<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
SEI INSTITUTIONAL MANAGED TRUST
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(Name of Registrant as Specified In Its Charter)
SEI INSTITUTIONAL MANAGED TRUST
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transaction applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid:
N/A
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[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
IMPORTANT SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
SEI CORE FIXED INCOME PORTFOLIO
SEI SMALL CAP VALUE PORTFOLIO
The document you hold in your hands
contains your proxy statement and proxy
card. A proxy card is, in essence, a
ballot. When you vote your proxy, it
tells us how to vote on your behalf on
important issues relating to your
Portfolio. Each proxy card may be
completed by checking a single box and
voting for or against all of the
proposals relating to your Portfolio,
or you may vote on each proposal
separately. If you simply sign the
proxy without specifying a vote, your
shares will be voted in accordance with
the recommendations of the Board of
Trustees.
We urge you to spend a few minutes with
the proxy statement, fill out your
proxy card, and return it to us. Voting
your proxy, and doing so promptly,
enables the Portfolio to avoid
conducting additional mailings. When
shareholders do not return their
proxies in sufficient numbers, the
expense of follow-up may cost your
Portfolio money.
Please take a few moments to exercise
your right to vote. Thank you.
- --------------------------------------------------------------------------------
SEI INSTITUTIONAL MANAGED TRUST
<PAGE>
SEI INSTITUTIONAL MANAGED TRUST
CORE FIXED INCOME PORTFOLIO
SMALL CAP VALUE PORTFOLIO
Dear Shareholder,
The attached proxy statement solicits your vote as a Shareholder in the
Small Cap Value and/or Core Fixed Income Portfolios on a number of important
proposals being recommended by the Board of Trustees. Even if you are not
currently a Shareholder in either Portfolio, you are still eligible to vote.
Votes are solicited from Shareholders of record as of September 14, 1995.
A Special Meeting of Shareholders of the Small Cap Value and Core Fixed
Income Portfolios has been scheduled for Friday, November 13, 1995. While you
are, of course, welcome to join us at the meeting, most Shareholders cast
their votes by filing out and signing the proxy card that accompanies the
attached proxy statement.
The attached proxy statement is designed to give you information relating
each of the proposals on which you will be asked to vote. Although each
proposal is discussed in the proxy statement, not every Portfolio is required
to vote on every proposal. We encourage you to support the Trustees'
recommendations. The proposals described in the proxy statement relate to the
following matters:
SECTION I
Proposals 1 through 12 recommend revisions to the fundamental investment
limitations of each Portfolio in order to (1) update the policies and
limitations to reflect regulatory developments, (2) improve the Portfolio's
ability to adapt quickly to developments in the securities markets, and (3)
improve management efficiency by making the Portfolio's limitations as
consistent as possible.
SECTION II
Proposal 13 recommends the implementation of a "Manager of Managers"
structure under which SEI Financial Management Corporation will be named as
investment adviser and, subject to the approval of the Board of Trustees,
will be able to appoint additional and replacement sub-advisers for the
Core Fixed Income Portfolio without the approval of Shareholders.
SECTION III
Proposal 14 recommends the appointment of SEI Financial Management as
investment adviser for the Core Fixed Income Portfolio and the approval of
corresponding investment advisory agreement.
SECTION IV
Proposals 15 through 18 recommend the appointment or addition of certain
investment sub-advisers to the Small Cap Value and Core Fixed Income
Portfolios as follows:
Small Cap Value Portfolio: Boston Partners Asset Management, L.P.
Core Fixed Income Portfolio:Firstar Investment Research and Management
Company
BlackRock Financial Management, Inc.
Western Asset Management Company
<PAGE>
SEI INSTITUTIONAL MANAGED TRUST
2 OLIVER STREET
BOSTON, MA 02109
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 13, 1995
Notice is hereby given that a Special Meeting of Shareholders of the Small
Cap Value and Core Fixed Income Portfolios (each a "Portfolio" and, together,
the "Portfolios") of SEI Institutional Managed Trust (the "Trust") will be
held at the offices of SEI Financial Management Corporation ("SFM"), 680 East
Swedesford Road, Wayne, Pennsylvania 19087-1658, on Friday, November 13, 1995,
at 3:30 p.m.
At the meeting, Shareholders of the Portfolios will be asked to consider and
act on proposed amendments to each Portfolio's investment limitations, a new
management structure, new sub-advisers and new advisory and sub-advisory
agreements, and other matters detailed below (the "Proposals"). The enclosed
proxy card permits Shareholders of each Portfolio to vote either for or
against all Proposals that apply to that Portfolio by checking a single box,
or to vote on each applicable Proposal separately. The specifics of these
Proposals, which are more fully described in the attached Proxy Statement, are
as follows:
1. To combine each Portfolio's fundamental limitations concerning
diversification and concerning the acquisition of more than 10% of the
outstanding voting securities of any one issuer, and to amend certain other
language.
2. To amend each Portfolio's fundamental limitation concerning borrowing
to enhance each Portfolio's ability to borrow money.
3. To amend each Portfolio's fundamental limitation concerning making
loans to enhance each Portfolio's ability to make loans.
4. To reclassify each Portfolio's fundamental limitation concerning
pledging assets as non-fundamental, and to amend certain language.
5. To reclassify each Portfolio's fundamental limitation concerning
investment in securities for the purpose of exercising control as non-
fundamental.
6. To amend each Portfolio's fundamental limitation concerning investment
in real estate and commodities to clarify each Portfolio's ability to
invest in commodities contracts relating to financial instruments.
7. To reclassify each Portfolio's fundamental limitation concerning short
sales and margins sales as non-fundamental, and to amend certain language.
8. To reclassify each Portfolio's fundamental limitation concerning
investment in securities of investment companies as non-fundamental, and to
amend certain language.
9. To amend each Portfolio's fundamental limitation concerning the
issuance of senior securities to clarify each Portfolio's ability to issue
senior securities.
<PAGE>
10. To reclassify each Portfolio's fundamental limitation concerning
investment in securities of an issuer whose securities are owned by
officers and trustees of the Trust as non-fundamental.
11. To reclassify each Portfolio's fundamental limitation concerning
investment of more than 5% of total assets in securities of companies with
less than three years of operating history as non-fundamental.
12. To eliminate each Portfolio's fundamental limitation concerning
investment in warrants, puts, calls, straddles, spreads or combinations
thereof.
13. To authorize the Board of Trustees to appoint or replace investment
sub-advisers recommended by SFM for the Trust's Core Fixed Income Portfolio
without Shareholder approval of such sub-advisers' contracts.
14. To approve the selection of SFM as the Investment Adviser to the
Trust's Core Fixed Income Portfolio, and to approve the Investment Advisory
Agreement between the Trust, on behalf of the Core Fixed Income Portfolio,
and SFM.
15. To approve the selection of Boston Partners Asset Management, L.P.
("Boston"), as a sub-adviser to the Small Cap Value Portfolio, and to
approve a sub-advisory agreement between SFM and Boston.
16. To approve the selection of BlackRock Financial Management, Inc.
("BlackRock"), as a sub-adviser to the Core Fixed Income Portfolio, and to
approve a sub-advisory agreement between SFM and BlackRock.
17. To approve the selection of Firstar Investment Research & Management
Company ("FIRMCO") as a sub-adviser to the Core Fixed Income Portfolio, and
to approve a sub-advisory agreement between SFM and FIRMCO.
18. To approve the selection of Western Asset Management Company
("Western") as a sub-adviser to the Core Fixed Income Portfolio, and to
approve a sub-advisory agreement between SFM and Western.
Proposals 1 through 12 relate to revisions to the Core Fixed Income and
Small Cap Value Portfolios' investment limitations. The intent is to update,
restructure and/or reclassify the investment limitations to the extent
permitted by applicable law in order to reflect regulatory developments,
provide the flexibility to adapt to developments in the securities markets,
and to improve management efficiency by making the investment limitations as
consistent as possible. In addition, the Proposals will minimize the need to
call Shareholder meetings in the future to change certain investment
limitations.
Proposals 13 and 14 relate to the "Manager of Managers" structure approved
by the Trust's Board of Trustees for the Core Fixed Income Portfolio, wherein
SFM, which already acts as investment adviser to ten other Portfolios of the
Trust, will act as investment adviser to the Portfolio and recommend to the
Trustees which investment sub-advisers to appoint and replace for the
Portfolio. Apart from Shareholder approval, this structure requires an order
of exemption from the SEC before becoming operative. It is anticipated that if
and when exemptive relief is granted, the Manager of Managers structure will
enable the Trust to achieve a higher degree of management efficiency and will
reduce the need for Shareholder meetings in the future. In connection with the
Manager of Managers structure, the Trustees have approved
2
<PAGE>
the selection of SFM as Investment Adviser to the Portfolio, and a new
investment advisory agreement with SFM for the Portfolio.
Proposals 15 through 18 relate to approval of the selection of the current
investment adviser to the Core Fixed Income Portfolio to serve as investment
sub-adviser to the Portfolio, approval of certain new investment sub-advisers
to the Small Cap Value and Core Fixed Income Portfolios, and approval of a
form of sub-advisory agreement for the Portfolios. If the Manager of Managers
structure is implemented, and an SEC order is obtained, the Trustees would be
able, upon the recommendation of SFM and without Shareholder approval, to
replace these sub-advisers and/or appoint additional sub-advisers to this and
the other Portfolios, and to utilize investment sub-advisory agreements for
the Portfolios whose terms are different from those currently in use by the
Trust.
In accordance with their own discretion, the proxies are authorized to vote
on such other business as may properly come before the Meeting.
BY ORDER OF THE BOARD OF TRUSTEES
RICHARD W. GRANT, SECRETARY
All Shareholders are cordially invited to attend the Meeting. However, if
you are unable to be present at the Meeting, you are requested to mark, sign,
and date the enclosed Proxy and return it promptly in the enclosed, postage-
paid envelope so that the Meeting may be held and a maximum number of shares
may be voted.
Shareholders of record at the close of business on September 14, 1995 are
entitled to notice of and to vote at the Meeting or any adjournment thereof.
September 30, 1995
3
<PAGE>
SEI INSTITUTIONAL MANAGED TRUST
2 OLIVER STREET
BOSTON, MA 02109
-----------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of SEI Institutional Managed Trust (the
"Trust") for use at the Special Meeting of Shareholders to be held on November
13, 1995, at 3:30 p.m., at the offices of SEI Financial Management Corporation
("SFM"), 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658, and at any
adjourned session thereof (such meeting and any adjournment thereof are
hereinafter referred to as the "Meeting"). Shareholders of the Trust's Small
Cap Value and Core Fixed Income Portfolios (each a "Portfolio" and, together,
the "Portfolios") of record at the close of business on September 14, 1995
("Shareholders"), are entitled to vote at the Meeting. The table below sets
forth the approximate number of units of beneficial interest ("shares") issued
and outstanding for each Portfolio.
<TABLE>
<CAPTION>
NET ASSETS SHARES OUTSTANDING
PORTFOLIO AS OF SEPTEMBER 14, 1995 AS OF SEPTEMBER 14, 1995
--------- ------------------------ ------------------------
<S> <C> <C>
Small Cap Value $107,124,870.96 8,569,055.379
Core Fixed Income $416,455,268.83 39,864,557.696
</TABLE>
Each share is entitled to one vote and each fractional share is entitled to
a proportionate fractional vote on each matter as to which such shares are to
be voted at the Meeting.
In addition to the solicitation of proxies by mail, Trustees and officers of
the Trust and officers and employees of SFM, the current Manager and
Shareholder Servicing Agent for the Trust, may solicit proxies in person or by
telephone. Persons holding shares as nominees will, upon request, be
reimbursed for their reasonable expenses incurred in sending soliciting
materials to their principals. The general cost of solicitation will be borne
by the Trust, except that SFM will bear a portion of the overall cost of the
Proxy Statement relating to the approval of SFM as investment adviser. The
proxy and this Proxy Statement are being mailed to Shareholders on or about
September 30, 1995.
Shares represented by duly executed proxies will be voted in accordance with
the instructions given. Proxies may be revoked at any time before they are
exercised by a written revocation received by the President of the Trust at
680 East Swedesford Road, Wayne, Pennsylvania 19087-1658, by properly
executing a later-dated proxy, or by attending the Meeting and voting in
person.
1
<PAGE>
INTRODUCTION
The Trust is organized as a Massachusetts business trust and is not required
to hold annual meetings of Shareholders. The Meeting is being called in order
to permit the Shareholders of the Small Cap Value and Core Fixed Income
Portfolios of the Trust to vote on a number of issues related to the
investment limitations of those Portfolios, as well as to allow Shareholders
of the Core Fixed Income Portfolio to vote on a new management structure,
approve the selection of a new investment adviser and new sub-advisers, and
adopt new investment advisory and sub-advisory agreements in connection with
the approval of those new relationships. In addition, Shareholders of the
Small Cap Value Portfolio will vote upon a new sub-adviser and a new sub-
advisory agreement for the Portfolio.
SHAREHOLDERS OF THE SMALL CAP VALUE PORTFOLIO NEED ONLY CONSIDER THE
INFORMATION CONTAINED IN SECTIONS I, IV AND V OF THIS PROXY STATEMENT.
SHAREHOLDERS OF THE CORE FIXED INCOME PORTFOLIO SHOULD CONSIDER THE
INFORMATION CONTAINED IN EACH SECTION OF THIS PROXY STATEMENT. Shareholders of
the Trust's Large Cap Growth, Large Cap Value, Capital Appreciation, Small Cap
Growth, High Yield Bond, Equity Income, Balanced, Mid-Cap, and Bond Portfolios
have been solicited by prior proxy statements containing substantially the
same proposals as this Proxy Statement. The Real Estate Securities Portfolio
has not yet been publicly offered, and its sole Shareholder, SFM, approved the
Proposals contained in Section I of this Proxy Statement on July 10, 1995.
Shareholders of the Capital Growth Portfolio approved the Proposals contained
in Section I of this Proxy Statement on July 10, 1995.
The Proposals contained in Section I of this Proxy Statement require action
by the Shareholders of each of the Core Fixed Income and Small Cap Value
Portfolios. The Proposals contained in Sections II and III of this Proxy
Statement require action by the Shareholders of the Core Fixed Income
Portfolio. Before becoming fully operative, the "Manager of Managers"
structure discussed in Section II requires an order of exemption from the
Securities and Exchange Commission (the "SEC"). The Proposals contained in
Section IV of this Proxy Statement request that the Shareholders of the Small
Cap Value and Core Fixed Income Portfolios approve the selection of certain
additional investment sub-advisers to the Portfolios, and a new form of
investment sub-advisory agreement. Shareholders of the Core Fixed Income
Portfolio will also be asked to approve the selection of the current adviser
to the Portfolio as a sub-adviser to the Portfolio. The table below sets forth
the Proposals:
<TABLE>
<CAPTION>
PROPOSAL
NUMBER(S) PORTFOLIO(S) ISSUE
--------- ------------ -----
<C> <C> <S>
1-12 Core Fixed Income Proposals 1 through 12 relate to revisions to the
Small Cap Value Core Fixed Income and Small Cap Value Portfolios'
investment limitations. The intent is to update,
restructure and/or reclassify the investment limi-
tations to the extent permitted by applicable law
in order to reflect regulatory developments, pro-
vide the flexibility to adapt to developments in
the securities markets, and to improve management
efficiency by making the investment limitation as
consistent as possible. In addition, the Proposals
will minimize the need to call Shareholder meet-
ings in the future to change certain investment
limitations.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PROPOSAL
NUMBER(S) PORTFOLIO(S) ISSUE
--------- ------------ -----
<C> <C> <S>
13 Core Fixed Income To authorize the Board of Trustees to appoint ad-
ditional or replacement investment sub-advisers
without Shareholder approval of such sub-advisers'
contracts. This proposal relates to the "Manager
of Managers" structure wherein SFM, which already
acts as investment adviser to ten other Portfolios
of the Trust, will act as investment adviser for
the Portfolio and recommend to the Trustees which
investment sub-advisers to appoint and replace for
the Portfolio. Apart from Shareholder approval,
this structure requires an order of exemption from
the SEC before becoming operative.
14 Core Fixed Income To authorize SFM to act as investment Adviser to
the Portfolio and approve the Proposed Investment
Advisory Agreement between the Portfolio and SFM.
This proposal relates to the implementation of the
"Manager of Managers" structure.
15 Small Cap Value To approve the selection of Boston Partners Asset
Management, L.P. ("Boston") as an investment sub-
adviser for the Small Cap Value Portfolio, and to
approve the form of investment sub-advisory agree-
ment between SFM and Boston.
