<PAGE>
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO, AMONG OTHER THINGS, THIS PROSPECTUS HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SECURITIES OF THE FUNDS
REFERENCED IN THIS PROSPECTUS MAY NOT BE SOLD NOR MAY OFFERS TO BUY SUCH
SECURITIES BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES
REFERENCED HEREIN IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE. SECURITIES OF THE INTERNATIONAL EQUITY, EMERGING MARKETS EQUITY
AND INTERNATIONAL FIXED INCOME PORTFOLIOS ARE CURRENTLY OFFERED IN A SEPARATE
PROSPECTUS WHICH IS AVAILABLE BY CALLING 1-800-342-5734.
<PAGE>
PRELIMINARY PROSPECTUS DATED MAY 8, 1997
SUBJECT TO COMPLETION
SEI INTERNATIONAL TRUST
JUNE 30, 1997
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
EMERGING MARKETS EQUITY PORTFOLIO
INTERNATIONAL FIXED INCOME PORTFOLIO
EMERGING MARKETS DEBT PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus concisely sets forth information about the above-referenced
Portfolios that an investor needs to know before investing. Please read this
Prospectus carefully, and keep it on file for future reference.
A Statement of Additional Information dated June 30, 1997, has been filed with
the Securities and Exchange Commission (the "SEC") and is available upon request
and without charge by writing the Distributor, SEI Financial Services Company,
Oaks, Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of
Additional Information is incorporated by reference into this Prospectus.
SEI International Trust (the "Trust") is an open-end management investment
company, certain classes of which offer financial institutions a convenient
means of investing their own funds, or funds for which they act in a fiduciary,
agency or custodial capacity, in professionally managed diversified and
non-diversified portfolios of securities. A portfolio may offer separate classes
of shares that differ from each other primarily in the allocation of certain
distribution expenses and minimum investments. This Prospectus offers the Class
A shares of each of the Trust's equity and fixed income portfolios listed above.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING EMERGING
INTERNATIONAL MARKETS INTERNATIONAL MARKETS
EQUITY EQUITY FIXED INCOME DEBT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
Management/Advisory Fees (AFTER FEE WAIVER AND REIMBURSEMENT) (1) .86% 1.37% .85% .81%
12b-1 Fees none none none none
Total Other Expenses .42% .58% .15% .54%
Shareholder Servicing Fees (AFTER FEE WAIVER) (2) .25% .17% .0% .0%
- --------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVERS AND REIMBURSEMENT) (3) 1.28% 1.95% 1.00% 1.35%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) SEI FUND MANAGEMENT ("SEI MANAGEMENT"), IN ITS CAPACITY AS MANAGER FOR EACH
PORTFOLIO, AND CERTAIN OF THE ADVISERS, HAVE WAIVED, ON A VOLUNTARY BASIS, A
PORTION OF THEIR FEE, AND THE MANAGEMENT/ADVISORY FEES SHOWN REFLECT THESE
VOLUNTARY WAIVERS. SEI MANAGEMENT AND THE ADVISERS EACH RESERVE THE RIGHT TO
TERMINATE ITS WAIVER AT ANY TIME IN ITS SOLE DISCRETION. ABSENT SUCH FEE
WAIVER, MANAGEMENT/ADVISORY FEES WOULD BE .96% FOR THE INTERNATIONAL EQUITY
PORTFOLIO, 1.70% FOR THE EMERGING MARKETS EQUITY PORTFOLIO, .90% FOR THE
INTERNATIONAL FIXED INCOME PORTFOLIO AND 1.50% FOR THE EMERGING MARKETS DEBT
PORTFOLIO. MANAGEMENT/ADVISORY FEES HAVE BEEN RESTATED TO REFLECT CURRENT
EXPENSES.
(2) THE DISTRIBUTOR HAS WAIVED, ON A VOLUNTARY BASIS, ALL OR A PORTION OF ITS
SHAREHOLDER SERVICING FEE, AND THE SHAREHOLDER SERVICING FEES SHOWN REFLECT
THIS WAIVER. THE DISTRIBUTOR RESERVES THE RIGHT TO TERMINATE ITS WAIVER AT
ANY TIME IN ITS SOLE DISCRETION. ABSENT SUCH WAIVER, SHAREHOLDER SERVICING
FEES WOULD BE .25% FOR EACH OF THE PORTFOLIOS.
(3) ABSENT THESE FEE WAIVERS AND EXPENSE REIMBURSEMENTS, TOTAL OPERATING
EXPENSES WOULD BE 1.38% FOR THE INTERNATIONAL EQUITY PORTFOLIO, 2.36% FOR
THE EMERGING MARKETS EQUITY PORTFOLIO AND 1.30% FOR THE INTERNATIONAL FIXED
INCOME PORTFOLIO AND ARE ESTIMATED TO BE 2.29% FOR THE EMERGING MARKETS DEBT
PORTFOLIO. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE ADVISERS," "THE
SUB-ADVISERS" AND "THE MANAGER."
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor in a Portfolio would pay the following
expenses on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end of
each time period:
International Equity $13 $41 $ 70 $155
Emerging Markets Equity $20 $61 $105 $227
International Fixed Income $10 $32 $ 55 $122
Emerging Markets Debt $14 $43 -- --
- -------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN CLASS A SHARES OF THE PORTFOLIOS. THE INTERNATIONAL EQUITY
PORTFOLIO ALSO OFFERS CLASS D SHARES, WHICH ARE SUBJECT TO THE SAME EXPENSES,
EXCEPT THAT CLASS D SHARES BEAR SALES CHARGES AND DIFFERENT DISTRIBUTION COSTS
AND ADDITIONAL TRANSFER AGENT COSTS. A PERSON WHO PURCHASES SHARES THROUGH A
FINANCIAL INSTITUTION MAY BE CHARGED SEPARATE FEES BY THAT INSTITUTION.
ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE MANAGER," "THE ADVISERS," "THE
SUB-ADVISERS" AND "DISTRIBUTION AND SHAREHOLDER SERVICING."
2
<PAGE>
FINANCIAL HIGHLIGHTS
______________________________________________________________
The following information has been audited by Price Waterhouse LLP, the Trust's
independent accountants, as indicated in their report dated April 10, 1996 on
the Trust's financial statements as of February 29, 1996, incorporated by
reference into the Trust's Statement of Additional Information. The Trust's
financial statements and additional performance information are set forth in the
1996 Annual Report to Shareholders, which is available upon request and without
charge by calling 1-800-342-5734. This table should be read in conjunction with
the Trust's financial statements and notes thereto. The Emerging Markets Debt
Portfolio had not commenced operations as of the date of this Prospectus.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE PERIODS ENDED FEBRUARY 28,
<TABLE>
<CAPTION>
NET ASSET NET DISTRIBUTIONS NET
VALUE INVESTMENT NET REALIZED AND FROM NET DISTRIBUTIONS ASSETS
BEGINNING INCOME/ UNREALIZED INVESTMENT FROM REALIZED RETURN OF VALUE END
OF PERIOD (LOSS) GAINS/ (LOSSES) INCOME(4) CAPITAL GAINS CAPITAL OF PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------
INTERNATIONAL
EQUITY PORTFOLIO
- ------------------
CLASS A
1996 $ 9.59 $0.14 $ 1.45 $(0.19) $(0.99) $ -- $10.00
1995 11.00 0.15 (0.97) -- (0.59) -- 9.59
1994 8.93 0.13 2.05 (0.11) -- -- 11.00
1993 9.09 0.16 0.04 (0.36) -- -- 8.93
1992 9.56 0.19 (0.36) (0.30) -- -- 9.09
1991 9.62 0.18 (0.14) -- (0.01) (0.09) 9.65
1990(1) 10.00 0.04 (0.42) -- -- -- 9.62
- ------------------
EMERGING MARKETS
EQUITY PORTFOLIO
- ------------------
CLASS A
1996 $10.27 $(0.02) $ 0.72 $-- $(0.04) $ -- $10.93
1995(2) 10.00 0.01 0.26 -- -- -- 10.27
- ------------------
INTERNATIONAL
FIXED INCOME
PORTFOLIO
- ------------------
CLASS A
1996 $10.42 $0.58 $ 0.89 $(1.02) $(0.10) $ -- $10.77
1995 10.23 0.43 0.40 (0.62) (0.02) -- 10.42
1994(3) 10.00 0.14 0.18 (0.09) -- -- 10.23
<CAPTION>
RATIO OF
NET
INVESTMENT
RATIO OF NET RATIO OF INCOME/
INVESTMENT EXPENSES (LOSS) TO
RATIO OF INCOME/ TO AVERAGE AVERAGE NET
NET ASSETS EXPENSES (LOSS) TO NET ASSETS ASSETS PORTFOLIO
TOTAL END OF TO AVERAGE AVERAGE NET (EXCLUDING (EXCLUDING TURNOVER AVERAGE
RETURN PERIOD (000) NET ASSETS ASSETS WAIVERS) WAIVERS) RATE COMMISSION RATE+
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------
INTERNATIONAL
EQUITY PORTFOLIO
- ------------------
CLASS A
1996 17.30% $ 347,646 1.25% 1.29% 1.29% 1.25% 102%
1995 (7.67)% 328,503 1.19% 1.30% 1.21% 1.28% 64%
1994 24.44% 503,498 1.10% 1.46% 1.24% 1.32% 19%
1993 2.17% 178,287 1.10% 1.80% 1.53% 1.37% 23%
1992 (1.63)% 92,456 1.10% 2.07% 1.52% 1.63% 79%
1991 0.36% 35,829 1.10% 3.52% 1.64% 2.98% 14%
1990(1) (3.70)% 8,661 1.10% 3.13% 5.67% (1.44)% -- %
- ------------------
EMERGING MARKETS
EQUITY PORTFOLIO
- ------------------
CLASS A
1996 6.83% $ 67,181 1.95% (0.23)% 2.72% (1.00)% 104%
1995(2) 2.70% 5,300 1.95% 1.79% 4.98% (1.24)% -- %
- ------------------
INTERNATIONAL
FIXED INCOME
PORTFOLIO
- ------------------
CLASS A
1996 13.96% $ 84,318 1.00% 4.70% 1.27% 4.43% 269%
1995 8.43% 42,580 1.00% 4.68% 1.30% 4.38% 303%
1994(3) 6.41% 23,678 1.00% 3.81% 1.61% 3.20% 126%
</TABLE>
(1) INTERNATIONAL EQUITY CLASS A SHARES WERE OFFERED BEGINNING DECEMBER 20,
1989. ALL RATIOS FOR THAT PERIOD HAVE BEEN ANNUALIZED.
(2) EMERGING MARKETS EQUITY CLASS A SHARES WERE OFFERED BEGINNING JANUARY 17,
1995. ALL RATIOS FOR THAT PERIOD HAVE BEEN ANNUALIZED.
(3) INTERNATIONAL FIXED INCOME CLASS A SHARES WERE OFFERED BEGINNING SEPTEMBER
1, 1993. ALL RATIOS FOR THAT PERIOD HAVE BEEN ANNUALIZED.
