<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
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
SEI INSTITUTIONAL MANAGED TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
same
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $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
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
N/A
-----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11
N/A
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
N/A
-----------------------------------------------------------------------
[x] 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:
$125
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
Preliminary Proxy Statement
-----------------------------------------------------------------------
3) Filing Party:
SEI Institutional Managed Trust
-----------------------------------------------------------------------
4) Date Filed:
June 22, 1995
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<PAGE>
SEI INSTITUTIONAL MANAGED TRUST
2 OLIVER STREET
BOSTON, MA 02109
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
AUGUST 11, 1995
Notice is hereby given that a Special Meeting of Shareholders of certain
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 Company ("SFM"), 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658, on Friday, August 11, 1995, at 10:00 a.m.
At the meeting, Shareholders will be asked to consider and act on proposed
amendments to the Portfolios' 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 either to vote for or against all
Proposals that apply to that Portfolio by checking a single box, or to vote on
each applicable Proposal separately.
SECTION I.
Proposals 1 through 12 are interrelated in that they reflect a determination
by the Trust's Board of Trustees to recommend that the Portfolios' various
investment limitations be updated, and restructured and/or reclassified to the
extent permitted by applicable law to provide management efficiency and
investment flexibility, and to minimize the need to call Shareholder meetings
to change certain investment limitations in the future, as described in the
accompanying Proxy Statement. These investment limitations apply in all cases
to each Portfolio and govern the activities of each Portfolio on a stand-alone
basis. Each Portfolio's Shareholders will vote separately (i.e., by Portfolio)
on these Proposals. The specifics of these 12 Proposals are as follows:
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.
2. Proposal to amend each Portfolio's fundamental limitation concerning
borrowing to enhance each Portfolio's ability to borrow money.
3. Proposal to amend each Portfolio's fundamental limitation concerning
making loans to enhance each Portfolio's ability to make loans.
4. Proposal to reclassify each Portfolio's fundamental limitation
concerning pledging assets as non-fundamental, and to amend certain
language.
5. Proposal to reclassify each Portfolio's fundamental limitation
concerning investment in securities for the purpose of exercising control
as non-fundamental.
6. Proposal 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. Proposal to reclassify each Portfolio's fundamental limitation
concerning short sales and margins sales as non-fundamental, and to amend
certain language.
<PAGE>
8. Proposal to reclassify each Portfolio's fundamental limitation
concerning investment in securities of investment companies as non-
fundamental, and to amend certain language.
9. Proposal to amend each Portfolio's fundamental limitation concerning
the issuance of senior securities to clarify each Portfolio's ability to
issue senior securities.
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.
11. Proposal 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. Proposal to eliminate each Portfolio's fundamental limitation
concerning investment in warrants, puts, calls, straddles, spreads or
combinations thereof.
SECTION II.
Proposals 13 and 14 relate to a new management structure (the "Manager of
Managers" structure) approved by the Trust's Board of Trustees and required to
be approved by vote of the Shareholders of each Portfolio voting on these
proposals, wherein SFM, which already acts as investment adviser to several
Portfolios of the Trust, will act as investment adviser for certain other
Portfolios of the Trust and recommend to the Trustees which investment sub-
advisers to appoint and replace for such Portfolios. Apart from Shareholder
approval, this structure requires an order of exemption from the SEC before
becoming operative. It is anticipated that if and when the exemption 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. The specifics of these two Proposals are as follows:
13. Proposal to authorize the Trust's Board of Trustees to appoint
additional or replacement investment sub-advisers recommended by SFM for
the Trust's Small Cap Growth Portfolio without seeking approval of the
Portfolio's Shareholders of the contracts pursuant to which such sub-
advisers serve.
14. Proposal to authorize the Trust's Board of Trustees to appoint
additional or replacement investment sub-advisers recommended by SFM for
the Trust's Mid-Cap Portfolio without seeking approval of the Portfolio's
Shareholders of the contracts pursuant to which such sub-advisers serve.
SECTION III.
Proposals 15 and 16 relate to approval by Shareholders of the selection of
SFM as Investment Adviser to certain Portfolios in connection with the "Manager
of Managers" structure and the approval of a form of investment advisory
agreement for these Portfolios. A copy of the form of Investment Advisory
Agreement is attached as Exhibit A to the Proxy Statement. The specifics of
these two Proposals are as follows:
15. Proposal to approve the selection of SFM as the Investment Adviser
for the Trust's Small Cap Growth Portfolio, and to approve the Investment
Advisory Agreement between the Trust, on behalf of the Small Cap Growth
Portfolio, and SFM.
2
<PAGE>
16. Proposal to approve the selection of SFM as the Investment Adviser
for the Trust's Mid-Cap Portfolio, and to approve the Investment Advisory
Agreement between the Trust, on behalf of the Mid-Cap Portfolio, and SFM.
SECTION IV.
In connection with the approval of SFM as Investment Adviser, Proposals 17
through 21 solicit Shareholder approval of the selection of certain of the
current investment advisers for the Small Cap Growth Portfolio to serve as
investment sub-advisers for the Portfolio, approval of certain new investment
sub-advisers for the Portfolio, and approval of a form of Investment Sub-
Advisory Agreement for the Portfolio. A copy of the form of Investment Sub-
Advisory Agreement is attached as Exhibit B to the Proxy Statement. If the
"Manager of Managers" structure discussed in Sections II and III of the
attached Proxy Statement is approved by Shareholders 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 for this and the other Portfolios, and to utilize
investment sub-advisory agreements for the Portfolios whose terms are different
from those of the form of Investment Sub-Advisory Agreement attached as Exhibit
B to the Proxy Statement. It is anticipated that the "Manager of Managers"
structure will result in increased efficiency and fewer Shareholder meetings.
The specifics of these five Proposals are as follows:
17. Proposal to approve the selection of Investment Advisers, Inc.
("IAI") as an investment sub-adviser for the Small Cap Growth Portfolio,
and to approve the form of investment sub-advisory agreement between SFM
and IAI.
18. Proposal to approve the selection of Nicholas-Applegate Capital
Management ("Nicholas-Applegate") as an investment sub-adviser for the
Small Cap Growth Portfolio, and to approve the form of investment sub-
advisory agreement between SFM and Nicholas-Applegate.
19. Proposal to approve the selection of Pilgrim Baxter & Associates,
Ltd. ("Pilgrim Baxter") as an investment sub-adviser for the Small Cap
Growth Portfolio, and to approve the form of investment sub-advisory
agreement between SFM and Pilgrim Baxter.
20. Proposal to approve the selection of Apodaca-Johnston Capital
Management ("Apodaca") as an investment sub-adviser for the Small Cap
Growth Portfolio, and to approve the form of investment sub-advisory
agreement between SFM and Apodaca.
21. Proposal to approve the selection of Wall Street Associates ("WSA")
as an investment sub-adviser for the Small Cap Growth Portfolio, and to
approve the form of investment sub-advisory agreement between SFM and WSA.
SECTION V.
Proposals 22 through 25 relate to the approval by Shareholders of the
selection of Martingale Asset Management, L.P. ("Martingale") as investment
adviser for the Mid-Cap Portfolio and the approval of an Investment Advisory
Agreement between the Trust, on behalf of the Portfolio, and Martingale. On
June 5, 1995, the Board of Trustees voted to terminate the investment advisory
agreement between the Trust, on behalf of the Portfolio, and Nicholas-
Applegate, and voted to appoint Martingale to serve as the Portfolio's
investment adviser effective June 21, 1995, pending approval of the "Manager of
Managers" structure
3
<PAGE>
discussed in Sections II and III of the attached Proxy Statement. At the same
meeting, the Board approved the selection of Martingale as investment sub-
adviser for the Portfolio, effective upon approval by Shareholders of the
"Manager of Managers" structure. Accordingly, Shareholder approval is sought
for both the proposed investment advisory and investment sub-advisory
agreements with Martingale. The investment advisory agreement discussed in
Proposal 23 will only take effect if SFM is not approved by the Shareholders
of the Mid-Cap Portfolio as investment adviser for the Portfolio. (See
Proposal 16.)
In addition, there is a proposed transaction wherein Martingale will admit
Commerz International Capital Management ("CICM") as a general partner, after
which CICM will own 60% of Martingale. If this transaction is consummated,
whichever of the advisory agreements discussed in Proposals 22 and 23 is in
effect at the time of the proposed transaction will terminate, and the
Portfolio will have to resolicit Shareholders to approve a new investment
advisory or sub-advisory agreement. In order to avoid the expense associated
with holding an additional Shareholder meeting, the Trustees are recommending
that the Shareholders of the Portfolio approve additional investment advisory
and sub-advisory agreements with Martingale which contain terms identical to
those of the agreements described in Proposals 22 and 23. The agreements
described in Proposals 24 and 25 will become effective only upon the admission
of CICM as general partner and majority owner of Martingale.
The specifics of these four Proposals are as follows:
22. Proposal to approve the selection of Martingale as investment sub-
adviser for the Mid-Cap Portfolio, and to approve the form of investment
sub-advisory agreement between SFM and Martingale.
23. Proposal to approve the selection of Martingale as an investment
adviser for the Mid-Cap Portfolio, and to approve the form of investment
advisory agreement between the Trust, on behalf of the Mid-Cap Portfolio,
and Martingale.
24. Proposal to approve the selection of Martingale as investment sub-
adviser for the Mid-Cap Portfolio, and to approve the form of investment
sub-advisory agreement between SFM and Martingale, effective upon the
admission of CICM as general partner and majority owner of Martingale.
25. Proposal to approve the selection of Martingale as an investment
adviser for the Mid-Cap Portfolio, and to approve the form of investment
advisory agreement between the Trust, on behalf of the Mid-Cap Portfolio,
and Martingale, effective upon the admission of CICM as general partner and
majority owner of Martingale.
SECTION VI.
Proposal 26 relates to the approval by Shareholders of the selection of BEA
Associates ("BEA") as investment sub-adviser for the High Yield Bond Portfolio
and the approval of the investment sub-advisory agreement between SFM and BEA.
Prior to April 26, 1995, CS First Boston Investment Management, an affiliate
of BEA ("CSFBIM"), acted as investment sub-adviser for the High Yield Bond
Portfolio. Effective April 26, 1995, BEA agreed to acquire CSFBIM's U.S.
assets and certain liabilities and, pursuant to the former investment sub-
advisory agreement and the requirements of the Investment Company Act of 1940,
the former investment sub-advisory agreement between SFM and CSFBIM
terminated. On April 12, 1995, the Board of Trustees approved a new investment
sub-advisory agreement between SFM and BEA,
4
<PAGE>
which contains the same terms as the CSFBIM agreement except that it provides
for no compensation to BEA for its services pending Shareholder approval of the
agreement.
