OR QUALIFICATION UNDER
THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 5
FUND EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly in connection with
an investment in each Fund's Class D Shares ("Direct Expenses"). The table below
does not reflect any of the operating costs and investment advisory fees of the
Underlying Portfolios. In addition to the Direct Expenses, Class D Shareholders
of the Funds will indirectly bear their pro rata share of the expenses of the
Underlying Portfolios ("Indirect Expenses"). See "Indirect Expenses."
SHAREHOLDER TRANSACTION EXPENSES (as a percentage of offering price)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED
DIVERSIFIED GLOBAL DIVERSIFIED DIVERSIFIED DIVERSIFIED
CONSERVATIVE DIVERSIFIED MODERATE MODERATE GLOBAL GLOBAL DIVERSIFIED
INCOME CONSERVATIVE GROWTH GROWTH GROWTH STOCK U.S. STOCK
FUND FUND FUND FUND FUND FUND FUND
------------ ------------ ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchase None None None None None None None
Maximum Sales Charge Imposed on
Reinvested Dividends None None None None None None None
Maximum Contingent Deferred Sales
Charge None None None None None None None
Wire Redemption Fees None None None None None None None
Exchange Fees None None None None None None None
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL OPERATING EXPENSES (DIRECT EXPENSES)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Management/Advisory Fees (after
waivers) (1) .00% .00% .00% .00% .00% .00% .00%
12b-1 Fees .75% .75% .75% .75% .75% .75% .75%
Total Other Expenses (after
expense reimbursements) (2) (3) .37% .37% .37% .37% .37% .37% .37%
Shareholder Service Fees .25% .25% .25% .25% .25% .25% .25%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after
waivers and
expense reimbursements) (3) 1.12% 1.12% 1.12% 1.12% 1.12% 1.12% 1.12%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) SFM is currently waiving its advisory and management fees. Absent fee
waivers, management and advisory fees for each Fund would be .30%. These fee
waivers are voluntary and may be discontinued by SFM at any time in its sole
discretion.
(2) Absent SFM's expense reimbursement, other expenses are estimated to be .39%
for the current fiscal year. Each Fund's Shareholder Servicing Fees will be
reduced in an amount equal to the Fund's pro rata share of any Shareholder
Servicing Servicing Fees paid by any Underlying Portfolio in which such Fund
invests, but only to the extent necessary to comply with a condition of the
Trust's SEC exemptive order. See "General Investment Policies of the Funds."
(3) Absent SFM's fee waivers and expense reimbursements, the total operating
expenses of each Fund's Class D Shares would be 1.44%.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS.
----- ------
<S> <C> <C>
An investor in a Fund would pay the following expenses on a $1,000 investment assuming: (1) a 5% annual
return, and (2) redemption at the end of each time period:
Diversified Conservative Income Fund $11 $ 36
Diversified Conservative Fund $11 $ 36
Diversified Global Moderate Growth Fund $11 $ 36
Diversified Moderate Growth Fund $11 $ 36
Diversified Global Growth Fund $11 $ 36
Diversified Global Stock Fund $11 $ 36
Diversified U.S. Stock Fund $11 $ 36
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the expense tables and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in Class D Shares of each Fund. A person who purchases shares
through an account with a financial institution may be charged separate fees by
that institution in addition to those set forth above. The information set forth
in the foregoing table and example relates to the Class D Shares. Class D Shares
are subject to the same management and advisory expenses as Class A Shares, but
are also subject to different distribution, shareholder servicing and transfer
agent expenses. Additional information may be found under "The Adviser and
Manager of the Funds" and "Distribution of Fund Shares and Shareholder
Servicing."
Long-term Class D shareholders may pay more than the economic equivalent of the
maximum front-end sales charges otherwise permitted by the Compliance Rules of
the National Association of Securities Dealers.
2
<PAGE> 6
INDIRECT EXPENSES
Investors in the Funds should recognize that they may invest directly in the
Underlying Portfolios and that, by investing in Underlying Portfolios through
the Funds, they will bear not only their proportionate share of the expenses of
the Funds (including operating costs and investment advisory and administrative
fees to the extent the Adviser has not elected to waive such fees), but will
also indirectly bear similar expenses of the Underlying Portfolios ("Indirect
Expenses"). Moreover, the investment returns of the Funds will be net of the
expenses of the Underlying Portfolios. Investors that purchase shares of the
Funds through managed account programs who pay separate advisory fees for asset
allocation services should recognize that the combined expenses of the program
and the Funds (including the expenses charged by the Underlying Portfolios) may
involve greater fees and expenses than those present in other types of
investments. In addition, a shareholder of a Fund will indirectly bear expenses
paid by an Underlying Portfolio related to the distribution of its shares, if
any. In the case of Class D Shares, any Fund shareholder servicing fees will be
reduced in an amount equal to the Fund's pro rata portion of the shareholder
servicing fees paid by any Underlying Portfolio in which the Fund invests, but
only to the extent necessary to comply with a condition of the Trust's SEC
exemptive Order. Currently, Class A Shares of the Underlying Portfolios are
subject to a shareholder servicing fee of up to .25%. See "Distribution of Fund
Shares and Shareholder Servicing."
The chart below sets forth the expense ratios for each of the Underlying
Portfolios in which the Funds will invest (based on information as of September
30, 1996).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERLYING PORTFOLIOS ELIGIBLE FOR PURCHASE UNDERLYING PORTFOLIOS' EXPENSE RATIOS*
<S> <C>
SIMT Large Cap Growth Portfolio .85%
SIMT Large Cap Value Portfolio .85%
SIMT Small Cap Growth Portfolio 1.10%
SIMT Small Cap Value Portfolio 1.10%
SIT International Equity Portfolio 1.28%
SIT Emerging Markets Equity Portfolio 1.95%
SIMT Core Fixed Income Portfolio .60%
SIMT High Yield Bond Portfolio .85%
SIT International Fixed Income Portfolio 1.00%
SLAT Prime Obligation Portfolio .44%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Funds will purchase only Class A Shares of the Underlying Portfolios. The
expense ratios of the Class A Shares of the Underlying Portfolios shown above
reflect existing fee waivers and expense reimbursement arrangements that may
be discontinued at any time. Absent these fee waivers on the Class A Shares of
the Underlying Portfolios, these expense ratios would be higher.
Set forth below are the Expense Ranges of the Underlying Portfolios in which the
Funds invest. A range is provided since the average assets of each Fund invested
in each of the Underlying Portfolios may fluctuate. The investment ranges for
each Fund are set forth in the "Investment Objectives and Policies of the Funds"
section.
EXPENSE RANGES (INDIRECT EXPENSES)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Based on the Expense Ratios of the Underlying Portfolios, the range of average weighted RANGE OF
operating expenses for Class D shares of the Funds are expected to be as follows: EXPENSES
---------
Diversified Conservative Income Fund .58% to .80%
Diversified Conservative Fund .65% to .90%
Diversified Global Moderate Growth Fund .68% to 1.11%
Diversified Moderate Growth Fund .69% to .97%
Diversified Global Growth Fund .78% to 1.22%
Diversified Global Stock fund .85% to 1.22%
Diversified U.S. Stock Fund .75% to .95%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 7
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Period -- Unaudited
<TABLE>
<CAPTION>
Net
Realized Ratio of
Net and Net Net Expenses
Asset Net Unrealized Dividends Asset Assets to
Value Investment Gains from Net Value End of Average
Beginning Income/ (Losses) on Investment End Total Period Net
of Period (Loss) Securities Income of Period Return (000) Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- -----------------------------------------
DIVERSIFIED CONSERVATIVE INCOME FUND
- -----------------------------------------
Class A
Period Ended
07/31/96 (1) $ 10.12 $ 0.01 $ (0.08) $(0.01) $ 10.04 -0.69%** $ 1,165 0.12%*
- --------------------------------
DIVERSIFIED CONSERVATIVE FUND
- --------------------------------
Class A
Period Ended
07/31/96 (2) $ 9.26 $(0.11) $ 0.03 $ 0.00 $ 9.18 -0.85%** $ 976 0.12%*
- --------------------------------------
DIVERSIFIED MODERATE GROWTH FUND
- --------------------------------------
Class A
Period Ended
07/31/96 (3) $ 10.19 $ 0.02 $ (0.27) $ 0.00 $ 9.94 -2.42%** $ 5,300 0.12%*
- ----------------------------------
DIVERSIFIED GLOBAL GROWTH FUND
- ----------------------------------
Class A
Period Ended
07/31/96 (4) $ 10.19 $ 0.01 $ (0.39) $ 0.00 $ 9.81 -3.72%** $ 3,888 0.12%*
- ------------------------------
DIVERSIFIED U.S. STOCK FUND
- ------------------------------
Class A
Period Ended
07/31/96 (5) $ 10.27 $ 0.03 $ (0.56) $ 0.00 $ 9.74 -5.16%** $ 3,631 0.12%*
<CAPTION>
Ratio of
Ratio of Ratio of Net Investment
Net Expenses Income/
Investment to (Loss) to
Income/ Average Average
(Loss) to Net Net
Average Assets Assets Portfolio
Net (Excluding (Excluding Turnover
Assets Waivers) Waivers) Rate
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ------------------------------------
DIVERSIFIED CONSERVATIVE INCOME FUND
- ------------------------------------
Class A
Period Ended
07/31/96 (1) 4.79%* 8.51%* -3.60%* 21%
- -----------------------------
DIVERSIFIED CONSERVATIVE FUND
- -----------------------------
Class A
Period Ended
07/31/96 (2) 3.43%* 8.69%* -5.14%* 2%
- --------------------------------
DIVERSIFIED MODERATE GROWTH FUND
- --------------------------------
Class A
Period Ended
07/31/96 (3) 2.59%* 1.91%* 0.80%* 2%
- ------------------------------
DIVERSIFIED GLOBAL GROWTH FUND
- ------------------------------
Class A
Period Ended
07/31/96 (4) 2.19%* 2.89%* -0.58%* 0%
- ---------------------------
DIVERSIFIED U.S. STOCK FUND
- ---------------------------
Class A
Period Ended
07/31/96 (5) 1.97%* 3.49%* -1.40%* 33%
</TABLE>
* Annualized.
** Total return has not been annualized.
(1) Commenced operations 06/13/96
(2) Commenced operations 06/26/96
(3) Commenced operations 06/10/96
(4) Commenced operations 06/13/96
(5) Commenced operations 05/13/96
4
<PAGE> 8
INVESTMENT
OBJECTIVES AND
POLICIES OF
THE FUNDS
The Funds offer investors the opportunity to invest in
certain of the Underlying Portfolios, and are designed
primarily for tax-advantaged retirement and other long-
term investment or savings accounts, including: Individual
Retirement Accounts ("IRAs"), 403(b)(7) tax-sheltered
retirement accounts for employees of certain non-profit
organizations, 401(k) savings plans, profit-sharing and
money-purchase pension plans, and other employer-sponsored
pension and savings plans.
In order to achieve its investment objective, each
Fund invests a percentage of its assets within
predetermined percentage ranges in certain of the
Underlying Portfolios, which are separately-managed series
of the following investment companies: SEI Institutional
Managed Trust ("SIMT"), SEI International Trust ("SIT")
and SEI Liquid Asset Trust ("SLAT" and, together with SIMT
and SIT, the "Underlying Trusts"). The percentages reflect
the extent to which each Fund will invest in the
particular market segment represented by each Underlying
Portfolio, and the varying degrees of potential investment
risk and reward represented by each Fund's investments in
those market segments and their corresponding Underlying
Portfolios. The Adviser may alter these percentage ranges
when it deems appropriate. The assets of each Fund will be
allocated among each of the Underlying Portfolios in
accordance with its investment objective, the Adviser's
outlook for the economy, the financial markets and the
relative market valuations of the Underlying Portfolios.
In addition, in order to meet liquidity needs or for
temporary defensive purposes, each Fund may invest its
assets directly in cash, money market securities, or other
instruments, including stock or bond index futures and
options thereon. The investment objective of each Fund is
set forth below. Each Fund's investment objective is a
fundamental policy, and may not be changed without
shareholder approval. There can be no assurance that the
Funds will achieve their stated objectives.
DIVERSIFIED
CONSERVATIVE
INCOME FUND The Diversified Conservative Income Fund seeks to provide
current income and an opportunity for capital appreciation
through limited participation in domestic equity markets.
In general, relative to the other Funds, the Diversified
Conservative Income Fund should offer investors the
potential for a medium to high level of income and the
potential for a low to medium level of capital growth,
while subjecting investors
5
<PAGE> 9
to a medium level of principal risk. The Fund will invest in the following
Underlying Portfolios within the percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED CONSERVATIVE INCOME FUND'S ASSETS)
---------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 5-20%
SIMT Large Cap Value 5-20%
SIMT Small Cap Growth 0-15%
SIMT Small Cap Value 0-15%
SIMT Core Fixed Income 50-65%
SLAT Prime Obligation 0-30%
---------------------------------------------------------------------------------------
</TABLE>
DIVERSIFIED
CONSERVATIVE FUND The Diversified Conservative Fund seeks to provide current
income with the opportunity for capital appreciation
through limited participation in the domestic and
international equity markets. In general, relative to the
other Funds, the Diversified Conservative Fund should
offer investors the potential for a medium level of income
and the potential for a low to medium level of capital
growth, while subjecting investors to a medium level of
principal risk. The Fund will invest in the following
Underlying Portfolios within the percentage ranges set
forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED CONSERVATIVE FUND'S ASSETS)
---------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 5-20%
SIMT Large Cap Value 5-20%
SIMT Small Cap Growth 0-15%
SIMT Small Cap Value 0-15%
SIT International Equity 5-20%
SIMT Core Fixed Income 40-55%
SIT International Fixed Income 10-25%
SLAT Prime Obligation 0-30%
---------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 10
DIVERSIFIED GLOBAL
MODERATE
GROWTH FUND The Diversified Global Moderate Growth Fund seeks to
provide long-term capital appreciation through
participation in the domestic and global equity markets
with a limited level of current income. In general,
relative to the other funds, the Diversified Global
Moderate Growth Fund should offer investors the potential
for a medium level of income and the potential for a
medium level of capital growth, while subjecting investors
to a medium level of principal risk. The Fund will invest
in the following Underlying Portfolios within the
percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED GLOBAL MODERATE GROWTH FUND'S ASSETS)
---------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 10-25%
SIMT Large Cap Value 10-25%
SIMT Small Cap Growth 0-15%
SIMT Small Cap Value 0-15%
SIT International Equity 10-25%
SIT Emerging Markets Equity 0-15%
SIMT Core Fixed Income 20-35%
SIMT High Yield Bond 5-20%
SIT International Fixed Income 0-15%
SLAT Prime Obligation 0-30%
---------------------------------------------------------------------------------------
</TABLE>
DIVERSIFIED
MODERATE
GROWTH FUND The Diversified Moderate Growth Fund seeks to provide
long-term capital appreciation with a limited level of
current income. In general, relative to the other Funds,
the Diversified Moderate Growth Fund should offer
investors the potential for a medium level of income and
the potential for a medium level of capital growth, while
subjecting investors to a medium level of principal risk.
The Fund will invest in the following Underlying
Portfolios within the percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED MODERATE GROWTH FUND'S ASSETS)
---------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 10-25%
SIMT Large Cap Value 10-25%
SIMT Small Cap Growth 0-15%
SIMT Small Cap Value 0-15%
SIT International Equity 10-25%
SIMT Core Fixed Income 25-40%
SIT International Fixed Income 5-20%
SLAT Prime Obligation 0-30%
---------------------------------------------------------------------------------------
</TABLE>
DIVERSIFIED GLOBAL
GROWTH FUND The Diversified Global Growth Fund (formerly the
Diversified Growth Fund) seeks to provide long-term
capital appreciation. Current income is a secondary
consideration. In general, relative to the other Funds,
the Diversified Global Growth
7
<PAGE> 11
Fund should offer investors the potential for a low to
medium level of income and the potential for a medium to
high level of capital growth, while subjecting investors
to a higher level of principal risk. The Fund will
invest in the following Underlying Portfolios within the
percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED GROWTH FUND'S ASSETS)
-------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 15-30%
SIMT Large Cap Value 15-30%
SIMT Small Cap Growth 0-15%
SIMT Small Cap Value 0-15%
SIT International Equity 10-25%
SIT Emerging Markets Equity 5-20%
SIMT Core Fixed Income 5-20%
SIMT High Yield Bond 0-15%
SIT International Fixed Income 0-15%
SLAT Prime Obligation 0-30%
-------------------------------------------------------------------------------------
</TABLE>
DIVERSIFIED GLOBAL
STOCK FUND The Diversified Global Stock Fund seeks to provide
long-term capital appreciation through a diversified
global equity strategy. In general, relative to the other
Funds, the Diversified Global Stock Fund should offer
investors the potential for a lower level of income and
the potential for a higher level of capital growth, while
subjecting investors to medium to high levels of principal
risk. The Fund will invest in the following Underlying
Portfolios within the percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED GLOBAL STOCK FUND'S ASSETS)
-------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 20-35%
SIMT Large Cap Value 20-35%
SIMT Small Cap Growth 0-15%
SIMT Small Cap Value 0-15%
SIT International Equity 15-30%
SIT Emerging Markets Equity 5-20%
SLAT Prime Obligation 0-30%
-------------------------------------------------------------------------------------
</TABLE>
DIVERSIFIED
U.S. STOCK FUND The Diversified U.S. Stock Fund seeks to provide long-term
capital appreciation through a diversified domestic equity
strategy. Current income is an incidental consideration.
In general, relative to the other Funds, the Diversified
U.S. Stock Fund should offer investors the potential for a
lower level of income and the potential for a high level
of capital growth, while subjecting investors to a medium
8
<PAGE> 12
to high level of principal risk. The Fund will invest in
the following Underlying Portfolios within the
percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED U.S. STOCK FUND'S ASSETS)
------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 30-45%
SIMT Large Cap Value 30-45%
SIMT Small Cap Growth 5-20%
SIMT Small Cap Value 5-20%
SLAT Prime Obligation 0-30%
------------------------------------------------------------------------------------
</TABLE>
GENERAL
INVESTMENT
POLICIES
OF THE FUNDS
The Funds will attempt to achieve their investment
objectives by purchasing shares of the Underlying
Portfolios within the percentage ranges set forth above.
The SEC has issued an exemptive order to the Trust dated
December 20, 1995 (the "Order"), permitting the Funds to
acquire up to 100% of the Shares of any of the Underlying
Portfolios under certain conditions. Absent this Order,
the Investment Company Act of 1940 (the "1940 Act") would
substantially limit the ability of the Funds and
Underlying Portfolios to engage in these transactions.
In addition to purchasing shares of the Underlying
Portfolios, the Funds may use futures contracts and
options in order to remain effectively fully invested in
proportions consistent with SFM's current asset allocation
strategy in an efficient and cost effective manner.
Specifically, each Fund may enter into futures contracts
and options thereon provided that the aggregate deposits
required on these contracts do not exceed 5% of the Fund's
total assets.
Futures contracts and options may also be used to
reallocate the Funds' assets among asset categories while
minimizing transaction costs, to maintain cash reserves
while simulating full investment, to facilitate trading or
to seek higher investment returns or simulate full
investment when a futures contract is priced attractively
or is otherwise considered more advantageous than the
underlying security or index. The Funds will not use
futures contracts or options to leverage their portfolios.
In order to meet liquidity needs, or for temporary
defensive purposes, the Funds may purchase money market
securities or other short-term debt instruments rated in
one of the top two categories by a nationally recognized
statistical rating organization ("NRSRO") at the time of
purchase or, if not rated, determined to be of comparable
quality by the Adviser. To the extent that a Fund is
engaged in temporary defensive investing, it will not be
pursuing its investment objective. See "Description of
Permitted Investments and Risk Factors of the Underlying
Portfolios."
9
<PAGE> 13
RISK FACTORS
OF THE FUNDS
Prospective investors in the Funds should consider the
following risk factors:
- Any investment in a mutual fund involves risk and,
although the Funds invest in a number of Underlying
Portfolios, this practice does not eliminate investment
risk;
- Under certain circumstances, an Underlying Portfolio may
determine to make payment of a redemption request by a
Fund wholly or partly by a distribution in kind of
securities from its portfolio, instead of cash, in
accordance with the rules of the SEC. In such cases, the
Funds may hold securities distributed by an Underlying
Portfolio until the Adviser determines that it is
appropriate to dispose of such securities;
- Certain Underlying Portfolios may: invest a portion of
their assets in foreign securities; enter into forward
currency transactions; lend their portfolio securities;
enter into stock index, interest rate and currency
futures contracts, and options on such contracts; engage
in other types of options transactions; make short
sales; purchase zero coupon and payment-in-kind bonds;
and engage in various other investment practices.
Further information about these investment policies and
practices can be found under "Investment Objectives and
Policies of the Underlying Portfolios" and "Description
of Permitted Investments and Risk Factors of the
Underlying Portfolios" in this Prospectus and in the
Trust's Statement of Additional Information, and in the
prospectuses of each of the Underlying Portfolios;
- The Diversified Global Growth Fund can invest as much as
15% of its assets in the SIMT High Yield Bond Portfolio.
As a result, this Fund will be subject to the risks
associated with high yield investing;
- Certain Funds invest at least 10% and can invest as much
as 25% of their assets in the SIT International Fixed
Income Portfolio, which invests primarily in foreign
fixed-income securities. Certain other Funds invest at
least 20% and can invest as much as 50% of their assets
in Underlying Portfolios that invest primarily in
foreign equity securities. These investments will
subject the Funds to risks associated with investing in
foreign securities; and
- The officers and trustees of the Trust also serve as
officers and trustees of the Underlying Trusts. In
addition, the Adviser to each Fund serves as investment
adviser to certain of the Underlying Portfolios.
Conflicts may arise as these persons seek to fulfill
their fiduciary responsibilities at both levels.
Further information regarding these risk factors may be
found elsewhere in this Prospectus and in the Statement of
Additional Information.
10
<PAGE> 14
INVESTMENT
LIMITATIONS OF
THE FUNDS
The following investment limitations are fundamental for
each Fund, and may not be changed without shareholder
approval.
1. Each Fund will concentrate its investments in mutual
fund shares.
2. Each Fund may borrow money in an amount up to 33 1/3%
of the value of its total assets, provided that, for
purposes of this limitation, investment strategies
which either obligate a Fund to purchase securities or
require a Fund to segregate assets are not considered
to be borrowings. Except where a Fund has borrowed
money for temporary purposes in amounts not exceeding
5% of its assets, asset coverage of 300% is required
for all borrowings.
Each Fund is subject to further fundamental and
non-fundamental limitations which are described in the
Trust's Statement of Additional Information.
PORTFOLIO TURNOVER
OF THE FUNDS
Each Fund's portfolio turnover rate (i.e., the rate at
which the Fund buys and sells shares of the Underlying
Portfolios) is not expected to exceed 10%. Asset
reallocation decisions typically will occur only once
every quarter. However, if market conditions warrant, SFM
may make more frequent reallocation decisions, which will
result in a higher portfolio turnover rate. The Funds will
purchase or sell shares of the Underlying Portfolios: (a)
to accommodate purchases and redemptions of each Fund's
shares; (b) in response to market or other economic
conditions; and (c) to maintain or modify the allocation
of each Fund's assets among the Underlying Portfolios
within the percentage limits described above or as altered
by SFM from time to time. It is important to note,
however, that the portfolio turnover rate of certain of
the Underlying Portfolios (i.e., the rate at which the
Underlying Portfolios buy and sell securities), may exceed
100%. Such a turnover rate may result in higher
transaction costs and may result in additional tax
consequences for shareholders (including the Funds).
11
<PAGE> 15
INVESTMENT GOALS
OF THE UNDERLYING
PORTFOLIOS
The following table describes the investment goal of each
Underlying Portfolio:
<TABLE>
<CAPTION>
UNDERLYING PORTFOLIO INVESTMENT GOAL
-----------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth Growth of Capital
SIMT Large Cap Value Growth of Capital and Income
SIMT Small Cap Growth Aggressive Growth of Capital
SIMT Small Cap Value Aggressive Growth of Capital and Income
SIT International Equity Growth of Capital
SIT Emerging Markets Equity Aggressive Growth of Capital
SIMT Core Fixed Income Income
SIMT High Yield Bond Aggressive Income
SIT International Fixed Income Income
SLAT Prime Obligation Price Stability
-----------------------------------------------------------------------------
</TABLE>
INVESTMENT
OBJECTIVES AND
POLICIES OF THE
UNDERLYING
PORTFOLIOS
Set forth below are the investment objectives and policies
that apply to the Underlying Portfolios. The investment
objective of each Underlying Portfolio is a fundamental
policy of that Portfolio, and may not be changed without
approval of such Portfolio's shareholders, which may
include the Fund. Certain general investment policies that
apply to two or more of the Underlying Portfolios are set
forth in the "General Investment Policies of the
Underlying Portfolios" section, below. There can be no
assurance that the Underlying Portfolios will achieve
their respective investment objectives. For additional
information regarding the investments and investment
techniques of the Underlying Portfolios, as well as the
risk factors attendant with those investments and
investment techniques, please see the "Description of
Permitted Investments and Risk Factors of the Underlying
Portfolios" section of the Prospectus.
SIMT LARGE CAP
GROWTH PORTFOLIO The SIMT Large Cap Growth Portfolio seeks to provide
capital appreciation. Under normal market conditions, the
Portfolio will invest at least 65% of its total assets in
equity securities of large companies (i.e., companies with
market capitalizations of more than $1 billion) which, in
the advisers' opinion, possess significant growth
potential. Any remaining assets may be invested in fixed
income securities or in equity securities of smaller
companies that the Portfolio's advisers believe are
12
<PAGE> 16
appropriate in light of the Portfolio's objective.
Equity securities include common stock, preferred stock,
warrants or rights to subscribe to common stock and, in
general, any security that is convertible into or
exchangeable for common stock. Fixed income securities
must be rated investment grade or better, i.e., rated at
least BBB by Standard & Poor's Corporation ("S&P") or
Baa by Moody's Investors Service, Inc. ("Moody's").
SIMT LARGE CAP
VALUE PORTFOLIO The SIMT Large Cap Value Portfolio seeks to provide
long-term growth of capital and income. Under normal
market conditions, the Portfolio will invest at least 65%
of its total assets in a diversified portfolio of high
quality, income-producing common stocks of large companies
(i.e., companies with market capitalizations of more than
$1 billion) which, in the advisers' opinion, are
undervalued in the marketplace at the time of purchase. In
general, the advisers characterize high quality securities
as those that have above-average reinvestment rates. The
advisers also consider other factors, such as earnings and
dividend growth prospects as well as industry outlook and
market share. Equity securities include common stock,
preferred stock, warrants or rights to subscribe to common
stock and, in general, any security that is convertible
into or exchangeable for common stock. Any remaining
assets may be invested in investment grade fixed income
securities.
SIMT SMALL CAP
GROWTH PORTFOLIO The SIMT Small Cap Growth Portfolio seeks to provide
long-term capital appreciation. Under normal market
conditions, the Portfolio will invest at least 65% of its
total assets in the equity securities of smaller growth
companies (i.e., companies with market capitalizations of
less than $1 billion) which, in the advisers' opinion, are
in an early stage or transitional point in their
development and have demonstrated or have the potential
for above average capital growth. The advisers will select
companies that have the potential to gain market share in
their industry, achieve and maintain high and consistent
profitability or produce increases in earnings. The
advisers also seek companies with strong company
management and superior fundamental strength.
Small capitalization companies have the potential
to show earnings growth over time that is well above the
growth rate of the overall economy. Any remaining assets
may be invested in the equity securities of more
established companies that the advisers believe may offer
strong capital appreciation potential due to their
relative market position, anticipated earnings growth,
changes in management or other similar opportunities.
Equity securities include common stock, preferred stock,
warrants and rights to subscribe to common stock and, in
general, any security that is convertible into or
exchangeable for common stock.
In order to meet liquidity needs, or for temporary
defensive purposes, the Portfolio may invest all or a
portion of its assets in common stocks of larger, more
established companies, fixed income securities, cash or
money market securities. Fixed income securities will only
be purchased if they are rated investment grade or
13
<PAGE> 17
better. Investment grade bonds include securities rated
at least BBB by S&P or Baa by Moody's. Money market
securities will only be purchased if they have been
given one of the two top ratings by a nationally
recognized statistical rating organization ("NRSRO"), or
if not rated, determined to be of comparable quality by
the Portfolio's advisers.
SIMT SMALL CAP
VALUE PORTFOLIO The SIMT Small Cap Value Portfolio seeks to provide
capital appreciation. Under normal market conditions, the
Portfolio will invest at least 65% of its total assets in
the equity securities of smaller companies (i.e.,
companies with market capitalizations of less than $1
billion) which, in the advisers' opinion, have prices that
appear low relative to certain fundamental characteristics
such as earnings, book value, or return on equity. Any
remaining assets may be invested in fixed income
securities or equity securities of larger, more
established companies that the Portfolio's advisers
believe are appropriate in light of the Portfolio's
objective. Equity securities include common stock,
preferred stock, warrants and rights to subscribe to
common stock and, in general, any security that is
convertible into or exchangeable for common stock. Fixed
income securities must be rated investment grade or
better, i.e., rated at least BBB by S&P or Baa by Moody's.
SIT INTERNATIONAL
EQUITY PORTFOLIO The SIT International Equity Portfolio seeks to provide
long-term capital appreciation by investing primarily in a
diversified portfolio of equity securities of non-U.S.
issuers. Under normal circumstances, at least 65% of the
Portfolio's assets will be invested in equity securities
of non-U.S. issuers located in at least three countries
other than the United States. The Portfolio may enter into
forward foreign currency contracts as a hedge against
possible variations in foreign exchange rates. A forward
foreign currency contract is a commitment to purchase or
sell a specified currency, at a specified future date, at
a specified price. The Portfolio may enter into forward
foreign currency contracts to hedge a specific security
transaction or to hedge a portfolio position. These
contracts may be bought or sold to protect the Portfolio,
to some degree, against a possible loss resulting from an
adverse change in the relationship between foreign
currencies and the U.S. dollar. The Portfolio may also
invest in options on currencies.
Securities of non-U.S. issuers purchased by the
Portfolio may be purchased in foreign markets, on U.S.
registered exchanges, the over-the-counter market or in
the form of sponsored or unsponsored American Depositary
Receipts ("ADRs") traded on registered exchanges or NASDAQ
or sponsored or unsponsored European Depositary Receipts
("EDRs"), Continental Depositary Receipts ("CDRs") or
Global Depositary Receipts ("GDRs"). The Portfolio will
typically invest in equity securities listed on recognized
foreign exchanges, but may also invest in securities
traded in over-the-counter markets. The Portfolio expects
its investments to emphasize both large and intermediate
capitalization companies.
14
<PAGE> 18
The Portfolio expects to be fully invested in its
primary investments described above, but may invest up to
35% of its total assets in U.S. or non-U.S. cash reserves;
money market instruments; swaps; options on securities,
non-U.S. indices and currencies; futures contracts,
including stock index futures contracts; and options on
futures contracts.
Permissible money market instruments include
securities issued or guaranteed by the United States
Government, its agencies or instrumentalities; securities
issued or guaranteed by non-U.S. governments, which are
rated at time of purchase A or higher by S&P or Moody's,
or are determined by the advisers to be of comparable
quality; repurchase agreements; certificates of deposit
and bankers' acceptances issued by banks or savings and
loan associations having net assets of at least $500
million as of the end of their most recent fiscal year;
high-grade commercial paper; and other long- and
short-term debt instruments which are rated at the time of
purchase A or higher by S&P or Moody's and which, with
respect to such long-term debt instruments, are within 397
days of their maturity.
The Portfolio is also permitted to acquire floating
and variable rate securities and purchase securities on a
when-issued or delayed delivery basis. Although permitted
to do so, the Portfolio does not currently intend to
invest in securities issued by passive foreign investment
companies or to engage in securities lending.
For temporary defensive purposes, when an adviser
determines that market conditions warrant, the Portfolio
may invest up to 50% of its assets in the U.S. and
non-U.S. money market instruments described above and
other U.S. and non-U.S. long- and short-term debt
instruments which are rated BBB or higher by S&P or Baa or
higher by Moody's at the time of purchase, or are
determined by the adviser to be of comparable quality; may
hold a portion of such assets in cash; and may invest in
securities of supranational entities which are rated A or
higher by S&P or Moody's at the time of purchase, or are
determined by the adviser to be of comparable quality.
SIT EMERGING
MARKETS EQUITY
PORTFOLIO The SIT Emerging Markets Equity Portfolio seeks to provide
capital appreciation by investing primarily in a
diversified portfolio of equity securities of emerging
market issuers. Under normal circumstances, at least 65%
of the Portfolio's assets will be invested in equity
securities of emerging market issuers. Under normal market
conditions, the Portfolio maintains investments in at
least six emerging market countries and does not invest
more than 35% of its total assets in any one emerging
market country. For these purposes, the Portfolio defines
an emerging market country as any country the economy and
market of which the World Bank or the United Nations
considers to be emerging or developing. The Portfolio's
advisers consider emerging market issuers to be companies
the securities of which are principally traded in the
capital markets of emerging market countries: that derive
at least 50% of their total revenue from either goods
produced or services
15
<PAGE> 19
rendered in emerging market countries, regardless of
where the securities of such companies are principally
traded; or that are organized under the laws of and have
a principal office in an emerging market country. In
addition to its primary investments, described above,
the Portfolio may invest up to 35% of its total assets
in debt securities, including up to 5% of its total
assets in debt securities rated below investment grade.
These debt securities will include debt securities of
emerging market companies. Bonds rated below investment
grade are often referred to as "junk bonds." Such
securities involve greater risk of default or price
declines than investment grade securities.
The Portfolio may invest in certain debt securities
issued by the governments of emerging market countries
that are or may be eligible for conversion into
investments in emerging market companies under debt
conversion programs sponsored by such governments.
The Portfolio may invest in futures contracts and
purchase securities on a when-issued or delayed delivery
basis. The Portfolio may also purchase and write options
to buy or sell futures contracts.
For temporary defensive purposes, when an adviser
determines that market conditions warrant, the Portfolio
may invest up to 20% of its total assets in the equity
securities of companies constituting the Morgan Stanley
Capital International Europe, Australia, Far East Index
(the "EAFE Index"). These companies typically have larger
average market capitalizations than the emerging market
companies in which the Portfolio generally invests.
The SIT Emerging Markets Equity Portfolio uses a
proprietary, quantitative asset allocation model. This
model employs mean-variance optimization, a process used
in developed markets based on modern portfolio theory and
statistics. Mean-variance optimization helps determine the
percentage of assets to invest in each country to maximize
expected returns for a given risk level. The Portfolio
invests in those countries that the advisers expect to
have the highest risk/reward tradeoff when incorporated
into a total portfolio context. The advisers attempt to
construct a portfolio of emerging market investments that
approximates the risk level of an internationally
diversified portfolio of securities in developed markets.
This "top-down" country selection is combined with
"bottom-up" fundamental industry analysis and stock
selection based on original research, publicly available
information, and company visits.
The Portfolio's investments in emerging markets can
be considered speculative, and therefore may offer higher
potential for gains and losses than developed markets of
the world. With respect to any emerging country, there is
the greater potential for nationalization, expropriation
or confiscatory taxation, political changes, government
regulation, social instability or diplomatic developments
(including war) which could affect adversely the economies
of such countries or investments in such countries. The
economies of developing countries generally are
16
<PAGE> 20
heavily dependent upon international trade and,
accordingly, have been and may continue to be adversely
affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other
protectionist measures imposed or negotiated by the
countries with which they trade.
SIMT CORE FIXED
INCOME PORTFOLIO The SIMT Core Fixed Income Portfolio seeks to provide
current income consistent with the preservation of
capital. Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in fixed
income securities that are rated investment grade or
better, i.e., rated in one of the four highest rating
categories by an NRSRO at the time of purchase, or, if not
rated, determined to be of comparable quality by the
advisers. Fixed income securities in which the Portfolio
may invest consist of: (i) corporate bonds and debentures;
(ii) obligations issued by the United States Government,
its agencies and instrumentalities; (iii) municipal
securities of issuers located in all fifty states, the
District of Columbia, Puerto Rico and other U.S.
territories and possessions, consisting of municipal bond,
municipal notes, tax-exempt commercial paper and municipal
lease obligations; (iv) receipts involving U.S. Treasury
obligations; (v) mortgage-backed securities; (vi)
asset-backed securities; and (vii) zero coupon,
pay-in-kind or deferred payment securities.
Any remaining assets may be invested in: (i)
interest-only and principal-only components of
mortgage-backed securities; (ii) mortgage dollar rolls;
(iii) securities issued on a when-issued and
delayed-delivery basis, including TBA mortgage-backed
securities; (iv) warrants; (v) money market securities;
and (vi) Yankee obligations. In addition, the Portfolio
may purchase or write options, futures (including futures
on U.S. Treasury obligations and Eurodollar instruments)
and options on futures.
Duration is a measure of the expected life of a
fixed income security on a cash flow basis. Most debt
obligations provide interest payments and a final payment
at maturity. Some also have put or call provisions that
allow the security to be redeemed at specified dates prior
to maturity. Duration incorporates yield, coupon interest
payments, final maturity and call features into a single
measure. The advisers therefore consider it a more
accurate measure of a security's expected life and
sensitivity to interest rate changes than is the
security's term to maturity.
The Portfolio invests in a portfolio with a
dollar-weighted average duration that will, under normal
market conditions, stay within plus or minus 20% of what
the advisers believe to be the average duration of the
domestic bond market as a whole. The advisers base their
analysis of the average duration of the domestic bond
market on bond market indices which they believe to be
representative. The advisers currently use the Lehman
Aggregate Bond Index for this purpose.
SIMT HIGH YIELD
BOND PORTFOLIO The SIMT High Yield Bond Portfolio seeks to maximize total
return. Under normal market conditions, the Portfolio will
invest at least 65% of its total assets in fixed-income
securities that are rated below investment grade (i.e.,
rated below the top four rating categories by an NRSRO at
the time of purchase), or, if not rated, are
17
<PAGE> 21
determined to be of comparable quality by the Portfolio's
advisers. Below investment grade securities are commonly
referred to as "junk bonds," and generally entail
increased credit and market risk. The achievement of the
Portfolio's investment objective may be more dependent
on the advisers' own credit analysis than would be the
case if the Portfolio invested in higher rated
securities. There is no bottom limit on the ratings of
high yield securities that may be purchased or held by
the Portfolio.
The Portfolio may invest in all types of fixed
income securities issued by domestic and foreign issuers,
including: (i) mortgage-backed securities; (ii) asset-
backed securities; (iii) zero coupon, pay-in-kind or
deferred payment securities; and (iv) variable and
floating rate instruments.
Any assets of the Portfolio not invested in the
fixed income securities described above may be invested
in: (i) convertible securities; (ii) preferred stocks;
(iii) equity securities; (iv) investment grade fixed
income securities; (v) money market securities; (vi)
securities issued on a when-issued and delayed-delivery
basis, including TBA mortgage-backed securities; (vii)
forward foreign currency contracts; and (viii) Yankee
obligations. In addition, the Portfolio may purchase or
write options, futures and options on futures. The
advisers may vary the average maturity of the securities
in the Portfolio without limit, and there is no
restriction on the maturity of any individual security.
The securities purchased by the Portfolio may be
rated in the lowest rating category for fixed income
securities. Bonds rated C by Moody's are the lowest rated
class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real
investment standing. Bonds are rated D by S&P when the
issue is in payment default, or the obligor has filed for
bankruptcy. The D rating is used when interest or
principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace
period. The ratings established by each NRSRO represents
its opinions of the safety of principal and interest
payments (and not the market risk) of bonds and other debt
securities they undertake to rate at the time of issuance.
Ratings are not absolute standards of quality and may not
reflect changes in an issuer's creditworthiness.
Accordingly, although the Portfolio's advisers will
consider ratings, they will perform their own analyses and
will not rely principally on ratings. The advisers will
consider, among other things, the price of the security
and the financial history and condition, the prospects and
the management of an issuer in selecting securities for
the Portfolio.
RISK FACTORS RELATING TO INVESTING IN LOWER RATED
SECURITIES-- Fixed income securities are subject to the
risk of an issuer's ability to meet principal and interest
payments on the obligation (credit risk), and may also be
subject to price volatility due to such factors as
interest rate sensitivity, market perception of the
creditworthiness of the issuer and general market
liquidity (market risk). Lower
18
<PAGE> 22
rated or unrated (i.e., high yield) securities are more
likely to react to developments affecting market and
credit risk than are more highly rated securities, which
primarily react to movements in the general level of
interest rates. The market values of fixed-income
securities tend to vary inversely with the level of
interest rates. Yields and market values of high yield
securities will fluctuate over time, reflecting not only
changing interest rates but the market's perception of
credit quality and the outlook for economic growth. When
economic conditions appear to be deteriorating, medium
to lower rated securities may decline in value due to
heightened concern over credit quality, regardless of the
prevailing interest rates. Investors should carefully
consider the relative risks of investing in high yield
securities and understand that such securities are not
generally meant for short-term investing.
The high yield market is relatively new and its
growth has paralleled a long period of economic expansion
and an increase in merger, acquisition and leveraged
buyout activity. Adverse economic developments can disrupt
the market for high yield securities, and severely affect
the ability of issuers, especially highly leveraged
issuers, to service their debt obligations or to repay
their obligations upon maturity which may lead to a higher
incidence of default on such securities. In addition, the
secondary market for high yield securities, which is
concentrated in relatively few market makers, may not be
as liquid as the secondary market for more highly rated
securities. As a result, the Portfolio could find it more
difficult to sell these securities or may be able to sell
the securities only at prices lower than if such
securities were widely traded. Furthermore, the Portfolio
may experience difficulty in valuing certain securities at
certain times. Prices realized upon the sale of such lower
rated or unrated securities, under these circumstances,
may be less than the prices used in calculating the
Portfolio's net asset value.
Lower rated debt obligations also present risks
based on payment expectations. If an issuer calls an
obligation for redemption, the Portfolio may have to
replace the security with a lower yielding security,
resulting in a decreased return for investors. If the
Portfolio experiences unexpected net redemptions, it may
be forced to sell its higher rated securities, resulting
in a decline in the overall credit quality of the
Portfolio's investment portfolio and increasing the
exposure of the Portfolio to the risks of high yield
securities.
SIT INTERNATIONAL
FIXED INCOME
PORTFOLIO The SIT International Fixed Income Portfolio seeks to
provide capital appreciation and current income through
investment primarily in high quality, non-U.S. dollar
denominated government and corporate fixed income
securities or debt obligations. Under normal
circumstances, at least 65% of the Portfolio's assets will
be invested in high quality foreign government and foreign
corporate fixed income securities or debt obligations of
issuers located in at least three countries other than the
United States.
19
<PAGE> 23
The fixed income securities in which the SIT
International Fixed Income Portfolio may invest are: (i)
fixed income securities issued or guaranteed by a foreign
government or one of its agencies, authorities,
instrumentalities or political subdivisions; (ii) fixed
income securities issued or guaranteed by supranational
entities; (iii) fixed income securities issued by foreign
corporations; (iv) convertible securities; and (v) fixed
income securities issued by foreign banks or bank holding
companies. All such investments will be in high quality
securities denominated in various currencies, including
the European Currency Unit. High quality securities are
rated in one of the highest four rating categories by an
NRSRO or, of comparable quality at the time of purchase as
determined by the adviser.
Any remaining assets of the Portfolio will be
invested in any of the fixed income securities described
above, obligations issued or guaranteed as to principal
and interest by the United States Government, its agencies
or instrumentalities ("U.S. Government Securities"),
swaps, options and futures. The Portfolio may also
purchase and write options to buy or sell futures
contracts. The Portfolio also may enter into forward
currency contracts, purchase securities on a when-issued
or delayed delivery basis and engage in short selling.
Furthermore, although the Portfolio will concentrate its
investments in relatively developed countries, the
Portfolio may invest up to 5% of its assets in similar
securities or debt obligations that are denominated in the
currencies of developing countries and that are of
comparable quality to such securities and debt obligations
at the time of purchase as determined by the adviser.
There are no restrictions on the average maturity
of the securities held by the Portfolio or the maturity of
any single instrument. Maturities may vary widely
depending on the adviser's assessment of interest rate
trends and other economic and market factors. In the event
a security owned by the Portfolio is downgraded below the
rating categories discussed above, the adviser will review
the situation and take appropriate action with regard to
the security.
The Portfolio is a non-diversified investment
company, as defined in the 1940 Act, which means that more
than 5% of its assets may be invested in one or more
issuers, although the adviser does not intend to invest
more than 5% of its assets in any single issuer with the
exception of securities which are issued or guaranteed by
a national government. The value of shares of the
Portfolio may be more susceptible to any single economic,
political or regulatory occurrence than the shares of a
diversified investment company would be. The Portfolio
intends to satisfy the diversification requirements
necessary to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the
"Code").
For temporary defensive purposes, when an adviser
determines that market conditions warrant, the Portfolio
may invest up to 100% of its assets in U.S. dollar
denominated fixed income securities and the following
domestic and foreign money
20
<PAGE> 24
market instruments: government obligations, certificates
of deposit, bankers' acceptances, time deposits,
commercial paper, short-term corporate debt issues and
repurchase agreements. The Portfolio may hold a portion
of its assets in cash for liquidity purposes.
SLAT PRIME
OBLIGATION PORTFOLIO The SLAT Prime Obligation Portfolio seeks to preserve
principal value and maintain a high degree of liquidity
while providing current income. The Portfolio invests
exclusively in: (i) commercial paper rated at least A-1 by
S&P or Prime-1 by Moody's at the time of investment or, if
not rated, determined by the Adviser to be of comparable
quality; (ii) obligations (including certificates of
deposit, time deposits, bankers' acceptances and bank
notes) of U.S. commercial banks or other institutions that
are members of the Federal Reserve System or are insured
by the Federal Deposit Insurance Corporation, which banks
or institutions have total assets of $500 million or more
as shown on their most recent public financial statements
at the time of investment, provided that such obligations
are rated in the top two short-term rating categories by
two or more NRSROs, or one NRSRO if only one NRSRO has
rated the security at the time of investment or, if not
rated, determined by the adviser to be of comparable
quality; (iii) short-term corporate obligations rated AAA
or AA by S&P or Aaa or Aa by Moody's at the time of
investment or, if not rated, determined by the adviser to
be of comparable quality; (iv) short-term obligations
issued by state and local governmental issuers, which are
rated, at the time of investment, by at least two NRSROs
in one of the two highest municipal bond rating
categories, and which carry yields that are competitive
with those of other types of money market instruments of
comparable quality; (v) U.S. Treasury obligations or
obligations issued or guaranteed as to principal and
interest by agencies or instrumentalities of the U.S.
Government; and (vi) repurchase agreements involving any
of the foregoing obligations.
The Portfolio may invest up to 10% of its net
assets in illiquid securities. However, restricted
securities, including Rule 144A Securities and Section
4(2) commercial paper, that meet the criteria established
by the Board of Trustees of the Trust may be considered
liquid.
The Portfolio may only purchase securities with a
remaining maturity of 365 days or less, and, as a matter
of non-fundamental policy, will maintain a dollar-weighted
average portfolio maturity of 90 days or less. An
investment in the Portfolio is neither insured or
guaranteed by the U.S. Government and there can be no
assurance that the Portfolio will be able to maintain a
stable net asset value of $1.00 per share.
21
<PAGE> 25
GENERAL
INVESTMENT
POLICIES OF THE
UNDERLYING
PORTFOLIOS
Borrowing Each Underlying Portfolio, except the SLAT Prime
Obligation Portfolio, may borrow money to meet redemptions
or for temporary or emergency purposes. An Underlying
Portfolio will not purchase securities while its
borrowings exceed 5% of its total assets.
Common Stocks Each Underlying Portfolio, except the SLAT Prime
Obligation, SIMT Core Fixed Income, SIMT High Yield Bond
and SIT International Fixed Income Portfolios, will invest
in common stocks; provided, however, that the Underlying
Portfolios may only invest in such securities if they are
listed on registered exchanges or actively traded in the
over-the-counter market.
Forward Foreign
Currency Contracts The Underlying Portfolios, except the SIMT Core Fixed
Income, SIMT Large Cap Growth, SIMT Small Cap Growth, SIMT
Large Cap Value, SIMT Small Cap Value, and SLAT Prime
Obligation Portfolios may purchase forward foreign
currency contracts.
Illiquid Securities Each Underlying Portfolio's investment in illiquid
securities will be limited to 15% of its net assets (10%
with respect to the SLAT Prime Obligation, SIT
International Equity, SIT Emerging Markets Equity, and SIT
International Fixed Income Portfolios).
Investment Company
Securities Each Underlying Portfolio, except the SLAT Prime
Obligation Portfolio, may purchase investment company
securities, which will result in additional layering of
expenses. However, there are legal limits on the amount of
such securities that may be acquired by an Underlying
Portfolio. As a condition to the Order that was granted to
the Trust by the SEC, no Underlying Portfolio in which a
Fund invests may purchase: (i) more than 3 percent of the
total outstanding voting securities of another registered
investment company; (ii) securities issued by such
investment company if such securities have an aggregate
value of more than 5 percent of the total assets of such
Underlying Portfolio; or (iii) securities issued by such
investment company and all other investment companies if
such securities have an aggregate value of more than 10
percent of the total assets of such Underlying Portfolio.