16 Core Fixed Income To approve the selection of BlackRock Financial
Management, Inc. ("BlackRock") as an investment
sub-adviser for the Core Fixed Income Portfolio,
and to approve the form of investment sub-advisory
agreement between SFM and BlackRock.
17 Core Fixed Income To approve the selection of Firstar Investment Re-
search and Management Company ("FIRMCO") as an in-
vestment sub-adviser for the Core Fixed Income
Portfolio, and to approve the form of investment
sub-advisory agreement between SFM and FIRMCO.
18 Core Fixed Income To approve the selection of Western Asset Manage-
ment ("Western") as an investment sub-adviser for
the Core Fixed Income Portfolio, and to approve
the form of investment sub-advisory agreement be-
tween SFM and Western.
</TABLE>
SECTION I.
The Proposals in Section I relate to certain changes to the fundamental
investment limitations of the Small Cap Value and Core Fixed Income
Portfolios. The Proposals regarding these Portfolios' investment limitations
are designed to establish a new set of fundamental and non-fundamental
investment limitations for those Portfolios by amending certain of the
existing fundamental investment limitations and reclassifying others as non-
fundamental. The Investment Company Act of 1940 (the "1940 Act") and the
securities laws of certain states require investment companies to adopt
certain investment policies, including investment limitations, that can be
changed only by a Shareholder vote. Investment companies
3
<PAGE>
may also elect to designate other policies as policies that may be changed
only by a Shareholder vote. Both types of policies are "fundamental" policies.
In addition, investment companies may elect to designate other policies as
policies that may be changed by the Board of Trustees, without a Shareholder
vote; and such policies are referred to as "non-fundamental" policies. Each
Portfolio is treated as a separate investment company and adopts its own
fundamental and non-fundamental policies and limitations.
The Portfolios' fundamental investment policies and limitations are set
forth in the Trust's prospectuses and statement of additional information. The
Trustees have elected to reclassify some limitations as non-fundamental and/or
modify other fundamental limitations in order to: (1) update the policies and
limitations to reflect regulatory developments; (2) improve the Portfolios'
ability to adapt to developments in the securities markets; and (3) improve
management efficiency by making the Portfolios' limitations as consistent as
possible. In some cases, the Portfolios adopted fundamental limitations to
comply with federal or state regulatory requirements that have changed. The
Trustees have determined that it is not in the Portfolios' interest to have
Shareholders vote whenever regulatory changes require or permit the Portfolios
to change their investment limitations. To the extent that Shareholders vote
to reclassify certain limitations as non-fundamental, the Trustees will be
able to change such limitations without future Shareholder votes.
In addition, securities markets are evolving rapidly and the Portfolios'
advisers need flexibility, subject to Trustee oversight and general
considerations of prudence, to keep up with developments. Finally, it is more
efficient from a management and compliance point of view if each Portfolio has
the same limitations to the extent feasible. For this reason, it is believed
that investment limitations should only be fundamental where specifically
required by law. EACH PORTFOLIO'S FUNDAMENTAL INVESTMENT OBJECTIVE, AS
DISTINGUISHED FROM ITS INVESTMENT LIMITATIONS, WILL NOT BE CHANGED.
The proposed amendments to each Portfolio's fundamental limitations will
become effective immediately upon Shareholder approval. For each Portfolio, if
a Proposal is not approved by vote of the Shareholders of the Portfolio, the
current limitations will remain in effect.
1. PROPOSAL TO COMBINE EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING
DIVERSIFICATION WITH EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING THE
ACQUISITION OF MORE THAN 10% OF THE OUTSTANDING VOTING SECURITIES OF ANY
ONE ISSUER, AND TO AMEND CERTAIN OTHER LANGUAGE.
At the Meeting, Shareholders of each Portfolio will vote separately
regarding the combination of each Portfolio's fundamental limitation on
diversification with its fundamental limitation on acquiring more than 10% of
the voting securities of an issuer. These limitations currently read as
follows:
No Portfolio may purchase securities of any issuer (except securities
issued or guaranteed by the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the total assets of the
Portfolio would be invested in the securities of such issuer. This
restriction applies to
4
<PAGE>
75% of each Portfolio's total assets. This restriction does not apply to
the Real Estate Securities Portfolio.
No Portfolio may acquire more than 10% of the voting securities of any
one issuer.
It is proposed that each Portfolio's current fundamental limitations be
replaced with the following fundamental limitation:
With respect to 75% of its total assets, no Portfolio other than the Real
Estate Securities Portfolio may (i) 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 its
total assets would be invested in the securities of such issuer; or (ii)
acquire more than 10% of the outstanding voting securities of any one
issuer.
As revised, this single limitation will conform to the diversification
requirements of the 1940 Act. If the Proposal is approved, each Portfolio
would be required to invest 75% of its total assets so that no more than 5% of
total assets would be invested in any one issuer, and so that each Portfolio
owned no more than 10% of the voting securities of any such issuer. The
portion of the limitation relating to acquiring more than 10% of the voting
securities of any issuer previously applied to all of each Portfolio's assets,
but under the amended limitation will apply only to 75% of each Portfolio's
assets. As to the remaining 25% of total assets, there would be no direct
limitation on the amount of assets each Portfolio could invest in any single
issuer or the amount of voting securities of a single issuer that each
Portfolio could hold, so long as such position did not contravene each
Portfolio's policy regarding investment for the purpose of exercising control
over an issuer. This would permit each Portfolio, for example, to invest 25%
of its total assets in a single issuer's securities, or to invest 10% of its
total assets in securities of one issuer and 15% in securities of another
issuer. Having increased flexibility to acquire larger positions in the
securities of individual issuers may provide opportunities to enhance each
Portfolio's performance. At the same time, investing a larger percentage of a
Portfolio's assets in a single issuer's securities increases the Portfolio's
exposure to credit and other risks associated with that issuer's financial
condition and business operations, including market risk and the risk of
bankruptcy or default.
Adoption of the proposed limitation regarding diversification is not
expected to affect the way in which the Portfolios are managed, the investment
performance of the Portfolios, or the instruments in which they invest, and
the Portfolios will continue to attempt to conform to the "diversification"
requirements for regulated investment companies under the Internal Revenue
Code of 1986, as amended (the "Code").
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 1.
---
5
<PAGE>
2. PROPOSAL TO AMEND EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING
BORROWING.
At the Meeting, the Shareholders of each Portfolio will vote separately
regarding the amendment of each Portfolio's fundamental limitation regarding
borrowing, which currently is stated as follows:
No Portfolio may borrow money, except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the value of total assets
provided further that the Large Cap Growth, Small Cap Value, and High Yield
Bond Portfolios will not purchase securities while borrowings exceed 5% of
total assets. This borrowing provision is included solely to facilitate the
orderly sale of portfolio securities to accommodate heavy redemption
requests if they should occur and is not for investment purposes. All
borrowing will be repaid before making additional investments and any
interest paid on such borrowing will reduce income.
It is proposed that each Portfolio's current fundamental limitation be
replaced with the following amended fundamental limitation concerning
borrowing:
No Portfolio may borrow money in an amount exceeding 33 1/3% of the value
of its total assets, provided that, for purposes of this limitation,
investment strategies which either obligate a Portfolio to purchase
securities or require a Portfolio to segregate assets are not considered to
be borrowings. To the extent that its borrowings exceed 5% of its assets,
(i) all borrowings will be repaid before making additional investments and
any interest paid on such borrowings will reduce income, and (ii) asset
coverage of at least 300% is required.
The primary purpose of this Proposal is to amend and update each Portfolio's
limitation on borrowing to clarify its application in light of current law and
interpretations thereof by regulatory authorities. As amended, the limitation
will afford each Portfolio increased flexibility in making investment
decisions, and may enable the Portfolios to take advantage of changing market
conditions.
Under positions established by the SEC staff, investment strategies which
obligate a Portfolio to purchase securities at a future date or otherwise
require that a Portfolio segregate assets, are considered to be "borrowings."
However, by segregating assets equal to the amount of such "borrowings" as
required by Section 18 of the 1940 Act, these investment strategies will not
result in the issuance of "senior securities" by the Portfolio and, as a
result, will not lead the Portfolio to be leveraged in the traditional sense
since the Portfolio's ability to borrow is reduced by one dollar for every
dollar of its assets that is segregated.
Adoption of the proposed limitation is not expected to have a material
impact in the foreseeable future on the management of the Portfolios, the
investment performance of the Portfolios, or the securities or instruments in
which each of the Portfolios may invest. If the Proposal is approved, the
amended fundamental limitation regarding borrowing cannot be changed with
respect to a Portfolio without the vote of the Shareholders of that Portfolio.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 2.
---
6
<PAGE>
3. PROPOSAL TO AMEND EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING MAKING
LOANS.
At the Meeting, Shareholders of each Portfolio will vote separately
regarding the amendment of each Portfolio's fundamental limitation concerning
loans, which is currently stated as follows:
No Portfolio may make loans, except that (i) each Portfolio may purchase
or hold debt instruments in accordance with its investment objective and
policies; (ii) each Portfolio may enter into repurchase agreements,
provided that repurchase agreements maturing in more than seven days,
restricted securities and other securities which are not readily marketable
are not to exceed, in the aggregate, 10% of the Portfolio's total assets,
except for the Mid-Cap Growth and Real Estate Securities Portfolios, which
cannot exceed 15% of such Portfolio's total assets; and (iii) the Large Cap
Growth, Large Cap Value, Small Cap Value, Small Cap Growth, Capital
Appreciation, Equity Income, Balanced, Capital Growth, Real Estate
Securities and High Yield Bond Portfolios may engage in securities lending
as described in the Prospectuses and the Statement of Additional
Information.
It is proposed that each Portfolio's current limitation be replaced with the
following fundamental investment limitation governing lending:
No Portfolio may make loans if, as a result, more than 33 1/3% of its
total assets would be lent to other parties, except that each Portfolio may
(i) purchase or hold debt instruments in accordance with its investment
objective and policies; (ii) enter into repurchase agreements; and (iii)
lend its securities.
The primary purpose of this Proposal is to amend and update each Portfolio's
limitation on lending to clarify its application in light of current law and
interpretations thereof by regulatory authorities. As amended, the limitation
will afford each Portfolio increased flexibility in making investment
decisions, and may enable the Portfolios to take advantage of changing market
conditions. In addition, the new limitation will enable the Core Fixed Income
Portfolio to lend its securities. In securities lending transactions, although
there may be risks of delay in recovery of the loaned securities or even loss
of rights in the collateral should the borrower of the securities fail
financially or become insolvent, a Portfolio may be able to realize additional
income.
With respect to investments in illiquid and restricted securities, the new
limitation will not include any restrictions. Instead, the Trustees have
adopted separate non-fundamental limitations concerning investment in illiquid
and restricted securities which are detailed below.
Adoption of the proposed limitation on lending is not expected to affect in
the foreseeable future the way in which the Portfolios are managed, the
investment performance of the Portfolios, or the instruments in which they
invest. If the Proposal is approved, the new fundamental lending limitation
cannot be changed without a future vote of Shareholders.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 3.
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4. PROPOSAL TO RECLASSIFY EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING
PLEDGING ASSETS AS NON-FUNDAMENTAL, AND TO AMEND CERTAIN LANGUAGE.
At the Meeting, the Shareholders of each Portfolio will vote separately to
reclassify as non-fundamental each Portfolio's fundamental limitation
concerning pledging, mortgaging or hypothecating its assets, which currently
is stated as follows:
No Portfolio may pledge, mortgage or hypothecate assets except to secure
temporary borrowing permitted by [the Portfolio's fundamental limitation on
borrowing] in aggregate amounts not to exceed 10% of total assets of such
Portfolio taken at current value at the time of the incurrence of such
loan.
It is proposed that this limitation concerning pledging, mortgaging or
hypothecating its assets be amended to read as follows:
No Portfolio may pledge, mortgage or hypothecate assets except to secure
borrowings permitted by the Portfolio's fundamental limitation on
borrowing.
The Trustees recommend that the Shareholders vote to reclassify this
limitation since it is not legally required to be fundamental. The proposed
non-fundamental limitation on pledging assets, when considered in conjunction
with the amended fundamental limitation on lending, will afford the Portfolios
greater flexibility and may allow the Portfolios to take advantage of changing
market conditions. However, when a Portfolio pledges its assets, there may be
risks of delay in recovery of the assets pledged, or even loss of rights in
the pledged assets should the party to whom the assets have been pledged fail
financially or become insolvent.
Nonetheless, if approved, this Proposal is not expected to have a material
impact on the management of any of the Portfolios, the investment performance
of the Portfolios, or the securities or instruments in which each of the
Portfolios may invest, and it is not expected that the Portfolios' overall
policy with respect to pledging assets will change in the near future. If the
Proposal is approved, the non-fundamental limitation concerning pledging,
mortgaging or hypothecating can be changed with respect to a Portfolio without
the vote of the Shareholders of that Portfolio. Any change in a Portfolio's
investment strategies will be disclosed to Shareholders.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 4.
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5. PROPOSAL TO RECLASSIFY EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING
INVESTMENT IN SECURITIES FOR THE PURPOSE OF EXERCISING CONTROL AS NON-
FUNDAMENTAL.
At the Meeting, the Shareholders of each Portfolio will vote separately
regarding the reclassification as non-fundamental each Portfolio's fundamental
limitation concerning investment in securities for the purpose of exercising
control over management of any company, which currently is stated as follows:
No Portfolio may invest in companies for the purpose of exercising
control.
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Reclassification of the fundamental limitation as non-fundamental will not
affect the current management of the Portfolios, the investment performance of
the Portfolios, or the securities or instruments in which each of the
Portfolios may invest. The Portfolios have no present intention to invest in
companies for the purpose of exercising control, and it is not expected that
the Portfolios' policy with respect to investing in companies for the purpose
of exercising control will change in the near future. However, if the Proposal
is approved, the non-fundamental limitation regarding investing for the
purpose of exercising control over management of any company can be changed
with respect to a Portfolio without the vote of the Shareholders of that
Portfolio so that, in the future, the Portfolios may invest in companies in
order to exercise control over management. Should the Portfolios elect to
invest in companies for the purpose of exercising control, there is a risk
that the investment advisers may not be qualified to exercise control over a
company in a manner that increases Shareholder value. In addition, by
exercising control over a company, the Portfolios would be subject to
increased filing fees under the 1933 Act, as well as additional administrative
expenses associated with controlling a company.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 5.
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6. PROPOSAL TO AMEND EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING
INVESTMENT IN REAL ESTATE AND COMMODITIES.
At the Meeting, Shareholders of each Portfolio will vote separately
regarding the amendment of each Portfolio's fundamental limitation with
respect to investing in real estate and commodities, which is currently stated
as follows:
No Portfolio may purchase or sell real estate, real estate limited
partnership interests, commodities or commodities contracts. However,
subject to the permitted investments, the Portfolios may purchase
obligations issued by companies which invest in real estate, commodities or
commodities contracts.
It is proposed that each Portfolio's current fundamental limitation be
replaced with the following amended fundamental limitation concerning
investment in real estate and commodities:
No Portfolio may purchase or sell real estate, physical commodities, or
commodities contracts, except that each Portfolio may purchase (i)
marketable securities issued by companies which own or invest in real
estate (including real estate investment trusts), commodities, or
commodities contracts, and (ii) commodities contracts relating to financial
instruments, such as financial futures contracts and options on such
contracts.
The primary purpose of this Proposal is to amend and update each Portfolio's
limitation on investing in real estate and commodities to clarify its
application in light of current law and interpretations thereof by regulatory
authorities. If the Proposal is approved, the amended fundamental limitation
regarding investment in real estate and commodities cannot be changed with
respect to a Portfolio without the vote of the Shareholders of that Portfolio.
Adoption of the proposed limitation concerning real estate is not expected
to significantly affect the way in which the Portfolios are managed or the way
in which securities or instruments are selected for the Portfolios. The
Portfolios will not acquire real estate. However, the proposed limitation
would clarify several points. First, the proposed limitation would make it
explicit that the Portfolios may acquire a
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security or other instrument that is secured by a mortgage or other right to
foreclose on real estate, in the event of a default. Second, the proposed
limitation would clarify the fact that the Portfolios may invest in securities
issued or guaranteed by companies engaged in acquiring, constructing,
financing, developing, or operating real estate projects (e.g., securities of
issuers that develop various industrial, commercial, or residential real
estate projects such as factories, office buildings, or apartments). Any
investments in these securities or other instruments are, of course, subject
to each Portfolio's investment objective and policies, as well as to other
limitations regarding diversification and concentration in particular
industries. Moreover, to the extent that the Portfolios invest to a greater
degree in real estate related securities, they will be subject to the risks of
the real estate market.
