<PAGE>
As filed with the Securities and Exchange Commission on April 28, 1995
Registration No. 33-80158
811-8562
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 1 [X]
----
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2 [X]
Insurance Investment Products Trust
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(Exact Name of Registrant as Specified in Charter)
c/o CT Corporation, 2 Oliver Street, Boston, Massachusetts 02109
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 215-254-1000
David G. Lee Copy to:
Insurance Investment Products Trust Stephen E. Roth, Esquire
680 East Swedesford Road Sutherland, Asbill & Brennan
Wayne, Pennsylvania 19087-1658 1275 Pennsylvania Avenue, N.W.
(Name and Address of Agent for Service) Washington, D.C. 20004-2404
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of the Registration Statement.
DECLARATION PURSUANT TO RULE 24f-2
An indefinite amount of securities is being registered under the Securities Act
of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. No
securities were sold pursuant to this Registration Statement in 1994 and
accordingly no notice pursuant to Rule 24f-2 was filed for that year.
_____________
It is proposed that this filing will become effective: (check appropriate
box)
[X] immediately upon filing pursuant to paragraph (b).
[ ] on (date) pursuant to paragraph (b).
[ ] 60 days after filing pursuant to paragraph (a).
[ ] on (date) pursuant to paragraph (a) of Rule 485.
<PAGE>
INSURANCE INVESTMENT PRODUCTS TRUST
FORM N-1A
CROSS REFERENCE SHEET
___________________
<TABLE>
<CAPTION>
Part A
Item No. Prospectus Heading
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<C> <S> <C>
1. Cover Page Cover Page
2. Synopsis Introduction
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Introduction; International Growth
Fund; Growth Fund; Aggressive Growth
Fund; Income Equity Fund, Intermediate
Fixed Income Fund; Money Market Fund;
General Investment Policies;
Investment Limitations; Fundamental
Policies; General Information;
Description of Permitted Investments
and Related Risk Factors
5. Management of the Fund The Manager and Shareholder Servicing
Agent; The Advisers; The Sub-Advisers
6. Capital Stock and Other Securities Taxes; General Information
7. Purchase of Securities Being How to Purchase and Redeem Shares;
Offered The Distributor
8. Redemption or Repurchase How to Purchase and Redeem Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
Part B Heading in Statement
Item No. of Additional Information
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<C> <S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Description of Shares
13. Investment Objectives and International Growth Fund; Growth
Policies Fund; Aggressive Growth Fund; Income
Equity Fund; Intermediate Fixed Income
Fund; Money Market Fund; Investment
Limitations; Description of Permitted
Investments
14. Management of the Registrant The Manager and Shareholder Servicing
Agent; The Advisers and Sub-Advisers
15. Control Persons and Principal Control Persons and Principal Holders
Holders of Securities of Securities
16. Investment Advisory and Other The Manager and Shareholder Servicing
Services Agent; The Advisers and Sub-Advisers;
Independent Public Accountants
17. Brokerage Allocation Fund Transactions
18. Capital Stock and Other Securities Description of Shares
19. Purchase, Redemption, and Pricing Purchase and Redemption of Shares
of Securities Being Offered
20. Tax Status Taxes
21. Underwriters Purchase and Redemption of Shares;
The Distributor
22. Calculation of Performance Data Performance
23. Financial Statements Financial Statements
</TABLE>
Part C
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Information required to be included in Part C is set forth under
the appropriate item, so numbered, in Part C of this Registration Statement.
-II-
<PAGE>
INSURANCE INVESTMENT PRODUCTS TRUST
APRIL 28, 1995
________________________________________________________________________________
INTERNATIONAL GROWTH
GROWTH
AGGRESSIVE GROWTH
INCOME EQUITY
INTERMEDIATE FIXED INCOME
MONEY MARKET
________________________________________________________________________________
Insurance Investment Products Trust (the "Trust") is a series type mutual
fund that is intended to be a funding vehicle for variable annuity and variable
life insurance contracts ("variable contracts") supported by separate accounts
of various life insurance companies (the "Insurers"). The Trust consists of six
professionally managed investment funds (each, a "Fund"), although one or more
Funds may not be available for investment under variable contracts offered by a
particular Insurer. A purchaser of a variable contract should refer to the
prospectus for his or her variable contract for information regarding which
Funds are available under his or her contract. Each Fund has a different
investment objective.
This Prospectus sets forth concisely the basic information about the Trust
that a prospective investor should know before investing. Investors are advised
to read this Prospectus and retain it for future reference. A Statement of
Additional Information dated April 28, 1995, as it may be amended from time to
time, has been filed with the Securities and Exchange Commission and is
available without charge through SEI Financial Management Corporation, 680 East
Swedesford Road, Wayne, PA 19087-1658 or by calling 1-800-645-8524. The
Statement of Additional Information is incorporated into this Prospectus by
reference.
The purchaser of a variable contract should read this Prospectus in
conjunction with the prospectus for his or her variable contract.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
________________________________________________________________________________
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, NOR ARE THE TRUST'S SHARES FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THE TRUST'S SHARES INVOLVES RISK,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
________________________________________________________________________________
<PAGE>
FINANCIAL HIGHLIGHTS INSURANCE INVESTMENT PRODUCTS TRUST
FOR THE PERIOD ENDED MARCH 31, 1995 UNAUDITED
The following information has been prepared in conjunction with the Trust's
unaudited financial statements as of March 31, 1995, which are included in the
Trust's Statement of Additional Information under "Financial Statements." This
table should be read in conjunction with the Trust's financial statements and
notes thereto.
