<PAGE>
SEI ASSET ALLOCATION TRUST
JULY 31, 1997
- --------------------------------------------------------------------------------
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 July 31, 1997, has been filed with
the Securities and Exchange Commission ("SEC") and may be obtained upon request
and without charge by writing the Distributor, SEI Investments Distribution Co.
(the "Distributor"), at Oaks, Pennsylvania 19456, 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 Investments
Management Corporation ("SIMC" or the "Adviser") within certain predetermined
percentage ranges. Each Fund offers two classes of shares, Class A Shares and
Class D Shares. Both classes of Shares are offered primarily to tax-advantaged
and other retirement accounts. Class A Shares differ from Class D 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, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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.
<PAGE>
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"). 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.
ANNUAL OPERATING EXPENSES (DIRECT EXPENSES)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED
DIVERSIFIED DIVERSIFIED GLOBAL DIVERSIFIED DIVERSIFIED DIVERSIFIED DIVERSIFIED
CONSERVATIVE CONSERVATIVE MODERATE MODERATE GLOBAL GLOBAL U.S. STOCK
INCOME FUND FUND GROWTH FUND GROWTH FUND GROWTH FUND STOCK 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 (2) .12% .12% .12% .12% .12% .12% .12%
- -----------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER
WAIVERS) (2) .12% .12% .12% .12% .12% .12% .12%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) SIMC AND SEI FUND MANAGEMENT ARE CURRENTLY WAIVING THEIR 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 SIMC AND SEI FUND MANAGEMENT AT ANY TIME IN THEIR SOLE DISCRETION.
(2) ABSENT SIMC'S AND SEI FUND MANAGEMENT'S FEE WAIVERS, THE TOTAL OPERATING
EXPENSES OF EACH FUND'S CLASS A SHARES WOULD BE .42%.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
Based on the estimated Direct and indirect expenses (see below),
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 $ 8 $26 $45 $100
Diversified Conservative Fund $10 $31 $54 $120
Diversified Global Moderate Growth Fund $12 $37 $64 $141
Diversified Moderate Growth Fund $11 $32 $56 $125
Diversified Global Growth Fund $12 $38 $67 $147
Diversified Global Stock Fund $12 $38 $66 $145
Diversified U.S. Stock Fund $11 $32 $56 $125
- ----------------------------------------------------------------------------------------------------
</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. IN ADDITION TO THE DIRECT
EXPENSES SET FORTH IN THE "ANNUAL OPERATING EXPENSES" ABOVE, EACH FUND WILL BEAR
THE INDIRECT EXPENSES OF ITS INVESTMENTS IN THE UNDERLYING PORTFOLIOS. THE
EXPENSE EXAMPLES ARE BASED ON THE TOTAL OPERATING EXPENSES OF EACH FUND PLUS A
WEIGHTED AVERAGE OF THE EXPENSE RATIOS OF THE UNDERLYING PORTFOLIOS BASED ON
CURRENT ALLOCATIONS. THE FUNDS' COMBINED EXPENSE RATIO MAY BE HIGHER OR LOWER
DEPENDING ON THE ALLOCATION OF THE FUNDS ASSETS AMONG THE UNDERLYING PORTFOLIOS.
THE CHART ON THE FOLLOWING PAGE PROVIDES THE TOTAL OPERATING EXPENSES FOR EACH
UNDERLYING PORTFOLIO. 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. 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>
INDIRECT EXPENSES
________________________________________________________________
As shown in the example above, investors in the Funds will also indirectly bear
expenses of the Underlying Portfolios ("Indirect Expenses").
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 May 31,
1997).
UNDERLYING PORTFOLIOS EXPENSE RATIOS*
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 Emerging Markets Debt Portfolio 1.35%
SIT International Fixed Income
Portfolio 1.00%
SLAT Prime Obligation Portfolio .44%
- ----------------------------------------------------------------------------
* 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.
3
<PAGE>
FINANCIAL HIGHLIGHTS
______________________________________________________________
The following financial highlights for a share outstanding throughout each
period have been derived from the Funds' financial statements which were audited
by Price Waterhouse LLP, independent accountants, whose report thereon, dated
May 13, 1997, was unqualified. This information should be read in conjunction
with the Trust's financial statements as of and for the fiscal year ended March
31, 1997, and notes thereto, which are incorporated by reference to the Trust's
Statement of Additional Information. Additional information is set forth in the
Trust's 1997 Annual Report to Shareholders, which is available upon request and
without charge by calling 1-800-342-5734.
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
REALIZED
NET AND NET
ASSET NET UNREALIZED DIVIDENDS ASSET
VALUE INVESTMENT GAINS FROM NET DISTRIBUTIONS VALUE
BEGINNING INCOME/ (LOSSES) ON INVESTMENT FROM CAPITAL END
OF PERIOD (LOSS) SECURITIES INCOME GAINS OF PERIOD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------
Diversified Conservative Income Fund
- -----------------------------------
Class A
Period Ended
03/31/97 (1)# $10.12 $ 0.37 $ 0.27 $(0.21) -- $ 10.55
- -----------------------------------------
Diversified Conservative Fund
- ---------------------------
Class A
Period Ended
03/31/97 (2)# $ 9.26 $ 0.26 $ 0.35 $(0.18) $(0.07) $ 9.62
- ----------------------------------------------------------
Diversified Global Moderate Growth Fund
- ---------------------------------------
Class A
Period Ended
03/31/97 (3)# $10.00 $ 0.06 $ 0.14 $(0.05) -- $ 10.15
- ------------------------------------------------
Diversified Moderate Growth Fund
- --------------------------------
Class A
Period Ended
03/31/97 (4)# $10.19 $ 0.23 $ 0.50 $(0.16) $(0.02) $ 10.74
- --------------------------------------------
Diversified Global Growth Fund
- -----------------------------
Class A
Period Ended
03/31/97 (5)# $10.19 $ 0.15 $ 0.68 $(0.10) $(0.01) $ 10.91
- -----------------------------------------
Diversified Global Stock Fund
- ---------------------------
Class A
Period Ended
03/31/97 (6)# $10.00 $ 0.02 $ 0.05 $(0.03) -- $ 10.04
- --------------------------------------
Diversified U.S. Stock Fund
- -------------------------
Class A
Period Ended
03/31/97 (7)# $10.27 $ 0.07 $ 1.09 $(0.05) -- $ 11.38
<CAPTION>
RATIO OF RATIO OF RATIO OF NET
NET EXPENSES INVESTMENT
RATIO OF INVESTMENT TO AVERAGE INCOME/(LOSS)
NET EXPENSES INCOME/ NET ASSETS TO AVERAGE
ASSETS TO (LOSS) TO (EXCLUDING NET ASSETS
END OF AVERAGE AVERAGE WAIVERS (EXCLUDING PORTFOLIO
TOTAL PERIOD NET NET AND WAIVERS AND TURNOVER
RETURN (000) ASSETS ASSETS REIMBURSEMENT) REIMBURSEMENT) RATE
- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------
Diversified Conservative Income Fund
- -----------------------------------
Class A
Period Ended
03/31/97 (1)# 6.35%** $ 2,983 0.12%* 4.38%* 3.65%*+ 0.85%*+ 27%
- ----------------------------------------
Diversified Conservative Fund
- ---------------------------
Class A
Period Ended
03/31/97 (2)# 6.54%** $ 5,989 0.12%* 3.56%* 2.75%*+ 0.93%*+ 65%
- ----------------------------------------
Diversified Global Moderate Growth Fund
- ---------------------------------------
Class A
Period Ended
03/31/97 (3)# 1.96%** $ 68 0.12%* 2.03%* N/A++ N/A++ 3%
- ----------------------------------------
Diversified Moderate Growth Fund
- --------------------------------
Class A
Period Ended
03/31/97 (4)# 7.12%** $15,440 0.12%* 2.64%* 1.45%*+ 1.31%*+ 22%
- ----------------------------------------
Diversified Global Growth Fund
- -----------------------------
Class A
Period Ended
03/31/97 (5)# 8.10%** $16,049 0.12%* 1.74%* 1.53%*+ 0.33%*+ 13%
- ----------------------------------------
Diversified Global Stock Fund
- ---------------------------
Class A
Period Ended
03/31/97 (6)# 0.67%** $ 4,807 0.12%* 0.65%* 2.13%*+ (1.36)%*+ --
- --------------------------------------
Diversified U.S. Stock Fund
- -------------------------
Class A
Period Ended
03/31/97 (7)# 11.33%** $ 9,065 0.12%* 0.72%* 1.84%*+ (1.00)%*+ 28%
</TABLE>
+ Ratios reflect the impact of the initial low level of average net assets
associated with commencement of operations and the effects of annualization.
++ Ratio is not meaningful due to low level of assets and because SEI
Investments will bear all expenses exceeding specific limitations.
# Per share calculations were performed using average shares for the period.
* Annualized.
** Total return has not been annualized.
(1) Commenced operations 06/13/96
(2) Commenced operations 06/26/96
(3) Commenced operations 12/13/96
(4) Commenced operations 06/10/96
(5) Commenced operations 06/13/96
(6) Commenced operations 12/09/96
(7) Commenced operations 05/13/96
4
<PAGE>
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>
to a medium level of principal risk. The Fund will invest
in the following asset classes within the percentage
ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED
CONSERVATIVE INCOME FUND'S ASSETS)
- -------------------------------------------------------------------
<S> <C> <C>
EQUITY.................................. 10-50%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
FIXED INCOME............................ 50-65%
SIMT CORE FIXED INCOME
MONEY MARKET............................ 0-30%
SLAT PRIME OBLIGATION
- -------------------------------------------------------------------
</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
asset classes within the percentage ranges set forth
below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED
CONSERVATIVE FUND'S ASSETS)
- -------------------------------------------------------------------
<S> <C> <C>
EQUITY.................................. 15-50%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
SIT INTERNATIONAL EQUITY
FIXED INCOME............................ 50-80%
SIMT CORE FIXED INCOME
SIT INTERNATIONAL FIXED INCOME
MONEY MARKET............................ 0-30%
SLAT PRIME OBLIGATION
- -------------------------------------------------------------------
</TABLE>
6
<PAGE>
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 asset classes within the percentage
ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED
GLOBAL MODERATE GROWTH FUND'S ASSETS)
- -------------------------------------------------------------------
<S> <C> <C>
EQUITY.................................. 30-75%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
SIT INTERNATIONAL EQUITY
SIT EMERGING MARKETS EQUITY
FIXED INCOME............................ 25-70%
SIMT CORE FIXED INCOME
SIMT HIGH YIELD BOND
SIT INTERNATIONAL FIXED INCOME
SIT EMERGING MARKETS DEBT
MONEY MARKET............................ 0-30%
SLAT PRIME OBLIGATION
- -------------------------------------------------------------------
</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
7
<PAGE>
growth, while subjecting investors to a medium level of
principal risk. The Fund will invest in the following
asset classes within the percentage ranges set forth
below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED
MODERATE GROWTH FUND'S ASSETS)
- -------------------------------------------------------------------
<S> <C> <C>
EQUITY.................................. 30-70%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
SIT INTERNATIONAL EQUITY
FIXED INCOME............................ 30-60%
SIMT CORE FIXED INCOME
SIT INTERNATIONAL FIXED INCOME
MONEY MARKET............................ 0-30%
SLAT PRIME OBLIGATION
- -------------------------------------------------------------------
</TABLE>
DIVERSIFIED GLOBAL
GROWTH FUND
The Diversified Global 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 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 asset classes within the percentage ranges set
forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED
GLOBAL GROWTH FUND'S ASSETS)
- -------------------------------------------------------------------
<S> <C> <C>
EQUITY.................................. 45-95%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
SIT INTERNATIONAL EQUITY
SIT EMERGING MARKETS EQUITY
FIXED INCOME............................ 5-50%
SIMT CORE FIXED INCOME
SIMT HIGH YIELD BOND
SIT INTERNATIONAL FIXED INCOME
SIT EMERGING MARKETS DEBT
MONEY MARKET............................ 0-30%
SLAT PRIME OBLIGATION
- -------------------------------------------------------------------
</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,
8
<PAGE>
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 asset classes
within the percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED
GLOBAL STOCK FUND'S ASSETS)
- -------------------------------------------------------------------
<S> <C> <C>
EQUITY.................................. 70-100%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
SIT INTERNATIONAL EQUITY
SIT EMERGING MARKETS EQUITY
MONEY MARKET............................ 0-30%
SLAT PRIME OBLIGATION
- -------------------------------------------------------------------
</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
to high level of principal risk. The Fund will invest in
the following asset classes within the percentage ranges
set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED
U.S. STOCK FUND'S ASSETS)
- -------------------------------------------------------------------
<S> <C> <C>
EQUITY.................................. 70-100%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
MONEY MARKET............................ 0-30%
SLAT PRIME OBLIGATION
- -------------------------------------------------------------------
</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
for each asset class. 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
9
<PAGE>
Underlying Portfolios under certain conditions. Absent
this Order, the Investment Company Act of 1940 (the "1940
Act") could 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 SIMC'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.
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."
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, including securities
issued by emerging market issuers; 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 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;
10
<PAGE>
- The Diversified Global Growth Fund and Diversified
Global Moderate Growth Fund can each invest a portion of
its assets in the SIMT High Yield Bond Portfolio. As a
result, these Funds will be subject to the risks
associated with high yield investing;
- Certain Funds invest at least 10% and can invest as much
as 30% of their assets in the SIT International Fixed
Income and SIT Emerging Markets Debt Portfolios, which
invest primarily in foreign fixed-income securities,
including securities issued by emerging market issuers.
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.
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 65%. Asset
reallocation decisions typically will occur only once
every quarter. However, if market conditions warrant, SIMC
may make more frequent reallocation decisions, which will
result in a higher portfolio turnover rate. The Funds will
purchase or sell shares of
11
<PAGE>
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 SIMC 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).
INVESTMENT GOALS
OF THE
UNDERLYING
PORTFOLIOS
_________________________________________________________________________
The following table describes the investment goal of each
Underlying Portfolio eligible (as of May 31, 1997) for
investment by the Funds:
<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
SIT Emerging Markets Debt Portfolio Aggressive Growth of Capital and Income
SLAT Prime Obligation Price Stability
- --------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT
OBJECTIVES
OF THE
UNDERLYING
PORTFOLIOS
_________________________________________________________________________
Set forth below are the investment objectives 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
12
<PAGE>
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.