Adoption of the proposed limitation regarding commodities and commodities
contracts is intended to make clear the fact that the Portfolios may engage to
the extent permitted by law in transactions involving commodities contracts
relating to financial instruments (i.e., financial futures contracts and
options on such contracts). Thus, while no Portfolio may acquire physical
commodities or futures contracts thereon, a Portfolio may, with the approval
of the Board of Trustees and upon proper disclosure in its Prospectus, invest
in financial futures and options.
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified
future time and at a specified price. An option on a futures contract gives
the purchaser the right, in exchange for a premium, to assume a position in a
futures contract at a specified exercise price during the term of the option.
To the extent approved by the Board of Trustees, each 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. Similarly, each Portfolio may
buy and sell futures contracts and related options to manage its exposure to
changing interest rates and securities prices. Each Portfolio that engages in
futures transactions 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. Further, each such Portfolio will limit
its use of futures to the extent necessary to qualify for exemption from
regulation by the Commodities Futures Trading Commission.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 6.
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7. PROPOSAL TO RECLASSIFY EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING
SHORT SALES AND MARGIN SALES AS NON-FUNDAMENTAL, AND TO AMEND CERTAIN
LANGUAGE.
At the Meeting, Shareholders of each Portfolio will vote separately to
reclassify the limitation with respect to purchases on margin and short sales
as non-fundamental and to amend certain language in the limitation. The
limitation is currently stated as follows:
No Portfolio may make short sales of securities, maintain a short
position, or purchase securities on margin, except that each Portfolio may
obtain short-term credits as necessary for the clearance of security
transactions.
It is proposed that each Portfolio's current fundamental investment be
replaced with the following non-fundamental limitation that conforms with
legal requirements imposed by applicable law:
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No Portfolio may purchase securities on margin or effect short sales,
except that each Portfolio may (i) obtain short-term credits as necessary
for the clearance of security transactions, (ii) provide initial and
variation margin payments in connection with transactions involving futures
contracts and options on such contracts, and (iii) make short sales
"against the box" or in compliance with the SEC's position regarding the
asset segregation requirements imposed by Section 18 of the 1940 Act.
The primary purpose of reclassifying the Proposal is to remove an
unnecessary fundamental limitation that is not required to be fundamental. In
a short sale, an investor sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. In an investment
technique known as a short sale "against the box," an investor sells
securities short while owning the same securities in the same amount, or
having the right to obtain equivalent securities. The investor could have the
right to obtain equivalent securities, for example, through its ownership of
warrants, options, or convertible bonds. The proposed non-fundamental
limitation would clarify that short sales against the box are not deemed to
constitute short sales of securities.
Certain state regulations currently prohibit mutual funds from entering into
any short sales other than short sales against the box. If the proposal is
approved, however, the Board of Trustees would be able to change each
Portfolio's proposed non-fundamental limitation in the future, without a vote
of Shareholders, if state regulations were to change to permit other types of
short sales, or if waivers from existing requirements were available, subject
to appropriate disclosure to investors. Pursuant to this limitation, each
Portfolio may make short sales in accordance with asset segregation
requirements imposed by the SEC staff. However, until certain state
regulations are changed to permit otherwise, the Portfolios will only sell
short against the box. In the event that these state regulations are
eliminated, and upon appropriate disclosure by a Portfolio, the Portfolios may
engage in other types of short sales.
Margin purchases involve the purchase of securities with money borrowed from
a broker. "Margin" is the cash or eligible securities that the borrower places
with a broker as collateral against the loan. Each Portfolio's current
fundamental limitation prohibits the Portfolio from purchasing securities on
margin, except that each Portfolio may purchase securities on margin to obtain
such short-term credits as may be necessary for the clearance of transactions,
and may make initial and variation margin payments in connection with the
purchase and sale of futures contracts and options on futures contracts.
Since the Portfolios have no present intention to make short sales,
reclassification of this fundamental limitation is unlikely to affect each
Portfolio's investment techniques at this time. Similarly, although
reclassification of each Portfolio's fundamental limitation on margin
purchases is unlikely to affect the Portfolio's investment techniques at this
time, in the event of a change in federal regulatory requirements, each
Portfolio may alter its investment practices in the future. Any substantial
change in a Portfolio's investment strategies will be disclosed to
Shareholders. In addition, it is believed that efforts to standardize this
investment limitation will facilitate investment compliance efforts and are in
the best interests of Shareholders.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 7.
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8. PROPOSAL TO RECLASSIFY EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING
INVESTMENT IN SECURITIES OF INVESTMENT COMPANIES AS NON-FUNDAMENTAL, AND TO
AMEND CERTAIN LANGUAGE.
At the Meeting, the Shareholders of each Portfolio will vote separately to
approve certain amended language and to reclassify as non-fundamental the
Portfolio's fundamental limitation concerning investment in securities of any
investment company, which currently is stated as follows:
No Portfolio may purchase securities of other investment companies except
as permitted by the 1940 Act, and the rules and regulations thereunder, and
may only purchase money market open-end investment companies. Under these
rules and regulations, a Portfolio is prohibited from acquiring the
securities of other investment companies if, as a result of such
acquisition, the Portfolio owns more than 3% of the total voting stock of
the company; securities issued by any one investment company represent more
than 5% of the total Portfolio assets; or securities (other than treasury
stock) issued by all investment companies represent more than 10% of the
total assets of the Portfolio. A Portfolio's purchase of such investment
company securities results in the bearing of expenses such that
shareholders would indirectly bear a proportionate share of the operating
expenses of such investment companies, including advisory fees.
It is proposed that each Portfolio's current fundamental limitation be
replaced with the following non-fundamental limitation concerning investment
in securities of investment companies:
No Portfolio may invest its assets in securities of any investment
company, except (i) by purchase in the open market involving only customary
brokers' commissions, (ii) in connection with mergers, acquisitions of
assets, or consolidations, or (iii) as otherwise permitted by the 1940 Act.
The primary purpose of this Proposal is to amend and update each Portfolio's
limitation on investing in investment companies to clarify its application in
light of current law and interpretations thereof by regulatory authorities. If
the Proposal is approved, each Portfolio's policy regarding investment in
securities of investment companies can be changed with respect to a Portfolio
without the vote of the Shareholders of that Portfolio.
The ability of mutual funds to invest in other investment companies is
restricted by the 1940 Act and by some state blue sky laws. Each Portfolio's
current fundamental limitation recites certain of federal and state
restrictions. The federal restrictions will remain applicable to each
Portfolio whether or not they are recited in a fundamental limitation. In
addition, the Portfolios will comply with all currently applicable state
regulations. However, should such state regulations be relaxed or eliminated
in the future, having the limitation as non-fundamental will allow the
Trustees to change the limitation without the vote of the Shareholders. This
will afford the Portfolios increased flexibility in making investment
decisions, and may allow the Portfolios to respond rapidly to changing market
conditions.
Under both the previous limitation and the new non-fundamental limitation,
investment company shares that are purchased by a Portfolio shall be limited
to shares of money market open-end investment companies and SFM and the sub-
adviser will waive their respective advisory fees on that portion of the
Portfolio's assets placed in such money market open-end investment companies.
Absent such fee waivers, each Portfolio's purchase of investment company
securities would result in the Shareholders indirectly
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<PAGE>
bearing a portion of the operating expenses of such investment companies,
including advisory fees. In the event that state regulations are changed in
the future to permit investments in other types of mutual funds, the
Portfolios will be subject to risks that are different (but not necessarily
greater) than investments in money-market investment companies.
Reclassification of the above fundamental limitation as non-fundamental is
not expected to have any current impact on each Portfolio's investment
practices or the securities or instruments in which each Portfolio invests,
and it is not expected that the Portfolios' policy with regard to investing in
other investment companies will change in the near future.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 8.
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9. PROPOSAL TO AMEND EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING THE
ISSUANCE OF SENIOR SECURITIES.
At the Meeting, Shareholders of each Portfolio will vote separately
regarding the amendment of each Portfolio's fundamental limitation with
respect to the issuance of senior securities, which is currently stated as
follows:
No Portfolio may issue senior securities (as defined in the 1940 Act)
except in connection with permitted borrowing as described in the
Prospectuses and the Statement of Additional Information or as permitted by
rule, regulation or order of the Securities and Exchange Commission (the
"SEC").
It is proposed that each Portfolio's current fundamental limitation be
replaced with the following amended fundamental limitation concerning the
issuance of senior securities:
No Portfolio may issue senior securities (as defined in the 1940 Act)
except as permitted by rule, regulation or order of the Securities and
Exchange Commission (the "SEC").
The primary purpose of this Proposal is to amend and update each Portfolio's
limitation on senior securities to clarify its application in light of current
law and interpretations thereof by regulatory authorities. In addition, the
amended fundamental limitation will conform to the limitations of other
investment companies managed by SFM.
Although the definition of a "senior security" involves complex statutory
and regulatory concepts, a senior security is generally thought of as an
obligation of a fund which has a claim to the fund's assets or earnings that
takes precedence over the claims of the fund's shareholders. The 1940 Act
generally prohibits mutual funds from issuing senior securities; however, as
long as certain conditions are satisfied, mutual funds are permitted to engage
in certain types of transactions that might be considered to result in the
issuance of "senior securities." For example, a transaction which obligates a
fund to pay money at a future date (e.g., the purchase of securities to be
settled on a date that is further away than the normal settlement period) may
be considered a "senior security." A mutual fund, however, is permitted to
enter into this type of transaction if it maintains a segregated account
containing liquid securities in an amount equal to its obligation to pay cash
for the securities at a future date. Each Portfolio will utilize transactions
that may be considered "senior securities" only in accordance with applicable
regulatory requirements under the 1940 Act. In addition, the Trust may issue
additional classes of shares in accordance with Rule 18f-3 under the 1940 Act.
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If the Proposal is approved, the amended fundamental limitation regarding
the issuance of senior securities cannot be changed with respect to a
Portfolio without the vote of the Shareholders of that Portfolio. Adoption of
the proposed limitation on senior securities is not expected to affect the way
in which each Portfolio is managed, the investment performance of each
Portfolio, or the securities or instruments in which each Portfolio invests.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 9.
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10. PROPOSAL TO RECLASSIFY EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING
INVESTMENT IN SECURITIES OF AN ISSUER WHOSE SECURITIES ARE OWNED BY
OFFICERS AND TRUSTEES OF THE TRUST AS NON-FUNDAMENTAL.
At the Meeting, the Shareholders of each Portfolio will vote separately
regarding reclassifying as a non-fundamental policy the Portfolio's
fundamental limitation concerning investment in securities of an issuer if
those officers and Trustees of the Trust or its investment adviser owning more
than 1/2 of 1% of such securities together own more than 5% of such
securities. This limitation is currently stated as follows:
No Portfolio may purchase or retain securities of an issuer if, to the
knowledge of the Trust, an officer, trustee, partner or director of the
Trust or any investment adviser to the Trust owns beneficially more than
1/2 of the 1% of the shares or securities of such issuer and all such
officers, trustees, partners and directors owning more than 1/2 of 1% of
such shares or securities together own more than 5% of such shares or
securities.
The purpose of this Proposal is to reclassify the limitation as non-
fundamental. This investment limitation was originally adopted to address
state blue sky regulations in connection with the registration of shares of
the Portfolios for sale. Only one state currently requires such a limitation.
It is believed that this fundamental investment limitation should be
reclassified since, while it has not precluded investments in the past, its
reclassification potentially will increase each Portfolio's flexibility when
choosing investments in the future.
If the Proposal is approved, each Portfolio's non-fundamental limitation
regarding investment in securities of an issuer whose securities are owned to
a certain extent by officers and Trustees of the Trust can be changed with
respect to a Portfolio without the vote of the Shareholders of that Portfolio,
as any such changes may be necessary or desirable in response to regulatory,
market, legal, or other developments. Reclassification of the fundamental
limitation as a non-fundamental limitation is not expected to affect the
management of the Portfolios, the investment performance of the Portfolios, or
the securities or instruments in which each of the Portfolios may invest. It
is not expected that the Portfolios' policy with regard to the purchase of
securities owned by officers and Trustees of the Trust will change in the near
future.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 10.
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11. PROPOSAL TO RECLASSIFY EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING
INVESTMENT OF MORE THAN 5% OF ITS TOTAL ASSETS IN SECURITIES OF COMPANIES
WITH LESS THAN THREE YEARS OF OPERATING HISTORY AS NON-FUNDAMENTAL.
At the Meeting, the Shareholders of each Portfolio will vote separately
regarding reclassifying as a non-fundamental policy each Portfolio's
fundamental limitation concerning investment of more than 5% of its total
assets in securities of companies which have (with predecessors) a record of
less than three years' continuous operation, which currently is stated as
follows:
No Portfolio may purchase securities of any company which has (with
predecessors) a record of less than three years continuing operations if,
as a result, more than 5% of the total assets (taken at fair market value)
would be invested in such securities.
The purpose of this Proposal is to reclassify the limitation as non-
fundamental. Newly formed issuers or "unseasoned issuers" are issuers with
less than three years' continuous operation. The purpose of the limitation on
investments in unseasoned issuers is to comply with state blue sky laws and
limit the risks associated with investing in companies that have no proven
track record in business and whose prospects are uncertain. The proposed non-
fundamental investment limitation will clarify that each Portfolio's
unseasoned issuers limitation is applicable only to securities issued by
newly-formed entities engaged in a trade or business with a prior history of
operations of less than three years, and not to government securities. The
adoption of a standard non-fundamental limitation will facilitate compliance
efforts and will enable the Portfolios to respond more promptly if applicable
state laws change in the future.
If the Proposal is approved, each Portfolio's non-fundamental limitation
regarding investment of more than 5% of total assets in securities of
companies with less than three years of operating history can be changed with
respect to a Portfolio without the vote of the Shareholders of that Portfolio.
Reclassification of the limitation as a non-fundamental limitation is not
expected to affect the management of the Portfolios, the investment
performance of the Portfolios, or the securities or instruments in which each
of the Portfolios may invest. It is not expected that the Portfolios' policy
with regard to the purchase of securities of companies with less than three
years operating history will change in the near future.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 11.
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12. PROPOSAL TO ELIMINATE EACH PORTFOLIO'S FUNDAMENTAL LIMITATION CONCERNING
INVESTMENT IN WARRANTS, PUTS, CALLS, STRADDLES, SPREADS OR COMBINATIONS
THEREOF.
At the Meeting, Shareholders of each Portfolio will vote separately to
eliminate each Portfolio's fundamental limitation concerning investment in
warrants, puts, calls, straddles, spreads, or combinations thereof, which is
currently stated as follows:
No Portfolio may purchase warrants, puts, calls, straddles, spreads or
combinations thereof except that the Core Fixed Income, Bond, and High
Yield Bond Portfolios may purchase investments with put features as
described in the Prospectus and the Statement of Additional Information and
the Large Cap Growth, Small Cap Value, Small Cap Growth, Mid-Cap Growth,
Real Estate Securities,
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Core Fixed Income, and High Yield Bond Portfolios may invest in warrants
and options as described in their Prospectuses and in the Statement of
Additional Information.
It is proposed that each Portfolio's fundamental limitation concerning
investment in warrants, puts, calls, straddles, spreads, or combinations
thereof be eliminated.
If the Proposal is approved, each Portfolio may invest in warrants, puts,
calls, straddles, spreads, or combinations thereof to the extent consistent
with the 1940 Act, state blue sky regulations, and each Portfolio's investment
objectives and policies and disclosure. Currently, the Large Cap Growth, Small
Cap Value, Small Cap Growth, Mid-Cap, Real Estate Securities, Core Fixed
Income and High Yield Bond Portfolios each have a non-fundamental limitation
concerning the purchase of warrants which provides that so long as shares of
those Portfolios are registered in Texas and such restrictions are required as
a consequence of such registration, those Portfolios will not invest more than
5% of the Portfolios net assets in warrants; provided that, of this, no more
than 2% will be invested in warrants that are not listed in the New York Stock
Exchange. The Portfolios have no present intention to substantially alter
their investment strategies in this regard. However, to the extent that
regulatory or market developments make these investments more appropriate or
necessary, this policy can be changed with respect to a Portfolio without the
vote of the Shareholders of that Portfolio.
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. Each 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.