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Intermediate
International Aggressive Income Fixed Money
Growth(1) Growth(1) Growth(1) Equity(1) Income (1) Market(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00 $10.00 $10.00 $10.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net Investment Income 0.03 0.03 0.01 0.04 0.08 0.01
Net Realized and Unrealized
Gain (Loss) on Investments (0.11) 0.30 0.48 0.22 0.12 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.08) 0.33 0.49 0.26 0.20 0.01
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Less Distributions from:
Net Investment Income - (0.03) (0.01) (0.04) (0.08) (0.01)
Realized Capital Gains - - - - - -
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Total Distributions - (0.03) (0.01) (0.04) (0.08) (0.01)
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Net Asset Value, End of Period $ 9.92 $10.30 $10.48 $10.22 $10.12 $ 1.00
====================================================================================================================================
Total Return + (0.80) 3.30% 4.90% 2.60% 1.99% 0.71%
%
====================================================================================================================================
Ratios/Supplemental Data
Net Assets End of Period $1,058,601 $1,128,933 $592,664 $1,116,839 $1,014,676 $602,128
Ratio of Expenses to Average
Net Assets 1.40% 1.00% 1.20% 1.00% 0.70% 0.50%
Ratio of Expenses to Average Net
Assets (Excluding Waivers/ 3.40% 1.49% 2.13% 1.44% 1.21% 1.05%
Reimbursements)
Ratio of Net Income to Average
Net Assets 2.55% 2.23% 0.77% 3.00% 5.79% 5.49%
Ratio of Net Income (Loss) to Average
Net Assets (Excluding Waivers/ 0.55% 1.74% (0.16%) 2.56% 5.28% 4.94%
Reimbursements)
Portfolio Turnover Rate 2% 14% 14% 1% 0% N/A
====================================================================================================================================
</TABLE>
+ Total Return is for the period indicated and has not been annualized.
(1) Commenced operations on February 10, 1995. All ratios for the period
have been annualized.
<PAGE>
<TABLE>
<CAPTION>
Table of Contents____________________________________________________________________________________
<S> <C> <S> <C>
The Trust................................ 2 How to Purchase and Redeem Shares.......... 13
Investment Objectives and Policies....... 2 Performance................................ 14
General Investment Policies.............. 6 Taxes...................................... 15S
Investment Limitations................... 7 General Information........................ 15
The Manager and Shareholder Servicing Agent 8 Description of Permitted Investments and Related
The Advisers............................. 8 Risk Factors............................. 18
The Sub-Advisers......................... 9 Appendix................................... A-1
The Trust____________________________________________________________________________________________
</TABLE>
Insurance Investment Products Trust (the "Trust") offers units of beneficial
interest ("shares") in series, each corresponding to one of six separate
diversified investment funds: the International Growth, Growth, Aggressive
Growth, Income Equity, Intermediate Fixed Income, and Money Market Funds (the
"Funds"). Additional information pertaining to the Trust may be obtained by
writing to SEI Financial Management Corporation, 680 East Swedesford Road,
Wayne, PA 19087-1658 or by calling 1-800-645-8524.
The Trust is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company. It currently offers its
shares only to separate accounts of Insurers as a funding vehicle for variable
contracts supported by such separate accounts. The Trust does not offer its
shares directly to the general public. It is anticipated that most separate
accounts investing in the Trust will be registered with the Securities and
Exchange Commission as unit investment trusts, a type of investment company.
Information regarding the variable contracts and the separate accounts
is contained in separate prospectuses for which the Trust assumes no
responsibility. Variable contract owners are not "shareholders" of the Trust.
Rather, each Insurer and its separate accounts are the Trust's shareholders.
However, the Trust expects that, in accordance with current law, voting rights
for the Trust's shares will be passed on to variable contract owners.
INVESTMENT
OBJECTIVES AND
POLICIES____________________________________________________________________
The information below sets out the investment objectives and policies of each
Fund. There can be no assurance that any Fund will achieve its investment
objective. For additional information regarding permitted investments and
related risk factors, see "Description of Permitted Investments and Related Risk
Factors" in this prospectus and in the Statement of Additional Information. For
a description of the ratings applicable to certain permitted investments, see
the "Appendix."
INTERNATIONAL GROWTH
FUND
The investment objective of the International Growth
Fund is 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 Growth Fund's assets will be invested in
the following equity securities of non-U.S. issuers:
common stocks, securities convertible into common
stocks, preferred stocks, warrants and rights to
subscribe to common stocks. At all times at least 65% of
the Fund's total assets will be invested in securities
of issuers located in at least three different countries
other than the United States. This Fund may also be
subject to additional diversification requirements under
state insurance law. See "General Investment
Policies."
The Fund may also enter into forward foreign
currency contracts as a hedge against possible
variations in foreign exchange rates. A forward foreign
currency contract is a commitment to purchase or sell a
specified currency, at a
2
<PAGE>
specified future date, at a specified price. The Fund
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 Fund, to some degree, against a
possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S.
Dollar. The Fund also may invest in options on
currencies.
Securities of non-U.S. issuers purchased by the
Fund may be purchased in non-U.S. markets, on United
States registered exchanges, on 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 Fund will typically
invest in equity securities listed on recognized non-
U.S. exchanges, but may also invest in securities traded
in over-the-counter markets.
The Fund 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 as described below
under "General Investment Policies"; swaps; options on
securities, non-U.S. indices and currencies; futures
contracts, including stock index futures contracts; and
options on futures contracts. The Fund is also permitted
to acquire variable and floating rate securities,
purchase securities on a when-issued or delayed delivery
basis and purchase illiquid securities. Although
permitted to do so, the Fund does not currently intend
to invest in securities issued by passive non-U.S.
investment companies.
The Fund's investment adviser is SEI Financial
Management Corporation ("SFM") and its investment sub-
advisers are Acadian Asset Management, Inc. and
WorldInvest Limited.