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.
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.
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.
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.
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
13
<PAGE>
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.
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.
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 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.
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.
SIT EMERGING MARKETS DEBT PORTFOLIO
The investment objective of the SIT Emerging Markets Debt
Portfolio is to maximize total return. Under normal
circumstances, at least 80% of the SIT Emerging Markets
Debt Portfolio's total assets will be invested in debt
securities of government, government-related and corporate
issuers in emerging market countries and of entities
organized to restructure the outstanding debt of such
issuers.
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) high quality commercial paper; (ii)
bank obligations; (iii) high quality short-term corporate
obligations; (iv) high quality short-term obligations
issued by state and local governmental issuers; (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.
14
<PAGE>
GENERAL
INVESTMENT
POLICIES OF THE
UNDERLYING
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.
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 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.
WARRANTS
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.
15
<PAGE>
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.
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.
THE ADVISER AND
MANAGER OF
THE FUNDS
_________________________________________________________________________
SEI Investments Management Corporation acts as investment
adviser to each of the Funds and certain of the Underlying
Portfolios, and manages the Funds and the Underlying
Portfolios by focusing on four key principles: asset
allocation, portfolio structure, the use of specialist
managers, and continuous portfolio management. Asset
allocation across appropriate asset classes is the central
theme of SIMC's
16
<PAGE>
investment philosophy. Another element of SIMC's strategy
is to access the return potential of the financial markets
and reduce risk by having a portfolio that is diversified
within each asset class. In order to manage investments in
these distinct asset classes, SIMC oversees a network of
specialist managers who invest the assets of the
Underlying Portfolios in distinct sectors of the markets.
These specialist managers seek to adhere to distinct
investment disciplines, and provide opportunities for
greater consistency and predictability of results, as well
as broader diversification across and within asset
classes. The final element of SIMC's investment philosophy
is continuous portfolio management. This element consists
of two components: (i) regular rebalancing to ensure that
the appropriate mix of assets is constantly in place, and
(ii) constant monitoring and evaluation of specialist
managers for the Underlying Portfolios to ensure that they
do not deviate from the stated philosophy or process.
Under an Investment Advisory Agreement with the
Trust, SIMC 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
Investments Company ("SEI"), a financial services company.
The principal business address of the Adviser and SEI is
Oaks, Pennsylvania 19456. 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 43 investment
companies including more than 325 portfolios, which
investment companies had more than $93.9 billion in assets
as of May 31, 1997.
Investment and asset allocation decisions for the
Funds are made by a committee within SIMC.
17
<PAGE>
SEI Fund Management ("SEI Management") provides the
Trust with overall management services, regulatory
reporting, all necessary office space, equipment,
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 May 31, 1997:
<TABLE>
<CAPTION>
UNDERLYING PORTFOLIO INVESTMENT ADVISOR SUB-ADVISER(S)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
SIMT Large Cap Growth SIMC Alliance Capital Management, L.P.
American Express Asset Management Group
Inc.
Provident Investment Counsel, Inc.
- --------------------------------------------------------------------------------------------------
SIMT Large Cap Value SIMC LSV Asset Management
Mellon Equity Associates
Pacific Alliance Capital Management
- --------------------------------------------------------------------------------------------------
SIMT Small Cap Growth SIMC First of America Investment Corporation
Furman Selz Capital Management LLC
Nicholas-Applegate Capital Management
Wall Street Associates
- --------------------------------------------------------------------------------------------------
SIMT Small Cap Value SIMC Boston Partners Asset Management, L.P.
1838 Investment Advisors, L.P.
LSV Asset Management
- --------------------------------------------------------------------------------------------------
SIT International Equity SIMC Acadian Asset Management, Inc.
Farrell Wako Global Investment Management,
Inc.
Lazard London International Investment
Management Limited
Seligman Henderson, Co.
Yamaichi Capital Management, Inc. and
Yamaichi Capital Management
(Singapore) Limited
- --------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
UNDERLYING PORTFOLIO INVESTMENT ADVISOR SUB-ADVISER(S)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
SIT Emerging Markets Equity SIMC Coronation Asset Management
(Proprietary) Limited
Montgomery Asset Management, L.P.
Parametric Portfolio Associates
Yamaichi Capital Management, Inc. and
Yamaichi Capital Management
(Singapore) Limited
- --------------------------------------------------------------------------------------------------
SIMT Core Fixed Income SIMC BlackRock Financial Management, Inc.
Firstar Investment Research &
Management Company
Western Asset Management Company
- --------------------------------------------------------------------------------------------------
SIMT High Yield Bond SIMC BEA Associates
- --------------------------------------------------------------------------------------------------
SIT International Fixed Income Strategic Fixed None
Income, L.P.
- --------------------------------------------------------------------------------------------------
SIT Emerging Markets Debt SIMC Salomon Brothers Asset Management, Inc.
- --------------------------------------------------------------------------------------------------
SLAT Prime Obligation Wellington None
Management
Company, LLP
- --------------------------------------------------------------------------------------------------
</TABLE>
SEI INVESTMENTS MANAGEMENT CORPORATION
In addition to serving as the Trust's Adviser, SIMC 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"), SIMC 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.
SIMC acts as a "manager of managers" for the
Underlying SEI Portfolios. As Adviser, SIMC 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 SIMC, and under the supervision of both
SIMC 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 SIMC, 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, SIMC allocates and, when
appropriate, reallocates the Underlying SEI Portfolios'
assets among sub-advisers, monitors and evaluates sub-
19
<PAGE>
adviser performance, and oversees sub-adviser compliance
with the Portfolios' investment objectives, policies and
restrictions. SIMC 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.
SIMC has obtained an exemptive order from the
Securities and Exchange Commission (the "SEC") that
permits SIMC, with the approval of the Underlying SEI
Portfolios' Boards for Trustees, to retain sub-advisers
unaffiliated with SIMC 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 SIMC
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, SIMC 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, .4875% of the
average daily net assets of the SIMT High Yield Bond
Portfolio, and .85% of the average daily net assets of the
SIT Emerging Markets Debt Portfolio. SIMC pays the
sub-advisers out of these fees.
STRATEGIC FIXED INCOME L.P.
Strategic Fixed Income L.P. ("SFI") serves 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 31, 1997, SFI managed $5.8 billion of client assets.
The principal address of SFI is 1001 Nineteenth Street
North, 16th Floor, Arlington, Virginia 22209.
WELLINGTON MANAGEMENT COMPANY, LLP
Wellington Management Company, LLP ("WMC"), 75 State
Street, Boston, Massachusetts 02109, serves as the
investment adviser to the SLAT Prime Obligation Portfolio.
As of March 31, 1997, WMC had investment management
authority with respect to approximately $136.3 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 limited liability
20
<PAGE>
partnership of which the following persons are managing
partners: Robert W. Doran, Duncan M. McFarland and John R.
Ryan.
ACADIAN ASSET MANAGEMENT, INC.
Acadian Asset Management, Inc. ("Acadian") serves as an
investment sub-adviser to a portion of the assets of the
SIT International Equity Portfolio. Acadian was founded in
1977, and manages approximately $4 billion in assets
invested globally. Acadian's business address is Two
International Place, Boston, Massachusetts 02110.
ALLIANCE CAPITAL MANAGEMENT L.P.
Alliance Capital Management L.P. ("Alliance Capital")
serves as an 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. As of March 31, 1997,
Alliance managed over $182 billion in assets. The
principal business address of Alliance is 1345 Avenue of
the Americas, New York, New York 10105.
AMERICAN EXPRESS ASSET MANAGEMENT GROUP INC.
American Express Asset Management Group Inc. (formerly,
IDS Advisory Group Inc.) ("American Express") serves as an
investment sub-adviser to a portion of the assets of the
SIMT Large Cap Growth Portfolio. American Express is a
registered investment adviser. As of March 31, 1997,
American Express managed over $24 billion in assets.
American Express was founded in 1972 to manage tax-exempt
assets for institutional clients. The principal business
address of American Express is IDS Tower 10, Minneapolis,
Minnesota 55440.
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.
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 31, 1997, BEA managed approximately $29
billion in assets.
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 31, 1997,
BlackRock had $47 billion in assets under management.
BlackRock provides investment advice to investment
companies, trusts, charitable organizations, pension and
profit sharing plans and government entities.
21
<PAGE>
BOSTON PARTNERS ASSET MANAGEMENT, L.P.
Boston Partners Asset Management, L.P. ("BPAM") serves as
an 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 was
founded in April, 1995, and as of March 31, 1997, it had
approximately $8.5 billion in assets under management.
BPAM's clients include corporations, endowments,
foundations, pension and profit sharing plans and two
other investment companies.
22
<PAGE>
CORONATION ASSET MANAGEMENT (PROPRIETARY)
LIMITED
Coronation Asset Management (Proprietary) Limited
("Coronation") serves as an investment sub-adviser to a
portion of the assets of the SIT Emerging Markets Equity
Portfolio. Coronation, a registered investment adviser
organized under the laws of the Republic of South Africa,
was founded in 1993, and as of March 31, 1997, managed
$3.3 billion in assets. The principal business address of
Coronation is 80 Strand Street, Cape Town, South Africa,
8001.
1838 INVESTMENT ADVISORS, L.P.
1838 Investment Advisors, L.P. ("1838") serves as an
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 31, 1997, 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.
FARRELL-WAKO
GLOBAL INVESTMENT MANAGEMENT, INC.
Farrell-Wako Global Investment Management, Inc.
("Farrell-Wako") serves as an investment sub-adviser to a
portion of the assets of the SIT International Equity
Portfolio. Farrell-Wako, a Delaware corporation, was
founded in 1991 and is a registered investment adviser in
the U.S. and Japan. As of March 31, 1997, Farrell-Wako
managed over $298 million. The principal address of
Farrell-Wako is 780 Third Avenue, New York, New York
10017.
FIRST OF AMERICA INVESTMENT CORPORATION
First of America Investment Corporation ("First of
America") serves as an investment sub-adviser to a portion
of the assets of the SIMT Small Cap Growth Portfolio.
First of America is a Michigan corporation that, together
with its predecessor, has been engaged in the investment
advisory business since 1932. First of America's principal
business address is 303 North Rose Street, Suite 500,
Kalamazoo, Michigan 49007. As of March 31, 1997, First of
America had approximately $14.4 billion in assets under
management. First of America's clients include mutual
funds, trust funds, and individually managed institutional
and individual accounts.
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 March 31, 1997, it had
approximately $19.3 billion in assets under management.
FIRMCO's clients include pension and profit sharing plans,
trusts and estates and one other investment company.
FURMAN SELZ CAPITAL MANAGEMENT LLC
Furman Selz Capital Management LLC ("Furman Selz") serves
as an investment sub-adviser to a portion of the assets of
the SIMT Small Cap Growth Portfolio. Furman Selz, a
Delaware limited liability company whose predecessor was
formed in 1977,
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<PAGE>
is a registered investment adviser that managed
approximately $8.1 billion in assets as of March 31, 1997.
Furman Selz's principal business address is 230 Park
Avenue, New York, NY 10169.
LAZARD LONDON INTERNATIONAL INVESTMENT MANAGEMENT LIMITED
Lazard London International Investment Management Limited
("Lazard") serves as an investment sub-adviser for a
portion of the assets of the SIT International Equity
Portfolio. Lazard is a registered investment adviser with
its principal business address at 21 Moorfields, London,
England EC2P 2HT. Lazard, which was founded in 1980,
offers international investment services to clients of
Lazard Asset Management Holdings Limited. Lazard and its
asset management affiliates manage domestic (UK)
portfolios and international portfolios for institutions
and private clients, including insurance funds, pension
funds, charities and mutual funds. As of March 31, 1997,
Lazard and its asset management affiliates had
approximately $6.7 billion in assets under management.
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 and the SIMT Small 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. As of March 31, 1997, LSV
managed approximately $684 million in client assets.
The Adviser pays LSV fees based on a percentage of
the average monthly market value of the assets of the SIMT
Large Cap Value Portfolio and the SIMT Small Cap Value
Portfolio managed by LSV. These fees, which are calculated
daily and paid monthly, are at an annual rate of .20% of
the average monthly market value of the assets of the SIMT
Large Cap Value Portfolio managed by LSV and .50% of the
average monthly market value of the assets of the SIMT
Small Cap Value Portfolio managed by LSV.
MELLON EQUITY ASSOCIATES
Mellon Equity Associates ("Mellon Equity") serves as an
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 that provides
investment management services to the equity and balanced
pension, public fund and profit-sharing investment
management markets. Mellon Equity had discretionary
management authority with respect to approximately $11.7
billion of assets as of March 31, 1997. The business
address for Mellon Equity is 500 Grant Street, Suite 3700,
Pittsburgh, Pennsylvania 15258.
MONTGOMERY ASSET MANAGEMENT L.P.
Montgomery Asset Management, L.P. ("MAM") serves as an
investment sub-adviser to a portion of the assets of the
SIT Emerging Markets Equity Portfolio. As of March 31,
1997, MAM had approximately $7.8 billion in assets under
management.
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<PAGE>
MAM has over six years experience providing investment
management services. The principal address of MAM is 101
California Street, San Francisco, California 94111.
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
Nicholas-Applegate Capital Management
("Nicholas-Applegate") serves as an 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
March 31, 1997, Nicholas-Applegate had discretionary
management authority with respect to approximately $28.7
billion of assets. The principal business address of
Nicholas-Applegate is 600 West Broadway, 29th Floor, San
Diego, California 92101.
PACIFIC ALLIANCE CAPITAL MANAGEMENT
Pacific Alliance Capital Management ("Pacific") serves as
an investment sub-adviser to a portion of the assets of
the SIMT Large Cap Value Portfolio. Pacific provides
equity and fixed-income management services to a broad
array of corporate and municipal clients. As of March 31,
1997, Pacific had discretionary management authority with
respect to approximately $13 billion of assets. The
principal business address of Pacific is 475 Sansome
Street, San Francisco, California 94111.
PARAMETRIC
PORTFOLIO
ASSOCIATES
Parametric Portfolio Associates ("Parametric") serves as
an investment sub-adviser to a portion of the assets of
the SIT Emerging Markets Equity Portfolio. Parametric is a
general partnership whose predecessor was founded in 1987.
As of March 31, 1997, Parametric managed approximately
$2.1 billion in client assets. Parametric's business
address is 701 5th Avenue, Suite 7310, Seattle, Washington
98104.