Each 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 Portfolios, loss of the premium paid
may be offset by an increase in the value of the Portfolios' securities or by
a decrease in the cost of acquisition of securities by the Portfolios.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 12.
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In addition to the foregoing fundamental and non-fundamental limitations,
the Trustees have approved the adoption of two additional non-fundamental
limitations for each Portfolio of the Trust. The new non-fundamental
limitations, which relate to investments in illiquid and restricted
securities, are consistent with the current regulatory requirements for
investments in these types of securities. The non-fundamental limitation on
illiquid securities provides that:
No Portfolio may purchase illiquid securities, i.e., securities that
cannot be disposed of for their approximate carrying value in seven days or
less (which term includes repurchase agreements and time deposits maturing
in more than seven days) if, in the aggregate, more than 15% of its total
assets would be invested in illiquid securities. Notwithstanding the
foregoing, securities eligible to be re-sold under Rule 144A of the 1933
Act may be treated as liquid securities under procedures adopted by the
Board of Trustees.
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The non-fundamental limitation on restricted securities provides that:
No Portfolio may purchase securities which must be registered under the
1933 Act, as amended, before they may be sold to the public, if, in the
aggregate, more than 15% of its total assets would be invested in such
restricted securities. Securities exempted from registration upon re-sale
by Rule 144A under the 1933 Act are not deemed to be restricted securities
for purposes of this limitation.
The Portfolios currently have a similar fundamental limitation on investing
in illiquid securities, which is contained in the fundamental limitation on
making loans. (See Proposal 3, above.) Since the Portfolios are still subject
to state regulations which limit the Portfolios' investments in illiquid
securities, it is not expected that this new limitation, or the new limitation
on restricted securities, will have a material impact on the Portfolios'
investment techniques, performance, or management. However, as non-fundamental
limitations, the Trustees can change these limitations with respect to a
Portfolio without the vote of the Shareholders of that Portfolio.
Rule 144A Securities are restricted securities that have not been registered
under the 1933 Act, but which may be traded by certain qualified institutional
investors, including investment companies. Certain state blue sky laws limit
the ability of investment companies to invest in restricted securities, which
as defined therein include Rule 144A Securities. While the Portfolios will
continue to conform to all applicable state regulations, in the event that
these state regulations are changed to permit the Portfolios to invest to a
greater extent in restricted securities, upon approval by the Trustees, the
Portfolios may do so without a further Shareholder vote. Any change in a
Portfolio's investment strategies will be disclosed to Shareholders.
SECTION II.
Section 15(a) of the 1940 Act requires that all contracts pursuant to which
persons serve as investment advisers to investment companies be approved by
shareholders. As interpreted, this requirement would apply to appointment of
sub-advisers to any Portfolio of the Trust for which SFM will act as
investment adviser. The SEC has granted conditional exemptions from the
shareholder approval requirements. The Trust has applied for such an
exemption, and if it is granted and these Proposals are approved, the Board of
Trustees would, without Shareholder approval, be able to appoint additional or
replacement sub-advisers (herein, "Managers"). The Board would not, however,
be able to replace SFM as investment adviser to each Portfolio of the Trust
without complying with the 1940 Act and applicable regulations governing
Shareholder approval of advisory contracts.
The Proposals contained in Sections II and III of this Proxy Statement are
intended to facilitate the efficient operation of the "Manager of Managers"
structure and afford the Trust increased management flexibility. Assuming SFM,
which currently serves as Investment Adviser and Manager of Managers for ten
other Portfolios of the Trust, is approved as investment adviser to the Core
Fixed Income Portfolio, it will continuously monitor the performance of the
Managers and may from time to time recommend that the Board of Trustees
replace one or more Managers or appoint additional Managers, depending on
SFM's assessment of what combination of Managers it believes will optimize the
Portfolio's chances of achieving its investment objective. Accordingly, while
there is no way of knowing exactly how often SFM may recommend, and the Board
approve, the selection of an additional Manager, or the replacement of an
17
<PAGE>
existing Manager, both of which would typically require a Shareholder meeting,
it is likely that the Manager of Managers structure would result in more
frequent Shareholder meetings than would otherwise be the case. However, if
the SEC grants the exemption, the Trustees will not be required to call a
Shareholder meeting each time a new sub-adviser is approved. Shareholder
meetings entail substantial costs which could reduce the desired benefits of
the Manager of Managers structure. These costs must be weighed against the
benefits of Shareholder scrutiny of proposed contracts with additional or
replacement Managers; however, even in the absence of Shareholder approval,
any proposal to add or replace Managers would receive careful review. First,
SFM would assess the Portfolio's needs and, if it believed additional or
replacement Managers could benefit the Portfolio, would systematically search
the relevant universe of available investment Managers. Second, any
recommendations made by SFM would have to be approved by a majority of the
Trustees, including a majority of the Trustees who are not "interested
persons" within the meaning of the 1940 Act. Finally, any selections of
additional or replacement Managers would have to comply with conditions
contained in the SEC exemption, if it is granted.
13. AUTHORIZATION FOR THE BOARD OF TRUSTEES TO APPOINT INVESTMENT SUB-ADVISERS
TO THE CORE FIXED INCOME PORTFOLIO OF THE TRUST WITHOUT SEEKING APPROVAL
BY THE PORTFOLIO'S SHAREHOLDERS OF THE CONTRACTS PURSUANT TO WHICH SUCH
SUB-ADVISERS SERVE.
This Proposal will facilitate the appointment of additional and replacement
sub-advisers without a Shareholder vote if SFM serves as Manager of Managers
for the Core Fixed Income Portfolio of the Trust. This arrangement requires
the SEC's approval of SFM's application to implement the Manager of Managers
structure.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 13.
---
SECTION III.
The Board of Trustees is recommending that Shareholders of the Core Fixed
Income Portfolio approve SFM as the investment adviser to the Portfolio and
approve the form of investment advisory agreement (the "Investment Advisory
Agreement") between the Trust and SFM relating to the Portfolio (which is
attached as Exhibit A to this Proxy Statement). The Trustees of the Trust,
including all of the Trustees who are not "interested persons" of the Trust,
approved the Investment Advisory Agreement with respect to the Portfolio at a
meeting held on March 6, 1995. SFM already serves as investment adviser to ten
other Portfolios of the Trust pursuant to an investment advisory agreement
dated December 16, 1994, between SFM and the Trust, on behalf of those
Portfolios.
Other than the identity of the investment adviser, there are no material
differences between the Investment Advisory Agreement and the existing
investment advisory agreement of the other Portfolios of the Trust. While the
level of compensation paid to SFM by the Core Fixed Income Portfolio for
advisory services will be .15% higher than that paid to the current adviser,
SFM's contractual management fee will be reduced by .15% for the Portfolio. As
a result, the compensation received by SFM under the Investment Advisory
Agreement and the Management Agreement will not increase from the level
currently received by SFM for its management services, and the overall cost to
the Portfolio of advisory and management services will not be increased. (See
"Description of the Investment Adviser," below.)
18
<PAGE>
Duties Under the Investment Advisory Agreement. Under the Investment
Advisory Agreement, SFM will serve as investment adviser to the Core Fixed
Income Portfolio and will provide its proprietary investment adviser
selection, monitoring, and asset allocation services to the Portfolio. Subject
to Board approval, SFM, in turn, will enter into investment sub-advisory
agreements with one or more sub-advisers (each a "Manager" and, collectively,
the "Managers") to exercise investment discretion over the assets (or a
portion of the assets) of the Portfolio. Consistent with its goal of using
multiple Managers to carry out the Portfolio's investment objective and
policies, SFM may provide specific portfolio security advice with respect to
all or some portion of the Portfolio's assets.
SFM will perform internal due diligence on prospective Managers for the
Portfolio and monitor Manager performance using its proprietary investment
adviser selection and monitoring process. SFM will be responsible for
communicating performance targets and evaluations to Managers, supervising
each Manager's compliance with the Portfolio's fundamental investment
objectives and policies, authorizing Managers to engage in certain investment
techniques for the Portfolio, and recommending to the Board of Trustees
whether sub-advisory agreements should be renewed, modified or terminated. SFM
also will recommend to the Board the addition of new Managers as it deems
appropriate. (See Section II, above.)
For its investment advisory services, SFM will receive an advisory fee from
the Portfolio based on the Portfolio's assets. SFM will then pay the Managers
out of this fee.
Under this structure, the Trust will operate in a manner that is distinctly
different from virtually all other investment companies. Most investment
companies operate under a structure in which a single related group of
companies provide investment advisory, administrative, and distribution
services. Typically, the investment company pays the advisory fee to its
investment adviser which, in turn, compensates internal portfolio managers who
make specific securities selections. In contrast, the Trust will offer
investors an opportunity to access, on a pooled investment basis, the core
elements of SFM's investment adviser selection, monitoring, and asset
allocation services. Under this "Manager of Managers" approach, SFM will
recommend and, if the Trustees approve the recommendation, monitor for the
Portfolio one or more Managers using a range of investment styles. (See
Section II, above.)
Duration and Termination. Unless terminated earlier, the Investment Advisory
Agreement shall continue in effect as to the Portfolio until on or about
December 16, 1996, and thereafter, for periods of one year for so long as such
continuance is specifically approved with respect to the Portfolio at least
annually (i) by the vote of the holders of a majority of the outstanding
shares of the Portfolio or by the Trustees of the Trust, and (ii) by the vote
of a majority of those Trustees of the Trust who are not parties to the
Investment Advisory Agreement or "interested persons" (as that term is defined
in the 1940 Act) of any party thereto, cast in person at a meeting called for
the purpose of voting on such approval. The Investment Advisory Agreement will
terminate automatically in the event of its assignment and is terminable at
any time without penalty by the Trustees of the Trust or with respect to the
Portfolio by a vote of a majority of the outstanding shares of the Portfolio
on not less than 30 days nor more than 60 days written notice to SFM. In
addition, it is terminable by SFM upon 90 days written notice to the Trust.
SFM will discharge its responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust. The Investment Advisory Agreement
provides that SFM shall not be liable for any error of
19
<PAGE>
judgment or mistake of law or for any loss arising out of any investment or
for any act or omission in carrying out its duties thereunder, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard by SFM of its
obligations or duties thereunder.
Description of the Investment Adviser. SFM is a wholly-owned subsidiary of
SEI Corporation ("SEI"), a financial services company located at 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. As of August 31, 1995, SFM acted in a similar "Manager of Managers"
role with respect to $2.2 billion of client assets, including ten other
Portfolios of the Trust. SFM has served as Manager of Managers of the Small
Cap Value and Large Cap Growth Portfolios since their commencement of
operations on December 19, 1994, and of the High Yield Bond Portfolio since
its commencement of operations on January 11, 1995. In addition, SFM has
served as Manager of Managers of the Large Cap Value Portfolio since
Shareholder approval on December 16, 1994, of the Equity Income, Balanced,
Capital Appreciation and Bond Portfolios since Shareholder approval on July
10, 1995, and of the Small Cap Growth and Mid-Cap Portfolios since Shareholder
approval on August 11 and August 14, 1995, respectively.
SFM currently serves as investment adviser, manager and/or administrator to
more than 30 investment companies, including more than 274 portfolios, which
investment companies had more than $49.5 billion in assets as of August 31,
1995.
In addition to serving as investment adviser to the ten Portfolios of the
Trust, SFM serves as Manager of the Trust pursuant to a Management Agreement
dated January 22, 1987. In connection with its role as Manager, SFM provides
the Trust with overall management services, regulatory reporting, all
necessary office space, equipment, personnel and facilities, and acts as
transfer agent, dividend disbursing agent, and shareholder servicing agent for
certain classes of the Portfolios' shares.
For its management services under the current management arrangements, SFM
is entitled to a fee which is calculated daily and paid monthly at an annual
rate of .43% of the average daily net assets of the Core Fixed Income
Portfolio. SFM and the Managers may waive all or a portion of their respective
fees in order to limit the operating expenses of a Portfolio. Any such waiver
is voluntary and may be terminated at any time in their sole discretion.
20
<PAGE>
For the fiscal year ended September 30, 1994, the Trust paid to SFM the
following management fees:
<TABLE>
<CAPTION>
PORTFOLIO FEES PAID (000) FEE WAIVERS (000)
--------- --------------- -----------------
<S> <C> <C>
Large Cap Value $ 799 $ 0
Capital Growth $ 0 $787
Small Cap Growth $1,023 $259
Capital Appreciation $3,649 $377
Equity Income $1,801 $149
Balanced $ 173 $ 81
Mid-Cap $ 329 $115
Core Fixed Income $1,031 $297
Bond $ 337 $131
</TABLE>
- --------
The Real Estate Securities, Small Cap Value, Large Cap Growth, and High Yield
Bond Portfolios of the Trust had not commenced operations as of September 30,
1994.
Once the Manager of Managers structure is in place, SFM's management fee
will be reduced by .15% for the Core Fixed Income Portfolio in order to
compensate for the increased advisory and sub-advisory fees payable under that
structure.
The table below sets forth information about the proposed level of fees
payable to SFM both as Adviser and Manager, and to the Managers, assuming that
the Shareholders of the Core Fixed Income Portfolio approve the Manager of
Managers structure:
<TABLE>
<CAPTION>
SUB-ADVISORY
FEE PAID BY SFM
(BASED UPON A
PERCENTAGE
OF THE MARKET
ADVISORY FEE ADVISORY FEE VALUE OF THE PORTION
PAID TO SUB-ADVISER PAID TO SFM OF THE PORTFOLIO'S ADMINISTRATION
PROPOSED UNDER FORMER UNDER NEW ASSETS MANAGED FEE PAID TO
PORTFOLIO SUB-ADVISER ADVISORY AGREEMENT ADVISORY AGREEMENT BY THE SUB-ADVISER) SFM*
--------- -------------------- ------------------- ------------------ -------------------- --------------
<S> <C> <C> <C> <C> <C>
Core Fixed Western Asset
Income Management .125% .275% .125% .28%
BlackRock Financial
Management, Inc. N/A .15%
Firstar Investment
Research &
Management Company N/A .10%
</TABLE>
- --------
* For the Core Fixed Income Portfolio, the contractual administration fee
payable to SFM has been lowered by .15% in order to compensate for the
increased level of advisory and sub-advisory fees payable under the Manager
of Managers structure. However, the total level of fees payable to SFM, as
well as the overall level of expenses for each Portfolio, will remain the
same.
Listed below are the names and principal occupations of each of the
directors and the principal executive officers of SFM. The principal business
address of each director and the principal executive
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<PAGE>
officers, as it relates to their duties at SFM, is 680 East Swedesford Road,
Wayne, Pennsylvania 19087-1658.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
Alfred P. West, Jr. Director, Chairman & Chief Executive Officer
Henry H. Greer Director, President & Chief Operating Officer
Carmen V. Romeo Director, Executive Vice President & Treasurer
Richard B. Lieb Executive Vice President
Edward Loughlin Executive Vice President, President--Insurance Asset
Services & Asset Management Services Divisions
Charles A. Marsh Executive Vice President
Carl A. Guarino Senior Vice President
Cris Brookmyer Controller
Kevin P. Robins Senior Vice President, General Counsel & Secretary
</TABLE>
Trustees' Consideration. At a meeting held on March 6, 1995, the Board of
Trustees reviewed SFM's qualifications to act as investment adviser to the
Core Fixed Income Portfolio, placing particular emphasis on its proposed role
in recommending, monitoring and terminating Managers, subject to Board of
Trustee oversight, and its performance as investment adviser to the certain
other Portfolios of the Trust advised by SFM at that time. The Trustees
received written and oral information regarding SFM's key personnel, its
experience in selection and evaluation of investment Managers and research
performed by SFM and others that had led SFM to recommend a "Manager of
Managers" structure (i.e., one in which SFM would act as the investment
adviser and one or more Managers would assume substantial day-to-day
investment responsibilities; see Section II, above). In recommending that the
Shareholders approve the Investment Advisory Agreement, the Trustees carefully
evaluated the experience of SFM's key personnel in institutional investing and
the quality of services SFM is expected to provide to the Portfolio, as well
as other factors relating to SFM's provision of investment advisory services
including, but not limited to: (1) the fee and expense ratios of comparable
mutual funds; (2) the performance of the Portfolio since commencement of
operations; (3) the nature and quality of the services expected to be rendered
to the Portfolio by SFM; (4) the distinct investment objective and policies of
the Portfolio; (5) that the compensation payable to SFM by the Portfolio under
the proposed Investment Advisory Agreement and the Management Agreement will
be at the same rate as the compensation payable to SFM and the proposed Sub-
Advisers under the existing Investment Advisory and Management Agreements; (6)
the history, reputation, qualification and background of SFM as well as the
qualifications of its personnel and its financial condition; (7) the benefits
expected to be realized as a result of the Manager of Managers structure; and
(8) other factors deemed relevant. The Trustees also reviewed the fees to be
paid to SFM in comparison to those being charged in the relevant segment of
the mutual fund business, including any benefits received by SFM or its
affiliates in connection with soft dollar payments.
