<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1999.
FILE NO. 2-97111
FILE NO. 811-4283
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 23 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 25 /X/
------------------------
SEI INDEX FUNDS
(Exact Name of Registrant as Specified in Charter)
C/O CT CORPORATION
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (800) 932-7781
EDWARD D. LOUGHLIN
C/O SEI INVESTMENTS COMPANY
OAKS, PENNSYLVANIA 19456
(Name and Address of Agent for Service)
------------------------
COPIES TO:
RICHARD W. GRANT, ESQUIRE JOHN H. GRADY, JR., ESQUIRE
Morgan, Lewis & Bockius LLP Morgan, Lewis & Bockius LLP
1701 Market Street 1701 Market Street
Philadelphia, Pennsylvania 19103 Philadelphia, Pennsylvania 19103
------------------------
Title of Securities Being Registered ............. Units of Benenficial Interest
------------------------
/X/ immediately upon filing pursuant to paragraph (b)
/ / on [date] pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on [date] pursuant to paragraph (a)
If appropriate, check the following box:
/ / This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SEI
Index
Funds
CLASS A SHARES
PROSPECTUS
JULY 31, 1999
---------------------------------------------------------
S&P 500 INDEX FUND
BOND INDEX FUND
---------------------------------------------------------
INVESTMENT ADVISERS
SEI INVESTMENTS MANAGEMENT CORPORATION
(S&P 500 INDEX FUND)
MELLON BOND ASSOCIATES, LLP
(BOND INDEX FUND)
INVESTMENT SUB-ADVISER
WORLD ASSET MANAGEMENT, LLC
(S&P 500 INDEX FUND)
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED ANY
FUND SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.
<PAGE>
SEI Index Funds
ABOUT THIS PROSPECTUS
- ------------------------------------------------------------------------
SEI Index Funds is a mutual fund that offers different classes of shares in
separate investment portfolios (Funds). The Funds have individual investment
goals and strategies, and are designed primarily for institutional investors and
financial institutions and their clients. This prospectus gives you important
information about Class A Shares of the Funds that you should know before
investing. Please read this prospectus and keep it for future reference.
This prospectus has been arranged into different sections so that you can easily
review this important information. On the next page, there is some general
information you should know about risk and return which is common to each Fund.
For more detailed information about each Fund, please see:
S&P 500 INDEX FUND...................................................4
BOND INDEX FUND......................................................6
THE FUNDS' OTHER INVESTMENTS.........................................8
THE INVESTMENT ADVISERS AND SUB-ADVISER..............................8
PURCHASING, SELLING AND EXCHANGING FUND SHARES......................10
DIVIDENDS AND DISTRIBUTIONS.........................................11
TAXES...............................................................11
FINANCIAL HIGHLIGHTS................................................12
HOW TO OBTAIN MORE INFORMATION ABOUT SEI INDEX FUNDS........Back Cover
<PAGE>
PROSPECTUS 3
RISK/RETURN INFORMATION COMMON TO THE FUNDS
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
Each Fund has its own investment goal and strategies for reaching that goal.
Each Fund's assets are managed under the direction of its Adviser. For the S&P
500 Index Fund, SEI Investments Management Corporation (SIMC) is the Adviser,
and one or more Sub-Advisers manage a portion of the Fund's assets. SIMC acts as
"manager of managers" for the S&P 500 Index Fund, and attempts to ensure that
the Sub-Adviser(s) comply with the Fund's investment policies and guidelines.
SIMC may also recommend the appointment of additional or replacement
Sub-Advisers to the Fund's Board. Mellon Bond Associates, LLP, serves as Adviser
to the Bond Index Fund.
Each Fund attempts to track the performance of a benchmark index. Factors such
as cash flows, Fund expenses, imperfect correlation between the Funds'
investments and those of their benchmarks, rounding of share prices, changes to
the benchmark, and regulatory policies may affect the Funds' ability to achieve
perfect correlation. The magnitude of any tracking error may be affected by a
higher portfolio turnover rate. Because an index is just a composite of the
prices of the securities it represents rather than an actual portfolio of those
securities, an index will have no expenses. As a result, a Fund, which will have
expenses such as brokerage, custody, management fees and other operational
costs, may not achieve its investment objective of accurately correlating to an
index. Investing in the Funds involves risk and there is no guarantee that a
Fund will achieve its goal. No matter how good a job the Advisers do, you could
lose money on your investment in the Fund, just as you could with other
investments. A Fund share is not a bank deposit and it is not insured or
guaranteed by the FDIC or any government agency.
The value of your investment in a Fund is based on the market prices of the
securities the Funds hold. These prices change daily due to economic and other
events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities a Fund owns and the markets in which they trade. The
estimated level of volatility for each Fund is set forth in the Fund Summaries
that follow. The effect on a Fund's share price of a change in the value of a
single security will depend on how widely that Fund diversifies its holdings.
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other mutual funds (and most organizations around the world), the Funds
could be affected by computer problems related to the transition to the year
2000. While no one knows if these problems will have any impact on the Funds or
on the financial markets in general, each Fund is taking steps to protect Fund
investors. These include efforts to ensure that each Fund's own systems are
prepared to make the transition to the year 2000, and to determine that the
problem will not affect the systems used by each Fund's mission critical service
providers. The Funds have also sought and received assurances from these service
providers that they are devoting significant resources to prevent material
adverse consequences to the Funds. Whether these steps will be effective can
only be known for certain in the year 2000. While such assurances have been
received, year 2000 problems may ultimately negatively affect the companies and
governments whose securities the Funds purchase, which may have an impact on the
value of the Funds' shares. There is additional information on these risks in
the Statement of Additional Information.
<PAGE>
4 PROSPECTUS
S&P 500 INDEX FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Investment results that correspond to the Standard
& Poor's 500 Composite Index (S&P 500 Index)
- ------------------------------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Medium to High
- ------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Utilizing a specialist sub-adviser, the Fund
invests in the common stocks and other equity
securities included in the S&P 500 Index.
</TABLE>
- ------------------------------------------------------------------------
INVESTMENT STRATEGY
The S&P 500 Index Fund invests substantially all of its assets in securities
listed in the S&P 500 Index, which is comprised of 500 selected securities
(mostly common stocks). The Fund's ability to replicate the performance of the
S&P 500 Index will depend to some extent on the size and timing of cash flows
into and out of the Fund, as well as on the level of the Fund's expenses. The
Sub-Adviser selects the Fund's securities under the general supervision of SIMC,
but the Sub-Adviser makes no attempt to "manage" the Fund in the traditional
sense (I.E., by using economic, market or financial analyses). Instead, the
Sub-Adviser purchases a basket of securities that includes most of the companies
in the Index. However, the Fund's Sub-Adviser may sell an investment if the
merit of the investment has been substantially impaired by extraordinary events
or adverse financial conditions.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
The Fund is also subject to the risk that the performance of the Fund may not
correlate to that of the S&P 500 Index. In addition, the Fund is subject to the
risk that its investment approach, which attempts to replicate the performance
of the S&P 500 Index, may perform differently from other mutual funds which
focus on particular equity market segments or invest in other asset classes.
<PAGE>
PROSPECTUS 5
S&P 500 INDEX FUND
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year for two years.*
<TABLE>
<S> <C>
1997 32.82%
1998 28.18%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
21.21 -10.03%
(12/31/98) (09/30/98)
</TABLE>
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S CLASS A TOTAL RETURN FROM JANUARY 1, 1999, TO JUNE 30, 1999, WAS 12.12%.
This table compares the Fund's average annual total returns for Class A Shares
for the periods ended December 31, 1998, to those of the S&P 500 Index.
<TABLE>
<CAPTION>
SINCE INCEPTION
CLASS A SHARES 1 YEAR (FEBRUARY 28, 1996)
<S> <C> <C>
- -------------------------------------------------------------------------------------
S&P 500 INDEX FUND 28.18% 27.35%
- -------------------------------------------------------------------------------------
S&P 500 INDEX* 28.60% 28.17%**
- -------------------------------------------------------------------------------------
</TABLE>
* AN INDEX MEASURES THE MARKET PRICES OF A SPECIFIC GROUP OF SECURITIES IN A
PARTICULAR MARKET OR SECURITIES IN A MARKET SECTOR. YOU CANNOT INVEST DIRECTLY
IN AN INDEX. UNLIKE A MUTUAL FUND, AN INDEX DOES NOT HAVE AN INVESTMENT ADVISER
AND DOES NOT PAY ANY COMMISSIONS OR EXPENSES. IF AN INDEX HAD EXPENSES, ITS
PERFORMANCE WOULD BE LOWER. THE S&P 500 INDEX IS A WIDELY RECOGNIZED, MARKET
VALUE-WEIGHTED (HIGHER MARKET VALUE STOCKS HAVE MORE INFLUENCE THAN LOWER MARKET
VALUE STOCKS) INDEX OF 500 STOCKS DESIGNED TO MIMIC THE OVERALL EQUITY MARKET'S
INDUSTRY WEIGHTINGS.
** THE INCEPTION DATE FOR THE INDEX IS FEBRUARY 29, 1996.
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------
FUND FEES AND EXPENSES
This table describes the highest fees and expenses that you may pay indirectly
if you buy and hold shares of the Fund.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES DEDUCTED FROM FUND ASSETS) CLASS A SHARES
<S> <C>
Investment Advisory Fees 0.03%
Distribution (12b-1) Fees None
Other Expenses 0.41%
-------
Total Annual Fund Operating Expenses 0.44%*
</TABLE>
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADMINISTRATOR
ISVOLUNTARILY WAIVING A PORTION OF ITS FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THE ADMINISTRATOR MAY DISCONTINUE ALL OR PART OF
THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL TOTAL
OPERATING EXPENSES ARE AS FOLLOWS:
<TABLE>
<S> <C>
S&P 500 INDEX FUND - CLASS A SHARES 0.40%
</TABLE>
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS AND SUB-ADVISER"
AND "DISTRIBUTION OF FUND SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fundwith the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of the period. The Example also assumes that each year
your investment has a 5% return, that Fund expenses remain the same, and that
you reinvest all dividends and distributions. Although your actual costs and
returns might be different, your approximate costs of investing $10,000 in the
Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
S&P 500 Index Fund - Class A
Shares $45 $141 $246 $555
</TABLE>
<PAGE>
6 PROSPECTUS
BOND INDEX FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Investment results that correspond to the
performance of the Lehman Aggregate Bond Index
(Lehman Index)
- ------------------------------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Medium
- ------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Utilizing a specialist adviser, the Fund invests
in investment grade fixed income securities
included in the Lehman Index.
</TABLE>
- ------------------------------------------------------------------------
INVESTMENT STRATEGY
The Bond Index Fund invests exclusively in investment grade (I.E., BBB/Baa or
better at the time or purchase) corporate and government fixed income
securities, including mortgage-backed securities, of U.S. and foreign issuers
included in the Lehman Index. The Fund's ability to replicate the performance of
the Lehman Index will depend to some extent on the size and timing of cash flows
into and out of the Fund, as well as on the level of the Fund's expenses. The
Adviser makes no attempt to "manage" the Fund in the traditional sense (I.E., by
using economic, market or financial analyses). Instead, the Adviser will hold a
representative sample of the securities in the Lehman Index, selecting a limited
number of issues to represent entire "classes" of securities and dividing those
classes into sectors based on issuer, quality and maturity. The Adviser will
purchase various types of securities in an attempt to approximate the class and
sector weightings of the Lehman Index. The Fund's Adviser may sell a security
that has been downgraded or whose value has otherwise been impaired. The Fund in
the aggregate generally will have a dollar-weighted average duration that is
consistent with that of the Lehman Index (currently 4.5 years).
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.
Mortgage-backed securities are fixed income securities representing an interest
in a pool of underlying mortgage loans. They are sensitive to changes in
interest rates, but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the underlying
mortgage loans. As a result, it may not be possible to determine in advance the
actual maturity date or average life of a mortgage-backed security. Rising
interest rates tend to discourage refinancings, with the result that the average
life and volatility of the security will increase, exacerbating its decrease in
market price. When interest rates fall, however, mortgage-backed securities may
not gain as much in market value because of the expectation of additional
mortgage prepayments that must be reinvested at lower interest rates. Prepayment
risk may make it difficult to calculate the average maturity of the Fund's
mortgage-backed securities and, therefore, to assess the volatility risk of the
Fund.
The privately issued mortgage-backed securities that the Fund invests in are not
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
and may bear a greater risk of nonpayment than securities that are backed by the
U.S. Treasury. However, the timely payment of principal and interest normally is
supported, at least partially, by various credit enhancements by banks and other
financial institutions. There can be no assurance, however, that such credit
enhancements will support full payment of the principal and interest on such
obligations. In addition, changes in the credit quality of the entity which
provides credit enhancement could cause losses to the Fund and affect its share
price.
The Fund is also subject to the risk that the performance of the Fund may not
correlate to that of the Lehman Index. Since it purchases only a small sample of
securities in the Lehman Index, the Fund's performance may not be similar to
that of the Lehman Index. In addition, the Fund is subject to the risk that its
investment approach, which attempts to replicate the performance of the Lehman
Index, may perform differently than other mutual funds which focus on particular
fixed income market segments or invest in other asset classes.
<PAGE>
PROSPECTUS 7
BOND INDEX FUND
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year for ten years.*
<TABLE>
<S> <C>
1989 13.93%
1990 8.34%
1991 13.51%
1992 7.09%
1993 9.29%
1994 -3.18%
1995 17.94%
1996 2.96%
1997 9.38%
1998 8.86%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
8.27% -2.89%
(06/30/89) (03/31/94)
</TABLE>
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM DECEMBER 31, 1998, TO JUNE 30, 1999, WAS -1.88%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998, to those of the Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
SINCE
INCEPTION
(MAY 19,
CLASS A SHARES 1 YEAR 5 YEARS 10 YEARS 1986)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
BOND INDEX FUND 8.86% 6.96% 8.67% 8.06%
- ----------------------------------------------------------------------
LEHMAN AGGREGATE BOND INDEX* 8.67% 7.27% 9.26% 8.87%**
- ----------------------------------------------------------------------
</TABLE>
* AN INDEX MEASURES THE MARKET PRICES OF A SPECIFIC GROUP OF SECURITIES IN A
PARTICULAR MARKET OR SECURITIES IN A MARKET SECTOR. YOU CANNOT INVEST DIRECTLY
IN AN INDEX. UNLIKE A MUTUAL FUND, AN INDEX DOES NOT HAVE AN INVESTMENT ADVISER
AND DOES NOT PAY ANY COMMISSIONS OR EXPENSES. IF AN INDEX HAD EXPENSES, ITS
PERFORMANCE WOULD BE LOWER. THE LEHMAN AGGREGATE BOND INDEX IS A
WIDELY-RECOGNIZED, MARKET VALUE-WEIGHTED (HIGHER MARKET VALUE SECURITIES HAVE
MORE INFLUENCE THAN LOWER MARKET VALUE SECURITIES) INDEX OF U.S. GOVERNMENT
OBLIGATIONS, CORPORATE DEBT SECURITIES, AND AAA RATED MORTGAGE-BACKED
SECURITIES. ALL SECURITIES IN THE INDEX ARE RATED INVESTMENT GRADE (BBB) OR
HIGHER, WITH MATURITIES OF AT LEAST 1 YEAR.
** THE INCEPTION DATE FOR THE INDEX IS MAY 5, 1996.
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------
FUND FEES AND EXPENSES
This table describes the highest fees and expenses that you may pay indirectly
if you buy and hold shares of the Fund.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES DEDUCTED FROM FUND ASSETS) CLASS A SHARES
<S> <C>
Investment Advisory Fees 0.07%
Distribution (12b-1) Fees None
Other Expenses 0.65%
-------
Total Annual Fund Operating Expenses 0.72%*
</TABLE>
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADMINISTRATOR AND
DISTRIBUTOR ARE VOLUNTARILY WAIVING A PORTION OF THEIR FEES IN ORDER TO KEEP
TOTAL OPERATING EXPENSES AT A SPECIFIED LEVEL. THE ADMINISTRATOR AND DISTRIBUTOR
MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE
WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
<TABLE>
<S> <C>
BOND INDEX FUND - CLASS A SHARES 0.38%
</TABLE>
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS AND SUB-ADVISER"
AND "DISTRIBUTION OF FUND SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fundwith the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of the period. The Example also assumes that each year
your investment has a 5% return, that Fund expenses remain the same, and that
you reinvest all dividends and distributions. Although your actual costs and
returns might be different, your approximate costs of investing $10,000 in the
Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Bond Index Fund -- Class A
Shares $74 $230 $401 $894
</TABLE>
<PAGE>
8 PROSPECTUS
INVESTMENTS ADVISERS AND SUB-ADVISERS
THE FUNDS' OTHER INVESTMENTS
This prospectus describes the Funds' primary strategies, and the Funds will
normally invest at least 90% of their assets in the types of securities
described in this prospectus. However, the Funds also may invest in other
securities, use other strategies and engage in other investment practices. These
investments and strategies, as well as those described in this prospectus, are
described in detail in the Funds' Statement of Additional Information (SAI).
The investments and strategies described in this prospectus are those that the
Advisers and the Sub-Adviser use under normal conditions. During unusual
economic or market conditions, or for temporary defensive or liquidity purposes,
each Fund may invest up to 100% of its assets in cash or cash equivalents that
would not ordinarily be consistent with the Funds' objectives. A Fund will do so
only if the Adviser or Sub-Adviser believes that the risk of loss outweighs the
opportunity for capital gains or higher income. Of course, there is no guarantee
that any Fund will achieve its investment goal.
INVESTMENT ADVISERS AND SUB-ADVISER
- --------------------------------------------------------------------------------
SEI INVESTMENTS MANAGEMENT CORPORATION (SIMC) ACTS AS THE MANAGER OF MANAGERS OF
THE S&P 500 INDEX FUND, AND IS RESPONSIBLE FOR THE INVESTMENT PERFORMANCE OF THE
FUND SINCE IT ALLOCATES THE FUND'S ASSETS TO ONE OR MORE SUB-ADVISERS AND
RECOMMENDS HIRING OR CHANGING SUB-ADVISERS TO THE BOARD OF TRUSTEES. World Asset
Management, LLC, the Sub-Adviser of the S&P 500 Index Fund, provides security
selection advice for the Fund. Mellon Bond Associates, LLP, the Adviser to the
Bond Index Fund provides security selection advice for that Fund.
Each Investment Adviser or Sub-Adviser makes investment decisions for the Funds
and continuously reviews, supervises, and administers its Fund's investment
program. The Board of Trustees of the Funds supervises the Advisers and
Sub-Adviser and establishes policies that they must follow in their management
activities, and oversees the hiring and termination of Sub-Advisers recommended
by SIMC for the S&P 500 Index Fund. SIMC pays the Sub-Adviser out of the
investment advisory fees it receives (described below).
SIMC serves as the Adviser to the S&P 500 Index Fund. SIMC oversees the
Sub-Adviser to ensure compliance with the Fund's investment policies and
guidelines and monitors the Sub-Adviser's adherence to its investment style. As
of May 31, 1999, SIMC had approximately $43.6 billion in assets under
management. For the fiscal year ended March 31, 1999, SIMC received advisory
fees of:
<TABLE>
<S> <C>
S&P 500 Index Fund 0.03%
</TABLE>
Mellon Bond Associates, LLP ("MBA") serves as the Adviser to the Bond Index
Fund. MBA is a Pennsylvania limited liability partnership whose ultimate owner
is Mellon Bank Corporation. As of May 31, 1999, MBA had approximately $49.5
billion in assets under management. For the fiscal year ended March 31, 1999,
MBA received advisory fees of:
<TABLE>
<S> <C>
Bond Index Fund 0.07%
</TABLE>
World Asset Management, LLC ("World") serves as Sub-Adviser to the S&P 500 Index
Fund. World is a limited liability company that is wholly-owned by Munder
Capital Management. As of May 31, 1999, World had approximately $19.6 billion in
assets under management. Prior to November 18, 1998, World served as Adviser to
the Fund and received fees of 0.03%.