PROVIDENT INVESTMENT COUNSEL, INC.
Provident Investment Counsel, Inc. ("Provident") serves as
an investment sub-adviser, 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 provides investment advice to corporations, public
entities, foundations and labor unions, as well as to
other investment companies. As of March 31, 1997,
Provident had over $18 billion in client assets under
management.
SALOMON BROTHERS ASSET MANAGEMENT INC.
Salomon Brothers Asset Management Inc. ("SBAM") serves as
the investment sub-adviser for the assets of the SIT
Emerging Markets Debt Portfolio. SBAM is a Delaware
corporation that was founded in 1987. SBAM is a registered
investment adviser that currently manages approximately
$20 billion in client assets. SBAM's principal business
address is 7 World Trade Center, New York, New York 10048.
SELIGMAN HENDERSON CO.
Seligman Henderson Co. ("Seligman") serves as an
investment 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. Seligman Henderson
25
<PAGE>
Co. was established in 1991, and manages approximately
$3.4 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.
WALL STREET ASSOCIATES
Wall Street Associates ("WSA") serves as an 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 March 31, 1997, had
approximately $933 million in assets under management. 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.
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.
Western was founded in 1971, and specializes in the
management of fixed income portfolios. As of March 31,
1997, Western managed approximately $31 billion in client
assets.
YAMAICHI CAPITAL MANAGEMENT, INC. AND YAMAICHI
CAPITAL
MANAGEMENT (SINGAPORE) LIMITED
Yamaichi Capital Management, Inc. ("Yamaichi") and
Yamaichi Capital Management (Singapore) Limited ("YCMS")
jointly serve as an investment sub-adviser to a portion of
the assets of the SIT International Equity Portfolio and
the SIT Emerging Markets Equity Portfolio. Yamaichi is a
New York Corporation established in 1981 and YCMS is a
Singapore corporation established in 1979. As of March 31,
1997, YCMS and its affiliates managed approximately $900
million 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,
#13-01/05, Hong Leong Centre, Singapore 068906.
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, Kansas City, Missouri 64105, have
entered into a transfer agent agreement with respect to
the Trust's Class A shares.
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<PAGE>
DISTRIBUTION AND
SHAREHOLDER SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (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 or shareholder servicing 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 and at its own
expense, provide promotional incentives, in the form of
cash or other compensation, to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Funds' shares.
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. 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 and
other 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").
Shareholders who desire to purchase or redeem shares
for cash must place their orders with the Transfer Agent
(or its authorized 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
27
<PAGE>
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
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 $150,000; however, the minimum investment may be
waived at the Distributor's discretion. All subsequent
purchases must be at least $1,000.
Shareholders who desire to redeem shares of the Funds
must place their redemption orders with Transfer Agent (or
its authorized 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
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<PAGE>
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 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.
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.
29
<PAGE>
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.
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
29
<PAGE>
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 Internal
Revenue Code of 1986 (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 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
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<PAGE>
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
Fund Management, Oaks, Pennsylvania 19456, 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 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.
As of May 5, 1997, the North American Trust Company,
Trustee for Steptoe & Johnson Retirement Plan (San Diego,
CA), owned a controlling interest (as defined by the 1940
Act), of the Diversified Global Growth Fund and the
Diversified U.S. Stock Fund.
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 SEI Asset
Allocation Funds, P.O. Box 419240, Kansas City, Missouri
64141-6240.
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<PAGE>
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
SEI Fund Management, 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.
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
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<PAGE>
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.
BRADY BONDS
Certain debt obligations, customarily referred to as
"Brady Bonds," are created through the exchange of
existing commercial bank loans to foreign entities for new
obligations in connection with debt restructuring under a
plan introduced by former U.S. Secretary of the Treasury,
Nicholas F. Brady (the "Brady Plan"). Brady Bonds have
been issued only recently, and, accordingly, do not have a
long payment history. They may be fully or partially
collateralized or uncollateralized and issued in various
currencies (although most are U.S. dollar denominated) and
they are actively traded in the over-the-counter secondary
market. U.S. dollar denominated, collateralized Brady
Bonds, which may be fixed rate par bonds or floating rate
discount bonds, are generally collateralized in full as to
principal due at maturity by U.S. Treasury zero coupon
obligations which have the same maturity as the Brady
Bonds. Certain interest payments on these Brady Bonds may
be collateralized by cash or securities in an amount that,
in the case of fixed rate bonds, is typically equal to
between 12 and 18 months of rolling interest payments or,
in the case of floating rate bonds, initially is typically
equal to between 12 and 18 months rolling interest
payments based on the applicable interest rate at that
time and is adjusted at regular intervals thereafter with
the balance of interest accruals in each case being
uncollateralized. Payment of interest and (except in the
case of principal collateralized Brady Bonds) principal on
Brady Bonds with no or limited collateral depends on the
willingness and ability of the foreign government to make
payment. In the event of a default on collateralized Brady
Bonds for which obligations are accelerated, the
collateral for the payment of principal will not be
distributed to investors, nor will such obligations be
sold and the proceeds distributed. The collateral will be
held by the collateral agent to the scheduled maturity of
the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face amount of the
collateral will equal the principal payments which would
have then been due on the Brady Bonds in the normal
course.
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
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
33
<PAGE>
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.
EUROBONDS
A Eurobond is a bond denominated in U.S. dollars or other
currencies and sold to investors outside of the country
whose currency is used. Eurobonds may be issued by
government or corporate issuers, and are typically
underwritten by banks and brokerage firms from numerous
countries. While Eurobonds typically pay principal and
interest in Eurodollars, U.S. dollars held in banks
outside of the United States, they may pay principal and
interest in other currencies.
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 Underlying 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 and SIT Emerging Markets Debt Portfolios
may invest a portion of their 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
34
<PAGE>
fluctuations in foreign currencies, or to gain exposure to
a particular market or instrument.
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.
HIGH YIELD FOREIGN SOVEREIGN DEBT SECURITIES
Investing in fixed and floating rate high yield foreign
sovereign debt securities will expose a Portfolio to the
direct or indirect consequences of political, social or
economic changes in the countries that issue the
securities. The ability and willingness of sovereign
obligors in developing and emerging market countries or
the governmental authorities that control repayment of
their external debt to pay principal and interest on such
debt when due may depend on general economic and political
conditions within the relevant country. Countries such as
those in which a Portfolio may invest have historically
experienced, and may continue to experience, high rates of
inflation, high interest rates, exchange rate trade
difficulties and extreme poverty and unemployment. Many of
these countries are also characterized by political
uncertainty or instability. Additional factors which may
influence the ability or willingness to service debt
include, but are not limited to, a country's cash flow
situation, the availability of sufficient foreign exchange
on the date a payment is due, the relative size of its
debt service burden to the economy as a whole, and its
government's policy towards the International Monetary
Fund, the World Bank and other international agencies.
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, securities for
which there is no active secondary market and repurchase
agreements with maturities or durations over seven days in
length.
JUNK BONDS
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. The market for these
securities may be less active, causing market price
volatility and limited liquidity in the secondary market.
This may limit a Portfolio's ability to sell such
securities at their market value. In addition, the market
for these securities may also be adversely affected by
legislative and regulatory developments. Credit quality in
the junk bond market can change
35
<PAGE>
suddenly and unexpectedly, and even recently issued credit
ratings may not fully reflect the actual risks imposed by
a particular security.
LOAN PARTICIPATIONS AND ASSIGNMENTS
Loan participations are interests in loans to U.S.
corporations which are administered by the lending bank or
agent for a syndicate of lending banks, and sold by the
lending bank or syndicate member ("intermediary bank"). In
a loan participation, the borrower corporation will be
deemed to be the issuer of the participation interest
except to the extent the Portfolio derives its rights from
the intermediary bank. Because the intermediary bank does
not guarantee a loan participation in any way, a loan
participation is subject to the credit risks generally
associated with the underlying corporate borrower. In the
event of the bankruptcy or insolvency of the corporate
borrower, a loan participation may be subject to certain
defenses that can be asserted by such borrower as a result
of improper conduct by the intermediary bank. In addition,
in the event the underlying corporate borrower fails to
pay principal and interest when due, the Portfolio may be
subject to delays, expenses and risks that are greater
than those that would have been involved if the Portfolio
had purchased a direct obligation of such borrower. Under
the terms of a loan participation, the Portfolio may be
regarded as a creditor of the intermediary bank, (rather
than of the underlying corporate borrower), so that the
Portfolio may also be subject to the risk that the
intermediary bank may become solvent. The secondary
market, if any, for these loan participations is limited.
Loan assignments are investments in assignments of
all or a portion of certain loans from third parties. When
a Portfolio purchases assignments from lenders it will
acquire direct rights against the borrower on the loan.
Since assignments are arranged through private
negotiations between potential assignees and assignors,
however, the rights and obligations acquired by the
Portfolio may differ from, and be more limited than, those
held by the assigning lender. Loan participations and
assignments are considered to be illiquid.
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
36
<PAGE>
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.
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 on a security 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 on a security
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.
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.
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
37
<PAGE>
from the date of purchase. Repurchase agreements are
considered loans under the 1940 Act.
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.
STRUCTURED SECURITIES
The SIT Emerging Markets Debt Portfolio may invest a
portion of its assets in entities organized and operated
solely for the purpose of restructuring the investment
characteristics of sovereign debt obligations. This type
of restructuring involves the deposit with, or purchase
by, an entity, such as a corporation or trust, or
specified instruments (such as commercial bank loans or
Brady Bonds) and the issuance by that entity of one or
more classes of securities ("Structured Securities")
backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments
may be apportioned among the newly issued Structured
Securities to create securities with different investment
characteristics, such as varying maturities, payment
priorities and interest rate provisions, and the
38
<PAGE>
extent of the payments made with respect to Structured
Securities is dependent on the extent of the cash flow on
the underlying instruments. Because Structured Securities
of the type in which the Portfolio anticipates it will
invest typically involve no credit enhancement, their
credit risk generally will be equivalent to that of the
underlying instruments. The Portfolio is permitted to
invest in a class of Structured Securities that is either
subordinated or unsubordinated to the right of payment of
another class. Subordinated Structured Securities
typically have higher yields and present greater risks
than unsubordinated Structured Securities. Structured
Securities are typically sold in private placement
transactions, and there currently is no active trading
market for Structured Securities. Certain issuers of such
structured securities may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, the
Portfolio's investment in such securities may be limited
by certain investment restrictions contained in the 1940
Act.
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 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 Portfolio'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
Portfolio'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., Fannie
Mae securities).
39
<PAGE>
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.
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.
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.
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.
40
<PAGE>
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 of the Underlying
Portfolios..................................... 12
General Investment Policies of the Underlying
Portfolios..................................... 15
Risk Factors of the Underlying Portfolios........ 16
The Adviser and Manager of the Funds............. 16
The Advisers and Sub-Advisers to the Underlying
Portfolios..................................... 18
Transfer Agent................................... 26
Distribution and Shareholder Servicing........... 26
Purchase and Redemption of Shares................ 26
Performance...................................... 28
Taxes............................................ 29
General Information.............................. 30
Description of Permitted Investments and Risk
Factors of the Underlying Portfolios........... 32
</TABLE>
41
<PAGE>
SEI FINANCIAL
SERVICES
COMPANY
Oaks, PA 19456
800-DIAL-SEI/800-342-5734
SEI-F-116-01 CLASS A
PROSPECTUS AS OF
JULY 31, 1997
ASSET
ALLOCATION
FUNDS
- ---------------------------------------
Diversified
Conservative Income
- ---------------------------------------
Diversified Conservative
- ---------------------------------------
Diversified Global
Moderate Growth
- ---------------------------------------
Diversified
Moderate Growth
- ---------------------------------------
Diversified Global Growth
- ---------------------------------------
Diversified Global Stock
- ---------------------------------------
Diversified U.S. Stock
- ---------------------------------------
SEI
<PAGE>
SEI ASSET ALLOCATION TRUST
JULY 31, 1997
- --------------------------------------------------------------------------------
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 July 31, 1997, has been filed with
the Securities and Exchange Commission ("SEC") and may be obtained upon request
and without charge by writing the Distributor, SEI Investments Distribution Co.
(the "Distributor"), at Oaks, Pennsylvania 19456, 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 Investments
Management Corporation ("SIMC" or the "Adviser") within certain predetermined
percentage ranges. Each Fund offers two classes of shares, Class A Shares and
Class D Shares. Both classes of Shares are offered primarily to tax-advantaged
and other retirement accounts. Class D Shares are offered 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, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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.
<PAGE>
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"). 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.
SHAREHOLDER TRANSACTION EXPENSES (AS A PERCENTAGE OF OFFERING PRICE)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED
DIVERSIFIED DIVERSIFIED GLOBAL DIVERSIFIED DIVERSIFIED DIVERSIFIED DIVERSIFIED
CONSERVATIVE CONSERVATIVE MODERATE MODERATE GLOBAL GLOBAL U.S. STOCK
INCOME FUND FUND GROWTH FUND GROWTH FUND GROWTH FUND STOCK 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 (2) (3) .37% .37% .37% .37% .37% .37% .37%
Shareholder Service Fees .25% .25% .25% .25% .25% .25% .25%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses
(AFTER WAIVERS) (3) 1.12% 1.12% 1.12% 1.12% 1.12% 1.12% 1.12%
</TABLE>
- --------------------------------------------------------------------------------
(1) SIMC AND SEI FUND MANAGEMENT ARE CURRENTLY WAIVING THEIR 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 SIMC AND SEI FUND MANAGEMENT AT ANY TIME IN THEIR SOLE DISCRETION.
