<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
SEI TAX EXEMPT TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
same
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2), or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
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2) Aggregate number of securities to which transaction applies:
N/A
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11
N/A
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4) Proposed maximum aggregate value of transaction:
N/A
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
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IMPORTANT SHAREHOLDER INFORMATION
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The document you hold in your hands contains your proxy statement and
proxy card. A proxy card is, in essence, a ballot. When you vote
your proxy, it tells us how to vote on your behalf on important issues
relating to your portfolio. If you simply sign the proxy card without
specifying a vote, your shares will be voted in accordance with the
recommendations of the board of trustees.
We urge you to spend a few minutes with the proxy statement, fill out
your proxy card, and return it to us. Voting your proxy, and doing so
promptly, ensures that the Portfolio will not need to conduct
additional mailings. When shareholders do not return their proxies in
sufficient numbers, we have to incur the expense of follow-up
solicitations, which may cost your portfolio money.
Please take a few moments to exercise your right to vote. Thank you.
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SEI TAX EXEMPT TRUST
<PAGE>
SEI TAX EXEMPT TRUST
Intermediate-Term Municipal Portfolio
Dear Shareholder,
A Shareholder Meeting of the Intermediate-Term Municipal Portfolio of SEI Tax
Exempt Trust (the "Trust") has been scheduled for Tuesday, April 16, 1996. If
you were a shareholder of record as of the close of business on February 22,
1996, you are entitled to vote at the meeting or any adjournment of the meeting.
While you are, of course, welcome to join us at the meeting, most Shareholders
cast their votes by filling out and signing the enclosed proxy card. Whether or
not you plan to attend the meeting, we need your vote. Please mark, sign, and
date the enclosed proxy card and return it promptly in the enclosed postage-paid
envelope so that the maximum number of shares may be voted.
The attached proxy statement is designed to give you information relating to
each of the Proposals on which you will be asked to consider and vote. We
encourage you to support the Trustees' recommendations. The Proposals described
in the proxy statement relate to the following matters:
1. Authorizing the Board of Trustees of the Trust to approve additional and
replacement sub-advisers for the Intermediate-Term Municipal Portfolio
without the approval of Shareholders.
2. Approving the selection of SEI Financial Management Corporation as
investment adviser for the Intermediate-Term Municipal Portfolio and a new
investment advisory agreement between the Trust, on behalf of the
Portfolio, and SEI Financial Management Corporation.
3. Approving the selection of Standish, Ayer & Wood, Inc. as sub-adviser to
the Intermediate-Term Municipal Portfolio and a new sub-advisory agreement
between SEI Financial Management and Standish, Ayer & Wood.
Your vote is important to us. Please do not hesitate to call 1-800-DIAL SEI if
you have any questions about the Proposals under consideration. Thank you for
taking the time to consider these important Proposals and for your investment in
the SEI Funds.
Sincerely,
David G. Lee
President
<PAGE>
PRELIMINARY COPY
SEI TAX EXEMPT TRUST
2 OLIVER STREET
BOSTON, MA 02109
Notice of Special Meeting of Shareholders
April 16, 1996
Notice is hereby given that a Special Meeting of shareholders of the
Intermediate-Term Municipal Portfolio (the "Portfolio") of SEI Tax Exempt Trust
(the "Trust") will be held at the offices of SEI Financial Management
Corporation ("SFM"), 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658,
on Tuesday, April 16, 1996, at 3:30 p.m.
At the meeting, shareholders of the Portfolio (the "Shareholders") will be
asked to consider and act on to a new management structure for the Portfolio, a
new adviser and sub-adviser and new advisory and sub-advisory agreements, and
other matters detailed below (the "Proposals"). The specifics of these
Proposals, which are more fully described in the attached Proxy Statement, are
as follows:
1. To authorize the Board of Trustees to appoint or replace
investment sub-advisers recommended by SFM for the Trust's Portfolio
without Shareholder approval of such sub-advisers' contracts.
2. To approve the selection of SFM as the Investment Adviser to the
Trust's Portfolio, and to approve the Investment Advisory Agreement between
the Trust, on behalf of the Portfolio, and SFM.
3. To approve the selection of Standish, Ayer & Wood, Inc.,
as a sub-adviser to the Portfolio, and to approve a sub-advisory agreement
between SFM and Standish.
Proposals 1 and 2 relate to the "Manager of Managers" structure approved by
the Trust's Board of Trustees, wherein SFM will act as investment adviser to the
Portfolio and recommend to the Trustees which investment sub-advisers to appoint
and replace for the Portfolio. Apart from Shareholder approval, this structure
requires an order of exemption from the Securities and Exchange Commission
("SEC") before becoming operative. It is anticipated that if and when exemptive
relief is granted, the "Manager of Managers" structure will enable the Trust to
achieve a higher degree of management efficiency and will reduce the need for
Shareholder meetings in the future. In connection with the proposed
implementation of the "Manager of Managers" structure, the Trustees have
approved the selection of SFM as investment adviser to the Portfolio under a new
investment advisory agreement for the Portfolio.
<PAGE>
Proposal 3 relates to approval of the selection of the current investment
adviser as investment sub-adviser to the Portfolio, and approval of a form of
investment sub-advisory agreement for the Portfolio. If the "Manager of
Managers" structure is implemented, and an SEC order is obtained, the Trustees
would be able, upon the recommendation of SFM and without Shareholder approval,
to replace the sub-adviser and/or appoint additional sub-advisers to the
Portfolio, and to utilize investment sub-advisory agreements for the Portfolio
whose terms are different from those currently in use by the Trust.
In accordance with their own discretion, the proxies are authorized to vote
on such other business as may properly come before the Meeting.
By Order of the Board of Trustees
Richard W. Grant, Secretary
All Shareholders are cordially invited to attend the Meeting. However, if
you are unable to be present at the Meeting, you are requested to mark, sign,
and date the enclosed proxy card and return it promptly in the enclosed,
postage-paid envelope so that the Meeting may be held and a maximum number of
shares may be voted.
Shareholders of record at the close of business on February 22, 1996 are
entitled to notice of and to vote at the Meeting or any adjournment thereof.
March 8, 1996
2
<PAGE>
PRELIMINARY COPY
SEI TAX EXEMPT TRUST
2 OLIVER STREET
BOSTON, MA 02109
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Trustees of SEI Tax Exempt Trust (the "Trust") for use at the
Special Meeting of Shareholders to be held on April 16, 1996, at 3:30 p.m., at
the offices of SEI Financial Management Corporation ("SFM"), 680 East Swedesford
Road, Wayne, Pennsylvania 19087-1658, and at any adjourned session thereof (such
meeting and any adjournment thereof are hereinafter referred to as the
"Meeting"). Shareholders of the Intermediate-Term Municipal Portfolio (the
"Portfolio") of the Trust (the "Shareholders") of record at the close of
business on February 22, 1996, are entitled to vote at the Meeting. As of
February 22, 1996, the approximate number of units of beneficial interest
("shares") issued and outstanding for the Portfolio was ___________________.
Each share is entitled to one vote and each fractional share is entitled to a
proportionate fractional vote on each matter as to which such shares are to be
voted at the Meeting. Shareholders of each class of each Fund will vote
together on each Proposal relating to their Fund.
In addition to the solicitation of proxies by mail, Trustees and officers of the
Trust and officers and employees of SFM, the Manager and Shareholder Servicing
Agent for the Trust, and third parties hired for such purpose, may solicit
proxies in person or by telephone. Persons holding shares as nominees will,
upon request, be reimbursed for their reasonable expenses incurred in sending
soliciting materials to their principals. The general cost of solicitation will
be borne by the Trust, except that SFM will bear a portion of the overall cost
of the Proxy Statement relating to the approval of SFM as investment adviser.
The proxy and this Proxy Statement are being mailed to Shareholders on or about
March 8, 1996.
Shares represented by duly executed proxies will be voted in accordance with the
instructions given. Proxies may be revoked at any time before they are
exercised by a written revocation received by the President of the Trust at 680
East Swedesford Road, Wayne, Pennsylvania 19087-1658, by properly executing a
later-dated proxy, or by attending the Meeting and voting in person.