<PAGE>
PROSPECTUS 9
PURCHASING, SELLING AND EXCHANGING FUND SHARES
This section tells you how to purchase, sell (sometimes called "redeem") and
exchange Class A Shares of the Funds.
The Funds offer Class A Shares only to financial institutions and intermediaries
for their own or their customers' accounts. For more information on how to open
an account and set up procedures for placing transactions, please call
1-800-DIAL-SEI.
HOW TO PURCHASE FUND SHARES
You may purchase shares on any day that the New York Stock Exchange is open for
business (Business Day).
Financial institutions and intermediaries may purchase Class A Shares by placing
orders with the Funds' Transfer Agent (or its authorized agent). Institutions
and intermediaries that use certain SEI proprietary systems may place orders
electronically through those systems. Cash investments must be transmitted or
delivered in federal funds to the Funds' wire agents by the close of business on
the same day the order is placed. The Funds may reject any purchase order if it
is determined that accepting the order would not be in the best interests of the
Funds or their shareholders.
When you purchase, sell or exchange Fund shares through financial institutions
(rather than directly from the Funds), you may have to transmit your purchase,
sale and exchange requests to these financial institutions at an earlier time
for your transaction to become effective that day. This allows these financial
institutions time to process your requests and transmit them to the Funds.
Certain other intermediaries, including certain broker-dealers and shareholder
organizations, are authorized to accept purchase, redemption and exchange
request for Fund shares. These requests are normally executed at the NAV next
determined after the intermediary receives the request. These authorized
intermediaries are responsible for transmitting requests and delivering funds on
a timely basis.
Investors who deal directly with a financial institution or financial
intermediary will have to follow the institution's or intermediary's procedures
for transacting with the Funds. For more information about how to purchase, sell
or exchange Fund shares through your financial institution, you should contact
your financial institution directly. Investors may be charged a fee for purchase
and/or redemption transactions effectuated through certain broker-dealers or
other financial intermediaries.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after the Funds receive your purchase order. EachFund
calculates its NAV once each Business Day at the regularly-scheduled close of
normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern
time). So, for you to receive the current Business Day's NAV, generally the
Funds must receive your purchase order before 4:00 p.m. Eastern time.
HOW THE FUNDS CALCULATE NAV
NAV for one Fund share is the value of that share's portion of all of the net
assets in the Fund. In calculating NAV, each Fund generally values its
investment portfolio at market price. If market prices are unavailable or a Fund
thinks that they are unreliable, fair value prices may be determined in good
faith using methods approved by the Board of Trustees.
The Bond Index Fund holds securities that are listed on foreign exchanges. These
securities may trade on weekends or other days when the Fund does not calculate
NAV. As a result, the market value of the Fund's investments may change on days
when you cannot purchase or sell Fund shares.
MINIMUM PURCHASES
To purchase Class A Shares for the first time, you must invest at least $100,000
in any Fund. Your subsequent investments in any Fund must be made in amounts of
at least $1,000.
The Funds may accept investments of smaller amounts at their discretion.
<PAGE>
10 PROSPECTUS
PURCHASING, SELLING AND EXCHANGING FUND SHARES
HOW TO SELL YOUR FUND SHARES
Holders of Class A Shares may sell shares on any Business Day by following the
procedures established when they opened their account or accounts with the Funds
or with their financial institution or intermediary. Your financial institution
or intermediary may charge you a fee for its services. The sale price of each
share will be the next NAV determined after the Funds (or their authorized
intermediary) receive your request.
RECEIVING YOUR MONEY
Normally, the Funds will send your sale proceeds within three Business Days
after they receive your request, but it may take up to seven days. Your proceeds
will be wired to your bank account.
REDEMPTIONS IN KIND
The Funds generally pay sale (redemption) proceeds in cash. However, under
unusual conditions that make the payment of cash unwise (and for the protection
of the Funds' remaining shareholders) the Funds might pay all or part of your
redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). It is highly unlikely that your shares
would ever be redeemed in kind, but if they were you would probably have to pay
transaction costs to sell the securities distributed to you, as well as taxes on
any capital gains from the sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
The Funds may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in the Funds' SAI.
HOW TO EXCHANGE YOUR SHARES
You may exchange your Class A Shares of the Funds for Class A Shares of any
other SEI Fund on any Business Day by contacting your financial institution or
intermediary by mail or telephone. Your financial institution or intermediary
may charge you a fee for its services. This exchange privilege may be changed or
canceled at any time upon 60 days' notice.
When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after the Funds receive your exchange request.
TELEPHONE TRANSACTIONS
Purchasing and selling Fund shares over the telephone is extremely convenient,
but not without risk. Although the Funds have certain safeguards and procedures
to confirm the identity of callers and the authenticity of instructions, the
Funds are not responsible for any losses or costs incurred by following
telephone instructions we reasonably believe to be genuine. If you or your
financial institution transacts with the Funds over the telephone, you will
generally bear the risk of any loss.
DISTRIBUTION OF FUND SHARES
SEI Investments Distribution Co. (SIDCo.) is the distributor of the Funds.
SIDCo. receives no compensation for distributing the Funds' Class A Shares.
For Class A Shares, shareholder servicing fees, as a percentage of average daily
net assets may be up to 0.15% and 0.25%, respectively, for the S&P 500 Index and
Bond Index Funds.
<PAGE>
PROSPECTUS 11
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The S&P 500 Index Fund distributes its investment income quarterly and the Bond
Index Fund distributes its investment income monthly as dividends to
shareholders. Each Fund makes distributions of capital gains, if any, at least
annually. If you own Fund shares on a Fund's record date, you will be entitled
to receive the distribution.
You will receive dividends and distributions in the form of additional
Fundshares unless you elect to receive payment in cash. To elect cash payment,
you must notify the Funds in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Funds
receive your written notice. To cancel your election, simply send the Funds
written notice.
TAXES
PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax
issues that affect the Funds and their shareholders. This summary is based on
current tax laws, which may change.
Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from a Fund may be taxable whether or not you reinvest them. Income
distributions are generally taxable at ordinary income tax rates. Capital gains
distributions are generally taxable at the rates applicable to long-term capital
gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT.
The Funds use a tax management technique known as "highest in, first out." Using
this technique, the portfolio holdings that have experienced the smallest gain
or largest loss are sold first in an effort to minimize capital gains and
enhance after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN THE SAI.
<PAGE>
12 PROSPECTUS
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about Class A Shares of
each Fund. This information is intended to help you understand each Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Some of this information reflects financial information for a
single Fund share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in a Fund, assuming you reinvested
all of your dividends and distributions.
This information has been audited by Arthur Andersen, LLP, independent public
accountants. Their report, along with each Fund's financial statements, appears
in the annual report that accompanies the Funds' SAI. You can obtain the annual
report, which contains more performance information, at no charge by calling
1-800-DIAL-SEI.
SEI INDEX FUNDS -- FOR THE PERIODS ENDED MARCH 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET
REALIZED
AND NET
UNREALIZED ASSET
NET ASSET GAINS OR DIVIDENDS DISTRIBUTIONS VALUE,
VALUE, NET (LOSSES) FROM NET FROM END
BEGINNING INVESTMENT ON INVESTMENT CAPITAL OF
OF PERIOD INCOME SECURITIES INCOME GAINS PERIOD
---------- ---------- ---------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
- --------------------
S&P 500 INDEX FUND
- ------------------
CLASS A+
1999............ $ 34.71 $ 0.40 $ 5.76 $ (0.40 ) $ (0.34 ) $ 40.13
1998............ 24.06 0.41 10.86 (0.41 ) (0.21 ) 34.71
1997............ 20.87 0.48 3.47 (0.43 ) (0.33 ) 24.06
1996(1)......... 20.82 -- 0.05 -- -- 20.87
- -----------------
BOND INDEX FUND
- ---------------
CLASS A +
1999............ $ 10.52 $ 0.62 $ 0.03 $ (0.62 ) -- $ 10.55
1998............ 10.01 0.64 0.51 (0.64 ) -- 10.52
1997............ 10.26 0.64 (0.21 ) (0.68 ) -- 10.01
1996(2)......... 9.90 0.64 0.36 (0.64 ) -- 10.26
1995............ 10.09 0.63 (0.20 ) (0.62 ) -- 9.90
<CAPTION>
RATIO OF NET
RATIO OF RATIO INVESTMENT
NET OF EXPENSES INCOME
RATIO OF INVESTMENT TO AVERAGE TO AVERAGE
NET ASSETS EXPENSES INCOME NET ASSETS NET ASSETS PORTFOLIO
TOTAL END OF TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
RETURN PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
------- ------------ ---------- ---------- -------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------
S&P 500 INDEX FUND
- ------------------
CLASS A+
1999............ 18.05% $ 687,706 0.40% 1.11% 0.44% 1.07% 7%
1998............ 47.43% 451,077 0.40% 1.37% 0.44% 1.33% 4%
1997............ 19.22% 108,770 0.40% 1.84% 0.46% 1.78% 2%
1996(1)......... 0.24%* 3,007 0.46% 0.97% 0.58% 0.85% 3%
- -----------------
BOND INDEX FUND
- ---------------
CLASS A +
1999............ 6.25% $ 56,981 0.38% 5.79% 0.72% 5.45% 40%
1998............ 11.81% 43,282 0.38% 6.22% 0.78% 5.82% 44%
1997............ 4.36% 35,691 0.38% 6.26% 0.71% 5.93% 46%
1996(2)......... 10.31% 51,185 0.38% 6.20% 0.48% 6.10% 59%
1995............ 4.54% 45,643 0.38% 6.33% 0.48% 6.23% 21%
</TABLE>
* The total return has not been annualized
+ On July 31, 1997 the Board of Trustees approved the renaming of the Class E
shares to Class A shares
(1) S&P 500 Index Class A shares, formerly the Class E shares, were offered
beginning February 28, 1996. All ratios for that period have been
annualized.
(2) The investment adviser was changed from World Asset Management to Mellon
Bond Associates effective October 2, 1996
<PAGE>
SEI Index
Funds
INVESTMENT ADVISERS
SEI Investments Management Corporation (SIMC)
One Freedom Valley Drive
Oaks, PA 19456
Mellon Bond Associates, LLP
Mellon Bank Center
1735 Market Street, Room 610
Philadelphia, PA 19101
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
- ------------------------------------------------
The SAI dated July 31, 1999, includes detailed information about SEI Index
Funds. The SAI is on file with the SEC and is incorporated by reference into
this prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
- ------------------------------------------------
These reports list each Fund's holdings and contain information from the Funds'
managers about strategies and recent market conditions and trends and their
impact on performance. The reports also contain detailed financial information
about the Funds.
TO OBTAIN MORE INFORMATION:
- ------------------------------------------------
BY TELEPHONE: CALL 1-800-DIAL-SEI
BY MAIL: WRITE TO THE FUNDS AT:
One Freedom Valley Drive
Oaks, PA 19456
BY INTERNET: HTTP://WWW.SEIC.COM
FROM THE SEC: YOU CAN ALSO OBTAIN THE SAI OR THE ANNUAL AND SEMI-ANNUAL reports,
as well as other information about SEI Index Funds, from the SEC's website
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009.
The Funds' Investment Company Act registration number is 811-4283.
<PAGE>
SEI
Index
Funds
CLASS E SHARES
PROSPECTUS
JULY 31, 1999
---------------------------------------------------------
S&P 500 INDEX FUND
---------------------------------------------------------
INVESTMENT ADVISER
SEI INVESTMENTS MANAGEMENT CORPORATION
INVESTMENT SUB-ADVISER
WORLD ASSET MANAGEMENT, LLC
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED ANY
FUND SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.
<PAGE>
SEI Index Funds
ABOUT THIS PROSPECTUS
- ------------------------------------------------------------------------
SEI Index Funds is a mutual fund that offers shares in separate investment
portfolios (Funds). The Funds have individual investment goals and strategies.
This prospectus gives you important information about the Class E Shares of the
S&P 500 Index Fund that you should know before investing. Please read this
prospectus and keep it for future reference.
This prospectus has been arranged into different sections so that you can easily
review this important information. On the next page, there is some general
information you should know about risk and return. For more detailed information
about the Fund, please see:
PRINCIPAL INVESTMENT STRATEGIES AND RISKS,
PERFORMANCE INFORMATION AND EXPENSES.................................3
THE FUND'S OTHER INVESTMENTS.........................................4
THE INVESTMENT ADVISER AND SUB-ADVISER...............................6
PURCHASING AND SELLING FUND SHARES...................................6
DIVIDENDS AND DISTRIBUTIONS..........................................8
TAXES................................................................8
FINANCIAL HIGHLIGHTS.................................................9
HOW TO OBTAIN MORE INFORMATION ABOUT SEI INDEX FUNDS........Back Cover
<PAGE>
PROSPECTUS 3
RISK/RETURN INFORMATION
S&P 500 Index Fund is a mutual fund. A mutual fund pools shareholders' money
and, using professional investment managers, invests it in securities.
The Fund has an investment goal and strategies for reaching that goal. The
Fund's assets are managed under the direction of SEI Investments Management
Corporation (SIMC), and one or more Sub-Advisers manage portions of the Fund's
assets and invest those assets in a way that they believe will help the Fund
achieve its goal. SIMC acts as "manager of managers" for the Fund, and attempts
to ensure that the Sub-Adviser(s) comply with the Fund's investment policies and
guidelines. SIMC may also recommend the appointment of additional or replacement
Sub-Advisers to the Fund's Board.
The Fund attempts to track the performance of a benchmark index. Factors such as
cash flows, Fund expenses, imperfect correlation between the Fund's investments
and those of their benchmarks, rounding of share prices, changes to the
benchmark, and regulatory policies may affect the Fund's ability to achieve
perfect correlation. The magnitude of any tracking error may be affected by a
higher portfolio turnover rate. Because an index is just a composite of the
prices of the securities it represents rather than an actual portfolio of those
securities, an index will have no expenses. As a result, the Fund, which will
have expenses such as brokerage, custody, management fees and other operational
costs, may not achieve its investment objective of accurately correlating to an
index. Investing in the Fund involves risk and there is no guarantee that the
Fund will achieve its goal. No matter how good a job the Adviser and Sub-Adviser
do, you could lose money on your investment in the Fund, just as you could with
other investments. A Fund share is not a bank deposit and it is not insured or
guaranteed by the FDIC or any government agency.
The value of your investment in the Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and other
events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities the Fund owns and the markets in which they trade. The
estimated level of volatility for the Fund is set forth in the Fund Summary that
follows. The effect on the Fund's share price of a change in the value of a
single security will depend on how widely the Fund diversifies its holdings.
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other mutual funds (and most organizations around the world), the Fundcould
be affected by computer problems related to the transition to the year 2000.
While no one knows if these problems will have any impact on the Fund or on the
financial markets in general, the Fund is taking steps to protect Fund
investors. These include efforts to ensure that the Fund's own systems are
prepared to make the transition to the year 2000, and to determine that the
problem will not affect the systems used by the Fund's mission critical service
providers. The Fund has also sought and received assurances from these service
providers that they are devoting significant resources to prevent material
adverse consequences to the Fund. Whether these steps will be effective can only
be known for certain in the year 2000. While such assurances have been received,
year 2000 problems may ultimately negatively affect the companies whose
securities the Fund purchases, which may have an impact on the value of the
Fund's shares. There is additional information on these risks in the Statement
of Additional Information.
<PAGE>
4 PROSPECTUS
S&P 500 INDEX FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Investment results that correspond to the Standard
& Poor's 500 Composite Index (S&P 500 Index)
- ------------------------------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Medium to High
- ------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Utilizing a specialist sub-adviser, the Fund
invests in the common stocks and other equity
securities included in the S&P 500 Index.
</TABLE>
- ------------------------------------------------------------------------
INVESTMENT STRATEGY
The S&P 500 Index Fund invests substantially all of its assets in securities
listed in the S&P 500 Index, which is comprised of 500 selected securities
(mostly common stocks). The Fund's ability to replicate the performance of the
S&P 500 Index will depend to some extent on the size and timing of cash flows
into and out of the Fund, as well as on the level of the Fund's expenses. The
Sub-Adviser selects the Fund's securities under the general supervision of SIMC,
but the Sub-Adviser makes no attempt to "manage" the Fund in the traditional
sense (I.E., by using economic, market or financial analyses). Instead, the
Sub-Adviser purchases a basket of securities that includes most of the companies
in the Index. However, the Fund's Sub-Adviser may sell an investment if the
merit of the investment has been substantially impaired by extraordinary events
or adverse financial conditions.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
The Fund is also subject to the risk that the performance of the Fund may not
correlate to that of the S&P 500 Index. In addition, the Fund is subject to the
risk that its investment approach, which attempts to replicate the performance
of the S&P 500 Index, may perform differently from other mutual funds which
focus on particular equity market segments or invest in other asset classes.
<PAGE>
PROSPECTUS 5
S&P 500 INDEX FUND
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class E Shares
from year to year for ten years.*
<TABLE>
<S> <C>
1989 31.61%
1990 -3.16%
1991 29.94%
1992 7.36%
1993 9.83%
1994 0.99%
1995 37.35%
1996 22.62%
1997 33.07%
1998 28.34%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
21.26% -13.78%
(12/31/98) (09/30/90)
</TABLE>
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S CLASS E TOTAL RETURNS FROM JANUARY 1, 1999, TO JUNE 30, 1999, WAS 12.25%.
This table compares the Fund's average annual total returns for Class E shares
for the periods December 31, 1998, to those of the S&P 500 Index.
<TABLE>
<CAPTION>
SINCE
INCEPTION
(JULY 31,
CLASS E SHARES 1 YEAR 5 YEARS 10 YEARS 1985)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
S&P 500 INDEX FUND 28.34% 23.77% 18.95% 17.76%*
- ----------------------------------------------------------------------
S&P 500 INDEX* 28.60% 24.05% 19.19% 18.26%**
- ----------------------------------------------------------------------
</TABLE>
* AN INDEX MEASURES THE MARKET PRICES OF A SPECIFIC GROUP OF SECURITIES IN A
PARTICULAR MARKET OR SECURITIES IN A MARKET SECTOR. YOU CANNOT INVEST DIRECTLY
IN AN INDEX. UNLIKE A MUTUAL FUND, AN INDEX DOES NOT HAVE AN INVESTMENT ADVISER
AND DOES NOT PAY ANY COMMISSIONS OR EXPENSES. IF AN INDEX HAD EXPENSES, ITS
PERFORMANCE WOULD BE LOWER. THE S&P 500 INDEX IS A WIDELY RECOGNIZED, MARKET
VALUE-WEIGHTED (HIGHER MARKET VALUE STOCKS HAVE MORE INFLUENCE THAN LOWER MARKET
VALUE STOCKS) INDEX OF 500 STOCKS DESIGNED TO MIMIC THE OVERALL EQUITY MARKET'S
INDUSTRY WEIGHTINGS.