In the event Shareholders of the Core Fixed Income Portfolio do not approve
the selection of SFM as investment adviser and the Investment Advisory
Agreement between the Trust, on behalf of the Portfolio, and SFM, or if the
Shareholders of the Portfolio do not approve the Manager of Managers structure
discussed in Section II of the Proxy Statement, at the Special Meeting to
which this Proxy Statement relates, or any adjournment thereof, the Trustees
will consider the appropriate course of action.
22
<PAGE>
14. APPROVAL OF SFM AS THE INVESTMENT ADVISER TO THE CORE FIXED INCOME
PORTFOLIO, AND APPROVAL OF AN INVESTMENT ADVISORY AGREEMENT BETWEEN THE
TRUST, ON BEHALF OF THE PORTFOLIO, AND SFM.
Description of the Portfolio. The investment objective of the Core Fixed
Income Portfolio is to provide current income consistent with the preservation
of capital. The Portfolio's investments consist of corporate bonds and
debentures, U.S. Government securities, mortgage and asset-backed securities,
and other fixed income investments.
Termination of the Current Investment Advisory Agreement. Western Asset
Management ("Western") currently serves as investment adviser to the Core
Fixed Income Portfolio pursuant to an investment advisory agreement. The Board
of Trustees voted on March 6, 1995 to terminate the agreement based upon the
Board's determination that the selection of SFM to provide investment advisory
services as described herein will be in the best interests of the Core Fixed
Income Portfolio. The Board also approved SFM as the new investment adviser,
and Western as sub-adviser, effective upon approval by Shareholders. In
addition, on September 12, 1995, the Board approved two additional sub-
advisers, Firstar Investment Research & Management Company ("FIRMCO") and
BlackRock Financial Management, Inc. ("BlackRock"), as sub-advisers to the
Core Fixed Income Portfolio, effective upon approval by Shareholders.
Compensation. Under the proposed Investment Advisory Agreement, the Trust
would pay SFM a fee, which is calculated daily and paid monthly, at an annual
rate of .275% of the average daily net assets of the Core Fixed Income
Portfolio. As SFM did not previously serve as investment adviser to the Core
Fixed Income Portfolio and FIRMCO and BlackRock did not serve as sub-advisers,
the aggregate investment advisory and sub-advisory fees paid to SFM, FIRMCO,
and BlackRock during the last fiscal year was, in each instance, $0. Western
received $273,000.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 14.
---
SECTION IV.
The Board of Trustees is recommending that Shareholders of the Small Cap
Value and Core Fixed Income Portfolios approve the investment sub-advisers
recommended in Proposals 15 through 18 as investment sub-advisers to the Small
Cap Value and Core Fixed Income Portfolios, and approve the form of investment
sub-advisory agreement (the "Investment Sub-Advisory Agreement") between SFM
and the proposed investment sub-advisers, a copy of which is attached as
Exhibit B to this Proxy Statement.
The Sub-Advisers. The entities described in Proposals 15 through 18 will
serve as investment sub-advisers (each, a "Sub-Adviser," and, collectively,
the "Sub-Advisers") to the Small Cap Value and Core Fixed Income Portfolios.
Under the Manager of Managers structure, SFM will have 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. SFM will be 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 objectives
and policies and each Portfolio's investment performance and may provide
specific portfolio security advice. In accordance with each Portfolio's
investment objectives
23
<PAGE>
and policies, and under the supervision of SFM and the Trust's Board of
Trustees, each Sub-Adviser will be responsible for the day-to-day investment
management of all or a discrete portion of the assets of a Portfolio. The Sub-
Advisers are authorized to make investment decisions for the Portfolios and
place orders on behalf of the Portfolios to effect the investment decisions
made.
In addition, SFM will monitor the compliance of each Sub-Adviser with
regulatory and tax regulations, such as those relating to portfolio
concentration and diversification. For the most part, compliance with these
requirements by each Sub-Adviser with respect to its portion of a Portfolio
will assure compliance by the Portfolio as a whole. In addition, SFM will
monitor positions taken by each Sub-Adviser and will notify Sub-Advisers to
any developing situations to help ensure that investments do not run afoul of
the short-short test or the wash sale rules. To the extent that having
multiple Sub-Advisers responsible for investing separate portions of a
Portfolio's assets creates the need for coordination among the Sub-Advisers,
there is an increased risk that the Portfolio will not comply with these
regulatory and tax requirements.
It is possible that different Sub-Advisers to the same Portfolio could take
opposite actions within a short period of time with respect to a particular
security. For example, one Sub-Adviser could buy a security for a Portfolio
and shortly thereafter another Sub-Adviser could sell the same security from
the portion of the Portfolio's assets allocated to it. If in these
circumstances the securities could be transferred from one Sub-Adviser's
portion of the Portfolio to another, the Portfolio could avoid transaction
costs and could avoid creating possible wash sales and short-short gains under
the Code. Such transfers are not practicable, but the Sub-Advisers and SFM do
not believe that there will be 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 Sub-
Advisers. Moreover, the Sub-Advisers would probably only rarely engage in the
types of offsetting transactions described above, especially within a short
time period. Therefore, it is a matter of speculation whether offsetting
transactions would result in any significant increases in transaction costs or
have significant tax consequences. With respect to the latter, SFM and the
Sub-Advisers will establish procedures with respect to the short-short test
which are designed to prevent realization of short-short gains in excess of
Code limits. It is true that wash sales could occur in spite of the efforts of
SFM, but it is believed that the benefits of using multiple managers outweighs
the consequences of any wash sales.
SFM is currently seeking an exemptive order from the SEC that would permit
SFM, with the approval of the Trust's Board of Trustees, to retain Sub-
Advisers for a Portfolio without submitting the accompanying sub-advisory
agreement to a vote of the Portfolio's shareholders. If granted, the exemptive
relief will permit the non-disclosure of amounts payable by SFM under such
sub-advisory agreements. The Trust will notify shareholders in the event of
any change in the identity of the Sub-Adviser to a Portfolio. Until or unless
this exemptive order is granted, if one of the Sub-Advisers is terminated or
departs from a Portfolio with multiple Sub-Advisers, the Portfolio will handle
such termination or departure in one of two ways. First, the Portfolio may
propose that a new 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 Sub-Adviser's assets among the remaining Sub-Advisers. This
allocation would not require new investment advisory contracts
24
<PAGE>
with the remaining Sub-Advisers, and consequently no Shareholder approval
would be necessary. If the Manager of Managers structure is approved, the
Trustees will be able to instruct SFM to add or replace Sub-Advisers without
Shareholder approval.
Trustees' Consideration. The Trustees of the Trust, including all of the
Trustees who are not "interested persons" of the Trust, approved the general
form of the Investment Sub-Advisory Agreement with respect to the Small Cap
Value and Core Fixed Income Portfolios at meetings held on March 6 and
September 11-12, 1995. The Trustees received written and oral information from
both SFM and the proposed Sub-Advisers. SFM recommended the selection of the
proposed Sub-Advisers and reviewed the considerations and the search process
that had led to the recommendation. The Trustees also met with representatives
of the proposed Sub-Advisers and considered information about key personnel,
investment philosophy and process and performance track record, among other
factors. In recommending that the Shareholders approve the Investment Sub-
Advisory Agreements, the Trustees carefully evaluated the investing experience
of each proposed Sub-Adviser's key personnel and the quality of services each
proposed Sub-Adviser can be expected to provide to the Portfolios, including,
but not limited to: (1) the fee and expense ratios of comparable mutual funds;
(2) the performance of the Portfolios since commencement of operations; (3)
the nature and quality of the services expected to be rendered to the
Portfolios by each proposed Sub-Adviser; (4) the distinct investment objective
and policies of the Portfolios; (5) the fact that the compensation payable to
each proposed Sub-Adviser by the Portfolios under the proposed Investment Sub-
Advisory Agreements will be at the same or a lower rate as the compensation
payable to the proposed Sub-Advisers under the existing investment advisory
agreements; (6) the history, reputation, qualification and background of each
proposed Sub-Adviser as well as the qualifications of their personnel and
their respective financial conditions; (7) their performance records; (8) the
benefits expected to be realized as a result of the Manager of Managers
structure; and (9) other factors deemed relevant. The Trustees also reviewed
the fees to be paid to each Sub-Adviser in comparison to those being charged
in the relevant segment of the mutual fund business, including any benefits
received by any Sub-Adviser or its affiliates in connection with soft dollar
payments.
Duties Under each Investment Sub-Advisory Agreement. Under each Investment
Sub-Advisory Agreement, the Sub-Adviser makes the investment decisions for the
assets of the Portfolio allocated to it by SFM (if such Portfolio has more
than one Sub-Adviser), and continuously reviews, supervises, and administers
the Portfolio's investment program with respect to these assets. Each Sub-
Adviser is independent of SFM and discharges its responsibilities subject to
the supervision of SFM and the Trustees of the Trust and in a manner
consistent with each Portfolio's investment objectives, policies and
limitations.
Duration and Termination. Unless terminated earlier, each Investment Sub-
Advisory Agreement shall continue in effect as to each Portfolio through 1997,
and thereafter, for periods of one year for so long as such continuance is
specifically approved at least annually (i) by the vote of the holders of a
majority of the outstanding shares of such Portfolio or by the Trustees of the
Trust, and (ii) by the vote of a majority of those Trustees of the Trust who
are not parties to the Investment Advisory Agreement or Investment Sub-
Advisory Agreement or who are not "interested persons" (as that term is
defined in the 1940 Act, as amended) of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. If the Manager of
Managers structure is approved by the Shareholders of a Portfolio, the
25
<PAGE>
Trustees may add and replace Sub-Advisers without Shareholder approval. This
structure requires an order of exemption from the SEC before becoming
operative. If SFM obtains exemptive relief from the SEC permitting it to
engage a Sub-Adviser without first obtaining approval of the Investment Sub-
Advisory Agreement from a majority of the outstanding voting securities of the
Portfolio(s) involved, the Investment Sub-Advisory Agreement shall become
effective upon its approval by the Trust's Board of Trustees. Any Sub-Adviser
so selected and approved shall be without the protection accorded by
shareholder approval of an investment adviser's receipt of compensation under
Section 36(b) of the 1940 Act.
Each Investment Sub-Advisory Agreement will terminate automatically in the
event of its assignment or in the event that SFM's Investment Advisory
Agreement is terminated. Each Investment Sub-Advisory Agreement is terminable
at any time without penalty by the Trustees of the Trust, or, with respect to
each Portfolio, by a vote of a majority of the outstanding shares of such
Portfolio on not less than 30 days nor more than 60 days written notice to
such Portfolio's Sub-Adviser. In addition, each Portfolio's Investment Sub-
Advisory Agreement is terminable by such Portfolio's Sub-Adviser upon 90 days
written notice to the Trust or SFM.
Allocation of Assets Among Sub-Advisers--Small Cap Value Portfolio. 1838
Investment Advisers, L.P. ("1838") is currently the sole investment sub-
adviser to the Portfolio, 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. The Board of Trustees voted on
September 11, 1995 to appoint Boston as an additional sub-adviser to the
Portfolio. SFM, as Manager, will allocate the assets of the Portfolio among
the two Sub-Advisers under the supervision of the Board of Trustees.
Allocation of Assets Among Sub-Advisers--Core Fixed Income
Portfolio. Western is currently the sole investment adviser to the Portfolio
and provides the review, supervision and management of the Portfolio's
investment program and related reporting and recordkeeping services for all of
the Portfolio's assets. In connection with their approval of the Manager of
Managers structure to the Portfolio, the Board of Trustees voted on March 6
and September 12, 1995, to appoint Western, BlackRock and FIRMCO as sub-
advisers to the Portfolio. SFM, as Manager, will allocate the assets of the
Portfolio among the three Sub-Advisers under the supervision of the Board of
Trustees.
In the event Shareholders of a Portfolio do not approve the adoption of an
Investment Sub-Advisory Agreement at the Special Meeting to which this Proxy
Statement relates, or any adjournment thereof, the Trustees will consider the
appropriate course of action.
15. APPROVAL OF AN INVESTMENT SUB-ADVISER AND THE INVESTMENT SUB-ADVISORY
AGREEMENT FOR THE SMALL CAP VALUE PORTFOLIO
The Board of Trustees is recommending that Shareholders of the Small Cap
Value Portfolio approve Boston Partners Asset Management, L.P. ("Boston") as
an additional investment sub-adviser to the Portfolio and approve the form of
Investment Sub-Advisory Agreement between SFM and Boston.
Compensation. Under the proposed Investment Sub-Advisory Agreement, SFM will
pay Boston a fee, which is calculated and paid monthly, based on the annual
percentage rate of .50% of the average monthly market value of the portion of
the assets of the Small Cap Value Portfolio managed by Boston.
26
<PAGE>
Under the existing investment sub-advisory agreement between SFM and 1838, SFM
pays 1838 a fee, which is calculated and paid monthly, based on the annual
percentage rate .50% of the average daily net assets under management.
Description of Boston. Boston Partners Asset Management, L.P. ("Boston"), a
Delaware limited partnership, is a registered investment adviser with its
principal business address at One Financial Center, 43rd Floor, Boston,
Massachusetts 02111. Boston's general partner, Boston Partners, Inc., One
Financial Center, 43rd Floor, Boston, Massachusetts 02111, whose sole
shareholder is Desmond J. Heathwood, Chief Investment Officer of Boston, owns
approximately 20% of Boston's partnership interests. Boston was founded in
April, 1995, and as of July 31, 1995, it had approximately $3.7 billion in
assets under management. Boston's clients include corporations, endowments,
foundations, pension and profit sharing plans, and one other investment
company.
The portion of the Small Cap Value Portfolio's assets allocated to Boston
will be managed by Wayne J. Archambo, C.F.A. Mr. Archambo has been employed by
Boston since its organization, and has 10 years experience investing in small
capitalization stocks. Prior to joining Boston, Mr. Archambo was a Vice
President and Equity Policy Committee member at The Boston Company Asset
Management, Inc., where he created that firm's small capitalization value
product.
Listed below are the names, principal occupations and addresses of the
principal executive officer and of each of the members of Boston's Advisory
Committee. No Trustee of the Trust purchased or sold partnership interests in
Boston during the Trust's most recent fiscal year.
<TABLE>
<CAPTION>
NAME TITLE ADDRESS
---- ----- -------
<S> <C> <C>
Desmond J. Heathwood Chief Investment Officer One Financial Center
43rd Floor
Boston, MA 02111
Mark E. Donovan Vice Chairman, One Financial Center
Equity Policy Committee 43rd Floor
Boston, MA 02111
Michael A. Jones Director of Sales and Marketing One Financial Center
43rd Floor
Boston, MA 02111
William R. Leach Senior Portfolio Manager One Financial Center
43rd Floor
Boston, MA 02111
Harry Rosenbluth Senior Portfolio Manager 300 Drakes Landing Road
Suite 270
Greenbrae, CA 94904
William W. Carter Chairman, Equity Policy Committee 333 South Grand Avenue
Suite 1840
Los Angeles, CA 90071
</TABLE>
27
<PAGE>
Boston, along with its general partner and several of its limited partners,
is a defendant in a civil action in Massachusetts brought by The Boston
Company Asset Management, Inc. ("TBCAM"), the former employer of certain
partners of Boston. TBCAM alleges various causes of action arising from the
unsuccessful effort by Desmond J. Heathwood, the sole shareholder of Boston's
general partner, and other former TBCAM officers, to purchase the assets of
TBCAM, and the resulting formation of Boston. The defendants have filed an
answer which denies all of TBCAM's allegations, and have asserted
counterclaims against TBCAM. The parties are currently engaged in discovery
proceedings, and no trial date has been set.
Boston believes that TBCAM's action is without merit, and will not have a
material adverse effect on Boston. The Trustees of the Trust considered
information about the litigation when they approved Boston as an investment
sub-adviser for the Portfolio.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 15.
---
16. APPROVAL OF AN INVESTMENT SUB-ADVISER AND THE INVESTMENT SUB-ADVISORY
AGREEMENT FOR THE CORE FIXED INCOME PORTFOLIO.