INTRODUCTION
The Trust is organized as a Massachusetts business trust and is not required to
hold annual meetings of Shareholders. The Meeting is being called in order to
permit the
<PAGE>
Shareholders of the Portfolio to vote on a new management structure, approve the
selection of a new investment adviser and new sub-adviser, and adopt new
investment advisory and sub-advisory agreements in connection with the approval
of those new relationships.
SECTION I.
Section 15(a) of the Investment Company Act of 1940, as amended (the "1940 Act")
requires that all contracts pursuant to which persons serve as investment
advisers to investment companies be approved by shareholders. As interpreted,
this requirement would apply to the appointment of sub-advisers to any portfolio
of the Trust for which SFM will act as investment adviser. The SEC has granted
conditional exemptions from the shareholder approval requirements. The Trust
has applied for such an exemption, and if it is granted and this Proposal is
approved, the Board of Trustees would, without Shareholder approval, be able to
appoint additional or replacement sub-advisers (each a "Manager" and,
collectively, the "Managers"). The Board would not, however, be able to replace
SFM as investment adviser to each Portfolio of the Trust without complying with
the 1940 Act and applicable regulations governing Shareholder approval of
advisory contracts.
The Proposals contained in Sections I and II of this Proxy Statement are
intended to facilitate the efficient operation of the "Manager of Managers"
structure and afford the Trust increased management flexibility. Assuming SFM
is approved as investment adviser to the Portfolio, it will continuously monitor
the performance of the Managers and may from time to time recommend that the
Board of Trustees replace one or more Managers or appoint additional Managers,
depending on SFM's assessment of what combination of Managers it believes will
optimize the Portfolio's chances of achieving its investment objective.
Accordingly, while there is no way of knowing exactly how often SFM may
recommend, and the Board approve, the selection of an additional Manager, or the
replacement of an existing Manager, both of which would typically require a
Shareholder meeting, it is likely that the Manager of Managers structure would
result in more frequent Shareholder meetings than would otherwise be the case.
However, if the SEC grants the exemption, the Trustees will not be required to
call a Shareholder meeting each time a new sub-adviser is approved. Shareholder
meetings entail substantial costs which could reduce the desired benefits of the
Manager of Managers structure. These costs must be weighed against the benefits
of Shareholder scrutiny of proposed contracts with additional or replacement
Managers; however, even in the absence of Shareholder approval, any proposal to
add or replace Managers would receive careful review. First, SFM would assess
the Portfolio's needs and, if it believed additional or replacement Managers
could benefit the Portfolio, would systematically search the relevant universe
of available investment managers. Second, any recommendations made by SFM would
have to be approved by a majority of the Trustees, including a majority of the
Trustees who are not "interested persons" within the
2
<PAGE>
meaning of the 1940 Act. Finally, any selections of additional or replacement
Managers would have to comply with conditions contained in the SEC exemption, if
it is granted.
1. AUTHORIZATION FOR THE BOARD OF TRUSTEES TO APPOINT INVESTMENT SUB-ADVISERS
TO THE INTERMEDIATE-TERM MUNICIPAL PORTFOLIO OF THE TRUST WITHOUT SEEKING
APPROVAL BY THE PORTFOLIO'S SHAREHOLDERS OF THE CONTRACTS PURSUANT TO
WHICH SUCH SUB-ADVISERS SERVE.
This Proposal will facilitate the appointment of additional and replacement sub-
advisers without a Shareholder vote if SFM serves as Manager of Managers for the
Portfolio. This arrangement requires the SEC's approval of SFM's application to
implement the Manager of Managers structure.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 1.
---
SECTION II.
The Board of Trustees is recommending that Shareholders of the Portfolio approve
SFM as the investment adviser to the Portfolio and approve the form of
investment advisory agreement (the "Investment Advisory Agreement") between the
Trust and SFM relating to the Portfolio (which is attached as Exhibit A to this
Proxy Statement). The Trustees, of the Trust, including all of the Trustees who
are not "interested persons" of the Trust, approved the Investment Advisory
Agreement with respect to the Portfolio at a meeting held on December 4, 1995.
The description of the Investment Advisory Agreement in this Proxy Statement is
qualified in its entirety by reference to the form of the new Investment
Advisory Agreement attached hereto as Exhibit A.
Other than the identity of the investment adviser, there are no material
differences between the Investment Advisory Agreement and the existing
investment advisory agreements of the other portfolios of the Trust. While the
level of compensation paid to SFM by the Portfolio for advisory services will be
.15% higher than that paid to the current adviser, SFM's contractual management
fee will be reduced by .15% for the Portfolio. As a result, the compensation
received by SFM under the Investment Advisory Agreement and the Management
Agreement will not increase from the level currently received by SFM for its
management services, and the overall cost to the Portfolio of advisory and
management services will not be increased. (See "Description of the Investment
Adviser," below.)
Duties Under the Investment Advisory Agreement. Under the Investment Advisory
Agreement, SFM will serve as investment adviser to the Portfolio and will
provide its proprietary investment adviser selection, monitoring, and asset
allocation services to the
3
<PAGE>
Portfolio. Subject to Board approval, SFM, in turn, will enter into investment
sub-advisory agreements with one or more sub-advisers to exercise investment
discretion over the assets (or a portion of the assets) of the Portfolio.
Consistent with its goal of using multiple Managers to carry out the Portfolio's
investment objective and policies, SFM may provide specific portfolio security
advice with respect to all or some portion of the Portfolio's assets.
SFM will perform internal due diligence on prospective Managers for the
Portfolio and monitor Manager performance using its proprietary investment
adviser selection and monitoring process. SFM will be responsible for
communicating performance targets and evaluations to Managers, supervising each
Manager's compliance with the Portfolio's fundamental investment objectives and
policies, authorizing Managers to engage in certain investment techniques for
the Portfolio, and recommending to the Board of Trustees whether sub-advisory
agreements should be renewed, modified or terminated. SFM also will recommend to
the Board the addition of new Managers as it deems appropriate. (See Section I,
above.)
For its investment advisory services, SFM will receive an advisory fee from the
Portfolio based on the Portfolio's assets. SFM will then pay the Managers out
of this fee.
Under this structure, 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.
Typically, the investment company pays the advisory fee to its investment
adviser which, in turn, compensates internal portfolio managers who make
specific securities selections. In contrast, the Trust will offer investors an
opportunity to access, on a pooled investment basis, the core elements of SFM's
investment adviser selection, monitoring, and asset allocation services. Under
this "Manager of Managers" approach, SFM will recommend and, if the Trustees
approve the recommendation, monitor for the Portfolio one or more managers using
a range of investment styles. (See Section I, above.)
Duration and Termination. Unless terminated earlier, the Investment Advisory
Agreement shall continue in effect as to the Portfolio until on or about April
30, 1998, and thereafter, for periods of one year for so long as such
continuance is specifically approved with respect to the Portfolio at least
annually (i) by the vote of the holders of a majority of the outstanding shares
of the Portfolio or by the Trustees of the Trust, and (ii) by the vote of a
majority of those Trustees of the Trust who are not parties to the Investment
Advisory Agreement or "interested persons" (as that term is defined in the 1940
Act) of any party thereto, cast in person at a meeting called for the purpose of
voting on such approval. The Investment 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 the Portfolio by
a vote of a majority of the outstanding shares of the Portfolio on not less than
30 days nor more
4
<PAGE>
than 60 days written notice to SFM. In addition, it is terminable by SFM upon 90
days written notice to the Trust.
SFM will discharge its responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust. The Investment Advisory Agreement
provides that SFM shall not be protected against any liability to the Trust or
its Shareholders by reason of willful misfeasance, bad faith, or gross
negligence on its part in the performance of its duties or from reckless
disregard by SFM of its obligations or duties thereunder.
Description of the Investment Adviser. SFM is a wholly-owned subsidiary of SEI
Corporation, a financial services company located at 680 East Swedesford Road,
Wayne, Pennsylvania 19087-1658 ("SEI"). SEI was founded in 1968 and is a
leading provider of investment solutions to banks, institutional investors,
investment advisers, and insurance companies. Affiliates of SFM have provided
consulting advice to institutional investors for more than 20 years, including
advice regarding selection and evaluation of investment advisers. As of
___________, 1996, SFM acted in a similar "manager of managers" role with
respect to $______ billion of client assets.