** THE INCEPTION DATE FOR THE INDEX IS JULY 31, 1985.
- --------------------------------------------------------------------------------
FUND EXPENSES
This table describes the highest fees and expenses that you may pay indirectly
if you buy and hold shares of the Fund.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES DEDUCTED FROM FUND ASSETS) CLASS E SHARES
<S> <C>
Investment Advisory Fees 0.03%
Distribution (12b-1) Fees None
Other Expenses 0.51%
-----
Total Annual Fund Operating Expenses 0.54%*
</TABLE>
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADMINISTRATOR AND
DISTRIBUTOR ARE VOLUNTARILY WAIVING A PORTION OF THEIR FEES IN ORDER TO KEEP
TOTAL OPERATING EXPENSES AT A SPECIFIED LEVEL. THE ADMINISTRATOR AND DISTRIBUTOR
MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE
WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
<TABLE>
<S> <C>
S&P 500 INDEX FUND -- CLASS E 0.25%
</TABLE>
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER AND SUB-ADVISER"
AND "DISTRIBUTION OF FUND SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period. The Example also assumes that each year your
investment has a 5% return that Fund expenses remain the same, and that you
reinvest all dividends and distributions. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Fund
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
S&P 500 Index Fund $55 $173 $302 $677
</TABLE>
<PAGE>
6 PROSPECTUS
INVESTMENT ADVISER AND SUB-ADVISER
THE FUND'S OTHER INVESTMENTS
This prospectus describes the Fund's primary strategies, and the Fund will
normally invest at least 90% of its assets in the types of securities described
in this prospectus. However, the Fund also may invest in other securities, use
other strategies and engage in other investment practices. These investments and
strategies, as well as those described in this prospectus, are described in
detail in the Fund's Statement of Additional Information (SAI).
The investments and strategies described in this prospectus are those that the
Sub-Adviser uses under normal conditions. During unusual economic or market
conditions, or for temporary defensive or liquidity purposes, the Fund may
invest up to 100% of its assets in cash or cash equivalents that would not
ordinarily be consistent with the Fund's objectives. The Fund will do so only if
the Adviser or Sub-Adviser believes that the risk of loss outweighs the
opportunity for capital gains or higher income. Of course, there is no guarantee
that the Fund will achieve its investment goal.
INVESTMENT ADVISER AND SUB-ADVISER
SEI INVESTMENTS MANAGEMENT CORPORATION (SIMC) ACTS AS THE MANAGER OF MANAGERS OF
THE S&P 500 INDEX FUND, AND IS RESPONSIBLE FOR THE INVESTMENT PERFORMANCE OF THE
FUND SINCE IT ALLOCATES THE FUND'S ASSETS TO ONE OR MORE SUB-ADVISERS AND
RECOMMENDS HIRING OR CHANGING SUB-ADVISERS TO THE BOARD OF TRUSTEES. World Asset
Management, LLC, the Sub-Adviser of the S&P 500 Index Fund, makes investment
decisions for the Fund and continuously reviews, supervises and administers the
Fund's investment program.
SIMC oversees the Sub-Adviser to ensure compliance with the Fund's investment
policies and guidelines, and monitors the Sub-Adviser's adherence to its
investment style. The Board of Trustees of the Fund supervises the Advisers and
Sub-Advisers, establishes policies that they must follow in their management
activities, and oversees the hiring and termination of Sub-Advisers recommended
by SIMC. SIMC pays the Sub-Adviser out of the investment advisory fees it
receives (described below).
SIMC serves as the Adviser to the S&P 500 Index Fund. As of May 31, 1999, SIMC
had approximately $43.6 billion in assets under management. For the fiscal year
ended March 31, 1999, SIMC received advisory fees of:
<TABLE>
<S> <C>
S&P 500 Index Fund 0.03%
</TABLE>
World Asset Management, LLC ("World") serves as Sub-Adviser to the S&P 500 Index
Fund. World is a limited liability company that is wholly-owned by Munder
Capital Management. As of May 31, 1999, World had approximately $19.6 billion in
assets under management. Prior to November 18, 1998, World served as Adviser to
the Fund and received fees of 0.03%.
<PAGE>
PROSPECTUS 7
PURCHASING AND SELLING FUND SHARES
This section tells you how to purchase or sell (sometimes called "redeem") Class
E Shares of the Fund.
The Fund offers Class E Shares only to financial institutions and intermediaries
for their own or their customers' accounts. For more information on how to open
an account and set up procedures for placing transactions, please call
1-800-DIAL-SEI.
HOW TO PURCHASE FUND SHARES
You may purchase shares on any day that the New York Stock Exchange is open for
business (Business Day).
Financial institutions and intermediaries may purchase Class E Shares by placing
orders with the Fund's Transfer Agent (or its authorized agent). Institutions
and intermediaries that use certain SEI proprietary systems may place orders
electronically through those systems. Cash investments must be transmitted or
delivered in federal funds to the Fund's wire agents by the close of business on
the same day the order is placed. The Fund may reject any purchase order if it
is determined that accepting the order would not be in the best interests of the
Fund or its shareholders.
When you purchase, sell or exchange Fund shares through financial institutions
(rather than directly from the Fund), you may have to transmit your purchase,
sale and exchange requests to these financial institutions at an earlier time
for your transaction to become effective that day. This allows these financial
institutions time to process your requests and transmit them to the Fund.
Certain other intermediaries, including certain broker-dealers and shareholder
organizations, are authorized to accept purchase, redemption and exchange
request for Fund shares. These requests are normally executed at the NAV next
determined after the intermediary receives the request. These authorized
intermediaries are responsible for transmitting requests and delivering funds on
a timely basis.
Investors who deal directly with a financial institution or financial
intermediary will have to follow the institution's or intermediary's procedures
for transacting with the Fund. For more information about how to purchase, sell
or exchange Fund shares through your financial institution, you should contact
your financial institution directly. Investors may be charged a fee for purchase
and/or redemption transactions effectuated through certain broker-dealers or
other financial intermediaries.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after the Fund receives your purchase order. The Fund
calculates its NAV once each Business Day at the regularly-scheduled close of
normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern
time). So, for you to receive the current Business Day's NAV, generally theFund
must receive your purchase order before 4:00 p.m. Eastern time.
HOW THE FUND CALCULATES NAV
NAV for one Fund share is the value of that share's portion of all of the net
assets in the Fund.
In calculating NAV, the Fund generally values its investment portfolio at market
price. If market prices are unavailable or the Fund thinks that they are
unreliable, fair value prices may be determined in good faith using methods
approved by the Board of Trustees.
MINIMUM PURCHASES
To purchase shares for the first time, you must invest at least $5,000,000 in
the Fund.
Your subsequent investments in the Fund must be made in amounts of at least
$1,000. The Fund may accept investments of smaller amounts at its discretion.
<PAGE>
8 PROSPECTUS
PURCHASING AND SELLING FUND SHARES
HOW TO SELL YOUR FUND SHARES
Holders of Class E Shares may sell shares on any Business Day by following the
procedures established when they opened their account or accounts with the Fund
or with their financial institution or intermediary. Your financial institution
or intermediary may charge you a fee for its services. The sale price of each
share will be the next NAV determined after the Fund (or its authorized
intermediary) receives your request.
RECEIVING YOUR MONEY
Normally, the Fund will send your sale proceeds within three Business Days after
the Fund receives your request, but it may take up to seven days. Your proceeds
will be wired to your bank account.
REDEMPTIONS IN KIND
The Fund generally pays sale (redemption) proceeds in cash. However, under
unusual conditions that make the payment of cash unwise (and for the protection
of the Fund's remaining shareholders) the Fund might pay all or part of your
redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). It is highly unlikely that your shares
would ever be redeemed in kind, but if they were you would probably have to pay
transaction costs to sell the securities distributed to you, as well as taxes on
any capital gains from the sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
The Fund may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in the Fund's SAI.
TELEPHONE TRANSACTIONS
Purchasing and selling Fund shares over the telephone is extremely convenient,
but not without risk. Although the Fund has certain safeguards and procedures to
confirm the identity of callers and the authenticity of instructions, the Fund
is not responsible for any losses or costs incurred by following telephone
instructions the Fund reasonably believes to be genuine. If you or your
financial institution transacts with the Fund over the telephone, you will
generally bear the risk of any loss.
DISTRIBUTION OF FUND SHARES
SEI Investments Distribution Co. (SIDCo.) is the distributor of the shares of
the Fund. SIDCo. receives no compensation for distributing the Fund's Class E
Shares.
For Class E Shares, shareholder servicing fees, as a percentage of average daily
net assets, may be up to .25%.
<PAGE>
PROSPECTUS 9
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes its investment income periodically (at least annually) as a
dividend to shareholders. The Fund makes distributions of capital gains, if any,
at least annually. If you own Fund shares on a Fund's record date, you will be
entitled to receive the distribution.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Fund
receives your written notice. To cancel your election, simply send the Fund
written notice.
TAXES
PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below the Fund has summarized some important tax
issues that affect the Fund and its shareholders. This summary is based on
current tax laws, which may change.
The Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from the Fund may be taxable whether or not you reinvest them. Income
distributions are generally taxable at ordinary income tax rates. Capital gains
distributions are generally taxable at the rates applicable to long-term capital
gains. EACH SALE OF FUND SHARES IS A TAXABLE EVENT.
The Fund uses a tax management technique known as "highest in, first out." Using
this technique, the portfolio holdings that have experienced the smallest gain
or largest loss are sold first in an effort to minimize capital gains and
enhance after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN THE SAI.
<PAGE>
10 PROSPECTUS
FINANCIAL HIGHLIGHTS
The table that follows presents performance information about Class E Shares of
the Fund. This information is intended to help you understand the Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Some of this information reflects financial information for a
single Fund share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in the Fund, assuming you
reinvested all of your dividends and distributions.
This information has been audited by Arthur Andersen, LLP, independent public
accountants. Their report, along with the Fund's financial statements, appears
in the annual report that accompanies the Fund's SAI. You can obtain the annual
report, which contains more performance information, at no charge by calling
1-800-DIAL-SEI.
SEI INDEX FUNDS -- FOR THE PERIODS ENDED MARCH 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET
REALIZED
AND NET
UNREALIZED ASSET
NET ASSET GAINS OR DIVIDENDS DISTRIBUTIONS VALUE,
VALUE, NET (LOSSES) FROM NET FROM END
BEGINNING INVESTMENT ON INVESTMENT CAPITAL OF
OF PERIOD INCOME SECURITIES INCOME GAINS PERIOD
---------- ---------- ---------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------
S&P 500 INDEX FUND
- ---------------------
CLASS E++
1999 $ 34.77 $ 0.57 $ 5.68 $ (0.45 ) $ (0.34 ) $ 40.23
1998 24.10 0.45 10.88 (0.45 ) (0.21 ) 34.77
1997 20.88 0.46 3.54 (0.45 ) (0.33 ) 24.10
1996 16.40 0.44 4.72 (0.37 ) (0.31 ) 20.88
1995 15.07 0.42 1.79 (0.42 ) (0.46 ) 16.40
<CAPTION>
RATIO OF NET
RATIO OF RATIO INVESTMENT
NET OF EXPENSES INCOME
RATIO OF INVESTMENT TO AVERAGE TO AVERAGE
NET ASSETS EXPENSES INCOME NET ASSETS NET ASSETS PORTFOLIO
TOTAL END OF TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
RETURN PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
------- ------------ ---------- ---------- -------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------
S&P 500 INDEX FUND
- --------------------
CLASS E++
1999 18.29% $ 1,606,449 0.25% 1.26% 0.54% 0.97% 7%
1998 47.62% 1,300,924 0.25% 1.55% 0.54% 1.26% 4%
1997 19.46% 835,889 0.25% 2.03% 0.54% 1.74% 2%
1996 31.88% 630,566 0.25% 2.31% 0.35% 2.21% 3%
1995 15.26% 458,012 0.25% 2.69% 0.35% 2.59% 4%
</TABLE>
++ On July 31, 1997 the Board of Trustees approved the renaming of the Class A
shares to Class E shares.
<PAGE>
SEI Index
Funds
INVESTMENT ADVISER
SEI Investments Management Corporation (SIMC)
One Freedom Valley Drive
Oaks, PA 19456
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the Fund is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
- ------------------------------------------------
The SAI dated July 31,1999, includes detailed information about SEI Index Funds.
The SAI is on file with the SEC and is incorporated by reference into this
prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
- ------------------------------------------------
These reports list the Fund's holdings and contain information from the Fund's
managers about strategies and recent market conditions and trends and their
impact on performance. The reports also contain detailed financial information
about the Fund.
TO OBTAIN MORE INFORMATION:
- ------------------------------------------------
BY TELEPHONE: CALL 1-800-DIAL-SEI
BY MAIL: WRITE TO THE FUND AT:
One Freedom Valley Drive
Oaks, PA 19456
BY INTERNET: HTTP://WWW.SEIC.COM
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about SEI Index Funds, from the SEC's website
("http:// www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
req uest documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009.
The Fund's Investment Company Act registration number is 811-4283.
<PAGE>
SEI INDEX FUNDS
Administrator:
SEI Investments Fund Management
Distributor:
SEI Investments Distribution Co.
Investment Advisers and Sub-Advisers:
SEI Investments Management Corporation
Mellon Bond Associates, LLP
World Asset Management LLC
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 Prospectuses dated July
31, 1999. Prospectuses may be obtained without charge by writing the Trust's
distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456, or by
calling 1-800-342-5734. Unless otherwise defined herein, capitalized terms used
herein but not defined herein shall have the respective meanings set forth in
the Prospectus.
TABLE OF CONTENTS
<TABLE>
<S> <C>
The Trust................................................................. S-2
Investment Objectives and Policies........................................ S-2
Description of Permitted Investments and Risk Factors..................... S-5
Investment Limitations.................................................... S-14
The Administrator and Transfer Agent...................................... S-15
The Advisers and Sub-Adviser.............................................. S-16
Distribution and Shareholder Servicing.................................... S-17
Trustees and Officers of the Trust........................................ S-18
Performance............................................................... S-21
Purchase and Redemption of Shares......................................... S-21
Taxes..................................................................... S-22
Portfolio Transactions.................................................... S-25
Description of Shares..................................................... S-26
Limitation of Trustees' Liability......................................... S-26
Voting Rights............................................................. S-26
Shareholder Liability..................................................... S-26
Control Persons and Principal Holders of Securities....................... S-27
Custodian................................................................. S-28
Experts................................................................... S-28
Legal Counsel............................................................. S-28
Financial Statements...................................................... S-28
</TABLE>
July 31, 1999
<PAGE>
THE TRUST
SEI Index Funds (the "Trust") is a diversified, open-end management
investment company established as a Massachusetts business trust pursuant to a
Declaration of Trust dated March 6, 1985. The Declaration of Trust permits the
Trust to offer separate series of units of beneficial interest ("shares") and
separate classes of series. Except for differences between Class A and Class E
shares of the S&P 500 Index Fund pertaining to shareholder service plans, 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 Trust's S&P 500 Index Fund and the Bond Index Fund (the "Funds").
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, litigation and other extraordinary expenses, brokerage
costs, interest charges, taxes and organization expenses.
The S&P 500 Index Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's Corporation ("S&P"). S&P makes no representation or warranty,
express or implied, to the purchasers of the Fund or any member of the public
regarding the advisability of investing in index funds or the Fund or the
ability of the S&P 500 Composite Stock Price Index (the "S&P 500 Index") to
track general stock market performance. S&P's only relationship to the licensee,
the Trust, is the licensing of certain trademarks and trade names of S&P and of
the S&P 500 Index which is determined, composed and calculated by S&P without
regard to the licensee or the Fund. S&P has no obligation to take the needs of
the licensee or the owners of the Fund into consideration in determining,
composing or calculating the S&P 500 Index. S&P is not responsible for and has
not participated in the determination of, the timing of, prices at, or
quantities of the Fund to be issued or in the determination or calculation of
the equation by which the Fund is to be converted into cash. S&P has no
obligation or liability in connection with the administration, marketing or
trading of the Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE FUND, OWNERS OF THE FUND, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN
IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. S&P MAKES
NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
INVESTMENT OBJECTIVES AND POLICIES
S&P 500 INDEX FUND--The S&P 500 Index Fund seeks to provide investment
results that correspond to the aggregate price and dividend performance of the
securities in the Standard & Poor's 500 Composite Stock Price Index (the "S&P
500 Index"), which is comprised of 500 selected securities (most of which are
common stocks listed on the New York Stock Exchange).
The Fund's ability to duplicate the performance of the S&P 500 Index will
depend to some extent on the size and timing of cashflows into and out of the
Fund, as well as on the level of the Fund's expenses.
Adjustments made to accommodate cash flows will track the S&P 500 Index to
the maximum extent possible, and may result in brokerage expenses for the Fund.
Over time, the correlation between the
S-2
<PAGE>
performance of the Fund and the S&P 500 Index is expected to be over 0.95. A
correlation of 1.00 would indicate perfect correlation, which would be achieved
when the net asset value of the Fund, including the value of its dividend and
capital gains distributions, increased or decreased in exact proportion to
changes in the S&P 500 Index.
The Fund will normally be invested in all of the stocks and other securities
which comprise the S&P 500 Index, except when changes are made to the S&P 500
Index itself. The Fund's policy is to be fully invested in common stocks and
other securities included in the Index, and it is expected that cash reserve
items would normally be less than 10% of net assets. Accordingly, an investment
in shares of the Fund involves risks similar to those of investing in a
portfolio consisting of the common stocks and other securities of some or all of
the companies included in the S&P 500 Index.
The weightings of securities in the S&P 500 Index are based on each
security's relative total market value, I.E., market price per share times the
number of shares outstanding. Because of this weighting, approximately 50% of
the S&P 500 Index is currently composed of stocks of the 50 largest companies in
the S&P 500 Index, and the S&P 500 Index currently represents over 65% of the
market value of all U.S. common stocks listed on the New York Stock Exchange.
World Asset Management, LLC ("World"), the Fund's investment Sub-Adviser,
makes no attempt to "manage" the Fund in the traditional sense (I.E., by using
economic, financial or market analyses). The adverse financial situation of a
company usually will not result in the elimination of a security from the Fund.
However, an investment may be removed from the Fund if, in the judgment of
World, the merit of the investment has been substantially impaired by
extraordinary events or adverse financial conditions. Furthermore,
administrative adjustments may be made in the Fund from time to time because of
mergers, changes in the composition of the S&P 500 Index and similar reasons. In
certain circumstances, World may exercise discretion in determining whether to
exercise warrants or rights issued in respect to fund securities or whether to
tender fund securities pursuant to a tender or exchange offer.
The equity securities in which the Fund invests are common stocks, preferred
stocks, securities convertible into common stock and American Depositary
Receipts ("ADRs"). The Fund may also purchase shares of real estate investment
trusts ("REITs").
The Fund may enter into stock index futures contracts to maintain adequate
liquidity to meet its redemption demands while maximizing the level of the
Fund's assets which are tracking the performance of the S&P 500 Index, provided
that the value of these contracts does not exceed 20% of the Fund's total
assets. The Fund may only purchase those stock index futures contracts--such as
futures contracts on the S&P 500 Index--that are likely to closely replicate the
performance of the S&P 500 Index. The Fund also can sell such futures contracts
in order to close out a previously established position. The Fund will not enter
into any stock index futures contract for the purpose of speculation, and will
only enter into contracts traded on national securities exchanges with
standardized maturity dates.
The Fund may invest cash reserves in securities issued by the U.S.