Investment Grade
Debt Securities Each Underlying Portfolio, except the SLAT Prime
Obligation Portfolio, may invest in investment grade debt
securities. Interest payments and principal security for
securities rated in the fourth highest rating category
(i.e., BBB by S&P or Baa by Moody's) appear adequate for
the present, but certain protective elements may be
lacking or may be characteristically unreliable over any
great length of time. Such
22
<PAGE> 26
securities lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Money Market
Instruments In order to meet liquidity needs or for temporary
defensive purposes, the Underlying Portfolios may hold
cash reserves and invest in money market instruments
(including securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, repurchase
agreements, certificates of deposit and bankers'
acceptances issued by banks or savings and loan
associations having net assets of at least $500 million as
of the end of their most recent fiscal year, high-grade
commercial paper and other short-term debt securities)
rated at the time of purchase in the top two categories by
an NRSRO, or, if not rated, determined by the adviser to
be of comparable quality at the time of purchase. To the
extent any Underlying Portfolio is engaged in temporary
defensive investing, it will not be pursuing its
investment objective.
Options and Futures Each Underlying Portfolio, except the SLAT Prime
Obligation Portfolio, may purchase or sell options,
futures and options on futures. Risks associated with
investing in options and futures may include lack of a
liquid secondary market, trading restrictions which may be
imposed by an exchange and government regulations which
may restrict trading.
Securities Lending Each Underlying Portfolio, except the SLAT Prime
Obligation Portfolio, may lend its securities to qualified
investors for the purpose of realizing additional income.
U.S. Dollar Denominated
Securities of Foreign
Issuers Each Underlying Portfolio, except the SLAT Prime
Obligation, SIMT Small Cap Growth, and SIMT Core Fixed
Income Portfolios, may invest in U.S. dollar denominated
securities of foreign issuers, including American
Depositary Receipts that are traded on registered
exchanges or listed on NASDAQ.
Warrants Consistent with any applicable state law limitations, each
Underlying Portfolio, except the SLAT Prime Obligation
Portfolio, may purchase warrants in order to increase
total return.
When-Issued and Delayed
Delivery Securities The Underlying Portfolios may purchase securities on a
when-issued or delayed-delivery basis.
For additional information regarding the permitted
investments of the Underlying Portfolios see the
"Description of Permitted Investments and Risk Factors of
the Underlying Portfolios" in this Prospectus, the Trust's
Statement of Additional Information, the "Description of
Permitted Investments and Risk Factors" in the Underlying
Portfolios' Prospectuses and the "Description of Permitted
Investments" in the Underlying Portfolios' Statements of
Additional Information.
23
<PAGE> 27
RISK FACTORS OF
THE UNDERLYING
PORTFOLIOS
From time to time, the Underlying Portfolios may
experience relatively large purchases or redemptions due
to asset allocation decisions made by the Adviser for its
clients, including the Trust. These transactions may have
a material effect on the Underlying Portfolios, since
Underlying Portfolios that experience redemptions as a
result of reallocations may have to sell portfolio
securities and because Underlying Portfolios that receive
additional cash will have to invest it. While it is
impossible to predict the overall impact of these
transactions over time, there could be adverse effects on
portfolio management to the extent that Underlying
Portfolios may be required to sell securities at times
when they would not otherwise do so, or receive cash that
cannot be invested in an expeditious manner. There may be
tax consequences associated with purchases and sales of
securities, and such sales may also increase transaction
costs. The Adviser is committed to minimizing the impact
of these transactions on the Underlying Portfolios to the
extent it is consistent with pursuing the investment
objectives of its asset allocation clients. The Adviser
will monitor the impact of asset allocation decisions on
the Underlying Portfolios and, where practicable, a Fund
will, at any one time, only redeem shares of an Underlying
Portfolio to reduce its allocation to that particular
Portfolio in increments of up to 5% (e.g., from 20% to
15%), except where such redemptions are to meet Fund
shareholder redemption requests. The Adviser will
nevertheless face conflicts in fulfilling its
responsibilities because of the possible differences
between the interests of its asset allocation clients
(including shareholders of the Funds) and the interests of
the Underlying Portfolios.
FUNDAMENTAL
LIMITATIONS OF
THE UNDERLYING
PORTFOLIOS
Each Underlying Portfolio, except the SIT International
Fixed Income Fund, may not invest more than 5% of its
assets in the securities of a single issuer. (This
limitation applies to 75% of the assets of the SIMT and
the other SIT Portfolios, and does not apply to securities
issued by the U.S. Government, its agencies or
instrumentalities.)
Each Underlying Portfolio may not purchase
securities which would cause more than 25% of such
Portfolio's assets to be invested in the securities of
issuers conducting business in the same industry. (This
limitation does not apply to investments in securities
issued by the U.S. Government, its agencies or
24
<PAGE> 28
instrumentalities and, with respect to the SLAT Prime
Obligation Portfolio, obligations of domestic banks.)
The foregoing percentage limitations will apply at
the time of the purchase of the security by an Underlying
Portfolio. Additional fundamental and non-fundamental
investment limitations are set forth in the Underlying
Portfolios' Prospectuses and Statements of Additional
Information.
THE ADVISER AND
MANAGER OF
THE FUNDS
Under an Investment Advisory Agreement with the Trust, SEI
Financial Management Corporation ("SFM" or the "Adviser")
acts as the investment adviser to each Fund. Under the
Agreement, the Adviser provides its proprietary asset
allocation services to the Funds, and exercises investment
discretion over the assets of the Funds. The Adviser
monitors the allocation of each Fund's assets, and is
responsible for supervising compliance with each Fund's
fundamental investment objective and policies. Although it
is expected that each Fund will typically be fully
invested in the Underlying Portfolios, the Adviser may,
from time to time, direct the investment of each Fund's
cash balances in money market securities or in other
instruments, including stock or bond index futures and
options thereon.
For its investment advisory services to the Trust,
the Adviser is entitled to a fee, which is calculated
daily and paid monthly, at an annual rate of .10% of each
Fund's average daily net assets. The Adviser has
voluntarily agreed to waive this fee for the foreseeable
future. This waiver may be terminated by the Adviser at
any time in its sole discretion.
The Adviser is a wholly-owned subsidiary of SEI
Corporation ("SEI"), a financial services company located
in Wayne, Pennsylvania. The principal business address of
the Adviser is 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658. SEI was founded in 1968, and is a
leading provider of investment solutions to banks,
institutional investors, investment advisers and insurance
companies. Affiliates of the Adviser have provided
consulting advice to institutional investors for more than
20 years, including advice regarding the selection and
evaluation of investment advisers and advice regarding
asset allocation strategies. The Adviser currently serves
as manager or administrator to more than 39 investment
companies including more than 290 portfolios, which
investment companies had more than $66 billion in assets
as of August 31, 1996.
Investment and asset allocation decisions for the
Funds are made by a committee within SFM.
SEI Fund Management ("SEI Management") provides the
Trust with overall management services, regulatory
reporting, all necessary office space, equipment,
25
<PAGE> 29
personnel, and facilities, and acts as dividend disbursing
agent and shareholder servicing agent.
For its management services, SEI Management is
entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the average daily
net assets of each Fund. SEI Management has agreed to
waive its administration fee for the foreseeable future.
This waiver is voluntary and may be discontinued at any
time in SEI Management's sole discretion.
THE ADVISERS
AND SUB-ADVISERS
TO THE UNDERLYING
PORTFOLIOS
The following table sets forth information about the
advisers and sub-advisers to the Underlying Portfolios
approved by the Boards of Trustees of the Underlying
Trusts as of September 30, 1996:
<TABLE>
<CAPTION>
UNDERLYING PORTFOLIO INVESTMENT ADVISOR SUB-ADVISER(S)
---------------------------------------------------------------------------------------
<S> <C> <C>
SIMT Large Cap Growth SFM Alliance Capital Management, L.P.
IDS Advisory Group Inc.
Provident Investment Counsel, Inc.
---------------------------------------------------------------------------------------
SIMT Large Cap Value SFM LSV Asset Management
Mellon Equity Associates
Pacific Alliance Capital
Management
---------------------------------------------------------------------------------------
SIMT Small Cap Growth SFM Apodaca-Johnston Capital
Management
First of America Investment
Corporation
Nicholas-Applegate Capital
Management
Wall Street Associates
---------------------------------------------------------------------------------------
SIMT Small Cap Value SFM Boston Partners Asset Management,
L.P.
1838 Investment Advisors, L.P.
---------------------------------------------------------------------------------------
SIT International Equity SFM Acadian Asset Management, Inc.
Farrell Wako Global Investment
Management, Inc.
Morgan Grenfell Investment
Services, Ltd.
Seligman Henderson, Co.
Yamaichi Capital Management, Inc.
and Yamaichi Capital Management
(Singapore) Limited
---------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 30
<TABLE>
<CAPTION>
UNDERLYING PORTFOLIO INVESTMENT ADVISOR SUB-ADVISER(S)
<S> <C> <C>
---------------------------------------------------------------------------------------
SIT Emerging Markets Equity SFM Montgomery Asset Management, L.P.
---------------------------------------------------------------------------------------
SIMT Core Fixed Income SFM BlackRock Financial Management,
Inc.
Firstar Investment Research &
Management Company
Western Asset Management Company
---------------------------------------------------------------------------------------
SIMT High Yield Bond SFM BEA Associates
---------------------------------------------------------------------------------------
SIT International Fixed Income Strategic Fixed None
Income, L.P.
---------------------------------------------------------------------------------------
SLAT Prime Obligation Wellington None
Management
Company
---------------------------------------------------------------------------------------
</TABLE>
SEI FINANCIAL
MANAGEMENT
CORPORATION In addition to serving as the Trust's Adviser, SFM serves
as investment adviser to each Underlying Portfolio except
the SIT International Fixed Income and SLAT Prime
Obligation Portfolios.
Under the advisory agreement with each Underlying
Portfolio for which it serves as investment adviser (an
"Underlying SEI Portfolio"), SFM is authorized to make
investment decisions for the assets of the Underlying SEI
Portfolio, and to continuously review, supervise and
administer the Underlying SEI Portfolio's investment
program.
SFM acts as a "manager of managers" for the
Underlying SEI Portfolios. As Adviser, SFM oversees the
investment advisory services provided to the Underlying
SEI Portfolios and manages the cash portion of the
Portfolios' assets. Pursuant to separate sub-advisory
agreements with SFM, and under the supervision of both the
Adviser and the Boards of Trustees of the Underlying SEI
Portfolios, the sub-advisers are responsible for the
day-to-day investment management of all or a discrete
portion of the assets of the Underlying SEI Portfolios.
The sub-advisers are selected based primarily upon the
research and recommendations of SFM, which evaluates
quantitatively and qualitatively each such sub-adviser's
skills and investment results in managing assets for
specific asset classes, investment styles and strategies.
Subject to Board review, SFM allocates and, when
appropriate, reallocates the Underlying SEI Portfolios'
assets among sub-advisers, monitors and evaluates
sub-adviser performance, and oversees sub-adviser
compliance with the Portfolios' investment objectives,
policies and restrictions. SFM HAS THE ULTIMATE
RESPONSIBILITY FOR THE INVESTMENT PERFORMANCE OF THE
UNDERLYING SEI PORTFOLIOS DUE TO ITS RESPONSIBILITY TO
OVERSEE SUB-ADVISERS AND RECOMMEND THEIR HIRING,
TERMINATION AND REPLACEMENT.
27
<PAGE> 31
SFM has obtained an exemptive order from the
Securities and Exchange Commission (the "SEC") that
permits SFM, with the approval of the Underlying SEI
Portfolios' Boards for Trustees, to retain sub-advisers
unaffiliated with SFM for the Portfolios without
submitting the sub-advisory agreements to a vote of the
Portfolios' shareholders. The exemptive relief permits the
disclosure of only the aggregate amount payable by SFM
under all such sub-advisory agreements. The Underlying SEI
Portfolios will notify shareholders in the event of any
addition or change in the identity of its sub-advisers.
For its advisory services to the Underlying
Portfolios, SFM is entitled to a fee, which is calculated
daily and paid monthly, at an annual rate of .40% of the
average daily net assets of the SIMT Large Cap Growth
Portfolio, .35% of the average daily net assets of the
SIMT Large Cap Value Portfolio, .65% of the average daily
net assets of the SIMT Small Cap Growth and Small Cap
Value Portfolios, .505% of the average daily net assets of
the SIT International Equity Portfolio, 1.05% of the
average daily net assets of the SIT Emerging Markets
Equity Portfolio, .275% of the average daily net assets of
the SIMT Core Fixed Income Portfolio, and .4875% of the
average daily net assets of the SIMT High Yield Bond
Portfolio.
STRATEGIC FIXED
INCOME L.P. Strategic Fixed Income L.P. ("SFI") acts as the investment
adviser to the SIT International Fixed Income Portfolio.
SFI is a limited partnership formed in 1991 under the laws
of the State of Delaware to manage multi-currency fixed
income portfolios. The general partner of the firm is
Kenneth Windheim and the limited partner is Strategic
Investment Partners ("SIP"). As of March 1, 1996, SFI
managed $5.4 billion of client assets. Together, SFI and
SIP managed over $10.2 billion in client assets as of that
date. The principal address of SFI is 1001 Nineteenth
Street North, 16th Floor, Arlington, Virginia 22209.
SFI is entitled to a fee, which is calculated and
paid monthly, at an annual rate of .30% of the average
daily net assets of the SIT International Fixed Income
Portfolio. SFI has voluntarily agreed to waive all or a
portion of its fee in order to limit the total operating
expenses of the Portfolio. SFI reserves the right to
terminate its voluntary waiver at any time in its sole
discretion.
WELLINGTON
MANAGEMENT
COMPANY Wellington Management Company ("WMC"), 75 State Street,
Boston, Massachusetts 02109, serves as the investment
adviser to the SLAT Prime Obligation Portfolio.
As of March 1, 1996, WMC had investment management
authority with respect to approximately $109 billion of
assets. WMC is a professional investment counseling firm
which provides investment services to investment
companies, employee benefit plans, endowments,
foundations, and other institutions and individuals. WMC's
predecessor organizations have provided investment
advisory services to investment companies since 1933, and
to investment counseling clients since 1960. WMC is a
Massachusetts general partnership of which the following
28
<PAGE> 32
persons are managing partners: Robert W. Doran, Duncan M.
McFarland and John R. Ryan.
WMC is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate of .075% of the
combined average daily net assets of the various
portfolios of SLAT up to $500 million, and .02% of such
average daily net assets in excess of $500 million. Such
fees are allocated daily among the various portfolios of
SLAT on the basis of their relative net assets.
ACADIAN ASSET
MANAGEMENT, INC. Acadian Asset Management, Inc. ("Acadian") acts as an
investment sub-adviser to the SIT International Equity
Portfolio pursuant to a sub-advisory agreement with the
Adviser. In accordance with the Portfolio's investment
objectives and policies and under the supervision of the
Adviser and the Underlying Trust's Board of Trustees,
Acadian is responsible for the day-to-day investment
management of the portion of the Portfolio assigned to it
by the Board of Trustees and, with respect thereto, places
orders on behalf of the Portfolio to effect the investment
decisions made.
Acadian, a wholly-owned subsidiary of United Asset
Management Corporation, was founded in 1977, and manages
approximately $3 billion in assets invested globally.
Acadian's business address is Two International Place,
Boston, Massachusetts 02110.
The Adviser pays Acadian a fee based on a
percentage of the average monthly market value of the
assets of the SIT International Equity Portfolio assigned
to Acadian.
ALLIANCE CAPITAL
MANAGEMENT L.P. Alliance Capital Management L.P. ("Alliance Capital")
serves as investment sub-adviser to a portion of the
assets of the SIMT Large Cap Growth Portfolio. Alliance is
a registered investment adviser organized as a Delaware
limited partnership which originated as Alliance Capital
Management Corporation in 1971. Alliance Capital
Management Corporation, an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the
United States, is the general partner of Alliance . As of
March 1, 1996, Alliance managed over $149 billion in
assets. The principal business address of Alliance is 1345
Avenue of the Americas, New York, New York 10105.
The Adviser pays Alliance a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Large Cap Growth Portfolio managed by
Alliance.
APODACA-JOHNSTON
CAPITAL
MANAGEMENT Apodaca-Johnston Capital Management ("Apodaca") serves as
an investment sub-adviser to a portion of the assets of
the SIMT Small Cap Growth Portfolio. Apodaca is a
California corporation with its principal address at 50
California Street, Suite 3315, San Francisco, California
94014. Apodaca is owned equally by Scott Johnson, Jerry C.
Apodaca, Jr., and Jerry Apodaca, Sr. Apodaca's predecessor
was founded in 1985, and as of September 30, 1995, Apodaca
had approximately $290 million in assets under management.
Apodaca's clients include pension and profit sharing
plans, an endowment fund and an investment company
portfolio.
29
<PAGE> 33
The Adviser pays Apodaca a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Small Cap Growth Portfolio managed by
Apodaca.
BEA ASSOCIATES BEA Associates ("BEA") serves as investment sub-adviser to
the SIMT High Yield Bond Portfolio. BEA is a general
partnership organized under the laws of the State of New
York and, together with its predecessor firms, has been
engaged in the investment advisory business for over 50
years. BEA's principal offices are located at One Citicorp
Center, 153 East 53rd Street, New York, New York 10022.
Credit Suisse Capital Corporation ("CS Capital") is an 80%
partner in BEA and CS Advisers Corp., a New York
corporation which is a wholly-owned subsidiary of CS
Capital, is a 20% partner in BEA. CS Capital is a
wholly-owned subsidiary of Credit Suisse Investment
Corporation, which is a wholly-owned subsidiary of Credit
Suisse, the second largest Swiss bank, which, in turn, is
a subsidiary of CS Holding, a Swiss corporation. BEA is
registered as an investment adviser under the Investment
Advisers Act of 1940.
BEA is a diversified asset manager, handling global
equity, balanced, fixed income and derivative securities
accounts for private individuals, as well as corporate
pension and profit-sharing plans, state pension funds,
union funds, endowments and other charitable institutions.
As of March 1, 1996, BEA managed approximately $28 billion
in assets.
The Adviser pays BEA a fee based on a percentage of
the average monthly market value of the assets of the SIMT
High Yield Bond Portfolio managed by BEA.
BLACKROCK FINANCIAL
MANAGEMENT, INC. BlackRock Financial Management, Inc. ("BlackRock") serves
as an investment sub-adviser to a portion of the assets of
the SIMT Core Fixed Income Portfolio. BlackRock, a
registered investment adviser, is a Delaware corporation
with its principal business address at 345 Park Avenue,
30th Floor, New York, New York 10154. BlackRock's
predecessor was founded in 1988, and as of March 1, 1996,
BlackRock had $36.5 billion in assets under management.
BlackRock is wholly-owned by PNC Asset Management Group,
Inc., a wholly-owned subsidiary of PNC Bank, N.A. PNC
Bank, N.A.'s ultimate parent is PNC Bank Corp., One PNC
Plaza, Pittsburgh, Pennsylvania 15265, a bank holding
company. BlackRock provides investment advice to
investment companies, trusts, charitable organizations,
pension and profit sharing plans and government entities.
The Adviser pays BlackRock a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Core Fixed Income Portfolio managed by
BlackRock.
BOSTON PARTNERS
ASSET MANAGEMENT,
L.P. Boston Partners Asset Management, L.P. ("BPAM") serves as
investment sub-adviser to a portion of the assets of the
SIMT Small Cap Value Portfolio. BPAM, a Delaware limited
partnership, is a registered investment adviser with its
principal business
30
<PAGE> 34
address at One Financial Center, 43rd Floor, Boston,
Massachusetts 02111. BPAM's general partner, Boston
Partners, Inc., One Financial Center, 43rd Floor, Boston,
Massachusetts 02111, whose sole shareholder is Desmond J.
Heathwood, Chief Investment Officer of BPAM, owns
approximately 20% of BPAM's partnership interests. BPAM
was founded in April, 1995, and as of December 31, 1995,
it had approximately $5.5 billion in assets under
management. BPAM's clients include corporations,
endowments, foundations, pension and profit sharing plans
and two other investment companies.
The Adviser pays BPAM a fee based on a percentage
of the average monthly market value of the assets of the
SIMT Small Cap Value Portfolio managed by BPAM.
1838 INVESTMENT
ADVISORS, L.P. 1838 Investment Advisors, L.P. ("1838") serves as
investment sub-adviser to a portion of the assets of the
SIMT Small Cap Value Portfolio. 1838 is a Delaware limited
partnership located at 100 Matsonford Road, Radnor,
Pennsylvania. As of March 1, 1996, 1838 managed $4.7
billion in assets in large and small capitalization
equity, fixed income and balanced account portfolios.
Clients include corporate employee benefit plans,
municipalities, endowments, foundations, jointly trusteed
plans, insurance companies and wealthy individuals.
The Adviser pays 1838 a fee based on a percentage
of the average monthly market value of the assets of the
SIMT Small Cap Value Portfolio managed by 1838.
FARRELL WAKO
GLOBAL INVESTMENT
MANAGEMENT, INC. Farrell Wako Global Investment Management, Inc. ("Farrell
Wako") acts as sub-adviser to a portion of the SIT
International Equity Portfolio. Farrell Wako, a Delaware
corporation and a wholly-owned subsidiary of Wako
Securities, was founded in 1991 and is a registered
investment advisor in the U.S. and Japan. Farrell Wako
currently manages over $200 million. The principal address
of Farrell Wako is 780 Third Avenue, New York, New York
10017.
The Advisor pays Farrell Wako a fee based on a
percentage of the average monthly market value of the
assets of the SIT International Equity Portfolio managed
by Farrell Wako.
FIRST OF AMERICA
INVESTMENT
CORPORATION First of America Investment Corporation ("First America")
acts as sub-adviser to a portion of the SIMT Small Cap
Growth Portfolio. First of America is a Michigan
Corporation that is a wholly-owned subsidiary of First of
America Bank -- Michigan, N.A., a national banking
association, which is in turn a wholly-owned subsidiary of
First of America Bank Corporation, a registered bank
holding company. First of America is registered as an
investment adviser under the Investment Advisers Act of
1940. First of America, together with its predecessor, has
been engaged in the investment advisory business since
1932. First America's principal business address is 303
North Rose Street, Suite 500, Kalamazoo, Michigan 49007.
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As of March 31, 1996, First of America had
approximately $13.7 billion in assets under management.
First of America's clients include mutual funds, trust
funds, and individually managed institutional and
individual accounts.
The Adviser pays First of America a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Small Cap Growth Portfolio assigned to
First of America.
FIRSTAR INVESTMENT
RESEARCH &
MANAGEMENT
COMPANY Firstar Investment Research & Management Company
("FIRMCO") serves as an investment sub-adviser to a
portion of the assets of the SIMT Core Fixed Income
Portfolio. FIRMCO is a registered investment adviser with
its principal business address at 777 East Wisconsin
Avenue, Suite 800, Milwaukee, Wisconsin 53202. FIRMCO was
founded in 1986, and as of December 31, 1995, it had
approximately $15.6 billion in assets under management.
FIRMCO is a wholly-owned subsidiary of Firstar
Corporation, a bank holding company located at 777 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202. FIRMCO's
clients include pension and profit sharing plans, trusts
and estates and one other investment company.
The Adviser pays FIRMCO a fee based on a percentage
of the average monthly market value of the assets of the
SIMT Core Fixed Income Portfolio managed by FIRMCO.
IDS ADVISORY
GROUP INC. IDS Advisory Group Inc. ("IDS") serves as investment
sub-adviser to a portion of the assets of the SIMT Large
Cap Growth Portfolio. IDS is a registered investment
adviser and wholly-owned subsidiary of American Express
Financial Corporation. As of March 1, 1996, IDS managed
over $24 billion in assets, with $5 billion of this total
in large capitalization growth domestic equities. IDS was
founded in 1972 to manage tax-exempt assets for
institutional clients. The principal business address of
IDS is IDS Tower 10, Minneapolis, Minnesota 55440.
The Adviser pays IDS a fee based on a annual
percentage of the average monthly market value of the
assets of the SIMT Large Cap Growth Portfolio managed by
IDS.
LSV ASSET
MANAGEMENT LSV Asset Management ("LSV") serves as investment
sub-adviser to a portion of the assets of the SIMT Large
Cap Value Portfolio. LSV is a registered investment
adviser organized as a Delaware general partnership. An
affiliate of the Adviser owns a majority interest of LSV.
The principal business address of LSV is 181 W. Madison
Avenue, Chicago, Illinois 60602.
LSV makes investment decisions based on a
quantitative computer model and, based on its ongoing
research and statistical analysis, make adjustments to the
model. Securities are identified for purchase or sale by
the Portfolio based upon the computer model and defined
variance tolerances. Purchases and sales are effected by
LSV based upon the output from the model.
The Adviser pays LSV a fee based on a percentage of
the average monthly market value of the assets of the SIMT
Large Cap Value Portfolio managed by LSV.
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<PAGE> 36
MELLON EQUITY
ASSOCIATES Mellon Equity Associates ("Mellon Equity") serves as
investment sub-adviser to a portion of the assets of the
SIMT Large Cap Value Portfolio. Mellon Equity is a
Pennsylvania business trust founded in 1987, whose
beneficial owners are Mellon Bank, N.A. and MMIP, Inc.
Mellon Equity is a professional investment counseling firm
that provides investment management services to the equity
and balanced pension, public fund and profit-sharing
investment management markets, and is a registered
investment adviser under the Investment Advisers Act of
1940. Mellon Equity had discretionary management authority
with respect to approximately $8.8 billion of assets as of
December 31, 1995. Mellon Equity's predecessor
organization had managed domestic equity tax-exempt
institutional accounts since 1947. The business address
for Mellon Equity is 500 Grant Street, Suite 3700,
Pittsburgh, Pennsylvania 15258.
The Adviser pays Mellon Equity a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Large Cap Value Portfolio managed by
Mellon Equity.
MONTGOMERY ASSET
MANAGEMENT L.P. Montgomery Asset Management, L.P. ("MAM") acts as the
investment sub-adviser to the SIT Emerging Markets Equity
Portfolio. In accordance with the Portfolio's investment
objective and policies and under the supervision of the
Adviser and the Underlying Trust's Board of Trustees, MAM
is responsible for the day-to-day investment management of
the Portfolio and places orders on behalf of the Portfolio
to effect the investment decisions made.
MAM is an affiliate of Montgomery Securities, a San
Francisco-based investment banking firm. As of February
29, 1996, MAM had approximately $7.1 billion in assets
under management. MAM has over four years experience
providing investment management services. The principal
address of MAM is 600 Montgomery Street, San Francisco,
California 94111.
The Adviser pays MAM a fee based on a percentage of
the average monthly market value of the assets of the SIT
International Equity Portfolio assigned to MAM.
MORGAN GRENFELL
INVESTMENT SERVICES
LIMITED Morgan Grenfell Investment Services Limited ("MG") acts as
the investment sub-adviser to the SIT International Equity
Portfolio. MG, a subsidiary of Morgan Grenfell Asset
Management Limited, managed over $12 billion in assets as
of December 31, 1995. Morgan Grenfell Asset Management
Limited, a wholly-owned subsidiary of Deutsche Bank, A.G.,
a German financial services conglomerate, managed over $94
billion in assets as of December 31, 1995. MG has over 11
years experience in managing international portfolios for
North American clients. MG attempts to exploit perceived
inefficiencies present in the European markets with
original research and an emphasis on stock selection. The
principal address of MG is 20 Finsbury Circus, London,
England, EC2M 1NB.
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<PAGE> 37
The Adviser pays MG a fee based on a percentage of
the average monthly market value of the assets of the SIT
International Equity Portfolio assigned to MG.
NICHOLAS-APPLEGATE
CAPITAL
MANAGEMENT Nicholas-Applegate Capital Management
("Nicholas-Applegate") serves as investment sub-adviser to
a portion of the assets of the SIMT Small Cap Growth
Portfolio. Nicholas-Applegate has operated as an
investment adviser which provides investment services to
employee benefit plans, endowments, foundations, other
institutions and investment companies since 1984. As of
December 31, 1995, Nicholas-Applegate had discretionary
management authority with respect to approximately $29
billion of assets. The principal business address of
Nicholas-Applegate is 600 West Broadway, 29th Floor, San
Diego, California 92101. Nicholas-Applegate, pursuant to a
partnership agreement, is controlled by its general
partner Nicholas-Applegate Capital Management Holdings,
L.P., a limited partnership controlled by Arthur E.
Nicholas.
The Adviser pays Nicholas-Applegate a fee based on
a percentage of the average monthly market value of the
assets of the SIMT Small Cap Growth Portfolio managed by
Nicholas-Applegate.
PACIFIC ALLIANCE
CAPITAL
MANAGEMENT Pacific Alliance Capital Management ("Pacific") serves as
investment sub-adviser to a portion of the assets of the
SIMT Large Cap Value Portfolio. Pacific is a division of
Union Bank of California, N.A., and provides equity and
fixed-income management services to a broad array of
corporate and municipal clients. Union Bank of California,
N.A. is a wholly-owned subsidiary of The Bank of
Tokyo-Mitsubishi Limited. As of December 31, 1995, Pacific
had discretionary management authority with respect to
approximately $11.9 billion of assets. The principal
business address of Pacific is 475 Sansome Street, San
Francisco, California 94111.
The Adviser pays Pacific a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Large Cap Value Portfolio managed by
Pacific.
PROVIDENT
INVESTMENT
COUNSEL, INC. Provident Investment Counsel, Inc. ("Provident"), is a
registered investment adviser with its principal business
address at 300 North Lake Avenue, Pasadena, California
91101. Provident, which, through its predecessors, has
been in business since 1951, and is a wholly-owned
subsidiary of UAM. Provident provides investment advice to
corporations, public entities, foundations and labor
unions, as well as to other investment companies. As of
December 31, 1995, Provident had over $16 billion in
client assets under management.
The Adviser pays Provident a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Large Cap Growth Portfolio managed by
Provident.
SELIGMAN
HENDERSON CO. Seligman Henderson Co. ("Seligman") acts as sub-adviser to
a portion of the assets of the SIT International Equity
Portfolio. Seligman Henderson Co. is a New York general
partnership and is structured as an equal partnership
between J&W Seligman & Co. and Henderson International
Inc., a controlled affiliate of
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<PAGE> 38
Henderson Administration Group plc. Seligman Henderson Co.
was established in 1991 and manages over $3 billion in
global and international equity portfolios for U.S.
institutional and retail clients. The principal address of
Seligman is 100 Park Avenue, New York, New York 10017.
The Adviser pays Seligman a fee based on a
percentage of the average monthly market value of the
assets of the SIT International Equity Portfolio managed
by Seligman.
WALL STREET
ASSOCIATES Wall Street Associates ("WSA") serves as investment
sub-adviser to a portion of the assets of the SIMT Small
Cap Growth Portfolio. WSA is organized as a corporation
with its principal business address at 1200 Prospect
Street, Suite 100, La Jolla, California 92037. WSA was
founded in 1987, and as of December 31, 1995, had
approximately $900 million in assets under management. WSA
is owned equally by William Jeffery III, Kenneth F.
McCain, and Richard S. Coons. WSA provides investment
advisory services for institutional clients, an investment
partnership for which it serves as general partner, a
group trust, for which it serves as sole investment
manager, and an offshore fund for foreign investors for
which it serves as the sole investment manager.
The Adviser pays WSA a fee based on a percentage of
the average monthly market value of the assets of the SIMT
Small Cap Growth Portfolio assigned to WSA.
WESTERN ASSET
MANAGEMENT
COMPANY Western Asset Management Company ("Western") serves as an
investment sub-adviser to a portion of the assets of the
SIMT Core Fixed Income Portfolio. Western is located at
117 East Colorado Boulevard, Pasadena, California 91105,
and is a wholly owned subsidiary of Legg Mason, Inc., a
financial services company located in Baltimore, Maryland.
Western was founded in 1971, and specializes in the
management of fixed income portfolios. As of March 1,
1996, Western managed approximately $19.7 billion in
client assets, including $2 billion of investment company
assets.
The Adviser pays Western a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Core Fixed Income Portfolio managed by
Western.
YAMAICHI CAPITAL
MANAGEMENT, INC.
AND YAMAICHI
CAPITAL
MANAGEMENT
(SINGAPORE)
LIMITED Yamaichi Capital Management, Inc. ("Yamaichi") and
Yamaichi Capital Management (Singapore) Limited ("YCMS")
jointly act as sub-adviser to a portion of the assets of
the SIT International Equity Portfolio. Yamaichi is a New
York Corporation established in 1981 and YCMS is a
Singapore corporation established in 1979, and each is a
wholly-owned subsidiary of Yamaichi International Capital
Management Co., Ltd ("YICM"). Yamaichi, YCMS and YICM are
controlled by Yamaichi Securities Co., Ltd., which is
located in Tokyo, Japan. YCMS and its affiliates manage
approximately $22 billion worldwide. The principal address
of Yamaichi is 2 World Trade Center, Suite 9828, New York,
New York 10048. The principal address of YCMS is 138
Robinson Road, #19-01, Hong Leong Centre, Singapore
068906.
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<PAGE> 39
The Adviser pays Yamaichi a fee based on a
percentage of the average monthly market value of the
assets of the SIT International Equity Portfolio managed
by Yamaichi.
Information regarding the portfolio managers
employed by the advisers and sub-advisers to the
Underlying Portfolios is set forth in the Trust's
Statement of Additional Information.
TRANSFER AGENT
The Trust and DST Systems, Inc. (the "Transfer Agent"),
1004 Baltimore Street, 2nd Floor, Kansas City, Missouri
64105, have entered into a transfer agent agreement with
respect to the Trust's Class D shares.
DISTRIBUTION
AND SHAREHOLDER
SERVICING
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as each Fund's
distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust. The Trustees of
the Trust have adopted a distribution plan for the Trust's
Class D shares (the "Class D Plan") pursuant to Rule 12b-1
under the 1940 Act.
The Class D Plan provides for payments to the
Distributor for distribution-related services at an annual
rate of .75% of each Fund's average daily net assets
attributable to Class D Shares. In addition, pursuant to a
Shareholder Service Plan and Agreement (the "Service
Plan"), each Fund is authorized to pay the Distributor a
fee in connection with the ongoing servicing of
shareholder accounts owning such Class D Shares, which is
calculated and payable monthly, at the annual rate of .25%
of the value of the average daily net assets attributable
to Class D Shares of the Fund.
The distribution-related payments under the Class D
Plan may be used by the Distributor to provide initial and
ongoing sales compensation to its investment executives
and to other broker-dealers and financial intermediaries
in respect of sales of Class D Shares, to compensate third
parties for the provision of distribution-related services
relating to Class D Shares, and to pay for advertising and
promotional expenses in connection with the distribution
of Class D Shares. These advertising and promotional
expenses may include: costs of printing and mailing
prospectuses, statements of additional information and
shareholder reports to prospective investors; preparation
and distribution of sales literature; advertising of any
type; an allocation of other expenses of the Distributor
related to the distribution of Class D Shares; and
payments to, and expenses of, officers, employees or
representatives of the Distributor, of other
broker-dealers, banks or
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<PAGE> 40
other financial institutions, and of any other persons who
provide support services in connection with the
distribution of Fund Shares.
The service fees payable to the Distributor under
the Service Plan are intended to compensate the
Distributor for the provision of shareholder services, and
may be used by the Distributor to provide compensation to
financial intermediaries for ongoing service and/or
maintenance of shareholder accounts with respect to Class
D Shares of the applicable Funds. Such shareholder
services may include: telephone service to shareholders;
acceptance and processing of written correspondence, new
account applications and subsequent purchases by check;
mailing of confirmations, statements and tax forms
directly to shareholders; maintenance of customer
accounts, and acceptance of payment for trades by check,
Federal Reserve wire or Automatic Clearing House payment.
The Distributor shall perform or supervise the performance
by others of other shareholder services in connection with
the operation of the Funds, as agreed from time to time.
Payments under the Class D Plan are not tied
exclusively to the expenses for distribution activities
actually incurred by the Distributor or third parties, so
that such payments may exceed expenses actually incurred
by the Distributor. Similarly, payments to the Distributor
under the Service Plan are not directly tied to
shareholder servicing expenses incurred. The Trust's Board
of Trustees will evaluate the appropriateness of the Class
D Plan and the Service Plan and their payment terms on a
continuing basis and, in doing so, will consider all
relevant factors, including expenses borne by the
Distributor and amounts it receives under the Class D Plan
and the Service Plan.
Periodically, the Distributor may waive a portion
of the fees payable to it under the Service Plan in order
to keep within certain limits imposed by the Trust's SEC
Order. Specifically, any Fund's shareholder servicing fees
will be reduced in an amount equal to the Fund's pro rata
portion of any shareholder servicing fees paid by any
Underlying Portfolio in which the Fund invests, but only
to the extent necessary to comply with the Trust's SEC
Order.
It is possible that an institution may offer
different categories of shares to its customers and thus
receive different compensation with respect to the
different categories. These financial institutions may
also charge separate fees to their customers.
The Distributor may, from time to time in its sole
discretion, institute one or more promotional incentive
programs, which will be paid for by the Distributor from
its own resources. Under any such program, the Distributor
will provide promotional incentives, in the form of cash
or other compensation, including merchandise, airline
vouchers, trips and vacation packages, to all dealers
selling shares of the Funds. Such promotional incentives
will be offered uniformly to all shares of the Funds and
also will be offered uniformly to all dealers, predicated
upon the amount of shares of the Funds sold by such
dealer.
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<PAGE> 41
PURCHASE AND
REDEMPTION OF
SHARES
Financial institutions may acquire Class D Shares of the
Funds for their own account or as record owner on behalf
of fiduciary, agency or custody accounts by placing orders
with the Transfer Agent. State securities laws may require
financial institutions purchasing shares for their
customers to register as dealers pursuant to state laws.
To allow for processing and transmittal of orders to the
Transfer Agent on the same day, financial institutions may
impose earlier cut-off times for receipt of purchase
orders directed through them. Certain financial
institutions may charge separate customer account fees.
Information concerning shareholder services and any
charges will be provided to the customer by the
Intermediary.
Class D shares are offered to tax-advantaged
retirement accounts. If you are investing in a Fund
through a 401(k) or other retirement plan, you should
contact your plan sponsor for the services and procedures
which pertain to your account.
Shares of each Fund may be purchased or redeemed on
days on which the New York Stock Exchange is open for
business (a "Business Day"). Shares of the Funds are
offered only to residents of states in which the shares
are eligible for purchase.
Shareholders who desire to purchase or redeem
shares for cash must place their orders with the Transfer
Agent prior to 4:00 p.m. Eastern time on any Business Day
for the order to be accepted on that Business Day.
Generally, cash investments must be transmitted or
delivered in federal funds to the wire agent by 12 noon on
the next Business Day following the day the order is
placed. The Trust reserves the right to reject a purchase
order when the Distributor determines that it is not in
the best interest of the Trust or its shareholders to
accept such order. In circumstances where a purchase order
is received and payment is made, but no instructions are
given as to which Fund should be purchased, the
Distributor may invest such payment in an affiliated money
market fund until the purchase instructions have been
clarified. Until the Transfer Agent receives purchase
instructions in good order, such purchase request will not
be accepted by the Trust.
Purchases will be made in full and fractional
shares of the Funds calculated to three decimal places.
The Trust will send shareholders of record a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after the
receipt of the purchase order by the Transfer Agent.
The net asset value per share of each Fund is
determined by dividing the total market value of such
Fund's investments and other assets, less any liabilities,
by the total number of outstanding shares of that Fund.
The assets of each Fund consist primarily of shares of the
Underlying Portfolios, which are valued at their
38
<PAGE> 42
respective net asset values. The Underlying Portfolios
value their portfolio securities at the last quoted sales
price for such securities, or, if there is no such
reported sales price on the valuation date, at the most
recent quoted bid price. An Underlying Portfolio may also
use a pricing service to obtain the last sale price of
each equity or fixed income security held in its
portfolio. Unlisted securities for which market quotations
are readily available are valued at the most recent quoted
bid price. Net asset value per share is determined daily
as of the close of business of the New York Stock Exchange
(currently, 4:00 p.m. Eastern time) on each Business Day.
The minimum initial investment in a Fund's Class D
shares is $25,000; however, the minimum investment may be
waived at the Distributor's discretion. All subsequent
purchases must be at least $100.
Shareholders who desire to redeem shares of the
Funds must place their redemption orders with Transfer
Agent prior to 4:00 p.m. Eastern time on any Business Day.
The redemption price is the net asset value per share of
the Fund next determined after receipt by the Transfer
Agent of the redemption order. Payment or redemption will
be made as promptly as possible and, in any event, within
seven days after the redemption order is received.
The Trust intends to generally make redemptions in
cash. The Trust may, however, make redemptions in whole or
in part by a distribution in kind of readily marketable
securities in lieu of cash. Shareholders may incur
brokerage costs on the sale of any such securities so
received in payment of redemptions.
Purchase and redemption orders may be placed by
telephone by calling 1-800-342-5734. Neither the Trust nor
the Transfer Agent will be responsible for any loss,
liability, cost or expense for acting upon wire
instructions or upon telephone instructions that it
reasonably believes to be genuine. The Trust and the
Trust's Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone
instructions. If reasonable procedures are not employed,
the Trust and/or Trust's Transfer Agent may be liable for
any losses due to unauthorized or fraudulent telephone
transactions. If market conditions are extraordinarily
active, or other extraordinary circumstances exist, and
you experience difficulties placing redemption orders by
telephone, you may wish to consider placing your order by
other means.
You may redeem shares at any time. For an IRA or
other tax-deferred account, you must make your redemption
request in writing. You should be aware that any
distributions personally received by you from the account
prior to age 59 1/2 are generally subject to a 10% penalty
tax, as well as to ordinary income taxes. To avoid the 10%
penalty, you must generally roll over your distribution to
another tax-deferred account or tax-qualified retirement
plan (if permitted) within 60 days.
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<PAGE> 43
PERFORMANCE
From time to time, the Funds may advertise yield and total
return. These figures will be based on historical earnings
and are not intended to indicate future performance. The
yield of a Fund refers to the annualized income generated
by an investment in the Fund over a specified 30-day
period. The yield is calculated by assuming that the same
amount of income generated by the investment during that
period is generated in each 30-day period over one year
and is shown as a percentage of the investment.
The total return of a Fund refers to the average
compounded rate of return to a hypothetical investment for
designated time periods (including but not limited to, the
period from which the Fund commenced operations through
the specified date), assuming that the entire investment
is redeemed at the end of each period and assuming the
reinvestment of all dividend and capital gain
distributions. The total return of a Fund may also be
quoted as a dollar amount or on an aggregate basis or an
actual basis, without inclusion of any front-end or
contingent sales charges, or with a reduced sales charge
in advertisements distributed to investors entitled to a
reduced sales charge.
A Fund may periodically compare its performance to
that of: (i) other mutual funds tracked by mutual fund
rating services (such as Lipper Analytical), financial and
business publications and periodicals; (ii) broad groups
of comparable mutual funds; (iii) unmanaged indices which
may assume investment of dividends but generally do not
reflect deductions for administrative and management
costs; or (iv) other investment alternatives. The Fund may
quote Morningstar, Inc., a service that ranks mutual funds
on the basis of risk-adjusted performance, and Ibbotson
Associates of Chicago, Illinois, which provides historical
returns of the capital markets in the U.S. The Fund may
use long-term performance of these capital markets to
demonstrate general long-term risk versus reward scenarios
and could include the value of a hypothetical investment
in any of the capital markets. The Fund may also quote
financial and business publications and periodicals as
they relate to fund management, investment philosophy, and
investment techniques.
The Fund may quote various measures of volatility
and benchmark correlation in advertising and may compare
these measures to those of other funds. Measures of
volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while
measures of benchmark correlation indicate how valid a
comparative benchmark might be. Measures of volatility and
correlation are calculated using averages of historical
data and cannot be calculated precisely.
For each Fund, the performance of Class A Shares
will normally be higher than the performance of the Class
D shares of that Fund because of the additional
distribution, shareholder servicing and transfer agent
expenses charged to Class D Shares.
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<PAGE> 44
TAXES
The following summary of federal income tax consequences
is based on current tax laws and regulations, which may be
changed by legislative, judicial, or administrative
action. No attempt has been made to present a detailed
explanation of the federal, state, or local tax treatment
of the Funds or their shareholders. In addition, state and
local tax consequences of an investment in a Fund may
differ from the federal income tax consequences described
below. Accordingly, shareholders are urged to consult
their tax advisers regarding specific questions as to
federal, state, and local taxes. Additional information
concerning taxes is set forth in the Statement of
Additional Information.
IRAs and participants in other tax-qualified
retirement plans generally will not be subject to federal
tax liability on either dividend and capital gain
distributions from the Funds or redemption of shares of
the Funds. Rather, participants in such plans will be
taxed when they begin taking distributions from their IRAs
and/or the plans. There are various restrictions under the
Code on eligibility, contributions and withdrawals,
depending on the type of tax-deferred account or
tax-qualified retirement plan. The rules governing
tax-deferred accounts and tax-qualified retirement plans
are complex, and failure to comply with the governing
rules and regulations may result in a substantial cost to
you, including the loss of tax advantages and the
imposition of additional taxes and penalties by the IRS.
You should consult with a tax professional on the specific
rules governing your own plan.
TAX STATUS OF THE
FUNDS Each Fund is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other Funds. Each Fund intends to continue to qualify for
the special tax treatment afforded regulated investment
companies ("RICs") under Subchapter M of the Code, so as
to be relieved of federal income tax on net investment
income and net capital gain (the excess of net long-term
capital gain over net short-term capital loss) distributed
to shareholders.
TAX STATUS OF
DISTRIBUTIONS Each Fund will distribute substantially all of its net
investment income (including net short-term capital gain)
and net capital gain to shareholders. Dividends from a
Fund's net investment income will be taxable to its
shareholders as ordinary income, whether received in cash
or in additional shares, to the extent of the Fund's
earnings and profits. Dividends from a Fund's net
investment income will qualify for the dividends received
deduction for corporate shareholders to the extent such
dividends are derived from dividends paid by Underlying
Portfolios that qualify for such deduction. Distributions
of net capital gain are taxable to shareholders as long-
term capital gain regardless of how long the shareholders
have held shares or whether the distributions are received
in cash or in additional shares. Each Fund will make
annual reports to shareholders of the federal income tax
status of all distributions. Each Fund intends to make
sufficient distributions to avoid liability for
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<PAGE> 45
the federal excise tax applicable to RICs. Dividends
declared by a Fund in October, November or December of any
year and payable to shareholders of record on a date in
such a month will be deemed to have been paid by the Fund
and received by the shareholders on December 31 of that
year if paid by the Fund at any time during the following
January.
Investment income received by the Funds from
sources within foreign countries may be subject to foreign
income taxes withheld at the source. The Funds will not be
able to treat shareholders as having paid their
proportionate share of such taxes for foreign tax credit
purposes.
Each sale or redemption of a Fund's shares is a
taxable transaction to the shareholder.
GENERAL
INFORMATION
The Trust The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated November 20, 1995. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. Shareholders may purchase shares in each Fund
through two separate classes of shares: Class A Shares and
Class D Shares, which provide for variations in
distribution, shareholder servicing and transfer agent
costs, voting rights and dividends. Additional information
pertaining to the Trust may be obtained by writing to SEI
Financial Management Corporation, 680 East Swedesford
Road, Wayne, Pennsylvania 19087-1658, or by calling
1-800-342-5734. All consideration received by the Trust
for shares of any Fund and all assets of such Fund belong
to that Fund and would be subject to liabilities related
thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, including litigation
and other extraordinary expenses, brokerage costs,
interest charges, taxes and organization expenses.
Trustees of the Trust The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
Voting Rights Each share held entitles the shareholder of record to one
vote. Each portfolio of the Trust will vote separately on
matters relating solely to that portfolio. Each class will
vote separately on matters pertaining to its distribution
plan. Each Fund will vote its
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<PAGE> 46
Underlying Portfolio shares in proportion to the votes of
all other shareholders of each respective Underlying
Portfolio.
As a Massachusetts business trust, the Trust is not
required to hold annual meetings of shareholders, but
approval will be sought for certain changes in the
operation of the Trust and for the election of Trustees
under certain circumstances. In addition, a Trustee may be
removed by the remaining Trustees or by shareholders at a
special meeting called upon written request of
shareholders owning at least 10% of the outstanding shares
of the Trust. In the event that such a meeting is
requested, the Trust will provide appropriate assistance
and information to the shareholders requesting the
meeting.
Reporting The Trust issues unaudited financial information
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
Shareholder Inquiries Shareholder inquiries should be directed to DST Systems,
Inc., P.O. Box 419240, Kansas City, Missouri 64141-6240.
Dividends Substantially all of the net investment income (exclusive
of capital gain) of each Fund is periodically declared and
paid as a dividend. Capital gains, if any, are distributed
at least annually.
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares at the net asset value next determined following
the record date, unless the shareholder has elected to
take such payment in cash. Shareholders may change their
election by providing written notice to the Adviser at
least 15 days prior to the distribution.
