<PAGE>
SEI INSTITUTIONAL MANAGED TRUST
JANUARY 31, 1995
- --------------------------------------------------------------------------------
LARGE CAP VALUE PORTFOLIO
LARGE CAP GROWTH PORTFOLIO
SMALL CAP VALUE PORTFOLIO
SMALL CAP GROWTH PORTFOLIO
MID-CAP GROWTH PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
EQUITY INCOME PORTFOLIO
BALANCED PORTFOLIO
CAPITAL GROWTH PORTFOLIO
REAL ESTATE SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
Please read this Prospectus carefully before investing, and keep it on file for
future reference.
A Statement of Additional Information dated January 31, 1995 has been filed
with the Securities and Exchange Commission and is available without charge
through the Distributor, SEI Financial Services Company, 680 East Swedesford
Road, Wayne, PA 19087 or by calling 1-800-342-5734. The Statement of Additional
Information is incorporated into this Prospectus by reference.
SEI Institutional Managed Trust (the "Trust") is a mutual fund that offers
financial institutions a convenient means of investing their own funds or funds
for which they act in a fiduciary, agency or custodial capacity in
professionally managed diversified and non-diversified portfolios of
securities. A portfolio may offer separate classes of shares that differ from
each other primarily in the allocation of certain distribution expenses and
minimum investment amounts. This Prospectus offers the Class A and/or Class B
shares of one balanced (fixed income and equity) and nine equity portfolios
(the "Portfolios" and each of these, a "Portfolio") listed above.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
- --------------------------------------------------------------------------------
<PAGE>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) Class A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP SMALL CAP SMALL CAP MID-CAP CAPITAL EQUITY
VALUE GROWTH VALUE GROWTH GROWTH APPRECIATION INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee/Advisory
Fees (after fee waiver)
(2) 0.65% 0.70% 0.98% 0.99% 0.86% 0.75% 0.73%
12b-1 Fees (after fee
waiver and reimburse-
ments) (3) 0.05% 0.07% 0.07% 0.06% 0.08% 0.05% 0.06%
Other Expenses (after
reimbursements) (4) 0.05% 0.08% 0.05% 0.05% 0.03% 0.04% 0.03%
- --------------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waiver) (5) 0.75% 0.85% 1.10% 1.10% 0.97% 0.84% 0.82%
- --------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) Class A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED CAPITAL GROWTH REAL ESTATE SECURITIES
PORTFOLIO PORTFOLIO(1) PORTFOLIO(1)
--------- -------------- ----------------------
<S> <C> <C> <C>
Management Fee/Advisory Fees
(after fee waiver) (2) 0.59% 0.00% 0.85%
12b-1 Fees (after fee waiver
and reimbursements) (3) 0.11% 0.00% 0.06%
Other Expenses (after reim-
bursements) (4) 0.05% 0.00% 0.04%
- ------------------------------------------------------------------------------
Total Operating Expenses (af-
ter fee waiver) (5) 0.75% 0.00% 0.95%
- ------------------------------------------------------------------------------
</TABLE>
(1) The Capital Growth and Real Estate Securities Portfolios offer only Class A
shares.
(2) SEI Financial Management Corporation ("SFM"), in its capacity as Manager
for each Portfolio, and certain of the investment advisers and sub-advisers
(collectively, "advisers") have agreed to waive, on a voluntary basis, a
portion of their fees, and the management/advisory fees shown reflect these
voluntary waivers. Such fee waivers are voluntary and may be terminated at
any time in the sole discretion of each entity that has agreed to waive a
portion of its fee. Absent such fee waivers, management/advisory fees would
be: Large Cap Value Portfolio, .70%; Large Cap Growth Portfolio, .75%;
Small Cap Value Portfolio, 1.00%; Small Cap Growth Portfolio, 1.00%; Mid-
Cap Growth Portfolio, .95%; Capital Appreciation Portfolio, .75%; Equity
Income Portfolio, .75%; Balanced Portfolio, .75%; Capital Growth Portfolio,
.50%; and Real Estate Securities Portfolio, .95%.
(3) The 12b-1 fee shown refers to each Portfolio's current 12b-1 budget for
reimbursement of expenses and, with respect to the Capital Growth
Portfolio, after reimbursement by SFM. SFM reserves the right to terminate
its reimbursement at any time in its sole discretion. Absent such
reimbursement, the 12b-1 fee would be .01% for the Capital Growth
Portfolio. The maximum 12b-1 fees payable by Class A shares of each
Portfolio is .30%.
(4) Other Expenses for the Large Cap Growth and Small Cap Value Portfolios are
based on estimated amounts for the current fiscal year. Absent SFM's
reimbursement of its management fee, other expenses for the Capital Growth
Portfolio would be .03%. SFM reserves the right to terminate its
reimbursement at any time in its sole discretion.
(5) Absent the voluntary fee waivers described above, total operating expenses
for the Class A shares of the Portfolios would be: Large Cap Value
Portfolio, .80%; Large Cap Growth Portfolio, .90%; Small Cap Value
Portfolio, 1.12%; Small Cap Growth Portfolio, 1.11%; Mid-Cap Growth
Portfolio, 1.06%; Capital Appreciation Portfolio, .84%; Equity Income
Portfolio, .84%; Balanced Portfolio, .91%; Capital Growth Portfolio, .54%;
and Real Estate Securities Portfolio, 1.05%. Additional information may be
found under "The Advisers and Sub-Advisers" and "The Manager and
Shareholder Servicing Agent."
EXAMPLE Class A
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
------ ------ ------ -------
<S> <C> <C> <C> <C>
An investor in a Portfolio would pay the follow-
ing expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the
end of each time period:
Large Cap Value Portfolio $ 8.00 $24.00 $42.00 $ 93.00
Large Cap Growth Portfolio $ 9.00 $27.00 -- --
Small Cap Value Portfolio $11.00 $35.00 -- --
Small Cap Growth Portfolio $11.00 $35.00 $61.00 $134.00
Mid-Cap Growth Portfolio $10.00 $31.00 $54.00 $119.00
Capital Appreciation Portfolio $ 9.00 $27.00 $47.00 $104.00
Equity Income Portfolio $ 8.00 $26.00 $46.00 $101.00
Balanced Portfolio $ 8.00 $24.00 $42.00 $ 93.00
Capital Growth Portfolio $ 0.00 $ 0.00 $ 0.00 $ 0.00
Real Estate Securities Portfolio $10.00 $30.00 $53.00 $117.00
- ------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in Class A shares of the Portfolios. The information set
forth in the foregoing table and example relates only to each Portfolio's Class
A shares. Certain Portfolios also offer ProVantage Funds shares, which are
subject to the same expenses except that ProVantage Funds shares bear different
distribution costs and additional transfer agent costs and sales loads. A
person who purchases shares through a financial institution may be charged
separate fees by that institution. Additional information may be found under
"The Manager and Shareholder Servicing Agent," "The Advisers and Sub-Advisers"
and "Distribution."
Long-term shareholders may eventually pay more than the economic equivalent of
the maximum front-end sales charges otherwise permitted by the Rules of Fair
Practice (the "Rules") of the National Association of Securities Dealers, Inc.
("NASD").
2
<PAGE>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) Class B
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP SMALL CAP SMALL CAP MID-CAP CAPITAL EQUITY
VALUE GROWTH VALUE GROWTH GROWTH APPRECIATION INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee/Advisory
Fees (after fee waiver)
(1) 0.65% 0.70% 0.98% 0.99% 0.86% 0.75% 0.73%
12b-1 Fees (2) 0.35% 0.37% 0.37% 0.36% 0.38% 0.35% 0.36%
Other Expenses (3) 0.05% 0.08% 0.05% 0.05% 0.03% 0.04% 0.03%
- --------------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waiver) (4) 1.05% 1.15% 1.40% 1.40% 1.27% 1.14% 1.12%
- --------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) Class B
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED
PORTFOLIO
---------
<S> <C>
Management Fee/Advisory Fees (after fee waiver) (1) 0.59%
12b-1 Fees (2) 0.41%
Other Expenses (after reimbursements) (3) 0.05%
- --------------------------------------------------------------
Total Operating Expenses (after fee waiver) (4) 1.05%
- --------------------------------------------------------------
</TABLE>
(1) SEI Financial Management Corporation ("SFM"), in its capacity as Manager
for each Portfolio, and certain of the investment advisers and sub-advisers
(collectively, "advisers") have agreed to waive, on a voluntary basis, a
portion of their fees, and the management/advisory fees shown reflect these
voluntary waivers. Such fee waivers are voluntary and may be terminated at
any time in the sole discretion of each entity that has agreed to waive a
portion of its fee. Absent such fee waivers, management/advisory fees would
be: Large Cap Value Portfolio, .70%; Large Cap Growth Portfolio, .75%;
Small Cap Value Portfolio, 1.00%; Small Cap Growth Portfolio, 1.00%; Mid-
Cap Growth Portfolio, .95%; Capital Appreciation Portfolio, .75%; Equity
Income Portfolio, .75%; and Balanced Portfolio, .75%.
(2) The 12b-1 fees shown include the Large Cap Value, Large Cap Growth, Small
Cap Value, Small Cap Growth, Mid-Cap Growth, Capital Appreciation, Equity
Income and Balanced Portfolios' current 12b-1 budget. The maximum 12b-1
fees payable by Class B shares of these Portfolios are .60%.
(3) Other Expenses for the Large Cap Growth and Small Cap Value Portfolios are
based on estimated amounts for the current fiscal year.
(4) Absent the voluntary fee waivers described above, total operating expenses
for the Class B Shares of the Portfolios would be: Large Cap Value
Portfolio, 1.10%; Large Cap Growth Portfolio, 1.20%; Small Cap Value
Portfolio, 1.42%; Small Cap Growth Portfolio, 1.41%; Mid-Cap Growth
Portfolio, 1.36%; Capital Appreciation Portfolio, 1.14%; Equity Income
Portfolio, 1.14%; and Balanced Portfolio, 1.21%. Additional information may
be found under "The Advisers and Sub-Advisers" and "The Manager and
Shareholder Servicing Agent."
EXAMPLE Class B
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
------ ------ ------ -------
<S> <C> <C> <C> <C>
An investor in a Portfolio would pay the follow-
ing expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the
end of each time period:
Large Cap Value Portfolio $11.00 $33.00 $58.00 $128.00
Large Cap Growth Portfolio $12.00 $37.00 -- --
Small Cap Value Portfolio $14.00 $44.00 -- --
Small Cap Growth Portfolio $14.00 $44.00 $77.00 $168.00
Mid-Cap Growth Portfolio $13.00 $40.00 $70.00 $153.00
Capital Appreciation Portfolio $12.00 $36.00 $63.00 $139.00
Equity Income Portfolio $11.00 $36.00 $62.00 $136.00
Balanced Portfolio $11.00 $33.00 $58.00 $128.00
- ------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in Class B shares of the Portfolios. The information set
forth in the foregoing table and example relates only to each Portfolio's Class
B shares. Certain Portfolios also offer ProVantage Funds shares, which are
subject to the same expenses except that ProVantage Funds shares bear different
distribution costs and additional transfer agent costs and sales loads. A
person who purchases shares through a financial institution may be charged
separate fees by that institution. Additional information may be found under
"The Manager and Shareholder Servicing Agent," "The Advisers and Sub-Advisers"
and "Distribution."
Long-term shareholders may eventually pay more than the economic equivalent of
the maximum front-end sales charges otherwise permitted by the Rules of Fair
Practice (the "Rules") of the National Association of Securities Dealers, Inc.
("NASD").
3
<PAGE>
FINANCIAL HIGHLIGHTS ___________________________________________________________
The following information has been audited by Price Waterhouse LLP, the Trust's
independent accountants, as indicated in their report dated November 11, 1994
on the Trust's financial statements as of September 30, 1994 included in the
Trust's Statement of Additional Information under "Financial Information."
Additional performance information is set forth in the 1994 Annual Report to
Shareholders and is available upon request and without charge by calling 1-800-
342-5734. As of the most recent fiscal year, there were no shares outstanding
of the Large Cap Growth, Small Cap Value and Real Estate Securities Portfolios
and no Class B shares outstanding of any Portfolio. This table should be read
in conjunction with the Trust's financial statements and notes thereto.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Large Cap Value Portfolio (1)(2)(3)
------------------------------------------------------------------------------
For the periods ended September 30,
-----------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 (4)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $11.54 $12.49 $12.05 $9.30 $11.75 $9.45 $10.99 $10.00
- --------------------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income
(Loss) 0.28 0.31 0.34 0.35 0.33 0.33 0.30 0.12
- --------------------------------------------------------------------------------------------------------
Net Realized and
Unrealized Gains
(Losses) on Securities (0.46) 0.22 0.71 2.92 (2.16) 2.24 (1.52) 0.96
- --------------------------------------------------------------------------------------------------------
Total from Investment
Operations $(0.18) $.53 $1.05 $3.27 $(1.83) $2.57 $(1.22) $1.08
- --------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends from Net In-
vestment Income (0.27) (0.33) (0.33) (0.35) (0.38) (0.27) (0.31) (0.09)
Distributions from Re-
alized Capital Gains (0.38) (1.15) (0.28) (0.17) (0.24) -- (0.01) --
- --------------------------------------------------------------------------------------------------------
Total Distributions $(0.65) $(1.48) $(0.61) $(0.52) $(0.62) $(0.27) $(0.32) $(0.09)
- --------------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $10.71 $11.54 $12.49 $12.05 $9.30 $11.75 $9.45 $10.99
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Total Return (1.64)% 4.35% 9.17% 35.95% (16.42)% 27.58% (10.88)% 24.28%
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Ratios/Supplemental Da-
ta:
Net Assets, End of
Period (000) $133,178 $205,157 $242,065 $187,876 $119,763 $111,810 $ 44,841 $39,234
Ratio of Expenses to
Average Net Assets 0.75% 0.75% 0.75% 0.75% 0.75% 0.76% 0.75% 0.74%
Ratio of Expenses to
Average Net Assets
(Excluding Waivers) 0.75% 0.76% 0.80% 0.83% 0.98% 1.26% 1.33% 1.14%
Ratio of Net
Investment Income
(Loss) to Average Net
Assets 2.51% 2.64% 2.79% 3.11% 3.05% 3.31% 3.37% 2.82%
Ratio of Net
Investment Income
(Loss) to Average Net
Assets
(Excluding Waivers) 2.51% 2.63% 2.74% 3.03% 2.82% 2.81% 2.79% 2.42%
Portfolio Turnover
Rate 67% 96% 17% 25% 28% 29% 44% 7%
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Large Cap Value Portfolio's Investment Adviser changed on October 22, 1992
and on October 3, 1994.
(2) On October 3, 1994 the Value Portfolio changed its name to the Large Cap
Value Portfolio.
(3) As of December 16, 1994, the Large Cap Value Portfolio's investment adviser
is SEI Financial Management Corporation and its sub-advisers are LSV Asset
Management, Mellon Equity Associates and Merus Capital Management.
(4) Large Cap Value Class A shares were offered beginning April 20, 1987. All
ratios including total return for that period have been annualized.
4
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Small Cap Growth Portfolio
----------------------------
For the periods ended September 30,
-----------------------------------
1994 1993 1992 (1)
- -------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period $14.67 $10.65 $10.00
- -------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income
(Loss) (0.05) (0.02) 0.02
Net Realized and
Unrealized Gains (Losses)
on Securities 0.07 4.05 0.65
- -------------------------------------------------------------
Total from Investment
Operations $0.02 $4.03 $0.67
- -------------------------------------------------------------
Less Distributions:
Dividends from Net
Investment Income -- (0.01) (0.02)
Distributions from
Realized Capital Gains (0.65) -- --
- -------------------------------------------------------------
Total Distributions $(0.65) $(0.01) $(0.02)
- -------------------------------------------------------------
Net Asset Value, End of
Period $14.04 $14.67 $10.65
- -------------------------------------------------------------
- -------------------------------------------------------------
Total Return 0.23% 37.81% 15.07%
- -------------------------------------------------------------
- -------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period
(000) $300,296 $193,816 $36,191
Ratio of Expenses to
Average Net Assets 1.01% 0.97% 0.97%
Ratio of Expenses to
Average Net Assets
(Excluding Waivers) 1.11% 1.14% 1.29%
Ratio of Net Investment
Income (Loss) to Average
Net Assets (0.51)% (0.25)% 0.49%
Ratio of Net Investment
Income (Loss) to Average
Net Assets (Excluding
Waivers) (0.61)% (0.42)% 0.17%
Portfolio Turnover Rate 97% 85% 33%
- ---------------------------------------------------------
- ---------------------------------------------------------
</TABLE>
(1) Small Cap Growth Class A shares were offered beginning April 20, 1992. All
ratios including total return for that period have been annualized.
5
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
FOR A CLASS A FUNDS SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Mid-
Cap Growth Portfolio
-----------------------
For the periods ended
September 30,
------------------------
1994 1993(1)
- -------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $12.10 $10.00
- -------------------------------------------------------------------------
Income from Investment Operations:
Net Investment Income (Loss) 0.01 0.01
Net Realized and Unrealized Gains (Losses) on
Securities (0.98) 2.10
- -------------------------------------------------------------------------
Total from Investment Operations $(0.97) $2.11
- -------------------------------------------------------------------------
Less Distributions:
Dividends from Net Investment Income (0.01) (0.01)
Distributions from Realized Capital Gains (0.23) --
- -------------------------------------------------------------------------
Total Distributions $(0.24) $(0.01)
- -------------------------------------------------------------------------
Net Asset Value, End of Period $10.89 $12.10
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Total Return (8.10)% 34.06%
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (000) $108,002 $57,669
Ratio of Expenses to Average Net Assets 0.93% 0.90%
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 1.06% 1.12%
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.03% 0.26%
Ratio of Net Investment Income (Loss) to
Average Net Assets (Excluding Waivers) (0.10)% 0.04%
Portfolio Turnover Rate 89% 87%
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
</TABLE>
(1) Mid-Cap Growth Class A shares were offered beginning February 16, 1993. All
ratios including total return for that period have been annualized.
6
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Capital Appreciation Portfolio
------------------------------
For the periods ended September 30,
-----------------------------------
1994 1993 1992 1991 1990 1989 1988 (1)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $16.36 $15.09 $14.15 $11.21 $13.29 $10.06 $10.00
- --------------------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income
(Loss) 0.24 0.32 0.30 0.41 0.35 0.31 0.16
Net Realized and
Unrealized Gains
(Losses) on Securities (0.22) 1.68 1.23 3.06 (1.01) 3.34 0.03
- --------------------------------------------------------------------------------------
Total from Investment
Operations $0.02 $2.00 $1.53 $3.47 $(0.66) $3.65 $0.19
- --------------------------------------------------------------------------------------
Less Distributions:
Dividends from Net
Investment Income (0.25) (0.30) (0.30) (0.40) (0.39) (0.28) (0.13)
Distributions from
Realized Capital Gains (0.95) (0.43) (0.29) (0.13) (1.03) (0.14) --
- --------------------------------------------------------------------------------------
Total Distributions $(1.20) $(0.73) $(0.59) $(0.53) $(1.42) $(0.42) $(0.13)
- --------------------------------------------------------------------------------------
Net Asset Value, End of
Period $15.18 $16.36 $15.09 $14.15 $11.21 $13.29 $10.06
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Total Return (0.11)% 13.50% 11.03% 31.69% (5.75)% 37.43% 3.34%
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Ratios/Supplemental
Data:
Net Assets, End of
Period (000) $729,100 $776,745 $536,028 $248,440 $47,250 $47,250 $17,848
Ratio of Expenses to
Average Net Assets 0.79% 0.75% 0.75% 0.75% 0.75% 0.76% 0.76%
Ratio of Expenses to
Average Net Assets
(Excluding Waivers) 0.84% 0.84% 0.88% 0.94% 1.04% 1.50% 1.14%
Ratio of Net
Investment Income
(Loss) to Average Net
Assets 1.45% 2.06% 2.12% 3.10% 2.95% 2.98% 3.17%
Ratio of Net
Investment Income
(Loss) to Average Net
Assets (Excluding
Waivers) 1.40% 1.97% 1.99% 2.91% 2.66% 2.24% 2.79%
Portfolio Turnover
Rate 109% 119% 84% 83% 96% 122% 87%
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
(1) Capital Appreciation Class A shares were offered beginning March 1, 1988.
All ratios including total return for that period have been annualized.
7
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Equity Income Portfolio
-----------------------
For the periods ended September 30,
-----------------------------------
1994 1993 1992 1991 1990 1989 1988 (1)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $15.00 $13.33 $12.36 $10.09 $12.82 $10.37 $10.00
- --------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income
(Loss) 0.51 0.54 0.52 0.57 0.62 0.49 0.10
Net Realized and
Unrealized Gains
(Losses)
on Securities (0.38) 1.75 1.05 2.54 (2.41) 2.40 0.34
- --------------------------------------------------------------------------------------------
Total from Investment
Operations $0.13 $2.29 $1.57 $3.11 $3.03 $2.89 $0.44
- --------------------------------------------------------------------------------------------
Less Distributions:
Dividends from Net
Investment Income (0.50) (0.51) (0.52) (0.60) (0.66) (0.42) (0.07)
Distributions from
Realized Capital Gains (0.57) (0.08) (0.08) (0.24) (0.28) (0.02) --
- --------------------------------------------------------------------------------------------
Total Distributions $(1.07) $(0.59) $(0.60) $(0.84) $(0.94) $(0.44) $(0.07)
- --------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $14.06 $15.00 $13.33 $12.36 $10.09 $12.82 $10.37
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Total Return 1.05% 17.34% 13.03% 32.05% (15.02)% 28.53% 13.49%
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Ratios/Supplemental
Data:
Net Assets, End of
Period (000) $418,207 $337,939 $178,756 $93,552 $54,193 $30,865 $2,910
Ratio of Expenses to
Average Net Assets 0.78% 0.75% 0.75% 0.75% 0.75% 0.76% 1.04%
Ratio of Expenses to
Average Net Assets
(Excluding Waivers) 0.84% 0.85% 0.87% 0.86% 1.02% 2.62% 1.18%
Ratio of Net
Investment Income
(Loss)
to Average Net Assets 3.68% 3.73% 4.15% 4.99% 5.63% 5.03% 4.74%
Ratio of Net
Investment Income
(Loss)
to Average Net Assets
(Excluding Waivers) 3.62% 3.63% 4.03% 4.88% 5.36% 3.17% 4.60%
Portfolio Turnover
Rate 28% 39% 18% 42% 33% 11% 5%
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
(1) Equity Income Class A shares were offered beginning June 2, 1988. All
ratios including total return for that period have been annualized.
8
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Balanced Portfolio (1)
----------------------
For the periods ended September 30,
-----------------------------------
1994 1993 1992 1991 1990 (2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $12.24 $11.35 $10.70 $9.77 $10.00
- -------------------------------------------------------------------------------
Income from Investment Operations:
Net Investment Income (Loss) 0.23 0.25 0.52 0.65 0.07
Net Realized and Unrealized
Gains (Losses) on Securities (0.62) 1.29 0.73 0.96 (0.30)
- -------------------------------------------------------------------------------
Total from Investment Operations $(0.39) $1.54 $1.25 $1.61 $(0.23)
- -------------------------------------------------------------------------------
Less Distributions:
Dividends from Net Investment
Income (0.22) (0.26) (0.53) (0.68) --
Distributions from Realized
Capital Gains (0.11) (0.39) (0.07) -- --
- -------------------------------------------------------------------------------
Total Distributions $(0.33) $(0.65) $(0.60) $(0.68) --
- -------------------------------------------------------------------------------
Net Asset Value, End of Period $11.52 $12.24 $11.35 $10.70 $9.77
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Return (3.25)% 14.49% 11.64% 15.96% (15.56)%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (000) $65,480 $33,807 $5,974 $2,174 $459
Ratio of Expenses to Average Net
Assets 0.75% 0.75% 0.75% 0.75% 0.76%
Ratio of Expenses to Average Net
Assets (Excluding Waivers) 0.91% 0.94% 1.12% 2.54% 3.23%
Ratio of Net Investment Income
(Loss) to Average Net Assets 2.05% 2.24% 4.83% 5.68% 5.66%
Ratio of Net Investment Income
(Loss) to Average Net Assets
(Excluding Waivers) 1.89% 2.05% 4.46% 3.89% 3.19%
Portfolio Turnover Rate 149% 109% 101% 19% 0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) Balanced Portfolio's Investment Adviser changed on September 6, 1992.
(2) Balanced Class A shares were offered beginning August 7, 1990. All ratios
including total return for that period have been annualized.
9
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Capital Growth Portfolio
------------------------
For the periods ended September 30,
------------------------------------------------
1994 1993 1992 1991 1990 (1)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $13.94 $12.50 $11.51 $8.38 $10.00
- ------------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income
(Loss) 0.20 0.21 0.55 0.26 0.26
Net Realized and
Unrealized Gains (Losses)
on Securities (0.04) 2.66 1.81 3.16 (1.65)
- ------------------------------------------------------------------------------
Total from Investment
Operations $0.16 $2.87 $2.36 $3.42 $(1.39)
- ------------------------------------------------------------------------------
Less Distributions:
Dividends from Net
Investment Income (0.20) (0.21) (0.57) (0.25) (0.23)
Distributions from
Realized Capital Gains (2.35) (1.22) (0.80) (0.04) --
- ------------------------------------------------------------------------------
Total Distributions $(2.55) $(1.43) $(1.37) $(0.29) $(0.23)
- ------------------------------------------------------------------------------
Net Asset Value, End of
Period $11.55 $13.94 $12.50 $11.51 $8.38
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Return 1.51% 24.40% 18.87% 43.00% (19.27)%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period
(000) $132,962 $203,001 $170,829 $123,057 $76,876
Ratio of Expenses to
Average Net Assets 0.00% 0.00% 0.00% 0.00% 0.00%
Ratio of Expenses to
Average Net Assets
(Excluding Waivers) 0.54% 0.54% 0.55% 0.59% 0.48%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 1.61% 1.63% 1.78% 2.60% 3.73%
Ratio of Net Investment
Income (Loss) to Average
Net Assets
(Excluding Waivers) 1.07% 1.09% 1.23% 2.01% 3.25%
Portfolio Turnover Rate 81% 120% 111% 135% 99%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
(1) Capital Growth Class A shares were offered beginning January 4, 1990. All
ratios including total return for that period have been annualized.
10
<PAGE>
THE TRUST ______________________________________________________________________
SEI INSTITUTIONAL MANAGED TRUST (the "Trust") is an open-end management
investment company that has diversified and non-diversified portfolios. The
Trust offers units of beneficial interest ("shares") in separate investment
portfolios. Certain portfolios have three separate classes of shares, Class A,
Class B and ProVantage Funds, which provide for variations in distribution and
transfer agent costs, sales charges, voting rights and dividends. This
prospectus offers Class A and B shares of the Trust's Large Cap Value, Large
Cap Growth, Small Cap Value, Small Cap Growth, Mid-Cap Growth, Capital
Appreciation, Equity Income and Balanced Portfolios and Class A shares of the
Trust's Capital Growth and Real Estate Securities Portfolios (the "Portfolios"
and each of these, a "Portfolio"). Additional information pertaining to the
Trust may be obtained in writing from SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087 or by calling 1-800-342-5734.
INVESTMENT OBJECTIVES AND POLICIES _____________________________________________
LARGE CAP VALUE The investment objective of the Large Cap Value Portfolio is
PORTFOLIO long-term growth of capital and income. There is no
assurance that the Portfolio will achieve its investment
objective.
The Portfolio invests primarily in a diversified
portfolio of high quality, income producing common stocks
which, in the advisers' opinion, are undervalued in the
marketplace at the time of purchase. In general, the
advisers characterize high quality securities as those that
have above-average returns-on-equity and above average
reinvestment rates relative to the stock market in general
as measured by the S&P Barra/Value Index. The advisers also
consider other factors, such as earnings and dividend growth
prospects as well as industry outlook and market share.
Under normal conditions, the Portfolio will invest at least
65% of its total assets in common stocks of companies with a
market capitalization of at least $1 billion.
Under normal circumstances the Portfolio, to the extent
not invested in the securities described above, may invest
in investment grade bonds. Investment grade bonds include
securities rated BBB by Standard & Poor's Corporation (S&P")
or Baa by Moody's Investors Service, Inc. (Moody's), which
may be regarded as having speculative characteristics.
The Portfolio's investment adviser is SEI Financial
Management Corporation and its investment sub-advisers are
LSV Asset Management, Mellon Equity Associates and Merus
Capital Management.
LARGE CAP The investment objective of the Large Cap Growth Portfolio
GROWTH is capital appreciation. There is no assurance that the
PORTFOLIO Portfolio will achieve its investment objective.
Under normal conditions, the Portfolio will invest at
least 65% of its total assets in equity securities of large
companies (i.e., companies with market capitalizations of
more than $1 billion). The Portfolio's advisers will
generally select securities of issuers believed to possess
significant growth potential. Any remaining assets may be
invested in fixed income securities or in equity securities
of smaller companies that the Portfolio's advisers
11
<PAGE>
believe are appropriate in light of the Portfolio's
objective. Equity securities include common stock, preferred
stock, warrants or rights to subscribe to common stock and,
in general, any security that is convertible into or
exchangeable for common stock. Fixed income securities must
be rated investment grade or better, i.e., rated at least
BBB by S&P or Baa by Moody's. Debt securities rated BBB or
Baa lack outstanding investment characteristics, and have
speculative characteristics as well.
In order to meet liquidity needs, or for temporary
defensive purposes, the Portfolio may invest up to 100% of
its assets in cash and money market securities. Money market
securities must be rated in one of the top two categories by
a major rating service or, if unrated, be of comparable
quality as determined by the Portfolio's adviser.
The Portfolio's annual turnover rate may exceed 100%.
Such a turnover rate may result in higher transaction costs
and may result in additional taxes for shareholders. See
"Taxes."
The Portfolio's investment adviser is SEI Financial
Management Corporation and its investment sub-advisers are
Alliance Capital Management L.P. and IDS Advisory Group Inc.
SMALL CAP VALUE The investment objective of the Small Cap Value Portfolio is
PORTFOLIO capital appreciation. There is no assurance that the
Portfolio will achieve its investment objective.
Under normal market conditions, the Portfolio will invest
at least 65% of its total assets in the equity securities of
smaller companies (i.e., companies with market
capitalizations of less than $1 billion). The Portfolio's
advisers will select securities of companies believed to be
undervalued on the basis of various market-related criteria.
Any remaining assets may be invested in fixed income
securities or equity securities of larger, more established
companies that the Portfolio's advisers believe are
appropriate in light of the Portfolio's objective. Equity
securities include common stock, preferred stock, warrants
and rights to subscribe to common stock and, in general, any
security that is convertible into or exchangeable for common
stock. Fixed income securities must be rated investment
grade or better, i.e., rated at least BBB by S&P or Baa by
Moody's. Debt securities rated BBB or Baa lack outstanding
investment characteristics, and have speculative
characteristics as well.
In order to meet liquidity needs, or for temporary
defensive purposes, the Portfolio may invest up to 100% of
its assets in cash and money market securities. Money market
securities must be rated in one of the two top categories by
a major rating service or, if unrated, be of comparable
quality as determined by the Portfolio's advisers.
The Portfolio's investment adviser is SEI Financial
Management Corporation and its investment sub-adviser is
1838 Investment Advisors, L.P.
SMALL CAP The investment objective of the Small Cap Growth Portfolio
GROWTH is to provide long-term capital appreciation by investing
PORTFOLIO primarily in equity securities of smaller companies. There
is no assurance that the Portfolio will achieve its
investment objective.
12
<PAGE>
The Portfolio seeks to provide long-term capital
appreciation. The Portfolio's policy is to invest in equity
securities of smaller companies that the advisers believe
are in an early stage or transitional point in their
development and have demonstrated or have the potential for
above average capital growth. The advisers will select
companies which have the potential to gain market share in
their industry, achieve and maintain high and consistent
profitability or produce increases in earnings. The advisers
also seek companies with strong company management and
superior fundamental strength.
Under normal market conditions, the Portfolio will invest
at least 65% of its total assets in the equity securities of
smaller growth companies (i.e., market capitalizations less
than $1 billion). Small capitalization companies have the
potential to show earnings growth over time that is well
above the growth rate of the overall economy. The remaining
35% of the Portfolio's assets may be invested in the equity
securities of more established companies that the advisers
believe may offer strong capital appreciation potential due
to their relative market position, anticipated earnings
growth, changes in management or other similar
opportunities. Equity securities include common stock,
preferred stock, warrants and rights to subscribe to common
stock and, in general, any security that is convertible into
or exchangeable for common stock.
For temporary defensive purposes, when in the opinion of
the advisers market conditions so warrant, the Portfolio may
invest all or a portion of its assets in common stocks of
larger, more established companies or in fixed income
securities or money market securities (consisting of
securities issued or guaranteed by the United States
Government, its agencies or instrumentalities, repurchase
agreements backed by such securities, certificates of
deposit, bankers acceptances and high-grade commercial
paper). Fixed income securities will only be purchased if
they are rated investment grade or better. Investment grade
bonds include securities rated at least BBB by S&P or Baa by
Moody's. Securities rated BBB or Baa may be regarded as
having speculative characteristics. Short-term money market
securities will only be purchased if they have been given
one of the two top ratings by a major rating service, or if
unrated, are of comparable quality as determined by the
advisers. To the extent the Portfolio is engaged in
temporary defensive investments, the Portfolio will not be
pursuing its investment objective.
The Portfolio's investment advisers are Investment
Advisers, Inc., Nicholas-Applegate Capital Management (a
Limited Partnership) and Pilgrim Baxter & Associates, Ltd.
MID-CAP GROWTH The investment objective of the Mid-Cap Growth Portfolio is
PORTFOLIO to provide long-term capital appreciation by investing
primarily in equity securities of medium sized companies.
There is no assurance that the Portfolio will achieve its
investment objective.
The Portfolio seeks to achieve its investment objective
by investing in equity securities of medium sized companies.
Under normal market conditions, the Portfolio will invest at
least 65% of its total assets in equity securities of
companies having stock market capitalizations of $500
million to $5 billion. Such companies are typically well
13
<PAGE>
established but have not reached full maturity and may offer
significant growth potential. The adviser will seek to
identify companies which, in its opinion, will experience
accelerating earnings, increased institutional ownership or
strong price appreciation relative to their industries and
broad market averages.
All of the equity securities in which the Portfolio
invests are traded on registered exchanges or on the over-
the-counter market in the United States. Equity securities
include common stock, warrants and rights to subscribe to
common stock and, in general, any security that is
convertible into or exchangeable for common stock.
Any assets not invested in equity securities of medium
sized companies as described above are invested in equity
securities of larger, more established companies or in fixed
income securities or short-term money market securities
(including securities issued or guaranteed by the United
States Government, its agencies or instrumentalities,
repurchase agreements backed by such securities,
certificates of deposit, bankers' acceptances and high-grade
commercial paper). Fixed income securities will only be
purchased if they are rated investment grade or better at
time of purchase. Investment grade bonds include securities
rated at least BBB by S&P or Baa by Moody's. Securities
rated BBB or Baa may be regarded as having speculative
characteristics. Short-term money market securities,
certificates of deposit, banker's acceptances and commercial
paper will only be purchased if they have been given one of
the two top ratings by a major rating service, or if
unrated, are of comparable quality as determined by the
adviser. For temporary defensive purposes, when the adviser
determined that market conditions warrant, the Portfolio may
invest all or a portion of its assets in the securities or
instruments described in this paragraph.
The Portfolio's investment adviser is Nicholas-Applegate
Capital Management.
CAPITAL The investment objective of the Capital Appreciation
APPRECIATION Portfolio is capital appreciation. There is no assurance
PORTFOLIO that the Portfolio will achieve its investment objective.
The Portfolio invests primarily in a diversified
portfolio of common stocks (and securities convertible into
common stock) which, in the adviser's opinion, are
undervalued in the marketplace at the time of purchase.
Dividend income is an incidental consideration compared to
growth of capital. In selecting securities for the
Portfolio, the adviser will evaluate factors it believes are
likely to affect long-term capital appreciation such as the
issuer's background, industry position, historical returns
on equity and experience and qualifications of the
management team. The adviser will rotate the Portfolio
holdings between various market sectors based on economic
analysis of the overall business cycle. Under normal
conditions, at least 65% of the Portfolio will be invested
in common stocks.
Under normal circumstances the Portfolio, to the extent
not invested in the securities described above, may invest
in investment grade bonds. Investment grade bonds include
securities rated BBB by S&P or Baa by Moody's, which may be
regarded as having speculative characteristics.
14
<PAGE>
For the fiscal year ended September 30, 1994, as a result
of its investment strategies, the Portfolio's annual
portfolio turnover rate is 109%. Such a turnover rate may
result in higher transaction costs and may result in
additional taxes for shareholders. See "Taxes."
The Portfolio's investment adviser is SunBank Capital
Management, N.A.
EQUITY INCOME The investment objective of the Equity Income Portfolio is
PORTFOLIO to provide current income and, as a secondary objective,
moderate capital appreciation. There is no assurance that
the Portfolio will achieve its investment objective.
The Portfolio invests primarily in a diversified
portfolio of common stocks. The investment approach employed
by the adviser emphasizes income producing common stocks
which, in general, have above-average dividend yields
relative to the stock market as measured by the S&P 500
Index. Under normal conditions, at least 65% of the
Portfolio will be invested in common stocks.
Under normal circumstances the Portfolio, to the extent
not invested in the securities described above, may invest
in investment grade bonds. Investment grade bonds include
securities rated BBB by S&P or Baa by Moody's, which may be
regarded as having speculative characteristics.
The Portfolio's investment adviser is Merus Capital
Management.
BALANCED The investment objective of the Balanced Portfolio is total
PORTFOLIO return consistent with the preservation of capital. There is
no assurance that the Portfolio will achieve its investment
objective.
The Portfolio invests in a combination of undervalued
common stocks and fixed income securities. The Portfolio
seeks strong total return in all market conditions, with a
special emphasis on minimizing interim declines during
falling equity markets. The Portfolio primarily invests in
large capitalization equity securities, intermediate-
maturity fixed income securities and money market
instruments.
Under normal conditions, the Portfolio will invest a
minimum of 25% of its total assets in investment grade fixed
income securities. Such securities consist of bonds,
debentures, notes and similar obligations or instruments
which constitute a security and evidence indebtedness. Fixed
income securities in which the Portfolio may invest are
United States Government securities, mortgage-backed
securities, corporate bonds and bank obligations.
The Portfolio will invest in corporate bonds rated BBB or
higher by S&P or Baa or higher by Moody's at the time of
purchase. Corporate bonds rated BBB or Baa are considered to
be medium grade obligations that have some speculative
characteristics.
The Portfolio will, under normal conditions, invest
between 30% and 70% of its total assets in common stocks,
depending upon the adviser's assessment of market
conditions. When the adviser believes that equity markets
are overvalued, the common stock exposure will be at the low
end of this range. The adviser expects that equity
15
<PAGE>
exposure will average 60% over time. The Portfolio may also
invest in U.S. dollar denominated securities of foreign
issuers (including American Depositary Receipts that are
traded on registered exchanges or listed on NASDAQ).
The average maturity of the fixed income securities in
the Portfolio will, under normal circumstances, be
approximately five years, although this will vary with
changing market conditions.
For the fiscal year ended September 30, 1994, as a result
of its investment strategies, the equity and fixed-income
portions of the Portfolio's annual turnover rate is 128% and
197%, respectively. Such turnover rates may result in higher
transaction costs and may result in additional taxes for
shareholders. See "Taxes."
The Portfolio's investment adviser is SunBank Capital
Management, N.A.
CAPITAL GROWTH The investment objective of the Capital Growth Portfolio is
PORTFOLIO capital appreciation. As a secondary investment objective,
the Portfolio will also seek to realize current income.
There is no assurance that the Portfolio will achieve its
investment objective.
The Portfolio invests at least 65% of its total assets in
a diversified portfolio of common stocks of small companies
and securities that are convertible into common stocks that
are deemed by the adviser to offer favorable prospects for
growth in market value. These companies will generally have
a capitalization of no higher than $1.5 billion.
Convertible bonds and convertible preferred stock are
securities that have characteristics similar to both fixed
income and equity securities. Because of the conversion
feature, the market value of convertible securities tends to
move together with the market value of the underlying common
stocks. As a result, the selection of a convertible security
is based to a greater extent on the potential for capital
appreciation which may exist in the underlying common
stocks. The Portfolio will invest in convertible securities
that are rated at least CCC by S&P or Caa by Moody's or, if
unrated, are of comparable quality as determined by the
adviser. However, the Portfolio may invest only up to 5% of
its net assets in convertible securities that are rated, at
time of purchase, below BBB by S&P or Baa by Moody's or, if
unrated, are of comparable quality as determined by the
adviser. Such securities are considered by S&P and Moody's
to be of poor standing and they may be in default or present
elements of danger to the repayment of principal and
interest. Securities rated BBB may have speculative
characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case
with higher grade bonds.
Under normal circumstances the Portfolio, to the extent
not invested in the securities described above, may invest
for income purposes in bonds rated, at time of purchase, A
or better by S&P or Moody's or, if unrated, deemed to be of
equal quality by the adviser.
As a result of its investment strategies, the Portfolio's
annual portfolio turnover rate is expected to be over 100%.
A high turnover rate may result in higher transaction costs
and may result in additional taxes for shareholders. See
"Taxes."
The Portfolio's investment adviser is SunBank Capital
Management, N.A.
16
<PAGE>
REAL ESTATE The investment objective of the Real Estate Securities
SECURITIES Portfolio is to provide above average current income and
PORTFOLIO long-term capital appreciation by investing primarily in
equity securities of real estate companies. There is no
assurance that the Portfolio will achieve its investment
objective.
The Portfolio invests primarily in income producing
equity securities of publicly traded companies principally
engaged in the real estate industry. For purposes of the
Portfolio's investment policies, a company is "principally
engaged" in the real estate industry if (i) it derives at
least 50% of its revenues or profits from the ownership,
construction, management, financing or sale of residential,
commercial or industrial real estate, or (ii) it has at
least 50% of the fair market value of its assets invested in
residential, commercial or industrial real estate.
Under normal circumstances, at least 65% of the
Portfolio's total assets will be invested in income
producing equity securities of real estate companies. Such
equity securities are common stocks (including shares or
units of beneficial interest of Real Estate Investment
Trusts ("REITs")), rights or warrants to purchase common
stocks, and preferred stock. The Portfolio seeks to invest
in equity securities of companies that provide a dividend
yield that exceeds the composite dividend yield of
securities comprising the S&P 500 Index.
The majority of the Portfolio's total assets will be
invested in securities of REITs. REITs pool investors' funds
for investment primarily in income producing real estate or
real estate related loans or interests. 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
interest payments. Hybrid REITs combine the characteristics
of both Equity and Mortgage REITs. The Portfolio will invest
primarily in Equity and Hybrid REITs.
Under normal circumstances the Portfolio may invest up to
35% of its total assets in debt securities issued or
guaranteed by real estate companies or secured by real
estate assets and rated, at time of purchase, in one of the
four highest rating categories by a nationally recognized
statistical rating organization ("NRSRO") or determined by
the adviser to be of comparable quality at the time of
purchase, high quality money market instruments such as
notes, certificates of deposit or bankers' acceptances
issued by domestic or foreign issuers, or high-grade debt
securities, consisting of corporate debt securities and
United States Government securities. Securities rated in the
lowest category of investment grade securities have
speculative characteristics. Investment grade securities are
securities that are rated in one of the four highest rating
categories by an NRSRO.
The Portfolio's investment adviser is E.I.I. Realty
Securities, Inc.
17
<PAGE>
GENERAL INVESTMENT POLICIES ____________________________________________________
Borrowing The Large Cap Value, Large Cap Growth, Small Cap Value,
Capital Appreciation, Equity Income, Balanced and Capital
Growth Portfolios may borrow money. Interest paid on such
borrowings will reduce a Portfolio's income. A Portfolio
will not purchase securities while its borrowings exceed 5%
of its total assets.
Common Stocks The Large Cap Value, Large Cap Growth, Small Cap Value,
Small Cap Growth, Capital Appreciation, Equity Income and
Capital Growth Portfolios will invest in common stocks;
provided however, that the Large Cap Value, Small Cap
Growth, Capital Appreciation, Equity Income and Capital
Growth Portfolios may only invest in such securities if they
are listed on registered exchanges or actively traded in the
over-the-counter market.
Investment The Large Cap Growth and Small Cap Value Portfolios may
Company purchase investment company securities, which will result in
Securities the layering of expenses. There are legal limits on the
amount of such securities that may be acquired by a
Portfolio.
Money Market In order to meet liquidity needs, the Large Cap Value, Large
Instruments Cap Growth, Small Cap Value, Capital Appreciation, Equity
Income and Capital Growth Portfolios may hold cash reserves
and invest in money market instruments (including securities
issued or guaranteed by the United States Government, its
agencies or instrumentalities, repurchase agreements,
certificates of deposit and bankers' acceptances issued by
banks or savings and loan associations having net assets of
at least $500 million as of the end of their most recent
fiscal year and high-grade commercial paper) related at time
of purchase in the top two categories by a national rating
agency or determined to be of comparable quality by the
adviser at the time of purchase.
Options and The Large Cap Growth and Small Cap Value Portfolios may
Futures purchase or write options, futures and options on futures.
Risk associated with investing in options and futures may
include lack of a liquid secondary market, trading
restrictions which may be imposed by an exchange and
government regulations which may restrict trading.
Securities Each Portfolio may lend assets to qualified investors for
Lending the purpose of realizing additional income; however, the
Large Cap Value, Small Cap Growth, Mid-Cap Growth, Capital
Appreciation, Equity Income, Balanced, Capital Growth and
Real Estate Securities Portfolios each may only lend up to
20% of its total assets for such purpose.
Temporary For temporary defensive purposes when the adviser determines
Defensive that market conditions warrant, each of the Large Cap Value,
Investments Capital Appreciation, Equity Income, Balanced, Capital
Growth and Real Estate Securities Portfolios may invest up
to 100% of its assets in the money market instruments
described above and other long and short-term debt
instruments which are rated A or higher by S&P or Moody's at
the time of purchase, and may hold a portion of its assets
in cash. To the extent any Portfolio is engaged in temporary
defensive investments, the Portfolio will not be pursuing
its investment objective.
18
<PAGE>
U.S. Dollar The Large Cap Value, Large Cap Growth, Small Cap Value,
Denominated Capital Appreciation, Equity Income and Capital Growth
Securities of Portfolios may invest in U.S. dollar denominated securities
Foreign Issuers of foreign issuers (including American Depositary Receipts,
that are traded on registered exchanges or listed on
NASDAQ).
U.S. Treasury The Large Cap Value, Capital Appreciation, Equity Income,
Receipts Capital Growth Portfolios may invest in receipts involving
U.S. Treasury Obligations.
When-Issued and All Portfolios may invest in when-issued and delayed
Delayed- delivery securities.
Delivery For additional information regarding the Portfolios'
Securities permitted investments, see "Description of Permitted
Investments and Risk Factors" in this Prospectus and
"Description of Permitted Investments" in the Statement of
Additional Information. For a description of the above
ratings, see "Description of Ratings" in the Statement of
Additional Information.
INVESTMENT LIMITATIONS _________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolios. Fundamental policies
cannot be changed with respect to the Trust or a Portfolio
without the consent of the holders of a majority of the
Trust's or that Portfolio's outstanding shares.
No Portfolio 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 total assets of the Portfolio would be invested in
the securities of such issuer. This restriction applies
to 75% of each Portfolio's total assets. This restriction
does not apply to the Real Estate Securities Portfolio.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio 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; and provided further that with respect
to the Real Estate Securities Portfolio, that this
limitation does not apply to investments in securities of
companies principally engaged in the real estate
industry.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional investment
limitations are set forth in the Statement of Additional
Information.
19
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THE MANAGER AND SHAREHOLDER SERVICING AGENT ____________________________________
SEI Financial Management Corporation ("SFM"), provides the
Trust with overall management services, regulatory
reporting, all necessary office space, equipment, personnel
and facilities, and acts as transfer agent, dividend
disbursing agent and shareholder servicing agent.
For its management services, SFM is entitled to a fee
which is calculated daily and paid monthly at an annual rate
of .50% of the average daily net assets of the Small Cap
Growth, Capital Appreciation, Equity Income, Balanced, Mid-
Cap Growth and Capital Growth Portfolios, at an annual rate
of .35% of the average daily net assets of the Large Cap
Value, Large Cap Growth and Small Cap Value Portfolios and
at an annual rate of .55% of the average daily net assets of
the Real Estate Securities Portfolio. SFM and the advisers
may waive all or a portion of their fee in order to limit
the operating expenses of a Portfolio. Any such waiver is
voluntary and may be terminated at any time in their sole
discretion.
For the fiscal year ended September 30, 1994, the
Portfolios paid SFM the following management fees (based on
each Portfolio's average daily net assets after fee
waivers): Large Cap Value Portfolio, .50%; Small Cap Growth
Portfolio, .40%; Capital Appreciation Portfolio, .45%;
Equity Income Portfolio, .46%; Balanced Portfolio, .34%;
Mid-Cap Growth Portfolio, .37%; and Capital Growth
Portfolio, .00%. The Large Cap Growth, Small Cap Value and
Real Estate Securities Portfolios had not commenced
operations as of September 30, 1994.
THE ADVISERS AND SUB-ADVISERS __________________________________________________
The following entities serve as investment advisers (each,
an "Adviser," and collectively, the "Advisers") and
investment sub-advisers (each, a "Sub-Adviser," and
collectively, the "Sub-Advisers") to the Trust's Portfolios.