(2) EACH FUND'S SHAREHOLDER SERVICING FEES WILL BE REDUCED IN AN AMOUNT EQUAL TO
THE FUND'S PRO RATA SHARE OF ANY SHAREHOLDER 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 SIMC'S AND SEI FUND MANAGEMENT'S FEE WAIVERS, THE TOTAL OPERATING
EXPENSES OF EACH FUND'S CLASS D SHARES WOULD BE 1.42%.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
Based on the estimated Direct and indirect
expenses (see below), 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 $18 $37 $ 98 $213
Diversified Conservative Fund $20 $62 $ 107 $231
Diversified Global Moderate Growth Fund $22 $68 $ 116 $249
Diversified Moderate Growth Fund $21 $63 $ 109 $235
Diversified Global Growth Fund $22 $69 $ 118 $254
Diversified Global Stock Fund $22 $69 $ 118 $253
Diversified U.S. Stock Fund $21 $68 $ 107 $235
</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. IN ADDITION TO THE DIRECT
EXPENSES SET FORTH IN THE "ANNUAL OPERATING EXPENSES" ABOVE, EACH FUND WILL BEAR
THE INDIRECT EXPENSES OF ITS INVESTMENTS IN THE UNDERLYING PORTFOLIOS. THE
EXPENSE EXAMPLES ARE BASED ON THE TOTAL OPERATING EXPENSES OF EACH FUND PLUS A
WEIGHTED AVERAGE OF THE EXPENSE RATIOS OF THE UNDERLYING PORTFOLIOS BASED ON
CURRENT ALLOCATIONS. THE FUNDS' COMBINED EXPENSE RATIO MAY BE HIGHER OR LOWER
DEPENDING ON THE ALLOCATION OF THE FUNDS ASSETS AMONG THE UNDERLYING PORTFOLIOS.
THE CHART ON THE FOLLOWING PAGE PROVIDES THE TOTAL OPERATING EXPENSES FOR EACH
UNDERLYING PORTFOLIO. 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 CHARGE OTHERWISE PERMITTED BY THE CONDUCT RULES OF THE
NATIONAL ASSOCIATION OF SECURITIES DEALERS.
2
<PAGE>
INDIRECT EXPENSES
________________________________________________________________
As shown in the example above, investors in the Funds also indirectly bear
expenses of the Underlying Portfolios ("Indirect Expenses").
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 May 31,
1997).
<TABLE>
<CAPTION>
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 Emerging Markets Debt Portfolio 1.35%
SIT International Fixed Income Portfolio 1.00%
SLAT Prime Obligation Portfolio .44%
</TABLE>
- --------------------------------------------------------------------------------
* 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.
3
<PAGE>
FINANCIAL HIGHLIGHTS
______________________________________________________________
The following financial highlights for a share outstanding throughout each
period have been derived from the Funds' financial statements which were audited
by Price Waterhouse LLP, independent accountants, whose report thereon, dated
May 13, 1997, was unqualified. This information should be read in conjunction
with the Trust's financial statements as of and for the fiscal year ended March
31, 1997, and notes thereto, which are incorporated by reference to the Trust's
Statement of Additional Information. Additional information is set forth in the
Trust's 1997 Annual Report to Shareholders, which is available upon request and
without charge by calling 1-800-342-5734.
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
REALIZED
NET AND
ASSET NET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE INVESTMENT GAINS FROM NET FROM NET ASSET
BEGINNING INCOME/ (LOSSES) ON INVESTMENT CAPITAL VALUE END
OF PERIOD (LOSS) SECURITIES INCOME GAINS OF PERIOD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------
DIVERSIFIED CONSERVATIVE INCOME FUND
- ----------------------------------------
Class D
Period Ended
03/31/97 (1)# $10.09 $ 0.27 $0.30 $(0.17) $ -- $10.49
- -----------------------------------
DIVERSIFIED CONSERVATIVE FUND
- -----------------------------------
Class D
Period Ended
03/31/97 (2)# $ 9.33 $ 0.19 $0.26 $(0.13) $(0.07) $ 9.58
- ----------------------------------------
DIVERSIFIED GLOBAL MODERATE GROWTH FUND
- ----------------------------------------
Class D
Period Ended
03/31/97 (3)# $10.00 $ 0.02 $0.13 $(0.04) $ -- $10.11
- ----------------------------------------
DIVERSIFIED MODERATE GROWTH FUND
- ----------------------------------------
Class D
Period Ended
03/31/97 (4)# $10.21 $ 0.15 $0.44 $(0.11) $(0.02) $10.67
- -------------------------------------
DIVERSIFIED GLOBAL GROWTH FUND
- -------------------------------------
Class D
Period Ended
03/31/97 (5)# $10.24 $ 0.06 $0.63 $(0.05) $(0.01) $10.87
- -----------------------------------
DIVERSIFIED GLOBAL STOCK FUND
- -----------------------------------
Class D
Period Ended
03/31/97 (6)# $10.00 $(0.03) $0.06 $(0.02) $ -- $10.01
- ---------------------------------
DIVERSIFIED U.S. STOCK FUND
- ---------------------------------
Class D
Period Ended
03/31/97 (7)# $10.36 $(0.03) $1.01 $(0.02) $ -- $11.32
<CAPTION>
RATIO OF NET
INVESTMENT
RATIO OF RATIO OF INCOME/
RATIO OF NET EXPENSES (LOSS) TO
NET EXPENSES INVESTMENT TO AVERAGE AVERAGE NET
ASSETS TO INCOME/ NET ASSETS ASSETS
END OF AVERAGE (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
TOTAL PERIOD NET AVERAGE WAIVERS AND WAIVERS AND TURNOVER
RETURN (000) ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------
DIVERSIFIED CONSERVATIVE INCOME FUND
- ----------------------------------------
Class D
Period Ended
03/31/97 (1)# 5.67%** $ 603 1.12%* 3.37%* N/A++ N/A++ 27%
- -----------------------------------
DIVERSIFIED CONSERVATIVE FUND
- -----------------------------------
Class D
Period Ended
03/31/97 (2)# 4.84%** $1,704 1.12%* 2.60%* 3.72%*+ 0.00%* 65%
- ----------------------------------------
DIVERSIFIED GLOBAL MODERATE GROWTH FUND
- ----------------------------------------
Class D
Period Ended
03/31/97 (3)# 1.52%** $ 85 1.12%* 0.60%* N/A++ N/A++ 3%
- ----------------------------------------
DIVERSIFIED MODERATE GROWTH FUND
- ----------------------------------------
Class D
Period Ended
03/31/97 (4)# 5.71%** $6,471 1.12%* 1.63%* 2.57%*+ 0.18%* 22%
- -------------------------------------
DIVERSIFIED GLOBAL GROWTH FUND
- -------------------------------------
Class D
Period Ended
03/31/97 (5)# 6.69%** $6,882 1.12%* 0.71%* 2.56%*+ (0.73)%* 13%
- -----------------------------------
DIVERSIFIED GLOBAL STOCK FUND
- -----------------------------------
Class D
Period Ended
03/31/97 (6)# 0.31%** $ 46 1.12%* (1.06)%* N/A++ N/A++ --
- ---------------------------------
DIVERSIFIED U.S. STOCK FUND
- ---------------------------------
Class D
Period Ended
03/31/97 (7)# 9.43%** $5,885 1.12%* (0.39)%* 2.75%*+ (2.02)%* 28%
</TABLE>
+ Ratios reflect the impact of the initial low level of average net assets
associated with commencement of operations and the effects of annualization.
++ Ratio is not meaningful due to low level of assets and because SEI
Investments will bear all expenses exceeding specific limitations.
# Per share calculations were performed using average shares for the period.
* Annualized.
** Total return has not been annualized.
(1) Commenced operations 06/21/96
(2) Commenced operations 07/01/96
(3) Commenced operations 12/05/96
(4) Commenced operations 05/30/96
(5) Commenced operations 05/30/96
(6) Commenced operations 12/05/96
(7) Commenced operations 07/01/96
4
<PAGE>
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>
to a medium level of principal risk. The Fund will invest
in the following Underlying asset classes within the
percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED
CONSERVATIVE INCOME FUND'S ASSETS)
- -----------------------------------------------------------------------------
<S> <C> <C>
EQUITY............................................ 10-50%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
FIXED INCOME...................................... 50-65%
SIMT CORE FIXED INCOME
MONEY MARKET...................................... 0-30%
SLAT PRIME OBLIGATION
---------------------------------------------------------------------
</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
asset classes within the percentage ranges set forth
below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED
CONSERVATIVE FUND'S ASSETS)
- -----------------------------------------------------------------------------
<S> <C> <C>
EQUITY............................................ 15-50%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
SIT INTERNATIONAL EQUITY
FIXED INCOME...................................... 50-80%
SIMT CORE FIXED INCOME
SIT INTERNATIONAL FIXED INCOME
MONEY MARKET...................................... 0-30%
SLAT PRIME OBLIGATION
---------------------------------------------------------------------
</TABLE>
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 and debt
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
6
<PAGE>
Fund will invest in the following asset classes within the
percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED GLOBAL
MODERATE GROWTH FUND'S ASSETS)
<S> <C> <C>
- -----------------------------------------------------------------------------
EQUITY............................................ 30-75%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
SIT INTERNATIONAL EQUITY
SIT EMERGING MARKETS EQUITY
FIXED INCOME...................................... 25-70%
SIMT CORE FIXED INCOME
SIMT HIGH YIELD BOND
SIT INTERNATIONAL FIXED INCOME
SIT EMERGING MARKETS DEBT
MONEY MARKET...................................... 0-30%
SLAT PRIME OBLIGATION
---------------------------------------------------------------------
</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 asset classes within
the percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED MODERATE
GROWTH FUND'S ASSETS)
- -----------------------------------------------------------------------------
<S> <C> <C>
EQUITY............................................ 30-70%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
SIT INTERNATIONAL EQUITY
FIXED INCOME...................................... 30-60%
SIMT CORE FIXED INCOME
SIT INTERNATIONAL FIXED INCOME
MONEY MARKET...................................... 0-30%
SLAT PRIME OBLIGATION
---------------------------------------------------------------------
</TABLE>
DIVERSIFIED GLOBAL
GROWTH FUND
The Diversified Global Growth Fund seeks to provide
long-term capital appreciation. Current income is a
secondary consideration. In general, relative to the other
Funds,
7
<PAGE>
the Diversified Global Growth 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 asset classes
within the percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED GLOBAL
GROWTH FUND'S ASSETS)
- -----------------------------------------------------------------------------
<S> <C> <C>
EQUITY............................................ 45-95%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
SIT INTERNATIONAL EQUITY
SIT EMERGING MARKETS EQUITY
FIXED INCOME...................................... 5-50%
SIMT CORE FIXED INCOME
SIMT HIGH YIELD BOND
SIT INTERNATIONAL FIXED INCOME
SIT EMERGING MARKETS DEBT
MONEY MARKET...................................... 0-30%
SLAT PRIME OBLIGATION
---------------------------------------------------------------------
</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 asset classes
within the percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED
GLOBAL STOCK FUND'S ASSETS)
- ----------------------------------------------------------------------------
<S> <C> <C>
EQUITY........................................... 70-100%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
SIT INTERNATIONAL EQUITY
SIT EMERGING MARKETS EQUITY
MONEY MARKET..................................... 0-30%
SLAT PRIME OBLIGATION
---------------------------------------------------------------------
</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
8
<PAGE>
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 to high level of principal risk. The
Fund will invest in the following asset classes within the
percentage ranges set forth below:
<TABLE>
<CAPTION>
INVESTMENT RANGE (PERCENT OF THE
ASSET CLASS DIVERSIFIED U.S.
STOCK FUND'S ASSETS)
- ----------------------------------------------------------------------------
<S> <C> <C>
EQUITY........................................... 70-100%
SIMT LARGE CAP GROWTH
SIMT LARGE CAP VALUE
SIMT SMALL CAP GROWTH
SIMT SMALL CAP VALUE
MONEY MARKET..................................... 0-30%
SLAT PRIME OBLIGATION
---------------------------------------------------------------------
</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
for each asset class. 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") could 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 SIMC'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.
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>
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, including securities
issued by emerging market issuers; 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 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 and Diversified
Global Moderate Growth Fund can each invest a portion of
its assets in the SIMT High Yield Bond Portfolio. As a
result, these Funds will be subject to the risks
associated with high yield investing;
- Certain Funds invest at least 10% and can invest as much
as 30% of their assets in the SIT International Fixed
Income and SIT Emerging Markets Debt Portfolios, which
invest primarily in foreign fixed-income securities,
including securities issued by emerging market issuers.
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>
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 65%. Asset
reallocation decisions typically will occur only once
every quarter. However, if market conditions warrant, SIMC
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 SIMC 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>
INVESTMENT GOALS
OF THE UNDERLYING
PORTFOLIOS
_________________________________________________________________________
The following table describes the investment goal of each
Underlying Portfolio eligible (as of May 31, 1997) for
investment by the Funds:
<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
Aggressive Growth of Capital and
SIMT Small Cap Value 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
SIT Emerging Markets Debt Aggressive Growth of Capital and
Portfolio Income
SLAT Prime Obligation Price Stability
---------------------------------------------------------------------
</TABLE>
INVESTMENT
OBJECTIVES
OF THE
UNDERLYING
PORTFOLIOS
_________________________________________________________________________
Set forth below are the investment objectives 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.
12
<PAGE>
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.
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.
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.
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.
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.
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.
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-
13
<PAGE>
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
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.
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.
SIT EMERGING MARKETS DEBT PORTFOLIO
The investment objective of the SIT Emerging Markets Debt
Portfolio is to maximize total return. Under normal
circumstances, at least 80% of the SIT Emerging Markets
Debt Portfolio's total assets will be invested in debt
securities of government, government-related and corporate
issuers in emerging market countries and of entities
organized to restructure the outstanding debt of such
issuers.
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) high quality commercial paper; (ii)
bank obligations; (iii) high quality short-term corporate
obligations; (iv) high quality short-term obligations
issued by state and local governmental issuers; (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.
GENERAL
INVESTMENT
POLICIES OF THE
UNDERLYING
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.
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
14
<PAGE>
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.
WARRANTS
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.
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
15
<PAGE>
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.
THE ADVISER AND
MANAGER OF
THE FUNDS
_________________________________________________________________________
SEI Investments Management Corporation acts as investment
adviser to each of the Funds and certain of the Underlying
Portfolios, and manages the Funds and the Underlying
Portfolios by focusing on four key principles: asset
allocation, portfolio structure, the use of specialist
managers, and continuous portfolio management. Asset
allocation across appropriate asset classes is the central
theme of SIMC's investment philosophy. Another element of
SIMC's strategy is to access the return potential of the
financial markets and reduce risk by having a portfolio
that is diversified within each asset class. In order to
manage investments in these distinct asset classes, SIMC
oversees a network of specialist managers who invest the
assets of the Underlying Portfolios in distinct sectors of
the markets. These specialist managers seek to adhere to
distinct investment disciplines, and provide opportunities
for greater consistency and predictability of results, as
well as broader diversification across and within asset
classes. The final element of SIMC's investment philosophy
is continuous portfolio management. This element consists
of two components: (i) regular rebalancing to ensure that
the appropriate mix of assets is constantly in place, and
(ii) constant monitoring and evaluation of specialist
managers for the Underlying Portfolios to ensure that they
do not deviate from the stated philosophy or process.