Dividends and capital gains of each Fund are paid
on a per-share basis. The value of each share will be
reduced by the amount of any such payment. If shares are
purchased shortly before the record date for dividend or
capital gain distributions, a shareholder will pay the
full price for the shares and receive some portion of the
price back as a taxable dividend or distribution.
Counsel and Independent
Accountants Morgan, Lewis & Bockius LLP serves as counsel to the
Trust. Price Waterhouse LLP serves as the independent
accountants of the Trust.
Custodian and Wire Agent
SFM, which serves as transfer agent for the Underlying
Portfolios, also maintains custody of assets of each Fund
that consist of uncertificated shares of the Underlying
Portfolios. CoreStates Bank, N.A., Broad and Chestnut
Streets, P.O. Box 7618, Philadelphia, Pennsylvania 19101,
acts as Custodian for the non-mutual fund assets of each
Fund (the "Custodian"). The Custodian holds cash,
securities and other assets of the Trust as required by
the 1940 Act, and acts as wire agent of the Trust's
assets.
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DESCRIPTION OF
PERMITTED
INVESTMENTS AND
RISK FACTORS OF
THE UNDERLYING
PORTFOLIOS
The following is a brief description of the permitted
investment practices for the Underlying Portfolios, and
the associated risk factors:
American Depositary
Receipts ("ADRs"),
Continental Depositary
Receipts ("CDRs"),
European Depositary
Receipts ("EDRs") and
Global Depositary
Receipts ("GDRs") ADRs are securities, typically issued by a U.S. financial
institution (a "depositary"), that evidence ownership
interests in a security or a pool of securities issued by
a foreign issuer and deposited with the depositary. ADRs
include American Depositary Shares and New York Shares.
EDRs, which are sometimes referred to as Continental
Depositary Receipts ("CDRs"), are securities, typically
issued by a non-U.S. financial institution, that evidence
ownership interests in a security or a pool of securities
issued by either a U.S. or foreign issuer. GDRs are issued
globally and evidence similar ownership.
Asset-Backed Securities
Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and
auto loans, leases and credit card receivables. Such
securities are generally issued as pass-through
certificates, which represent undivided fractional
ownership interests in the underlying pools of assets.
Such securities also may be debt obligations and are
generally issued as the debt of a special purpose entity,
such as a trust, organized solely for the purpose of
owning such assets and issuing such debt.
Convertible
Securities Convertible securities are corporate securities that are
exchangeable for a set number of another security at a
prestated price. Convertible securities typically have
characteristics similar to both fixed income and equity
securities. Because of the conversion feature, the market
value of a convertible security tends to move with the
market value of the underlying stock. The value of a
convertible security is also affected by prevailing
interest rates, the credit quality of the issuer, and any
call provisions.
Demand Instruments Demand instruments are instruments which may involve a
conditional or unconditional demand feature which permits
the holder to demand payment of the principal amount of
the instrument. They may include variable amount master
demand notes.
Derivatives Derivatives are securities that derive their value from
other securities, assets or indices. The following are
considered derivative securities: options on futures,
futures, options (e.g., puts and calls), swap agreements,
mortgage-backed securities and forward commitments,
floating and variable rate securities, convertible
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securities, "stripped" U.S. Treasury securities (e.g.,
Receipts and STRIPs) and privately issued stripped
securities (e.g., TGRs, TRs and CATS).
Equity Securities Equity securities represent ownership interests in a
company or corporation and consist of common stock,
preferred stock, warrants and rights to subscribe to
common stock and, in general, any security that is
convertible into or exchangeable for common stock.
Investments in common stocks are subject to market risks
which may cause their prices to fluctuate over time. The
value of convertible securities is also affected by
prevailing interest rates, the credit quality of the
issuer and any call provisions. Changes in the value of
fund securities will not necessarily affect cash income
derived from these securities, but will affect a
Portfolio's net asset value.
Fixed Income Securities
Fixed income securities are debt obligations issued by
corporations, municipalities and other borrowers. The
market value of fixed income investments will generally
change in response to interest rate changes and other
factors. During periods of falling interest rates, the
values of outstanding fixed income securities generally
rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline.
The Portfolios may invest in securities rated in
the fourth highest category by an NRSRO; such securities,
while still investment grade, are considered to have
speculative characteristics. The SIMT High Yield Bond Fund
must invest at least 65%, and the SIT Emerging Markets
Equity Portfolio may invest, up to 5% of its net assets in
securities rated lower than investment grade. Bonds rated
below investment grade are often referred to as "junk
bonds." Such securities involve greater risk of default or
price declines than investment grade securities due to
changes in the issuer's creditworthiness and the outlook
for economic growth.
Forward Foreign
Currency Contracts A forward contract involves an obligation to purchase or
sell a specific currency amount at a future date, agreed
upon by the parties, at a price set at the time of the
contract. A Portfolio may also enter into a contract to
sell, for a fixed amount of U.S. dollars or other
appropriate currency, the amount of foreign currency
approximating the value of some or all of the Portfolio's
securities denominated in such foreign currency.
Futures Contracts and
Options on Futures
Contracts Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a
specific security at a specified future time and at a
specified price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume
a position in a futures contract at a specified exercise
price during the term of the option. A Portfolio may use
futures contracts and related options for bona fide
hedging purposes, to offset changes in the value of
securities held or expected to be acquired or be disposed
of, to minimize fluctuations in foreign currencies, or to
gain exposure to a particular market or instrument. A
Portfolio will minimize the risk that it will be unable to
close out a
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<PAGE> 49
futures contract by only entering into futures contracts
which are traded on national futures exchanges. In
addition, a Portfolio will only sell covered futures
contracts and options on futures contracts.
Stock and bond index futures are futures contracts
for various stock and bond indices that are traded on
registered securities exchanges. Stock and bond index
futures contracts obligate the seller to deliver (and the
purchaser to take) an amount of cash equal to a specific
dollar amount times the difference between the value of a
specific stock or bond index at the close of the last
trading day of the contract and the price at which the
agreement is made.
Stock and bond index futures contracts are
bilateral agreements pursuant to which two parties agree
to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the
stock or bond index value at the close of trading of the
contract and the price at which the futures contract is
originally struck. No physical delivery of the stocks or
bonds comprising the Index is made; generally contracts
are closed out prior to the expiration date of the
contracts.
No price is paid upon entering into futures
contracts. Instead, a Portfolio would be required to
deposit an amount of cash or U.S. Treasury securities
known as "initial margin." Subsequent payments, called
"variation margin," to and from the broker, would be made
on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The
margin is in the nature of a performance bond or
good-faith deposit on a futures contract.
Eurodollar instruments are U.S. dollar-denominated
futures contracts or options thereon which are linked to
the London Interbank Offered Rate ("LIBOR"), although
foreign currency denominated instruments are available
from time to time. Eurodollar futures contracts enable
purchasers to obtain a fixed rate for the lending of the
funds and sellers to obtain a fixed rate for borrowings.
There are risks associated with these activities,
including the following: (1) the success of a hedging
strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in
markets and movements in interest rates; (2) there may be
an imperfect or no correlation between the changes in
market value of the securities held by the Portfolio and
the prices of futures and options on futures; (3) there
may not be a liquid secondary market for a futures
contract or option; (4) trading restrictions or
limitations may be imposed by an exchange; and (5)
government regulations may restrict trading in futures
contracts and futures options.
A Portfolio may enter into futures contracts and
options on futures contracts traded on an exchange
regulated by the Commodities Futures Trading Commission
("CFTC"), as long as, to the extent that such transactions
are not for "bona fide hedging purposes," the aggregate
initial margin and premiums on such positions (excluding
the amount by which such options are in the money) do not
exceed 5%
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<PAGE> 50
of a Portfolio's net assets. A Portfolio may buy and sell
futures contracts and related options to manage its
exposure to changing interest rates and securities prices.
Some strategies reduce a Portfolio's exposure to price
fluctuations, while others tend to increase its market
exposure. Futures and options on futures can be volatile
instruments and involve certain risks that could
negatively impact a Portfolio's return.
In order to avoid leveraging and related risks,
when a Portfolio purchases futures contracts, it will
collateralize its position by depositing an amount of cash
or liquid, high grade debt securities equal to the market
value of the futures positions held, less margin deposits,
in a segregated account with its custodian. Collateral
equal to the current market value of the futures position
will be marked to market on a daily basis.
Illiquid Securities Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price
at which they are being carried on the Portfolio's books.
Illiquid securities include demand instruments with a
demand notice period exceeding seven days, when there is
no secondary market for such security and repurchase
agreements with durations over seven days in length.
Money Market
Instruments Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks and U.S. branches of foreign banks; (ii) U.S.
Treasury Obligations and obligations of agencies and
instrumentalities of the U.S. Government; (iii)
high-quality commercial paper issued by U.S. and foreign
corporations; (iv) debt obligations with a maturity of one
year or less issued by corporations that issue
high-quality commercial paper; and (v) repurchase
agreements involving any of the foregoing obligations
entered into with highly-rated banks and broker-dealers.
Mortgage-Backed
Securities Mortgage-backed securities are instruments that entitle
the holder to a share of all interest and principal
payments from mortgages underlying the security. The
mortgages backing these securities include conventional
fifteen- and thirty-year fixed rate mortgages, graduated
payment mortgages, adjustable rate mortgages, and balloon
mortgages. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed
securities can be expected to accelerate. Prepayment of
mortgages which underlie securities purchased at a premium
often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital
gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict
accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities. These are
securities that are issued or guaranteed by a U.S.
Government agency representing an interest in a pool of
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<PAGE> 51
mortgage loans. The primary issuers or guarantors of these
mortgage-backed securities are GNMA, FNMA and FHLMC. GNMA,
FNMA and FHLMC guarantee timely distributions of interest
to certificate holders. GNMA and FNMA also guarantee
timely distributions of scheduled principal. FNMA and
FHLMC obligations are not backed by the full faith and
credit of the U.S. Government as GNMA certificates are,
but FNMA and FHLMC securities are supported by the
instrumentalities' right to borrow from the U.S. Treasury.
Private Pass-Through Securities. These are
mortgage-backed securities issued by a non-governmental
entity, such as a trust or corporate entity. These
securities include collateralized mortgage obligations
("CMOs") and real estate mortgage investment conduits
("REMICs"). While they are generally structured with one
or more types of credit enhancement, private pass-through
securities typically lack a guarantee by an entity having
the credit status of a governmental agency or
instrumentality.
Collateralized Mortgage Obligations ("CMOs"). CMOs
are debt obligations or multiclass pass-through
certificates issued by agencies or instrumentalities of
the U.S. Government or by private originators or investors
in mortgage loans. Principal payments on the underlying
mortgage assets may cause CMOs to be retired substantially
earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium
paid.
Parallel Pay Securities; PAC Bonds. Parallel pay
CMOs and REMICS are structured to provide payments of
principal on each payment date to more than one class.
These simultaneous payments are taken into account in
calculating the stated maturity date or final distribution
date of each class, which must be retired by its stated
maturity date or final distribution date, but may be
retired earlier. Planned Amortization Class CMOs ("PAC
Bonds") generally require payments of a specified amount
of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on
such securities having the highest priority after interest
has been paid to all classes.
REMICs. A REMIC is a CMO that qualifies for
special tax treatment under the Internal Revenue Code and
invests in certain mortgages principally secured by
interests in real property. Investors may purchase
beneficial interests in REMICs, which are known as
"regular" interests, or "residual" interests. Guaranteed
REMIC pass-through certificates ("REMIC Certificates")
issued by FNMA or FHLMC represent beneficial ownership
interests in a REMIC trust consisting principally of
mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage
pass-through certificates.
Stripped Mortgage-Backed Securities ("SMBs"). SMBs
are usually structured with two classes that receive
specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One
class may receive all of the interest payments and is thus
termed an interest-only class ("IO"), while the
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other class may receive all of the principal payments and
is thus termed the principal-only class ("PO"). The value
of IOs tends to increase as rates rise and decrease as
rates fall; the opposite is true of POs. SMB's are
extremely sensitive to changes in interest rates because
of the impact thereon of prepayment of principal on the
underlying mortgage securities.
Mortgage Dollar Rolls Mortgage "dollar rolls" are transactions in which
mortgage-backed securities are sold for delivery in the
current month and the seller simultaneously contracts to
repurchase substantially similar securities on a specified
future date. The difference between the sale price and the
purchase price (plus any interest earned on the cash
proceeds of the sale) is netted against the interest
income foregone on the securities sold to arrive at an
implied borrowing rate. Alternatively, the sale and
purchase transactions can be executed at the same price,
with the Portfolio being paid a fee as consideration for
entering into the commitment to purchase.
Municipal Securities Municipal securities consist of: (i) debt obligations
issued by or on behalf of public authorities to obtain
funds to be used for various public facilities, for
refunding outstanding obligations, for general operating
expenses, and for lending such funds to other public
institutions and facilities, and (ii) certain private
activity and industrial development bonds issued by or on
behalf of public authorities to obtain funds to provide
for the construction, equipment, repair or improvement of
privately operated facilities.
Obligations of
Supranational
Entities Obligations of supranational entities are obligations of
entities established through the joint participation of
several governments, such as the Asian Development Bank,
the Inter-American Development Bank, International Bank
for Reconstruction and Development (World Bank), African
Development Bank, European Economic Community, European
Investment Bank and the Nordic Investment Bank.
Options A put option gives the purchaser of the option the right
to sell, and the writer of the option the obligation to
buy, the underlying security at any time during the option
period. A call option gives the purchaser of the option
the right to buy, and the writer of the option the
obligation to sell, the underlying security at any time
during the option period. The premium paid to the writer
is the consideration for undertaking the obligations under
the option contract. The initial purchase (sale) of an
option contract is an "opening transaction." In order to
close out an option position, a Portfolio may enter into a
"closing transaction," which is simply the sale (purchase)
of an option contract on the same security with the same
exercise price and expiration date as the option contract
originally opened. If a Portfolio is unable to effect a
closing purchase transaction with respect to an option it
has written, it will not be able to sell the underlying
security until the option expires or the Portfolio
delivers the security upon exercise.
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A Portfolio may purchase put and call options to
protect against a decline in the market value of the
securities in its portfolio or to anticipate an increase
in the market value of securities that the Portfolio may
seek to purchase in the future. A Portfolio purchasing put
and call options pays a premium therefor. If price
movements in the underlying securities are such that
exercise of the options would not be profitable for the
Portfolio, loss of the premium paid may be offset by an
increase in the value of the Portfolio's securities or by
a decrease in the cost of acquisition of securities by the
Portfolio.
A Portfolio may write covered call options as a
means of increasing the yield on its fund and as a means
of providing limited protection against decreases in its
market value. When a fund sells an option, if the
underlying securities do not increase or decrease to a
price level that would make the exercise of the option
profitable to the holder thereof, the option generally
will expire without being exercised and the Portfolio will
realized as profit the premium received for such option.
When a call option written by a Portfolio is exercised,
the Portfolio will be required to sell the underlying
securities to the option holder at the strike price, and
will not participate in any increase in the price of such
securities above the strike price. When a put option
written by a Portfolio is exercised, the Portfolio will be
required to purchase the underlying securities at the
strike price, which may be in excess of the market value
of such securities.
A Portfolio may purchase and write options on an
exchange or over-the-counter. Over-the-counter options
("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with
dealers and not with a clearing corporation, and therefore
entail the risk of non-performance by the dealer. OTC
options are available for a greater variety of securities
and for a wider range of expiration dates and exercise
prices than are available for exchange-traded options.
Because OTC options are not traded on an exchange, pricing
is done normally by reference to information from a market
maker. It is the position of the SEC that OTC options are
generally illiquid.
A Portfolio may purchase and write put and call
options on foreign currencies (traded on U.S. and foreign
exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign
currency written by a Portfolio will be "covered," which
means that the Portfolio will own an equal amount of the
underlying foreign currency. With respect to put options
on foreign currency written by a Portfolio, the Portfolio
will establish a segregated account with its Custodian
consisting of cash or liquid, high grade debt securities
in an amount equal to the amount the Portfolio would be
required to pay upon exercise of the put.
A Portfolio may purchase and write put and call
options on indices and enter into related closing
transactions. Put and call options on indices are similar
to options on securities except that options on an index
give the holder the right to
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receive, upon exercise of the option, an amount of cash if
the closing level of the underlying index is greater than
(or less than, in the case of puts) the exercise price of
the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise
price of the option, expressed in dollars multiplied by a
specified number. Thus, unlike options on individual
securities, all settlements are in cash, and gain or loss
depends on price movements in the particular market
represented by the index generally, rather than the price
movements in individual securities. A Portfolio may choose
to terminate an option position by entering into a closing
transaction. The ability of a Portfolio to enter into
closing transactions depends upon the existence of a
liquid secondary market for such transactions.
All options written on indices must be covered.
When a Portfolio writes an option on an index, it will
establish a segregated account containing cash or liquid,
high grade debt securities with its custodian in an amount
at least equal to the market value of the option and will
maintain the account while the option is open or will
otherwise cover the transaction.
Risk Factors: Risks associated with options
transactions include: (1) the success of a hedging
strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in
markets and movements in interest rates; (2) there may be
an imperfect correlation between the movement in prices of
options and the securities underlying them; (3) there may
not be a liquid secondary market for options; and (4)
while a Portfolio will receive a premium when it writes
covered call options, it may not participate fully in a
rise in the market value of the underlying security.
Receipts Receipts are sold as zero coupon securities, which means
that they are sold at a substantial discount and redeemed
at face value at their maturity date without interim cash
payments of interest or principal. This discount is
accreted over the life of the security, and such accretion
will constitute the income earned on the security for both
accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate
volatility than interest paying investments. See also
"Taxes."
REITs REITs are trusts that invest primarily in commercial real
estate or real estate-related loans. The value of
interests in REITs may be affected by the value of the
property owned or the quality of the mortgages held by the
trust.
Repurchase Agreements Repurchase agreements are agreements by which a Portfolio
obtains a security and simultaneously commits to return
the security to the seller at an agreed upon price
(including principal and interest) on an agreed upon date
within a number of days from the date of purchase.
Repurchase agreements are considered loans under the 1940
Act.
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Securities Lending In order to generate additional income, a Portfolio may
lend securities which it owns pursuant to agreements
requiring that the loan be continuously secured by
collateral consisting of cash or securities of the U.S.
Government or its agencies equal to at least 100% of the
market value of the loaned securities. A Portfolio
continues to receive interest on the loaned securities
while simultaneously earning interest on the investment of
cash collateral. Collateral is marked to market daily.
There may be risks of delay in recovery of the securities
or even loss of rights in the collateral should the
borrower of the securities fail financially or become
insolvent.
Securities of
Foreign Issuers There are certain risks connected with investing in
foreign securities. These include risks of adverse
political and economic developments (including possible
governmental seizure or nationalization of assets), the
possible imposition of exchange controls or other
governmental restrictions, less uniformity in accounting
and reporting requirements, the possibility that there
will be less information on such securities and their
issuers available to the public, the difficulty of
obtaining or enforcing court judgments abroad,
restrictions on foreign investments in other
jurisdictions, difficulties in effecting repatriation of
capital invested abroad and difficulties in transaction
settlements and the effect of delay on shareholder equity.
Foreign securities may be subject to foreign taxes, and
may be less marketable than comparable U.S. securities.
The value of a Portfolio's investments denominated in
foreign currencies will depend on the relative strengths
of those currencies and the U.S. dollars, and a Portfolio
may be affected favorably or unfavorably by changes in the
exchange rates or exchange control regulations between
foreign currencies and the U.S. dollar. Changes in foreign
currency exchange rates also may affect the value of
dividends and interest earned, gains and losses realized
on the sale of securities and net investment income and
gains if any, to be distributed to shareholders by a
Portfolio. Furthermore, emerging market countries may have
less stable political environments than more developed
countries. Also, it may be more difficult to obtain a
judgment in a court outside the United States.
Short Sales A Portfolio may sell securities short against the box. A
short sale is "against the box" if at all times during
which the short position is open, the Portfolio owns at
least an equal amount of the securities or securities
convertible into, or exchangeable without further
consideration for, securities of the same issue as the
securities that are sold short.
Swaps, Caps, Floors
and Collars Interest rate swaps, mortgage swaps, currency swaps and
other types of swap agreements such as caps, floors and
collars are designed to permit the purchaser to preserve a
return or spread on a particular investment or portion of
its portfolio, and to protect against any increase in the
price of securities a Portfolio anticipates purchasing at
a later date. In a typical interest rate swap, one party
agrees to make
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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 amount, for a specific
period of time. 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.
Swap agreements will tend to shift the Fund's
investment exposure from one type of investment to
another. Depending on how they are used, swap agreements
may increase or decrease the overall volatility of the
Fund's investment and their share price and yield.
U.S. Government Agency
Obligations Obligations issued or guaranteed by agencies of the U.S.
Government, including, among others, the Federal Farm
Credit Bank, the Federal Housing Administration and the
Small Business Administration, and obligations issued or
guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage
Corporation, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the
full faith and credit of the U.S. Treasury (e.g., GNMA
securities), and others are supported by the right of the
issuer to borrow from the Treasury (e.g., Federal Farm
Credit Bank securities), while still others are supported
only by the credit of the instrumentality (e.g., FNMA
securities).
U.S. Treasury
Obligations U.S. Treasury obligations consist of bills, notes and
bonds issued by the U.S. Treasury, as well as separately
traded interest and principal component parts of such
obligations known as Separately Traded Registered Interest
and Principal Securities ("STRIPS") that are transferable
through the Federal book-entry system. STRIPS are sold as
zero coupon securities.
U.S. Treasury
Receipts U.S. Treasury receipts are interests in separately traded
interest and principal component parts of U.S. Treasury
obligations that are issued by banks or brokerage firms
and are created by depositing U.S. Treasury notes and
obligations into a special account at a custodian bank.
The custodian holds the interest and principal payments
for the benefit of the registered owners of the
certificates of receipts. The custodian arranges for the
issuance of the certificates or receipts evidencing
ownership and maintains the register.
Variable and Floating
Rate Instruments Certain obligations may carry variable or floating rates
of interest and may involve conditional or unconditional
demand features. Such instruments bear interest at rates
which are not fixed, but which vary with changes in
specified market rates or indices. The interest rates on
these securities may be reset daily, weekly, quarterly or
some other reset period, and may have a floor or ceiling
on interest rate changes.
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Warrants Warrants are instruments giving holders the right, but not
the obligation, to buy equity or fixed income securities
of a company at a given price during a specified period.
When-Issued and Delayed
Delivery Securities When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment.
Yankee Obligations Yankee obligations ("Yankees") are U.S. dollar-denominated
instruments of foreign issuers who either register with
the Securities and Exchange Commission or issue securities
under Rule 144A of the Securities Exchange Act of 1933.
These consist of debt securities (including preferred or
preference stock of non-governmental issuers),
certificates of deposit, fixed time deposits and bankers'
acceptances issued by foreign banks, and debt obligations
of foreign governments or their subdivisions, agencies and
instrumentalities, international agencies and
supranational entities.
Zero Coupon, Pay In-Kind
and Deferred Payment
Securities Zero coupon securities are securities that are sold at a
discount to par value and securities on which interest
payments are not made during the life of the security.
Upon maturity, the holder is entitled to receive the par
value of the security. While interest payments are not
made on such securities, holders of such securities are
deemed to have received "phantom income" annually. Because
a Portfolio will distribute its "phantom income" to
shareholders, to the extent that shareholders elect to
receive dividends in cash rather than reinvesting such
dividends in additional shares, a Portfolio will have
fewer assets with which to purchase income producing
securities. Zero coupon, pay-in-kind and deferred payment
securities may be subject to greater fluctuation in value
and lesser liquidity in the event of adverse market
conditions that comparably rated securities paying cash
interest at regular interest payment periods.
Additional information on other permitted
investments can be found in the Trust's Statement of
Additional Information and in the Underlying Portfolios'
Prospectuses and Statements of Additional Information.
54
<PAGE> 58
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Fund Expenses (Class D Shares).................... 2
Indirect Expenses................................. 3
Financial Highlights.............................. 4
Investment Objectives and Policies of the Funds... 5
General Investment Policies of the Funds.......... 9
Risk Factors of the Funds......................... 10
Investment Limitations of the Funds............... 11
Portfolio Turnover of the Funds................... 11
Investment Goals of the Underlying Portfolios..... 12
Investment Objectives and Policies of the
Underlying Portfolios........................... 12
General Investment Policies of the Underlying
Portfolios...................................... 22
Risk Factors of the Underlying Portfolios......... 24
Fundamental Limitations of the Underlying
Portfolios...................................... 24
The Adviser and Manager of the Funds.............. 25
The Advisers and Sub-Advisers to the Underlying
Portfolios...................................... 26
Transfer Agent.................................... 36
Distribution of Fund Shares and Shareholder
Servicing....................................... 36
Purchase and Redemption of Shares................. 38
Performance....................................... 40
Taxes............................................. 41
General Information............................... 42
Description of Permitted Investments and Risk
Factors of the Underlying Portfolios............ 44
</TABLE>
55
<PAGE> 59
PRELIMINARY PROSPECTUS DATED SEPTEMBER 16, 1996
SUBJECT TO COMPLETION
SEI ASSET ALLOCATION TRUST
DECEMBER 1, 1996
- --------------------------------------------------------------------------------
DIVERSIFIED CONSERVATIVE INCOME FUND
DIVERSIFIED CONSERVATIVE FUND
DIVERSIFIED GLOBAL MODERATE GROWTH FUND
DIVERSIFIED MODERATE GROWTH FUND
DIVERSIFIED GLOBAL GROWTH FUND
DIVERSIFIED GLOBAL STOCK FUND
DIVERSIFIED U.S. STOCK FUND
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely information about the above-referenced
Funds. Please read this Prospectus carefully before investing, and keep it on
file for future reference.
A Statement of Additional Information dated December 1, 1996, has been filed
with the Securities and Exchange Commission ("SEC") and may be obtained upon
request and without charge by writing the Distributor, SEI Financial Services
Company (the "Distributor"), at 680 East Swedesford Road, Wayne, Pennsylvania
19087-1658, or by calling 1-800-342-5734. The Statement of Additional
Information is incorporated into this Prospectus by reference.
SEI Asset Allocation Trust (the "Trust") is an open-end management investment
company consisting of the following seven separate diversified investment
portfolios (each a "Fund" and, together, the "Funds"): Diversified Conservative
Income Fund, Diversified Conservative Fund, Diversified Global Moderate Growth
Fund, Diversified Moderate Growth Fund, Diversified Global Growth Fund (formerly
the Diversified Growth Fund), Diversified Global Stock Fund and Diversified U.S.
Stock Fund. Each Fund offers investors a convenient means of investing in shares
of certain mutual funds (the "Underlying Portfolios") managed by SEI Financial
Management Corporation ("SFM" or the "Adviser") within certain predetermined
percentage ranges. Each Fund offers two classes of shares, Class A Shares and
Class D Shares. Class A Shares are offered primarily to tax-advantaged and other
retirement accounts. Class D Shares are offered primarily to tax-advantaged and
other retirement accounts through banks, broker-dealers and other financial
institutions that have entered into arrangements with the Distributor to sell
Class D Shares to their customers. Class D Shares differ from Class A Shares
primarily in the allocation of certain distribution, shareholder servicing and
transfer agent expenses, and in the range and types of shareholder services
offered to investors. This Prospectus offers Class A Shares of the Funds.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE FUNDS INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OF AMENDMENT. A
REGISTRATION STATEMENT RELATING TO, AMONG OTHER THINGS, THIS PROSPECTUS HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SECURITIES OF THE
FUNDS REFERENCED IN THIS PROSPECTUS MAY NOT BE SOLD NOR MAY OFFERS TO BUY
SUCH SECURITIES BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF
SECURITIES REFERENCED HEREIN IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION
OR SALE WOULD BE UNLAWFUL PRIOR TO SUCH REGISTRATION OR QUALIFICATION UNDER
THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 60
FUND EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly in connection with
an investment in each Fund's Class A Shares ("Direct Expenses"). The table below
does not reflect any of the operating costs and investment advisory fees of the
Underlying Portfolios. In addition to the Direct Expenses, Class A Shareholders
of the Funds will indirectly bear their pro rata share of the expenses of the
Underlying Portfolios ("Indirect Expenses"). See "Indirect Expenses."
ANNUAL OPERATING EXPENSES (DIRECT EXPENSES)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED
DIVERSIFIED GLOBAL DIVERSIFIED DIVERSIFIED DIVERSIFIED
CONSERVATIVE DIVERSIFIED MODERATE MODERATE GLOBAL GLOBAL DIVERSIFIED
INCOME CONSERVATIVE GROWTH GROWTH GROWTH STOCK U.S. STOCK
FUND FUND FUND FUND FUND FUND FUND
------------ ------------ ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Management/Advisory Fees (after
waivers) (1) .00% .00% .00% .00% .00% .00% .00%
12b-1 Fees None None None None None None None
Total Other Expenses (after
expense reimbursements) (2) (3) .12% .12% .12% .12% .12% .12% .12%
- -----------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after
waivers and expense
reimbursement) (3) .12% .12% .12% .12% .12% .12% .12%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) SFM is currently waiving its advisory and management fees. Absent fee
waivers, management and advisory fees for each Fund would be .30%. These
fee waivers are voluntary and may be discontinued by SFM at any time in its
sole discretion.
(2) Absent SFM's expense reimbursement, other expenses are estimated to be .14%
for the current fiscal year.
(3) Absent SFM's fee waivers and expense reimbursements, the total operating
expenses of each Fund's Class A Shares would be .44%.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS.
----- ------
<S> <C> <C>
An investor in a Fund would pay the following expenses on a $1,000 investment assuming: (1) a 5% annual
return, and (2) redemption at the end of each time period:
Diversified Conservative Income Fund $ 1 $4
Diversified Conservative Fund $ 1 $4
Diversified Global Moderate Growth Fund $ 1 $4
Diversified Moderate Growth Fund $ 1 $4
Diversified Global Growth Fund $ 1 $4
Diversified Global Stock Fund $ 1 $4
Diversified U.S. Stock Fund $ 1 $4
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the expense tables and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in Class A Shares of each Fund. A person who purchases shares
through an account with a financial institution may be charged separate fees by
that institution in addition to those set forth above. The information set forth
in the foregoing table and example relates to the Class A Shares. Class A Shares
are subject to the same management and advisory expenses as Class D Shares, but
are subject to different distribution, shareholder servicing and transfer agent
expenses. Additional information may be found under "The Adviser and Manager of
the Funds" and "Distribution of Fund Shares and Shareholder Servicing."
2
<PAGE> 61
INDIRECT EXPENSES
Investors in the Funds should recognize that they may invest directly in the
Underlying Portfolios and that, by investing in Underlying Portfolios through
the Funds, they will bear not only their proportionate share of the expenses of
the Funds (including operating costs and investment advisory and administrative
fees to the extent the Adviser has not elected to waive such fees), but will
also indirectly bear similar expenses of the Underlying Portfolios ("Indirect
Expenses"). Moreover, the investment returns of the Funds will be net of the
expenses of the Underlying Portfolios. Investors that purchase shares of the
Funds through managed account programs who pay separate advisory fees for asset
allocation services should recognize that the combined expenses of the program
and the Funds (including the expenses charged by the Underlying Portfolios) may
involve greater fees and expenses than those present in other types of
investments. In addition, a shareholder of a Fund will indirectly bear expenses
paid by an Underlying Portfolio related to the distribution of its shares, if
any. Currently, Class A Shares of the Underlying Portfolios are subject to a
shareholder servicing fee of up to .25%. See "Distribution of Fund Shares and
Shareholder Servicing."
The chart below sets forth the expense ratios for each of the Underlying
Portfolios in which the Funds will invest (based on information as of September
30, 1996).
<TABLE>
<CAPTION>
UNDERLYING PORTFOLIOS ELIGIBLE FOR PURCHASE UNDERLYING PORTFOLIOS' EXPENSE RATIOS*
<S> <C>
SIMT Large Cap Growth Portfolio .85%
SIMT Large Cap Value Portfolio .85%
SIMT Small Cap Growth Portfolio 1.10%
SIMT Small Cap Value Portfolio 1.10%
SIT International Equity Portfolio 1.28%
SIT Emerging Markets Equity Portfolio 1.95%
SIMT Core Fixed Income Portfolio .60%
SIMT High Yield Bond Portfolio .85%
SIT International Fixed Income Portfolio 1.00%
SLAT Prime Obligation Portfolio .44%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Funds will purchase only Class A Shares of the Underlying Portfolios. The
expense ratios of the Class A Shares of the Underlying Portfolios shown above
reflect existing fee waivers and expense reimbursement arrangements that may
be discontinued at any time. Absent these fee waivers on the Class A Shares of
the Underlying Portfolios, these expense ratios would be higher.
Set forth below are the Expense Ranges of the Underlying Portfolios in which the
Funds invest. A range is provided since the average assets of each Fund invested
in each of the Underlying Portfolios may fluctuate. The investment ranges for
each Fund are set forth in the "Investment Objectives and Policies of the Funds"
section.
EXPENSE RANGES (INDIRECT EXPENSES)
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Based on the expense ratios of the Underlying Portfolios, the range of average weighted RANGE OF
operating expenses for Class A shares of the Funds are expected to be as follows: EXPENSES
---------
Diversified Conservative Income Fund .58% to .80%
Diversified Conservative Fund .65% to .90%
Diversified Global Moderate Growth Fund .68% to 1.11%
Diversified Moderate Growth Fund .69% to .97%
Diversified Growth Fund .78% to 1.22%
Diversified Global Stock Fund .85% to 1.22%
Diversified U.S. Stock Fund .75% to .95%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 62
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Period -- Unaudited
<TABLE>
<CAPTION>
Net
Realized Ratio of
Net and Net Net Expenses
Asset Net Unrealized Dividends Asset Assets to
Value Investment Gains from Net Value End of Average
Beginning Income/ (Losses) on Investment End Total Period Net
of Period (Loss) Securities Income of Period Return (000) Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------
DIVERSIFIED CONSERVATIVE INCOME FUND
- -----------------------------------------
Class D
Period Ended
07/31/96 (1) $ 10.09 $(0.01) $ (0.05) $(0.01) $ 10.02 -0.61%** $ 303 1.12%*
- --------------------------------
DIVERSIFIED CONSERVATIVE FUND
- --------------------------------
Class D
Period Ended
07/31/96 (2) $ 9.33 $(0.12) $ (0.05) $ 0.00 $ 9.16 -1.82%** $ 279 1.12%*
- --------------------------------------
DIVERSIFIED MODERATE GROWTH FUND
- --------------------------------------
Class D
Period Ended
07/31/96 (3) $ 10.21 $ 0.01 $ (0.31) $ 0.00 $ 9.91 -2.94%** $ 3,687 1.12%*
- ---------------------------
DIVERSIFIED GLOBAL GROWTH FUND
- ---------------------------
Class D
Period Ended
07/31/96 (4) $ 10.24 $ 0.00 $ (0.45) $ 0.00 $ 9.79 -4.39%** $ 5,213 1.12%*
- ------------------------------
DIVERSIFIED U.S. STOCK FUND
- ------------------------------
Class D
Period Ended
07/31/96 (5) $ 10.36 $ 0.01 $ (0.66) $ 0.00 $ 9.71 -6.27%** $ 4,010 1.12%*
<CAPTION>
Ratio of
Net
Ratio of Investment
Ratio of Expenses Income/
Investment to (Loss) to
Income/ Average Average
(Loss) to Net Net
Average Assets Assets Portfolio
Net (Excluding (Excluding Turnover
Assets Waivers) Waivers) Rate
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------
- ------------------------------------
DIVERSIFIED CONSERVATIVE INCOME FUND
- ------------------------------------
Class D
Period Ended
07/31/96 (1) 3.56%* 15.91%* -11.23%* 21%
- -----------------------------
DIVERSIFIED CONSERVATIVE FUND
- -----------------------------
Class D
Period Ended
07/31/96 (2) 1.66%* 16.86%* -14.08%* 2%
- --------------------------------
DIVERSIFIED MODERATE GROWTH FUND
- --------------------------------
Class D
Period Ended
07/31/96 (3) 0.74%* 4.75%* -2.89%* 2%
- ------------------------------
DIVERSIFIED GLOBAL GROWTH FUND
- ------------------------------
Class D
Period Ended
07/31/96 (4) 0.01%* 4.19%* -3.06%* 0%
- ---------------------------
DIVERSIFIED U.S. STOCK FUND
- ---------------------------
Class D
Period Ended
07/31/96 (5) -1.03%* 3.03%* -2.94%* 33%
</TABLE>
* Annualized.
** Total return has not been annualized.
(1) Commenced operations 06/21/96
(2) Commenced operations 07/01/96
(3) Commenced operations 05/30/96
(4) Commenced operations 05/30/96
(5) Commenced operations 07/01/96
4
<PAGE> 63
INVESTMENT
OBJECTIVES AND
POLICIES OF
THE FUNDS
The Funds offer investors the opportunity to invest in
certain of the Underlying Portfolios, and are designed
primarily for tax-advantaged retirement and other long-
term investment or savings accounts, including: Individual
Retirement Accounts ("IRAs"), 403(b)(7) tax-sheltered
retirement accounts for employees of certain non-profit
organizations, 401(k) savings plans, profit-sharing and
money-purchase pension plans, and other employer-sponsored
pension and savings plans.
In order to achieve its investment objective, each
Fund invests a percentage of its assets within
predetermined percentage ranges in certain of the
Underlying Portfolios, which are separately-managed series
of the following investment companies: SEI Institutional
Managed Trust ("SIMT"), SEI International Trust ("SIT")
and SEI Liquid Asset Trust ("SLAT" and, together with SIMT
and SIT, the "Underlying Trusts"). The percentages reflect
the extent to which each Fund will invest in the
particular market segment represented by each Underlying
Portfolio, and the varying degrees of potential investment
risk and reward represented by each Fund's investments in
those market segments and their corresponding Underlying
Portfolios. The Adviser may alter these percentage ranges
when it deems appropriate. The assets of each Fund will be
allocated among each of the Underlying Portfolios in
accordance with its investment objective, the Adviser's
outlook for the economy, the financial markets and the
relative market valuations of the Underlying Portfolios.
In addition, in order to meet liquidity needs or for
temporary defensive purposes, each Fund may invest its
assets directly in cash, money market securities, or other
instruments, including stock or bond index futures and
options thereon. The investment objective of each Fund is
set forth below. Each Fund's investment objective is a
fundamental policy, and may not be changed without
shareholder approval. There can be no assurance that the
Funds will achieve their stated objectives.
DIVERSIFIED
CONSERVATIVE
INCOME FUND The Diversified Conservative Income Fund seeks to provide
current income and an opportunity for capital appreciation
through limited participation in domestic equity markets.
In general, relative to the other Funds, the Diversified
Conservative Income Fund should offer investors the
potential for a medium to high level of income and the
potential for a low to medium level of capital growth,
while subjecting investors
5
<PAGE> 64
to a medium level of principal risk. The Fund will
invest in the following Underlying Portfolios within the
percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED CONSERVATIVE INCOME FUND'S ASSETS)
---------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 5-20%
SIMT Large Cap Value 5-20%
SIMT Small Cap Growth 0-15%
SIMT Small Cap Value 0-15%
SIMT Core Fixed Income 50-65%
SLAT Prime Obligation 0-30%
---------------------------------------------------------------------------------------
</TABLE>
DIVERSIFIED
CONSERVATIVE FUND The Diversified Conservative Fund seeks to provide current
income with the opportunity for capital appreciation
through limited participation in the domestic and
international equity markets. In general, relative to the
other Funds, the Diversified Conservative Fund should
offer investors the potential for a medium level of income
and the potential for a low to medium level of capital
growth, while subjecting investors to a medium level of
principal risk. The Fund will invest in the following
Underlying Portfolios within the percentage ranges set
forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED CONSERVATIVE FUND'S ASSETS)
---------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 5-20%
SIMT Large Cap Value 5-20%
SIMT Small Cap Growth 0-15%
SIMT Small Cap Value 0-15%
SIT International Equity 5-20%
SIMT Core Fixed Income 40-55%
SIT International Fixed Income 10-25%
SLAT Prime Obligation 0-30%
---------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 65
DIVERSIFIED GLOBAL
MODERATE
GROWTH FUND The Diversified Global Moderate Growth Fund seeks to
provide long-term capital appreciation through
participation in the domestic and global equity markets
with a limited level of current income. In general,
relative to the other Funds, the Diversified Global
Moderate Growth Fund should offer investors the potential
for a medium level of income and the potential for a
medium level of capital growth, while subjecting investors
to a medium level of principal risk. The Fund will invest
in the following Underlying Portfolios within the
percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED GLOBAL MODERATE GROWTH FUND'S ASSETS)
---------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 10-25%
SIMT Large Cap Value 10-25%
SIMT Small Cap Growth 0-15%
SIMT Small Cap Value 0-15%
SIT International Equity 10-25%
SIT Emerging Markets Equity 0-15%
SIMT Core Fixed Income 20-35%
SIMT High Yield Bond 5-20%
SIT International Fixed Income 0-15%
SLAT Prime Obligation 0-30%
---------------------------------------------------------------------------------------
</TABLE>
DIVERSIFIED
MODERATE
GROWTH FUND The Diversified Moderate Growth Fund seeks to provide
long-term capital appreciation with a limited level of
current income. In general, relative to the other Funds,
the Diversified Moderate Growth Fund should offer
investors the potential for a medium level of income and
the potential for a medium level of capital growth, while
subjecting investors to a medium level of principal risk.
The Fund will invest in the following Underlying
Portfolios within the percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED MODERATE GROWTH FUND'S ASSETS)
---------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 10-25%
SIMT Large Cap Value 10-25%
SIMT Small Cap Growth 0-15%
SIMT Small Cap Value 0-15%
SIT International Equity 10-25%
SIMT Core Fixed Income 25-40%
SIT International Fixed Income 5-20%
SLAT Prime Obligation 0-30%
---------------------------------------------------------------------------------------
</TABLE>
DIVERSIFIED GLOBAL
GROWTH FUND The Diversified Global Growth Fund (formerly Diversified
Growth Fund) seeks to provide long-term capital
appreciation. Current income is a secondary consideration.
In general, relative to the other Funds, the Diversified
Global Growth Fund should
7
<PAGE> 66
offer investors the potential for a low to medium level
of income and the potential for a medium to high level
of capital growth, while subjecting investors to a
higher level of principal risk. The Fund will invest in
the following Underlying Portfolios within the
percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED GROWTH FUND'S ASSETS)
-------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 15-30%
SIMT Large Cap Value 15-30%
SIMT Small Cap Growth 0-15%
SIMT Small Cap Value 0-15%
SIT International Equity 10-25%
SIT Emerging Markets Equity 5-20%
SIMT Core Fixed Income 5-20%
SIMT High Yield Bond 0-15%
SIT International Fixed Income 0-15%
SLAT Prime Obligation 0-30%
-------------------------------------------------------------------------------------
</TABLE>
DIVERSIFIED GLOBAL
STOCK FUND The Diversified Global Stock Fund seeks to provide
long-term capital appreciation through a diversified
global equity strategy. In general, relative to the other
Funds, the Diversified Global Stock Fund should offer
investors the potential for a lower level of income and
the potential for a higher level of capital growth, while
subjecting investors to medium to high levels of principal
risk. The Fund will invest in the following Underlying
Portfolios within the percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED GLOBAL STOCK FUND'S ASSETS)
-------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 20-35%
SIMT Large Cap Value 20-35%
SIMT Small Cap Growth 0-15%
SIMT Small Cap Value 0-15%
SIT International Equity 15-30%
SIT Emerging Markets Equity 5-20%
SLAT Prime Obligation 0-30%
-------------------------------------------------------------------------------------
</TABLE>
DIVERSIFIED
U.S. STOCK FUND The Diversified U.S. Stock Fund seeks to provide long-term
capital appreciation through a diversified domestic equity
strategy. Current income is an incidental consideration.
In general, relative to the other Funds, the Diversified
U.S. Stock Fund should offer investors the potential for a
lower level of income and the potential for a high level
of capital growth, while subjecting investors to a medium
8
<PAGE> 67
to high level of principal risk. The Fund will invest in
the following Underlying Portfolios within the
percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
UNDERLYING PORTFOLIO DIVERSIFIED U.S. STOCK FUND'S ASSETS)
------------------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth 30-45%
SIMT Large Cap Value 30-45%
SIMT Small Cap Growth 5-20%
SIMT Small Cap Value 5-20%
SLAT Prime Obligation 0-30%
------------------------------------------------------------------------------------
</TABLE>
GENERAL
INVESTMENT
POLICIES
OF THE FUNDS
The Funds will attempt to achieve their investment
objectives by purchasing shares of the Underlying
Portfolios within the percentage ranges set forth above.
The SEC has issued an exemptive order to the Trust dated
December 20, 1995 (the "Order"), permitting the Funds to
acquire up to 100% of the Shares of any of the Underlying
Portfolios under certain conditions. Absent this Order,
the Investment Company Act of 1940 (the "1940 Act") would
substantially limit the ability of the Funds and
Underlying Portfolios to engage in these transactions.
In addition to purchasing shares of the Underlying
Portfolios, the Funds may use futures contracts and
options in order to remain effectively fully invested in
proportions consistent with SFM's current asset allocation
strategy in an efficient and cost effective manner.
Specifically, each Fund may enter into futures contracts
and options thereon provided that the aggregate deposits
required on these contracts do not exceed 5% of the Fund's
total assets.
Futures contracts and options may also be used to
reallocate the Funds' assets among asset categories while
minimizing transaction costs, to maintain cash reserves
while simulating full investment, to facilitate trading or
to seek higher investment returns or simulate full
investment when a futures contract is priced attractively
or is otherwise considered more advantageous than the
underlying security or index. The Funds will not use
futures contracts or options to leverage their portfolios.
In order to meet liquidity needs, or for temporary
defensive purposes, the Funds may purchase money market
securities or other short-term debt instruments rated in
one of the top two categories by a nationally recognized
statistical rating organization ("NRSRO") at the time of
purchase or, if not rated, determined to be of comparable
quality by the Adviser. To the extent that a Fund is
engaged in temporary defensive investing, it will not be
pursuing its investment objective. See "Description of
Permitted Investments and Risk Factors of the Underlying
Portfolios."
9
<PAGE> 68
RISK FACTORS
OF THE FUNDS
Prospective investors in the Funds should consider the
following risk factors:
- Any investment in a mutual fund involves risk and,
although the Funds invest in a number of Underlying
Portfolios, this practice does not eliminate investment
risk;
- Under certain circumstances, an Underlying Portfolio may
determine to make payment of a redemption request by a
Fund wholly or partly by a distribution in kind of
securities from its portfolio, instead of cash, in
accordance with the rules of the SEC. In such cases, the
Funds may hold securities distributed by an Underlying
Portfolio until the Adviser determines that it is
appropriate to dispose of such securities;
- Certain Underlying Portfolios may: invest a portion of
their assets in foreign securities; enter into forward
currency transactions; lend their portfolio securities;
enter into stock index, interest rate and currency
futures contracts, and options on such contracts; engage
in other types of options transactions; make short
sales; purchase zero coupon and payment-in-kind bonds;
and engage in various other investment practices.
Further information about these investment policies and
practices can be found under "Investment Objectives and
Policies of the Underlying Portfolios" and "Description
of Permitted Investments and Risk Factors of the
Underlying Portfolios" in this Prospectus and in the
Trust's Statement of Additional Information, and in the
prospectuses of each of the Underlying Portfolios;
- The Diversified Global Growth Fund can invest as much as
15% of its assets in the SIMT High Yield Bond Portfolio.
As a result, this Fund will be subject to the risks
associated with high yield investing;
- Certain Funds invest at least 10% and can invest as much
as 25% of their assets in the SIT International Fixed
Income Portfolio, which invests primarily in foreign
fixed-income securities. Certain other Funds invest at
least 20% and can invest as much as 50% of their assets
in Underlying Portfolios that invest primarily in
foreign equity securities. These investments will
subject the Funds to risks associated with investing in
foreign securities; and
- The officers and trustees of the Trust also serve as
officers and trustees of the Underlying Trusts. In
addition, the Adviser to each Fund serves as investment
adviser to certain of the Underlying Portfolios.
Conflicts may arise as these persons seek to fulfill
their fiduciary responsibilities at both levels.
Further information regarding these risk factors may be
found elsewhere in this Prospectus and in the Statement of
Additional Information.
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<PAGE> 69
INVESTMENT
LIMITATIONS OF
THE FUNDS
The following investment limitations are fundamental for
each Fund, and may not be changed without shareholder
approval.
1. Each Fund will concentrate its investments in mutual
fund shares.
2. Each Fund may borrow money in an amount up to 33 1/3%
of the value of its total assets, provided that, for
purposes of this limitation, investment strategies
which either obligate a Fund to purchase securities or
require a Fund to segregate assets are not considered
to be borrowings. Except where a Fund has borrowed
money for temporary purposes in amounts not exceeding
5% of its assets, asset coverage of 300% is required
for all borrowings.
Each Fund is subject to further fundamental and
non-fundamental limitations which are described in the
Trust's Statement of Additional Information.