(4) DISTRIBUTIONS FROM NET INVESTMENT INCOME INCLUDE DISTRIBUTIONS OF CERTAIN
FOREIGN CURRENCY GAINS AND LOSSES.
+ AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
3
<PAGE>
THE TRUST
__________________________________________________________________________
SEI INTERNATIONAL TRUST (the "Trust") is an open-end management investment
company that offers units of beneficial interest ("shares") in separate
diversified and non-diversified investment portfolios. This Prospectus offers
Class A shares of the Trust's International Equity, Emerging Markets Equity,
International Fixed Income and Emerging Markets Debt Portfolios (each a
"Portfolio" and, together, the "Portfolios"). The International Equity Portfolio
has two separate classes of shares, Class A and Class D, which provide for
variations in distribution, shareholder servicing and transfer agent costs,
sales charges, voting rights and dividends. The investment advisers and
sub-advisers to the Portfolios are referred to collectively as the "advisers."
Additional information pertaining to the Trust may be obtained by writing to SEI
Financial Services Company, Oaks, Pennsylvania 19456, or by calling
1-800-342-5734.
INVESTMENT OBJECTIVES
AND POLICIES
___________________________________________________________________________
INTERNATIONAL EQUITY
The International Equity Portfolio seeks to provide
long-term capital appreciation by investing primarily in a
diversified portfolio of equity securities of non-U.S.
issuers.
Under normal circumstances, at least 65% of the
International Equity Portfolio's assets will be invested in
equity securities of non-U.S. issuers located in at least
three countries other than the United States.
Securities of non-U.S. issuers purchased by the
Portfolio will typically be listed on recognized foreign
exchanges but also may be purchased in foreign markets, on
U.S. registered exchanges, in the over-the-counter market
or in the form of sponsored or unsponsored American
Depositary Receipts ("ADRs") traded on registered exchanges
or NASDAQ, or sponsored or unsponsored European Depositary
Receipts ("EDRs"), Continental Depositary Receipts ("CDRs")
or Global Depositary Receipts ("GDRs"). The Portfolio
expects its investments to emphasize both large,
intermediate and small capitalization companies.
The International Equity Portfolio may enter into
forward foreign currency contracts as a hedge against
possible variations in foreign exchange rates. The
Portfolio may enter into forward foreign currency contracts
to hedge a specific security transaction or to hedge a
portfolio position. These contracts may be bought or sold
to protect the Portfolio, to some degree, against a
possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S.
dollar. The Portfolio also may invest in options on
currencies.
The Portfolio expects to be fully invested in its
primary investments, described above, but may invest up to
35% of its total assets in U.S. or non-U.S. cash reserves;
money market instruments; swaps; options on securities,
non-U.S. indices and currencies; futures contracts,
including stock index futures contracts; and options on
futures contracts.
For temporary defensive purposes, when the advisers
determine that market conditions warrant, the Portfolio may
invest up to 50% of its assets in U.S. and non-U.S.
4
<PAGE>
money market instruments described above and in other U.S.
and non-U.S. long- and short-term debt instruments which
are rated BBB or higher by S&P or Baa or higher by Moody's
at the time of purchase, or which are determined by the
advisers to be of comparable quality; invest a portion of
such assets in cash; and invest such assets in securities
of supranational entities which are rated A or higher by
S&P or Moody's at the time of purchase or which are
determined by the advisers to be of comparable quality.
The Portfolio is also permitted to acquire floating
and variable rate securities, purchase securities on a
when-issued or delayed delivery basis, and invest up to 15%
of its total assets in illiquid securities. Although
permitted to do so, the Portfolio does not currently intend
to invest in securities issued by passive foreign
investment companies or to engage in securities lending.
EMERGING MARKETS EQUITY
The Emerging Markets Equity Portfolio seeks to provide
capital appreciation by investing primarily in a
diversified portfolio of equity securities of emerging
market issuers.
Under normal circumstances, at least 65% of the
Emerging Markets Equity Portfolio's assets will be invested
in equity securities of emerging market issuers. Under
normal conditions, the Portfolio maintains investments in
at least six emerging market countries and does not invest
more than 35% of its total assets in any one emerging
market country.
In addition to its primary investments described
above, the Portfolio may invest up to 35% of its total
assets in debt securities, including up to 5% of its total
assets in debt securities rated below investment grade.
These debt securities will include debt securities of
emerging market companies. Bonds rated below investment
grade are often referred to as "junk bonds." Such
securities involve greater risk of default or price
volatility than investment grade securities.
The Portfolio may invest in certain debt securities
issued by the governments of emerging market countries that
are or may be eligible for conversion into investments in
emerging market companies under debt conversion programs
sponsored by such governments.
The Portfolio may invest up to 15% of its total
assets in illiquid securities. The Portfolio's advisers
believe that carefully selected investments in joint
ventures, cooperatives, partnerships, private placements,
unlisted securities and other similar situations
(collectively, "special situations") could enhance the
Portfolio's capital appreciation potential. Investments in
special situations may be illiquid, as determined by the
Portfolio's advisers based on criteria approved by the
Board of Trustees. To the extent these investments are
deemed illiquid, the Portfolio's investment in them will be
consistent with its 15% restriction on investment in
illiquid securities.
The Portfolio may invest up to 10% of its total
assets in shares of other investment companies. The
Portfolio may invest in futures contracts and purchase
securities on a
5
<PAGE>
when-issued or delayed delivery basis. The Portfolio may
also purchase and write options to buy or sell futures
contracts.
For temporary defensive purposes, when the advisers
determine that market conditions warrant, the Portfolio may
invest up to 20% of its total assets in the equity
securities of companies constituting the Morgan Stanley
Capital International Europe, Australia, Far East Index
(the "EAFE Index"). These companies typically have larger
average market capitalizations than the emerging market
companies in which the Portfolio generally invests.
INTERNATIONAL FIXED INCOME
The International Fixed Income Portfolio seeks to provide
capital appreciation and current income through investment
primarily in high quality, non-U.S. dollar denominated
government and corporate fixed income securities or debt
obligations.
Under normal circumstances, at least 65% of the
International Fixed Income Portfolio's assets will be
invested in high quality foreign government and foreign
corporate fixed income securities or debt obligations of
issuers located in at least three countries other than the
United States.
The International Fixed Income Portfolio will invest
primarily in: (i) fixed income securities issued or
guaranteed by a foreign government or one of its agencies,
authorities, instrumentalities or political subdivisions;
(ii) fixed income securities issued or guaranteed by
supranational entities; (iii) fixed income securities
issued by foreign corporations; (iv) convertible
securities; and (v) fixed income securities issued by
foreign banks or bank holding companies. All such
investments will be in high quality securities denominated
in various currencies, including the European Currency
Unit. Investment grade securities are rated in one of the
highest four rating categories by a nationally recognized
statistical rating agency ("NRSRO") or determined by the
adviser to be of comparable quality at the time of
purchase. Securities or obligations rated in the fourth
highest rating category may have speculative
characteristics.
Any remaining assets of the Portfolio will be
invested in any of the securities described above,
obligations issued or guaranteed as to principal and
interest by the United States Government, its agencies or
instrumentalities ("U.S. Government securities"), swaps,
options and futures. The Portfolio may also purchase and
write options to buy or sell futures contracts, enter into
forward currency contracts, purchase securities on a
when-issued or delayed delivery basis and engage in short
selling. The Portfolio may invest up to 10% of its total
assets in illiquid securities. Furthermore, although the
Portfolio will concentrate its investments in relatively
developed countries, the Portfolio may invest up to 5% of
its assets in similar securities or debt obligations that
are denominated in the currencies of developing countries
and that are determined by the advisers to be of comparable
quality to such securities and debt obligations at the time
of purchase.
Under normal circumstances, the portfolio turnover
rate for this Portfolio is expected to exceed 200% per
year. Short-term gains realized from portfolio transactions
6
<PAGE>
are taxable to shareholders as ordinary income. In
addition, higher portfolio turnover rates can result in
corresponding increases in portfolio transaction costs. The
Portfolio will not consider portfolio turnover a limiting
factor in implementing investment decisions which are
consistent with the Portfolio's objectives and policies.
EMERGING MARKETS DEBT
The investment objective of the Emerging Markets Debt
Portfolio is to maximize total return.
Under normal circumstances, at least 80% of the
Emerging Markets Debt Portfolio's total assets will be
invested in debt securities of government, government-
related and corporate issuers in emerging market countries
and of entities organized to restructure outstanding debt
of such issuers. The Portfolio defines an emerging market
country as any country the economy and market of which the
World Bank or the United Nations considers to be emerging
or developing. The Portfolio's advisers consider emerging
market issuers to be companies the securities of which are
principally traded in the capital markets of emerging
market countries; that derive at least 50% of their total
revenue from either goods produced or services rendered in
emerging market countries, regardless of where the
securities of such companies are principally traded; or
that are organized under the laws of and have a principal
office in an emerging market country.
In selecting emerging market country debt securities
for investment, the advisers will apply a market risk
analysis contemplating assessment of factors such as
liquidity, volatility, tax implications, interest rate
sensitivity, counterparty risks and technical market
considerations. Currently, investing in many emerging
market country securities is not feasible or may involve
unacceptable political risks.
Emerging market country debt securities in which the
Emerging Markets Debt Portfolio may invest are U.S.
dollar-denominated and non-U.S. dollar-denominated
corporate and government debt securities, including bonds,
notes, bills, debentures, convertible securities, warrants,
bank debt obligations, short-term paper, mortgage and other
asset-backed securities, preferred stock, loan
participations and assignments and interests issued by
entities organized and operated for the purpose of
restructuring the investment characteristics of instruments
issued by emerging market country issuers. The Portfolio
may invest in Brady Bonds, which are debt securities issued
by debtor nations to restructure their outstanding external
indebtedness.