SFM currently serves as investment adviser, manager and/or administrator to more
than 26 investment companies, including more than 220 portfolios, which
investment companies had more than $51 billion in assets as of September 30,
1996.
SFM serves as Manager of the Trust, pursuant to a Management Agreement dated May
23, 1986. In connection with its role as Manager, SFM provides the Trust with
overall management services, regulatory reporting, all necessary office space,
equipment, personnel and facilities, and acts as transfer agent, dividend
disbursing agent, and shareholder servicing agent for certain classes of the
Portfolio's shares.
For its management services under the current management arrangements, SFM is
entitled to a fee which is calculated daily and paid monthly at an annual rate
of .39% of the average daily net assets of the Portfolio. SFM and the Managers
may waive all or a portion of their respective fees in order to limit the
operating expenses of a Portfolio. Any such waiver is voluntary and may be
terminated at any time in the discretion of SFM and the Managers.
For the fiscal year ended August 31, 1995, the Portfolio paid to SFM the
following management fees:
<TABLE>
Fees Paid Fees Waived
(000) (000)
<S> <C> <C>
Intermediate-Term Municipal Portfolio $288 $ 125
</TABLE>
5
<PAGE>
Once the Manager of Managers structure is in place, SFM's management fee will be
reduced by .15% for the Portfolio in order to compensate for the increased
advisory and sub-advisory fees payable under that structure.
The table below sets forth information about the proposed level of fees payable
to SFM both as Adviser and Manager, and to the Managers, assuming that the
Shareholders approve the Manager of Managers structure:
<TABLE>
<CAPTION>
========================================================================================
Sub-Advisory Fee Paid
by SFM (based upon a
percentage of the
Advisory Fee market value of the
Paid to SFM portion of the Administration
Proposed Sub- Under New Portfolio's assets Fee Paid to
Portfolio Adviser Advisory managed by the Sub- SFM*
Agreement Adviser)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Intermediate- Standish, Ayer .33% .18% up to $125 million .24%
Term Municipal & Wood, Inc. .15% over $125 million
========================================================================================
</TABLE>
*For the Portfolio, the contractual administration fee payable to SFM has been
lowered by .15% in order to compensate for the increased level of advisory and
sub-advisory fees payable under the Manager of Managers structure. However, the
total level of fees payable to SFM will remain the same.
Under the proposed Manager of Managers structure, SFM, as investment adviser,
will not waive a portion of its fee. As shown in the table below, overall level
of expenses for the Portfolio will be higher under the proposed Manager of
Managers structure.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Proposed Manager of
Managers Fee
Current Fee Arrangement Arrangement
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Total Operating Expenses .55% .60%
- ----------------------------------------------------------------------------------------
</TABLE>
Listed below are the names and principal occupations of each of the directors
and the principal executive officers of SFM. The principal business address of
each director and the principal executive officers, as it relates to their
duties at SFM, is 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658.
Name Title
- ---- -----
Alfred P. West, Jr. Director, Chairman & Chief Executive Officer
Henry H. Greer Director, President & Chief Operating Officer
Carmen V. Romeo Director, Executive Vice President & Treasurer
6
<PAGE>
Richard B. Lieb Executive Vice President
Edward Loughlin Executive Vice President; President, Asset
Management Group
Charles A. Marsh Executive Vice President
Carl A. Guarino Senior Vice President
Cris Brookmyer Controller
Kevin P. Robins Senior Vice President, General Counsel & Secretary
Trustees' Consideration. At a meeting held on December 4, 1995, the Board of
Trustees reviewed SFM's qualifications to act as investment adviser to the
Portfolio, placing particular emphasis on its proposed role in recommending,
monitoring and terminating Managers, subject to Board of Trustees' oversight.
The Trustees received written and oral information regarding SFM's key
personnel, its experience in selection and evaluation of investment Managers and
research performed by SFM and others that had led SFM to recommend a "Manager of
Managers" structure (i.e., one in which SFM would act as the investment adviser
and one or more Managers would assume substantial day-to-day investment
responsibilities; see Section I, above). In recommending that the Shareholders
approve the Investment Advisory Agreement, the Trustees carefully evaluated the
experience of SFM's key personnel in institutional investing and the quality of
services SFM is expected to provide to the Portfolio, as well as other factors
relating to SFM's provision of investment advisory services including, but not
limited to: (1) the fee and expense ratios of comparable mutual funds; (2) the
performance of the Portfolio since commencement of operations; (3) the nature
and quality of the services expected to be rendered to the Portfolio by SFM; (4)
the distinct investment objective and policies of the Portfolio; (5) that the
compensation payable to SFM by the Portfolio under the proposed Investment
Advisory Agreement and the Management Agreement will be at the same rate as the
compensation payable to SFM and the proposed Sub-Adviser under the existing
Investment Advisory and Management Agreements; (6) the history, reputation,
qualification and background of SFM as well as the qualifications of its
personnel and its financial condition; (7) the benefits expected to be realized
as a result of the Manager of Managers structure; and (8) other factors deemed
relevant. The Trustees also reviewed the fees to be paid to SFM in comparison to
those being charged in the relevant segment of the mutual fund business,
including any benefits received by SFM or its affiliates in connection with soft
dollar payments.
In the event Shareholders of the Portfolio do not approve the selection of SFM
as investment adviser and the Investment Advisory Agreement between the Trust,
on behalf of the Portfolio, and SFM, or if the Shareholders of the Portfolio do
not approve the Manager of Managers structure discussed in Section I of the
Proxy Statement, at the Special Meeting to which this Proxy Statement relates,
or any adjournment thereof, the Trustees will consider an appropriate course of
action.
2. APPROVAL OF SFM AS THE INVESTMENT ADVISER TO THE INTERMEDIATE-TERM
MUNICIPAL PORTFOLIO, AND APPROVAL OF AN
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INVESTMENT ADVISORY AGREEMENT BETWEEN THE TRUST, ON BEHALF OF THE
PORTFOLIO, AND SFM.
Description of the Portfolio. The investment objective of the Portfolio is to
provide the highest level of income exempt from federal income taxes that can be
obtained, consistent with the preservation of capital. The Portfolio's
investments consist of investment grade municipal securities.
Termination of the Previous Investment Advisory Agreements. Weiss, Peck & Greer,
LLP ("WPG"), served as investment adviser to the Portfolio pursuant to an
investment advisory agreement dated April 12, 1989, and last approved by [the
sole initial shareholder] on ________. The Board of Trustees voted on December
4, 1995, to terminate the agreement based upon the Board's determination that
the selection of SFM to provide investment advisory services as described herein
will be in the best interests of the Portfolio. The Board also approved SFM as
the new investment adviser, and Standish as sub-adviser, effective upon approval
by Shareholders.
In addition, the Board approved Standish to serve as interim investment adviser
to the Portfolio until the implementation of the proposed Manager of Managers
structure. As permitted by the 1940 Act, Standish may begin serving as
investment adviser after Board approval but prior to shareholder approval as the
fee paid to it is less than the current investment advisory fee. The fee
structure set forth below reflects the proposed interim fee arrangement that
took effect after the investment advisory agreement with WPG was terminated and
the new interim advisory agreement with Standish was approved by the Board.
This interim investment advisory agreement will terminate upon the approval of
SFM as investment adviser.
Compensation. Under the proposed Investment Advisory Agreement, the Trust will
pay SFM a fee, which is calculated daily and paid monthly, at an annual rate of
.33% of the average daily net assets of the Portfolio. Under the proposed
interim advisory agreement, the Trust will pay Standish a fee, which is
calculated daily and paid monthly at an annual rate of .18% up to $125 million
and .15% over $125 million. As SFM did not previously serve as investment
adviser to the Portfolio and Standish did not serve as investment adviser or
sub-adviser, the aggregate investment advisory and sub-advisory fees paid to SFM
and Standish during the last fiscal year was, in each instance, $0. WPG
received $131,000.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 2.
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SECTION III.