26. Proposal to approve the selection of BEA as an investment sub-adviser
for the High Yield Bond Portfolio, and to approve the investment sub-
advisory agreement between SFM and BEA.
SECTION VII.
27. 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 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 June 16, 1995 are entitled
to notice of and to vote at the Meeting or any adjournment thereof.
July 7, 1995
5
<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 August
11, 1995 at 10:00 a.m. at the offices of SEI Financial Management Company
("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 certain Portfolios
(each a "Portfolio" and, together, the "Portfolios") of the Trust
("Shareholders") of record at the close of business on June 16, 1995 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 of the Trust being solicited by this Proxy Statement:
<TABLE>
<CAPTION>
NET ASSETS SHARES OUTSTANDING
PORTFOLIO AS OF JUNE 16, 1995 AS OF JUNE 16, 1995
--------- ------------------- -------------------
<S> <C> <C>
Small Cap Growth $285,164,679.07 17,319,859.436
Mid-Cap $ 30,797,296.32 2,619,111.045
High Yield Bond $ 17,147,330.02 1,642,462.190
</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 and BEA
will bear a portion of the overall cost of the Proxy Statement relating to the
approval of BEA as investment sub-adviser. The proxy and this Proxy Statement
are being mailed to Shareholders on or about July 7, 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.
FOR THOSE SHAREHOLDERS WHO WISH TO VOTE FOR OR AGAINST ALL OF THE PROPOSALS
TO WHICH HIS OR HER SHARES RELATE, EACH PROXY CARD MAY BE COMPLETED BY
CHECKING A SINGLE BOX. HOWEVER, EACH PROXY CARD ALSO SETS FORTH EACH
APPLICABLE PROPOSAL, WHICH CAN BE VOTED ON SEPARATELY.
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 certain Portfolios of the Trust to vote on a
number of issues related to the investment limitations of the Portfolios of
the Trust, as well as to vote on a new management structure, approve the
selection of a new investment adviser and new sub-advisers for certain
Portfolios, and adopt new investment advisory and sub-advisory agreements in
connection with the approval of those new relationships.
The Proposals contained in Section I of this Proxy Statement (Proposals 1
through 12) must be acted upon by the Shareholders of each Portfolio of the
Trust being solicited by this Proxy Statement. Shareholders of the High Yield
Bond Portfolio (sometimes referred to herein as the "SFM-Advised Portfolio"),
are not required to act upon the Proposals contained in Sections II, III, IV
and V of this Proxy Statement. Shareholders of the Large Cap Growth, Large Cap
Value, Capital Growth, Capital Appreciation, Equity Income, Balanced and Bond
Portfolios (the "Additional Portfolios") have been solicited by a prior proxy
statement containing substantially the same information and proposals as this
Proxy Statement (except for Sections V and VI). The Real Estate Securities
Portfolio is not yet being offered publicly, and its sole Shareholder, SFM,
will be solicited separately. It is anticipated that the Trustees will
recommend that the remaining Portfolios of the Trust (i.e., the Small Cap
Value and Core Fixed Income Portfolios) adopt the management structure
discussed in Sections II and III of this Proxy Statement. In the event that
the Trustees make such a recommendation, the remaining Portfolios of the Trust
will be solicited by a later proxy statement containing substantially the same
information and proposals as this Proxy Statement (except Sections V and VI).
ACCORDINGLY, SHAREHOLDERS OF THE HIGH YIELD BOND PORTFOLIO NEED ONLY CONSIDER
THE INFORMATION CONTAINED IN SECTIONS I, VI AND VII OF THIS PROXY STATEMENT.
The Proposals contained in Sections II and III of this Proxy Statement
(Proposals 13 through 16) require action by the Shareholders of the Small Cap
Growth and Mid-Cap Portfolios of the Trust (sometimes referred to herein as
the "Non-SFM-Advised Portfolios"), voting separately. 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 summary voting tables below set forth the action required by
the Shareholders of the Non-SFM-Advised Portfolios of the Trust on each of the
Proposals contained in Sections II and III:
APPROVAL OF PROPOSALS AUTHORIZING THE
BOARD OF TRUSTEES TO APPOINT ADDITIONAL
OR REPLACEMENT INVESTMENT SUB-ADVISERS
WITHOUT SHAREHOLDER APPROVAL.
<TABLE>
<CAPTION>
PROPOSAL NUMBER PORTFOLIO
--------------- ---------
<S> <C>
13 Small Cap Growth
14 Mid-Cap
</TABLE>
2
<PAGE>
APPROVAL OF SFM AS INVESTMENT ADVISER
FOR THE NON-SFM-ADVISED PORTFOLIOS AND
APPROVAL OF THE PROPOSED INVESTMENT ADVISORY AGREEMENT.
<TABLE>
<CAPTION>
PROPOSAL NUMBER PORTFOLIO
--------------- ---------
<S> <C>
15 Small Cap Growth
16 Mid-Cap
</TABLE>
The Proposals contained in Section IV of this Proxy Statement (Proposals 17
through 21) ask the Shareholders of the Small Cap Growth Portfolio to approve
the selection of certain of the current investment advisers of the Portfolio
to serve as investment sub-advisers for the Portfolio, the selection of
certain new sub-advisers as additional investment sub-advisers for the
Portfolio, and the new form of investment sub-advisory agreement for the Small
Cap Growth Portfolio. The summary voting table below sets forth the action
required by the Shareholders of the Small Cap Growth Portfolio on each of the
Proposals in Section IV of this Proxy Statement:
APPROVAL OF NEW SUB-ADVISERS FOR THE
SMALL CAP GROWTH PORTFOLIO AND APPROVAL OF
THE PROPOSED INVESTMENT SUB-ADVISORY AGREEMENTS:
<TABLE>
<CAPTION>
PROPOSAL NUMBER PORTFOLIO PROPOSED SUB-ADVISER
--------------- --------- --------------------
<S> <C> <C>
17 Small Cap Growth Investment Advisers, Inc.
18 Small Cap Growth Nicholas-Applegate Capital Management
19 Small Cap Growth Pilgrim Baxter & Associates, Ltd.
20 Small Cap Growth Apodaca-Johnston Capital Management
21 Small Cap Growth Wall Street Associates
</TABLE>
The Proposals contained in Section V of this Proxy Statement (Proposals 22
through 25) require the Shareholders of the Mid-Cap Portfolio to approve the
selection of Martingale Asset Management, L.P. ("Martingale") as the
investment sub-adviser for the Portfolio, to approve an investment sub-
advisory agreement between SFM and Martingale (Proposal 22), to approve the
selection of Martingale as an investment adviser, and to approve in the
alternative the form of investment advisory agreement between the Trust, on
behalf of the Portfolio, and Martingale, in the event that SFM is not approved
by Shareholders as investment adviser as discussed in Proposal 16 (Proposal
23). In addition, Proposals 24 and 25 request that the Shareholders of the
Mid-Cap Portfolio to approve the selection of Martingale as the investment
sub-adviser, to approve an investment sub-advisory agreement between SFM and
Martingale, to approve the selection of Martingale as an investment adviser,
and to approve the form of investment advisory agreement between the Trust, on
behalf of the Portfolio, and Martingale, to become effective upon the
admission of CICM as general partner and majority owner of Martingale.
3
<PAGE>
APPROVAL OF MARTINGALE AS INVESTMENT SUB-ADVISER
FOR THE MID-CAP PORTFOLIO AND APPROVAL OF
THE PROPOSED INVESTMENT SUB-ADVISORY AGREEMENT
<TABLE>
<CAPTION>
PROPOSAL NUMBER PROPOSED INVESTMENT SUB-ADVISER
--------------- -------------------------------
<S> <C>
22 Martingale Asset Management, L.P.
</TABLE>
APPROVAL OF MARTINGALE AS INVESTMENT ADVISER
FOR THE MID-CAP PORTFOLIO AND APPROVAL OF
THE PROPOSED INVESTMENT ADVISORY AGREEMENT
<TABLE>
<CAPTION>
PROPOSAL NUMBER PROPOSED INVESTMENT ADVISER
--------------- ---------------------------
<S> <C>
23 Martingale Asset Management, L.P.
</TABLE>
APPROVAL OF MARTINGALE AS INVESTMENT SUB-ADVISER
FOR THE MID-CAP PORTFOLIO AND APPROVAL OF
THE PROPOSED INVESTMENT SUB-ADVISORY AGREEMENT
TO BECOME EFFECTIVE UPON THE ADMISSION OF CICM AS
GENERAL PARTNER AND MAJORITY OWNER OF MARTINGALE
<TABLE>
<CAPTION>
PROPOSAL NUMBER PROPOSED INVESTMENT SUB-ADVISER
--------------- -------------------------------
<S> <C>
24 Martingale Asset Management, L.P.
</TABLE>
APPROVAL OF MARTINGALE AS INVESTMENT ADVISER
FOR THE MID-CAP PORTFOLIO AND APPROVAL OF
THE PROPOSED INVESTMENT ADVISORY AGREEMENT
TO BECOME EFFECTIVE UPON THE ADMISSION OF CICM AS
GENERAL PARTNER AND MAJORITY OWNER OF MARTINGALE
<TABLE>
<CAPTION>
PROPOSAL NUMBER PROPOSED INVESTMENT ADVISER
--------------- ---------------------------
<S> <C>
25 Martingale Asset Management, L.P.
</TABLE>
The Proposal contained in Section VI of the Proxy Statement (Proposal 26)
requires the Shareholders of the High Yield Bond Portfolio to approve the
selection of BEA Associates ("BEA") as investment sub-adviser for the Portfolio
and the investment sub-advisory agreement between SFM and BEA.
APPROVAL OF BEA AS INVESTMENT SUB-ADVISER
FOR THE HIGH YIELD BOND PORTFOLIO AND APPROVAL OF
THE PROPOSED INVESTMENT SUB-ADVISORY AGREEMENT
<TABLE>
<CAPTION>
PROPOSED INVESTMENT SUB-
PROPOSAL NUMBER ADVISER
--------------- ------------------------
<S> <C>
26 BEA Associates
</TABLE>
4
<PAGE>
SECTION I.
The Proposals in Section I relate to certain changes to the fundamental
investment limitations of certain Portfolios of the Trust. Essentially, the
Proposals regarding the Trust's investment limitations are designed to
establish a new set of fundamental investment limitations and non-fundamental
investment limitations for each of the Portfolios being solicited by this
Proxy Statement by amending certain of the existing fundamental investment
limitations and reclassifying some of them 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 may also elect to designate other policies as policies
that may be changed only by a Shareholder vote. Both types of policies are
referred to as "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. For purposes of fundamental and non-fundamental
policies, each separate series of an investment company is treated as a
separate investment company and each adopts its own fundamental and non-
fundamental policies and limitations.