GROWTH FUND
The investment objective of the Growth Fund is
capital appreciation.
Under normal conditions, the Fund will invest at
least 65 percent of its total assets in equity
securities of large companies (i.e., companies with
market capitalizations of more than $1 billion at the
time of purchase). The Fund's advisers will generally
select securities of issuers believed by them to possess
significant growth potential. Any remaining assets may
be invested in fixed-income securities or money market
instruments as defined below under "General Investment
Policies" or in equity securities of smaller companies
that the Fund's advisers believe are appropriate in
light of the Fund's objective. Equity securities in
which the Fund invests include common stock, preferred
stock, warrants or rights to subscribe to common stock
and, in general, any security that is convertible into
or exchangeable for common stock.
As a result of its investment strategies, the
Fund's annual portfolio turnover rate is expected to be
over 100%. A high turnover rate will result in higher
transaction costs.
The Fund's investment adviser is SFM and its
investment sub-advisers are IDS Advisory Group Inc. and
Alliance Capital Management L.P.
AGGRESSIVE GROWTH
FUND
The investment objective of the Aggressive Growth Fund
is to provide long-term capital appreciation by
investing primarily in equity securities of smaller
companies.
The Fund's policy is to invest in equity
securities of smaller companies that its advisers
believe are in an early stage or transitional point in
their development and have demonstrated or have the
potential for above average capital growth. The Fund's
advisers will select companies which have the potential
to gain market share in their industry, achieve and
maintain high and consistent
3
<PAGE>
profitability or produce increases in earnings. The
Fund's advisers also seek companies with strong company
management and superior fundamental strength.
Under normal market conditions, the Fund will
invest at least 65% of its total assets in the equity
securities of smaller growth companies (i.e., market
capitalizations less than $1 billion at time of
purchase). Small capitalization companies have the
potential to show earnings growth over time that is well
above the growth rate of the overall economy. The
remaining 35% of the Fund's assets may be invested in
the equity securities of more established companies that
its advisers believe may offer strong capital
appreciation potential due to their relative market
position, anticipated earnings growth, changes in
management or other similar opportunities. Equity
securities in which the Fund invests include common
stock, preferred stock, warrants and rights to subscribe
to common stock and, in general, any security that is
convertible into or exchangeable for common stock.
The Fund's investment adviser is SFM and its
investment sub-adviser is Pilgrim Baxter & Associates,
Ltd.
INCOME EQUITY
FUND
The investment objective of the Income Equity Fund is
long-term growth of capital and income.
The Fund invests primarily in a diversified
portfolio of high quality, income producing common
stocks which, in the advisers' opinion, are undervalued
in the marketplace at the time of purchase. In general,
the advisers characterize high quality common stocks as
those that have average returns-on-equity and above
average reinvestment rates. The Fund's advisers also
consider other factors, such as earnings and dividend
growth prospects as well as industry outlook and market
share. Under normal conditions, the Fund will invest at
least 65 percent of its total assets in common stocks of
companies with a market capitalization of at least $1
billion.
The Fund's investment adviser is SFM and its
investment sub-advisers are Merus Capital Management,
Mellon Equity Associates and LSV Asset Management.
INTERMEDIATE FIXED
INCOME FUND
The investment objective of the Intermediate Fixed
Income Fund is current income consistent with the
preservation of capital.
The Intermediate Fixed Income Fund's permitted
investments consist of corporate bonds and debentures,
obligations issued by the United States Government, its
agencies and instrumentalities, receipts involving U.S.
Treasury obligations, collateralized mortgage
obligations and asset backed securities that are rated
AAA, AA or A by S&P or Aaa, Aa or A by Moody's at the
time of purchase or of comparable quality (as determined
by the Fund's advisers). The Intermediate Fixed Income
Fund may invest up to 35% of its total assets in
corporate bonds and debentures rated BBB by Standard &
Poors Corporation ("S&P") or Baa by Moody's Investors
Service, Inc. ("Moody's") at the time of purchase. In
addition, the Fund may invest in money market
instruments as described below under "General Investment
Policies." The Fund's advisers may purchase bond
warrants in order to increase the Fund's total return,
and may purchase interest-only and principal-only
components of mortgage-backed securities and
collateralized mortgage obligations, mortgage rolls and
Yankee obligations. The Fund may also purchase and sell
futures, options, and options on futures. Under normal
market conditions, the Fund will invest at least 65% of
its total assets in bonds. Securities comprising the
Fund will have an aggregate average weighted maturity of
five to ten years. By so limiting the maturity of its
investments, the Fund's assets are expected to
experience less price volatility in response to changes
in interest rates than similar securities with longer
maturities.
4
<PAGE>
As a result of its investment strategies, the
Fund's annual portfolio turnover rate is expected to
exceed 100%. Such a rate, if achieved, to higher
transaction costs.
The Fund's investment adviser is SFM and its
investment sub-adviser is Western Asset Management
Company.
MONEY MARKET
FUND
The investment objective of the Money Market Fund is to
preserve principal value and maintain a high degree of
liquidity while providing current income.
The Money Market Fund intends to comply with
regulations of the SEC applicable to money market funds.
These regulations impose certain quality, maturity and
diversification restraints on investments by the Fund.
Under these regulations, the Fund will maintain an
average maturity on a dollar-weighted basis of 90 days
or less and will acquire only eligible securities (as
defined in the "Appendix") maturing in 397 days or less.
For a further discussion of these rules, see the
"Appendix." The Fund will use its best efforts to
maintain a constant net asset value of $1.00 per
share.
An investment in the Money Market Fund is
neither insured nor guaranteed by the U.S. Government,
and there can be no assurance that the Money Market Fund
will be able to maintain a stable net asset value of
$1.00 per share.