8
<PAGE>
The Board of Trustees is recommending that Shareholders approve Standish as
investment sub-adviser to the Portfolio and approve the form of investment sub-
advisory agreement (the "Investment Sub-Advisory Agreement") between SFM and
Standish, a copy of which is attached as Exhibit B to this Proxy Statement. The
Trustees, including all the Trustees who are not "interested persons" of the
Trust, approved the Investment Sub-Advisory Agreement with respect to the
Portfolio at a meeting held on December 4, 1995. The description of the
Investment Sub-Advisory Agreement in this Proxy Statement is qualified in its
entirety by reference to the form of the Investment Sub-Advisory Agreement
attached hereto as Exhibit B.
The Sub-Adviser. Standish will serve as investment sub-adviser (the "Sub-
Adviser") to the Portfolio. Under the Manager of Managers structure, SFM will
have general oversight responsibility for the investment advisory services
provided to the Portfolio, including formulating the Portfolio's investment
policies and analyzing economic trends affecting the Portfolio. SFM will be
responsible for managing the allocation of assets among the Portfolio's proposed
Sub-Adviser and future Sub-Advisers and directing and evaluating the investment
services provided by the Sub-Adviser, including its adherence to the Portfolio's
investment objectives and policies and the Portfolio's investment performance
and may provide specific portfolio security advice. In accordance with the
Portfolio's investment objectives and policies, and under the supervision of SFM
and the Trust's Board of Trustees, the Sub-Adviser will be responsible for the
day-to-day investment management of all or a discrete portion of the assets of a
Portfolio. The Sub-Adviser is authorized to make investment decisions for the
Portfolio and place orders on behalf of the Portfolio to effect the investment
decisions made.
In addition, SFM will monitor the compliance of the Sub-Adviser with regulatory
and tax regulations, such as those relating to portfolio concentration and
diversification. For the most part, compliance with these requirements by the
Sub-Adviser with respect to its portion of the Portfolio will assure compliance
by the Portfolio as a whole. In addition, SFM will monitor positions taken by
the Sub-Adviser and will notify the Sub-Adviser to any developing situations to
help ensure that investments do not run afoul of the short-short test or the
wash sale rules. To the extent that having multiple Sub-Advisers responsible for
investing separate portions of a Portfolio's assets creates the need for
coordination among the Sub-Advisers, there is an increased risk that the
Portfolio will not comply with these regulatory and tax requirements.
It is possible that different Sub-Advisers to the same portfolio could take
opposite actions within a short period of time with respect to a particular
security. For example, one Sub-Adviser could buy a security for a portfolio and
shortly thereafter another Sub-Adviser could sell the same security from the
portion of the portfolio's assets allocated to it. If in these circumstances the
securities could be transferred from one Sub-Adviser's portion of a portfolio to
another, the portfolio could avoid transaction costs and could avoid creating
possible wash sales and short-short gains under the Code. Such transfers are not
practicable, but the Sub-Advisers and SFM do not believe that there will be
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material adverse effects on a portfolio as a result. First, it does not appear
likely that there will be substantial overlap in the securities acquired for a
portfolio by various Sub-Advisers. Moreover, the Sub-Advisers would probably
only rarely engage in the types of offsetting transactions described above,
especially within a short time period. Therefore, it is a matter of speculation
whether offsetting transactions would result in any significant increases in
transaction costs or have significant tax consequences. With respect to the
latter, SFM and the Sub-Advisers will establish procedures with respect to the
short-short test which are designed to prevent realization of short-short gains
in excess of the limits of the Internal Revenue Code of 1986, as amended. It is
true that wash sales could occur in spite of the efforts of SFM, but it is
believed that the benefits of using multiple managers outweighs the consequences
of any wash sales.
SFM is currently seeking an exemptive order from the SEC that would permit SFM,
with the approval of the Trust's Board of Trustees, to retain Sub-Advisers for a
Portfolio without submitting the accompanying sub-advisory agreement to a vote
of the Portfolio's Shareholders. If granted, the exemptive relief will permit
the non-disclosure of amounts payable by SFM under such sub-advisory agreements.
The Trust will notify Shareholders in the event of any change in the identity of
the Sub-Adviser to a Portfolio. Until or unless this exemptive order is granted,
if one of the Sub-Advisers is terminated or departs from a Portfolio with
multiple Sub-Advisers, the Portfolio will handle such termination or departure
in one of two ways. First, the Portfolio may propose that a new Sub-Adviser be
appointed to manage that portion of the Portfolio's assets managed by the
departing Sub-Adviser. In this case, the Portfolio would be required to submit
to the vote of the Portfolio's Shareholders the approval of an investment sub-
advisory contract with the new sub-adviser. In the alternative, the Portfolio
may decide to allocate the departing Sub-Adviser's assets among the remaining
Sub-Advisers. This allocation would not require new investment sub-advisory
contracts with the remaining Sub-Advisers, and consequently no Shareholder
approval would be necessary. If the Manager of Managers structure is approved,
the Trustees will be able to instruct SFM to add or replace sub-advisers without
Shareholder approval.
Trustees' Consideration. The Trustees of the Trust, including all of the
Trustees who are not "interested persons" of the Trust, approved the general
form of the Investment Sub-Advisory Agreement with respect to the Portfolio at a
meeting held on December 4, 1995. The Trustees received written and oral
information from both SFM and the proposed Sub-Adviser. SFM recommended the
selection of the proposed Sub-Adviser and reviewed the considerations and the
search process that had led to the recommendation. The Trustees also met with
representatives of the proposed Sub-Adviser and considered information about key
personnel, investment philosophy and process and performance track record, among
other factors. In recommending that the Shareholders approve the Investment
Sub-Advisory Agreement, the Trustees carefully evaluated the investing
experience of the proposed Sub-Adviser's key personnel and the quality of
services the proposed Sub-Adviser can be expected to provide to the Portfolio,
including, but not limited to: (1) the fee and expense ratios of comparable
mutual funds;
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<PAGE>
(2) the performance of the Portfolio since commencement of operations; (3) the
nature and quality of the services expected to be rendered to the Portfolio by
the proposed Sub-Adviser; (4) the distinct investment objective and policies of
the Portfolio; (5) the fact that the compensation payable to the proposed Sub-
Adviser by the Portfolio under the proposed Investment Sub-Advisory Agreement
will be at the same or a lower rate as the compensation payable under the
existing investment advisory agreements; (6) the history, reputation,
qualification and background of the proposed Sub-Adviser as well as the
qualifications of its personnel and its financial condition; (7) its performance
records; (8) the benefits expected to be realized as a result of the Manager of
Managers structure; and (9) other factors deemed relevant. The Trustees also
reviewed the fees to be paid to the Sub-Adviser in comparison to those being
charged in the relevant segment of the mutual fund business, including any
benefits received by the Sub-Adviser or its affiliates in connection with soft
dollar payments.
Duties Under the Investment Sub-Advisory Agreement. Under the Investment Sub-
Advisory Agreement, the Sub-Adviser makes the investment decisions for the
assets of the Portfolio allocated to it by SFM (if the Portfolio has more than
one Sub-Adviser), and continuously reviews, supervises, and administers the
Portfolio's investment program with respect to these assets. The Sub-Adviser is
independent of SFM and discharges its responsibilities subject to the
supervision of SFM and the Trustees of the Trust and in a manner consistent with
the Portfolio's investment objectives, policies and limitations.
Duration and Termination. Unless terminated earlier, the Investment Sub-
Advisory Agreement shall continue in effect as to the Portfolio through April
30, 1998, and thereafter, for periods of one year for so long as such
continuance is specifically approved at least annually (i) by the vote of the
holders of a majority of the outstanding shares of such Portfolio or by the
Trustees of the Trust, and (ii) by the vote of a majority of those Trustees of
the Trust who are not parties to the Investment Advisory Agreement or Investment
Sub-Advisory Agreement or who are not "interested persons" (as that term is
defined in the 1940 Act) of any party thereto, cast in person at a meeting
called for the purpose of voting on such approval. If the Manager of Managers
structure is approved by the Shareholders of the Portfolio, the Trustees may add
and replace Sub-Advisers without Shareholder approval. This structure requires
an order of exemption from the SEC before becoming operative. If SFM obtains
exemptive relief from the SEC permitting it to engage a Sub-Adviser without
first obtaining approval of the Investment Sub-Advisory Agreement from a
majority of the outstanding voting securities of the Portfolio(s) involved, the
Investment Sub-Advisory Agreement shall become effective upon its approval by
the Trust's Board of Trustees. Any Sub-Adviser so selected and approved shall be
without the protection accorded by shareholder approval of an investment
adviser's receipt of compensation under Section 36(b) of the 1940 Act.