The Board of Trustees is recommending that Shareholders of the Core Fixed
Income Portfolio approve BlackRock as an Additional Sub-Adviser to the
Portfolio and approve the form of Investment Sub-Advisory Agreement between
SFM and BlackRock.
Compensation. Under the proposed Investment Sub-Advisory Agreement, SFM will
pay BlackRock a fee, which is calculated and paid monthly, based on the annual
percentage rate of .15% of the average monthly market value of the portion of
the assets of the Core Fixed Income Portfolio managed by BlackRock. For the
fiscal year ended September 30, 1994, the Portfolio paid the Portfolio's
adviser an advisory fee under the then-current advisory agreement of .125% of
the average daily net assets under such adviser's investment management.
Description of BlackRock. BlackRock Financial Management, Inc.
("BlackRock"), a registered investment adviser, is a Delaware corporation with
its principal business address at 345 Park Avenue, 30th Floor, New York, New
York 10154. BlackRock's predecessor was founded in 1988, and as of July 31,
1995, BlackRock had $32.5 billion in assets under management. BlackRock is
wholly-owned by PNC Asset Management Group, Inc., a wholly-owned subsidiary of
PNC Bank, N.A. PNC Bank, N.A.'s ultimate parent is PNC Bank Corp., One PNC
Plaza, Pittsburgh, Pennsylvania 15265. BlackRock provides investment advice to
investment companies, trusts, charitable organizations, pension and profit
sharing plans and government entities.
The portion of the Core Fixed Income Portfolio's assets allocated to
BlackRock will be managed by BlackRock's Portfolio Management Team. While all
of BlackRock's portfolios are team managed, the portfolio manager who has day-
to-day responsibility for the Portfolio is Keith Anderson. Mr. Anderson is a
Managing Director and Co-Head of Portfolio Management at BlackRock, and has 5
years experience investing in fixed income securities.
28
<PAGE>
BlackRock also serves as investment adviser or sub-adviser to several other
registered investment companies with investment objective similar to those of
the Portfolio. The approximate net assets of such funds or Portfolios and the
fee payable by each, are set forth below:
<TABLE>
<CAPTION>
NET ASSETS FEE
FUND (AS OF 7/31/95) PAYABLE
---- --------------- ----------------
<S> <C> <C>
PNC Managed Income Mutual Fund $563,512,000 .30%
PNC Balanced Mutual Fund--Fixed Income $61,529,000 .30%
PNC Government Income Mutual Fund $12,559,000 .00%*
Accessor Funds, Inc. $38,202,000 .25%**
Sierra Trust Funds $470,839,000 .185%
GNA Government Fund $1,163,027,000 .15% first $500M
.10% next $250M
.05% next $500M
.04% over $1.25B
</TABLE>
- --------
* Currently being waived.
** Maximum fee.
Listed below are the names and principal occupations of each of the
directors and the principal executive officer of BlackRock. The principal
business address of each director and the principal executive officer, as it
relates to their duties at BlackRock is 345 Park Avenue, 30th Floor, New York,
New York 10154, except that Richard C. Caldwell's principal business address
is Eleven Penn Center, 1835 Market Street, Philadelphia, Pennsylvania 19103.
No Trustee of the Trust purchased or sold shares of or interests in BlackRock
during the Trust's most recent fiscal year.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
Laurence D. Fink Chairman and Chief Executive Officer
Ralph L. Schlosstein President and Director
Scott M. Amero Managing Director
Keith T. Anderson Managing Director
Richard C. Caldwell Director
Wesley R. Edens Managing Director
Hugh R. Frater Managing Director
Henry Gabbay Managing Director
Bennett W. Golub, Ph.D. Managing Director
Charles S. Hallac Managing Director
Michael C. Huebsch Managing Director
Robert S. Kapito Managing Director
P. Philip Matthews Managing Director
Barbara G. Novick Managing Director
Karen H. Sabath Managing Director
Joel M. Shaiman Managing Director
Susan L. Wagner Managing Director
</TABLE>
29
<PAGE>
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 16.
17. APPROVAL OF AN INVESTMENT SUB-ADVISER AND THE INVESTMENT SUB-ADVISORY
AGREEMENT FOR THE CORE FIXED INCOME PORTFOLIO.
The Board of Trustees is recommending that Shareholders of the Core Fixed
Income Portfolio approve FIRMCO as an Investment Sub-Adviser to the Portfolio
and approve the form of Investment Sub-Advisory Agreement between SFM and
FIRMCO.
Compensation. Under the proposed Investment Sub-Advisory Agreement, SFM will
pay FIRMCO a fee, which is calculated and paid monthly, based on the annual
percentage rate of .10% of the average monthly market value of the portion of
the assets of the Core Fixed Income Portfolio managed by FIRMCO. For the
fiscal year ended September 30, 1994, the Portfolio paid the Portfolio's
adviser an advisory fee under the then-current advisory agreement of .125% of
the average daily net assets under such adviser's investment management.
Description of FIRMCO. Firstar Investment Research & Management Company
("FIRMCO") is a registered investment adviser with its principal business
address at 777 East Wisconsin Avenue, Suite 800, Milwaukee, Wisconsin 53202.
FIRMCO was founded in 1986, and as of July 31, 1995, it had approximately
$14.7 billion in assets under management. FIRMCO is a wholly-owned subsidiary
of Firstar Corporation, a bank holding company located at 777 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202. FIRMCO's clients include pension and
profit sharing plans, trusts and estates and one other investment company.
The portion of the Core Fixed Income Portfolio's assets allocated to FIRMCO
will be managed by FIRMCO's Fixed Income Group. Mr. Charlie Groeschell will
manage the portion of the Portfolio's assets allocated to FIRMCO on a day-to-
day basis. Mr. Groeschell, a Senior Vice President of FIRMCO, has been
employed by FIRMCO or its affiliates since 1983, and has 12 years experience
in fixed income investing.
FIRMCO also serves as the investment adviser or sub-adviser to one other
registered investment company with investment objectives similar to those of
the Portfolio. The approximate net assets of such fund and the fee payable by
it are set forth below:
<TABLE>
<CAPTION>
NET ASSETS FEE
FUND (AS OF 7/31/95) PAYABLE
---- --------------- -------
<S> <C> <C>
Portico Bond IMMDEX Fund $290,000,000 .30%
</TABLE>
30
<PAGE>
Listed below are the names and principal occupations of each of the
directors and the principal executive officer of FIRMCO. The principal
business address of each director and the principal executive officer as it
relates to their duties at FIRMCO is 777 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202. No Trustee of the Trust purchased or sold shares of or
interests in FIRMCO during the Trust's most recent fiscal year.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
Scott Harkness Chairman
Mary Ellen Stanek President and Director
Michael Bills Director
John Becker Director
Blaine Rieke Director
Robert Webster Director
Steven Parish Director
</TABLE>
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 17.
---
18. APPROVAL OF AN INVESTMENT SUB-ADVISER AND THE INVESTMENT SUB-ADVISORY
AGREEMENT FOR THE CORE FIXED INCOME PORTFOLIO.
The Board of Trustees is recommending that Shareholders of the Core Fixed
Income Portfolio approve Western as a Sub-Adviser to the Portfolio and approve
the form of Investment Sub-Advisory Agreement between SFM and Western.
Compensation. Under the proposed Investment Sub-Advisory Agreement, SFM will
pay Western a fee, which is calculated and paid monthly, based on the annual
percentage rate of .125% of the average monthly market value of the portion of
the assets of the Core Fixed Income Portfolio managed by Western. For the
fiscal year ended September 30, 1994, the Portfolio paid Western an advisory
fee under the then-current advisory agreement of .125% of the average daily
net assets under management.
Description of Western. Since January 19, 1994, Western Asset Management
Company ("Western") has served as investment adviser to 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 at 111 S.
Calvert Street, Baltimore, Maryland 21202. Alliance Capital Management, L.P.,
a subsidiary of The Equitable Companies, Incorporated, 787 Seventh Avenue, New
York, New York 10019, owns more than 10% of the outstanding shares of Legg
Mason, Inc. Western was founded in 1971, and specializes in the management of
fixed income portfolios. As of June 30, 1995, Western managed approximately
$15 billion in client assets, including $3 billion of investment company
assets.
Kent S. Engel, Director and Chief Investment Officer of Western, has been
primarily responsible for day-to-day management of the Portfolio since January
19, 1994, and has been with Western and its predecessor since 1969.
31
<PAGE>
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.
Western also serves as investment sub-adviser to two other registered
investment company portfolios with investment objectives similar to those of
the Portfolio. The approximate net assets of such portfolios, and the fee
payable by each, are set forth below:
<TABLE>
<CAPTION>
ASSET SIZE FEE FEES
FUND (AS OF 6/30/95) PAYABLE WAIVED
---- --------------- -------- -------
<S> <C> <C> <C>
Western Asset Trust Full Range Duration
Portfolio $336,773,680 $893,566 $69,442
SEI Insurance Investment Products Trust--
Intermediate Fixed Income Fund $ 1,133,813 $ 388 --
</TABLE>
Listed below are the names and principal occupations of each of the
directors and the principal executive officer of Western. The principal
business address of each director and the principal executive officer as it
relates to their positions at Western is 117 East Colorado Boulevard,
Pasadena, California 91105. No Trustee of the Trust purchased or sold shares
of or interests in Western during the Trust's most recent fiscal year.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
W. Curtis Livingston Director and CEO
Kent S. Engel Director
Raymond A. Mason Director
Elisabeth N. Spector Director
Edward A. Taber III Director
</TABLE>
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 18.
---
SECTION V.
GENERAL INFORMATION ABOUT THE TRUST AND OTHER MATTERS
Distribution. SEI Financial Services Company ("SFS"), a wholly-owned
subsidiary of SEI Corporation, 680 East Swedesford Road, Wayne, Pennsylvania
19087-1658 ("SEI"), acts as the Distributor of the Trust's shares pursuant to
a Distribution Agreement dated January 22, 1987, between the Trust and SFS.
Alfred P. West, Jr. serves as Chairman of the Board and Chief Executive
Officer of SFS and SEI, and Henry H. Greer serves as Director, President and
Chief Operating Officer of SFS and SEI. William M. Doran, a Trustee of the
Trust, is a Director and Secretary of SEI.
Portfolio Transactions. For the Trust's fiscal year ended September 30,
1994, the Portfolios of the Trust paid the following amounts in brokerage
commissions to affiliates of the Portfolios.
32
<PAGE>
<TABLE>
<CAPTION>
TOTAL BROKERAGE AMOUNT PAID TO % PAID TO
PORTFOLIO COMMISSION AFFILIATED BROKER AFFILIATED BROKER
--------- --------------- ----------------- -----------------
<S> <C> <C> <C>
Large Cap Value $ 267,632 $ 10,375 4%
Capital Growth $ 331,813 $ 29,306 9%
Small Cap Growth $ 447,356 $ 47,550 11%
Capital Appreciation $1,611,243 $173,127 11%
Equity Income $ 490,073 $ 38,830 8%
Balanced $ 101,709 $ 20,376 20%
Mid-Cap Growth $ 264,405 $ 18,120 7%
Core Fixed Income $ 1,840 $ 0 0%
Bond $ 0 $ 0 0%
</TABLE>
- --------
The Real Estate Securities, Small Cap Value, Large Cap Growth, and High Yield
Bond Portfolios of the Trust had not commenced operations as of September 30,
1994.
5% Shareholders. As of September 14, 1995, the following persons were the
only persons who were, to the knowledge of the Trust, beneficial owners of 5%
or more of shares of the Portfolios of the Trust voting at this Meeting.
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OF
PORTFOLIO OF BENEFICIAL OWNER NUMBER OF SHARES PORTFOLIO'S SHARES
--------- ------------------------ ---------------- ------------------
<S> <C> <C> <C>
Small Cap Value Eagle Trust Company 4,288,879.987 50.05%
Attn: Suzanne O'Boyle
680 E. Swedesford Rd.
Wayne, PA 19087
Core Fixed Income Eagle Trust Company 15,213,528.153 38.21%
Attn: Suzanne O'Boyle
680 E. Swedesford Rd.
Wayne, PA 19087
Core Fixed Income BMS and Company 2,061,136.937 5.17%
c/o Central Trust Bank
Attn: Trust Services
P.O. Box 779
Jefferson City, MO 65102
</TABLE>
The Trust's Trustees and officers beneficially own less than 1% of the
shares of the Trust.
Adjournment. In the event that sufficient votes in favor of a Proposal set
forth in the Notice of the Special Meeting are not received by the time
scheduled for the meeting, the persons named as proxies may propose one or
more adjournments of the meeting for a period or periods of not more than 60
days in the aggregate to permit further solicitation of proxies with respect
to any of such Proposal. Any such adjournment will require the affirmative
vote of a majority of the votes cast on the question in person or by proxy at
the session of the meeting to be adjourned. The persons named as proxies will
vote in favor of such adjournment those proxies which they are entitled to
vote in favor of such Proposals. They will vote against any such adjournment
those proxies required to be voted against any such Proposals. The costs of
any such additional solicitation and of any adjourned session will be borne by
the Trust.
33
<PAGE>
Required Vote. Approval of the Proposals with respect to a Portfolio
requires the affirmative vote of a majority of the outstanding shares of a
Portfolio. As defined in the 1940 Act, "majority of the outstanding shares"
means the vote of (i) 67% or more of a Portfolio's or the Trust's outstanding
shares present at a meeting, if the holders of more than 50% of the
outstanding shares of a Portfolio or the Trust are present or represented by
proxy, or (ii) more than 50% of a Portfolio's or the Trust's outstanding
shares, whichever is less.
Abstentions and "broker non-votes" will not be counted for or against any
Proposal to which it relates, but will be counted for purposes of determining
whether a quorum is present. Abstentions will be counted as votes present for
purposes of determining a "majority of the outstanding voting securities"
present at the Meeting, and will therefore have the effect of counting against
the Proposal to which it relates.
Shareholder Proposals. The Trust does not hold annual Shareholder Meetings.
Shareholders wishing to submit proposals for inclusion in a proxy statement
for a subsequent meeting should send their written proposals to the Secretary
of the Trust c/o SEI Corporation, Legal Department, 680 East Swedesford Road,
Wayne, Pennsylvania 19087-1658.
Reports to Shareholders. The Trust will furnish, without charge, a copy of
the most recent Annual Report to Shareholders of the Trust and the most recent
Semi-Annual Report succeeding such Annual Report, if any, on request. Requests
should be directed to the Trust at 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658, or by calling 1-800-342-5734.
Other Matters. The Trustees know of no other business to be brought before
the meeting. However, if any other matters properly come before the meeting,
it is their intention that proxies which do not contain specific restrictions
to the contrary will be voted on such matters in accordance with the judgment
of the persons named in the enclosed form of proxy.
-----------------
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT PROMPTLY.
34
<PAGE>
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
SEI INSTITUTIONAL MANAGED TRUST
AGREEMENT made this 16th day of December, 1994, by and between SEI
Institutional Managed Trust, a Massachusetts business trust (the "Trust"), and
SEI Financial Management Corporation, (the "Adviser").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"),
consisting of several portfolios of shares, each having its own investment
policies; and
WHEREAS, the Trust desires to retain the Adviser to render investment
management services with respect to its Large Cap Growth, Small Cap Value,
High Yield Bond Portfolios and such other portfolios as the Trust and the
Adviser may agree upon (the "Portfolios"), and the Adviser is willing to
render such services:
NOW, THEREFORE, in consideration of mutual covenants herein contained, the
parties hereto agree as follows:
1. DUTIES OF THE ADVISER. The Trust employs the Adviser to manage the
investment and reinvestment of the assets, to hire (subject to the approval of
the Trust's Board of Trustees and, except as otherwise permitted under the
terms of any exemptive relief obtained by the Adviser from the Securities and
Exchange Commission, or by rule or regulation, a majority of the outstanding
voting securities of any affected Portfolio(s)) and thereafter supervise the
investment activities of one or more sub-advisers deemed necessary to carry
out the investment program of any Portfolios of the Trust, and to continuously
review, supervise and (where appropriate) administer the investment program of
the Portfolios, to determine in its discretion (where appropriate) the
securities to be purchased or sold, to provide the Administrator and the Trust
with records concerning the Adviser's activities which the Trust is required
to maintain, and to render regular reports to the Administrator and to the
Trust's officers and Trustees concerning the Adviser's discharge of the
foregoing responsibilities. The retention of a sub-adviser by the Adviser
shall not relieve the Adviser of its responsibilities under this Agreement.