Under an Investment Advisory Agreement with the
Trust, SIMC 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
16
<PAGE>
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
Investments Company ("SEI"), a financial services company.
The principal business address of the Adviser and SEI is
Oaks, Pennsylvania 19456. 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 43 investment
companies including more than 325 portfolios, which
investment companies had more than $93.9 billion in assets
as of May 31, 1997.
Investment and asset allocation decisions for the
Funds are made by a committee within SIMC.
SEI Fund Management ("SEI Management") provides the
Trust with overall management services, regulatory
reporting, all necessary office space, equipment,
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.
17
<PAGE>
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 May 31, 1997:
<TABLE>
<CAPTION>
INVESTMENT
UNDERLYING PORTFOLIO ADVISOR SUB-ADVISER(S)
- -----------------------------------------------------------------------------
<S> <C> <C>
SIMT Large Cap Growth SIMC Alliance Capital Management, L.P.
American Express Asset Management
Group Inc.
Provident Investment Counsel, Inc.
- -----------------------------------------------------------------------------
SIMT Large Cap Value SIMC LSV Asset Management
Mellon Equity Associates
Pacific Alliance Capital
Management
- -----------------------------------------------------------------------------
SIMT Small Cap Growth SIMC First of America Investment
Corporation
Furman Selz Capital Management LLC
Nicholas-Applegate Capital
Management
Wall Street Associates
- -----------------------------------------------------------------------------
SIMT Small Cap Value SIMC Boston Partners Asset Management,
L.P.
1838 Investment Advisors, L.P.
LSV Asset Management
- -----------------------------------------------------------------------------
SIT International Equity SIMC Acadian Asset Management, Inc.
Farrell Wako Global Investment
Management, Inc.
Lazard London International
Investment Management Limited
Seligman Henderson, Co.
Yamaichi Capital Management, Inc.
and
Yamaichi Capital Management
(Singapore) Limited
- -----------------------------------------------------------------------------
SIT Emerging Markets SIMC Coronation Asset Management
Equity (Proprietary) Limited
Montgomery Asset Management, L.P.
Parametric Portfolio Associates
Yamaichi Capital Management, Inc.
and
Yamaichi Capital Management
(Singapore) Limited
- -----------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT
UNDERLYING PORTFOLIO ADVISOR SUB-ADVISER(S)
- -----------------------------------------------------------------------------
<S> <C> <C>
SIMT Core Fixed Income SIMC BlackRock Financial Management,
Inc.
Firstar Investment Research &
Management Company
Western Asset Management Company
- -----------------------------------------------------------------------------
SIMT High Yield Bond SIMC BEA Associates
- -----------------------------------------------------------------------------
SIT International Fixed Strategic None
Income Fixed Income,
L.P.
- -----------------------------------------------------------------------------
SIT Emerging Markets Debt SIMC Salomon Brothers Asset Management,
Inc.
- -----------------------------------------------------------------------------
SLAT Prime Obligation Wellington None
Management
Company, LLP
- -----------------------------------------------------------------------------
</TABLE>
SEI INVESTMENTS MANAGEMENT CORPORATION
In addition to serving as the Trust's Adviser, SIMC 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"), SIMC 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.
SIMC acts as a "manager of managers" for the
Underlying SEI Portfolios. As Adviser, SIMC 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 SIMC, and under the supervision of both
SIMC 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 SIMC, 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, SIMC 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. SIMC 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.
19
<PAGE>
SIMC has obtained an exemptive order from the
Securities and Exchange Commission (the "SEC") that
permits SIMC, with the approval of the Underlying SEI
Portfolios' Boards for Trustees, to retain sub-advisers
unaffiliated with SIMC 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 SIMC
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, SIMC 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, .4875% of the
average daily net assets of the SIMT High Yield Bond
Portfolio, and .85% of the average daily net assets of the
SIT Emerging Markets Debt Portfolio. SIMC pays the
sub-advisers out of these fees.
STRATEGIC FIXED INCOME L.P.
Strategic Fixed Income L.P. ("SFI") serves 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 31, 1997, SFI managed $5.8 billion of client assets.
The principal address of SFI is 1001 Nineteenth Street
North, 16th Floor, Arlington, Virginia 22209.
WELLINGTON MANAGEMENT COMPANY, LLP
Wellington Management Company, LLP ("WMC"), 75 State
Street, Boston, Massachusetts 02109, serves as the
investment adviser to the SLAT Prime Obligation Portfolio.
As of March 31, 1997, WMC had investment management
authority with respect to approximately $136.3 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 limited liability partnership of which the
following persons are managing partners: Robert W. Doran,
Duncan M. McFarland and John R. Ryan.
ACADIAN ASSET MANAGEMENT, INC.
Acadian Asset Management, Inc. ("Acadian") serves as an
investment sub-adviser to a portion of the assets of the
SIT International Equity Portfolio. Acadian was
20
<PAGE>
founded in 1977, and manages approximately $4 billion in
assets invested globally. Acadian's business address is
Two International Place, Boston, Massachusetts 02110.
ALLIANCE CAPITAL MANAGEMENT L.P.
Alliance Capital Management L.P. ("Alliance Capital")
serves as an 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. As of March 31, 1997,
Alliance managed over $182 billion in assets. The
principal business address of Alliance is 1345 Avenue of
the Americas, New York, New York 10105.
AMERICAN EXPRESS ASSET MANAGEMENT GROUP INC.
American Express Asset Management Group Inc. (formerly,
IDS Advisory Group Inc.) ("American Express") serves as an
investment sub-adviser to a portion of the assets of the
SIMT Large Cap Growth Portfolio. As of March 31, 1997,
American Express managed over $24 billion in assets.
American Express was founded in 1972 to manage tax-exempt
assets for institutional clients. The principal business
address of American Express is IDS Tower 10, Minneapolis,
Minnesota 55440.
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.
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 31, 1997, BEA managed approximately $29
billion in assets.
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 31, 1997,
BlackRock had $47 billion in assets under management.
BlackRock provides investment advice to investment
companies, trusts, charitable organizations, pension and
profit sharing plans and government entities.
BOSTON PARTNERS ASSET MANAGEMENT, L.P.
Boston Partners Asset Management, L.P. ("BPAM") serves as
an 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 was
founded in April, 1995, and as of March 31, 1997, it had
approximately $8.5 billion in assets under management.
BPAM's clients include corporations,
21
<PAGE>
endowments, foundations, pension and profit sharing plans
and two other investment companies.
22
<PAGE>
CORONATION ASSET MANAGEMENT (PROPRIETARY)
LIMITED
Coronation Asset Management (Proprietary) Limited
("Coronation") serves as an investment sub-adviser to a
portion of the assets of the SIT Emerging Markets Equity
Portfolio. Coronation, a registered investment adviser
organized under the laws of the Republic of South Africa,
was founded in 1993, and as of March 31, 1997, managed
$3.3 billion in assets. The principal business address of
Coronation is 80 Strand Street, Cape Town, South Africa,
8001.
1838 INVESTMENT ADVISORS, L.P.
1838 Investment Advisors, L.P. ("1838") serves as an
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 31, 1997, 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.
FARRELL-WAKO GLOBAL INVESTMENT MANAGEMENT, INC.
Farrell-Wako Global Investment Management, Inc.
("Farrell-Wako") serves as an investment sub-adviser to a
portion of the assets of the SIT International Equity
Portfolio. Farrell-Wako, a Delaware corporation, was
founded in 1991 and is a registered investment adviser in
the U.S. and Japan. As of March 31, 1997, Farrell-Wako
managed over $298 million. The principal address of
Farrell-Wako is 780 Third Avenue, New York, New York
10017.
FIRST OF AMERICA INVESTMENT CORPORATION
First of America Investment Corporation ("First of
America") serves as an investment sub-adviser to a portion
of the assets of the SIMT Small Cap Growth Portfolio.
First of America is a Michigan Corporation that, together
with its predecessor, has been engaged in the investment
advisory business since 1932. First of America's principal
business address is 303 North Rose Street, Suite 500,
Kalamazoo, Michigan 49007. As of March 31, 1997, First of
America had approximately $14.4 billion in assets under
management. First of America's clients include mutual
funds, trust funds, and individually managed institutional
and individual accounts.
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 March 31, 1997, it had
approximately $19.3 billion in assets under management.
FIRMCO's clients include pension and profit sharing plans,
trusts and estates and one other investment company.
FURMAN SELZ CAPITAL MANAGEMENT LLC
Furman Selz Capital Management LLC ("Furman Selz") serves
as an investment sub-adviser to a portion of the assets of
the SIMT Small Cap Growth Portfolio. Furman Selz, a
Delaware limited liability company whose predecessor was
formed in 1977,
23
<PAGE>
is a registered investment adviser that managed
approximately $8.1 billion in assets as of March 31, 1997.
Furman Selz's principal business address is 230 Park
Avenue, New York, NY 10169.
LAZARD LONDON INTERNATIONAL INVESTMENT MANAGEMENT LIMITED
Lazard London International Investment Management Limited
("Lazard") serves as an investment sub-adviser for a
portion of the assets of the SIT International Equity
Portfolio. Lazard is a registered investment adviser with
its principal business address at 21 Moorfields, London,
England EC2P 2HT. Lazard, which was founded in 1980,
offers international investment services to clients of
Lazard Asset Management Holdings Limited. Lazard and its
asset management affiliates manage domestic (UK)
portfolios and international portfolios for institutions
and private clients, including insurance funds, pension
funds, charities and mutual funds. As of March 31, 1997,
Lazard and its asset management affiliates had
approximately $6.7 billion in assets under management.
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 and the SIMT Small 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. As of March 31, 1997, LSV
managed approximately $684 million in client assets.
The Adviser pays LSV fees based on a percentage of
the average monthly market value of the assets of the SIMT
Large Cap Value Portfolio and the SIMT Small Cap Value
Portfolio managed by LSV. These fees, which are calculated
daily and paid monthly, are at an annual rate of .20% of
the average monthly market value of the assets of the SIMT
Large Cap Value Portfolio managed by LSV and .50% of the
average monthly market value of the assets of the SIMT
Small 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 that provides
investment management services to the equity and balanced
pension, public fund and profit-sharing investment
management markets. Mellon Equity had discretionary
management authority with respect to approximately $11.7
billion of assets as of March 31, 1997. The business
address for Mellon Equity is 500 Grant Street, Suite 3700,
Pittsburgh, Pennsylvania 15258.
MONTGOMERY ASSET MANAGEMENT L.P.
Montgomery Asset Management, L.P. ("MAM") serves as an
investment sub-adviser to a portion of the assets of the
SIT Emerging Markets Equity Portfolio. As of March 31,
1997, MAM had approximately $7.8 billion in assets under
management.
24
<PAGE>
MAM has over six years experience providing investment
management services. The principal address of MAM is 101
California Street, San Francisco, California 94111.
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
Nicholas-Applegate Capital Management
("Nicholas-Applegate") serves as an 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
March 31, 1997, Nicholas-Applegate had discretionary
management authority with respect to approximately $28.7
billion of assets. The principal business address of
Nicholas-Applegate is 600 West Broadway, 29th Floor, San
Diego, California 92101.
PACIFIC ALLIANCE CAPITAL MANAGEMENT
Pacific Alliance Capital Management ("Pacific") serves as
an investment sub-adviser to a portion of the assets of
the SIMT Large Cap Value Portfolio. Pacific provides
equity and fixed-income management services to a broad
array of corporate and municipal clients. As of March 31,
1997, Pacific had discretionary management authority with
respect to approximately $13 billion of assets. The
principal business address of Pacific is 475 Sansome
Street, San Francisco, California 94111.
PARAMETRIC
PORTFOLIO
ASSOCIATES
Parametric Portfolio Associates ("Parametric") serves as
an investment sub-adviser to a portion of the assets of
the SIT Emerging Markets Equity Portfolio. Parametric is a
general partnership whose predecessor was founded in 1987.
As of March 31, 1997, Parametric managed approximately
$2.1 billion in client assets. Parametric's business
address is 701 5th Avenue, Suite 7310, Seattle, Washington
98104.
PROVIDENT INVESTMENT COUNSEL, INC.
Provident Investment Counsel, Inc. ("Provident") serves as
an investment sub-advisor, 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 provides investment advice to corporations, public
entities, foundations and labor unions, as well as to
other investment companies. As of March 31, 1997,
Provident had over $18 billion in client assets under
management.
SALOMON BROTHERS ASSET MANAGEMENT INC.
Salomon Brothers Asset Management Inc. ("SBAM") serves as
the investment sub-adviser for the assets of the SIT
Emerging Markets Debt Portfolio. SBAM is a Delaware
corporation that was founded in 1987. SBAM is a registered
investment adviser that currently manages approximately
$20 billion in client assets. SBAM's principal business
address is 7 World Trade Center, New York, New York,
10048.
SELIGMAN HENDERSON CO.
Seligman Henderson Co. ("Seligman") serves as an
investment 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. Seligman Henderson
25
<PAGE>
Co. was established in 1991, and manages approximately
$3.4 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.
WALL STREET ASSOCIATES
Wall Street Associates ("WSA") serves as an 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 March 31, 1997, had
approximately $933 million in assets under management. 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.
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.
Western was founded in 1971, and specializes in the
management of fixed income portfolios. As of March 31,
1997, Western managed approximately $31 billion in client
assets.
YAMAICHI CAPITAL MANAGEMENT, INC. AND YAMAICHI CAPITAL MANAGEMENT (SINGAPORE)
LIMITED
Yamaichi Capital Management, Inc. ("Yamaichi") and
Yamaichi Capital Management (Singapore) Limited ("YCMS")
jointly serve as an investment sub-adviser to a portion of
the assets of the SIT International Equity Portfolio and
the SIT Emerging Markets Equity Portfolio. Yamaichi is a
New York Corporation established in 1981 and YCMS is a
Singapore corporation established in 1979. As of March 31,
1997, YCMS and its affiliates managed approximately $900
million 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,
#13-01/05, Hong Leong Centre, Singapore 068906.
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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, 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 Investments Distribution Co. (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 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,
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<PAGE>
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 and at its own
expense, provide promotional incentives, in the form of
cash or other compensation, to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Funds' shares.