The Money Market Fund invests exclusively in (i)
commercial paper rated in the top rating category by two
or more nationally recognized statistical rating
organizations ("NRSROs"), or one NRSRO if only one NRSRO
has rated the security at the time of investment or, if
not rated, determined by the Fund's advisers to be of
comparable quality; (ii) obligations (including
certificates of deposit, time deposits, and bankers'
acceptances and bank notes) of U.S. commercial banks
that are members of the Federal Reserve System or the
Federal Deposit Insurance Corporation or savings and
loan institutions, which banks or institutions have
total assets of $500 million or more as shown on their
most recent public financial statements at the time of
investment, provided that such obligations are rated in
the top two short-term rating categories by two or more
NRSROs, or one NRSRO if only one NRSRO has rated the
security at the time of investment or, if not rated,
determined by the Fund's advisers to be of comparable
quality; (iii) short-term corporate obligations rated in
the top two short-term rating categories by an NRSRO at
the time of investment or, if not rated, determined by
the Fund's advisers to be of comparable quality; (iv)
short-term obligations issued by state and local
governmental issuers, which are rated, at the time of
investment, by at least two NRSROs in one of the two
highest municipal bond rating categories, and carry
yields that are competitive with those of other types of
money market instruments of comparable quality; (v) U.S.
Treasury obligations, obligations issued or guaranteed
as to principal and interest by the agencies or
instrumentalities of the U.S. government, and repurchase
agreements involving such obligations; and (vi) U.S.
dollar denominated issuers of foreign governments
including Canadian and Provincial Government and Crown
Agency Obligations; and (vii) repurchase agreements
involving any of such obligations.
The purchase of unrated securities by the Fund's
advisers is subject to the approval of or ratification
by the Trustees.
The Fund's investment adviser is Wellington
Management Company.
GENERAL
INVESTMENT
POLICIES________________________________________________________________________
5
<PAGE>
The Aggressive Growth and the Income Equity Funds invest
in common stocks only if those investments are listed on
registered exchanges or traded in the over-the-counter
market. Under normal circumstances each of those Funds,
to the extent not invested in the securities described
above with regard to their respective investment
policies, may invest in investment grade bonds.
Investment grade bonds include securities rated BBB by
S&P or Baa by Moody's, which may be regarded as having
speculative characteristics.
In order to meet liquidity needs, the
International Growth, Growth, Aggressive Growth, Income
Equity, and Intermediate Fixed Income Funds may hold
cash reserves and invest in "money market instruments"
(consisting of securities issued or guaranteed by the
United States Government, its agencies or
instrumentalities, repurchase agreements backed by such
securities, certificates of deposit and bankers
acceptances issued by banks or savings and loan
associations having net assets of at least $500 million
as of the end of their most recent fiscal year and high-
grade commercial paper) rated at the time of purchase in
the top two categories by an NRSRO or determined to be
of comparable quality by the applicable Fund's advisers
at the time of purchase, and other long and short-term
debt instruments, which are rated at the time of
purchase A or higher by S&P or Moody's, and which, with
respect to such long-term debt instruments, are within
397 days of their maturity.
In addition, each of the International Growth,
Growth, Aggressive Growth, and Income Equity Funds may,
for the purpose of realizing additional income, lend
portfolio securities to qualified investors. The Growth,
Aggressive Growth, and Income Equity Funds each have
limited portfolio securities lending to 20% of a Fund's
total assets.
The Growth and Income Equity Funds may invest in
receipts involving Treasury Obligations. In addition,
the Growth, Income Equity, and Intermediate Fixed Income
Funds may also invest in U.S. dollar denominated
securities of non-U.S. issuers (including American
Depositary Receipts that are traded on registered
exchanges or listed on NASDAQ).
Each Fund may invest up to 15% of its total
assets, and the Money Market Fund may invest up to 10%
of its total assets, in illiquid securities. In
addition, each Fund may purchase restricted securities
(such as Rule 144A securities and Section 4(2)
commercial paper) that are liquid in an amount not to
exceed 10% of the total assets of the Fund. Restricted
securities are considered liquid only if the Fund's
advisers determine they meet the criteria established by
the Board of Trustees of the Trust.
For temporary defensive purposes, when in the
opinion of its advisers market conditions so warrant,
the International Growth Fund may invest up to 50% of
its assets in U.S. or non-U.S. debt securities,
securities issued by, or guaranteed by, U.S. or non-U.S.
governments or the agencies or instrumentalities of such
governments, securities issued by supranational agencies
and U.S. and non-U.S. currencies. Such U.S. and non-U.S.
debt securities will be of comparable quality to U.S.
securities rated Baa or higher by Moody's or BBB or
higher by S&P. Securities rated Baa or BBB may be
regarded as having speculative characteristics, are
deemed to be medium grade securities and are regarded as
having an adequate capacity to pay interest and repay
principal.
Each of the Growth, Income Equity and
Intermediate Fixed Income Funds, may borrow money, but
none of them has any present intention to do so.
For temporary defensive purposes, each of the
Growth, Income Equity, and Intermediate Fixed Income
Funds may, when its respective advisers determine that
market conditions warrant, invest up to 100% of its
assets in the Money Market Instruments described above
and in other long- and short-term debt instruments which
are rated A or higher by S&P or Moody's at the time of
purchase, and may hold a portion of its assets in
cash.
6
<PAGE>
For temporary defensive purposes, when in the
opinion of its advisers market conditions so warrant,
the Aggressive Growth Fund may invest up to 100% of its
assets in common stocks of larger, more established
companies or in fixed income securities or the Money
Market Instruments described above. Fixed income
securities will only be purchased if they are rated
investment grade or better.