The Investment Sub-Advisory Agreement will terminate automatically in the event
of its assignment or in the event that SFM's Investment Advisory Agreement is
terminated. The Investment Sub-Advisory Agreement is terminable at any time
without penalty by the Trustees of the Trust, or, with respect to the Portfolio,
by a vote of a majority of the outstanding shares of such Portfolio on not less
than 30 days nor more than 60 days written notice to such Portfolio's Sub-
Adviser. In addition, the Portfolio's Investment
11
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Sub-Advisory Agreement is terminable by such Portfolio's Sub-Adviser upon 90
days written notice to the Trust or SFM.
In the event Shareholders of the Portfolio do not approve the adoption of an
Investment Sub-Advisory Agreement at the Meeting to which this Proxy Statement
relates, or any adjournment thereof, the Trustees will consider the appropriate
course of action.
3. APPROVAL OF AN INVESTMENT SUB-ADVISER AND THE INVESTMENT SUB-ADVISORY
AGREEMENT FOR THE INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
The Board of Trustees is recommending that Shareholders of the Portfolio approve
Standish ("Standish") as a Sub-Adviser to the Portfolio and approve the form of
Investment Sub-Advisory Agreement between SFM and Standish.
Compensation. Under the proposed Investment Sub-Advisory Agreement, SFM will pay
Standish a fee, which is calculated and paid monthly, based on the annual
percentage rate of .18% up to $125 million and .15% over $125 million of the
average monthly market value of the assets of the Portfolio.
Description of Standish, Ayer & Wood. Standish is a Massachusetts corporation
with its principal business address at One Financial Center, Suite 26, Boston,
Massachusetts 02111. Standish was founded in 1933, and as of January 15, 1996,
it had approximately $29.4 billion in assets under management. Standish's
clients include corporations, endowments, foundations, pension and profit
sharing plans, and other investment companies.
The Portfolio's assets will be managed by Raymond J. Kubiak, CFA. Mr. Kubiak
has 15 years experience in public finance and is a Vice President and Director
of Standish. He has been with Standish since March, 1988.
Listed below are the names, titles and principal occupations of the principal
executive officer and of each member of the Board of Directors of Standish. The
principal business address of the principal executive officer and the members of
the Board of Trustees, as it relates to their duties at Standish, is One
Financial Center, Suite 26, Boston, MA 02111. No Trustee of the Trust purchased
or sold interests in Standish during the Trust's most recent fiscal year.
Principal
Name Title Occupation
- ---- ----- ----------
Caleb F. Aldrich Director Vice President
Nicholas S. Battelle Director Vice President
Walter M. Cabot Director Senior Advisor
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Principal
Name Title Occupation
- ---- ----- ----------
David H. Cameron Director Vice President
Karen K. Chandor Director Vice President
Davis B. Clayson Managing Director Vice President
Richard C. Doll Director Vice President
Dolores S. Driscoll Managing Director Vice President
Mark A. Flaherty Director Vice President, Trader
Maria D. Furman Director Vice President
James E. Hollis, III Director Vice President
Raymond J. Kubiak Director Vice President
Edward H. Ladd Chairman and Director --
Laurence A. Manchester Director Vice President
David W. Murray Director Vice President, Treasurer
George W. Noyes Director President
Arthur H. Parker, II Director Vice President
Howard B. Rubin Director Vice President
Austin C. Smith Director Vice President, Portfolio
Manager
David C. Stuehr Director Vice President
James J. Sweeney Director Vice President
Ralph S. Tate Director Vice President
Richard S. Wood Director, Secretary Vice President
SECTION IV.
GENERAL INFORMATION ABOUT THE TRUST AND OTHER MATTERS
Distribution. SEI Financial Services Company ("SFS"), a wholly-owned
subsidiary of SEI acts as the Distributor of the Trust's shares pursuant to a
Distribution Agreement dated January 22, 1987, between the Trust and SFS. Alfred
P. West, Jr. serves as Chairman of the Board and Chief Executive Officer of SFS
and SEI, and Henry H. Greer serves as Director, President and Chief Operating
Officer of SFS and SEI. William M. Doran, a Trustee of the Trust, is a Director
and Secretary of SEI.
Portfolio Transactions. For the fiscal year ended August 31, 1995, the
Portfolio paid no brokerage commissions to affiliates.
5% Shareholders. As of ___________, 1996, the following persons were the only
persons who were, to the knowledge of the Trust, beneficial owners of 5% or more
of shares of the Portfolio voting at this Meeting.
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Name and Address of Percentage of
Beneficial Owner Number of Shares Portfolio's Shares
- ---------------- ---------------- ------------------
The Trust's Trustees and officers do not beneficially own any shares of the
Trust.
Adjournment. In the event that sufficient votes in favor of a Proposal set
forth in the Notice of the Special Meeting are not received by the time
scheduled for the meeting, the persons named as proxies may propose one or more
adjournments of the meeting for a period or periods of not more than 60 days in
the aggregate to permit further solicitation of proxies with respect to any of
such Proposal. Any such adjournment will require the affirmative vote of a
majority of the votes cast on the question in person or by proxy at the session
of the meeting to be adjourned. The persons named as proxies will vote in favor
of such adjournment those proxies which they are entitled to vote in favor of
such Proposals. They will vote against any such adjournment those proxies
required to be voted against any such Proposals. The costs of any such
additional solicitation and of any adjourned session will be borne by the Trust.
Required Vote. Approval of the Proposals requires the affirmative vote of a
majority of the outstanding shares of the Portfolio. As defined in the 1940 Act,
"majority of the outstanding shares" means the vote of (i) 67% or more of the
Portfolio's outstanding shares present at a meeting, if the holders of more than
50% of the outstanding shares of the Portfolio are present or represented by
proxy, or (ii) more than 50% of the Portfolio's outstanding shares, whichever is
less.
Abstentions and "broker non-votes" will not be counted for or against any
Proposal to which it relates, but will be counted for purposes of determining
whether a quorum is present. Abstentions will be counted as votes present for
purposes of determining a "majority of the outstanding voting securities"
present at the Meeting, and will therefore have the effect of counting against
the Proposal to which it relates.
Shareholder Proposals. The Trust does not hold annual Shareholder meetings.
Shareholders wishing to submit proposals for inclusion in a proxy statement for
a subsequent meeting should send their written proposals to the Secretary of the
Trust c/o SEI Corporation, Legal Department, 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658.
Reports to Shareholders. The Trust will furnish, without charge, a copy of the
most recent Annual Report to Shareholders of the Trust and the most recent Semi-
Annual Report succeeding such Annual Report, if any, on request. Requests should
be directed
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to the Trust at 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658, or by
calling 1-800-342-5734.
Other Matters. The Trustees know of no other business to be brought before the
meeting. However, if any other matters properly come before the meeting, it is
their intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
--------------------------
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY.
15
<PAGE>
SEI TAX EXEMPT TRUST
Intermediate-Term Municipal Portfolio
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF TRUSTEES FOR
THE SPECIAL MEETING OF SHAREHOLDERS, APRIL 16, 1996
The undersigned, revoking previous proxies with respect to the Shares (defined
below), hereby appoints David G. Lee and Robert B. Carroll as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the Intermediate-Term Municipal Portfolio (the "Portfolio") of
SEI Tax Exempt Trust (the "Trust") to be held in the offices of SEI Financial
Management Corporation ("SFM"), 680 East Swedesford Road, Wayne, Pennsylvania
19087-1658, on Tuesday, April 16, 1996, at 3:30 p.m., and any adjournments or
postponements thereof (the "Meeting") all shares of beneficial interest of said
Portfolio that the undersigned would be entitled to vote if personally present
at the Meeting (the "Shares") on the proposals set forth below respecting the
Portfolio's new management structure, the new adviser and sub-adviser, and the
new advisory and sub-advisory agreements and, in accordance with their own
discretion, any other matters properly brought before the Meeting.