PORTFOLIO TURNOVER
OF THE FUNDS
Each Fund's portfolio turnover rate (i.e., the rate at
which the Fund buys and sells shares of the Underlying
Portfolios) is not expected to exceed 10%. Asset
reallocation decisions typically will occur only once
every quarter. However, if market conditions warrant, SFM
may make more frequent reallocation decisions, which will
result in a higher portfolio turnover rate. The Funds will
purchase or sell shares of the Underlying Portfolios: (a)
to accommodate purchases and redemptions of each Fund's
shares; (b) in response to market or other economic
conditions; and (c) to maintain or modify the allocation
of each Fund's assets among the Underlying Portfolios
within the percentage limits described above or as altered
by SFM from time to time. It is important to note,
however, that the portfolio turnover rate of certain of
the Underlying Portfolios (i.e., the rate at which the
Underlying Portfolios buy and sell securities), may exceed
100%. Such a turnover rate may result in higher
transaction costs and may result in additional tax
consequences for shareholders (including the Funds).
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INVESTMENT GOALS
OF THE UNDERLYING
PORTFOLIOS
The following table describes the investment goal of each
Underlying Portfolio:
<TABLE>
<CAPTION>
UNDERLYING PORTFOLIO INVESTMENT GOAL
-----------------------------------------------------------------------------
<S> <C>
SIMT Large Cap Growth Growth of Capital
SIMT Large Cap Value Growth of Capital and Income
SIMT Small Cap Growth Aggressive Growth of Capital
SIMT Small Cap Value Aggressive Growth of Capital and Income
SIT International Equity Growth of Capital
SIT Emerging Markets Equity Aggressive Growth of Capital
SIMT Core Fixed Income Income
SIMT High Yield Bond Aggressive Income
SIT International Fixed Income Income
SLAT Prime Obligation Price Stability
-----------------------------------------------------------------------------
</TABLE>
INVESTMENT
OBJECTIVES AND
POLICIES OF THE
UNDERLYING
PORTFOLIOS
Set forth below are the investment objectives and policies
that apply to the Underlying Portfolios. The investment
objective of each Underlying Portfolio is a fundamental
policy of that Portfolio, and may not be changed without
approval of such Portfolio's shareholders, which may
include the Fund. Certain general investment policies that
apply to two or more of the Underlying Portfolios are set
forth in the "General Investment Policies of the
Underlying Portfolios" section, below. There can be no
assurance that the Underlying Portfolios will achieve
their respective investment objectives. For additional
information regarding the investments and investment
techniques of the Underlying Portfolios, as well as the
risk factors attendant with those investments and
investment techniques, please see the "Description of
Permitted Investments and Risk Factors of the Underlying
Portfolios" section of this Prospectus.
SIMT LARGE CAP
GROWTH PORTFOLIO The SIMT Large Cap Growth Portfolio seeks to provide
capital appreciation. Under normal market conditions, the
Portfolio will invest at least 65% of its total assets in
equity securities of large companies (i.e., companies with
market capitalizations of more than $1 billion) which, in
the advisers' opinion, possess significant growth
potential. Any remaining assets may be invested in fixed
income securities or in equity securities of smaller
companies that the Portfolio's advisers believe are
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<PAGE> 71
appropriate in light of the Portfolio's objective. Equity
securities include common stock, preferred stock, warrants
or rights to subscribe to common stock and, in general,
any security that is convertible into or exchangeable for
common stock. Fixed income securities must be rated
investment grade or better, i.e., rated at least BBB by
Standard & Poor's Corporation ("S&P") or Baa by Moody's
Investors Service, Inc. ("Moody's").
SIMT LARGE CAP
VALUE PORTFOLIO The SIMT Large Cap Value Portfolio seeks to provide
long-term growth of capital and income. Under normal
market conditions, the Portfolio will invest at least 65%
of its total assets in a diversified portfolio of high
quality, income-producing common stocks of large companies
(i.e., companies with market capitalizations of more than
$1 billion) which, in the advisers' opinion, are
undervalued in the marketplace at the time of purchase. In
general, the advisers characterize high quality securities
as those that have above-average reinvestment rates. The
advisers also consider other factors, such as earnings and
dividend growth prospects as well as industry outlook and
market share. Equity securities include common stock,
preferred stock, warrants or rights to subscribe to common
stock and, in general, any security that is convertible
into or exchangeable for common stock. Any remaining
assets may be invested in investment grade fixed income
securities.
SIMT SMALL CAP
GROWTH PORTFOLIO The SIMT Small Cap Growth Portfolio seeks to provide
long-term capital appreciation. Under normal market
conditions, the Portfolio will invest at least 65% of its
total assets in the equity securities of smaller growth
companies (i.e., companies with market capitalizations of
less than $1 billion) which, in the advisers' opinion, are
in an early stage or transitional point in their
development and have demonstrated or have the potential
for above average capital growth. The advisers will select
companies that have the potential to gain market share in
their industry, achieve and maintain high and consistent
profitability or produce increases in earnings. The
advisers also seek companies with strong company
management and superior fundamental strength.
Small capitalization companies have the potential
to show earnings growth over time that is well above the
growth rate of the overall economy. Any remaining assets
may be invested in the equity securities of more
established companies that the advisers believe may offer
strong capital appreciation potential due to their
relative market position, anticipated earnings growth,
changes in management or other similar opportunities.
Equity securities include common stock, preferred stock,
warrants and rights to subscribe to common stock and, in
general, any security that is convertible into or
exchangeable for common stock.
In order to meet liquidity needs, or for temporary
defensive purposes, the Portfolio may invest all or a
portion of its assets in common stocks of larger, more
established companies, fixed income securities, cash or
money market securities. Fixed income securities will only
be purchased if they are rated investment grade or
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<PAGE> 72
better. Investment grade bonds include securities rated at
least BBB by S&P or Baa by Moody's. Money market
securities will only be purchased if they have been given
one of the two top ratings by a nationally recognized
statistical rating organization ("NRSRO"), or if not
rated, determined to be of comparable quality by the
Portfolio's advisers.
SIMT SMALL CAP
VALUE PORTFOLIO The SIMT Small Cap Value Portfolio seeks to provide
capital appreciation. Under normal market conditions, the
Portfolio will invest at least 65% of its total assets in
the equity securities of smaller companies (i.e.,
companies with market capitalizations of less than $1
billion) which, in the advisers' opinion, have prices that
appear low relative to certain fundamental characteristics
such as earnings, book value, or return on equity. Any
remaining assets may be invested in fixed income
securities or equity securities of larger, more
established companies that the Portfolio's advisers
believe are appropriate in light of the Portfolio's
objective. Equity securities include common stock,
preferred stock, warrants and rights to subscribe to
common stock and, in general, any security that is
convertible into or exchangeable for common stock. Fixed
income securities must be rated investment grade or
better, i.e., rated at least BBB by S&P or Baa by Moody's.
SIT INTERNATIONAL
EQUITY PORTFOLIO The SIT International Equity Portfolio seeks to provide
long-term capital appreciation by investing primarily in a
diversified portfolio of equity securities of non-U.S.
issuers. Under normal circumstances, at least 65% of the
Portfolio's assets will be invested in equity securities
of non-U.S. issuers located in at least three countries
other than the United States. The Portfolio may enter into
forward foreign currency contracts as a hedge against
possible variations in foreign exchange rates. A forward
foreign currency contract is a commitment to purchase or
sell a specified currency, at a specified future date, at
a specified price. The Portfolio may enter into forward
foreign currency contracts to hedge a specific security
transaction or to hedge a portfolio position. These
contracts may be bought or sold to protect the Portfolio,
to some degree, against a possible loss resulting from an
adverse change in the relationship between foreign
currencies and the U.S. dollar. The Portfolio may also
invest in options on currencies.
Securities of non-U.S. issuers purchased by the
Portfolio may be purchased in foreign markets, on U.S.
registered exchanges, the over-the-counter market or in
the form of sponsored or unsponsored American Depositary
Receipts ("ADRs") traded on registered exchanges or NASDAQ
or sponsored or unsponsored European Depositary Receipts
("EDRs"), Continental Depositary Receipts ("CDRs") or
Global Depositary Receipts ("GDRs"). The Portfolio will
typically invest in equity securities listed on recognized
foreign exchanges, but may also invest in securities
traded in over-the-counter markets. The Portfolio expects
its investments to emphasize both large and intermediate
capitalization companies.
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<PAGE> 73
The Portfolio expects to be fully invested in its
primary investments described above, but may invest up to
35% of its total assets in U.S. or non-U.S. cash reserves;
money market instruments; swaps; options on securities,
non-U.S. indices and currencies; futures contracts,
including stock index futures contracts; and options on
futures contracts.
Permissible money market instruments include
securities issued or guaranteed by the United States
Government, its agencies or instrumentalities; securities
issued or guaranteed by non-U.S. governments, which are
rated at time of purchase A or higher by S&P or Moody's,
or are determined by the advisers to be of comparable
quality; repurchase agreements; certificates of deposit
and bankers' acceptances issued by banks or savings and
loan associations having net assets of at least $500
million as of the end of their most recent fiscal year;
high-grade commercial paper; and other long- and
short-term debt instruments which are rated at the time of
purchase A or higher by S&P or Moody's and which, with
respect to such long-term debt instruments, are within 397
days of their maturity.
The Portfolio is also permitted to acquire floating
and variable rate securities, and purchase securities on a
when-issued or delayed delivery basis. Although permitted
to do so, the Portfolio does not currently intend to
invest in securities issued by passive foreign investment
companies or to engage in securities lending.
For temporary defensive purposes, when an adviser
determines that market conditions warrant, the Portfolio
may invest up to 50% of its assets in the U.S. and
non-U.S. money market instruments described above and
other U.S. and non-U.S. long- and short-term debt
instruments which are rated BBB or higher by S&P or Baa or
higher by Moody's at the time of purchase, or are
determined by the adviser to be of comparable quality; may
hold a portion of such assets in cash; and may invest in
securities of supranational entities which are rated A or
higher by S&P or Moody's at the time of purchase, or are
determined by the adviser to be of comparable quality.
SIT EMERGING
MARKETS EQUITY
PORTFOLIO The SIT Emerging Markets Equity Portfolio seeks to provide
capital appreciation by investing primarily in a
diversified portfolio of equity securities of emerging
market issuers. Under normal circumstances, at least 65%
of the Portfolio's assets will be invested in equity
securities of emerging market issuers. Under normal market
conditions, the Portfolio maintains investments in at
least six emerging market countries and does not invest
more than 35% of its total assets in any one emerging
market country. For these purposes, the Portfolio defines
an emerging market country as any country the economy and
market of which the World Bank or the United Nations
considers to be emerging or developing. The Portfolio's
advisers consider emerging market issuers to be companies
the securities of which are principally traded in the
capital markets of emerging market countries: that
15
<PAGE> 74
derive at least 50% of their total revenue from either
goods produced or services rendered in emerging market
countries, regardless of where the securities of such
companies are principally traded; or that are organized
under the laws of and have a principal office in an
emerging market country. In addition to its primary
investments, described above, the Portfolio may invest up
to 35% of its total assets in debt securities, including
up to 5% of its total assets in debt securities rated
below investment grade. These debt securities will include
debt securities of emerging market companies. Bonds rated
below investment grade are often referred to as "junk
bonds." Such securities involve greater risk of default or
price declines than investment grade securities.
The Portfolio may invest in certain debt securities
issued by the governments of emerging market countries
that are or may be eligible for conversion into
investments in emerging market companies under debt
conversion programs sponsored by such governments.
The Portfolio may invest in futures contracts and
purchase securities on a when-issued or delayed delivery
basis. The Portfolio may also purchase and write options
to buy or sell futures contracts.
For temporary defensive purposes, when an adviser
determines that market conditions warrant, the Portfolio
may invest up to 20% of its total assets in the equity
securities of companies constituting the Morgan Stanley
Capital International Europe, Australia, Far East Index
(the "EAFE Index"). These companies typically have larger
average market capitalizations than the emerging market
companies in which the Portfolio generally invests.
The SIT Emerging Markets Equity Portfolio uses a
proprietary, quantitative asset allocation model. This
model employs mean-variance optimization, a process used
in developed markets based on modern portfolio theory and
statistics. Mean-variance optimization helps determine the
percentage of assets to invest in each country to maximize
expected returns for a given risk level. The Portfolio
invests in those countries that the advisers expect to
have the highest risk/reward tradeoff when incorporated
into a total portfolio context. The advisers attempt to
construct a portfolio of emerging market investments that
approximates the risk level of an internationally
diversified portfolio of securities in developed markets.
This "top-down" country selection is combined with
"bottom-up" fundamental industry analysis and stock
selection based on original research, publicly available
information, and company visits.
The Portfolio's investments in emerging markets can
be considered speculative, and therefore may offer higher
potential for gains and losses than developed markets of
the world. With respect to any emerging country, there is
the greater potential for nationalization, expropriation
or confiscatory taxation, political changes, government
regulation, social instability or diplomatic developments
(including war) which could affect adversely the economies
of such countries or
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<PAGE> 75
investments in such countries. The economies of developing
countries generally are heavily dependent upon
international trade and, accordingly, have been and may
continue to be adversely affected by trade barriers,
exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed
or negotiated by the countries with which they trade.
SIMT CORE FIXED
INCOME PORTFOLIO The SIMT Core Fixed Income Portfolio seeks to provide
current income consistent with the preservation of
capital. Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in fixed
income securities that are rated investment grade or
better, i.e., rated in one of the four highest rating
categories by an NRSRO at the time of purchase, or, if not
rated, determined to be of comparable quality by the
advisers. Fixed income securities in which the Portfolio
may invest consist of: (i) corporate bonds and debentures;
(ii) obligations issued by the United States Government,
its agencies and instrumentalities; (iii) municipal
securities of issuers located in all fifty states, the
District of Columbia, Puerto Rico and other U.S.
territories and possessions, consisting of municipal bond,
municipal notes, tax-exempt commercial paper and municipal
lease obligations; (iv) receipts involving U.S. Treasury
obligations; (v) mortgage-backed securities; (vi)
asset-backed securities; and (vii) zero coupon,
pay-in-kind or deferred payment securities.
Any remaining assets may be invested in: (i)
interest-only and principal-only components of
mortgage-backed securities; (ii) mortgage dollar rolls;
(iii) securities issued on a when-issued and
delayed-delivery basis, including TBA mortgage-backed
securities; (iv) warrants; (v) money market securities;
and (vi) Yankee obligations. In addition, the Portfolio
may purchase or write options, futures (including futures
on U.S. Treasury obligations and Eurodollar instruments)
and options on futures.
Duration is a measure of the expected life of a
fixed income security on a cash flow basis. Most debt
obligations provide interest payments and a final payment
at maturity. Some also have put or call provisions that
allow the security to be redeemed at specified dates prior
to maturity. Duration incorporates yield, coupon interest
payments, final maturity and call features into a single
measure. The advisers therefore consider it a more
accurate measure of a security's expected life and
sensitivity to interest rate changes than is the
security's term to maturity.
The Portfolio invests in a portfolio with a
dollar-weighted average duration that will, under normal
market conditions, stay within plus or minus 20% of what
the advisers believe to be the average duration of the
domestic bond market as a whole. The advisers base their
analysis of the average duration of the domestic bond
market on bond market indices which they believe to be
representative. The advisers currently use the Lehman
Aggregate Bond Index for this purpose.
SIMT HIGH YIELD
BOND PORTFOLIO The SIMT High Yield Bond Portfolio seeks to maximize total
return. Under normal market conditions, the Portfolio will
invest at least 65% of its total assets in fixed-income
securities that are rated below investment grade (i.e.,
rated below the top
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<PAGE> 76
four rating categories by an NRSRO at the time of
purchase), or, if not rated, are determined to be of
comparable quality by the Portfolio's advisers. Below
investment grade securities are commonly referred to as
"junk bonds," and generally entail increased credit and
market risk. The achievement of the Portfolio's investment
objective may be more dependent on the advisers' own
credit analysis than would be the case if the Portfolio
invested in higher rated securities. There is no bottom
limit on the ratings of high yield securities that may be
purchased or held by the Portfolio.
The Portfolio may invest in all types of fixed
income securities issued by domestic and foreign issuers,
including: (i) mortgage-backed securities; (ii) asset-
backed securities; (iii) zero coupon, pay-in-kind or
deferred payment securities; and (iv) variable and
floating rate instruments.
Any assets of the Portfolio not invested in the
fixed income securities described above may be invested
in: (i) convertible securities; (ii) preferred stocks;
(iii) equity securities; (iv) investment grade fixed
income securities; (v) money market securities; (vi)
securities issued on a when-issued and delayed-delivery
basis, including TBA mortgage-backed securities; (vii)
forward foreign currency contracts; and (viii) Yankee
obligations. In addition, the Portfolio may purchase or
write options, futures and options on futures. The
advisers may vary the average maturity of the securities
in the Portfolio without limit, and there is no
restriction on the maturity of any individual security.
The securities purchased by the Portfolio may be
rated in the lowest rating category for fixed income
securities. Bonds rated C by Moody's are the lowest rated
class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real
investment standing. Bonds are rated D by S&P when the
issue is in payment default, or the obligor has filed for
bankruptcy. The D rating is used when interest or
principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace
period. The ratings established by each NRSRO represents
its opinions of the safety of principal and interest
payments (and not the market risk) of bonds and other debt
securities they undertake to rate at the time of issuance.
Ratings are not absolute standards of quality and may not
reflect changes in an issuer's creditworthiness.
Accordingly, although the Portfolio's advisers will
consider ratings, they will perform their own analyses and
will not rely principally on ratings. The advisers will
consider, among other things, the price of the security
and the financial history and condition, the prospects and
the management of an issuer in selecting securities for
the Portfolio.
RISK FACTORS RELATING TO INVESTING IN LOWER RATED
SECURITIES-- Fixed income securities are subject to the
risk of an issuer's ability to meet principal and interest
payments on the obligation (credit risk), and may also be
subject to price volatility due to such factors as
interest rate sensitivity, market perception of
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<PAGE> 77
the creditworthiness of the issuer and general market
liquidity (market risk). Lower rated or unrated (i.e.,
high yield) securities are more likely to react to
developments affecting market and credit risk than are
more highly rated securities, which primarily react to
movements in the general level of interest rates. The
market values of fixed-income securities tend to vary
inversely with the level of interest rates. Yields and
market values of high yield securities will fluctuate over
time, reflecting not only changing interest rates but the
market's perception of credit quality and the outlook for
economic growth. When economic conditions appear to be
deteriorating, medium to lower rated securities may
decline in value due to heightened concern over credit
quality, regardless of the prevailing interest rates.
Investors should carefully consider the relative risks of
investing in high yield securities and understand that
such securities are not generally meant for short-term
investing.
The high yield market is relatively new and its
growth has paralleled a long period of economic expansion
and an increase in merger, acquisition and leveraged
buyout activity. Adverse economic developments can disrupt
the market for high yield securities, and severely affect
the ability of issuers, especially highly leveraged
issuers, to service their debt obligations or to repay
their obligations upon maturity which may lead to a higher
incidence of default on such securities. In addition, the
secondary market for high yield securities, which is
concentrated in relatively few market makers, may not be
as liquid as the secondary market for more highly rated
securities. As a result, the Portfolio could find it more
difficult to sell these securities or may be able to sell
the securities only at prices lower than if such
securities were widely traded. Furthermore, the Portfolio
may experience difficulty in valuing certain securities at
certain times. Prices realized upon the sale of such lower
rated or unrated securities, under these circumstances,
may be less than the prices used in calculating the
Portfolio's net asset value.
Lower rated debt obligations also present risks
based on payment expectations. If an issuer calls an
obligation for redemption, the Portfolio may have to
replace the security with a lower yielding security,
resulting in a decreased return for investors. If the
Portfolio experiences unexpected net redemptions, it may
be forced to sell its higher rated securities, resulting
in a decline in the overall credit quality of the
Portfolio's investment portfolio and increasing the
exposure of the Portfolio to the risks of high yield
securities.
SIT INTERNATIONAL
FIXED INCOME
PORTFOLIO The SIT International Fixed Income Portfolio seeks to
provide capital appreciation and current income through
investment primarily in high quality, non-U.S. dollar
denominated government and corporate fixed income
securities or debt obligations. Under normal
circumstances, at least 65% of the Portfolio's assets will
be invested in high quality foreign government and foreign
corporate fixed income securities or
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<PAGE> 78
debt obligations of issuers located in at least three
countries other than the United States.
The fixed income securities in which the SIT
International Fixed Income Portfolio may invest are: (i)
fixed income securities issued or guaranteed by a foreign
government or one of its agencies, authorities,
instrumentalities or political subdivisions; (ii) fixed
income securities issued or guaranteed by supranational
entities; (iii) fixed income securities issued by foreign
corporations; (iv) convertible securities; and (v) fixed
income securities issued by foreign banks or bank holding
companies. All such investments will be in high quality
securities denominated in various currencies, including
the European Currency Unit. High quality securities are
rated in one of the highest four rating categories by an
NRSRO or, of comparable quality at the time of purchase as
determined by the adviser.
Any remaining assets of the Portfolio will be
invested in any of the fixed income securities described
above, obligations issued or guaranteed as to principal
and interest by the United States Government, its agencies
or instrumentalities ("U.S. Government Securities"),
swaps, options and futures. The Portfolio may also
purchase and write options to buy or sell futures
contracts. The Portfolio also may enter into forward
currency contracts, purchase securities on a when-issued
or delayed delivery basis and engage in short selling.
Furthermore, although the Portfolio will concentrate its
investments in relatively developed countries, the
Portfolio may invest up to 5% of its assets in similar
securities or debt obligations that are denominated in the
currencies of developing countries and that are of
comparable quality to such securities and debt obligations
at the time of purchase as determined by the adviser.
There are no restrictions on the average maturity
of the securities held by the Portfolio or the maturity of
any single instrument. Maturities may vary widely
depending on the adviser's assessment of interest rate
trends and other economic and market factors. In the event
a security owned by the Portfolio is downgraded below the
rating categories discussed above, the adviser will review
the situation and take appropriate action with regard to
the security.
The Portfolio is a non-diversified investment
company, as defined in the 1940 Act, which means that more
than 5% of its assets may be invested in one or more
issuers, although the adviser does not intend to invest
more than 5% of its assets in any single issuer with the
exception of securities which are issued or guaranteed by
a national government. The value of shares of the
Portfolio may be more susceptible to any single economic,
political or regulatory occurrence than the shares of a
diversified investment company would be. The Portfolio
intends to satisfy the diversification requirements
necessary to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the
"Code").
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For temporary defensive purposes, when an adviser
determines that market conditions warrant, the Portfolio
may invest up to 100% of its assets in U.S. dollar
denominated fixed income securities and the following
domestic and foreign money market instruments: government
obligations, certificates of deposit, bankers'
acceptances, time deposits, commercial paper, short-term
corporate debt issues and repurchase agreements. The
Portfolio may hold a portion of its assets in cash for
liquidity purposes.
SLAT PRIME
OBLIGATION PORTFOLIO The SLAT Prime Obligation Portfolio seeks to preserve
principal value and maintain a high degree of liquidity
while providing current income. The Portfolio invests
exclusively in: (i) commercial paper rated at least A-1 by
S&P or Prime-1 by Moody's at the time of investment or, if
not rated, determined by the Adviser to be of comparable
quality; (ii) obligations (including certificates of
deposit, time deposits, bankers' acceptances and bank
notes) of U.S. commercial banks and other institutions
that are members of the Federal Reserve System or are
insured by the Federal Deposit Insurance Corporation,
which banks or institutions have total assets of $500
million or more as shown on their most recent public
financial statements at the time of investment, provided
that such obligations are rated in the top two short-term
rating categories by two or more NRSROs, or one NRSRO if
only one NRSRO has rated the security at the time of
investment or, if not rated, determined by the adviser to
be of comparable quality; (iii) short-term corporate
obligations rated AAA or AA by S&P or Aaa or Aa by Moody's
at the time of investment or, if not rated, determined by
the adviser to be of comparable quality; (iv) short-term
obligations issued by state and local governmental
issuers, which are rated, at the time of investment, by at
least two NRSROs in one of the two highest municipal bond
rating categories, and which carry yields that are
competitive with those of other types of money market
instruments of comparable quality; (v) U.S. Treasury
obligations or obligations issued or guaranteed as to
principal and interest by agencies or instrumentalities of
the U.S. Government; and (vi) repurchase agreements
involving any of the foregoing obligations.
The Portfolio may invest up to 10% of its net
assets in illiquid securities. However, restricted
securities, including Rule 144A Securities and Section
4(2) commercial paper, that meet the criteria established
by the Board of Trustees of the Trust may be considered
liquid.
The Portfolio may only purchase securities with a
remaining maturity of 365 days or less, and, as a matter
of non-fundamental policy, will maintain a dollar-weighted
average portfolio maturity of 90 days or less. An
investment in the Portfolio is neither insured or
guaranteed by the U.S. Government and there can be no
assurance that the Portfolio will be able to maintain a
stable net asset value of $1.00 per share.
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GENERAL
INVESTMENT
POLICIES OF THE
UNDERLYING
PORTFOLIOS
Borrowing Each Underlying Portfolio, except the SLAT Prime
Obligation Portfolio, may borrow money to meet redemptions
or for temporary or emergency purposes. An Underlying
Portfolio will not purchase securities while its
borrowings exceed 5% of its total assets.
Common Stocks Each Underlying Portfolio, except the SLAT Prime
Obligation, SIMT Core Fixed Income, SIMT High Yield Bond
and SIT International Fixed Income Portfolios, will invest
in common stocks; provided, however, that the Underlying
Portfolios may only invest in such securities if they are
listed on registered exchanges or actively traded in the
over-the-counter market.
Forward Foreign
Currency Contracts The Underlying Portfolios, except the SIMT Core Fixed
Income, SIMT Large Cap Growth, SIMT Small Cap Growth, SIMT
Large Cap Value, SIMT Small Cap Value, and SLAT Prime
Obligation Portfolios may purchase forward foreign
currency contracts.
Illiquid Securities Each Underlying Portfolio's investment in illiquid
securities will be limited to 15% of its net assets (10%
with respect to the SLAT Prime Obligation, SIT
International Equity, SIT Emerging Markets Equity, and SIT
International Fixed Income Portfolios).
Investment Company
Securities Each Underlying Portfolio, except the SLAT Prime
Obligation Portfolio, may purchase investment company
securities, which will result in additional layering of
expenses. However, there are legal limits on the amount of
such securities that may be acquired by an Underlying
Portfolio. As a condition to the Order that was granted to
the Trust by the SEC, no Underlying Portfolio in which a
Fund invests may purchase: (i) more than 3 percent of the
total outstanding voting securities of another registered
investment company; (ii) securities issued by such
investment company if such securities have an aggregate
value of more than 5 percent of the total assets of such
Underlying Portfolio; or (iii) securities issued by such
investment company and all other investment companies if
such securities have an aggregate value of more than 10
percent of the total assets of such Underlying Portfolio.
Investment Grade
Debt Securities Each Underlying Portfolio, except the SLAT Prime
Obligation Portfolio, may invest in investment grade debt
securities. Interest payments and principal security for
securities rated in the fourth highest rating category
(i.e., BBB by S&P or Baa by Moody's) appear adequate for
the present, but certain protective elements may be
lacking or may be characteristically unreliable over any
great length of time. Such
22
<PAGE> 81
securities lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Money Market
Instruments In order to meet liquidity needs or for temporary
defensive purposes, the Underlying Portfolios may hold
cash reserves and invest in money market instruments
(including securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, repurchase
agreements, certificates of deposit and bankers'
acceptances issued by banks or savings and loan
associations having net assets of at least $500 million as
of the end of their most recent fiscal year, high-grade
commercial paper and other short-term debt securities)
rated at the time of purchase in the top two categories by
an NRSRO, or, if not rated, determined by the adviser to
be of comparable quality at the time of purchase. To the
extent any Underlying Portfolio is engaged in temporary
defensive investing, it will not be pursuing its
investment objective.
Options and Futures Each Underlying Portfolio, except the SLAT Prime
Obligation Portfolio, may purchase or sell options,
futures and options on futures. Risks associated with
investing in options and futures may include lack of a
liquid secondary market, trading restrictions which may be
imposed by an exchange and government regulations which
may restrict trading.
Securities Lending Each Underlying Portfolio, except the SLAT Prime
Obligation Portfolio, may lend its securities to qualified
investors for the purpose of realizing additional income.
U.S. Dollar Denominated
Securities of Foreign
Issuers Each Underlying Portfolio, except the SLAT Prime
Obligation, SIMT Small Cap Growth, and SIMT Core Fixed
Income Portfolios, may invest in U.S. dollar denominated
securities of foreign issuers, including American
Depositary Receipts that are traded on registered
exchanges or listed on NASDAQ.
Warrants Consistent with any applicable state law limitations, each
Underlying Portfolio, except the SLAT Prime Obligation
Portfolio, may purchase warrants in order to increase
total return.
When-Issued and Delayed
Delivery Securities The Underlying Portfolios may purchase securities on a
when-issued or delayed-delivery basis.
For additional information regarding the permitted
investments of the Underlying Portfolios see the
"Description of Permitted Investments and Risk Factors of
the Underlying Portfolios" in this Prospectus, the Trust's
Statement of Additional Information, the "Description of
Permitted Investments and Risk Factors" in the Underlying
Portfolios' Prospectuses and the "Description of Permitted
Investments" in the Underlying Portfolios' Statements of
Additional Information.
23
<PAGE> 82
RISK FACTORS OF
THE UNDERLYING
PORTFOLIOS
From time to time, the Underlying Portfolios may
experience relatively large purchases or redemptions due
to asset allocation decisions made by the Adviser for its
clients, including the Trust. These transactions may have
a material effect on the Underlying Portfolios, since
Underlying Portfolios that experience redemptions as a
result of reallocations may have to sell portfolio
securities and because Underlying Portfolios that receive
additional cash will have to invest it. While it is
impossible to predict the overall impact of these
transactions over time, there could be adverse effects on
portfolio management to the extent that Underlying
Portfolios may be required to sell securities at times
when they would not otherwise do so, or receive cash that
cannot be invested in an expeditious manner. There may be
tax consequences associated with purchases and sales of
securities, and such sales may also increase transaction
costs. The Adviser is committed to minimizing the impact
of these transactions on the Underlying Portfolios to the
extent it is consistent with pursuing the investment
objectives of its asset allocation clients. The Adviser
will monitor the impact of asset allocation decisions on
the Underlying Portfolios and, where practicable, a Fund
will, at any one time, only redeem shares of an Underlying
Portfolio to reduce its allocation to that particular
Portfolio in increments of up to 5% (e.g., from 20% to
15%), except where such redemptions are to meet Fund
shareholder redemption requests. The Adviser will
nevertheless face conflicts in fulfilling its
responsibilities because of the possible differences
between the interests of its asset allocation clients
(including shareholders of the Funds) and the interests of
the Underlying Portfolios.
FUNDAMENTAL
LIMITATIONS OF
THE UNDERLYING
PORTFOLIOS
Each Underlying Portfolio, except the SIT International
Fixed Income Fund, may not invest more than 5% of its
assets in the securities of a single issuer. (This
limitation applies to 75% of the assets of the SIMT and
the other SIT Portfolios, and does not apply to securities
issued by the U.S. Government, its agencies or
instrumentalities.)
Each Underlying Portfolio may not purchase
securities which would cause more than 25% of such
Portfolio's assets to be invested in the securities of
issuers conducting business in the same industry. (This
limitation does not apply to investments in securities
issued by the U.S. Government, its agencies or
24
<PAGE> 83
instrumentalities and, with respect to the SLAT Prime
Obligation Portfolio, obligations of domestic banks.)
The foregoing percentage limitations will apply at
the time of the purchase of the security by an Underlying
Portfolio. Additional fundamental and non-fundamental
investment limitations are set forth in the Underlying
Portfolios' Prospectuses and Statements of Additional
Information.
THE ADVISER AND
MANAGER OF
THE FUNDS
Under an Investment Advisory Agreement with the Trust, SEI
Financial Management Corporation ("SFM" or the "Adviser")
acts as the investment adviser to each Fund. Under the
Agreement, the Adviser provides its proprietary asset
allocation services to the Funds, and exercises investment
discretion over the assets of the Funds. The Adviser
monitors the allocation of each Fund's assets, and is
responsible for supervising compliance with each Fund's
fundamental investment objective and policies. Although it
is expected that each Fund will typically be fully
invested in the Underlying Portfolios, the Adviser may,
from time to time, direct the investment of each Fund's
cash balances in money market securities or in other
instruments, including stock or bond index futures and
options thereon.
For its investment advisory services to the Trust,
the Adviser is entitled to a fee, which is calculated
daily and paid monthly, at an annual rate of .10% of each
Fund's average daily net assets. The Adviser has
voluntarily agreed to waive this fee for the foreseeable
future. This waiver may be terminated by the Adviser at
any time in its sole discretion.
The Adviser is a wholly-owned subsidiary of SEI
Corporation ("SEI"), a financial services company located
in Wayne, Pennsylvania. The principal business address of
the Adviser is 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658. SEI was founded in 1968, and is a
leading provider of investment solutions to banks,
institutional investors, investment advisers and insurance
companies. Affiliates of the Adviser have provided
consulting advice to institutional investors for more than
20 years, including advice regarding the selection and
evaluation of investment advisers and advice regarding
asset allocation strategies. The Adviser currently serves
as manager or administrator to more than 39 investment
companies including more than 290 portfolios, which
investment companies had more than $66 billion in assets
as of August 31, 1996.
Investment and asset allocation decisions for the
Funds are made by a committee within SFM.
SEI Fund Management ("SEI Management") provides the
Trust with overall management services, regulatory
reporting, all necessary office space, equipment,
25
<PAGE> 84
personnel, and facilities, and acts as dividend disbursing
agent and shareholder servicing agent.
For its management services, SEI Management is
entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the average daily
net assets of each Fund. SEI Management has agreed to
waive its administration fee for the foreseeable future.
This waiver is voluntary and may be discontinued at any
time in SEI Management's sole discretion.
THE ADVISERS
AND SUB-ADVISERS
TO THE UNDERLYING
PORTFOLIOS
The following table sets forth information about the
advisers and sub-advisers to the Underlying Portfolios
approved by the Boards of Trustees of the Underlying
Trusts as of September 30, 1996:
<TABLE>
<CAPTION>
UNDERLYING PORTFOLIO INVESTMENT ADVISOR SUB-ADVISER(S)
---------------------------------------------------------------------------------------
<S> <C> <C>
SIMT Large Cap Growth SFM Alliance Capital Management, L.P.
IDS Advisory Group Inc.
Provident Investment Counsel, Inc.
---------------------------------------------------------------------------------------
SIMT Large Cap Value SFM LSV Asset Management
Mellon Equity Associates
Pacific Alliance Capital
Management
---------------------------------------------------------------------------------------
SIMT Small Cap Growth SFM Apodaca-Johnston Capital
Management
First of America Investment
Corporation
Nicholas-Applegate Capital
Management
Wall Street Associates
---------------------------------------------------------------------------------------
SIMT Small Cap Value SFM Boston Partners Asset Management,
L.P.
1838 Investment Advisors, L.P.
---------------------------------------------------------------------------------------
SIT International Equity SFM Acadian Asset Management, Inc.
Farrell Wako Global Investment
Management, Inc.
Morgan Grenfell Investment
Services, Ltd.
Seligman Henderson, Co.
Yamaichi Capital Management, Inc.
and Yamaichi Capital Management
(Singapore) Limited
---------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 85
<TABLE>
<CAPTION>
UNDERLYING PORTFOLIO INVESTMENT ADVISOR SUB-ADVISER(S)
---------------------------------------------------------------------------------------
<S> <C> <C>
SIT Emerging Markets Equity SFM Montgomery Asset Management, L.P.
---------------------------------------------------------------------------------------
SIMT Core Fixed Income SFM BlackRock Financial Management,
Inc.
Firstar Investment Research &
Management Company
Western Asset Management Company
---------------------------------------------------------------------------------------
SIMT High Yield Bond SFM BEA Associates
---------------------------------------------------------------------------------------
SIT International Fixed Income Strategic Fixed None
Income, L.P.
---------------------------------------------------------------------------------------
SLAT Prime Obligation Wellington None
Management
Company
---------------------------------------------------------------------------------------
</TABLE>
SEI FINANCIAL
MANAGEMENT
CORPORATION In addition to serving as the Trust's Adviser, SFM serves
as investment adviser to each Underlying Portfolio except
the SIT International Fixed Income and SLAT Prime
Obligation Portfolios.
Under its advisory agreement with each Underlying
Portfolio for which it serves as investment adviser (an
"Underlying SEI Portfolio"), SFM is authorized to make
investment decisions for the assets of the Underlying SEI
Portfolio, and to continuously review, supervise and
administer the Underlying SEI Portfolio's investment
program.
SFM acts as a "manager of managers" for the
Underlying SEI Portfolios. As Adviser, SFM oversees the
investment advisory services provided to the Underlying
SEI Portfolios and manages the cash portion of the
Portfolios' assets. Pursuant to separate sub-advisory
agreements with SFM, and under the supervision of both SFM
and the Boards of Trustees of the Underlying SEI
Portfolios, the sub-advisers are responsible for the
day-to-day investment management of all or a discrete
portion of the assets of the Underlying SEI Portfolios.
The sub-advisers are selected based primarily upon the
research and recommendations of SFM, which evaluates
quantitatively and qualitatively each such sub-adviser's
skills and investment results in managing assets for
specific asset classes, investment styles and strategies.
Subject to Board review, SFM allocates and, when
appropriate, reallocates the Underlying SEI Portfolios'
assets among sub-advisers, monitors and evaluates sub-
adviser performance, and oversees sub-adviser compliance
with the Portfolios' investment objectives, policies and
restrictions. SFM HAS THE ULTIMATE RESPONSIBILITY FOR THE
INVESTMENT PERFORMANCE OF THE UNDERLYING SEI PORTFOLIOS
DUE TO ITS RESPONSIBILITY TO OVERSEE SUB-ADVISERS AND
RECOMMEND THEIR HIRING, TERMINATION AND REPLACEMENT.
27
<PAGE> 86
SFM has obtained an exemptive order from the
Securities and Exchange Commission (the "SEC") that
permits SFM, with the approval of the Underlying SEI
Portfolios' Boards for Trustees, to retain sub-advisers
unaffiliated with SFM for the Portfolios without
submitting the sub-advisory agreements to a vote of the
Portfolios' shareholders. The exemptive relief permits the
disclosure of only the aggregate amount payable by SFM
under all such sub-advisory agreements. The Underlying SEI
Portfolios will notify shareholders in the event of any
addition or change in the identity of its sub-advisers.
For its advisory services to the Underlying
Portfolios, SFM is entitled to a fee, which is calculated
daily and paid monthly, at an annual rate of .40% of the
average daily net assets of the SIMT Large Cap Growth
Portfolio, .35% of the average daily net assets of the
SIMT Large Cap Value Portfolio, .65% of the average daily
net assets of the SIMT Small Cap Growth and Small Cap
Value Portfolios, .505% of the average daily net assets of
the SIT International Equity Portfolio, 1.05% of the
average daily net assets of the SIT Emerging Markets
Equity Portfolio, .275% of the average daily net assets of
the SIMT Core Fixed Income Portfolio, and .4875% of the
average daily net assets of the SIMT High Yield Bond
Portfolio.
STRATEGIC FIXED
INCOME L.P. Strategic Fixed Income L.P. ("SFI") acts as the investment
adviser to the SIT International Fixed Income Portfolio.
SFI is a limited partnership formed in 1991 under the laws
of the State of Delaware to manage multi-currency fixed
income portfolios. The general partner of the firm is
Kenneth Windheim and the limited partner is Strategic
Investment Partners ("SIP"). As of March 1, 1996, SFI
managed $5.4 billion of client assets. Together, SFI and
SIP managed over $10.2 billion in client assets as of that
date. The principal address of SFI is 1001 Nineteenth
Street North, 16th Floor, Arlington, Virginia 22209.
SFI is entitled to a fee, which is calculated and
paid monthly, at an annual rate of .30% of the average
daily net assets of the SIT International Fixed Income
Portfolio. SFI has voluntarily agreed to waive all or a
portion of its fee in order to limit the total operating
expenses of the Portfolio. SFI reserves the right to
terminate its voluntary waiver at any time in its sole
discretion.
WELLINGTON
MANAGEMENT
COMPANY Wellington Management Company ("WMC"), 75 State Street,
Boston, Massachusetts 02109, serves as the investment
adviser to the SLAT Prime Obligation Portfolio.
As of March 1, 1996, WMC had investment management
authority with respect to approximately $109 billion of
assets. WMC is a professional investment counseling firm
which provides investment services to investment
companies, employee benefit plans, endowments,
foundations, and other institutions and individuals. WMC's
predecessor organizations have provided investment
advisory services to investment companies since 1933, and
to investment counseling clients since 1960. WMC is a
Massachusetts general partnership of which the following
28
<PAGE> 87
persons are managing partners: Robert W. Doran, Duncan M.
McFarland and John R. Ryan.
WMC is entitled to a fee which is calculated daily
and paid monthly at an annual rate of .075% of the
combined average daily net assets of the various
portfolios of SLAT up to $500 million, and .02% of such
average daily net assets in excess of $500 million. Such
fees are allocated daily among the various portfolios of
SLAT on the basis of their relative net assets.
ACADIAN ASSET
MANAGEMENT, INC. Acadian Asset Management, Inc. ("Acadian") acts as an
investment sub-adviser to the SIT International Equity
Portfolio pursuant to a sub-advisory agreement with the
Adviser. In accordance with the Portfolio's investment
objectives and policies and under the supervision of the
Adviser and the Underlying Trust's Board of Trustees,
Acadian is responsible for the day-to-day investment
management of the portion of the Portfolio assigned to it
by the Board of Trustees and, with respect thereto, places
orders on behalf of the Portfolio to effect the investment
decisions made.
Acadian, a wholly-owned subsidiary of United Asset
Management Corporation, was founded in 1977, and manages
approximately $3 billion in assets invested globally.
Acadian's business address is Two International Place,
Boston, Massachusetts 02110.
The Adviser pays Acadian a fee based on a
percentage of the average monthly market value of the
assets of the SIT International Equity Portfolio assigned
to it.
ALLIANCE CAPITAL
MANAGEMENT L.P. Alliance Capital Management L.P. ("Alliance Capital")
serves as investment sub-adviser to a portion of the
assets of the SIMT Large Cap Growth Portfolio. Alliance is
a registered investment adviser organized as a Delaware
limited partnership which originated as Alliance Capital
Management Corporation in 1971. Alliance Capital
Management Corporation, an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the
United States, is the general partner of Alliance. As of
March 1, 1996, Alliance managed over $149 billion in
assets. The principal business address of Alliance is 1345
Avenue of the Americas, New York, New York 10105.
The Adviser pays Alliance a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Large Cap Growth Portfolio managed by
Alliance.
APODACA-JOHNSTON
CAPITAL
MANAGEMENT Apodaca-Johnston Capital Management ("Apodaca") serves as
an investment sub-adviser to a portion of the assets of
the SIMT Small Cap Growth Portfolio. Apodaca is a
California corporation with its principal address at 50
California Street, Suite 3315, San Francisco, California
94014. Apodaca is owned equally by Scott Johnson, Jerry C.
Apodaca, Jr., and Jerry Apodaca, Sr. Apodaca's predecessor
was founded in 1985, and as of September 30, 1995, Apodaca
had approximately $290 million in assets under management.
Apodaca's clients include pension and profit sharing
plans, an endowment fund and an investment company
portfolio.
29
<PAGE> 88
The Adviser pays Apodaca a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Small Cap Growth Portfolio managed by
Apodaca.
BEA ASSOCIATES BEA Associates ("BEA") serves as investment sub-adviser to
the SIMT High Yield Bond Portfolio. BEA is a general
partnership organized under the laws of the State of New
York and, together with its predecessor firms, has been
engaged in the investment advisory business for over 50
years. BEA's principal offices are located at One Citicorp
Center, 153 East 53rd Street, New York, New York 10022.
Credit Suisse Capital Corporation ("CS Capital") is an 80%
partner in BEA and CS Advisers Corp., a New York
corporation which is a wholly-owned subsidiary of CS
Capital, is a 20% partner in BEA. CS Capital is a
wholly-owned subsidiary of Credit Suisse Investment
Corporation, which is a wholly-owned subsidiary of Credit
Suisse, the second largest Swiss bank, which, in turn, is
a subsidiary of CS Holding, a Swiss corporation. BEA is
registered as an investment adviser under the Investment
Advisers Act of 1940.
BEA is a diversified asset manager, handling global
equity, balanced, fixed income and derivative securities
accounts for private individuals, as well as corporate
pension and profit-sharing plans, state pension funds,
union funds, endowments and other charitable institutions.
As of March 1, 1996, BEA managed approximately $28 billion
in assets.
The Adviser pays BEA a fee based on a percentage of
the average monthly market value of the assets of the SIMT
High Yield Bond Portfolio managed by BEA.
BLACKROCK FINANCIAL
MANAGEMENT, INC. BlackRock Financial Management, Inc. ("BlackRock") serves
as an investment sub-adviser to a portion of the assets of
the SIMT Core Fixed Income Portfolio. BlackRock, a
registered investment adviser, is a Delaware corporation
with its principal business address at 345 Park Avenue,
30th Floor, New York, New York 10154. BlackRock's
predecessor was founded in 1988, and as of March 1, 1996,
BlackRock had $36.5 billion in assets under management.
BlackRock is wholly-owned by PNC Asset Management Group,
Inc., a wholly-owned subsidiary of PNC Bank, N.A. PNC
Bank, N.A.'s ultimate parent is PNC Bank Corp., One PNC
Plaza, Pittsburgh, Pennsylvania 15265, a bank holding
company. BlackRock provides investment advice to
investment companies, trusts, charitable organizations,
pension and profit sharing plans and government entities.
The Adviser pays BlackRock a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Core Fixed Income Portfolio managed by
BlackRock.
30
<PAGE> 89
BOSTON PARTNERS
ASSET MANAGEMENT,
L.P. Boston Partners Asset Management, L.P. ("BPAM") serves as
investment sub-adviser to a portion of the assets of the
SIMT Small Cap Value Portfolio. BPAM, a Delaware limited
partnership, is a registered investment adviser with its
principal business address at One Financial Center, 43rd
Floor, Boston, Massachusetts 02111. BPAM's general
partner, Boston Partners, Inc., One Financial Center, 43rd
Floor, Boston, Massachusetts 02111, whose sole shareholder
is Desmond J. Heathwood, Chief Investment Officer of BPAM,
owns approximately 20% of BPAM's partnership interests.
BPAM was founded in April, 1995, and as of December 31,
1995, it had approximately $5.5 billion in assets under
management. BPAM's clients include corporations,
endowments, foundations, pension and profit sharing plans
and two other investment companies.
The Adviser pays BPAM a fee based on a percentage
of the average monthly market value of the assets of the
SIMT Small Cap Value Portfolio managed by BPAM.
1838 INVESTMENT
ADVISORS, L.P. 1838 Investment Advisors, L.P. ("1838") serves as
investment sub-adviser to a portion of the assets of the
SIMT Small Cap Value Portfolio. 1838 is a Delaware limited
partnership located at 100 Matsonford Road, Radnor,
Pennsylvania. As of March 1, 1996, 1838 managed $4.7
billion in assets in large and small capitalization
equity, fixed income and balanced account portfolios.
Clients include corporate employee benefit plans,
municipalities, endowments, foundations, jointly trusteed
plans, insurance companies and wealthy individuals.
The Adviser pays 1838 a fee based on a percentage
of the average monthly market value of the assets of the
SIMT Small Cap Value Portfolio managed by 1838.
FARRELL WAKO
GLOBAL INVESTMENT
MANAGEMENT, INC. Farrell Wako Global Investment Management, Inc. ("Farrell
Wako") acts as sub-adviser to a portion of the SIT
International Equity Portfolio. Farrell Wako, a Delaware
corporation and a wholly-owned subsidiary of Wako
Securities, was founded in 1991 and is a registered
investment advisor in the U.S. and Japan. Farrell Wako
currently manages over $200 million. The principal address
of Farrell Wako is 780 Third Avenue, New York, New York
10017.
The Adviser pays Farrell Wako a fee based on a
percentage of the average monthly market value of the
assets of the SIT International Equity Portfolio managed
by Farrell Wako.
FIRST OF AMERICA
INVESTMENT
CORPORATION First of America Investment Corporation ("First America")
acts as sub-adviser to a portion of the SIMT Small Cap
Growth Portfolio. First of America is a Michigan
Corporation that is a wholly-owned subsidiary of First of
America Bank -- Michigan, N.A., a national banking
association, which is in turn a wholly-owned subsidiary of
First of America Bank Corporation, a registered bank
holding company. First of America is registered as an
investment adviser under the Investment Advisers Act of
31
<PAGE> 90
1940. First of America, together with its predecessor,
has been engaged in the investment advisory business
since 1932. First America's principal business address
is 303 North Rose Street, Suite 500, Kalamazoo, Michigan
49007.
As of March 31, 1996, First of America had
approximately $13.7 billion in assets under management.
First of America's clients include mutual funds, trust
funds, and individually managed institutional and
individual accounts.
The Adviser pays First of America a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Small Cap Growth Portfolio assigned to
First of America.