The Adviser shall discharge the foregoing responsibilities subject to the
control of the Board of Trustees of the Trust and in compliance with such
policies as the Trustees may from time to time establish, and in compliance
with the objectives, policies, and limitations for each such Portfolio set
forth in the Trust's prospectus and statement of additional information, as
amended from time to time (referred to collectively as the "Prospectus"), and
applicable laws and regulations. The Trust will furnish the Adviser from time
to time with copies of all amendments or supplements to the Prospectus, if
any.
The Adviser accepts such employment and agrees, at its own expense, to
render the services and to provide the office space, furnishings and equipment
and the personnel (including any sub-advisers) required by it to perform the
services on the terms and for the compensation provided herein. The Adviser
will not, however, pay for the cost of securities, commodities, and other
investments (including brokerage commissions and other transaction charges, if
any) purchased or sold for the Trust.
A-1
<PAGE>
2. DELIVERY OF DOCUMENTS. The Trust has furnished Adviser with copies
properly certified or authenticated of each of the following:
(a) The Trust's Agreement and Declaration of Trust, as filed with the
Secretary of State of the Commonwealth of Massachusetts (such Agreement and
Declaration of Trust, as presently in effect and as it shall from time to
time be amended, is herein called the "Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the "By-
Laws");
(c) Prospectus(es) of the Portfolio(s).
3. OTHER COVENANTS. The Adviser agrees that it:
(a) will comply with all applicable Rules and Regulations of the
Securities and Exchange Commission and will in addition conduct its
activities under this Agreement in accordance with other applicable law;
(b) will place orders pursuant to its investment determinations for the
Portfolios either directly with the issuer or with any broker or dealer. In
executing Portfolio transactions and selecting brokers or dealers, the
Adviser will use its best efforts to seek on behalf of the Portfolio the
best overall terms available. In assessing the best overall terms available
for any transaction, the Adviser shall consider all factors that it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, both
for the specific transaction and on a continuing basis. In evaluating the
best overall terms available, and in selecting the broker-dealer to execute
a particular transaction the Adviser may also consider the brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Portfolio and/or other
accounts over which the Adviser or an affiliate of the Adviser may exercise
investment discretion. The Adviser is authorized, subject to the prior
approval of the Trust's Board of Trustees, to pay to a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for any of the Portfolios which is in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction if, but only if, the Adviser determines in good
faith that such commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer--viewed
in terms of that particular transaction or terms of the overall
responsibilities of the Adviser to the Portfolio. In addition, the Adviser
if authorized to allocate purchase and sale orders for portfolio securities
to brokers or dealers (including brokers and dealers that are affiliated
with the Adviser or the Trust's principal underwriter) to take into account
the sale of shares of the Trust if the Adviser believes that the quality of
the transaction and the commission are comparable to what they would be
with other qualified firms. In no instance, however, will any Portfolio's
securities be purchased from or sold to the Adviser, any sub-adviser
engaged with respect to that Portfolio, the Trust's principal underwriter,
or any affiliated person of either the Trust, the Adviser, and sub-adviser
or the principal underwriter, acting as principal in the transaction,
except to the extent permitted by the Securities and Exchange Commission
and the 1940 Act.
A-2
<PAGE>
4. COMPENSATION OF THE ADVISER. For the services to be rendered by the
Adviser as provided in Sections 1 and 2 of this Agreement, the Trust shall pay
to the Adviser compensation at the rate(s) specified in the Schedule(s) which
are attached hereto and made a part of this Agreement. Such compensation shall
be paid to the Adviser at the end of each month, and calculated by applying a
daily rate, based on the annual percentage rates as specified in the attached
Schedule(s), to the assets of the Portfolio. The fee shall be based on the
average daily net assets for the month involved. The Adviser may, in its
discretion and from time to time, waive a portion of its fee.
All rights of compensation under this Agreement for services performed as of
the termination date shall survive the termination of this Agreement.
5. EXCESS EXPENSES. If the expenses for any Portfolio for any fiscal year
(including fees and other amounts payable to the Adviser, but excluding
interest, taxes, brokerage costs, litigation, and other extraordinary costs)
as calculated every business day would exceed the expense limitations imposed
on investment companies by any applicable statute or regulatory authority of
any jurisdiction in which Shares are qualified for offer and sale, the Adviser
shall bear such excess cost.
However, the Adviser will not bear expenses of the Trust or any Portfolio
which would result in the Trust's inability to qualify as a regulated
investment company under provisions of the Internal Revenue Code. Payment of
expenses by the Adviser pursuant to this Section 5 shall be settled on a
monthly basis (subject to fiscal year end reconciliation) by a waiver of the
Adviser's fees provided for hereunder, and such waiver shall be treated as a
reduction in the purchase price of the Adviser's services.
6. REPORTS. The Trust and the Adviser agree to furnish to each other, if
applicable, current prospectuses, proxy statements, reports to shareholders,
certified copies of their financial statements, and such other information
with regard to their affairs as each may reasonably request. The Adviser
further agrees to furnish to the Trust, if applicable, the same such documents
and information pertaining to any sub-adviser as the Trust may reasonably
request.
7. STATUS OF THE ADVISER. The services of the Adviser to the Trust are not
to be deemed exclusive, and the Adviser shall be free to render similar
services to others so long as its services to the Trust are not impaired
thereby. The Adviser shall be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Trust in any way or otherwise be deemed an agent of
the Trust. To the extent that the purchase or sale of securities or other
investments of any issuer may be deemed by the Adviser to be suitable for two
or more accounts managed by the Adviser, the available securities or
investments may be allocated in a manner believed by the Adviser to be
equitable to each account. It is recognized that in some cases this may
adversely affect the price paid or received by the Trust or the size or
position obtainable for or disposed by the Trust or any Portfolio.
8. CERTAIN RECORDS. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under the
1940 Act which are prepared or maintained by the Adviser (or any sub-adviser)
on behalf of the Trust are the property of the Trust and will be surrendered
promptly to the Trust on request. The Adviser further agrees to preserve for
the periods prescribed in Rule 31a-2 under the 1940 Act the records required
to be maintained under Rule 31a-1 under the 1940 Act.
A-3
<PAGE>
9. LIMITATION OF LIABILITY OF THE ADVISER. The duties of the Adviser shall
be confined to those expressly set forth herein, and no implied duties are
assumed by or may be asserted against the Adviser hereunder. The Adviser shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in carrying out its
duties hereunder, except a loss resulting from willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable state law which cannot be waived or
modified hereby. (As used in this Section 9, the term "Adviser" shall include
directors, officers, employees and other corporate agents of the Adviser as
well as that corporation itself).
10. PERMISSIBLE INTERESTS. Trustees, agents, and shareholders of the Trust
are or may be interested in the Adviser (or any successor thereof) as
directors, partners, officers, or shareholders, or otherwise; directors,
partners, officers, agents, and shareholders of the Adviser are or may be
interested in the Trust as Trustees, officers, shareholders or otherwise; and
the Adviser (or any successor) is or may be interested in the Trust as a
shareholder or otherwise subject to the provisions of applicable law. All such
interests shall be fully disclosed between the parties on an ongoing basis and
in the Trust's Prospectus as required by law. In addition, brokerage
transactions for the Trust may be effected through affiliates of the Adviser
or any sub-adviser if approved by the Board of Trustees, subject to the rules
and regulations of the Securities and Exchange Commission.
11. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until two years from date of
execution, and thereafter, for periods of one year so long as such continuance
thereafter is specifically approved at least annually (a) by the vote of a
majority of those Trustees of the Trust who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (b) by the Trustees of the
Trust or by vote of a majority of the outstanding voting securities of each
Portfolio; provided, however, that if the shareholders of any Portfolio fail
to approve the Agreement as provided herein, the Adviser may continue to serve
hereunder in the manner and to the extent permitted by the 1940 Act and rules
and regulations thereunder. The foregoing requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated as to any Portfolio at any time, without
the payment of any penalty by vote of a majority of the Trustees of the Trust
or by vote of a majority of the outstanding voting securities of the Portfolio
on not less than 30 days nor more than 60 days written notice to the Adviser,
or by the Adviser at any time without the payment of any penalty, on 90 days
written notice to the Trust. This Agreement will automatically and immediately
terminate in the event of its assignment.
As used in this Section 11, the terms "assignment", "interested persons",
and a "vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission.
12. GOVERNING LAW. This Agreement shall be governed by the internal laws of
the Commonwealth of Massachusetts, without regard to conflict of law
principles; provided, however that nothing herein shall be construed as being
inconsistent with the 1940 Act.
A-4
<PAGE>
13. NOTICE: Any notice, advice or report to be given pursuant to this
Agreement shall be deemed sufficient if delivered or mailed by registered,
certified or overnight mail, postage prepaid addressed by the party giving
notice to the other party at the last address furnished by the other party:
To the Adviser at: SEI Financial Management
Corporation
680 East Swedesford Road
Wayne, PA 19087
Attn: Legal Department
To the Trust at: SEI Financial Management
Corporation
680 East Swedesford Road
Wayne, PA 19087
Attn: Legal Department
14. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
15. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to this Agreement's subject matter. This Agreement
may be executed in any number of counterparts, each of which shall be deemed
to be an original, but such counterparts shall, together, constitute only one
instrument.
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the Trust
as Trustees, and is not binding upon any of the Trustees, officers, or
shareholders of the Trust individually but binding only upon the assets and
property of the Trust.
No Portfolio of the Trust shall be liable for the obligations of any other
Portfolio of the Trust. Without limiting the generality of the foregoing, the
Adviser shall look only to the assets of a particular Portfolio for payment of
fees for services rendered to that Portfolio.
Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
SEI Institutional Managed Trust SEI Financial Management
Corporation
By: ___________________________________
By: _______________________________
Attest: _______________________________
Attest: ___________________________
A-5
<PAGE>
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN
SEI INSTITUTIONAL MANAGED TRUST
AND
SEI FINANCIAL MANAGEMENT CORPORATION
Pursuant to Article 4, the Trust shall pay the Adviser compensation at an
annual rate as follows:
<TABLE>
<S> <C>
Large Cap Growth .40%
Small Cap Value .65%
High Yield Bond .4875%
Large Cap Value .35%
</TABLE>
A-6
<PAGE>
SCHEDULE B TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN
SEI INSTITUTIONAL MANAGED TRUST
AND
SEI FINANCIAL MANAGEMENT CORPORATION
Pursuant to Article 4, the Trust shall pay the Adviser compensation at an
annual rate as follows:
<TABLE>
<S> <C>
Capital Appreciation .40%
Balanced .40%
Equity Income .40%
Bond .275%
Small Cap Growth .65%
Mid-Cap .40%
</TABLE>
A-7
<PAGE>
SCHEDULE C TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN
SEI INSTITUTIONAL MANAGED TRUST
AND
SEI FINANCIAL MANAGEMENT CORPORATION
Pursuant to Article 4, the Trust shall pay the Adviser compensation at an
annual rate as follows:
<TABLE>
<S> <C>
Core Fixed Income .275%
</TABLE>
A-8
<PAGE>
EXHIBIT B
INVESTMENT SUB-ADVISORY AGREEMENT
SEI INSTITUTIONAL MANAGED TRUST
AGREEMENT made this day of , 1995, between SEI Financial Management
Corporation, (the "Adviser") and (the "Sub-Adviser").
WHEREAS, SEI Institutional Managed Trust, a Massachusetts business trust
(the "Trust") is registered as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated
(the "Advisory Agreement") with the Trust, pursuant to which the
Adviser will act as investment adviser to the Portfolio (the
"Portfolio"), which is a series of the Trust; and
WHEREAS, the Adviser, with the approval of the Trust, desires to retain the
Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Portfolio, and the Sub-Adviser is
willing to render such investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser and the
Trust's Board of Trustees, the Sub-Adviser shall manage all of the securities
and other assets of the Portfolio entrusted to it hereunder (the "Assets"),
including the purchase, retention and disposition of the Assets, in accordance
with the Portfolio's investment objectives, policies and restrictions as
stated in the Portfolio's prospectus and statement of additional information,
as currently in effect and as amended or supplemented from time to time
(referred to collectively as the "Prospectus"), and subject to the following:
(a) The Sub-Adviser shall, in consultation with and subject to the
direction of the Adviser, determine from time to time what Assets will be
purchased, retained or sold by the Portfolio, and what portion of the
Assets will be invested or held uninvested in cash.
(b) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the Trust's
Declaration of Trust (as defined herein) and the Prospectus and with the
instructions and directions of the Adviser and of the Board of Trustees of
the Trust and will conform to and comply with the requirements of the 1940
Act, the Internal Revenue Code of 1986, and all other applicable federal
and state laws and regulations, as each is amended from time to time.
(c) The Sub-Adviser shall determine the Assets to be purchased or sold by
the Portfolio as provided in subparagraph (a), and will place orders with
or through such persons, brokers or dealers to carry out the policy with
respect to brokerage set forth in the Portfolio's Registration Statement
(as defined herein) and Prospectus or as the Board of Trustees or the
Adviser may direct from time to time, in conformity with federal securities
laws. In executing Portfolio transactions and selecting brokers or dealers,
the Sub-Adviser will use its best efforts to seek on behalf of the
Portfolio the best overall terms available. In assessing the best overall
terms available for any transaction, the Sub-Adviser shall consider all
factors that it deems relevant, including the breadth of the market in the
B-1
<PAGE>
security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. In evaluating the best overall terms available, and in selecting the
broker-dealer to execute a particular transaction the Sub-Adviser may also
consider the brokerage and research services provided (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934).
Consistent with any guidelines established by the Board of Trustees of the
Trust, the Sub-Adviser is authorized to pay to a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines in good faith that
such commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer--viewed in terms of
that particular transaction or terms of the overall responsibilities of the
Sub-Adviser to the Portfolio. In addition, the Sub-Adviser if authorized to
allocate purchase and sale orders for securities to brokers or dealers
(including brokers and dealers that are affiliated with the Adviser, Sub-
Adviser or the Trust's principal underwriter) to take into account the sale
of shares of the Trust if the Sub-Adviser believes that the quality of the
transaction and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will the Portfolio's Assets
be purchased from or sold to the Adviser, Sub-Adviser, the Trust's
principal underwriter, or any affiliated person of either the Trust,
Adviser, the Sub-Adviser or the principal underwriter, acting as principal
in the transaction, except to the extent permitted by the Securities and
Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records with respect to
transactions involving the Assets required by subparagraphs (b)(5), (6),
(7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act.
The Sub-Adviser shall provide to the Adviser or the Board of Trustees such
periodic and special reports, balance sheets or financial information, and
such other information with regard to its affairs that the Adviser or Board
of Trustees may reasonably request.
The Sub-Adviser shall keep the books and records relating to the Assets
required to be maintained by the Sub-Adviser under this Agreement and shall
timely furnish to the Adviser all information relating to the Sub-Adviser's
services under this Agreement needed by the Adviser to keep the other books
and records of the Portfolio required by Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall also furnish to the Adviser any other information relating
to the Assets that is required to be filled by the Adviser or the Trust with
the SEC or sent to shareholders under the 1940 Act (including the rules
adopted thereunder) or any exemptive or other relief that the Adviser or the
Trust obtains from the SEC. The Sub-Adviser agrees that all records that it
maintains on behalf of the Portfolio are property of the Portfolio and the
Sub-Adviser will surrender promptly to the Portfolio any of such records upon
the Portfolio's request; provided, however, that the Sub-Adviser may retain a
copy of such records. In addition, for the duration of this Agreement, the
Sub-Adviser shall preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any such records as are required to be maintained by it pursuant to
this Agreement, and shall transfer said records to any successor sub-adviser
upon the termination of Agreement (or, if there is no successor sub-adviser,
to the Adviser).
(e) The Sub-Adviser shall provide the Portfolio's custodian on each
business day with information relating to all transactions concerning the
Portfolio's Assets and shall provide the Adviser with such information upon
request of the Adviser.
B-2
<PAGE>
(f) The investment management services provided by the Sub-Adviser under
this Agreement are not to be deemed exclusive and the Sub-Adviser shall be
free to render similar services to others, as long as such services do not
impair the services rendered to the Adviser or the Trust.
(g) The Sub-Adviser shall promptly notify the Adviser of any financial
condition that is likely to impair the Sub-Adviser's ability to fulfill its
commitment under this Agreement.
(h) The Sub-Adviser shall review all proxy solicitation materials and be
responsible for voting and handling all proxies in relation to the
securities held in the Portfolio. The Adviser shall instruct the custodian
and other parties providing services to the Portfolio to promptly forward
misdirected proxies to the Sub-Adviser.
Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners, officers or
employees.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have responsibility
for all services to be provided to the Portfolio pursuant to the Advisory
Agreement and shall oversee and review the Sub-Adviser's performance of its
duties under this Agreement; provided, however, that in connection with its
management of the assets, nothing herein shall be construed to relieve the
Sub-Adviser of responsibility for compliance with the Trust's Declaration of
Trust (as defined herein), the Prospectus, the instructions and directions of
the Board of Trustees of the Trust, the requirements of the 1940 Act, the
Internal Revenue Code of 1986, and all other applicable federal and state laws
and regulations, as each is amended from time to time.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following documents:
(a) The Trust's Agreement and Declaration of Trust, as filed with the
Secretary of State of the Commonwealth of Massachusetts (such Agreement and
Declaration of Trust, as in effect on the date of this Agreement and as
amended from time to time, herein called the "Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the "By-
Laws");
(c) Prospectus(es) of the Portfolio.
4. COMPENSATION TO THE SUB-ADVISER. For the services to be provided by the
Sub-Adviser pursuant to this Agreement, the Adviser will pay the Sub-Adviser,
and the Sub-Adviser agrees to accept as full compensation therefor, a sub-
advisory fee at the rate specified in the Schedule(s) which is attached hereto
and made part of this Agreement. The fee will be calculated based on the
average monthly market value of the Assets under the Sub-Adviser's management
and will be paid to the Sub-Adviser monthly. Except as may otherwise be
prohibited by law or regulation (including any then current SEC staff
interpretation), the Sub-Adviser may, in its discretion and from time to time,
waive a portion of its fee.
5. INDEMNIFICATION. The Sub-Adviser shall indemnify and hold harmless the
Adviser from and against any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) howsoever
arising from or in connection with the performance of the Sub-Adviser's
obligations under this Agreement; provided, however, that the Sub-Adviser's
obligations under this Section 5 shall be reduced to the extent that the claim
against, or the loss, liability or damage experienced
B-3
<PAGE>
by the Adviser, is caused by or is otherwise directly related to the Adviser's
own willful misfeasance, bad faith or negligence, or to the reckless disregard
of its duties under this Agreement.
6. DURATION AND TERMINATION. This Agreement shall become effective upon its
approval by the Trust's Board of Trustees and by the vote of a majority of the
outstanding voting securities of the Portfolio.
This Agreement shall continue in effect for a period of more than two years
from the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act; provided, however, that this
Agreement may be terminated with respect to the Portfolio (a) by the Portfolio
at any time, without the payment of any penalty, by the vote of a majority of
Trustees of the Trust or by the vote of a majority of the outstanding voting
securities of the Portfolio, (b) by the Adviser at any time, without the
payment of any penalty, on not more than 60 days nor less than 30 days written
notice to the Sub-Adviser, or (c) by the Sub-Adviser at any time, without the
payment of any penalty, on 90 days written notice to the Adviser. This
Agreement shall terminate automatically and immediately in the event of its
assignment, or in the event of a termination of the Adviser's agreement with
the Trust. As used in this Section 8, the terms "assignment" and "vote of a
majority of the outstanding voting securities" shall have the respective
meanings set forth in the 1940 Act and the rules and regulations thereunder,
subject to such exceptions as may be granted by the Commission under the 1940
Act.
7. GOVERNING LAW. This Agreement shall be governed by the internal laws of
the Commonwealth of Massachusetts, without regard to conflict of law
principles; provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
8. SEVERABILITY. Should any part of this Agreement be held invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
9. NOTICE: Any notice, advice or report to be given pursuant to this
Agreement shall be deemed sufficient if delivered or mailed by registered,
certified or overnight mail, postage prepaid addressed by the party giving
notice to the other party at the last address furnished by the other party:
To the Adviser At: SEI Financial Management
Corporation
680 East Swedesford Road
Wayne, PA 19087
Attention: Legal Department
To the Sub-Adviser at:
10. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to this Agreement's subject matter. This Agreement
may be executed in any number of counterparts, each of which shall be deemed
to be an original, but such counterparts shall, together, constitute only one
instrument.
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts, and notice is hereby
given that the obligations of this instrument are not binding upon any of the
Trustees, officers or shareholders of the Portfolio or the Trust.
B-4
<PAGE>
Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first
written above.
SEI Financial Management Corporation
By: ___________________________________ By: _______________________________
Name: _________________________________ Name: _____________________________
Title: ________________________________ Title: ____________________________
B-5
<PAGE>
SCHEDULE A
TO THE
SUB-ADVISORY AGREEMENT
BETWEEN
SEI FINANCIAL MANAGEMENT CORPORATION
AND
Pursuant to Article 4, the Adviser shall pay the Sub-Adviser compensation at
an annual rate as follows:
<TABLE>
<S> <C>
Portfolio .%
</TABLE>
B-6
<PAGE>
SEI INSTITUTIONAL MANAGED TRUST
Small Cap Value Portfolio
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF TRUSTEES FOR
THE SPECIAL MEETING OF SHAREHOLDERS, NOVEMBER 13, 1995
The undersigned, revoking previous proxies with respect to the Shares (defined
below), hereby appoints David G. Lee and Robert B. Carroll as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the Small Cap Value Portfolio (the "Portfolio") of SEI
Institutional Managed Trust (the "Trust") to be held in the offices of SEI
Financial Management Corporation ("SFM"), 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658, on Monday, November 13, 1995 at 3:30 p.m., and any
adjournments or postponements thereof (the "Meeting") all shares of beneficial
interest of said Trust that the undersigned would be entitled to vote if
personally present at the Meeting ("Shares") on the proposals set forth below
respecting the proposed amendments to (and/or reclassifications of) the
Portfolio's investment limitations, the new sub-adviser, and the new sub-
advisory agreement and, in accordance with their own discretion, any other
matters properly brought before the Meeting.
If you wish to vote "For" or "Against" all of the Proposals relating to your
shares of the Portfolio of the Trust, or if you wish to "Abstain" from voting on
all such Proposals, please fill out the box below:
==================================================================
The proxies are authorized to vote upon all of the Proposals
relating to the Small Cap Value Portfolio of the Trust.
___For ___Against ___Abstain
==================================================================
If you complete the box above, you do not need to vote on the individual
Proposals listed below. If you complete both the box and the Proposals below,
the proxies will use the voting instructions indicated below for each Proposal.
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS A VOTE "FOR" THE PROPOSALS TO:
PROPOSAL 1. Combine the Portfolio's fundamental limitation concerning
diversification with the Portfolio's fundamental limitation
concerning the acquisition of more than 10% of the outstanding
voting securities of any one issuer, and to amend certain other
language.
___For ___Against ___Abstain
<PAGE>
PROPOSAL 2. Amend the Portfolio's fundamental limitation concerning borrowing
to enhance the Portfolio's ability to borrow money.
___For ___Against ___Abstain
PROPOSAL 3. Amend the Portfolio's fundamental limitation concerning making
loans to enhance the Portfolio's ability to make loans.
___For ___Against ___Abstain
PROPOSAL 4. Reclassify the Portfolio's fundamental limitation concerning
pledging assets as non-fundamental, and to amend certain language.
___For ___Against ___Abstain
PROPOSAL 5. Reclassify the Portfolio's fundamental limitation concerning
investment in securities for the purpose of exercising control as
non-fundamental.
___For ___Against ___Abstain
PROPOSAL 6. Amend the Portfolio's fundamental limitation concerning investment
in real estate and commodities to clarify the Portfolio's ability
to invest in commodities contracts relating to financial
instruments.
___For ___Against ___Abstain
PROPOSAL 7. Reclassify the Portfolio's fundamental limitation concerning short
sales and margins sales as non-fundamental, and to amend certain
language.
___For ___Against ___Abstain
PROPOSAL 8. Reclassify the Portfolio's fundamental limitation concerning
investment in securities of investment companies as non-
fundamental, and to amend certain language.
___For ___Against ___Abstain
2
<PAGE>
PROPOSAL 9. Amend the Portfolio's fundamental limitation concerning the
issuance of senior securities to clarify the Portfolio's ability
to issue senior securities.
___For ___Against ___Abstain
PROPOSAL 10. Reclassify the Portfolio's fundamental limitation concerning
investment in securities of an issuer whose securities are owned
by officers and trustees of the Trust as non-fundamental.
___For ___Against ___Abstain
PROPOSAL 11. Reclassify the Portfolio's fundamental limitation concerning
investment of more than 5% of total assets in securities of
companies with less than three years of operating history as non-
fundamental.
___For ___Against ___Abstain
PROPOSAL 12. Eliminate the Portfolio's fundamental limitation concerning
investment in warrants, puts, calls, straddles, spreads or
combinations thereof.
___For ___Against ___Abstain
PROPOSAL 15. Approve the selection of Boston Partners Asset Management, L.P.
("Boston") as an investment sub-adviser for the Portfolio, and to
approve the form of investment sub-advisory agreement between SFM
and Boston.
___For ___Against ___Abstain
THIS PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED HEREIN BY THE
SIGNING SHAREHOLDER. IF NO CONTRARY DIRECTION IS GIVEN WHEN THE DULY EXECUTED
PROXY IS RETURNED, THIS PROXY WILL BE VOTED FOR EACH OF THE FOREGOING PROPOSALS
AND WILL BE VOTED IN THE APPOINTED PROXIES' DISCRETION UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING.
The undersigned acknowledges receipt with this proxy of a copy of the Notice of
Special Meeting and the Proxy Statement of the Board of Trustees. Your
signature(s) on this proxy should be exactly as your name(s) appear on this
Proxy. If the shares are held jointly, each holder should sign this Proxy.
Attorneys-in-fact, executors, administrators, trustees or guardians should
indicate the full title and capacity in which they are signing.
3
<PAGE>
Dated:_________________, 1995 _________________________________
Signature of Shareholder
_________________________________
Signature (Joint owners)
PLEASE DATE, SIGN AND RETURN PROMPTLY USING THE ENCLOSED, POSTAGE-PAID ENVELOPE
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING; YOU MAY, NEVERTHELESS, VOTE IN
PERSON IF YOU DO ATTEND IN PERSON.
4
<PAGE>
SEI INSTITUTIONAL MANAGED TRUST
Core Fixed Income Portfolio
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF TRUSTEES FOR
THE SPECIAL MEETING OF SHAREHOLDERS, NOVEMBER 13, 1995
The undersigned, revoking previous proxies with respect to the Shares (defined
below), hereby appoints David G. Lee and Robert B. Carroll as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the Core Fixed Income Portfolio (the "Portfolio") of SEI
Institutional Managed Trust (the "Trust") to be held in the offices of SEI
Financial Management Corporation ("SFM"), 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658, on Monday, November 13, 1995 at 3:30 p.m., and any
adjournments or postponements thereof (the "Meeting") all shares of beneficial
interest of said Trust that the undersigned would be entitled to vote if
personally present at the Meeting ("Shares") on the proposals set forth below
respecting the proposed amendments to (and/or reclassifications of) the
Portfolio's investment limitations, the new management structure, the new sub-
advisers, and the new advisory and sub-advisory agreements and, in accordance
with their own discretion, any other matters properly brought before the
Meeting.
If you wish to vote "For" or "Against" all of the Proposals relating to your
shares of the Portfolio of the Trust, or if you wish to "Abstain" from voting on
all such Proposals, please fill out the box below:
==================================================================
The proxies are authorized to vote upon all of the Proposals
relating to the Core Fixed Income Portfolio of the Trust.
___For ___Against ___Abstain
==================================================================
If you complete the box above, you do not need to vote on the individual
Proposals listed below. If you complete both the box and the Proposals below,
the proxies will use the voting instructions indicated below for each Proposal.
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS A VOTE "FOR" THE PROPOSALS TO:
PROPOSAL 1. Combine the Portfolio's fundamental limitation concerning
diversification with the Portfolio's fundamental limitation
concerning the acquisition of more than 10% of the outstanding
voting securities of any one issuer, and to amend certain other
language.
___For ___Against ___Abstain
<PAGE>
PROPOSAL 2. Amend the Portfolio's fundamental limitation concerning borrowing
to enhance the Portfolio's ability to borrow money.
___For ___Against ___Abstain
PROPOSAL 3. Amend the Portfolio's fundamental limitation concerning making
loans to enhance the Portfolio's ability to make loans.
___For ___Against ___Abstain
PROPOSAL 4. Reclassify the Portfolio's fundamental limitation concerning
pledging assets as non-fundamental, and to amend certain language.
___For ___Against ___Abstain
PROPOSAL 5. Reclassify the Portfolio's fundamental limitation concerning
investment in securities for the purpose of exercising control as
non-fundamental.
___For ___Against ___Abstain
PROPOSAL 6. Amend the Portfolio's fundamental limitation concerning investment
in real estate and commodities to clarify the Portfolio's ability
to invest in commodities contracts relating to financial
instruments.
___For ___Against ___Abstain
PROPOSAL 7. Reclassify the Portfolio's fundamental limitation concerning short
sales and margins sales as non-fundamental, and to amend certain
language.
___For ___Against ___Abstain
PROPOSAL 8. Reclassify the Portfolio's fundamental limitation concerning
investment in securities of investment companies as non-
fundamental, and to amend certain language.
___For ___Against ___Abstain
2
<PAGE>
PROPOSAL 9. Amend the Portfolio's fundamental limitation concerning the
issuance of senior securities to clarify the Portfolio's ability
to issue senior securities.
___For ___Against ___Abstain
PROPOSAL 10. Reclassify the Portfolio's fundamental limitation concerning
investment in securities of an issuer whose securities are owned
by officers and trustees of the Trust as non-fundamental.
___For ___Against ___Abstain
PROPOSAL 11. Reclassify the Portfolio's fundamental limitation concerning
investment of more than 5% of total assets in securities of
companies with less than three years of operating history as non-
fundamental.
___For ___Against ___Abstain
PROPOSAL 12. Eliminate the Portfolio's fundamental limitation concerning
investment in warrants, puts, calls, straddles, spreads or
combinations thereof.
___For ___Against ___Abstain
PROPOSAL 13. Authorize the Trust's Board of Trustees to appoint additional or
replacement investment sub-advisers recommended by SFM for the
Portfolio without seeking approval of the Portfolio's Shareholders
of the contracts pursuant to which such sub-advisers serve.
___For ___Against ___Abstain
PROPOSAL 14. Approve the selection of SFM as the Investment Adviser for the
Portfolio, and to approve the Investment Advisory Agreement
between the Trust, on behalf of the Portfolio, and SFM.
___For ___Against ___Abstain
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PROPOSAL 16. Approve the selection of BlackRock Financial Management, Inc.
("BlackRock") as an investment sub-adviser for the Portfolio, and
to approve the form of investment sub-advisory agreement between
SFM and BlackRock.
___For ___Against ___Abstain
PROPOSAL 17. Approve the selection of Firstar Investment Research & Management
Company ("FIRMCO") as an investment sub-adviser for the Portfolio,
and to approve the form of investment sub-advisory agreement
between SFM and FIRMCO.
___For ___Against ___Abstain
PROPOSAL 18. Approve the selection of Western Asset Management ("Western") as
an investment sub-adviser for the Portfolio, and to approve the
form of investment sub-advisory agreement between SFM and Western.
___For ___Against ___Abstain
THIS PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED HEREIN BY THE
SIGNING SHAREHOLDER. IF NO CONTRARY DIRECTION IS GIVEN WHEN THE DULY EXECUTED
PROXY IS RETURNED, THIS PROXY WILL BE VOTED FOR EACH OF THE FOREGOING PROPOSALS
AND WILL BE VOTED IN THE APPOINTED PROXIES' DISCRETION UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING.
The undersigned acknowledges receipt with this proxy of a copy of the Notice of
Special Meeting and the Proxy Statement of the Board of Trustees. Your
signature(s) on this proxy should be exactly as your name(s) appear on this
Proxy. If the shares are held jointly, each holder should sign this Proxy.
Attorneys-in-fact, executors, administrators, trustees or guardians should
indicate the full title and capacity in which they are signing.
Dated:_________________, 1995 ______________________________
Signature of Shareholder
______________________________
Signature (Joint owners)
PLEASE DATE, SIGN AND RETURN PROMPTLY USING THE ENCLOSED, POSTAGE-PAID ENVELOPE
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING; YOU MAY, NEVERTHELESS, VOTE IN
PERSON IF YOU DO ATTEND IN PERSON.
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