Each Adviser has general oversight responsibility for the
investment advisory services provided to the Portfolios,
including formulating the Portfolios' investment policies
and analyzing economic trends affecting the Portfolios. In
addition, SFM, where it is the Adviser to a Portfolio, is
responsible for managing the allocation of assets among the
Portfolio's Sub-Advisers and directing and evaluating the
investment services provided by the Sub-Advisers, including
their adherence to each Portfolio's respective investment
objective and policies and each Portfolio's investment
performance. In accordance with each Portfolio's investment
objective and policies, and under the supervision of the
Adviser and the Trust's Board of Trustees, each Sub-Adviser
and certain Advisers are responsible for the day-to-day
investment management of all or a discrete portion of the
assets of a Portfolio. The Advisers and Sub-Advisers are
authorized
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to make investment decisions for the Portfolios and place
orders on behalf of the Portfolios to effect the investment
decisions made.
The Glass-Steagall Act restricts the securities
activities of banks such as the Bank of California, Sun
Trust Banks, Inc. and Mellon Bank Corporation, but federal
regulatory authorities permit such banks to provide
investment advisory and other services to mutual funds.
Should this position be challenged successfully in court or
reversed by legislation, the Trust might have to make other
investment advisory arrangements.
In addition, SFM monitors the compliance of each adviser
with regulatory and tax regulations, such as portfolio
concentration and diversification. For the most part
compliance with these requirements by each adviser with
respect to its portion of a Portfolio will assure compliance
by the Portfolio as a whole. In addition, SFM monitors
positions taken by each adviser and will notify advisers of
any developing situations to help ensure that investments do
not run afoul of the short-short test or the wash sale
rules. To the extent that having multiple advisers
responsible for investing separate portions of a Portfolio's
assets creates the need for coordination among the advisers,
there is an increased risk that the Portfolio will not
comply with these regulatory and tax requirements.
It is possible that different advisers for the same
Portfolio could take opposite actions within a short period
of time with respect to a particular security. For example,
one adviser could buy a security for the Portfolio and
shortly thereafter another adviser could sell the same
security from the portion of the Portfolio allocated to it.
If in these circumstances the securities could be
transferred from one adviser's portion of the Portfolio to
another, the Portfolio could avoid transaction costs and
could avoid creating possible wash sales and short-short
gains under the Internal Revenue Code of 1986, as amended
(the "Code"). Such transfers are not practicable but the
advisers and SFM do not believe that there will be material
adverse effects on a Portfolio as a result. First, it does
not appear likely that there will be substantial overlap in
the securities acquired for a Portfolio by the various
advisers. Moreover, the advisers would probably only rarely
engage in the types of offsetting transactions described
above, especially within a short time period. Therefore, it
is a matter of speculation whether offsetting transactions
would result in any significant increases in transaction
costs or have significant tax consequences. With respect to
the latter, SFM and the advisers have established procedures
with respect to the short-short test which are designed to
prevent realization of short-short gains in excess of Code
limits. It is true that wash sales could occur in spite of
the efforts of SFM, but the Board of Trustees believes that
the benefits of using multi-managers outweighs the
consequences of any wash sales.
SFM is currently seeking an exemptive order from the
Securities and Exchange Commission (the "SEC") that would
permit SFM, with the approval of the Trust's Board of
Trustees, to retain sub-advisers for a Portfolio without
submitting the sub-advisory agreement to a vote of the
Portfolio's shareholders. If granted, the exemptive relief
will
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permit the non-disclosure of amounts payable by SFM under
such sub-advisory agreements. The Trust will notify
shareholders in the event of any change in the identity of
the sub-adviser for a Portfolio. Until or unless this
exemptive order is granted, if one of the advisers is
terminated or departs from a Portfolio with multiple
advisers, the Portfolio will handle such termination or
departure in one of two ways. First, the Portfolio may
propose that a new investment adviser be appointed to manage
that portion of the Portfolio's assets managed by the
departing adviser. In this case, the Portfolio would be
required to submit to the vote of the Portfolio's
shareholders the approval of a investment advisory contract
with the new adviser. In the alternative, the Portfolio may
decide to allocate the departing adviser's assets among the
remaining advisers. This allocation would not require new
investment advisory contracts with the remaining advisers,
and consequently no shareholder approval would be necessary.
1838 INVESTMENT 1838 Investment Advisors, L.P. ("1838") serves as investment
ADVISORS, L.P. sub-adviser to the Small Cap Value Portfolio. 1838 is a
Delaware limited partnership located at 100 Matsonford Road,
Radnor, Pennsylvania. As of September 30, 1994, 1838 managed
$3.5 billion in assets in large and small capitalization
equity, fixed income and balanced account portfolios.
Clients include corporate employee benefit plans,
municipalities, endowments, foundations, jointly trusteed
plans, insurance companies and wealthy individuals.
Edwin B. Powell, Holly L. Guthrie and Joseph T. Doyle,
have served as the portfolio managers to the Small Cap Value
Portfolio since its inception. These individuals work as a
team and share responsibility. Mr. Doyle has been with 1838
since 1988. Mr. Powell and Ms. Guthrie joined 1838 in 1994.
Mr. Powell managed small cap equity portfolios for Provident
Capital Management from 1987 to 1994. Ms. Guthrie managed
small cap equity portfolios for Provident Capital Management
from 1992 to 1994. Prior to that she was employed by
CoreStates Investment Advisers from 1987 to 1992 as an
equity analyst and portfolio manager.
1838 is entitled to a fee, which is calculated daily and
paid monthly by SFM at an annual rate of .50%. 1838 may
waive all or a portion of its fee in order to limit the
operating expenses of the Portfolio. 1838 reserves the
right, in its sole discretion, to terminate any such
voluntary fee waiver at any time. During the last fiscal
year, the Small Cap Value Portfolio had not commenced
operations and therefore 1838 did not receive an advisory
fee.
ALLIANCE Alliance Capital Management L.P. ("Alliance Capital") serves
CAPITAL as investment sub-adviser to a portion of the assets of the
MANAGEMENT L.P. Large Cap Growth Portfolio. Alliance is a registered
investment adviser organized as a Delaware limited
partnership which originated as Alliance Capital Management
Corporation in 1971. Alliance Capital Management
Corporation, an indirect wholly-owned subsidiary of The
Equitable Life Assurance Society of the United States, is
the general partner of Alliance. As of September 30, 1994,
Alliance managed over $123
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billion in assets. The principal business address of
Alliance is 1345 Avenue of the Americas, New York, New York
10105.
John L. Blundin, Senior Vice President of Alliance and
Christopher Toub, Vice President of Alliance, each serve as
portfolio managers to the Large Cap Growth Portfolio. Mr.
Blundin joined Alliance in 1972. Mr. Toub joined Alliance in
1992 as a portfolio manager with the Disciplined Growth
Group. Prior to 1992, Mr. Toub was with Marcus, Schloss, a
private investment partnership, as an analyst and portfolio
manager. Prior to Marcus, Schloss, Mr. Toub worked at Bear
Stearns in proprietary trading. Both Mr. Blundin and Mr.
Toub have served as portfolio managers of the Large Cap
Growth Portfolio since its inception.
Alliance is entitled to the greater of $125,000 or a fee
which is paid monthly by SFM at an annual rate of .25% of
the market value of investments of that portion of the Large
Cap Growth Portfolio which Alliance manages. Alliance may
waive all or a portion of its fee in order to limit the
operating expenses of the Portfolio. Alliance reserves the
right, in its sole discretion, to terminate any such
voluntary fee waiver at any time. During the last fiscal
year, the Large Cap Growth Portfolio had not commenced
operations and therefore Alliance did not receive an
advisory fee.
E.I.I. REALTY E.I.I. Realty Securities Inc. ("E.I.I.") serves as
SECURITIES, investment adviser of the Real Estate Securities Portfolio.
INC. E.I.I. is a professional investment adviser which is
registered under the Investment Advisers Act of 1940, as
amended (the "1940 Act") and which, with its affiliates, has
been providing services to employee benefit plans,
corporations and high net worth individuals, both foreign
and domestic, since April 1983. As of September 30, 1994,
E.I.I. and/or its affiliates had investment management
authority with respect to approximately $400 million of
assets. The principal business address of E.I.I. is 667
Madison Avenue, 16th floor, New York, New York, 10021.
E.I.I. is a wholly owned subsidiary of European Investors
Incorporated.
Richard J. Adler, Vice President of European Investors
Incorporated and Cydney C. Donnell, Vice President of
E.I.I., have served as portfolio managers for the Portfolio.
For the past five years, they have been the portfolio
managers and/or real estate securities analysts for European
Investors Incorporated and E.I.I. respectively.
E.I.I. is entitled to a fee which is calculated daily and
paid monthly by the Portfolio, at an annual rate of .40% of
the average daily net assets of the Portfolio. The Portfolio
had not commenced operations as of the fiscal year ended
September 30, 1994.
IDS ADVISORY IDS Advisory Group Inc. ("IDS") serves as investment sub-
GROUP INC. adviser to a portion of the assets of the Large Cap Growth
Portfolio. IDS is a registered investment adviser and
wholly-owned subsidiary of IDS Financial Corporation.
Effective January 1, 1995, IDS Financial Corporation will be
changing its name to American Express Financial Corporation.
As of September 30, 1994, IDS managed over $20.5 billion in
assets with $5 billion of this total
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in large capitalization growth domestic equities. IDS was
founded in 1972 to manage tax-exempt assets for
institutional clients. The principal business address of IDS
is IDS Tower 10, Minneapolis, MN 55440.
The day-to-day management of IDS' portion of the Large
Cap Growth Portfolio's investments is the responsibility of
a committee composed of the eight investment portfolio
managers of the equity investment team. No individual person
is primarily responsible for making recommendations to that
committee. IDS has served as sub-adviser to the Large Cap
Growth Portfolio since its inception.
IDS is entitled to the greater of $125,000 or a fee which
is paid monthly by SFM at an annual rate of .25% of the
market value of investments of that portion of the Large Cap
Growth Portfolio which IDS manages. IDS may waive all or a
portion of its fee in order to limit the operating expenses
of the Portfolio. IDS reserves the right, in its sole
discretion, to terminate any such voluntary fee waiver at
any time. During the last fiscal year, the Large Cap Growth
Portfolio had not commenced operations and therefore IDS did
not receive an advisory fee.
INVESTMENT Investment Advisers, Inc. ("Investment Advisers") serves as
ADVISERS, INC. investment adviser of the Small Cap Growth Portfolio, which
is also advised by Nicholas-Applegate Capital Management and
Pilgrim Baxter & Associates, Ltd. Investment Advisers has
operated as a professional investment counseling firm which
provides investment services to employee benefit plans,
endowments, foundations, other institutions and investment
companies since 1947. As of September 30, 1994, Investment
Advisers had discretionary management authority with respect
to approximately $13 billion of assets. The principal
business address of Investment Advisers is 3700 First Bank
Place, 601 Second Avenue, Minneapolis, Minnesota 55402.
Investment Advisers is an indirect majority owned subsidiary
of publicly held TSB Group, Plc, a United Kingdom financial
services group.
Until July 1, 1993, Investment Advisers was the sole
investment adviser and provided the review, supervision and
management of the Portfolio's investment program and related
reporting and recordkeeping services for all of the
Portfolio's assets. As of July 1, 1993, Nicholas-Applegate
Capital Management and Pilgrim Baxter & Associates, Ltd.
began to serve as investment advisers for portions of the
Portfolio's assets not advised by Investment Advisers. As
more fully described below, the Board of Trustees allocates
the Portfolio's assets among the three investment advisers
from time to time. Performance for each investment adviser
will be based upon the performance of the assets of the
entire Portfolio.
The method of allocating the assets of the Portfolio from
cash inflows and outflows resulting from shareholder
purchases and redemptions among the three Advisers is as
follows: For net shareholder purchases, the resulting cash
inflow will be allocated among all three Advisers in
proportion to the amount by which each Adviser's assets
under management is below their allocated capacity. In the
case of net shareholder redemptions, all three Advisers will
contribute to net redemptions in proportion to their assets
under
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management as a percentage of total assets in the Portfolio.
The Board of Trustees will retain, in its discretion, the
authority to increase or decrease the assets assigned to
each Adviser. SFM, as Manager for the Trust, will allocate
the assets of the Portfolio among the three Advisers
pursuant to the above formula and the direction of the Board
of Trustees.
Rick D. Leggott, CFA, is a Senior Vice President and
Equity Portfolio Manager of Investment Advisers. In 1986 he
became Senior Investment Officer for Central Trust Company,
N.A. Mr. Leggott joined the adviser as a growth stock
specialist in 1987, and has been a Portfolio Manager of the
Small-Cap Growth Portfolio since April 20, 1992.
Investment Advisers is entitled to a fee, which is
calculated daily and paid monthly by the Portfolio, at an
annual rate of .50% of the average daily net assets assigned
to it. For the fiscal year ended September 30, 1994, the
Portfolio paid each of the Portfolio's advisers an advisory
fee of .50% of the average daily net assets under such
adviser's investment management. Of this .50% advisory fee,
.18% of the Portfolio's total average daily net assets was
paid to Investment Advisers.
LSV ASSET LSV Asset Management ("LSV") serves as investment sub-
MANAGEMENT adviser to a portion of the assets of the Large Cap Value
Portfolio. LSV is a registered investment adviser organized
as a Delaware general partnership in which an affiliate of
SFM owns a majority interest. The general partners of LSV
have developed quantitative value analysis methodology and
software which has been used to manage assets over the past
5 years. Although LSV has never managed investment
companies, the portfolio identified by the model has been
implemented by three institutional clients with aggregate
assets invested of approximately $455 million including $15
million in a portfolio of U.S. securities. The principal
business address of LSV is 181 W. Madison Avenue, Chicago,
IL 60602.
Investment decisions are made by the quantitative
computer model. Josef Lakonishok, Andrei Shleifer and Robert
Vishny, officers of LSV, will on a continuous basis monitor
the quantitative analysis model and based on their ongoing
research and statistical analysis make adjustments to the
model. Securities are identified for purchase or sale by the
portfolio based upon the computer model and defined variance
tolerances. Purchases and sales are effected by LSV based
upon the output from the model.
LSV, is entitled to a fee, which is paid monthly by SFM,
at an annual rate of .20% of the market value of investments
under its management. During the fiscal year ended September
30, 1994, LSV did not serve as investment sub-adviser for
the Portfolio and therefore did not receive an advisory fee.
MELLON EQUITY As of December 16, 1994, Mellon Equity Associates ("Mellon")
ASSOCIATES serves as investment sub-adviser to a portion of the assets
of the Large Cap Value Portfolio. Between October 3, 1994
and December 16, 1994, Mellon acted as investment adviser of
the Portfolio. Prior to October 3, 1994, the Portfolio was
advised by Duff & Phelps Investment Management Company
("Duff & Phelps"). Mellon is a Pennsylvania business trust
founded in 1987, whose sole beneficiary is MBC Investments
Corporation, a wholly-owned subsidiary of the
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Mellon Bank Corporation. Mellon is a professional investment
counseling firm that provides investment management services
to the equity and balanced pension, public fund and profit-
sharing investment management markets, and is a registered
investment adviser under the 1940 Act. Mellon had
discretionary management authority with respect to
approximately $6.2 billion of assets as of September 30,
1994. Mellon's predecessor organization had managed domestic
equity tax-exempt institutional accounts since 1947. The
business address for Mellon is 500 Grant Street, Suite 3700,
Pittsburgh, PA 15258.
William P. Rydell and Robert A. Wilk are the Portfolio
Managers for Mellon's portion of the assets of the Large Cap
Value Portfolio. Mr. Rydell is the President and Chief
Executive Officer of Mellon, and has been managing
individual and collectivized portfolios at Mellon since
1982. Mr. Wilk is a Senior Vice President and Portfolio
Manager of Mellon, and has been involved with securities
analysis, quantitative research, asset allocation, trading
and client services at Mellon since April 1990. Prior to
joining Mellon, Mr. Wilk was in charge of portfolio
management and conducted quantitative research for another
investment subsidiary of Mellon Bank Corporation, Triangle
Portfolio Associates.
Mellon is entitled to a fee, which is paid monthly by
SFM, at an annual rate of .20% of the market value of
investments under its management. During the fiscal year
ended September 30, 1994, Mellon did not serve as investment
adviser or sub-adviser for the Portfolio and therefore did
not receive an advisory fee.
MERUS CAPITAL Merus Capital Management ("Merus") serves as investment
MANAGEMENT adviser for the Equity Income Portfolio. In addition, as of
December 16, 1994, Merus also serves as the investment sub-
adviser to a portion of the assets of the Large Cap Value
Portfolio. Merus is a division of the Bank of California and
provides equity and fixed-income management services to a
broad array of corporate and municipal clients. As of
September 30, 1994, Merus had discretionary management
authority with respect to approximately $6.2 billion of
assets. The principal business address of Merus is 475
Sansome Street, San Francisco, California 94111.
Each Portfolio is managed by a committee.
Merus is entitled to a fee, which is calculated daily and
paid monthly by the Equity Income Portfolio, at an annual
rate of .25% of the average daily net assets of the
Portfolio. Merus may reduce its fee, in its discretion, for
competitive purposes. In addition, Merus has voluntarily
agreed to waive fees in an amount that operates to limit net
operating expenses. Merus reserves the right, in its sole
discretion, to terminate this voluntary fee waived at any
time. For the fiscal year ended September 30, 1994, the
Portfolio paid Merus an advisory fee of .23% of its average
daily net assets after fee waivers.
Merus is entitled to a fee, which is paid monthly by SFM,
at an annual rate of .20% of the market value of investments
of the Large Cap Value Portfolio under its management.
During the fiscal year ended September 30, 1994, Merus did
not serve as investment sub-adviser for the Portfolio and
therefore did not receive an advisory fee.
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NICHOLAS- Nicholas-Applegate Capital Management ("Nicholas-Applegate")
APPLEGATE is one of three advisers to the Small Cap Growth Portfolio
CAPITAL and is responsible for a portion of the assets of the
MANAGEMENT Portfolio. Nicholas-Applegate also serves as the Mid-Cap
Growth Portfolio's investment adviser.
Nicholas-Applegate has operated as an investment adviser
which provides investment services to employee benefit
plans, endowments, foundations, other institutions and
investment companies since April 20, 1987. As of September
30, 1994, Nicholas-Applegate had discretionary management
authority with respect to approximately $13 billion of
assets. The principal business address of Nicholas-Applegate
is 600 West Broadway, 29th Floor, San Diego, CA 92101.
Nicholas-Applegate, pursuant to a partnership agreement, is
controlled by its general partner Nicholas-Applegate Capital
Management, Inc., a corporation owned by Arthur E. Nicholas.
Nicholas-Applegate manages its portion of the Small Cap
Growth Portfolio through its systematic-driven management
team under the supervision of Mr. Nicholas, founder and
Chief Investment Officer of the firm. Nicholas-Applegate's
systems driven investment team, headed by Lawrence S.
Speidell, has been primarily responsible for the day-to-day
management of the Portfolio since March 1994. Mr. Speidell
has been a Portfolio Manager and investment team leader with
Nicholas-Applegate since March 1994. Prior to joining
Nicholas-Applegate, he was an institutional portfolio
manager with Batterymarch Financial Management.
Nicholas-Applegate is entitled to a fee which is
calculated daily and paid monthly by the Small Cap Growth
Portfolio, at an annual rate of .50% of the average daily
net assets assigned to it. For the fiscal year ended
September 30, 1994, the Portfolio paid each of the
Portfolio's advisers an advisory fee of .50% of the daily
net assets under such Adviser's investment management. Of
this .50% advisory fee, .16% of the Portfolio's total
average daily net assets was paid to Nicholas-Applegate.
John C. Marshall, Jr. has been the Portfolio manager for
the Mid-Cap Growth Portfolio since February, 1993. Mr.
Marshall joined Nicholas-Applegate in March 1989 and is a
Partner and Portfolio Manager and lead manager in the Mid-
Cap area. Prior to joining Nicholas-Applegate, Mr. Marshall
was a Managing Director of Equity Investment at Pacific
Century Advisers from May 1986 until March 1989.
Nicholas-Applegate is entitled to a fee which is
calculated daily and paid monthly by the Mid-Cap Growth
Portfolio at an annual rate of .45% of the average daily net
assets of the Portfolio up to the first $100 million in
assets and .40% on assets in excess of $100 million. For the
fiscal year ended September 30, 1994, the Mid-Cap Growth
Portfolio paid Nicholas Applegate an advisory fee of .45% of
its average daily net assets.
PILGRIM BAXTER Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter") is one
& ASSOCIATES, of three advisers to the Small Cap Growth Portfolio and is
LTD. responsible for a portion of assets of the Portfolio.
Pilgrim Baxter has operated as a professional investment
counseling firm which provides investment services to
pension and profit-sharing plans, other institutions and
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investment companies since November, 1982. As of September
30, 1994, Pilgrim Baxter had discretionary management
authority with respect to approximately $106 billion of
assets. The principal business address of Pilgrim Baxter is
1255 Drummers Lane, Suite 300, Wayne, Pennsylvania 19087.
Pilgrim Baxter is an "S" Corporation with majority ownership
by Gary L. Pilgrim (42.35%) and Harold J. Baxter (42.35%).
Pilgrim Baxter has entered into certain agreements with
Framlington (USA), Inc., the U.S. affiliate of a British
financial services firm, Framlington Group plc
("Framlington"), for sharing the profits of Pilgrim Baxter's
advisory contract income (not including income from Pilgrim
Baxter's advisory agreement with the Fund and sub-advisory
fees from other mutual funds).
John F. Force, CFA, joined Pilgrim Baxter in January 1993
and is a portfolio Manager/Analyst. Mr. Force has been
managing the Small Cap Growth Portfolio since July 1, 1993
when Pilgrim Baxter became an adviser. Prior to joining
Pilgrim Baxter, Mr. Force was Vice President/Portfolio
Manager at Fiduciary Management Associates from July 1987 to
September 1992.
Pilgrim Baxter is entitled to a fee which is calculated
daily and paid monthly by the Portfolio, at an annual rate
of .50% of the average daily net assets assigned to it. For
the fiscal year ended September 30, 1994, the Portfolio paid
each of the Portfolio's advisers an advisory fee of .50% of
the daily net assets under such Adviser's investment
management. Of this .50% advisory fee, .16% of the
Portfolio's total average daily net assets was paid to
Pilgrim Baxter.
SEI FINANCIAL SEI Financial Management Corporation ("SFM") serves as
MANAGEMENT investment adviser for the Large Cap Value, Large Cap Growth
CORPORATION and Small Cap Value Portfolios. SFM is a wholly-owned
subsidiary of SEI Corporation ("SEI"), a financial services
company located in Wayne, Pennsylvania. The principal
business address of SFM is 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658. SEI was founded in 1968 and is a
leading provider of investment solutions to banks,
institutional investors, investment advisers, and insurance
companies. Affiliates of SFM have provided consulting advice
to institutional investors for more than 20 years, including
advice regarding selection and evaluation of investment
advisers. Although SFM has not previously been the
investment adviser to an investment company, it currently
serves as manager or administrator to more than 26
investment companies, including more than 220 portfolios,
which investment companies have more than $42 billion in
assets as of September 30, 1994.
For these advisory services, SFM is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .35% of the Large Cap Value Portfolio's average
daily net assets, at an annual rate of .40% of the Large Cap
Growth Portfolio's average daily net assets and at an annual
rate of .65% of the Small Cap Value Portfolio's average
daily net assets. During the fiscal year ended September 30,
1994, SFM did not act as investment adviser for the Large
Cap Value Portfolio and therefore did not receive an
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advisory fee. The Large Cap Growth and Small Cap Value
Portfolios had not commenced operations as of the fiscal
year ended September 30, 1994.
SUNBANK CAPITAL SunBank Capital Management, N.A. ("SunBank") serves as
MANAGEMENT, investment adviser for the Capital Appreciation, Balanced
N.A. and Capital Growth Portfolios. SunBank was established in
1934 and is owned by SunBank, Inc., a wholly-owned
subsidiary of Sun Trust Banks, Inc., a bank holding company.
As of September 30, 1994, SunBank had discretionary
management authority with respect to approximately $11.75
billion of assets. The principal business address of SunBank
is P.O. Box 3808, Orlando, Florida 32802,
Anthony R. Gray is Chairman and Chief Investment Officer
of SunBank since 1987, and has managed the Capital
Appreciation and Balanced Portfolios since their inception.
Mr. Gray joined SunBank in 1979 as Director of Research of
the Trust Investment Division.
John D. Race is President of SunBank and has managed the
Balanced Portfolio since its inception.
Thomas Edgar is Senior Vice President of SunBank since
1990, and has managed the Capital Growth Portfolio since its
inception. Prior to joining SunBank, Mr. Edgar served as
Senior Vice President of First Union Bank from 1988 to 1990.
SunBank is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate of .25% of the Capital
Appreciation and Balanced Portfolios' average daily net
assets. For the fiscal year ended September 30, 1994, each
Portfolio paid SunBank an advisory fee of .25% of its
average daily net assets. SunBank is not paid a fee for
providing advisory services to the Capital Growth Portfolio.
DISTRIBUTION ___________________________________________________________________
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as each Portfolio's
distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust. Each Portfolio has
a distribution plan for its shares (the "Class A Plan,"
"Class B Plan" and/or the "ProVantage Plan;" collectively,
the "Plans") pursuant to Rule 12b-1 under 1940 Act. The
Trust intends to operate the Plans in accordance with their
terms and with the NASD rules concerning sales charges.
The Distribution Agreement and the Plans provide for
reimbursement for expenses incurred by the Distributor in an
amount not to exceed .30% of the average daily net assets of
each Portfolio on an annualized basis, provided those
expenses are permissible as to both type and amount under a
budget adopted by the Board of Trustees, including those
Trustees who are not interested persons and have no
financial interest in the Plans or any related agreement
("Qualified Trustees"). The Class B and ProVantage Plans
also provide for additional payments for distribution and
shareholder services as described below.
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Distribution-related expenses reimbursable to the
Distributor under the budget include those related to the
costs of advertising and sales materials, the costs of
federal and state securities law registration, advertising
expenses and promotional and sales expenses including
expenses for travel, communication and compensation and
benefits for sales personnel. The Trust is not obligated to
reimburse the Distributor for any expenditures in excess of
the approved budget. Currently the budget (shown here as a
percentage of daily net assets) for each Portfolio is as
follows: Large Cap Value Portfolio, 0.05%; Large Cap Growth
Portfolio, 0.07%; Small Cap Value Portfolio, 0.07%, Small
Cap Growth Portfolio, 0.06%; Mid-Cap Growth Portfolio,
0.08%; Capital Appreciation Portfolio, 0.05%; Equity Income
Portfolio, 0.06%; Balanced Portfolio, 0.11%; and Real Estate
Securities Portfolio, 0.06%. SFM has voluntarily agreed to
waive its fee and to reimburse the Capital Growth Portfolio
for its expenses in order to limit the operating expenses of
the Portfolio to not more than 0.00% on an annualized basis.
Distribution expenses not attributable to a specific
portfolio are allocated among each of the portfolios of the
Trust based on average net assets.
The Class B Plan, in addition to providing for the
reimbursement payments described above, provides for
payments to the Distributor at an annual rate of .30% of the
Portfolio's average daily net assets attributable to Class B
shares. These additional payments are characterized as
"compensation," and are not directly tied to expenses
incurred by the Distributor; the payments the Distributor
receives during any year may therefore be higher or lower
than its actual expenses. This additional payment may be
used to compensate financial institutions that provide
distribution-related services to their customers.
The ProVantage Plan is similar to the Class B Plan
described above, but applies only to ProVantage Funds
shareholders.
It is possible that an institution may offer different
classes of shares to its customers and thus receive
different compensation with respect to different classes.
These financial institutions may also charge separate fees
to their customers.
The Trust may also execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive usual and customary compensation.
In addition, the Distributor may, from time to time in
its sole discretion, institute one or more promotional
incentive programs, which will be paid by the Distributor
from the sales charge it receives or from any other source
available to it. Under any such program, the Distributor
will provide promotional incentives, in the form of cash or
other compensation, including merchandise, airline vouchers,
trips and vacation packages, to all dealers selling shares
of the Portfolios. Such promotional incentives will be
offered uniformly to all dealers and predicated upon the
amount of shares of the Portfolios sold by the dealer.
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PURCHASE AND REDEMPTION OF SHARES ______________________________________________
Financial institutions may acquire Class A and/or Class B
shares of the Portfolios for their own accounts or as record
owner on behalf of fiduciary, agency or custody accounts by
placing orders with SFM. Institutions that use certain SEI
proprietary systems may place orders electronically through
those systems. State securities laws may require banks and
financial institutions purchasing shares for their customers
to register as dealers pursuant to state laws. Financial
institutions may impose an earlier cut-off time for receipt
of purchase orders directed through them to allow for
processing and transmittal of these orders to SFM for
effectiveness the same day. Financial institutions that
purchase shares for the accounts of their customers may
impose separate charges on these customers for account
services. Shares of the Portfolios are offered only to
residents of states in which the shares are eligible for
purchase.
Shares of each Portfolio may be purchased or redeemed on
days on which the New York Stock Exchange is open for
business ("Business Days").
Shareholders who desire to purchase shares for cash must
place their orders with SFM prior to 4:00 p.m. Eastern time
on any Business Day for the order to be accepted on that
Business Day. Cash investments must be transmitted or
delivered in federal funds to the wire agent on the next
Business Day following the day the order is placed. The
Trust reserves the right to reject a purchase order when the
Distributor determines that it is not in the best interest
of the Trust or its shareholders to accept such purchase
order.
Purchases will be made in full and fractional shares of
the Portfolios calculated to three decimal places. The Trust
will send shareholders a statement of shares owned after
each transaction. The purchase price of shares is the net
asset value next determined after a purchase order is
received and accepted by the Trust. The net asset value per
share of each Portfolio is determined by dividing the total
market value of a Portfolio's investment and other assets,
less any liabilities, by the total outstanding shares of
that Portfolio. Net asset value per share is determined
daily as of 4:00 p.m. Eastern time on any Business Day.
The market value of each portfolio security is obtained
by SFM from an independent pricing service. Securities
having maturities of 60 days or less at the time of purchase
will be valued using the amortized cost method (described in
the Statement of Additional Information). The pricing
service relies primarily on prices of actual market
transactions as well as trader quotations. However, the
pricing service may use a matrix system to determine
valuations of equity and 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. The
procedures used by the pricing service and its valuations
are reviewed by the officers of the Trust under the general
supervision of the Trustees.
Shareholders who desire to redeem shares of the
Portfolios must place their redemption orders with SFM prior
to 4:00 p.m. Eastern time on any Business Day. The
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redemption price is the net asset value per share of the
Portfolio next determined after receipt by SFM of the
redemption order. Payment on redemption will be made as
promptly as possible and, in any event, within seven days
after the redemption order is received.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor SFM will be responsible for
any loss, liability, cost or expense for acting upon wire
instructions or upon telephone instructions that it
reasonably believes to be genuine. The Trust and SFM will
each employ reasonable procedures to confirm that
instructions communicated by telephone are genuine,
including requiring a form of personal identification prior
to acting upon instructions received by telephone and
recording telephone instructions.
If market conditions are extraordinarily active, or other
extraordinary circumstances exist, and shareholders
experience difficulties placing redemption orders by
telephone, shareholders may wish to consider placing their
order by other means.
PERFORMANCE ____________________________________________________________________
From time to time, a Portfolio may advertise yield and total
return. These figures will be based on historical earnings
and are not intended to indicate future performance. No
representation can be made concerning actual yield or future
returns. The yield of a Portfolio refers to the income
generated by a hypothetical investment, net of any sales
charge imposed in the case of some of the ProVantage Funds
shares, in such Portfolio over a thirty day period. This
income is then "annualized," i.e., the income over thirty
days is assumed to be generated over one year and is shown
as a percentage of the investment.
The total return of a Portfolio refers to the average
compounded rate of return on a hypothetical investment for
designated time periods, assuming that the entire investment
is redeemed at the end of each period and assuming the
reinvestment of all dividend and capital gain distributions.
The performance of Class A shares will normally be higher
than for Class B shares and ProVantage Fund shares because
of the additional distribution expenses charged to Class B
shares and additional distribution expenses, transfer agency
expenses and sales charges (when applicable) charged to
ProVantage Funds shares.
A Portfolio may periodically compare its performance to
that of other mutual funds tracked by mutual fund rating
services (such as Lipper Analytical) or by financial and
business publications and periodicals, broad groups of
comparable mutual funds, unmanaged indices which may assume
investment of dividends but generally do not reflect
deductions for administrative and management costs or to
other investment alternatives. A Portfolio may quote
Morningstar, Inc., a service that ranks mutual funds on the
basis of risk-adjusted performance. A Portfolio may use
long-term performance of these capital markets to
demonstrate general long-term risk versus reward scenarios
and could include the value of a hypothetical investment in
any of the capital markets. A Portfolio may also
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quote financial and business publications and periodicals as
they relate to fund management, investment philosophy and
investment techniques.
A Portfolio may quote various measures of volatility and
benchmark correlation in advertising and may compare these
measures to those of other funds. Measures of volatility
attempt to compare historical share price fluctuations or
total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might
be. Measures of volatility and correlation are calculated
using averages of historical data and cannot be calculated
precisely.
Additional performance information is set forth in the
1994 Annual Report to Shareholders and is available upon
request and without charge by calling 1-800-342-5734.
TAXES __________________________________________________________________________
The following summary of federal income tax consequences is
based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No attempt has been made to present a detailed explanation
of the federal, state or local income tax treatment of a
Portfolio or its shareholders. Accordingly, shareholders are
urged to consult their tax advisers regarding specific
questions as to federal, state and local taxes. State and
local tax consequences of an investment in a Portfolio may
differ from the federal income tax consequences described
below. Additional information concerning taxes is set forth
in the Statement of Additional Information.
Tax Status of A Portfolio is treated as a separate entity for federal
the Portfolios income tax purposes and is not combined with the Trust's
other portfolios. Each Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies ("RICs") under Subchapter M of the
Code, so as to be relieved of federal income tax on net
investment company taxable income (including the excess, if
any, of net short-term capital gains over net long-term
capital losses) and net capital gains (the excess of net
long-term capital gains over net short-term capital losses)
distributed to shareholders.
Tax Status of Each Portfolio distributes substantially all of its net
Distributions investment company taxable income to shareholders. Dividends
from a Portfolio's net investment company taxable income are
taxable to its shareholders as ordinary income (whether
received in cash or in additional shares), and generally
will qualify for the dividends-received deduction for
corporate shareholders to the extent that such dividends are
derived from dividends paid on domestic and equity
securities owned by the Portfolio. Distributions of net
capital gains are taxable to shareholders as long-term
capital gains, regardless of how long a shareholder has held
shares. Each Portfolio will make annual reports to
shareholders of the federal income tax status of all
distributions.
Dividends declared by a Portfolio in October, November or
December of any year and payable to shareholders of record
on a date in such a month will be deemed to have been paid
by the Portfolio and received by the shareholders on
December 31 of the year declared if paid by a Portfolio at
any time during the following January.
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Each Portfolio intends to make sufficient distributions
to avoid liability for the federal excise tax.
Sale, exchange or redemption of a Portfolio's shares
generally is a taxable transaction to the shareholder.
GENERAL INFORMATION ____________________________________________________________
The Trust The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated October 20, 1986. The
Declaration of Trust permits the Trust to offer separate
series of shares and different classes of each portfolio.
All consideration received by the Trust for shares of any
class of any portfolio and all assets of such portfolio or
class belong to that portfolio or class, respectively, and
would be subject to the liabilities related thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
Trustees of the The management and affairs of the Trust are supervised by
Trust the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
Voting Rights Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will vote
separately on matters pertaining solely to that portfolio or
class, such as any distribution plan. As a Massachusetts
business trust, the Trust is not required to hold annual
meetings of shareholders but approval will be sought for
certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining Trustees
or by shareholders at a special meeting called upon written
request of shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a
meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
Reporting The Trust issues unaudited financial information semi-
annually and audited financial statements annually. The
Trust furnishes proxy statements and other reports to
shareholders of record.
Shareholder Shareholder inquiries should be directed to the Manager, SEI
Inquiries Financial Management Corporation, 680 East Swedesford Road,
Wayne, PA 19087.
Dividends Substantially all of the net investment income (exclusive of
capital gains) of each Portfolio is periodically declared
and paid as a dividend. Dividends currently are paid on a
monthly basis for the Large Cap Value, Capital Appreciation,
Equity Income, Balanced and Capital Growth Portfolios and
currently are paid on a quarterly basis for the Large Cap
Growth,
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Small Cap Value, Small Cap Growth, Mid-Cap Growth and Real
Estate Securities Portfolios. Currently, net capital gains
(the excess of net long-term capital gain over net short-
term capital loss) realized, if any, will be distributed at
least annually.
Shareholders automatically receive all income dividends
and capital gain distributions in additional shares at the
net asset value next determined following the record date,
unless the shareholder has elected to take such payment in
cash. Shareholders may change their election by providing
written notice to SFM at least 15 days prior to the
distribution.
Dividends and capital gains of each Portfolio are paid on
a per-share basis. The value of each share will be reduced
by the amount of any such payment. If shares are purchased
shortly before the record date for a dividend or capital
gains distributions, a shareholder will pay the full price
for the share and receive some portion of the price back as
a taxable dividend or distribution.
The dividends on ProVantage Funds shares or Class B
shares of each Portfolio that offers these shares will
normally be lower than those on Class A shares because of
the additional distribution expenses charged to Class B
shares and the additional distribution and transfer agent
expenses charged to ProVantage Funds shares.
Counsel and Morgan, Lewis & Bockius serves as counsel to the Trust.
Independent Price Waterhouse LLP serves as the independent accountants
Accountants of the Trust.
Custodian and CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
Wire Agent 7618, Philadelphia, PA 19101 (the "Custodian"), acts as
custodian of the Trust's assets. The Custodian holds cash,
securities and other assets of the Trust as required by the
1940 Act.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS __________________________
The following is a description of the permitted investment
practices for the Portfolios, and the associated risk
factors:
American ADRs are securities, typically issued by a U.S. financial
Depositary institution (a "depositary"), that evidence ownership
Receipts interests in a security or a pool of securities issued by a
("ADRs") 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 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. ADRs that are not listed or traded on
an exchange can
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be purchased over the counter. Prices for such ADRs are
determined by market makers. The Large Cap Growth and Small
Cap Value Portfolios may invest in ADRs.
Bankers' Bankers' acceptances are bills of exchange or time drafts
Acceptances drawn on and accepted by a commercial bank. Bankers'
acceptances are sued by corporations to finance the shipment
and storage of goods. Maturities are generally six months or
less. All Portfolios may invest in bankers' acceptances.
Certificates of Certificates of deposit are interest bearing instruments
Deposit with a specific maturity. They are issued by banks and
savings and loan institutions in exchange for the deposit of
funds and normally can be traded in the secondary market
prior to maturity. Certificates of deposit with penalties
for early withdrawal will be considered illiquid. All
Portfolios may invest in certificates of deposit.
Commercial Commercial paper is a term used to described unsecured
Paper short-term promissory notes issued by banks, municipalities,
corporations and other entities. Maturities on these issues
vary from a few to 270 days. All Portfolios may invest in
commercial paper.
Convertible Convertible securities are corporate securities that are
Securities exchangeable for a set number of another security at a
prestated price. Convertible securities typically have
characteristics similar to both fixed-income and equity
securities. Because of the conversion feature, the market
value of a convertible security tends to move with the
market value of the underlying stock. The value of a
convertible security is also affected by prevailing interest
rates, the credit quality of the issuer, and any call
provisions. All Portfolios except the Balanced Portfolio may
invest in convertible securities.
Derivatives Derivatives are securities that derive their value from
other securities. The following are considered derivative
securities: options on futures, futures, options (i.e., puts
and calls) swap agreements, mortgage-backed securities
(CMOs, REMICs, IOs and POs), when-issued securities and
forward commitments, floating and variable rate securities,
convertible securities, "stripped" U.S. Treasury securities
(e.g., Receipts and STRIPs), privately issued stripped
securities (e.g., TGRs, TRs and CATS). See elsewhere in this
"Description of Permitted Investments and Risk Factors" for
discussions of these various instruments, and see
"Investment Objectives and Policies" for more information
about any investment policies and limitations applicable to
their use.
Equity Equity securities represent ownership interests in a company
Securities or corporation and include common stock, preferred stock,
and warrants and other rights to acquire such instruments.
Investments in common stocks are subject to market risks
which may cause their prices to fluctuate over time. The
value of convertible securities is also affected by
prevailing interest rates, the credit quality of the issuer
and any call provisions. Changes in the value of portfolio
securities will not necessarily affect cash income derived
from these securities but will affect a Portfolio's net
asset value.
Investments in small capitalization companies involves
greater risk than is customarily associated with larger,
more established companies due to the greater business
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risks of small size, limited markets and financial
resources, narrow product lines and the frequent lack of
depth of management. The securities of small companies are
often traded over-the-counter and may not be traded in
volumes typical on a national securities exchange.
Consequently, the securities of smaller companies may have
limited market stability and may be subject to more abrupt
or erratic market movements than securities of larger, more
established growth companies or the market averages in
general. All Portfolios may invest in equity securities.
Fixed Income Fixed income securities are debt obligations issued by
Securities corporations, municipalities and other borrowers. The market
value of fixed income investments will generally change in
response to interest rate changes and other factors. During
periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during
periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities
with longer maturities tend to produce higher yields, the
prices of longer maturity securities are also subject to
greater market fluctuations as a result of changes in
interest rates. Changes by recognized agencies in the rating
of any fixed income security and in the ability of an issuer
to make payments of interest and principal will also affect
the value of these investments. Changes in the value of
portfolio securities will not affect cash income derived
from these securities but will affect a Portfolio's net
asset value. All Portfolios except the Real Estate
Securities may invest in fixed income securities.
Futures and Futures contracts provide for the future sale by one party
Options on and purchase by another party of a specified amount of a
Futures specific security at a specified future time and at a
specified price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume a
position in a futures contract at a specified exercise price
during the term of the option. A Portfolio may use futures
contracts and related options for bona fide hedging
purposes, to offset changes in the value of securities held
or expected to be acquired or be disposed of, to minimize
fluctuations in foreign currencies, or to gain exposure to a
particular market or instrument. A Portfolio will minimize
the risk that it will be unable to close out a futures
contract by only entering into futures contracts which are
traded on national futures exchanges.
Stock index futures are futures contracts for various
stock indices that are traded on registered securities
exchanges. A stock index futures contract obligates the
seller to deliver (and the purchaser to take) an amount of
cash equal to a specific dollar amount times the difference
between the value of a specific stock index at the close of
the last trading day of the contract and the price at which
the agreement is made.
There are risks associated with these activities,
including the following: (1) the success of a hedging
strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets
and movements in interest rates, (2) there may be an
imperfect or no correlation between the changes in market
value of the securities held by the Portfolio and the prices
of futures and options on futures, (3) there may not be a
liquid secondary market for a futures contract or option,
(4) trading
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restrictions or limitations may be imposed by an exchange,
and (5) government regulations may restrict trading in
futures contracts and futures options. The Large Cap Growth
and Small Cap Value Portfolios may invest in futures and
options on futures.
Illiquid Illiquid securities are securities that cannot be disposed
Securities of within seven business days at approximately the price at
which they are being carried on the Portfolio's books. An
illiquid security includes a demand instrument with a demand
notice period exceeding seven days, where there is no
secondary market for such security, and repurchase
agreements with durations over 7 days in length. The Real
Estate Securities Portfolio may invest in illiquid
securities.
Money Market Money market securities are high-quality, dollar-
Instruments 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 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 with outstanding high-
quality commercial papers; and (v) repurchase agreements
involving any of the foregoing obligations entered into with
highly-rated banks and broker-dealers. All Portfolios may
invest in money market securities.
Mortgage-Backed Mortgage-backed securities are instruments that entitle the
Securities holder to a share of all interest and principal payments
from mortgages underlying the security. The mortgages
backing these securities include conventional thirty-year
fixed-rate mortgages, graduated payment mortgages, and
adjustable rate mortgages. During periods of declining
interest rates, prepayment of mortgages underlying mortgage-
backed securities can be expected to accelerate. Prepayment
of mortgages which underlie securities purchased at a
premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital
gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict
accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities: These are securities
that are issued or guaranteed by a U.S. Government agency
representing an interest in a pool of mortgage loans. The
primary issuers or guarantors of these mortgage-backed
securities are GNMA, FNMA and FHLMC. FNMA and FHLMC
obligations are not backed by the full faith and credit of
the U.S. Government as GNMA certificates are, but FNMA and
FHLMC securities are supported by the instrumentalities'
right to borrow from the U.S. Treasury. GNMA, FNMA and FHLMC
each guarantees timely distributions of interest to
certificate holders. GNMA and FNMA also each guarantees
timely distributions of scheduled principal. FHLMC has in
the past guaranteed only the ultimate collection of
principal of the underlying mortgage loan; however, FHLMC
now issues mortgage-backed securities (FHLMC Gold PCs) which
also guarantee timely payment of monthly principal
reductions. Government
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and private guarantees do not extend to the securities'
value, which is likely to vary inversely with fluctuations
in interest rates.
Private Pass-Through Securities: These are mortgage-
backed securities issued by a non-governmental entity, such
as a trust. These securities include collateralized mortgage
obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two
rating categories. 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. 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. 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.
REMICs: A REMIC is a CMO that qualifies for special tax
treatment under the Internal Revenue Code and invests in
certain mortgages principally secured by interests in real
property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or
"residual" interests. Guaranteed REMIC pass-through
certificates ("REMIC Certificates") issued by FNMA or FHLMC
represent beneficial ownership interests in a REMIC trust
consisting principally of mortgage loans or FNMA, FHLMC or
GNMA-guaranteed mortgage pass-through certificates. For
FHLMC REMIC Certificates, FHLMC guarantees the timely
payment of interest, and also guarantees the payment of
principal as payments are required to be made on the
underlying mortgage participation certificates. FNMA REMIC
Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA.
Parallel Pay Securities; PAC Bonds: Parallel pay CMOs and
REMICS are structured to provide payments of principal on
each payment date to more than one class. These simultaneous
payments are taken into account in calculating the stated
maturity date or final distribution date of each class,
which must be retired by its stated maturity date or final
distribution date, but may be retired earlier. Planned
Amortization Class CMOs ("PAC Bonds") generally require
payments of a specified amount of principal on each payment
date. PAC Bonds are always parallel pay CMOs with the
required principal payment on such securities having the
highest priority after interest has been paid to all
classes.
REITs: REITs are trusts that invest primarily in
commercial real estate or real estate-related loans. The
value of interests in REITs may be affected by the value of
the
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property owned or the quality of the mortgages held by the
trust. See also, "Real Estate Securities."
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. SMBs are extremely sensitive to changes in interest
rates because of the impact thereon of prepayment of
principal on the underlying mortgage securities can
experience wide swings in value in response to changes in
interest rates and associated mortgage prepayment rates.
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.
Risk Factors: Due to the possibility of prepayments of
the underlying mortgage instruments, mortgage-backed
securities generally do not have a known maturity. In the
absence of a known maturity, market participants generally
refer to an estimated average life. An average life estimate
is a function of an assumption regarding anticipated
prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other
factors. The assumption is necessarily subjective, and thus
different market participants can produce different average
life estimates with regard to the same security. There can
be no assurance that estimated average life will be a
security's actual average life. The Balanced Portfolio may
invest in mortgaged-backed securities.
Non- Investment in the Real Estate Securities Portfolio, a non-
Diversification diversified mutual fund, may entail greater risk than would
investment in a diversified investment company because the
concentration in securities of relatively few issuers could
result in greater fluctuation in the total market value of
the Portfolio's holdings. Any economic, political, or
regulatory developments affecting the value of the
securities the Portfolio holds could have a greater impact
on the total value of the Portfolio's holdings than would be
the case if the portfolio securities were diversified among
more issuers. The Portfolio intends to comply with the
diversification requirements of Subchapter M of the Code. In
accordance with these requirements, the Portfolio will not
invest more than 5% of its total assets in any one issuer;
this limitation applies to 50% of the Portfolio's total
assets.
Options A put option gives the purchaser of the option the right to
sell, and the writer of the option the obligation to buy,
the underlying security at any time during the option
period. A call option gives the purchaser of the option the
right to buy, and the writer of the option the obligation to
sell, the underlying security at any time during the option
period. The premium paid to the writer is the consideration
for undertaking the obligations under the option contract.
The initial purchase (sale) of an option contract is an
"opening
40
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transaction." In order to close out an option position, a
portfolio may enter into a "closing transaction," which is
simply the sale (purchase) of an option contract on the same
security with the same exercise price and expiration date as
the option contract originally opened.
A Portfolio may purchase put and call options to protect
against a decline in the market value of the securities in
its portfolio or to anticipate an increase in the market
value of securities that a Portfolio may seek to purchase in
the future. A Portfolio purchasing put and call options pays
a premium therefor. If price movements in the underlying
securities are such that exercise of the options would not
be profitable for the Portfolio, loss of the premium paid
may be offset by an increase in the value of the Portfolio's
securities or by a decrease in the cost of acquisition of
securities by the Portfolio.
A Portfolio may write covered call options as a means of
increasing the yield on its portfolio and as a means of
providing limited protection against decreases in its market
value. When a portfolio sells an option, if the underlying
securities do not increase or decrease to a price level that
would make the exercise of the option profitable to the
holder thereof, the option generally will expire without
being exercised and the Portfolio will realize as profit the
premium received for such option. When a call option of
which a portfolio is the writer is exercised, the Portfolio
will be required to sell the underlying securities to the
option holder at the strike price, and will not participate
in any increase in the price of such securities above the
strike price. When a put option of which the Portfolio is
the writer is exercised, the Portfolio will be requited to
purchase the underlying securities at the strike price,
which may be in excess of the market value of such
securities.
A Portfolio may purchase and write options on an exchange
or over-the-counter. Over-the-counter options ("OTC
options") differ from exchange-traded options in several
respects. They are transacted directly with dealers and not
with a clearing corporation, and therefore entail the risk
of non-performance by the dealer. OTC options are available
for a greater variety of securities and for a wider range of
expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded
on an exchange, pricing is done normally by reference to
information from a market maker. It is the position of the
Securities and Exchange Commission that OTC options are
generally illiquid.