FIRSTAR INVESTMENT
RESEARCH &
MANAGEMENT
COMPANY Firstar Investment Research & Management Company
("FIRMCO") serves as an investment sub-adviser to a
portion of the assets of the SIMT Core Fixed Income
Portfolio. FIRMCO is a registered investment adviser with
its principal business address at 777 East Wisconsin
Avenue, Suite 800, Milwaukee, Wisconsin 53202. FIRMCO was
founded in 1986, and as of December 31, 1995, it had
approximately $15.6 billion in assets under management.
FIRMCO is a wholly-owned subsidiary of Firstar
Corporation, a bank holding company located at 777 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202. FIRMCO's
clients include pension and profit sharing plans, trusts
and estates and one other investment company.
The Adviser pays FIRMCO a fee based on a percentage
of the average monthly market value of the assets of the
SIMT Core Fixed Income Portfolio managed by FIRMCO.
IDS ADVISORY
GROUP INC. IDS Advisory Group Inc. ("IDS") serves as investment
sub-adviser to a portion of the assets of the SIMT Large
Cap Growth Portfolio. IDS is a registered investment
adviser and wholly-owned subsidiary of American Express
Financial Corporation. As of March 1, 1996, IDS managed
over $24 billion in assets, with $5 billion of this total
in large capitalization growth domestic equities. IDS was
founded in 1972 to manage tax-exempt assets for
institutional clients. The principal business address of
IDS is IDS Tower 10, Minneapolis, Minnesota 55440.
The Adviser pays IDS a fee based on a annual
percentage of the average monthly market value of the
assets of the SIMT Large Cap Growth Portfolio managed by
IDS.
LSV ASSET
MANAGEMENT LSV Asset Management ("LSV") serves as investment
sub-adviser to a portion of the assets of the SIMT Large
Cap Value Portfolio. LSV is a registered investment
adviser organized as a Delaware general partnership. An
affiliate of the Adviser owns a majority interest of LSV.
The principal business address of LSV is 181 W. Madison
Avenue, Chicago, Illinois 60602.
LSV makes investment decisions based on a
quantitative computer model and, based on its ongoing
research and statistical analysis, make adjustments to the
model. Securities are identified for purchase or sale by
the Portfolio based upon the
32
<PAGE> 91
computer model and defined variance tolerances. Purchases
and sales are effected by LSV based upon the output from
the model.
The Adviser pays LSV a fee based on a percentage of
the average monthly market value of the assets of the SIMT
Large Cap Value Portfolio managed by LSV.
MELLON EQUITY
ASSOCIATES Mellon Equity Associates ("Mellon Equity") serves as
investment sub-adviser to a portion of the assets of the
SIMT Large Cap Value Portfolio. Mellon Equity is a
Pennsylvania business trust founded in 1987, whose
beneficial owners are Mellon Bank, N.A. and MMIP, Inc.
Mellon Equity is a professional investment counseling firm
that provides investment management services to the equity
and balanced pension, public fund and profit-sharing
investment management markets, and is a registered
investment adviser under the Investment Advisers Act of
1940. Mellon Equity had discretionary management authority
with respect to approximately $8.8 billion of assets as of
December 31, 1995. Mellon Equity's predecessor
organization had managed domestic equity tax-exempt
institutional accounts since 1947. The business address
for Mellon Equity is 500 Grant Street, Suite 3700,
Pittsburgh, Pennsylvania 15258.
The Adviser pays Mellon Equity a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Large Cap Value Portfolio managed by
Mellon Equity.
MONTGOMERY ASSET
MANAGEMENT L.P. Montgomery Asset Management, L.P. ("MAM") acts as the
investment sub-adviser to the SIT Emerging Markets Equity
Portfolio. In accordance with the Portfolio's investment
objective and policies and under the supervision of the
Adviser and the Underlying Trust's Board of Trustees, MAM
is responsible for the day-to-day investment management of
the Portfolio and places orders on behalf of the Portfolio
to effect the investment decisions made.
MAM is an affiliate of Montgomery Securities, a San
Francisco-based investment banking firm. As of February
29, 1996, MAM had approximately $7.1 billion in assets
under management. MAM has over four years experience
providing investment management services. The principal
address of MAM is 600 Montgomery Street, San Francisco,
California 94111.
The Adviser pays MAM a fee based on a percentage of
the average monthly market value of the assets of the SIT
International Equity Portfolio assigned to MAM.
MORGAN GRENFELL
INVESTMENT SERVICES
LIMITED Morgan Grenfell Investment Services Limited ("MG") acts as
the investment sub-adviser to the SIT International Equity
Portfolio. MG, a subsidiary of Morgan Grenfell Asset
Management Limited, managed over $12 billion in assets as
of December 31, 1995. Morgan Grenfell Asset Management
Limited, a wholly-owned subsidiary of Deutsche Bank, A.G.,
a German financial services conglomerate, managed over $94
billion in assets as of December 31, 1995. MG has over 11
years experience in managing international portfolios for
North American clients.
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MG attempts to exploit perceived inefficiencies present
in the European markets with original research and an
emphasis on stock selection. The principal address of MG
is 20 Finsbury Circus, London, England, EC2M 1NB.
The Adviser pays MG a fee based on a percentage of
the average monthly market value of the assets of the SIT
International Equity Portfolio assigned to MG.
NICHOLAS-APPLEGATE
CAPITAL
MANAGEMENT Nicholas-Applegate Capital Management
("Nicholas-Applegate") serves as investment sub-adviser to
a portion of the assets of the SIMT Small Cap Growth
Portfolio. Nicholas-Applegate has operated as an
investment adviser which provides investment services to
employee benefit plans, endowments, foundations, other
institutions and investment companies since 1984. As of
December 31, 1995, Nicholas-Applegate had discretionary
management authority with respect to approximately $29
billion of assets. The principal business address of
Nicholas-Applegate is 600 West Broadway, 29th Floor, San
Diego, California 92101. Nicholas-Applegate, pursuant to a
partnership agreement, is controlled by its general
partner Nicholas-Applegate Capital Management Holdings,
L.P., a limited partnership controlled by Arthur E.
Nicholas.
The Adviser pays Nicholas-Applegate a fee based on
a percentage of the average monthly market value of the
assets of the SIMT Small Cap Growth Portfolio managed by
Nicholas-Applegate.
PACIFIC ALLIANCE
CAPITAL
MANAGEMENT Pacific Alliance Capital Management ("Pacific") serves as
investment sub-adviser to a portion of the assets of the
SIMT Large Cap Value Portfolio. Pacific is a division of
Union Bank of California, N.A., and provides equity and
fixed-income management services to a broad array of
corporate and municipal clients. Union Bank of California,
N.A. is a wholly-owned subsidiary of The Bank of
Tokyo-Mitsubishi Limited. As of December 31, 1995, Pacific
had discretionary management authority with respect to
approximately $11.9 billion of assets. The principal
business address of Pacific is 475 Sansome Street, San
Francisco, California 94111.
The Adviser pays Pacific a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Large Cap Value Portfolio managed by
Pacific.
PROVIDENT
INVESTMENT
COUNSEL, INC. Provident Investment Counsel, Inc. ("Provident"), is a
registered investment adviser with its principal business
address at 300 North Lake Avenue, Pasadena, California
91101. Provident, which, through its predecessors, has
been in business since 1951, and is a wholly-owned
subsidiary of UAM. Provident provides investment advice to
corporations, public entities, foundations and labor
unions, as well as to other investment companies. As of
December 31, 1995, Provident had over $16 billion in
client assets under management.
The Adviser pays Provident a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Large Cap Growth Portfolio managed by
Provident.
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SELIGMAN
HENDERSON CO. Seligman Henderson Co. ("Seligman") acts as sub-adviser to
a portion of the assets of the SIT International Equity
Portfolio. Seligman Henderson Co. is a New York general
partnership and is structured as an equal partnership
between J&W Seligman & Co. and Henderson International
Inc., a controlled affiliate of Henderson Administration
Group plc. Seligman Henderson Co. was established in 1991
and manages over $3 billion in global and international
equity portfolios for U.S. institutional and retail
clients. The principal address of Seligman is 100 Park
Avenue, New York, New York 10017.
The Adviser pays Seligman a fee based on a
percentage of the average monthly market value of the
assets of the SIT International Equity Portfolio managed
by Seligman.
WALL STREET
ASSOCIATES Wall Street Associates ("WSA") serves as investment
sub-adviser to a portion of the assets of the SIMT Small
Cap Growth Portfolio. WSA is organized as a corporation
with its principal business address at 1200 Prospect
Street, Suite 100, La Jolla, California 92037. WSA was
founded in 1987, and as of December 31, 1995, had
approximately $900 million in assets under management. WSA
is owned equally by William Jeffery III, Kenneth F.
McCain, and Richard S. Coons. WSA provides investment
advisory services for institutional clients, an investment
partnership for which it serves as general partner, a
group trust, for which it serves as sole investment
manager, and an offshore fund for foreign investors for
which it serves as the sole investment manager.
The Adviser pays WSA is based on the basis of a
percentage of the average monthly market value of the
assets of the SIMT Small Cap Growth Portfolio assigned to
WSA.
WESTERN ASSET
MANAGEMENT
COMPANY Western Asset Management Company ("Western") serves as an
investment sub-adviser to a portion of the assets of the
SIMT Core Fixed Income Portfolio. Western is located at
117 East Colorado Boulevard, Pasadena, California 91105,
and is a wholly owned subsidiary of Legg Mason, Inc., a
financial services company located in Baltimore, Maryland.
Western was founded in 1971, and specializes in the
management of fixed income portfolios. As of March 1,
1996, Western managed approximately $19.7 billion in
client assets, including $2 billion of investment company
assets.
The Adviser pays Western a fee based on a
percentage of the average monthly market value of the
assets of the SIMT Core Fixed Income Portfolio managed by
Western.
YAMAICHI CAPITAL
MANAGEMENT, INC.
AND YAMAICHI
CAPITAL
MANAGEMENT
(SINGAPORE) LIMITED Yamaichi Capital Management, Inc. ("Yamaichi") and
Yamaichi Capital Management (Singapore) Limited ("YCMS")
jointly act as sub-adviser to a portion of the assets of
the SIT International Equity Portfolio. Yamaichi is a New
York Corporation established in 1981 and YCMS is a
Singapore corporation established in 1979, and each is a
wholly-owned subsidiary of Yamaichi International Capital
Management
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Co., Ltd ("YICM"). Yamaichi, YCMS and YICM are controlled
by Yamaichi Securities Co., Ltd., which is located in
Tokyo, Japan. YCMS and its affiliates manage
approximately $22 billion worldwide. The principal
address of Yamaichi is 2 World Trade Center, Suite 9828,
New York, New York 10048. The principal address
of YCMS is 138 Robinson Road, #19-01, Hong Leong Centre,
Singapore 068906.
The Adviser pays Yamaichi a fee based on a
percentage of the average monthly market value of the
assets of the SIT International Equity Portfolio managed
by Yamaichi.
Information regarding the portfolio managers
employed by the advisers and sub-advisers to the
Underlying Portfolios is set forth in the Trust's
Statement of Additional Information.
TRANSFER AGENT
The Trust and DST Systems, Inc. (the "Transfer Agent"),
1004 Baltimore Street, 2nd Floor, Kansas City, Missouri
64105, have entered into a transfer agent agreement with
respect to the Trust's Class A shares.
DISTRIBUTION
AND SHAREHOLDER
SERVICING
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as each Fund's
distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust. The Trustees of
the Trust have adopted a distribution plan for the Trust's
Class D shares (the "Class D Plan") pursuant to Rule 12b-1
under the 1940 Act, as well as a shareholder servicing
plan. Class A Shares of the Funds are not subject to a
distribution plan.
It is possible that an institution may offer
different categories of shares to its customers and thus
receive different compensation with respect to the
different categories. These financial institutions may
also charge separate fees to their customers.
The Distributor may, from time to time in its sole
discretion, institute one or more promotional incentive
programs, which will be paid for by the Distributor from
its own resources. Under any such program, the Distributor
will provide promotional incentives, in the form of cash
or other compensation, including merchandise, airline
vouchers, trips and vacation packages, to all dealers
selling shares of the Funds. Such promotional incentives
will be offered uniformly to all shares of the Funds and
also will be offered uniformly to all dealers, predicated
upon the amount of shares of the Funds sold by such
dealer.
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<PAGE> 95
PURCHASE AND
REDEMPTION OF
SHARES
Financial institutions may acquire Class A Shares of the
Funds for their own account or as record owner on behalf
of fiduciary, agency or custody accounts by placing orders
with the Transfer Agent. State securities laws may require
financial institutions purchasing shares for their
customers to register as dealers pursuant to state laws.
To allow for processing and transmittal of orders to the
Transfer Agent on the same day, financial institutions may
impose earlier cut-off times for receipt of purchase
orders directed through them. Certain financial
institutions may charge separate customer account fees.
Information concerning shareholder services and any
charges will be provided to the customer by the
Intermediary.
Class A shares are offered to tax-advantaged
retirement accounts. If you are investing in a Fund
through a 401(k) or other retirement plan, you should
contact your plan sponsor for the services and procedures
which pertain to your account.
Shares of each Fund may be purchased or redeemed on
days on which the New York Stock Exchange is open for
business (a "Business Day"). Shares of the Funds are
offered only to residents of states in which the shares
are eligible for purchase.
Shareholders who desire to purchase or redeem
shares for cash must place their orders with the Transfer
Agent prior to 4:00 p.m. Eastern time on any Business Day
for the order to be accepted on that Business Day.
Generally, cash investments must be transmitted or
delivered in federal funds to the wire agent by 12 noon on
the next Business Day following the day the order is
placed. The Trust reserves the right to reject a purchase
order when the Distributor determines that it is not in
the best interest of the Trust or its shareholders to
accept such order. In circumstances where a purchase order
is received and payment is made, but no instructions are
given as to which Fund should be purchased, the
Distributor may invest such payment in an affiliated money
market fund until the purchase instructions have been
clarified. Until the Transfer Agent receives purchase
instructions in good order, such purchase request will not
be accepted by the Trust.
Purchases will be made in full and fractional
shares of the Funds calculated to three decimal places.
The Trust will send shareholders of record a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after the
receipt of the purchase order by the Transfer Agent.
The net asset value per share of each Fund is
determined by dividing the total market value of such
Fund's investments and other assets, less any liabilities,
by the total number of outstanding shares of that Fund.
The assets of each Fund consist primarily of shares of the
Underlying Portfolios, which are valued at their
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<PAGE> 96
respective net asset values. The Underlying Portfolios
value their portfolio securities at the last quoted
sales price for such securities, or, if there is no such
reported sales price on the valuation date, at the most
recent quoted bid price. An Underlying Portfolio may
also use a pricing service to obtain the last sale price
of each equity or fixed income security held in its
portfolio. Unlisted securities for which market
quotations are readily available are valued at the most
recent quoted bid price. Net asset value per share is
determined daily as of the close of business of the
New York Stock Exchange (currently, 4:00 p.m. Eastern
time) on each Business Day.
The minimum initial investment in a Fund's Class A
shares is $25,000; however, the minimum investment may be
waived at the Distributor's discretion.
Shareholders who desire to redeem shares of the
Funds must place their redemption orders with Transfer
Agent prior to 4:00 p.m. Eastern time on any Business Day.
The redemption price is the net asset value per share of
the Fund next determined after receipt by the Transfer
Agent of the redemption order. Payment or redemption will
be made as promptly as possible and, in any event, within
seven days after the redemption order is received.
The Trust intends to generally make redemptions in
cash. The Trust may, however, make redemptions in whole or
in part by a distribution in kind of readily marketable
securities in lieu of cash. Shareholders may incur
brokerage costs on the sale of any such securities so
received in payment of redemptions.
Purchase and redemption orders may be placed by
telephone by calling 1-800-342-5734. Neither the Trust nor
the Transfer Agent will be responsible for any loss,
liability, cost or expense for acting upon wire
instructions or upon telephone instructions that it
reasonably believes to be genuine. The Trust and the
Trust's Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone
instructions. If reasonable procedures are not employed,
the Trust and/or Trust's Transfer Agent may be liable for
any losses due to unauthorized or fraudulent telephone
transactions. If market conditions are extraordinarily
active, or other extraordinary circumstances exist, and
you experience difficulties placing redemption orders by
telephone, you may wish to consider placing your order by
other means.
You may redeem shares at any time. For an IRA or
other tax-deferred account, you must make your redemption
request in writing. You should be aware that any
distributions personally received by you from the account
prior to age 59 1/2 are generally subject to a 10% penalty
tax, as well as to ordinary income taxes. To avoid the 10%
penalty, you must generally roll over your distribution to
another tax-deferred account or tax-qualified retirement
plan (if permitted) within 60 days.
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PERFORMANCE
From time to time, the Funds may advertise yield and total
return. These figures will be based on historical earnings
and are not intended to indicate future performance. The
yield of a Fund refers to the annualized income generated
by an investment in the Fund over a specified 30-day
period. The yield is calculated by assuming that the same
amount of income generated by the investment during that
period is generated in each 30-day period over one year
and is shown as a percentage of the investment.
The total return of a Fund refers to the average
compounded rate of return to a hypothetical investment for
designated time periods (including but not limited to, the
period from which the Fund commenced operations through
the specified date), assuming that the entire investment
is redeemed at the end of each period and assuming the
reinvestment of all dividend and capital gain
distributions. The total return of a Fund may also be
quoted as a dollar amount or on an aggregate basis or an
actual basis, without inclusion of any front-end or
contingent sales charges, or with a reduced sales charge
in advertisements distributed to investors entitled to a
reduced sales charge.
A Fund may periodically compare its performance to
that of: (i) other mutual funds tracked by mutual fund
rating services (such as Lipper Analytical), financial and
business publications and periodicals; (ii) broad groups
of comparable mutual funds; (iii) unmanaged indices which
may assume investment of dividends but generally do not
reflect deductions for administrative and management
costs; or (iv) other investment alternatives. The Fund may
quote Morningstar, Inc., a service that ranks mutual funds
on the basis of risk-adjusted performance, and Ibbotson
Associates of Chicago, Illinois, which provides historical
returns of the capital markets in the U.S. The Fund may
use long-term performance of these capital markets to
demonstrate general long-term risk versus reward scenarios
and could include the value of a hypothetical investment
in any of the capital markets. The Fund may also quote
financial and business publications and periodicals as
they relate to fund management, investment philosophy, and
investment techniques.
The Fund may quote various measures of volatility
and benchmark correlation in advertising and may compare
these measures to those of other funds. Measures of
volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while
measures of benchmark correlation indicate how valid a
comparative benchmark might be. Measures of volatility and
correlation are calculated using averages of historical
data and cannot be calculated precisely.
For each Fund, the performance of Class A Shares
will normally be higher than the performance of the Class
D shares of that Fund because of the additional
distribution, shareholder servicing and transfer agent
expenses charged to Class D Shares.
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TAXES
The following summary of federal income tax consequences
is based on current tax laws and regulations, which may be
changed by legislative, judicial, or administrative
action. No attempt has been made to present a detailed
explanation of the federal, state, or local tax treatment
of the Funds or their shareholders. In addition, state and
local tax consequences of an investment in a Fund may
differ from the federal income tax consequences described
below. Accordingly, shareholders are urged to consult
their tax advisers regarding specific questions as to
federal, state, and local taxes. Additional information
concerning taxes is set forth in the Statement of
Additional Information.
IRAs and participants in other tax-qualified
retirement plans generally will not be subject to federal
tax liability on either dividend and capital gain
distributions from the Funds or redemption of shares of
the Funds. Rather, participants in such plans will be
taxed when they begin taking distributions from their IRAs
and/or the plans. There are various restrictions under the
Code on eligibility, contributions and withdrawals,
depending on the type of tax-deferred account or
tax-qualified retirement plan. The rules governing
tax-deferred accounts and tax-qualified retirement plans
are complex, and failure to comply with the governing
rules and regulations may result in a substantial cost to
you, including the loss of tax advantages and the
imposition of additional taxes and penalties by the IRS.
You should consult with a tax professional on the specific
rules governing your own plan.
TAX STATUS OF THE
FUNDS Each Fund is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other Funds. Each Fund intends to continue to qualify for
the special tax treatment afforded regulated investment
companies ("RICs") under Subchapter M of the Code, so as
to be relieved of federal income tax on net investment
income and net capital gain (the excess of net long-term
capital gain over net short-term capital loss) distributed
to shareholders.
TAX STATUS OF
DISTRIBUTIONS Each Fund will distribute substantially all of its net
investment income (including net short-term capital gain)
and net capital gain to shareholders. Dividends from a
Fund's net investment income will be taxable to its
shareholders as ordinary income, whether received in cash
or in additional shares, to the extent of the Fund's
earnings and profits. Dividends from a Fund's net
investment income will qualify for the dividends received
deduction for corporate shareholders to the extent such
dividends are derived from dividends paid by Underlying
Portfolios that qualify for such deduction. Distributions
of net capital gain are taxable to shareholders as long-
term capital gain regardless of how long the shareholders
have held shares or whether the distributions are received
in cash or in additional shares. Each Fund will make
annual reports to shareholders of the federal income tax
status of all distributions. Each Fund intends to make
sufficient distributions to avoid liability for
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the federal excise tax applicable to RICs. Dividends
declared by a Fund in October, November or December of
any year and payable to shareholders of record on a date
in such a month will be deemed to have been paid by the
Fund and received by the shareholders on December 31 of
that year if paid by the Fund at any time during the
following January.
Investment income received by the Funds from
sources within foreign countries may be subject to foreign
income taxes withheld at the source. The Funds will not be
able to treat shareholders as having paid their
proportionate share of such taxes for foreign tax credit
purposes.
Each sale or redemption of a Fund's shares is a
taxable transaction to the shareholder.
GENERAL
INFORMATION
The Trust The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated November 20, 1995. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. Shareholders may purchase shares in each Fund
through two separate classes of shares: Class A Shares and
Class D Shares, which provide for variations in
distribution, shareholder servicing and transfer agent
costs, voting rights and dividends. Additional information
pertaining to the Trust may be obtained by writing to SEI
Financial Management Corporation, 680 East Swedesford
Road, Wayne, Pennsylvania 19087-1658, or by calling
1-800-342-5734. All consideration received by the Trust
for shares of any Fund and all assets of such Fund belong
to that Fund and would be subject to liabilities related
thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, including litigation
and other extraordinary expenses, brokerage costs,
interest charges, taxes and organization expenses.
Trustees of the Trust The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
Voting Rights Each share held entitles the shareholder of record to one
vote. Each portfolio of the Trust will vote separately on
matters relating solely to that portfolio. Each class will
vote separately on matters pertaining to its distribution
plan. Each Fund will vote its
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<PAGE> 100
Underlying Portfolio shares in proportion to the votes of
all other shareholders of each respective Underlying
Portfolio.
As a Massachusetts business trust, the Trust is not
required to hold annual meetings of shareholders, but
approval will be sought for certain changes in the
operation of the Trust and for the election of Trustees
under certain circumstances. In addition, a Trustee may be
removed by the remaining Trustees or by shareholders at a
special meeting called upon written request of
shareholders owning at least 10% of the outstanding shares
of the Trust. In the event that such a meeting is
requested, the Trust will provide appropriate assistance
and information to the shareholders requesting the
meeting.
Reporting The Trust issues unaudited financial information
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
Shareholder Inquiries Shareholder inquiries should be directed to DST Systems,
Inc., P.O. Box 419240, Kansas City, Missouri 64141-6240.
Dividends Substantially all of the net investment income (exclusive
of capital gain) of each Fund is periodically declared and
paid as a dividend. Capital gains, if any, are distributed
at least annually.
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares at the net asset value next determined following
the record date, unless the shareholder has elected to
take such payment in cash. Shareholders may change their
election by providing written notice to the Adviser at
least 15 days prior to the distribution.
Dividends and capital gains of each Fund are paid
on a per-share basis. The value of each share will be
reduced by the amount of any such payment. If shares are
purchased shortly before the record date for dividend or
capital gain distributions, a shareholder will pay the
full price for the shares and receive some portion of the
price back as a taxable dividend or distribution.
Counsel and Independent
Accountants Morgan, Lewis & Bockius LLP serves as counsel to the
Trust. Price Waterhouse LLP serves as the independent
accountants of the Trust.
Custodian and Wire Agent
SFM, which serves as transfer agent for the Underlying
Portfolios, also maintains custody of assets of each Fund
that consist of uncertificated shares of the Underlying
Portfolios. CoreStates Bank, N.A., Broad and Chestnut
Streets, P.O. Box 7618, Philadelphia, Pennsylvania 19101,
acts as Custodian for the non-mutual fund assets of each
Fund (the "Custodian"). The Custodian holds cash,
securities and other assets of the Trust as required by
the 1940 Act, and acts as wire agent of the Trust's
assets.
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DESCRIPTION OF
PERMITTED
INVESTMENTS AND
RISK FACTORS OF
THE UNDERLYING
PORTFOLIOS
The following is a brief description of the permitted
investments and investment practices practices for the
Underlying Portfolios, and the associated risk factors:
American Depositary
Receipts ("ADRs"),
Continental Depositary
Receipts ("CDRs"),
European Depositary
Receipts ("EDRs") and
Global Depositary
Receipts ("GDRs") ADRs are securities, typically issued by a U.S. financial
institution (a "depositary"), that evidence ownership
interests in a security or a pool of securities issued by
a foreign issuer and deposited with the depositary. ADRs
include American Depositary Shares and New York Shares.
EDRs, which are sometimes referred to as Continental
Depositary Receipts ("CDRs"), are securities, typically
issued by a non-U.S. financial institution, that evidence
ownership interests in a security or a pool of securities
issued by either a U.S. or foreign issuer. GDRs are issued
globally and evidence similar ownership.
Asset-Backed Securities
Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and
auto loans, leases and credit card receivables. Such
securities are generally issued as pass-through
certificates, which represent undivided fractional
ownership interests in the underlying pools of assets.
Such securities also may be debt obligations and are
generally issued as the debt of a special purpose entity,
such as a trust, organized solely for the purpose of
owning such assets and issuing such debt.
Convertible Securities
Convertible securities are corporate securities that are
exchangeable for a set number of another security at a
prestated price. Convertible securities typically have
characteristics similar to both fixed income and equity
securities. Because of the conversion feature, the market
value of a convertible security tends to move with the
market value of the underlying stock. The value of a
convertible security is also affected by prevailing
interest rates, the credit quality of the issuer, and any
call provisions.
Demand Instruments Demand instruments are instruments which may involve a
conditional or unconditional demand feature which permits
the holder to demand payment of the principal amount of
the instrument. They may include variable amount master
demand notes.
Derivatives Derivatives are securities that derive their value from
other securities, assets or indices. The following are
considered derivative securities: options on futures,
futures, options (e.g., puts and calls), swap agreements,
mortgage-backed securities and forward commitments,
floating and variable rate securities, convertible
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securities, "stripped" U.S. Treasury securities (e.g.,
Receipts and STRIPs) and privately issued stripped
securities (e.g., TGRs, TRs and CATS).
Equity Securities Equity securities represent ownership interests in a
company or corporation and consist of common stock,
preferred stock, warrants and rights to subscribe to
common stock and, in general, any security that is
convertible into or exchangeable for common stock.
Investments in common stocks are subject to market risks
which may cause their prices to fluctuate over time. The
value of convertible securities is also affected by
prevailing interest rates, the credit quality of the
issuer and any call provisions. Changes in the value of
fund securities will not necessarily affect cash income
derived from these securities, but will affect a
Portfolio's net asset value.
Fixed Income Securities
Fixed income securities are debt obligations issued by
corporations, municipalities and other borrowers. The
market value of fixed income investments will generally
change in response to interest rate changes and other
factors. During periods of falling interest rates, the
values of outstanding fixed income securities generally
rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline.
The Portfolios may invest in securities rated in
the fourth highest category by an NRSRO; such securities,
while still investment grade, are considered to have
speculative characteristics. The SIMT High Yield Bond Fund
must invest at least 65%, and the SIT Emerging Markets
Equity Portfolio may invest, up to 5% of its net assets in
securities rated lower than investment grade. Bonds rated
below investment grade are often referred to as "junk
bonds." Such securities involve greater risk of default or
price declines than investment grade securities due to
changes in the issuer's creditworthiness and the outlook
for economic growth.
Forward Foreign
Currency Contracts A forward contract involves an obligation to purchase or
sell a specific currency amount at a future date, agreed
upon by the parties, at a price set at the time of the
contract. A Portfolio may also enter into a contract to
sell, for a fixed amount of U.S. dollars or other
appropriate currency, the amount of foreign currency
approximating the value of some or all of the Portfolio's
securities denominated in such foreign currency.
Futures Contracts and
Options on Futures
Contracts Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a
specific security at a specified future time and at a
specified price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume
a position in a futures contract at a specified exercise
price during the term of the option. A Portfolio may use
futures contracts and related options for bona fide
hedging purposes, to offset changes in the value of
securities held or expected to be acquired or be disposed
of, to minimize fluctuations in foreign currencies, or to
gain exposure to a particular market or instrument. A
Portfolio will minimize the risk that it will be unable to
close out a
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futures contract by only entering into futures contracts
which are traded on national futures exchanges. In
addition, a Portfolio will only sell covered futures
contracts and options on futures contracts.
Stock and bond index futures are futures contracts
for various stock and bond indices that are traded on
registered securities exchanges. Stock and bond index
futures contracts obligate the seller to deliver (and the
purchaser to take) an amount of cash equal to a specific
dollar amount times the difference between the value of a
specific stock or bond index at the close of the last
trading day of the contract and the price at which the
agreement is made.
Stock and bond index futures contracts are
bilateral agreements pursuant to which two parties agree
to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the
stock or bond index value at the close of trading of the
contract and the price at which the futures contract is
originally struck. No physical delivery of the stocks or
bonds comprising the Index is made; generally contracts
are closed out prior to the expiration date of the
contracts.
No price is paid upon entering into futures
contracts. Instead, a Portfolio would be required to
deposit an amount of cash or U.S. Treasury securities
known as "initial margin." Subsequent payments, called
"variation margin," to and from the broker, would be made
on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The
margin is in the nature of a performance bond or
good-faith deposit on a futures contract.
Eurodollar instruments are U.S. dollar-denominated
futures contracts or options thereon which are linked to
the London Interbank Offered Rate ("LIBOR"), although
foreign currency denominated instruments are available
from time to time. Eurodollar futures contracts enable
purchasers to obtain a fixed rate for the lending of the
funds and sellers to obtain a fixed rate for borrowings.
There are risks associated with these activities,
including the following: (1) the success of a hedging
strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in
markets and movements in interest rates; (2) there may be
an imperfect or no correlation between the changes in
market value of the securities held by the Portfolio and
the prices of futures and options on futures; (3) there
may not be a liquid secondary market for a futures
contract or option; (4) trading restrictions or
limitations may be imposed by an exchange; and (5)
government regulations may restrict trading in futures
contracts and futures options.
A Portfolio may enter into futures contracts and
options on futures contracts traded on an exchange
regulated by the Commodities Futures Trading Commission
("CFTC"), as long as, to the extent that such transactions
are not for "bona fide hedging purposes," the aggregate
initial margin and premiums on such positions (excluding
the amount by which such options are in the money) do not
exceed 5%
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of a Portfolio's net assets. A Portfolio may buy and
sell futures contracts and related options to manage its
exposure to changing interest rates and securities
prices. Some strategies reduce a Portfolio's exposure to
price fluctuations, while others tend to increase its
market exposure. Futures and options on futures can be
volatile instruments and involve certain risks that could
negatively impact a Portfolio's return.
In order to avoid leveraging and related risks,
when a Portfolio purchases futures contracts, it will
collateralize its position by depositing an amount of cash
or liquid, high grade debt securities equal to the market
value of the futures positions held, less margin deposits,
in a segregated account with its custodian. Collateral
equal to the current market value of the futures position
will be marked to market on a daily basis.
Illiquid Securities Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price
at which they are being carried on the Portfolio's books.
Illiquid securities include demand instruments with a
demand notice period exceeding seven days, when there is
no secondary market for such security and repurchase
agreements with durations over seven days in length.
Money Market
Instruments Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks and U.S. branches of foreign banks; (ii) U.S.
Treasury Obligations and obligations of agencies and
instrumentalities of the U.S. Government; (iii)
high-quality commercial paper issued by U.S. and foreign
corporations; (iv) debt obligations with a maturity of one
year or less issued by corporations that issue
high-quality commercial paper; and (v) repurchase
agreements involving any of the foregoing obligations
entered into with highly-rated banks and broker-dealers.
Mortgage-Backed
Securities Mortgage-backed securities are instruments that entitle
the holder to a share of all interest and principal
payments from mortgages underlying the security. The
mortgages backing these securities include conventional
fifteen- and thirty-year fixed rate mortgages, graduated
payment mortgages, adjustable rate mortgages, and balloon
mortgages. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed
securities can be expected to accelerate. Prepayment of
mortgages which underlie securities purchased at a premium
often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital
gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict
accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities. These are
securities that are issued or guaranteed by a U.S.
Government agency representing an interest in a pool of
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mortgage loans. The primary issuers or guarantors of
these mortgage-backed securities are GNMA, FNMA and
FHLMC. GNMA, FNMA and FHLMC guarantee timely distribu-
tions of interest to certificate holders. GNMA and FNMA
also guarantee timely distributions of scheduled
principal. FNMA and FHLMC obligations are not backed by
the full faith and credit of the U.S. Government as GNMA
certificates are, but FNMA and FHLMC securities are
supported by the instrumentalities' right to borrow from
the U.S. Treasury.
Private Pass-Through Securities. These are
mortgage-backed securities issued by a non-governmental
entity, such as a trust or corporate. These securities
include collateralized mortgage obligations ("CMOs") and
real estate mortgage investment conduits ("REMICs"). While
they are generally structured with one or more types of
credit enhancement, private pass-through securities
typically lack a guarantee by an entity having the credit
status of a governmental agency or instrumentality.
Collateralized Mortgage Obligations ("CMOs"). CMOs
are debt obligations or multiclass pass-through
certificates issued by agencies or instrumentalities of
the U.S. Government or by private originators or investors
in mortgage loans. Principal payments on the underlying
mortgage assets may cause CMOs to be retired substantially
earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium
paid.
Parallel Pay Securities; PAC Bonds. Parallel pay
CMOs and REMICS are structured to provide payments of
principal on each payment date to more than one class.
These simultaneous payments are taken into account in
calculating the stated maturity date or final distribution
date of each class, which must be retired by its stated
maturity date or final distribution date, but may be
retired earlier. Planned Amortization Class CMOs ("PAC
Bonds") generally require payments of a specified amount
of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on
such securities having the highest priority after interest
has been paid to all classes.
REMICs. A REMIC is a CMO that qualifies for
special tax treatment under the Internal Revenue Code and
invests in certain mortgages principally secured by
interests in real property. Investors may purchase
beneficial interests in REMICs, which are known as
"regular" interests, or "residual" interests. Guaranteed
REMIC pass-through certificates ("REMIC Certificates")
issued by FNMA or FHLMC represent beneficial ownership
interests in a REMIC trust consisting principally of
mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage
pass-through certificates.
Stripped Mortgage-Backed Securities ("SMBs"). SMBs
are usually structured with two classes that receive
specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One
class may receive all of the interest payments and is thus
termed an interest-only class ("IO"), while the
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other class may receive all of the principal payments and
is thus termed the principal-only class ("PO"). The value
of IOs tends to increase as rates rise and decrease as
rates fall; the opposite is true of POs. SMBs are
extremely sensitive to changes in interest rates because
of the impact thereon of prepayment of principal on the
underlying mortgage securities.
Mortgage Dollar Rolls Mortgage "dollar rolls" are transactions in which
mortgage-backed securities are sold for delivery in the
current month and the seller simultaneously contracts to
repurchase substantially similar securities on a specified
future date. The difference between the sale price and the
purchase price (plus any interest earned on the cash
proceeds of the sale) is netted against the interest
income foregone on the securities sold to arrive at an
implied borrowing rate. Alternatively, the sale and
purchase transactions can be executed at the same price,
with the Portfolio being paid a fee as consideration for
entering into the commitment to purchase.
Municipal Securities Municipal securities consist of: (i) debt obligations
issued by or on behalf of public authorities to obtain
funds to be used for various public facilities, for
refunding outstanding obligations, for general operating
expenses, and for lending such funds to other public
institutions and facilities, and (ii) certain private
activity and industrial development bonds issued by or on
behalf of public authorities to obtain funds to provide
for the construction, equipment, repair or improvement of
privately operated facilities.
Obligations of
Supranational
Entities Obligations of supranational entities are obligations of
entities established through the joint participation of
several governments, such as the Asian Development Bank,
the Inter-American Development Bank, International Bank
for Reconstruction and Development (World Bank), African
Development Bank, European Economic Community, European
Investment Bank and the Nordic Investment Bank.
Options A put option gives the purchaser of the option the right
to sell, and the writer of the option the obligation to
buy, the underlying security at any time during the option
period. A call option gives the purchaser of the option
the right to buy, and the writer of the option the
obligation to sell, the underlying security at any time
during the option period. The premium paid to the writer
is the consideration for undertaking the obligations under
the option contract. The initial purchase (sale) of an
option contract is an "opening transaction." In order to
close out an option position, a Portfolio may enter into a
"closing transaction," which is simply the sale (purchase)
of an option contract on the same security with the same
exercise price and expiration date as the option contract
originally opened. If a Portfolio is unable to effect a
closing purchase transaction with respect to an option it
has written, it will not be able to sell the underlying
security until the option expires or the Portfolio
delivers the security upon exercise.
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A Portfolio may purchase put and call options to
protect against a decline in the market value of the
securities in its portfolio or to anticipate an increase
in the market value of securities that the Portfolio may
seek to purchase in the future. A Portfolio purchasing put
and call options pays a premium therefor. If price
movements in the underlying securities are such that
exercise of the options would not be profitable for the
Portfolio, loss of the premium paid may be offset by an
increase in the value of the Portfolio's securities or by
a decrease in the cost of acquisition of securities by the
Portfolio.
A Portfolio may write covered call options as a
means of increasing the yield on its fund and as a means
of providing limited protection against decreases in its
market value. When a fund sells an option, if the
underlying securities do not increase or decrease to a
price level that would make the exercise of the option
profitable to the holder thereof, the option generally
will expire without being exercised and the Portfolio will
realized as profit the premium received for such option.
When a call option written by a Portfolio is exercised,
the Portfolio will be required to sell the underlying
securities to the option holder at the strike price, and
will not participate in any increase in the price of such
securities above the strike price. When a put option
written by a Portfolio is exercised, the Portfolio will be
required to purchase the underlying securities at the
strike price, which may be in
excess of the market value of such securities.
A Portfolio may purchase and write options on an
exchange or over-the-counter. Over-the-counter options
("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with
dealers and not with a clearing corporation, and therefore
entail the risk of non-performance by the dealer. OTC
options are available for a greater variety of securities
and for a wider range of expiration dates and exercise
prices than are available for exchange-traded options.
Because OTC options are not traded on an exchange, pricing
is done normally by reference to information from a market
maker. It is the position of the SEC that OTC options are
generally illiquid.
A Portfolio may purchase and write put and call
options on foreign currencies (traded on U.S. and foreign
exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign
currency written by a Portfolio will be "covered," which
means that the Portfolio will own an equal amount of the
underlying foreign currency. With respect to put options
on foreign currency written by a Portfolio, the Portfolio
will establish a segregated account with its Custodian
consisting of cash or liquid, high grade debt securities
in an amount equal to the amount the Portfolio would be
required to pay upon exercise of the put.
A Portfolio may purchase and write put and call
options on indices and enter into related closing
transactions. Put and call options on indices are similar
to options on securities except that options on an index
give the holder the right to
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receive, upon exercise of the option, an amount of cash
if the closing level of the underlying index is greater
than (or less than, in the case of puts) the exercise
price of the option. This amount of cash is equal to the
difference between the closing price of the index and
the exercise price of the option, expressed in dollars
multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and
gain or loss depends on price movements in the particular
market represented by the index generally, rather than
the price movements in individual securities. A Portfolio
may choose to terminate an option position by entering
into a closing transaction. The ability of a Portfolio
to enter into closing transactions depends upon the
existence of a liquid secondary market for such
transactions.
All options written on indices must be covered.
When a Portfolio writes an option on an index, it will
establish a segregated account containing cash or liquid,
high grade debt securities with its custodian in an amount
at least equal to the market value of the option and will
maintain the account while the option is open or will
otherwise cover the transaction.
Risk Factors: Risks associated with options
transactions include: (1) the success of a hedging
strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in
markets and movements in interest rates; (2) there may be
an imperfect correlation between the movement in prices of
options and the securities underlying them; (3) there may
not be a liquid secondary market for options; and (4)
while a Portfolio will receive a premium when it writes
covered call options, it may not participate fully in a
rise in the market value of the underlying security.
Receipts Receipts are sold as zero coupon securities, which means
that they are sold at a substantial discount and redeemed
at face value at their maturity date without interim cash
payments of interest or principal. This discount is
accreted over the life of the security, and such accretion
will constitute the income earned on the security for both
accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate
volatility than interest paying investments. See also
"Taxes."
REITs REITs are trusts that invest primarily in commercial real
estate or real estate-related loans. The value of
interests in REITs may be affected by the value of the
property owned or the quality of the mortgages held by the
trust.
Repurchase Agreements Repurchase agreements are agreements by which a Portfolio
obtains a security and simultaneously commits to return
the security to the seller at an agreed upon price
(including principal and interest) on an agreed upon date
within a number of days from the date of purchase.
Repurchase agreements are considered loans under the 1940
Act.
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Securities Lending In order to generate additional income, a Portfolio may
lend securities which it owns pursuant to agreements
requiring that the loan be continuously secured by
collateral consisting of cash or securities of the U.S.
Government or its agencies equal to at least 100% of the
market value of the loaned securities. A Portfolio
continues to receive interest on the loaned securities
while simultaneously earning interest on the investment of
cash collateral. Collateral is marked to market daily.
There may be risks of delay in recovery of the securities
or even loss of rights in the collateral should the
borrower of the securities fail financially or become
insolvent.
Securities of
Foreign Issuers There are certain risks connected with investing in
foreign securities. These include risks of adverse
political and economic developments (including possible
governmental seizure or nationalization of assets), the
possible imposition of exchange controls or other
governmental restrictions, less uniformity in accounting
and reporting requirements, the possibility that there
will be less information on such securities and their
issuers available to the public, the difficulty of
obtaining or enforcing court judgments abroad,
restrictions on foreign investments in other
jurisdictions, difficulties in effecting repatriation of
capital invested abroad and difficulties in transaction
settlements and the effect of delay on shareholder equity.
Foreign securities may be subject to foreign taxes, and
may be less marketable than comparable U.S. securities.
The value of a Portfolio's investments denominated in
foreign currencies will depend on the relative strengths
of those currencies and the U.S. dollars, and a Portfolio
may be affected favorably or unfavorably by changes in the
exchange rates or exchange control regulations between
foreign currencies and the U.S. dollar. Changes in foreign
currency exchange rates also may affect the value of
dividends and interest earned, gains and losses realized
on the sale of securities and net investment income and
gains if any, to be distributed to shareholders by a
Portfolio. Furthermore, emerging market countries may have
less stable political environments than more developed
countries. Also, it may be more difficult to obtain a
judgment in a court outside the United States.
Short Sales A Portfolio may sell securities short against the box. A
short sale is "against the box" if at all times during
which the short position is open, the Portfolio owns at
least an equal amount of the securities or securities
convertible into, or exchangeable without further
consideration for, securities of the same issue as the
securities that are sold short.
Swaps, Caps, Floors
and Collars Interest rate swaps, mortgage swaps, currency swaps and
other types of swap agreements such as caps, floors and
collars are designed to permit the purchaser to preserve a
return or spread on a particular investment or portion of
its portfolio, and to protect against any increase in the
price of securities a Portfolio anticipates purchasing at
a later date. In a typical interest rate swap, one party
agrees to make
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regular payments equal to a floating interest rate times
a "notional principalamount," in return for payments
equal to a fixed rate times the same amount, for a
specific period of time. 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.
Swap agreements will tend to shift the Fund's
investment exposure from one type of investment to
another. Depending on how they are used, swap agreements
may increase or decrease the overall volatility of the
Fund's investment and their share price and yield.
U.S. Government Agency
Obligations Obligations issued or guaranteed by agencies of the U.S.
Government, including, among others, the Federal Farm
Credit Bank, the Federal Housing Administration and the
Small Business Administration, and obligations issued or
guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage
Corporation, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the
full faith and credit of the U.S. Treasury (e.g., GNMA
securities), and others are supported by the right of the
issuer to borrow from the Treasury (e.g., Federal Farm
Credit Bank securities), while still others are supported
only by the credit of the instrumentality (e.g., FNMA
securities).
U.S. Treasury
Obligations U.S. Treasury obligations consist of bills, notes and
bonds issued by the U.S. Treasury, as well as separately
traded interest and principal component parts of such
obligations known as Separately Traded Registered Interest
and Principal Securities ("STRIPS") that are transferable
through the Federal book-entry system. STRIPS are sold as
zero coupon securities.
U.S. Treasury U.S. Treasury receipts are interests in separately traded
Receipts interest and principal component parts of U.S. Treasury
obligations that are issued by banks or brokerage firms
and are created by depositing U.S. Treasury notes and
obligations into a special account at a custodian bank.
The custodian holds the interest and principal payments
for the benefit of the registered owners of the
certificates of receipts. The custodian arranges for the
issuance of the certificates or receipts evidencing
ownership and maintains the register.
Variable and Floating
Rate Instruments Certain obligations may carry variable or floating rates
of interest and may involve conditional or unconditional
demand features. Such instruments bear interest at rates
which are not fixed, but which vary with changes in
specified market rates or indices. The interest rates on
these securities may be reset daily, weekly, quarterly or
some other reset period, and may have a floor or ceiling
on interest rate changes.
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Warrants Warrants are instruments giving holders the right, but not
the obligation, to buy equity or fixed income securities
of a company at a given price during a specified period.
When-Issued and Delayed
Delivery Securities When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment.
Yankee Obligations Yankee obligations ("Yankees") are U.S. dollar-denominated
instruments of foreign issuers who either register with
the Securities and Exchange Commission or issue securities
under Rule 144A of the Securities Exchange Act of 1933.
These consist of debt securities (including preferred or
preference stock of non-governmental issuers),
certificates of deposit, fixed time deposits and bankers'
acceptances issued by foreign banks, and debt obligations
of foreign governments or their subdivisions, agencies and
instrumentalities, international agencies and
supranational entities.
Zero Coupon, Pay In-Kind
and Deferred Payment
Securities Zero coupon securities are securities that are sold at a
discount to par value and securities on which interest
payments are not made during the life of the security.
Upon maturity, the holder is entitled to receive the par
value of the security. While interest payments are not
made on such securities, holders of such securities are
deemed to have received "phantom income" annually. Because
a Portfolio will distribute its "phantom income" to
shareholders, to the extent that shareholders elect to
receive dividends in cash rather than reinvesting such
dividends in additional shares, a Portfolio will have
fewer assets with which to purchase income producing
securities. Zero coupon, pay-in-kind and deferred payment
securities may be subject to greater fluctuation in value
and lesser liquidity in the event of adverse market
conditions that comparably rated securities paying cash
interest at regular interest payment periods.
Additional information on other permitted
investments can be found in the Trust's Statement of
Additional Information and in the Underlying Portfolios'
Prospectuses and Statements of Additional Information.
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Fund Expenses (Class A Shares).................... 2
Indirect Expenses................................. 3
Financial Highlights.............................. 4
Investment Objectives and Policies of the Funds... 5
General Investment Policies of the Funds.......... 9
Risk Factors of the Funds......................... 10
Investment Limitations of the Funds............... 11
Portfolio Turnover of the Funds................... 11
Investment Goals of the Underlying Portfolios..... 12
Investment Objectives and Policies of the
Underlying Portfolios........................... 12
General Investment Policies of the Underlying
Portfolios...................................... 22
Risk Factors of the Underlying Portfolios......... 24
Fundamental Limitations of the Underlying
Portfolios...................................... 24
The Adviser and Manager of the Funds.............. 25
The Advisers and Sub-Advisers to the Underlying
Portfolios...................................... 26
Transfer Agent.................................... 36
Distribution of Fund Shares and Shareholder
Servicing....................................... 36
Purchase and Redemption of Shares................. 37
Performance....................................... 39
Taxes............................................. 40
General Information............................... 41
Description of Permitted Investments and Risk
Factors of the Underlying Portfolios............ 43
</TABLE>
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PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED SEPTEMBER 16, 1996
SUBJECT TO COMPLETION
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OF AMENDMENT.
A REGISTRATION STATEMENT RELATING TO, AMONG OTHER THINGS, THIS
STATEMENT OF ADDITIONAL INFORMATION HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. SECURITIES OF THE FUNDS REFERENCED IN THIS
STATEMENT OF ADDITIONAL INFORMATION MAY NOT BE SOLD NOR MAY OFFERS TO
BUY SUCH SECURITIES BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES REFERENCED HEREIN IN
ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO SUCH REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SEI ASSET ALLOCATION TRUST
INVESTMENT ADVISER:
SEI FINANCIAL MANAGEMENT CORPORATION
MANAGER:
SEI FUND MANAGEMENT
DISTRIBUTOR:
SEI FINANCIAL SERVICES COMPANY
This STATEMENT OF ADDITIONAL INFORMATION is not a Prospectus. It is intended to
provide additional information regarding the activities and operations of the
Trust, and should be read in conjunction with the Trust's Prospectus dated
December 1, 1996. A Prospectus may be obtained upon request and without charge
by writing the Trust's distributor, SEI Financial Services Company, at 680 East
Swedesford Road, Wayne, Pennsylvania 19087-1658, or by calling 1-800-342-5734.