The Portfolio's investments in government,
government-related and restructured debt securities will
consist of (i) debt securities or obligations issued or
guaranteed by governments, governmental agencies or
instrumentalities and political subdivisions located in
emerging market countries (including participations in
loans between governments and financial institutions), (ii)
debt securities or obligations issued by government-owned,
controlled or sponsored entities located in emerging market
countries (including participations in loans between
governments and financial institutions), and (iii)
interests in
7
<PAGE>
structured securities of issuers organized and operated for
the purpose of restructuring the investment characteristics
of instruments issued by any of the entities described
above.
The Portfolio's investments in debt securities of
corporate issuers in emerging market countries may include
debt securities or obligations issued by (i) banks located
in emerging market countries or by branches of emerging
market country banks located outside the home country, or
(ii) companies organized under the laws of an emerging
market country.
The Portfolio may invest up to 10% of its total
assets in common stock, convertible securities, warrants or
other equity securities when consistent with the
Portfolio's objective. The Portfolio will generally hold
such equity investments as a result of purchases of unit
offerings of fixed-income securities which include such
securities or in connection with an actual or proposed
conversion or exchange of fixed-income securities. The
Portfolio may also enter into repurchase agreements and
reverse repurchase agreements, may purchase when-issued
securities, lend portfolio securities and invest in shares
of other investment companies. The Portfolio may purchase
restricted securities and may invest up to 15% of the value
of its total assets in illiquid securities. The Portfolio
may invest in options and futures for hedging purposes, and
may enter into swaps or related transactions. In addition,
the Portfolio may invest in receipts, zero coupon
securities, pay-in-kind bonds, Eurobonds, dollar rolls, and
deferred payment securities.
The securities in which the Portfolio will invest
will not be required to meet a minimum rating standard and
may not be rated for creditworthiness by any
internationally recognized credit rating organization. In
fact, the Portfolio's investments are expected to be in the
lower and lowest rating categories established by
internationally recognized credit rating organizations or
determined to be of comparable quality. Such securities
involve significantly greater risks, including price
volatility and risk of default of payment of interest and
principal than higher rated securities. An investment in
the Portfolio should not be considered as a complete
investment program for all investors.
There is no limit on the percentage of the
Portfolio's assets that may be invested in non-U.S. dollar
denominated securities. However, it is expected that the
majority of the Portfolio's assets will be denominated in
U.S. dollars.
There can be no assurance that the Portfolios will
achieve their respective objectives.
GENERAL INVESTMENT
POLICIES AND RISK
FACTORS
____________________________________________________________________________
EQUITY SECURITIES
Equity securities represent ownership interests in a
company or corporation and include common stock, preferred
stock and warrants and other rights to acquire such
instruments. Changes in the value of portfolio securities
will not necessarily affect cash income derived from these
securities, but will affect a Portfolio's net asset value.
8
<PAGE>
FIXED INCOME SECURITIES
Fixed income securities are debt obligations issued by
corporations, municipalities and other borrowers. The
market value of the fixed income investments will generally
change in response to interest rate changes and other
factors. During periods of falling interest rates, the
values of outstanding fixed income securities generally
rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. Moreover,
while securities with longer maturities tend to produce
higher yields, the prices of longer maturity securities are
also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies
in the rating of any fixed income security and in the
ability of an issuer to make payments of interest and
principal also affect the value of these investments.
Changes in the value of these securities will not affect
cash income derived from these securities, but will affect
a Portfolio's net asset value.
There are no restrictions on the average maturity of
the International Fixed Income or the Emerging Markets Debt
Portfolios or the maturity of any single instrument.
Maturities may vary widely depending on the adviser's
assessment of interest rate trends and other economic and
market factors. In the event a security owned by a
Portfolio is downgraded, the adviser will review the
situation and take appropriate action with regard to the
security. Fixed income securities rated BBB or Baa lack
outstanding investment characteristics, and have
speculative characteristics as well.
NON-DIVERSIFICATION
The International Fixed Income and Emerging Markets Debt
Portfolios are non-diversified investment companies, as
defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), which means that a relatively high
percentage of assets of the Portfolios may be invested in
the obligations of a limited number of issuers. Although
the advisers do not intend to invest more than 5% of its
assets in any single issuer with the exception of
securities which are issued or guaranteed by a national
government, the value of shares of the Portfolios may be
more susceptible to any single economic, political or
regulatory occurrence than the shares of a diversified
investment company would be. The Portfolios intend to
satisfy the diversification requirements necessary to
qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code").
SECURITIES OF FOREIGN AND EMERGING MARKET ISSUERS
There are certain risks connected with investing in foreign
securities. These include risks of adverse political and
economic developments (including possible governmental
seizure or nationalization of assets), the possible
imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting
requirements, the possibility that there will be less
information on such securities and their issuers available
to the public, the difficulty of obtaining or enforcing
court judgments abroad, restrictions on foreign investments
in other jurisdictions, difficulties in effecting
repatriation of capital invested abroad and difficulties in
transaction settlements and the effect of delay on
shareholder equity. Foreign securities may be subject to
foreign taxes, and may be less marketable than comparable
U.S. securities. The value of a Portfolio's investments
denominated in foreign currencies will depend on the
relative strengths of those currencies
9
<PAGE>
and the U.S. dollar, and a Portfolio may be affected
favorably or unfavorably by changes in the exchange rates
or exchange control regulations between foreign currencies
and the U.S. dollar. Changes in foreign currency exchange
rates also may affect the value of dividends and interest
earned, gains and losses realized on the sale of securities
and net investment income and gains if any, to be
distributed to shareholders by a Portfolio.
A Portfolio's investments in emerging markets can be
considered speculative, and therefore may offer higher
potential for gains and losses than developed markets of
the world. With respect to any emerging country, there may
be a greater potential for nationalization, expropriation
or confiscatory taxation, political changes, government
regulation, social instability or diplomatic developments
(including war) which could affect adversely the economies
of such countries or investments in such countries. The
economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have
been and may continue to be adversely affected by trade
barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures
imposed or negotiated by the countries with which they
trade.
In addition to the risks of investing in emerging
market country debt securities, a Portfolio's investment in
government, government-related and restructured debt
instruments are subject to special risks, including the
inability or unwillingness to repay principal and interest,
requests to reschedule or restructure outstanding debt, and
requests to extend additional loan amounts. A Portfolio may
have limited recourse in the event of default on such debt
instruments.
TEMPORARY DEFENSIVE INVESTMENTS
For temporary defensive purposes, when the advisers
determine that market conditions warrant, the International
Fixed Income and Emerging Markets Debt Portfolios may
invest up to 100% of their assets in U.S.
dollar-denominated fixed income securities or debt
obligations and the following domestic and foreign money
market instruments: government obligations, certificates of
deposit, bankers' acceptances, time deposits, commercial
paper, short-term corporate debt issues and repurchase
agreements. The Portfolios may hold a portion of their
assets in cash for liquidity purposes.
For additional information regarding the Portfolios'
permitted investments see "Description of Permitted
Investments and Risk Factors" in this Prospectus and
"Description of Permitted Investments" in the Statement of
Additional Information. For a description of the above
ratings see the Statement of Additional Information.
INVESTMENT LIMITATIONS
________________________________________________________________________
The investment objective and certain of the investment
limitations (including those listed below) are fundamental
policies of the Portfolios. Fundamental policies cannot be
changed with respect to the Trust or a Portfolio without
the consent of the holders of a majority of the Trust's or
that Portfolio's outstanding shares.
10
<PAGE>
EACH OF THE INTERNATIONAL EQUITY, EMERGING MARKETS EQUITY
AND EMERGING MARKETS DEBT PORTFOLIOS MAY NOT:
1. With respect to 75% of its total assets, (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. This
limitation does not apply to the Emerging Markets Debt
Portfolio.
2. Purchase any securities which would cause more than 25%
of its total assets to be invested in the securities of
one or more issuers conducting their principal business
activities in the same industry, provided that this
limitation does not apply to investments in securities
issued or guaranteed by the United States Government, its
agencies or instrumentalities. For purposes of this
limitation, supranational entities will be considered to
comprise an industry, as will each foreign government
that issues securities purchased by the Emerging Markets
Debt Portfolio.
3. Borrow money in an amount exceeding 33% 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 INTERNATIONAL FIXED INCOME PORTFOLIO MAY NOT:
1. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio to be invested in
the securities of one or more issuers conducting their
principal business activities in the same industry,
provided that this limitation does not apply to
investments in obligations issued or guaranteed by the
United States Government or its agencies and
instrumentalities.
2. Borrow money except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the value
of the total assets of the Portfolio. This borrowing
provision is included solely to facilitate the orderly
sale of portfolio securities to accommodate substantial
redemption requests if they should occur and is not for
investment purposes. All borrowings will be repaid before
making additional investments for the Portfolio and any
interest paid on such borrowings will reduce the income
of the Portfolio.
For purposes of the industry concentration
limitations discussed above, these definitions apply to
each Portfolio, and for purposes of the International Fixed
Income Portfolio, these limitations form part of the
fundamental limitation: (i) utility companies will be
divided according to their services, for example, gas, gas
transmission, electric and telephone will each be
considered a separate industry; (ii) financial service
companies will
11
<PAGE>
be classified according to end users of their services, for
example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; (iii)
supranational agencies will be deemed to be issuers
conducting their principal business activities in the same
industry; and (iv) governmental issuers within a particular
country will be deemed to be conducting their principal
business in the same industry.
The foregoing percentage limitations (except the
limitation on borrowing) will apply at the time of the
purchase of a security. Additional fundamental and
non-fundamental investment limitations are set forth in the
Statement of Additional Information.
THE MANAGER
______________________________________________________________________
SEI Fund Management ("SEI Management") provides the Trust
with overall management services, regulatory reporting, all
necessary office space, equipment, personnel and
facilities, and acts as dividend disbursing agent. SEI
Management also serves as transfer agent (the "Transfer
Agent") to the Trust's Class A shares.