To the extent any Fund is engaged in temporary
defensive investments, that Fund will not be pursuing
its investment objective.
Each Fund intends to comply in all material
respects with current insurance laws and regulations
applicable to separate accounts investing in the Fund.
This operating policy is a non-fundamental policy which
can be changed by the Trustees at any time. Currently,
California imposes diversification requirements on Funds
investing in non-U.S. securities. Under these
requirements, a Fund investing at least 80% of its
assets in non-U.S. securities must be invested in at
least five countries; less than 80% but at least 60%, in
at least four countries; less than 60% but at least 40%,
in at least three countries; and less than 40% but at
least 20%, in at least two countries, except that up to
35% of a Fund's assets may be invested in securities of
issuers located in any of the following countries:
Australia, Canada, France, Japan, the United Kingdom or
Germany. Each Fund, other than the International Growth
Fund, has adopted a non-fundamental policy that it will
not invest more than 20% of its assets in non-U.S.
securities although it may invest up to 35% of its
assets in securities of issuers located in the specified
countries. The International Growth Fund intends to
comply with the California diversification requirements,
when applicable.
INVESTMENT
LIMITATIONS____________________________________________________________________
The investment limitations set forth below as to each
Fund, along with its respective investment objective,
are fundamental policies of that Fund. Fundamental
policies cannot be changed without the consent of the
holders of a majority of that Fund's outstanding
shares.
Each Fund may not:
1. Purchase securities of any issuer (except
securities issued or guaranteed by the United
States Government, its agencies or
instrumentalities and any security guaranteed
thereby) if as a result more than 5% of the total
assets of the Fund (based on fair market value at
the time of investment) would be invested in the
securities of such issuer. This restriction applies
to 75% of the assets of each Fund.
2. Purchase any securities which would cause more than
25% of the total assets of the Fund, based on fair
market value at the time of such purchase, to be
invested in the securities of one or more issuers
conducting their principal business activities in
the same industry, provided that, as to the Money
Market Fund, this limitation does not apply to
investments in (a) domestic banks and (b)
obligations issued or guaranteed by the United
States government or its agencies and
instrumentalities. With respect to the
International Growth Fund, for purposes of this
investment limitation, supranational agencies are
deemed to be issuers conducting their principal
business activities in the same industry.
The foregoing percentages will apply at the time of the
purchase of a security. Additional investment
limitations are set forth in the Statement of Additional
Information.
7
<PAGE>
THE MANAGER
AND SHAREHOLDER
SERVICING AGENT_________________________________________________________________
SEI Financial Management Corporation ("SFM") provides
the Trust with overall management services, regulatory
reporting, all necessary office space, equipment,
personnel and facilities, and acts as transfer agent,
dividend disbursing agent and shareholder servicing
agent. SFM is a wholly-owned subsidiary of SEI
Corporation ("SEI"). Founded in 1968, SEI is a leading
provider of investment solutions to banks, institutional
investors, investment advisers and insurance companies.
SFM and its affiliates have provided consultative advice
to institutional investors for more than 20 years,
including advice on selecting and evaluating the
performance of investment advisers. As of March 31,
1995, assets for which SFM served as manager totaled
approximately $48 billion.
For its management services to the Trust, SFM is
entitled to a management fee which is calculated daily
as a percentage of each Fund's average daily net assets
and paid monthly at an annual rate of .55% as to the
International Growth Fund, .45% as to each of the
Aggressive Growth, Growth and Income Equity Funds, .38%
as to the Intermediate Fixed Income Fund, and .42% as to
the Money Market Fund. SFM has voluntarily agreed to
waive a portion of its advisory or management fee and
reimburse the Trust, if necessary, in order to limit the
total operating expenses of each Fund. SFM reserves the
right to terminate its voluntary fee waiver at any time
in its sole discretion.
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THE ADVISERS________________________________________________________________
SEI Financial
Management Corporation
SFM also acts as the investment adviser for each Fund of
the Trust, except the Money Market Fund for which
Wellington Management Company serves as investment
adviser. As Adviser, SFM is authorized to make
investment decisions for the assets of the Funds for
which it serves as investment adviser. In addition, SFM
has general oversight responsibility for the investment
advisory services provided to the Funds, including
formulating the Funds' investment policies, analyzing
economic trends affecting the Funds, managing the
allocation of assets among the Funds' sub-advisers, and
generally directing and evaluating the investment
services provided by the sub-advisers, including their
adherence to each Fund's respective investment objective
and policies and each Fund's investment
performance.
For these advisory services, SFM is entitled to
a fee, which is calculated daily as a percentage of each
Fund's average daily net assets and paid monthly at an
annual rate of .475% as to the International Growth
Fund, .65% as to the Aggressive Growth Fund, .40% as to
the Growth Fund, .35% as to the Income Equity Fund, and
.275% as to the Intermediate Fixed Income Fund. SFM pays
the sub-advisers out of its own revenues.
SFM is currently seeking an exemptive order from
the Securities and Exchange Commission (the "SEC") that
would permit SFM, with the approval of the Trust's Board
of Trustees, to retain sub-advisers for a Fund without
submitting the sub-advisory agreements to a vote of the
Fund's shareholders. If granted, the exemptive relief
will permit the non-disclosure of amounts payable by SFM
under such sub-advisory agreements. The Trust will
notify shareholders in the event of any change in the
identity of the sub-adviser for a Fund. Until or unless
this exemptive order is granted, if a duly appointed
adviser is terminated or otherwise ceases to advise a
Fund with multiple advisers, the Fund will handle such
termination or departure in one of two ways. First, the
Fund may propose that a new investment adviser be
appointed to manage that portion of the Fund's assets
managed by the departing adviser. In this case, the Fund
would be required to submit to the vote of the Fund's
shareholders the approval of an investment advisory
contract with the new adviser. In the alternative, the
Fund may decide to allocate the departing adviser's
assets among the remaining advisers. This allocation
would not require new investment advisory contracts with
the remaining advisers, and consequently no shareholder
approval would be necessary.