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS A VOTE "FOR" THE PROPOSALS TO:
PROPOSAL 1. Authorize the Trust's Board of Trustees to appoint additional or
replacement investment sub-advisers recommended by SFM for the
Portfolio without seeking approval of the Portfolio's
Shareholders of the contracts pursuant to which such sub-advisers
serve.
____For ____Against ____Abstain
PROPOSAL 2. Approve the selection of SFM as the investment adviser for the
Portfolio, and to approve the Investment Advisory Agreement
between the Trust, on behalf of the Portfolio, and SFM.
____For ____Against ____Abstain
<PAGE>
PROPOSAL 3. Approve the selection of Standish, Ayer & Wood, Inc. ("Standish")
as an investment sub-adviser for the Portfolio, and to approve
the form of investment sub-advisory agreement between SFM and
Standish.
____For ____Against ____Abstain
This proxy will, when properly executed, be voted as directed herein by the
signing Shareholder. If no contrary direction is given when the duly executed
proxy is returned, this proxy will be voted FOR each of the foregoing proposals
and will be voted in the appointed proxies' discretion upon such other business
as may properly come before the Meeting.
The undersigned acknowledges receipt with this proxy of a copy of the Notice of
Special Meeting and the Proxy Statement of the Board of Trustees. Your
signature(s) on this proxy should be exactly as your name(s) appear on this
Proxy. If the shares are held jointly, each holder should sign this Proxy.
Attorneys-in-fact, executors, administrators, trustees or guardians should
indicate the full title and capacity in which they are signing.
Dated:_________________, 1996 ________________________________
Signature of Shareholder
________________________________
Signature (Joint owners)
PLEASE DATE, SIGN AND RETURN PROMPTLY USING THE ENCLOSED, POSTAGE-PAID ENVELOPE
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING; YOU MAY, NEVERTHELESS, VOTE IN
PERSON IF YOU DO ATTEND.
2
<PAGE>
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
SEI TAX EXEMPT TRUST
AGREEMENT made this _____ day of _______, 1995, by and between SEI Tax Exempt
Trust, a Massachusetts business trust (the "Trust"), and SEI Financial
Management Corporation, (the "Adviser").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"),
consisting of several portfolios of shares, each having its own investment
policies; and
WHEREAS, the Trust desires to retain the Adviser to render investment
management services with respect to its Intermediate-Term Municipal Portfolio
and such other portfolios as the Trust and the Adviser may agree upon (the
"Portfolios"), and the Adviser is willing to render such services:
NOW, THEREFORE, in consideration of mutual covenants herein contained, the
parties hereto agree as follows:
1. Duties of the Adviser. The Trust employs the Adviser to manage the
investment and reinvestment of the assets, to hire (subject to the approval
of the Trust's Board of Trustees and, except as otherwise permitted under
the terms of any exemptive relief obtained by the Adviser from the
Securities and Exchange Commission, or by rule or regulation, a majority of
the outstanding voting securities of any affected Portfolio(s)) and
thereafter supervise the investment activities of one or more sub-advisers
deemed necessary to carry out the investment program of any Portfolios of
the Trust, and to continuously review, supervise and (where appropriate)
administer the investment program of the Portfolios, to determine in its
discretion (where appropriate) the securities to be purchased or sold, to
provide the Administrator and the Trust with records concerning the
Adviser's activities which the Trust is required to maintain, and to render
regular reports to the Administrator and to the Trust's officers and
Trustees concerning the Adviser's discharge of the foregoing
responsibilities. The retention of a sub-adviser by the Adviser shall not
relieve the Adviser of its responsibilities under this Agreement.
The Adviser shall discharge the foregoing responsibilities subject to the
control of the Board of Trustees of the Trust and in compliance with such
policies as the Trustees may from time to time establish, and in compliance
with the objectives, policies, and limitations for each such Portfolio set
forth in the Trust's prospectus and statement of additional information, as
amended from time to time (referred to collectively as the "Prospectus"),
and applicable laws and regulations. The Trust will furnish the Adviser
from time to time with copies of all amendments or supplements to the
Prospectus, if any.
The Adviser accepts such employment and agrees, at its own expense, to
render the services and to provide the office space, furnishings and
equipment and the personnel (including any sub-advisers) required by it to
perform the services on the terms and for the compensation provided herein.
The Adviser will not, however, pay for the cost of securities, commodities,
and other investments (including brokerage commissions and other
transaction charges, if any) purchased or sold for the Trust.
2. Delivery of Documents. The Trust has furnished Adviser with copies
properly certified or authenticated of each of the following:
(a) The Trust's Agreement and Declaration of Trust, as filed with the
Secretary of State of the Commonwealth of Massachusetts (such Agreement and
Declaration of Trust, as presently in
<PAGE>
effect and as it shall from time to time be amended, is herein called the
"Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the
"By-Laws");
(c) Prospectus(es) of the Portfolio(s).
3. Other Covenants. The Adviser agrees that it:
(a) will comply with all applicable Rules and Regulations of the
Securities and Exchange Commission and will in addition conduct its
activities under this Agreement in accordance with other applicable law;
(b) will place orders pursuant to its investment determinations for the
Portfolios either directly with the issuer or with any broker or dealer. In
executing Portfolio transactions and selecting brokers or dealers, the
Adviser will use its best efforts to seek on behalf of the Portfolio the
best overall terms available. In assessing the best overall terms available
for any transaction, the Adviser shall consider all factors that it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, both
for the specific transaction and on a continuing basis. In evaluating the
best overall terms available, and in selecting the broker-dealer to execute
a particular transaction the Adviser may also consider the brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Portfolio and/or other
accounts over which the Adviser or an affiliate of the Adviser may exercise
investment discretion. The Adviser is authorized, subject to the prior
approval of the Trust's Board of Trustees, to pay to a broker or dealer
who provides such brokerage and research services a commission for
executing a portfolio transaction for any of the Portfolios which is in
excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if, but only if, the Adviser
determines in good faith that such commission was reasonable in relation to
the value of the brokerage and research services provided by such broker or
dealer - - viewed in terms of that particular transaction or terms of the
overall responsibilities of the Adviser to the Portfolio. In addition, the
Adviser if authorized to allocate purchase and sale orders for portfolio
securities to brokers or dealers (including brokers and dealers that are
affiliated with the Adviser or the Trust's principal underwriter) to take
into account the sale of shares of the Trust if the Adviser believes that
the quality of the transaction and the commission are comparable to what
they would be with other qualified firms. In no instance, however, will any
Portfolio's securities be purchased from or sold to the Adviser, any
sub-adviser engaged with respect to that Portfolio, the Trust's principal
underwriter, or any affiliated person of either the Trust, the Adviser, and
sub-adviser or the principal underwriter, acting as principal in the
transaction, except to the extent permitted by the Securities and Exchange
Commission and the 1940 Act.
4. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Sections 1 and 2 of this Agreement, the Trust shall
pay to the Adviser compensation at the rate(s) specified in the Schedule(s)
which are attached hereto and made a part of this Agreement. Such
compensation shall be paid to the Adviser at the end of each month, and
calculated by applying a daily rate, based on the annual percentage rates
as specified in the attached Schedule(s), to the assets of the Portfolio.
The fee shall be based on the average daily net assets for the month
involved. The Adviser may, in its discretion and from time to time, waive a
portion of its fee.
2
<PAGE>
All rights of compensation under this Agreement for services performed as
of the termination date shall survive the termination of this Agreement.
5. Excess Expenses. If the expenses for any Portfolio for any fiscal year
(including fees and other amounts payable to the Adviser, but excluding
interest, taxes, brokerage costs, litigation, and other extraordinary
costs) as calculated every business day would exceed the expense
limitations imposed on investment companies by any applicable statute or
regulatory authority of any jurisdiction in which Shares are qualified for
offer and sale, the Adviser shall bear such excess cost.
However, the Adviser will not bear expenses of the Trust or any Portfolio
which would result in the Trust's inability to qualify as a regulated
investment company under provisions of the Internal Revenue Code. Payment
of expenses by the Adviser pursuant to this Section 5 shall be settled on a
monthly basis (subject to fiscal year end reconciliation) by a waiver of
the Adviser's fees provided for hereunder, and such waiver shall be treated
as a reduction in the purchase price of the Adviser's services.