For its management services, SEI Management is
entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .45% of the average daily net
assets of the International Equity Portfolio, .65% of the
average daily net assets of the Emerging Markets Equity and
Emerging Markets Debt Portfolios and .60% of the average
daily net assets of the International Fixed Income
Portfolio. SEI Management has voluntarily agreed to waive
all or a portion of its fees, and if necessary, reimburse
other operating expenses, in order to limit the total
operating expenses of each Portfolio. SEI Management
reserves the right to terminate these voluntary fee waivers
at any time in its sole discretion.
For the fiscal year ended February 28, 1997, the
International Equity, Emerging Markets Equity and
International Fixed Income Portfolios paid management fees,
after fee waivers, of .44%, .48% and .49%, respectively, of
their average daily net assets.
THE ADVISERS
______________________________________________________________________
Under advisory agreements with the Trust (the "Advisory
Agreements"), SEI Financial Management Corporation ("SFM")
serves as the investment adviser for the International
Equity, Emerging Markets Equity and Emerging Markets Debt
Portfolios. Strategic Fixed Income L.P. serves as the
investment adviser for the International Fixed Income
Portfolio. Under the Advisory Agreements, the investment
advisers are authorized to make investment decisions for
the assets of the Portfolios, and to continuously, review,
supervise and administer the Portfolios' investment
program.
SEI FINANCIAL MANAGEMENT CORPORATION
SFM serves as the investment adviser for the International
Equity, Emerging Markets Equity and Emerging Markets Debt
Portfolios. SFM is a wholly-owned subsidiary of SEI
Investments Company ("SEI"), a financial services company.
The principal business address of SEI and SFM is Oaks,
Pennsylvania 19456. SEI was founded in 1968, and is a
leading provider of investment solutions to banks,
institutional investors, investment advisers and
12
<PAGE>
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. SFM currently serves as
manager or administrator to more than investment
companies, including more than portfolios, which
investment companies had more than $ billion in assets as
of 31, 1997.
In its role as the investment adviser to the
International Equity, Emerging Markets Equity and Emerging
Markets Debt Portfolios, SFM operates as a "manager of
managers." As adviser, SFM oversees the investment advisory
services provided to the International Equity, Emerging
Markets Equity and Emerging Markets Debt Portfolios and
manages the cash portion of the International Equity and
Emerging Markets Equity Portfolios' assets. Pursuant to
separate sub-advisory agreements with SFM, and under the
supervision of SFM and the Board of Trustees, the
sub-advisers are responsible for the day-to-day investment
management of all or a discrete portion of the assets of
the International Equity, Emerging Markets Equity and
Emerging Markets Debt Portfolios. The sub-advisers are
selected based primarily upon the research and
recommendations of SFM, which evaluates quantitatively and
qualitatively each sub-adviser's skills and investment
results in managing assets for specific asset classes,
investment styles and strategies. Subject to Board review,
SFM allocates and, when appropriate, reallocates the
Portfolios' assets
among sub-advisers, monitors and evaluates sub-adviser
performance, and oversees sub-adviser compliance with the
Portfolios' investment objectives, policies and
restrictions. SFM HAS THE ULTIMATE RESPONSIBILITY FOR THE
INVESTMENT PERFORMANCE OF THE INTERNATIONAL EQUITY,
EMERGING MARKETS EQUITY AND EMERGING MARKETS DEBT
PORTFOLIOS DUE TO ITS RESPONSIBILITY TO OVERSEE
SUB-ADVISERS AND RECOMMEND THEIR HIRING, TERMINATION AND
REPLACEMENT.
For these advisory services, SFM is entitled to a
fee, which is calculated daily and paid monthly, at an
annual rate of .505% of the International Equity
Portfolio's average daily net assets, 1.05% of the Emerging
Markets Equity Portfolio's average daily net assets, and
.85% of the Emerging Markets Debt Portfolio's average daily
net assets. SFM pays the sub-advisers a fee out of its
advisory fee, which fee is based on a percentage of the
average monthly market value of the assets managed by each
sub-adviser.
For the fiscal year ended February 28, 1997, the
International Equity and Emerging Markets Equity Portfolios
paid advisory fees, after fee waivers, of .46% and .84%,
respectively, of their average daily net assets. The
Emerging Markets Debt Portfolio had not commenced
operations as of February 28, 1997.
SFM has obtained an exemptive order from the
Securities and Exchange Commission (the "SEC") that permits
SFM, with the approval of the Trust's Board of Trustees, to
retain sub-advisers unaffiliated with SFM for the
Portfolios without submitting the sub-advisory agreements
to a vote of the Portfolios' shareholders. The exemptive
relief permits the disclosure of only the aggregate amount
payable by SFM under all such
13
<PAGE>
sub-advisory agreements for each portfolio. The Portfolios
will notify shareholders in the event of any addition or
change in the identity of its sub-advisers.
STRATEGIC FIXED INCOME L.P.
Strategic Fixed Income L.P. ("SFI") serves as the
investment adviser to the International Fixed Income
Portfolio. SFI is a limited partnership formed in 1991
under the laws of the State of Delaware, to manage
multi-currency fixed income portfolios. The general partner
of the firm is Gobi Investment Inc., of which Kenneth
Windheim is the sole shareholder, and the limited partner
is Strategic Investment Management ("SIM"). As of March 31,
1997, SFI managed $5.8 billion of client assets. The
principal address of SFI is 1001 Nineteenth Street North,
17th Floor, Arlington, Virginia 22209.
Kenneth Windheim, President of SFI, has been the
portfolio manager of the Portfolio since its inception in
1993. Mr. Windheim is assisted by Gregory Barnett and David
Jallits, Directors of SFI and portfolio managers of the
Portfolio since April 1994. Prior to forming SFI, Kenneth
Windheim was the Chief Investment Officer and Managing
Director of the group which managed global fixed income
portfolios at Prudential Asset Management. Prior to joining
SFI, Gregory Barnett was portfolio manager for the Pilgrim
Multi-Market Income Fund. Prior to that he was vice
president and senior fixed income portfolio manager at
Lexington Management. Prior to joining SFI, David Jallits
was Senior Portfolio Manager for a hedge fund at Teton
Partners. From 1982 to 1994, he was Vice President and
Global Fixed Income Portfolio Manager at The Putnam
Companies.
SFI is entitled to a fee which is calculated daily
and paid monthly by the Portfolio, at an annual rate of
.30% of the average daily net assets of the International
Fixed Income Portfolio. For the fiscal year ended February
28, 1997, SFI received an advisory fee (after fee waivers)
from the Portfolio of .25% of its average net assets.
THE SUB-ADVISERS
_________________________________________________________________
ACADIAN ASSET MANAGEMENT, INC.
Acadian Asset Management, Inc. ("Acadian") serves as a
sub-adviser for a portion of the assets of the
International Equity Portfolio. Acadian, a wholly-owned
subsidiary of United Asset Management Corporation ("UAM"),
was founded in 1977 and manages approximately $4 billion in
assets invested globally as of March 31, 1997. Acadian's
business address is Two International Place, 26th floor,
Boston, Massachusetts 02110.
An investment committee has been responsible for
managing the Portfolio's assets allocated to Acadian since
the Portfolio's inception.
CORONATION ASSET MANAGEMENT (PROPRIETARY) LIMITED
Coronation Asset Management (Proprietary) Limited
("Coronation") serves as a sub-adviser for a portion of the
assets of the Emerging Markets Equity Portfolio.
Coronation, a registered investment adviser organized under
the laws of the Republic of South Africa, was founded in
1993, and as of July 31, 1996, managed $2.5 billion in
assets. The principal business address of Coronation is 80
Strand Street, Cape Town, South Africa, 8001.
14
<PAGE>
Investment decisions for Coronation's portion of the
Portfolio are made by Anthony Gibson and Louis Stassen.
Prior to joining Coronation in 1993, Mr. Gibson, the head
of Coronation's Investment Committee, and Mr. Stassen, the
head of Coronation's research department, worked at Syfrets
Managed Assets for seven years and one year, respectively.
Prior to joining Syfrets Managed Assets, Mr. Stassen worked
as an Investment Analyst for Allan Gray Investment Counsel.
FARRELL WAKO GLOBAL INVESTMENT MANAGEMENT, INC.
Farrell Wako Global Investment Management, Inc. ("Farrell
Wako") serves as a sub-adviser for a portion of the assets
of the International Equity Portfolio. Farrell Wako, a
Delaware corporation and a wholly-owned subsidiary of Wako
Securities, was founded in 1991 and is a registered
investment advisor in the U.S. and Japan. Farrell Wako
currently manages over $325 million. The principal address
of Farrell Wako is 780 Third Avenue, New York, New York
10017.
James L. Farrell, the chairman of Farrell Wako,
manages its portion of the assets of the International
Equity Portfolio. Mr. Farrell has 31 years of experience in
investment management and applied financial research and
was responsible for management of over $1 billion in equity
assets as Chairman of MPT Associates prior to his
association with Farrell Wako.
LAZARD LONDON INTERNATIONAL INVESTMENT MANAGEMENT LIMITED
Lazard London International Investment Management Limited
("Lazard") serves as a sub-adviser for a portion of the
assets of the International Equity Portfolio. Lazard is a
registered investment adviser with its principal business
address at 21 Moorfields, London, England EC2P 2HT. Lazard
was founded in 1980. Lazard is a wholly-owned subsidiary of
Lazard Holdings Limited, which is a holding company
wholly-owned by Lazard Brothers and Co., Limited, a UK
merchant bank whose principal business address is 21
Moorfields, London, England EC2P 2HT. Lazard offers
international investment services to clients of Lazard
Brothers Asset Management Limited ("LBAM"), which is also
wholly-owned by Lazard Holdings Limited. Lazard and LBAM
manage domestic (UK) portfolios and international
portfolios for institutions and private clients, including
insurance funds, pension funds, charities and mutual funds.
As of March 31, 1997, Lazard and LBAM had approximately
$5.6 billion in assets under management.
Mr. Dino Fuschillo, Director of Lazard, has primary
responsibility for the day-to-day management of the portion
of the Portfolio's assets managed by Lazard. Mr. Fuschillo,
the dual employee of Lazard and LBAM, joined LBAM in 1989,
and has specialized in European equity management ever
since.
MONTGOMERY ASSET MANAGEMENT, L.P.