The Portfolios' fundamental investment policies and limitations are set
forth in the prospectuses and statement of additional information. The
Trustees have elected to reclassify some limitations as non-fundamental and/or
modify other fundamental limitations as set forth 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 do not think it is 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 Trustees
believe that 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, the Trustees believe that investment limitations
should only be fundamental where specifically required by law. THE FUNDAMENTAL
NATURE OF EACH PORTFOLIO'S INVESTMENT OBJECTIVE, AS DISTINGUISHED FROM ITS
INVESTMENT LIMITATIONS, WILL NOT BE CHANGED.
The amendments to a 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 limitation as applied to the Portfolio will remain unchanged.
5
<PAGE>
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, which are currently stated 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 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.
Subject to Shareholder approval, the Trustees intend to replace each
Portfolio's current fundamental limitations with the following fundamental
limitation concerning diversification:
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.
Despite these amendments to each Portfolio's fundamental limitation on
diversification, the Portfolios will continue to conform to the
"diversification" requirements for regulated investment companies under
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the Internal Revenue Code of 1986, as amended (the "Code"). If the Proposal is
approved, the new fundamental diversification limitation may not be changed
with respect to a Portfolio without a vote of Shareholders of that Portfolio.
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.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 1.
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.
Subject to Shareholder approval, the Trustees intend to replace each
Portfolio's current fundamental limitation 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.
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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.
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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.
Subject to Shareholder approval, the Trustees intend to replace each
Portfolio's current limitation 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 Mid-Cap, Core
Fixed Income, and Bond Portfolios to lend their 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
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.
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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.
Subject to Shareholder approval, the Trustees intend to amend this limitation
concerning pledging, mortgaging or hypothecating its assets 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.
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.
Subject to Shareholder approval, the Trustees intend to replace each
Portfolio's current fundamental limitation 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,
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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 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.
Subject to Shareholder approval, the Trustees intend to replace each
Portfolio's current fundamental investment limitation with the following non-
fundamental limitation that conforms with legal requirements imposed by
applicable law:
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 any
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.
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Since the Portfolios have no present intention to make short sales other
than short sales against the box, 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.
If the Proposal is approved, the non-fundamental limitation concerning short
sales and purchases on margin can 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 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.
Subject to Shareholder approval, the Trustees intend to replace each
Portfolio's current fundamental limitation 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.
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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 or the sub-
adviser will waive its fee on that portion of the Portfolio's assets placed in
such money market open-end investment companies. Absent such fee waiver, each
Portfolio's purchase of investment company securities would result in the
Shareholders indirectly 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 non-money-market investment
companies entail.
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").
Subject to Shareholder approval, the Trustees intend to replace each
Portfolio's current fundamental limitation 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
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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.
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 of 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
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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.
16
<PAGE>
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, Real
Estate Securities, 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.
Subject to Shareholder approval, the Trustees intend to eliminate each
Portfolio's fundamental limitation concerning investment in warrants, puts,
calls, straddles, spreads, or combinations thereof.
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 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.
---
In addition to the foregoing fundamental and non-fundamental limitations,
the Trustees have adopted two additional non-fundamental limitations for each
Portfolio of the Trust. The new non-fundamental
17
<PAGE>
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.
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 13, 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.
18
<PAGE>
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 each
of the SFM-Advised Portfolios and each of the Additional Portfolios, is
approved as investment adviser to the Non-SFM-Advised Portfolios, 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 each Portfolio's chances of achieving its
investment objective. Accordingly, while there is no way of knowing exactly
how often SFM may recommend, and the Board approve, the selection of an
additional Manager, or the replacement of an existing Manager, both of which
would typically require a Shareholder meeting, it is likely that the Manager
of Managers structure would result in more frequent Shareholder meetings than
would otherwise be the case. However, if the SEC grants the exemption, the
Trustees will not be required to call a Shareholder meeting each time a new
sub-adviser is approved. Shareholder meetings entail substantial costs which
could reduce the desired benefits of the Manager of Managers structure. These
costs must be weighed against the benefits of Shareholder scrutiny of proposed
contracts with additional or replacement Managers; however, even in the
absence of Shareholder approval, any proposal to add or replace Managers would
receive careful review. First, SFM would assess each 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
FOR THE SMALL CAP GROWTH 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 Small Cap Growth 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.
---
14. AUTHORIZATION FOR THE BOARD OF TRUSTEES TO APPOINT INVESTMENT SUB-ADVISERS
FOR THE MID-CAP 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 Mid-Cap 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 14.
---
19
<PAGE>
SECTION III.
The Board of Trustees is recommending that Shareholders of the Non-SFM-
Advised Portfolios of the Trust approve SFM as the investment adviser of the
Non-SFM-Advised Portfolios and approve the form of investment advisory
agreement (the "Investment Advisory Agreement") between the Trust and SFM
relating to the Non-SFM-Advised Portfolios (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 Non-SFM-Advised Portfolios
at a meeting held on March 6, 1995. SFM already serves as investment adviser
to the SFM-Advised Portfolio and the Additional Portfolios pursuant to an
Investment Advisory Agreement dated December 16, 1994, between SFM and the
Trust, on behalf of the SFM-Advised Portfolio and the Additional Portfolios.
Other than the identity of the investment adviser, there are no material
differences between the Investment Advisory Agreement and the existing
investment advisory agreements of the Non-SFM-Advised Portfolios of the Trust.
While the level of compensation paid to SFM by each Portfolio for advisory
services will be .15% higher than that paid to the current advisers, SFM's
contractual management fee will be reduced by .15% for each 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
each Portfolio of advisory and management services will not be increased. (See
"Description of the Investment Adviser," below.)
Duties Under the Investment Advisory Agreement. Under the Investment
Advisory Agreement, SFM will serve as investment adviser to the Non-SFM-
Advised Portfolios and will provide its proprietary investment adviser
selection, monitoring, and asset allocation services to the Non-SFM-Advised
Portfolios. 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 each Portfolio. Consistent
with its goal of using multiple Managers to carry out each Portfolio's
investment objective and policies, SFM may provide specific portfolio security
advice with respect to all or some portion of each Portfolio's assets.
SFM will perform internal due diligence on prospective Managers for each
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 each Portfolio's fundamental investment
objectives and policies, authorizing Managers to engage in certain investment
techniques for each 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
each 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
20
<PAGE>
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
each 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 each 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 a Portfolio 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 "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 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 SFM. In
addition, it is terminable by SFM upon 90 days written notice to the Trust.
SFM will discharge its responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust. The Investment Advisory Agreement
provides that SFM shall not be protected against any liability to the Trust or
its Shareholders by reason of willful misfeasance, bad faith, or gross
negligence on its part in the performance of its duties or from reckless
disregard by SFM of its obligations or duties thereunder.
Description of the Investment Adviser. SFM is a wholly-owned subsidiary of
SEI Corporation ("SEI"), a financial services company located in Wayne,
Pennsylvania. The principal business address of SFM is 680 East Swedesford
Road, Wayne, Pennsylvania 19087-1658. SEI was founded in 1968 and is a leading
provider of investment solutions to banks, institutional investors, investment
advisers, and insurance companies. Affiliates of SFM have provided consulting
advice to institutional investors for more than 20 years, including advice
regarding selection and evaluation of investment advisers. As of March 31,
1995, SFM acted in a similar "manager of managers" role with respect to $665
million of client assets, including certain Portfolios of the Trust. SFM
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 that management structure was approved by the
Shareholders of that Portfolio on December 16, 1994.
SFM currently serves as investment adviser, manager and/or administrator to
more than 26 investment companies, including more than 220 portfolios, which
investment companies had more than $48 billion in assets as of March 31, 1995.
In addition to serving as investment adviser to the SFM-Advised Portfolios,
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
21
<PAGE>
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 .50% of the average daily net assets of the Small Cap Growth, and Mid-
Cap Portfolios. 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.
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 each Portfolio operating under that structure in
order to compensate for the increased advisory and sub-advisory fees payable
under that structure.
22
<PAGE>
The table below sets forth information about the proposed level of fees
payable to SFM both as Adviser and Manager, and to the Managers, assuming that
the Shareholders approve the Manager of Managers structure:
<TABLE>
<CAPTION>
SUB-ADVISORY
FEE PAID BY SFM
(BASED UPON A PERCENTAGE
ADVISORY FEE ADVISORY FEE OF THE MARKET
PAID TO SUB- PAID TO SFM VALUE OF THE PORTION OF
ADVISER UNDER NEW THE PORTFOLIO'S ADMINISTRATION
PROPOSED UNDER FORMER ADVISORY ASSETS MANAGED FEE PAID TO
PORTFOLIO SUB-ADVISER ADVISORY AGREEMENT AGREEMENT BY THE SUB-ADVISER) SFM*
--------- ------------------------- ------------------ ------------ ------------------------ --------------
<S> <C> <C> <C> <C> <C>
Small Cap Growth Nicholas-Applegate .50% .65% .50% .35%
Capital Management
Investment Advisers, Inc. .50% .50%
Pilgrim-Baxter & .50% .50%
Associates, Ltd.
Apodaca-Johnston N/A .50%
Capital Management
Wall Street Associates N/A .50%
Mid-Cap Nicholas-Applegate .45% up to .40% .25% payable .35%
Capital Management $100,000,000 to Martingale
(current adviser) .40% in excess of Asset
$100,000,000 Management, L.P.
</TABLE>
- --------
* For the Small Cap Growth 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. In the case of the Mid-Cap Portfolio, the fee payable to the new sub-
adviser will be up to .20% lower than that currently being paid by the
Portfolio to its adviser since the advisory fee will be reduced by up to
.05% and the management fee will be reduced by .15%. The overall level of
fees received by SFM 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 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 Division & Asset Management Services
Division
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>
23
<PAGE>
Trustees' Consideration. At a meeting held on March 6, 1995, the Board of
Trustees reviewed SFM's qualifications to act as investment adviser for the
Non-SFM-Advised Portfolios of the Trust, placing particular emphasis on its
proposed role in recommending, monitoring and terminating Managers, subject to
Board of Trustees oversight, and its performance as investment adviser for the
SFM-Advised Portfolio and the Additional Portfolios of the Trust. 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 Portfolios, 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 Portfolios since commencement of
operations; (3) the nature and quality of the services expected to be rendered
to the Portfolios by SFM; (4) the distinct investment objective and policies
of the Portfolios; (5) that the compensation payable to SFM by the Portfolios
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 benefits received by
SFM or its affiliates in connection with soft dollar payments.