A Portfolio may purchase and write put and call options
on indices and enter into related closing transactions. Put
and call options on indices are similar to options on
securities except that options on an index give the holder
the right to 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
41
<PAGE>
on price movements in the particular market represented by
the index generally, rather than the price movements in
individual securities. A Portfolio may choose to terminate
an option position by entering into a closing transaction.
The ability of a Portfolio to enter into closing
transactions depends upon the existence of a liquid
secondary market for such transactions.
All options written on indices must be covered. When a
Portfolio writes an option on an index, it will establish a
segregated account containing cash or liquid high grade debt
securities with its custodian in an amount at least equal to
the market value of the option and will maintain the account
while the option is open or will otherwise cover the
transaction.
Risk Factors: Risks associated with options transactions
include: (1) the success of a hedging strategy may depend on
an ability to predict movements in the prices of individual
securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation
between the movement in prices of options and the securities
underlying them; (3) there may not be a liquid secondary
market for options; and (4) while a Portfolio will receive a
premium when it writes covered call options, it may not
participate fully in a rise in the market value of the
underlying security. The Large Cap Growth and Small Cap
Value Portfolios may invest in options.
Real Estate The Real Estate Securities Portfolio may be subject to the
Securities risks associated with the direct ownership of real estate
because of its policy of concentration in the securities of
companies principally engaged in the real estate industry.
For example, real estate values may fluctuate as a result of
general and local economic conditions, overbuilding and
increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or
condemnation losses, regulatory limitations on rents,
changes in neighborhood values, changes in how appealing
properties are to tenants and increases in interest rates.
The value of securities of companies which service the real
estate business sector may also be affected by such risks.
Because the Portfolio may invest a substantial portion of
its assets in REITs, the Portfolio may also be subject to
certain risks associated with the direct investments of the
REITs. REITs may be affected by changes in the value 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 in
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, the performance of 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. Changes in prevailing
interest rates may inversely affect the value of the debt
securities in which the Portfolio will invest. Changes in
the value of portfolio securities will not
42
<PAGE>
necessarily affect cash income derived from these securities
but will affect a Portfolio's net asset value. See also
"REITS" in the description of "Mortgaged-Backed Securities"
described above.
Receipts Receipts are sold as zero coupon securities which means that
they are sold at a substantial discount and redeemed at face
value at their maturity date without interim cash payments
of interest or principal. This discount is accreted over the
life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax
purposes. Because of these features, such securities may be
subject to greater interest rate volatility than interest
paying Permitted Investments. See also "Taxes." The Large
Cap Value, Capital Appreciation, Equity Income and Capital
Growth Portfolios may invest in receipts.
Repurchase Arrangements by which a Portfolio obtains a security and
Agreements simultaneously commits to return the security to the seller
at an agreed upon price (including principal and interest)
on an agreed upon date within a number of days from the date
of purchase. The Custodian or its agent will hold the
security as collateral for the repurchase agreement.
Collateral must be maintained at a value at least equal to
102% of the purchase price. The Portfolio bears a risk of
loss in the event the other party defaults on its
obligations and the Portfolio is delayed or prevented from
its right to dispose of the collateral securities or if the
Portfolio realizes a loss on the sale of the collateral
securities. The adviser will enter into repurchase
agreements on behalf of the Portfolio only with financial
institutions deemed to present minimal risk of bankruptcy
during the term of the agreement based on guidelines
established and periodically reviewed by the Trustees.
Repurchase agreements are considered loans under the 1940
Act. All Portfolios may invest in repurchase agreements.
Securities In order to generate additional income, a Portfolio may lend
Lending securities which it owns pursuant to agreements requiring
that the loan be continuously secured by collateral
consisting of cash, securities of the U.S. Government or its
agencies equal to at least 100% of the market value of the
securities lent. A Portfolio continues to receive interest
on the securities lent while simultaneously earning interest
on the investment of cash collateral. Collateral is marked
to market daily. There may be risks of delay in recovery of
the securities or even loss of rights in the collateral
should the borrower of the securities fail financially or
become insolvent.
Securities of There are certain risks connected with investing in foreign
Foreign Issuers securities. These include risks of adverse political and
economic developments (including possible governmental
seizure or nationalization of assets), the possible
imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting
requirements, the possibility that there will be less
information on such securities and their issuers available
to the public, the difficulty of obtaining or enforcing
court judgments abroad, restrictions on foreign investments
in other jurisdictions, difficulties in effecting
repatriation of capital
43
<PAGE>
invested abroad, and difficulties in transaction settlements
and the effect of delay on shareholder equity. Foreign
securities may be subject to foreign taxes, and may be less
marketable than comparable U.S. securities. The value of a
Portfolio's investments denominated in foreign currencies
will depend on the relative strengths of those currencies
and the U.S. dollars, and a Portfolio may be affected
favorably or unfavorably by changes in the exchange rates or
exchange control regulations between foreign currencies and
the U.S. dollar. Changes in foreign currency exchange rates
also may affect the value of dividends and interest earned,
gains and losses realized on the sale of securities and net
investment income and gains if any, to be distributed to
shareholders by a Portfolio. The Large Cap Value, Large Cap
Growth, Small Cap Value, Capital Appreciation, Equity
Income, Balanced, Capital Growth and Real Estate Securities
Portfolios may invest in securities of foreign issuers.
Time Deposits Time deposits are non-negotiable receipts issued by a bank
in exchange for the deposit of funds. Like a certificate of
deposit, it earns a specified rate of interest over a
definite period of time; however, it cannot be traded in the
secondary market. Time deposits are considered to be
illiquid securities. The Large Cap Growth, Small Cap Value
and Real Estate Securities Portfolios may invest in time
deposits.
U.S. Government Obligations issued or guaranteed by agencies of the U.S.
Agencies Government, including, among others, the Federal Farm Credit
Bank, the Federal Housing Administration and the Small
Business Administration, and obligations issued or
guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage
Corporation, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the full
faith and credit of the U.S. Treasury (e.g., Government
National Mortgage Association), others are supported by the
right of the issuer to borrow from the Treasury (e.g.,
Federal Farm Credit Bank), while still others are supported
only by the credit of the instrumentality (e.g., Federal
National Mortgage Association). Guarantees of principal by
agencies or instrumentalities of the U.S. 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. All Portfolios may invest in obligations issued or
guaranteed by U.S. Government agencies.
U.S. Treasury U.S. Treasury obligations consist of bills, notes and bonds
Obligations issued by the U.S. Treasury and separately traded interest
and principal component parts of such obligations that are
transferable through the Federal book-entry Principal
Securities ("STRIPS"). All Portfolios may invest in U.S.
Treasury Obligations.
U.S. Treasury U. S. Treasury receipts are interests in separately traded
Receipts interest and principal component parts of U.S. Treasury
obligations that are issued by banks or brokerage firms and
are created by depositing U.S. Treasury notes and
obligations into a special account at
44
<PAGE>
custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners
of the certificates of receipts. The custodian arranges for
the issuance of the certificates or receipts evidencing
ownership and maintains the register. Receipts include
"Treasury Receipts" ("TRs"), "Treasury Investment Growth
Receipts" ("TIGRs") "Liquid Yield Option Notes" ("LYONs")
and "Certificates of Accrual on Treasury Securities"
("CATS"). TIGRs and CATS are interests in private
proprietary accounts while TRs and STRIPS are interest in
accounts sponsored by the U.S. Treasury. The Large Cap
Value, Capital Appreciation, Equity Income and Capital
Growth Portfolios may invest in U.S. Treasury receipts.
Variable and Certain obligations may carry variable or floating rates of
Floating Rate interest, and may involve a conditional or unconditional
Instruments 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
some other reset period, 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.
All Portfolios may invest in variable and floating rate
instruments.
Warrants Warrants are instruments giving holders the right, but not
the obligation, to buy shares of a company at a given price
during a specified period. The Large Cap Growth, Small Cap
Value, Small Cap Growth, Mid-Cap Growth and Real Estate
Securities Portfolios may invest in warrants.
When-Issued and When-issued or delayed delivery basis transactions involve
Delayed the purchase of an instrument with payment and delivery
Delivery taking place in the future. Delivery of and payment for
Securities these securities may occur a month or more after the date of
the purchase commitment. A Portfolio will maintain with the
custodian a separate account with liquid high grade debt
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these securities
is fixed as of the purchase date and no interest accrues to
a Portfolio before settlement. 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.
Although a Portfolio generally purchases securities on a
when-issued or forward commitment basis with the intention
of actually acquiring securities, a Portfolio may dispose of
a when-issued security or forward commitment prior to
settlement if it deems appropriate. All Portfolios may
invest in when-issued and delayed delivery securities.
Additional information on permitted investments and risk
factors can be found in the Statement of Additional
Information.
45
<PAGE>
TABLE OF CONTENTS ______________________________________________________________
<TABLE>
<S> <C>
The Trust............................................................... 11
Investment Objective and Policies....................................... 11
General Investment Policies............................................. 18
Investment Limitations.................................................. 19
The Manager & Shareholder Servicing Agent............................... 20
The Advisers and Sub-Advisers........................................... 20
Distribution............................................................ 29
Purchase & Redemption of Shares......................................... 31
Performance............................................................. 32
Taxes................................................................... 33
General Information..................................................... 34
Description of Permitted Investment and Risk Factors.................... 35
</TABLE>
<PAGE>
PROSPECTUS
JANUARY 31, 1995
- --------------------------------------------------------------------------------
LARGE CAP VALUE PORTFOLIO
LARGE CAP GROWTH PORTFOLIO
SMALL CAP VALUE PORTFOLIO
SMALL CAP GROWTH PORTFOLIO
MID-CAP GROWTH PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
EQUITY INCOME PORTFOLIO
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
Please read this Prospectus carefully before investing, and keep it on file for
future reference. It contains information that can help you decide if a
Portfolio's investment goals match your own.
A Statement of Additional Information (SAI) dated January 31, 1995 has been
filed with the Securities and Exchange Commission and is available without
charge through the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087 or by calling 1-800-437-6016. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Institutional Managed Trust (the "Trust") is a mutual fund that offers
shareholders a convenient means of investing their funds in one or more
professionally managed diversified and non-diversified portfolios of
securities. The Large Cap Value, Large Cap Growth, Small Cap Value, Small Cap
Growth, Mid-Cap Growth, Capital Appreciation, Equity Income and Balanced
Portfolios, investment portfolios of the Trust, offer three classes of shares,
Class A shares, Class B shares and ProVantage Funds shares. ProVantage Funds
shares differ from Class A and Class B shares primarily in the imposition of
sales charges and the allocation of certain distribution expenses and transfer
agent fees. ProVantage Funds shares are available through SEI Financial
Services Company (the Trust's distributor) and through participating broker-
dealers, financial institutions and other organizations. This Prospectus offers
the ProVantage Funds shares of one balanced (fixed income and equity) and seven
equity portfolios (the "Portfolios" and each of these a "Portfolio") listed
above.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
- --------------------------------------------------------------------------------
<PAGE>
HOW TO READ THIS PROSPECTUS ____________________________________________________
This Prospectus gives you information that you should know about the Portfolios
before investing. Brief descriptions are also provided throughout the
Prospectus to better explain certain key points. To find these helpful guides,
look for this symbol. (SYMBOL APPEARS HERE)
FUND HIGHLIGHTS ________________________________________________________________
The following summary provides basic information about the ProVantage Funds
shares of the Trust's Large Cap Value, Large Cap Growth, Small Cap Value, Small
Cap Growth, Mid-Cap Growth, Capital Appreciation, Equity Income and Balanced
Portfolios. This summary is qualified in its entirety by reference to the more
detailed information provided elsewhere in this Prospectus and in the Statement
of Additional Information.
INVESTMENT Below are the investment objectives and policies for each
OBJECTIVES AND Portfolio. For more information, see "Investment Objectives and
POLICIES Policies," "General Investment Policies" and "Description of
Permitted Investments and Risk Factors."
LARGE CAP The Large Cap Value Portfolio seeks to provide long-term growth
VALUE of capital and income by investing primarily in a diversified
PORTFOLIO portfolio of high quality, income producing common stocks which
in the advisers' opinion is undervalued at the time of pur-
chase.
LARGE CAP The Large Cap Growth Portfolio seeks to provide capital
GROWTH appreciation by investing primarily in equity securities of
PORTFOLIO large companies.
SMALL CAP The Small Cap Value Portfolio seeks to provide capital ap-
VALUE preciation by investing pri-marily in equity securities of
PORTFOLIO small companies.
SMALL CAP The Small Cap Growth Portfolio seeks to provide long-term
GROWTH capital appreciation by investing primarily in equity
PORTFOLIO securities of smaller companies that the adviser believes are
in an early stage or transitional point in their development
and have demonstrated or have the potential for above average
capital growth.
MID-CAP GROWTH The Mid-Cap Growth Portfolio seeks to provide long-term capital
PORTFOLIO appreciation by investing primarily in equity securities of
medium sized companies that the adviser believes are well
established but have not reached full maturity, and may offer
significant growth potential.
CAPITAL The Capital Appreciation Portfolio seeks to provide capital
APPRECIATION appreciation by investing primarily in a diversified portfo-
PORTFOLIO lio of common stocks (and securities convertible into common
stock) which, in the adviser's opinion, are undervalued in
the market place at the time of purchase.
EQUITY INCOME The Equity Income Portfolio seeks to provide current income
PORTFOLIO and moderate capital appreciation by investing primarily in a
diversified portfolio of common stocks.
................................................................................
TABLE OF
CONTENTS
Fund Highlights............................................................ 2
Shareholder Transaction Expenses........................................... 5
Annual Operating Expenses.................................................. 5
Your Account and Doing Business with ProVantage Funds...................... 10
Investment Objectives and Policies......................................... 13
General Investment Policies................................................ 19
Investment Limitations..................................................... 20
The Manager and Shareholder Servicing Agent................................ 21
The Advisers and Sub-Advisers.............................................. 21
Distribution............................................................... 30
Performance................................................................ 31
Taxes...................................................................... 32
Additional Information About Doing Business with Us........................ 33
General Information........................................................ 37
Description of Permitted Investments and Risk Factors...................... 39
................................................................................
2
<PAGE>
BALANCED The Balanced Portfolio seeks to provide total return while
PORTFOLIO preserving capital by investing primarily in a combination of
undervalued common stocks and fixed income securities.
UNDERSTANDING Shares of the Portfolios, like shares of any mutual fund,
RISK will fluctuate in value and when you sell your shares, they
may be worth more or less than what you paid for them. Each
Portfolio may invest in equity securities that are affected
by market and economic factors, and may invest in fixed in-
come securities that tend to vary inversely with interest
rates and may be affected by other market and economic fac-
tors as well, which may cause these securities to fluctuate
in value. In addition, the Small Cap Value and Small Cap
Growth Portfolios may invest in equity securities of smaller
companies, which involves greater risk than is customarily
associated with investments in larger, more established com-
panies. There is no assurance that the Portfolios will
achieve their investment objectives. See "Investment Objec-
tives and Policies" and "Description of Permitted Investments
and Risk Factors."
................................................................................
(SYMBOL APPEARS PROVANTAGE FUNDS
HERE)
Believing that no single investment manager can deliver outstanding perfor-
mance in every investment category, only those advisers who have distinguished
themselves within their areas of specialization are selected to advise our mu-
tual funds.
...............................................................................
MANAGEMENT SEI FINANCIAL MANAGEMENT CORPORATION ("SFM") serves as the
PROFILE investment adviser of the Large Cap Value Portfolio, Large
Cap Growth Portfolio and Small Cap Value Portfolio. MELLON
EQUITY ASSOCIATES and MERUS CAPITAL MANAGEMENT each serves as
the investment sub-adviser for a portion of the Large Cap Value
Portfolio. ALLIANCE CAPITAL MANAGEMENT L.P. and IDS ADVISORY
GROUP each serves as the investment sub-adviser for a portion
of the Large Cap Growth Portfolio. 1838 INVESTMENT ADVISORS,
L.P. serves as the investment sub-adviser to the Small Cap
Value Portfolio. INVESTMENT ADVISERS, INC., NICHOLAS-APPLEGATE
CAPITAL MANAGEMENT and PILGRIM BAXTER & ASSOCIATES, LTD. each
serves as an investment adviser for a portion of the Small Cap
Growth Portfolio. SUNBANK CAPITAL MANAGEMENT, N.A. serves as
the investment adviser of the Capital Appreciation and
Balanced Portfolios. MERUS CAPITAL MANAGEMENT, a division of
The Bank of California, also serves as the investment adviser
of the Equity Income Portfolio. NICHOLAS-APPLEGATE CAPITAL
MANAGEMENT also serves as the investment adviser for the Mid-
Cap Growth Portfolio. SFM serves as the manager, shareholder
servicing agent and transfer agent of the Trust. SEI Financial
Services Company acts as distributor of the Trust's shares. See
"The Manager and Shareholder Servicing Agent," "The Advisers
and Sub-Advisers" and "Distribution."
YOUR ACCOUNT You may open an account with just $1,000 and make additional
AND DOING investments with as little as $100. ProVantage Funds shares
BUSINESS WITH of the Portfolios are offered at net asset value per share
PROVANTAGE plus a maximum sales charge at the time of purchase of 5.00%.
FUNDS Shareholders who purchase higher amounts may qualify for a
reduced sales charge. Redemptions of a Portfolio's shares are
made at net asset value per share. See "Your Account and
Doing Business with ProVantage Funds" and "Additional
Information About Doing Business with Us."
3
<PAGE>
DIVIDENDS Substantially all of the net investment income (exclusive of
capital gains) is distributed in the form of dividends that
will be paid monthly for the Large Cap Value, Capital
Appreciation, Equity Income and Balanced Portfolios, and
quarterly for the Large Cap Growth, Small Cap Value, Small
Cap Growth and Mid-Cap Growth Portfolios. Any realized net
capital gain is distributed at least annually. Distributions
are paid in additional shares unless the shareholder elects
to take the payment in cash. See "Dividends."
INFORMATION/ For more information about ProVantage Funds call SEI
SERVICE Financial Services Company at 1-800-437-6016.
CONTACTS
4
<PAGE>
SHAREHOLDER TRANSACTION EXPENSES (as a percentage of offering price)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE LARGE SMALL SMALL
CAP CAP CAP CAP MID-CAP CAPITAL EQUITY
VALUE GROWTH VALUE GROWTH GROWTH APPRECIATION INCOME BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Im-
posed on Purchases 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Maximum Sales Charge Im-
posed on Reinvested Div-
idends None None None None None None None None
Redemption Fees (1) None None None None None None None None
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------------
Management/Advisory Fees
(after fee waiver) (2) .65% .70% .98% .99% .86% .75% .73% .59%
12b-1 Fees (3) .30% .32% .32% .31% .33% .30% .31% .36%
Other Expenses (4) .20% .23% .20% .20% .18% .19% .18% .20%
- ------------------------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waiver) (5) 1.15% 1.25% 1.50% 1.50% 1.37% 1.24% 1.22% 1.15%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A charge, currently $10.00, is imposed on wires of redemption proceeds of
the Portfolios' ProVantage Funds shares.
(2) SEI Financial Management Corporation ("SFM"), in its capacity as Manager
for each Portfolio, and certain of the investment advisers and sub-advisers
(collectively, "advisers") have agreed to waive, on a voluntary basis, a
portion of their fees, and the management/advisory fees shown reflect this
voluntary waiver. Such fee waivers are voluntary and may be terminated at
any time in the sole discretion of each entity that has agreed to waive a
portion of its fee. Absent such fee waiver, management/advisory fees would
be: Large Cap Value Portfolio, .70%; Large Cap Growth Portfolio, .75%;
Small Cap Value Portfolio, 1.00%; Small Cap Growth Portfolio, 1.00%; Mid-
Cap Growth Portfolio, .95%; Capital Appreciation Portfolio, .75%; Equity
Income Portfolio, .75%; and Balanced Portfolio, .75%;.
(3) The 12b-1 fees shown include both the Portfolios' current 12b-1 budget for
reimbursement of expenses and the Distributor's voluntary waiver of a
portion of its compensatory fee. The Distributor reserves the right to
terminate its waiver at any time in its sole discretion. The maximum 12b-1
fees payable by the ProVantage Funds shares of each Portfolio are .60%.
(4) Other Expenses for the Large Cap Growth and Small Cap Value Portfolios are
based on estimated amounts for the current fiscal year.
(5) Absent the voluntary fee waivers described above, total operating expenses
for ProVantage Funds shares would be: Large Cap Value Portfolio, 1.20%;
Large Cap Growth Portfolio, 1.35%; Small Cap Value Portfolio, 1.57%; Small
Cap Growth Portfolio, 1.51%; Mid-Cap Growth Portfolio 1.46%; Capital
Appreciation Portfolio, 1.24%; Equity Income Portfolio, 1.24%; and Balanced
Portfolio, 1.31%.
EXAMPLE
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
------ ------ ------- -------
<S> <C> <C> <C> <C>
An investor in a Portfolio would pay the fol-
lowing expenses on a $1,000 investment assuming
(1) the imposition of the maximum sales load;
(2) 5% annual return and (3) redemption at the
end of each time period:
Large Cap Value Portfolio $61.00 $85.00 $110.00 $183.00
Large Cap Growth Portfolio $62.00 $88.00 -- --
Small Cap Value Portfolio $65.00 $95.00 -- --
Small Cap Growth Portfolio $65.00 $95.00 $128.00 $220.00
Mid-Cap Growth Portfolio $63.00 $91.00 $121.00 $206.00
Capital Appreciation Portfolio $62.00 $87.00 $115.00 $193.00
Equity Income Portfolio $62.00 $87.00 $114.00 $190.00
Balanced Portfolio $61.00 $85.00 $110.00 $183.00
- ------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in ProVantage Funds shares of each Portfolio. A person who
purchases shares through an account with a financial institution may be charged
separate fees by that institution. The information set forth in the foregoing
table and example relates only to the ProVantage Funds shares. Each Portfolio
also offers Class A and Class B shares, which are subject to the same expenses,
except that there are no sales loads, different distribution costs and no
transfer agent costs. Additional information may be found under "The Manager
and Shareholder Servicing Agent," "The Advisers and Sub-Advisers" and
"Distribution."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "Purchase of Shares." Long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charges otherwise permitted by the Rules of Fair Practice (the "Rules")
of the National Association of Securities Dealers, Inc. ("NASD").
5
<PAGE>
FINANCIAL HIGHLIGHTS ___________________________________________________________
The following information has been audited by Price Waterhouse LLP, the Trust's
independent accountants, as indicated in their report dated November 11, 1994
on the Trust's financial statements as of September 30, 1994 included in the
Trust's Statement of Additional Information under "Financial Information."
Additional performance information is set forth in the 1994 Annual Report to
Shareholders and is available upon request and without charge by calling 1-800-
437-6016. As of the most recent fiscal year, there were no ProVantage Funds
shares outstanding of the Large Cap Value, Large Cap Growth, Small Cap Value
and Balanced Portfolios. This table should be read in conjunction with the
Trust's financial statements and notes thereto.
FOR A PROVANTAGE FUNDS SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Small Cap Growth Portfolio
--------------------------
For the period ended
September 30,
1994 (1)
- ------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $14.04
- ------------------------------------------------------------------------------
Income from Investment Operations:
Net Investment Income (Loss) (0.02)
Net Realized and Unrealized Gains (Losses) on
Securities (0.03)
- ------------------------------------------------------------------------------
Total from Investment Operations $(0.05)
- ------------------------------------------------------------------------------
Less Distributions:
Dividends from Net Investment Income --
Distributions from Realized Capital Gains --
- ------------------------------------------------------------------------------
Total Distributions $ --
- ------------------------------------------------------------------------------
Net Asset Value, End of Period $13.99
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Return (3.02)%*
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (000) $171
Ratio of Expenses to Average Net Assets 1.49%
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 1.52%
Ratio of Net Investment Income (Loss) to Average
Net Assets (0.92)%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (0.95)%
Portfolio Turnover Rate 97%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
* Sales load is not reflected in total return.
(1) Small Cap Growth ProVantage Funds shares were offered beginning May 2,
1994. All ratios including total return for that period have been
annualized.
6
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
FOR A PROVANTAGE FUNDS SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Mid-Cap Growth Portfolio
------------------------
For the period ended
September 30,
1994 (1)
- ------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $11.19
- ------------------------------------------------------------------------------
Income from Investment Operations:
Net Investment Income (Loss) (0.01)
Net Realized and Unrealized Gains (Losses) on
Securities (0.31)
- ------------------------------------------------------------------------------
Total from Investment Operations $(0.32)
- ------------------------------------------------------------------------------
Less Distributions:
Dividends from Net Investment Income --
Distributions from Realized Capital Gains --
- ------------------------------------------------------------------------------
Total Distributions $ --
- ------------------------------------------------------------------------------
Net Asset Value, End of Period $10.87
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Return (8.63)%*
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (000) $60
Ratio of Expenses to Average Net Assets 1.36%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.45%
Ratio of Net Investment Income (Loss) to Average
Net Assets (0.41)%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (0.50)%
Portfolio Turnover Rate 89%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
* Sales load is not reflected in total return.
(1) Mid-Cap Growth ProVantage Funds shares were offered beginning May 2, 1994.
All ratios including total return for that period have been annualized.
7
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
FOR A PROVANTAGE FUNDS SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Capital Appreciation Portfolio
---------------------------------
For the periods ended
September 30,
---------------------------------
1994 1993 (1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $16.36 $16.17
- -------------------------------------------------------------------------------
Income from Investment Operations:
Net Investment Income (Loss) 0.18 0.05
Net Realized and Unrealized Gains (Losses)
on Securities (0.22) 0.16
- -------------------------------------------------------------------------------
Total from Investment Operations $(0.04) $0.21
- -------------------------------------------------------------------------------
Less Distributions:
Dividends from Net Investment Income (0.20) (0.02)
Distributions from Realized Capital Gains (0.95) --
- -------------------------------------------------------------------------------
Total Distributions $(1.15) $(0.02)
- -------------------------------------------------------------------------------
Net Asset Value, End of Period $15.17 $16.36
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Return (0.46)%* 10.65%*
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (000) $2,182 $2
Ratio of Expenses to Average Net Assets 1.24% 1.15%
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 1.27% 1.24%
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.20% 2.54%
Ratio of Net Investment Income (Loss) to
Average Net Assets (Excluding Waivers) 1.16% 2.45%
Portfolio Turnover Rate 109% 119%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
* Sales load is not reflected in total return.
(1) Capital Appreciation ProVantage Funds shares were offered beginning August
16, 1993. All ratios including total return for that period have been
annualized.
8
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
FOR A PROVANTAGE FUNDS SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Equity Income Portfolio
--------------------------
For the periods ended
September 30,
--------------------------
1994 1993 (1)
- ------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $15.00 $14.82
- ------------------------------------------------------------------------------
Income from Investment Operations:
Net Investment Income (Loss) 0.45 0.02
Net Realized and Unrealized Gains (Losses) on
Securities (0.38) 0.16
- ------------------------------------------------------------------------------
Total from Investment Operations $0.07 $0.18
- ------------------------------------------------------------------------------
Less Distributions:
Dividends from Net Investment Income (0.46) --
Distributions from Realized Capital Gains (0.57) --
- ------------------------------------------------------------------------------
Total Distributions $(1.03) $ --
- ------------------------------------------------------------------------------
Net Asset Value, End of Period $14.04 $15.00
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Return 0.61%* 42.39%*
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (000) $892 $6
Ratio of Expenses to Average Net Assets 1.20% 1.15%
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 1.35% 1.46%
Ratio of Net Investment Income (Loss) to Average
Net Assets 3.36% 5.39%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) 3.21% 5.08%
Portfolio Turnover Rate 28% 39%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
* Sales load is not reflected in total return.
(1) Equity Income ProVantage Funds shares were offered beginning September 22,
1993. All ratios including total return for that period have been
annualized.
9
<PAGE>
YOUR ACCOUNT AND DOING BUSINESS WITH PROVANTAGE FUNDS __________________________
ProVantage Funds shares of the Portfolios are sold on a continuous basis and
may be purchased directly from the Trust's Distributor, SEI Financial Services
Company. Shares may also be purchased through financial institutions, broker-
dealers, or other organizations which have established a dealer agreement or
other arrangement with SEI Financial Services Company ("Intermediaries"). For
more information about the following topics, see "Additional Information About
Doing Business with Us."
- --------------------------------------------------------------------------------
HOW TO BUY, ProVantage Funds shares of the Portfolios may be purchased
SELL AND through Intermediaries which provide various levels of
EXCHANGE shareholder services to their customers. Contact your
SHARES THROUGH Intermediary for information about the services available to
INTERMEDIARIES you and for specific instructions on how to buy, sell and
exchange shares. To allow for processing and transmittal of
orders to the Distributor on the same day, Intermediaries may
impose earlier cut-off times for receipt of purchase orders.
Certain Intermediaries may charge customer account fees.
Information concerning shareholder services and any charges
will be provided to the customer by the Intermediary. Certain
of these Intermediaries may be required to register as
broker/dealers under state law. The shares you purchase through
an Intermediary may be held "of record" by that Intermediary.
If you want to transfer the registration of shares beneficially
owned by you, but held "of record" by an Intermediary, you
should call the Intermediary to request this change.
................................................................................
(SYMBOL WHAT IS AN
APPEARS INTERMEDIARY?
HERE)
Any entity, such as a bank, broker-dealer, other financial institution, as-
sociation or organization which has entered into an arrangement with the Dis-
tributor to sell ProVantage Funds shares to its customers.
................................................................................
HOW TO BUY Application forms can be obtained by calling SEI Financial
SHARES FROM Services Company at 1-800-437-6016. ProVantage Funds shares
THE of the Portfolios are offered only to residents of states in
DISTRIBUTOR which the shares are eligible for purchase.
Opening an You may buy ProVantage Funds shares by mailing a completed
Account application and a check (or other negotiable bank instrument
By Check or money order) payable to "ProVantage Funds (Portfolio
Name)." If you send a check that does not clear, the purchase
will be canceled and you could be liable for any losses or
fees incurred.
By Fed Wire To buy shares by Fed Wire call SEI Financial
Services Company toll-free at 1-800-437-6016.
Automatic You may systematically buy ProVantage Funds shares through
Investment deductions from your checking or savings accounts, provided
Plan ("AIP") these accounts are maintained through banks which are part of
the Automated Clearing House ("ACH") system. You may purchase
shares on a fixed schedule (semi-monthly or monthly) with
amounts as low as $25, or as high as $100,000. Upon notice,
the amount you commit to the AIP may be changed or canceled
at any time. The AIP is subject to account minimum initial
purchase amounts and minimum maintained balance requirements
discussed under "Additional Information About Doing Business
With Us."
10
<PAGE>
OTHER Your purchase is subject to a sales charge which varies
INFORMATION depending on the size of your purchase. The following table
ABOUT BUYING shows the regular sales charges on ProVantage Funds shares
SHARES of the Portfolios to a "single purchaser," together with the
reallowance paid to dealers and the agency commission paid
Sales Charges to brokers (collectively the "commission"):
<TABLE>
---------------------------------------------------------------------------------
<CAPTION>
SALES CHARGE REALLOWANCE AND
SALES CHARGE AS AS APPROPRIATE BROKERAGE COMMISSION
A PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE NET AMOUNT INVESTED OFFERING PRICE
---------------------------------------------------------------------------------
<S> <C> <C> <C>
(less than) $50,000 5.00% 5.26% 4.50%
$50,000 but (less than)
$100,000 4.50% 4.71% 4.00%
$100,000 but (less than)
$250,000 3.50% 3.63% 3.00%
$250,000 but (less than)
$500,000 2.50% 2.56% 2.00%
$500,000 but (less than)
$1,000,000 2.00% 2.04% 1.75%
$1,000,000 but (less than)
$2,000,000 1.00% 1.01% 1.00%
$2,000,000 but (less than)
$4,000,000 .50% .50% .50%
Over $4,000,000 none none none
---------------------------------------------------------------------------------
</TABLE>
The commissions shown in the table above apply to sales
through Intermediaries. Under certain circumstances,
commissions up to the amount of the entire sales charge may
be re-allowed to certain Intermediaries, who might then be
deemed to be "underwriters" under the Securities Act of
1933, as amended.
Right of A Right of Accumulation allows you, under certain
Accumulation circumstances, to combine your current purchase with the
current market value of previously purchased shares of each
Portfolio and ProVantage Funds shares of other portfolios
("Eligible Portfolios") in order to obtain a reduced sales
charge.
Letter of A Letter of Intent allows you, under certain circumstances,
Intent to aggregate anticipated purchases over a 13-month period to
obtain a reduced sales charge.
Sales Charge Certain shareholders may qualify for a sales charge waiver.
Waiver To determine whether or not you qualify for a sales charge
waiver see "Additional Information About Doing Business with
Us." Shareholders who qualify for a sales charge waiver must
notify SFM before purchasing shares.
11
<PAGE>
EXCHANGING Once good payment for your shares has been received and
SHARES accepted (i.e., an account has been established), you may
When Can You exchange some or all of your shares for ProVantage Funds
Exchange shares of other portfolios. Exchanges are made at net asset
Shares? value plus any applicable sales charge.
When Do Sales Portfolios that are not money market portfolios currently
Charges Apply impose a sales charge on ProVantage Funds shares. If you
to an exchange into one of these "non-money market" portfolios,
Exchange? you will have to pay a sales charge on any portion of your
exchanged ProVantage Funds shares for which you have not
previously paid a sales charge.
................................................................................
(SYMBOL HOW DOES AN
APPEARS EXCHANGE
HERE) TAKE PLACE?
When making an exchange, you authorize the sale of your shares of one or more
Portfolios in order to purchase the shares of another Portfolio. In other
words, you are executing a sell order and then a buy order. This sale of your
shares is a taxable event which could result in a taxable gain or loss.
................................................................................
If you previously paid a sales charge on your ProVantage
Funds shares, no additional sales charge will be assessed when
you exchange those ProVantage Funds shares for other ProVantage
Funds shares.
If you buy ProVantage Funds shares of a "non-money market"
fund and you receive a sales charge waiver, you will be
deemed to have paid the sales charge for purposes of this
exchange privilege. In calculating any sales charge payable
on your exchange, the Trust will assume that the first shares
you exchange are those on which you have already paid a sales
charge. Sales charge waivers may also be available under
certain circumstances described in the portfolios'
prospectuses.
The Trust reserves the right to change the terms and
conditions of the exchange privilege discussed herein, or to
terminate the exchange privilege, upon 60 days' notice. The
Trust also reserves the right to deny an exchange request
made within 60 days of the purchase of a non-money market
portfolio.
Requesting an To request an exchange, you must provide proper instructions
Exchange of in writing to SFM. Telephone exchanges will also be accepted
Shares if you previously elected this option on your account
application.
In the case of shares held "of record" by an Intermediary
but beneficially owned by you, you should contact the
Intermediary who will contact SFM and effect the exchange on
your behalf.
12
<PAGE>
HOW TO SELL To sell your shares, a written request for redemption in good
SHARES THROUGH order must be received by SFM. Valid written redemption
THE requests will be effective on receipt. All shareholders of
DISTRIBUTOR record must sign the redemption request.
By Mail For information about the proper form of redemption
requests, call 1-800-437-6016. You may also have the proceeds
mailed to an address of record or mailed (or sent by ACH) to a
commercial bank account previously designated on the Account
Application or specified by written instruction to SEI
Financial Services Company. There is no charge for having
redemption requests mailed to a designated bank account.
................................................................................
(SYMBOL WHAT IS A
APPEARS SIGNATURE
HERE) GUARANTEE?
A signature guarantee verifies the authenticity of your signature and may be
obtained from any of the following: banks, brokers, dealers, certain credit
unions, securities exchange or association, clearing agency or savings
association. A notary public cannot provide a signature guarantee.
................................................................................
By Telephone You may sell your shares by telephone if you previously
elected that option on the Account Application. You may have
the proceeds mailed to the address of record, wired or sent by
ACH to a commercial bank account previously designated on the
Account Application. Under most circumstances, payments will be
transmitted on the next Business Day following receipt of a
valid telephone request for redemption. Wire redemption
requests may be made by calling SEI Financial Services Company
at 1-800-437-6016, who will subtract a wire redemption charge
(presently $10.00) from the amount of the redemption.
Systematic You may establish a systematic withdrawal plan for an account
Withdrawal with a $10,000 minimum balance. Under the plan, redemptions
Plan ("SWP") can be automatically processed from accounts (monthly,
quarterly, semi-annually or annually) by check or by ACH with
a minimum redemption amount of $50.
INVESTMENT OBJECTIVES AND POLICIES _____________________________________________
LARGE CAP The investment objective of the Large Cap Value Portfolio is
VALUE long-term growth of capital and income. There is no assurance
PORTFOLIO that the Portfolio will achieve its investment objective.
The Portfolio invests primarily in a diversified portfolio
of high quality, income producing common stocks which, in the
advisers' opinion, are undervalued in the marketplace at the
time of purchase. In general, the advisers characterize high
quality securities as those that have above-average returns-on-
equity and above average reinvestment
................................................................................
(SYMBOL WHAT ARE
APPEARS INVESTMENT
HERE) OBJECTIVES
AND POLICIES?
A Portfolio's investment objective is a statement of what it seeks to achieve.
It is important to make sure that the investment objective matches your own
financial needs and circumstances. The investment policies section spells out
the types of securities in which each Portfolio invests.
................................................................................
13
<PAGE>
rates relative to the stock market in general as measured by
the S&P Barra/Value Index. The advisers also consider other
factors, such as earnings and dividend growth prospects as
well as industry outlook and market share. Under normal
conditions, the Portfolio will invest at least 65% of its
total assets will be invested in common stocks of companies
with a market capitalization of at least $1 billion.
Under normal circumstances the Portfolio, to the extent
not invested in the securities described above, may invest
in investment grade bonds. Investment grade bonds include
securities rated BBB by Standard & Poor's Corporation
("S&P") or Baa by Moody's Investors Service, Inc.
("Moody's"), which may be regarded as having speculative
characteristics.
The Portfolio's investment adviser is SEI Financial
Management Corporation and its investment sub-advisers are
LSV Asset Management, Mellon Equity Associates and Merus
Capital Management.
LARGE CAP The investment objectives of the Large Cap Growth Portfolio
GROWTH is capital appreciation. There is no assurance that the
PORTFOLIO Portfolio will achieve its investment objective.
Under normal conditions, the Portfolio will invest at
least 65% of its total assets in equity securities of large
companies (i.e., companies with market capitalizations of
more than $1 billion). The Portfolio's advisers will
generally select securities of issuers believed to possess
significant growth potential. Any remaining assets may be
invested in fixed income securities or in equity securities
of smaller companies that the Portfolio's advisers believe
are appropriate in light of the Portfolio's objective.
Equity securities include common stock, preferred stock,
warrants or rights to subscribe to common stock and, in
general, any security that is convertible into or
exchangeable for common stock. Fixed-income securities must
be rated investment grade or better, i.e., rated at least
BBB by S&P or Baa by Moody's. Debt securities rated BBB or
Baa lack outstanding investment characteristics, and have
speculative characteristics as well.
In order to meet liquidity needs, or for temporary
defensive purposes, the Portfolio may invest up to 100% of
its assets in cash and money market securities. Money market
securities must be rated in one of the top two categories by
a major rating service or, if unrated, be of comparable
quality as determined by the managers.
The Portfolio's annual turnover rate may exceed 100%. Such
a turnover rate may result in higher transaction costs and
may result in additional taxes for shareholders. See
"Taxes."
The Portfolio's investment adviser is a SEI Financial
Management Corporation and its investment sub-advisers are
Alliance Capital Management L.P. and IDS Advisory Group Inc.
SMALL CAP VALUE The investment objective of the Small Cap Value Portfolio is
PORTFOLIO capital appreciation. There is no assurance that the
Portfolio will achieve its investment objective.
Under normal market conditions, the Portfolio will invest
at least 65% of its total assets in the equity securities of
smaller companies (i.e., companies with market
14
<PAGE>
capitalizations of less than $1 billion). The Portfolio's
advisers will select securities of companies believed to be
undervalued on the basis of various market-related
criteria. Any remaining assets may be invested in fixed
income securities or equity securities of larger, more
established companies that the Portfolio's advisers believe
are appropriate in light of the Portfolio's objective.
Equity securities include common stock, preferred stock,
warrants and rights to subscribe to common stock and, in
general, any security that is convertible into or
exchangeable for common stock. Fixed income securities must
be rated investment grade or better, i.e., rated at least
BBB by S&P or Baa by Moody's. Debt securities rated BBB or
Baa lack outstanding investment characteristics, and have
speculative characteristics as well.
In order to meet liquidity needs, or for temporary
defensive purposes, the Portfolio may invest up to 100% of
its assets in cash and money market securities. Money
market securities must be rated in one of the two top
categories by a major rating service or, if unrated, be of
comparable quality as determined by the Portfolio's
advisers.
The Portfolio's investment adviser is SEI Financial
Management Corporation and its investment sub-adviser is
1838 Investment Advisors, L.P.
SMALL CAP GROWTH The investment objective of the Small Cap Growth Portfolio
PORTFOLIO is to provide long-term capital appreciation by investing
primarily in equity securities of smaller companies. There
is no assurance that the Portfolio will achieve its
investment objective.
The Portfolio seeks to provide long-term capital
appreciation. The Portfolio's policy is to invest in equity
securities of smaller companies that the advisers believe
are in an early stage or transitional point in their
development and have demonstrated or have the potential for
above average capital growth. The advisers will select
companies which have the potential to gain market share in
their industry, achieve and maintain high and consistent
profitability or produce increases in earnings. The
advisers also seek companies with strong company management
and superior fundamental strength.
Under normal market conditions, the Portfolio will invest
at least 65% of its total assets in the equity securities
of smaller growth companies (i.e., market capitalizations
less than $1 billion). Small capitalization companies have
the potential to show earnings growth over time that is
well above the growth rate of the overall economy. The
remaining 35% of the Portfolio's assets may be invested in
the equity securities of more established companies that
the advisers believe may offer strong capital appreciation
potential due to their relative market position,
anticipated earnings growth, changes in management or other
similar opportunities. Equity securities include common
stock, preferred stock, warrants and rights to subscribe to
common stock and, in general, any security that is
convertible into or exchangeable for common stock.
For temporary defensive purposes, when in the opinion of
the advisers market conditions so warrant, the Portfolio
may invest all or a portion of its assets in common stocks
of larger, more established companies or in fixed income
securities or money market securities (consisting of
securities issued or guaranteed by the United States
15
<PAGE>
Government, its agencies or instrumentalities, repurchase
agreements backed by such securities, certificates of
deposit, bankers acceptances and high-grade commercial
paper). Fixed income securities will only be purchased if
they are rated investment grade or better. Investment grade
bonds include securities rated at least BBB by S&P or Baa by
Moody's. Securities rated BBB or Baa may be regarded as
having speculative characteristics. Money market securities
will only be purchased if they have been given one of the
two top ratings by a major rating service, or if unrated,
are of comparable quality as determined by the advisers. To
the extent the Portfolio is engaged in temporary defensive
investments, the Portfolio will not be pursuing its
investment objective.
The Portfolio's investment advisers are Investment
Advisers, Inc., Nicholas-Applegate Capital Management (a
Limited Partnership) and Pilgrim Baxter & Associates, Ltd.
MID-CAP GROWTH The investment objective of the Mid-Cap Growth Portfolio is
PORTFOLIO to provide long-term capital appreciation by investing
primarily in equity securities of medium sized companies.
There is no assurance that the Portfolio will achieve its
investment objective.
The Portfolio seeks to achieve its investment objective
by investing in equity securities of medium sized companies.
Under normal market conditions, the Portfolio will invest at
least 65% of its total assets in equity securities of
companies having stock market capitalizations of $500
million to $5 billion. Such companies are typically well
established but have not reached full maturity and may offer
significant growth potential. The adviser will seek to
identify companies which, in its opinion, will experience
accelerating earnings, increased institutional ownership or
strong price appreciation relative to their industries and
broad market averages.
All of the equity securities in which the Portfolio
invests are traded on registered exchanges or on the over-
the-counter market in the United States. Equity securities
include common stock, warrants and rights to subscribe to
common stock and, in general, any security that is
convertible into or exchangeable for common stock.
Any assets not invested in equity securities of medium
sized companies as described above are invested in equity
securities of larger, more established companies or in fixed
income securities or short-term money market securities
(including securities issued or guaranteed by the United
States Government, its agencies or instrumentalities,
repurchase agreements backed by such securities,
certificates of deposit, bankers' acceptances and high-grade
commercial paper). Fixed income securities will only be
purchased if they are rated investment grade or better at
time of purchase. Investment grade bonds include securities
rated at least BBB by S&P or Baa by Moody's. Securities
rated BBB or Baa may be regarded as having speculative
characteristics. Short-term money market securities,
certificates of deposit, banker's acceptances and commercial
paper will only be purchased if they have been given one of
the two top ratings by a major rating service, or if
unrated, are of comparable quality as determined by the
adviser. For temporary defensive purposes, when the adviser
determined that market conditions warrant, the Portfolio may
invest all or a portion of its assets in the securities or
instruments described in this paragraph. To
16
<PAGE>
the extent the Portfolio is engaged in temporary defensive
investments, the Portfolio will not be pursuing its
investment objective.
The Portfolio's investment adviser is Nicholas-Applegate
Capital Management.
CAPITAL The investment objective of the Capital Appreciation
APPRECIATION Portfolio is capital appreciation. There is no assurance
PORTFOLIO that the Portfolio will achieve its investment objective.
The Portfolio invests primarily in a diversified
portfolio of common stocks (and securities convertible into
common stock) which, in the adviser's opinion, are
undervalued in the marketplace at the time of purchase.
Dividend income is an incidental consideration compared to
growth of capital. In selecting securities for the
Portfolio, the adviser will evaluate factors it believes are
likely to affect long-term capital appreciation such as the
issuer's background, industry position, historical returns
on equity and experience and qualifications of the
management team. The adviser will rotate the Portfolio
holdings between various market sectors based on economic
analysis of the overall business cycle. Under normal
conditions, at least 65% of the Portfolio will be invested
in common stocks.
Under normal circumstances the Portfolio, to the extent
not invested in the securities described above, may invest
in investment grade bonds. Investment grade bonds include
securities rated BBB by S&P or Baa by Moody's, which may be
regarded as having speculative characteristics.
For the fiscal year ended September 30, 1994, as a result
of its investment strategies, the Portfolio's annual
portfolio turnover rate is 109%. Such a turnover rate may
result in higher transaction costs and may result in
additional taxes for shareholders. See "Taxes."
The Portfolio's investment adviser is SunBank Capital
Management, N.A.
EQUITY INCOME The investment objective of the Equity Income Portfolio (the
PORTFOLIO "Portfolio") is to provide current income and, as a
secondary objective, moderate capital appreciation. There is
no assurance that the Portfolio will achieve its investment
objective.
The Portfolio invests primarily in a diversified
portfolio of common stocks. The investment approach employed
by the adviser emphasizes income producing common stocks
which, in general, have above-average dividend yields
relative to the stock market as measured by the S&P 500
Index. Under normal conditions, at least 65% of the
Portfolio will be invested in common stocks.
Under normal circumstances the Portfolio, to the extent
not invested in the securities described above, may invest
in investment grade bonds. Investment grade bonds include
securities rated BBB by S&P or Baa by Moody's, which may be
regarded as having speculative characteristics.
The Portfolio's investment adviser is Merus Capital
Management.
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BALANCED The investment objective of the Balanced Portfolio is total
PORTFOLIO return consistent with the preservation of capital. There is
no assurance that the Portfolio will achieve its investment
objective.
The Portfolio invests in a combination of undervalued
common stocks and fixed income securities. The Portfolio
seeks strong total return in all market conditions, with a
special emphasis on minimizing interim declines during
falling equity markets. The Portfolio primarily invests in
large capitalization equity securities, intermediate-
maturity fixed income securities and money market
instruments.
Under normal conditions, the Portfolio will invest a
minimum of 25% of its total assets in investment grade fixed
income securities. Such securities consist of bonds,
debentures, notes and similar obligations or instruments
which constitute a security and evidence indebtedness. Fixed
income securities in which the Portfolio may invest are
United States Government securities, mortgage-backed
securities, corporate bonds and bank obligations.
The Portfolio will invest in corporate bonds rated BBB or
higher by S&P or Baa or higher by Moody's at the time of
purchase. Corporate bonds rated BBB or Baa are considered to
be medium grade obligations that have some speculative
characteristics.
The Portfolio will, under normal conditions, invest
between 30% and 70% of its total assets in common stocks,
depending upon the adviser's assessment of market
conditions. When the adviser believes that equity markets
are overvalued, the common stock exposure will be at the low
end of this range. The adviser expects that equity exposure
will average 60% over time. The Portfolio may also invest in
U.S. dollar denominated securities of foreign issuers
(including American Depositary Receipts that are traded on
registered exchanges or listed on NASDAQ).
The average maturity of the fixed income securities in
the Portfolio will, under normal circumstances, be
approximately five years, although this will vary with
changing market conditions.
For the fiscal year ended September 30, 1994, as a result
of its investment strategies, the equity and fixed-income
portions of the Portfolio's annual turnover rate is 128% and
197%, respectively. Such turnover rates may result in higher
transaction costs and may result in additional taxes for
shareholders. See "Taxes."
The Portfolio's investment adviser is SunBank Capital
Management, N.A.
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GENERAL INVESTMENT POLICIES ____________________________________________________
Borrowing The Large Cap Value, Large Cap Growth, Small Cap Value,
Capital Appreciation, Equity Income and Balanced Portfolios
may borrow money. Interest paid on such borrowings will
reduce a Portfolio's income. A Portfolio will not purchase
securities while its borrowings exceed 5% of its total
assets.