Montgomery Asset Management, L.P. ("MAM") serves as a
sub-adviser for a portion of the assets of the Emerging
Markets Equity Portfolio. MAM is an independent affiliate
of Montgomery Securities, a San Francisco based investment
banking firm. As of March 31, 1997, MAM had approximately
$8 billion in assets under management. MAM has over six
15
<PAGE>
years experience providing investment management services.
The principal address of MAM is 101 California Street, San
Francisco, California 94111.
Josephine S. Jimenez, Bryan L. Sudweeks and Jesus
Duarte share primary responsibility for the Emerging
Markets Equity Portfolio. Ms. Jimenez and Dr. Sudweeks have
fifteen and eight years experience, respectively, in
emerging markets investment. Both joined MAM in 1991. Mr.
Duarte, Senior Portfolio Manager and Regional Head of Latin
American Investing, joined MAM in 1994. Prior to joining
MAM, he was a Director and Vice President of Latinvest.
PARAMETRIC PORTFOLIO ASSOCIATES
Parametric Portfolio Associates ("Parametric") serves as a
sub-adviser for a portion of the assets of the Emerging
Markets Equity Portfolio. Parametric is a general
partnership whose general partners are PIMCO Advisors L.P.
("PIMCO"), the supervisory general partner, and Parametric
Management, Inc., the managing general partner (a
wholly-owned subsidiary of PIMCO). Parametric's predecessor
was founded in 1987, and as of March 31, 1997, Parametric
managed approximately $1.5 billion in client assets.
Parametric's business address is 701 Fifth Avenue, Suite
7310, Seattle, WA 98104. PIMCO's address is 800 Newport
Center Drive, Newport Beach, California 92660.
Clifford Quisenberry, CFA, Senior Investment Manager
and Research Manager, is responsible for managing the
portion of the Portfolio's assets allocated to Parametric.
Prior to joining Parametric, Mr. Quisenberry was a
Portfolio Manager with Cutler & Company.
SALOMON BROTHERS ASSET MANAGEMENT INC.
Salomon Brothers Asset Management Inc. ("SBAM") serves as
the sub-adviser for the assets of the Emerging Markets Debt
Portfolio. SBAM, an indirect wholly-owned subsidiary of
Salomon, Inc., is a Delaware corporation that was founded
in 1987. SBAM is a registered investment adviser that
currently manages approximately $19.6 billion in client
assets. SBAM's principal business address is 7 World Trade
Center, New York, New York 10048.
SBAM employs a team approach in managing the
Portfolio; however, Peter J. Wilby has the primary
day-to-day responsibility for the Portfolio. Mr. Wilby, a
Managing Director who joined SBAM in 1989, has considerable
experience in managing portfolios of high yield and
emerging markets debt portfolios.
SELIGMAN HENDERSON CO.
Seligman Henderson Co. serves as a sub-adviser for a
portion of the assets of the International Equity
Portfolio. Seligman Henderson Co. is a New York general
partnership and is structured as an equal partnership
between J.&W. Seligman & Co. Incorporated and Henderson
International Inc., a controlled affiliate of Henderson
plc. Seligman Henderson Co. was established in 1991 and
manages over $3.4 billion in global and international
equity portfolios for U.S. institutional and retail
clients. The principal address of Seligman Henderson Co. is
100 Park Avenue, New York, New York 10017.
Mr. William Garnett is primarily responsible for the
day-to-day management and investment decisions with respect
to the International Equity Portfolio's assets allocated to
16
<PAGE>
Seligman Henderson Co. Mr. Garnett has more than 11 years'
experience in managing Japanese small cap equity
securities. Mr. Iain Clark, Seligman Henderson Co.'s chief
investment officer, has ultimate responsibility for
portfolio management. Mr. Clark has more than 25 years
experience, including 12 with Henderson plc.
YAMAICHI CAPITAL MANAGEMENT, INC. AND YAMAICHI CAPITAL MANAGEMENT (SINGAPORE)
LIMITED
Yamaichi Capital Management, Inc. ("Yamaichi") and Yamaichi
Capital Management (Singapore) Limited ("YCMS") jointly
serve as sub-adviser for a portion of the assets of the
International Equity Portfolio and for a portion of the
assets of the Emerging Markets Equity Portfolio. Yamaichi
is a New York Corporation established in 1981 and YCMS is a
Singapore corporation established in 1979, and each is a
wholly-owned subsidiary of Yamaichi International Capital
Management Co., Ltd. ("YICM"). Yamaichi, YCMS and YICM are
controlled by Yamaichi Securities Co., Ltd., which is
located in Tokyo, Japan. YCMS and its affiliates manage
approximately $ billion worldwide. The principal address
of Yamaichi is 2 World Trade Center, Suite 9828, New York,
New York 10048. The principal address of YCMS is 138
Robinson Road, #13-01/05, Hong Leong Centre, Singapore
068906.
Mr. Marco Wong leads the management team for the
assets of the International Equity and Emerging Markets
Equity Portfolios allocated to Yamaichi and YCMS. Mr. Wong
has been with YCMS since 1986.
DISTRIBUTION AND
SHAREHOLDER SERVICING
__________________________________________________________________________
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as each Portfolio's
distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust.
The Portfolios have adopted a shareholder service
plan for Class A shares (the "Class A Service Plan") under
which firms, including the Distributor, that provide
shareholder and administrative services may receive
compensation therefor. Under the Class A Service Plan, the
Distributor may provide those services itself, or may enter
into arrangements under which third parties provide such
services and are compensated by the Distributor. Under such
arrangements, the Distributor may retain as profit any
difference between the fee it receives and the amount it
pays such third parties. In addition, the Portfolios may
enter into such arrangements directly. Under the Class A
Service Plan, a Portfolio may pay the Distributor a fee at
a negotiated annual rate of up to .25% of the average daily
net assets of such Portfolio attributable to Class A shares
that are subject to the arrangement in return for provision
of a broad range of shareholder and administrative
services, including: maintaining client accounts; arranging
for bank wires; responding to client inquiries concerning
services provided for investments; changing dividend
options; account designations and addresses; providing
sub-accounting; providing information on
17
<PAGE>
share positions to clients; forwarding shareholder
communications to clients; processing purchase, exchange
and redemption orders; and processing dividend payments.
In addition, the International Equity Portfolio has
adopted a distribution plan for its Class D shares (the
"Class D Plan") pursuant to Rule 12b-1 under the 1940 Act.
It is possible that an institution may offer
different classes of shares to its customers and thus
receive different compensation with respect to different
classes. These financial institutions may also charge
separate fees to their customers.
The Trust may execute brokerage or other agency
transactions through the Distributor, for which the
Distributor may receive compensation.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation, to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolios'
shares.
PURCHASE AND
REDEMPTION OF SHARES
____________________________________________________________________________
Financial institutions may acquire Class A shares of the
Portfolios for their own account, or as a record owner on
behalf of fiduciary, agency or custody accounts, by placing
orders with the Transfer Agent. Institutions that use
certain SEI proprietary systems may place orders
electronically through those systems. Financial
institutions may impose an earlier cut-off time for receipt
of purchase orders directed through them to allow for
processing and transmittal of these orders to the Transfer
Agent for effectiveness on the same day. Financial
institutions which purchase shares for the accounts of
their customers may impose separate charges on these
customers for account services.
Shares of each Portfolio may be purchased or redeemed
on days on which the New York Stock Exchange is open for
business ("Business Days"). The minimum initial investment
in a Portfolio is $100,000; however, the minimum investment
may be waived at the Distributor's discretion. All
subsequent purchases must be at least $1,000.
Shareholders who desire to purchase shares for cash
must place their orders with the Transfer Agent (or its
authorized agent) prior to 4:00 p.m. Eastern time on any
Business Day for the order to be accepted on that Business
Day. Generally, cash investments must be transmitted or
delivered in federal funds to the wire agent on the next
Business Day following the day the order is placed. The
Trust reserves the right to reject a purchase order when
the Distributor determines that it is not in the best
interest of the Trust or its shareholders to accept such
purchase order. In addition, because excessive trading
(including short-term "market timing" trading) can hurt a
Portfolio's performance, each Portfolio may refuse purchase
orders from any shareholder account if the accountholder
has been advised that previous purchase and redemption
transactions were considered excessive in number or amount.
Accounts under common control or
18
<PAGE>
ownership, including those with the same taxpayer
identification number and those administered so as to
redeem or purchase shares based upon certain predetermined
market indicators, will be considered one account for this
purpose.
Purchases will be made in full and fractional shares
of the Portfolios calculated to three decimal places. The
Trust will send shareholders a statement of shares owned
after each transaction. The purchase price of shares is the
net asset value next determined after a purchase order is
received and accepted by the Trust. The net asset value per
share of each Portfolio is determined by dividing the total
market value of a Portfolio's investment and other assets,
less any liabilities, by the total number of outstanding
shares of that Portfolio. Net asset value per share is
determined daily as of the close of business of the New
York Stock Exchange (currently, 4:00 p.m. Eastern time) on
any Business Day.
Information about the market value of each portfolio
security may be obtained by SEI Management from an
independent pricing service. Securities having maturities
of 60 days or less at the time of purchase will be valued
using the amortized cost method (described in the Statement
of Additional Information), which approximates the
securities' market value. The pricing service may use a
matrix system to determine valuations of equity and fixed
income securities. This system considers such factors as
security prices, yields, maturities, call features, ratings
and developments relating to specific securities in
arriving at valuations. The pricing service may also
provide market quotations. The procedures used by the
pricing service and its valuations are reviewed by the
officers of the Trust under the general supervision of the
Trustees. Portfolio securities for which market quotations
are available are valued at the last quoted sale price on
each Business Day or, if there is no such reported sale, at
the most recently quoted bid price.
Shareholders who desire to redeem shares of the
Portfolios must place their redemption orders with the
Transfer Agent (or its authorized agent) prior to 4:00 p.m.
Eastern time on any Business Day. The redemption price is
the net asset value per share of the Portfolio next
determined after receipt by the Transfer Agent of the
redemption order. Payment on redemption will be made as
promptly as possible and, in any event, within seven days
after the redemption order is received.
The Trust intends to generally make redemptions in
cash. The Trust may, however, make redemptions in whole or
in part by a distribution in kind of readily marketable
securities in lieu of cash. Shareholders may incur
brokerage costs on the sale of any such securities so
received in payment of redemptions.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The
Trust and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone instructions.
19
<PAGE>
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by other
means.