In the event Shareholders of a Portfolio do not approve the selection of SFM
as investment adviser and the Investment Advisory Agreement between the Trust,
on behalf of the Non-SFM-Advised Portfolios, and SFM, or if the Shareholders
of a 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.
15. APPROVAL OF SFM AS THE INVESTMENT ADVISER FOR THE SMALL CAP GROWTH
PORTFOLIO OF THE TRUST, 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 Small Cap
Growth Portfolio is to provide long-term capital appreciation by investing
primarily in equity securities of smaller companies believed to be in an early
stage or transitional point in their development and have demonstrated or have
the potential for above average capital growth. The Portfolio's advisers will
select companies which have the potential to gain market share in their
industry, achieve and maintain high and consistent profitability or produce
increases in earnings. The Portfolio's advisers will also seek companies with
strong management and superior fundamental strengths.
Termination of the Current Investment Advisory Agreements. Investment
Advisers, Inc. ("IAI"), Nicholas-Applegate Capital Management ("Nicholas-
Applegate"), and Pilgrim Baxter & Associates, Ltd.
24
<PAGE>
("Pilgrim Baxter") currently serve as investment advisers to the Small Cap
Growth Portfolio pursuant to investment advisory agreements. The Board of
Trustees voted on March 6, 1995 to terminate these agreements 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 Small Cap
Growth Portfolio. The Board also approved SFM as the new investment adviser,
and IAI, Nicholas-Applegate, Pilgrim Baxter as sub-advisers, effective upon
approval by Shareholders. On June 5, 1995, the Board approved two additional
sub-advisers, Apodaca-Johnston Capital Management ("Apodaca") and Wall Street
Associates ("WSA") as the new sub-advisers, 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 .65% of the average daily net assets of the Small Cap Growth
Portfolio. As SFM did not previously serve as investment adviser to the Small
Cap Growth Portfolio and Apodaca and WSA did not serve as sub-advisers, the
aggregate investment advisory and sub-advisory fees paid to SFM, Apodaca, and
WSA during the last fiscal year was, in each instance, $0. IAI, Nicholas-
Applegate, and Pilgrim Baxter received $451,000, $411,000 and $420,000,
respectively.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 15.
---
16. APPROVAL OF SFM AS THE INVESTMENT ADVISER FOR THE MID-CAP PORTFOLIO OF THE
TRUST, 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 Mid-Cap
Portfolio (previously, the Mid-Cap Growth Portfolio) is to provide long-term
capital appreciation by investing primarily in equity securities of medium-
sized companies. Such companies are typically well established but have not
reached full maturity and may offer significant growth potential. On June 5,
1995, the Board of Trustees voted to change the name of the Portfolio from the
Mid-Cap Growth Portfolio to the Mid-Cap Portfolio to reflect a shift in the
investment orientation of the Portfolio toward a broader exposure to mid cap
equities in order to enable the Portfolio to better manage the risk inherent
in mid-sized companies.
Termination of the Current Investment Advisory Agreement. Nicholas-Applegate
currently serves as investment adviser to the Mid-Cap Portfolio pursuant to an
investment advisory agreement. The Board of Trustees voted on March 6, 1995 to
terminate this 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 Mid-Cap Portfolio. The Board also
approved SFM as the new investment adviser. At a meeting held on June 5-6,
1995, the Board of Trustees voted to replace Nicholas-Applegate and to appoint
Martingale as the new sub-adviser, effective upon approval of Shareholders.
(See Proposals 22 and 23, below.)
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 .40% of the average daily net assets of the Mid-Cap Portfolio. As SFM
did not previously serve as investment adviser to the Mid-Cap Portfolio and
Martingale did not serve as sub-adviser, the aggregate investment advisory and
sub-advisory fees paid
25
<PAGE>
to SFM and Martingale during the last fiscal year was, in each instance, $0.
Nicholas-Applegate received $400,000.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 16.
---
SECTION IV.
The Board of Trustees is recommending that Shareholders of the Small Cap
Growth Portfolio approve each investment sub-adviser recommended in Proposals
17 through 21 as investment sub-advisers of the Small Cap Growth Portfolio 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 17 through 21 and
Proposals 22, 24 and 26 will serve as investment sub-advisers (each, a "Sub-
Adviser," and, collectively, the "Sub-Advisers") to the Non-SFM-Advised
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 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 of
any developing situations to help ensure that investments do not run afoul of
the short-short test or the wash sale rules. To the extent that having
multiple 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. However, the use of multiple managers may
allow a Portfolio to take advantage of each manager's investment expertise,
and may result in less overall volatility.
It is possible that different Sub-Advisers for 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
26
<PAGE>
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 for 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 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 Non-SFM-
Advised Portfolios and the High Yield Bond Portfolio at meetings held on March
6, April 12, and June 5-6, 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
27
<PAGE>
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 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. Each Investment Sub-Advisory Agreement provides that each Sub-
Adviser shall not be protected against any liability to the Trust, its
shareholders, or SFM by reason of willful misfeasance, bad faith, or
negligence on its part in the performance of its duties or from reckless
disregard by such Sub-Adviser of its obligations or duties thereunder.
Duration and Termination. Unless terminated earlier, each Investment Sub-
Advisory Agreement shall continue in effect as to each Portfolio through June
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
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. Until July 1, 1993, IAI was the
sole investment adviser and provided the review, supervision and management of
the Portfolio's investment program and related reporting and recordkeeping
services for all of the Portfolio's assets. As of July 1, 1993, Nicholas-
Applegate and Pilgrim Baxter began to serve as investment advisers for
portions of the Portfolio's assets
28
<PAGE>
not advised by IAI. The Board of Trustees voted on June 5, 1995 to appoint
Apodaca and WSA as additional sub-advisers for the Portfolio. SFM, as Manager,
will allocate the assets of the Portfolio among the five Sub-Advisers under
the supervision of the Board of Trustees. Accordingly, upon approval of all of
the Proposals relating to the Portfolio, it is expected that the assets of the
Portfolio initially will be allocated as follows:
<TABLE>
<CAPTION>
SUB-ADVISER % OF PORTFOLIO'S ASSETS
----------- -----------------------
<S> <C>
IAI 15%
Nicholas-Applegate 15%
Pilgrim Baxter 20%
Apodaca 25%
WSA 25%
</TABLE>
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.
17. APPROVAL OF AN INVESTMENT SUB-ADVISER AND THE INVESTMENT SUB-ADVISORY
AGREEMENT FOR THE SMALL CAP GROWTH PORTFOLIO
The Board of Trustees is recommending that Shareholders of the Small Cap
Growth Portfolio approve IAI as an Investment Sub-Adviser of the Portfolio and
approve the form of Investment Sub-Advisory Agreement between SFM and IAI.
Compensation. Under the proposed Investment Sub-Advisory Agreement, SFM will
pay IAI 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 Growth Portfolio managed by IAI. For the fiscal
year ended September 30, 1994, the Portfolio paid each of the Portfolio's
advisers an advisory fee under the then-current advisory agreement of .50% of
the average daily net assets under such adviser's investment management. Of
the total .50% advisory fee, .18% of the Portfolio's total average daily net
assets was paid to IAI.
Description of IAI. IAI currently acts as an Investment Adviser of the Small
Cap Growth Portfolio, which is also advised by Nicholas-Applegate and Pilgrim
Baxter. IAI has operated as a professional investment counseling firm which
provides investment services to employee benefit plans, endowments,
foundations, other institutions and investment companies since 1947. As of
June 30, 1995. IAI had discretionary management authority with respect to
approximately $14 billion of assets. The principal business address of IAI is
3700 First Bank Place, 601 Second Avenue, Minneapolis, Minnesota 55402. IAI is
an indirect majority owned subsidiary of publicly held TSB Group, Plc, a
United Kingdom financial services group.
IAI also serves as 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 PAYABLE
FUND (AS OF 6/9/95) (MOST RECENT FISCAL YEAR)
---- -------------- -------------------------
<S> <C> <C>
IAI Emerging Growth Fund $365,152,000 $2,099,484
</TABLE>
29
<PAGE>
Listed below are the names and principal occupations of each of the
directors and the principal executive officer of IAI. The principal business
address of each director and the principal executive officer, as it relates to
their duties at IAI is 3700 First Bank Place, 601 Second Avenue, Minneapolis,
Minnesota 55402. No Trustee of the Trust purchased or sold shares of interests
in IAI during the Trust's most recent fiscal year.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
Hugh Ronald Freedberg Director, Chairman of the Board
Noel Paul Rahn Director, Chief Executive Officer
Charles Peter Barrington Director
Richard Oliver Bernays Director
Larry Ray Hill Director
Irving P. "Kip" Knelman Director
Andrew Scott Plummer Director
Eric St. Clair Stobart Director
Richard Edward Struthers 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 SMALL CAP GROWTH PORTFOLIO.
The Board of Trustees is recommending that Shareholders of the Small Cap
Growth Portfolio approve Nicholas-Applegate as a Sub-Adviser of the Portfolio
and approve the form of Investment Sub-Advisory Agreement between SFM and
Nicholas-Applegate.
Compensation. Under the proposed Investment Sub-Advisory Agreement, SFM will
pay Nicholas-Applegate 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 Growth Portfolio managed by Nicholas-
Applegate. For the fiscal year ended September 30, 1994, the Portfolio paid
each of the Portfolio's advisers an advisory fee under the then-current
advisory agreement of .50% of the average daily net assets under such
adviser's management. Of the total .50% advisory fee, .16% of the Portfolio's
total average daily net assets was paid to Nicholas-Applegate.
Description of Nicholas-Applegate. Nicholas-Applegate currently acts as an
Investment Adviser of the Small Cap Growth Portfolio which is also advised by
IAI and Pilgrim Baxter. Nicholas-Applegate has operated as an investment
adviser which provides investment services to employee benefit plans,
endowments, foundations, other institutions and, since April 20, 1987,
investment companies. As of June 30, 1995, Nicholas-Applegate had
discretionary management authority with respect to approximately $25 billion
of assets. The principal business address of Nicholas-Applegate is 600 West
Broadway, 29th Floor, San Diego, CA 92101. Nicholas-Applegate, pursuant to a
partnership agreement, is controlled by its general partner Nicholas-Applegate
Capital Management, Inc., a corporation owned by Arthur E. Nicholas.