Government, its agencies or instrumentalities, bankers' acceptances, commercial
paper rated at least A-1 by S&P and/or Prime-1 by Moody's Investors Services,
Inc. ("Moody's"), certificates of deposit and repurchase agreements involving
such obligations. Such investments will not be used for defensive purposes.
BOND INDEX FUND--The Bond Index Fund currently seeks to provide investment
results that correspond to the aggregate price and interest performance of the
Lehman Aggregate Bond Index (the "Lehman Index"), which tracks the performance
of debt securities. The Lehman Index is made up of the Government/Corporate
Index, the Mortgage-Backed Securities Index and the Asset-Backed Securities
Index. The Lehman Index includes fixed rate debt issues rated investment grade
or higher by one or more nationally recognized statistical ratings organizations
("NRSROs"). All issues have at least one year to maturity and an outstanding par
value of at least $100 million. Lehman Brothers, Inc. is neither a sponsor
S-3
<PAGE>
of nor in any other way affiliated with the Trust. Inclusion of a security in
the Lehman Index in no way implies an opinion of Lehman Brothers, Inc. as to its
attractiveness or appropriateness as an investment.
In seeking to generate results that correspond to the performance of the
Lehman Index, the Fund will invest in the following obligations: (i) debt
obligations issued or guaranteed by the United States Government or its agencies
or instrumentalities; (ii) investment-grade debt obligations issued by U.S.
corporations; (iii) debt obligations issued or guaranteed by foreign sovereign
governments, municipalities, governmental agencies or international agencies;
(iv) mortgage-backed securities, including conventional 15- and 30-year fixed
rate mortgages, graduated payment mortgages, balloon mortgages and adjustable
rate mortgages; (v) asset-backed securities; and (vi) any other issues that are
included in the Lehman Index.
Fixed income securities in which the Fund may invest must be rated BBB or
better by S&P or Baa or better by Moody's at the time of purchase. Debt
securities rated BBB or Baa lack outstanding investment characteristics and have
speculative characteristics as well. In the event that a security held by the
Fund is downgraded below investment grade, the adviser will promptly review the
situation and take appropriate action.
If an obligation which is included in the Lehman Index on the first day of
the month ceases to meet any of the qualifications for inclusion in the Lehman
Index during that month, the obligation remains in the Lehman Index through the
end of that month and then is eliminated from the Lehman Index. Mellon Bond
Associates, LLP ("MBA"), the Fund's investment adviser, will monitor portfolio
securities in order to determine whether any of these obligations have ceased to
qualify for inclusion in the Lehman Index. If an obligation has ceased to
qualify for inclusion in the Lehman Index as a result of: (i) a lowered
investment rating, (ii) an aggregate outstanding principal amount of less than
$100 million, or (iii) a remaining maturity that no longer exceeds one year
(collectively, "Ineligible Obligations"), the investment adviser may either
undertake to sell such Ineligible Obligations as quickly as is financially
prudent, which may be prior to or later than the time that obligation is removed
from the Lehman Index, or may determine to retain the security. To the extent
that the investment adviser determines to retain Ineligible Obligations, such
Ineligible Obligations, together with cash and money market instruments, will
not exceed 20% of the Fund's net assets. Although the Fund retains the right to
invest up to 20% of its net assets in Ineligible Obligations, cash and money
market instruments, these items are expected to constitute less than 10% of the
net assets of the Fund. Obligations held by the Fund that became Ineligible
Obligations as a result of being rated below investment grade (which securities
are often referred to as "junk bonds") will not constitute more than 5% of the
Fund's net assets. In addition, cash holdings will not exceed 5% of the Fund's
net assets. In addition, obligations that become eligible for inclusion in the
Lehman Index during a particular month generally will not actually be included
in the Lehman Index until the next month. However, the Fund may elect to
purchase any such obligation and deem it to be included in the Lehman Index once
it becomes eligible.
The Fund generally will not hold all of the individual issues which comprise
the Lehman Index because of the large number of securities involved. Instead,
the Fund will hold a representative sample of the securities in the Index,
selecting issues to represent entire "classes" or types of securities in the
Lehman Index. Obligations included in the Lehman Index have been categorized by
MBA into sectors which have been organized on the basis of type of issuer, and
then further classified by quality and remaining maturities. The percentage of
the Fund's assets to be invested in the aggregate obligations included in a
particular sector of the Lehman Index will approximate, to the maximum extent
feasible, the percentage such sector represents in the Lehman Index. The Fund's
ability to duplicate the performance of the Lehman Index will depend to some
extent on the size and timing of cash flows into and out of the Portfolio, as
well as on the level of the Fund's expenses, and the capability of MBA to select
a representative sample of the securities included in the Lehman Index. To the
extent that the size of the Fund's assets limits the number of issues that the
Fund can purchase, there is more potential for deviation from the Lehman Index's
performance than at larger asset levels.
S-4
<PAGE>
The Fund may invest in restricted securities, including Rule 144A
securities, included in the Lehman Index.
GENERAL
Each Fund may lend a portion of its assets to qualified institutions for the
purpose of realizing additional income, however neither Fund has any present
intention to lend its securities. Each Fund may invest in illiquid securities;
however, not more than 10% of the total assets of each Fund will be invested in
such instruments. The Funds may enter into forward commitments, or purchase
securities on a when-issued or delayed delivery basis.
There can be no assurance that the Funds will achieve their respective
investment objectives.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
AMERICAN DEPOSITARY RECEIPTS ("ADRS")--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 may be available 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 receipts underlying security. Holders of unsponsored
depositary receipts 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 (NON-MORTGAGE)--Asset-backed securities consist of
securities secured by 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 instruments, which
are also known as collateralized obligations and are generally issued as the
debt of a special purpose entity, such as a trust or corporation, organized
solely for purpose of owning such assets and issuing such debt. A Fund may
invest in other asset-backed securities that may be created in the future if the
Advisor determines they are suitable.
BANK OBLIGATIONS--The Funds may invest in bank obligations of U.S.
commercial banks or savings and loan institutions, including certificates of
deposit, time deposits and bankers' acceptances. A time deposit is an account
containing a currency balance pledged to remain at a particular bank for a
specified period in return for payment of interest. A bankers' acceptance is a
bill of exchange guaranteed by a bank or trust company for payment within one to
six months. Bankers' acceptances are used to provide manufacturers and exporters
with capital to operate between the time of manufacture or export and payment by
the purchaser. A certificate of deposit is an interest-bearing instrument with a
specific maturity issued by a bank or savings and loan institution in exchange
for the deposit of funds that normally can be traded in the secondary market
prior to maturity.
EQUITY SECURITIES--Equity securities represent ownership interests in a
company or corporation, and include common stock, preferred stock, and warrants
and other rights to acquire such instruments. Investments in equity securities
are subject to market risks that may cause their prices to fluctuate over time.
The value of convertible equity securities is also affected by prevailing
interest rates, the credit quality of the issuer and any call provisions.
Fluctuations in the value of equity securities will not necessarily affect cash
income derived from these securities, but will affect a Fund's net asset value.
FIXED INCOME SECURITIES--Fixed income securities are debt obligations issued
by corporations, municipalities and other borrowers. While securities with
longer maturities tend to produce higher yields,
S-5
<PAGE>
the prices of longer maturity securities are also subject to greater market
fluctuations. The market value of the 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.
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 also
affect the value of these investments. Changes in the value of these securities
will not necessarily affect cash income derived from these securities but will
affect a Fund's net asset value.
FOREIGN SECURITIES--Foreign securities are securities issued by non-U.S.
issuers. Certain of the Underlying Funds 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
Fund to investment risks that differ in some respects from those related to
investments in obligations of U.S. domestic issuers. Investing in the securities
of foreign companies and the utilization of forward foreign currency contracts
involve special risks and considerations not typically associated with investing
in U.S. companies. 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 Funds 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.
FUTURES AND OPTIONS ON FUTURES--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 Fund may use futures contracts and related options for
BONA FIDE hedging purposes, to offset changes in the value of securities held or
expected to be acquired or be disposed of, to minimize fluctuations in foreign
currencies, or to gain exposure to a particular market or instrument. A Fund
will minimize the risk that it will be unable to close out a futures contract by
only entering into futures contracts that are traded on national futures
exchanges.
An index futures contract is a bilateral agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the 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 bonds comprising the index is
made; generally contracts are closed out prior to the expiration date of the
contract.
In order to avoid leveraging and related risks, when a Fund invests in
futures contracts, it will cover 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 and that amount will be marked to
market on a daily basis.
S-6
<PAGE>
A Fund may enter into futures contracts and options on futures contracts
traded on an exchange regulated by the Commodities Futures Trading Commission
("CFTC"), so 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 the Fund's net assets.
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 Fund 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 options on futures. In addition, some
strategies reduce a Fund's exposure to price fluctuations, while others tend to
increase its market exposure. Futures and options on futures can be volatile
instruments and involve certain risks that could negatively impact a Fund's
return.
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 Fund's books. Illiquid securities include demand
instruments with demand notice periods exceeding seven days, securities for
which there is no active secondary market, and repurchase agreements with
maturities 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 Fund'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.
MONEY MARKET INSTRUMENTS--Money market instruments 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 issued by the 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.
The Bond Index Fund may purchase securities representing interests in
mortgage pools guaranteed by U.S. Government agencies or instrumentalities,
including Government National Mortgage Association ("GNMA"), Fannie Mae and
Federal Home Loan Mortgage Corporation ("FHLMC"), conventional mortgage-pass
through obligations, and Federal Housing Administration-insured mortgage pools.
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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 is a wholly-owned U.S.
Government corporation which guarantees the timely payment of principal and
interest. The market value and interest yield of these instruments can vary due
to market interest rate fluctuations and early prepayments of underlying
mortgages. These securities represent ownership in a pool of federally insured
mortgage loans. GNMA certificates consist of underlying mortgages with a maximum
maturity of 30 years. However, due to scheduled and unscheduled principal
payments, GNMA certificates have a shorter average maturity and, therefore, less
principal volatility than a comparable 30-year bond. Since prepayment rates vary
widely, it is not possible to predict accurately the average maturity of a
particular GNMA pool. The scheduled monthly interest and principal payments
relating to mortgages in the pool will be "passed through" to investors. GNMA
securities differ from conventional bonds in that principal is paid back to the
certificate holders over the life of the loan rather than at maturity. As a
result, the Fund will receive monthly scheduled payments of principal and
interest. In addition, the Fund may receive unscheduled principal payments
representing prepayments on the underlying mortgages. Any prepayments will be
reinvested at the then prevailing interest rate.
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.
PRIVATE PASS-THROUGH SECURITIES--These are mortgage-backed securities issued by
a non-governmental entity, such as a trust or corporate entity. These securities
include collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conduits ("REMICs"). While they are generally structured with one or
more types of credit enhancement, private pass-through securities typically lack
a guarantee by an entity having the credit status of a governmental agency or
instrumentality.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")--CMOs are debt obligations or
multiclass pass-through certificates issued by agencies or instrumentalities of
the U.S. Government or by private originators or investors in mortgage loans.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially earlier then their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid. 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.
REMICS--A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by
Fannie Mae or FHLMC represent beneficial ownership interests in a REMIC trust
consisting principally of mortgage loans or Fannie
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Mae, FHLMC or GNMA-guaranteed mortgage pass-through certificates. 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.
STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS")--SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and is thus termed an interest-only class ("IO"), while
the other class may receive all of the principal payments and is thus termed the
principal-only class ("PO"). The value of IOs tends to increase as rates rise
and decrease as rates fall; the opposite is true of POs. During times when
interest rates are experiencing fluctuations, such securities can be difficult
to price on a consistent basis. The market for SMBs is not as fully developed as
other markets; SMBs, therefore, may be illiquid.
OPTIONS--A Fund may purchase and write put and call options on indices and
enter into related closing transactions. 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.
A Fund may purchase and write put and call options on foreign currencies
(traded on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an equal amount of the
underlying foreign currency.
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.
All options written on indices or securities must be covered. When a Fund
writes an option or security on an index or a foreign currency, it will
establish a segregated account containing cash or liquid securities in an amount
at least equal to the market value of the option and will maintain the account
while the option is open or will otherwise cover the transaction.
Each Fund may trade put and call options on securities and securities
indices, as the advisers determine is appropriate in seeking the Fund's
investment objective, and except as restricted by each Fund's investment
limitations as set forth below. See "Investment Limitations."
The initial purchase (sale) of an option contract is an "opening
transaction." In order to close out an option position, a Fund 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 Fund 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 Fund
delivers the security upon exercise.
A Fund may purchase put and call options on securities 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 Fund may seek to purchase
in the future. A Fund 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 Fund loss of the premium paid may be
offset by an increase in the value of the Fund's securities or by a decrease in
the cost of acquisition of securities by the Fund.
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A Fund may write covered call options on securities 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 writes 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 Fund will realize as profit the
premium received for such option. When a call option of which a Fund is the
writer is exercised, the Fund 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 of which a Fund is the writer is exercised, the Fund will be required to
purchase the underlying securities at a price in excess of the market value of
such securities.
A Fund 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 Securities and Exchange Commission that OTC options are
generally illiquid.
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.
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 Fund 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. A REIT is not taxed on income distributed to its
shareholders or unitholders if it complies with regulatory requirements relating
to its organization, ownership, assets and income, and with a regulatory
requirement that it distribute to its shareholders or unitholders at least 95%
of its taxable income for each taxable year. Generally, REITs can be classified
as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs invest the
majority of their assets directly in real property and derive their income
primarily from rents and capital gains from appreciation realized through
property sales. Mortgage REITs invest the majority of their assets in real
estate mortgages and derive their income from interest payments. Hybrid REITs
combine the characteristics of both Equity and Mortgage REITs. By investing in
REITs indirectly through the Fund, shareholders will bear not only the
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of underlying REITs.
A Fund may be subject to certain risks associated with the direct
investments of the REITs. REITs may be affected by changes in the of their
underlying properties and by defaults by borrowers or tenants. Mortgage REITs
may be affected by the quality of the credit extended. Furthermore, REITs are
dependent on specialized management skills. Some REITs may have limited
diversification and may be subject to risks inherent on financing a limited
number of properties. REITs depend generally on their ability to generate cash
flow to make distributions to shareholders or unitholders, and may be subject to
defaults by borrowers and to self-liquidations. In addition, a REIT may be
affected by its failure to qualify for tax-free pass-through of income under the
Code or its failure to maintain exemption from registration under the 1940 Act.
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. A Fund bears a risk of loss in the event that the other party to a
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repurchase agreement defaults on its obligations and the Fund is delayed or
prevented from exercising its rights to dispose of the collateral securities. A
fund may enter into repurchase agreements only with financial institutions that
its adviser 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 Fund 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 a Fund will provide
that the underlying security at all times shall have a value at least equal to
102% of the price stated in the agreement. This underlying security will be
marked to market daily. Each adviser will monitor compliance with this
requirement. Under all repurchase agreements entered into by a Fund, the Fund or
its agent will have actual or constructive possession of the securities held as
collateral for the repurchase agreement. However, if the seller defaults, a Fund
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, a Fund may
incur delay and costs in selling the security and may suffer a loss if the Fund
is treated as an unsecured creditor.
SECURITIES LENDING--In order to generate additional income, a Fund may lend
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, in an amount at least equal to the
market value of the loaned securities. Loans are made only to borrowers deemed
by the advisers to be in good standing and when, in the judgment of the
advisers, 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. The Funds may use the
Distributor as a broker in these transactions.
STOCK INDEX FUTURES--A stock index futures contract is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
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 securities
comprising the index is made; generally contracts are closed out prior to the
expiration date of the contract.
In order to avoid leveraging and related risks, when a Fund 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.
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 Fund 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 options on futures.
The S&P 500 Index Fund may invest in stock index futures. No price is paid
upon entering into futures contracts. Instead, a Fund is required to deposit an
amount of cash or U.S. Treasury securities known as "initial margin." Subsequent
payments, call "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 nature of initial and variation margin in futures
transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of funds to finance the
transactions. Rather, the margin is in the nature of a performance bond or
good-faith deposit on the contract that is returned to the Fund upon termination
of the contract, assuming all contractual obligations
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have been satisfied. Positions in futures contracts may be closed only on an
exchange or board of trade providing a secondary market for such futures
contracts. The value of the contract usually will vary in direct proportion to
the total face value. Market value of a stock index futures position is defined
as the closing value of the Index multiplied by 500 times the number of
contracts held.
The Fund's ability to effectively utilize futures contracts depends on
several factors. First, it is possible that there will not be a perfect price
correlation between the futures contracts and their underlying stock index. In
addition, the purchase of a futures contract involves the risk that the Fund
could lose more than the original margin deposit required to initiate a futures
transaction.
In considering the proposed use of futures contracts, particular note should
be taken that futures contracts relate to the anticipated levels at some point
in the future not to the current level of the underlying instrument; thus, for
example, trading of stock index futures may not reflect the trading of the
securities which are used to formulate an index or even actual fluctuations in
the relevant index itself. There is, in addition, a risk that movements in the
price of futures contracts will not correlate with the movement in prices of the
stock index being tracked. There may be several reasons unrelated to the value
of the underlying securities which causes this situation to occur. First, all
participants in the futures market are subject to initial and variation margin
requirements. If, to avoid meeting additional margin deposit requirements or for
other reasons, investors choose to close a significant number of futures
contracts through offsetting transactions, distortions in the normal price
relationship between the securities markets and the futures markets may occur.
Second, because the deposit requirements in the futures market are less onerous
than margin requirements in the securities market, there may be increased
participation by speculators in the futures market which may also cause
temporary price distortions. The Fund will not engage in transactions in futures
contracts for speculative purposes.
TRACKING ERROR RISK--Factors such as Fund expenses, imperfect correlation
between the Fund's investments and those of their benchmarks, rounding of share
prices, changes to the benchmark, regulatory policies, and leverage, may affect
their ability to achieve perfect correlation. The magnitude of any tracking
error may be affected by a higher portfolio turnover rate. Because an index is
just a composite of the prices of the securities it represents rather than an
actual portfolio of those securities, an index will have no expenses. As a
result, a Fund which will have expenses such as taxes, custody, management fees
and other operational costs, and brokerage, may not achieve its investment
objective of accurately correlating to an index.
U.S. GOVERNMENT SECURITIES--The Funds may invest in U.S. Government
Securities, which include bills, notes and bonds issued by the United States
Treasury, obligations issued or guaranteed by agencies of the United States
Government including, among others, Export Import Bank of the United States,
Farmers Home Administration, Federal Farm Credit Bank, Federal Housing
Administration, Maritime Administration, Small Business Administration, and The
Tennessee Valley Authority and obligations issued or guaranteed by
instrumentalities of the United States Government including, among others,
Federal Home Loan Banks, FHLMC, Federal Intermediate Credit Banks, Federal Land
Banks, Fannie Mae and the United States Postal Service. Some of these securities
are supported by the full faith and credit of the United States Treasury (E.G.,
GNMA securities), others are supported by the right of the issuer to borrow from
the Treasury (E.G., Federal Farm Credit Bank securities) and still others are
supported only by the credit of the instrumentality (E.G., Fannie Mae
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 Fund's shares.
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,
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known as Separately Traded Registered Interest and Principal Securities
("STRIPS") that are transferable through the Federal book-entry system.
VARIABLE AND FLOATING RATE INSTRUMENTS--Certain obligations may carry
variable or floating rates of interest and may involve a conditional or
unconditional demand feature. 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 at
some other interval, and may have a floor or ceiling on interest rate changes.