PERFORMANCE
______________________________________________________________________
From time to time, each Portfolio may advertise the yield
and total return. These figures will be based on historical
earnings and are not intended to indicate future
performance. No representation can be made concerning
actual yields or future returns. The yield of a Portfolio
refers to the income generated by a hypothetical
investment, net of any sales charge imposed in the case of
some of the Class D shares, in such Portfolio over a thirty
day period. This income is then "annualized" (I.E., the
income over thirty days is assumed to be generated over one
year and is shown as a percentage of the investment).
The total return of a Portfolio refers to the average
compounded rate of return on a hypothetical investment for
designated time periods, assuming that the entire
investment is redeemed at the end of each period and
assuming the reinvestment of all dividend and capital gain
distributions.
The performance of Class A shares will normally be
higher than for Class D shares because of the additional
distribution expenses, transfer agency expenses and sales
charge (when applicable) charged to Class D shares.
A Portfolio may periodically compare its performance
to that of: (i) other mutual funds tracked by mutual fund
rating services (such as Lipper Analytical), financial and
business publications and periodicals; (ii) broad groups of
comparable mutual funds; (iii) unmanaged indices which may
assume investment of dividends but generally do not reflect
deductions for administrative and management costs; or (iv)
other investment alternatives. A Portfolio may quote
Morningstar, Inc., a service that ranks mutual funds on the
basis of risk-adjusted performance. A Portfolio may use
long-term performance of these capital markets to
demonstrate general long-term risk versus reward scenarios
and could include the value of a hypothetical investment in
any of the capital markets. A Portfolio may also quote
financial and business publications and periodicals as they
relate to fund management, investment philosophy and
investment techniques.
A Portfolio may quote various measures of volatility
and benchmark correlation in advertising and may compare
these measures to those of other funds. Measures of
volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while measures
of benchmark correlation indicate how valid a comparative
benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot
be calculated precisely.
TAXES
______________________________________________________________________________
The following summary of federal income tax consequences is
based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No
20
<PAGE>
attempt has been made to present a detailed explanation of
the federal, state or local tax treatment of the Portfolios
or their shareholders. In addition, state and local tax
consequences of an investment in a Portfolio may differ
from the federal income tax consequences described below.
Accordingly, shareholders are urged to consult their tax
advisers regarding specific questions as to federal, state
and local taxes. Additional information concerning taxes is
set forth in the Statement of Additional Information.
TAX STATUS OF THE PORTFOLIOS
Each Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolios intend to qualify for the
special tax treatment afforded regulated investment
companies ("RICs") under Subchapter M of the Code, so as to
be relieved of federal income tax on net investment income
and net capital gains (the excess of net long-term capital
gain over net short-term capital losses) distributed to
shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Portfolio distributes substantially all of its net
investment income (including net short-term capital gains)
to shareholders. Dividends from a Portfolio's net
investment income are taxable to its shareholders as
ordinary income (whether received in cash or in additional
shares) and generally will not qualify for the corporate
dividends-received deduction unless derived from dividends
received by a Portfolio from domestic (U.S.) corporations.
Distributions of net capital gains are taxable to
shareholders as long-term capital gains regardless of how
long the shareholders have held shares. The Portfolios
provide annual reports to shareholders of the federal
income tax status of all distributions.
Dividends declared by a Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in such a month will be
deemed to have been paid by the Portfolio and received by
the Shareholders on December 31 of the year declared if
paid by the Portfolio at any time during the following
January.
Each Portfolio intends to make sufficient
distributions to avoid liability for the federal excise tax
applicable to RICs.
Investment income received by the Portfolios from
sources within foreign countries may be subject to foreign
income taxes withheld at the source. To the extent that a
Portfolio is liable for foreign income taxes so withheld,
the Portfolio intends to operate so as to meet the
requirements of the Code to pass through to the
shareholders credit for foreign income taxes paid. Although
the Portfolios intend to meet Code requirements to pass
through credit for such taxes, there can be no assurance
that the Portfolios will be able to do so.
Each sale, exchange or redemption of Portfolio shares
is a taxable transaction to the shareholder.
GENERAL INFORMATION
______________________________________________________________
THE TRUST
The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated June 30, 1988. The
Declaration of Trust permits the Trust to offer separate
series of shares and different classes of each portfolio.
All consideration received by the Trust for
21
<PAGE>
shares of any class of any portfolio and all assets of such
portfolio or class belong to that portfolio or class,
respectively, and would be subject to the liabilities
related thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
Certain shareholders in one or more of the Portfolios
may obtain asset allocation services from the Adviser and
other financial intermediaries with respect to their
investments in such Portfolios. If a sufficient amount of a
Portfolio's assets are subject to such asset allocation
services, the Portfolio may incur higher transaction costs
and a higher portfolio turnover rate than would otherwise
be anticipated as a result of redemptions and purchases of
Portfolio shares pursuant to such services. Further, to the
extent that the Adviser is providing asset allocation
services and providing investment advice to the Portfolios,
it may face conflicts of interest in fulfilling its
responsibilities because of the possible differences
between the interests of its asset allocation clients and
the interest of the Portfolios.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one
vote. Shareholders of each Portfolio or class will vote
separately on matters pertaining solely to that Portfolio
or class, such as any distribution plan. As a Massachusetts
business trust, the Trust is not required to hold annual
meetings of shareholders, but approval will be sought for
certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining
Trustees or by shareholders at a special meeting called
upon written request of shareholders owning at least 10% of
the outstanding shares of the Trust. In the event that such
a meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
REPORTING
The Trust issues an unaudited report semi-annually and
audited financial statements annually. The Trust furnishes
proxy statements and other reports to shareholders of
record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Manager,
SEI Fund Management, Oaks, Pennsylvania 19456.
DIVIDENDS
Substantially all of the net investment income (exclusive
of capital gains) of each Portfolio is periodically
declared and paid as a dividend. Currently, net capital
gains (the excess of net long-term capital gain over net
short-term capital loss) realized, if any, will be
distributed at least annually.
22
<PAGE>
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares at the net asset value next determined following the
record date, unless the shareholder has elected to take
such payment in cash. Shareholders may change their
election by providing written notice to SEI Management at
least 15 days prior to the distribution.
Dividends and capital gains of each Portfolio are
paid on a per-share basis. The value of each share will be
reduced by the amount of any such payment. If shares are
purchased shortly before the record date for a dividend or
capital gains distributions, a shareholder will pay the
full price for the share and receive some portion of the
price back as a taxable dividend or distribution.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Price Waterhouse LLP serves as the independent accountants
of the Trust.
CUSTODIAN AND WIRE AGENT
State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, acts as Custodian for the
assets of the International Equity, Emerging Markets
Equity, International Fixed Income and Emerging Markets
Debt Portfolios (the "Custodian"). The Custodian holds
cash, securities and other assets of the Trust as required
by the 1940 Act. CoreStates Bank, N.A., Broad and Chestnut
Streets, P.O. Box 7618, Philadelphia, Pennsylvania 19101,
acts as wire agent of the Trust's assets.
DESCRIPTION OF
PERMITTED INVESTMENTS
AND RISK FACTORS
____________________________________________________________________________
The following is a description of certain of the permitted
investment practices for the Portfolios, and the associated
risk factors:
AMERICAN DEPOSITARY RECEIPTS ("ADRS"),
CONTINENTAL DEPOSITARY RECEIPTS ("CDRS"),
EUROPEAN DEPOSITARY RECEIPTS ("EDRS") AND
GLOBAL DEPOSITARY RECEIPTS ("GDRS")
ADRs are securities, typically issued by a U.S. financial
institution (a "depositary"), that evidence ownership
interests in a security or a pool of securities issued by a
foreign issuer and deposited with the depositary. EDRs,
which are sometimes referred to as Continental Depositary
Receipts ("CDRs"), are securities, typically issued by a
non-U.S. financial institution, that evidence ownership
interests in a security or a pool of securities issued by
either a U.S. or foreign issuer. GDRs are issued globally
and evidence a similar ownership arrangement. Generally,
ADRs are designed for trading in the U.S. securities
market, EDRs are designed for trading in European
Securities Markets and GDRs are designed for trading in
non-U.S. Securities Markets. ADRs, EDRs, CDRs and GDRs may
be available for investment through "sponsored" or
"unsponsored" facilities. A sponsored facility is
established jointly by the issuer of the security
underlying the receipt and a depositary, whereas an
unsponsored facility may be established by a depositary
without participation by the issuer of the receipt's
underlying security.
23
<PAGE>
BRADY BONDS
Certain debt obligations, customarily referred to as "Brady
Bonds," are created through the exchange of existing
commercial bank loans to foreign entities for new
obligations in connection with debt restructuring under a
plan introduced by former U.S. Secretary of the Treasury,
Nicholas F. Brady (the "Brady Plan"). Brady Bonds have been
issued only recently, and, accordingly, do not have a long
payment history. They may be fully or partially
collateralized or uncollateralized and issued in various
currencies (although most are U.S. dollar denominated) and
they are actively traded in the over-the-counter secondary
market. U.S. dollar denominated, collateralized Brady
Bonds, which may be fixed rate par bonds or floating rate
discount bonds, are generally collateralized in full as to
principal due at maturity by U.S. Treasury zero coupon
obligations which have the same maturity as the Brady
Bonds. Certain interest payments on these Brady Bonds may
be collateralized by cash or securities in an amount that,
in the case of fixed rate bonds, is typically equal to
between 12 and 18 months of rolling interest payments or,
in the case of floating rate bonds, initially is typically
equal to between 12 and 18 months rolling interest payments
based on the applicable interest rate at that time and is
adjusted at regular intervals thereafter with the balance
of interest accruals in each case being uncollateralized.
Payment of interest and (except in the case of principal
collateralized Brady Bonds) principal on Brady Bonds with
no or limited collateral depends on the willingness and
ability of the foreign government to make payment. In the
event of a default on collateralized Brady Bonds for which
obligations are accelerated, the collateral for the payment
of principal will not be distributed to investors, nor will
such obligations be sold and the proceeds distributed. The
collateral will be held by the collateral agent to the
scheduled maturity of the defaulted Brady Bonds, which will
continue to be outstanding, at which time the fact amount
of the collateral will equal the principal payments which
would have then been due on the Brady Bonds in the normal
course.
CONVERTIBLE SECURITIES
Convertible securities are securities that are exchangeable
for a set number of another security at a prestated price.