Wellington
Management
Company
Wellington Management Company ("WMC") serves as
investment adviser to the Money Market Fund. WMC, is a
professional investment counseling firm which provides
investment services to investment companies, employee
benefit plans, endowments, foundations, and other
institutions and individuals. As of September 30, WMC
had discretionary management authority with respect to
approximately $82 billion of assets. WMC's predecessor
organizations have provided investment advisory services
to investment companies since 1933 and to investment
counseling clients since 1960. Wellington Trust Company,
National Association, a wholly-owned subsidiary of WMC,
utilizes SEI's trust accounting services. WMC, 75 State
Street, Boston, MA 02109, is a Massachusetts general
partnership, of which the following persons are managing
partners: Robert W. Doran, Duncan M. McFarland and John
B. Neff.
John C. Keogh, Sr., Vice President of WMC serves
as portfolio manager to the Money Market Fund. Mr. Keogh
has been a portfolio manager with WMC since 1983 and has
served as Fund manager of the Money Market Fund since
its inception.
9
<PAGE>
WMC is entitled to a fee, which is paid monthly
at an annual rate based on the daily net assets of the
Money Market Fund. The annual rate is set at .075% up to
$500 million and .02% on assets over $500 million. WMC
may from time to time waive a portion of its fee in
order to limit the total operating expenses of the Fund.
WMC reserves the right to terminate this voluntary fee
waiver at any time in its sole discretion.
THE SUB-ADVISERS________________________________________________________________
In accordance with each Fund's investment objective and
policies, and under the supervision of SFM and the
Trust's Board of Trustees, each Sub-Adviser (each a
"Sub-Adviser" and, collectively, the "Sub-Advisers") is
responsible for the day-to-day investment management of
either the entire or a discrete portion of the assets of
a Fund. The Sub-Advisers make investment decisions for
the Funds and place orders on behalf of the Funds to
effect the investment decisions made.
Certain Sub-Advisers are affiliated with banks.
The Glass-Steagall Act restricts the securities
activities of banks but federal regulatory authorities
permit such banks to provide investment advisory and
other services to mutual funds. Should this position be
challenged successfully in court or reversed by
legislation, the Trust might have to make other
investment advisory arrangements for the Income Equity
Fund.
Acadian Asset
Management, Inc.
Acadian Asset Management, Inc. ("Acadian") serves as
Sub-Adviser to a portion of the assets of the
International Growth Fund. Acadian is a registered
investment adviser and wholly owned subsidiary of United
Asset Management Corporation. As of September 30, 1994,
Acadian managed approximately $2 billion assets invested
globally. Acadian and its predecessor entities have
provided investment management services for
international equity assets since 1977. The principal
business address of Acadian is 260 Franklin Street,
Suite 1750, Boston, Massachusetts 02110.
The day-to-day management of Acadian's portion
of the Fund's investments is the responsibility of a
committee composed of individuals. No individual person
is primarily responsible for making recommendations to
that committee.
Acadian is entitled to a fee, which is paid
monthly by SFM at an annual rate based on the market
value of investments of that portion of the
International Growth Fund which Acadian manages. The
annual rate is set at .325% on the first $150 million,
.25% on the next $100 million, .15% on the next $100
million and .10% on assets in excess of $350
million.
Alliance Capital
Management L.P.
Alliance Capital Management L.P. ("Alliance") serves as
Sub-Adviser to a portion of the assets of the Growth
Fund. Alliance is a registered investment adviser
organized as a Delaware limited partnership which
originated as Alliance Capital Management Corporation in
1971. Alliance Capital Management Corporation ("ACMLP"),
an indirect wholly owned subsidiary of The Equitable
Life Assurance Society of the United States, is the
general partner of Alliance. As of September 30, 1994,
Alliance managed over $123 billion in assets. The
principal business address of Alliance is 1345 Avenue of
the Americas, New York, NY 10105.
John L. Blundin, Senior Vice President of
Alliance and Christopher Toub, Vice President of
Alliance, each serve as portfolio managers to the Growth
Fund. Mr. Blundin joined Alliance in 1972. Mr. Toub
joined Alliance in 1992 as a portfolio manager with the
Disciplined Growth Group. Prior to 1992, Mr. Toub was
with Marcus, Schloss, a private investment partnership,
as an analyst and portfolio
10
<PAGE>
manager. Prior to Marcus, Schloss, Mr. Toub worked at
Bear Stearns in proprietary trading. Both Mr. Blundin
and Mr. Toub have served as portfolio managers of the
Growth Fund since its inception.
Alliance is entitled to a fee, which is paid
monthly by SFM at an annual rate of .25% of the market
value of investments of that portion of the Growth Fund
which Alliance manages. Alliance may from time to time
waive a portion of its fee in order to limit the total
operating expenses of the Fund. Alliance reserves the
right to terminate its voluntary fee waiver at any time
in its sole discretion.
IDS Advisory Group
Inc.
IDS Advisory Group Inc. ("IDS") serves as Sub-Adviser to
a portion of the assets of the Growth Fund. IDS is a
registered investment adviser and wholly owned
subsidiary of IDS Financial Corporation. As of September
30, 1994, IDS managed over $20.5 billion in assets with
$5 billion of this total in large capitalization growth
domestic equities. IDS was founded in 1972 to manage
tax-exempt assets for institutional clients. The
principal business address of IDS is IDS Tower 10,
Minneapolis, MN 55440.