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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES--The Bond Index Fund may
purchase debt obligations on a when-issued basis, in which case delivery and
payment normally take place within 45 days after the date of the commitment to
purchase. The Fund 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 if it is deemed advisable. The when-issued securities
are subject to market fluctuation, and no interest accrues to the purchaser
during the period prior to settlement. 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 which case there could be an unrealized
loss at the time of delivery.
These securities are subject to market fluctuation due to changes in market
interest rates, and it is possible that the market value at the time of
settlement could be higher or lower than the purchase price if the general level
of interest rates has changed.
The Fund will establish a segregated account and maintain liquid assets in
an amount at least equal in value to the Fund's commitments to purchase
when-issued securities. If the value of these assets declines, the Fund 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.
YANKEE OBLIGATIONS--Yankee obligations ("Yankees") are U.S.
dollar-denominated instruments of foreign issuers who either register with the
SEC or issue under Rule 144A under the Securities Act of 1933 Act. These
obligations 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. Some securities issued by foreign
governments or their subdivisions, agencies and instrumentalities may not be
backed by the full faith and credit of the foreign government.
The Yankee obligations selected for a Fund will adhere to the same quality
standards as those utilized for the selection of domestic debt obligations.
YEAR 2000 RISKS--The Trust depends on the smooth functioning of computer
systems in almost every aspect of its business. Like other mutual funds,
business and individuals around the world, the Trust could be adversely affected
if the computer systems used by its service providers do not properly process
dates on and after January 1, 2000 and distinguish between the year 2000 and the
year 1900. The Trust has asked its mission critical service providers whether
they expect to have their computer systems adjusted for the year 2000
transition, and have sought and received assurances from each that its system is
expected to accommodate the year 2000 without material adverse consequences to
the Trust. The Trust and its shareholders may experience losses if these
assurances prove to be incorrect or as a result of year 2000 computer
difficulties experienced by issuers of portfolio securities or third parties,
such as custodians, banks, broker-dealers or others with which the Trust does
business.
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Furthermore, many foreign countries are not as prepared as the U.S. for the
year 2000 transition. As a result, computer difficulties in foreign markets and
with foreign institutions as a result of the year 2000 may add to the
possibility of losses to the Trust and its shareholder.
INVESTMENT LIMITATIONS
Neither Fund may:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States Government, its agencies or instrumentalities) if, as a
result, more than 5% of the Fund's total assets would be invested in the
securities of such issuer. This restriction applies to 75% of each Fund's
total assets.
2. Purchase any securities which would cause more than 25% of the Fund's total
assets to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed
by the United States Government or its agencies and instrumentalities.
3. 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 that Fund. 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 will be
repaid before making additional investments for that Fund, and any interest
paid on such borrowings will reduce the Fund's income.
4. Make loans, except that each Fund (i) may 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 Fund's total assets, (ii) may engage in securities
lending as described in this Prospectus, and (iii) may purchase or hold debt
instruments in accordance with its investment objectives and policies.
5. 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 the Fund taken at current value at the time of the incurrence
of such loan and, as to the S&P 500 Index Fund, in connection with stock
index futures trading as provided in the Prospectuses and this Statement of
Additional Information.
6. Invest in companies for the purpose of exercising control.
7. Purchase or sell real estate, real estate limited partnership interests,
physical commodities or commodities contracts. However, subject to its
permitted investments, a Fund may purchase (i) obligations issued by
companies which invest in real estate, commodities or commodities contracts,
and (ii) commodities contracts related to financial instruments, such as
financial futures contracts.
8. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits as
necessary for the clearance of security transactions.
9. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a fund security.
10. Purchase securities of other investment companies except as permitted by the
Investment Company Act of 1940 and the rules and regulations thereunder and
may only purchase securities of money market funds.
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11. Issue senior securities (as defined in the Investment Company Act of 1940)
except in connection with permitted borrowings as described in the
Prospectuses and this Statement of Additional Information or as permitted by
rule, regulation or order of the Securities and Exchange Commission ("SEC").
12. 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.
13. 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.
14. Purchase warrants, puts, calls, straddles, spreads or combinations thereof.
15. Invest in interests in oil, gas or other mineral exploration or development
programs.
16. 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 Prospectuses and
this Statement of Additional Information.
The foregoing percentages and percentage limitations (except the limitation
on borrowings) will apply at the time of the purchase of a security and shall
not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of a purchase of such security. These
investment limitations and fundamental policies of the Trust and may not be
changed without shareholder approval.
THE ADMINISTRATOR AND TRANSFER AGENT
The Management Agreement provides that the Administrator, SEI Investments
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 Management 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 continuance of the Management Agreement must be specifically approved at
least annually (i) by the vote of a majority of the Trustees or by the vote of a
majority of the outstanding voting securities of the Fund, and (ii) by the vote
of a majority of the Trustees of the Trust who are not parties to the Management
Agreement or an "interested person" (as that term is defined in the Investment
Company Act of 1940) of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Management Agreement is
terminable at any time without penalty by the Trustees of the Trust, by a vote
of a majority of the outstanding shares of a Fund or by SEI Management on not
less than 30 days' nor more than 60 days' written notice. This Agreement shall
not be assignable by either party without the written consent of the other
party.
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
Investments"), is the owner of all beneficial interest in SEI Management. SEI
Investments 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 or sub-administrator to the following other mutual funds: The
Achievement Funds Trust, The Advisors' Inner Circle Fund, Alpha Select Funds,
The Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784
Funds-Registered Trademark-, CNI Charter Funds, CrestFunds, Inc., CUFUND, The
Expedition Funds, First American Funds, Inc., First American Investment Funds,
Inc., First American Strategy
S-15
<PAGE>
Funds, Inc., HighMark Funds, Huntington Funds, The Nevis Funds, Oak Associates
Funds, The Parkstone Advantage Funds, The PBHG Funds, Inc., The PBHG Advisor
Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Institutional Investments Trust,
SEI Institutional Managed Trust, SEI Institutional International Trust, SEI
Insurance Products Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI
Classic Funds, STI Classic Variable Trust, TIP Funds, and UAM Funds, Inc.
If operating expenses of either Fund exceed applicable limitations, SEI
Management will pay such excess. SEI Management will not be required to bear
expenses of the 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 of 1986, as amended (the "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 years ended March 31, 1997, 1998, and 1999, the Funds paid
fees to SEI Management as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES PAID MANAGEMENT FEES
(000) WAIVED (000)
---------------------- ------------------
FUND 1997 1998 1999 1997 1998 1999
- ------------------------------------------ ------ ------ ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 Index Fund........................ $1,271 $2,404 $3,413 $446 $520 $ 700
Bond Index Fund........................... $ 114 $ 78 $ 127 $ 46 $ 59 $ 44
</TABLE>
THE ADVISERS AND SUB-ADVISER
SEI Investments Management Corporation ("SIMC") is a wholly-owned subsidiary
of SEI Investments, a financial services company. The principal business address
of SIMC and SEI Investments is Oaks, Pennsylvania, 19456. SEI Investments was
founded in 1968, and is a leading provider of investment solutions to banks,
institutional investors, investment advisers and insurance companies. Affiliates
of SIMC have provided consulting advice to institutional investors for more than
20 years, including advice regarding selection and evaluation of sub-advisers.
SIMC currently serves as manager to more than 46 investment companies, including
more than 387 funds, with more than $43.6 billion in assets as of May 31, 1999.
SIMC is the investment adviser for S&P 500 Index Fund, and operates as a
"manager of managers." As Adviser to the S&P 500 Index Fund, SIMC oversees the
investment advisory services provided to the Funds and manages the cash portion
of the Fund's assets. Pursuant to a separate sub-advisory agreement with SIMC,
and under the supervision of SIMC and the Board of Trustees, World Asset
Management, LLC (the "Sub-Adviser") is responsible for the day-to-day investment
management of all or a discrete portion of the assets of the Fund. Sub-Advisers
are selected for the Fund based primarily upon the research and recommendations
of SIMC, which evaluates quantitatively and qualitatively a Sub-Adviser's skills
and investment results in managing assets for specific asset classes, investment
styles and strategies.
Subject to Board review, SIMC evaluates Sub-Adviser performance, and
oversees Sub-Adviser compliance with the Fund's investment objectives, policies
and restrictions. SIMC HAS ULTIMATE RESPONSIBILITY FOR THE INVESTMENT
PERFORMANCE OF THE FUND DUE TO ITS RESPONSIBILITY TO OVERSEE SUB-ADVISERS AND
RECOMMEND THEIR HIRING, TERMINATION AND REPLACEMENT.
S-16
<PAGE>
For its advisory services, SIMC is entitled to a fee, which is calculated
daily and paid monthly, at the annual rate of .03% of the average daily net
assets of the S&P 500 Index Fund. For the fiscal year ended March 31, 1999, the
S&P 500 Index Fund paid adviser fees to SIMC, after fee waivers of .03% of the
average daily net assets.
Mellon Bond Associates, LLP ("MBA") serves as the investment adviser to the
Bond Index Fund. MBA has been serving as the adviser to the Bond Index Fund
since October 2, 1995.
For its advisory services, MBA is entitled to a fee, which is calculated
daily and paid monthly, at the annual rate of .07% of the average daily net
assets of the Bond Index Fund. For the fiscal years ended March 31, 1997, 1998
and 1999, MBA received fees of $32,040, $27,435 and $34,116 respectively, from
the Bond Index Fund.
Each Investment Advisory and Sub-Advisory Agreement (each an Investment
Advisory Agreement) provides that the adviser 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 continuance of each Investment Advisory Agreement must be specifically
approved at least annually (i) by the vote of a majority of the outstanding
shares of the Fund or by the Trustees, and (ii) by the vote of a majority of the
Trustees who are not parties to such Investment Advisory Agreement or
"interested persons" 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
Fund, by a majority of the outstanding shares of the Fund, on not less than 30
days' nor more than 60 days' written notice to the adviser, or by the adviser on
90 days' written notice to the Trust.
SIMC and the Trust have 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 unaffiliated with SIMC for the
Funds without submitting the Sub-Adviser agreements to a vote of the Fund's
shareholders. The exemptive relief permits SIMC to disclose only the aggregate
amount payable by SIMC to the Sub-Advisers under all such Sub-Adviser agreements
for the Fund. The Fund will notify shareholders in the event of any addition or
change in the identity of its Sub-Advisers.
World Asset Management, the sub-adviser to the S&P 500 Index Fund, is a
general partnership which engages in investment management and advisory
services. World is entitled to a fee for its investment sub-advisory services,
which is based on the average monthly market value of the assets of the Fund.
For the fiscal period ended March 31, 1999, World received fees of $560,916.
Prior to November 18, 1998, World was Adviser to the Fund, and any fees paid
prior to that date were for advisory services for the fiscal years ended March
31, 1997 and 1998, World received advisory fees of $234,127 and $398,677,
respectively, from the Fund. Fees paid to World after November 18, 1998, were
paid to World by SIMC for sub-advisory services.
DISTRIBUTION AND SHAREHOLDER SERVICING
The Distribution Agreement is renewable annually and may be terminated by
the Distributor, a majority vote of the Disinterested Trustees or by a majority
vote of the outstanding securities of the Trust upon not more than 60 days'
written notice by either party. No compensation is paid to the Distributor under
the Distribution Agreement. The Distributor, SEI Investments Distribution Co.,
is a wholly-owned subsidiary of SEI Investments.
The Funds have adopted shareholder servicing plans for the Class A and Class
E shares (the "Service Plans"). Under these Plans, the Distributor may perform,
or may compensate other service providers for performing, the following
shareholder and administrative services: maintaining client accounts; arranging
for bank wires; responding to client inquiries concerning services provided on
investments; assisting clients
S-17
<PAGE>
in changing dividend options, account designations and addresses;
sub-accounting; providing information on share positions to clients; forwarding
shareholder communications to clients; processing purchase, exchange and
redemption orders; and processing dividend payments. Under the Service Plans,
the Distributor may retain as a profit any difference between the fee it
receives and the amount it pays to third parties.
Certain institutions may also charge separate fees for related services. It
is possible that an institution may offer different classes of shares to its
customers and thus receive compensation with respect to different classes.
Certain Class A and Class E shareholders offering shares to their customers may
be required to register as dealers pursuant to state laws.
TRUSTEES AND OFFICERS 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.
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, Alpha Select
Funds, The Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784
Funds-Registered Trademark-, CrestFunds, Inc., CUFUND, The Expedition Funds,
First American Funds, Inc., First American Investment Funds, Inc., First
American Strategy Funds, Inc., HighMark Funds, Huntington Funds, The Nevis Fund,
Inc., Oak Associates Funds, The Parkstone Group of Funds, The PBHG Funds, Inc.,
PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust,
SEI Daily Income Trust, SEI Institutional Investments Trust, SEI Institutional
International Trust, SEI Institutional Managed Trust, SEI Insurance Products
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 Investments Fund Management or its affiliates
and distributed by SEI Investments Distribution Co. (the "Distributor").
ROBERT A. NESHER (DOB 08/17/46)--Chairman of the Board of
Trustees*--Currently performs various services on behalf of SEI Investments for
which Mr. Nesher is compensated. Executive Vice President of SEI Investments,
1986-1994. Director and Executive Vice President of the SEI Investments
Management Corporation, the Administrator and the Distributor, 1981-1994,
Trustee of The Advisors' Inner Circle Fund, The Arbor Fund, Boston 1784
Funds-Registered Trademark-, The Expedition Funds, Oak Associates Funds, Pillar
Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Institutional
International Trust, SEI Insurance Products Trust, SEI Liquid Asset Trust and
SEI Tax Exempt Trust.
WILLIAM M. DORAN (DOB 05/26/40)--Trustee*--1701 Market Street, Philadelphia,
PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust,
SEI Investments, the SEI Investments Management Corporation, the Administrator
and the Distributor, Director and Secretary of SEI Investments and Secretary of
the SEI Investments Management Corporation, the Administrator and the
Distributor, Trustee of The Advisors' Inner Circle Fund, The Arbor Fund, The
Expedition Funds, Marquis Funds-Registered Trademark-, Oak Associates Funds, SEI
Asset Allocation Trust, SEI Daily Income Trust, SEI Institutional Investments
Trust, SEI Institutional Managed Trust, SEI Institutional International Trust,
SEI Insurance Products Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust.
F. WENDELL GOOCH (DOB 12/03/32)--Trustee**--President, Orange County
Publishing Co., Inc.; Publisher, Paoli News and Paoli Republican; and Editor,
Paoli Republican, October 1981-January 1997. President, H&W Distribution, Inc.,
since July 1984. Executive Vice President, Trust Department, Harris
S-18
<PAGE>
Trust and Savings Bank and Chairman of the Board of Directors of The Harris
Trust Company of Arizona before January 1981. Trustee of SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI Institutional International Trust, SEI
Insurance Products Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI
Classic Funds and STI Classic Variable Trust.
JAMES M. STOREY (DOB 04/12/31)--Trustee**--Partner, Dechert Price & Rhoads,
from September 1987-December 1993. Trustee of The Advisors' Inner Circle Fund,
The Arbor Fund, The Expedition Funds, Oak Associates Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI Institutional International Trust, SEI
Insurance Products Trust, SEI Liquid Asset Trust, and SEI Tax Exempt Trust.
GEORGE J. SULLIVAN, JR. (DOB 11/13/42)--Trustee**--Chief Executive Officer,
Newfound Consultants Inc. since April 1997. General Partner, Teton Partners,
L.P., June 1991-December 1996; Chief Financial Officer, Noble Partners, L.P.,
March 1991-December 1996; Treasurer and Clerk, Peak Asset Management, Inc.,
since 1991; Trustee, Navigator Securities Lending Trust, since 1995, Trustee of
The Advisor's Inner Circle Fund, The Arbor Fund, The Expedition Funds, Oak
Associates Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI
Institutional International Trust, SEI Insurance Products Trust, SEI Liquid
Asset Trust, and SEI Tax Exempt Trust.
EDWARD D. LOUGHLIN (DOB 03/07/51)--President and Chief Executive
Officer--Executive Vice President and President--Asset Management Division of
SEI Investments, the SEI Investments Management Corporation and the
Administrator since 1997. Senior Vice President, SEI Investments, 1986-1991;
Vice President, SEI Investments, 1981-1986.
TODD B. CIPPERMAN (DOB 02/14/66)--Vice President and Assistant
Secretary--Vice President and Assistant Secretary of SEI Investments, the SEI
Investments Management Corporation, the Administrator and the Distributor since
1995. Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston &
Strawn (law firm), 1991-1994.
JAMES R. FOGGO (DOB 06/30/64)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of SEI Investments since January 1998. Vice
President of the Administrator and Distributor since May 1999. Associate, Paul
Weiss, Rifkind, Wharton & Garrison (law firm), 1998. Associate, Baker & McKenzie
(law firm), 1995-1998. Associate, Battle Fowler L.L.P. (law firm), 1993-1995.
Operations Manager, The Shareholder Services Group, Inc., 1986-1990.
LYDIA A. GAVALIS (DOB 06/05/64)--Vice President and Assistant
Secretary--Vice President and Assistant Secretary of the Administrator and the
Distributor since 1998. Assistant General Counsel and Director of Arbitration,
Philadelphia Stock Exchange, 1989-1998.
KATHY HEILIG (DOB 12/21/58)--Vice President and Assistant
Secretary--Treasurer of SEI Investments Company since 1997; Assistant Controller
of SEI Investments Company since 1995; Vice President of SEI Investments Company
since 1991; Director of Taxes of SEI Investments Company 1987 to 1991. Tax
Manager, Arthur Andersen LLP prior to 1987.
JOSEPH M. O'DONNELL (DOB 11/13/54)--Vice President and Assistant
Secretary--Vice President and Assistant Secretary of the SEI Investments
Management Corporation, the Administrator and the Distributor since 1998. Vice
President and General Counsel, FPS Services, Inc., 1993-1997. Staff Counsel and
Secretary, Provident Mutual Family of Funds, 1990-1993.
CYNTHIA M. PARRISH (DOB 10/23/59)--Vice President and Assistant
Secretary--Vice President and Assistant Secretary of the SEI Investments, the
SEI Investments Management Corporation, the Administrator and the Distributor
since August 1997. Branch Chief, Division of Enforcement, U.S.
S-19
<PAGE>
Securities and Exchange Commission, January 1995-August 1997. Senior
Counsel--Division of Enforcement, U.S. Securities and Exchange Commission,
September 1992-January 1995. Staff Attorney--Division of Enforcement, U.S.
Securities and Exchange Commission, September 1990-September 1992.
KEVIN P. ROBINS (DOB 04/15/61)--Vice President and Assistant
Secretary--Senior Vice President and General Counsel of SEI Investments, the SEI
Investments Management Corporation, the Administrator and the Distributor since
1994. Assistant Secretary of SEI Investments since 1992; Secretary of the SIMC
and the Administrator since 1994. Vice President, General Counsel and Assistant
Secretary of the SEI Investments Management Corporation, the Administrator and
the Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius LLP (law firm),
1988-1992.
LYNDA J. STRIEGEL (DOB 10/30/48)--Vice President and Assistant
Secretary--Vice President and Assistant Secretary of the Administrator and the
Distributor since 1998. Senior Asset Management Counsel, Barnett Banks, Inc.
(1997-1998). Partner, Groom and Nordberg, Chartered, 1996-1997. Associate
General Counsel, Riggs Bank, N.A., 1991-1995.
RICHARD W. GRANT (DOB 10/25/45)--Secretary--1701 Market Street,
Philadelphia, PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm) since
1989, counsel to the Trust, SEI Investments, SIMC, the Administrator and the
Distributor.