Common Stocks The Large Cap Value, Large Cap Growth, Small Cap Value,
Small Cap Growth, Capital Appreciation and Equity Income
Portfolios will invest in common stocks; provided however,
that the Large Cap Value, Small Cap Growth, Capital
Appreciation, Equity Income and Capital Growth Portfolio may
only invest in such securities if they are listed on
registered exchanges or actively traded in the over-the-
counter market.
Investment The Large Cap Growth and Small Cap Value Portfolios may
Company purchase investment company securities, which will result in
Securities the layering of expenses. There are legal limits on the
amount of such securities that may be acquired by a
Portfolio.
Money Market In order to meet liquidity needs, the Large Cap Value, Large
Instruments Cap Growth, Small Cap Value, Capital Appreciation and Equity
Income Portfolios may hold cash reserves and invest in money
market instruments (including securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities, repurchase agreements, certificates of
deposit and bankers' acceptances issued by banks or savings
and loan associations having net assets of at least $500
million as of the end of their most recent fiscal year and
high-grade commercial paper) related at time of purchase in
the top two categories by a national rating agency or
determined to be of comparable quality by the adviser at the
time of purchase.
Options and The Large Cap Growth and Small Cap Value Portfolios may
Futures purchase or write options, futures and options on futures.
Risks associated with investing in options and futures may
include lack of a liquid secondary market, trading
restrictions which may be imposed by an exchange and
government regulations which may restrict trading.
Securities Each Portfolio may lend its assets to qualified investors
Lending for the purpose of realizing additional income; however, the
Large Cap Value, Small Cap Growth, Mid-Cap Growth, Capital
Appreciation, Equity Income, Balanced, Capital Growth and
Real Estate Securities Portfolios each may only lend up to
20% of its total assets for such purpose.
Temporary For temporary defensive purposes when the adviser determines
Defensive that market conditions warrant, each of the Large Cap Value,
Investments Capital Appreciation, Equity Income and Balanced Portfolios
may invest up to 100% of its assets in the money market
instruments described above and other long- and short-term
debt instruments which are rated A or higher by S&P or
Moody's at the time of purchase, and may hold a portion of
its assets in cash. To
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<PAGE>
the extent any Portfolio is engaged in temporary defensive
investments, the Portfolio will not be pursuing its
investment objective.
U.S. Dollar The Large Cap Value, Large Cap Growth, Small Cap Value,
Denominated Capital Appreciation and Equity Income Portfolios may also
Securities of invest in U.S. dollar denominated securities of foreign
Foreign Issuers issuers (including American Depositary Receipts, that are
traded on registered exchanges or listed on NASDAQ).
U.S. Treasury The Large Cap Value, Capital Appreciation and Equity Income
Receipts Portfolios may invest in receipts involving U.S. Treasury
Obligations.
When-Issued and All Portfolios may invest in when-issued and delayed
Delayed- delivery securities.
Delivery
Securities
For additional information regarding the Portfolios'
permitted investments, see "Description of Permitted
Investments and Risk Factors" in this Prospectus and
"Description of Permitted Investments" in the Statement of
Additional Information. For a description of the above
ratings, see "Description of Ratings" in the Statement of
Additional Information.
INVESTMENT LIMITATIONS _________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolios. Fundamental policies
cannot be changed with respect to the Trust or a Portfolio
without the consent of the holders of a majority of the
Trust's or that Portfolio's outstanding shares.
No Portfolio 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 total assets of the Portfolio would be invested in
the securities of such issuer. This restriction applies
to 75% of each Portfolio's total assets.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio 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.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional investment
limitations are set forth in the Statement of Additional
Information.
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THE MANAGER AND SHAREHOLDER SERVICING AGENT ____________________________________
SEI Financial Management Corporation ("SFM"), provides the
Trust with overall management services, regulatory reporting,
all necessary office space, equipment, personnel and
facilities, and acts as transfer agent, dividend disbursing
agent and shareholder servicing agent.
For its management services, SFM is entitled to a fee
which is calculated daily and paid monthly at an annual rate
of .50% of the average daily net assets of the Small Cap
Growth, Mid-Cap Growth, Capital Appreciation, Equity and
Balanced Portfolios and at an annual rate of .35% of the
average daily net assets of the Large Cap Value, Large Cap
Growth and Small Cap Value Portfolios. In addition, SFM has
voluntarily agreed to waive a portion of its fees in order to
limit the operating expenses of each Portfolio in order to
limit the operating expenses of a Portfolio's ProVantage
Funds shares on an annualized basis. Any such waiver is
voluntary and may be terminated at any time in SFM's sole
discretion.
For the fiscal year ended September 30, 1994, the
Portfolios paid SFM the following management fees (based on
their average daily net assets after fee waivers): Large Cap
Value Portfolio, .50%; Small Cap Growth Portfolio, .40%;
Capital Appreciation Portfolio, .45%; Equity Income
Portfolio, .46%; Balanced Portfolio, .34%; and Mid-Cap Growth
Portfolio, .37%.
THE ADVISERS AND SUB-ADVISERS __________________________________________________
The following entities serve as investment advisers (each, an
"Adviser," and collectively, the "Advisers") and investment
sub-advisers (each, a "Sub-Adviser," and collectively, the
"Sub-Advisers") to the Trust's Portfolios. Each Adviser has
general oversight responsibility for the investment advisory
services provided to the Portfolios, including formulating the
Portfolios' investment policies and analyzing economic trends
affecting the Portfolios. In addition, SFM, where it is the
Adviser to a Portfolio, is responsible for managing the
allocation of assets among the Portfolio's Sub-Advisers and
directing and evaluating the investment services provided by
the Sub-Advisers, including their adherence to each Portfolio's
respective investment objective and policies and each
Portfolio's investment performance. In accordance with each
Portfolio's investment objective and policies, and under the
supervision of the Adviser and the Trust's Board of Trustees,
each Sub-Adviser and certain
................................................................................
(SYMBOL INVESTMENT
APPEARS ADVISER
HERE)
A Portfolio's advisers manage the investment activities and are responsible for
the performance of the Portfolio. The advisers conduct investment research,
executes investment strategies based on an assessment of economic and market
conditions, and determine which securities to buy, hold or sell.
................................................................................
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<PAGE>
Advisers are responsible for the day-to-day investment
management of all or a discrete portion of the assets of a
Portfolio. The Advisers and Sub-Advisers are authorized to
make investment decisions for the Portfolios and place
orders on behalf of the Portfolios to effect the investment
decisions made.
The Glass-Steagall Act restricts the securities
activities of banks such as the Bank of California, Sun
Trust Banks, Inc. and Mellon Bank Corporation, but federal
regulatory authorities permit such banks to provide
investment advisory and other services to mutual funds.
Should this position be challenged successfully in court or
reversed by legislation, the Trust might have to make other
investment advisory arrangements.
In addition, SFM monitors the compliance of each adviser
with regulatory and tax regulations, such as portfolio
concentration and diversification. For the most part
compliance with these requirements by each adviser with
respect to its portion of a Portfolio will assure compliance
by the Portfolio as a whole. In addition, SFM monitors
positions taken by each adviser and will notify advisers of
any developing situations to help ensure that investments do
not run afoul of the short-short test or the wash sale
rules. To the extent that having multiple advisers
responsible for investing separate portions of a Portfolio's
assets creates the need for coordination among the advisers,
there is an increased risk that the Portfolio will not
comply with these regulatory and tax requirements.
It is possible that different advisers for the same
Portfolio could take opposite actions within a short period
of time with respect to a particular security. For example,
one adviser could buy a security for the Portfolio and
shortly thereafter another adviser could sell the same
security from the portion of the Portfolio allocated to it.
If in these circumstances the securities could be
transferred from one adviser's portion of the Portfolio to
another, the Portfolio could avoid transaction costs and
could avoid creating possible wash sales and short-short
gains under the Internal Revenue Code of 1986, as amended
(the "Code"). Such transfers are not practicable but the
advisers and SFM do not believe that there will be material
adverse effects on a Portfolio as a result. First, it does
not appear likely that there will be substantial overlap in
the securities acquired for a Portfolio by the various
advisers. Moreover, the advisers would probably only rarely
engage in the types of offsetting transactions described
above, especially within a short time period. Therefore, it
is a matter of speculation whether offsetting transactions
would result in any significant increases in transaction
costs or have significant tax consequences. With respect to
the latter, SFM and the advisers have established procedures
with respect to the short-short test which are designed to
prevent realization of short-short gains in excess of Code
limits. It is true that wash sales could occur in spite of
the efforts of SFM, but the Board of Trustees believes that
the benefits of using multi-managers outweighs the
consequences of any wash sales.
SFM is currently seeking an exemptive order from the
Securities and Exchange Commission (the "SEC") that would
permit SFM, with the approval of the Trust's Board of
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<PAGE>
Trustees, to retain sub-advisers for a Portfolio without
submitting the sub-advisory agreement to a vote of the
Portfolio's shareholders. If granted, the exemptive relief
will permit the non-disclosure of amounts payable by SFM
under such sub-advisory agreements. The Trust will notify
shareholders in the event of any change in the identity of
the sub-adviser for a Portfolio. Until or unless this
exemptive order is granted, if one of the advisers is
terminated or departs from a Portfolio with multiple
advisers, the Portfolio will handle such termination or
departure in one of two ways. First, the Portfolio may
propose that a new investment adviser be appointed to manage
that portion of the Portfolio's assets managed by the
departing adviser. In this case, the Portfolio would be
required to submit to the vote of the Portfolio's
shareholders the approval of an investment advisory contract
with the new adviser. In the alternative, the Portfolio may
decide to allocate the departing adviser's assets among the
remaining advisers. This allocation would not require new
investment advisory contracts with the remaining advisers,
and consequently no shareholder approval would be necessary.
1838 INVESTMENT 1838 Investment Advisors, L.P. ("1838") serves as investment
ADVISORS, L.P. sub-adviser of the Small Cap Value Portfolio. 1838 is a
Delaware limited partnership located at 100 Matsonford Road,
Radnor, Pennsylvania. As of September 30, 1994, 1838 managed
$3.5 billion in assets in large and small capitalization
equity, fixed income and balanced account portfolios.
Clients include corporate employee benefit plans,
municipalities, endowments, foundations, jointly trusteed
plans, insurance companies and wealthy individuals.
Edwin B. Powell, Holly. L. Guthrie and Joseph T. Doyle,
have served as the portfolio managers to the Small Cap Value
Portfolio since its inception. These individuals work as a
team and share responsibility. Mr. Doyle has been with 1838
since 1988. Mr. Powell and Ms. Guthrie joined 1838 in 1994.
Mr. Powell managed small cap equity portfolios for Provident
Capital Management from 1987 to 1994. Ms. Guthrie managed
small cap equity portfolios for Provident Capital Management
from 1992 to 1994. Prior to that she was employed by
CoreStates Investment Advisers from 1987 to 1992 as an
equity analyst and portfolio manager.
1838 is entitled to a fee, which is calculated daily and
paid monthly by SFM at an annual rate of .50%. 1838 may
waive all or a portion of its fee in order to limit the
operating expenses of the Portfolio. 1838 reserves the
right, in its sole discretion, to terminate any such
voluntary fee waiver at any time. During the fiscal year
ended September 30, 1994, the Small Cap Value Portfolio had
not commenced operations and therefore 1838 did not receive
an advisory fee.
ALLIANCE Alliance Capital Management, L.P. ("Alliance") serves as
CAPITAL investment sub-adviser to a portion of the assets of the
MANAGEMENT, Large Cap Growth Portfolio. Alliance is a registered
L.P. investment adviser organized as a Delaware limited
partnership which originated as Alliance Capital Management
Corporation in 1971. Alliance Capital Management Corporation
("ACML"), an indirect wholly-owned subsidiary of The
Equitable Life Assurance Society of the United
23
<PAGE>
States, is the general partner of Alliance. As of September
30, 1994, Alliance managed over $123 billion in assets. The
principal business address of Alliance is 1345 Avenue of the
Americas, New York, New York 10105.
John L. Blundin, Senior Vice President of Alliance and
Christopher Toub, Vice President of Alliance, each serve as
portfolio managers to the Large Cap Growth Portfolio. Mr.
Blundin joined Alliance in 1972. Mr. Toub joined Alliance in
1992 as a portfolio manager with the Disciplined Growth
Group. Prior to 1992, Mr. Toub was with Marcus, Schloss, a
private investment partnership, as an analyst and portfolio
manager. Prior to Marcus, Schloss, Mr. Toub worked at Bear
Stearns in proprietary trading. Both Mr. Blundin and Mr.
Toub have served as portfolio managers of the Large Cap
Growth Portfolio since its inception.
Alliance is entitled to the greater of $125,000 or a fee
which is paid monthly by SFM at an annual rate of .25% of
the market value of investments of that portion of the Large
Cap Growth Portfolio which Alliance manages. Alliance may
waive all or a portion of its fees in order to limit the
operating expenses of the Portfolio. Alliance reserves the
right, in its sole discretion, to terminate any such
voluntary fee waiver at any time. During the fiscal year
ended September 30, 1994, the Large Cap Growth Portfolio had
not commenced operations and therefore Alliance did not
receive an advisory fee.
IDS ADVISORY IDS Advisory Group Inc. ("IDS") serves as investment sub-
GROUP INC. adviser to a portion of the assets of the Large Cap Growth
Portfolio. IDS is a registered investment adviser and
wholly-owned subsidiary of IDS Financial Corporation.
Effective January 1, 1995, IDS Financial Corporation will be
changing its name to American Express Financial Corporation.
As of September 30, 1994, IDS managed over $20.5 billion in
assets with $5 billion of this total in large capitalization
growth domestic equities. IDS was founded in 1972 to manage
tax-exempt assets for institutional clients. The principal
business address of IDS is IDS Tower 10, Minneapolis, MN
55440.
The day-to-day management of IDS' portion of the Large
Cap Growth Portfolio's investments is the responsibility of
a committee composed of the eight investment portfolio
managers of the equity investment team. No individual person
is primarily responsible for making recommendations to that
committee. IDS has served as sub-adviser to the Large Cap
Growth Portfolio since its inception.
IDS is entitled to the greater of $125,000 or a fee which
paid monthly by SFM at an annual rate of .25% of the market
value of investments of that portion of the Large Cap Growth
Portfolio which IDS manages. IDS may waive all or a portion
of its fee in order to limit the operating expenses of the
Portfolio. IDS reserves the right, in its sole discretion,
to terminate any such voluntary fee waiver at any time.
During the fiscal year ended, the Large Cap Growth Portfolio
had not commenced operations and therefore IDS did not
receive an advisory fee.
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<PAGE>
INVESTMENT Investment Advisers, Inc. ("Investment Advisers") serves as
ADVISERS, INC. investment adviser of the Small Cap Growth Portfolio, which
is also advised by Nicholas-Applegate Capital Management and
Pilgrim Baxter & Associates Ltd. Investment Advisers has
operated as a professional investment counseling firm which
provides investment services to employee benefit plans,
endowments, foundations, other institutions and investment
companies since 1947. As of September 30, 1994, Investment
Advisers had discretionary management authority with respect
to approximately $13 billion of assets. The principal
business address of Investment Advisers is 3700 First Bank
Place, 601 Second Avenue, Minneapolis, Minnesota 55402.
Investment Advisers is an indirect majority owned subsidiary
of publicly held TSB Group, Plc, a United Kingdom financial
services group.
Until July 1, 1993, Investment Advisers was the sole
investment adviser and provided the review, supervision and
management of the Portfolio's investment program and related
reporting and recordkeeping services for all of the
Portfolio's assets. As of July 1, 1993, Nicholas-Applegate
Capital Management and Pilgrim Baxter & Associates Ltd.
began to serve as investment advisers for portions of the
Portfolio's assets not advised by Investment Advisers. As
more fully described below, the Board of Trustees allocates
the Portfolio's assets among the three investment advisers
from time to time. Performance for each investment adviser
will be based upon the performance of the assets of the
entire Portfolio.
The method of allocating the assets of the Portfolio from
cash inflows and outflows resulting from shareholder
purchases and redemptions among the three Advisers is as
follows: For net shareholder purchases, the resulting cash
inflow will be allocated among all three Advisers in
proportion to the amount by which each Adviser's assets
under management is below their allocated capacity. In the
case of net shareholder redemptions, all three Advisers will
contribute to net redemptions in proportion to their assets
under management as a percentage of total assets in the
Portfolio. The Board of Trustees will retain, in its
discretion, the authority to increase or decrease the assets
assigned to each Adviser. SFM, as Manager for the Trust,
will allocate the assets of the Portfolio among the three
Advisers pursuant to the above formula and the direction of
the Board of Trustees.
Rick D. Leggott, CFA, is a Senior Vice President and
Equity Portfolio Manager of Investment Advisers. In 1986 he
became Senior Investment Officer for Central Trust Company,
N.A. Mr. Leggott joined the adviser as a growth stock
specialist in 1987, and has been a Portfolio Manager of the
Small-Cap Growth Portfolio since April 20, 1992.
Investment Advisers is entitled to a fee, which is
calculated daily and paid monthly by the Portfolio, at an
annual rate of .50% of the average daily net assets assigned
to it. For the fiscal year ended September 30, 1994, the
Portfolio paid each of the Portfolio's advisers an advisory
fee of .50% of the average daily net assets under such
adviser's investment management. Of this .50% advisory fee,
.18% of the Portfolio's total average daily net assets was
paid to Investment Advisers.
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<PAGE>
LSV ASSET LSV Asset Management ("LSV") serves as investment sub-
MANAGEMENT adviser to a portion of the assets of the Large Cap Value
Portfolio. LSV is a registered investment adviser organized
as a Delaware general partnership in which an affiliate of
SFM owns a majority interest. The general partners of LSV
have developed quantitative value analysis methodology and
software which has been used to manage assets over the past
5 years. Although LSV has never managed investment
companies, the portfolio identified by the model has been
implemented by three institutional clients with aggregate
assets invested of approximately $455 million including $15
million in a portfolio of U.S. securities. The principal
business address of LSV is 181 W. Madison Avenue, Chicago,
IL 60602.
Investment decisions are made by the quantitative
computer model. Josef Lakonishok, Andrei Shleifer and Robert
Vishny, officers of LSV, will on a continuous basis monitor
the quantitative analysis model and based on their ongoing
research and statistical analysis make adjustments to the
model. Securities are identified for purchase or sale by the
portfolio based upon the computer model and defined variance
tolerances. Purchases and sales are effected by LSV based
upon the output from the model.
LSV, is entitled to a fee, which is paid monthly by SFM,
at an annual rate of .20% of the market value of investments
under its management. During the fiscal year ended September
30, 1994, LSV did not serve as investment sub-adviser for
the Portfolio and therefore did not receive an advisory fee.
MELLON EQUITY As of December 16, 1994, Mellon Equity Associates ("Mellon")
ASSOCIATES serves as investment sub-adviser to a portion of the assets
of the Large Cap Value Portfolio. Between October 3, 1994
and December 16, 1994, Mellon acted as investment adviser of
the Portfolio. Prior to October 3, 1994, the Portfolio was
advised by Duff & Phelps Investment Management Company
("Duff & Phelps"). Mellon is a Pennsylvania business trust
founded in 1987, whose sole beneficiary is MBC Investments
Corporation, a wholly-owned subsidiary of the Mellon Bank
Corporation. Mellon is a professional investment counseling
firm that provides investment management services to the
equity and balanced pension, public fund and profit-sharing
investment management markets, and is a registered
investment adviser under the Investment Advisers Act of
1940, as amended (the "1940 Act"). Mellon had discretionary
management authority with respect to approximately $6.2
billion of assets as of September 30, 1994. Mellon's
predecessor organization had managed domestic equity tax-
exempt institutional accounts since 1947. The business
address for Mellon is 500 Grant Street, Suite 3700,
Pittsburgh, PA 15258.
William P. Rydell and Robert A. Wilk are the Portfolio
Managers for Mellon's portion of the Large Cap Value
Portfolio. Mr. Rydell is the President and Chief Executive
Officer of Mellon, and has been managing individual and
collectivized portfolios at Mellon since 1982. Mr. Wilk is a
Senior Vice President and Portfolio Manager of Mellon, and
has been involved with securities analysis, quantitative
research, asset allocation, trading and client services at
Mellon since April 1990. Prior to joining Mellon, Mr. Wilk
was in charge
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<PAGE>
of portfolio management and conducted quantitative research
for another investment subsidiary of Mellon Bank
Corporation, Triangle Portfolio Associates.
Mellon is entitled to a fee, which is paid monthly by
SFM, at an annual rate of .20% of the market value of
investments under its management. During the fiscal year
ended September 30, 1994, Mellon did not act as investment
adviser or sub-adviser for the Portfolio and therefore did
not receive an advisory fee.
MERUS CAPITAL Merus Capital Management ("Merus") serves as investment
MANAGEMENT adviser for the Equity Income Portfolio. In addition, as of
December 16, 1994, Merus also serves as the investment sub-
adviser to a portion of the assets of the Large Cap Value
Portfolio. Merus is a division of the Bank of California and
provides equity and fixed-income management services to a
broad array of corporate and municipal clients. As of
September 30, 1994, Merus had discretionary management
authority with respect to approximately $6.2 billion of
assets. The principal business address of Merus is 475
Sansome Street, San Francisco, California 94111.
Each Portfolio is managed by a committee.
Merus is entitled to a fee, which is calculated daily and
paid monthly by the Equity Income Portfolio, at an annual
rate of .25% of the average daily net assets of the
Portfolio. Merus may reduce its fee, in its discretion, for
competitive purposes. In addition, Merus has voluntarily
agreed to waive fees in an amount that operates to limit net
operating expenses. Merus reserves the right, in its sole
discretion, to terminate this voluntary fee waived at any
time. For the fiscal year ended September 30, 1994, the
Portfolio paid Merus an advisory fee of .23% of its average
daily net assets after fee waivers.
Merus is entitled to a fee, which is paid monthly by SFM,
at an annual rate of .20% of the market value of investments
of the Large Cap Value Portfolio under its management.
During the fiscal year ended September 30, 1994, Merus did
not act as investment sub-adviser for the Portfolio and
therefore did not receive an advisory fee.
NICHOLAS- Nicholas-Applegate Capital Management ("Nicholas-Applegate")
APPLEGATE is one of three advisers to the Small Cap Growth Portfolio
CAPITAL and is responsible for a portion of the assets of the
MANAGEMENT Portfolio. Nicholas-Applegate also serves as the Mid-Cap
Growth Portfolio's investment adviser.
Nicholas-Applegate has operated as an investment adviser
which provides investment services to employee benefit
plans, endowments, foundations, other institutions and
investment companies since April 20, 1987. As of September
30, 1994, Nicholas-Applegate had discretionary management
authority with respect to approximately $13 billion of
assets. The principal business address of Nicholas-Applegate
is 600 West Broadway, 29th Floor, San Diego, CA 92101.
Nicholas-Applegate, pursuant to a partnership agreement, is
controlled by its general partner Nicholas-Applegate Capital
Management, Inc., a corporation owned by Arthur E. Nicholas.
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<PAGE>
Nicholas-Applegate manages its portion of the Small Cap
Growth Portfolio through its systematic-driven management
team under the supervision of Mr. Nicholas, founder and
Chief Investment Officer of the firm. Nicholas-Applegate's
systems driven investment team, headed by Lawrence S.
Speidell, is primarily responsible for the day-to-day
management of the Portfolio since March 1994. Mr. Speidell
has been a Portfolio Manager and investment team leader with
Nicholas-Applegate since March 1994. Prior to joining
Nicholas-Applegate, he was an institutional portfolio
manager with Batterymarch Financial Management.
Nicholas-Applegate is entitled to a fee which is
calculated daily and paid monthly by the Small Cap Growth
Portfolio, at an annual rate of .50% of the average daily
net assets assigned to it. For the fiscal year ended
September 30, 1994, the Portfolio paid each of the
Portfolio's advisers an advisory fee of .50% of the daily
net assets under such Adviser's investment management. Of
this .50% advisory fee, .16% of the Portfolio's total
average daily net assets was paid to Nicholas-Applegate.
John C. Marshall, Jr. has been the Portfolio manager for
the Mid-Cap Growth Portfolio since February, 1993. Mr.
Marshall joined Nicholas-Applegate in March 1989 and is a
Partner and Portfolio Manager and lead manager in the Mid-
Cap area. Prior to joining Nicholas-Applegate, Mr. Marshall
was a Managing Director of Equity Investment at Pacific
Century Advisers from May 1986 until March 1989.
Nicholas-Applegate is entitled to a fee which is
calculated daily and paid monthly by the Mid-Cap Growth
Portfolio, at an annual rate of .45% of the average daily
net assets of the Portfolio up to the first $100 million in
assets and .40% on assets in excess of $100 million. For the
fiscal year ended September 30, 1994, the Mid-Cap Growth
Portfolio paid Nicholas-Applegate an advisory fee of .45% of
its average daily net assets.
PILGRIM BAXTER Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter") is one
& ASSOCIATES, of three advisers to the Small Cap Growth Portfolio and is
LTD. responsible for a portion of assets of the Portfolio.
Pilgrim Baxter has operated as a professional investment
counseling firm which provides investment services to
pension and profit-sharing plans, other institutions and
investment companies since November, 1982. As of September
30, 1994, Pilgrim Baxter had discretionary management
authority with respect to approximately $106 billion of
assets. The principal business address of Pilgrim Baxter is
1255 Drummers Lane, Suite 300, Wayne, Pennsylvania 19087.
Pilgrim Baxter is an "S" Corporation with majority ownership
by Gary L. Pilgrim (42.35%) and Harold J. Baxter (42.35%).
Pilgrim Baxter has entered into certain agreements with
Framlington (USA), Inc., the U.S. affiliate of a British
financial services firm, Framlington Group plc
("Framlington"), for sharing the profits of Pilgrim Baxter's
advisory contract income (not including income from Pilgrim
Baxter's advisory agreement with the Fund and sub-advisory
fees from other mutual funds).
28
<PAGE>
John F. Force, CFA, joined Pilgrim Baxter in January 1993
and is a portfolio Manager/Analyst. Mr. Force has been
managing the Small Cap Growth Portfolio since July 1, 1993
when Pilgrim Baxter became an adviser. Prior to joining
Pilgrim Baxter, Mr. Force was Vice President/Portfolio
Manager at Fiduciary Management Associates from July 1987 to
September 1992.
Pilgrim Baxter is entitled to a fee which is calculated
daily and paid monthly by the Portfolio, at an annual rate
of .50% of the average daily net assets assigned to it. For
the fiscal year ended September 30, 1994, the Portfolio paid
each of the Portfolio's advisers an advisory fee of .50% of
the daily net assets under such Adviser's investment
management. Of this .50% advisory fee, .16% of the
Portfolio's total average daily net assets was paid to
Pilgrim Baxter.
SEI FINANCIAL SEI Financial Management Corporation ("SFM") serves as
MANAGEMENT investment adviser for the Large Cap Value Large Cap Growth
CORPORATION and Small Cap Value Portfolios. SFM is a wholly-owned
subsidiary of SEI Corporation ("SEI"), a financial services
company located in Wayne, Pennsylvania. The principal
business address of SFM is 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658. SEI was founded in 1968 and is a
leading provider of investment solutions to banks,
institutional investors, investment advisers and insurance
companies. Affiliates of SFM have provided consulting advice
to institutional investors for more than 20 years, including
advice regarding selection and evaluation of investment
advisers. Although SFM has not previously been the
investment adviser to an investment company, it currently
serves as manager or administrator to more than 26
investment companies, including more than 220 portfolios,
which investment companies have more than $42 billion in
assets as of September 30, 1994.
For these advisory services SFM is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .35% of the Large Cap Value Portfolio's average
daily net assets, at an annual rate of .40% of the Large Cap
Growth Portfolio's average daily net assets and at an annual
rate of .65% of the Small Cap Value Portfolio's average
daily net assets. During the fiscal year ended September 30,
1994, SFM did not act as investment adviser for the Large
Cap Value Portfolio and therefore did not receive an
advisory fee.
SUNBANK CAPITAL SunBank Capital Management, N.A. ("SunBank") serves as
MANAGEMENT, investment adviser for the Capital Appreciation and Balanced
N.A. Portfolios. SunBank was established in 1934 and is owned by
SunBank, Inc., a wholly-owned subsidiary of Sun Trust Banks,
Inc., a bank holding company. As of September 30, 1994,
SunBank had discretionary management authority with respect
to approximately $11.75 billion of assets. The principal
business address of SunBank is P.O. Box 3808, Orlando,
Florida 32802.
Anthony R. Gray is Chairman and Chief Investment Officer
of SunBank since 1987, and has managed the Capital
Appreciation and Balanced Portfolios since their inception.
Mr. Gray joined SunBank in 1979 as Director of Research of
the Trust Investment Division.
29
<PAGE>
John D. Race is President of SunBank and has managed the
Balanced Portfolio since its inception.
SunBank is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate of .25% of the Capital
Appreciation and Balanced Portfolios' average daily net
assets. For the fiscal year ended September 30, 1994, each
Portfolio paid SunBank an advisory fee of .25% of its
average daily net assets.
DISTRIBUTION ___________________________________________________________________
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as each Portfolio's
distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust. Each Portfolio has
a distribution plan for its shares (the "Class A Plan,"
"Class B Plan" and the "ProVantage Plan;" collectively, "the
Plans") pursuant to Rule 12b-1 under the 1940 Act. The Trust
intends to operate the Plans in accordance with their terms
and with the NASD rules concerning sales charges.
The Distribution Agreement and the Plans provide for
reimbursement for expenses incurred by the Distributor in an
amount not to exceed .30% of the average daily net assets of
each Portfolio on an annualized basis, provided those
expenses are permissible as to both type and amount under a
budget, adopted by the Board of Trustees, including those
Trustees who are not interested persons and have no
financial interest in the Plans or any related agreement
("Qualified Trustees"). The Class B and ProVantage Plans
provide for additional payments for distribution and
shareholder services as described below.
Distribution-related expenses reimbursable to the
Distributor under the budget include those related to the
costs of advertising and sales materials, the costs of
federal and state securities law registration, advertising
expenses and promotional and sales expenses including
expenses for travel, communication and compensation and
benefits for sales personnel. The Trust is not obligated to
reimburse the Distributor for any expenditures in excess of
the approved budget. Currently the budget (shown here as a
percentage of daily net assets) for each Portfolio is as
follows: Large Cap Value Portfolio, .05%; Large Cap Growth
Portfolio, .07%; Small Cap Value Portfolio, .07%; Small Cap
Growth Portfolio, .06%; Mid-Cap Growth Portfolio, .08%;
Capital Appreciation Portfolio, .05%; Equity Income
Portfolio, .06%; and Balanced Portfolio, .11%. Distribution
expenses not attributable to a specific portfolio are
allocated among each of the portfolios of the Trust based on
average net assets.
The ProVantage Plan, in addition to providing for the
reimbursement payments described above, provides for
payments to the Distributor at an annual rate of .30% of the
Portfolio's average daily net assets attributable to
ProVantage Funds shares. This additional payment may be used
to compensate financial institutions that provide
distribution-related services to their customers. These
additional payments are characterized as "compensation," and
are not directly tied to expenses incurred by the
Distributor; the payments the Distributor receives during
any year may therefore be higher or lower than its actual
expenses.
30
<PAGE>
These additional payments may be used to compensate the
Distributor for its services in connection with distribution
assistance or provision of shareholder services, and some or
all of it may be used to pay financial institutions and
intermediaries such as banks, savings and loan associations,
insurance companies, and investment counselors, broker-
dealers and the Distributor's affiliates and subsidiaries
for services or reimbursement of expenses incurred in
connection with distribution assistance or provision of
shareholder services. If the Distributor's expenses are less
than its fees under the ProVantage Plan, the Trust will
still pay the full fee and the Distributor will realize a
profit, but the Trust will not be obligated to pay in excess
of the full fee, even if the Distributor's actual expenses
are higher. Currently the Distributor is taking this
additional compensation payment under the ProVantage Plan at
a rate of only .25% of each Portfolio's average daily net
assets, on an annualized basis, attributable to ProVantage
Funds shares.
The Class B Plan is similar to the ProVantage Plan
described above except that for each Portfolio, the Class B
Plan provides for additional payments to the Distributor of
.30% and it applies only to Class B shares. It is possible
that an institution may offer different classes of shares to
its customers and thus receive different compensation with
respect to different classes. These financial institutions
may also charge separate fees to their customers.
The Trust may also execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive usual and customary compensation.
In addition, the Distributor may, from time to time in
its sole discretion, institute one or more promotional
incentive programs, which will be paid by the Distributor
from the sales charge it receives or from any other source
available to it. Under any such program, the Distributor
will provide promotional incentives, in the form of cash or
other compensation, including merchandise, airline vouchers,
trips and vacation packages, to all dealers selling shares
of the Portfolios. Such promotional incentives will be
offered uniformly to all dealers and predicated upon the
amount of shares of the Portfolios sold by the dealer.
PERFORMANCE ____________________________________________________________________
From time to time, a Portfolio may advertise yield and total
return. These figures will be based on historical earnings
and are not intended to indicate future performance. No
representation can be made concerning actual yield or future
returns. The yield of a Portfolio refers to the income
generated by a hypothetical investment, net of any sales
charge imposed in the case of some of the ProVantage Funds
shares, in such Portfolio over a thirty day period. This
income is then "annualized," i.e., the income over thirty
days is assumed to be generated over one year and is shown
as a percentage of the investment.
The total return of a Portfolio refers to the average
compounded rate of return on a hypothetical investment for
designated time periods, assuming that the entire investment
is redeemed at the end of each period and assuming the
reinvestment of all dividend and capital gain distributions.
31
<PAGE>
The performance of Class A shares will normally be higher
than for Class B shares and ProVantage Fund shares because of
the additional distribution expenses charged to Class B
shares and additional distribution expenses, transfer agency
expenses and sales charges (when applicable) charged to
ProVantage Funds shares.
A Portfolio may periodically compare its performance to
that of other mutual funds tracked by mutual fund rating
services (such as Lipper Analytical) or by financial and
business publications and periodicals, broad groups of
comparable mutual funds, unmanaged indices which may assume
investment of dividends but generally do not reflect
deductions for administrative and management costs or to
other investment alternatives. A Portfolio may quote
Morningstar, Inc., a service that ranks mutual funds on the
basis of risk-adjusted performance. A Portfolio may use long-
term performance of these capital markets to demonstrate
general long-term risk versus reward scenarios and could
include the value of a hypothetical investment in any of the
capital markets. A Portfolio may also quote financial and
business publications and periodicals as they relate to fund
management, investment philosophy and investment techniques.
A Portfolio may quote various measures of volatility and
benchmark correlation in advertising and may compare these
measures to those of other funds. Measures of volatility
attempt to compare historical share price fluctuations or
total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might
be. Measures of volatility and correlation are calculated
using averages of historical data and cannot be calculated
precisely.
Additional performance information is set forth in the
1994 Annual Report to Shareholders and is available upon
request and without charge by calling 1-800-437-6016.
TAXES __________________________________________________________________________
The following summary of federal income tax consequences is
based on current tax laws and regulations, which may be
changed by legislative, judicial, or administrative action.
No attempt has been made to present a detailed explanation of
the federal, state, or local income tax treatment of a
Portfolio or its shareholders. Accordingly, shareholders are
urged to consult their tax advisers regarding specific
questions as to federal, state, and local income taxes. State
and local tax consequences of an investment in a Portfolio
may differ from the federal income tax consequences described
below. Additional information concerning taxes is set forth
in the Statement of Additional Information.
Tax Status of A Portfolio is treated as a separate entity for federal income
the Portfolios tax purposes and is not combined with the Trust's other
portfolios. Each Portfolio intends to continue to qualify for
the special tax treatment afforded regulated investment
companies ("RICs") under Subchapter M of the Code, so as to be
relieved of federal income tax on net investment
................................................................................
(SYMBOL TAXES
APPEARS
HERE)
You must pay taxes on your Portfolio's earnings, whether you take your payments
in cash or additional shares.
................................................................................
32
<PAGE>
company taxable income (including the excess, if any, of net
short-term capital gains over net long-term capital losses)
and net capital gains (the excess of net long-term capital
gains over net short-term capital losses) distributed to
shareholders.
................................................................................
(SYMBOL DISTRIBUTIONS
APPEARS
HERE)
A Portfolio distributes income dividends and capital gains. Income dividends
represent the earnings from the Portfolio's investments; capital gains
distributions occur when a Portfolio sells investments for more than the
original purchase price.
................................................................................
Tax Status of Each Portfolio distributes substantially all of its net
Distributions investment company taxable income to shareholders. Dividends
from a Portfolio's net investment company taxable income are
taxable to its shareholders as ordinary income (whether
received in cash or in additional shares), and generally will
qualify for the dividends-received deduction for corporate
shareholders to the extent that such dividends are derived from
dividends paid on domestic and equity securities owned by the
Portfolio. Distributions of net capital gains are taxable to
shareholders as long-term capital gains regardless of how long
a shareholder has held shares. Each Portfolio will make annual
reports to shareholders of the federal income tax status of all
distributions. Dividends declared by a Portfolio in October,
November or December of any year and payable to shareholders of
record on a date in such a month will be deemed to have been
paid by the Portfolio and received by the shareholders on
December 31 of the year declared if paid by a Portfolio at any
time during the following January.
Each Portfolio intends to make sufficient distributions to
avoid liability for the federal excise tax.
Sale, exchange, or redemption of a Portfolio's shares
generally is a taxable transaction to the shareholder.
ADDITIONAL INFORMATION ABOUT DOING BUSINESS WITH US ____________________________
Business Days You may buy, sell or exchange shares on days which the New
York Stock Exchange is open for business (a "Business Day").
All purchase, exchange and redemption requests received in
"good order" will be effective as of the Business Day received
by the Distributor as long as the Distributor receives the
order and, in the case of a purchase request, payment before
4:00 p.m. Eastern time. Otherwise the purchase will be
effective when payment is received. Broker-dealers may have
separate arrangements with ProVantage Funds.
If an exchange request is for shares of a portfolio whose
net asset value is calculated as of a time earlier than 4:00
p.m. Eastern time, the
................................................................................
(SYMBOL BUY, EXCHANGE
APPEARS AND SELL
HERE) REQUESTS ARE
IN "GOOD
ORDER" WHEN:
. The account number and portfolio name are shown
. The amount of the transaction is specified in dollars or shares
. Signatures of all owners appear exactly as they are registered on the account
. Any required signature guarantees (if applicable) are included
. Other supporting legal documents (as necessary) are present
................................................................................
33
<PAGE>
exchange request will not be effective until the next
Business Day. Anyone who wishes to make an exchange must
have received a current prospectus of the portfolio into
which the exchange is being made before the exchange will be
effected.
Minimum The minimum initial investment in a Portfolio's ProVantage
Investments Funds Class is $1,000; however, the minimum investment may
be waived at the Distributor's discretion. All subsequent
purchases must be at least $100 ($25 for payroll deductions
authorized pursuant to pre-approved payroll deduction
plans). The Trust reserves the right to reject a purchase
order when the Distributor determines that it is not in the
best interest of the Trust or its shareholders to accept
such order.
Maintaining a Due to the relatively high cost of handling small
Minimum Account investments, a Portfolio reserves the right to redeem, at
Balance net asset value, the shares of any shareholder if, because
of redemptions of shares by or on behalf of the shareholder,
the account of such shareholder in a Portfolio has a value
of less than $1,000, the minimum initial purchase amount.
Accordingly, an investor purchasing shares of a Portfolio in
only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems any
of these shares. Before a Portfolio exercises its right to
redeem such shares and to send the proceeds to the
shareholder, the shareholder will be given notice that the
value of the shares in his or her account is less than the
minimum amount and will be allowed 60 days to make an
additional investment in a Portfolio in an amount that will
increase the value of the account to at least $1,000. See
"Purchase and Redemption of Shares" in the Statement of
Additional Information for examples of when the right of
redemption may be suspended.
At various times, a Portfolio may be requested to redeem
shares for which it has not yet received good payment. In
such circumstances, redemption proceeds will be forwarded
upon collection of payment for the shares; collection of
payment may take 10 or more days. A Portfolio intends to pay
cash for all shares redeemed, but under abnormal conditions
that make payment in cash unwise, payment may be made wholly
or partly in portfolio securities with a market value equal
to the redemption price. In such cases, an investor may
incur brokerage costs in converting such securities to cash.
Net Asset Value An order to buy shares will be executed at a per share price
equal to the net asset value next determined after the
receipt of the purchase order by the Distributor plus any
applicable sales charge (the "offering price"). No
certificates representing shares will be issued. An order to
sell shares will be executed at the net asset value per
share next determined after receipt and effectiveness of a
request for redemption in good order. Net asset value per
share is determined as of 4:00 p.m. Eastern time on each
Business Day. Payment to shareholders for shares redeemed
will be made within 7 days after receipt by the Distributor
of the redemption order.
How the Net The net asset value per share of a Portfolio is determined
Asset Value is by dividing the total market value of its investments and
Determined other assets, less any liabilities, by the total number of
outstanding shares of the Portfolio. A Portfolio may use a
pricing service to obtain the last
34
<PAGE>
sale price of each equity or fixed income security held by a
Portfolio. In addition, portfolio securities are valued at
the last quoted sales price for such securities, or, if
there is no such reported sales price on the valuation date,
at the most recent quoted bid price. Unlisted securities for
which market quotations are readily available are valued at
the most recent quoted bid price. Net asset value per share
is determined daily as of 4:00 p.m. Eastern time on each
Business Day. Purchases will be made in full and fractional
shares of a Portfolio calculated to three decimal places.
Although the methodology and procedures for determining net
asset value per share are identical for both classes of a
Portfolio, the net asset value per share of one class may
differ from that of another class because of the different
distribution fees charged to each class and the incremental
transfer agent fees charged to ProVantage Funds shares.
Rights of In calculating the sales charge rates applicable to current
Accumulation purchases of a Portfolio's shares, a "single purchaser"
(defined below) is entitled to combine current purchases
with the current market value of previously purchased shares
of a Portfolio and ProVantage Funds shares of other
portfolios ("Eligible Portfolios") which are sold subject to
a comparable sales charge.
The term "single purchaser" refers to (i) an individual,
(ii) an individual and spouse purchasing shares of a
Portfolio for their own account or for trust or custodial
accounts of their minor children, or (iii) a fiduciary
purchasing for any one trust, estate or fiduciary account,
including employee benefit plans created under Sections 401
or 457 of the Code, including related plans of the same
employer. Furthermore, under this provision, purchases by a
single purchaser shall include purchases by an individual
for his/her own account in combination with (i) purchases of
that individual and spouse for their joint accounts or for
trust and custodial accounts for their minor children and
(ii) purchases of that individual's spouse for his/her own
account. To be entitled to a reduced sales charge based upon
shares already owned, the investor must ask the Distributor
for such reduction at the time of purchase and provide the
account number(s) of the investor, the investor and spouse,
and their children (under age 21). A Portfolio may amend or
terminate this right of accumulation at any time as to
subsequent purchases.
Letter of By submitting a Letter of Intent (the "Letter") to the
Intent Distributor, a single purchaser may purchase shares of a
Portfolio and the other Eligible Portfolios during a 13-
month period at the reduced sales charge rates applying to
the aggregate amount of the intended purchases stated in the
Letter. The Letter may apply to purchases made up to 90 days
before the date of the Letter. It is the shareholder's
responsibility to notify SFM at the time the Letter is
submitted that there are prior purchases that may apply.
Five percent (5%) of the total amount intended to be
purchased will be held in escrow by the Distributor until
such purchase is completed within the 13-month period. The
13-month period begins on the date of the earliest purchase.
If the intended investment is not completed, SFM will
surrender an appropriate number of the escrowed shares for
redemption in order to realize the difference between the
sales charge on the
35
<PAGE>
shares purchased at the reduced rate and the sales charge
otherwise applicable to the total shares purchased. Such
purchasers may include the value of all their shares of the
Portfolio and of any of the other Eligible Portfolios in the
Trust towards the completion of such Letter.
Sales Charge No sales charge is imposed on shares of a Portfolio: (i)
Waivers issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Trust is a
party; (ii) sold to dealers or brokers that have a sales
agreement with the Distributor ("participating broker-
dealers"), for their own account or for retirement plans for
employees or sold to present employees of dealers or brokers
that certify to the Distributor at the time of purchase that
such purchase is for their own account; (iii) sold to
present employees of SEI or one of its affiliates, or of any
entity which is a current service provider to the Trust;
(iv) sold to tax-exempt organizations enumerated in Section
501(c) of the Code or qualified employee benefit plans
created under Sections 401, 403(b)(7) or 457 of the Code
(but not IRAs or SEPs); (v) sold to fee-based clients of
banks, financial planners and investment advisers; (vi) sold
to clients of trust companies and bank trust departments;
(vii) sold to trustees and officers of the Trust; (viii)
purchased with proceeds from the recent redemption of
another class of shares of a portfolio of the Trust, SEI
Tax-Exempt Trust, SEI International Trust, SEI Liquid Asset
Trust, or SEI Daily Income Trust; (ix) purchased with the
proceeds from the recent redemption of shares of a mutual
fund with similar investment objectives and policies (other
than ProVantage Funds) for which a front-end sales charge
was paid (this offer will be extended, to cover shares on
which a deferred sales charge was paid, if permitted under
regulatory authorities' interpretation of applicable law);
or (x) sold to participants or members of certain affinity
groups, such as trade associations or membership
organizations, which have entered into arrangements with the
Distributor. Members of affinity groups should see the
Statement of Additional Information or call the Distributor
for further information regarding sales charge waivers.
An investor relying upon any of the categories of waivers
of sales charges must qualify such waiver in advance of the
purchase with the Distributor or the financial institution
or the intermediary through which shares are purchased by
the investor.
The waiver of the sales charge under circumstances (viii)
and (ix) above applies only if the following conditions are
met: the purchase must be made within 60 days of the
redemption; the Distributor must be notified in writing by
the investor, or his or her agent, at the time a purchase is
made; and a copy of the investor's account statement showing
such redemption must accompany such notice. The waiver
policy with respect to the purchase of shares through the
use of proceeds from a recent redemption as described in
clauses (viii) and (ix) above will not be continued
indefinitely and may be discontinued at any time without
notice. Investors should call the Distributor at 1-800-437-
6016 to confirm availability prior to initiating the
procedures described in clauses (viii) and (ix) above.
36
<PAGE>
The Distributor has also entered into arrangements with
certain affinity groups and broker-dealers wherein their
members or clients are entitled to percentage-based
discounts from the otherwise applicable sales charge for
purchase of ProVantage Funds shares. Currently the
percentage-based discount is either 10% or 50%. Members of
affinity groups and clients of broker-dealers should see the
Statement of Additional Information or contact the
Distributor for further information.
Signature SFM may require that the signatures on the written request
Guarantees be guaranteed. You should be able to obtain a signature
guarantee from a bank, broker, dealer, certain credit
unions, securities exchange or association, clearing agency
or savings association. Notaries public cannot guarantee
signatures. The signature guarantee requirement will be
waived if all of the following conditions apply: (1) the
redemption is for not more than $5,000 worth of shares, (2)
the redemption check is payable to the shareholder(s) of
record, and (3) the redemption check is mailed to the
shareholder(s) at his or her address of record. The Trust
and SFM reserve the right to amend these requirements
without notice.
Telephone/Wire Redemption orders may be placed by telephone. Neither the
Instructions Trust nor SFM will be responsible for any loss, liability,
cost or expense for acting upon wire instructions or upon
telephone instructions that it reasonably believes to be
genuine. The Trust and SFM will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone instructions.
If market conditions are extraordinarily active, or other
extraordinary circumstances exist, and you experience
difficulties placing redemption orders by telephone, you may
wish to consider placing your order by other means.
Systematic Please note that if withdrawals exceed income dividends,
Withdrawal Plan your invested principal in the account will be depleted.
("SWP") Thus, depending upon the frequency and amounts of the
withdrawal payments and/or any fluctuations in the net asset
value per share, your original investment could be exhausted
entirely. To participate in the SWP, you must have your
dividends automatically reinvested. You may change or cancel
the SWP at any time, upon written notice to SFM.
How to Close An account may be closed by providing written notice to SFM.
your Account You may also close your account by telephone if you have
previously elected telephone options on your account
application.
GENERAL INFORMATION ____________________________________________________________
The Trust The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated October 20, 1986. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. Shareholders may purchase shares in the Portfolio
through three separate classes: Class A and Class B shares
and ProVantage Funds, which provide for variation in
distribution and transfer agent costs,
37
<PAGE>
voting rights, dividends, and the imposition of a sales
charge on the ProVantage Funds. This Prospectus offers the
ProVantage Funds shares of the Trust's Large Cap Value,
Small Cap Growth, Capital Appreciation, Equity Income,
Balanced and Mid-Cap Growth Portfolios. Additional
information pertaining to the Trust may be obtained by
writing to SEI Financial Management Corporation, 680 East
Swedesford Road, Wayne, Pennsylvania 19087 or by calling 1-
800-437-6016. All consideration received by the Trust for
shares of any portfolio and all assets of such portfolio
belong to that portfolio and would be subject to the
liabilities related thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, including litigation and
other extraordinary expenses, brokerage costs, interest
charges, taxes and organization expenses.
Trustees of the The management and affairs of the Trust are supervised by
Trust the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
Voting Rights Each share held entitles the shareholder of record to one
vote. Each portfolio of the Trust will vote separately on
matters relating solely to that Portfolio. Each class will
vote separately on matters pertaining to its distribution
plan. As a Massachusetts business trust, the Trust is not
required to hold annual meetings of shareholders but
approval will be sought for certain changes in the operation
of the Trust and for the election of Trustees under certain
circumstances. In addition, a Trustee may be removed by the
remaining Trustees or by shareholders at a special meeting
called upon written request of shareholders owning at least
10% of the outstanding shares of the Trust. In the event
that such a meeting is requested the Trust will provide
appropriate assistance and information to the shareholders
requesting the meeting.
Reporting The Trust issues unaudited financial information semi-
annually and audited financial statements annually. The
Trust furnishes proxy statements and other reports to
shareholders of record.
Shareholder Shareholder inquiries should be directed to the Manager, SEI
Inquiries Financial Management Corporation, P.O. Box 451, Wayne,
Pennsylvania 19087.