The day-to-day management of IDS' portion of the
Fund's investments is the responsibility of a committee
composed of the eight investment portfolio managers of
the equity investment team. No individual person is
primarily responsible for making recommendations to that
committee.
IDS is entitled to a fee, which is paid monthly
by SFM at an annual rate of .25% of the market value of
investments of that portion of the Growth Fund which IDS
manages. IDS may from time to time waive a portion of
its fee in order to limit the total operating expenses
of the Fund. IDS reserves the right to terminate its
voluntary fee waiver at any time in its sole
discretion.
LSV Asset
Management
LSV Asset Management ("LSV") serves as Sub-Adviser to a
portion of the assets of the Income Equity Fund. LSV is
a registered investment adviser organized as a Delaware
general partnership in which an affiliate of SFM owns a
majority interest. The general partners of LSV have
developed quantitative value analysis methodology and
software which has been used to manage assets over the
past 5 years. Although LSV has never managed investment
companies, the portfolio identified by the model has
been implemented by three institutional clients with
aggregate assets invested of approximately $455 million
including $15 million in a portfolio of U.S. securities.
The principal business address of LSV is 181 W. Madison
Avenue, Chicago, IL 60602.
Investment decisions are made by the
quantitative computer model. Josef Lakonishok, Andrei
Shleifer and Robert Vishny, officers of LSV, will on a
continuous basis monitor the quantitative analysis model
and based on their ongoing research and statistical
analysis make adjustments to the model. Securities are
identified for purchase or sale by the portfolio based
upon the computer model and defined variance tolerances.
Purchases and sales are effected by LSV based upon the
output from the model.
LSV is entitled to a fee, which is paid monthly
by SFM at an annual rate of .20% of the market value of
investments of that portion of the Income Equity Fund
which LSV manages.
Mellon Equity
Associates
Mellon Equity Associates ("MEA") serves as Sub-Adviser
to a portion of the assets of the Income Equity Fund.
MEA is a registered investment adviser and a
Pennsylvania business trust whose sole beneficiary is
MBC Investments Corporation, a wholly owned subsidiary
of the Mellon Bank Corporation. MEA was formed in 1987
and focuses on the equity and balanced pension, public
fund and profit-sharing investment management markets.
As of September 30, 1994, MEA had approximately $5.2
billion in assets under management. The
11
<PAGE>
principal business address of Mellon is 500 Grant
Street, Suite 3700, Pittsburgh, PA 15258.
William P. Rydell, CFA and President and Chief
Executive Officer of MEA, and Robert A. Wilk, CFA and
Senior Vice President of MEA, each serve as portfolio
managers to the Income Equity Fund. Mr. Rydell began his
career with Mellon Bank in 1973 and has been associated
with MEA since its inception in 1987. Mr. Wilk has been
associated with MEA since April, 1990. Prior to 1990,
Mr. Wilk was in charge of portfolio management and
involved in quantitative research for another of
Mellon's investment subsidiaries, Triangle Portfolio
Associates. Both Mr. Rydell and Mr. Wilk have served as
portfolio managers of the Income Equity Fund since its
inception.
Mellon is entitled to a fee, which is paid
monthly by SFM at an annual rate of .20% of the market
value of investments of that portion of the Income
Equity Fund which Mellon manages.
Merus Capital
Management
Merus Capital Management ("Merus") serves as Sub-Adviser
to a portion of the assets of the Income Equity Fund.
Merus is a division of The Bank of California and
provides equity and fixed income management services to
a wide array of corporate and municipal clients. As of
September 30, 1994, Merus had discretionary management
authority with respect to approximately $6.2 billion in
assets. The principal business address of Merus is 475
Sansome Street, San Francisco, CA 94111.
The day-to-day management of Merus' portion of
the Fund's investments is the responsibility of a
committee composed of individuals. No individual person
is primarily responsible for making recommendations to
that committee.
Merus is entitled to a fee, which is paid
monthly by SFM at an annual rate of .20% of the market
value of investments of that portion of the Income
Equity Fund which Merus manages.
Pilgrim Baxter &
Associates, Ltd.
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter")
serves as Sub-Adviser to the Aggressive Growth Fund.
Pilgrim Baxter is a professional investment counseling
firm which provides investment services to pension and
profit-sharing plans, other institutions and investment
companies since November, 1982. As of September 30,
1994, Pilgrim Baxter had discretionary management
authority with respect to approximately $3.8 billion of
assets. The principal business address of Pilgrim Baxter
is 1255 Drummers Lane, Suite 300, Wayne, Pennsylvania
19087. Pilgrim Baxter is an indirect wholly owned
subsidiary of United Asset Management.
John F. Force, CFA, joined Pilgrim Baxter in
January 1993 and is a portfolio Manager/Analyst. Prior
to joining Pilgrim Baxter, Mr. Force was Vice
President/Portfolio Manager at Fiduciary Management
Associates from July 1987 to September 1992. Mr. Force
has served as portfolio manager of the Aggressive Growth
Fund since its inception.
Pilgrim Baxter is entitled to a fee, which is
paid monthly by SFM at an annual rate of .50% of the
daily net assets of the Aggressive Growth Fund.
Western Asset
Management
Company
Western Asset Management Company ("Western") serves as
Sub-Adviser to the Intermediate Fixed Income Fund.
Western was founded in 1971 and specializes in
the management of fixed income portfolios. Western is
located at 117 East Colorado Boulevard, Pasadena,
California 91105 and is a wholly-owned subsidiary of
Legg Mason, Inc., a financial services company located
in Baltimore, Maryland. As of September 30, 1994,
Western managed approximately $12 billion in client
assets, including $2 billion of investment company
assets.