Convertible securities typically have characteristics
similar to both fixed income and equity securities. Because
of the conversion feature, the market value of a
convertible security tends to move with the market value of
the underlying stock. The value of a convertible security
is also affected by prevailing interest rates, the credit
quality of the issuer, and any call provisions.
DERIVATIVES
Derivatives are securities that derive their value from
other securities, assets or indices. The following are
considered derivative securities: options on futures,
futures, options (E.G., puts and calls), swap agreements,
mortgage-backed securities (E.G., CMOs, REMICs, IOs and
POs), when-issued securities and forward commitments,
floating and variable rate securities, convertible
securities, "stripped" U.S. Treasury securities (E.G.,
Receipts and STRIPs), privately issued stripped securities
(E.G., TGRs, TRs and CATS). See elsewhere in this
"Description of Permitted Investments and Risk Factors" for
discussions of these various instruments.
24
<PAGE>
DOLLAR ROLLS
"Dollar rolls" are transactions in which securities are
sold for delivery in the current month and the seller
simultaneously contracts to repurchase substantially
similar securities on a specified future date. The
difference between the sale price and the purchase price
(plus any interest earned on the cash proceeds of the sale)
is netted against the interest income foregone on the
securities sold to arrive at an implied borrowing rate.
Alternatively, the sale and purchase transactions can be
executed at the same price, with the Portfolio being paid a
fee as consideration for entering into the commitment to
purchase.
EUROBONDS
A Eurobond is a bond denominated in U.S. dollars or other
currencies and sold to investors outside of the country
whose currency is used. Eurobonds may be issued by
government or corporate issuers, and are typically
underwritten by banks and brokerage firms from numerous
countries. While Eurobonds typically pay principal and
interest in Eurodollars, U.S. dollars held in banks outside
of the United States, they may pay principal and interest
in other currencies.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward contract involves an obligation to purchase or
sell a specific currency amount at a future date, agreed
upon by the parties, at a price set at the time of the
contract. A Portfolio may also enter into a contract to
sell, for a fixed amount of U.S. dollars or other
appropriate currency, the amount of foreign currency
approximating the value of some or all of the Portfolio's
securities denominated in such foreign currency.
At the maturity of a forward contract, the Portfolio
may either sell a portfolio security and make delivery of
the foreign currency, or it may retain the security and
terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the
same currency trader, obligating it to purchase, on the
same maturity date, the same amount of the foreign
currency. The Portfolio may realize a gain or loss from
currency transactions.
FUTURES AND OPTIONS ON FUTURES
Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a
specific security at a specified future time and at a
specified price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume a
position in a futures contract at a specified exercise
price during the term of the option. A Portfolio may use
futures contracts and related options for bona fide hedging
purposes, to offset changes in the value of securities held
or expected to be acquired or be disposed of, to minimize
fluctuations in foreign currencies, or to gain exposure to
a particular market or instrument. A Portfolio will
minimize the risk that it will be unable to close out a
futures contract by only entering into futures contracts
which are traded on national futures exchanges.
A stock index futures contract is a bilateral
agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to a specified
dollar amount times the difference between the stock index
value at the close of trading of the contract and the price
at which the futures contract is originally struck. No
physical
25
<PAGE>
delivery of the stocks comprising the Index is made;
generally contracts are closed out prior to the expiration
date of the contract.
In order to avoid leveraging and related risks, when
a Portfolio purchases futures contracts, it will
collateralize its position by depositing an amount of cash
or cash equivalents, equal to the market value of the
futures positions held, less margin deposits, in a
segregated account with the Trust's custodian. Collateral
equal to the current market value of the futures position
will be marked to market on a daily basis.
A Portfolio may enter into futures contracts and
options on futures contracts traded on an exchange
regulated by the Commodities Futures Trading Commission
("CFTC"), as long as, to the extent that such transactions
are not for "bona fide hedging purposes," the aggregate
initial margin and premiums on such positions (excluding
the amount by which such options are in the money) do not
exceed 5% of a Portfolio's net assets.
There are risks associated with these activities,
including the following: (1) the success of a hedging
strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in
markets and movements in interest rates; (2) there may be
an imperfect or no correlation between the changes in
market value of the securities held by the Portfolio and
the prices of futures and options on futures; (3) there may
not be a liquid secondary market for a futures contract or
option; (4) trading restrictions or limitations may be
imposed by an exchange; and (5) government regulations may
restrict trading in futures contracts and futures options.
HIGH YIELD FOREIGN SOVEREIGN DEBT SECURITIES
Investing in fixed and floating rate high yield foreign
sovereign debt securities will expose a Portfolio to the
direct or indirect consequences of political, social or
economic changes in the countries that issue the
securities. The ability and willingness of sovereign
obligors in developing and emerging market countries or the
governmental authorities that control repayment of their
external debt to pay principal and interest on such debt
when due may depend on general economic and political
conditions within the relevant country. Countries such as
those in which a Portfolio may invest have historically
experienced, and may continue to experience, high rates of
inflation, high interest rates, exchange rate trade
difficulties and extreme poverty and unemployment. Many of
these countries are also characterized by political
uncertainty or instability. Additional factors which may
influence the ability or willingness to service debt
include, but are not limited to, a country's cash flow
situation, the availability of sufficient foreign exchange
on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, and its
government's policy towards the International Monetary
Fund, the World Bank and other international agencies.
The ability of a foreign sovereign obligor to make
timely payments on its external debt obligations will also
be strongly influenced by the obligor's balance of
payments, including export performance, its access to
international credits and investments, fluctuations in
interest rates and the extent of its foreign reserves. A
country whose
26
<PAGE>
exports are concentrated in a few commodities or whose
economy depends on certain strategic imports could be
vulnerable to fluctuations in international prices of these
commodities or imports. To the extent that a country
receives payment for its exports in currencies other than
dollars, its ability to make debt payments denominated in
dollars could be adversely affected. If a foreign sovereign
obligor cannot generate sufficient earnings from foreign
trade to service its external debt, it may need to depend
on continuing loans and aid from foreign governments,
commercial banks and multilateral organizations, and
inflows of foreign investment. The commitment on the part
of these foreign governments, multilateral organizations
and others to make such disbursements may be conditioned on
the government's implementation of economic reforms and/or
economic performance and the timely service of its
obligations. Failure to implement such reforms, achieve
such levels of economic performance or repay principal or
interest when due may result in the cancellation of such
third parties' commitments to lend funds, which may further
impair the obligor's ability or willingness to timely
service its debts.
ILLIQUID SECURITIES
Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price at
which they are being carried on a Portfolio's books.
Illiquid securities include demand instruments with demand
notice periods exceeding seven days, securities for which
there is no active secondary market, and repurchase
agreements with maturities or durations over seven days in
length. In addition, the Emerging Markets Equity Portfolio
believes that carefully selected investments in joint
ventures, cooperatives, partnerships, private placements,
unlisted securities and other similar situations
(collectively, "special situations") could enhance the
Portfolio's capital appreciation potential. To the extent
these investments are deemed illiquid, the Emerging Markets
Equity Portfolio's investment in them will be consistent
with its 15% restriction on investment in illiquid
securities. Investments in special situations and certain
other instruments may be liquid, as determined by the
Portfolio's advisers based on criteria approved by the
Board of Trustees.
INVESTMENT COMPANIES
Because of restrictions on direct investment by U.S.
entities in certain countries, investment in other
investment companies may be the most practical or only
manner in which an international and global fund can invest
in the securities markets of those countries. A Portfolio
does not intend to invest in other investment companies
unless, in the judgment of its advisers, the potential
benefits of such investments exceed the associated costs
relative to the benefits and costs associated with direct
investments in the underlying securities.
Investments in closed-end investment companies may
involve the payment of substantial premiums above the net
asset value of such issuer's portfolio securities and are
subject to limitations under the 1940 Act. A Portfolio also
may incur tax liability to the extent it invests in the
stock of a foreign issuer that constitutes a "passive
foreign investment company."
LOAN PARTICIPATIONS AND ASSIGNMENTS
Loan participations are interests in loans to U.S.
corporations which are administered by the lending bank or
agent for a syndicate of lending banks, and sold by the
lending bank
27
<PAGE>
or syndicate member ("intermediary bank"). In a loan
participation, the borrower corporation will be deemed to
be the issuer of the participation interest except to the
extent the Portfolio derives its rights from the
intermediary bank. Because the intermediary bank does not
guarantee a loan participation in any way, a loan
participation is subject to the credit risks generally
associated with the underlying corporate borrower. In the
event of the bankruptcy or insolvency of the corporate
borrower, a loan participation may be subject to certain
defenses that can be asserted by such borrower as a result
of improper conduct by the intermediary bank. In addition,
in the event the underlying corporate borrower fails to pay
principal and interest when due, the Portfolio may be
subject to delays, expenses and risks that are greater than
those that would have been involved if the Portfolio had
purchased a direct obligation of such borrower. Under the
terms of a loan participation, the Portfolio may be
regarded as a creditor of the intermediary bank, (rather
than of the underlying corporate borrower), so that the
Portfolio may also be subject to the risk that the
intermediary bank may become insolvent. The secondary
market, if any, for these loan participations is limited.
Loan assignments are investments in assignments of
all or a portion of certain loans from third parties. When
a Portfolio purchases assignments from lenders it will
acquire direct rights against the borrower on the loan.
Since assignments are arranged through private negotiations
between potential assignees and assignors, however, the
rights and obligations acquired by the Portfolio may differ
from, and be more limited than, those held by the assigning
lender. Loan participations and assignments are considered
to be illiquid.
MONEY MARKET INSTRUMENTS
Money market securities are high-quality, dollar and non
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks and U.S. branches of foreign banks; (ii) U.S.
Treasury obligations and obligations of agencies and
instrumentalities of the U.S. Government; (iii)
high-quality commercial paper issued by U.S. and foreign
corporations; (iv) debt obligations with a maturity of one
year or less issued by corporations and governments that
issue high-quality commercial paper or similar securities;
and (v) repurchase agreements involving any of the
foregoing obligations entered into with highly-rated banks
and broker-dealers.