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. To allow for processing and
transmittal of orders to the Transfer Agent on the same
day, financial institutions may impose earlier cut-
27
<PAGE>
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 and
other retirement accounts through banks, brokers-dealers
and other financial institutions that have entered into
arrangements with the Distributor to sell Class D Shares
to their customers. 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").
Shareholders who desire to purchase or redeem shares
for cash must place their orders with the Transfer Agent
(or its authorized 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
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.
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<PAGE>
The minimum initial investment in a Fund's Class D
shares is $150,000; however, the minimum investment may be
waived at the Distributor's discretion. All subsequent
purchases must be at least $1,000.
Shareholders who desire to redeem shares of the Funds
must place their redemption orders with Transfer Agent (or
its authorized 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 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.
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
29
<PAGE>
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.
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.
30
<PAGE>
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 Internal
Revenue Code of 1986 (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 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.
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<PAGE>
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
Fund Management, Oaks, Pennsylvania 19456, 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 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.
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<PAGE>
As of May 5, 1997, the North American Trust Company,
Trustee for Steptoe & Johnson Retirement Plan (San Diego,
CA), owned a controlling interest (as defined by the 1940
Act), of the Diversified Global Growth Fund and the
Diversified U.S. Stock Fund.
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 SEI Asset
Allocation Funds, 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
SEI Fund Management 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.
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:
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<PAGE>
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.
BRADY BONDS
Certain debt obligations, customarily referred to as
"Brady Bonds," are created through the exchange of
existing commercial bank loans to foreign entities for new
obligations in connection with debt restructuring under a
plan introduced by former U.S. Secretary of the Treasury,
Nicholas F. Brady (the "Brady Plan"). Brady Bonds have
been issued only recently, and, accordingly, do not have a
long payment history. They may be fully or partially
collateralized or uncollateralized and issued in various
currencies (although most are U.S. dollar denominated) and
they are actively traded in the over-the-counter secondary
market. U.S. dollar denominated, collateralized Brady
Bonds, which may be fixed rate par bonds or floating rate
discount bonds, are generally collateralized in full as to
principal due at maturity by U.S. Treasury zero coupon
obligations which have the same maturity as the Brady
Bonds. Certain interest payments on these Brady Bonds may
be collateralized by cash or securities in an amount that,
in the case of fixed rate bonds, is typically equal to
between 12 and 18 months of rolling interest payments or,
in the case of floating rate bonds, initially is typically
equal to between 12 and 18 months rolling interest
payments based on the applicable interest rate at that
time and is adjusted at regular intervals thereafter with
the balance of interest accruals in each case being
uncollateralized. Payment of interest and (except in the
case of principal collateralized Brady Bonds) principal on
Brady Bonds with no or limited collateral depends on the
willingness and ability of the foreign government to make
payment. In the event of a default on collateralized Brady
Bonds for which obligations are accelerated, the
collateral for the payment of principal will not be
distributed to investors, nor will such obligations be
sold and the proceeds distributed. The collateral will be
held by the collateral agent to the scheduled maturity of
the defaulted Brady Bonds, which will continue to be
outstanding, at which time the
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<PAGE>
face amount of the collateral will equal the principal
payments which would have then been due on the Brady Bonds
in the normal course.
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
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.
EUROBONDS
A Eurobond is a bond denominated in U.S. dollars or other
currencies and sold to investors outside of the country
whose currency is used. Eurobonds may be issued by
government or corporate issuers, and are typically
underwritten by banks and brokerage firms from numerous
countries. While Eurobonds typically pay principal and
interest in Eurodollars, U.S. dollars held in banks
outside of the United States, they may pay principal and
interest in other currencies.
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 Underlying 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 and SIT Emerging Markets Debt Portfolios
may invest, a portion of their 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
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<PAGE>
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.
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.
HIGH YIELD FOREIGN SOVEREIGN DEBT SECURITIES
Investing in fixed and floating rate high yield foreign
sovereign debt securities will expose a Portfolio to the
direct or indirect consequences of political, social or
economic changes in the countries that issue the
securities. The ability and willingness of sovereign
obligors in developing and emerging market countries or
the governmental authorities that control repayment of
their external debt to pay principal and interest on such
debt when due may depend on general economic and political
conditions within the relevant country. Countries such as
those in which a Portfolio may invest have historically
experienced, and may continue to experience, high rates of
inflation, high interest rates, exchange rate trade
difficulties and extreme poverty and unemployment. Many of
these countries are also characterized by political
uncertainty or instability. Additional factors which may
influence the ability or willingness to service debt
include, but are not limited to, a country's cash flow
situation, the availability of sufficient foreign exchange
on the date a payment is due, the relative size of its
debt service burden to the economy as a whole, and its
government's policy towards the International Monetary
Fund, the World Bank and other international agencies.
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
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<PAGE>
books. Illiquid securities include demand instruments with
a demand notice period exceeding seven days, securities
for which there is no active secondary market and
repurchase agreements with maturities or durations over
seven days in length.
JUNK BONDS
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. The market for these
securities may be less active, causing market price
volatility and limited liquidity in the secondary market.
This may limit a Portfolio's ability to sell such
securities at their market value. In addition, the market
for these securities may also 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.
LOAN PARTICIPATIONS AND ASSIGNMENTS
Loan participations are interests in loans to U.S.
corporations which are administered by the lending bank or
agent for a syndicate of lending banks, and sold by the
lending bank or syndicate member (intermediary bank). In a
loan participation, the borrower corporation will be
deemed to be the issuer of the participation interest
except to the extent the Portfolio derives its rights from
the intermediary bank. Because the intermediary bank does
not guarantee a loan participation in any way, a loan
participation is subject to the credit risks generally
associated with the underlying corporate borrower. In the
event of the bankruptcy or insolvency of the corporate
borrower, a loan participation may be subject to certain
defenses that can be asserted by such borrower as a result
of improper conduct by the intermediary bank. In addition,
in the event the underlying corporate borrower fails to
pay principal and interest when due, the Portfolio may be
subject to delays, expenses and risks that are greater
than those that would have been involved if the Portfolio
had purchased a direct obligation of such borrower. Under
the terms of a loan participation, the Portfolio may be
regarded as a creditor of the intermediary bank, (rather
than of the underlying corporate borrower), so that the
Portfolio may also be subject to the risk that the
intermediary bank may become solvent. The secondary
market, if any, for these loan participations is limited.
Loan assignments are investments in assignments of
all or a portion of certain loans from third parties. When
a Portfolio purchases assignments from lenders it will
acquire direct rights against the borrower on the loan.
Since assignments are arranged through private
negotiations between potential assignees and assignors,
however, the rights and obligations acquired by the
Portfolio may differ from, and be more limited than, those
held by the assigning lender. Loan participations and
assignments are considered to be illiquid.
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
37
<PAGE>
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.
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 on a security 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 on a security
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.
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
38
<PAGE>
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.
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.
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
39
<PAGE>
Portfolio. Furthermore, emerging market countries may have
less stable political environments than more developed
countries.
STRUCTURED SECURITIES
The SIT Emerging Markets Debt Portfolio may invest a
portion of its assets in entities organized and operated
solely for the purpose of restructuring the investment
characteristics of sovereign debt obligations. This type
of restructuring involves the deposit with, or purchase
by, an entity, such as a corporation or trust, or
specified instruments (such as commercial bank loans or
Brady Bonds) and the issuance by that entity of one or
more classes of securities ("Structured Securities")
backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments
may be apportioned among the newly issued Structured
Securities to create securities with different investment
characteristics, such as varying maturities, payment
priorities and interest rate provisions, and the extent of
the payments made with respect to Structured Securities is
dependent on the extent of the cash flow on the underlying
instruments. Because Structured Securities of the type in
which the Portfolio anticipates it will invest typically
involve no credit enhancement, their credit risk generally
will be equivalent to that of the underlying instruments.
The Portfolio is permitted to invest in a class of
Structured Securities that is either subordinated or
unsubordinated to the right of payment of another class.
Subordinated Structured Securities typically have higher
yields and present greater risks than unsubordinated
Structured Securities. Structured Securities are typically
sold in private placement transactions, and there
currently is no active trading market for Structured
Securities. Certain issuers of such structured securities
may be deemed to be "investment companies" as defined in
the 1940 Act. As a result, the Portfolio's investment in
such securities may be limited by certain investment
restrictions contained in the 1940 Act.
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 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 Portfolio's
investment exposure from one type of investment to
another. Depending on how they are used, swap
40
<PAGE>
agreements may increase or decrease the overall volatility
of the Portfolio'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., Fannie
Mae 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.
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.
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.
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
41
<PAGE>
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.
42
<PAGE>
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 of the Underlying
Portfolios..................................... 12
General Investment Policies of the Underlying
Portfolios..................................... 14
Risk Factors of the Underlying Portfolios........ 15
The Adviser and Manager of the Funds............. 16
The Advisers and Sub-Advisers to the Underlying
Portfolios..................................... 18
Transfer Agent................................... 26
Distribution and Shareholder Servicing........... 26
Purchase and Redemption of Shares................ 27
Performance...................................... 29
Taxes............................................ 30
General Information.............................. 32
Description of Permitted Investments and Risk
Factors of the Underlying Portfolios........... 33
</TABLE>
43
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<PAGE>
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<PAGE>
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<PAGE>
SEI FINANCIAL
SERVICES
COMPANY
Oaks, PA 19456
800-DIAL-SEI/800-342-5734
SEI-F-117-01 CLASS D
PROSPECTUS AS OF
JULY 31, 1997
ASSET
ALLOCATION
FUNDS
- ---------------------------------
Diversified
Conservative Income
- ---------------------------------
Diversified Conservative
- ---------------------------------
Diversified Global
Moderate Growth
- ---------------------------------
Diversified
Moderate Growth
- ---------------------------------
Diversified Global Growth
- ---------------------------------
Diversified Global Stock
- ---------------------------------
Diversified U.S. Stock
- ---------------------------------
SEI
<PAGE>
SEI ASSET ALLOCATION TRUST
Investment Adviser:
SEI Investments Management Corporation
Manager:
SEI Fund Management
Distributor:
SEI Investments Distribution Co.
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 July
31, 1997. A Prospectus may be obtained upon request and without charge by
writing the Trust's distributor, SEI Investments Distribution Co., at Oaks,
Pennsylvania 19456, or by calling 1-800-342-5734.
TABLE OF CONTENTS
<TABLE>
<S> <C>
The Trust............................................................................. S-2
Description of Permitted Investments of the Underlying Portfolios..................... S-2
Investment Limitations of the Funds................................................... S-14
Investment Limitations of the Underlying Portfolios................................... S-15
The Manager to the Funds.............................................................. S-19
The Investment Adviser to the Funds................................................... S-20
The Advisers and Sub-Advisers to the Underlying Portfolios............................ S-21
Portfolio Managers of the Underlying Portfolios....................................... S-21
Distribution.......................................................................... S-25
Trustees and Officers of the Trust.................................................... S-26
Performance........................................................................... S-28
Purchase and Redemption of Shares..................................................... S-29
Shareholder Services.................................................................. S-29
Taxes................................................................................. S-30
Portfolio Transactions................................................................ S-31
Description of Shares................................................................. S-32
Limitation of Trustees' Liability..................................................... S-33
Voting................................................................................ S-33
Shareholder Liability................................................................. S-33
Control Persons and Principal Holders of Securities................................... S-33
Financial Statements.................................................................. S-34
Appendix.............................................................................. S-35
July 31, 1997
</TABLE>
<PAGE>
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 Investments Management Corporation ("SIMC"), 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, SIT
Emerging Markets Debt 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.
S-2
<PAGE>
For example, there is a risk that another party could acquire an interest in the
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 municipalities, corporations and other
entities. Maturities on these issues vary, generally from one 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.
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.
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
S-3
<PAGE>
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 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.
FUTURES AND OPTIONS--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
S-4
<PAGE>
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, an
Underlying 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.
An Underlying 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% of an Underlying Portfolio's net assets. An
Underlying Portfolio may buy and sell futures contracts and related options to
manage its exposure to changing interest rates and securities prices. Some
strategies reduce an Underlying 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 an Underlying Portfolio's return.
An Underlying Portfolio will minimize the risk that it will be unable to
close out a futures contract by only entering into futures contracts which are
traded on national futures exchanges. In addition, an Underlying Portfolio will
only sell covered futures contracts and options on futures contracts.
In order to avoid leveraging and related risks, when an Underlying Portfolio
purchases futures contracts, it will collateralize its position by depositing an
amount of cash or liquid securities equal to the market value of the futures
positions held, less margin deposits, in a segregated account. Collateral equal
to the current market value of the futures position will be marked to market on
a daily basis.
Futures contracts and options may be used by the Funds to reallocate 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.
HIGH YIELD FOREIGN SOVEREIGN DEBT OBLIGATIONS--The ability of a foreign
sovereign obligor to make timely payments on its external debt obligations will
also be strongly influenced by the obligor's balance of payments, including
export performance, its access to international credits and investments,
fluctuations in interest rates and the extent of its foreign reserves. A country
whose exports are concentrated in a few commodities or whose economy depends on
certain strategic imports could be vulnerable to fluctuations in international
prices of these commodities or imports. To the extent that a country receives
payment for its exports in currencies other than dollars, its ability to make
debt payments denominated in dollars could be adversely affected. If a foreign
sovereign obligor cannot generate sufficient earnings from foreign trade to
service its external debt, it may need to depend on continuing loans and aid
from foreign governments, commercial banks and multilateral organizations, and
inflows of foreign investment. The commitment on the part of these foreign
governments, multilateral organizations and others to make such disbursements
may be conditioned on the government's implementation of economic reforms and/or
economic performance and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when
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due may result in the cancellation of such third parties' commitments to lend
funds, which may further impair the obligor's ability or willingness to timely
service its debts.
ILLIQUID SECURITIES--The advisers of the SIT Emerging Markets Equity
Portfolio believe 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 15%
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. The SIT Emerging Markets Debt Portfolio may invest
in securities with the lowest available rating.
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK SECURITIES. The
descriptions below are intended to supplement the discussion in the Prospectus.
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 Underlying 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 downturn 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 Underlying 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 Underlying
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 Underlying 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 Underlying Portfolio's assets. If
the Underlying 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 Underlying Portfolio's rate of return.