6. Reports. The Trust and the Adviser agree to furnish to each other, if
applicable, current prospectuses, proxy statements, reports to
shareholders, certified copies of their financial statements, and such
other information with regard to their affairs as each may reasonably
request. The Adviser further agrees to furnish to the Trust, if applicable,
the same such documents and information pertaining to any sub-adviser as
the Trust may reasonably request.
7. Status of the Adviser. The services of the Adviser to the Trust are not to
be deemed exclusive, and the Adviser shall be free to render similar
services to others so long as its services to the Trust are not impaired
thereby. The Adviser shall be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority
to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust. To the extent that the purchase or sale of securities
or other investments of any issuer may be deemed by the Adviser to be
suitable for two or more accounts managed by the Adviser, the available
securities or investments may be allocated in a manner believed by the
Adviser to be equitable to each account. It is recognized that in some
cases this may adversely affect the price paid or received by the Trust or
the size or position obtainable for or disposed by the Trust or any
Portfolio.
8. Certain Records. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under
the 1940 Act which are prepared or maintained by the Adviser (or any
sub-adviser) on behalf of the Trust are the property of the Trust and will
be surrendered promptly to the Trust on request. The Adviser further agrees
to preserve for the periods prescribed in Rule 31a-2 under the 1940 Act the
records required to be maintained under Rule 31a-1 under the 1940 Act.
9. Limitation of Liability of the Adviser. The duties of the Adviser shall be
confined to those expressly set forth herein, and no implied duties are
assumed by or may be asserted against the Adviser hereunder. The Adviser
shall not be liable for any error of judgment or mistake of law or for any
loss arising out of any investment or for any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by
reason of reckless disregard of its obligations and duties hereunder,
except as may otherwise be provided under provisions of applicable state
law which cannot be waived or modified hereby. (As used in this Section 9,
the term "Adviser" shall include directors, officers, employees and other
corporate agents of the Adviser as well as that corporation
3
<PAGE>
itself).
10. Permissible Interests. Trustees, agents, and shareholders of the Trust are
or may be interested in the Adviser (or any successor thereof) as
directors, partners, officers, or shareholders, or otherwise; directors,
partners, officers, agents, and shareholders of the Adviser are or may be
interested in the Trust as Trustees, officers, shareholders or otherwise;
and the Adviser (or any successor) is or may be interested in the Trust as
a shareholder or otherwise subject to the provisions of applicable law.
All such interests shall be fully disclosed between the parties on an
ongoing basis and in the Trust's Prospectus as required by law. In
addition, brokerage transactions for the Trust may be effected through
affiliates of the Adviser or any sub-adviser if approved by the Board of
Trustees, subject to the rules and regulations of the Securities and
Exchange Commission.
11. Duration and Termination. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until two years from date of
execution, and thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least annually (a) by
the vote of a majority of those Trustees of the Trust who are not parties
to this Agreement or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by
the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of each Portfolio; provided, however, that if the
shareholders of any Portfolio fail to approve the Agreement as provided
herein, the Adviser may continue to serve hereunder in the manner and to
the extent permitted by the 1940 Act and rules and regulations thereunder.
The foregoing requirement that continuance of this Agreement be
"specifically approved at least annually" shall be construed in a manner
consistent with the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated as to any Portfolio at any time, without
the payment of any penalty by vote of a majority of the Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Portfolio on not less than 30 days nor more than 60 days written notice to
the Adviser, or by the Adviser at any time without the payment of any
penalty, on 90 days written notice to the Trust. This Agreement will
automatically and immediately terminate in the event of its assignment.
As used in this Section 11, the terms "assignment", "interested persons",
and a "vote of a majority of the outstanding voting securities" shall have
the respective meanings set forth in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission.
12. Governing Law. This Agreement shall be governed by the internal laws of
the Commonwealth of Massachusetts, without regard to conflict of law
principles; provided, however that nothing herein shall be construed as
being inconsistent with the 1940 Act.
13. Notice: Any notice, advice or report to be given pursuant to this
Agreement shall be deemed sufficient if delivered or mailed by registered,
certified or overnight mail, postage prepaid addressed by the party giving
notice to the other party at the last address furnished by the other party:
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To the Adviser at: SEI Financial Management Corporation
680 East Swedesford Road
Wayne, PA 19087
Attn: Legal Department
To the Trust at: SEI Financial Management Corporation
680 East Swedesford Road
Wayne, PA 19087
Attn: Legal Department
14. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
15. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject matter.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
A copy of the Declaration of Trust of the Trust is on file with the Secretary of
State of the Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust as Trustees, and
is not binding upon any of the Trustees, officers, or shareholders of the Trust
individually but binding only upon the assets and property of the Trust.
No Portfolio of the Trust shall be liable for the obligations of any other
Portfolio of the Trust. Without limiting the generality of the foregoing, the
Adviser shall look only to the assets of a particular Portfolio for payment of
fees for services rendered to that Portfolio.
Where the effect of a requirement of the 1940 Act reflected in any provision of
this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.
SEI Tax Exempt Trust SEI Financial Management Corporation
By: By:
Attest: Attest:
5
<PAGE>
Schedule A
to the
Investment Advisory Agreement
between
SEI Tax Exempt Trust
and
SEI Financial Management Corporation
Pursuant to Article 4, the Trust shall pay the Adviser compensation at an annual
rate as follows:
Intermediate-Term Municipal Portfolio . 33%
6
<PAGE>
EXHIBIT B
INVESTMENT SUB-ADVISORY AGREEMENT
SEI TAX EXEMPT TRUST
--------------------
AGREEMENT made this _____ day of ______, 1995, between SEI Financial
Management Corporation, (the "Adviser") and Standish, Ayer & Wood, Inc. (the
"Sub-Adviser").
WHEREAS, SEI Tax Exempt Trust, a Massachusetts business trust (the "Trust")
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated __________ (the "Advisory Agreement") with the Trust, pursuant to which
the Adviser will act as investment adviser to the Intermediate-Term Municipal
Portfolio (the "Portfolio"), which is a series of the Trust; and
WHEREAS, the Adviser, with the approval of the Trust, desires to retain the
Sub-Adviser to provide investment advisory services to the Adviser in connection
with the management of the Portfolio, and the Sub-Adviser is willing to render
such investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. Duties of the Sub-Adviser. Subject to supervision by the Adviser and the
Trust's Board of Trustees, the Sub-Adviser shall manage all of the
securities and other assets of the Portfolio entrusted to it hereunder (the
"Assets"), including the purchase, retention and disposition of the Assets,
in accordance with the Portfolio's investment objectives, policies and
restrictions as stated in the Portfolio's prospectus and statement of
additional information, as currently in effect and as amended or
supplemented from time to time (referred to collectively as the
"Prospectus"), and subject to the following:
(a) The Sub-Adviser shall, in consultation with and subject to the direction
of the Adviser, determine from time to time what Assets will be purchased,
retained or sold by the Portfolio, and what portion of the Assets will be
invested or held uninvested in cash.
(b) In the performance of its duties and obligations under this Agreement, the
Sub-Adviser shall act in conformity with the Trust's Declaration of Trust
(as defined herein) and the Prospectus and with the instructions and
directions of the Adviser and of the Board of Trustees of the Trust and
will conform to and comply with the requirements of the 1940 Act, the
Internal Revenue Code of 1986, and all other applicable federal and state
laws and regulations, as each is amended from time to time.
(c) The Sub-Adviser shall determine the Assets to be purchased or sold by the
Portfolio as provided in subparagraph (a) and will place orders with or
through such persons, brokers or dealers to carry out the policy with
respect to brokerage set forth in the Portfolio's Registration Statement
(as defined herein) and Prospectus or as the Board of Trustees or the
Adviser may direct from time to time, in conformity with federal securities
laws. In executing Portfolio transactions and selecting brokers or dealers,
the Sub-Adviser will use its best efforts to seek on behalf of the
Portfolio the best overall terms available. In assessing the best overall
terms available for any transaction, the Sub-Adviser shall consider all
factors that it deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition and execution
<PAGE>
capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. In evaluating the best overall terms available, and in selecting the
broker-dealer to execute a particular transaction, the Sub-Adviser may also
consider the brokerage and research services provided (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934).