TABLE OF CONTENTS
The Trust...............................................................S-2
Description of Permitted Investments of the Underlying Portfolios.......S-2
Investment Limitations of the Funds....................................S-12
Investment Limitations of the Underlying Portfolios....................S-14
The Manager ...........................................................S-18
The Investment Adviser to the Funds....................................S-19
The Advisers and Sub-Advisers To the Underlying Portfolios.............S-20
Portfolio Managers of the Underlying Portfolios........................S-20
Distribution...........................................................S-23
Trustees and Officers of the Trust.....................................S-24
Performance............................................................S-26
Purchase and Redemption of Shares......................................S-26
Shareholder Services...................................................S-27
Taxes..................................................................S-28
Portfolio Transactions.................................................S-29
Description of Shares..................................................S-30
Limitation of Trustees' Liability......................................S-30
Voting.................................................................S-30
Shareholder Liability..................................................S-31
Experts................................................................S-31
Financial Statements...................................................S-31
Appendix...............................................................S-39
December 1, 1996
SEI-F-113-01
<PAGE> 114
THE TRUST
SEI Asset Allocation (the "Trust") is an open-end management investment company
that currently consists of the following seven separate investment portfolios
(each a "Fund" and, together, the "Funds"): Diversified Conservative Income
Fund, Diversified Conservative Fund, Diversified Global Moderate Growth Fund,
Diversified Moderate Growth Fund, Diversified Global Growth Fund (formerly the
Diversified Growth Fund), Diversified Global Stock Fund, and Diversified U.S.
Stock Fund. The Funds invest in shares of certain portfolios (the "Underlying
Portfolios") of SEI Liquid Asset Trust ("SLAT"), SEI Institutional Managed Trust
("SIMT") and SEI International Trust ("SIT"), each of which is managed by SEI
Financial Management Corporation ("SFM"), the Trust's investment adviser.
(Together, SLAT, SIMT and SIT are the "Underlying Trusts.") The Funds may invest
in the following Underlying Portfolios: SIMT Large Cap Growth Portfolio, SIMT
Large Cap Value Portfolio, SIMT Small Cap Growth Portfolio, SIMT Small Cap Value
Portfolio, SIT International Equity Portfolio, SIT Emerging Markets Equity
Portfolio, SIMT Core Fixed Income Portfolio, SIMT High Yield Bond Portfolio, SIT
International Fixed Income Portfolio and SLAT Prime Obligation Portfolio.
The Trust was established as a Massachusetts business trust pursuant to a
Declaration of Trust dated November 20, 1995. The Declaration of Trust permits
the Trust to offer separate series ("portfolios") of units of beneficial
interest ("shares") and separate classes of portfolios. Except for differences
between the Class A shares and Class D shares pertaining to distribution and
shareholder servicing fees, voting rights, dividends and transfer agent
expenses, each share of each Fund represents an equal proportionate interest in
that Fund with each other share of that Fund.
This Statement of Additional Information relates to the following Funds:
Diversified Conservative Income Fund, Diversified Conservative Fund, Diversified
Global Moderate Growth Fund, Diversified Moderate Growth Fund, Diversified
Global Growth Fund, Diversified Global Stock Fund, and Diversified U.S. Stock
Fund. Shareholders may purchase shares in the Funds through two separate
classes, Class A and Class D, which provide for variations in distribution and
shareholder servicing costs, transfer agent fees, voting rights and dividends.
DESCRIPTION OF PERMITTED INVESTMENTS OF THE UNDERLYING PORTFOLIOS
AMERICAN DEPOSITORY RECEIPTS ("ADRS") Generally, ADRs are designed for trading
in the U.S. securities market, EDRs are designed for trading in European
securities markets and GDRs are designed for trading in non-U.S. securities
markets. ADRs, EDRs, CDRs and GDRs may be available for investment through
"sponsored" or "unsponsored" facilities. A sponsored facility is established
jointly by the issuer of the security underlying the receipt and a depositary,
whereas an unsponsored facility may be established by a depositary without
participation by the issuer of the receipt's underlying security. Holders of an
unsponsored depositary receipt generally bear all the costs of the unsponsored
facility. The depositary of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through to the holders of the receipts voting
rights with respect to the deposited securities.
ASSET-BACKED SECURITIES Asset-backed securities are securities backed by
automobile, credit-card or other types of receivables and in securities backed
by other types of assets. Credit support for asset-backed securities may be
based on the underlying assets and/or provided by a third party through credit
enhancements. Credit enhancement techniques include letters of credit, insurance
bonds, limited guarantees (which are generally provided by the issuer),
senior-subordinated structures and over-collateralization.
Asset-backed securities are not issued or guaranteed by the United States
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts for a certain period by a letter of credit issued by a financial
institution (such as a bank or insurance company) unaffiliated with the issuers
of such securities. The purchase of asset-backed securities raises risk
considerations peculiar to the financing of the instruments underlying such
securities. For example, there is a risk that another party could acquire an
interest in the
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obligations superior to that of the holders of the asset-backed securities.
There also is the possibility that recoveries on repossessed collateral may not,
in some cases, be available to support payments on those securities.
Asset-backed securities entail prepayment risk, which may vary depending on the
type of asset, but is generally less than the prepayment risk associated with
the mortgage-backed securities. In addition, credit card receivables are
unsecured obligations of the card holders.
BANK NOTES Bank notes are notes used to represent debt obligations issued by
banks in large denominations.
BANKERS' ACCEPTANCES Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers' acceptances are issued by
corporations to finance the shipment and storage of goods. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT Certificates of deposit are interest-bearing instruments
with a specific maturity. They are issued by banks and savings and loan
institutions in exchange for the deposit of funds and normally can be traded in
the secondary market prior to maturity. Certificates of deposit with penalties
for early withdrawal will be considered illiquid.
COMMERCIAL PAPER Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary, generally from a few to 270
days.
CONVERTIBLE SECURITIES Convertible securities, such as rights, bonds, notes and
preferred stocks, which are convertible into or exchange for common stocks, have
characteristics similar to both fixed income and equity securities. Because of
the conversion feature, the market value of convertible securities tends to move
together with the market value of the underlying stock. As a result, an
Underlying Portfolio's selection of convertible securities is based, to a great
extent, on the potential for capital appreciation that may exist in the
underlying stock.
CORPORATE ZERO COUPON SECURITIES Corporate zero coupon securities are: (i) notes
or debentures which do not pay current interest and are issued at substantial
discounts from par value; or (ii) notes or debentures that pay no current
interest until a stated date one or more years into the future, after which date
the issuer is obligated to pay interest until maturity, usually at a higher rate
than if interest were payable from the date of issuance and may also make
interest payments in kind (e.g., with identical zero coupon securities). Such
corporate zero coupon securities, in addition to the risks identified above, are
subject to the risk of the issuer's failure to pay interest and repay principal
in accordance with the terms of the obligation.
FIXED INCOME SECURITIES Fixed income securities with longer maturities tend to
produce higher yields, the prices of longer maturity securities and are also
subject to greater market fluctuations as a result of changes in interest rates.
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. Changes in the value of portfolio
securities will not affect cash income derived from these securities but will
affect an Underlying Portfolio's net asset value.
FOREIGN SECURITIES Foreign securities are securities issued by non-U.S. issuers.
Certain of the Underlying Portfolios may invest in U.S. dollar denominated
obligations or securities of foreign issuers. Permissible investments may
consist of obligations of foreign branches of U.S. banks and foreign banks,
including European Certificates of Deposit, European Time Deposits, Canadian
Time Deposits, Yankee Certificates of Deposit and investments in Canadian
Commercial Paper and Europaper. These instruments may subject the Underlying
Portfolio to investment risks that differ in some respects from those related to
investments in obligations of U.S. domestic issuers. Such risks include future
adverse political and economic developments, the possible imposition of
withholding taxes on interest or other income, possible seizure,
nationalization, or expropriation of foreign deposits, the possible
establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in the exchange rates, or the adoption of
other foreign
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governmental restrictions which might adversely affect the payment of principal
and interest on such obligations. Such investments may also entail higher
custodial fees and sales commissions than domestic investments. Foreign issuers
of securities or obligations are often subject to different accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements than those
applicable to domestic branches of U.S. banks. The yankee obligations selected
for the Portfolios will adhere to the same quality standards as those utilized
for the selection of domestic debt obligations.
Some securities issued by foreign governments or their subdivisions, agencies or
instrumentalities may not be backed by the full faith and credit of the foreign
government.
FORWARD FOREIGN CURRENCY CONTRACTS Forward Foreign Currency Contracts are
contracts which involve an obligation to purchase or sell a specified currency
at a future date at a price set at the time of the contract. Forward currency
contracts do not eliminate fluctuations in the values of portfolio securities
but rather allow an Underlying Portfolio to establish a rate of exchange for a
future point in time. At the maturity of a forward contract, the Portfolio may
either sell a portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader, obligating it to purchase, on the same maturity date, the same
amount of the foreign currency. The Portfolio may realize a gain or loss from
currency transactions.
When entering into a contract for the purchase or sale of a security in a
foreign currency, an Underlying Portfolio may enter into a foreign forward
currency contract for the amount of the purchase or sale price to protect
against variations, between the date the security is purchased or sold and the
date on which payment is made or received, in the value of the foreign currency
relative to the United States dollar or other foreign currency.
Also, when the Underlying Portfolio's adviser or sub-adviser anticipates that a
particular foreign currency may decline substantially relative to the United
States dollar or other leading currencies, in order to reduce risk, an
Underlying Portfolio may enter into a forward contract to sell, for a fixed
amount, the amount of foreign currency approximating the value of its securities
denominated in such foreign currency. With respect to any such forward foreign
currency contract, it will not generally be possible to match precisely the
amount covered by that contract and the value of the securities involved due to
changes in the values of such securities resulting from market movements between
the date the forward contract is entered into and the date it matures. In
addition, while forward currency contracts may offer protection from losses
resulting from declines in value of a particular foreign currency, they also
limit potential gains which might result from increases in the value of such
currency. An Underlying Portfolio will also incur costs in connection with
forward foreign currency contracts and conversions of foreign currencies into
United States dollars. Some of the Underlying Portfolios may enter into forward
foreign currency contracts.
ILLIQUID SECURITIES The SIT Emerging Markets Equity Portfolio believes that
carefully selected investments in joint ventures, cooperatives, partnerships,
private placements, unlisted securities and other similar situations
(collectively, "special situations") could enhance the Portfolio's capital
appreciation potential. Investments in special situations may be illiquid, as
determined by the Portfolio's advisers based on criteria approved by the Board
of Trustees. To the extent these investments are deemed illiquid, the
Portfolio's investment in them will be consistent with its 10% restriction on
investment in illiquid securities.
LOWER RATED SECURITIES Lower-rated securities are lower-rated bonds commonly
referred to as "junk bonds" or high-yield/high-risk securities. These securities
are rated "Baa" or lower by Moody's Investors Service, Inc. ("Moody's") or "BBB"
or lower by Standard & Poor's Corporation ("S&P"). The SIMT High Yield Bond
Portfolio may invest in securities rated as low as "C" by Moody's or "D" by S&P.
These ratings indicate that the obligations are speculative and may be in
default. In addition, the Portfolio may invest in unrated securities of
comparable quality subject to the restrictions stated in the Portfolio's
Prospectus.
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CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK SECURITIES. The
descriptions below are intended to supplement the discussion in the Portfolio's
Prospectus under "Risk Factors Relating to Investing in Lower Rated Securities."
GROWTH OF HIGH-YIELD, HIGH-RISK BOND MARKET. The widespread expansion
of government, consumer and corporate debt within the U.S. economy has made the
corporate sector more vulnerable to economic downturns or increased interest
rates. Further, an economic downturn could severely disrupt the market for lower
rated bonds and adversely affect the value of outstanding bonds and the ability
of the issuers to repay principal and interest. The market for lower-rated
securities may be less active, causing market price volatility and limited
liquidity in the secondary market. This may limit the Portfolios' ability to
sell such securities at their market value. In addition, the market for these
securities may be adversely affected by legislative and regulatory developments.
Credit quality in the junk bond market can change suddenly and unexpectedly, and
even recently issued credit ratings may not fully reflect the actual risks
imposed by a particular security.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES. Lower rated bonds
are very sensitive to adverse economic changes and corporate developments.
During an economic down turn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress that would adversely
affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaulted on its obligations to pay interest
or principal or entered into bankruptcy proceedings, the Portfolio may incur
losses or expenses in seeking recovery of amounts owed to it. In addition,
periods of economic uncertainty and change can be expected to result in
increased volatility of market prices of high-yield, high-risk bonds and the
Portfolio's net asset value.
PAYMENT EXPECTATIONS. High-yield, high-risk bonds may contain
redemption or call provisions. If an issuer exercised these provisions in a
declining interest rate market, the Portfolio would have to replace the security
with a lower yielding security, resulting in a decreased return for investors.
Conversely, a high-yield, high-risk bond's value will decrease in a rising
interest rate market, as will the value of the Portfolio's assets. If the
Portfolio experiences significant unexpected net redemptions, this may force it
to sell high-yield, high-risk bonds without regard to their investment merits,
thereby decreasing the asset base upon which expenses can be spread and possibly
reducing the Portfolio's rate of return.
LIQUIDITY AND VALUATION. There may be little trading in the secondary
market for particular bonds, which may affect adversely the Portfolio's ability
to value accurately or dispose of such bonds. Adverse publicity and investor
perception, whether or not based on fundamental analysis, may decrease the
values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
LEGISLATION. Federal laws require the divestiture by federally insured
savings and loan associations of their investments in lower rated bonds and
limit the deductibility of interest by certain corporate issuers of high yield
bonds. These laws could adversely affect the Portfolio's net asset value and
investment practices, the secondary market for high-yield securities, the
financial condition of issuers of these securities and the value of outstanding
high-yield securities.
TAXES. The Portfolio may purchase debt securities (such as zero-coupon
or pay-in-kind securities) that contain original issue discount. Original issue
discount that accrues in a taxable year is treated as earned by a Portfolio and
therefore is subject to the distribution requirements of the tax code even
though the Portfolio has not received any interest payments on such obligations
during that period. Because the original issue discount earned by the Portfolio
in a taxable year may not be represented by cash income, the Portfolio may have
to dispose of other securities and use the proceeds to make distributions to
shareholders.
MORTGAGE-BACKED SECURITIES Mortgage-backed securities are securities which
represent pools of mortgage loans assembled for sale to investors by various
governmental agencies, such as the Government National Mortgage Association
("GNMA") and government-related organizations such as the Federal National
Mortgage Association
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("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"), as well as by
non-governmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers, and private mortgage insurance companies.
Certain Underlying Portfolios may, consistent with their respective investment
objectives and policies, invest in mortgage-backed securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. Although
certain mortgage-backed securities are guaranteed by a third party or otherwise
similarly secured, the market value of the security, which may fluctuate, is not
so secured. If an Underlying Portfolio purchases a mortgage-backed security at a
premium, that portion may be lost if there is a decline in the market value of
the security whether resulting from changes in interest rates or prepayments in
the underlying mortgage collateral. As with other interest-bearing securities,
the prices of such securities are inversely affected by changes in interest
rates. However, though the value of a mortgage-backed security may decline when
interest rates rise, the converse is not necessarily true since in periods of
declining interest rates the mortgages underlying the securities are prone to
prepayment. Because of these unpredictable prepayment characteristics, it is
often not possible to predict accurately the average life or realized yield of a
particular issue. For this and other reasons, a mortgage-backed security's
stated maturity may be shortened by unscheduled prepayments on the underlying
mortgages and, therefore, it is not possible to predict accurately the
security's investment return to an Underlying Portfolio. In addition, regular
payments received in respect of mortgage-backed securities include both interest
and principal. No assurance can be given as to the return an Underlying
Portfolio will receive when these amounts are reinvested.
An Underlying Portfolio may also invest in collateralized mortgage obligations
("CMOs") structured on pools of mortgage pass-through certificates or mortgage
loans. In a CMO, series of bonds or certificates are usually issued in multiple
classes. Principal and interest paid on the underlying mortgage assets may be
allocated among the several classes of a series of a CMO in a variety of ways.
Each class of a CMO, often referred to as a "tranche," is issued with a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. CMOs will be purchased only if rated in the three highest rating
categories by a nationally recognized statistical rating organization such as
Moody's or S&P. For purposes of determining the average maturity of a
mortgage-backed security in its investment portfolio, the Underlying Portfolios
may utilize the expected average life of the security, as estimated in good
faith by the Portfolio's adviser and sub-advisers, and will not invest in
mortgage-backed securities with an expected average maturity of over seven
years.
Stripped mortgage-backed securities ("SMBs") are mortgage-backed securities
where the interest portion of the security has been stripped from the principal
portion of the security, and the two component parts are sold separately. SMBs
are extremely sensitive to changes in interest rates because of the impact
thereon of prepayment of principal on the underlying mortgage securities. The
market for SMBs is not as fully developed as other markets; SMBs, therefore, may
be illiquid.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-backed securities
and among the securities that they issue. Mortgage-backed securities issued by
the GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") that are guaranteed as to the timely payment of principal and interest by
GNMA and such guarantee is backed by the full faith and credit of the United
States. GNMA is a wholly-owned U.S. Government corporation within the Department
of Housing and Urban Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Treasury to make payments under
its guarantee. Mortgage-backed securities issued by the FNMA include FNMA
Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") that
are solely the obligations of the FNMA and are not backed by or entitled to the
full faith and credit of the United States. The FNMA is a government-sponsored
organization owned entirely by private stockholders. Fannie Maes are guaranteed
as to timely payment of the principal and interest by FNMA. Mortgage-backed
securities issued by the FHLMC include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "PC's"). The FHLMC is a corporate
instrumentality of the United States, created pursuant to an Act of Congress,
which is owned entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the
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underlying mortgage loans. When the FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable. For
FHLMC REMIC Certificates, FHLMC guarantees the timely payment of interest, and
also guarantees the payment of principal as payments are required to be made on
the underlying mortgage participation certificates. FNMA REMIC Certificates are
issued and guaranteed as to timely distribution of principal and interest by
FNMA.
MORTGAGE DOLLAR ROLLS Mortgage dollar rolls may be renewed prior to cash
settlement and initially may involve only a firm commitment agreement by the
Portfolio to buy a security. If the broker-dealer to whom the Portfolio sells
the security becomes insolvent, the Portfolio's right to repurchase the security
may be restricted. Other risks involved in entering into mortgage dollar rolls
include the risk that the value of the security may change adversely over the
term of the mortgage dollar roll and that the security the Portfolio is required
to repurchase may be worth less than the security that the Portfolio originally
held.
To avoid any leveraging concerns, a Portfolio will place U.S. Government or
other liquid, high grade debt securities in a segregated account with its
Custodian in an amount sufficient to cover its repurchase obligation.
MUNICIPAL LEASES Municipal leases are instruments, or participations in
instruments, issued in connection with lease obligations or installment purchase
contract obligations of municipalities ("municipal lease obligations"). Although
municipal lease obligations do not constitute general obligations of the issuing
municipality, a lease obligation is ordinarily backed by the municipality's
covenant to budget for, appropriate funds for, and make the payments due under
the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses, which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose in the relevant years. Municipal lease
obligations are a relatively new for of financing, and the market for such
obligations is still developing. Municipal leases will be treated as liquid only
if they satisfy criteria set forth in guidelines established by the Board of
Trustees, and there can be no assurance that a market will exist or continue to
exist for any municipal lease obligation.
MUNICIPAL SECURITIES Municipal Securities include general obligation bonds
backed by the taxing power of the issuing municipality, revenue bonds backed by
the revenues of a project or facility (tolls from a bridge, for example), and
certificates of participation, which represent an interest in an underlying
obligation or commitment, such as an obligation issued in connection with a
leasing arrangement. The payment of principal and interest on private activity
and industrial development bonds generally is dependent solely on the ability of
a facility's user to meet its financial obligations and the pledge, if any, of
real and personal property as security for such payment.
Municipal securities include both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes and participation interests in
municipal notes. Municipal bonds include general obligation bonds, revenue or
special obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds.
OPTIONS Options are contracts that give one of the parties to the contract the
right to buy or sell the security that is subject to the option at a stated
price during the option period, and obligates the other party to the contract to
buy or sell such security at the stated price during the option period.
The Underlying Portfolios may trade put and call options on stocks and stock
indices to a limited extent, as the Adviser or Sub-Adviser determines is
appropriate in seeking an Underlying Portfolio's investment objective, and
except as restricted by each Underlying Portfolio's investment limitations as
set forth below. See "Investment Limitations."
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A put option gives the purchaser (an Underlying Portfolio) the right to sell,
and imposes on the writer an obligation to buy, the underlying security at the
exercise price during the option period. The advantage to an Underlying
Portfolio of buying the protective put is that if the price of the security
falls during the option period, the Underlying Portfolio may exercise the put
and receive the higher exercise price for the security. However, if the security
rises in value, the Underlying Portfolio will have paid a premium for the put,
which will expire unexercised.
A call option gives the purchaser the right to buy and imposes on the writer (an
Underlying Portfolio) the obligation to sell, the underlying security at the
exercise price during the option period. The advantage to an Underlying
Portfolio of writing covered call options is that the Underlying Portfolio
receives a premium, which is additional income. However, if the security rises
in value, an Underlying Portfolio may not fully participate in the market
appreciation. During the option period, a covered call option writer may be
assigned an exercise notice by the broker-dealer through whom such call option
was sold requiring the writer to deliver the underlying security against payment
of the exercise price. An Underlying Portfolio's obligation as the writer of a
covered call is terminated upon the expiration of the option period or at such
earlier time in which the writer effects a closing purchase transaction. As
noted above, a closing purchase transaction is one in which an Underlying
Portfolio, when obligated as a writer of an option, terminates its obligation by
purchasing an option of the same series as the option previously written. A
closing purchase transaction cannot be effected with respect to an option once
the option writer has received an exercise notice for such option.
The market value of an option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the pricing volatility of the underlying
security and the time remaining until the expiration date. The Underlying
Portfolios will engage in option transactions only as hedging transactions and
not for speculative purposes.
PAY-IN-KIND SECURITIES Pay-in-kind securities are securities which, at the
issuer's option, pay interest in either cash or additional securities for a
specified period. Pay-in-kind bonds, like zero coupon bonds, are designed to
give an issuer flexibility in managing cash flow. Pay-in-kind bonds are expected
to reflect the market value of the underlying debt plus an amount representing
accrued interest since the last payment. Pay-in-kind bonds are usually less
volatile than zero coupon bonds, but more volatile than cash pay securities.
PRIVATIZATIONS Privatizations are foreign government programs for selling all or
part of the interests in government owned or controlled enterprises. The ability
of a U.S. entity to participate in privatizations in certain foreign countries
may be limited by local law, or the terms on which a Portfolio may be permitted
to participate may be less advantageous than those applicable for local
investors. There can be no assurance that foreign governments will continue to
sell their interests in companies currently owned or controlled by them or that
privatization programs will be successful.
RECEIPTS Receipts are interests in separately traded interest and principal
component parts of U.S. Government obligations that are issued by banks or
brokerage firms and are created by depositing U.S. Government obligations into a
special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
"Treasury Receipts" ("TRs"), "Treasury Investment Growth Receipts" ("TIGRs"),
and "Certificates of Accrual on Treasury Securities" ("CATS"). TIGRs and CATS
are interests in private proprietary accounts, while TRs and STRIPS (See "U.S.
Treasury Obligations") are interests in accounts sponsored by the U.S. Treasury.
Receipts are sold as zero coupon securities; for more information, see "Zero
Coupon Securities."
REPURCHASE AGREEMENTS Repurchase agreements are agreements under which
securities are acquired from a securities dealer or bank subject to resale on an
agreed upon date and at an agreed upon price which includes principal and
interest. The Underlying Portfolio or its agent will have actual or constructive
possession of the securities held as collateral for the repurchase agreement. An
Underlying Portfolio bears a risk of loss in the event the other party defaults
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on its obligations and the Portfolio is delayed or prevented from exercising its
right to dispose of the collateral securities, or if the Portfolio realizes a
loss on the sale of the collateral securities. An adviser will enter into
repurchase agreements on behalf of an Underlying Portfolio only with financial
institutions deemed to present minimal risk of bankruptcy during the term of the
agreement based on guidelines established and periodically reviewed by the
Trustees. An Underlying Portfolio enters into repurchase agreements only with
financial institutions that it deems to present minimal risk of bankruptcy
during the term of the agreement, based on guidelines that are periodically
reviewed by the Board of Trustees. These guidelines currently permit each
Underlying Portfolio to enter into repurchase agreements only with approved
banks and primary securities dealers, as recognized by the Federal Reserve Bank
of New York, which have minimum net capital of $100 million, or with a member
bank of the Federal Reserve System. Repurchase agreements are considered to be
loans collateralized by the underlying security. Repurchase agreements entered
into by an Underlying Portfolio will provide that the underlying security at all
times shall have a value at least equal to 102% of the price stated in the
agreement. This underlying security will be marked to market daily. The advisers
and sub-advisers will monitor compliance with this requirement. Under all
repurchase agreements entered into by an Underlying Portfolio, the Custodian or
its agent must take possession of the underlying collateral. However, if the
seller defaults, an Underlying Portfolio could realize a loss on the sale of the
underlying security to the extent the proceeds of the sale are less than the
resale price. In addition, even though the Bankruptcy Code provides protection
for most repurchase agreements, if the seller should be involved in bankruptcy
or insolvency proceedings, an Underlying Portfolio may incur delay and costs in
selling the security and may suffer a loss of principal and interest if the
Underlying Portfolio is treated as an unsecured creditor.
RESTRICTED SECURITIES Restricted securities are securities that may not be sold
freely to the public absent registration under the Securities Act of 1933, as
amended (the "1933 Act"), or an exemption from registration. Section 4(2)
commercial paper is issued in reliance on an exemption from registration under
Section 4(2) of the 1933 Act, and is generally sold to institutional investors
(including investment companies) who purchase for investment. Any resale of such
commercial paper must be in an exempt transaction, usually to an institutional
investor through the issuer or investment dealers who make a market on such
commercial paper. Rule 144A securities are securities re-sold in reliance on an
exemption from registration provided by Rule 144A under the 1933 Act.
SECURITIES LENDING Securities lending is an investment technique which enables
an Underlying Portfolio to generate additional income by lending its securities
pursuant to agreements requiring that the loans be continuously secured by cash,
securities of the U.S. Government or its agencies, or any combination of cash
and such securities, as collateral equal to at least the market value at all
times of the loaned securities. Such loans will not be made if, as a result, the
aggregate amount of all outstanding loaned securities for an Underlying
Portfolio exceeds 20% of the value of that Portfolio's total assets taken at
fair market value. Loans are made only to borrowers deemed by the adviser or
sub-adviser to be in good standing and when, in the judgment of the adviser or
sub-adviser, the consideration that can be earned currently from such loaned
securities justifies the attendant risk. Any loan may be terminated by either
party upon reasonable notice to the other party. Each of the Underlying
Portfolios may use the Distributor as a broker in these transactions.
SWAPS, CAPS, FLOORS AND COLLARS 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 amount, for a specific 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, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specific interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make
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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. In swap agreements, if the Underlying Portfolio agrees to exchange
payments in dollars for payments in foreign currency, the swap agreement would
tend to decrease the Underlying Portfolio'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 the
Underlying Portfolio's investment and their share price and yield.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a result,
swaps can be highly volatile and have a considerable impact on the Underlying
Portfolio'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. An Underlying Portfolio may also suffer losses if it is unable to
terminate outstanding swap agreements or reduce its exposure through offsetting
transactions. Any obligation an Underlying Portfolio may have under these types
of arrangements will be covered by setting aside liquid, high grade debt
securities in a segregated account. An Underlying Portfolio will enter into
swaps only with counterparties believed to be creditworthy.
TIME DEPOSITS Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time deposits with a withdrawal penalty are
considered to be illiquid securities.
U.S. GOVERNMENT AGENCY SECURITIES Guarantees of principal by agencies or
instrumentalities of the United States Government may be a guarantee of payment
at the maturity of the obligation so that in the event of a default prior to
maturity there might not be a market and thus no means of realizing on the
obligation prior to maturity. Guarantees as to the timely payment of principal
and interest do not extend to the value or yield of these securities nor to the
value of the Underlying Portfolio's shares.
U.S. TREASURY RECEIPTS U.S. Treasury receipts include "Treasury Receipts"
("TRs"), "Treasury Investment Growth Receipts" ("TIGRs") "Liquid Yield Option
Notes" ("LYONs") and "Certificates of Accrual on Treasury Securities" ("CATS").
LYONs, TIGRs and CATS are interests in private proprietary accounts, while TRs
and STRIPS are interests in accounts sponsored by the U.S. Treasury.
VARIABLE OR FLOATING RATE INSTRUMENTS Variable or floating rate instruments are
instruments which may involve a demand feature and may include variable amount
master demand notes available through the Custodian. Variable or floating rate
instruments bear interest at a rate which varies with changes in market rates.
The holder of an instrument with a demand feature may tender the instrument back
to the issuer at par prior to maturity. A variable amount master demand note is
issued pursuant to a written agreement between the issuer and the holder, its
amount may be increased by the holder or decreased by the holder or issuer, it
is payable on demand, and the rate of interest varies based upon an agreed
formula. There is a risk that the current interest rate on such obligations may
not accurately reflect existing market interest rates. A demand instrument with
a demand notice exceeding seven days may be considered illiquid if there is no
secondary market for such security. The quality of the underlying credit must,
in the opinion of an Underlying Portfolio's advisers, be equivalent to the
long-term bond or commercial paper ratings applicable to permitted investments
for each Underlying Portfolio. Each Underlying Portfolio's advisers will monitor
on an ongoing basis the earning power, cash flow, and liquidity ratios of the
issuers of such instruments and will similarly monitor the ability of an issuer
of a demand instrument to pay principal and interest on demand.
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In case of obligations which include a put feature at the option of the debt
holder, the date of the put may be used as an effective maturity date for the
purpose of determining weighted average portfolio maturity.
WHEN-ISSUED SECURITIES When-issued securities are securities for which delivery
and payment normally take place within 45 days after the date of commitment to
purchase. In the case of debt obligations, delivery and payment normally takes
place within 45 days after the date of commitment to purchase. An Underlying
Portfolio will only make commitments to purchase obligations on a when-issued
basis with the intention of actually acquiring the securities, but may sell them
before the settlement date. The when-issued securities are subject to market
fluctuation, and no interest accrues to the purchaser during this period. The
payment obligation and the interest rate that will be received on the securities
are each fixed at the time the purchaser enters into the commitment. Purchasing
obligations on a when-issued basis is a form of leveraging and can involve a
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself. In that case
there could be an unrealized loss at the time of delivery. An Underlying
Portfolio will establish a segregated account with its custodian and maintain
liquid, high grade debt securities in an amount at least equal in value to that
Underlying Portfolio's commitments to purchase when-issued securities. If the
value of these assets declines, the Underlying Portfolio involved will place
additional liquid assets in the account on a daily basis so that the value of
the assets in the account is equal to the amount of such commitments.
One form of when-issued or delayed-delivery security that a Portfolio may
purchase is a "to be announced" ("TBA") mortgage-backed security. A TBA
mortgage-backed security transaction arises when a mortgage-backed security,
such as a GNMA pass-through security, is purchased or sold with specific pools
that will constitute that GNMA pass-through security to be announced on a future
settlement date.
ZERO COUPON SECURITIES Zero coupon securities are fixed income securities that
have been stripped of their unmatured interest coupons. Zero coupon securities,
including STRIPS and Receipts (TRs, TIGRs and CATS) are sold at a (usually
substantial) discount and redeemed at face value at their maturity date without
interim cash payments of interest or principal. The amount of this discount is
accredited over the life of the security, and the accretion constitutes the
income earned on the security for both accounting and tax purposes. Because of
these features, the market prices of zero coupon securities are generally more
volatile than the market prices of securities that have similar maturity but
that pay interest periodically. Zero coupon securities are likely to respond to
a greater degree to interest rate changes than are non-zero coupon securities
with similar maturity and credit qualities. Shareholders may have to redeem
shares to pay tax on the "phantom income" earned by a Portfolio, and the
Portfolio may have to dispose of its portfolio securities under disadvantageous
circumstances to generate cash, or may have to leverage itself by borrowing cash
to satisfy distribution requirements. A Portfolio accrues income with respect to
the securities prior to the receipt in cash payments. Pay-in-kind securities are
securities that have interest payable by delivery of additional securities.
Deferred payment securities are securities that remain zero coupon securities
until a predetermined date, at which time the stated coupon rate becomes
effective and interest becomes payable at regular intervals. See also "Taxes."
INVESTMENT LIMITATIONS OF THE FUNDS
FUNDAMENTAL POLICIES
Each Fund may not:
1. Make loans if, as a result, more than 33 1/3% of its total assets would
be loaned to other parties.
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2. Purchase or sell real estate, physical commodities, or commodities
contracts, except that each Fund may purchase commodities contracts
relating to financial instruments, such as financial futures or index
contracts and options on such contracts.
3. Issue senior securities (as defined in the 1940 Act) except as
permitted by rule, regulation or order of the Securities and Exchange
Commission (the "SEC").
4. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a portfolio security.
5. Invest in interests in oil, gas, or other mineral exploration or
development programs and oil, gas or mineral leases.
These investment limitations and certain of the investment limitations in each
Prospectus are fundamental policies of the Funds and may not be changed without
the approval of a majority of a Fund's outstanding shares. The term "majority of
outstanding shares" means the vote of: (i) 67% or more of a fund's shares
present at a meeting, if more than 50% of the outstanding shares of a fund are
present or represented by proxy; or (ii) more than 50% of a fund's outstanding
shares, whichever is less.
NON-FUNDAMENTAL POLICIES
Each Fund may not:
1. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by the Fund's fundamental limitation on borrowing.
2. Invest in companies for the purpose of exercising control.
3. Purchase securities on margin or effect short sales, except that each
Fund may: (i) obtain short-term credits as necessary for the clearance
of security transactions; (ii) provide initial and variation margin
payments in connection with transactions involving futures contracts
and options on such contracts; and (iii) make short sales "against the
box" or in compliance with the SEC's position regarding the asset
segregation requirements imposed by Section 18 of the 1940 Act.
4. Invest its assets in securities of any investment company, except: (i)
by purchase in the open market involving only customary brokers'
commissions; (ii) in connection with mergers, acquisitions of assets,
or consolidations; or (iii) as permitted by the Trust's SEC Order; or
(iv) as otherwise permitted by the 1940 Act.
5. Purchase or retain securities (other than obligations issued or
guaranteed by the U.S. Government or any foreign government, their
agencies or instrumentalities or shares of the Underlying Portfolios)
of an issuer if, to the knowledge of the Trust, an officer, trustee,
partner or director of the Trust or any investment adviser of the Trust
owns beneficially more than 1/2 of the 1% of the shares or securities
of such issuer and all such officers, trustees, partners and directors
owning more than 1/2 of 1% of such shares or securities together own
more than 5% of such shares or securities.
6. Purchase securities of any company which has (with predecessors) a
record of less than three years continuing operations if, as a result,
more than 5% of the total assets (taken at fair market value) would be
invested in such securities.
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7. Purchase or hold illiquid securities, i.e., securities that cannot be
disposed of for their approximate carrying value in seven days or less
(which term includes repurchase agreements and time deposits maturing
in more than seven days) if, in the aggregate, more than 15% of its net
assets would be invested in illiquid securities.
A Fund's purchase of investment company securities results in the bearing of
expenses such that shareholders would indirectly bear a proportionate share of
the operating expenses of such investment companies, including advisory fees.
Each of the foregoing percentage limitations (except with respect to the
limitation on investing in illiquid securities) applies at the time of purchase.
These limitations are non-fundamental and may be changed by the Trust's Board of
Trustees without a vote of shareholders.
ADDITIONAL RESTRICTIONS
The following are non-fundamental investment limitations that are currently
required by one or more states in which the Trust sells shares of the Funds.
These limitations are in addition to, and in some cases more restrictive than,
the fundamental and non-fundamental investment limitations listed above. A
limitation may be changed or eliminated without shareholder approval if the
relevant state changes or eliminates its policy regarding such investment
restriction. As long as a Fund's shares are registered for sale in such states,
it may not:
1. Invest more than 5% of its net assets in warrants; provided that, of
this 5%, no more than 2% will be in warrants that are not listed on the
New York Stock Exchange or the American Stock Exchange.
2. Invest more than 15% of its net assets in illiquid securities,
including securities which are not readily marketable.
INVESTMENT LIMITATIONS OF THE UNDERLYING PORTFOLIOS
FUNDAMENTAL POLICIES
The following investment limitations are fundamental policies of each Underlying
Portfolio which cannot be changed with respect to an Underlying Portfolio
without the consent of the holders of a majority of that Portfolio's outstanding
shares.
The SIMT Core Fixed Income, SIMT High Yield Bond, SIMT Large Cap Growth, SIMT
Large Cap Value, SIMT Small Cap Growth, SIMT Small Cap Value, SIT International
Equity and SIT Emerging Markets Equity Portfolios may not:
1. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies which either obligate a Portfolio to purchase securities or
require a Portfolio to segregate assets are not considered to be
borrowings. To the extent that its borrowings exceed 5% of its assets,
(i) all borrowings will be repaid before making additional investments
and any interest paid on such borrowings will reduce income; and (ii)
asset coverage of at least 300% is required.
2. Make loans if, as a result, more than 33 1/3% of its total assets would
be lent to other parties, except that each Portfolio may (i) purchase
or hold debt instruments in accordance with its investment objective
and policies; (ii) enter into repurchase agreements; and (iii) lend its
securities in accordance with its prospectus and statement of
additional information.
3. Purchase or sell real estate, physical commodities, or commodities
contracts, except that each Portfolio may purchase (i) marketable
securities issued by companies which own or invest in real estate
(including real estate investment trusts), commodities, or commodities
contracts; and (ii) commodities contracts relating to financial
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instruments, such as financial futures contracts and options on such
contracts.
4. Issue senior securities (as defined in the 1940 Act) except as
permitted by rule, regulation or order of the Securities and Exchange
Commission (the "SEC").
5. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a portfolio security.
6. Invest in interests in oil, gas, or other mineral exploration or
development programs and oil, gas or mineral leases.
The SIT International Fixed Income Portfolio may not:
1. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings as described in the Prospectuses in aggregate amounts not to
exceed 10% of the net assets of such Portfolio taken at current value
at the time of the incurrence of such loan.
2. Make loans, except that the Portfolio may (i) purchase or hold debt
securities in accordance with its investment objectives and policies;
(ii) engage in securities lending as described in this Prospectus and
in the Statement of Additional Information; and (iii) enter into
repurchase agreements, provided that repurchase agreements and time
deposits maturing in more than seven days, and other illiquid
securities, including securities which are not readily marketable or
are restricted, are not to exceed, in the aggregate, 10% of the total
assets of the International Fixed Income Portfolio.
3. Invest in companies for the purpose of exercising control.
4. Acquire more than 10% of the voting securities of any one issuer.
5. Purchase or sell real estate, real estate limited partnership
interests, commodities or commodities contracts. However, subject to
its permitted investments, the Portfolio may purchase obligations
issued by companies which invest in real estate, commodities or
commodities contracts.
6. Make short sales of securities, maintain a short position or purchase
securities on margin, except as described in the Prospectus and except
that the Trust may obtain short-term credits as necessary for the
clearance of security transactions.
7. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a portfolio security.
8. Purchase securities of other investment companies except as permitted
by the 1940 Act and the rules and regulations thereunder and may only
purchase securities of money market funds.
9. Issue senior securities (as defined in the 1940 Act) except in
connection with permitted borrowing as described in the Prospectuses in
this Statement of Additional Information or as permitted by rule,
regulation or order of the SEC.
10. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, partner or director of the Trust or any
investment adviser of the Trust owns beneficially more than 1/2 of 1%
of the shares or securities of such issuer and all such officers,
trustees, partners and directors owning more than 1/2 of 1% of
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such shares or securities together own more than 5% of such shares or
securities.
11. Purchase securities of any company which has (with predecessors) a
record of less than three years continuing operations if, as a result,
more than 5% of the total assets (taken at current value) would be
invested in such securities.
12. Invest in interests in oil, gas or other mineral exploration or
development programs and oil, gas or mineral leases.
13. Purchase restricted securities (securities which must be registered
under the Securities Act of 1933, as amended (the "1933 Act"), before
they may be offered or sold to the public) or other illiquid securities
except as described in the Prospectuses and this Statement of
Additional Information.
The SLAT Prime Obligation Portfolio may not:
1. Borrow money except for temporary or emergency purposes and then only
in an amount not exceeding 10% of the value of the total assets of the
Portfolio. This borrowing provision is included solely to facilitate
the orderly sale of portfolio securities to accommodate substantial
redemption requests if they should occur and is not for investment
purposes. All borrowings by the Portfolio will be repaid before making
additional investments for the Portfolio and any interest on such
borrowings will reduce the income of the Portfolio.
2. Make loans, except that the Portfolio may purchase or hold debt
instruments in accordance with its investment objective and policies
and may enter into repurchase agreements, provided that repurchase
agreements maturing in more than seven days, restricted securities and
other illiquid securities are not to exceed, in the aggregate, 10% of
the Portfolio's total assets.
3. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings, as described in the Prospectus, in aggregate amounts not to
exceed 10% of the net assets of such Portfolio taken at fair market
value at the time such loan is incurred.
4. Invest in companies for the purpose of exercising control.
5. Acquire more than 10% of the voting securities of any one issuer.
6. Purchase or sell real estate, real estate limited partnership
interests, commodities or commodities contracts including futures
contracts. However, subject to its permitted investments, the Portfolio
may purchase obligations issued by companies which invest in real
estate, real estate limited partnerships, commodities or commodities
contracts.
7. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Portfolio may obtain short-term
credits as necessary for the clearance of securities transactions.
8. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a portfolio security.
9. Purchase securities of other investment companies except as permitted
by the 1940 Act and the rules and regulations thereunder and, in any
event, may not purchase securities of other open-end investment
companies. Under these rules and regulations, the Portfolio is
prohibited from acquiring the securities of other investment companies
if, as a result of such acquisition, the Portfolio owns more than 3% of
the total voting stock of an investment company; securities issued by
any one investment company represent more than 5% of the total
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Portfolio assets; or securities (other than treasury stock) issued by
all investment companies represent more than 10% of the total assets of
the Portfolio. These investment companies typically incur fees that are
separate from those fees incurred directly by the Portfolio. The
Portfolio's purchase of such investment companies results in the
layering of expenses such that shareholders would indirectly bear a
proportionate share of such investment companies' expenses, including
advisory fees.
10. Issue senior securities (as defined in the Investment Company Act of
1940) except in connection with permitted borrowings as described in
the Prospectus and Statement of Additional Information or as permitted
by rule, regulation or order of the Securities and Exchange Commission.
11. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, partner or director of the Trust or any
investment adviser of the Trust owns beneficially more than 1/2 of 1%
of the shares or securities of such issuer and all such officers,
trustees, partners and directors owning more than 1/2 of 1% of such
shares or securities together own more than 5% of such shares of
securities.
12. Purchase securities of any company which has (with predecessors) a
record of less than three years' continuing operations, except (i)
obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, or (ii) municipal securities which are rated by
at least two nationally recognized municipal bond rating services, if,
as a result, more than 5% of the total assets (taken at fair market
value) of the Portfolio would be invested in such securities.
13. Purchase warrants, puts, calls, straddles, spreads or combinations
thereof.
14. Invest in interests in oil, gas or other mineral exploration or
development programs.
15. Purchase restricted securities (securities which must be registered
under the Securities Act of 1933 before they may be offered or sold to
the public) or other illiquid securities except as described in the
Prospectus and this Statement of Additional Information.
The foregoing percentages will apply at the time of the purchase of a security
and shall not be considered violated unless an excess or deficiency occurs
immediately after or as a result of a purchase of such security. These
investment limitations and the investment limitations in each Underlying
Portfolio's Prospectus are fundamental policies of the Trust and may not be
changed without shareholder approval.
NON-FUNDAMENTAL POLICIES
The SIMT Core Fixed Income, SIMT High Yield Bond, SIMT Large Cap Growth, SIMT
Large Cap Value, SIMT Small Cap Growth, SIMT Small Cap Value, SIT International
Equity and SIT Emerging Markets Equity Portfolios may not:
1. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by the Portfolio's fundamental limitation on borrowing.
2. Invest in companies for the purpose of exercising control.
3. Purchase securities on margin or effect short sales, except that each
Portfolio may (i) obtain short-term credits as necessary for the
clearance of security transactions; (ii) provide initial and variation
margin payments in connection with transactions involving futures
contracts and options on such contracts; and (iii) make short sales
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"against the box" or in compliance with the SEC's position regarding
the asset segregation requirements imposed by Section 18 of the 1940
Act.
4. Invest its assets in securities of any investment company, except (i)
by purchase in the open market involving only customary brokers'
commissions; (ii) in connection with mergers, acquisitions of assets,
or consolidations; or (iii) as otherwise permitted by the 1940 Act.
5. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, partner or director of the Trust or any
investment adviser of the Trust owns beneficially more than 1/2 of the
1% of the shares or securities of such issuer and all such officers,
trustees, partners and directors owning more than 1/2 of 1% of such
shares or securities together own more than 5% of such shares or
securities.
6. Purchase securities of any company which has (with predecessors) a
record of less than three years continuing operations if, as a result,
more than 5% of the total assets (taken at fair market value) would be
invested in such securities.
7. Purchase or hold illiquid securities, i.e., securities that cannot be
disposed of for their approximate carrying value in seven days or less
(which term includes repurchase agreements and time deposits maturing
in more than seven days) if, in the aggregate, more than 15% of its net
assets would be invested in illiquid securities. Notwithstanding the
foregoing, securities issued pursuant to Section 4(2) of the 1933 Act
and securities eligible to be re-sold under Rule 144A of the 1933 Act
may be treated as liquid securities under procedures adopted by the
Board of Trustees.
8. Purchase securities which must be registered under the 1933 Act, as
amended, before they may be sold to the public, if, in the aggregate,
more than 15% of its net assets would be invested in such restricted
securities. Securities issued pursuant to Section 4(2) of the 1933 Act
and securities exempted from registration upon re-sale by Rule 144A
under the 1933 Act are not deemed to be restricted securities for
purposes of this limitation.
The SLAT Prime Obligation Portfolio must:
1. Maintain an average dollar-weighted portfolio maturity of 90 days or
less.
Under rules and regulations, established by the SEC, an Underlying Portfolio is
prohibited from acquiring the securities of other investment companies if, as a
result of such acquisition, the Underlying Portfolio owns more than 3% of the
total voting stock of the company; securities issued by any one investment
company represent more than 5% of the Underlying Portfolio's total assets; or
securities (other than treasury stock) issued by all investment companies
represent more than 10% of the total assets of the Underlying Portfolio. An
Underlying Portfolio's purchase of such investment company securities results in
the bearing of expenses such that shareholders would indirectly bear a
proportionate share of the operating expenses of such investment companies,
including advisory fees.
Each of the foregoing percentage limitations (except with respect to the
limitation on investing in illiquid securities) apply at the time of purchase.
These limitations are non-fundamental and may be changed by the Underlying
Trust's Board of Trustees without a vote of shareholders.
ADDITIONAL RESTRICTIONS
The following are non-fundamental investment limitations that are currently
required by one or more states in which the Trust sells shares of the Underlying
Portfolios. These limitations are in addition to, and in some cases more
restrictive than, the fundamental and non-fundamental investment limitations
listed above. A limitation may be changed or eliminated without shareholder
approval if the relevant state changes or eliminates its policy regarding such
investment restriction.
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As long as an Underlying Portfolio's shares are registered for sale in such
states, it may not:
1. Invest more than 5% of its net assets in warrants; provided that of
this 5% no more than 2% will be in warrants that are not listed on the
New York Stock Exchange or the American Stock Exchange.
2. Invest in the securities of other investment companies except by
purchase in the open market where no commission or profit to a sponsor
or dealer results from the purchase other than the customary broker's
commission, or except when the purchase is part of a plan of merger,
consolidation, reorganization or acquisition. [This restriction does
not apply to the SIMT High Yield Bond Portfolio.]
3. Invest more than 15% (10% with respect to the SIT International Equity,
SIT Emerging Markets Equity, and SIT International Fixed Income
Portfolios) of its net assets in illiquid securities, including
securities which are not readily marketable or are restricted. This
limitation does not apply to the SLAT Prime Obligation Portfolio.
4. Invest more than 15% of its net assets in restricted securities. For
purposes of this limitation, securities exempted from registration
under the 1933 Act, including Rule 144A securities and Section 4(2)
commercial paper, are considered to be liquid. This limitation does not
apply to the SLAT Prime Obligation Portfolio.
5. [SIT Portfolios only] Make short sales, except short sales "against the
box."