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LIQUIDITY AND VALUATION. There may be little trading in the secondary
market for particular bonds, which may affect adversely the Underlying
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 Underlying 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 an Underlying
Portfolio and therefore is subject to the distribution requirements of the tax
code even though the Underlying Portfolio has not received any interest payments
on such obligations during that period. Because the original issue discount
earned by the Underlying Portfolio in a taxable year may not be represented by
cash income, the Underlying 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 Fannie Mae 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.
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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.
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
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are GNMA, Fannie Mae and FHLMC. GNMA, Fannie Mae and FHLMC guarantee
timely distributions of interest to certificate holders. GNMA and Fannie Mae
also guarantee timely distributions of scheduled principal. Fannie Mae and FHLMC
obligations are not backed by the full faith and credit of the U.S. Government
as GNMA certificates are, but Fannie Mae 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 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.
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 Fannie Mae include Fannie
Mae Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes")
that are solely the obligations of Fannie Mae and are not backed by or entitled
to the full faith and credit of the United States. Fannie Mae is a
government-sponsored organization owned entirely by private stockholders. Fannie
Maes are guaranteed as to timely payment of the principal and interest by Fannie
Mae. 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 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. Fannie Mae REMIC Certificates are issued and guaranteed as to
timely distribution of principal and interest by Fannie Mae.
MORTGAGE DOLLAR ROLLS--Mortgage dollar rolls may be renewed prior to cash
settlement and initially may involve only a firm commitment agreement by the
Underlying Portfolio to buy a security. If the broker-dealer to whom the
Underlying Portfolio sells the security becomes insolvent, the Underlying
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 Underlying Portfolio is required to repurchase may be
worth less than the security that the Underlying Portfolio originally held.
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To avoid any leveraging concerns, an Underlying Portfolio will place cash or
liquid securities in a segregated account 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 on securities 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."
A put option on a security 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 on a security 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
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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.
An Underlying 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 Underlying
Portfolio may seek to purchase in the future. An Underlying 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 Underlying 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 Underlying Portfolio.
An Underlying 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 Underlying Portfolio will
realized as profit the premium received for such option. When a call option
written by an Underlying Portfolio is exercised, the Underlying 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 an Underlying Portfolio is
exercised, the Underlying 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.
An Underlying 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.
An Underlying 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 an Underlying Portfolio will be "covered," which means that
the Underlying Portfolio will own an equal amount of the underlying foreign
currency. With respect to put options on foreign currency written by an
Underlying Portfolio, the Underlying Portfolio will establish a segregated
account consisting of cash or liquid securities in an amount equal to the amount
the Underlying Portfolio would be required to pay upon exercise of the put.
An Underlying 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 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.
An Underlying Portfolio may choose to terminate an option position by entering
into a closing transaction. The ability of an Underlying 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 an Underlying Portfolio
writes an option on an index, it will establish a segregated account containing
cash or liquid securities with its custodian in an
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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.
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 an Underlying
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 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. 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. 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
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
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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.
SHORT SALES--An Underlying 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 Underlying 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--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 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.
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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 cash or liquid 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 or
maturing in more than seven days 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 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. 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.
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
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<PAGE>
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
and maintain cash or liquid 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.
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 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 an Underlying
Portfolio, and the Underlying 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. An
Underlying 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.
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.
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<PAGE>
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 as
permitted by the Trust's SEC Order or as otherwise permitted by the 1940
Act.
5. 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.
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.
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<PAGE>
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, SIT Emerging Markets Debt 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 a Portfolio makes 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 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.
S-16
<PAGE>
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 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
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<PAGE>
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 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
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 "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 as
permitted by the 1940 Act.
5. 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
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maturing in more than seven days) if, in the aggregate, more than 15% of its
net assets would be invested in illiquid securities.
6. Purchase securities which are not readily marketable if, in the aggregate,
more than 15% of its total assets would be invested in such restricted
securities.
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.
THE MANAGER TO THE FUNDS
The Administration Agreement provides that SEI Fund Management ("SEI
Management") 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 SEI Management; or (e) as
to any Fund or the Trust, effective upon the liquidation of such Fund or the
Trust, as the case may be.
SEI Management, a Delaware business trust, has its principal business
offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation
("SIMC"), a wholly-owned subsidiary of SEI Investments Company ("SEI"), is the
owner of all beneficial interest in SEI Management. Alfred P. West, Jr., Carmen
V. Romeo, and Henry H. Greer constitute the Board of Directors of SIMC, the
Investment Adviser to the Funds. Mr. West serves as the Chairman of the Board of
Directors and Chief Executive Officer of SIMC and SEI, Mr. Greer serves as
President and Chief Operating Officer of SIMC and SEI, and Chief Financial
Officer of SEI, and Mr. Romeo serves as Executive Vice President and Treasurer
of SEI. SEI and its subsidiaries and affiliates, including SEI Management, are
leading providers of funds evaluation services, trust accounting systems, and
brokerage and information services to financial institutions, institutional
investors, and money managers. SEI Management and its affiliates also serve as
administrator 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.,
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<PAGE>
CUFUND, The Expedition Funds, FMB Funds, Inc., First American Funds, Inc., First
American Investment Funds, Inc., First American Strategy Funds, Inc., High Mark
Funds, Marquis Funds-Registered Trademark-, Monitor Funds, Morgan Grenfell
Investment Trust, The PBHG Funds, Inc., The Pillar Funds, Profit Funds
Investment Trust, Rembrandt Funds-Registered Trademark-, Santa Barbara Group of
Mutual Funds, Inc., Boston 1784 Funds-Registered Trademark-, 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, STI Classic Funds, STI Classic Variable Trust, and TIP Funds.
If operating expenses of any Fund exceed applicable limitations, SEI
Management will pay such excess. SEI Management 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.
For the fiscal year ended March 31, 1997, SEI Management waived fees as
follows:
<TABLE>
<CAPTION>
FEES PAID FEE WAIVERS
---------- ----------------
1997 1997
---------- ----------------
<S> <C> <C>
Diversified Conservative Income Fund.............. $0 $ 3,551
Diversified Conservative Fund..................... $0 $ 5,471
Diversified Global Moderate Growth Fund........... $0 $ 29
Diversified Moderate Growth Fund.................. $0 $20,907
Diversified Global Growth Fund.................... $0 $20,537
Diversified Global Stock Fund..................... $0 $ 2,307
Diversified U.S. Stock Fund....................... $0 $16,684
</TABLE>
THE INVESTMENT ADVISER TO THE FUNDS
SIMC will discharge its responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust. The Trust's Advisory Agreement with
SIMC provides that SIMC 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 SIMC (I.E., the Underlying Portfolios). In turn, these
Underlying Portfolios invest in equity and debt securities. SIMC is responsible
for investing the assets of each Fund in certain of the Underlying Portfolios
within percentage ranges established by SIMC, 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 SIMC, or by SIMC on 90 days' written notice to the Trust.
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<PAGE>
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 SIMC for access, on a pooled investment basis, to
the core elements of SIMC's investment adviser selection, monitoring, and asset
allocation services. Under the "Manager of Managers" approach employed by the
Underlying SIMT and SIT Portfolios, SIMC 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, SIMC has obtained an
exemptive order from the Securities and Exchange Commission (the "SEC") that
permits SIMC, 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 SIMC under
such sub-advisory agreements.
For the fiscal year ended March 31, 1997, the Adviser waived fees as
follows:
<TABLE>
<CAPTION>
FEES PAID FEE WAIVERS
---------- ----------------
1997 1997
---------- ----------------
<S> <C> <C>
Diversified Conservative Income Fund.............. $0 $ 1,775
Diversified Conservative Fund..................... $0 $ 2,709
Diversified Global Moderate Growth Fund........... $0 $ 14
Diversified Moderate Growth Fund.................. $0 $10,453
Diversified Global Growth Fund.................... $0 $10,268
Diversified Global Stock Fund..................... $0 $ 1,154
Diversified U.S. Stock Fund....................... $0 $ 8,342
</TABLE>
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 a portion
of the assets of 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.
S-21
<PAGE>
A committee composed of the six investment portfolio managers of the equity
investment team of American Express Asset Management Group Inc. (formerly, IDS
Advisory Group Inc.) ("American Express") is responsible for the day-to-day
management of a portion of the SIMT Large Cap Growth Portfolio's investments.
American Express has served as sub-adviser to the SIMT Large Cap Growth
Portfolio since its inception.
Provident Investment Counsel, Inc. ("PIC") is a sub-adviser to the SIMT
Large Cap Growth Portfolio. PIC utilizes a team approach to portfolio
management. However, its Managing Director, Jeffrey J. Miller, is responsible
for the day-to-day management of the portion of the Portfolio's assets assigned
to PIC. Mr. Miller has been employed by PIC since 1972, and has 24 years of
investment experience.
SIMT LARGE CAP VALUE PORTFOLIO
Josef Lakonishok, Andrei Shliefer and Robert Vishny, officers of LSV Asset
Management ("LSV"), an affiliate of SIMC, 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 portfolios at Mellon since
1982. Mr. Wilk is a Senior Vice President and Portfolio Manager of Mellon, and
has been at Mellon since April, 1990.
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
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's assets under the general
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
portion of the assets of the Portfolio managed by Nicholas-Applegate 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.
Matthew S. Price and David C. Campbell, Managing Directors/Portfolio
Managers of Furman Selz Capital Management LLC ("Furman Selz"), are primarily
responsible for the day-to-day management and investment decisions made with
respect to the assets of the Portfolio managed by Furman Selz. Prior to joining
Furman Selz, Mr. Price and Mr. Campbell were Senior Portfolio Managers at Value
Asset Management.
S-22
<PAGE>
SIMT SMALL CAP VALUE PORTFOLIO
Edwin B. Powell has served as the portfolio manager 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. 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"), is managed by Wayne J.
Archambo, C.F.A. Mr. Archambo has been employed by Boston since its
organization, and has 10 years experience investing in equities. Prior to
joining Boston, Mr. Archambo was employed at The Boston Company Asset
Management, Inc. ("TBCAM"), from 1989 through April 1995.
Josef Lakonishok, Andrei Shliefer and Robert Vishny, officers of LSV Asset
Management ("LSV"), an affiliate of SIMC, 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 Small 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.
SIT INTERNATIONAL EQUITY PORTFOLIO
Acadian Asset Management, Inc. ("Acadian") is a sub-adviser to a portion of
the assets of 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.
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 31 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 MPT Associates
prior to his association with Farrell-Wako.
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
11 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 25 years
experience, including 12 with Henderson 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.
Mr. Dino Fuschillo, Director of Lazard Brothers, has primary responsibility
for the day-to-day management of the portion of the SIT International Equity
Portfolio's assets managed by Lazard London International Investment Management
Limited ("Lazard"). Mr. Fuschillo, a dual employee of Lazard and Lazard Brothers
Asset Management ("LBAM"), joined LBAM in 1989, and has specialized in European
equity management ever since.
SIT EMERGING MARKETS EQUITY PORTFOLIO
Josephine S. Jimenez, Bryan L. Sudweeks and Jesus Duarte share primary
responsibility for the SIT Emerging Markets Equity Portfolio managed by
Montgomery Asset Management, LLC ("Montgomery"). Ms. Jimenez and Mr. Sudweeks
have fifteen and eight years experience, respectively, in emerging markets
investment. Both joined Montgomery in 1991. Mr. Duarte, Senior Portfolio Manager
and Regional Head
S-23
<PAGE>
of Latin American Investing, joined Montgomery in 1994. Prior to joining
Montgomery, he was a Director and Vice President of Latinvest.
Investment decisions for Coronation Asset Management (Proprietary) Limited's
("Coronation") portion of the Portfolio are made by Anthony Gibson and Louis
Stassen. Prior to joining Coronation in 1993, Mr. Gibson, the head of
Coronation's Investment Committee, and Mr. Stassen, the head of Coronation's
research department, worked at Syfrets Managed Assets for seven years and one
year, respectively. Prior to joining Syfrets Managed Assets, Mr. Stassen worked
as an Investment Analyst for Allan Gray Investment Counsel.
Cliff Quisenberry, CFA, Senior Investment Manager and Research Manager, is
responsible for managing the portion of the Portfolio's assets allocated to
Parametric Portfolio Associates ("Parametric"). Prior to joining Parametric, Mr.
Quisenberry was a Portfolio Manager with Cutler & Company.
Mr. Marco Wong leads the management team for the assets of the SIT Emerging
Markets Equity Portfolio allocated to Yamaichi Capital Management, Inc. and
Yamaichi Capital Management (Singapore) Limited ("YCMS"). Mr. Wong has been with
YCMS since 1986.
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
managers who have day-to-day responsibility for the Portfolio are Keith Anderson
and Andrew Phillips. Mr. Anderson is a Managing Director and Co-Head of
Portfolio Management at BlackRock, and has 13 years experience investing in
fixed income securities. Mr. Phillips is a Vice President and Portfolio Manager
with primary responsibility for the management of the firm's investment
activities in fixed-rate mortgage securities.
Mr. Charles Groeschell, a Senior Vice President of Firstar Investment
Research & Management Company ("FIRMCO"), has been employed by FIRMCO or its
affiliates since 1983, and has had 14 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 the portion of the assets of the SIMT Core Fixed Income
Portfolio managed by Western 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 12 years of investment management experience, including
7 years of experience working with high yield bonds. Prior to joining CS First
Boston, Mr. Lindquist was with Prudential Insurance Company of America.
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 1993. 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 was the Chief Investment Officer
and Managing Director of the group which managed a global fixed income
portfolios at Prudential Asset Management. Prior to joining SFI, Gregory Barnett
was portfolio manager for the Pilgrim Multi-Market Income Fund. 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.
S-24
<PAGE>
SIT EMERGING MARKETS DEBT PORTFOLIO
Salomon Brothers Asset Management Inc. ("SBAM") employs a team approach in
managing the SIT Emerging Markets Debt Portfolio; however, Peter J. Wilby has
the primary day-to-day responsibility for the Portfolio. Mr. Wilby, a Managing
Director who joined SBAM in 1989, has considerable experience in managing high
yield and emerging markets debt portfolios.
DISTRIBUTION
The Trust has adopted a Distribution Plan for its Class D shares (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 SIMC (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.