Consistent with any guidelines established by the Board of Trustees of the
Trust, the Sub-Adviser is authorized to pay to a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines in good faith that
such commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer - - viewed in terms
of that particular transaction or terms of the overall responsibilities of
the Sub-Adviser to the Portfolio. In addition, the Sub-Adviser if
authorized to allocate purchase and sale orders for securities to brokers
or dealers (including brokers and dealers that are affiliated with the
Adviser, Sub-Adviser or the Trust's principal underwriter) to take into
account the sale of shares of the Trust if the Sub-Adviser believes that
the quality of the transaction and the commission are comparable to what
they would be with other qualified firms. In no instance, however, will the
Portfolio's Assets be purchased from or sold to the Adviser, Sub-Adviser,
the Trust's principal underwriter, or any affiliated person of either the
Trust, Adviser, the Sub-Adviser or the principal underwriter, acting as
principal in the transaction, except to the extent permitted by the
Securities and Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records with respect to
transactions involving the Assets required by subparagraphs (b)(5), (6),
(7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act.
The Sub-Adviser shall provide to the Adviser or the Board of Trustees such
periodic and special reports, balance sheets or financial information, and
such other information with regard to its affairs as the Adviser or Board
of Trustees may reasonably request.
The Sub-Adviser shall keep the books and records relating to the Assets
required to be maintained by the Sub-Adviser under this Agreement and shall
timely furnish to the Adviser all information relating to the Sub-Adviser's
services under this Agreement needed by the Adviser to keep the other books
and records of the Portfolio required by Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall also furnish to the Adviser any other information
relating to the Assets that is required to be filed by the Adviser or the
Trust with the SEC") or sent to shareholders under the 1940 Act (including
the rules adopted thereunder) or any exemptive or other relief that the
Adviser or the Trust obtains from the SEC. The Sub-Adviser agrees that all
records that it maintains on behalf of the Portfolio are property of the
Portfolio and the Sub-Adviser will surrender promptly to the Portfolio any
of such records upon the Portfolio's request; provided, however, that the
Sub-Adviser may retain a copy of such records. In addition, for the
duration of this Agreement, the Sub-Adviser shall preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any such records as are
required to be maintained by it pursuant to this Agreement, and shall
transfer said records to any successor Sub-Adviser upon the termination of
this Agreement (or, if there is no successor Sub-Adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Portfolio's custodian on each business
day with information relating to all transactions concerning the
Portfolio's Assets and shall provide the Adviser with such information upon
request of the Adviser.
(f) The investment management services provided by the Sub-Adviser under
this Agreement are not to be deemed exclusive and the Sub-Adviser shall be
free to render similar services to others, as
2
<PAGE>
long as such services do not impair the services rendered to the Adviser or
the Trust.
(g) The Sub-Adviser shall promptly notify the Adviser of any financial
condition that is likely to impair the Sub-Adviser's ability to fulfill its
commitment under this Agreement.
(h) The Sub-Adviser shall review all proxy solicitation materials and be
responsible for voting and handling all proxies in relation to the
securities held in the Portfolio. The Adviser shall instruct the custodian
and other parties providing services to the Portfolio to promptly forward
misdirected proxies to the Sub-Adviser.
Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners, officers
or employees.
2. Duties of the Adviser. The Adviser shall continue to have responsibility
for all services to be provided to the Portfolio pursuant to the Advisory
Agreement and shall oversee and review the Sub-Adviser's performance of
its duties under this Agreement; provided, however, that in connection
with its management of the Assets, nothing herein shall be construed to
relieve the Sub-Adviser of responsibility for compliance with the Trust's
Declaration of Trust (as defined herein), the Prospectus, the instructions
and directions of the Board of Trustees of the Trust, the requirements
of the 1940 Act, the Internal Revenue Code of 1986, and all other
applicable federal and state laws and regulations, as each is amended from
time to time.
3. Delivery of Documents. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following
documents:
(a) The Trust's Agreement and Declaration of Trust, as filed with the
Secretary of State of the Commonwealth of Massachusetts (such Agreement and
Declaration of Trust, as in effect on the date of this Agreement and as
amended from time to time, herein called the "Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the
"By-Laws");
(c) Prospectus(es) of the Portfolio.
4. Compensation to the Sub-Adviser. For the services to be provided by the
Sub-Adviser pursuant to this Agreement, the Adviser will pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation
therefor, a sub-advisory fee at the rate specified in the Schedule(s) which
is attached hereto and made part of this Agreement. The fee will be
calculated based on the average monthly market value of the Assets under
the Sub-Adviser's management and will be paid to the Sub-Adviser monthly.
Except as may otherwise be prohibited by law or regulation (including any
then current SEC staff interpretation), the Sub-Adviser may, in its
discretion and from time to time, waive a portion of its fee.
5. Indemnification. The Sub-Adviser shall indemnify and hold harmless the
Adviser from and against any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) howsoever
arising from or in connection with the performance of the Sub-Adviser's
obligations under this Agreement; provided, however, that the Sub-Adviser's
obligation under this Section 5 shall be reduced to the extent that the
claim against, or the loss, liability or damage experienced by the Adviser,
is caused by or is otherwise directly related to the
3
<PAGE>
Adviser's own willful misfeasance, bad faith or negligence, or to the
reckless disregard of its duties under this Agreement.
6. Duration and Termination. This Agreement shall become effective upon its
approval by the Trust's Board of Trustees and by the vote of a majority of
the outstanding voting securities of the Portfolio. This Agreement shall
continue in effect for a period of more than two years from the date hereof
only so long as continuance is specifically approved at least annually in
conformance with the 1940 Act; provided, however, that this Agreement may
be terminated with respect to the Portfolio (a) by the Portfolio at any
time, without the payment of any penalty, by the vote of a majority of
Trustees of the Trust or by the vote of a majority of the outstanding
voting securities of the Portfolio, (b) by the Adviser at any time, without
the payment of any penalty, on not more than 60 days' nor less than 30
days' written notice to the Sub-Adviser, or (c) by the Sub-Adviser at any
time, without the payment of any penalty, on 90 days' written notice to the
Adviser. This Agreement shall terminate automatically and immediately in
the event of its assignment, or in the event of a termination of the
Adviser's agreement with the Trust. As used in this Section 6, the terms
"assignment" and "vote of a majority of the outstanding voting securities"
shall have the respective meanings set forth in the 1940 Act and the rules
and regulations thereunder, subject to such exceptions as may be granted by
the SEC under the 1940 Act.
7. Governing Law. This Agreement shall be governed by the internal laws of
the Commonwealth of Massachusetts, without regard to conflict of law
principles; provided, however, that nothing herein shall be construed as
being inconsistent with the 1940 Act.
8. Severability. Should any part of this Agreement be held invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
9. Notice: Any notice, advice or report to be given pursuant to this
Agreement shall be deemed sufficient if delivered or mailed by registered,
certified or overnight mail, postage prepaid addressed by the party giving
notice to the other party at the last address furnished by the other party:
To the Adviser at: SEI Financial Management Corporation
680 East Swedesford Road
Wayne, PA 19087
Attention: Legal Department
To the Sub-Adviser at: Standish, Ayer & Wood, Inc.
One Financial Center, Suite 26
Boston, MA 02111
Attention: President
10. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject matter.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
A copy of the Declaration of Trust is on file with the Secretary of State
of the Commonwealth of Massachusetts, and notice is hereby given that the
obligations of this instrument are not binding upon
4
<PAGE>
any of the Trustees, officers or shareholders of the Portfolio or the Trust.
Where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
SEI Financial Management Corporation Standish, Ayer & Wood, Inc.
By: By:
-------------------------------- --------------------------------
Name: Name:
------------------------------ ------------------------------
Title: Title:
----------------------------- -----------------------------
5
<PAGE>
Schedule A
to the
Sub-Advisory Agreement
between
SEI Financial Management Corporation
and
Standish, Ayer & Wood, Inc.
Pursuant to Article 4, the Adviser shall pay the Sub-Adviser compensation at an
annual rate as follows:
Intermediate-Term Municipal Portfolio .__%
6