MARK E. NAGLE (DOB 10/20/59)--Controller and Chief Financial Officer--Vice
President of Fund Accounting and Administration for SEI Investments Mutual Fund
Services and Vice President of the Administrator since 1996. Vice President of
the Distributor since December 1997. Vice President, Fund Accounting, BISYS Fund
Services September 1995 to November 1996, Senior Vice President and Site
Manager, Fidelity Investments 1981 to September 1995.
- ------------------------
*Messrs. Nesher and Doran are Trustees who may be deemed to be "interested
persons" of the Trust as the term is defined in the 1940 Act.
**Messrs. Gooch, Storey, and Sullivan serve as members of the Audit Committee of
the Trust.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for unaffiliated Trustees.
Compensation of officers and affiliated Trustees of the Trust is paid by SEI
Management.
<TABLE>
<CAPTION>
AGGREGATE PENSION OR
COMPENSATION FROM RETIREMENT BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION FROM REGISTRANT
REGISTRANT FOR FYE ACCRUED AS PART OF BENEFITS UPON AND FUND COMPLEX PAID TO TRUSTEES
NAME OF PERSON AND POSITION 3/31/98 FUND EXPENSES RETIREMENT FOR FYE 3/31/98
- ------------------------------- ------------------ ------------------- ---------------- -----------------------------------
<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...... $ 4,747 $0 $0 $104,750 for services on 8 boards
Frank E. Morris, Trustee*...... $ 3,551 $0 $0 $77,250 for services on 8 boards
James M. Storey, Trustee....... $ 4,747 $0 $0 $104,750 for services on 8 boards
George J. Sullivan, Trustee.... $ 4,747 $0 $0 $104,750 for services on 8 boards
</TABLE>
- ------------------------
* Mr. Frank E. Morris retired as of 12/31/98.
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.
S-20
<PAGE>
PERFORMANCE
From time to time, a Fund may advertise yield. 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
such Fund over a specified 30-day period. The yield is calculated by assuming
that the income generated by the investment during that period is generated over
a one year and is shown as a percentage of the investment. In particular, yield
will be calculated according to the following formula:
6
Yield = 2[(a-b/cd + 1) - 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.
Actual yield will depend on such variables as asset quality, average asset
maturity, the type of instruments a Fund invests in, changes in interest rates
on money market instruments, changes in the expenses of the Fund and other
factors. For the 30-day period ending March 31, 1999, the yield for the Class A
S&P 500 Index Fund was 0.94%, the yield for the Class E S&P 500 Index Fund was
1.09% and the yield for the Class A Bond Index Fund was 5.63%.
From time to time, each Fund may advertise total return. 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:
n
P(1 + T) = 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.
Based on the foregoing, the average annual total return for the Funds from
inception through March 31, 1999, and for the one, five and ten year periods
ended March 31, 1999 were as follows:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------------
SINCE
FUND CLASS ONE YEAR FIVE YEAR TEN YEAR INCEPTION
- ----------------------------------------- --------------------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
S&P 500 Index Fund A.......................... 28.18% N/A N/A 27.35%
E.......................... 28.34% 23.77% 18.95% 17.76%
Bond Index Fund A.......................... 8.86% 6.96% 8.67% 8.06%
</TABLE>
PURCHASE AND REDEMPTION OF SHARES
The purchase and redemption price of shares is the net asset value of each
share. A Fund's securities are valued by SEI Management pursuant to valuations
provided by an independent pricing service (generally the last quoted sale
price). Securities having maturities of 60 days or less at the time of purchase
will be valued using the amortized cost method. Pricing services may use a
matrix system to determine valuations of fixed income securities. This system
considers such factors as security prices, yields, maturities, call features,
ratings and developments relating to specific securities in arriving at
valuations. Pricing services may also provide market quotations. The procedures
of pricing service and their valuations are reviewed by the officers of the
Trust under the general supervision of the Trustees. Fund 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
S-21
<PAGE>
securities for which market quotations are readily available are valued at the
most recently quoted bid price.
Shares of a Fund may be purchased in exchange for securities included in
that Fund subject to SEI Management's determination that the securities are
acceptable. Securities accepted in an exchange will be valued at the market
value. All accrued interest and subscription of other rights which are reflected
in the market price of accepted securities at the time of valuation become the
property of the Trust and must be delivered by the Shareholder to the Trust upon
receipt from the issuer.
SEI Management will not accept securities for a Fund unless: (1) such
securities are appropriate in the Fund at the time of the exchange; (2) such
securities are acquired for investment and not for resale; (3) the Shareholder
represents and agrees that all securities offered to the Trust for the Fund are
not subject to any restrictions upon their sale by the Fund under the Securities
Act of 1933, or otherwise; (4) such securities are traded on the American Stock
Exchange, the New York Stock Exchange or on NASDAQ in an unrelated transaction
with a quoted sales price on the same day the exchange valuation is made or, if
not listed on such exchanges or on NASDAQ, have prices available from an
independent pricing service approved by the Trust's Board of Trustees; and (5)
the securities may be acquired under the investment restrictions applicable to
the Fund.
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 Fund for any period
during which the New York Stock Exchange, the Administrator, the Distributor
and/or the Custodian is not open for business. The New York Stock Exchange will
not open in observance of the following holidays: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas.
It is currently the Trust's policy to pay for 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 securities held by
a Fund 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 the
Fund of the Trust during any 90-day period of up to the lesser of $250,000 or 1%
of the Trust's net assets in cash. A gain or loss for federal income tax
purposes would be realized by a shareholder subject to taxation upon an in-kind
redemption depending upon the shareholder's basis in the shares of the Fund
redeemed.
TAXES
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. Certain legislation proposed at the time of writing, 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.
QUALIFICATION AS A RIC
Each Fund intends to qualify as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. By following such a policy, each Fund
expects to eliminate or reduce to a nominal amount the federal income taxes to
which such Fund may be subject. In order to qualify for treatment as a RIC under
the Code, a Fund must distribute annually to its shareholders at least 90% of
its investment company taxable income (generally, net investment income,
including net short-term capital gain) and 90% of its net tax-exempt interest
income, if any (the excess of its tax-exempt interest income
S-22
<PAGE>
over certain deductions attributable to that income), ("Distribution
Requirement") and 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, gains from the sale or other disposition of stocks or
securities or certain other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in stocks
or securities; (ii) 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 the Fund's total assets and
that does not represent more than 10% of the outstanding voting securities of
the issuer; and (iii) at the close of each quarter of a Fund's taxable year, not
more than 25% of the value of its total 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 that 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, a Fund will be
subject to a nondeductible 4% federal excise tax to the extent it fails to
distribute to its shareholders by the end of any calendar year 98% of its
ordinary income for that year and 98% of its capital gain net income (the excess
of short and long-term capital gains over short and long-term capital losses)
for the one-year period ending on October 31 of that year (and any retained
amount from the prior calendar year).
Although each Fund intends to distribute substantially all of its net
investment income and capital gains for any taxable (I.E., fiscal) year, a Fund
will be subject to Federal income taxation to the extent any such income or
gains are not distributed. 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 gains distributions) 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 during the
90-day period beginning on the date which is 45 days before the date on which
such shares become exdividend with respect to such dividend.
TAX STATUS OF DISTRIBUTIONS
Dividends from a Fund's net investment income will be taxable to
shareholders as ordinary income (whether received in cash or in additional
shares) to the extent of the Fund's earnings and profits. Dividends paid by the
S&P 500 Index Fund will be eligible for the dividends-received deduction allowed
to corporate shareholders to the extent they are derived from dividends from
domestic corporations, subject to certain limitations; however, dividends
received by a corporate shareholder which qualify for the dividends-received
deduction may be subject to the alternative minimum tax.
Each Fund may either retain or distribute to shareholders its excess of net
long-term capital gains over net short-term capital losses ("net capital
gains"). If a Fund distributes its net capital gains to shareholders, such gains
will not qualify for the dividends received deduction, and they are taxable to
shareholders as long-term capital gains, regardless of the length of time the
shareholder has held shares. Conversely, if a Fund elects to retain its net
capital gains, such Fund will be taxed thereon (except to the extent of any
available capital loss carryovers) at the applicable corporate capital gains tax
rate. In this event, it is expected that a Fund will elect to have its
shareholders treated as having received a distribution of such gains, with the
result that they will be required to report such gains on their federal income
tax returns as long-term capital gains, will receive a tax credit for their
allocable share of capital gains tax paid by the Fund on the gains, and will
increase the tax basis for their shares by an amount equal to the deemed
distribution less the tax credit.
Any gain or loss recognized on a sale, exchange or redemption of shares of a
Fund by a shareholder who is not a dealer in securities will generally, for
individual shareholders, be treated as a long-term capital
S-23
<PAGE>
gain or loss if the shares have been held for more than twelve months and
otherwise will be treated as short-term capital gain or loss. However, if shares
on which a shareholder has received a net capital gain distribution are
subsequently sold, exchanged or redeemed and such shares have been held for six
months or less, any loss recognized will be treated as a long-term capital loss
to the extent of the net capital gain distribution. Long-term capital gains are
currently taxed at a maximum rate of 20% and short-term capital gains are
currently taxed at ordinary income tax rates.
A Fund will be required in certain cases to withhold and remit to the United
States Treasury 31% of distributions payable to any individual or non-corporate
shareholder who (1) has provided 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.
The S&P 500 Index Fund may invest in stock index futures. The use of stock
index futures contracts involves specialized and complex income tax rules that
will determine the character and timing of recognition of the income received in
connection therewith by the Fund and thereby affect the amount and proportion of
income that will be available for distribution as dividends or capital gain
distributions.
Stock index futures contracts held by the Fund at the end of each taxable
year will be required to be "marked to market" for Federal income tax purposes
(that is, treated as having been sold at that time at market value). Any
unrealized gain or loss taxed pursuant to this rule will be added to realized
gains and losses recognized on other futures contracts sold by the Fund during
the year, and the resulting gain or loss will be deemed to consist of 60%
long-term capital gain or loss and 40% short-term capital gain or loss. The Fund
may elect to exclude certain hedging transactions from the mark-to-market rule.
Gain from hedging transactions is treated as ordinary income.
The Trust has obtained a private letter ruling from the Internal Revenue
Service confirming that the income and assets attributable to transactions in
stock index futures contracts qualify under the above-described income and asset
tests applicable to RICs.
For purposes of the Distribution Requirement (as well as for other purposes)
the Bond Index Fund will be required to treat any recognized market discount on
debt obligations which it holds as interest income. Generally, market discount
is the amount by which the stated redemption price of a bond exceeds the amount
paid by a purchaser of the bond (most common where the value of a bond decreases
after original issue as a result of a decline in the creditworthiness of the
issuer or an increase in prevailing interest rates). Generally, market discount
is recognized on the disposition, or receipt of any principal payment, with
respect to a bond bearing market discount, by treating a portion of the proceeds
as interest income. The application of these rules (and the rules regarding
original issue discount) to debt obligations held by the Bond Index Fund could
affect (i) the amount and timing of distributions to shareholders and (ii) the
ability of the Fund to satisfy the Distribution Requirement.
Investment income received by the Bond Index Fund from sources within
foreign countries may be subject to foreign income taxes withheld at the source.
The Bond Index Fund will not be able to elect to treat its shareholders as
having paid their proportionate share of such taxes for foreign tax purposes.
STATE TAXES
Neither Portfolio is liable for any income or franchise tax in Massachusetts
if it qualifies as a RIC for Federal income tax purposes. Distributions by the
Funds to shareholders and the ownership of shares may be subject to state and
local taxes. Since state and local tax consequences may differ from the federal
income tax consequences discussed above, shareholders are urged to consult their
tax advisers on state and local tax matters.
S-24
<PAGE>
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, each Adviser is 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 each Adviser
generally seeks reasonably competitive spreads or commissions, the Trust will
not necessarily be paying the lowest spread or commission available. The Trust's
policy of investing in securities with short maturities will result in high
portfolio turnover. The Trust will not purchase portfolio securities from any
affiliated person acting as principal except in conformity with the regulations
of the SEC.
The Trust does not expect to use one particular dealer, but, subject to the
Trust's policy of seeking the best net results, dealers who provide supplemental
investment research to an Adviser may receive orders for transactions by the
Trust. Information so received will be in addition to and not in lieu of the
services required to be performed by an Adviser under its Advisory Agreement,
and the expenses of an Adviser will not necessarily be reduced as a result of
the receipt of such supplemental information.
The money market securities in which the Funds invest are traded primarily
in the over-the-counter market generally do not involve either brokerage
commissions or transfer taxes. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, each Adviser
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. The cost of
executing portfolio securities transactions of the Fund will primarily consist
of dealer spreads and underwriting commissions.
Each Fund may execute brokerage or other agency transactions through the
Distributor, a registered broker-dealer, for a commission, in conformity with
the Investment Company Act of 1940, the Securities Exchange Act of 1934 and the
rules and regulations thereunder. 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." 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.
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, each Adviser 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.
It is expected that the Fund turnover rate will normally not exceed 100% for
any Fund. A Fund 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.
S-25
<PAGE>
The portfolio turnover rate for the S&P 500 Index Fund for the fiscal years
ending March 31, 1997, 1998 and 1999 were 2%, 4%, and 7% respectively. The
portfolio turnover rate for the Bond Index Fund for the fiscal years ending
March 31, 1997, 1998 and 1999 were 46%, 44% and 40% respectively.
For the fiscal years ended March 31, 1997, 1998 and 1999, the S&P 500 Index
Fund paid brokerage commissions of $99,663, $89,956 and $115,647, respectively.
For the fiscal years ended March 31, 1997, 1998 and 1999, the Bond Index Fund
paid no brokerage commissions.
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
such Fund. Each share upon liquidation entitles a shareholder to a pro rata
share in the net assets of the Fund. Shareholders have no preemptive rights. The
Declaration of Trust provides that the Trustees of the Trust may create
additional portfolios of shares or classes of portfolios. Share certificates
representing the shares will not be issued.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for
his 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 wilful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
VOTING RIGHTS
Each share held entitles the shareholder of record to one vote. Shareholders
of each Fund or class will vote separately on matters pertaining solely to that
Fund or class, such as any distribution plan. As a Massachusetts business trust,
the Trust is not required to hold annual meetings of shareholders, but aproval
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.
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.
S-26
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of July 1, 1999, 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 Funds. The Trust believes that most of the shares
referred to above were held by the above persons in accounts for their
fiduciary, agency, or custodial customers:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHAREHOLDER NUMBER OF SHARES PERCENT OF FUNDS
- ----------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
S&P 500 INDEX FUND--CLASS A
Citicorp Trustee for the Citigroup Savings Plan ............................. 981,873.49 5.48%
S&P 500 Index
Worldwide Securities Services
3800 Citibank Center Tampa
Acctg Par B3-08
Tampa, FL 33610-9559
SEI Trust Company ........................................................... 15,434,896.23 86.07%
Attn: Jacqueline Esposito
One Freedom Valley Drive
Oaks, PA 19456
S&P 500 INDEX FUND--CLASS E
Nationwide Life Insurance Company ........................................... 3,844,646.57 9.34%
c/o NACO-IPO Portfolio Accounting
Attn: Denise Bradley
P.O. Box 182029
Columbus, OH 43218
Nationwide Life Insurance Company ........................................... 4,061,981.43 9.86%
Nationwide GPVA
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, Ohio 43218-2029
Nationwide Life Insurance Company ........................................... 2,313,698.80 5.62%
Nationwide Ohio
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
SEI Trust Company ........................................................... 3,260,378.68 7.92%
Attn: Jacqueline Esposito
One Freedom Valley Drive
Oaks, PA 19456
BOND INDEX FUND--CLASS A
Capital City Trust Company .................................................. 310,310.13 5.22%
Attn: Linda Glessner
P.O. Box 1549
Tallahassee, FL 32302-1549
</TABLE>
S-27
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHAREHOLDER NUMBER OF SHARES PERCENT OF FUNDS
- ----------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Palsan Company .............................................................. 334,100.80 5.62%
c/o Cumitomo Bank of California
320 California Street, 3rd Floor
Trust Department-Stephen N. Emigh
San Francisco, CA 94104-1403
The Fulton Company .......................................................... 1,768,498.59 29.77%
c/o Fulton Bank Trust Dept
Attn: Dennis Patrick
One Penn Square
Lancaster, PA 17602-2853
SEI Trust Company ........................................................... 585,200.09 9.85%
Attn: Jacqueline Esposito
One Freedom Valley Drive
Oaks, PA 19456
NABANK & Co. ................................................................ 395,873.88 6.67%
Attn: Record Keeping
P.O. Box 2180
Tulsa, OK 74101-2180
</TABLE>
CUSTODIAN
Comerica Bank, the custodian for the Funds, holds cash, securities and other
assets of the Trust as required by the Investment Company Act of 1940. The
principal business address of Comerica Bank is 411 W. Lafayette, Detroit,
Michigan 48226.
EXPERTS
The financial statements incorporated by reference into this Statement of
Additional Information have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP serves as legal counsel to the Trust.
FINANCIAL STATEMENTS
The Trust's financial statements for the fiscal year ended March 31, 1999,
including notes thereto and the report of Arthur Andersen LLP thereon, are
herein incorporated by reference to the Trust's 1999 Annual Report. A copy of
the 1999 Annual Report must accompany the delivery of this Statement of
Additional Information.
S-28
<PAGE>
SEI INDEX FUNDS
POST-EFFECTIVE AMENDMENT NO. 22
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS:
<TABLE>
<S> <C>
(a)(1) Declaration of Trust originally filed as Exhibit (1) with Registrant's
Registration Statement on Form N-1A (File No. 2-97111) filed with the
Securities and Exchange Commission ("SEC") on April 17, 1985 is
incorporated herein by reference to Exhibit (1)(a) of Post-Effective
Amendment No. 20 filed with the SEC on July 29, 1997.
(a)(2) Written Instrument Amending the Agreement and Declaration of Trust dated
April 8, 1987 is incorporated herein by reference to Exhibit (1)(b) of
Post-Effective Amendment No. 20 filed with the SEC on July 29, 1997.
(a)(3) Written Instrument Amending the Declaration of Trust dated December 23, 1988
is incorporated herein by reference to Exhibit (1)(c) of Post-Effective
Amendment No. 20 filed with the SEC on July 29, 1997.
(b)(1) By-Laws originally filed as Exhibit (2) with Registrant's Registration
Statement on Form N-1A (File No. 2-97111) filed with the SEC on April 17,
1985 are incorporated herein by reference to Exhibit (2)(a) of
Post-Effective Amendment No. 20 filed with the SEC on July 29, 1997.
(b)(2) Amended By-Laws are incorporated herein by reference to Exhibit (2)(b) of
Post-Effective Amendment No. 20 to Registrant's Registration Statement on
Form N-1A (File No. 2-97111) filed with the SEC on July 29, 1997.
(d)(1) Investment Administration Agreement with Manufacturers National Bank of
Detroit, dated July 25, 1986, as originally filed with Post-Effective
Amendment No. 12 to Registrant's Registration Statement on Form N-1A (File
No. 2-97111) filed with the SEC on July 11, 1990 is incorporated herein by
reference to Exhibit (5)(a) of Post-Effective Amendment No. 20 filed with
the SEC on July 29, 1997.
(d)(2) Investment Administration Agreement with Woodbridge Capital Management, Inc.
as originally filed with Post-Effective Amendment No. 15 to Registrant's
Registration Statement on Form N-1A (File No. 2-97111) filed with the SEC
on July 29, 1993 is incorporated herein by reference to Exhibit (5)(b) of
Post-Effective Amendment No. 19 filed with the SEC on May 31, 1996.