<TABLE>
<CAPTION>
AMOUNT PAID TO
3RD PARTIES BY
THE DISTRIBUTOR
FOR
TOTAL FEES DISTRIBUTION
DISTRIBUTION PAID RELATED
PORTFOLIO CLASS D EXPENSES % SERVICES
- ---------------------------------------------------------------------------- ------------- --------- ---------------
<S> <C> <C> <C>
Diversified Conservative Income Fund........................................ $ 2,458 .75% $ 2,458
Diversified Conservative Fund............................................... $ 8,926 .75% $ 8,926
Diversified Global Moderate Growth Fund..................................... $ 40 .75% $ 40
Diversified Moderate Growth Fund............................................ $ 31,802 .75% $ 31,802
Diversified Global Growth Fund.............................................. $ 34,263 .75% $ 34,263
Diversified Global Stock Fund............................................... $ 5 .75% $ 5
Diversified U.S. Stock Fund................................................. $ 28,857 .75% $ 28,857
</TABLE>
S-25
<PAGE>
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 each
Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as officers of some or all of the following:
The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund,
ARK Funds, Bishop Street Funds, CoreFunds, Inc., CrestFunds, Inc., CUFUND, The
Expedition Funds, FMB Funds, Inc., First American Funds, Inc., First American
Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds,
Marquis Funds-Registered Trademark-, Monitor Funds, Morgan Grenfell Investment
Trust, The PBHG Funds, Inc., The Pillar Funds, Profit Funds Investment Trust,
Rembrandt Funds-Registered Trademark-, Santa Barbara Group of Mutual Funds,
Inc., Boston 1784 Funds-Registered Trademark-, SEI Daily Income Trust, SEI Index
Funds, SEI Institutional Investments Trust, SEI International Trust, SEI
Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI
Classic Funds, STI Classic Variable Trust, and TIP Funds, each of which is an
open-end management investment company managed by SEI Fund Management or its
affiliates and, except for Profit Funds Investment Trust, Rembrandt
Funds-Registered Trademark-, and Santa Barbara Group of Mutual Funds, Inc., are
distributed by SEI Investments Distribution Co. (the "Distributor").
ROBERT A. NESHER (DOB 08/17/46)--Chairman of the Board of Trustees*--Retired
since 1994. Executive Officer--Executive Vice President of SEI, 1986-1994.
Director and Executive Vice President of SEI Management and the Distributor,
1981-1994. Trustee of The Arbor Fund, Marquis Funds-Registered Trademark-, The
Advisors' Inner Circle Fund, SEI Liquid Asset Trust, SEI Daily Income Trust, SEI
Tax Exempt Trust, SEI Index Funds, SEI Institutional Managed Trust, SEI
Institutional Investments Trust, SEI International Trust, Boston 1784
Funds-Registered Trademark-, Pillar Funds and Rembrandt
Funds-Registered Trademark-.
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, SEI Management and Distributor, Director and Secretary of SEI and
Secretary of the Manager and Distributor. Trustee of The Arbor Fund, Marquis
Funds-Registered Trademark-, The Advisors' Inner Circle Fund, SEI Liquid Asset
Trust, SEI Daily Income Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI
Institutional Managed Trust, SEI Institutional Investments Trust and SEI
International Trust.
F. WENDELL GOOCH (DOB 12/03/32)--Trustee**--P.O. Box 190, Paoli, IN 47454.
President, Orange County Publishing Co., Inc., from October 1981 to January 1,
1997. 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, SEI Liquid Asset
Trust, SEI Daily Income Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI
Institutional Managed Trust, SEI Institutional Investments Trust and SEI
International Trust.
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-Registered Trademark-, The Advisors'
Inner Circle Fund, SEI Liquid Asset Trust, SEI Daily Income Trust, SEI Tax
Exempt Trust, SEI Index Funds, SEI Institutional Managed Trust, SEI
Institutional Investments Trust and SEI International Trust.
JAMES M. STOREY (DOB 04/12/31)--Trustee**--89A Mt. Vernon Street, Boston, MA
02108. Retired since 1994. Partner, Dechert Price & Rhoads, from September
1987--December 1993; Trustee of The Arbor Fund, Marquis
Funds-Registered Trademark-, The Advisors' Inner Circle Fund, SEI Liquid Asset
Trust, SEI Daily Income Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI
Institutional Managed Trust, SEI Institutional Investments Trust and SEI
International Trust.
GEORGE J. SULLIVAN, JR. (DOB 11/13/42)--Trustee**--48 Catherine Drive,
Peabody, MA 01960. General Partner, Teton Partners, L.P., since 1991: Chief
Financial Officer, Noble Partners, L.P., since 1991:
S-26
<PAGE>
Treasurer and Clerk, Peak Asset Management, Inc., since 1991; Trustee, Navigator
Securities Lending Trust, since 1995. Trustee of SEI Liquid Asset Trust, SEI
Daily Income Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI Institutional
Managed Trust, SEI Institutional Investments Trust, and SEI International Trust.
DAVID G. LEE (DOB 04/16/52)--President and Chief Executive Officer--Senior
Vice President of SEI Management and the Distributor since 1993. Vice President
of SEI Management and the 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 SEI, SEI Management and Distributor since
1988.
KEVIN P. ROBINS (DOB 04/15/61)--Vice President and Assistant
Secretary--Senior Vice President and General Counsel of SEI, SEI Management and
Distributor since 1994. Vice President and Assistant Secretary of SEI, SEI
Management 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, SEI, SEI Management and Distributor.
KATHRYN L. STANTON (DOB 11/19/58)--Vice President and Assistant
Secretary--Deputy General Counsel, Vice President, Assistant Secretary of SEI,
SEI Management and Distributor since 1994, General Counsel, Investment Systems &
Services since 1997. Associate, Morgan, Lewis & Bockius LLP (law firm),
1989-1994.
MARK E. NAGLE (DOB 10/20/59)--Controller and Chief Financial Officer--Vice
President of Fund Accounting and Administration for SEI Fund Resources and SEI
Management since 1996. Vice President of Fund Accounting, BISYS Fund Services
(1995-1996). Fidelity Investments (1981-1995).
TODD B. CIPPERMAN (DOB 02/14/66)--Vice President and Assistant
Secretary--Vice President and Assistant Secretary of SEI, SEI Management 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, SEI Management and
Distributor since 1996. Associate, Drinker, Biddle & Reath (law firm). Assistant
Vice President/Administration, Delaware Service Company, Inc. (1992-1993),
Assistant Vice President--Operations, Delaware Service Company, Inc.
(1988-1992).
MARC H. CAHN (DOB 06/19/57)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of SEI, SEI Management and Distributor since
1996. Associate General Counsel, Barclays Bank PLC (1995-1996). ERISA counsel,
First Fidelity Bancorporation (1994-1995). Associate, Morgan, Lewis & Bockius
LLP (1989-1994).
- ------------------------
*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, Morris and Sullivan serve as members of the Audit
Committee of the Trust.
S-27
<PAGE>
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 SEI
Management.
<TABLE>
<CAPTION>
AGGREGATE PENSION OR TOTAL COMPENSATION FROM
COMPENSATION RETIREMENT BENEFITS ESTIMATED ANNUAL REGISTRANT AND FUND
FROM REGISTRANT ACCRUED AS PART OF FUND BENEFITS UPON COMPLEX PAID TO DIRECTORS
NAME OF PERSON AND POSITION FOR FYE 3/31/97 EXPENSES RETIREMENT FOR FYE 3/31/97
- ------------------------------ ----------------- ----------------------- --------------------- -------------------------
<S> <C> <C> <C> <C>
Robert A. Nesher, Trustee..... $ 0 $ 0 $ 0 $0 for services on 8
boards
William M. Doran, Trustee..... $ 0 $ 0 $ 0 $0 for services on 8
boards
F. Wendell Gooch, Trustee..... $ 5,043 $ 0 $ 0 $90,000 for services on 8
boards
Frank E. Morris, Trustee...... $ 5,043 $ 0 $ 0 $90,000 for services on 8
boards
James M. Storey, Trustee...... $ 5,043 $ 0 $ 0 $90,000 for services on 8
boards
George J. Sullivan, Trustee... $ 5,043 $ 0 $ 0 $90,000 for services on 8
boards
</TABLE>
- ------------------------
Mr. Edward W. Binshadler is a Trustee Emeritus of the Trust. Mr. Binshadler
serves as a consultant to the Audit Committee and receives as compensation,
$5,000 per Audit Committee meeting attended.
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.
The average annual total return since inception through March 31, 1997, for
Class A Shares of the Funds is as follows: Diversified Conservative Income
Fund--6.35%, Diversified Conservative Fund-- 6.54%, Diversified Global Moderate
Growth Fund--1.96%, Diversified Moderate Growth Fund--7.12%, Diversified Global
Growth Fund--8.10%, Diversified Global Stock Fund--.67%, and Diversified U.S.
Stock Fund--11.33%.
The average annual total return since inception through March 31, 1997 for
Class D Shares of the Funds is as follows: Diversified Conservative Income
Fund--5.67%, Diversified Conservative Fund-- 4.84%, Diversified Global Moderate
Growth Fund--1.52%, Diversified Moderate Growth Fund--5.71%, Diversified Global
Growth Fund--6.69%, Diversified Global Stock Fund--.31%, and Diversified U.S.
Stock Fund--9.43%.
S-28
<PAGE>
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 SIMC 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
SIMC pursuant to valuations provided by an independent pricing service
(generally the last quoted sale price). Underlying Portfolio securities listed
on a securities 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, Martin Luther King, Jr. 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, the
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.
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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 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
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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, 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
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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, SIMC
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, SIMC
and the various firms that serve as sub-advisers to certain Underlying
Portfolios, in the exercise of joint 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 SIMC 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.
The portfolio turnover rate for each Fund for the fiscal year ended March
31, 1997 was as follows: Diversified Conservative Income Fund, 27%; Diversified
Conservative Fund, 65%; Diversified Global Moderate Growth Fund, 3%; Diversified
Moderate Growth Fund, 22%; Diversified Global Growth Fund, 13%; Diversified
Global Stock Fund, 0%; and Diversified U.S. Stock Fund, 28%.
A portfolio turnover rate would exceed 100% if all of its securities,
exclusive of U.S. Government securities and other securities whose maturities at
the time of acquisition are one year or less, are replaced in the period of one
year. Turnover rates may vary from year to year and may be affected by cash
requirements for redemptions and by requirements which enable a Fund to receive
favorable tax treatment.
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.
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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.
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.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of May 5, 1997, the following persons were the only persons who were
record owners (or, to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Portfolios. The Trust believes that most of the shares
referred to below were held by the following persons in accounts for their
fiduciary, agency, or custodial customers.
Diversified Conservative Income Fund: SEI Trust Company, Attn: Mutual Fund
Administrator, One Freedom Valley Drive, Oaks, PA 19456, 44.26%; Republic & Co.,
c/o Imperial Trust Company, 201 N. Figueroa St., Ste. 610, Los Angeles, CA
90012-2629, 7.50%; Lebanon Valley National Bank, 555 Willow St., P.O. Box 448,
Lebanon, PA 17042-0448, 7.09%; Eldoark Company, P.O. Box 751, El Dorado, AR
71731-0751, 6.43%; F & M Company, P.O. Box 2800, Winchester, VA 22604-2000,
6.30%; GABCO, P.O. Box 810, Jasper, IN 47547-0810, 5.20%.
Diversified Conservative Fund: SEI Trust Company, Attn: Mutual Fund
Administrator, One Freedom Valley Dr., Oaks, PA 19456, 47.06%; North American
Trust Company TTEE, Steptoe & Johnson Retirement Plan, P.O. Box 84419, San
Diego, CA 92138-4419, 18.42%; SEI Trust Company, Attn: 10427 Mutual Fund
Administrator, One Freedom Valley Dr., Oaks, PA 19456, 15.74%; GABCO, P.O. Box
810, Jasper, IN 47547-0810, 6.57%.
Diversified Moderate Growth Fund: SEI Trust Company, Attn: Mutual Fund
Administrator, One Freedom Valley Drive, Oaks, PA 19456, 24.84%; North American
Trust Company TTEE, Steptoe & Johnson Retirement Plan, P.O. Box 84419, San
Diego, CA 92138-4419, 24.44%; GABCO, P.O. Box 810,
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Jasper, IN 47547-0810, 17.99%; SEI Trust Company, Attn: 10427 Mutual Fund
Administration, One Freedom Valley Dr., Oaks, PA 19456, 9.90%; F & M Company,
P.O. Box 2800, Winchester, VA 22604-2000, 9.84%.
Diversified Global Growth Fund: SEI Trust Company, Attn: Mutual Fund
Administrator, One Freedom Valley Drive, Oaks, PA 19456, 44.28%; North American
Trust Company TTEE, Steptoe & Johnson Retirement Plan, P.O. Box 84419, San
Diego, CA 92138-4419, 25.84%; Republic & Co., c/o Imperial Trust Company, 201 N.
Figueroa St., Ste. 610, Los Angeles, CA 90012-2629, 6.14%; GABCO, P.O. Box 810,
Jasper, IN 47547-0810, 5.57%; F & M Company, P.O. Box 2800, Winchester, VA
22604-2000, 5.05%.
Diversified U.S. Stock Fund: North American Trust Company TTEE, Steptoe &
Johnson Retirement Plan, P.O. Box 84419, San Diego, CA 92138-4419, 37.38%; SEI
Trust Company, Attn: Mutual Fund Administrator, One Freedom Valley Drive, Oaks,
PA 19456, 21.09%; GABCO, P.O. Box 810, Jasper, IN 47547-0810, 15.68%; F & M
Company, P.O. Box 2800, Winchester, VA 22604-2000, 9.70%.
Diversified Global Moderate Growth Fund: SEI Trust Company, Attn: Mutual
Fund Administrator, One Freedom Valley Drive, Oaks, PA 19456, 66.06%; SEI Trust
Company, Attn: 10427 Mutual Fund Administration, One Freedom Valley Dr., Oaks,
PA 19456, 31.76%.
Diversified Global Stock Fund: SEI Trust Company, Attn: Mutual Fund
Administrator, One Freedom Valley Drive, Oaks, PA 19456, 83.08%; FTC & Co.,
Attn: Datalynx 106, P.O. Box 173736, Denver, CO 80217-3736, 12.14%.
FINANCIAL STATEMENTS
The Trust's financial statements for the fiscal year ended March 31, 1997,
including notes thereto and the report of Price Waterhouse LLP thereon, are
herein incorporated by reference. A copy of the 1997 Annual Report must
accompany the delivery of this Statement of Additional Information.
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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.
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
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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.
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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.
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.
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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.
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
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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 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).
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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 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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