THE MANAGER TO THE FUNDS
The Administration Agreement provides that SEI Fund Management (the "Manager")
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of SEI Management in the performance of its
duties or from reckless disregard of its duties and obligations thereunder.
The Administration Agreement shall remain effective for the initial term of the
Agreement and each renewal term thereof unless earlier terminated (a) by the
mutual written agreement of the parties; (b) by either party of the
Administration Agreement on 90 days' written notice, as of the end of the
initial term or the end of any renewal term; (c) by either party of the
Administration Agreement on such date as is specified in written notice given by
the terminating party, in the event of a material breach of the Administration
Agreement by the other party, provided the terminating party has notified the
other party of such breach at least 45 days prior to the specified date of
termination and the breaching party has not remedied such breach by the
specified date; (d) effective upon the liquidation of the Manager; or (e) as to
any Fund or the Trust, effective upon the liquidation of such Fund or the Trust,
as the case may be.
The Manager, a Delaware business trust, has its principal business offices at
680 East Swedesford Road, Wayne, Pennsylvania 19087-1658. SEI Financial
Management Corporation ("SFM"), a wholly-owned subsidiary of SEI Corporation
("SEI"), is the owner of all beneficial interest in the Manager. Alfred P. West,
Jr., Carmen V. Romeo, and Henry H. Greer constitute the Board of Directors of
SFM, the Investment Adviser to the Funds. Mr. West serves as the Chairman of the
Board of Directors and Chief Executive Officer of SFM and SEI, and Mr. Greer
serves as President and Chief Operating Officer of SFM and SEI. SEI and its
subsidiaries and affiliates, including the Manager, are leading providers of
funds evaluation services, trust accounting systems, and brokerage and
information services to financial institutions, institutional investors, and
money managers. The Manager and its affiliates also serve as administrator or
manager to the following other mutual funds: The Achievement Funds Trust, The
Advisors' Inner Circle Fund, The Arbor Fund, ARK Funds, Bishop Street Funds,
CoreFunds, Inc., CrestFunds, Inc., CUFUND, FMB Funds, Inc., First American
Funds, Inc., First American Investment Funds, Inc., Inventor Funds, Inc.,
Marquis Funds(R), Monitor Funds, Morgan Grenfell Investment Trust, The PBHG
Funds, Inc., The Pillar Funds, Rembrandt Funds(R), 1784 Funds(R), SEI Daily
Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI International Trust, SEI Liquid Asset Trust,
SEI Tax Exempt Trust, Stepstone Funds, STI Classic Funds, STI Classic Variable
Trust, and Turner Funds.
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If operating expenses of any Fund exceed limitations established by certain
states, the Manager will pay such excess. The Manager will not be required to
bear expenses of any Fund to an extent which would result in the Fund's
inability to qualify as a regulated investment company under provisions of the
Internal Revenue Code. The term "expenses" is defined in such laws or
regulations, and generally excludes brokerage commissions, distribution
expenses, taxes, interest and extraordinary expenses.
THE INVESTMENT ADVISER TO THE FUNDS
SFM will discharge its responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust. The Trust's Advisory Agreement with
SFM provides that SFM shall not be protected against any liability to the Trust
or its shareholders by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard of its obligations or duties thereunder.
The Trust will operate in a manner that is distinctly different from virtually
all other investment companies. Most investment companies operate under a
structure in which a single related group of companies provide investment
advisory, administrative, and distribution services, and in which the investment
companies purchase equity and debt securities. The Trust, however, invests in
shares of certain related investment companies that are advised and/or
administered by SFM (i.e., the Underlying Portfolios). In turn, these Underlying
Portfolios invest in equity and debt securities. SFM is responsible for
investing the assets of each Fund in certain of the Underlying Portfolios within
percentage ranges established by SFM, and for investing uninvested cash balances
in short-term investments, including repurchase agreements.
The continuance of the Advisory Agreement must be specifically approved at least
annually: (i) by the vote of a majority of the outstanding shares of that Fund
or by the Trustees; and (ii) by the vote of a majority of the Trustees who are
not parties to such Agreement or "interested persons" of any party thereto, cast
in person at a meeting called for the purpose of voting on such approval. The
Advisory Agreement will terminate automatically in the event of its assignment,
and is terminable at any time without penalty by the Trustees of the Trust or,
with respect to a Fund, by a majority of the outstanding shares of that Fund, on
not less than 30 days' nor more than 60 days' written notice to the SFM, or by
SFM on 90 days' written notice to the Trust.
SFM will reimburse each Fund for certain expenses which in any year exceed the
limits prescribed by any state in which the Fund's shares are qualified for
sale. Presently, the most restrictive expense ratio limitation imposed by any
state is 2.5% of the first $30 million of a Fund's average daily net assets, 2%
of the next $70 million of such assets, and 1.5% of net assets in excess of $100
million. For the purpose of determining whether a Fund is entitled to
reimbursement, the expenses of the Fund are calculated on a monthly basis. If a
Fund is entitled to reimbursement, that month's management fee will be reduced
or postponed with any adjustment made after the end of the year.
THE ADVISERS AND SUB-ADVISERS TO THE UNDERLYING PORTFOLIOS
Each Advisory and certain of the Sub-Advisory Agreements provide that each
Adviser (or Sub-Adviser) shall not be protected against any liability to the
Underlying Trusts or their shareholders by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard of its obligations or duties thereunder. In addition, certain
of the Sub-Advisory Agreements provide that the Sub-Advisers shall not be
protected against any liability to the Underlying Trusts or their Shareholders
by reason of willful misfeasance, bad faith or negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder.
Pursuant to the Advisory and Sub-Advisory Agreements, the Underlying SIMT and
SIT Portfolios rely upon SFM for access, on a pooled investment basis, the core
elements of SFM's investment adviser selection, monitoring, and asset allocation
services. Under the "Manager of Managers" approach employed by the Underlying
SIMT and SIT Portfolios,
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SFM will recommend and, if the Trustees of the Underlying Trusts approve the
recommendation, monitor for the Underlying Portfolios one or more managers using
a range of investment styles.
The continuance of each Advisory and Sub-Advisory Agreement must be specifically
approved at least annually: (i) by the vote of a majority of the outstanding
shares of that Underlying Portfolio or by the Trustees; and (ii) by the vote of
a majority of the Trustees who are not parties to such Agreement or "interested
persons" of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval. Each Advisory or Sub-Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Trustees of the Trust or, with respect to an
Underlying Portfolio, by a majority of the outstanding shares of that Underlying
Portfolio, on not less than 30 days' nor more than 60 days' written notice to
the Adviser (or Sub-Adviser), or by the Adviser (or Sub- Adviser) on 90 days'
written notice to the Trust. However, SFM has obtained an exemptive order from
the Securities and Exchange Commission (the "SEC") that permits SFM, with the
approval of the Trust's Board of Trustees, to retain sub-advisers for an
Underlying Portfolio without submitting the sub-advisory agreement to a vote of
the Underlying Portfolio's shareholders. In addition, the exemptive relief
permits the non-disclosure of amounts payable by SFM under such sub-advisory
agreements.
PORTFOLIO MANAGERS OF THE UNDERLYING PORTFOLIOS
The following persons serve as portfolio managers to the Underlying Portfolios.
SIMT LARGE CAP GROWTH PORTFOLIO
Alliance Capital Management L.P. ("Alliance") is a sub-adviser to the SIMT Large
Cap Growth Portfolio. A committee of investment professionals at Alliance has
been responsible for managing the assets of the Portfolio allocated to Alliance
since the Portfolio's inception.
A committee composed of the eight investment portfolio managers of the equity
investment team of IDS Advisory Group Inc. ("IDS") is responsible for the
day-to-day management of a portion of the SIMT Large Cap Growth Portfolio's
investments. No individual person is primarily responsible for making
recommendations to that committee.
Provident Investment Counsel, Inc. ("PIC") is a sub-adviser to the SIMT Large
Cap Growth Portfolio. PIC utilizes a team approach to portfolio management. The
Managing Director, Jeffrey J. Miller, is responsible for the day-to-day
management of the Portfolio.
SIMT LARGE CAP VALUE PORTFOLIO
Investment decisions have been made by the quantitative computer model since
March, 1995. Josef Lakonishok, Andrei Shiefer and Robert Vishny, officers of LSV
Asset Management ("LSV"), monitor the quantitative analysis model on a
continuous basis, and make adjustments to the model based on their ongoing
research and statistical analysis. Securities are identified for purchase or
sale for the SIMT Large Cap Value Portfolio based upon the computer model and
defined variance tolerances. Purchases and sales are effected by LSV based upon
the output from the model.
William P. Rydell and Robert A. Wilk of Mellon Equity Associates ("Mellon") have
been the portfolio managers for Mellon's portion of the assets of the SIMT Large
Cap Value Portfolio since 1994. Mr. Rydell is the President and Chief Executive
Officer of Mellon, and has been managing individual and collectivized portfolios
at Mellon since 1982. Mr. Wilk is a Senior Vice President and portfolio manager
of Mellon, and has been involved with securities analysis, quantitative
research, asset allocation, trading and client services at Mellon since April,
1990. Prior to joining Mellon, Mr. Wilk was in charge of portfolio management
and conducted quantitative research for another investment subsidiary of Mellon
Bank Corporation, Triangle Portfolio Associates.
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Pacific Alliance Capital Management ("Pacific"), a division of Union Bank of
California, N.A., is a sub-adviser to SIMT's Large Cap Value Portfolio. A
committee of investment professionals at Pacific has been responsible for
managing the assets of the Portfolio allocated to Pacific since December, 1994.
SIMT SMALL CAP GROWTH PORTFOLIO
The portion of the SIMT Small Cap Growth Portfolio's assets allocated to
Apodaca-Johnston Capital Management, Inc. ("Apodaca") have been managed since
August, 1995 by Scott Johnston and Jerry C. Apodaca, Jr. Mr. Johnston, a
principal and 1/3 owner of Apodaca, founded Apodaca's predecessor in 1985, and
has 23 years of investment experience. Jerry C. Apodaca, Jr. joined the firm as
a principal and 1/3 owner in 1991, and has 12 years investment management
experience. Before joining Apodaca, Mr. Apodaca was a Vice President of
Marketing at Newport First Investments, Inc.
Mr. Roger Stamper, CFA, has primary responsibility for First of America
Investment Corporation's ("First of America") portion of the SIMT Small Cap
Growth Portfolio. Mr. Stamper is a Managing Director of First of America, and
has been with First of America since 1988.
Nicholas-Applegate Capital Management, Inc. ("Nicholas-Applegate") manages its
portion of the SIMT Small Cap Growth Portfolio through its systematic-driven
management team under the supervision of Mr. Nicholas, founder and Chief
Investment Officer of the firm. Nicholas-Applegate's systems driven investment
team, headed by Lawrence S. Speidell, has been primarily responsible for the
day-to-day management of the Portfolio since March, 1994. Mr. Speidell has been
a portfolio manager and investment team leader with Nicholas-Applegate since
March, 1994. Prior to joining Nicholas-Applegate, he was an institutional
portfolio manager with Batterymarch Financial Management.
William Jeffrey III, Kenneth F. McCain, and Richard S. Coons, each of whom own
1/3 of Wall Street Associates ("WSA"), serve as portfolio managers for the
portion of the SIMT Small Cap Growth Portfolio's assets allocated to WSA since
August, 1995. Each is a principal of WSA and, together, they have 73 years of
investment management experience.
SIMT SMALL CAP VALUE PORTFOLIO
Edwin B. Powell and Joseph T. Doyle, have served as the portfolio managers to
the SIMT Small Cap Value Portfolio since its inception, and since 1995, Cynthia
R. Axlrod has also served as a portfolio manager to the Portfolio. These
individuals work as a team and share responsibility. Mr. Doyle has been with
1838 Investment Advisors, L.P. ("1838") since 1988. Mr. Powell joined 1838 in
1994. Mr. Powell managed small cap equity portfolios for Provident Capital
Management from 1987 to 1994. Prior to joining 1838, Ms. Axlrod was with Friess
Associates from 1992 to 1995. Prior to 1992, Ms. Axlrod was with Provident
Capital Management from 1987 to 1992.
The portion of the SIMT Small Cap Value Portfolio's assets allocated to Boston
Partners Asset Management, L.P. ("Boston") have been managed since November,
1995 by Wayne J. Archambo, C.F.A. Mr. Archambo has been employed by Boston since
its organization, and has 10 years experience investing in small capitalization
stocks. Prior to joining Boston, Mr. Archambo was a Senior Vice President and
member of the Equity Policy Committee at The Boston Company Asset Management,
Inc. ("TBCAM"), where he created that firm's Small Capitalization Value Product
and Mid Capitalization Product. Prior to joining TBCAM in 1989, Mr. Archambo
spent six years as a portfolio manager/analyst for Boston-based Systematic
Investors.
SIT INTERNATIONAL EQUITY PORTFOLIO
Acadian Asset Management, Inc. ("Acadian") is a sub-adviser to the SIT
International Equity Portfolio. A committee of investment professionals at
Acadian has been responsible for managing the Portfolio assets allocated to
Acadian since the Portfolio's inception.
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James L. Farrell, the Chairman of Farrell Wako Global Investment Management,
Inc. ("Farrell Wako"), manages its portion of the assets of the SIT
International Equity Portfolio. Mr. Farrell has 30 years of experience in
investment management and applied financial research and was responsible for
management of over $1 billion in equity assets as Chairman of MPI Associates
prior to his association with Farrell Wako.
Julian R. Johnston and Jeremy G. Lodwick have shared primary responsibility for
a portion of the assets of the SIT International Equity Portfolio and its
predecessor fund since its inception. Mr. Johnston has 20 years experience in
European equity investment. Mr. Johnston joined Morgan Grenfell Investment
Services Limited ("MG") in 1984 and is currently the head of the MG Continental
European Investment team. He speaks French, German, Swedish and Danish fluently.
Mr. Lodwick has ten years experience in European equity investment. He joined MG
in 1986 and was a UK equity research analyst before moving to New York where he
was a member of the client liaison and marketing team for 5 years. He returned
to the London office in 1991 to manage European equity portfolios.
Mr. William Garnett will be primarily responsible for the day-to-day management
and investment decisions with respect to the SIT International Equity
Portfolio's assets allocated to Seligman Henderson Co. Mr. Garnett has more than
10 years' experience in managing Japanese small cap equity securities. Mr. Iain
Clark, Seligman Henderson Co.'s chief investment officer, will have ultimate
responsibility for portfolio management. Mr. Clark has more than 24 years
experience, including 11 with Henderson Administration Group plc.
Mr. Marco Wong leads the management team for the assets of the SIT International
Equity Portfolio allocated to Yamaichi Capital Management, Inc. and Yamaichi
Capital Management (Singapore) Limited ("YCMS"). Mr. Wong has been with YCMS
since 1986.
SIT EMERGING MARKETS EQUITY PORTFOLIO
Josephine S. Jimenez and Bryan L. Sudweeks share primary responsibility for the
SIT Emerging Markets Equity Portfolio. Ms. Jimenez and Mr. Sudweeks have
thirteen and six years experience, respectively, in emerging markets investment.
Both joined Montgomery Asset Management, L.P. in 1991.
SIMT CORE FIXED INCOME PORTFOLIO
BlackRock Financial Management, Inc. ("BlackRock") employs a team approach in
managing the SIMT Core Fixed Income Portfolio, however, the portfolio manager
who has day-to-day responsibility for the Portfolio is Keith Anderson. Mr.
Anderson is a Managing Director and Co-Head of Portfolio Management at
BlackRock, and has 12 years experience investing in fixed income securities.
Prior to founding BlackRock in 1988, Mr. Anderson was a Vice President in Fixed
Income Research at The First Boston Corporation.
Mr. Charles Groeschell, a Senior Vice President of Firstar Investment Research &
Management Company ("FIRMCO") and portfolio manager of a portion of the assets
of the SIMT Core Fixed Income Portfolio, has been employed by FIRMCO or its
affiliates since 1983, and has had 13 years experience in fixed income
investing.
Kent S. Engel, Director and Chief Investment Officer of Western Asset Management
Company ("Western"), has been primarily responsible for the day-to-day
management of a portion of the assets of the SIMT Core Fixed Income Portfolio
since January 19, 1994. Mr. Engel has been with Western and its predecessor
since 1969.
SIMT HIGH YIELD BOND PORTFOLIO
The SIMT High Yield Bond Portfolio's assets have been managed by Richard J.
Lindquist, C.F.A., since its inception. Mr. Lindquist joined BEA Associates
("BEA") in 1995 as a result of BEA's acquisition of CS First Boston Investment
Management, and has had 11 years of investment management experience, including
6 years of experience working with
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high yield bonds. Prior to joining CS First Boston, Mr. Lindquist was with
Prudential Insurance Company of America where he managed high yield portfolios
totalling approximately $1.3 billion.
SIT INTERNATIONAL FIXED INCOME PORTFOLIO
Kenneth Windheim, President of Strategic Fixed Income, L.P. ("SFI"), has been
the portfolio manager of the SIT International Fixed Income Portfolio since its
inception in 1991. Mr. Windheim is assisted by Gregory Barnett and David
Jallits, Directors of SFI and portfolio managers of the Portfolio since April
1994. Prior to forming SFI, Kenneth Windheim managed a global fund income
portfolio at Prudential Asset Management. Prior to joining SFI, Gregory Barnett
was portfolio manager for the Pilgrim Multi-Market Income Fund with active use
of foreign exchange option strategies. Prior to that he was vice president and
senior fixed income portfolio manager at Lexington Management. Prior to joining
SFI, David Jallits was Senior Portfolio Manager for a hedge fund at Teton
Partners. From 1982-1994, he was Vice President and Global Fixed Income
portfolio manager at The Putnam Companies.
DISTRIBUTION
The Trust has adopted a Distribution Plan for Class D (the "Class D Plan") in
accordance with the provisions of Rule 12b-1 under the 1940 Act (which regulates
circumstances under which an investment company may directly or indirectly bear
expenses relating to the distribution of its shares). In this regard, the Board
of Trustees has determined that the Class D Plan and the Distribution Agreement
are in the best interests of the shareholders. Continuance of the Class D Plan
must be approved annually by a majority of the Trustees of the Trust and by a
majority of the Trustees who are not "interested persons" of the Trust (as that
term is defined in the 1940 Act) and who have no direct or indirect financial
interest in the operation of a Distribution Plan or in any agreements related
thereto ("Qualified Trustees"). The Class D Plan requires that quarterly written
reports of amounts spent under the Plan and the purposes of such expenditures be
furnished to and reviewed by the Trustees. The Class D Plan may not be amended
to increase materially the amount which may be spent thereunder without approval
by a majority of the outstanding shares of the Fund or class affected. All
material amendments of the Class D Plan will require approval by a majority of
the Trustees of the Trust and of the Qualified Trustees.
Except to the extent that SEI Management (as Manager) and SFM (as investment
adviser) benefitted through increased fees from an increase in the net assets of
the Trust which may have resulted in part from the expenditures, no interested
person of the Trust nor any Trustee of the Trust who is not an interested person
of the Trust had a direct or indirect financial interest in the operation of the
Class D Plan or related agreements.
Although banking laws and regulations prohibit banks from distributing shares of
open-end investment companies such as the Trust, according to an opinion issued
to the staff of the SEC by the Office of the Comptroller of the Currency,
financial institutions are not prohibited from acting in other capacities for
investment companies, such as providing shareholder services. Should future
legislative, judicial or administrative action prohibit or restrict the
activities of financial institutions in connection with providing shareholder
services, the Trust may be required to alter materially or discontinue its
arrangements with such financial institutions.
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees and executive officers of the Trust, their respective dates of
birth and their principal occupations for the last five years are set forth
below. Each may have held other positions with the named companies during that
period. Unless otherwise noted, the business address of each Trustee and
executive officer is SEI Financial Management Corporation, 680 East Swedesford
Road, Wayne, Pennsylvania 19087-1658. Certain officers of the Trust also serve
as trustees and/or officers of The Achievement Funds Trust, The Advisors' Inner
Circle Fund, The Arbor Fund, ARK Funds, Bishop Street Funds, CoreFunds, Inc.,
CrestFunds, Inc., CUFUND, First American Funds, Inc., First American Investment
Funds, Inc., FMB Funds, Inc., Insurance Investment Products Trust, Inventor
Funds, Inc., Marquis Funds(R), Monitor
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Funds, Morgan Grenfell Investment Trust, The PBHG Funds, Inc., The Pillar Funds,
Rembrandt Funds(R), 1784 Funds, SEI Daily Income Trust, SEI Institutional
Managed Trust, SEI International Trust, SEI Tax Exempt Trust, Stepstone Funds,
STI Classic Funds, STI Classic Variable Trust and Turner Funds, open-end
management investment companies which are managed by SEI Financial Management
Corporation and with the exception of Rembrandt Funds, are distributed by SEI
Financial Services Company.
ROBERT A. NESHER (DOB 08/17/46) - Chairman of the Board of Trustees* - Retired
since 1994. Executive Vice President of SEI, 1986-1994. Director and Executive
Vice President of the Manager and the Distributor, 1981-1994. Trustee of the
Arbor Fund, Marquis Funds(R), Advisors' Inner Circle Fund, and Inventor Funds,
Inc.
WILLIAM M. DORAN (DOB 05/26/40) - Trustee* - 2000 One Logan Square,
Philadelphia, PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel
to the Trust, Manager and Distributor, Director and Secretary of SEI and
Secretary of the Manager and Distributor.
F. WENDELL GOOCH (DOB 12/03/37) - Trustee** - P.O. Box 190, Paoli, IN 47454.
President, Orange County Publishing Co., Inc. since October 1981. Publisher of
the Paoli News and the Paoli Republican and Editor of the Paoli Republican since
January 1981. President, H & W Distribution, Inc. since July 1984. Executive
Vice President, Trust Department, Harris Trust and Savings Bank and Chairman of
the Board of Directors of The Harris Trust Company of Arizona before January
1981. Trustee of STI Classic Funds.
FRANK E. MORRIS (DOB 12/30/23) - Trustee** - 105 Walpole Street, Dover, MA
02030. Retired since 1990. Peter Drucker Professor of Management, Boston
College, 1989-1990. President, Federal Reserve Bank of Boston, 1968-1988.
Trustee of The Arbor Fund, Marquis Funds(R), Advisors' Inner Circle Fund, and
Inventor Funds, Inc.
JAMES M. STOREY (DOB 04/12//31) - Trustee - Partner, Dechert Price & Rhoads,
from September 1987 - December 1993; Honorary Trustee, SEI Daily Income Trust,
SEI Tax Exempt Trust, SEI Index Funds and SEI Institutional Managed Trust since
December 1993.
DAVID G. LEE (DOB 04/16/52) - President and Chief Executive Officer - Senior
Vice President of the Manager and Distributor since 1993. Vice President of the
Manager and Distributor, 1991-1993. President, GW Sierra Trust Funds before
1991.
SANDRA K. ORLOW (DOB 10/18/53) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Manager and Distributor since 1988.
KEVIN P. ROBINS (DOB 04/15/61) - Vice President and Assistant Secretary - Senior
Vice President and General Counsel of SEI, the Administrator and Distributor
since 1994. Vice President and Assistant Secretary of SEI, the Administrator and
Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius LLP (law firm),
1988-1992.
RICHARD W. GRANT (DOB 10/25/45) - Secretary - 2000 One Logan Square,
Philadelphia, PA 19103, Partner, Morgan, Lewis & Bockius LLP (law firm), counsel
to the Trust, Manager and Distributor.
KATHRYN L. STANTON (DOB 11/19/58) - Vice President and Assistant Secretary -
Vice President, Assistant Secretary of SEI, the Administrator and Distributor
since 1994. Associate, Morgan, Lewis & Bockius LLP (law firm), 1989-1994.
JOSEPH P. LYDON (DOB 09/27/59) - Vice President and Assistant Secretary -
Director, Business Administration of Fund Resources, April 1995. Vice President,
Fund Group, Dremen Value Management, LP, President Dremen Financial Services,
Inc. prior to 1995.
STEPHEN G. MEYER (DOB 07/12/65) - Controller, Chief Financial Officer-Vice
President and Controller of SEI
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Corporation since 1994. Director, Internal Audit and Risk Management, SEI
Corporation, 1992-1994. Senior Associate, Coopers and Lybrand, 1990-1992.
Internal Audit, Vanguard Group prior to 1992.
TODD CIPPERMAN (DOB 01/14/66) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI, the Administrator and the Distributor
since 1995. Associate, Dewey Ballantine (law firm) (1994-1995). Associate,
Winston & Strawn (law firm) (1991-1994).
BARBARA A. NUGENT (DOB 06/18/56) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI, the Administrator and Distributor
since 1996. Associate, Drinker, Biddle & Reath (law firm). Assistant Vice
President/Administration, Delaware Service Company, Inc.
MARC H. CAHN (DOB 06/19/57) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI, the Administrator and Distributor
since 1996. Associate General Counsel, Barclays Bank PLC. ERISA counsel, First
Fidelity Bancorporation.
*Messrs. Nesher and Doran are Trustees who may be deemed to be "interested
persons" of the Trust as the term is defined in the 1940 Act.
**Messrs. Gooch, Storey and Morris serve as members of the Audit Committee of
the Trust.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for unaffiliated Trustees.
Compensation of officers and affiliated Trustees of the Trust is paid by the
Manager.
PERFORMANCE
From time to time, each Fund may advertise yield and/or total return. These
figures will be based on historical earnings and are not intended to indicate
future performance.
The yield of a Fund refers to the annualized income generated by an investment
in the Fund over a specified 30-day period. The yield is calculated by assuming
that the income generated by the investment during that period generated each
period over one year and is shown as a percentage of the investment. In
particular, yield will be calculated according to the following formula: Yield =
2[((a-b)/(cd)) + 1)(6) - 1] where a = dividends and interest earned during the
period; b = expenses accrued for the period (net of reimbursement); c = the
current daily number of shares outstanding during the period that were entitled
to receive dividends; and d = the maximum offering price per share on the last
day of the period.
The total return of a Fund refers to the average compounded rate of return to a
hypothetical investment for designated time periods (including but not limited
to, the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each
period. In particular, total return will be calculated according to the
following formula: P(1+T)(n) = ERV, where P = a hypothetical initial payment of
$1,000; T = average annual total return: n = number of years; and ERV = ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
designated time period as of the end of such period.
PURCHASE AND REDEMPTION OF SHARES
The purchase and redemption price of shares is the net asset value of each
share. The net asset value of each Fund is determined by SFM and is based upon
the proportional net asset values of each Fund's Underlying Portfolio shares
(plus any available cash). Each Underlying Portfolio's securities are valued by
SFM pursuant to valuations provided by an independent pricing service (generally
the last quoted sale price). Underlying Portfolio securities listed on a
securities
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exchange for which market quotations are available are valued at the last quoted
sale price on each Business Day (defined as days on which the New York Stock
Exchange is open for business ("Business Day")) or, if there is no such reported
sale, at the most recently quoted bid price. Unlisted securities for which
market quotations are readily available are valued at the most recently quoted
bid price. The pricing service may also use a matrix system to determine
valuations. This system considers such factors as security prices, yields,
maturities, call features, ratings and developments relating to specific
securities in arriving at valuations. The procedures of the pricing service and
its valuations are reviewed by the officers of the Trust under the general
supervision of the Trustees.
It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in kind of readily marketable securities held
by an Underlying Portfolio in lieu of cash. Shareholders may incur brokerage
charges on the sale of any such securities so received in payment of
redemptions. However, a shareholder will at all times be entitled to aggregate
cash redemptions from all Underlying Portfolios of the Trust during any 90-day
period of up to the lesser of $250,000 or 1% of the Trust's net assets. A gain
or loss for federal income tax purposes may be realized by a taxable shareholder
upon an in-kind redemption depending upon the shareholder's basis in the shares
of the Trust redeemed.
Purchases and redemptions of shares of the Funds may be made on any day the New
York Stock Exchange is open for business. Currently, the following holidays are
observed by the Trust: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period during which trading
on the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or evaluation of the portfolio securities is not reasonably
practicable, or for such other periods as the SEC may by order permit. The Trust
also reserves the right to suspend sales of shares of the Funds for any period
during which the New York Stock Exchange, the Manager, the Distributor, and/or
the Custodian are not open for business.
SHAREHOLDER SERVICES
DISTRIBUTION INVESTMENT OPTION: Distributions of dividends and capital gains
made by the Funds may be automatically invested in shares of one of the Funds if
shares of the Fund are available for sale. Such investments will be subject to
initial investment minimums, as well as additional purchase minimums. A
shareholder considering the Distribution Investment Option should obtain and
read the prospectus of the Underlying Portfolios and consider the differences in
objectives and policies before making any investment.
EXCHANGE PRIVILEGE: Some or all of the shares of a Fund's Shares for which
payment has been received (i.e., an established account), may be exchanged for
Shares of the same Class of other Funds of the Trust. A shareholder may exchange
the shares of each Fund's Shares, for which good payment has been received, in
his or her account at any time, regardless of how long he or she has held his or
her shares. Exchanges are made at net asset value. The Trust reserves the right
to change the terms and conditions of the exchange privilege discussed herein,
or to terminate the exchange privilege, upon 60 days' notice. Exchanges will be
made only after proper instructions in writing or by telephone (an "Exchange
Request") are received for an established account by the Distributor.
Each Exchange Request must be in proper form (i.e., if in writing, signed by the
record owner(s) exactly as the shares are registered; if by telephone-proper
account identification is given by the dealer or shareholder of record), and
each exchange must involve either shares having an aggregate value of at least
$1,000 or all the shares in the account. Each exchange involves the redemption
of the shares of a Fund (the "Old Fund") to be exchanged and the purchase at net
asset
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value of the shares of the other Funds (the "New Funds"). Any gain or loss on
the redemption of the shares exchanged is reportable on the shareholder's
federal income tax return, unless such shares were held in a tax-deferred
account or tax-qualified retirement plan. If the Exchange Request is received by
the Distributor in writing or by telephone on any business day prior to the
redemption cut-off time specified in the Prospectus, the exchange usually will
occur on that day if all the restrictions set forth above have been complied
with at that time. However, payment of the redemption proceeds by the Old Funds
and thus the purchase of shares of the New Funds, may be delayed for up to seven
days if the Fund determines that such delay would be in the best interest of all
of its shareholders. Investment dealers which have satisfied criteria
established by the Funds may also communicate a Shareholder's Exchange Request
to the Funds subject to the restrictions set forth above. No more than five
exchange requests may be made in any one telephone Exchange Request.
TAXES
The following is only a summary of certain additional federal tax considerations
generally affecting the Funds and their shareholders that are not described in
the Funds' prospectus. No attempt is made to present a detailed explanation of
the federal, state or local tax treatment of the Funds or their shareholders and
the discussion here and in the Funds' prospectus is not intended as a substitute
for careful tax planning.
This discussion of federal income tax consequences is based on the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations issued
thereunder, in effect on the date of this Statement of Additional Information.
New legislation, as well as administrative changes or court decisions, may
significantly change the conclusions expressed herein, and may have a
retroactive effect with respect to the transactions contemplated herein.
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other Funds. Each Fund intends to qualify as a
regulated investment company ("RIC") under Subchapter M of the Code so that it
will be relieved of federal income tax on that part of its income that is
distributed to shareholders. In order to qualify for treatment as a RIC, a Fund
must distribute annually to its shareholders at least 90% of its investment
company taxable income (generally, net investment income plus the excess, if
any, of net short-term capital gain over net long-term capital loss)
("Distribution Requirement") and also must meet several additional requirements.
Among these requirements are the following (i) at least 90% of a Fund's gross
income each taxable year must be derived from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
stock or securities, or other income derived with respect to its business of
investing in such stock or securities; (ii) less than 30% of a Fund's gross
income each taxable year must be derived from the sale or other disposition of
stocks, securities or certain other investments held for less than three months;
(iii) at the close of each quarter of a Fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
government securities, securities of other RICs and other securities, with such
other securities limited, in respect of any one issuer, to an amount that does
not exceed 5% of the value of a Fund's assets and that does not represent more
than 10% of the outstanding voting securities of such issuer; and (iv) at the
close of each quarter of a Fund's taxable year, not more than 25% of the value
of its assets may be invested in securities (other than U.S. Government
securities or the securities of other RICs) of any one issuer or of two or more
issuers which are engaged in the same, similar, or related trades or businesses,
if the Fund owns at least 20% of the voting power of such issuers.
Notwithstanding the Distribution Requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital
gain, a Fund will be subject to a nondeductible 4% federal excise tax to the
extent it fails to distribute by the end of any calendar year at least 98% of
its ordinary income for that year and 98% of its capital gain net income (the
excess of short- and long-term capital gain over short- and long-term capital
loss) for the one-year period ending on October 31 of that year, plus certain
other amounts. Each Fund intends to make sufficient distributions to avoid
liability for the federal excise tax applicable to RICs. A Fund may in certain
circumstances be required to liquidate portfolio investments in order to make
sufficient distributions to avoid federal excise tax liability when the
investment advisor might not otherwise have chosen to do so,
S-27
<PAGE> 140
and liquidation of investments in such circumstances may affect the ability of a
Fund to satisfy the requirements for qualification as a RIC.
If capital gain distributions have been made with respect to shares that are
sold at a loss after being held for six months or less, then the loss is treated
as a long-term capital loss to the extent of the capital gain distributions.
If a Fund fails to qualify as a RIC for any year, all of its income will be
subject to tax at corporate rates, and its distributions (including capital gain
distributions) generally will be taxable as ordinary income dividends to its
shareholders, subject to the dividends received deduction for corporate
shareholders who have held shares for more than 45 days.
A Fund will be required in certain cases to withhold and remit to the United
States Treasury 31% of amounts payable to any shareholder who (1) has provided
the Fund either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the Internal Revenue Service for failure
to properly report payments of interest or dividends, or (3) who has failed to
certify to the Fund that such shareholder is not subject to backup withholding.
STATE TAXES
A Fund is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by a Fund to
shareholders and the ownership of shares may be subject to state and local
taxes. Shareholders should consult their own tax advisers regarding the effect
of federal, state and local taxes in their own individual circumstances.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the advisers and sub-advisers are responsible for
placing orders to execute Fund transactions. In placing orders, it is the
Trust's policy to seek to obtain the best net results taking into account such
factors as price (including the applicable dealer spread), size, type and
difficulty of the transaction involved, the firm's general execution and
operational facilities, and the firm's risk in positioning the securities
involved. While the advisers generally seek reasonably competitive spreads or
commissions, the Trust will not necessarily be paying the lowest spread or
commission available. The Trust will not purchase portfolio securities from any
affiliated person acting as principal except in conformity with the regulations
of the SEC.
It is expected that the Funds may execute brokerage or other agency transactions
through the Distributor, a registered broker-dealer, for a commission, in
conformity with the 1940 Act, the Securities Exchange Act of 1934, as amended,
and rules and regulations of the SEC. Under these provisions, the Distributor is
permitted to receive and retain compensation for effecting portfolio
transactions for a Fund on an exchange if a written contract is in effect
between the Distributor and the Trust expressly permitting the Distributor to
receive and retain such compensation. These provisions further require that
commissions paid to the Distributor by the Trust for exchange transactions not
exceed "usual and customary" brokerage commissions. The rules define "usual and
customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time." In addition, the Fund may direct commission business to one or
more designated broker-dealers, including the Distributor, in connection with
such broker-dealer's payment of certain of the Fund's expenses. The Trustees,
including those who are not "interested persons" of the Trust, have adopted
procedures for evaluating the reasonableness of commissions paid to the
Distributor and will review these procedures periodically. In addition, SFM has
adopted a policy respecting the receipt of research and related products and
services in connection with transactions effected for the Underlying Portfolios
operating within the "Manager of Managers" structure. Under this policy, SFM and
the various firms that serve as sub-advisers to certain Underlying Portfolios,
in the exercise of joint
S-28
<PAGE> 141
investment discretion over the assets of an Underlying Portfolio, will direct a
substantial portion of an Underlying Portfolio's brokerage to the Distributor in
consideration of the Distributor's provision of research and related products to
SFM for use in performing its advisory responsibilities. All such transactions
directed to the Distributor must be accomplished in a manner that is consistent
with each Underlying Trust's policy to achieve best net results, and must comply
with each Underlying Trust's procedures regarding the execution of transactions
through affiliated brokers.
Since the Trust does not market its shares through intermediary brokers or
dealers, it is not the Trust's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, the Underlying Portfolio's advisers or sub-advisers may place
portfolio orders with qualified broker-dealers who recommend the Trust to
clients, and may, when a number of brokers and dealers can provide best price
and execution on a particular transaction, consider such recommendations by a
broker or dealer in selecting among broker-dealers.
The Trust does not expect to use one particular dealer, but the Underlying
Portfolio's advisers or sub-advisers may, consistent with the interests of the
Underlying Portfolios, select brokers on the basis of the research services they
provide to the Underlying Portfolio's advisers and sub-advisers. Such services
may include analysis of the business or prospects of a company, industry or
economic sector or statistical and pricing services. Information so received by
the advisers or sub-advisers will be in addition to and not in lieu of the
services required to be performed by an Underlying Portfolio's advisers or
sub-advisers under the advisory and sub-advisory agreements. If in the judgment
of an Underlying Portfolio's advisers, the Underlying Portfolio, or other
accounts managed by the Underlying Portfolio's advisers or sub-advisers, will be
benefitted by supplemental research services, the Underlying Portfolio's
advisers or sub-advisers are authorized to pay brokerage commissions to a broker
furnishing such services that are in excess of commissions which another broker
may have charged for effecting the same transaction. The expenses of an
Underlying Portfolio's advisers or sub-advisers will not necessarily be reduced
as a result of the receipt of such supplemental information.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of each Fund, each of which represents an equal proportionate interest in
that Fund. Each share upon liquidation entitles a shareholder to a pro rata
share in the net assets of that Fund, after taking into account the additional
distribution, shareholder servicing and transfer agency expenses attributable to
Class D Shares. Shareholders have no preemptive rights. The Declaration of Trust
provides that the Trustees of the Trust may create additional series of shares
or separate classes of portfolios. Share certificates representing the shares
will not be issued.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his or
her own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or administrators, shall not be liable
for any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his or her
willful misfeasance, bad faith, gross negligence or reckless disregard of his or
her duties.
S-29
<PAGE> 142
VOTING
Where the Trust's Prospectus or Statement of Additional Information states that
an investment limitation or a fundamental policy may not be changed without
shareholder approval, such approval means the vote of (i) 67% or more of the
affected Fund's shares present at a meeting if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by Proxy, or (ii)
more than 50% of the affected Fund's outstanding shares, whichever is less.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the Trust. Even if, however, the Trust were held to be a partnership, the
possibility of the shareholders incurring financial loss for that reason appears
remote because the Trust's Declaration of Trust contains an express disclaimer
of shareholder liability for obligations of the Trust and requires that notice
of such disclaimer be given in each agreement, obligation or instrument entered
into or executed by or on behalf of the Trust or the Trustees, and because, the
Declaration of Trust provides for indemnification out of the Trust property for
any shareholders held personally liable for the obligations of the Trust.
EXPERTS
The financial statements dated February 16, 1996 included in this Statement of
Additional Information have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
FINANCIAL STATEMENTS
Following are the Funds' audited seed capital financial statements dated
February 16, 1996 and unaudited financial statements for the period from
commencement of operations of each Fund until July 31, 1996.
S-30
<PAGE> 143
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors
SEI Asset Allocation Trust
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Diversified
Conservative Income, Diversified Conservative, Diversified Moderate Growth,
Diversified Growth and Diversified U.S. Stock Funds (constituting SEI Asset
Allocation Trust, hereafter referred to as the "Trust") at February 16, 1996,
in conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Trust's management; our responsibility
is to express an opinion on this financial statement based on our audit. We
conducted our audit of this financial statement in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania
February 21, 1996
<PAGE> 144
SEI ASSET ALLOCATION TRUST
Statement of Assets and Liabilities
February 16, 1996
Diversified Growth Fund
Assets:
<TABLE>
<S> <C> <C>
Cash $ 1,000
Deferred Organization Costs 16,400
Deferred Offering Costs 23,000
-------
Total Assets 40,400
-------
Liabilities:
Due to Manager 39,400
-------
Net Assets $ 1,000
=======
Net Assets Consist of:
Portfolio shares of Class A (unlimited authorization - no par value)
based on 50.000 outstanding shares of beneficial interest $ 500
Portfolio shares of Class D (unlimited authorization - no par value)
based on 50.000 outstanding shares of beneficial interest 500
-------
Total Net Assets: $ 1,000
=======
Net Asset Value, Offering and Redemption Price, Class A $ 10.00
=======
Net Asset Value, Offering and Redemption Price, Class D $ 10.00
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-31
<PAGE> 145
SEI ASSET ALLOCATION TRUST
Statement of Assets and Liabilities
February 16, 1996
Diversified U.S. Stock Fund
<TABLE>
Assets:
<S> <C> <C>
Cash $ 1,000
Deferred Organization Costs 16,400
Deferred Offering Costs 23,000
-------
Total Assets 40,400
-------
Liabilities:
Due to Manager 39,400
-------
Net Assets $ 1,000
=======
Net Assets Consist of:
Portfolio shares of Class A (unlimited authorization - no par value)
based on 50.000 outstanding shares of beneficial interest $ 500
Portfolio shares of Class D (unlimited authorization - no par value)
based on 50.000 outstanding shares of beneficial interest 500
-------
Total Net Assets: $ 1,000
=======
Net Asset Value, Offering and Redemption Price, Class A $ 10.00
=======
Net Asset Value, Offering and Redemption Price, Class D $ 10.00
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-32
<PAGE> 146
SEI ASSET ALLOCATION TRUST
Statement of Assets and Liabilities
February 16, 1996
Diversified Conservative Fund
<TABLE>
Assets:
<S> <C> <C>
Cash $ 1,000
Deferred Organization Costs 16,400
Deferred Offering Costs 23,000
-------
Total Assets 40,400
-------
Liabilities:
Due to Manager 39,400
-------
Net Assets $ 1,000
=======
Net Assets Consist of:
Portfolio shares of Class A (unlimited authorization - no par value)
based on 50.000 outstanding shares of beneficial interest $ 500
Portfolio shares of Class D (unlimited authorization - no par value)
based on 50.000 outstanding shares of beneficial interest 500
-------
Total Net Assets: $ 1,000
=======
Net Asset Value, Offering and Redemption Price, Class A $ 10.00
=======
Net Asset Value, Offering and Redemption Price, Class D $ 10.00
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-33
<PAGE> 147
SEI ASSET ALLOCATION TRUST
Statement of Assets and Liabilities
February 16, 1996
Diversified Moderate Growth Fund
<TABLE>
Assets:
<S> <C> <C>
Cash $ 1,000
Deferred Organization Costs 16,400
Deferred Offering Costs 23,000
-------
Total Assets 40,400
-------
Liabilities:
Due to Manager 39,400
-------
Net Assets $ 1,000
=======
Net Assets Consist of:
Portfolio shares of Class A (unlimited authorization - no par value)
based on 50.000 outstanding shares of beneficial interest $ 500
Portfolio shares of Class D (unlimited authorization - no par value)
based on 50.000 outstanding shares of beneficial interest 500
-------
Total Net Assets: $ 1,000
=======
Net Asset Value, Offering and Redemption Price, Class A $ 10.00
=======
Net Asset Value, Offering and Redemption Price, Class D $ 10.00
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-34
<PAGE> 148
SEI ASSET ALLOCATION TRUST
Statement of Assets and Liabilities
February 16, 1996
Diversified Conservative Income Fund
<TABLE>
Assets:
<S> <C> <C>
Cash $ 96,000
Deferred Organization Costs 16,400
Deferred Offering Costs 23,000
--------
Total Assets 135,400
--------
Liabilities:
Due to Manager 39,400
--------
Net Assets $ 96,000
========
Net Assets Consist of:
Portfolio shares of Class A (unlimited authorization - no par value)
based on 9,550.000 outstanding shares of beneficial interest $ 95,500
Portfolio shares of Class D (unlimited authorization - no par value)
based on 50.000 outstanding shares of beneficial interest 500
--------
Total Net Assets: $ 96,000
========
Net Asset Value, Offering and Redemption Price, Class A $ 10.00
========
Net Asset Value, Offering and Redemption Price, Class D $ 10.00
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-35
<PAGE> 149
SEI ASSET ALLOCATION TRUST
Notes to Financial Statements (continued)
February 16, 1996
SEI ASSET ALLOCATION TRUST
Notes to Financial Statements
February 16, 1996
1. Organization:
The Trust is organized as a Massachusetts Business Trust under a Declaration of
Trust dated November 20, 1995. The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company with five
diversified Funds: Diversified Conservative Income Fund, Diversified
Conservative Fund, Diversified Moderate Growth Fund, Diversified Growth Fund,
and Diversified U.S. Stock Fund. Each Fund offers shareholders the opportunity
to invest in certain of the Underlying Portfolios, which are separately-managed
series of the following investment companies: SEI Institutional Managed Trust,
SEI International Trust, SEI Liquid Asset Trust. The Declaration of Trust
permits the Trust to offer separate classes of shares in each Fund, Class A
Shares and Class D Shares. The assets of each Fund are segregated, and a
shareholder's interest is limited to the Fund in which shares are held. The
Funds have not commenced operations except those related to organizational
matters and the sale of initial shares of beneficial interest to SEI Financial
Management Corporation (the "Adviser" and "Manager") on February 16, 1996. The
following is a summary of the significant accounting policies followed by the
Trust.
2. Investment Advisory, Management, Distribution and Shareholder Servicing
Agreements:
The Trust expects to enter into the following service agreements:
Under the Investment Advisory Agreement with the Trust, SEI Financial
Management Corporation ("SFM" or the "Adviser") will act as the investment
adviser to each Fund. For its investment advisory services to the Trust, the
Adviser will be entitled to a fee, which is calculated daily and paid monthly,
at an annual rate of .10% of each Fund's average daily net assets.
Under the Administration Agreement with the Trust, SFM will also provide the
Trust with overall management services, and act as dividend disbursing agent and
shareholder servicing agent. For these services to the Funds, SFM will be
entitled to a fee, which is calculated daily and paid monthly, at an annual rate
of .20% of the average daily net assets of each Fund.
SEI Financial Services company (the "Distributor"), a wholly-owned subsidiary of
SEI, will serve as each Fund's distributor pursuant to a distribution agreement
(the "Distribution Agreement") with the Trust. The Trustees of the Trust have
adopted a distribution and service plan for the Trust's Class D shares (the
"Class D Plan") pursuant to Rule 12b-1 under the 1940 Act. The Class D Plan
provides for payments to the distributor for distribution-related services at an
S-36
<PAGE> 150
SEI ASSET ALLOCATION TRUST
Notes to Financial Statements (continued)
February 16, 1996
annual rate of .75% of each Fund's average daily net assets attributable to
Class D Shares. In addition, each Fund is authorized to pay the Distributor a
fee in connection with the ongoing servicing of shareholder accounts owning such
Class D Shares, calculated and payable monthly, at an annual rate of .25% of the
value of the average daily net assets attributable to Class D Shares of the
Fund. Periodically, the Distributor may waive a portion of the fees payable to
it under the Class D Plan in order to keep within certain sales charge limits
imposed by the Rules of the NASD. Specifically, any Fund's distribution/
shareholder servicing fees will be reduced in an amount equal to the Fund's
pro rata portion of any Underlying Portfolio in which the Fund invests.
3. Organizational Costs, Offering Costs and Transactions with Affiliates:
Organizational costs have been capitalized by the Fund and are being amortized
over 60 months commencing with operations. In the event any of the initial
shares are redeemed by any holder thereof during the period that the fund is
amortizing its organizational costs, the redemption proceeds payable to the
holder thereof by the Fund will be reduced by the unamortized organizational
costs in the same ratio as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of the redemption. These
costs include legal fees of approximately $50,000 for organizational work
performed by a law firm of which an officer and Trustee of the Trust is a
Partner.
Offering costs have been capitalized by the Fund and will be amortized over
twelve months commencing with operations.
Certain officers and/or trustees of the Trust are also officers of the Manager
and Adviser. The Trust pays each unaffiliated Trustee an annual fee for
attendance of quarterly, interim and committee meetings. Compensation of
officers and affiliated Trustees of the Trust is paid by the Manager.