(d)(3) Investment Advisory Agreement with World Asset Management is incorporated
herein by reference to Exhibit (5)(c) of Post-Effective Amendment No. 17
to Registrant's Registration Statement on Form N-1A (File No. 2-97111)
filed with the SEC on May 31, 1995.
(d)(4) Investment Advisory Agreement with Mellon Bond Associates is incorporated
herein by reference to Exhibit (5)(d) of Post-Effective Amendment No. 19
to Registrant's Registration Statement on Form N-1A (File No. 2-97111)
filed with the SEC on May 31, 1996.
(d)(5) Form of Amended and Restated Investment Advisory Agreement by and between
SEI Index Funds and World Asset Management, dated December 9, 1996, is
incorporated herein by reference to Exhibit (5)(e) of Post-Effective
Amendment No. 20 to Registrant's Registration Statement on Form N-1A (File
No. 2-97111) filed with the SEC on July 29, 1997.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
(d)(6) Investment Advisory Agreement by and between S&P 500 Index Fund and SEI
Investments Management Corporation, dated November 18, 1998, is filed
herewith.
(d)(7) Investment Sub-Advisory Agreement by and between SEI Investments Management
Corporation and World Asset Management, LLC, dated November 18, 1998, is
filed herewith.
(e)(1) Distribution Agreement with SEI Financial Services Company as originally
filed with Pre-Effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A (File No. 2-97111) filed with the SEC on July 12,
1985 is incorporated herein by reference to Exhibit (6)(a) of
Post-Effective Amendment No. 19 filed with the SEC on May 31, 1996.
(e)(2) Amended and Restated Distribution Agreement with SEI Financial Services
Company is incorporated herein by reference to Exhibit (6)(b) of
Post-Effective Amendment No. 18 to Registrant's Registration Statement on
Form N-1A (File No. 2-97111) filed with the SEC on December 28, 1995.
(f) Not Applicable
(g)(1) Custodian Agreement with Manufacturers National Bank of Detroit as
originally filed with Pre-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A (File No. 2-97111) filed with the SEC
on July 12, 1985 is incorporated herein by reference to Exhibit (8)(a) of
Post-Effective Amendment No. 20 filed with the SEC on July 29, 1997.
(g)(2) Amendment to the Custodian Agreement, dated January 3, 1986, is herein
incorporated by reference to Exhibit (8)(b) of Post-Effective Amendment
No. 21 to Registrant's Registration Statement on Form N-1A (File No.
2-97111) filed with the SEC on July 29, 1998.
(h)(1) Management Agreement by and between TrustFunds Equity Index Funds and SEI
Financial Management Corporation is incorporated herein by reference to
Exhibit (9)(a) of Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (File No. 2-97111) filed with the SEC
on May 31, 1996.
(h)(2) Management Agreement by and between TrustFunds Equity Index Funds and SEI
Financial Management Corporation is incorporated herein by reference to
Exhibit (9)(b) of Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (File No. 2-97111) filed with the SEC
on May 31, 1996.
(h)(3) Class A Shareholder Service Plan and Agreement is incorporated herein by
reference to Exhibit (9)(c) of Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (File No. 2-97111) filed
with the SEC on May 31, 1996.
(h)(4) Class E Shareholder Service Plan and Agreement is incorporated herein by
reference to Exhibit (9)(d) of Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (File No. 2-97111) filed
with the SEC on May 31, 1996.
(h)(5) Consent to Assignment and Assumption of the Administration Agreement between
the Trust and SEI Financial Management Corporation to SEI Fund Management
is filed herewith.
(i) Opinion and Consent of Counsel is filed herewith.
(j) Consent of Independent Public Accountants is filed herewith.
(k) Not Applicable
(l) Not Applicable
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C>
(m)(1) Distribution Plan with SEI Financial Services Company as originally filed
with Pre-Effective Amendment No. 1 to Registrant's Registration Statement
on Form N-1A (File No. 2-97111) filed with the SEC on June 14, 1985 is
incorporated herein by reference to Exhibit (15)(a) of Post-Effective
Amendment No. 19 to Registrant's Registration Statement on Form N-1A (File
No. 2-97111) filed with the SEC on May 31, 1996.
(m)(2) Distribution Plan is incorporated herein by reference to Exhibit (15)(b) of
Post-Effective Amendment No. 18 to Registrant's Registration Statement on
Form N-1A (File No. 2-97111) filed with the SEC on December 28, 1995.
(m)(3) Amended and Restated Class E Distribution Plan is incorporated herein by
reference to Exhibit (15)(c) of Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (File No. 2-97111) filed
with the SEC on May 31, 1996.
(n) Not Applicable
(o)(1) Rule 18f-3 Plan is incorporated herein by reference to Exhibit (18)(a) of
Post-Effective Amendment No. 18 to Registrant's Registration Statement on
Form N-1A (File No. 2-97111) filed with the SEC on December 28, 1995.
(o)(2) Amendment No. 1 to Rule 18f-3 Plan relating to Class A and E shares is
incorporated herein by reference to Exhibit (18)(b) of Post-Effective
Amendment No. 19 to Registrant's Registration Statement on Form N-1A (File
No. 2-97111) filed with the SEC on May 31, 1996.
(p) Powers of Attorney for Robert A. Nesher, William M. Doran, Mark E. Nagle, F.
Wendell Gooch, George J. Sullivan, Jr., James M. Storey and Edward D.
Loughlin are incorporated by reference to Exhibit (p) of Post-Effective
Amendment No. 22 to Registrant's Registration Statement on Form N-1A
(File No. 2-97111) filed with the SEC on May 28, 1999.
</TABLE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:
See the Prospectuses and Statement of Additional Information filed herewith
regarding the Trust's control relationships. The Administrator is a subsidiary
of SEI Investments Company which also controls the distributor of the
Registrant, SEI Investments Distribution Co., and other corporations engaged in
providing various financial and record keeping services, primarily to bank trust
departments, pension plan sponsors, and investment managers.
ITEM 25. INDEMNIFICATION:
Article VIII of the Agreement and Declaration of Trust filed as Exhibit 1 to
the Registration Statement dated April 17, 1985 is incorporated by reference.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, directors, officers and controlling persons
of the Registrant by the Registrant pursuant to the Declaration of Trust or
otherwise, the Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
C-3
<PAGE>
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:
SEI INVESTMENTS MANAGEMENT CORPORATION
<TABLE>
<CAPTION>
NAME AND POSITION WITH
INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
Alfred P. West, Jr. SEI Investments Company Director, Chairman and CEO
Chairman, CEO, Director
SEI Investments Distribution Co. Director and Chairman
SEI Inc. (Canada) Director
SEI Ventures, Inc. Director, Chairman & President
SEI Funds, Inc. CEO & Chairman of the Board of
Directors
Rembrandt Financial Services Company Chairman of the Board of the Board of
Directors
SEI Global Investment Corp. Director, CEO & Chairman
SEI Investments Global Management Chairman & CEO
(Cayman), Limited
SEI Capital AG Director, Chairman of the Board
SEI Global Capital Investments, Inc. Director, CEO & Chairman
CR Financial Services Company Director, Chairman of the Board
CR Capital Resources, Inc. Director, Chairman of the Board
SEI Investments Mutual Fund Services Chairman & CEO
SEI Investments Fund Management Chairman & CEO
SEI Global Holdings (Cayman) Inc. Chairman & CEO
Henry H. Greer SEI Investments Company Director, President, COO & CFO
President, COO, Director
SEI Investments Distribution Co. Director
SEI Funds, Inc. Director, President & COO
Rembrandt Financial Services Company Director
SEI Global Investment Corp. President & CFO
SEI Investments Global Management Director, President & COO
(Cayman), Limited
SEI Global Capital Investments, Inc. Director & President
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH
INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
SEI Investments- Global Fund Services Director
Limited
CR Financial Services Company Director
CR Capital Resources, Inc. Director & President
SEI Investments Mutual Fund Services COO
SEI Investments Fund Management COO
SEI Global Holdings (Cayman) Inc. Director, President & COO
SEI Investments Argentina S.A. Director
SEI Investments De Mexico Director
Carmen V. Romeo SEI Investments Company Director, Executive Vice President,
Director, Executive Vice President -- Investment Advisory
President Group
SEI Investments Distribution Co. Director
SEI Trust Company Director
SEI Ventures, Inc. Director, Executive Vice President
SEI Investments Developments, Inc. Director, President
SEI Funds, Inc. Executive Vice President
Rembrandt Financial Services Company Director, Executive Vice President
SEI Global Investments Corp. Executive Vice President
SEI Global Investments Inc. Director, Executive Vice President
SEI Primus Holding Corp. Director, President
CR Financial Services Company Director
CR Capital Resources, Inc. Director
SEI Investments Mutual Fund Services Executive Vice President
SEI Investments Fund Management Executive Vice President
Richard B. Lieb SEI Investments Company Director, Executive Vice President,
Executive Vice President -- Investment Systems &
President Services Division
SEI Investments Distribution Co. Executive Vice President
SEI Trust Company Director & Chairman of the Board
SEI Investments Mutual Fund Services Executive Vice President
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH
INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
SEI Investments Fund Management Executive Vice President
Edward Loughlin SEI Investments Company Executive Vice President, President --
Executive Vice Asset Management Division
President
SEI Insurance Group, Inc. Director, President & Secretary
SEI Funds, Inc. Executive Vice President
SEI Advanced Capital Management, Inc. Director & President
SEI Investments Mutual Fund Services Executive Vice President
SEI Investments Fund Management Executive Vice President
Kevin P. Robins SEI Investments Company Senior Vice President, General Counsel
Senior Vice President, & Assistant Secretary
General Counsel & Secretary
SEI Investments Distribution Co. Senior Vice President, General Counsel
SEI Inc. (Canada) Senior Vice President, General Counsel
& Secretary
SEI Trust Company Director, Senior Vice President,
General Counsel & Assistant Secretary
SEI Investments, Inc. Senior Vice President, General Counsel
& Secretary
SEI Ventures, Inc. Senior Vice President, General Counsel
& Secretary
SEI Investments Developments, Inc. Senior Vice President, General Counsel
& Secretary
SEI Insurance Group, Inc. Senior Vice President, General Counsel
SEI Funds, Inc. Senior Vice President, General Counsel
& Secretary
Rembrandt Financial Services Company Vice President & Assistant Secretary
SEI Global Investments Corp. Senior Vice President, General Counsel
& Secretary
SEI Advanced Capital Management, Inc. Senior Vice President, General Counsel
& Secretary
SEI Investments Global Management Director, General Counsel & Secretary
(Cayman), Limited
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH
INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
SEI Global Capital Investments Inc. Senior Vice President, General Counsel
& Secretary
SEI Primus Holding Corp. Senior Vice President, General Counsel
& Secretary
CR Capital Resources, Inc. Senior Vice President
SEI Investments Mutual Fund Services Senior Vice President, General Counsel
& Secretary
SEI Investments Fund Management Senior Vice President, General Counsel
& Secretary
</TABLE>
MELLON BOND ASSOCIATES, LLP
Mellon Bond Associates, LLP ("Mellon Bond") is a Sub-Adviser to the Fund's
Bond Index Fund. The principal business address of Mellon Bond is Mellon Bank
Center, 1735 Market Street, Philadelphia, Pennsylvania 19101-7899. Mellon Bond
is an investment adviser registered under the Advisers Act.
<TABLE>
<CAPTION>
NAME AND POSITION WITH
INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
William Keith Smith TBCAM Holdings, Inc. Director
Executive Committee
Franklin Portfolio Holdings, Inc. Director
Boston Safe Advisors, Inc. Director
Buck Consultants Chairman
The Dreyfus Corporation Chairman
The Bridgewater Land Co., Inc. President, Director
Mellon Preferred Capital Corporation President, Director
Wellington-Medford II Properties, Inc. President, Director
TBC Securities Co., Inc. President, Director
The Boston Company, Inc. Chairman of The Board, CEO
Boston Safe Deposit and Trust Company Chairman of the Board, CEO, Director,
Chairman of Exec. Committee
Boston Group Holdings, Inc. CEO, Director, Chairman
Mellon Europe Limited Director
Laurel Capital Advisors, LLP Executive Committee
Mellon Equity Associates, LLP Executive Committee
Mellon Global Investing Corp. Director
Mellon Financial Services Corp. #18 Vice Chairman & Director
Mellon Accounting Services, Inc. Director
MGIC-UK Ltd. Director
Mellon Capital Management Corp. Director
Mellon Financial Company Director, Chairman
Mellon Bank, N.A. Senior Vice Chairman
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH
INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
Ronald Phillip O'Hanley, III Franklin Portfolio Holdings, Inc. Director
Chairman, Executive
Committee
The Boston Company Asset Management, Director
Inc.
Boston Safe Advisors, Inc. Director
Mellon Capital Management Corporation Director
Certus Asset Advisors Corporation Director
Mellon Equity Associates, LLP Executive Committee Chairman
Mellon-France Corporation Director
Laurel Capital Advisors, LLP Executive Committee
CCF-Mellon Partners Partner Representative
Christopher Mark Condron The Boston Company Asset Management, President, Chairman
Executive Committee LLC
TBCAM Holdings, Inc. President, Director, Chairman
The Dreyfus Corporation President, CEO, COO, Director
Franklin Portfolio Holdings, Inc. Director
Certus Asset Advisors Corporation Director
Boston Safe Advisors, Inc. President, Director
Mellon Capital Management Corporation Director
Mellon Equity Associates, LLP Executive Committee
Mellon Bank, N.A. President, COO
Mellon Bank Corporation Director
The Boston Company, Inc. Director
Laurel Capital Advisors, LLP Executive Committee
The Boston Company Financial President, Director
Strategies, Inc.
James Milton Gockley Mellon Securities Trust Company Vice President
Executive Committee
Dreyfus Investment Services Corporation Vice President
Laurel Capital Advisors, LLP Vice President
Boston Safe Deposit and Trust Company General Counsel
The Boston Company, Inc. General Counsel
Mellon Accounting Services, Inc. Vice President
Mellon Capital Management Corporation Vice President
Mellon Equity Associates, LLP Executive Committee
Mellon Financial Services Corp #17 Vice President
Mellon-France Corporation Vice President
Paul Roger McCaan The Dreyfus Corporation Portfolio Manager
President/CEO, Executive
Committee
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH
INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
William Folwell Adam Executive -- --
Vice President
David Burch Chittim Senior -- --
Vice President
Joan Antoniazzi Greene Mellon Equity Associates Treasurer
Treasurer
Mellon Capital Management Corp. Treasurer
Mellon Securities Trust Company Assistant Treasurer
Mellon Bank Treasurer
John Kenneth Milne Executive -- --
Vice President
Laurie Ann Carroll -- --
Senior Vice President
Gregory Daniel Curran -- --
Senior Vice President
Ailsa Taylor Keglar -- --
Vice President
Christopher Michael Pelligrino -- --
Vice President
Nancy Gail Rogers -- --
Vice President
Gerald Alan Thomas Senior Vice -- --
President
Deborah S. Wingerson -- --
Vice President
</TABLE>
WORLD ASSET MANAGEMENT, LLC
World Asset Management, LLC ("World") is a Sub-Adviser to the Fund's S&P 500
Index Fund. The principal business address of World is 255 Brown Street, Suite
250, Birmingham, Michigan 48009-6208. World is an investment adviser registered
under the Advisers Act.
<TABLE>
<CAPTION>
NAME AND POSITION WITH
INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
Steven Arthur Albrech Vice
President, COO
Terry Harley Gardner
Vice President, CFO
Tom Bruce Johnson
CIO
Robert Joseph Kay Director of
Client Services
Theodore Duncan Miller Sr.
Portfolio Manger
Lee Paul Munder
CEO
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH
INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
James Christopher Robinson
Portfolio Manager
Lisa Ann Rosen
General Counsel
Robert Joseph Samrah
Portfolio Manager
Kenneth Arthur Schluchter, III
Portfolio Manager
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS:
(a) Furnish the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing the securities of
the Registrant also acts as a principal underwriter, distributor or
investment adviser.
Registrant's distributor, SEI Investments Distribution Co. (the
"Distributor"), acts as distributor for:
<TABLE>
<S> <C>
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International August 30, 1988
Trust
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, November 1, 1992
Inc.
The Arbor Fund January 28, 1993
Boston 1784 June 1, 1993
Funds-Registered Trademark-
The PBHG Funds, Inc. July 16, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Huntington Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments June 14, 1996
Trust
First American Strategy Funds, October 1, 1996
Inc.
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
</TABLE>
C-10
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITERS: (CONTINUED)
<TABLE>
<S> <C>
PBHG Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
Alpha Select Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Funds June 24, 1998
The Parkstone Group of Funds September 14, 1998
CNI Charter Funds April 1, 1999
The Parkstone Advantage Fund May 1, 1999
</TABLE>
The Distributor provides numerous financial services to investment managers,
pension plan sponsors, and bank trust departments. These services include
portfolio evaluation, performance measurement and consulting services
("Funds Evaluation") and automated execution, clearing and settlement of
securities transactions ("MarketLink").
(b) Furnish the Information required by the following table with respect to each
director, officer or partner of each principal underwriter named in the
answer to Item 21 of Part B. Unless otherwise noted, the business address of
each director or officer is Oaks, PA 19456.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES WITH
NAME POSITION AND OFFICE WITH UNDERWRITER REGISTRANT
- ------------------------- ---------------------------------------------- ----------------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman of the Board of Directors --
Henry H. Greer Director --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating Officer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchison Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
Kevin P. Robins Senior Vice President & General Vice President & Assistant
Counsel Secretary
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary Vice President & Assistant
Secretary
</TABLE>
C-11
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITERS: (CONTINUED)
<TABLE>
<CAPTION>
POSITIONS AND OFFICES WITH
NAME POSITION AND OFFICE WITH UNDERWRITER REGISTRANT
- ------------------------- ---------------------------------------------- ----------------------------
<S> <C> <C>
S. Courtney E. Collier Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
James R. Foggo Vice President & Assistant Secretary Vice President & Assistant
Secretary
Vic Galef Vice President & Managing Director --
Lydia A. Gavalis Vice President & Assistant Secretary Vice President & Assistant
Secretary
Greg Gettinger Vice President & Assistant Secretary --
Kathy Heilig Vice President Vice President & Assistant
Secretary
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Mark Nagle Vice President Controller & Chief Financial
Officer
Joanne Nelson Vice President --
Joseph M. O'Donnell Vice President & Assistant Secretary Vice President & Assistant
Secretary
Cynthia M. Parrish Vice President & Assistant Secretary Vice President & Assistant
Secretary
Kim Rainey Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary --
Lynda J. Striegel Vice President & Assistant Secretary Vice President & Assistant
Secretary
Lori L. White Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Assistant Secretary --
</TABLE>
C-12
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS:
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6);
(8); (12); and 31a-1(d), the required books and records are maintained at
the offices of Registrant's Custodian for those portfolios:
Comerica Bank
411 W. Lafayette
Detroit, MI 48226
(b) With respect to Rules 31a-1(a); 31a-1(b)(1), (2)(C) and (D); (4); (5);
(6); (8); (9); (10); (11); and 31a-1(f), the required books and records
are maintained at the offices of Registrant's Administrator:
SEI Investments Fund Management
Oaks, PA 19456
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's Adviser for those portfolios:
<TABLE>
<S> <C>
S&P 500 INDEX FUND BOND INDEX FUND
SEI Investments Management Mellon Bond Associates, LLP
Corporation One Mellon Bank, Suite 4135
One Freedom Valley Drive Pittsburgh, PA 15258
Oaks, PA 19456
World Asset Management
255 Brown Street
Centre, 2nd Floor
Birmingham, MI 48009
</TABLE>
ITEM 29. MANAGEMENT SERVICES:
None.