Dividends Substantially all of the net investment income (exclusive of
capital gains) of the Portfolios is periodically declared
and paid as a dividend. Currently, capital gains, if any,
are distributed at least annually.
Shareholders automatically receive all income dividends
and capital gain distributions in additional shares at the
net asset value next determined following the record date,
unless the shareholder has elected to take such payment in
cash. Shareholders may change their election by providing
written notice to SFM at least 15 days prior to the
distribution.
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<PAGE>
Dividends and capital gains of each Portfolio are paid on
a per-share basis. The value of each share will be reduced
by the amount of any such payment. If shares are purchased
shortly before the record date for a dividend or capital
gains distributions, a shareholder will pay the full price
for the share and receive some portion of the price back as
a taxable dividend or distribution.
The dividends on ProVantage Funds shares will normally be
lower than on Class A and Class B shares of a Portfolio
because of the additional distribution and transfer agent
expenses charged to ProVantage Funds shares.
Counsel and Morgan, Lewis & Bockius serves as counsel to the Trust.
Independent Price Waterhouse LLP serves as the independent accountants
Accountants of the Trust.
Custodian and CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
Wire Agent 7618, Philadelphia, PA 19101 (the "Custodian"), acts as
custodian of the Trust's assets. The Custodian holds cash,
securities and other assets of the Trust as required by the
1940 Act.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS __________________________
The following is a description of the permitted investment
practices for the Portfolios, and the associated risk
factors:
American ADRs are securities, typically issued by U.S. financial
Depositary institution (a "depositary"), that evidence ownership
Receipts interests in a security or a pool of securities issued by a
("ADRs") 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 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. ADRs that are not listed or traded on
an exchange can be purchased over the counter. Prices for
such ADRs are determined by the market makers. The Large Cap
Growth and Small Cap Value Portfolios may invest in ADRs.
Bankers' Bankers' acceptances are bills of exchange or time drafts
Acceptances drawn on and accepted by a commercial bank. Bankers'
acceptances are used by corporations to finance the shipment
and storage of goods. Maturities are generally six months or
less. All Portfolios may invest in bankers' acceptances.
Certificates of Certificates of deposit are interest bearing instruments
Deposit with a specific maturity. They are issued by banks and
savings and loan institutions in exchange for the deposit of
funds and
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normally can be traded in the secondary market prior to
maturity. Certificates of deposit with penalties for early
withdrawal will be considered illiquid. All Portfolios may
invest in certificates of deposit.
Commercial Commercial paper is a term used to describe unsecured short-
Paper term promissory notes issued by banks, municipalities,
corporations and other entities. Maturities on these issues
vary from a few to 270 days. All Portfolios may invest in
commercial paper.
Convertible Convertible securities are corporate securities that are
Securities exchangeable for a set number of another security at a
prestated price. Convertible securities typically have
characteristics similar to both fixed-income and equity
securities. Because of the conversion feature, the market
value of a convertible security tends to move with the
market value of the underlying stock. The value of a
convertible security is also affected by prevailing interest
rates, the credit quality of the issuer, and any call
provisions. All Portfolios except the Balanced Portfolio may
invest in convertible securities.
Derivatives Derivatives are securities that derive their value from
other securities. The following are considered derivative
securities: options on futures, futures, options (e.g., puts
and calls) swap agreements, mortgage-backed securities
(CMOs, REMICs, IOs and POs), when-issued securities and
forward commitments, floating and variable rate securities,
convertible securities, "stripped" U.S. Treasury securities
(e.g., Receipts and STRIPs), privately issued stripped
securities (e.g., TGRs, TRs and CATS). See elsewhere in this
"Description of Permitted Investments and Risk Factors" for
discussions of these various instruments, and see
"Investment Objectives and Policies" for more information
about any investment policies and limitations applicable to
their use.
Equity Equity securities represent ownership interests in a company
Securities or corporation and include common stock, preferred stock,
and warrants and other rights to acquire such instruments.
Investments in common stocks are subject to market risks
which may cause their prices to fluctuate over time. The
value of convertible securities is also affected by
prevailing interest rates, the credit quality of the issuer
and any call provisions. Changes in the value of portfolio
securities will not necessarily affect cash income derived
from these securities but will affect a Portfolio's net
asset value.
Investments in small capitalization companies involves
greater risk than is customarily associated with larger,
more established companies due to the greater business risks
of small size, limited markets and financial resources,
narrow product lines and the frequent lack of depth of
management. The securities of small companies are often
traded over-the-counter and may not be traded in volumes
typical on a national securities exchange. Consequently, the
securities of smaller companies may have limited market
stability and may be subject to more abrupt or erratic
market movements than securities of larger, more established
growth companies or the market averages in general. All
Portfolios may invest in equity securities.
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Fixed Income Fixed income securities are debt obligations issued by
Securities corporations, municipalities and other borrowers. The market
value of fixed income investments will generally change in
response to interest rate changes and other factors. During
periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during
periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities
with longer maturities tend to produce higher yields, the
prices of longer maturity securities are also subject to
greater market fluctuations as a result of changes in
interest rates. Changes by recognized agencies in the rating
of any fixed income security and in the ability of an issuer
to make payments of interest and principal will also affect
the value of these investments. Changes in the value of
portfolio securities will not affect cash income derived
from these securities but will affect a Portfolio's net
asset value. All Portfolios may invest in fixed income
securities.
Futures and Futures contracts provide for the future sale by one party
Options on and purchase by another party of a specified amount of a
Futures specific security at a specified future time and at a
specified price. An option on a futures contract give the
purchaser the right, in exchange for a premium, to assume a
position in a futures contract at a specified exercise price
during the term of the option. A Portfolio may use futures
contracts and related options for bona fide hedging
purposes, to offset changes in the value of securities held
or expected to be acquired or be disposed of, to minimize
fluctuations in foreign currencies, or to gain exposure to a
particular market or instrument. A Portfolio will minimize
the risk that it will be unable to close out a futures
contract which are traded on national futures exchanges.
Stock index futures are futures contracts for various
stock indices that are traded on registered securities
exchanges. A stock index futures contract obligates the
seller to deliver (and the purchaser to take) an amount of
cash equal to a specific dollar amount times the difference
between the value of a specific stock index at the close of
the last trading day of the contract and the price at which
the agreement is made.
There are risks associated with these activities,
including the following: (1) the success of a hedging
strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets
and movements in interest rates, (2) there may be an
imperfect or no correlation between the changes in market
value of the securities held by the Portfolio and the prices
of futures and options on future, (3) there may not be a
liquid secondary market for a futures contract or option,
(4) trading restrictions or limitations may be imposed by an
exchange, and (5) government regulations may restrict
trading in futures contracts and futures option. The Large
Cap Growth and Small Cap Value Portfolios may invest in
futures and options on futures.
Money Market Money market securities are high-quality, dollar-
Instruments 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 instrumentalities of the U.S. Government; (iii) high-
quality
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commercial paper issued by U.S. and foreign corporation;
(iv) debt obligations with a maturity of one year or less
issued by corporations with outstanding high-quality
commercial papers; and (v) repurchase agreements involving
any of the foregoing obligations entered into with highly-
rated banks and broker-dealers. All Portfolios may invest in
money market securities.
Mortgage-Backed Mortgage-backed securities are instruments that entitle the
Securities holder to a share of all interest and principal payments
from mortgages underlying the security. The mortgages
backing these securities include conventional thirty-year
fixed-rate mortgages, graduated payment mortgages, and
adjustable rate mortgages. During periods of declining
interest rates, prepayment of mortgages underlying mortgage-
backed securities can be expected to accelerate. Prepayment
of mortgages which underlie securities purchased at a
premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital
gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict
accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities: These are securities
that are issued or guaranteed by a U.S. Government agency
representing an interest in a pool of mortgage loans. The
primary issuers or guarantors of these mortgage-backed
securities are GNMA, FNMA and FHLMC. FNMA and FHLMC
obligations are not backed by the full faith and credit of
the U.S. Government as GNMA certificates are, but FNMA and
FHLMC securities are supported by the instrumentalities'
right to borrow from the U.S. Treasury. GNMA, FNMA and FHLMC
each guarantees timely distributions of interest to
certificate holders. GNMA and FNMA also each guarantees
timely distributions of scheduled principal. FHLMC has in
the past guaranteed only the ultimate collection of
principal of the underlying mortgage loan; however, FHLMC
now issues mortgage-backed securities (FHLMC Gold PCs) which
also guarantee timely payment of monthly principal
reductions. Government and private guarantees do not extend
to the securities' value, which is likely to vary inversely
with fluctuations in interest rates.
Private Pass-Through Securities: These are mortgage-
backed securities issued by a non-governmental entity, such
as a trust. These securities include collateralized mortgage
obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two
rating categories. 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. 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
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with a specific fixed or floating coupon rate and has a
stated maturity or final distribution date. Principal
payments on the underlying mortgage assets may cause CMOs to
be retired substantially earlier than their stated
maturities or final distribution dates, resulting in a loss
of all or part of any premium paid.
REMICs: A REMIC is a CMO that qualifies for special tax
treatment under the Internal Revenue Code and invests in
certain mortgages principally secured by interests in real
property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or
"residual" interests. Guaranteed REMIC pass-through
certificates ("REMIC Certificates") issued by FNMA or FHLMC
represent beneficial ownership interests in a REMIC trust
consisting principally of mortgage loans or FNMA, FHLMC or
GNMA-guaranteed mortgage pass-through certificates. For
FHLMC REMIC Certificates, FHLMC guarantees the timely
payment of interest, and also guarantees the payment of
principal as payments are required to be made on the
underlying mortgage participation certificates. FNMA REMIC
Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA.
Parallel Pay Securities; PAC Bonds: Parallel pay CMOs and
REMICS are structured to provide payments of principal on
each payment date to more than one class. These simultaneous
payments are taken into account in calculating the stated
maturity date or final distribution date of each class,
which must be retired by its stated maturity date or final
distribution date, but may be retired earlier. Planned
Amortization Class CMOs ("PAC Bonds") generally require
payments of a specified amount of principal on each payment
date. PAC Bonds are always parallel pay CMOs with the
required principal payment on such securities having the
highest priority after interest has been paid to all
classes.
REITs: REITs are trusts that invest primarily in
commercial real estate or real estate-related loans. The
value of interests in REITs may be affected by the value of
the property owned or the quality of the mortgages held by
the trust.
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. SMBs are extremely sensitive to changes in interest
rates because of the impact thereon of prepayment of
principal on the underlying mortgage securities can
experience wide swings in value in response to changes in
interest rates and associated mortgage prepayment rates.
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.
Risk Factors: Due to the possibility of prepayments of
the underlying mortgage instruments, mortgage-backed
securities generally do not have a known maturity. In the
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absence of a known maturity, market participants generally
refer to an estimated average life. An average life estimate
is a function of an assumption regarding anticipated
prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other
factors. The assumption is necessarily subjective, and thus
different market participants can produce different average
life estimates with regard to the same security. There can
be no assurance that estimated average life will be a
security's actual average life. The Balanced Portfolio may
invest in mortgaged-backed securities.
Options A put option gives the purchase of the option the right to
sell, and the writer of the option the obligation to buy,
the underlying security at any time during the option
period. A call option gives the purchaser of the option the
right to buy, and the writer of the option the obligation to
sell, the underlying security at any time during the option
period. The premium paid to the writer is the consideration
for undertaking the obligations under the option contract.
The initial purchase (sale) of an option contract is an
"opening transaction." In order to close out an option
position, a portfolio may enter into a "closing
transaction," which is simply the sale (purchase) of an
option contract on the same security with the same exercise
price and expiration date as the option contract originally
opened.
A Portfolio may purchase put and call options to protect
against a decline in the market value of the securities in
its portfolio or to anticipate an increase in the market
value of securities that a Portfolio may seek to purchase in
the future. A Portfolio purchasing put and call options pays
a premium therefore. If price movements in the underlying
securities are such that exercise of the options would not
be profitable for the Portfolio, loss of the premium paid
may be offset by an increase in the value of the Portfolio's
securities or by a decrease in the cost of acquisition of
securities by the Portfolio.
A Portfolio may write covered call options as a means of
increasing the yield on its portfolio and as a means of
providing limited protection against decreases in its market
value. When a portfolio sells an option, if the underlying
securities do not increase or decrease to a price level that
would make the exercise of the option profitable to the
holder thereof, the option generally will expire without
being exercised and the Portfolio will realize as profit the
premium received for such option. When a call option of
which a portfolio is the writer is exercised, the Portfolio
will be required to sell the underlying securities to the
option holder at the strike price, and will not participate
in any increase in the price of such securities above the
strike pries. When a put option of which the Portfolio is
the writer is exercised, the Portfolio will be required to
purchase the underlying securities at the strike price,
which may be in excess of the market value of such
securities.
A Portfolio may purchase and write options on an exchange
or over-the-counter. Over-the-counter options ("OTC
options") differ from exchange-traded options in several
respects. They are transacted directly with dealers and not
with a clearing corporation, and
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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.
A Portfolio may purchase and write put and call options
on indices and enter into related closing transactions. Put
and call options on indices are similar to options on
securities except that options on an index give the holder
the right to receive, upon exercise of the option, an amount
of cash if the closing level of the underlying index is
greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal
to the difference between the closing price of the index and
the exercise price of the option, expressed in dollars
multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain
or loss depends on price movements in the particular market
represented by the index generally, rather than the price
movements in individual securities. A Portfolio may choose
to terminate an option position by entering into a closing
transaction. The ability of a Portfolio to enter into
closing transactions depends upon the existence of a liquid
secondary market for such transactions.
All options written on indices must be covered. When a
Portfolio writes an option on an index, it will establish a
segregated account containing cash or liquid high grade debt
securities with its custodian in an amount at least equal to
the market value of the option and will maintain the account
while the option is open or will otherwise cover the
transaction.
Risk Factors: Risks associated with options transactions
include: (1) the success of a hedging strategy may depend on
an ability to predict movements in the prices of individual
securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation
between the movement in prices of options and the securities
underlying them; (3) there may not be a liquid secondary
market for option; and (4) while a Portfolio will receive a
premium when it writes covered call options, it may not
participate fully in a rise in the market value of the
underlying security. The Large Cap Growth and Small Cap
Value Portfolios may invest in options.
Receipts Receipts are sold as zero coupon securities which means that
they are sold at a substantial discount and redeemed at face
value at their maturity date without interim cash payments
of interest or principal. This discount is accreted over the
life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax
purposes. Because of these features, such securities may be
subject to greater interest rate volatility than interest
paying Permitted Investments. The Large Cap Value, Capital
Appreciation and Equity Income Portfolios may invest in
receipts. See also "Taxes."
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Repurchase Arrangements by which a Portfolio obtains a security and
Agreements simultaneously commits to return the security to the seller
at an agreed upon price (including principal and interest)
on an agreed upon date within a number of days from the date
of purchase. The Custodian or its agent will hold the
security as collateral for the repurchase agreement.
Collateral must be maintained at a value at least equal to
102% of the purchase price. The Portfolio bears a risk of
loss in the event the other party defaults on its
obligations and the Portfolio is delayed or prevented from
its right to dispose of the collateral securities or if the
Portfolio realizes a loss on the sale of the collateral
securities. The adviser will enter into repurchase
agreements on behalf of the Portfolio only with financial
institutions deemed to present minimal risk of bankruptcy
during the term of the agreement based on guidelines
established and periodically reviewed by the Trustees.
Repurchase agreements are considered loans under the 1940
Act. All Portfolios may invest in repurchase agreements.
Securities In order to generate additional income, a Portfolio may lend
Lending securities which it owns pursuant to agreement requiring
that the loan be continuously secured by collateral
consisting of cash, securities of the U.S. Government or its
agencies equal to at least 100% of the market value of the
securities lent. A Portfolio continues to receive interest
on the securities lent while simultaneously earning interest
on the investment of cash collateral. Collateral is marked
to market daily. There may be risks of delay in recovery of
the securities or even loss of rights in the collateral
should the borrower of the securities fail financially or
become insolvent.
Securities of There are certain risks connected with investing in foreign
Foreign Issuers securities. These include risks of adverse political and
economic developments (including possible governmental
seizure or nationalization of assets), the possible
imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting
requirements, the possibility that there will be less
information on such securities and their issuers available
to the public, the difficulty of obtaining or enforcing
court judgments abroad, restrictions on foreign investments
in other jurisdictions, difficulties in effecting
repatriation of capital invested abroad, and difficulties in
transaction settlements and the effect of delay on
shareholder equity. Foreign securities may be subject to
foreign taxes, and may be less marketable than comparable
U.S. securities. The value of a Portfolio's investments
denominated in foreign currencies will depend on the
relative strengths of those currencies and the U.S. dollars,
and a Portfolio may be affected favorably or unfavorably by
changes in the exchange rates or exchange control
regulations between foreign currencies and the U.S. dollar.
Changes in foreign currency exchange rates also may affect
the value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income
and gains if any, to be distributed to shareholders by a
Portfolio. The Large Cap Value, Large Cap Growth, Small Cap
Value, Capital Appreciation, Equity Income and Balanced
Portfolios may invest in securities of foreign issuers.
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Time Deposits Time deposits are non-negotiable receipts issued by a bank
in exchange for the deposit of funds. Like a certificate of
deposit, it earns a specified rate of interest over a
definite period of time; however, it cannot be traded in the
secondary market. Time deposits are considered to be
illiquid securities. The Large Cap Growth and Small Cap
Value Portfolios may invest in time deposits.
U.S. Government Obligations issued or guaranteed by agencies of the U.S.
Agencies Government, including, among others, the Federal Farm Credit
Bank, the Federal Housing Administration and the Small
Business Administration, and obligations issued or
guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage
Corporation, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the full
faith and credit of the U.S. Treasury (e.g., Government
National Mortgage Association), others are supported by the
right of the issuer to borrow from the Treasury (e.g.,
Federal Farm Credit Bank), while still others are supported
only by the credit of the instrumentality (e.g., Federal
National Mortgage Association). Guarantees of principal by
agencies or instrumentalities of the U.S. 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. All Portfolios may invest in obligations issued or
guaranteed by U.S. government agencies.
U.S. Treasury U.S. Treasury obligations consist of bills, notes and bonds
Obligations issued by the U.S. Treasury and separately traded interest
and principal component parts of such obligations that are
transferable through the Federal book-entry Principal
Securities ("STRIPS"). All Portfolios may invest in U.S.
Treasury Obligations.
U.S. Treasury U.S. Treasury receipts are interests in separately traded
Receipts interest and principal component parts of U.S. Treasury
obligations that are issued by banks or brokerage firms and
are created by depositing U.S. Treasury notes and
obligations into a special account at custodian bank. The
custodian holds the interest and principal payments for the
benefit of the registered owners of the certificates of
receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains
the register. Receipts include "Treasury Receipts" ("TRs"),
"Treasury Investment Growth Receipts" ("TIGRs") "Liquid
Yield Option Notes" ("LYONs") and "Certificates of Accrual
on Treasury Securities" ("CATS"). TIGRs and CATS are
interests in private proprietary accounts while TRs and
STRIPS are interest in accounts sponsored by the U.S.
Treasury. The Large Cap Value, Capital Appreciation and
Equity Income Portfolios may invest in U.S. Treasury
receipts.
Variable and Certain obligations may carry variable or floating rates of
Floating Rate interest, and may involve a conditional or unconditional
Instruments demand feature. Such instruments bear interest at rates
which are not fixed, but which vary with changes in
specified market rates or indices. The
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interest rates on these securities may be reset daily,
weekly, quarterly or some other reset period, and may have a
floor or ceiling on interest rate changes. 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. All Portfolios may invest in variable and floating
rate instruments.
Warrants Warrants are instruments giving holders the right, but not
the obligation, to buy shares of a company at a given price
during a specified period. The Large Cap Growth, Small Cap
Value, Small Cap Growth and Mid-Cap Growth Portfolios may
invest in warrants.
When-Issued and When-issued or delayed delivery basis transactions involve
Delayed the purchase of an instrument with payment and delivery
Delivery taking place in the future. Delivery of and payment for
Securities these securities may occur a month or more after the date of
the purchase commitment. A Portfolio will maintain with the
custodian a separate account with liquid high grade debt
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these securities
is fixed as of the purchase date and no interest accrues to
a Portfolio before settlement. 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.
Although a Portfolio generally purchases securities on a
when-issued or forward commitment basis with the intention
of actually acquiring securities, a Portfolio may dispose of
a when-issued security or forward commitment prior to
settlement if it deems appropriate. All Portfolios may
invest in when-issued and delayed delivery securities.
Additional information on permitted investments and risk
factors can be found in the Statement of Additional
Information.
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SEI INSTITUTIONAL MANAGED TRUST
JANUARY 31, 1995
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CORE FIXED INCOME PORTFOLIO
BOND PORTFOLIO
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
Please read this Prospectus carefully before investing, and keep it on file for
future reference.
A Statement of Additional Information dated January 31, 1995 has been filed
with the Securities and Exchange Commission and is available without charge
through the Distributor, SEI Financial Services Company, 680 East Swedesford
Road, Wayne, PA 19087 or by calling 1-800-342-5734. The Statement of Additional
Information is incorporated into this Prospectus by reference.
SEI Institutional Managed Trust (the "Trust") is a mutual fund that offers
financial institutions a convenient means of investing their own funds or funds
for which they act in a fiduciary, agency or custodial capacity in
professionally managed diversified and non-diversified portfolios of
securities. A portfolio may offer separate classes of shares that differ from
each other primarily in the allocation of certain distribution expenses and
minimum investment amounts. This Prospectus offers the Class A and Class B
shares of the fixed income portfolios (the "Portfolios," and each of these, a
"Portfolio") listed above.
THE HIGH YIELD BOND PORTFOLIO INVESTS PRIMARILY AND MAY INVEST ALL OF ITS
ASSETS IN LOWER RATED BONDS, COMMONLY REFERRED TO AS "JUNK BONDS." THESE
SECURITIES ARE SPECULATIVE AND ARE SUBJECT TO GREATER RISK OF LOSS OF PRINCIPAL
AND INTEREST THAN ARE INVESTMENTS IN HIGHER RATED BONDS. BECAUSE INVESTMENT IN
SUCH SECURITIES ENTAILS GREATER RISKS, INCLUDING RISK OF DEFAULT, AN INVESTMENT
IN THE HIGH YIELD BOND PORTFOLIO SHOULD NOT CONSTITUTE A COMPLETE INVESTMENT
PROGRAM AND MAY NOT BE APPROPRIATE FOR ALL INVESTORS. INVESTORS SHOULD
CAREFULLY CONSIDER THE RISKS POSED BY AN INVESTMENT IN THE HIGH YIELD BOND
PORTFOLIO BEFORE INVESTING. SEE "INVESTMENT OBJECTIVES AND POLICIES," "RISK
FACTORS RELATED TO INVESTING IN LOWER RATED SECURITIES" AND THE "APPENDIX."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
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<PAGE>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) Class A
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<TABLE>
<CAPTION>
CORE FIXED HIGH YIELD
INCOME BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- ----------
<S> <C> <C> <C>
Management Fee/Advisory Fees (after fee waiv-
er) (1) 0.45% 0.44% 0.73%
12b-1 Fees (2) 0.06% 0.08% 0.07%
Other Expenses (3) 0.04% 0.03% 0.05%
- ------------------------------------------------------------------------------
Total Operating Expenses (after fee waiver) (4) 0.55% 0.55% 0.85%
- ------------------------------------------------------------------------------
</TABLE>
(1) SEI Financial Management Corporation ("SFM"), the Manager, has agreed to
waive, on a voluntary basis, a portion of its management fee, and the
management/advisory fees shown reflect this voluntary waiver. SFM reserves
the right to terminate its waiver at any time in its sole discretion.
Absent such fee waiver, management/advisory fees would be: Core Fixed
Income Portfolio, .56%; Bond Portfolio, .56%; and High Yield Bond
Portfolio, .8375%.
(2) The 12b-1 fees shown include each Portfolio's current 12b-1 budget. The
maximum 12b-1 fees payable by Class A shares of each Portfolio are .30%.
(3) Other Expenses for the High Yield Bond Portfolio are based on estimated
amounts for the current fiscal year.
(4) Absent the voluntary fee waivers described above, total operating expenses
for Class A shares of the Portfolios would be: Core Fixed Income Portfolio
.66%; Bond Portfolio, .67%; and High Yield Bond Portfolio, .96%. Additional
information may be found under "The Advisers and Sub-Advisers" and "The
Manager and Shareholder Servicing Agent."
EXAMPLE Class A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor in a Portfolio would pay the following
expenses on a $1,000
investment assuming (1) 5% annual return and (2)
redemption at the end
of each time period:
Core Fixed Income Portfolio $6.00 $18.00 $31.00 $69.00
Bond Portfolio $6.00 $18.00 $31.00 $69.00
High Yield Bond Portfolio $9.00 $27.00 -- --
- -------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in Class A shares of the Portfolios. The information set
forth in the foregoing table and example relates only to each Portfolio's Class
A shares. The Core Fixed Income, Bond and High Yield Bond Portfolios also offer
ProVantage Funds shares, which are subject to the same expenses except that
ProVantage Funds shares bear different distribution costs and additional
transfer agent costs and sales loads. A person who purchases shares through a
financial institution may be charged separate fees by that institution.
Additional information may be found under "The Manager and Shareholder
Servicing Agent," "The Advisers and Sub-Advisers" and "Distribution."
Long-term shareholders may eventually pay more than the economic equivalent of
the maximum front-end sales charges otherwise permitted by the Rules of Fair
Practice (the "Rules") of the National Association of Securities Dealers, Inc.
("NASD").
2
<PAGE>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) Class B
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CORE FIXED HIGH YIELD
INCOME BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- ----------
<S> <C> <C> <C>
Management Fee/Advisory Fees (after fee waiv-
er) (1) 0.45% 0.44% 0.73%
12b-1 Fees (2) 0.36% 0.38% 0.37%
Other Expenses (3) 0.04% 0.03% 0.05%
- ------------------------------------------------------------------------------
Total Operating Expenses (after fee waiver) (4) 0.85% 0.85% 1.15%
- ------------------------------------------------------------------------------
</TABLE>
(1) SEI Financial Management Corporation ("SFM"), the Manager, has agreed to
waive, on a voluntary basis, a portion of its management fee, and the
management/advisory fees shown reflect this voluntary waiver. SFM reserves
the right to terminate its waiver at any time in its sole discretion.
Absent such fee waiver, management/advisory fees would be: Core Fixed
Income Portfolio, .56%; Bond Portfolio, .56%; and High Yield Bond
Portfolio, .8375%.
(2) The 12b-1 fees shown include each Portfolio's current 12b-1 budget. The
maximum 12b-1 fees payable by Class B shares of each Portfolio are .60%.
(3) Other Expenses for the High Yield Bond Portfolio are based on estimated
amounts for the current fiscal year.
(4) Absent the voluntary fee waivers described above, total operating expenses
for Class B shares of the Portfolios would be: Core Fixed Income Portfolio,
.96%; Bond Portfolio, .97%; and High Yield Bond Portfolio, 1.26%.
Additional information may be found under "The Advisers and Sub-Advisers"
and "The Manager and Shareholder Servicing Agent."
EXAMPLE Class B
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
------ ------ ------ -------
<S> <C> <C> <C> <C>
An investor in a Portfolio would pay the follow-
ing expenses on a $1,000
investment assuming (1) 5% annual return and (2)
redemption at the end
of each time period:
Core Fixed Income Portfolio $ 9.00 $27.00 $47.00 $105.00
Bond Portfolio $ 9.00 $27.00 $47.00 $105.00
High Yield Bond Portfolio $12.00 $37.00 -- --
- ------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in Class B shares of the Portfolios. The information set
forth in the foregoing table and example relates only to each Portfolio's Class
B shares. The Core Fixed Income, Bond and High Yield Bond Portfolios also offer
ProVantage Funds shares, which are subject to the same expenses except that
ProVantage Funds shares bear different distribution costs and additional
transfer agent costs and sales loads. A person who purchases shares through a
financial institution may be charged separate fees by that institution.
Additional information may be found under "The Manager and Shareholder
Servicing Agent," "The Advisers and Sub-Advisers" and "Distribution."
Long-term shareholders may eventually pay more than the economic equivalent of
the maximum front-end sales charges otherwise permitted by the Rules of Fair
Practice (the "Rules") of the National Association of Securities Dealers, Inc.
("NASD").
3
<PAGE>
FINANCIAL HIGHLIGHTS ___________________________________________________________
The following information has been audited by Price Waterhouse LLP, the Trust's
independent accountants, as indicated in their report dated November 11, 1994
on the Trust's financial statements as of September 30, 1994 included in the
Trust's Statement of Additional Information under "Financial Information."
Additional performance information is set forth in the 1994 Annual Report to
Shareholders and is available upon request and without charge by calling 1-800-
342-5734. As of the most recent fiscal year, there were no shares outstanding
of the High Yield Bond Portfolio and no Class B shares outstanding of the Core
Fixed Income and Bond Portfolios. This table should be read in conjunction with
the Trust's financial statements and notes thereto.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Core Fixed Income Portfolio (1)(2)
----------------------------------
For the periods ended September 30,
-----------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 (3)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.87 $10.77 $10.30 $9.79 $9.95 $9.89 $9.84 $10.00
- -----------------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income
(Loss) 0.56 0.60 0.69 0.73 0.75 0.82 0.82 0.34
Net Realized and
Unrealized Gains
(Losses) on Securities (1.12) 0.23 0.49 0.52 (0.12) 0.06 0.07 (0.25)
- -----------------------------------------------------------------------------------------------------
Total from Investment
Operations $(0.56) $0.83 $1.18 $1.25 $0.63 $0.88 $0.89 $0.09
- -----------------------------------------------------------------------------------------------------
Less Distributions:
Dividends from Net
Investment Income (0.55) (0.60) (0.69) (0.74) (0.76) (0.82) (0.84) (0.25)
Distributions from
Realized Capital Gains (0.11) (0.18) (0.02) -- (0.03) -- -- --
- -----------------------------------------------------------------------------------------------------
Total Distributions $(0.66) $(0.78) $(0.71) $(0.74) $(0.79) $(0.82) $(0.84) $(0.25)
- -----------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $9.65 $10.87 $10.77 $10.30 $9.79 $9.95 $9.89 $9.84
=====================================================================================================
Total Return (5.36)% 8.58% 11.91% 13.31% 6.58% 9.39% 9.34% 2.26%
=====================================================================================================
Ratios/Supplemental
Data:
Net Assets, End of
Period (000) $311,955 $295,798 $213,632 $153,356 $83,876 $42,707 $25,661 $11,201
Ratio of Expenses to
Average Net Assets 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.47% 0.33%
Ratio of Expenses to
Average Net Assets
(Excluding Waivers) 0.62% 0.66% 0.68% 0.73% 0.76% 0.87% 1.12% 1.08%
Ratio of Net
Investment Income
(Loss) to Average Net
Assets 5.57% 5.63% 6.71% 7.41% 7.79% 8.57% 8.57% 8.59%
Ratio of Net
Investment Income
(Loss) to Average Net
Assets (Excluding
Waivers) 5.50% 5.52% 6.58% 7.23% 7.58% 8.25% 7.92% 7.84%
Portfolio Turnover
Rate 370% 35% 39% 44% 40% 42% 34% 7%
=====================================================================================================
</TABLE>
(1) Core Fixed Income Portfolio's Investment Adviser changed on January 19,
1994.
(2) During the year ended September 30, 1994, the Limited Volatility Bond
Portfolio changed its name to Intermediate Bond Portfolio. On December 16,
1994, the Intermediate Bond Portfolio changed its name to the Core Fixed
Income Portfolio.
(3) Core Fixed Income Bond Class A shares were offered beginning May 1, 1987.
All ratios including total return for that period have been annualized.
4
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Bond Portfolio
--------------
For the periods ended September 30,
-----------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 (1)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.25 $11.09 $10.47 $9.39 $10.38 $9.83 $9.16 $10.00
- ---------------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income
(Loss) 0.59 0.66 0.73 0.76 0.81 0.81 0.81 0.29
Net Realized and
Unrealized Gains
(Losses) on Securities (1.62) 1.19 0.62 1.10 (0.69) 0.74 0.71 (0.93)
- ---------------------------------------------------------------------------------------------------
Total from Investment
Operations $(1.03) $1.85 $1.35 $1.86 $0.12 $1.55 $1.52 $(0.64)
- ---------------------------------------------------------------------------------------------------
Less Distributions:
Dividends from Net
Investment Income (0.59) (0.67) (0.73) (0.77) (0.82) (0.79) (0.84) (0.20)
Distributions from
Realized Capital Gains (0.68) (0.02) -- (0.01) (0.29) (0.21) (0.01) --
- ---------------------------------------------------------------------------------------------------
Total Distributions $(1.27) $(0.69) $(0.73) $(0.78) $(1.11) $(1.00) $(0.85) $(0.20)
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $9.95 $12.25 $11.09 $10.47 $9.39 $10.38 $9.83 $9.16
===================================================================================================
Total Return (9.12)% 17.36% 13.52% 20.56% 0.97% 16.60% 17.22% (15.67)%
===================================================================================================
Ratios/Supplemental
Data:
Net Assets, End of
Period (000) $123,329 $97,163 $65,061 $40,683 $20,339 $27,580 $12,194 $ 5,762
Ratio of Expenses to
Average Net Assets 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.45% 0.35%
Ratio of Expenses to
Average Net Assets
(Excluding Waivers) 0.67% 0.66% 0.71% 0.76% 0.78% 0.87% 1.13% 1.69%
Ratio of Net
Investment Income
(Loss) to Average Net
Assets 5.61% 5.87% 6.98% 7.77% 8.06% 8.21% 8.54% 8.38%
Ratio of Net
Investment Income
(Loss) to Average Net
Assets (Excluding
Waivers) 5.49% 5.76% 6.82% 7.56% 7.83% 7.89% 7.86% 7.04%
Portfolio Turnover
Rate 73% 47% 24% 8% 89% 108% 125% 48%
===================================================================================================
</TABLE>
(1) Bond Class A shares were offered beginning May 4, 1987. All ratios
including total return for that period have been annualized.
5
<PAGE>
THE TRUST ______________________________________________________________________
SEI INSTITUTIONAL MANAGED TRUST (the "Trust") is an open-end management
investment company that has diversified and non-diversified portfolios. The
Trust offers units of beneficial interest ("shares") in separate investment
portfolios. Each portfolio has three separate classes of shares, Class A, Class
B and ProVantage Funds, which provide for variations in distribution and
transfer agent costs, sales charges, voting rights and dividends. This
prospectus offers Class A and B shares of the Trust's Intermediate Bond, Bond
and High Yield Bond Portfolios (the "Portfolios," and each of these, a
"Portfolio"). Additional information pertaining to the Trust may be obtained in
writing from SEI Financial Services Company, 680 East Swedesford Road, Wayne,
PA 19087 or by calling 1-800-342-5734.
INVESTMENT
OBJECTIVES AND
POLICIES _______________________________________________________________________
CORE FIXED The investment objective of the Core Fixed Income Portfolio
INCOME (formerly the Intermediate Bond Portfolio) is current income
PORTFOLIO consistent with the preservation of capital. There is no
assurance that the Portfolio will achieve its investment
objective.
The Portfolio's permitted investments consist of
corporate bonds and debentures, obligations issued by the
United States Government, its agencies and
instrumentalities, receipts involving U.S. Treasury
obligations, collateralized mortgage obligations and asset-
backed securities, that are rated AAA, AA or A by Standard &
Poor's Corporation ("S&P") or Aaa, Aa or A by Moody's
Investors Service ("Moody's") at the time of purchase, or of
comparable quality (as determined by the Portfolio's
adviser). The Portfolio may invest up to 35% of its total
assets in corporate bonds and debentures rated BBB by S&P or
Baa by Moody's at time of purchase. Securities which are
rated BBB by S&P or Baa by Moody's are considered as medium-
grade obligations (i.e. they are neither highly protected
nor poorly secured). Interest payments and principal
security appear adequate for the present but certain
protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such securities lack outstanding investment characteristics
and in fact have speculative characteristics as well. In
addition, the Portfolio may invest in money market
instruments. Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in bonds.
Consistent with any applicable state law limitations, the
adviser may purchase interest-only and principal-only
components of mortgage-backed securities and collateralized
mortgage obligations. Furthermore, the Portfolio may
purchase yankee obligations and mortgage dollar rolls. Under
normal market conditions, the average dollar-weighted
maturity of the Portfolio will range between 5 and 10 years.
By so limiting the maturity of its investments, the
Portfolio's assets are expected to experience less price
volatility in response to changes in interest rates than
similar securities with longer maturities.
For the fiscal year ended September 30, 1994, as a result
of its investment strategies, the Portfolio's annual
portfolio turnover rate is 370%. Such a turnover rate may
lead to higher transaction costs and may result in higher
taxes for shareholders.
The Portfolio's investment adviser is Western Asset
Management.
6
<PAGE>
BOND PORTFOLIO The investment objective of the Bond Portfolio is current
income consistent with preservation of capital. There is no
assurance that the Portfolio will achieve its investment
objective.
The Portfolio's permitted investments consist of
corporate bonds and debentures, obligations issued by the
United States Government, its agencies and instrumentalities
and receipts involving U.S. Treasury obligations, that are
rated AAA, AA, A or BBB by S&P or Aaa, Aa, A or Baa by
Moody's at the time of purchase or of comparable quality (as
determined by the Portfolio's adviser). Securities which are
rated BBB by S&P or Baa by Moody's are considered as medium-
grade obligations (i.e. they are neither highly protected
nor poorly secured). Interest payments and principal
security appear adequate for the present but certain
protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such securities lack outstanding investment characteristics
and in fact have speculative characteristics as well. Under
normal market conditions, the Portfolio will invest at least
65% of its total assets in bonds. There are no restrictions
on the Portfolio's maturity, but the average maturity is
expected to be greater than ten years.
The Portfolio's investment adviser is Boatmen's Trust
Company.
HIGH YIELD BOND The investment objective of the High Yield Bond Portfolio is
PORTFOLIO to maximize total return. There is no assurance that the
Portfolio will achieve its investment objective.
Under normal market conditions, the Portfolio will invest
at least 65% of its total assets in fixed-income debt
securities that are rated below investment grade (i.e.,
below the top four ratings categories used by Moody's or BBB
by S&P), or, if not rated, are deemed by the Portfolio's
advisers to be of comparable quality. Below investment grade
securities are commonly referred to as "junk bonds," and
general entail increased credit and market risk. The
achievement of the Portfolio's investment objective may be
more dependent on the Portfolio's adviser's own credit
analysis than is the case for higher rated securities. Any
remaining assets may be invested in preferred stocks, equity
securities, investment grade fixed-income securities and
money market securities that the Portfolio's advisers
believe are appropriate in light of the Portfolio's
objective.
The Portfolio may acquire all types of fixed income debt
securities issued by domestic and foreign issuers, including
convertible, mortgage-backed and asset-backed securities.
The Portfolio may invest in zero coupon, pay-in-kind or
deferred payment securities, and securities that pay
interest on a variable or floating rate basis. Securities in
the lowest rating categories may have predominantly
speculative characteristics or may be in default. The
Portfolio's advisers may vary the average maturity of the
securities in the Portfolio without limit and there is no
restriction on the maturity of any individual security.
There is no bottom limit on the ratings of high yield
securities that may be purchased or held by the Portfolio.
The "Appendix" to this Prospectus sets forth a
description of the bond rating categories of Moody's and
S&P. Ratings of S&P and Moody's represent their opinions of
7
<PAGE>
the safety of principal and interest payments (and not the
market risk) of bonds and other debt securities they
undertake to rate at the time of issuance. Ratings are not
absolute standards of quality and may not reflect changes in
an issuer's creditworthiness. Accordingly, although the
Portfolio's advisers will consider ratings, they will
perform their own analyses and will not rely principally on
ratings. The Portfolio's advisers will consider, among other
things, the price of the security and the financial history
and condition, the prospects and the management of an issuer
in selecting securities for the Portfolio.
The Portfolio's annual portfolio turnover rate may exceed
100%. Such a turnover rate may result in higher transaction
costs and may result in additional taxes for shareholders.
See "Taxes."
The Portfolio's investment adviser is SEI Financial
Management Corporation and its investment sub-adviser is CS
First Boston Management Corporation.
Risk Factors The High Yield Bond Portfolio may invest in lower rated
Relating to securities. Fixed income securities are subject to the risk
Investing in of an issuer's ability to meet principal and interest
Lower Rated payments on the obligation (credit risk), and may also be
Securities subject to price volatility due to such factors as interest
rate sensitivity, market perception of the creditworthiness
of the issuer and general market liquidity (market risk).
Lower rated or unrated (i.e., high yield) securities are
more likely to react to developments affecting market and
credit risk than are more highly rated securities, which
primarily react to movements in the general level of
interest rates. The market values of fixed-income securities
tend to vary inversely with the level of interest rates. The
market values of fixed-income securities tend to vary
inversely with the level of interest rates. Yields and
market values of high yield securities will fluctuate over
time, reflecting not only changing interest rates but the
market's perception of credit quality and the outlook for
economic growth. When economic conditions appear to be
deteriorating, medium to lower rated securities may decline
in value due to heightened concern over credit quality,
regardless of prevailing interest rates. Investors should
carefully consider the relative risks of investing in high
yield securities and understand that such securities are not
generally meant for short-term investing.
The high yield market is relatively new and its growth
has paralleled a long period of economic expansion and an
increase in merger, acquisition and leveraged buyout
activity. Adverse economic developments can disrupt the
market for high yield securities, and severely affect the
ability of issuers, especially highly leveraged issuers, to
service their debt obligations or to repay their obligations
upon maturity which may lead to a higher incidence of
default on such securities. In addition, the secondary
market for high yield securities, which is concentrated in
relatively few market makers, may not be as liquid as the
secondary market for more highly rated securities. As a
result, the Portfolio's adviser could find it more difficult
to sell these securities or may be able to sell the
securities only at prices lower than if such securities were
widely traded. Furthermore the Trust may experience
difficulty in valuing certain securities at certain times.
Prices realized upon the
8
<PAGE>
sale of such lower rated or unrated securities, under these
circumstances, may be less than the prices used in
calculating the Portfolio's net asset value.
Prices for high yield securities may be affected by
legislative and regulatory developments. These laws could
adversely affect the Portfolio's net asset value and
investment practices, the secondary market for high yield
securities, the financial condition of issuers of these
securities and the value of outstanding high yield
securities. For example, federal legislation requiring the
divestiture by federally insured savings and loans
associations of their investments in high yield bonds and
limiting the deductibility of interest by certain corporate
issuers of high yield bonds adversely affected the market in
recent years. Lower rated or unrated debt obligations also
present risks based on payment expectations. If an issuer
calls the obligations for redemption, the Portfolio may have
to replace the security with a lower yielding security,
resulting in a decreased return for investors. If the
Portfolio experiences unexpected net redemptions, it may be
forced to sell its higher rated securities, resulting in a
decline in the overall credit quality of the Portfolio's
investment portfolio and increasing the exposure of the
Portfolio to the risks of high yield securities.
Lower rated or unrated debt obligations also present
risks based on payment expectations. If an issuer calls the
obligations for redemption, the Portfolio may have to
replace the security with a lower yielding security,
resulting in a decreased return for investors. If the
Portfolio experiences unexpected net redemptions, it may be
forced to sell its higher rated securities, resulting in a
decline in the overall credit quality of the Portfolio's
investment portfolio and increasing the exposure of the
Portfolio to the risks of high yield securities.
GENERAL INVESTMENT
POLICIES _______________________________________________________________________
Borrowing The Core Fixed Income, Bond and High Yield Bond Portfolios
may borrow money to meet redemptions for temporary,
emergency purposes. A Portfolio will not purchase securities
while its borrowings exceed 5% of its total assets.
Forward Foreign The High Yield Bond Portfolio may purchase forward foreign
Currency currency contracts.
Contracts
Illiquid The High Yield Bond Portfolio's investment in illiquid
Securities securities will be limited to 15% of its net assets. The
Core Fixed Income and Bond Portfolios' investment in
illiquid securities will be limited to 10% of each
Portfolio's net assets.
Investment The High Yield Bond Portfolio may purchase investment
Company company securities, which will result in the layering of
Securities expenses. There are legal limits on the amount of such
securities that may be acquired by a Portfolio.
Options and The Core Fixed Income and High Yield Bond Portfolios may
Futures purchase or write options, futures and options on futures.
9
<PAGE>
Securities The High Yield Bond Portfolio may lend its securities in
Lending order to realize additional income.
Temporary For temporary defensive purposes, when the adviser
Defensive determines that market conditions warrant, the Core Fixed
Investments Income and Bond Portfolios may each invest up to 100% of its
assets in money market instruments (including securities
issued or guaranteed by the United States Government, its
agencies or instrumentalities, repurchase agreements,
certificates of deposit and bankers' acceptances issued by
banks or savings and loan associations having net assets of
at least $500 million as of the end of their most recent
fiscal year and high-grade commercial paper) rated, at time
of purchase, in the top two categories by a national rating
agency or determined to be of comparable quality by the
adviser at time of purchase, and other long and short-term
debt instruments which are rated at time of purchase A or
higher by S&P or Moody's at the time of purchase, and may
hold a portion of its assets in cash. In addition, each
Portfolio may borrow money. To the extent a Portfolio is
engaged in temporary defensive investments, such Portfolio
will not be pursuing its investment objective.
In order to meet liquidity needs or for temporary
defensive purposes, the High Yield Bond Portfolio may invest
up to 100% of its assets in cash and short term money market
securities. Money market securities must be rated in one of
the top two categories by a major rating service or, if
unrated, be of comparable quality as determined by the
Portfolio's advisers.
Warrants Consistent with any applicable state law limitations, each
of the Core Fixed Income and High Yield Bond Portfolios may
purchase warrants in order to increase the Portfolio's total
return.
When-Issued and The Core Fixed Income, Bond and High Yield Bond Portfolios
Delayed- may purchase securities on a when-issued or delayed-delivery
Delivery basis.
Securities
For additional information regarding the Portfolios'
permitted investments, see "Description of Permitted
Investments and Risk Factors" in this Prospectus and
"Description of Permitted Investments" in the Statement of
Additional Information. For a description of the above
ratings, see "Description of Ratings" in the Appendix to
this Prospectus and the Statement of Additional Information.
INVESTMENT
LIMITATIONS ____________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolios. It is also a
fundamental policy of the Bond Portfolio to invest its
assets solely in securities listed as appropriate
investments. Fundamental policies cannot be changed with
respect to the Trust or a Portfolio without the consent of
the holders of a majority of the Trust's or that Portfolio's
outstanding shares.
10
<PAGE>
No Portfolio 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 total assets of the Portfolio (based on fair market
value at the time of investment) would be invested in the
securities of such issuer. This restriction applies to
75% of each Portfolio's total assets.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio 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.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional investment
limitations are set forth in the Statement of Additional
Information.
THE MANAGER
AND SHAREHOLDER
SERVICING AGENT ________________________________________________________________
SEI Financial Management Corporation ("SFM"), provides the
Trust with overall management services, regulatory
reporting, all necessary office space, equipment, personnel
and facilities, and acts as transfer agent, dividend
disbursing agent and shareholder servicing agent. SFM is a
wholly-owned subsidiary of SEI Corporation ("SEI"). Founded
in 1968, SEI is a leading provider of investment solutions
to banks, institutional investors, investment advisers and
insurance companies. Affiliates of SFM have provided
consultative advice to institutional investors for more than
20 years, including advice on the selection and evaluation
of investment advisers.
For its management services, SFM is entitled to a fee
which is calculated daily and paid monthly at an annual rate
of .43% of the average daily net assets of the Core Fixed
Income Portfolio, .43% of the average daily net assets of
the Bond Portfolio and .35% of the average daily net assets
of the High Yield Bond Portfolio. SFM has voluntarily agreed
to waive a portion of its fees in order to limit the
operating expenses of each Portfolio. SFM reserves the
right, in its sole discretion, to terminate this voluntary
fee waiver at any time.
For the fiscal year ended September 30, 1994 the Core
Fixed Income Portfolio paid SFM a management fee of .33% and
the Bond Portfolio paid SFM a management fee of .32% of its
average daily net assets after fee waivers. During the last
fiscal year, the High Yield Bond Portfolio had not commenced
operations.
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THE ADVISERS AND
SUB-ADVISERS ___________________________________________________________________
The following entities serve as investment advisers (each,
an "Adviser," and collectively, the "Advisers") and
investment sub-advisers (each, a "Sub-Adviser," and
collectively, the "Sub-Advisers") to the Trust's Portfolios.
Each Adviser has general oversight responsibility for the
investment advisory services provided to the Portfolios,
including formulating the Portfolios' investment policies
and analyzing economic trends affecting the Portfolios. In
addition, SFM, where it is the Adviser to a Portfolio, is
responsible for managing the allocation of assets among the
Portfolio's Sub-Advisers and directing and evaluating the
investment services provided by the Sub-Advisers, including
their adherence to each Portfolio's respective investment
objective and policies and each Portfolio's investment
performance. In accordance with each Portfolio's investment
objective and policies, and under the supervision of the
Adviser and the Trust's Board of Trustees, each Sub-Adviser
and certain Advisers are responsible for the day-to-day
investment management of all or a discrete portion of the
assets of a Portfolio. The Advisers and Sub-Advisers are
authorized to make investment decisions for the Portfolios
and place orders on behalf of the Portfolios to effect the
investment decisions made.
The Glass-Steagall Act restricts the securities
activities of banks such as Boatmen's Bancshares, Inc., but
federal regulatory authorities permit such banks to provide
investment advisory and other services to mutual funds.
Should this position be challenged successfully in court or
reversed by legislation, the Trust might have to make other
investment advisory arrangements.