S-37
<PAGE> 151
SEI Asset Allocation Trust
Diversified Conservative Income Fund
July 31, 1996- Unaudited
Schedule of Investments
<TABLE>
<CAPTION>
Description Shares Value
- ----------- ------ -----
<S> <C> <C>
Equity Funds - 24.1%
SEI Institutional Managed Trust Large Cap Value Portfolio 10,432 $ 143,861
SEI Institutional Managed Trust Large Cap Growth Portfolio 11,522 156,003
SEI Institutional Managed Trust Small Cap Value Portfolio 2,311 27,873
SEI Institutional Managed Trust Small Cap Growth Portfolio 1,523 26,404
----------
Total Equity Funds (cost $368,906) 354,141
----------
Fixed Income Funds - 55.6%
SEI Institutional Managed Trust Core Fixed Income Portfolio
(cost $812,160) 80,084 816,053
----------
Money Market Funds - 19.8%
SEI Liquid Asset Trust Prime Obligation Portfolio
(cost $291,071) 291,071 291,071
----------
Total Investments - 99.5% of net assets
(cost $1,472,137) $1,461,265
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 152
SEI Asset Allocation Trust
Diversified Conservative Fund
July 31, 1996- Unaudited
Schedule of Investments
<TABLE>
<CAPTION>
Description Shares Value
- ----------- ------ -----
<S> <C> <C>
Equity Funds - 38.3%
SEI Institutional Managed Trust Large Cap Value Portfolio 11,377 $ 156,885
SEI Institutional Managed Trust Large Cap Growth Portfolio 12,423 168,210
SEI Institutional Managed Trust Small Cap Value Portfolio 2,956 35,654
SEI Institutional Managed Trust Small Cap Growth Portfolio 1,315 22,803
SEI International Trust Core International Equity Portfolio 9,573 97,361
----------
Total Equity Funds (cost $497,224) 480,913
----------
Fixed Income Funds - 58.9%
SEI Institutional Managed Trust Core Fixed Income Portfolio 53,784 548,061
SEI International Trust International Fixed Income Portfolio 17,262 191,265
----------
Total Fixed Income Funds (cost $732,047) 739,326
----------
Money Market Funds - 1.0%
SEI Liquid Asset Trust Prime Obligation Portfolio
(cost $12,412) 12,412 12,412
----------
Total Investments - 98.2% of net assets
(cost $1,241,683) $1,232,651
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 153
SEI Asset Allocation Trust
Diversified Moderate Growth Fund
July 31, 1996- Unaudited
Schedule of Investments
<TABLE>
<CAPTION>
Description Shares Value
- ----------- ------ -----
<S> <C> <C>
Equity Funds - 58.4%
SEI Institutional Managed Trust Large Cap Value Portfolio 127,374 $1,756,488
SEI Institutional Managed Trust Large Cap Growth Portfolio 136,134 1,843,260
SEI Institutional Managed Trust Small Cap Value Portfolio 28,431 342,874
SEI Institutional Managed Trust Small Cap Growth Portfolio 14,057 243,752
SEI International Trust Core International Equity Portfolio 104,680 1,064,592
----------
Total Equity Funds (cost $5,422,273) 5,250,966
----------
Fixed Income Funds - 39.7%
SEI Institutional Managed Trust Core Fixed Income Portfolio 258,807 2,637,245
SEI International Trust International Fixed Income Portfolio 83,898 929,595
----------
Total Fixed Income Funds (cost $3,523,360) 3,566,840
----------
Money Market Funds - 1.0%
SEI Liquid Asset Trust Prime Obligation Portfolio
(cost $90,393) 90,393 90,393
----------
Total Investments - 99.1% of net assets
(cost $9,036,026) $8,908,199
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 154
SEI Asset Allocation Trust
Diversified Global Growth Fund
July 31, 1996- Unaudited
Schedule of Investments
<TABLE>
<CAPTION>
Description Shares Value
- ----------- ------ -----
<S> <C> <C>
Equity Funds - 79.2%
SEI Institutional Managed Trust Large Cap Value Portfolio 150,522 $2,075,706
SEI Institutional Managed Trust Large Cap Growth Portfolio 161,699 2,189,405
SEI Institutional Managed Trust Small Cap Value Portfolio 37,064 446,989
SEI Institutional Managed Trust Small Cap Growth Portfolio 20,124 348,958
SEI International Trust Core International Equity Portfolio 142,979 1,454,092
SEI International Trust Emerging Markets Equity Portfolio 62,014 697,036
----------
Total Equity Funds (cost $7,361,580) 7,212,186
----------
Fixed Income Funds - 19.4%
SEI Institutional Managed Trust Core Fixed Income Portfolio 108,869 1,109,371
SEI Institutional Managed Trust High Yield Bond Portfolio 33,893 368,420
SEI International Trust International Fixed Income Portfolio 25,603 283,684
----------
Total Fixed Income Funds (cost $1,748,345) 1,761,475
----------
Money Market Funds - 1.0%
SEI Liquid Asset Trust Prime Obligation Portfolio
(cost $92,043) 92,043 92,043
----------
Total Investments - 99.6% of net assets
(cost $9,201,968) $9,065,704
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 155
SEI Asset Allocation Trust
Diversified U.S. Stock Fund
July 31, 1996- Unaudited
Schedule of Investments
<TABLE>
<CAPTION>
Description Shares Value
- ----------- ------ -----
<S> <C> <C>
Equity Funds - 98.5%
SEI Institutional Managed Trust Large Cap Value Portfolio 227,188 $3,132,924
SEI Institutional Managed Trust Large Cap Growth Portfolio 237,830 3,220,217
SEI Institutional Managed Trust Small Cap Value Portfolio 55,700 671,739
SEI Institutional Managed Trust Small Cap Growth Portfolio 28,722 498,038
----------
Total Equity Funds (cost $7,720,162) 7,522,918
----------
Money Market Funds - 1.0%
SEI Liquid Asset Trust Prime Obligation Portfolio
(cost $78,338) 78,338 78,338
----------
Total Investments - 99.5% of net assets
(cost $7,798,500) $7,601,256
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 156
SEI Asset Allocation Trust
July 31, 1996 - Unaudited
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Diversified Diversified
Conservative Diversified Moderate
Income Conservative Growth
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Assets:
Investments at value
(cost $1,472,137, $1,241,683,
and $9,036,026, respectively) $ 1,461,265 $ 1,232,651 $ 8,908,199
Deferred organization costs 8,545 8,545 8,545
Prepaid state registration fees 20,862 19,396 19,475
Dividends receivable 3,851 1,795 8,118
Receivable for capital shares sold 0 20,006 41,802
Receivable from administrator 0 0 12,715
Other assets 1,081 690 2,710
----------- ----------- -----------
Total assets 1,495,604 1,283,083 9,001,564
----------- ----------- -----------
Liabilities:
Payable to administrator 20,108 14,908 0
Other liabilities 7,818 13,302 15,023
----------- ----------- -----------
Total liabilities 27,926 28,210 15,023
----------- ----------- -----------
Net assets: $ 1,467,678 $ 1,254,873 $ 8,986,541
=========== =========== ===========
Net assets consist of:
Portfolio shares of Class A (unlimited authorization-
no par value) based on 115,996, 106,401, and
533,155 outstanding shares of beneficial interest,
respectively $ 1,168,495 $ 982,432 $ 5,408,761
Portfolio shares of Class D (unlimited authorization-
no par value) based on 30,254, 30,431, and
371,836 outstanding shares of beneficial interest,
respectively 303,581 278,371 3,693,286
Undistributed net investment income 5,901 3,141 15,531
Accumulated net realized gain (loss) on investments 573 (39) (3,210)
Net unrealized depreciation on investments (10,872) (9,032) (127,827)
----------- ----------- -----------
$ 1,467,678 $ 1,254,873 $ 8,986,541
=========== =========== ===========
Net asset value, offering and redemption price per share - Class A $ 10.04 $ 9.18 $ 9.94
=========== =========== ===========
Net asset value, offering and redemption price per share - Class D $ 10.02 $ 9.16 $ 9.91
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 157
SEI Asset Allocation Trust
July 31, 1996 - Unaudited
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Diversified Diversified
Global Growth U.S. Stock
Fund Fund
---- ----
<S> <C> <C>
Assets:
Investments at value
(cost $9,201,968, and $7,798,500, respectively) $ 9,065,704 $ 7,601,256
Deferred organization costs 8,545 8,545
Prepaid state registration fees 19,375 22,390
Dividends receivable 4,382 254
Receivable from administrator 13,124 12,842
Other assets 5,430 0
----------- -----------
Total assets 9,116,560 7,645,287
----------- -----------
Liabilities:
Other liabilities 15,810 4,144
----------- -----------
Net assets: $ 9,100,750 $ 7,641,143
=========== ===========
Net assets consist of:
Portfolio shares of Class A (unlimited authorization-
no par value) based on 396,399, and 372,833
outstanding shares of beneficial interest,
respectively $ 3,965,615 $ 3,826,105
Portfolio shares of Class D (unlimited authorization-
no par value) based on 532,523, and 412,993
outstanding shares of beneficial interest,
respectively 5,264,422 4,039,031
Undistributed net investment income 7,051 7,990
Accumulated net realized loss on investments (74) (34,739)
Net unrealized depreciation on investments (136,264) (197,244)
----------- -----------
$ 9,100,750 $ 7,641,143
=========== ===========
Net asset value, offering and redemption price per share - Class A $ 9.81 $ 9.74
=========== ===========
Net asset value, offering and redemption price per share - Class D $ 9.79 $ 9.71
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 158
SEI Asset Allocation Trust
Statement of Operations
For the period ended July 31, 1996 - Unaudited
<TABLE>
<CAPTION>
Diversified Diversified
Conservative Diversified Moderate
Income Conservative Growth
Fund (1) Fund (2) Fund (3)
-------- -------- --------
<S> <C> <C> <C>
Investment income:
Dividends $ 7,025 $ 3,487 $ 20,279
--------- --------- ---------
Expenses:
Administration fees 283 198 1,597
Less administration fees waived (283) (198) (1,597)
Investment advisory fees 142 99 799
Less investment advisory fees waived (142) (99) (799)
Contribution from administrator (13,421) (9,867) (16,516)
Custodian fees 268 197 345
Transfer agent fees 5,156 3,788 6,629
Professional fees 1,841 1,353 2,368
Registration & filing fees 2,937 2,157 3,776
Printing 2,685 1,972 3,452
Trustee 268 197 345
Insurance 168 123 215
Distribution & shareholder servicing fees* 205 150 1,988
Amortization of deferred organization costs 268 198 344
--------- --------- ---------
Total expenses 375 268 2,946
--------- --------- ---------
Net investment income 6,650 3,219 17,333
--------- --------- ---------
Net realized and unrealized gain (loss) on investments
Net realized gain (loss) from security transactions 574 (39) (3,210)
Net change in unrealized depreciation
on investments (11,575) (8,966) (127,845)
--------- --------- ---------
Net decrease in net assets from operations ($ 4,351) ($ 5,786) ($113,722)
========= ========= =========
</TABLE>
* All distribution and shareholder servicing fees are incurred at the Class D
level.
(1) Commenced operations 06/13/96
(2) Commenced operations 06/26/96
(3) Commenced operations 05/30/96
The accompanying notes are an integral part of the financial statements.
<PAGE> 159
SEI Asset Allocation Trust
Statement of Operations
For the period ended July 31, 1996 - Unaudited
<TABLE>
<CAPTION>
Diversified Diversified
Global Growth U.S. Stock
Fund (1) Fund (2)
-------- --------
<S> <C> <C>
Investment income:
Dividends $ 10,731 $ 10,721
--------- ---------
Expenses:
Administration fees 1,198 1,385
Less administration fees waived (1,198) (1,385)
Investment advisory fees 599 693
Less investment advisory fees waived (599) (693)
Contribution from administrator (16,761) (21,359)
Custodian fees 345 438
Transfer agent fees 6,629 8,418
Professional fees 2,368 3,006
Registration & filing fees 3,776 4,794
Printing 3,452 4,383
Trustee 345 438
Insurance 215 274
Distribution & shareholder servicing fees* 2,710 1,900
Amortization of deferred organization costs 346 438
--------- ---------
Total expenses 3,425 2,730
--------- ---------
Net investment income 7,306 7,991
--------- ---------
Net realized and unrealized loss on investments
Net realized loss from security transactions (75) (34,739)
Net change in unrealized depreciation
on investments (136,284) (197,258)
--------- ---------
Net decrease in net assets from operations ($129,053) ($224,006)
========= =========
</TABLE>
* All distribution and shareholder servicing fees are incurred at the Class D
level.
(1) Commenced operations 05/30/96
(2) Commenced operations 05/13/96
The accompanying notes are an integral part of the financial statements.
<PAGE> 160
SEI Asset Allocation Trust
Statement of Changes in Net Assets
For the period ended July 31, 1996 - Unaudited
<TABLE>
<CAPTION>
Diversified Diversified
Conservative Diversified Moderate
Income Conservative Growth
Fund (1) Fund (2) Fund (3)
-------- -------- --------
<S> <C> <C> <C>
Operations:
Net investment income $ 6,650 $ 3,219 $ 17,333
Net realized gain (loss) from security transactions 574 (39) (3,210)
Net change in unrealized depreciation
on investments (11,575) (8,966) (127,845)
----------- ----------- -----------
Net decrease in net assets resulting from operations (4,351) (5,786) (113,722)
----------- ----------- -----------
Dividends distributed from:
Net investment income:
Class A (1,115) (91) (1,803)
Class D (72) 0 0
----------- ----------- -----------
Total dividends distributed (1,187) (91) (1,803)
----------- ----------- -----------
Capital share transactions:
Class A
Proceeds from shares issued 1,262,031 981,841 5,501,513
Shares issued in lieu of cash distributions 1,115 91 1,775
Cost of shares repurchased (190,153) 0 (95,027)
Increase in net assets derived from
----------- ----------- -----------
Class A transactions 1,072,993 981,932 5,408,261
----------- ----------- -----------
Class D
Proceeds from shares issued 303,081 277,871 3,692,786
Shares issued in lieu of cash distributions 0 0 0
Cost of shares repurchased 0 0 0
Increase in net assets derived from
----------- ----------- -----------
Class D transactions 303,081 277,871 3,692,786
----------- ----------- -----------
Increase in net assets derived from capital
----------- ----------- -----------
share transactions 1,376,074 1,259,803 9,101,047
----------- ----------- -----------
Net increase in net assets 1,370,536 1,253,926 8,985,522
----------- ----------- -----------
Net assets:
Beginning of period 97,142 947 1,019
----------- ----------- -----------
End of period $ 1,467,678 $ 1,254,873 $ 8,986,541
=========== =========== ===========
Capital share transactions:
Class A
Shares issued 125,132 106,341 542,464
Shares issued in lieu of cash distributions 109 10 173
Shares repurchased (18,795) 0 (9,532)
----------- ----------- -----------
Total Class A transactions 106,446 106,351 533,105
=========== =========== ===========
Class D
Shares issued 30,204 30,381 371,786
Shares issued in lieu of cash distributions 0 0 0
Shares repurchased 0 0 0
----------- ----------- -----------
Total Class D transactions 30,204 30,381 371,786
=========== =========== ===========
</TABLE>
(1) Commenced operations 06/13/96
(2) Commenced operations 06/26/96
(3) Commenced operations 05/30/96
The accompanying notes are an integral part of the financial statements.
<PAGE> 161
SEI Asset Allocation Trust
Statement of Changes in Net Assets
For the period ended July 31, 1996 - Unaudited
<TABLE>
<CAPTION>
Diversified Diversified
Global Growth U.S. Stock
Fund (1) Fund (2)
-------- --------
<S> <C> <C>
Operations:
Net investment income $ 7,306 $ 7,991
Net realized loss from security transactions (75) (34,739)
Net change in unrealized depreciation
on investments (136,284) (197,258)
----------- -----------
Net decrease in net assets resulting from operations (129,053) (224,006)
----------- -----------
Dividends distributed from:
Net investment income:
Class A (255) 0
Class D 0 0
----------- -----------
Total dividends distributed (255) 0
----------- -----------
Capital share transactions:
Class A
Proceeds from shares issued 3,964,860 5,266,344
Shares issued in lieu of cash distributions 255 0
Cost of shares repurchased 0 (1,440,739)
Increase in net assets derived from
----------- -----------
Class A transactions 3,965,115 3,825,605
----------- -----------
Class D
Proceeds from shares issued 5,263,922 4,038,530
Shares issued in lieu of cash distributions 0 0
Cost of shares repurchased 0 0
Increase in net assets derived from
----------- -----------
Class D transactions 5,263,922 4,038,530
----------- -----------
Increase in net assets derived from capital
----------- -----------
share transactions 9,229,037 7,864,135
----------- -----------
Net increase in net assets 9,099,729 7,640,129
----------- -----------
Net assets:
Beginning of period 1,021 1,014
----------- -----------
End of period $ 9,100,750 $ 7,641,143
=========== ===========
Capital share transactions:
Class A
Shares issued 396,324 515,770
Shares issued in lieu of cash distributions 25 0
Shares repurchased 0 (142,987)
----------- -----------
Total Class A transactions 396,349 372,783
=========== ===========
Class D
Shares issued 532,473 412,943
Shares issued in lieu of cash distributions 0 0
Shares repurchased 0 0
----------- -----------
Total Class D transactions 532,473 412,943
=========== ===========
</TABLE>
(1) Commenced operations 05/30/96
(2) Commenced operations 05/13/96
The accompanying notes are an integral part of the financial statements.
<PAGE> 162
SEI Asset Allocation Trust
Financial Highlights
For a share outstanding throughout the period ended July 31, 1996 - Unaudited
<TABLE>
<CAPTION>
Diversified Diversified
Conservative Diversified Moderate
Income Conservative Growth
Fund Fund Fund
Class A(1) Class D(2) Class A(3) Class D(4) Class A(5) Class D(6)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.12 $ 10.09 $ 9.26 $ 9.33 $ 10.19 $ 10.21
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 0.01 (0.01) (0.11) (0.12) 0.02 0.01
Net realized and unrealized gains
(losses) on securities (0.08) (0.05) 0.03 (0.05) (0.27) (0.31)
--------- --------- --------- --------- --------- ---------
Total from investment operations (0.07) (0.06) (0.08) (0.17) (0.25) (0.30)
--------- --------- --------- --------- --------- ---------
Less distributions:
Distributions from net investment income (0.01) (0.01) 0.00 0.00 0.00 0.00
--------- --------- --------- --------- --------- ---------
Net asset value, end of period $ 10.04 $ 10.02 $ 9.18 $ 9.16 $ 9.94 $ 9.91
========= ========= ========= ========= ========= =========
Total return -0.69%** -0.61%** -0.85%** -1.82%** -2.42%** -2.94%**
Net assets, end of period (000) $ 1,165 $ 303 $ 976 $ 279 $ 5,300 $ 3,687
Ratio of expenses to average net assets 0.12%* 1.12%* 0.12%* 1.12%* 0.12%* 1.12%*
Ratio of expenses to average
net assets (excluding waivers) 8.51%* 15.91%* 8.69%* 16.86%* 1.91%* 4.75%*
Ratio of net income to average net assets 4.79%* 3.56%* 3.43%* 1.66%* 2.59%* 0.74%*
Ratio of net income to average
net assets (excluding waivers) -3.60%* -11.23%* -5.14%* -14.08%* 0.80%* -2.89%*
Portfolio turnover rate 21% 21% 2% 2% 2% 2%
</TABLE>
* Annualized.
** Total return has not been annualized.
(1) commenced operations 06/13/96
(2) commenced operations 06/21/96
(3) commenced operations 06/26/96
(4) commenced operations 07/01/96
(5) commenced operations 06/10/96
(6) commenced operations 05/30/96
The accompanying notes are an integral part of the financial statements.
<PAGE> 163
SEI Asset Allocation Trust
Financial Highlights
For a share outstanding throughout the period ended July 31, 1996 - Unaudited
<TABLE>
<CAPTION>
Diversified Diversified
Global Growth U.S. Stock
Fund Fund
Class A(1) Class D(2) Class A(3) Class D(4)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.19 $ 10.24 $ 10.27 $ 10.36
--------- --------- --------- ---------
Income from investment operations:
Net investment income 0.01 0.00 0.03 0.01
Net realized and unrealized
losses on securities (0.39) (0.45) (0.56) (0.66)
--------- --------- --------- ---------
Total from investment operations (0.38) (0.45) (0.53) (0.65)
--------- --------- --------- ---------
Less distributions:
Distributions from net investment income 0.00 0.00 0.00 0.00
--------- --------- --------- ---------
Net asset value, end of period $ 9.81 $ 9.79 $ 9.74 $ 9.71
========= ========= ========= =========
Total return -3.72%** -4.39%** -5.16%** -6.27%**
Net assets, end of period (000) $ 3,888 $ 5,213 $ 3,631 $ 4,010
Ratio of expenses to average net assets 0.12%* 1.12%* 0.12%* 1.12%*
Ratio of expenses to average
net assets (excluding waivers) 2.89%* 4.19%* 3.49%* 3.03%*
Ratio of net income to average net assets 2.19%* 0.01%* 1.97%* -1.03%*
Ratio of net income to average
net assets (excluding waivers) -0.58%* -3.06%* -1.40%* -2.94%*
Portfolio turnover rate 0% 0% 33% 33%
</TABLE>
* Annualized.
** Total return has not been annualized.
(1) commenced operations 06/13/96
(2) commenced operations 05/30/96
(3) commenced operations 05/13/96
(4) commenced operations 07/01/96
The accompanying notes are an integral part of the financial statements.
<PAGE> 164
SEI ASSET ALLOCATION TRUST
Notes to Financial Statements
July 31, 1996 - Unaudited
1. Organization:
The Trust is organized as a Massachusetts Business Trust under a Declaration of
Trust dated November 20, 1995 and had no operations through May 12, 1996, other
than those related to organizational matters and the sale of initial shares to
SEI Fund Management (the "Manager"). Each Fund and class of shares commenced
operations upon the purchase of fundshares other than the initial shares
purchased by the Manager. The Trust is registered under the Investment Company
Act of 1940, as amended, as an open-end investment company with five diversified
Funds: Diversified Conservative Income Fund, Diversified Conservative Fund,
Diversified Moderate Growth Fund, Diversified Global Growth Fund (formerly the
Diversified Growth Fund), and Diversified U.S. Stock Fund. Each Fund offers
shareholders the opportunity to invest in certain of the Underlying Portfolios,
which are separately-managed series of the following investment companies: SEI
Institutional Managed Trust, SEI International Trust, SEI Liquid Asset Trust.
The Declaration of Trust permits the Trust to offer separate classes of shares
in each Fund, Class A Shares and Class D Shares. The assets of each Fund are
segregated, and a shareholder's interest is limited to the Fund in which shares
are held. The Fund's prospectus provides a description of each Fund's investment
objectives, policies and strategies.
2. Significant Accounting Policies:
The following is a summary of the significant accounting policies followed by
the Funds.
Net Asset Value Per Share- The net asset value per share of each Fund
or class of shares is calculated each business day. In general, it is computed
by dividing the assets of each Fund or class of shares less its liabilities, by
the number of outstanding shares of the Fund or class. The assets of each Fund
consist primarily of the Underlying Portfolios, which are valued at their
respective net asset values. The Underlying Portfolios' investments in equity
securities which are traded on a national securities exchange (or reported on
NASDAQ national market system) are stated at the last quoted sales price if
readily available for such equity securities on each business day; other equity
securities traded in the over-the-counter market and listed equity securities
for which no sale price was reported on that date are stated at the last quoted
bid price. Debt obligations with remaining maturities in excess of sixty days
are valued at the most recently quoted bid price. Debt obligations with
remaining maturities of sixty days or less are valued at their amortized cost.
Federal Income Taxes- It is each Fund's intention to qualify as a
regulated investment company for Federal income tax purposes by complying with
the appropriate provisions of the Internal Revenue Code. Accordingly, no
provision for Federal income taxes is required in the accompanying financial
statements.
Security Transactions and Related Income- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Dividend income is recognized on the ex-dividend date. Costs used in determining
realized gains and losses on the sales of investment securities are those of the
specific securities sold.
Classes- Class specific expenses are borne by that class of shares.
Income, realized and unrealized gains/losses and non class-specific expenses are
allocated to the respective classes on the basis of relative daily net assets.
Expenses- Expenses that are directly related to one of the Fund's are
charged directly to that Fund. Other operating expenses of the Fund are prorated
to the Funds on the basis of relative net assets.
3. Investment Advisory, Management, Distribution and Shareholder Servicing
Agreements:
Under the Investment Advisory Agreement with the Trust, SEI Financial
Management Corporation ("SFM" or the "Adviser") acts as the investment adviser
to each Fund. For its investment advisory
<PAGE> 165
SEI ASSET ALLOCATION TRUST
Notes to Financial Statements
July 31, 1996 - Unaudited
services to the Trust, the Adviser is entitled to a fee, which is calculated
daily and paid monthly, at an annual rate of .10% of each Fund's average daily
net assets.
Under the Administration Agreement with the Trust, the Manager provides the
Trust with overall management services, and shareholder servicing. For these
services to the Funds, the Manager is entitled to a fee, which is calculated
daily and paid monthly, at an annual rate of .20% of the average daily net
assets of each Fund. The Manager and the Adviser have agreed to waive their fee
so that the total annual expenses of each fund will not exceed the lower of the
maximum limitations established by certain states or voluntary expense
limitations adopted by the Manager. In the event that the total annual expenses
of the Fund, after reflecting a waiver of all fees by the Manager and the
Adviser exceed the specific limitation, the Manager has agreed to bear such
excess.
SEI Financial Services company (the "Distributor"), a wholly-owned subsidiary of
SEI, serves as each Fund's distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust. The Trustees of the Trust have adopted
a distribution and service plan for the Trust's Class D shares (the "Class D
Plan") pursuant to Rule 12b-1 under the 1940 Act. The Class D Plan provides for
payments to the distributor for distribution-related services at an annual rate
of .75% of each Fund's average daily net assets attributable to Class D Shares.
In addition, each Fund is authorized to pay the Distributor a fee in connection
with the ongoing servicing of shareholder accounts owning such Class D Shares,
calculated and payable monthly, at an annual rate of .25% of the value of the
average daily net assets attributable to Class D Shares of the Fund.
4. Organizational Costs, and Transactions with Affiliates:
Organizational costs have been capitalized by the Fund and are being amortized
over 60 months commencing with operations. In the event any of the initial
shares are redeemed by any holder thereof during the period that the fund is
amortizing its organizational costs, the redemption proceeds payable to the
holder thereof by the Fund will be reduced by the unamortized organizational
costs in the same ratio as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of the redemption. These
costs include legal fees of approximately $50,000 for organizational work
performed by a law firm of which an officer and Trustee of the Trust is a
Partner.
Certain officers and/or trustees of the Trust are also officers of the Manager
and Adviser. The Trust pays each unaffiliated Trustee an annual fee for
attendance of quarterly, interim and committee meetings. Compensation of
officers and affiliated Trustees of the Trust is paid by the Manager.
5. Investment Transactions:
The cost of security purchases and the proceeds from the sale of securities
during the period ended July 31, 1996 were as follows:
Diversified Conservative Income Fund
<TABLE>
<CAPTION>
U.S. Government
Securities All Other Total
(000) (000) (000)
--------------- --------- -------
<S> <C> <C> <C>
Purchases.... $ - $1,343 $1,343
Sales........... $ - $ 163 $ 163
</TABLE>
<PAGE> 166
SEI ASSET ALLOCATION TRUST
Notes to Financial Statements
July 31, 1996 - Unaudited
<TABLE>
<CAPTION>
Diversified Conservative Fund
U.S. Government
Securities All Other Total
(000) (000) (000)
----- ----- -----
<S> <C> <C> <C>
Purchases.... $ - $1,243 $1,243
Sales........... $ - $ 692 $ 692
</TABLE>
<TABLE>
<CAPTION>
Diversified Moderate Growth Fund
U.S. Government
Securities All Other Total
(000) (000) (000)
----- ----- -----
<S> <C> <C> <C>
Purchases.... $ - $9,023 $9,023
Sales........... $ - $ 74 $ 74
</TABLE>
<TABLE>
<CAPTION>
Diversified Global Growth Fund
U.S. Government
Securities All Other Total
(000) (000) (000)
----- ----- -----
<S> <C> <C> <C>
Purchases.... $ - $9,118 $9,118
Sales........... $ - $3,845 $3,845
</TABLE>
<TABLE>
<CAPTION>
Diversified U.S. Stock Fund
U.S. Government
Securities All Other Total
(000) (000) (000)
----- ----- -----
<S> <C> <C> <C>
Purchases.... $ - $9,022 $9,022
Sales........... $ - $1,267 $1,267
</TABLE>
<PAGE> 167
SEI ASSET ALLOCATION TRUST
Notes to Financial Statements
July 31, 1996 - Unaudited
At July 31, 1996, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes were not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation on investment securities at July
31, 1996 for each Fund is as follows:
<TABLE>
<CAPTION>
Net
Appreciated Depreciated Unrealized
Securities Securities Depreciation
(000) (000) (000)
----- ----- -----
<S> <C> <C> <C>
Diversified Conservative Income $ 5 $ (16) $ (11)
Diversified Conservative 8 (17) (9)
Diversified Moderate Growth 52 (180) (128)
Diversified Global Growth 36 (172) (136)
Diversified U.S. Stock 29 (226) (197)
</TABLE>
<PAGE> 168
APPENDIX
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S RATING DEFINITIONS
LONG TERM BOND RATINGS
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's bond ratings, where specified, are applied to senior bank obligations
and insurance company senior policyholder and claims obligations with an
original maturity in excess of one year. Obligations relying upon support
mechanisms such as letters-of-credit and bonds of indemnity are excluded unless
explicitly rated.
S-38
<PAGE> 169
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located in
countries which carry a Moody's sovereign rating. Such branch obligations are
rated at the lower of the bank's rating or Moody's sovereign rating for the bank
deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings do
not incorporate an opinion as to whether payment of the obligation will be
affected by the actions of the government controlling the currency of
denomination. In addition, risk associated with bilateral conflicts between an
investor's home country and either the issuer's home country or the country
where an issuer branch is located are not incorporated into Moody's ratings.
Moody's makes no representation that rated bank obligations or insurance company
obligations are exempt from registration under the U.S. Securities Act of 1933
or issued in conformity with any other applicable law or regulation. Nor does
Moody's represent that any specific bank or insurance company obligation is
legally enforceable or is a valid senior obligation of a rated issuer.
Moody's ratings are opinions, not recommendations to buy or sell, and their
accuracy is not guaranteed. A rating should be weighed solely as one factor in
an investment decision and you should make your own study and evaluation of any
issuer whose securities or debt obligations you consider buying or selling.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
STANDARD & POOR'S RATING DEFINITIONS
A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a
security, as it does not comment on market price or suitability for a particular
investor.
The ratings are based, in varying degrees, on the following
considerations:
(1) Likelihood of default. The rating assesses the obligor's capacity and
willingness as to timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
(2) The obligation's nature and provisions.
(3) Protection afforded to, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under bankruptcy
laws and other laws affecting creditors' rights.
Likelihood of default is indicated by an issuer's senior debt rating. If
senior debt is not rated, an implied senior debt rating is determined.
Subordinated debt usually is rated lower than senior debt to better reflect
relative position of the obligation in bankruptcy. Unsecured debt, where
significant secured debt exists, is treated similarly to subordinated debt.
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<PAGE> 170
LONG-TERM RATINGS DEFINITIONS
INVESTMENT GRADE
AAA Debt rated 'AAA' has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated debt only in small degree.
A Debt rated 'A' has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than debt in higher-rated
categories.
BBB Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
SPECULATIVE GRADE
Debt rated 'BB', 'B', 'CCC', 'CC', and 'C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of speculation and
'C' the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB Debt rated 'BB' has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that could
lead to inadequate capacity to meet timely interest and principal
payments. The 'BB' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied 'BBB-' rating.
B Debt rate 'B' has greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions would likely impair capacity
or willingness to pay interest and repay principal. The 'B' rating
category also is used for debt subordinated to senior debt that is
assigned an actual or implied 'BB' or 'BB-' rating.
CCC Debt rated 'CCC' has a current identifiable vulnerability to default, and
is dependent on favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event
of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. The 'CCC' rating
category also is used for debt subordinated to senior debt that is
assigned an actual or implied 'B' or 'B-' rating.
CC The rating 'CC' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC' rating.
C The rating 'C' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
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CI Debt rated 'CI' is reserved for income bonds on which no interest is being
paid.
D Debt is rated 'D' when the issue is in payment default, or the obligor has
filed for bankruptcy. The 'D' rating is used when interest or principal
payments are not made on the date due, even if the applicable grace period
has not expired, unless S&P believes that such payments will be made
during such grace period.
Plus (+) or minus (-): The ratings from 'AA' to 'CCC' may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
C The letter 'c' indicates that the holder's option to tender the security
for purchase may be canceled under certain prestated conditions enumerated
in the tender option documents.
P The letter 'p' indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project financed by the
debt being rated and indicates that payment of debt service requirements
is largely or entirely dependent upon the successful timely completion of
the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of such completion. The
investor should exercise his own judgement with respect to such likelihood
and risk.
L The letter 'L' indicates that the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is
federally insured, and interest is adequately collateralized. In the case
of certificates of deposit, the letter 'L' indicates that the deposit,
combined with other deposits being held in the same right and capacity,
will be honored for principal and pre-default interest up to federal
insurance limits within 30 days after closing of the insured institution
or, in the event that the deposit is assumed by a successor insured
institution, upon maturity.
*Continuance of the rating is contingent upon S&P's receipt of an executed
copy of the escrow agreement or closing documentation confirming
investments and cash flows.
N.R. Not rated.
DEBT OBLIGATIONS OF ISSUERS OUTSIDE THE UNITED STATES AND ITS TERRITORIES are
rated on the same basis as domestic corporate and municipal issues. The ratings
measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.
If an issuer's actual or implied senior debt rating is 'AAA', its
subordinated or junior debt is rated 'AAA' or 'AA+'. If an issuer's actual or
implied senior debt rating is lower than 'AAA' but higher than 'BB+', its junior
debt is typically rated one designation lower than the senior debt rating. For
example, if the senior debt rating is 'A', subordinated debt normally would be
rated 'A-'. If an issuer's actual or implied senior debt rating is 'BB+' or
lower, its subordinated debt is typically rated two designations lower than the
senior debt rating.
INVESTMENT AND SPECULATIVE GRADES
The term "investment grade" was originally used by various regulatory
bodies to connote obligations eligible for investment by institutions such as
banks, insurance companies, and savings and loan associations. Over time, this
term gained widespread usage throughout the investment community. Issues rated
in the four highest categories, 'AAA', 'AA', 'A', 'BBB', generally are
recognized as being investment grade. Debt rated 'BB' or below generally is
referred
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to as speculative grade. The term "junk bond" is merely a more irreverent
expression for this category of more risky debt. Neither term indicates which
securities S&P deems worthy of investment, as an investor with a particular risk
preference may appropriately invest in securities that are not investment grade.
Ratings continue as a factor in may regulations, both in the U.S. and
abroad, notably in Japan. For example, the Securities and Exchange Commission
(SEC) requires investment-grade status in order to register debt on Form-3,
which, in turn, is how one offers debt via a Rule 415 shelf registration. The
Federal Reserve Board allows members of the Federal Reserve System to invest in
securities rated in the four highest categories, just as the Federal Home Loan
Bank System permits federally chartered savings and loan associations to invest
in corporate debt with those ratings, and the Department of Labor allows pension
funds to invest in commercial paper rated in one of the three highest
categories. In similar fashion, California regulates investments of
municipalities and county treasurers, Illinois limits collateral acceptable for
public deposits, and Vermont restricts investments of insurers and banks. The
New York and Philadelphia Stock Exchanges fix margin requirements for mortgage
securities depending on their rating, and the securities haircut for commercial
paper, debt securities, and preferred stock that determines net capital
requirements is also a function of the ratings assigned.
SHORT-TERM DEBT RATINGS (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit).
Moody's description of its three highest short-term debt ratings:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a
superior capacity for repayment of senior short-term promissory
obligations. Prime-1 repayment capacity will normally be
evidenced by many of the following characteristics:
-Leading market positions in well-established industries.
-High rates of return on funds employed.
-Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
-Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
-Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a
strong capacity for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings
and profitability may result in changes in the level of debt
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protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
S&P's description of its three highest short-term debt ratings:
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to have extremely
strong safety characteristics are denoted with a plus sign (+).
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high
as for issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher
designations.
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<PAGE> 174
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
(a) Financial Statements
Part A Financial Highlights
Part B The following unaudited financial statements as of
July 31, 1996 are included as part of the Statement
of Additional Information.
Schedule of Investments
Statement of Assets & Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Audited Financial Statements as of February 16,
1996 are included as part of the Statement of
Additional Information
Schedule of Investments
Statement of Assets & Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
(b) Additional Exhibits
1 Agreement and Declaration of Trust of the Registrant,
dated October 20, 1995 (incorporated herein by reference
to Initial Registration Statement, filed on December 1,
1995).
2 By-Laws of the Registrant (incorporated herein by
reference to Initial Registration Statement, filed on
December 1, 1995).
5(a) Investment Advisory Agreement between the Registrant and
SEI Financial Management Corporation, (incorporated herein
by reference to Pre-Effective Amendment No. 1 to
Registration Statement filed March 1, 1996).
6(a) Distribution Agreement between the Registrant and SEI
Financial Services Company, (incorporated herein by
reference to Pre-Effective Amendment No. 1 to Registration
Statement filed March 1, 1996).
8(a) Custodian Agreement between the Registrant and CoreStates
Bank, N.A., (incorporated herein by reference to
Pre-Effective Amendment No. 1 to Registration Statement
filed March 1, 1996).
9(a) Administration Agreement between the Registrant and SEI
Financial Management Corporation, (incorporated herein by
reference to Pre-Effective Amendment No. 1 to Registration
Statement filed March 1, 1996).
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<PAGE> 175
9(b) Transfer Agent Agreement between the Registrant and SEI
Financial Management Corporation, (incorporated herein by
reference to Pre-Effective Amendment No. 1 to Registration
Statement filed March 1, 1996).
10 Opinion and Consent of Counsel, (incorporated herein by
reference to Pre-Effective Amendment No. 1 to
Registration Statement filed March 1, 1996).
11 Consent of Independent Accountants is filed herewith.
16 Performance Calculations, (incorporated herein by
reference to Pre-Effective Amendment No. 1 to Registration
Statement filed March 1, 1996).
17 Financial Data Schedules, filed herewith.
24 Powers of Attorney for Richard F. Blanchard, F. Wendell
Gooch, Frank E. Morris, James M. Storey and Robert A.
Nesher (incorporated by reference to Initial Registration
Statement, filed on December 1, 1995) and for William M.
Doran, (incorporated herein by reference to Pre-Effective
Amendment No. 1 to Registration Statement filed March 1,
1996).
Item 25. Persons Controlled by or under Common Control with Registrant:
See the Prospectuses and the Statement of Additional Information
regarding the Registrant's control relationships. The Administrator is a
subsidiary of SEI Corporation, which also controls the distributor of the
Registrant, SEI Financial Services Company, other corporations engaged in
providing various financial and record keeping services, primarily to bank trust
departments, pension plan sponsors, and investment managers.
Item 26. Number of Holders of Securities:
<TABLE>
<CAPTION>
Class A Class D
------- -------
<S> <C> <C>
Diversified Conservative Income Fund 12 12
Diversified Conservative Fund 12 12
Diversified Global Moderate Growth Fund 0 0
Diversified Moderate Growth Fund 12 13
Diversified Global Growth Fund 12 15
Diversified Global Stock Fund 0 0
Diversified U.S. Stock Fund 11 11
</TABLE>
Item 27. Indemnification:
Article VIII of the Agreement of Declaration of Trust filed as Exhibit 1
to the Registration Statement is incorporated by reference. Insofar as
indemnification for liability arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the Declaration of Trust or otherwise, the Registrant is aware that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by trustees, directors, officers or controlling persons of the Registrant
in connection with the successful defense of any act, suit or proceeding) is
asserted by such trustees, directors, officers or controlling
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<PAGE> 176
persons in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Adviser:
ADVISER
SEI Financial Management Company ("SFM") is the investment adviser for the
Trust. The principal address of SFM is 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658. SFM is an investment adviser registered under the
Advisers Act.
The list required by this Item 28 of officers and directors of SFM, together
with information as to any other business profession, vocation or employment of
substantial nature engaged in by such officers and directors during the past two
years is incorporated by reference to Schedules A and D of Form ADV filed by SFM
to the Advisers Act (SEC File No. 801-24593).
Item 29. Principal Underwriters:
(a) Furnish the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing the
securities of the Registrant also acts as a principal underwriter,
distributor or investment adviser.
Registrant's distributor, SEI Financial Services Company ("SFS"), acts
as distributor for:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
Stepstone Funds January 30, 1991
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
CoreFunds, Inc. October 30, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
1784 Funds June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Marquis Funds(R) August 17, 1993
Morgan Grenfell Investment Trust January 3, 1994
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<PAGE> 177
Inventor Funds, Inc. August 1, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Monitor Funds January 11, 1996
FMB Funds, Inc. March 1, 1996
Turner Funds April 30, 1996
SEI Institutional Investments Trust June 14, 1996
SFS provides numerous financial services to investment managers, pension
plan sponsors, and bank trust departments. These services include
portfolio evaluation, performance measurement and consulting services
("Funds Evaluation") and automated execution, clearing and settlement of
securities transactions ("MarketLink").
(b) Furnish the Information required by the following table with respect to
each director, officer or partner of each principal underwriter named in
the answer to Item 21 of Part B. Unless otherwise noted, the business
address of each director or officer is 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658.
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ------------------- ---------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief Executive Officer --
Henry H. Greer Director, President & Chief Operating Officer --
Carmen V. Romeo Director, Executive Vice President & Treasurer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President, President - --
Investment Services Division
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jerome Hickey Senior Vice President --
Steven Kramer Senior Vice President --
David G. Lee Senior Vice President President and Chief
Executive Officer
William Madden Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
James V. Morris Senior Vice President --
Steven Onofrio Senior Vice President --
Kevin P. Robins Senior Vice President, General Counsel & Vice President and
Secretary Assistant Secretary
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Kenneth Zimmer Senior Vice President --
Robert Aller Vice President --
</TABLE>
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<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ------------------- ---------------------
<S> <C> <C>
Marc H. Cahn Vice President & Secretary Vice President and
Assistant Secretary
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary Vice President and
Assistant Secretary
Robert Crudup Vice President & Managing Director --
Ed Daly Vice President --
Jeff Drennen Vice President --
Mick Duncan Vice President & Team Leader --
Vic Galef Vice President & Managing Director --
Kathy Heilig Vice President --
Larry Hutchinson Vice President --
Michael Kantor Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
Donald H. Korytowski Vice President --
John Krzeminski Vice President & Managing Director --
Robert S. Ludwig Vice President & Team Leader --
Vicki Malloy Vice President & Team Leader --
Jack May Vice President --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Barbara A. Nugent Vice President & Assistant Secretary Vice President and
Assistant Secretary
Sandra K. Orlow Vice President & Assistant Secretary Vice President and
Assistant Secretary
Donald Pepin Vice President & Managing Director --
Larry Pokora Vice President --
Kim Rainey Vice President --
Paul Sachs Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary Vice President and
Assistant Secretary
Wayne M. Withrow Vice President & Managing Director --
William Zawaski Vice President --
James Dougherty Director of Brokerage Services --
</TABLE>
Item 30. Location of Accounts and Records:
Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the rules promulgated
thereunder, are maintained as follows:
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<PAGE> 179
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3);
(6); (8); (12); and 31a-1(d), the required books and records will be
maintained at the offices of Registrant's Custodian:
CoreStates Bank, N.A.
Broad & Chestnut Streets
P.O. Box 7618
Philadelphia, Pennsylvania 19101
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D);
(4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required books
and records are maintained at the offices of Registrant's Administrator:
SEI Fund Management
680 East Swedesford Road
Wayne, Pennsylvania 19087-1658
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f),
the required books and records are maintained at the principal offices
of the Registrant's Adviser:
SEI Financial Management Corporation
680 East Swedesford Road
Wayne, Pennsylvania 19087-1658
Item 31. Management Services: None.
Item 32. Undertakings:
Registrant hereby undertakes that whenever shareholders meeting the
requirements of Section 16(c) of the Investment Company Act of 1940 inform the
Board of Directors of their desire to communicate with Shareholders of the
Corporation, the Directors will inform such Shareholders as to the approximate
number of Shareholders of record and the approximate costs of mailing or afford
said Shareholders access to a list of Shareholders.
Registrant hereby undertakes to call a meeting of Shareholders for the
purpose of voting upon the question of removal of a Director(s) when requested
in writing to do so by the holders of at least 10% of Registrant's outstanding
shares and in connection with such meetings to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940.
Registrant hereby undertakes to file a post-effective amendment,
including financial statements which need not be audited, within 4-6 months from
the later of the commencement of operations of the Diversified Global Moderate
Growth Fund and the Diversified Global Stock Fund of the Registrant or the
effective date of Post-Effective Amendment No. 1 to the Registrant's 1933 Act
Registration Statement.
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<PAGE> 180
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Wayne, Commonwealth of Pennsylvania on
the 16th day of September, 1996.
SEI ASSET ALLOCATION TRUST
By: /s/ David G. Lee
------------------------------------
David G. Lee
President, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacity on the
dates indicated.
* Trustee September 16, 1996
_________________________
William M. Doran
* Trustee September 16, 1996
_________________________
F. Wendell Gooch
* Trustee September 16, 1996
_________________________
Frank E. Morris
* Trustee September 16, 1996
_________________________
James M. Storey
* Trustee September 16, 1996
_________________________
Robert A. Nesher
/s/ David G. Lee President, Chief Executive September 16, 1996
- ------------------------- Officer
David G. Lee
/s/ Stephen G. Meyer Controller and Chief September 16, 1996
- ------------------------- Financial Officer
Stephen G. Meyer
* By: /s/ David G. Lee
--------------------
David G. Lee
Attorney-in-Fact
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<PAGE> 181
EXHIBIT INDEX
Name Exhibit
- ---- -------
Agreement and Declaration of Trust of the Registrant, Ex-99.B1
dated October 20, 1995 (incorporated by reference to Initial
Registration Statement, filed on December 1, 1995).
By-Laws of the Registrant (incorporated by reference to Ex-99.B2
Initial Registration Statement, filed on December 1, 1995).
Investment Advisory Agreement between the Registrant Ex-99.B5(a)
and SEI Financial Management Corporation, (incorporated herein by
reference to Pre-Effective Amendment No. 1 to Registration
Statement filed March 1, 1996).
Distribution Agreement between Registrant and SEI Ex-99.B6
Financial Services Company, (incorporated herein by reference to
Pre-Effective Amendment No. 1 to Registration Statement filed
March 1, 1996).
Custodian Agreement between the Registrant and CoreStates Ex-99.B8
Bank, N.A., (incorporated herein by reference to
Pre-Effective Amendment No. 1 to Registration Statement filed
March 1, 1996).
Administration Agreement between the Registrant and Ex-99.B9(a)
SEI Financial Management Corporation, (incorporated herein by
reference to Pre-Effective Amendment No. 1 to Registration
Statement filed March 1, 1996).
Transfer Agent Agreement between the Registrant and Ex-99.B9(b)
SEI Financial Management Corporation, (incorporated herein by
reference to Pre-Effective Amendment No. 1 to Registration
Statement filed March 1, 1996).
Opinion and Consent of Counsel, (incorporated herein Ex-99.B10
by reference to Pre-Effective Amendment No. 1 to Registration
Statement filed March 1, 1996).
Consent of Independent Public Accountants, is filed herewith. Ex-99.B11
Distribution Plan, Class D shares, (incorporated herein Ex-99.B15
by reference to Pre-Effective Amendment No. 1 to Registration
Statement filed March 1, 1996).
Performance Calculations, (incorporated herein by reference Ex-99.B16
to Pre-Effective Amendment No. 1 to Registration
Statement filed March 1, 1996).
18f-3 Plan, (incorporated herein by reference to Pre-Effective Ex-99.B18
Amendment No. 1 to Registration Statement filed March 1, 1996).
Powers of Attorney for Richard F. Blanchard, F. Wendell Ex-99.B24
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Gooch, Frank E. Morris, James M. Storey and Robert A.
Nesher (incorporated by reference to Initial Registration Statement,
filed on December 1, 1995), and for William M. Doran,
(incorporated herein by reference to Pre-Effective
Amendment No. 1 to Registration Statement filed March 1, 1996).
Financial Data Schedules, filed herewith. Ex-27
Diversified Conservative Income Fund, Class A Ex-27.1A
Diversified Conservative Income Fund, Class D Ex-27.1D
Diversified Conservative Fund, Class A Ex-27.2A
Diversified Conservative Fund, Class D Ex-27.2D
Diversified Moderate Growth Fund, Class A Ex-27.3A
Diversified Moderate Growth Fund, Class D Ex-27.3D
Diversified Global Growth Fund, Class A Ex-27.4A
Diversified Global Growth Fund, Class D Ex-27.4D
Diversified U.S. Stock Fund, Class A Ex-27.5A
Diversified U.S. Stock Fund, Class D Ex-27.5D
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<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 1 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 21, 1996, relating to the statement of
assets and liabilities of SEI Asset Allocation Trust, which is also
incorporated by reference into the Registration Statement. We also consent to
the reference to us under the heading of "General Information" in the
Prospectuses and under the heading "Experts" in the Statement of Additional
Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Philadelphia, PA
September 12, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001003632
<NAME> SEI ASSET ALLOCATION TRUST
<SERIES>
<NUMBER> 010
<NAME> DIVERSIFIED CONSERVATIVE INCOME FUND CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JUN-13-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 1472137
<INVESTMENTS-AT-VALUE> 1461265
<RECEIVABLES> 3851
<ASSETS-OTHER> 1081
<OTHER-ITEMS-ASSETS> 29407
<TOTAL-ASSETS> 1495604
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27926
<TOTAL-LIABILITIES> 27926
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1472076
<SHARES-COMMON-STOCK> 115996
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 5901
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 573
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (10872)
<NET-ASSETS> 1467678
<DIVIDEND-INCOME> 7025
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (375)
<NET-INVESTMENT-INCOME> 6650
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</TABLE>