ITEM 30. UNDERTAKINGS:
None.
C-13
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust of SEI Index Funds is on
file with the Secretary of State of the Commonwealth of Massachusetts and notice
is hereby given that this Registration Statement has been executed on behalf of
the Trust by an officer of the Trust as an officer and by its Trustees as
trustees and not individually and the obligations of or arising out of this
Registration Statement are not binding upon any of the Trustees, officers, or
Shareholders individually but are binding only upon the assets and property of
the Trust.
C-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 23 to Registration Statement No. 2-97111 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Oaks, Commonwealth of Pennsylvania on the 29th day of July, 1999.
SEI INDEX FUNDS
By: /s/ EDWARD D. LOUGHLIN
-----------------------------------------
Edward D. Loughlin,
PRESIDENT & CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacity on the date(s) indicated.
*
- ------------------------------ Trustee July 29, 1999
William M. Doran
*
- ------------------------------ Trustee July 29, 1999
F. Wendell Gooch
*
- ------------------------------ Trustee July 29, 1999
George J. Sullivan, Jr.
*
- ------------------------------ Trustee July 29, 1999
James M. Storey
*
- ------------------------------ Trustee July 29, 1999
Robert A. Nesher
/s/ EDWARD D. LOUGHLIN President & Chief
- ------------------------------ Executive July 29, 1999
Edward D. Loughlin Officer
/s/ MARK E. NAGLE
- ------------------------------ Controller & Chief July 29, 1999
Mark E. Nagle Financial Officer
*By: /s/ EDWARD D. LOUGHLIN
-------------------------
Edward D. Loughlin
ATTORNEY-IN-FACT
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
- -----------------
<S> <C> <C>
EX-99.B(a)(1) Declaration of Trust as originally filed as Exhibit (1) with Registrant's Registration
Statement on Form N-1A (File No. 2-97111) filed with the Securities and Exchange
Commission ("SEC") on April 17, 1985 is incorporated herein by reference to Exhibit
(1)(a) of Post-Effective Amendment No. 20 filed with the SEC on July 29, 1997.
EX-99.B(a)(2) Written Instrument Amending the Agreement and Declaration of Trust dated April 8, 1987
is incorporated herein by reference to Exhibit (1)(b) of Post-Effective Amendment
No. 20 filed with the SEC on July 29, 1997.
EX-99.B(a)(3) Written Instrument Amending the Declaration of Trust dated December 23, 1988 is
incorporated herein by reference to Exhibit (1)(c) of Post-Effective Amendment No.
20 filed with the SEC on July 29, 1997.
EX-99.B(b)(1) By-Laws as originally filed as Exhibit (2) with Registrant's Registration Statement on
Form N-1A (File No. 2-97111) filed with the SEC on April 17, 1985 are incorporated
herein by reference to Exhibit (2)(a) of Post-Effective Amendment No. 20 filed with
the SEC on July 29, 1997.
EX-99.B(b)(2) Amended By-Laws are incorporated herein by reference to Exhibit (2)(b) of
Post-Effective Amendment No. 20 to Registrant's Registration Statement on Form N-1A
(File No. 2-97111) filed with the SEC on July 29, 1997.
EX-99.B(d)(1) Investment Administrator Agreement with Manufacturers National Bank of Detroit, dated
July 25, 1986, as originally filed with Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A (File No. 2-97111) filed with the
SEC on July 11, 1990 is incorporated herein by reference to Exhibit (5)(a) of
Post-Effective Amendment No. 20 filed with the SEC on July 29, 1997.
EX-99.B(d)(2) Investment Administration Agreement with Woodbridge Capital Management, Inc. as
originally filed with Post-Effective Amendment No. 15 to Registrant's Registration
Statement on Form N-1A (File No. 2-97111) filed with the SEC on July 29, 1993 is
incorporated herein by reference to Exhibit (5)(b) of Post-Effective Amendment No.
19 filed with the SEC on May 31, 1996.
EX-99.B(d)(3) Investment Advisory Agreement with World Asset Management is incorporated herein by
reference to Exhibit (5)(c) of Post-Effective Amendment No. 17 to Registrant's
Registration Statement on Form N-1A (File No. 2-97111) filed with the SEC on May 31,
1995.
EX-99.B(d)(4) Investment Advisory Agreement with Mellon Bond Associates is incorporated herein by
reference to Exhibit (5)(d) of Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (File No. 2-97111) filed with the SEC on May 31,
1996.
EX-99.B(d)(5) Form of Amended and Restated Investment Advisory Agreement by and between SEI Index
Funds and World Asset Management, dated December 9, 1996, is incorporated herein by
reference to Exhibit (5)(e) of Post-Effective Amendment No. 20 filed with the SEC on
July 29, 1997.
EX-99B(d)(6) Investment Advisory Agreement by and between S&P 500 Index Fund and SEI Investments
Management Corporation, dated November 18, 1998, is filed herewith.
Ex-99B(d)(7) Investment Sub-Advisory Agreement by and between SEI Investments Management
Corporation and World Asset Management, LLC, dated November 18, 1998, is filed
herewith.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
- -----------------
<S> <C> <C>
EX-99.B(e)(1) Distribution Agreement with SEI Financial Services Company as originally filed with
Pre-Effective Amendment No. 2 to Registrant's Registration Statement on Form N-1A
(File No. 2-97111) filed with the SEC on July 12, 1985 is incorporated herein by
reference to Exhibit (6)(a) of Post-Effective Amendment No. 19 filed with the SEC on
May 31, 1996.
EX-99.B(e)(2) Amended and Restated Distribution Agreement with SEI Financial Services Company is
incorporated by reference to Exhibit (6)(b) of Post-Effective Amendment No. 18 to
Registrant's Registration Statement on Form N-1A (File No. 2-97111) filed with the
SEC on December 28, 1995.
EX-99.B(f) Not Applicable
EX-99.B(g)(1) Custodian Agreement with Manufacturers National Bank of Detroit as originally filed
with Pre-Effective Amendment No. 2 to Registrant's Registration Statement on Form
N-1A (File No. 2-97111) filed with the SEC on July 12, 1985 is incorporated herein
by reference to Exhibit (8)(a) of Post-Effective Amendment No. 20 filed with the SEC
on July 29, 1997.
EX-99.B(g)(2) Amendment to the Custodian Agreement, dated January 3, 1986, is incorporated herein by
reference to Exhibit (8)(b) of Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A (File No. 2-97111) filed with the SEC on July
29, 1997.
EX-99.B(h)(1) Management Agreement by and between TrustFunds Equity Index Funds and SEI Financial
Management Corporation is incorporated herein by reference to Exhibit (9)(a) of
Post-Effective Amendment No. 19 to Registrant's Registration Statement on Form N-1A
(File No. 2-97111) filed with the SEC on May 31, 1996.
EX-99.B(h)(2) Management Agreement by and between TrustFunds Equity Index Funds and SEI Financial
Management Corporation is incorporated herein by reference to Exhibit (9)(b) of
Post-Effective Amendment No. 19 to Registrant's Registration Statement on Form N-1A
(File No. 2-97111) filed with the SEC on May 31, 1996.
EX-99.B(h)(3) Class A Shareholder Service Plan and Agreement is incorporated herein by reference to
Exhibit (9)(c) of Post-Effective Amendment No. 19 to Registrant's Registration
Statement on Form N-1A (File No. 2-97111) filed with the SEC on May 31, 1996.
EX-99.B(h)(4) Class E Shareholder Service Plan and Agreement is incorporated herein by reference to
Exhibit (9)(d) of Post-Effective Amendment No. 19 to Registrant's Registration
Statement on Form N-1A (File No. 2-97111) filed with the SEC on May 31, 1996.
EX-99.B(h)(5) Consent to Assignment and Assumption of the Administration Agreement between the Trust
and SEI Financial Management Corporation to SEI Fund Management is filed herewith.
EX-99.B(i) Opinion and Consent of Counsel is filed herewith.
EX-99.B(j) Consent of Independent Public Accountants is filed herewith.
EX-99.B(k) Not Applicable
EX-99.B(l) Not Applicable
EX-99.B(m)(1) Distribution Plan with SEI Financial Services Company as originally filed with
Pre-Effective Amendment No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 2-97111) filed with the SEC on June 14, 1985 is incorporated herein by
reference to Exhibit (15)(a) of Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (File No. 2-97111) filed with the SEC on May 31,
1996.
EX-99.B(m)(2) Distribution Plan is incorporated by reference to Exhibit (15)(b) of Post-Effective
Amendment No. 18 to Registrant's Registration Statement on Form N-1A (File No.
2-97111) filed with the SEC on December 28, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
- -----------------
<S> <C> <C>
EX-99.B(m)(3) Amended and Restated Class E Distribution Plan is incorporated herein by reference to
Exhibit (15)(c) of Post-Effective Amendment No. 19 to Registrant's Registration
Statement on Form N-1A (File No. 2-97111) filed with the SEC on May 31, 1996.
EX-99.B(n) Not Applicable
EX-99.B(o)(1) Rule 18f-3 Plan is incorporated herein by reference to Exhibit (18)(a) of Post-
Effective Amendment No. 18 to Registrant's Registration Statement on Form N-1A (File
No. 2-97111) filed with the SEC on December 28, 1995.
EX-99.B(o)(2) Amendment No. 1 to Rule 18f-3 Plan relating to Class A and E shares is incorporated
herein by reference to Exhibit (18)(b) of Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (File No. 2-97111) filed with the
SEC on May 31, 1996.
EX-99.B(p) Powers of Attorney for Robert A. Nesher, William M. Doran, Mark E. Nagle, F. Wendell
Gooch, George J. Sullivan, Jr., James M. Storey and Edward D. Loughlin are
incorporated by reference to Exhibit (p) of Post-Effective Amendment No. 22 to
Registrant's Registration Statement filed on Form N-1A (File No. 2-97111) filed with
the SEC on May 28, 1999.
</TABLE>
<PAGE>
CONSENT TO ASSIGNMENT AND ASSUMPTION
1. SEI Financial Management Corporation ("Assignor") hereby notifies SEI Index
Funds ("Trust") that it intends to assign all of its rights and delegate
its obligations under the Administration Agreement between the Trust and
SEI Financial Management Corporation, dated January 20, 1986, as amended
(the "Assignment and Assumption Agreement") to SEI Fund Management,
("Assignee"), no later than June 1, 1996, in connection with the transition
of Assignor's fund administration and distribution business to Assignee.
2. Trust releases Assignor from its rights and obligations under the Agreement
on or after the date the Assignment and Assumption Agreement is executed
and any liability or responsibility for (i) breach of the Agreement by
Assignee or (ii) demands and claims made against the Trust or damages,
losses or expenses incurred by the Trust on or after the date of the
Assignment and Assumption Agreement, unless such demands, claims, losses,
damages or expenses arose out of or resulted from an act or omission of
Assignor prior to the date of the Assignment and Assumption Agreement.
3. This consent is not a waiver or estoppel with respect to any rights the
Trust may have by reason of the past performance or failure to perform by
Assignor.
4. This consent is conditioned upon the execution of an Assignment and
Assumption Agreement between Assignor and Assignee that require(s) Assignee
(i) to assume all rights and obligations of Assignor under the Agreement
and (ii) to be liable to the Trust for any default or breach of the
Agreement to the extent the default or breach occurs on or after the date
of execution of the Assignment and Assumption Agreement.
5. Except as provided herein, neither this consent nor the Assignment and
Assumption Agreement shall alter or modify the terms or conditions of the
Agreement.
Trust: Assignor:
SEI Index Funds SEI Financial Management Corporation
By: (signature) By: (signature)
Title: Vice President Title: Vice President
Date: May 31, 1996 Date: May 31, 1996
<PAGE>
INVESTMENT ADVISORY AGREEMENT
SEI INDEX FUNDS
AGREEMENT made as of the 18th day of November, 1998, by and between SEI
Index Funds, a Massachusetts business trust (the "Trust"), and SEI Investments
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 the S&P 500 Index Fund and such other
portfolios as the Trust and the Adviser may agree upon (the "Funds"), 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 Fund(s)) and thereafter supervise the investment
activities of one or more sub-advisers deemed necessary to carry out the
investment program of any Funds of the Trust, and to continuously review,
supervise and (where appropriate) administer the investment program of the
Funds, 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 Fund 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)
<PAGE>
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 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 Fund(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
Funds either directly with the issuer or with any broker or dealer. In executing
Fund transactions and selecting brokers or dealers, the Adviser will use its
best efforts to seek on behalf of the Fund 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 Fund 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 Funds 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 Fund.
In addition, the Adviser is 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 Fund's
securities be purchased from or sold to the Adviser, any sub-adviser engaged
with respect to that Fund, the Trust's principal underwriter, or any affiliated
<PAGE>
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 Fund. 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.
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 Fund 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 Fund 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 Fund.
<PAGE>
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 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,
part-ners, 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 Fund; provided, however, that if the shareholders of any
Fund 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 Fund 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 Fund on not less than 30 days nor more than 60 days
<PAGE>
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:
To the Adviser at:
SEI Investments Management Corporation
One Freedom Valley Drive
Oaks, PA 19456
Attn: Legal Department
To the Trust at:
One Freedom Valley Drive
Oaks, PA 19456
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.
<PAGE>
No Fund of the Trust shall be liable for the obligations of any other Fund of
the Trust. Without limiting the generality of the foregoing, the Adviser shall
look only to the assets of a particular Fund for payment of fees for services
rendered to that Fund.
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 Index Funds SEI Investments Management Corporation
By: /s/ Cynthia Parrish By: /s/ Todd Cipperman
Name: Cynthia Parrish Name: Todd Cipperman
Title: Vice President Title: Vice President
<PAGE>
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN
SEI INDEX FUNDS
AND
SEI INVESTMENTS MANAGEMENT CORPORATION
Pursuant to Article 4, the Trust shall pay the Adviser compensation at an
annual rate as follows:
<TABLE>
<CAPTION>
<S> <C>
S&P 500 Index Fund .03%
</TABLE>
<PAGE>
INVESTMENT SUB-ADVISORY AGREEMENT
SEI INDEX FUNDS
AGREEMENT made as of the 18th day of November, 1998, between SEI
Investments Management Corporation, (the "Adviser") and World Asset Management,
LLC (the "Sub-Adviser").
WHEREAS, SEI Index Funds, 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 November 18, 1999 (the "Advisory Agreement") with the Trust, pursuant to
which the Adviser will act as investment adviser to the S&P 500 Index Fund (the
"Fund"), 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 Fund, 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 Fund entrusted to it hereunder (the "Assets"), including
the purchase, retention and disposition of the Assets, in accordance with the
Fund's investment objectives, policies and restrictions as stated in the Fund'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 Fund, 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
Fund 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 Fund'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 Fund transactions
and selecting brokers or dealers, the Sub-Adviser will use its best efforts to
seek on behalf of the Fund the best overall terms
<PAGE>
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 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 Fund 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 Fund. In addition, the
Sub-Adviser is 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 Fund'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 Fund 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 Fund
are property of the Fund and the Sub-Adviser will surrender promptly to the Fund
any of such records upon the Fund'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).
<PAGE>
(e) The Sub-Adviser shall provide the Fund's custodian on each business day
with information relating to all transactions concerning the Fund'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 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 Fund. The Adviser shall instruct the custodian and other parties
providing services to the Fund 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 Fund 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 Fund.
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
<PAGE>
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 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, without need for a vote of a majority
of the outstanding voting securities of the Fund, pursuant to an exemptive order
issued by the Securities and Exchange Commission. 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 Fund(a) by the Fund 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 Fund, (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:
<PAGE>
To the Adviser at: SEI Investments Management Corporation
One Freedom Valley Road
Oaks, PA 19456
Attention: Legal Department
To the Sub-Adviser at: World Asset Management
255 Brown Street, Suite 250
Birmingham, MI 48009-6208
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 any of the Trustees, officers or
shareholders of the Fund 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 INVESTMENTS MANAGEMENT CORPORATION WORLD ASSET MANAGEMENT, LLC
By: /s/ Todd Cipperman By: /s/ Todd Johnson
---------------------------- ----------------------------
Name: Todd Cipperman Name: Todd Johnson
---------------------------- ----------------------------
Title: Vice President Title: Portfolio Manager
---------------------------- ----------------------------
<PAGE>
SCHEDULE A
TO THE
SUB-ADVISORY AGREEMENT
BETWEEN
SEI INVESTMENTS MANAGEMENT CORPORATION
AND
WORLD ASSET MANAGEMENT, LLC
Pursuant to Article 4, the Adviser shall pay the Sub-Adviser compensation at an
annual rate of up to:
<TABLE>
<S> <C>
SEI Index Funds-
S&P 500 Index Fund .03%
</TABLE>
<PAGE>
July 26, 1999
SEI Index Funds
One Freedom Valley Drive
Oaks, Pennsylvania 19456
Re: Opinion of Counsel regarding Post-Effective Amendment No. 23 to the
Registration Statement filed on Form N-1A under the Securities Act
of 1933 (File No. 2-97111).
-------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to SEI Index Funds, a Massachusetts business trust (the
"Trust"), in connection with the above-referenced Registration Statement (as
amended, the "Registration Statement") which relates to the Trust's units of
beneficial interest, without par value (collectively, the "Shares"). This
opinion is being delivered to you in connection with the Trust's filing of
Post-Effective Amendment No. 23 to the Registration Statement (the "Amendment")
to be filed with the Securities and Exchange Commission pursuant to Rule 485(b)
of the Securities Act of 1933 (the "1933 Act"). With your permission, all
assumptions and statements of reliance herein have been made without any
independent investigation or verification on our part except to the extent
otherwise expressly stated, and we express no opinion with respect to the
subject matter or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have reviewed, among other things, executed
copies of the following documents:
(a) a certificate of the Commonwealth of Massachusetts as to the
existence and good standing of the Trust;
(b) the Agreement and Declaration of Trust for the Trust and all
amendments and supplements thereto (the "Declaration of Trust");
<PAGE>
SEI Index Funds
July 26, 1999
Page 2
(c) a certificate executed by Todd Cipperman, Assistant Secretary
of the Trust, certifying as to, and attaching copies of, the
Trust's Declaration of Trust and By-Laws (the "By-Laws"), and
certain resolutions adopted by the Board of Trustees of the Trust
authorizing the issuance of the Shares; and
(d) a printer's proof of the Amendment.
In our capacity as counsel to the Trust, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to such
opinion, we have relied upon, and assume the accuracy of, certificates and oral
or written statements of public officials and officers or representatives of the
Fund. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be in substantially the form of the printer's proof
referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Declaration
of Trust and By-Laws, and for the consideration described in the Registration
Statement, will be legally issued, fully paid and non assessable under the laws
of the Commonwealth of Massachusetts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not concede that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
/s/ Morgan, Lewis and Bockius LLP
Morgan, Lewis and Bockius LLP
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated May 3, 1999, on the
March 31, 1999 financial statements of the SEI Index Funds, included in the
previously filed Form N-30D dated May 27, 1999, and to all references to our
Firm included in or made part of this Post-Effective Amendment No. 23 to the
Registration Statement File No. 2-97111.
/s/ Arthur Andersen LLP
Philadelphia, PA
July 27, 1999