30
<PAGE>
Nicholas-Applegate 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 3/3/95) PAYABLE
---- -------------- -------
<S> <C> <C>
Nicholas-Applegate Emerging Growth $490,000,000 1.00%
Allmerica Investment Trust $181,000,000 .60%
Paine-Webber Aggressive Growth $ 16,000,000 .50%
</TABLE>
Listed below are the names and principal occupations of each of the
directors and the principal executive officer of Nicholas-Applegate. The
principal business address of each director and the principal executive
officer, as it relates to their duties at Nicholas-Applegate, is 600 West
Broadway, 29th Floor, San Diego, California 92101. No Trustee of the Trust
purchased or sold shares of or interests in Nicholas-Applegate during the
Trust's most recent fiscal year.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
Arthur Nicholas Managing Partner, Chief Investment Officer
Catherine Somhegyi Avery Partner
Laura DeMarco Partner
Terence Ellis Partner
Peter Johnson Partner
James Kellerman Partner
John Marshall Partner
James T. McComsey Partner
John Pipkin Partner
Ashley Rabun Partner
Fred Robertson Partner
Lawrence Speidell Partner
John Wylie Partner
</TABLE>
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 18.
---
19. APPROVAL OF AN INVESTMENT SUB-ADVISER AND THE INVESTMENT SUB-ADVISORY
AGREEMENT FOR THE SMALL CAP GROWTH PORTFOLIO.
The Board of Trustees is recommending that Shareholders of the Small Cap
Growth Portfolio approve Pilgrim Baxter as an Investment Sub-Adviser of the
Portfolio and approve the form of Investment Sub-Advisory Agreement between
SFM and Pilgrim Baxter.
Compensation. Under the proposed Investment Sub-Advisory Agreement, SFM will
pay Pilgrim Baxter 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 Growth Portfolio managed by Pilgrim
Baxter. For the fiscal year ended September 30, 1994, the Portfolio paid each
of the Portfolio's advisers an advisory fee under the then-current advisory
agreement of .50% of the average daily net assets
31
<PAGE>
under such adviser's investment management. Of the total .50% advisory fee,
.16% of the Portfolio's total average daily net assets was paid to Pilgrim
Baxter.
Description of Pilgrim Baxter. Pilgrim Baxter currently acts as an
Investment Adviser of the Small Cap Growth Portfolio, which is also advised by
IAI and Nicholas-Applegate. Pilgrim Baxter is a Delaware corporation with its
principal address at 1255 Drummers Lane, Suite 300, Wayne, PA 19087. Pilgrim
Baxter is registered under the Investment Advisers Act of 1940 (the "Advisers
Act"), and is an indirect wholly-owned subsidiary of United Asset Management
("UAM"). UAM's corporate headquarters is located at One International Place,
Boston, Massachusetts 02110. Pilgrim Baxter is a direct subsidiary of United
Asset Management Holdings, Inc., 103 Springer Building, 3411 Silver Side Road,
Wilmington, Delaware 19810. Prior to April 28, 1995, Pilgrim Baxter served as
the Portfolio's investment adviser pursuant to an investment advisory
agreement. Pilgrim Baxter was purchased by UAM on that date, and the then-
current investment advisory agreement thereafter terminated. The Portfolio
entered into a new investment advisory agreement with Pilgrim Baxter on that
date, the terms of which are identical to the first investment advisory
agreement between the Trust, on behalf of the Portfolio, and Pilgrim Baxter.
This new investment advisory agreement was approved by Shareholders at a
meeting held on April 24, 1995.
Pilgrim Baxter has been in the investment advisory business since 1982 and
as of April 30, 1995, had approximately $4.8 billion in assets under
management. Its clients are primarily tax-exempt organizations such as pension
plans and charitable institutions. Pilgrim Baxter is also general partner of,
and adviser to, two hedge funds.
Pilgrim Baxter also serves as the investment adviser or sub-adviser to
several other registered investment companies with investment objectives
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 5/1/95) PAYABLE
---- -------------- -------
<S> <C> <C>
PBHG Growth Fund $1,200,000,000 .85%
CG Capital Markets Fund $ 126,000,000 .30%
Diversified Investment Advisers, Inc. $ 55,000,000 .50%
SEI Variable Annuity $ 585,000,000 .50%
AAL Smaller Company Stock Fund $ 223,000,000 .50%
PBHG Emerging Fund $ 455,000,000 .85%
VIST Small Cap Portfolio $ 997,000,000 .50%
CMIA Life Span Balanced Small Cap $ 5,000,000 .60%
</TABLE>
32
<PAGE>
Listed below are the names and principal occupations of each of the
directors and the principal executive officer of Pilgrim Baxter. The principal
business address of each director and the principal executive officer is 1255
Drummers Lane, Suite 300, Wayne, PA 19087. No Trustee of the Trust purchased
or sold shares of or interests in Pilgrim Baxter during the Trust's most
recent fiscal year.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
Harold J. Baxter Director, Chairman and Chief Executive Officer
Gary L. Pilgrim Director, President and Chief Investment Officer
Brian F. Bereznak Chief Operating Officer
Bruce J. Muzina Portfolio Manager
</TABLE>
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 19.
---
20. APPROVAL OF AN INVESTMENT SUB-ADVISER AND THE INVESTMENT SUB-ADVISORY
AGREEMENT FOR THE SMALL CAP GROWTH PORTFOLIO.
The Board of Trustees is recommending that Shareholders of the Small Cap
Growth Portfolio approve Apodaca as a Sub-Adviser of the Portfolio and approve
the form of Investment Sub-Advisory Agreement between SFM and Apodaca.
Compensation. Under the proposed Investment Sub-Advisory Agreement, SFM will
pay Apodaca 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 Growth Portfolio managed by Apodaca.
Description of Apodaca. Apodaca is a California corporation with its
principal address at 50 California Street, Suite 3315, San Francisco, CA
94101. Apodaca's predecessor was founded in 1985, and as of June 30, 1995,
Apodaca, which was founded in 1991, had approximately $140 million in assets
under management. Apodaca's clients include individuals, pension and profit
sharing plans, an endowment fund, and an investment company portfolio.
The portion of the Portfolio's assets allocated to Apodaca will be managed
by Scott Johnston and Jerry C. Apodaca, Jr. Scott Johnston founded Apodaca's
predecessor in 1985, and has 23 years of investment management experience.
Jerry C. Apodaca, Jr. joined the firm as a principal in 1991, and has 12 years
investment management experience. Before joining Apodaca, Mr. Apodaca was a
Vice President of Marketing at Newport First Investments, Inc.
Apodaca also serves as investment sub-adviser to another registered
investment company portfolio with investment objectives similar to those of
the Portfolio. The approximate net assets of such portfolio, and the fee
payable by it, are set forth below:
<TABLE>
<CAPTION>
ASSET SIZE ASSETS MANAGED FEE
FUND (AS OF 3/31/95) BY APODACA PAYABLE
---- --------------- -------------- -------
<S> <C> <C> <C>
Calvert World Fund $10,404,377 $3,500,000 $3,645
</TABLE>
33
<PAGE>
Listed below are the names and principal occupations of each of the
directors and the principal executive officer of Apodaca. The principal
business address of each director and the principal executive officer is 500
California Street, Suite 3315, San Francisco, CA 94101. No Trustee of the
Trust purchased or sold shares of or interests in Apodaca during the Trust's
most recent fiscal year.
<TABLE>
<CAPTION>
% OF OWNERSHIP
NAME TITLE OF SUB-ADVISER
---- ----- --------------
<S> <C> <C>
Jerry Apodaca Director, Chairman and CEO 33 1/3%
Scott S. Johnson Director, Chief Investment Officer 33 1/3%
Jerry C. Apodaca, Jr. Director, Vice President 33 1/3%
</TABLE>
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 20.
---
21. APPROVAL OF AN INVESTMENT SUB-ADVISER AND THE INVESTMENT SUB-ADVISORY
AGREEMENT FOR THE SMALL CAP GROWTH PORTFOLIO.
The Board of Trustees is recommending that Shareholders of the Small Cap
Growth Portfolio approve WSA as a Sub-Adviser of the Portfolio and approve the
form of Investment Sub-Advisory Agreement between SFM and WSA.
Compensation. Under the proposed Investment Sub-Advisory Agreement, SFM will
pay WSA 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 Growth Portfolio managed by WSA.
Description of WSA. WSA is organized as a corporation with its principal
address at 1200 Prospect Street, Suite 100, La Jolla, CA 92037. WSA was
founded in 1987, and as of June 30, 1995, had approximately $640 million in
assets under management, none of which was held by registered investment
companies. WSA provides investment advisory services for institutional
clients, an investment partnership for which it serves as general partner, a
group trust for which it serves as sole investment manager, and an offshore
fund for foreign investors for which it serves as the sole investment manager.
William Jeffery, III, Kenneth F. McCain, and Richard S. Coons, each of whom
owns 1/3 of WSA, serve as Portfolio Managers for the portion of the
Portfolio's assets allocated to WSA. Each is a founding principal of WSA and,
together, they have 73 years of investment management experience.
Listed below are the names and principal occupations of each of the
directors and the principal executive officer of WSA. The principal business
address of each director and the principal executive officer is 1200 Prospect
Street, Suite 100, La Jolla, CA 92037. No Trustee of the Trust purchased or
sold shares of or interests in WSA during the Trust's most recent fiscal year.
<TABLE>
<CAPTION>
% OF OWNERSHIP
NAME TITLE OF SUB-ADVISER
---- ----- --------------
<S> <C> <C>
William Jeffery, III President, Principal 33 1/3%
Richard S. Coons Principal 33 1/3%
Kenneth F. McCain Principal 33 1/3%
</TABLE>
34
<PAGE>
Prior to being approved as investment sub-adviser for The Compass Capital
Group Small Company Fund on June 28, 1995, WSA did not serve as an investment
adviser or sub-adviser to any registered investment companies and, as such,
does not have extensive experience advising a highly regulated entity such as
an investment company. This may present additional risks for the Portfolio.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 21.
---
SECTION V.
The Board of Trustees voted on June 5-6, 1995 to appoint Martingale to
replace Nicholas-Applegate as investment sub-adviser of the Mid-Cap Portfolio.
At the same meeting, the Trustees voted to change the name of the Portfolio
from the Mid-Cap Growth to the Mid-Cap Portfolio in order to more accurately
reflect the investment emphasis of the Portfolio, and to remove any implied
orientation toward securities having "growth" characteristics.
Shareholders are being asked to approve both investment advisory and
investment sub-advisory agreements with Martingale. Shareholder approval is
being sought for the Investment Sub-Advisory Agreement between SFM and
Martingale in connection with the proposed Manager of Managers structure.