SFM is currently seeking an exemptive order from the
Securities and Exchange Commission (the "SEC") that would
permit SFM, with the approval of the Trust's Board of
Trustees, to retain sub-advisers for a Portfolio without
submitting the sub-advisory agreement to a vote of the
Portfolio's shareholders. If granted, the exemptive relief
will permit the non-disclosure of amounts payable by SFM
under such sub-advisory agreements. The Trust will notify
shareholders in the event of any change in the identity of
the sub-adviser for a Portfolio. Until or unless this
exemptive order is granted, if one of the advisers is
terminated or departs from a Portfolio with multiple
advisers, the Portfolio will handle such termination or
departure in one of two ways. First, the Portfolio may
propose that a new investment adviser be appointed to manage
that portion of the Portfolio's assets managed by the
departing adviser. In this case, the Portfolio would be
required to submit to the vote of the Portfolio's
shareholders the approval of a investment advisory contract
with the new adviser. In the alternative, the Portfolio may
decide to allocate the departing adviser's assets among the
remaining advisers. This allocation would not require new
investment advisory contracts with the remaining advisers,
and consequently no shareholder approval would be necessary.
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BOATMEN'S TRUST Boatmen's Trust Company ("Boatmen's") serves as investment
COMPANY adviser for the Bond Portfolio. Boatmen's is a subsidiary of
Boatmen's Bancshares, Inc., a multi-bank holding company.
Boatmen's provides trust and investment advisory services to
a broad array of individual and institutional clients. As of
September 30, 1994, Boatmen's total assets under management
were approximately $36 billion for a broad spectrum of
taxable and tax-exempt clients. The principal business
address of Boatmen's is 100 N. Broadway, St. Louis, Missouri
63102.
The Portfolio has been managed by a committee since its
inception.
Boatmen's is entitled to a fee from the Trust, calculated
daily and paid monthly at an annual rate of .125% of the
average daily net assets of the Portfolio. For the fiscal
year ended September 30, 1994, the Bond Portfolio paid
Boatmen's an advisory fee of .125% of its average daily net
assets.
CS FIRST BOSTON CS First Boston Investment Management Corporation ("CS First
INVESTMENT Boston Management"), 599 Lexington Avenue, 36th Floor, New
MANAGEMENT York, New York 10022, an affiliate of CS First Boston
CORPORATION Corporation ("CS First Boston"), serves as investment sub-
adviser for the High Yield Bond Portfolio. CS First Boston
and CS First Boston Management are subsidiaries of CS First
Boston, Inc. CS First Boston and CS First Boston Management
has been providing fixed income and equity investment
management services to institutional clients since 1984.
Total assets under management as of August 31, 1994 exceeded
$7.6 billion.
Richard J. Lindquist, CFA, Managing Director, has primary
responsibility for the day-to-day management of the
Portfolio. Mr. Lindquist has been the leader of the high
yield management team and primary high yield portfolio
manager since he joined CS First Boston Management in July
1989.
CS First Boston Management is entitled to a fee, which is
paid monthly by SFM, at an annual rate of .3375% of the
average monthly market value of investments under its
management. For the fiscal year ended September 30, 1994,
the High Yield Bond Portfolio had not commenced operations
and therefore CS First Boston Investment Management did not
receive an advisory fee.
SEI FINANCIAL SEI Financial Management Corporation ("SFM") serves as
MANAGEMENT investment adviser for the High Yield Bond Portfolio. As
CORPORATION Adviser, SFM has general oversight responsibility for the
investment advisory services provided to the Portfolio,
including formulating the Portfolio's investment policies,
analyzing economic trends affecting the Portfolio, managing
the allocation of assets among the Portfolio's sub-advisers
(if necessary) and generally directing and evaluating the
investment services provided by the sub-adviser, including
its adherence to the Portfolio's investment objective and
policies and the Portfolio's investment performance. SEI was
founded in 1968 and is a leading provider of investment
solutions to banks, institutional investors, investment
advisers and insurance companies. Affiliates of SFM have
provided consulting advice to institutional investors for
more than 20 years, including advice regarding the selection
and evaluation of investment advisers. Although
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SFM has not previoulsy been the investment adviser to an
investment company, it currently serves as manager or
administrator to more than 26 investment companies,
including more than 220 portfolios, which investment
companies have more than $42 billion in assets as of
September 30, 1994.
For these services, SFM is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of
.4875% of the Porfolio's average daily net assets. For the
fiscal year ended September 30, 1994, the High Yield Bond
Portfolio had not commenced operations and therefore SFM did
not receive an advisory fee.
SFM is currently seeking an exemptive order from the
Securities and Exchange Commission (the "SEC") that would
permit SFM, with the approval of the Trust's Board of
Trustees, to retain sub-advisers for the Portfolio without
submitting the sub-advisory agreement to a vote of the High
Yield Bond Portfolio's shareholders. If granted, the
exemptive relief will permit the non-disclosure of amounts
payable by SFM under such sub-advisory agreements. The Trust
will notify shareholders in the event of any change in the
identity of the sub-adviser for the Portfolio.
WESTERN ASSET Since January 19, 1994, Western Asset Management ("Western")
MANAGEMENT has served as investment adviser for the Core Fixed Income
Portfolio. Prior to that date, the investment adviser to the
Portfolio was Bank One Indianapolis, N.A. ("Bank One").
Western is located at 117 East Colorado Boulevard, Pasadena,
California 91105, and is a wholly owned subsidiary of Legg
Mason, Inc., a financial services company located in
Baltimore, Maryland. Western was founded in 1971, and
specializes in the management of fixed income portfolios. As
of September 30, 1994, Western managed approximately $12
billion in client assets, including $2 billion of investment
company assets.
Kent S. Engel, Director and Chief Investment Officer of
Western, is primarily responsible for the day-to-day
management of the Portfolio since January 19, 1994. Mr.
Engel has been with Western and its predecessor since 1969.
Western is entitled to a fee which is calculated daily
and paid monthly, at the annual rate of .125% of the
Portfolio's average daily net assets. For the fiscal year
ended September 30, 1994, the Portfolio paid each of the
Portfolio's advisers an advisory fee of .125% of its average
daily net assets. Of this .125% advisory fee, .085% of the
Portfolio's total average daily net assets was paid to
Western and .04% of the Portfolio's average daily net assets
was paid to Bank One.
DISTRIBUTION ___________________________________________________________________
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as each Portfolio's
distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust. Each Portfolio has
a distribution plan for its shares (the "Class A Plan,"
"Class B Plan" and the "ProVantage Plan;" collectively, the
"Plans") pursuant to Rule 12b-1 under the Investment Company
1940 Act of 1940, as
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amended (the "1940 Act"). The Trust intends to operate the
Plans in accordance with their terms and with the NASD rules
concerning sales charges.
The Distribution Agreement and the Plans provide for
reimbursement for expenses incurred by the Distributor in an
amount not to exceed .30% of the average daily net assets of
each Portfolio on an annualized basis, provided those
expenses are permissible as to both type and amount under a
budget adopted by the Board of Trustees, including those
Trustees who are not interested persons and have no
financial interest in the Plans or any related agreement
("Qualified Trustees"). The Class B and ProVantage Plans
also provide for additional payments for distribution and
shareholder services as described below.
Distribution-related expenses reimbursable to the
Distributor under the budget include those related to the
costs of advertising and sales materials, the costs of
federal and state securities law registration, advertising
expenses and promotional and sales expenses including
expenses for travel, communication and compensation and
benefits for sales personnel. The Trust is not obligated to
reimburse the Distributor for any expenditures in excess of
the approved budget. Currently the budget (shown here as a
percentage of daily net assets) for the Core Fixed Income
Portfolio is .06%, for the Bond Portfolio is .08% and for
the High Yield Bond Portfolio is .07%. Distribution expenses
not attributable to a specific portfolio are allocated among
each of the portfolios of the Trust based on average net
assets.
The Class B Plan, in addition to providing for the
reimbursement payments described above, provides for
payments to the Distributor at an annual rate of .30% of the
Portfolio's average daily net assets attributable to Class B
shares. These additional payments are characterized as
"compensation," and are not directly tied to expenses
incurred by the Distributor; the payments the Distributor
receives during any year may therefore be higher or lower
than its actual expenses. This additional payment may be
used to compensate financial institutions that provide
distribution-related services to their customers.
The ProVantage Plan is similar to the Class B Plan
described above, but applies only to ProVantage Funds
shareholders.
It is possible that an institution may offer different
classes of shares to its customers and thus receive
different compensation with respect to different classes.
These financial institutions may also charge separate fees
to their customers.
The Trust may also execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive usual and customary compensation.
The Distributor may, from time to time in its sole
discretion, institute one or more promotional incentive
programs, which will be paid by the Distributor from the
sales charge it receives or from any other source available
to it. Under any such program, the Distributor will provide
promotional incentives, in the form of cash or other
compensation, including merchandise, airline vouchers, trips
and vacation packages, to all dealers selling
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shares of the Portfolios. Such promotional incentives will
be offered uniformly to all dealers and predicated upon the
amount of shares of the Portfolios sold by the dealer.
PURCHASE AND
REDEMPTION OF
SHARES _________________________________________________________________________
Financial institutions may acquire Class A and Class B
shares of the Portfolios for their own accounts or as record
owner on behalf of fiduciary, agency or custody accounts by
placing orders with SFM. Institutions that use certain SEI
proprietary systems may place orders electronically through
those systems. State securities laws may require banks and
financial institutions purchasing shares for their customers
to register as dealers pursuant to state laws. Financial
institutions may impose an earlier cut-off time for receipt
of purchase orders directed through them to allow for
processing and transmittal of these orders to SFM for
effectiveness the same day. Financial institutions that
purchase shares for the accounts of their customers may
impose separate charges on these customers for account
services. Shares of the Portfolios are offered only to
residents of states in which the shares are eligible for
purchase.
Shares of each Portfolio may be purchased or redeemed on
days on which the New York Stock Exchange is open for
business ("Business Days").
Shareholders who desire to purchase shares for cash must
place their orders with SFM prior to 4:00 p.m. Eastern time
on any Business Day for the order to be accepted on that
Business Day. Cash investments must be transmitted or
delivered in federal funds to the wire agent on the next
Business Day following the day the order is placed. The
Trust reserves the right to reject a purchase order when the
Distributor determines that it is not in the best interest
of the Trust or its shareholders to accept such purchase
order.
Purchases will be made in full and fractional shares of
the Portfolios calculated to three decimal places. The Trust
will send shareholders a statement of shares owned after
each transaction. The purchase price of shares is the net
asset value next determined after a purchase order is
received and accepted by the Trust. The net asset value per
share of each Portfolio is determined by dividing the total
market value of a Portfolio's investment and other assets,
less any liabilities, by the total outstanding shares of
that Portfolio. Net asset value per share is determined
daily as of 4:00 p.m. Eastern time on any Business Day.
The market value of each portfolio security is obtained
by SFM from an independent pricing service. Securities
having maturities of 60 days or less at the time of purchase
will be valued using the amortized cost method (described in
the Statement of Additional Information). The pricing
service relies primarily on prices of actual market
transactions as well as trader quotations. However, the
pricing service may use a matrix system to determine
valuations of equity and fixed income securities. This
system considers such factors as security prices, yields,
maturities, call features, ratings and developments
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relating to specific securities in arriving at valuations.
The procedures used by the pricing service and its
valuations are reviewed by the officers of the Trust under
the general supervision of the Trustees.
Shareholders who desire to redeem shares of the
Portfolios must place their redemption orders with SFM prior
to 4:00 p.m. Eastern time on any Business Day. The
redemption price is the net asset value per share of the
Portfolio next determined after receipt by SFM of the
redemption order. Payment on redemption will be made as
promptly as possible and, in any event, within seven days
after the redemption order is received.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor SFM will be responsible for
any loss, liability, cost or expense for acting upon wire
instructions or upon telephone instructions that it
reasonably believes to be genuine. The Trust and SFM will
each employ reasonable procedures to confirm that
instructions communicated by telephone are genuine,
including requiring a form of personal identification prior
to acting upon instructions received by telephone and
recording telephone instructions.
If market conditions are extraordinarily active, or other
extraordinary circumstances exist, and shareholders
experience difficulties placing redemption orders by
telephone, shareholders may wish to consider placing their
order by other means.
PERFORMANCE ____________________________________________________________________
From time to time, a Portfolio may advertise yield and total
return. These figures will be based on historical earnings
and are not intended to indicate future performance. No
representation can be made concerning actual yield or future
returns. The yield of a Portfolio refers to the income
generated by a hypothetical investment, net of any sales
charge imposed in the case of some ProVantage Funds shares,
in such Portfolio over a thirty day period. This income is
then "annualized," i.e., the income over thirty days is
assumed to be generated over one year and is shown as a
percentage of the investment.
The total return of a Portfolio refers to the average
compounded rate of return on a hypothetical investment for
designated time periods, assuming that the entire investment
is redeemed at the end of each period and assuming the
reinvestment of all dividend and capital gain distributions.
The performance of Class A shares will normally be higher
than for Class B shares and ProVantage Fund shares because
of the additional distribution expenses charged to Class B
shares and additional distribution expenses, transfer agency
expenses and sales charges (when applicable) charged to
ProVantage Funds shares.
A Portfolio may periodically compare its performance to
that of other mutual funds tracked by mutual fund rating
services (such as Lipper Analytical) or by financial and
business publications and periodicals, broad groups of
comparable mutual funds, unmanaged indices which may assume
investment of dividends but generally do not reflect
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deductions for administrative and management costs or to
other investment alternatives. A Portfolio may quote
Morningstar, Inc., a service that ranks mutual funds on the
basis of risk-adjusted performance. A Portfolio may use
long-term performance of these capital markets to
demonstrate general long-term risk versus reward scenarios
and could include the value of a hypothetical investment in
any of the capital markets. A Portfolio may also quote
financial and business publications and periodicals as they
relate to fund management, investment philosophy and
investment techniques.
A Portfolio may quote various measures of volatility and
benchmark correlation in advertising and may compare these
measures to those of other funds. Measures of volatility
attempt to compare historical share price fluctuations or
total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might
be. Measures of volatility and correlation are calculated
using averages of historical data and cannot be calculated
precisely.
Additional performance information is set forth in the
1994 Annual Report to Shareholders and is available upon
request and without charge by calling 1-800-342-5734.
TAXES __________________________________________________________________________
The following summary of federal income tax consequences is
based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No attempt has been made to present a detailed explanation
of the federal, state or local income tax treatment of a
Portfolio or its shareholders. Accordingly, shareholders are
urged to consult their tax advisers regarding specific
questions as to federal, state and local taxes. State and
local tax consequences of an investment in a Portfolio may
differ from the federal income tax consequences described
below. Additional information concerning taxes is set forth
in the Statement of Additional Information.
Tax Status of A Portfolio is treated as a separate entity for federal
the Portfolios income tax purposes and is not combined with the Trust's
other portfolios. Each Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies ("RICs") under Subchapter M of the
Code, so as to be relieved of federal income tax on net
investment company taxable income (including the excess, if
any, of net short-term capital gains over net long-term
capital losses) and net capital gains (the excess of net
long-term capital gains over net short-term capital losses)
distributed to shareholders.
Tax Status of Each Portfolio distributes substantially all of its net
Distributions investment company taxable income to shareholders. Dividends
from a Portfolio's net investment company taxable income are
taxable to its shareholders as ordinary income (whether
received in cash or in additional shares). Dividends from
the High Yield Bond Portfolio's net investment income
ordinarily will not qualify for the corporate dividends-
received deduction. Distributions of net capital gains are
taxable to shareholders as long-term capital gains
regardless of how long a shareholder has held shares.
Dividends and distributions received from a Portfolio will
not
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qualify for the dividends received deduction. Each Portfolio
will make annual reports to shareholders of the federal
income tax status of all distributions.
Dividends declared by a Portfolio in October, November or
December of any year and payable to shareholders of record
on a date in such a month will be deemed to have been paid
by the Portfolio and received by the shareholders on
December 31 of the year declared if paid by a Portfolio at
any time during the following January.
Each Portfolio intends to make sufficient distributions
to avoid liability for federal excise tax.
Sale, exchange or redemption of a Portfolio's shares
generally is a taxable transaction to the shareholder.
GENERAL INFORMATION ____________________________________________________________
The Trust The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated October 20, 1986. The
Declaration of Trust permits the Trust to offer separate
series of shares and different classes of each portfolio.
All consideration received by the Trust for shares of any
class of any portfolio and all assets of such portfolio or
class belong to that portfolio or class, respectively, and
would be subject to the liabilities related thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
Trustees of the The management and affairs of the Trust are supervised by
Trust the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
Voting Rights Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will vote
separately on matters pertaining solely to that portfolio or
class, such as any distribution plan. As a Massachusetts
business trust, the Trust is not required to hold annual
meetings of shareholders but approval will be sought for
certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining Trustees
or by shareholders at a special meeting called upon written
request of shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a
meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
Reporting The Trust issues unaudited financial information semi-
annually and audited financial statements annually. The
Trust furnishes proxy statements and other reports to
shareholders of record.
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Shareholder Shareholder inquiries should be directed to the Manager, SEI
Inquiries Financial Management Corporation, 680 East Swedesford Road,
Wayne, PA 19087.
Dividends Substantially all of the net investment income (exclusive of
capital gains) of each Portfolio is periodically declared
and paid as a dividend. Dividends currently are paid on a
monthly basis for each Portfolio. Currently, net capital
gains (the excess of net long-term capital gain over net
short-term capital loss) realized, if any, will be
distributed at least annually.
Shareholders automatically receive all income dividends
and capital gain distributions in additional shares at the
net asset value next determined following the record date,
unless the shareholder has elected to take such payment in
cash. Shareholders may change their election by providing
written notice to the SFM at least 15 days prior to the
distribution.
Dividends and capital gains of each Portfolio are paid on
a per-share basis. The value of each share will be reduced
by the amount of any such payment. If shares are purchased
shortly before the record date for a dividend or capital
gains distributions, a shareholder will pay the full price
for the share and receive some portion of the price back as
a taxable dividend or distribution.
The dividends on ProVantage Funds shares or Class B
shares of the Portfolios will normally be lower than those
on Class A shares because of the additional distribution
expenses charged to Class B shares and the additional
distribution and transfer agent expenses charged to
ProVantage Funds shares.
Counsel and Morgan, Lewis & Bockius serves as counsel to the Trust.
Independent Price Waterhouse LLP serves as the independent accountants
Accountants of the Trust.
Custodian and CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
Wire Agent 7618, Philadelphia, PA 19101 (the "Custodian"), acts as
custodian of the Trust's assets. The Custodian holds cash,
securities and other assets of the Trust as required by the
1940 Act.
DESCRIPTION OF
PERMITTED
INVESTMENTS AND
RISK FACTORS ___________________________________________________________________
The following is a description of the permitted investment
practices for the Portfolios, and the associated risk
factors:
Asset-Backed Asset-backed securities are securities secured by non-
Securities mortgage assets such as company receivables, truck and auto
loans, leases and credit card receivables. Such securities
are generally issued as pass-through certificates, which
represent undivided fractional ownership interests in the
underlying pools of assets. Such securities also may be debt
instruments, which are also known as collateralized
obligations and are generally issued as the debt of a
special purpose entity, such as a trust, organized solely
for the purpose of owning such assets and issuing such debt.
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Asset-backed securities are not issued or guaranteed by
the United States Government or its agencies or
instrumentalities; however, the payment of principal and
interest on such obligations may be guaranteed up to certain
amounts and for a certain period by a letter of credit
issued by a financial institution (such as a bank or
insurance company) unaffiliated with the issuers of such
securities. The purchase of asset-backed securities raises
risk considerations peculiar to the financing of the
instruments underlying such securities. For example, there
is a risk that another party could acquire an interest in
the obligations superior to that of the holders of the
asset-backed securities. There also is the possibility that
recoveries on repossessed collateral may not, in some cases,
be available to support payments on those securities. Asset-
backed securities entail prepayment risk, which may vary
depending on the type of asset, but is generally less than
the prepayment risk associated with mortgage-backed
securities. In addition, credit card receivables are
unsecured obligations of the card holder.
The market for asset-backed securities is at a relatively
early stage of development. Accordingly, there may be a
limited secondary market for such securities. The Core Fixed
Income and High Yield Bond Portfolios may invest in asset-
backed securities.
Bankers' Bankers' acceptances are bills of exchange or time drafts
Acceptances drawn on and accepted by a commercial bank. Bankers'
acceptances are used by corporations to finance the shipment
and storage of goods. Maturities are generally six months or
less. Each Portfolio may invest in bankers' acceptances.
Certificates of Certificates of deposit are interest bearing instruments
Deposit with a specific maturity. They are issued by banks and
savings and loan institutions in exchange for the deposit of
funds and normally can be traded in the secondary market
prior to maturity. Certificates of deposit with penalties
for early withdrawal will be considered illiquid. Each
Portfolio may invest in certificates of deposit.
Commerical Commercial paper is a term used to describe unsecured short-
Paper term promissory notes issued by banks, municipalities,
corporations and other entities. Maturities on these issues
vary from a few to 270 days. The Core Fixed Income and Bond
Portfolios may invest in commercial paper.
Convertible Convertible securities are corporate securities that are
Securities exchangeable for a set number of another security at a
prestated price. Convertible securities typically have
characteristics similar to both fixed-income and equity
securities. Because of the conversion feature, the market
value of a convertible security tends to move with the
market value of the underlying stock. The value of a
convertible security is also affected by prevailing interest
rates, the credit quality of the issuer, and any call
provisions. The High Yield Bond and Bond Portfolios may
invest in convertible securities.
Derivatives Derivatives are securities that derive their value from
other securities. The following are considered derivative
securities: options on futures, futures, options (e.g., puts
and calls) swap agreements, mortgage-backed securities
(CMOs, REMICs, IOs and POs), when-issued
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securities and forward commitments, floating and variable
rate securities, convertible securities, "stripped" U.S.
Treasury securities (e.g., Receipts and STRIPs), privately
issued stripped securities (e.g., TGRs, TRs and CATS). See
elsewhere in this "Description of Permitted Investments and
Risk Factors" for discussions of these various instruments,
and see "Investment Objectives and Policies" for more
information about any investment policies and limitations
applicable to their use.
Equity Equity securities represent ownership interests in a company
Securities or corporation and include common stock, preferred stock and
warrants and other rights to acquire such instruments.
Investments in common stocks are subject to market risks
which may cause their prices to fluctuate over time. Changes
in the value of portfolio securities will not necessarily
affect cash income derived from these securities but will
affect a Portfolio's net asset value. The High Yield Bond
Portfolio may invest in equity securities.
Fixed Income Fixed income securities are debt obligations issued by
Securities corporations, municipalities and other borrowers. The market
value of fixed income investments will generally change in
response to interest rate changes and other factors. During
periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during
periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities
with longer maturities tend to produce higher yields, the
prices of longer maturity securities are also subject to
greater market fluctuations as a result of changes in
interest rates. Changes by recognized agencies in the rating
of any fixed income security and in the ability of an issuer
to make payments of interest and principal will also affect
the value of these investments. Changes in the value of
portfolio securities will not affect cash income derived
from these securities but will affect a Portfolio's net
asset value. Each Portfolio may invest in fixed income
securities.
Forward Foreign A forward contract involves an obligation to purchase or
Currency sell a specific currency amount at a future date, agreed
Contracts upon by the parties, at a price set at the time of the
contract. A Portfolio may also enter into a contract to
sell, for a fixed amount of U.S. dollars or other
appropriate currency, the amount of foreign currency
approximating the value of some or all of a Portfolio's
securities denominated in such foreign currency.
At the maturity of a forward contract, a Portfolio may
either sell a portfolio security and make delivery of the
foreign currency, or it may retain the security and
terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the
same currency trader, obligating it to purchase, on the same
maturity date, the same amount of the foreign currency. A
Portfolio may realize a gain or loss from currency
transactions. The High Yield Bond Portfolio may invest in
forward foreign currency contracts.
Futures and Futures contracts provide for the future sale by one party
Options on and purchase by another party of a specified amount of a
Futures 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
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premium, to assume a position in a futures contract at a
specified exercise price during the term of the option. A
Portfolio may use futures contracts and related options for
bona fide hedging purposes, to offset changes in the value
of securities held or expected to be acquired or be disposed
of, to minimize fluctuations in foreign currencies, or to
gain exposure to a particular market or instrument. A
Portfolio will minimize the risk that it will be unable to
close out a futures contract by only entering into futures
contracts which are traded on national futures exchanges.
Stock index futures are futures contracts for various
stock indices that are traded on registered securities
exchanges. A stock index futures contract obligates the
seller to deliver (and the purchaser to take) an amount of
cash equal to a specific dollar amount times the difference
between the value of a specific stock index at the close of
the last trading day of the contract and the price at which
the agreement is made.
There are risks associated with these activities,
including the following: (1) the success of a hedging
strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets
and movements in interest rates, (2) there may be an
imperfect or no correlation between the changes in market
value of the securities held by the Portfolio and the prices
of futures and options on futures, (3) there may not be a
liquid secondary market for a futures contract or option,
(4) trading restrictions or limitations may be imposed by an
exchange, and (5) government regulations may restrict
trading in futures contracts and futures options.
A Portfolio may enter into futures contracts and options
on futures contracts traded on an exchange regulated by the
Commodities Futures Trading Commission ("CFTC"), 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
Portfolio's net assets. The Portfolio may buy and sell
futures contracts and related options to manage its exposure
to changing interest rates and securities prices. Some
strategies reduce the Portfolio's exposure to price
fluctuations, while others tend to increase its market
exposure. Futures and options on futures can be volatile
instruments and involve certain risks that could negatively
impact the Portfolio's return. The Core Fixed Income and
High Yield Bond Portfolios may invest in futures and options
on futures.
Illiquid Illiquid securities are securities that cannot be disposed
Securities of within seven business days at approximately the price at
which they are being carried on a Portfolio's books. An
illiquid security includes a demand instrument with a demand
notice period exceeding seven days, where there is no
secondary market for such security, and repurchase
agreements with durations (or maturities) over 7 days in
length. Each Portfolio may invest in illiquid securities.
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
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for these securities may be less active, causing market
price volatility and limited liquidity in the secondary
market. This may limit a Portfolio's ability to sell such
securities at their market value. In addition, the market
for these securities may also be adversely affected by
legislative and regulatory developments. Credit quality in
the junk bond market can change suddenly and unexpectedly,
and even recently issued credit ratings may not fully
reflect the actual risks imposed by a particular security.
The High Yield Bond Portfolio may invest in junk bonds.
Money Market Money market securities are high-quality, dollar-
Securities 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 or guaranteed 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 of less
issued by corporations with outstanding high-quality
commercial paper; and (v) repurchase agreements involving
any of the foregoing obligations entered into with highly-
rated banks and broker-dealers. All Portfolios may invest in
money market securities.
Mortgage-Backed Mortgage-backed securities are instruments that entitle the
Securities holder to a share of all interest and principal payments
from mortgages underlying the security. The mortgages
backing these securities include conventional thirty-year
fixed-rate mortgages, graduated payment mortgages, and
adjustable rate mortgages. During periods of declining
interest rates, prepayment of mortgages underlying mortgage-
backed securities can be expected to accelerate. Prepayment
of mortgages which underlie securities purchased at a
premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital
gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict
accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities: These are securities
that are issued or guaranteed by a U.S. Government agency
representing an interest in a pool of mortgage loans. The
primary issuers or guarantors of these mortgage-backed
securities are GNMA, FNMA and FHLMC. FNMA and FHLMC
obligations are not backed by the full faith and credit of
the U.S. Government as GNMA certificates are, but FNMA and
FHLMC securities are supported by the instrumentalities'
right to borrow from the U.S. Treasury. GNMA, FNMA and FHLMC
each guarantees timely distributions of interest to
certificate holders. GNMA and FNMA also each guarantees
timely distributions of scheduled principal. FHLMC has in
the past guaranteed only the ultimate collection of
principal of the underlying mortgage loan; however, FHLMC
now issues mortgage-backed securities (FHLMC Gold PCs) which
also guarantee timely payment of monthly principal
reductions. Government and private guarantees do not extend
to the securities' value, which is likely to vary inversely
with fluctuations in interest rates.
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Private Pass-Through Securities: These are mortgage-
backed securities issued by a non-governmental entity, such
as a trust. These securities include collateralized mortgage
obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two
rating categories. 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. 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. 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.
REMICs: A REMIC is a CMO that qualifies for special tax
treatment under the Internal Revenue Code and invests in
certain mortgages principally secured by interests in real
property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or
"residual" interests. Guaranteed REMIC pass-through
certificates ("REMIC Certificates") issued by FNMA or FHLMC
represent beneficial ownership interests in a REMIC trust
consisting principally of mortgage loans or FNMA, FHLMC or
GNMA-guaranteed mortgage pass-through certificates. For
FHLMC REMIC Certificates, FHLMC guarantees the timely
payment of interest, and also guarantees the payment of
principal as payments are required to be made on the
underlying mortgage participation certificates. FNMA REMIC
Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA.
Parallel Pay Securities; PAC Bonds: Parallel pay CMOs and
REMICS are structured to provide payments of principal on
each payment date to more than one class. These simultaneous
payments are taken into account in calculating the stated
maturity date or final distribution date of each class,
which must be retired by its stated maturity date or final
distribution date, but may be retired earlier. Planned
Amortization Class CMOs ("PAC Bonds") generally require
payments of a specified amount of principal on each payment
date. PAC Bonds are always parallel pay CMOs with the
required principal payment on such securities having the
highest priority after interest has been paid to all
classes.
REITs: REITs are trusts that invest primarily in
commercial real estate or real estate-related loans. The
value of interests in REITs may be affected by the value of
the property owned or the quality of the mortgages held by
the trust.
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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. SMBs are extremely sensitive to changes in interest
rates because of the impact thereon of prepayment of
principal on the underlying mortgage securities can
experience wide swings in value in response to changes in
interest rates and associated mortgage prepayment rates.
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.
Risk Factors: Due to the possibility of prepayments of
the underlying mortgage instruments, mortgage-backed
securities generally do not have a known maturity. In the
absence of a known maturity, market participants generally
refer to an estimated average life. An average life estimate
is a function of an assumption regarding anticipated
prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other
factors. The assumption is necessarily subjective, and thus
different market participants can produce different average
life estimates with regard to the same security. There can
be no assurance that estimated average life will be a
security's actual average life. The Core Fixed Income, Bond
and High Yield Bond Portfolios may invest in mortgage-backed
securities.
Mortgage Dollar Mortgage "dollar rolls" are transactions in which mortgage-
Rolls backed securities are sold for delivery in the current month
and the seller simultaneously contracts to repurchase
substantially similar securities on a specified future date.
Any difference between the sale price and the purchase price
is netted against the interest income foregone on the
securities sold to arrive at an implied borrowing rate.
Alternatively, the sale and purchase transactions can be
executed at the same price, with the Portfolio being paid a
fee as consideration for entering into the commitment to
purchase. Mortgage dollar rolls may be renewed prior to cash
settlement and initially may involve only a firm commitment
agreement by the Portfolio to buy a security. If the broker-
dealer to whom the Portfolio sells the security becomes
insolvent, the Portfolio's right to repurchase the security
may be restricted. Other risks involved in entering into
mortgage dollar rolls include the risk that the value of the
security may change adversely over the term of the mortgage
dollar roll and that the security the Portfolio is required
to repurchase may be worth less than the security that the
Portfolio originally held.
To avoid any leveraging concerns, the Portfolio will
place U.S. Government or other liquid, high grade assets in
a segregated account in an amount sufficient to cover its
repurchase obligation. The Core Fixed Income Portfolio may
invest in mortgage dollar rolls.
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Options A put option gives the purchaser of the option the right to
sell, and the writer of the option the obligation to buy,
the underlying security at any time during the option
period. A call option gives the purchaser of the option the
right to buy, and the writer of the option the obligation to
sell, the underlying security at any time during the option
period. The premium paid to the writer is the consideration
for undertaking the obligations under the option contract.
The initial purchase (sale) of an option contract is an
"opening transaction." In order to close out an option
position, a Portfolio may enter into a "closing
transaction," which is simply the sale (purchase) of an
option contract on the same security with the same exercise
price and expiration date as the option contract originally
opened.
A Portfolio may purchase put and call options to protect
against a decline in the market value of the securities in
its portfolio or to anticipate an increase in the market
value of securities that the Portfolio may seek to purchase
in the future. A Portfolio purchasing put and call options
pays a premium therefor. If price movements in the
underlying securities are such that exercise of the options
would not be profitable for the Portfolio, loss of the
premium paid may be offset by an increase in the value of
the Portfolio's securities or by a decrease in the cost of
acquisition of securities by the Portfolio.
A Portfolio may write covered call options as a means of
increasing the yield on its portfolio and as a means of
providing limited protection against decreases in its market
value. When a Portfolio sells an option, if the underlying
securities do not increase or decrease to a price level that
would make the exercise of the option profitable to the
holder thereof, the option generally will expire without
being exercised and the Portfolio will realize as profit the
premium received for such option. When a call option of
which a Portfolio is the writer is exercised, the Portfolio
will be required to sell the underlying securities to the
option holder at the strike price, and will not participate
in any increase in the price of such securities above the
strike price. When a put option of which a Portfolio is the
writer is exercised, the Portfolio will be required to
purchase the underlying securities at the strike price,
which may be in excess of the market value of such
securities.
A Portfolio may purchase and write options on an exchange
or over-the-counter. Over-the-counter options ("OTC
options") differ from exchange-traded options in several
respects. They are transacted directly with dealers and not
with a clearing corporation, and therefore entail the risk
of non-performance by the dealer. OTC options are available
for a greater variety of securities and for a wider range of
expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded
on an exchange, pricing is done normally by reference to
information from a market maker. It is the position of the
Securities and Exchange Commission that OTC options are
generally illiquid.
A Portfolio may purchase and write put and call options
on foreign currencies (traded on U.S. and foreign exchanges
or over-the-counter markets) to manage its
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<PAGE>
exposure to exchange rates. Call options on foreign currency
written by a Portfolio will be "covered," which means that
the Portfolio will own an equal amount of the underlying
foreign currency. With respect to put options on foreign
currency written by a Portfolio, the Portfolio will
establish a segregated account with its custodian bank
consisting of cash or liquid, high grade debt securities in
an amount equal to the amount the Portfolio would be
required to pay upon exercise of the put.
A Portfolio may purchase and write put and call options
on indices and enter into related closing transactions. Put
and call options on indices are similar to options on
securities except that options on an index give the holder
the right to receive, upon exercise of the option, an amount
of cash if the closing level of the underlying index is
greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal
to the difference between the closing price of the index and
the exercise price of the option, expressed in dollars
multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain
or loss depends on price movements in the particular market
represented by the index generally, rather than the price
movements in individual securities. A Portfolio may choose
to terminate an option position by entering into a closing
transaction. The ability of a Portfolio to enter into
closing transactions depends upon the existence of a liquid
secondary market for such transactions.
A Portfolio may engage in writing covered call options.
Under a call option, the purchaser has the right to purchase
and the writer (the Portfolio) the obligation to sell the
underlying security at the exercise price during the option
period. Options purchased by the Portfolio will be listed on
a national securities exchange. In order to close out an
option position, the Portfolio may enter into a "closing
purchase transaction," which involves the purchase of an
option on the same security at the same exercise price and
expiration date. If the Portfolio is unable to effect a
closing purchase transaction with respect to an option it
has written, it will not be able to sell the underlying
security until the options expires or the Portfolio delivers
the security upon exercise. Permissible options include
options on stock indices.
Even where used only for hedging purposes, options
involve risks, including the following: (i) the success of
any hedging strategy utilizing options will depend on an
ability to predict movements in the prices of individual
securities and interest rates, (ii) there may be an
imperfect correlation between the movement in prices of
securities held by the Portfolio and the price of options,
(iii) there may not be a liquid secondary market for
options, and (iv) while the Portfolio will receive a premium
when it writes covered call options, it may not participate
fully in any rise in the market value of the underlying
security."
All options written on indices must be covered. When a
Portfolio writes an option on an index, it will establish a
segregated account containing cash or liquid high grade debt
securities with its custodian in an amount at least equal to
the market value of the option
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and will maintain the account while the option is open or
will otherwise cover the transaction.
Risk Factors. Risks associated with options transactions
include: (1) the success of a hedging strategy may depend on
an ability to predict movements in the prices of individual
securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation
between the movement in prices of options and the securities
underlying them; (3) there may not be a liquid secondary
market for options; and (4) while a Portfolio will receive a
premium when it writes covered call options, it may not
participate fully in a rise in the market value of the
underlying security. The Core Fixed Income and High Yield
Bond Portfolios may invest in options.
Receipts Receipts are sold as zero coupon securities which means that
they are sold at a substantial discount and redeemed at face
value at their maturity date without interim cash payments
of interest or principal. This discount is accreted over the
life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax
purposes. Because of these features, such securities may be
subject to greater interest rate volatility than interest
paying Permitted Investments. See also "Taxes." Each
Portfolio may invest in receipts.
Repurchase Agreements by which a Portfolio obtains a security and
Agreements simultaneously commits to return the security to the seller
at an agreed upon price (including principal and interest)
on an agreed upon date within a number of days from the date
of purchase. The Custodian or its agent will hold the
security as collateral for the repurchase agreement.
Collateral must be maintained at a value at least equal to
102% of the purchase price. The Portfolio bears a risk of
loss in the event the other party defaults on its
obligations and the Portfolio is delayed or prevented from
its right to dispose of the collateral securities or if the
Portfolio realizes a loss on the sale of the collateral
securities. The adviser will enter into repurchase
agreements on behalf of the Portfolio only with financial
institutions deemed to present minimal risk of bankruptcy
during the term of the agreement based on guidelines
established and periodically reviewed by the Trustees.
Repurchase agreements are considered loans under the 1940
Act. Each Portfolio may invest in repurchase agreements.
Securities In order to generate additional income, a Portfolio may lend
Lending securities which it owns pursuant to agreements requiring
that the loan be continuously secured by collateral
consisting of cash, securities of the U.S. Government or its
agencies equal to at least 100% of the market value of the
securities lent. A Portfolio continues to receive interest
on the securities lent while simultaneously earning interest
on the investment of cash collateral. Collateral is marked
to market daily. There may be risks of delay in recovery of
the securities or even loss of rights in the collateral
should the borrower of the securities fall financially or
become insolvent. The High Yield Bond Portfolio may lend
securities.
Securities of There are certain risks connected with investing in foreign
Foreign Issuers securities. These include risks of adverse political and
economic developments (including possible governmental
seizure or
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nationalization of assets), the possible imposition of
exchange controls or other governmental restrictions, less
uniformity in accounting and reporting requirements, the
possibility that there will be less information on such
securities and their issuers available to the public, the
difficulty of obtaining or enforcing court judgments abroad,
restrictions on foreign investments in other jurisdictions,
difficulties in effecting repatriation of capital invested
abroad, and difficulties in transaction settlements and the
effect of delay on shareholder equity. Foreign securities
may be subject to foreign taxes, and may be less marketable
than comparable U.S. securities. The value of a Portfolio's
investments denominated in foreign currencies will depend on
the relative strengths of those currencies and the U.S.
dollar, and a Portfolio may be affected favorably or
unfavorably by changes in the exchange rates or exchange
control regulations between foreign currencies and the U.S.
dollar. Changes in foreign currency exchange rates also may
affect the value of dividends and interest earned, gains and
losses realized on the sale of securities and net investment
income and gains, if any, to be distributed to shareholders
by a Portfolio. The High Yield Bond Portfolio may invest in
securities of foreign issuers.
U.S. Government Obligations issued or guaranteed by agencies of the U.S.
Agencies Government, including, among others, the Federal Farm Credit
Bank, the Federal Housing Administration and the Small
Business Administration, and obligations issued or
guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage
Corporation, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the full
faith and credit of the U.S. Treasury (e.g., Government
National Mortgage Association), others are supported by the
right of the issuer to borrow from the Treasury (e.g.,
Federal Farm Credit Bank), while still others are supported
only by the credit of the instrumentality (e.g., Federal
National Mortgage Association). Guarantees of principal by
agencies or instrumentalities of the U.S. 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
Portfolio's shares. Each Portfolio may invest in obligations
issued or guaranteed by U.S. Government agencies.
U.S. Treasury U.S. Treasury obligations consist of bills, notes and bonds
Obligations issued by the U.S. Treasury and separately traded interest
and principal component parts of such obligations that are
transferable through the Federal book-entry system known as
Separately Traded Registered Interest and Principal
Securities ("STRIPS"). Each Portfolio may invest in U.S.
Treasury obligations.
U.S. Treasury U.S. Treasury receipts are interests in separately traded
Receipts interest and principal component parts of U.S. Treasury
obligations that are issued by banks or brokerage firms and
are created by depositing U.S. Treasury obligations into a
special account at a custodian bank. The Custodian holds the
interest and principal payments for the benefit of the
registered
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owners of the certificates of receipts. The Custodian
arranges for the issuance of the certificates or receipts
evidencing ownership and maintains the register. Receipts
include "Treasury Receipts" ("TRs"), "Treasury Investment
Growth Receipts" (TIGRs"), "Liquid Yield Option Notes"
("LYONs") and "Certificates of Accrual on Treasury
Securities" ("CATS"). TIGRs and CATS are interests in
private proprietary accounts while TRs are interests in
accounts sponsored by the U.S. Treasury. Each Portfolio may
invest in U.S. Treasury receipts.
Variable and Certain obligations may carry variable or floating rates of
Floating Rate interest, and may involve a conditional or unconditional
Instruments 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
some other reset period, 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.
Each Portfolio may invest in variable and floating rate
instruments.
Warrants Warrants are instruments giving holders the right, but not
the obligation, to buy shares of a company at a given price
during a specified period. The Core Fixed Income and High
Yield Bond Portfolios may invest in warrants.
When-Issued and When-issued or delayed delivery basis transactions involve
Delayed the purchase of an instrument with payment and delivery
Delivery taking place in the future. Delivery of and payment for
Securities these securities may occur a month or more after the date of
the purchase commitment. The Portfolio will maintain with
the custodian a separate account with liquid high grade debt
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these securities
is fixed as of the purchase date and no interest accrues to
the Portfolio before settlement. 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. Although a Portfolio generally purchases securities
on a when-issued or forward commitment basis with the
intention of actually acquiring securities, a Portfolio may
dispose of a when-issued security or forward commitment
prior to settlement if it deems appropriate. Each Portfolio
may invest in when-issued and delayed delivery securities.
Yankee Yankee obligations ("Yankees") are U.S. dollar-denominated
Obligations instruments of foreign issuers who either register with the
Securities and Exchange Commission or issue under Rule
144(A). These consist of debt securities (including
preferred or preference stock of non-governmental issuers),
certificates of deposit, fixed time deposits and bankers'
acceptances issued by foreign banks, and debt obligations of
foreign governments or their subdivisions, agencies and
instrumentalities, international agencies and supranational
entities. Some
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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.
Investing in the securities of issuers based in any
foreign country involves special risks and considerations
not typically associated with investing in U.S. companies.
These include risks resulting from differences in
accounting, auditing and financial reporting standards,
lower liquidity than U.S. fixed income or debt securities,
the possibility of nationalization, expropriation or
confiscatory taxation; adverse changes in investment or
exchange control regulations and political instability.
There may be less publicly available information concerning
foreign issuers of securities held by the Portfolio than is
available concerning U.S. issuers. Purchases and sales of
foreign securities and dividends and interest payable on
those securities may be subject to foreign taxes and taxes
may be withheld from dividend and interest payments on those
securities. Foreign securities often trade with less
frequency and volume than domestic securities and therefore
may exhibit greater price volatility and a greater risk of
liquidity.
The yankee obligations selected for the Portfolio will
adhere to the same quality standards as those utilized for
the selection of domestic debt obligations. The Core Fixed
Income Portfolio may invest in yankee obligations.
Zero Coupon, Zero coupon securities are securities that are sold at a
Pay-In-Kind and discount to par value and securities on which interest
Deferred payments are not made during the life of the security. Upon
Payment maturity, the holder is entitled to receive the par value of
Securities the security. While interest payments are not made on such
securities, holders of such securities are deemed to have
received "phantom income" annually. Because a Portfolio will
distribute its "phantom income" to shareholders, to the
extent that shareholders elect to receive dividends in cash
rather than reinvesting such dividends in additional shares,
a Portfolio will have fewer assets with which to purchase
income producing securities. Alternatively, shareholders may
have to redeem shares to pay tax on this "phantom income."
In either case, the Portfolio may have to dispose of its
portfolio securities under disadvantageous circumstances to
generate cash, or may have to leverage itself by borrowing
cash to satisfy distribution requirements. A Portfolio
accrues income with respect to the securities prior to the
receipt of cash payments. Pay-in-kind securities are
securities that have interest payable by delivery of
additional securities. Deferred payment securities are
securities that remain zero coupon securities until a
predetermined date, at which time the stated coupon rate
becomes effective and interest becomes payable at regular
intervals. Zero coupon, pay-in-kind and deferred payment
securities may be subject to greater fluctuation in value
and lesser liquidity in the event of adverse market
conditions that comparably rated securities paying cash
interest at regular interest payment periods. The High Yield
Bond Portfolio may invest in zero coupon, pay-in-kind and
deferred payment securities.
Additional information on permitted investments and risk
factors can be found in the Statement of Additional
Information.
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APPENDIX--DESCRIPTION OF CORPORATE BOND RATINGS ________________________________
MOODY'S RATING DEFINITIONS
LONG TERM
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edged". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat larger than
the Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the
future.
Baa Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
A-1
<PAGE>
Moody's bond ratings, where specified, are applied to senior bank obligations
and insurance company senior policyholder and claims obligations with an
original maturity in excess of one year. Obligations relying upon support
mechanisms such as letters-of-credit and bonds of indemnity are excluded unless
explicitly rated.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located
in countries which carry a Moody's sovereign rating. Such branch obligations
are rated at the lower of the bank's rating or Moody's sovereign rating for the
bank deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings
do not incorporate an opinion as to whether payment of the obligation will be
affected by the actions of the government controlling the currency of
denomination. In addition, risk associated with bilateral conflicts between an
investor's home country and either the issuer's home country or the country
where an issuer branch is located are not incorporated into Moody's ratings.
Moody's makes no representation that rated bank obligations or insurance
company obligations are exempt from registration under the U.S. Securities Act
of 1933 or issued in conformity with any other applicable law or regulation.
Nor does Moody's represent that any specific bank or insurance company
obligation is legally enforceable or is a valid senior obligation of a rated
issuer.
Moody's ratings are opinions, not recommendations to buy or sell, and their
accuracy is not guaranteed. A rating should be weighed solely as one factor in
an investment decision and you should make your own study and evaluation of any
issuer whose securities or debt obligations you consider buying or selling.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
STANDARD & POOR'S RATINGS DEFINITIONS
A Standard & Poor's corporate or municipal debt rating is a current assessment
of creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.
The debt rating is not a recommendation to purchase, sell or hold a security,
as it does not comment on market price or suitability for a particular
investor.
The ratings are based, in varying degrees, on the following considerations:
(1) Likelihood of default. The rating assesses the obligor's capacity and
willingness as to timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
A-2
<PAGE>
(2) The obligation's nature and provisions.
(3) Protection afforded to, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under bankruptcy
laws and other laws affecting creditor's rights.
Likelihood of default is indicated by an issuer's senior debt rating. If senior
debt is not rated, an implied senior debt rating is determined. Subordinated
debt usually is rated lower than senior debt to better reflect relative
position of the obligation in bankruptcy. Unsecured debt, where significant
secured debt exists, is treated similarly to subordinated debt.
LONG-TERM
Investment Grade
AAA Debt rated 'AAA' has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated debt only in small degree.
A Debt rated 'A' has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Speculative Grade
Debt rated 'BB', 'B', 'CCC', 'CC', and 'C' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. 'BB' indicates the least degree of speculation and 'C' the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposure to adverse conditions.
BB Debt rated 'BB' has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that could
lead to inadequate capacity to meet timely interest and principal payments.
The 'BB' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied 'BBB-' rating.
B Debt rate 'B' has greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions would likely impair capacity or
willingness to pay interest and repay principal. The 'B' rating category
also is used for debt subordinated to senior debt that is assigned an
actual or implied 'BB' or 'BB-' rating.
CCC Debt rated 'CCC' has a current identifiable vulnerability to default, and
is dependent on favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event
of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal.
A-3
<PAGE>
The 'CCC' rating category also is used for debt subordinated to senior debt
that is assigned an actual or implied 'B' or 'B-' rating.
CC The rating 'CC' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC' rating.
C The rating 'C' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payment are continued.
CI Debt rated 'CI' is reserved for income bonds on which no interest is being
paid.
D Debt is rated 'D' when the issue is in payment default, or the obligor has
filed for bankruptcy. The 'D' rating is used when interest or principal
payments are not made on the date due, even if the applicable grace period
has not expired, unless S&P believes that such payments will be made during
such grace period.
Plus (+) or minus (-): The ratings from 'AA' to 'CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
C The letter 'c' indicates that the holder's option to tender the security for
purchase may be canceled under certain prestated conditions enumerated in
the tender option documents.
P The letter 'p' indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project financed by the debt
being rated and indicates that payment of the debt service requirements is
largely or entirely dependent upon the successful timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the
risk of default upon failure of such completion. The investor should
exercise his own judgement with respect to such likelihood and risk.
L The letter 'L' indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is
federally insured, and interest is adequately collateralized. In the case of
certificates of deposit, the letter "L' indicates that the deposit, combined
with other deposits being held in the same right and capacity, will be
honored for principal and pre-default interest up to federal insurance
limits within 30 days after closing of the insured institution or, in the
event that the deposit is assumed by a successor insured institution, upon
maturity.
- -------
* Continuance of the rating is contingent upon S&P's receipt of an executed
copy of the escrow agreement or closing documentation confirming investments
and cash flows.
N.R. Not rated.
Debt obligations of issuers outside the United States and its territories are
rated on the same basis as domestic corporate and municipal issues. The ratings
measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.