OBLIGATIONS OF SUPRANATIONAL ENTITIES
Supranational entities are entities established through the
joint participation of several governments, including the
Asian Development Bank, the Inter-American Development
Bank, International Bank for Reconstruction and Development
(World Bank), African Development Bank, European Economic
Community, European Investment Bank and the Nordic
Investment Bank. The governmental members, or "stock
holders," usually make initial capital contributions to the
supranational entity and, in many cases, are committed to
make additional capital contributions if the supranational
entity is unable to repay its borrowings.
OPTIONS
A put option gives the purchaser of the option the right to
sell, and the writer of the option the obligation to buy,
the underlying security at any time during the option
period.
28
<PAGE>
A call option gives the purchaser of the option the right
to buy, and the writer of the option the obligation to
sell, the underlying security at any time during the option
period. The premium paid to the writer is the consideration
for undertaking the obligations under the option contract.
A Portfolio may purchase and write put and call
options on indices and enter into related closing
transactions. Put and call options on indices are similar
to options on securities except that options on an index
give the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the
underlying index is greater than (or less than, in the case
of puts) the exercise price of the option. This amount of
cash is equal to the difference between the closing price
of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number.
Thus, unlike options on individual securities, all
settlements are in cash, and gain or loss depends on price
movements in the particular market represented by the index
generally, rather than the price movements in individual
securities.
A Portfolio may purchase and write put and call
options on foreign currencies (traded on U.S. and foreign
exchanges or over-the-counter markets), to manage its
exposure to exchange rates. Call options on foreign
currency written by a Portfolio will be "covered," which
means that the Portfolio will own an equal amount of the
underlying foreign currency. With respect to put options on
foreign currency written by a Portfolio, the Portfolio will
establish a segregated account with its custodian
consisting of cash or liquid, high grade debt securities in
an amount equal to the amount the Portfolio would be
required to pay upon exercise of the put.
All options written on indices must be covered. When
a Portfolio writes an option on an index, it will establish
a segregated account containing cash or liquid, high grade
debt securities with its custodian in an amount at least
equal to the market value of the option and will maintain
the account while the option is open, or will otherwise
cover the transaction.
RISK FACTORS: Risks associated with options
transactions include: (1) the success of a hedging strategy
may depend on an ability to predict movements in the prices
of individual securities, fluctuations in markets and
movements in interest rates; (2) there may be an imperfect
correlation between the movement in prices of options and
the securities underlying them; (3) there may not be a
liquid secondary market for options; and (4) while a
Portfolio will receive a premium when it writes covered
call options, it may not participate fully in a rise in the
market value of the underlying security.
PRIVATIZATIONS
Privatizations are foreign government programs for selling
all or part of the interests in government owned or
controlled enterprises. The ability of a U.S. entity to
participate in privatizations in certain foreign countries
may be limited by local law, or the terms on which a
Portfolio may be permitted to participate may be less
advantageous than those applicable for local investors.
There can be no assurance that foreign governments will
continue to sell their interests in companies currently
owned or controlled by them or that privatization programs
will be successful.
29
<PAGE>
RECEIPTS
Receipts are sold as zero coupon securities, which means
that they are sold at a substantial discount and redeemed
at face value at their maturity date without interim cash
payments of interest or principal. This discount is
accreted over the life of the security, and such accretion
will constitute the income earned on the security for both
accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate
volatility than interest paying investments.
REPURCHASE AGREEMENTS
Repurchase agreements are agreements by which a Portfolio
obtains a security and simultaneously commits to return the
security to the seller at an agreed upon price (including
principal and interest) on an agreed upon date within a
number of days from the date of purchase. Repurchase
agreements are considered loans under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS
Certain Portfolios may borrow funds for temporary purposes
by entering into reverse repurchase agreements. Pursuant to
such agreements, a Portfolio would sell portfolio
securities to financial institutions such as banks and
broker-dealers, and agree to repurchase them at a mutually
agreed-upon date and price. A Portfolio enters into reverse
repurchase agreements only to avoid otherwise selling
securities during unfavorable market conditions to meet
redemptions. At the time the Portfolio enters into a
reverse repurchase agreement, it places in a segregated
custodial account liquid assets such as U.S. Government
securities or other liquid high-grade debt securities
having a value equal to the repurchase price (including
accrued interest), and will subsequently monitor the
account to ensure that such equivalent value is maintained.
Reverse repurchase agreements involve the risk that the
market value of the securities sold by a Portfolio may
decline below the price at which it is obligated to
repurchase the securities. Reverse repurchase agreements
are considered to be borrowings by a Portfolio under the
1940 Act.
SECURITIES LENDING
In order to generate additional income, a Portfolio may
lend securities which it owns pursuant to agreements
requiring that the loan be continuously secured by
collateral consisting of cash or securities of the U.S.
Government or its agencies equal to at least 100% of the
market value of the loaned securities. A Portfolio
continues to receive interest on the loaned securities
while simultaneously earning interest on the investment of
cash collateral. Collateral is marked to market daily.
There may be risks of delay in recovery of the securities
or even loss of rights in the collateral should the
borrower of the securities fail financially or become
insolvent.
SHORT SALES
A Portfolio may only sell securities short "against the
box." A short sale is "against the box" if at all times
during which the short position is open, the Portfolio owns
at least an equal amount of the securities or securities
convertible into, or exchangeable without further
consideration for, securities of the same issue as the
securities that are sold short.
STRUCTURED SECURITIES
The Emerging Markets Debt Portfolio may invest a portion of
its assets in entities organized and operated solely for
the purpose of restructuring the investment characteristics
of sovereign debt obligations. This type of restructuring
involves the deposit with, or purchase by, an entity, such
as a corporation or trust, or specified instruments (such
as commercial bank loans or Brady Bonds) and the issuance
by that entity of one or
30
<PAGE>
more classes of securities ("Structured Securities") backed
by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments
may be apportioned among the newly issued Structured
Securities to create securities with different investment
characteristics, such as varying maturities, payment
priorities and interest rate provisions, and the extent of
the payments made with respect to Structured Securities is
dependent on the extent of the cash flow on the underlying
instruments. Because Structured Securities of the type in
which the Portfolio anticipates it will invest typically
involve no credit enhancement, their credit risk generally
will be equivalent to that of the underlying instruments.
The Portfolio is permitted to invest in a class of
Structured Securities that is either subordinated or
unsubordinated to the right of payment of another class.
Subordinated Structured Securities typically have higher
yields and present greater risks than unsubordinated
Structured Securities. Structured Securities are typically
sold in private placement transactions, and there currently
is no active trading market for Structured Securities.
Certain issuers of such structured securities may be deemed
to be "investment companies" as defined in the 1940 Act. As
a result, the Portfolio's investment in such securities may
be limited by certain investment restrictions contained in
the 1940 Act.
SWAPS, CAPS, FLOORS AND COLLARS
Interest rate swaps, mortgage swaps, currency swaps and
other types of swap agreements such as caps, floors and
collars are designed to permit the purchaser to preserve a
return or spread on a particular investment or portion of
its portfolio, and to protect against any increase in the
price of securities a Portfolio anticipates purchasing at a
later date.
Swap agreements will tend to shift a Portfolio's
investment exposure from one type of investment to another.
Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a
Portfolio's investment and their share price and yield.
U.S. GOVERNMENT AGENCY SECURITIES
Obligations issued or guaranteed by agencies of the U.S.
Government, including, among others, the Federal Farm
Credit Bank, the Federal Housing Administration and the
Small Business Administration and obligations issued or
guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage
Corporation, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the full
faith and credit of the U.S. Treasury (E.G., Government
National Mortgage Association Securities), and others are
supported by the right of the issuer to borrow from the
Treasury (E.G., Federal Farm Credit Bank Securities), while
still others are supported only by the credit of the
instrumentality (E.G., Fannie Mae Securities).
U.S. TREASURY OBLIGATIONS
U.S. Treasury obligations consist of bills, notes and bonds
issued by the U.S. Treasury, as well as separately traded
interest and principal component parts of such obligations,
known as Separately Traded Registered Interest and
Principal Securities ("STRIPS"), that are transferable
through the Federal book-entry system.
31
<PAGE>
U.S. TREASURY RECEIPTS
U.S. Treasury receipts are interests in separately traded
interest and principal component parts of U.S. Treasury
obligations that are issued by banks or brokerage firms and
are created by depositing U.S. Treasury notes and
obligations into a special account at a custodian bank. The
custodian holds the interest and principal payments for the
benefit of the registered owners of the certificates of
receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains
the register.
VARIABLE AND FLOATING RATE INSTRUMENTS
Certain obligations may carry variable or floating rates of
interest and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates
which are not fixed, but which vary with changes in
specified market rates or indices. The interest rates on
these securities may be reset daily, weekly, quarterly or
at some other interval, and may have a floor or ceiling on
interest rate changes.
WARRANTS
Warrants are instruments giving holders the right, but not
the obligation, to buy equity or fixed-income securities of
a company at a given price during a specified period.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. A Portfolio will maintain with its
Custodian a separate account with liquid, high grade debt
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these securities
is fixed as of the purchase date, and no interest accrues
to a Portfolio before settlement.
ZERO COUPON, PAY IN-KIND AND DEFERRED PAYMENT SECURITIES
Zero coupon securities are securities that are sold at a
discount to par value and securities on which interest
payments are not made during the life of the security. Upon
maturity, the holder is entitled to receive the par value
of the security. While interest payments are not made on
such securities, holders of such securities are deemed to
have received "phantom income" annually. Because a
Portfolio will distribute its "phantom income" to
shareholders, to the extent that shareholders elect to
receive dividends in cash rather than reinvesting such
dividends in additional shares, a Portfolio will have fewer
assets with which to purchase income producing securities.
Zero coupon, pay-in-kind and deferred payment securities
may be subject to greater fluctuation in value and lesser
liquidity in the event of adverse market conditions that
comparably rated securities paying cash interest at regular
interest payment periods.
Additional information on other permitted investments can
be found in the Statement of Additional Information.
32
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses........................ 2
Financial Highlights............................. 3
The Trust........................................ 4
Investment Objectives and Policies............... 4
General Investment Policies and Risk Factors..... 8
Investment Limitations........................... 10
The Manager...................................... 12
The Advisers..................................... 12
The Sub-Advisers................................. 14
Distribution and Shareholder Servicing........... 17
Purchase and Redemption of Shares................ 18
Performance...................................... 20
Taxes............................................ 20
General Information.............................. 21
Description of Permitted Investments and Risk
Factors......................................... 23
</TABLE>