Shareholder approval is also being sought for the investment advisory
agreement to ensure that the Portfolio has an adviser under contract should
the Portfolio's Shareholders fail to approve the Manager of Managers
structure. The investment advisory agreement between the Trust, on behalf of
the Portfolio, and Martingale, will only become effective if SFM is not
approved by the Shareholders as investment adviser for the Portfolio as
discussed in Proposal 16.
At present, Martingale is a limited partnership owned as follows: 78% by
several of its employees, 20% by BARRA, Inc., and 2% by an outside investor.
Martingale signed a definitive agreement on May 3, 1995 to admit Commerz
International Capital Management ("CICM") as a general partner. It is proposed
that after the transaction, CICM will hold a 60% interest in Martingale, with
the remaining 40% held by the current partners. BARRA's 20% ownership interest
will be bought out. The proposed transaction will, if consummated, result in
the "assignment" and termination of any advisory or sub-advisory agreement in
effect at the time of the transaction. In order to avoid the expense of
holding an additional Shareholder meeting after the proposed transaction takes
place, Shareholders are being asked to approve additional investment advisory
and sub-advisory agreements to become effective only upon the admission of
CICM as general partner and majority owner of Martingale (Proposals 24 and
25). Should the CICM transaction occur on terms different than those described
herein, the Portfolio may have to resolicit (at Martingale's expense) the vote
of the Portfolio's Shareholders to approve a new investment advisory or
investment sub-advisory agreement with respect to Martingale.
22. APPROVAL OF AN INVESTMENT SUB-ADVISER AND THE INVESTMENT SUB-ADVISORY
AGREEMENT FOR THE MID-CAP PORTFOLIO.
The Board of Trustees is recommending that Shareholders of the Mid-Cap
Portfolio approve Martingale as the Investment Sub-Adviser of the Portfolio
and approve the form of investment sub-advisory agreement between SFM and
Martingale.
35
<PAGE>
Trustees' Consideration. The Trustees of the Trust, including all of the
Trustees who are not "interested persons" of the Trust, approved the form of
investment sub-advisory agreement and the general form of the investment
advisory agreement (the "Agreements") with respect to the Mid-Cap Portfolio at
meetings held on March 6 and June 5-6, 1995. SFM recommended the selection of
Martingale and reviewed the considerations and the search process that had led
to the recommendation. The Trustees received written and oral information from
both SFM and Martingale. The Trustees also met with representatives of
Martingale and considered information about key personnel, investment
philosophy and process and performance track record, among other factors. In
recommending that the Shareholders approve the Agreements, the Trustees
carefully evaluated the investment experience of Martingale's key personnel
and the quality of services Martingale can be expected to provide to the
Portfolio, 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 Martingale; (4) the distinct
investment objective and policies of the Portfolio; (5) the fact that the
compensation payable to Martingale by the Portfolio under the Agreements will
be at a rate that is lower than the compensation payable to Nicholas-Applegate
under the existing investment advisory agreement; (6) the history, as well as
the qualifications of its personnel and its financial condition; (7) its
performance record; (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 Martingale in comparison to
those being charged in the relevant segment of the mutual fund business,
including benefits received by Martingale or its affiliates, if any, in
connection with soft dollar payments.
The Trustees voted to terminate the advisory agreement with Nicholas-
Applegate and employ Martingale in order to retain an adviser which they
believe will be able to manage the Portfolio with less deviation from the
broad mid cap market index.
Compensation. Under the Investment Sub-Advisory Agreement, SFM will pay
Martingale a fee, which is calculated daily and paid monthly, at an annual
rate of .25% of the market value of the investments of the Mid-Cap Portfolio.
For the fiscal year ended September 30, 1994, the Portfolio paid Nicholas-
Applegate an investment advisory fee of .45% of the average daily net assets
of the Portfolio under the then-current investment advisory agreement. If
Martingale is approved as investment sub-adviser (or as investment adviser as
provided in Proposal 23), the overall level of advisory and management fees
paid by the Portfolio will decrease by as much as .20%.
Description of Martingale. In connection with the shift towards a broader
range of middle capitalization or "mid cap" securities by the Portfolio, the
Board of Trustees approved the appointment of Martingale as investment sub-
adviser for the Portfolio effective June 21, 1995. Martingale is a Delaware
limited partnership with its principal address at 222 Berkeley Street, Boston,
Massachusetts 02116. Martingale's general partner is Martingale Asset
Management Corporation, 222 Berkeley Street, Boston, MA 02116, which is
controlled by Arnold S. Wood and William E. Jacques, who are also officers and
partners of Martingale. Martingale was established in 1987, and as of May 31,
1995, had assets of approximately $410 million under management. Martingale's
advisory clients include pension plans, endowments, foundations, and
investment company portfolios.
36
<PAGE>
Martingale serves as investment adviser for two additional 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
FUND (AS OF 3/31/95) PAYABLE
---- --------------- -------
<S> <C> <C>
Bennington Capital Management $22,500,000 $60,000
TIFF Investment Program $40,503,268 $75,000
</TABLE>
The assets of the Portfolio will be managed by John D. Freeman. Mr. Freeman
has 10 years of investment management experience, including 3 years experience
investing in securities of mid cap companies. Prior to joining Martingale, he
worked at BARRA, Inc. as a Manager of Consulting Services.
Listed below are the names and principal occupations of each of the
directors and the principal executive officer of Martingale. The principal
business address of each director and the principal executive officer is 222
Berkeley Street, Boston, Massachusetts 02116. No Trustee of the Trust
purchased or sold shares of or interests in Martingale during the Trust's most
recent fiscal year.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
Alan J. Strassman Chairman and Director
Arnold S. Wood Director
William E. Jacques Director
Patricia J. O'Connor Director
</TABLE>
If the proposed transaction involving CICM occurs, two persons, Heinz
Hockmann and Paul Burik, both employees of CICM, will be added to Martingale's
Board of Directors.
In the event Shareholders of the Portfolio do not approve the adoption of
the 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.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 22.
---
23. APPROVAL OF AN INVESTMENT ADVISER AND THE INVESTMENT ADVISORY AGREEMENT
FOR THE MID-CAP PORTFOLIO.
The Board of Trustees is recommending that Shareholders of the Mid-Cap
Portfolio approve Martingale as an Investment Adviser of the Portfolio and
approve the form of Investment Advisory Agreement between the Trust, on behalf
of the Portfolio, and Martingale.
Compensation. The compensation to be paid to Martingale under the proposed
Investment Advisory Agreement would be at the same rate as under the proposed
investment sub-advisory agreement discussed in Proposal 22 (i.e., .25%), but
based on the average daily net assets of the Portfolio and not on the market
value of the Portfolio's investments. The other terms of the Portfolio's
proposed Investment Advisory and Investment Sub-Advisory Agreements relating
to Martingale are identical (except as to the identity of the other party to
such agreements and as effected by the Manager of Managers structure).
37
<PAGE>
Description of Martingale. See the description of Martingale in Proposal 22.
In the event Shareholders of the Portfolio do not approve the adoption of
the investment 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.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 23.
---
24. APPROVAL OF AN INVESTMENT SUB-ADVISER AND THE INVESTMENT SUB-ADVISORY
AGREEMENT FOR THE MID-CAP PORTFOLIO EFFECTIVE ONLY UPON THE ADMISSION OF
CICM AS GENERAL PARTNER AND MAJORITY OWNER OF MARTINGALE.
The Board of Trustees is recommending that Shareholders of the Mid-Cap
Portfolio approve Martingale as an Investment Sub-Adviser of the Portfolio and
approve the form of Investment Sub-Advisory agreement between SFM and
Martingale, effective only upon the admission of CICM as general partner and
majority owner of Martingale.
The terms of this agreement are identical to those of the investment sub-
advisory agreement discussed in Proposal 22.
The Trustees believe that the transaction involving CICM will prove
beneficial to Shareholders of the portfolio insofar as it will provide
Martingale with additional capital and other resources necessary to carry on
an advisory business. Also, the Trustees were informed in this regard that the
transaction with CICM will have no impact on the management of the Portfolio
by Martingale. If the proposed transaction between CICM and Martingale occurs
on terms different than those described in Section V of this Proxy Statement,
Shareholders will be resolicited at Martingale's expense to approve a new
investment advisory or sub-advisory agreement.
In the event that Shareholders of the Portfolio do not approve the adoption
of the investment sub-advisory agreement discussed in this Proposal, the
Trustees will consider the appropriate course of action.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 24.
---
25. APPROVAL OF AN INVESTMENT ADVISER AND THE INVESTMENT ADVISORY AGREEMENT
FOR THE MID-CAP PORTFOLIO EFFECTIVE ONLY UPON THE ADMISSION OF CICM AS
GENERAL PARTNER AND MAJORITY OWNER OF MARTINGALE.
The Board of Trustees is recommending that Shareholders of the Mid-Cap
Portfolio approve Martingale as an Investment Adviser of the Portfolio and
approve the form of Investment Advisory agreement between the trust, on behalf
of the Portfolio, and Martingale, effective upon the admission of CICM as
general partner and majority owner of Martingale.
The terms of this agreement are identical to those of the investment
advisory agreement discussed in Proposal 23.
38
<PAGE>
The Trustees believe that the transaction involving CICM will prove
beneficial to Shareholders of the portfolio insofar as it will provide
Martingale with additional capital and other resources necessary to carry on
an advisory business. Also, the Trustees were informed in this regard that the
transaction with CICM will have no impact on the management of the Portfolio
by Martingale. If the proposed transaction between CICM and Martingale occurs
on terms different than those described in Section V of this Proxy Statement,
Shareholders will be resolicited at Martingale's expense to approve a new
investment advisory or sub-advisory agreement.
In the event that Shareholders of the Portfolio do not approve the adoption
of the investment advisory agreement discussed in this Proposal, the Trustees
will consider the appropriate course of action.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 25.
---
SECTION VI.
Prior to April 26, 1995, CS First Boston Investment Management ("CSFBIM")
served as investment sub-adviser for the High Yield Bond Portfolio pursuant to
an investment sub-advisory agreement dated as of September 28, 1994. Due to a
restructuring transaction wherein CSFBIM's U.S. assets and certain liabilities
were acquired by BEA, the investment sub-advisory agreement terminated. Until
the new agreement is approved by the Shareholders, BEA will serve without
compensation under the existing Investment Sub-Advisory Agreement approved by
the Board of Trustees on April 12, 1995.