If an issuer's actual or implied senior debt rating is 'AAA', its subordinated
or junior debt is rated 'AAA' or 'AA+'. If an issuer's actual or implied senior
debt rating is lower than 'AAA' but higher than 'BB+', its junior debt is
typically rated one
A-4
<PAGE>
designation lower than the senior debt ratings. For example, if the senior debt
rating is 'A', subordinated debt normally would be rated 'A-'. If an issuer's
actual or implied senior debt rating is 'BB+' or lower, its subordinated debt
is typically rated two designations lower than the senior debt rating.
NOTE: The term "investment grade" was originally used by various regulatory
bodies to connote obligations eligible for investment by institutions such as
banks, insurance companies, and savings and loan associations. Over time, this
term gained widespread usage throughout the investment community. Issues rated
in the four highest categories, 'AAA', 'AA', 'A', 'BBB', generally are
recognized as being investment grade. Debt 'BB' or below generally is referred
to as speculative grade. The term "junk bond" is merely a more irreverent
expression for this category of more risky debt. Neither term indicates which
securities S&P deems worthy of investment, as an investor with a particular
risk preference may appropriately invest in securities that are not investment
grade.
A-5
<PAGE>
TABLE OF CONTENTS ______________________________________________________________
<TABLE>
<S> <C>
The Trust.............................................................. 6
Investment Objective and Policies...................................... 6
General Investment Policies............................................ 9
Investment Limitations................................................. 10
The Manager and Shareholder Servicing Agent............................ 11
The Advisers and Sub-Advisers.......................................... 12
Distribution........................................................... 14
Purchase and Redemption of Shares...................................... 16
Performance............................................................ 17
Taxes.................................................................. 18
General Information.................................................... 19
Description of Permitted Investments and Risk Factors.................. 20
Appendix............................................................... A-1
</TABLE>
<PAGE>
PROSPECTUS
JANUARY 31, 1995
- --------------------------------------------------------------------------------
CORE FIXED INCOME PORTFOLIO
BOND PORTFOLIO
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
Please read this Prospectus carefully before investing, and keep it on file for
future reference. It contains information that can help you decide if a
Portfolio's investment goals match your own.
A Statement of Additional Information (SAI) dated January 31, 1995 has been
filed with the Securities and Exchange Commission and is available without
charge through the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087 or by calling 1-800-437-6016. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Institutional Managed Trust (the "Trust") is a mutual fund that offers
shareholders a convenient means of investing their funds in one or more
professionally managed diversified and non-diversified portfolios of
securities. The Core Fixed Income, Bond and High Yield Bond Portfolios,
investment portfolios of the Trust, offer three classes of shares, Class A
shares, Class B shares and ProVantage Funds shares. ProVantage Funds shares
differ from Class A and Class B shares primarily in the imposition of sales
charges and the allocation of certain distribution expenses and transfer agent
fees. ProVantage Funds shares are available through SEI Financial Services
Company (the Trust's distributor) and through participating broker-dealers,
financial institutions and other organizations. This Prospectus offers the
ProVantage Funds shares of the fixed income portfolios (the "Portfolios," and
each of these a "Portfolio") listed above.
THE HIGH YIELD BOND PORTFOLIO INVESTS PRIMARILY AND MAY INVEST ALL OF ITS
ASSETS IN LOWER RATED BONDS, COMMONLY REFERRED TO AS "JUNK BONDS." THESE
SECURITIES ARE SPECULATIVE AND ARE SUBJECT TO GREATER RISK OF LOSS OF PRINCIPAL
AND INTEREST THAN ARE INVESTMENTS IN HIGHER RATED BONDS. BECAUSE INVESTMENT IN
SUCH SECURITIES ENTAILS GREATER RISKS, INCLUDING RISK OF DEFAULT, AN INVESTMENT
IN THE HIGH YIELD BOND PORTFOLIO SHOULD NOT CONSTITUTE A COMPLETE INVESTMENT
PROGRAM AND MAY NOT BE APPROPRIATE FOR ALL INVESTORS. INVESTORS SHOULD
CAREFULLY CONSIDER THE RISKS POSED BY AN INVESTMENT IN THE HIGH YIELD BOND
PORTFOLIO BEFORE INVESTING. SEE "INVESTMENT OBJECTIVES AND POLICIES," "RISK
FACTORS RELATED TO INVESTING IN LOWER RATED SECURITIES" AND THE "APPENDIX."
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- --------------------------------------------------------------------------------
<PAGE>
HOW TO READ THIS PROSPECTUS ____________________________________________________
This Prospectus gives you information that you should know about the Portfolios
before investing. Brief descriptions are also provided throughout the
Prospectus to better explain certain key points. To find these helpful guides,
look for this symbol. (SYMBOL APPEARS HERE)
FUND HIGHLIGHTS ________________________________________________________________
The following summary provides basic information about the ProVantage Funds
shares of the Trust's Core Fixed Income, Bond and High Yield Bond Portfolios.
This summary is qualified in its entirety by reference to the more detailed
information provided elsewhere in this Prospectus and in the Statement of
Additional Information.
................................................................................
<TABLE>
<CAPTION>
TABLE OF
CONTENTS
<S> <C>
Fund Highlights............................................................ 2
Shareholder Transaction Expenses........................................... 4
Annual Operating Expenses.................................................. 4
Your Account and Doing Business with ProVantage Funds...................... 7
Investment Objectives and Policies......................................... 10
General Investment Policies................................................ 14
Investment Limitations..................................................... 15
The Manager and Shareholder Servicing Agent................................ 16
The Advisers and Sub-Advisers.............................................. 16
Distribution............................................................... 19
Performance................................................................ 21
Taxes...................................................................... 22
Additional Information About Doing Business with ProVantage Funds.......... 23
General Information........................................................ 27
Description of Permitted Investments and Risk Factors...................... 28
Appendix................................................................... A-1
................................................................................
</TABLE>
INVESTMENT Below are the investment objectives and policies for each
OBJECTIVES AND Portfolio. For more information, see "Investment Objectives
POLICIES and Policies" and "Description of Permitted Investments and
Risk Factors."
CORE FIXED The Core Fixed Income Portfolio seeks to provide current
INCOME income consistent with the preservation of capital by
PORTFOLIO investing primarily in corporate bonds and debentures,
obligations issued by the United States Government and its
agencies and instrumentalities, collateralized mortgage
obligations and asset-backed securities.
BOND PORTFOLIO The Bond Portfolio seeks to provide current income consistent
with the preservation of capital by investing primarily in
corporate bonds and debentures, obligations issued by the
United States Government and its agencies and
instrumentalities, custodial receipts, convertible securities
and preferred stock.
HIGH YIELD The High Yield Bond Portfolio seeks to maximize total return
BOND PORTFOLIO by investing primarily in a diversified portfolio of high
yield, lower rated fixed income securities.
UNDERSTANDING Shares of the Portfolios, like shares of any mutual fund, will
RISK fluctuate in value and when you sell your shares, they may be
worth more or less than what you paid for them. The value of
fixed income funds and the fixed income securities in which
they invest tend to vary inversely with interest rates and may
be affected by other market and economic factors as well. The
High Yield Bond Portfolio invests primarily in lower rated
bonds which are considered speculative and are subject to
greater loss of principal and interest than investments in
higher rated bonds. There is no assurance that the Portfolios
will achieve their investment objectives.
2
<PAGE>
MANAGEMENT WESTERN ASSET MANAGEMENT serves as the investment adviser of
PROFILE the Core Fixed Income Portfolio. BOATMEN'S TRUST COMPANY
serves as the investment adviser of the Bond Portfolio. SEI
FINANCIAL MANAGEMENT CORPORATION serves as the investment
adviser of the High Yield Bond Portfolio. CS FIRST BOSTON
MANAGMENT CORPORATION serves as the investment sub-adviser of
the High Yield Bond Portfolio. SFM serves as the manager,
shareholder servicing agent and transfer agent of the Trust.
SEI Financial Services Company acts as distributor of the
Trust's shares. See "The Manager and Shareholder Servicing
Agent," "The Advisers and Sub-Advisers" and "Distribution."
................................................................................
(SYMBOL APPEARS HERE) PROVANTAGE
FUNDS
Believing that no single investment manager can deliver outstanding performance
in every investment category, only those advisers who have distinguished
themselves within their areas of specialization are selected to advise our
mutual funds.
................................................................................
YOUR ACCOUNT You may open an account with just $1,000 and make additional
AND DOING investments with as little as $100. ProVantage Funds shares of
BUSINESS WITH the Portfolios are offered at net asset value per share plus a
PROVANTAGE FUNDS maximum sales charge at the time of purchase of 4.50%.
Shareholders who purchase higher amounts may qualify for a
reduced sales charge. Redemptions of a Portfolio's shares are
made at net asset value per share. See "Your Account and Doing
Business with ProVantage Funds" and "Additional Information
About Doing Business with Us."
DIVIDENDS Substantially all of the net investment income (exclusive of
capital gains) of each Portfolio is distributed in the form
of dividends that will be paid monthly. Any realized net
capital gain is distributed at least annually. Distributions
are paid in additional shares unless the shareholder elects
to take the payment in cash. See "Dividends."
INFORMATION/ For more information about ProVantage Funds call SEI Financial
SERVICE CONTACTS Services Company at 1-800-437-6016.
3
<PAGE>
SHAREHOLDER TRANSACTION EXPENSES (as a percentage of offering price)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH
CORE FIXED YIELD
INCOME BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- ---------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.50% 4.50% 4.50%
Maximum Sales Charge Imposed on Reinvested Div-
idends None None None
Redemption Fees (1) None None None
<CAPTION>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Management/Advisory Fees (after fee waiver) (2) .45% .44% .73%
12b-1 Fees (3) .31% .33% .32%
Other Expenses (4) .19% .18% .20%
- -------------------------------------------------------------------------------
Total Operating Expenses (after fee waiver) (5) .95% .95% 1.25%
- -------------------------------------------------------------------------------
</TABLE>
(1) A charge, currently $10.00, is imposed on wires of redemption proceeds of
the Portfolios' ProVantage Funds shares.
(2) SEI Financial Management Corporation ("SFM"), the Manager, has agreed to
waive, on a voluntary basis, a portion of its management fee, and the
management/advisory fee shown reflect this voluntary waiver. SFM reserves
the right to terminate this waiver at any time in its sole discretion.
Absent such fee waiver, management/advisory fees would be: Core Fixed
Income Portfolio, .56%; Bond Portfolio, .56%; and High Yield Bond
Portfolio, .8375%.
(3) The 12b-1 fees shown include both the Portfolio's current 12b-1 budget for
reimbursement of expenses and the Distributor's voluntary waiver of a
portion of its compensatory fee. The Distributor reserves the right to
terminate its waiver at any time in its sole discretion. The maximum 12b-1
fees payable by the ProVantage Funds shares of each Portfolio are .60%.
(4) Other Expenses for the High Yield Bond Portfolio are based on estimated
amounts for the current fiscal year.
(5) Absent the voluntary fee waivers described above, total operating expenses
for ProVantage Funds shares would be: Core Fixed Income Portfolio, 1.06%;
Bond Portfolio, 1.07%; and High Yield Bond Portfolio, 1.41%.
EXAMPLE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
------ ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on
a $1000 investment assuming
(1) imposition of the maximum sales load, (2) 5%
annual return and (3) redemption at the end of
each time period:
Core Fixed Income Portfolio $54.00 $74.00 $95.00 $156.00
Bond Portfolio $54.00 $74.00 $95.00 $156.00
High Yield Bond Portfolio $57.00 $83.00 -- --
- -------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in ProVantage Funds shares of each Portfolio. A person who
purchases shares through an account with a financial institution may be charged
separate fees by that institution. The information set forth in the foregoing
table and example relates only to the ProVantage Funds shares. Each Portfolio
also offers Class A and Class B shares, which are subject to the same expenses,
except that there are no sales loads, different distribution costs and no
transfer agent costs. Additional information may be found under "The Manager
and Shareholder Servicing Agent," "The Advisers and Sub-Advisers" and
"Distribution."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "Your Account and Doing Business with
ProVantage Funds" and "Additional Information About Doing Business with
ProVantage Funds."
Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges otherwise permitted by the Rules of Fair Practice (the
"Rules") of the National Association of Securities Dealers, Inc. ("NASD").
4
<PAGE>
FINANCIAL HIGHLIGHTS ___________________________________________________________
The following information has been audited by Price Waterhouse LLP, the Trust's
independent accountants, as indicated in their report dated November 11, 1994
on the Trust's financial statements as of September 30, 1994 included in the
Trust's Statement of Additional Information under "Financial Information."
Additional performance information is set forth in the 1994 Annual Report to
Shareholders and is available upon request and without charge by calling
1-800-437-6016. As of the most recent fiscal year, there were no shares
outstanding of the High Yield Bond Portfolio. This table should be read in
conjunction with the Trust's financial statements and notes thereto.
FOR A PROVANTAGE FUNDS SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Core Fixed Income
Portfolio (1)(2)
--------------------
For the period ended
September 30,
1994 (3)
- ----------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $9.77
- ----------------------------------------------------------------------------
Income from Investment Operations:
Net Investment Income (Loss) 0.21
Net Realized and Unrealized Gains (Losses) on
Securities (0.15)
- ----------------------------------------------------------------------------
Total from Investment Operations $0.06
- ----------------------------------------------------------------------------
Less Distributions:
Dividends from Net Investment Income (0.18)
Distributions from Realized Capital Gains --
- ----------------------------------------------------------------------------
Total Distributions $(0.18)
- ----------------------------------------------------------------------------
Net Asset Value, End of Period $9.65
============================================================================
Total Return 3.29%*
============================================================================
Ratios/Supplemental Data:
Net Assets, End of Period (000) $44
Ratio of Expenses to Average Net Assets 0.92%
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets 5.91%
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers) 5.83%
Portfolio Turnover Rate 370%
============================================================================
</TABLE>
* Sales load is not reflected in total return.
(1) Core Fixed Income Portfolio's Investment Adviser changed on January 19,
1994.
(2) During the year ended September 30, 1994, the Limited Volatility Bond
Portfolio changed its name to Intermediate Bond Portfolio. On December 16,
1994, the Intermediate Bond Portfolio changed its name to the Core Fixed
Income Portfolio.
(3) Core Fixed Income ProVantage Funds shares were offered beginning May 9,
1994. All ratios including total return for that period have been
annualized.
5
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
FOR A PROVANTAGE FUNDS SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Bond Portfolio
--------------
For the periods ended
September 30,
-------------
1994 1993 (1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $12.24 $12.07
- -------------------------------------------------------------------------------
Income from Investment Operations:
Net Investment Income (Loss) 0.58 0.07
Net Realized and Unrealized Gains (Losses) on
Securities (1.64) 0.15
- -------------------------------------------------------------------------------
Total from Investment Operations $(1.06) $0.22
- -------------------------------------------------------------------------------
Less Distributions:
Dividends from Net Investment Income (0.56) (0.05)
Distributions from Realized Capital Gains (0.68) --
- -------------------------------------------------------------------------------
Total Distributions $(1.24) $(0.05)
- -------------------------------------------------------------------------------
Net Asset Value, End of Period $9.94 $12.24
===============================================================================
Total Return (9.37)%* 14.75%*
===============================================================================
Ratios/Supplemental Data:
Net Assets, End of Period (000) $106 $2
Ratio of Expenses to Average Net Assets 0.95% 0.95%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.86% 1.06%
Ratio of Net Investment Income (Loss) to Average
Net Assets 5.38% 4.66%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) 4.47% 4.55%
Portfolio Turnover Rate 73% 47%
===============================================================================
</TABLE>
* Sales load is not reflected in total return.
(1) Bond ProVantage Funds shares were offered beginning August 16, 1993. All
Ratios including total return for that period have been annualized.
6
<PAGE>
YOUR ACCOUNT AND DOING BUSINESS WITH PROVANTAGE FUNDS __________________________
ProVantage Funds shares of the Portfolios are sold on a continuous basis and
may be purchased directly from the Trust's Distributor, SEI Financial Services
Company. Shares may also be purchased through financial institutions, broker-
dealers, or other organizations which have established a dealer agreement or
other arrangement with SEI Financial Services Company ("Intermediaries"). For
more information about the following topics, see "Additional Information About
Doing Business with Us."
- --------------------------------------------------------------------------------
HOW TO BUY, ProVantage Funds shares of the Portfolios may be purchased
SELL AND through Intermediaries which provide various levels of
EXCHANGE shareholder services to their customers. Contact your
SHARES THROUGH Intermediary for information about the services available to
INTERMEDIARIES you and for specific instructions on how to buy, sell and
exchange shares. To allow for processing and transmittal of
orders to the Distributor on the same day, Intermediaries may
impose earlier cut-off times for receipt of purchase orders.
Certain Intermediaries may charge customer account fees.
Information concerning shareholder services and any charges
will be provided to the customer by the Intermediary. Certain
of these Intermediaries may be required to register as
broker/dealers under state law.
The shares you purchase through an Intermediary may be
held "of record" by that Intermediary. If you want to
transfer the registration of shares beneficially owned by
you, but held "of record" by an Intermediary, you should call
the Intermediary to request this change.
................................................................................
(SYMBOL APPEARS HERE) WHAT IS AN
INTERMEDIARY?
Any entity, such as a bank, broker-dealer, other financial institution,
association or organization which has entered into an arrangement with the
Distributor to sell ProVantage Funds shares to its customers.
................................................................................
HOW TO BUY Application forms can be obtained by calling SEI Financial
SHARES FROM THE Services Company at 1-800-437-6016. ProVantage Funds shares
DISTRIBUTOR of the Portfolios are offered only to residents of states in
which the shares are eligible for purchase.
Opening an
Account You may buy ProVantage Funds shares by mailing a completed
By Check application and a check (or other negotiable bank instrument
or money order) payable to "ProVantage Funds (Portfolio
Name)." If you send a check that does not clear, the purchase
will be canceled and you could be liable for any losses or
fees incurred.
By Fed Wire To buy shares by Fed Wire call SEI Financial Services Company
toll-free at 1-800-437-6016.
Automatic You may systematically buy ProVantage Funds shares through
Investment deductions from your checking or savings accounts, provided
Plan ("AIP") these accounts are maintained through banks which are part of
the Automated Clearing House ("ACH") system. You may purchase
shares on a fixed schedule (semi-monthly or monthly) with
amounts as low as $25, or as high as $100,000. Upon notice,
the amount you commit to AIP may be changed or canceled at
any time. The AIP is subject to account minimum initial
puchase amounts and manimum maintained balance requirements
discussed under "Additional Information About Doing Business
With Us".
7
<PAGE>
OTHER Your purchase is subject to a sales charge which varies
INFORMATION depending on the size of your purchase. The following table
ABOUT BUYING shows the regular sales charges on ProVantage Funds shares
SHARES of the Portfolios to a "single purchaser," together with the
reallowance paid to dealers and the agency commission paid
Sales Charges to brokers (collectively the "commission"):
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
SALES CHARGE REALLOWANCE AND
SALES CHARGE AS AS APPROPRIATE BROKERAGE COMMISSION
A PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE NET AMOUNT INVESTED OFFERING PRICE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
less than $50,000 4.50% 4.71% 4.00%
$50,000 but less than $100,000 4.00% 4.17% 3.50%
$100,000 but less than $250,000 3.50% 3.63% 3.00%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 but less than $2,000,000 1.00% 1.01% 1.00%
$2,000,000 but less than $4,000,000 .50% .50% .50%
Over $4,000,000 none none none
---------------------------------------------------------------------------------------------
</TABLE>
The commissions shown in the table above apply to sales
through Intermediaries. Under certain circumstances,
commissions up to the amount of the entire sales charge may
be re-allowed to certain Intermediaries, who might then be
deemed to be "underwriters" under the Securities Act of
1933, as amended.
Right of A Right of Accumulation allows you, under certain
Accumulation circumstances, to combine your current purchase with the
current market value of previously purchased shares of each
Portfolio and ProVantage Funds shares of other portfolios
("Eligible Portfolios") in order to obtain a reduced sales
charge.
Letter of A Letter of Intent allows you, under certain circumstances,
Intent to aggregate anticipated purchases over a 13-month period to
obtain a reduced sales charge.
Sales Charge Certain shareholders may qualify for a sales charge waiver.
Waiver To determine whether or not you qualify for a sales charge
waiver see "Additional Information About Doing Business with
Us." Shareholders who qualify for a sales charge waiver must
notify the Transfer Agent before purchasing shares.
8
<PAGE>
EXCHANGING Once good payment for your shares has been received and
SHARES accepted (i.e., an account has been established), you may
exchange some or all of your shares for ProVantage Funds
When Can You shares of other portfolios. Exchanges are made at net asset
Exchange value plus any applicable sales charge.
Shares?
When Do Sales Portfolios that are not money market portfolios currently
Charges Apply impose a sales charge on ProVantage Funds shares. If you
to an exchange into one of these "non-money market" portfolios, you
Exchange? will have to pay a sales charge on any portion of your
exchanged ProVantage Funds shares for which you have not
previously paid a sales charge.
If you previously paid a sales charge on your ProVantage
Funds shares, no additional sales charge will be assessed when
you exchange those ProVantage Funds shares for other ProVantage
Funds shares.
................................................................................
(SYMBOL APPEARS HERE) HOW DOES AN
EXCHANGE
TAKE PLACE?
When making an exchange, you authorize the sale of your shares of one or more
Portfolios in order to purchase the shares of another Portfolio. In other words,
you are executing a sell order and then a buy order. This sale of your shares is
a taxable event which could result in a taxable gain or loss.
................................................................................
If you buy ProVantage Funds shares of a "non-money market"
fund and you receive a sales charge waiver, you will be deemed
to have paid the sales charge for purposes of this exchange
privilege. In calculating any sales charge payable on your
exchange, the Trust will assume that the first shares you
exchange are those on which you have already paid a sales
charge. Sales charge waivers may also be available under
certain circumstances described in the portfolios'
prospectuses.
The Trust reserves the right to change the terms and
conditions of the exchange privilege discussed herein, or to
terminate the exchange privilege, upon 60 days' notice. The
Trust also reserves the right to deny an exchange request
made within 60 days of the purchase of a non-money market
portfolio.
Requesting an To request an exchange, you must provide proper instructions
Exchange of in writing to SFM. Telephone exchanges will also be accepted
Shares if you previously elected this option on your account
application.
In the case of shares held "of record" by an Intermediary
but beneficially owned by you, you should contact the
Intermediary who will contact SFM and effect the exchange on
your behalf.
9
<PAGE>
HOW TO SELL To sell your shares, a written request for redemption in good
SHARES THROUGH order must be received by SFM. Valid written redemption
THE requests will be effective on receipt. All shareholders of
DISTRIBUTOR record must sign the redemption request.
For information about the proper form of redemption
By Mail requests, call 1-800-437-6016. You may also have the proceeds
mailed to an address of record or mailed (or sent by ACH) to a
commercial bank account previously designated on the Account
Application or specified by written instruction to SEI
Financial Services Company. There is no charge for having
redemption requests mailed to a designated bank account.
By Telephone You may sell your shares by telephone if you previously
elected that option on the Account Application. You may have
the proceeds mailed to the address of record, wired or sent by
ACH to a commercial bank account previously designated on the
Account Application. Under most circumstances, payments will be
transmitted on the next Business Day following receipt of a
valid telephone request for redemption. Wire redemption
requests may be made by calling SEI Financial Services Company
at 1-800-437-6016, who will subtract a wire redemption charge
(presently $10.00) from the amount of the redemption.
................................................................................
(SYMBOL APPEARS HERE) WHAT IS A
SIGNATURE
GUARANTEE?
A signature guarantee verifies the authenticity of your signature and may be
obtained from any of the following: banks, brokers, dealers, certain credit
unions, securities exchange or association, clearing agency or savings
association. A notary public cannot provide a signature guarantee.
................................................................................
Systematic You may establish a systematic withdrawal plan for an account
Withdrawal with a $10,000 minimum balance. Under the plan, redemptions
Plan ("SWP") can be automatically processed from accounts (monthly,
quarterly, semi-annually or annually) by check or by ACH with
a minimum redemption amount of $50.
INVESTMENT
OBJECTIVES AND
POLICIES ______________________________________________________________________
CORE FIXED The investment objective of the Core Fixed Income Portfolio
INCOME (formerly the Intermediate Bond Portfolio) is current income
PORTFOLIO consistent with the preservation of capital. There is no
assurance that the Portfolio will achieve its investment
objective.
The Portfolio's permitted investments consist of corporate
bonds and debentures, obligations issued by the United States
Government, its agencies and instrumentalities, receipts
involving U.S. Treasury obligations, collateralized mortgage
obligations and
...............................................................................
(SYMBOL APPEARS HERE) WHAT ARE
INVESTMENT
OBJECTIVES AND
POLICIES?
A Portfolio's investment objective is a statement of what it seeks to achieve.
It is important to make sure that the investment objective matches your own
financial needs and circumstances. The investment policies section spells
out the types of securities in which each Portfolio invests.
................................................................................
10
<PAGE>
asset-backed securities, that are rated AAA, AA or A by
Standard & Poor's Corporation ("S&P") or Aaa, Aa or A by
Moody's Investors Service ("Moody's") at the time of
purchase, or of comparable quality (as determined by the
Portfolio's adviser). The Portfolio may invest up to 35% of
its total assets in corporate bonds and debentures rated BBB
by S&P or Baa by Moody's at time of purchase. Securities
which are rated BBB by S&P or Baa by Moody's are considered
as medium-grade obligations (i.e. they are neither highly
protected nor poorly secured). Interest payments and
principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such securities lack outstanding investment characteristics
and in fact have speculative characteristics as well. In
addition, the Portfolio may invest in money market
instruments. Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in bonds.
Consistent with any applicable state law limitations, the
adviser may purchase interest-only and principal-only
components of mortgage-backed securities and collateralized
mortgage obligations. Furthermore, the Portfolio may
purchase yankee obligations and mortgage dollar rolls. Under
normal market conditions, the average dollar-weighted
maturity of the Portfolio will range between 5 and 10 years.
By so limiting the maturity of its investments, the
Portfolio's assets are expected to experience less price
volatility in response to changes in interest rates than
similar securities with longer maturities.
For the fiscal year ended September 30, 1994, as a result
of its investment strategies, the Portfolio's annual
portfolio turnover rate is 370%. Such a turnover rate may
lead to higher transaction costs and may result in higher
taxes for shareholders.
The Portfolio's investment adviser is Western Asset
Management.
BOND PORTFOLIO The investment objective of the Bond Portfolio is current
income consistent with preservation of capital. There is no
assurance that the Portfolio will achieve its investment
objective.
The Portfolio's permitted investments consist of
corporate bonds and debentures, obligations issued by the
United States Government, its agencies and instrumentalities
and receipts involving U.S. Treasury obligations, that are
rated AAA, AA, A or BBB by S&P or Aaa, Aa, A or Baa by
Moody's at the time of purchase or of comparable quality (as
determined by the Portfolio's adviser). Securities which are
rated BBB by S&P or Baa by Moody's are considered as medium-
grade obligations (i.e. they are neither highly protected
nor poorly secured). Interest payments and principal
security appear adequate for the present but certain
protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such securities lack outstanding investment characteristics
and in fact have speculative characteristics as well. Under
normal market conditions, the Portfolio will invest at least
65% of its total assets in bonds. There are no restrictions
on the Portfolio's maturity, but the average maturity is
expected to be greater than ten years.
The Portfolio's investment adviser is Boatmen's Trust
Company.
11
<PAGE>
HIGH YIELD BOND The investment objective of the High Yield Bond Portfolio is
PORTFOLIO to maximize total return. There is no assurance that the
Portfolio will achieve its investment objective.
Under normal market conditions, the Portfolio will invest
at least 65% of its total assets in fixed-income debt
securities that are rated below investment grade (i.e.,
below the top four ratings categories used by Moody's or BBB
by S&P), or, if not rated, are deemed by the Portfolio's
advisers to be of comparable quality. Below investment grade
securities are commonly referred to as "junk bonds," and
generally entail increased credit and market risk. The
achievement of the Portfolio's investment objective may be
more dependent on the Portfolio's adviser's own credit
analysis than is the case for higher rated securities. Any
remaining assets may be invested in preferred stocks, equity
securities, investment grade fixed-income securities and
money market securities that the Portfolio's advisers
believe are appropriate in light of the Portfolio's
objective.
The Portfolio may acquire all types of fixed income debt
securities issued by domestic and foreign issuers, including
convertible, mortgage-backed and asset-backed securities.
The Portfolio may invest in zero coupon, pay-in-kind or
deferred payment securities, and securities that pay
interest on a variable or floating rate basis. Securities in
the lowest rating categories may have predominantly
speculative characteristics or may be in default. The
Portfolio's advisers may vary the average maturity of the
securities in the Portfolio without limit and there is no
restriction on the maturity of any individual security.
There is no bottom limit on the ratings of high yield
securities that may be purchased or held by the Portfolio.
The "Appendix" to this Prospectus sets forth a
description of the bond rating categories of Moody's and
S&P. Ratings of S&P and Moody's represent their opinions of
the safety of principal and interest payments (and not the
market risk) of bonds and other debt securities they
undertake to rate at the time of issuance. Ratings are not
absolute standards of quality and may not reflect changes in
an issuer's creditworthiness. Accordingly, although the
Portfolio's advisers will consider ratings, they will
perform their own analyses and will not rely principally on
ratings. The Portfolio's advisers will consider, among other
things, the price of the security and the financial history
and condition, the prospects and the management of an issuer
in selecting securities for the Portfolio.
The Portfolio's annual portfolio turnover rate may exceed
100%. Such a turnover rate may result in higher transaction
costs and may result in additional taxes for shareholders.
See "Taxes."
The Portfolio's investment adviser is SEI Financial
Management Corporation and its investment sub-adviser is CS
First Boston Management Corporation.
Risk Factors The High Yield Bond Portfolio may invest in lower rated
Relating to securities. Fixed income securities are subject to the risk
Investing in of an issuer's ability to meet principal and interest
Lower Rated payments on the obligation (credit risk), and may also be
Securities subject to price volatility due to such factors as interest
rate sensitivity, market perception of the creditworthiness
of the issuer and general market liquidity (market risk).
Lower rated or unrated (i.e., high yield) securities
12
<PAGE>
are more likely to react to developments affecting market
and credit risk than are more highly rated securities, which
primarily react to movements in the general level of
interest rates. The market values of fixed-income securities
tend to vary inversely with the level of interest rates. The
market values of fixed-income securities tend to vary
inversely with the level of interest rates. Yields and
market values of high yield securities will fluctuate over
time, reflecting not only changing interest rates but the
market's perception of credit quality and the outlook for
economic growth. When economic conditions appear to be
deteriorating, medium to lower rated securities may decline
in value due to heightened concern over credit quality,
regardless of prevailing interest rates. Investors should
carefully consider the relative risks of investing in high
yield securities and understand that such securities are not
generally meant for short-term investing.
The high yield market is relatively new and its growth
has paralleled a long period of economic expansion and an
increase in merger, acquisition and leveraged buyout
activity. Adverse economic developments can disrupt the
market for high yield securities, and severely affect the
ability of issuers, especially highly leveraged issuers, to
service their debt obligations or to repay their obligations
upon maturity which may lead to a higher incidence of
default on such securities. In addition, the secondary
market for high yield securities, which is concentrated in
relatively few market makers, may not be as liquid as the
secondary market for more highly rated securities. As a
result, the Portfolio's adviser could find it more difficult
to sell these securities or may be able to sell the
securities only at prices lower than if such securities were
widely traded. Furthermore the Trust may experience
difficulty in valuing certain securities at certain times.
Prices realized upon the sale of such lower rated or unrated
securities, under these circumstances, may be less than the
prices used in calculating the Portfolio's net asset value.
Prices for high yield securities may be affected by
legislative and regulatory developments. These laws could
adversely affect the Portfolio's net asset value and
investment practices, the secondary market for high yield
securities, the financial condition of issuers of these
securities and the value of outstanding high yield
securities.
For example, federal legislation requiring the
divestiture by federally insured savings and loans
associations of their investments in high yield bonds and
limiting the deductibility of interest by certain corporate
issuers of high yield bonds adversely affected the market in
recent years. Lower rated or unrated debt obligations also
present risks based on payment expectations. If an issuer
calls the obligations for redemption, the Portfolio may have
to replace the security with a lower yielding security,
resulting in a decreased return for investors. If the
Portfolio experiences unexpected net redemptions, it may be
forced to sell its higher rated securities, resulting in a
decline in the overall credit quality of the Portfolio's
investment portfolio and increasing the exposure of the
Portfolio to the risks of high yield securities.
Lower rated or unrated debt obligations also present
risks based on payment expectations. If an issuer calls the
obligations for redemption, the Portfolio may have to
13
<PAGE>
replace the security with a lower yielding security,
resulting in a decreased return for investors. If the
Portfolio experiences unexpected net redemptions, it may be
forced to sell its higher rated securities, resulting in a
decline in the overall credit quality of the Portfolio's
investment portfolio and increasing the exposure of the
Portfolio to the risks of high yield securities.
GENERAL INVESTMENT
POLICIES _______________________________________________________________________
Borrowing The Core Fixed Income, Bond and High Yield Bond Portfolios
may borrow money to meet redemptions for temporary,
emergency purposes. A Portfolio will not purchase securities
while its borrowings exceed 5% of its total assets.
Forward Foreign The High Yield Bond Portfolio may purchase forward foreign
Currency currency contracts.
Contracts
Illiquid The High Yield Bond Portfolio's investment in illiquid
Securities securities will be limited to 15% of its net assets. The
Core Fixed Income and Bond Portfolios' investment in
illiquid securities will be limited to 10% of each
Portfolio's net assets.
Investment The High Yield Bond Portfolio may purchase investment
Company company securities, which will result in the layering of
Securities expenses. There are legal limits on the amount of such
securities that may be acquired by a Portfolio.
Options and The Core Fixed Income and High Yield Bond Portfolios may
Futures purchase or write options, futures and options on futures.
Securities The High Yield Bond Portfolio may lend its securities in
Lending order to realize additional income.
Temporary For temporary defensive purposes, when the adviser
Defensive determines that market conditions warrant, the Core Fixed
Investments Income and Bond Portfolios may invest up to 100% of its
assets in money market instruments (including securities
issued or guaranteed by the United States Government, its
agencies or instrumentalities, repurchase agreements,
certificates of deposit and bankers' acceptances issued by
banks or savings and loan associations having net assets of
at least $500 million as of the end of their most recent
fiscal year and high-grade commercial paper) rated, at time
of purchase, in the top two categories by a national rating
agency or determined to be of comparable quality by the
adviser at time of purchase, and other long and short-term
debt instruments which are rated at time of purchase A or
higher by S&P or Moody's at the time of purchase, and may
hold a portion of its assets in cash. In addition, each
Portfolio may borrow money. To the extent a Portfolio is
engaged in temporary defensive investments, such Portfolio
will not be pursuing its investment objective.
In order to meet liquidity needs or for temporary
defensive purposes, the High Yield Bond Portfolio may invest
up to 100% of its assets in cash and short term money market
securities. Money market securities must be rated in one of
the top two categories
14
<PAGE>
by a major rating service or, if unrated, be of comparable
quality as determined by the Portfolio's advisers.
Warrants Consistent with any applicable state law limitations, each
of the Core Fixed Income and High Yield Bond Portfolios may
purchase warrants in order to increase the Portfolio's total
return.
When-Issued and The Core Fixed Income, Bond and High Yield Bond Portfolios
Delayed- may purchase securities on a when-issued or delayed-delivery
Delivery basis.
Securities
For additional information regarding the Portfolios'
permitted investments, see "Description of Permitted
Investments and Risk Factors" in this Prospectus and
"Description of Permitted Investments" in the Statement of
Additional Information. For a description of the above
ratings, see "Description of Ratings" in the Appendix to
this Prospectus and the Statement of Additional Information.
INVESTMENT
LIMITATIONS ____________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolios. It is also a
fundamental policy of the Bond Portfolio to invest its
assets solely in securities listed as appropriate
investments. Fundamental policies cannot be changed with
respect to the Trust or a Portfolio without the consent of
the holders of a majority of the Trust's or that Portfolio's
outstanding shares.
No Portfolio 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 total assets of the Portfolio (based on fair market
value at the time of investment) would be invested in the
securities of such issuer. This restriction applies to
75% of each Portfolio's total assets.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio 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.
The foregoing percentage limitations will apply at the
time of the purchase of a security. Additional investment
limitations are set forth in the Statement of Additional
Information.
15
<PAGE>
THE MANAGER AND
SHAREHOLDER
SERVICING AGENT ________________________________________________________________
SEI Financial Management Corporation ("SFM"), provides the
Trust with overall management services, regulatory reporting,
all necessary office space, equipment, personnel and
facilities, and acts as transfer agent, dividend disbursing
agent and shareholder servicing agent. SFM is a wholly-owned
subsidiary of SEI Corporation ("SEI"). Founded in 1968, SEI
is a leading provider of investment solutions to banks,
institutional investors, investment advisers and insurance
companies. Affiliates of SFM have provided consultative
advice to institutional investors for more than 20 years,
including advice on the selection and evaluation of
investment advisers.
For its management services, SFM is entitled to a fee
which is calculated daily and paid monthly at an annual rate
of .43% of the average daily net assets of the Core Fixed
Income Portfolio, .43% of the average daily net assets of the
Bond Portfolio and .35% of the average daily net assets of
the High Yield Bond Portfolio. SFM has voluntarily agreed to
waive a portion of its fees in order to limit the operating
expenses of each Portfolio. SFM reserves the right, in its
sole discretion, to terminate this voluntary fee waiver at
any time.
For the fiscal year ended September 30, 1994 the Core
Fixed Income Portfolio paid SFM a management fee of .33% and
the Bond Portfolio paid SFM a management fee of .32% of its
average daily net assets after fee waivers. During the last
fiscal year, the High Yield Bond Portfolio had not commenced
operations.
THE ADVISERS AND
SUB-ADVISERS ___________________________________________________________________
The following entities serve as investment advisers (each, an
"Adviser," and collectively, the "Advisers") and investment
sub-advisers (each, a "Sub-Adviser," and collectively, the
"Sub-Advisers") to the Trust's Portfolios. Each Adviser has
general oversight responsibility for the investment advisory
services provided to the Portfolios, including formulating the
Portfolios' investment policies and analyzing economic trends
affecting the Portfolios. In addition, SFM, where it is the
Adviser to a Portfolio, is responsible for managing the
allocation of assets among the Portfolio's Sub-Advisers and
directing and evaluating the investment services provided by
the Sub-Advisers, including their adherence to each Portfolio's
respective investment objective and policies and each
Portfolio's investment performance. In accordance with each
Portfolio's investment objective and policies, and under the
supervision of the Adviser and the Trust's
................................................................................
(SYMBOL APPEARS HERE) INVESTMENT
ADVISER
A Portfolio's advisers manage the investment activities and are responsible for
the performance of the Portfolio. The advisers conduct investment research,
executes investment strategies based on an assessment of economic and market
conditions, and determine which securities to buy, hold or sell.
................................................................................
16
<PAGE>
Board of Trustees, each Sub-Adviser and certain Advisers are
responsible for the day-to-day investment management of all
or a discrete portion of the assets of a Portfolio. The
Advisers and Sub-Advisers are authorized to make investment
decisions for the Portfolios and place orders on behalf of
the Portfolios to effect the investment decisions made.
The Glass-Steagall Act restricts the securities
activities of banks such as Boatmen's Bancshares, Inc., but
federal regulatory authorities permit such banks to provide
investment advisory and other services to mutual funds.
Should this position be challenged successfully in court or
reversed by legislation, the Trust might have to make other
investment advisory arrangements.
SFM is currently seeking an exemptive order from the
Securities and Exchange Commission (the "SEC") that would
permit SFM, with the approval of the Trust's Board of
Trustees, to retain sub-advisers for a Portfolio without
submitting the sub-advisory agreement to a vote of the
Portfolio's shareholders. If granted, the exemptive relief
will permit the non-disclosure of amounts payable by SFM
under such sub-advisory agreements. The Trust will notify
shareholders in the event of any change in the identity of
the sub-adviser for a Portfolio. Until or unless this
exemptive order is granted, if one of the advisers is
terminated or departs from a Portfolio with multiple
advisers, the Portfolio will handle such termination or
departure in one of two ways. First, the Portfolio may
propose that a new investment adviser be appointed to manage
that portion of the Portfolio's assets managed by the
departing adviser. In this case, the Portfolio would be
required to submit to the vote of the Portfolio's
shareholders the approval of a investment advisory contract
with the new adviser. In the alternative, the Portfolio may
decide to allocate the departing adviser's assets among the
remaining advisers. This allocation would not require new
investment advisory contracts with the remaining advisers,
and consequently no shareholder approval would be necessary.
BOATMEN'S TRUST Boatmen's Trust Company ("Boatmen's") serves as investment
COMPANY adviser for the Bond Portfolio. Boatmen's is a subsidiary of
Boatmen's Bancshares, Inc., a multi-bank holding company.
Boatmen's provides trust and investment advisory services to
a broad array of individual and institutional clients. As of
September 30, 1994, Boatmen's total assets under management
were approximately $36 billion for a broad spectrum of
taxable and tax-exempt clients. The principal business
address of Boatmen's is 100 N. Broadway, St. Louis, Missouri
63102.
The Portfolio has been managed by a committee since its
inception.
Boatmen's is entitled to a fee from the Trust, calculated
daily and paid monthly at an annual rate of .125% of the
average daily net assets of the Portfolio. For the fiscal
year ended September 30, 1994, the Bond Portfolio paid
Boatmen's an advisory fee of .125% of its average daily net
assets.
17
<PAGE>
The Glass-Steagall Act restricts the securities
activities of banks such as Boatmen's Bancshares, Inc., but
federal regulatory authorities permit such banks to provide
investment advisory and other services to mutual funds.
Should this position be challenged successfully in court or
reversed by legislation, the Trust might have to make other
investment advisory arrangements.
CS FIRST BOSTON CS First Boston Investment Management Corporation ("CS First
INVESTMENT Boston Management"), 599 Lexington Avenue, 36th Floor, New
MANAGEMENT York, New York 10022, an affiliate of CS First Boston
CORPORATION Corporation ("CS First Boston"), serves as investment sub-
adviser for the High Yield Bond Portfolio. CS First Boston
and CS First Boston Management are subsidiaries of CS First
Boston, Inc. CS First Boston and CS First Boston Management
has been providing fixed income and equity investment
management services to institutional clients since 1984.
Total assets under management as of August 31, 1994 exceeded
$7.6 billion.
Richard J. Lindquist, CFA, Managing Director, has primary
responsibility for the day-to-day management of the
Portfolio. Mr. Lindquist has been the leader of the high
yield management team and primary high yield portfolio
manager since he joined CS First Boston Management in July
1989.
CS First Boston Management is entitled to a fee, which is
paid monthly by SFM, at an annual rate of .3375% of the
average monthly market value of investments under its
management. For the fiscal year ended September 30, 1994,
the High Yield Bond Portfolio had not commenced operations
and therefore CS First Boston Investment Management did not
receive an advisory fee.
SEI FINANCIAL SEI Financial Management Corporation ("SFM") serves as
MANAGEMENT investment adviser for the High Yield Bond Portfolio. As
CORPORATION Adviser, SFM has general oversight responsibility for the
investment advisory services provided to the Portfolio,
including formulating the Portfolio's investment policies,
analyzing economic trends affecting the Portfolio, managing
the allocation of assets among the Portfolio's sub-advisers
(if necessary) and generally directing and evaluating the
investment services provided by the sub-adviser, including
its adherence to the Portfolio's investment objective and
policies and the Portfolio's investment performance. SEI was
founded in 1968 and is a leading provider of investment
solutions to banks, institutional investors, investment
advisers and insurance companies. Affiliates of SFM have
provided consulting advice to institutional investors for
more than 20 years, including advice regarding the selection
and evaluation of investment advisers. Although SFM has not
previously been the investment adviser to an investment
company, it currently serves as manager or administrator to
more than 26 investment companies, including more than 220
portfolios, which investment companies have more than $42
billion in assets as of September 30, 1994.
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For these services, SFM is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of
.4875% of the Porfolio's average daily net assets. For the
fiscal year ended September 30, 1994, the High Yield Bond
Portfolio had not commenced operations and therefore SFM did
not receive an advisory fee.
WESTERN ASSET Since January 19, 1994, Western Asset Management ("Western")
MANAGEMENT has served as investment adviser for the Core Fixed Income
Portfolio. Prior to that date, the investment adviser to the
Portfolio was Bank One Indianapolis, N.A. ("Bank One").
Western is located at 117 East Colorado Boulevard, Pasadena,
California 91105, and is a wholly owned subsidiary of Legg
Mason, Inc., a financial services company located in
Baltimore, Maryland. Western was founded in 1971, and
specializes in the management of fixed income portfolios. As
of September 30, 1994, Western managed approximately $12
billion in client assets, including $2 billion of investment
company assets.
Kent S. Engel, Director and Chief Investment Officer of
Western, is primarily responsible for the day-to-day
management of the Portfolio since January 19, 1994. Engel
has been with Western and its predecessor since 1969.
Western is entitled to a fee which is calculated daily
and paid monthly, at the annual rate of .125% of the
Portfolio's average daily net assets. For the fiscal year
ended September 30, 1994, the Portfolio paid each of the
Portfolio's advisers an advisory fee of .125% of its average
daily net assets. Of this .125% advisory fee, .085% of the
Portfolio's total average daily net assets was paid to
Western and .04% of the Portfolio's average daily net assets
was paid to Bank One.
DISTRIBUTION ___________________________________________________________________
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as each Portfolio's
distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust. Each Portfolio has
a distribution plan for its shares (the "Class A Plan,"
"Class B Plan" and the "ProVantage Plan;" collectively, "the
Plans") pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "1940 Act"). The Trust intends
to operate the Plans in accordance with their terms and with
the NASD rules concerning sales charges.
The Distribution Agreement and the Plans provide for
reimbursement for expenses incurred by the Distributor in an
amount not to exceed .30% of the average daily net assets of
each Portfolio on an annualized basis, provided those
expenses are permissible as to both type and amount under a
budget, adopted by the Board of Trustees, including those
Trustees who are not interested persons and have no
financial interest in the Plans or any related agreement
("Qualified Trustees"). The Class B and ProVantage Plans
provide for additional payments for distribution and
shareholder services as described below.
Distribution-related expenses reimbursable to the
Distributor under the budget include those related to the
costs of advertising and sales materials, the costs of
federal
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and state securities law registration, advertising expenses
and promotional and sales expenses including expenses for
travel, communication and compensation and benefits for
sales personnel. The Trust is not obligated to reimburse the
Distributor for any expenditures in excess of the approved
budget. Currently the budget (shown here as a percentage of
daily net assets) for the Core Fixed Income Portfolio is
.31% , for the Bond Portfolio is .33% and for the High Yield
Bond Portfolio is .32%. Distribution expenses not
attributable to a specific portfolio are allocated among
each of the portfolios of the Trust based on average net
assets.
The ProVantage Plan, in addition to providing for the
reimbursement payments described above, provides for
payments to the Distributor at an annual rate of .30% of the
Portfolio's average daily net assets attributable to
ProVantage Funds shares. This additional payment may be used
to compensate financial institutions that provide
distribution-related services to their customers. These
additional payments are characterized as "compensation," and
are not directly tied to expenses incurred by the
Distributor; the payments the Distributor receives during
any year may therefore be higher or lower than its actual
expenses. These additional payments may be used to
compensate the Distributor for its services in connection
with distribution assistance or provision of shareholder
services, and some or all of it may be used to pay financial
institutions and intermediaries such as banks, savings and
loan associations, insurance companies, and investment
counselors, broker-dealers and the Distributor's affiliates
and subsidiaries for services or reimbursement of expenses
incurred in connection with distribution assistance or
provision of shareholder services. If the Distributor's
expenses are less than its fees under the ProVantage Plan,
the Trust will still pay the full fee and the Distributor
will realize a profit, but the Trust will not be obligated
to pay in excess of the full fee, even if the Distributor's
actual expenses are higher. Currently the Distributor is
taking this additional compensation payment under the
ProVantage Plan at a rate of only .25% of each Portfolio's
average daily net assets, on an annualized basis,
attributable to ProVantage Funds shares.
The Class B Plan is similar to the ProVantage Plan
described above except that for each Portfolio, the Class B
Plan provides for additional payments to the Distributor of
.30% and it applies only to Class B shares. It is possible
that an institution may offer different classes of shares to
its customers and thus receive different compensation with
respect to different classes. These financial institutions
may also charge separate fees to their customers.
The Trust may also execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive usual and customary compensation.
The Distributor may, from time to time in its sole
discretion, institute one or more promotional incentive
programs, which will be paid by the Distributor from the
sales charge it receives or from any other source available
to it. Under any such program, the Distributor will provide
promotional incentives, in the form of cash or other
compensation,
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including merchandise, airline vouchers, trips and vacation
packages, to all dealers selling shares of the Portfolios.
Such promotional incentives will be offered uniformly to all
dealers and predicated upon the amount of shares of the
Portfolios sold by the dealer.
PERFORMANCE ____________________________________________________________________
From time to time, a Portfolio may advertise yield and total
return. These figures will be based on historical earnings
and are not intended to indicate future performance. No
representation can be made concerning actual yield or future
returns. The yield of a Portfolio refers to the income
generated by a hypothetical investment, net of any sales
charge imposed in the case of some ProVantage Funds shares,
in such Portfolio over a thirty day period. This income is
then "annualized," i.e., the income over thirty days is
assumed to be generated over one year and is shown as a
percentage of the investment.
The total return of a Portfolio refers to the average
compounded rate of return on a hypothetical investment for
designated time periods, assuming that the entire investment
is redeemed at the end of each period and assuming the
reinvestment of all dividend and capital gain distributions.
The performance of Class A shares will normally be higher
than for Class B shares and ProVantage Fund shares because
of the additional distribution expenses charged to Class B
shares and additional distribution expenses, transfer agency
expenses and sales charges (when applicable) charged to
ProVantage Funds shares.