In the transaction, certain internal changes were effected. CSFBIM's entire
High Yield Fixed Income Team was integrated into BEA's High Yield Team, and
certain members of CSFBIM's High Grade Fixed Income Team joined BEA's
Structured Fixed Income Team. There will be no changes to the high-yield
investment philosophy or the investment process employed by the Portfolio's
manager and the Portfolio will be managed by the same portfolio manager. BEA
will apply the former CSFBIM investment methodology by utilizing strict buy
and sell guidelines, performing in-depth analyses to uncover undervalued
situations, diversifying the Portfolio to limit sector, company and overall
risk, and rotating through sectors to capitalize on successful investment
trends and themes.
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 High Yield
Bond Portfolio on April 12, 1995. The Trustees received written and oral
information from both SFM and BEA. SFM recommended the selection of BEA and
reviewed the considerations and the search process that had led to the
recommendation. The Trustees also met with representatives of BEA and
considered information about key personnel, investment philosophy and process
and performance track record, among other factors. In recommending that the
Shareholders approve the investment sub-advisory agreement, the Trustees
carefully evaluated the investment experience of BEA's key personnel and the
quality of services BEA can be expected to provide to the Portfolio,
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 BEA; (4) the distinct investment objective and policies of
the Portfolio; (5) the fact that the compensation payable to BEA by the
Portfolios under the proposed Investment Sub-Advisory Agreement will be at the
same rate as the compensation payable CSFBIM under
39
<PAGE>
the existing investment sub-advisory agreement; (6) the history, reputation,
qualification and background of BEA as well as the qualifications of its
personnel and its financial conditions; (7) its performance record; (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 BEA in comparison to those being charged in the
relevant segment of the mutual fund business, including benefits received by
BEA or its affiliates in connection with soft dollar payments.
26. APPROVAL OF AN INVESTMENT SUB-ADVISER AND THE INVESTMENT SUB-ADVISORY
AGREEMENT FOR THE HIGH YIELD BOND PORTFOLIO.
The Board of Trustees is recommending that Shareholders of the High Yield
Bond Portfolio approve BEA as an investment sub-adviser of the Portfolio and
approve the form of Investment Sub-Advisory Agreement between SFM and BEA.
Compensation. Under the proposed Investment Sub-Advisory Agreement, SFM will
pay BEA a fee, which is calculated and paid monthly, based on an annual
percentage rate of .3375% of the average monthly market value of assets of the
High Yield Bond Portfolio managed by BEA.
Description of BEA. BEA is a general partnership organized under the laws of
the State of New York and, together with its predecessor firms, has been
engaged in the investment advisory business for over 50 years. CS Capital is
an 80% partner and Basic Appraisals, Inc., which is owned by members of BEA
management, is a 20% partner in BEA. CS Capital is a wholly-owned subsidiary
of Credit Suisse Investment Corporation, which is a wholly-owned subsidiary of
Credit Suisse. In turn, Credit Suisse is a subsidiary of CS Holding, 8
Paradeplatz, Zurich, Switzerland, a Swiss corporation, which is also the
ultimate parent of CSFBIM. No one person or entity possesses a controlling
interest in Basic Appraisals, Inc.
BEA is a diversified asset manager, handling global equity, balanced, fixed
income and derivative securities accounts for private individuals, as well as
corporate pension and profit-sharing plans, state pension funds, union funds,
endowments and other charitable institutions. As of December 31, 1994, BEA
managed approximately $21 billion in assets of which approximately $2.6
billion are assets of fourteen registered investment companies, and none of
which have investment objectives similar to those of the Fund.
40
<PAGE>
Listed below are the names and principal occupations of each of the
directors and the principal executive officer of BEA. The principal business
address of each director and the principal executive officer is 153 East 53rd
Street, New York, NY 10022. No Trustee of the Trust has purchased or sold
shares of or interests in BEA during the Trust's most recent fiscal year.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
Manfred Adami Chairman of the Board of Directors*
William W. Priest, Jr. Executive Director and Chief Executive Officer*
Emilio Bassini Executive Director
Dr. Hans Geiger Director*
Jeffrey A. Geller Executive Director
John B. Hurford Executive Director
Dr. Hermann Maurer Director*
Robert J. Moore Executive Director
Michael F. Orr Director*
Daniel H. Sigg Executive Director
Timothy T. Taussig Executive Director
Albert L. Zesiger Executive Director
</TABLE>
- --------
* Member of BEA's Partnership Board.
BEA serves as investment adviser for high-yield sub-accounts of the
following investment companies. The approximate net assets of each sub-
account, and the fee payable by each, are set forth below:
<TABLE>
<CAPTION>
ASSET SIZE OF
SUB-ACCOUNT
FUND (AS OF 6/13/95) FEE PAYABLE
---- --------------- -----------
<S> <C> <C>
CMIA Lifespan Diversified Income Account $3,003,474 .45%
CMIA Lifespan Balanced Account $5,004,705 .45%
CMIA Lifespan Capital Appreciation Account $2,501,540 .45%
</TABLE>
The Portfolio's assets will continue to be managed by Richard Lindquist, the
Portfolio Manager. Mr. Lindquist has 11 years of investment management
experience, including several years of experience working with high yield
bonds. Prior to joining BEA, Mr. Lindquist was a Managing Director at CSFBIM.
In the event Shareholders of the Portfolio do not approve the adoption of
the 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.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 26.
---
SECTION VII.
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
41
<PAGE>
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 Portfolio.
<TABLE>
<CAPTION>
AMOUNT PAID % PAID TO
TOTAL BROKERAGE TO AFFILIATED AFFILIATED
PORTFOLIO COMMISSION BROKER 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 June 16, 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>
PERCENTAGE OF
NAME AND ADDRESS OF NUMBER OF PORTFOLIO'S
PORTFOLIO BENEFICIAL OWNER SHARES SHARES
--------- ------------------- ------------- -------------
<C> <S> <C> <C>
Small Cap Growth Eagle Trust Company 5,979,778.614 34.52%
Attn: Suzanne O'Boyle
680 East Swedesford Road
Wayne, PA 19087
Small Cap Growth Valle 1,703,338.153 9.83%
c/o Marshall & Ilsley
1000 North Water Street-TR11
Milwaukee, WI 53202
Small Cap Growth Batrus & Co. 1,027,518.253 5.93%
c/o Bankers Trust Company
P.O. Box 706
Church Street Station
New York, NY 10008
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS OF NUMBER OF PORTFOLIO'S
PORTFOLIO BENEFICIAL OWNER SHARES SHARES
--------- ------------------- ------------- -------------
<C> <S> <C> <C>
Mid-Cap Eagle Trust Company 945,078.672 36.07%
Attn: Suzanne O'Boyle
680 East Swedesford Road
Wayne, PA 19087
Mid-Cap BMS and Company 336,743.440 12.85%
c/o Central Trust Bank
Attn: Wanda McGlade
P.O. Box 779
Jefferson City, MO 65102
Mid-Cap First American Trust Company 315,181.496 12.03%
Attn: Jeff Eubanks
800 First American Center
Nashville, TN 37237-0801
High Yield Bond Eagle Trust Company 1,566,177.765 95.36%
Attn: Suzanne O'Boyle
680 East Swedesford Road
Wayne, PA 19087
</TABLE>
The Trust's Trustees and officers do not beneficially own any shares of the
Trust.
Adjournment. In the event that sufficient votes in favor of a Proposal set
forth in the Notice of the Special Meeting are not received by the time
scheduled for the meeting, the persons named as proxies may propose one or more
adjournments of the meeting for a period or periods of not more than 60 days in
the aggregate to permit further solicitation of proxies with respect to any of
such Proposal. Any such adjournment will require the affirmative vote of a
majority of the votes cast on the question in person or by proxy at the session
of the meeting to be adjourned. The persons named as proxies will vote in favor
of such adjournment those proxies which they are entitled to vote in favor of
such Proposals. They will vote against any such adjournment those proxies
required to be voted against any such Proposals. The costs of any such
additional solicitation and of any adjourned session will be borne by the
Trust.
Required Vote. Approval of the Proposals 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.
43
<PAGE>
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, PA 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.
44
<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>
EXHIBIT B
INVESTMENT SUB-ADVISORY AGREEMENT
SEI INSTITUTIONAL MANAGED TRUST
AGREEMENT made this day of , 1995, by and among 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 and will place orders with or through such persons, brokers
or dealers to carry out the policy with respect to brokerage set forth in
the Portfolio's Registration Statement (as defined herein) and Prospectus
or as the Board of Trustees or the Adviser may direct from time to time, in
conformity with federal securities laws. In executing Portfolio
transactions and selecting brokers or dealers, the Sub-Adviser will use its
best efforts to seek on behalf of the Portfolio the best overall terms
available. In assessing the best overall terms available for any
transaction, the Sub-Adviser shall consider all factors that it deems
relevant, including the breadth of the market in the security, the price of
the security, the
B-1
<PAGE>
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 (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 Sub-Adviser or an affiliate of the Sub-Adviser may exercise
investment discretion. The Sub-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 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 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
and shall render to the Adviser or Board of Trustees such periodic and
special reports as the Adviser or Board of Trustees may reasonably request.
The Sub-Adviser shall keep the books and records relating to the Assets
required to be maintained by the Sub-Adviser under this Agreement and shall
timely furnish to the Adviser all information relating to the Sub-Adviser's
services under this Agreement needed by the Adviser to keep the other books
and records of the Portfolio required by Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall also furnish to the Adviser any other information relating
to the Assets that is required to be filled by the Adviser or the Trust with
the Securities and Exchange Commission ("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 his
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.
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<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 nothing herein shall be
construed to relieve the Sub-Adviser of responsibility for compliance with the
Portfolio's investment objectives, policies, and restrictions, as provided in
Section 1 hereunder, in connection with its management of the Assets.
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 SEC staff current
interpretation thereon), the Sub-Adviser may, in its discretion and from time
to time, waive a portion of its fee.
5. LIMITATION OF LIABILITY OF THE SUB-ADVISER. The Sub-Adviser shall not be
liable for any error of judgment or for any loss suffered by the Adviser in
connection with performance of its obligations under this Agreement, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act),
or a loss resulting from willful misfeasance, bad faith or negligence on the
Sub-Adviser's part in the performance of its duties or from reckless disregard
of
B-3
<PAGE>
its obligations and duties under this Agreement, except as may otherwise be
provided under provisions of applicable state law which cannot be waived or
modified hereby.