A Portfolio may periodically compare its performance to
that of other mutual funds tracked by mutual fund rating
services (such as Lipper Analytical) or by financial and
business publications and periodicals, broad groups of
comparable mutual funds, unmanaged indices which may assume
investment of dividends but generally do not reflect
deductions for administrative and management costs or to
other investment alternatives. A Portfolio may quote
Morningstar, Inc., a service that ranks mutual funds on the
basis of risk-adjusted performance. A Portfolio may use
long-term performance of these capital markets to
demonstrate general long-term risk versus reward scenarios
and could include the value of a hypothetical investment in
any of the capital markets. A Portfolio may also quote
financial and business publications and periodicals as they
relate to fund management, investment philosophy and
investment techniques.
A Portfolio may quote various measures of volatility and
benchmark correlation in advertising and may compare these
measures to those of other funds. Measures of volatility
attempt to compare historical share price fluctuations or
total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might
be. Measures of volatility and correlation are calculated
using averages of historical data and cannot be calculated
precisely.
Additional performance information is set forth in the
1994 Annual Report to Shareholders and is available upon
request and without charge by calling 1-800-437-6016.
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TAXES __________________________________________________________________________
The following summary of federal income tax consequences is
based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action. No
attempt has been made to present a detailed explanation of
the federal, state or local income tax treatment of a
Portfolio or its shareholders. Accordingly, shareholders are
urged to consult their tax advisers regarding specific
questions as to federal, state, and local income taxes. State
and local tax consequences of an investment in a Portfolio
may differ from the federal income tax consequences described
below. Additional information concerning taxes is set forth
in the Statement of Additional Information.
Tax Status of A Portfolio is treated as a separate entity for federal income
the Portfolios tax purposes and is not combined with the Trust's other
portfolios. Each Portfolio intends to continue to qualify for
the special tax treatment afforded regulated investment
companies ("RICs") under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), so as to be relieved of
federal income tax on net investment company taxable income
(including the excess, if any, of net short-term capital gains
over net long-term capital losses) and net capital gains (the
excess of net long-term capital gains over net short-term
capital losses) distributed to shareholders.
................................................................................
(SYMBOL APPEARS HERE) TAXES
You must pay taxes on your Portfolio's earnings, whether you take your payments
in cash or additional shares.
................................................................................
Tax Status of Each Portfolio distributes substantially all of its net
Distributions investment company taxable income to shareholders. Dividends
from a Portfolio's net investment company taxable income are
taxable to its shareholders as ordinary income (whether
received in cash or in additional shares). Distributions of net
capital gains are taxable to shareholders as long-term capital
gains regardless of how long a shareholder has held shares.
Dividends and distributions received from a Portfolio will not
qualify for the dividends-received deduction. Each Portfolio
will make annual reports to shareholders of the federal income
tax status of all distributions.
................................................................................
(SYMBOL APPEARS HERE) DISTRIBUTIONS
A Portfolio distributes income dividends and capital gains. Income dividends
represent the earnings from the Portfolio's investments; capital gains
distributions occur when a Portfolio sells investments for more than the
original purchase price.
................................................................................
Dividends declared by a Portfolio in October, November or
December of any year and payable to shareholders of record on a
date in such a month will be deemed to have been paid by the
Portfolio and received by the shareholders on December 31 of
the year if paid by a Portfolio at any time during the
following January.
Each Portfolio intends to make sufficient distributions to
avoid liability for federal excise tax.
Sale, exchange, or redemption of a Portfolio's shares
generally is a taxable transaction to the shareholder.
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ADDITIONAL INFORMATION ABOUT DOING BUSINESS WITH US ____________________________
Business Days You may buy, sell or exchange shares on days which the New
York Stock Exchange is open for business (a "Business Day").
All purchase, exchange and redemption requests received in
"good order" will be effective as of the Business Day received
by the Distributor as long as the Distributor receives the
order and, in the case of a purchase request, payment before
4:00 p.m. Eastern time. Otherwise the purchase will be
effective when payment is received. Broker-dealers may have
separate arrangements with ProVantage Funds.
If an exchange request is for shares of a portfolio whose
net asset value is calculated as of a time earlier than 4:00
p.m. Eastern time, the exchange request will not be effective
until the next Business Day. Anyone who wishes to make an
exchange must have received a current prospectus of the
portfolio into which the exchange is being made before the
exchange will be effected.
................................................................................
(SYMBOL APPEARS HERE) BUY, EXCHANGE AND
SELL REQUESTS ARE IN
"GOOD ORDER" WHEN:
. The account number and portfolio name are shown
. The amount of the transaction is specified in dollars or shares
. Signatures of all owners appear exactly as they are registered on the account
. Any required signature guarantees (if applicable) are included
. Other supporting legal documents (as necessary) are present
................................................................................
Minimum The minimum initial investment in a Portfolio's ProVantage
Investments Funds Class is $1,000; however, the minimum investment may be
waived at the Distributor's discretion. All subsequent
purchases must be at least $100 ($25 for payroll deductions
authorized pursuant to pre-approved payroll deduction plans).
The Trust reserves the right to reject a purchase order when
the Distributor determines that it is not in the best
interest of the Trust or its shareholders to accept such
order.
Maintaining a Due to the relatively high cost of handling small
Minimum investments, a Portfolio reserves the right to redeem, at net
Account asset value, the shares of any shareholder if, because of
Balance redemptions of shares by or on behalf of the shareholder, the
account of such shareholder in a Portfolio has a value of
less than $1,000, the minimum initial purchase amount.
Accordingly, an investor purchasing shares of a Portfolio in
only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems any of
these shares. Before a Portfolio exercises its right to
redeem such shares and to send the proceeds to the
shareholder, the shareholder will be given notice that the
value of the shares in his or her account is less than the
minimum amount and will be allowed 60 days to make an
additional investment in a Portfolio in an amount that will
increase the value of the account to at least $1,000. See
"Purchase and Redemption of Shares" in the Statement of
Additional Information for examples of when the right of
redemption may be suspended.
At various times, a Portfolio may be requested to redeem
shares for which it has not yet received good payment. In
such circumstances, redemption proceeds will be forwarded
upon collection of payment for the shares; collection of
payment may take 10 or more days. A Portfolio intends to pay
cash for all shares redeemed, but under abnormal
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conditions that make payment in cash unwise, payment may be
made wholly or partly in portfolio securities with a market
value equal to the redemption price. In such cases, an
investor may incur brokerage costs in converting such
securities to cash.
Net Asset Value An order to buy shares will be executed at a per share price
equal to the net asset value next determined after the
receipt of the purchase order by the Distributor plus any
applicable sales charge (the "offering price"). No
certificates representing shares will be issued. An order to
sell shares will be executed at the net asset value per
share next determined after receipt and effectiveness of a
request for redemption in good order. Net asset value per
share is determined as of 4:00 p.m. Eastern time on each
Business Day. Payment to shareholders for shares redeemed
will be made within 7 days after receipt by the Distributor
of the redemption order.
How the Net The net asset value per share of a Portfolio is determined
Asset Value is by dividing the total market value of its investments and
Determined other assets, less any liabilities, by the total number of
outstanding shares of the Portfolio. A Portfolio may use a
pricing service to obtain the last sale price of each equity
or fixed income security held by a Portfolio. In addition,
portfolio securities are valued at the last quoted sales
price for such securities, or, if there is no such reported
sales price on the valuation date, at the most recent quoted
bid price. Unlisted securities for which market quotations
are readily available are valued at the most recent quoted
bid price. Net asset value per share is determined daily as
of 4:00 p.m. Eastern time on each Business Day. Purchases
will be made in full and fractional shares of a Portfolio
calculated to three decimal places. Although the methodology
and procedures for determining net asset value per share are
identical for both classes of a Portfolio, the net asset
value per share of one class may differ from that of another
class because of the different distribution fees charged to
each class and the incremental transfer agent fees charged
to ProVantage Funds shares.
Rights of In calculating the sales charge rates applicable to current
Accumulation purchases of a Portfolio's shares, a "single purchaser"
(defined below) is entitled to combine current purchases
with the current market value of previously purchased shares
of a Portfolio and ProVantage Funds shares of other
portfolios ("Eligible Portfolios") which are sold subject to
a comparable sales charge.
The term "single purchaser" refers to (i) an individual,
(ii) an individual and spouse purchasing shares of a
Portfolio for their own account or for trust or custodial
accounts of their minor children, or (iii) a fiduciary
purchasing for any one trust, estate or fiduciary account,
including employee benefit plans created under Sections 401
or 457 of the Code, including related plans of the same
employer. Furthermore, under this provision, purchases by a
single purchaser shall include purchases by an individual
for his/her own account in combination with (i) purchases of
that individual and spouse for their joint accounts or for
trust and custodial accounts for their minor children and
(ii) purchases of that individual's spouse for his/her own
account. To be entitled to a reduced sales charge based upon
shares already owned, the investor must ask the Distributor
for such reduction at the time
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of purchase and provide the account number(s) of the
investor, the investor and spouse, and their children (under
age 21). A Portfolio may amend or terminate this right of
accumulation at any time as to subsequent purchases.
Letter of By submitting a Letter of Intent (the "Letter") to the
Intent Distributor, a single purchaser may purchase shares of a
Portfolio and the other Eligible Portfolios during a 13-
month period at the reduced sales charge rates applying to
the aggregate amount of the intended purchases stated in the
Letter. The Letter may apply to purchases made up to 90 days
before the date of the Letter. It is the shareholder's
responsibility to notify SFM at the time the Letter is
submitted that there are prior purchases that may apply.
Five percent (5%) of the total amount intended to be
purchased will be held in escrow by the Distributor until
such purchase is completed within the 13-month period. The
13-month period begins on the date of the earliest purchase.
If the intended investment is not completed, SFM will
surrender an appropriate number of the escrowed shares for
redemption in order to realize the difference between the
sales charge on the shares purchased at the reduced rate and
the sales charge otherwise applicable to the total shares
purchased. Such purchasers may include the value of all
their shares of the Portfolio and of any of the other
Eligible Portfolios in the Trust towards the completion of
such Letter.
Sales Charge No sales charge is imposed on shares of a Portfolio: (i)
Waivers issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Trust is a
party; (ii) sold to dealers or brokers that have a sales
agreement with the Distributor ("participating broker-
dealers"), for their own account or for retirement plans for
employees or sold to present employees of dealers or brokers
that certify to the Distributor at the time of purchase that
such purchase is for their own account; (iii) sold to
present employees of SEI or one of its affiliates, or of any
entity which is a current service provider to the Trust;
(iv) sold to tax-exempt organizations enumerated in Section
501(c) of the Code or qualified employee benefit plans
created under Sections 401, 403(b)(7) or 457 of the Code
(but not IRAs or SEPs); (v) sold to fee-based clients of
banks, financial planners and investment advisers; (vi) sold
to clients of trust companies and bank trust departments;
(vii) sold to trustees and officers of the Trust; (viii)
purchased with proceeds from the recent redemption of
another class of shares of a portfolio of the Trust, SEI
Tax-Exempt Trust, SEI International Trust, SEI Liquid Asset
Trust, or SEI Daily Income Trust; (ix) purchased with the
proceeds from the recent redemption of shares of a mutual
fund with similar investment objectives and policies (other
than ProVantage Funds) for which a front-end sales charge
was paid (this offer will be extended, to cover shares on
which a deferred sales charge was paid, if permitted under
regulatory authorities' interpretation of applicable law);
or (x) sold to participants or members of certain affinity
groups, such as trade associations or membership
organizations, which have entered into arrangements with the
Distributor. Members of affinity groups should see the
Statement
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of Additional Information or call the Distributor for
further information regarding sales charge waivers.
An investor relying upon any of the categories of waivers
of sales charges must qualify such waiver in advance of the
purchase with the Distributor or the financial institution
or the intermediary through which shares are purchased by
the investor.
The waiver of the sales charge under circumstances (viii)
and (ix) above applies only if the following conditions are
met: the purchase must be made within 60 days of the
redemption; the Distributor must be notified in writing by
the investor, or his or her agent, at the time a purchase is
made; and a copy of the investor's account statement showing
such redemption must accompany such notice. The waiver
policy with respect to the purchase of shares through the
use of proceeds from a recent redemption as described in
clauses (viii) and (ix) above will not be continued
indefinitely and may be discontinued at any time without
notice. Investors should call the Distributor at 1-800-437-
6016 to confirm availability prior to initiating the
procedures described in clauses (viii) and (ix) above.
The Distributor has also entered into arrangements with
certain affinity groups and broker-dealers wherein their
members or clients are entitled to percentage-based
discounts from the otherwise applicable sales charge for
purchase of ProVantage Funds shares. Currently the
percentage-based discount is either 10% or 50%. Members of
affinity groups and clients of broker-dealers should see the
Statement of Additional Information or contact the
Distributor for further information.
Signature SFM may require that the signatures on the written request
Guarantees be guaranteed. You should be able to obtain a signature
guarantee from a bank, broker, dealer, certain credit
unions, securities exchange or association, clearing agency
or savings association. Notaries public cannot guarantee
signatures. The signature guarantee requirement will be
waived if all of the following conditions apply: (1) the
redemption is for not more than $5,000 worth of shares, (2)
the redemption check is payable to the shareholder(s) of
record, and (3) the redemption check is mailed to the
shareholder(s) at his or her address of record. The Trust
and the Transfer Agent reserve the right to amend these
requirements without notice.
Telephone/Wire Redemption orders may be placed by telephone. Neither the
Instructions Trust nor SFM will be responsible for any loss, liability,
cost or expense for acting upon wire instructions or upon
telephone instructions that it reasonably believes to be
genuine. The Trust and SFM will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone instructions.
If market conditions are extraordinarily active, or other
extraordinary circumstances exist, and you experience
difficulties placing redemption orders by telephone, you may
wish to consider placing your order by other means.
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Systematic Please note that if withdrawals exceed income dividends,
Withdrawal Plan your invested principal in the account will be depleted.
("SWP") Thus, depending upon the frequency and amounts of the
withdrawal payments and/or any fluctuations in the net asset
value per share, your original investment could be exhausted
entirely. To participate in the SWP, you must have your
dividends automatically reinvested. You may change or cancel
the SWP at any time, upon written notice to SFM.
How to Close An account may be closed by providing written notice to SFM.
your Account You may also close your account by telephone if you have
previously elected telephone options on your account
application.
GENERAL INFORMATION ____________________________________________________________
The Trust The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated October 20, 1986. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. Shareholders may purchase shares in the Portfolio
through three separate classes: Class A and Class B shares
and ProVantage Funds, which provide for variation in
distribution and transfer agent costs, voting rights,
dividends, and the imposition of a sales charge on the
ProVantage Funds. This Prospectus offers the ProVantage
Funds shares of the Trust's Core Fixed Income, Bond and High
Yield Bond Portfolios. Additional information pertaining to
the Trust may be obtained by writing to SEI Financial
Management Corporation, 680 East Swedesford Road, Wayne,
Pennsylvania 19087 or by calling 1-800-437-6016. All
consideration received by the Trust for shares of any
portfolio and all assets of such portfolio belong to that
portfolio and would be subject to liabilities related
thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, including litigation and
other extraordinary expenses, brokerage costs, interest
charges, taxes and organization expenses.
Trustees of the The management and affairs of the Trust are supervised by
Trust the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
Voting Rights Each share held entitles the shareholder of record to one
vote. Each portfolio of the Trust will vote separately on
matters relating solely to that Portfolio. Each class will
vote separately on matters pertaining to its distribution
plan. As a Massachusetts business trust, the Trust is not
required to hold annual meetings of shareholders but
approval will be sought for certain changes in the operation
of the Trust and for the election of Trustees under certain
circumstances. In addition, a Trustee may be removed by the
remaining Trustees or by shareholders at a special meeting
called upon written request of shareholders owning at least
10% of the outstanding shares of the Trust. In the event
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<PAGE>
that such a meeting is requested the Trust will provide
appropriate assistance and information to the shareholders
requesting the meeting.
Reporting The Trust issues unaudited financial information semi-
annually and audited financial statements annually. The
Trust furnishes proxy statements and other reports to
shareholders of record.
Shareholder Shareholder inquiries should be directed to the Manager, SEI
Inquiries Financial Management Corporation, P.O. Box 451, Wayne,
Pennsylvania 19087.
Dividends Substantially all of the net investment income (exclusive of
capital gains) of the Portfolios is periodically declared
and paid as a dividend. Dividends currently are paid on a
monthly basis for each Portfolio. Currently, net capital
gains (the excess of net long-term capital gain over net
short-term capital loss) realized, if any, will be
distributed at least annually.
Shareholders automatically receive all income dividends
and capital gain distributions in additional shares at the
net asset value next determined following the record date,
unless the shareholder has elected to take such payment in
cash. Shareholders may change their election by providing
written notice to SFM at least 15 days prior to the
distribution.
Dividends and capital gains of a Portfolio are paid on a
per-share basis. The value of each share will be reduced by
the amount of any such payment. If shares are purchased
shortly before the record date for dividend of capital gains
distributions, a shareholder will pay the full price for the
shares and receive some portion of the price back as a
taxable dividend or distribution.
The dividends on ProVantage Funds shares will normally be
lower than on Class A and Class B shares of a Portfolio
because of the additional distribution and transfer agent
expenses charged to ProVantage Funds shares.
Counsel and Morgan, Lewis & Bockius serves as counsel to the Trust.
Independent Price Waterhouse LLP serves as the independent accountants
Accountants of the Trust.
Custodianand CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
Wire Agent 7618, Philadelphia, PA 19101 (the "Custodian"), acts as
custodian of the Trust's assets. The Custodian holds cash,
securities and other assets of the Trust as required by the
1940 Act.
DESCRIPTION OF
PERMITTED
INVESTMENTS AND
RISK FACTORS ___________________________________________________________________
The following is a description of the permitted investment
practices for the Portfolios, and the associated risk
factors:
Asset-Backed Asset-backed securities are securities secured by non-
Securities mortgage assets such as company receivables, truck and auto
loans, leases and credit card receivables. Such securities
are generally issued as pass-through certificates, which
represent undivided fractional ownership interests in the
underlying pools of assets. Such securities also may be debt
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<PAGE>
instruments, which are also known as collateralized
obligations and are generally issued as the debt of a
special purpose entity, such as a trust, organized solely
for the purpose of owning such assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by
the United States Government or its agencies or
instrumentalities; however, the payment of principal and
interest on such obligations may be guaranteed up to certain
amounts and for a certain period by a letter of credit
issued by a financial institution (such as a bank or
insurance company) unaffiliated with the issuers of such
securities. The purchase of asset-backed securities raises
risk considerations peculiar to the financing of the
instruments underlying such securities. For example, there
is a risk that another party could acquire an interest in
the obligations superior to that of the holders of the
asset-backed securities. There also is the possibility that
recoveries on repossessed collateral may not, in some cases,
be available to support payments on those securities. Asset-
backed securities entail prepayment risk, which may vary
depending on the type of asset, but is generally less than
the prepayment risk associated with mortgage-backed
securities. In addition, credit card receivables are
unsecured obligations of the card holder.
The market for asset-backed securities is at a relatively
early stage of development. Accordingly, there may be a
limited secondary market for such securities. The Core Fixed
Income and High Yield Bond Portfolios may invest in asset-
backed securities.
Bankers' Bankers' acceptances are bills of exchange or time drafts
Acceptances drawn on and accepted by a commercial bank. Bankers'
acceptances are used by corporations to finance the shipment
and storage of goods. Maturities are generally six months or
less. Each Portfolio may invest in bankers' acceptances.
Certificates of Certificates of deposit are interest bearing instruments
Deposit with a specific maturity. They are issued by banks and
savings and loan institutions in exchange for the deposit of
funds and normally can be traded in the secondary market
prior to maturity. Certificates of deposit with penalties
for early withdrawal will be considered illiquid. Each
Portfolio may invest in certificates of deposit.
Commercial Commercial paper is a term used to describe unsecured short-
Paper term promissory notes issued by banks, municipalities,
corporations and other entities. Maturities on these issues
vary from a few to 270 days. The Core Fixed Income and Bond
Portfolios may invest in commercial paper.
Convertible Convertible securities are corporate securities that are
Securities exchangeable for a set number of another security at a
prestated price. Convertible securities typically have
characteristics similar to both fixed-income and equity
securities. Because of the conversion feature, the market
value of a convertible security tends to move with the
market value of the underlying stock. The value of a
convertible security is also affected by prevailing interest
rates, the credit quality of the issuer, and any call
provisions. The High Yield Bond and Bond Portfolios may
invest in convertible securities.
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Derivatives Derivatives are securities that derive their value from
other securities. The following are considered derivative
securities: options on futures, futures, options (e.g., puts
and calls) swap agreements, mortgage-backed securities
(CMOs, REMICs, IOs and POs), when-issued securities and
forward commitments, floating and variable rate securities,
convertible securities, "stripped" U.S. Treasury securities
(e.g., Receipts and STRIPs), privately issued stripped
securities (e.g., TGRs, TRs and CATS). See elsewhere in this
"Description of Permitted Investments and Risk Factors" for
discussions of these various instruments, and see
"Investment Objectives and Policies" for more information
about any investment policies and limitations applicable to
their use.
Equity Equity securities represent ownership interests in a company
Securities or corporation and include common stock, preferred stock and
warrants and other rights to acquire such instruments.
Investments in common stocks are subject to market risks
which may cause their prices to fluctuate over time. Changes
in the value of portfolio securities will not necessarily
affect cash income derived from these securities but will
affect a Portfolio's net asset value. The High Yield Bond
Portfolio may invest in equity securities.
Fixed Income Fixed income securities are debt obligations issued by
Securities corporations, municipalities and other borrowers. The market
value of fixed income investments will generally change in
response to interest rate changes and other factors. During
periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during
periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities
with longer maturities tend to produce higher yields, the
prices of longer maturity securities are also subject to
greater market fluctuations as a result of changes in
interest rates. Changes by recognized agencies in the rating
of any fixed income security and in the ability of an issuer
to make payments of interest and principal will also affect
the value of these investments. Changes in the value of
portfolio securities will not affect cash income derived
from these securities but will affect a Portfolio's net
asset value. Each Portfolio may invest in fixed income
securities.
Forward Foreign A forward contract involves an obligation to purchase or
Currency sell a specific currency amount at a future date, agreed
Contracts upon by the parties, at a price set at the time of the
contract. A Portfolio may also enter into a contract to
sell, for a fixed amount of U.S. dollars or other
appropriate currency, the amount of foreign currency
approximating the value of some or all of a Portfolio's
securities denominated in such foreign currency.
At the maturity of a forward contract, a Portfolio may
either sell a portfolio security and make delivery of the
foreign currency, or it may retain the security and
terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the
same currency trader, obligating it to purchase, on the same
maturity date, the same amount of the foreign currency. A
Portfolio may realize a gain or loss from currency
transactions. The High Yield Bond Portfolio may invest in
forward foreign currency contracts.
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Futures and Futures contracts provide for the future sale by one party
Options on and purchase by another party of a specified amount of a
Futures specific security at a specified future time and at a
specified price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume a
position in a futures contract at a specified exercise price
during the term of the option. A Portfolio may use futures
contracts and related options for bona fide hedging
purposes, to offset changes in the value of securities held
or expected to be acquired or be disposed of, to minimize
fluctuations in foreign currencies, or to gain exposure to a
particular market or instrument. A Portfolio will minimize
the risk that it will be unable to close out a futures
contract by only entering into futures contracts which are
traded on national futures exchanges.
Stock index futures are futures contracts for various
stock indices that are traded on registered securities
exchanges. A stock index futures contract obligates the
seller to deliver (and the purchaser to take) an amount of
cash equal to a specific dollar amount times the difference
between the value of a specific stock index at the close of
the last trading day of the contract and the price at which
the agreement is made.
There are risks associated with these activities,
including the following: (1) the success of a hedging
strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets
and movements in interest rates, (2) there may be an
imperfect or no correlation between the changes in market
value of the securities held by the Portfolio and the prices
of futures and options on futures, (3) there may not be a
liquid secondary market for a futures contract or option,
(4) trading restrictions or limitations may be imposed by an
exchange, and (5) government regulations may restrict
trading in futures contracts and futures options.
A Portfolio may enter into futures contracts and options
on futures contracts traded on an exchange regulated by the
Commodities Futures Trading Commission ("CFTC"), 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
Portfolio's net assets. The Portfolio may buy and sell
futures contracts and related options to manage its exposure
to changing interest rates and securities prices. Some
strategies reduce the Portfolio's exposure to price
fluctuations, while others tend to increase its market
exposure. Futures and options on futures can be volatile
instruments and involve certain risks that could negatively
impact the Portfolio's return. The Core Fixed Income and
High Yield Bond Portfolios may invest in futures and options
on futures.
Illiquid Illiquid securities are securities that cannot be disposed
Securities of within seven business days at approximately the price at
which they are being carried on a Portfolio's books. An
illiquid security includes a demand instrument with a demand
notice period exceeding seven days, where there is no
secondary market for such security, and repurchase
agreements with durations (or maturities) over 7 days in
length. Each Portfolio may invest in illiquid securities.
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Junk Bonds Bonds rated below investment grade are often referred to as
"junk bonds." Such securities involve greater risk of
default or price declines than investment grade securities
due to changes in the issuer's creditworthiness and the
outlook for economic growth. The market for these securities
may be less active, causing market price volatility and
limited liquidity in the secondary market. This may limit a
Portfolio's ability to sell such securities at their market
value. In addition, the market for these securities may also
be adversely affected by legislative and regulatory
developments. Credit quality in the junk bond market can
change suddenly and unexpectedly, and even recently issued
credit ratings may not fully reflect the actual risks
imposed by a particular security. The High Yield Bond
Portfolio may invest in junk bonds.
Money Market Money market securities are high-quality, dollar-
Securities 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 or guaranteed 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 of less
issued by corporations with outstanding high-quality
commercial paper; and (v) repurchase agreements involving
any of the foregoing obligations entered into with highly-
rated banks and broker-dealers. All Portfolios may invest in
money market securities.
Mortgage-Backed Mortgage-backed securities are instruments that entitle the
Securities holder to a share of all interest and principal payments
from mortgages underlying the security. The mortgages
backing these securities include conventional thirty-year
fixed-rate mortgages, graduated payment mortgages, and
adjustable rate mortgages. During periods of declining
interest rates, prepayment of mortgages underlying mortgage-
backed securities can be expected to accelerate. Prepayment
of mortgages which underlie securities purchased at a
premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital
gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict
accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities: These are securities
that are issued or guaranteed by a U.S. Government agency
representing an interest in a pool of mortgage loans. The
primary issuers or guarantors of these mortgage-backed
securities are GNMA, FNMA and FHLMC. FNMA and FHLMC
obligations are not backed by the full faith and credit of
the U.S. Government as GNMA certificates are, but FNMA and
FHLMC securities are supported by the instrumentalities'
right to borrow from the U.S. Treasury. GNMA, FNMA and FHLMC
each guarantees timely distributions of interest to
certificate holders. GNMA and FNMA also each guarantees
timely distributions of scheduled principal. FHLMC has in
the past guaranteed only the ultimate collection of
principal of the underlying mortgage loan; however, FHLMC
now issues mortgage-backed securities (FHLMC Gold PCs) which
also guarantee timely payment of monthly principal
reductions. Government
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and private guarantees do not extend to the securities'
value, which is likely to vary inversely with fluctuations
in interest rates.
Private Pass-Through Securities: These are mortgage-
backed securities issued by a non-governmental entity, such
as a trust. These securities include collateralized mortgage
obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two
rating categories. 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. 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. 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.
REMICs: A REMIC is a CMO that qualifies for special tax
treatment under the Internal Revenue Code and invests in
certain mortgages principally secured by interests in real
property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or
"residual" interests. Guaranteed REMIC pass-through
certificates ("REMIC Certificates") issued by FNMA or FHLMC
represent beneficial ownership interests in a REMIC trust
consisting principally of mortgage loans or FNMA, FHLMC or
GNMA-guaranteed mortgage pass-through certificates. For
FHLMC REMIC Certificates, FHLMC guarantees the timely
payment of interest, and also guarantees the payment of
principal as payments are required to be made on the
underlying mortgage participation certificates. FNMA REMIC
Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA.
Parallel Pay Securities; PAC Bonds: Parallel pay CMOs and
REMICS are structured to provide payments of principal on
each payment date to more than one class. These simultaneous
payments are taken into account in calculating the stated
maturity date or final distribution date of each class,
which must be retired by its stated maturity date or final
distribution date, but may be retired earlier. Planned
Amortization Class CMOs ("PAC Bonds") generally require
payments of a specified amount of principal on each payment
date. PAC Bonds are always parallel pay CMOs with the
required principal payment on such securities having the
highest priority after interest has been paid to all
classes.
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REITs: REITs are trusts that invest primarily in
commercial real estate or real estate-related loans. The
value of interests in REITs may be affected by the value of
the property owned or the quality of the mortgages held by
the trust.
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. SMBs are extremely sensitive to changes in interest
rates because of the impact thereon of prepayment of
principal on the underlying mortgage securities can
experience wide swings in value in response to changes in
interest rates and associated mortgage prepayment rates.
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.
Risk Factors: Due to the possibility of prepayments of
the underlying mortgage instruments, mortgage-backed
securities generally do not have a known maturity. In the
absence of a known maturity, market participants generally
refer to an estimated average life. An average life estimate
is a function of an assumption regarding anticipated
prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other
factors. The assumption is necessarily subjective, and thus
different market participants can produce different average
life estimates with regard to the same security. There can
be no assurance that estimated average life will be a
security's actual average life. The Core Fixed Income, Bond
and High Yield Bond Portfolios may invest in mortgage-backed
securities.
Mortgage Dollar Mortgage "dollar rolls" are transactions in which mortgage-
Rolls backed securities are sold for delivery in the current month
and the seller simultaneously contracts to repurchase
substantially similar securities on a specified future date.
Any difference between the sale price and the purchase price
is netted against the interest income foregone on the
securities sold to arrive at an implied borrowing rate.
Alternatively, the sale and purchase transactions can be
executed at the same price, with the Portfolio being paid a
fee as consideration for entering into the commitment to
purchase. Mortgage dollar rolls may be renewed prior to cash
settlement and initially may involve only a firm commitment
agreement by the Portfolio to buy a security. If the broker-
dealer to whom the Portfolio sells the security becomes
insolvent, the Portfolio's right to repurchase the security
may be restricted. Other risks involved in entering into
mortgage dollar rolls include the risk that the value of the
security may change adversely over the term of the mortgage
dollar roll and that the security the Portfolio is required
to repurchase may be worth less than the security that the
Portfolio originally held.
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To avoid any leveraging concerns, the Portfolio will
place U.S. Government or other liquid, high grade assets in
a segregated account in an amount sufficient to cover its
repurchase obligation. The Core Fixed Income Portfolio may
invest in mortgage dollar rolls.
Options A put option gives the purchaser of the option the right to
sell, and the writer of the option the obligation to buy,
the underlying security at any time during the option
period. A call option gives the purchaser of the option the
right to buy, and the writer of the option the obligation to
sell, the underlying security at any time during the option
period. The premium paid to the writer is the consideration
for undertaking the obligations under the option contract.
The initial purchase (sale) of an option contract is an
"opening transaction." In order to close out an option
position, a Portfolio may enter into a "closing
transaction," which is simply the sale (purchase) of an
option contract on the same security with the same exercise
price and expiration date as the option contract originally
opened.
A Portfolio may purchase put and call options to protect
against a decline in the market value of the securities in
its portfolio or to anticipate an increase in the market
value of securities that the Portfolio may seek to purchase
in the future. A Portfolio purchasing put and call options
pays a premium therefor. If price movements in the
underlying securities are such that exercise of the options
would not be profitable for the Portfolio, loss of the
premium paid may be offset by an increase in the value of
the Portfolio's securities or by a decrease in the cost of
acquisition of securities by the Portfolio.
A Portfolio may write covered call options as a means of
increasing the yield on its portfolio and as a means of
providing limited protection against decreases in its market
value. When a Portfolio sells an option, if the underlying
securities do not increase or decrease to a price level that
would make the exercise of the option profitable to the
holder thereof, the option generally will expire without
being exercised and the Portfolio will realize as profit the
premium received for such option. When a call option of
which a Portfolio is the writer is exercised, the Portfolio
will be required to sell the underlying securities to the
option holder at the strike price, and will not participate
in any increase in the price of such securities above the
strike price. When a put option of which a Portfolio is the
writer is exercised, the Portfolio will be required to
purchase the underlying securities at the strike price,
which may be in excess of the market value of such
securities.
A Portfolio may purchase and write options on an exchange
or over-the-counter. Over-the-counter options ("OTC
options") differ from exchange-traded options in several
respects. They are transacted directly with dealers and not
with a clearing corporation, and therefore entail the risk
of non-performance by the dealer. OTC options are available
for a greater variety of securities and for a wider range of
expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded
on an exchange, pricing is done normally by reference to
information from a market maker. It is
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the position of the Securities and Exchange Commission that
OTC options are generally illiquid.
A Portfolio may purchase and write put and call options
on foreign currencies (traded on U.S. and foreign exchanges
or over-the-counter markets) to manage its exposure to
exchange rates. Call options on foreign currency written by
a Portfolio will be "covered," which means that the
Portfolio will own an equal amount of the underlying foreign
currency. With respect to put options on foreign currency
written by a Portfolio, the Portfolio will establish a
segregated account with its custodian bank consisting of
cash or liquid, high grade debt securities in an amount
equal to the amount the Portfolio would be required to pay
upon exercise of the put.
A Portfolio may purchase and write put and call options
on indices and enter into related closing transactions. Put
and call options on indices are similar to options on
securities except that options on an index give the holder
the right to receive, upon exercise of the option, an amount
of cash if the closing level of the underlying index is
greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal
to the difference between the closing price of the index and
the exercise price of the option, expressed in dollars
multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain
or loss depends on price movements in the particular market
represented by the index generally, rather than the price
movements in individual securities. A Portfolio may choose
to terminate an option position by entering into a closing
transaction. The ability of a Portfolio to enter into
closing transactions depends upon the existence of a liquid
secondary market for such transactions.
A Portfolio may engage in writing covered call options.
Under a call option, the purchaser has the right to purchase
and the writer (the Portfolio) the obligation to sell the
underlying security at the exercise price during the option
period. Options purchased by the Portfolio will be listed on
a national securities exchange. In order to close out an
option position, the Portfolio may enter into a "closing
purchase transaction," which involves the purchase of an
option on the same security at the same exercise price and
expiration date. If the Portfolio is unable to effect a
closing purchase transaction with respect to an option it
has written, it will not be able to sell the underlying
security until the options expires or the Portfolio delivers
the security upon exercise. Permissible options include
options on stock indices.
Even where used only for hedging purposes, options
involve risks, including the following: (i) the success of
any hedging strategy utilizing options will depend on an
ability to predict movements in the prices of individual
securities and interest rates, (ii) there may be an
imperfect correlation between the movement in prices of
securities held by the Portfolio and the price of options,
(iii) there may not be a liquid secondary market for
options, and (iv) while the Portfolio will receive a premium
when it writes covered call
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options, it may not participate fully in any rise in the
market value of the underlying security."
All options written on indices must be covered. When a
Portfolio writes an option on an index, it will establish a
segregated account containing cash or liquid high grade debt
securities with its custodian in an amount at least equal to
the market value of the option and will maintain the account
while the option is open or will otherwise cover the
transaction.
Risk Factors. Risks associated with options transactions
include: (1) the success of a hedging strategy may depend on
an ability to predict movements in the prices of individual
securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation
between the movement in prices of options and the securities
underlying them; (3) there may not be a liquid secondary
market for options; and (4) while a Portfolio will receive a
premium when it writes covered call options, it may not
participate fully in a rise in the market value of the
underlying security. The Core Fixed Income and High Yield
Bond Portfolios may invest in options.
Receipts Receipts are sold as zero coupon securities which means that
they are sold at a substantial discount and redeemed at face
value at their maturity date without interim cash payments
of interest or principal. This discount is accreted over the
life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax
purposes. Because of these features, such securities may be
subject to greater interest rate volatility than interest
paying Permitted Investments. See also "Taxes." Each
Portfolio may invest in receipts.
Repurchase Agreements by which a Portfolio obtains a security and
Agreements simultaneously commits to return the security to the seller
at an agreed upon price (including principal and interest)
on an agreed upon date within a number of days from the date
of purchase. The Custodian or its agent will hold the
security as collateral for the repurchase agreement.
Collateral must be maintained at a value at least equal to
102% of the purchase price. The Portfolio bears a risk of
loss in the event the other party defaults on its
obligations and the Portfolio is delayed or prevented from
its right to dispose of the collateral securities or if the
Portfolio realizes a loss on the sale of the collateral
securities. The adviser will enter into repurchase
agreements on behalf of the Portfolio only with financial
institutions deemed to present minimal risk of bankruptcy
during the term of the agreement based on guidelines
established and periodically reviewed by the Trustees.
Repurchase agreements are considered loans under the 1940
Act. Each Portfolio may invest in repurchase agreements.
Securities In order to generate additional income, a portfolio may lend
Lending securities which it owns pursuant to agreements requiring
that the loan be continuously secured by collateral
consisting of cash, securities of the U.S. Government or its
agencies equal to at least 100% of the market value of the
securities lent. A Portfolio continues to receive interest
on the securities lent while simultaneously earning interest
on the investment of cash
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collateral. Collateral is marked to market daily. There may
be risks of delay in recovery of the securities or even loss
of rights in the collateral should the borrower of the
securities fall financially or become insolvent. The High
Yield Bond Portfolio may lend securities.
Securities of There are certain risks connected with investing in foreign
Foreign Issuers securities. These include risks of adverse political and
economic developments (including possible governmental
seizure or nationalization of assets), the possible
imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting
requirements, the possibility that there will be less
information on such securities and their issuers available
to the public, the difficulty of obtaining or enforcing
court judgments abroad, restrictions on foreign investments
in other jurisdictions, difficulties in effecting
repatriation of capital invested abroad, and difficulties in
transaction settlements and the effect of delay on
shareholder equity. Foreign securities may be subject to
foreign taxes, and may be less marketable than comparable
U.S. securities. The value of a Portfolio's investments
denominated in foreign currencies will depend on the
relative strengths of those currencies and the U.S. dollar,
and a Portfolio may be affected favorably or unfavorably by
changes in the exchange rates or exchange control
regulations between foreign currencies and the U.S. dollar.
Changes in foreign currency exchange rates also may affect
the value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income
and gains, if any, to be distributed to shareholders by a
Portfolio. The High Yield Bond Portfolio may invest in
securities of foreign issuers.
U.S. Government Obligations issued or guaranteed by agencies of the U.S.
Agencies Government, including, among others, the Federal Farm Credit
Bank, the Federal Housing Administration and the Small
Business Administration, and obligations issued or
guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage
Corporation, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the full
faith and credit of the U.S. Treasury (e.g., Government
National Mortgage Association), others are supported by the
right of the issuer to borrow from the Treasury (e.g.,
Federal Farm Credit Bank), while still others are supported
only by the credit of the instrumentality (e.g., Federal
National Mortgage Association). Guarantees of principal by
agencies or instrumentalities of the U.S. 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
Portfolio's shares. Each Portfolio may invest in obligations
issued or guaranteed by U.S. Government agencies.
U.S. Treasury U.S. Treasury obligations consist of bills, notes and bonds
Obligations issued by the U.S. Treasury and separately traded interest
and principal component parts of such obligations that are
transferable through the Federal book-entry system known as
Separately Traded
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Registered Interest and Principal Securities ("STRIPS").
Each Portfolio may invest in U.S. Treasury obligations.
U.S. Treasury U.S. Treasury receipts are interests in separately traded
Receipts interest and principal component parts of U.S. Treasury
obligations that are issued by banks or brokerage firms and
are created by depositing U.S. Treasury obligations into a
special account at a custodian bank. The Custodian holds the
interest and principal payments for the benefit of the
registered owners of the certificates of receipts. The
Custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register.
Receipts include "Treasury Receipts" ("TRs"), "Treasury
Investment Growth Receipts" ("TIGRs"), "Liquid Yield Option
Notes" ("LYONs") and "Certificates of Accrual on Treasury
Securities" ("CATS"). TIGRs and CATS are interests in
private proprietary accounts while TRs are interests in
accounts sponsored by the U.S. Treasury. Each Portfolio may
invest in U.S. Treasury receipts.
Variable and Certain obligations may carry variable or floating rates of
Floating Rate interest, and may involve a conditional or unconditional
Instruments 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
some other reset period, 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.
Each Portfolio may invest in variable and floating rate
instruments.
Warrants Warrants are instruments giving holders the right, but not
the obligation, to buy shares of a company at a given price
during a specified period. The High Yield Bond Portfolio may
invest in warrants.
When-Issued and When-issued or delayed delivery basis transactions involve
Delayed the purchase of an instrument with payment and delivery
Delivery taking place in the future. Delivery of and payment for
Securities these securities may occur a month or more after the date of
the purchase commitment. The Portfolio will maintain with
the custodian a separate account with liquid high grade debt
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these securities
is fixed as of the purchase date and no interest accrues to
the Portfolio before settlement. 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. Although a Portfolio generally purchases securities
on a when-issued or forward commitment basis with the
intention of actually acquiring securities, a Portfolio may
dispose of a when-issued security or forward commitment
prior to settlement if it deems appropriate. Each Portfolio
may invest in when-issued and delayed delivery securities.
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Yankee Yankee obligations ("Yankees") are U.S. dollar-denominated
Obligations instruments of foreign issuers who either register with the
Securities and Exchange Commission or issue under Rule
144(A). These consist of debt securities (including
preferred or preference stock of non-governmental issuers),
certificates of deposit, fixed time deposits and bankers'
acceptances issued by foreign banks, and debt obligations of
foreign governments or their subdivisions, agencies and
instrumentalities, international agencies and supranational
entities. 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.
Investing in the securities of issuers based in any
foreign country involves special risks and considerations
not typically associated with investing in U.S. companies.
These include risks resulting from differences in
accounting, auditing and financial reporting standards,
lower liquidity than U.S. fixed income or debt securities,
the possibility of nationalization, expropriation or
confiscatory taxation; adverse changes in investment or
exchange control regulations and political instability.
There may be less publicly available information concerning
foreign issuers of securities held by the Portfolio than is
available concerning U.S. issuers. Purchases and sales of
foreign securities and dividends and interest payable on
those securities may be subject to foreign taxes and taxes
may be withheld from dividend and interest payments on those
securities. Foreign securities often trade with less
frequency and volume than domestic securities and therefore
may exhibit greater price volatility and a greater risk of
liquidity.
The yankee obligations selected for the Portfolio will
adhere to the same quality standards as those utilized for
the selection of domestic debt obligations. The Core Fixed
Income Portfolio may invest in yankee obligations.
Zero Coupon, Zero coupon securities are securities that are sold at a
Pay-In-Kind and discount to par value and securities on which interest
Deferred payments are not made during the life of the security. Upon
Payment maturity, the holder is entitled to receive the par value of
Securities the security. While interest payments are not made on such
securities, holders of such securities are deemed to have
received "phantom income" annually. Because a Portfolio will
distribute its "phantom income" to shareholders, to the
extent that shareholders elect to receive dividends in cash
rather than reinvesting such dividends in additional shares,
a Portfolio will have fewer assets with which to purchase
income producing securities. Alternatively, shareholders may
have to redeem shares to pay tax on this "phantom income."
In either case, the Portfolio may have to dispose of its
portfolio securities under disadvantageous circumstances to
generate cash, or may have to leverage itself by borrowing
cash to satisfy distribution requirements. A Portfolio
accrues income with respect to the securities prior to the
receipt of cash payments. Pay-in-kind securities are
securities that have interest payable by delivery of
additional securities. Deferred payment securities are
securities that remain zero coupon securities until a
predetermined date, at which time the stated coupon rate
becomes effective and interest becomes payable at regular
intervals. Zero coupon, pay-in-kind and deferred payment
securities may be subject to greater fluctuation in value
and lesser
40
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liquidity in the event of adverse market conditions that
comparably rated securities paying cash interest at regular
interest payment periods. The High Yield Bond Portfolio may
invest in zero coupon, pay-in-kind and deferred payment
securities.
Additional information on permitted investments and risk
factors can be found in the Statement of Additional
Information.
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APPENDIX--DESCRIPTION OF CORPORATE BOND RATINGS ________________________________
MOODY'S RATING DEFINITIONS
LONG TERM
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edged". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat larger than
the Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
A-1
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Moody's bond ratings, where specified, are applied to senior bank obligations
and insurance company senior policyholder and claims obligations with an
original maturity in excess of one year. Obligations relying upon support
mechanisms such as letters-of-credit and bonds of indemnity are excluded unless
explicitly rated.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located
in countries which carry a Moody's sovereign rating. Such branch obligations
are rated at the lower of the bank's rating or Moody's sovereign rating for the
bank deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings
do not incorporate an opinion as to whether payment of the obligation will be
affected by the actions of the government controlling the currency of
denomination. In addition, risk associated with bilateral conflicts between an
investor's home country and either the issuer's home country or the country
where an issuer branch is located are not incorporated into Moody's ratings.
Moody's makes no representation that rated bank obligations or insurance
company obligations are exempt from registration under the U.S. Securities Act
of 1933 or issued in conformity with any other applicable law or regulation.
Nor does Moody's represent that any specific bank or insurance company
obligation is legally enforceable or is a valid senior obligation of a rated
issuer.
Moody's ratings are opinions, not recommendations to buy or sell, and their
accuracy is not guaranteed. A rating should be weighed solely as one factor in
an investment decision and you should make your own study and evaluation of any
issuer whose securities or debt obligations you consider buying or selling.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
STANDARD & POOR'S RATING DEFINITIONS
A Standard & Poor's corporate or municipal debt rating is a current assessment
of creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.
The debt rating is not a recommendation to purchase, sell or hold a security,
as it does not comment on market price or suitability for a particular
investor.
The ratings are based, in varying degrees, on the following considerations:
(1) Likelihood of default. The rating assesses the obligor's capacity and
willingness as to timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
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(2) The obligation's nature and provisions.
(3) Protection afforded to, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under bankruptcy
laws and other laws affecting creditor's rights.
Likelihood of default is indicated by an issuer's senior debt rating. If senior
debt is not rated, an implied senior debt rating is determined. Subordinated
debt usually is rated lower than senior debt to better reflect relative
position of the obligation in bankruptcy. Unsecured debt, where significant
secured debt exists, is treated similarly to subordinated debt.
LONG-TERM
Investment Grade
AAA Debt rated 'AAA' has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated debt only in small degree.
A Debt rated 'A' has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Speculative Grade
Debt rated 'BB', 'B', 'CCC', 'CC', and 'C' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. 'BB' indicates the least degree of speculation and 'C' the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposure to adverse conditions.
BB Debt rated 'BB' has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that could
lead to inadequate capacity to meet timely interest and principal payments.
The 'BB' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied 'BBB-' rating.
B Debt rate 'B' has greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions would likely impair capacity or
willingness to pay interest and repay principal. The 'B' rating category
also is used for debt subordinated to senior debt that is assigned an
actual or implied 'BB' or 'BB-' rating.
CCC Debt rated 'CCC' has a current identifiable vulnerability to default, and
is dependent on favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event
of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal.
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The 'CCC' rating category also is used for debt subordinated to senior debt
that is assigned an actual or implied 'B' or 'B-' rating.
CC The rating 'CC' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC' rating.
C The rating 'C' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payment are continued.
CI Debt rated 'CI' is reserved for income bonds on which no interest is being
paid.
D Debt is rated 'D' when the issue is in payment default, or the obligor has
filed for bankruptcy. The 'D' rating is used when interest or principal
payments are not made on the date due, even if the applicable grace period
has not expired, unless S&P believes that such payments will be made during
such grace period.
Plus (+) or minus (-): The ratings from 'AA' to 'CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
c The letter 'c' indicates that the holder's option to tender the security for
purchase may be canceled under certain prestated conditions enumerated in
the tender option documents.
P The letter 'p' indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project financed by the debt
being rated and indicates that payment of the debt service requirements is
largely or entirely dependent upon the successful timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the
risk of default upon failure of such completion. The investor should
exercise his own judgement with respect to such likelihood and risk.
L The letter 'L' indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is
federally insured, and interest is adequately collateralized. In the case of
certificates of deposit, the letter 'L' indicates that the deposit, combined
with other deposits being held in the same right and capacity, will be
honored for principal and pre-default interest up to federal insurance
limits within 30 days after closing of the insured institution or, in the
event that the deposit is assumed by a successor insured institution, upon
maturity.
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* Continuance of the rating is contingent upon S&P's receipt of an executed
copy of the escrow agreement or closing documentation confirming investments
and cash flows.
N.R. Not rated.
Debt obligations of issuers outside the United States and its territories are
rated on the same basis as domestic corporate and municipal issues. The ratings
measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.
If an issuer's actual or implied senior debt rating is 'AAA', its subordinated
or junior debt is rated 'AAA' or 'AA+'. If an issuer's actual or implied senior
debt rating is lower than 'AAA' but higher than 'BB+', its junior debt is
typically rated
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once designation lower than the senior debt ratings. For example, if the senior
debt rating is 'A', subordinated debt normally would be rated 'A-'. If an
issuer's actual or implied senior debt rating is 'BB+' or lower, its
subordinated debt is typically rated two designations lower than the senior
debt rating.
NOTE: The term "investment grade" was originally used by various regulatory
bodies to connote obligations eligible for investment by institutions such as
banks, insurance companies, and savings and loan associations. Over time, this
term gained widespread usage throughout the investment community. Issues rated
in the four highest categories, 'AAA', 'AA', 'A', 'BBB', generally are
recognized as being investment grade. Debt 'BB' or below generally is referred
to as speculative grade. The term "junk bond" is merely a more irreverent
expression for this category of more risky debt. Neither term indicates which
securities S&P deems worthy of investment, as an investor with a particular
risk preference may appropriately invest in securities that are not investment
grade.
A-5