6. REPORTS. During the term of this Agreement, the Adviser agrees to furnish
the Sub-Adviser at its principal office all prospectuses, proxy statements,
reports to stockholders, sales literature or other materials prepared for
distribution to stockholders of the Portfolios, the Trust or the public that
refer to the Sub-Adviser or its clients in any way prior to use thereof and
not to use material if the Sub-Adviser reasonably objects in writing within
five business days (or such other period as may be mutually agreed) after
receipt thereof. The Sub-Adviser's right to object to such materials is
limited to the portions of such materials that expressly relate to the Sub-
Adviser, its services and its clients. The Adviser agrees to use its
reasonable best efforts to ensure that materials prepared by its employees or
agents or its affiliates that refer to the Sub-Adviser or its clients in any
way are consistent with those materials previously approved by the Sub-Adviser
as referenced in the first sentence of this paragraph. Sales literature may be
furnished to the Sub-Adviser by first class or overnight mail, facsimile
transmission equipment or hand delivery.
7. 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 this Agreement or the performance by the
Sub-Adviser of its duties hereunder; provided, however, that the Sub-Adviser
shall not be required to indemnify or otherwise hold the Adviser harmless
under this Section 7 where the claim against, or the loss, liability or damage
experienced by the Adviser, is caused by or is otherwise directly related to
the Adviser's own willful misfeasance, bad faith or negligence, or to the
reckless disregard of its duties under this Agreement.
8. 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; provided, however, that at any
time the Adviser shall have obtained exemptive relief from the SEC permitting
it to engage a Sub-Adviser without first obtaining approval of the Agreement
from a majority of the outstanding voting securities of the Portfolio(s)
involved, the 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.
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.
B-4
<PAGE>
9. 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.
10. 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.
11. 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:
12. 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.
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: ____________________________
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<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>
EXHIBIT C
INVESTMENT ADVISORY AGREEMENT
SEI INSTITUTIONAL MANAGED TRUST
AGREEMENT made this th day of , 1995 by and between SEI Institutional
Managed Trust, a Massachusetts business trust (the "Trust"), and Martingale
Asset Management, L.P. (the "Adviser").
WHEREAS, the Trust is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several series of shares, each having its own investment
policies; and
WHEREAS, the Trust has retained SEI Financial Management Corporation (the
"Administrator") to provide administration of the Trust's operations, subject
to the control of the Board of Trustees; and
WHEREAS, the Trust desires to retain the Adviser to render investment
management services with respect to the portfolio(s) listed in Schedule A to
this Agreement 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, and to continuously review,
supervise, and administer the investment program of the Portfolios, to
determine in its discretion 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 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, and applicable laws and regulations.
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 required by it to perform the services on the terms and for
the compensation provided herein.
2. PORTFOLIO TRANSACTIONS. The Adviser is authorized to select the brokers
or dealers that will execute the purchases and sales of portfolio securities
for the Portfolios and is directed to use its best efforts to obtain the best
net results as described in the Trust's prospectus and statement of additional
information as amended from time to time. The Adviser will promptly
communicate to the Administrator and to the
C-1
<PAGE>
officers and the Trustees of the Trust such information relating to portfolio
transactions as they may reasonably request.
It is understood that the Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or be in breach
of any obligation owing to the Trust under this Agreement, or otherwise,
solely by reason of its having directed a securities transaction on behalf of
the Trust to a broker-dealer in compliance with the provisions of Section
28(e) of the Securities Exchange Act of 1934.
3. 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 specified in Schedule A which is
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 Schedule A,
to the assets. The fee shall be based on the average daily net assets for the
month involved.
All rights of compensation under this Agreement for services performed as of
the termination date shall survive the termination of this Agreement.
4. 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.
5. 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.
6. 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 on behalf of the
Trust are the property of the Trust and will be surrendered promptly to the
Trust on request.
7. 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 7, the term "Adviser" shall include
directors, officers, employees and other corporate agents of the Adviser as
well as that corporation itself).
8. 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;
C-2
<PAGE>
directors, partners, officers, agents, and shareholders of the Adviser are or
may be interested in the Trust as Trustees, shareholders or otherwise; and the
Adviser (or any successor) is or may be interested in the Trust as a
shareholder or otherwise. In addition, brokerage transactions for the Trust
may be effected through affiliates of the Adviser if approved by the Board of
Trustees, subject to the rules and regulations of the Securities and Exchange
Commission.
9. 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 or as of the close of business on the
day that a majority of the outstanding voting securities of the Portfolio
approve the appointment of SFM as investment adviser to the Portfolio. Any
notice under this Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party at any office of such party.
As used in this Section 9, 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 under said Act.
10. 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.
11. NOTICE. Any notice required or permitted to be given by either party to
the other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at
the last address furnished by the other party to the party giving notice: if
to the Trust, at 680 East Swedesford Road, Wayne, PA 19087, Attention:
President and if to the Adviser at: Martingale Asset Management, L.P., 222
Berkeley Street, Boston, MA 02210.
12. 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.
C-3
<PAGE>
A copy of the Agreement and Declaration of Trust of the Trust is on file
with the Secretary 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 the Portfolios for payment of fees
for services rendered to the Portfolios.
IN WITNESS WHEREOF, the parties hereto have caused this Investment Advisory
Agreement to be executed as of the day and year first written above.
SEI INSTITUTIONAL MANAGED TRUST MARTINGALE ASSET MANAGEMENT, L.P.
By: ___________________________________ By: _______________________________
Name: _________________________________ Name: _____________________________
Attest: _______________________________ Attest: ___________________________
Name: _________________________________ Name: _____________________________
C-4
<PAGE>
SCHEDULE A DATED
TO THE
INVESTMENT ADVISORY AGREEMENT
DATED
BETWEEN
SEI INSTITUTIONAL MANAGED TRUST
AND
MARTINGALE ASSET MANAGEMENT, L.P.
Pursuant to Section 3, the Trust shall pay the Adviser compensation at an
annual rate as follows:
<TABLE>
<S> <C>
Mid-Cap Portfolio .25% (in basis points)
</TABLE>
C-5
<PAGE>
SEI INSTITUTIONAL MANAGED TRUST
Mid-Cap Portfolio
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF TRUSTEES FOR
THE SPECIAL MEETING OF SHAREHOLDERS, AUGUST 11, 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 Mid-Cap 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 Friday, August 11, 1995 at 10:00 a.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 reclassification of) the Portfolio's investment
limitations, the new management structure, a new sub-adviser, and 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 Mid-Cap 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 14. Authorize the Trust's Board of Trustees to appoint additional or
replacement investment sub-advisers 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 16. Approve the selection of SFM as the Investment Adviser for the
Portfolio, as described in the attached Proxy Statement, and to
approve the Investment Advisory Agreement between the Trust, on
behalf of the Portfolio, and SFM.
____For ____Against ____Abstain
3
<PAGE>
PROPOSAL 22. Approve the selection of Martingale Asset Management, L.P.
("Martingale") as investment sub-adviser for the Portfolio, and
to approve the form of investment sub-advisory agreement between
SFM and Martingale.
____For ____Against ____Abstain
PROPOSAL 23. Approve the selection of Martingale as an investment adviser for
the Portfolio, and to approve the form of investment advisory
agreement between the Trust, on behalf of the Portfolio, and
Martingale.
____For ____Against ____Abstain
PROPOSAL 24. Approve the selection of Martingale as investment sub-adviser for
the Portfolio, and to approve the form of investment sub-advisory
agreement between SFM and Martingale, effective only upon the
admission of CICM as general partner and majority owner of
Martingale.
____For ____Against ____Abstain
PROPOSAL 25. Approve the selection of Martingale as an investment adviser for
the Portfolio, and to approve the form of investment advisory
agreement between the Trust, on behalf of the Mid-Cap Portfolio,
and Martingale, effective only upon the admission of CICM as
general partner and majority owner of Martingale.
____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 ________________________________
4
<PAGE>
Signature of Shareholder
________________________________
Signature (Joint owners)
PLEASE DATE, SIGN AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING; YOU MAY, NEVERTHELESS, VOTE IN PERSON IF YOU
DO SO ATTEND.
5
<PAGE>
SEI INSTITUTIONAL MANAGED TRUST
High Yield Bond Portfolio
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF TRUSTEES FOR
THE SPECIAL MEETING OF SHAREHOLDERS, AUGUST 11, 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 High Yield Bond 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 Friday, August 11, 1995 at 10:00 a.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, a new sub-adviser, and a 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 High Yield Bond 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 26. Approve the selection of BEA Associates ("BEA") as an investment
sub-adviser for the Portfolio, and to approve the investment sub-
advisory agreement between SFM and BEA.
____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
3
<PAGE>
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 ENVELOPE WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING; YOU MAY, NEVERTHELESS, VOTE IN PERSON IF YOU
DO SO ATTEND.
4
<PAGE>
SEI INSTITUTIONAL MANAGED TRUST
Small Cap Growth Portfolio
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF TRUSTEES FOR
THE SPECIAL MEETING OF SHAREHOLDERS, AUGUST 11, 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 Growth 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 Friday, August 11, 1995 at 10:00 a.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 Small Cap Growth 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 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 15. Approve the selection of SFM as the Investment Adviser for the
Portfolio, as described in the attached Proxy Statement, and to
approve the Investment Advisory Agreement between the Trust, on
behalf of the Portfolio, and SFM.
____For ____Against ____Abstain
3
<PAGE>
PROPOSAL 17. Approve the selection of Investment Advisers, Inc. ("IAI") as an
investment sub-adviser for the Portfolio, and to approve the form
of investment sub-advisory agreement between SFM and IAI.
____For ____Against ____Abstain
PROPOSAL 18. Approve the selection of Nicholas-Applegate Capital Management
("Nicholas-Applegate") as an investment sub-adviser for the
Portfolio, and to approve the form of investment sub-advisory
agreement between SFM and Nicholas-Applegate.
____For ____Against ____Abstain
PROPOSAL 19. Approve the selection of Pilgrim Baxter & Associates ("Pilgrim
Baxter") as an investment sub-adviser for the Portfolio, and to
approve the form of investment sub-advisory agreement between SFM
and Pilgrim Baxter.
____For ____Against ____Abstain
PROPOSAL 20. Approve the selection of Apodaca-Johnston Capital Management
("Apodaca") as an investment sub-adviser for the Portfolio, and
to approve the form of investment sub-advisory agreement between
SFM and Apodaca.
____For ____Against ____Abstain
PROPOSAL 21. Approve the selection of Wall Street Associates ("WSA") as an
investment sub-adviser for the Portfolio, and to approve the form
of investment sub-advisory agreement between SFM and WSA.
____For ____Against ____Abstain
4
<PAGE>
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 ENVELOPE WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING; YOU MAY, NEVERTHELESS, VOTE IN PERSON IF YOU
DO SO ATTEND.
5