12
<PAGE>
Kent S. Engel, Director and Chief Investment Officer of
Western, is primarily responsible for the day-to-day
investment decisions made with respect to the Fund. Mr.
Engel has been with Western and its predecessor since
1969, and has been the portfolio manager of the
Intermediate Fixed Income Fund since its inception.
Western is entitled to a fee, which is paid monthly by
SFM at an annual rate of .125% of the daily net assets
of the Intermediate Fixed Income Fund.
WorldInvest Limited
WorldInvest Limited ("WorldInvest") serves as Sub-
Adviser to a portion of the assets of the International
Growth Fund. WorldInvest is a registered investment
adviser and wholly owned subsidiary of WorldInvest
Holdings Limited. As of September 30, 1994, WorldInvest
managed $5.5 billion in international and global
equities much of which is for U.S. based institutional
clients including pension funds, endowments and
foundations. WorldInvest and its predecessor entities
have provided investment management services for
international equity assets since 1977. The principal
business address of WorldInvest is 56 Russell Square,
London WC1B 4HP England.
The day-to-day management of WorldInvest's
portion of the Fund's investments is the responsibility
of a committee composed of individuals led by Mark
Beale. Mr. Beale is an Equity Investment Manager for
WorldInvest and has been with the firm since 1982.
WorldInvest is entitled to a fee, which is paid
monthly by SFM at an annual rate based on the market
value of investments of that portion of the
International Growth Fund which WorldInvest manages. The
annual rate is set at .325% on the first $300 million
and .20% on assets over $300 million.
HOW TO PURCHASE
AND REDEEM
SHARES__________________________________________________________________________
Shares of the Trust may be purchased only by Insurers
and their separate accounts. Individuals and variable
contract owners may not place purchase or redemption
orders with the Trust. A variable contract purchaser
should refer to the prospectus for his or her contract
for more information on the availability of specific
Funds as investment options and his or her investment,
redemption and surrender rights under the contract.
Insurers place purchase and redemption orders
for shares of Funds of the Trust based on aggregating
and netting premiums and redemption and other
transaction requests received and charges deducted in
their administration of the variable contracts and their
separate accounts. A purchase order for shares of a Fund
for a separate account will be effected at the net asset
value determined for a given business day if the order
and federal funds in the purchase amount are received by
the Trust on the next business day in accordance with
its procedures. A redemption order for shares of a Fund
for a separate account will be effected at the net asset
value determined for a given business day if the order
is received by the Trust on the next business day in
accordance with its procedures.
A "business day" is a day on which the New York
Stock Exchange is open for business. However, shares of
the Money Market Fund cannot be purchased by Federal
Reserve wire on Federal holidays restricting wire
transfers.
No share certificates will be issued when shares
are purchased. It is currently the Trust's policy to pay
all redemptions in cash, although the Trust retains the
right to satisfy a redemption request for a Fund in
whole or in part by a distribution in kind of readily
marketable securities held by the Fund. The Trust
ordinarily will make payment for all shares redeemed
within seven days after receipt
13
<PAGE>
by the Trust or its transfer agent of a satisfactory
redemption request, except as provided by rules of the
SEC.
PERFORMANCE_____________________________________________________________________
From time to time, in advertisements, sales literature,
or reports to shareholders, the "current yield" and
"effective compound yield" of the Money Market Fund may
be quoted. These figures are based on historical
earnings and are not intended to indicate future
performance. The "current yield" of the Money Market
Fund refers to the income generated by an investment
over a seven-day period which is then "annualized." That
is, the amount of income generated by the investment
during that week is assumed to be generated each week
over a 52-week period and is shown as a percentage of
the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an
investment in the Money Market Fund is assumed to be
reinvested. The "effective yield" will be slightly
higher than the "current yield" because of the
compounding effect of this assumed reinvestment.
From time to time, the yield and total return of
any Fund, other than the Money Market Fund, may be
quoted in advertisements, sales literature, or reports
to shareholders. These figures are based on historical
earnings and are not intended to indicate future
performance. No representation can be made concerning
actual future yields or returns. The yield of a Fund
(other than the Money Market Fund) refers to the income
generated by a hypothetical investment in such Fund over
a 30-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 Fund 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.
A Fund's performance may periodically be
compared to that of other mutual funds tracked by mutual
funds rating services (such as Lipper Analytical),
financial and business publications and periodicals,
broad groups of comparable mutual funds or unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative
and management costs or to other investment
alternatives. Morningstar, Inc., a service that ranks
mutual funds on the basis of risk-adjusted performance,
may be quoted. Long-term performance of capital markets
may be used to demonstrate general long-term risk versus
reward scenarios, and this use could include the value
of a hypothetical investment in any of the capital
markets. Financial and business publications and
periodicals as they relate to fund management,
investment philosophy, and investment techniques may
also be quoted.
Performance data may be used from time to time
in advertising or marketing the Trust's shares,
including data from Lipper Analytical Services, Inc.,
IBC/Donoghue's Money Fund Report, Financial Planning
Magazine, Standard & Poor's Indices, Dow Jones
Industrial Averages, VARDS, Bank Rate Monitor, and other
industry publications. Other sources of performance data
are set forth in the Statement of Additional
Information.
Various measures of volatility and benchmark
correlation with respect to a Fund may be quoted in
advertising, sales literature, and reports to
shareholders and these measures may be compared 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
14
<PAGE>
comparative benchmark might be. Measures of volatility
and correlation are calculated using averages of
historical data and cannot be calculated precisely.
TAXES___________________________________________________________________________
Each Fund intends to qualify and to continue to qualify
as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended ("Code").
As such, a Fund will not be subject to Federal income
tax on that part of its investment company taxable
income (consisting generally of net investment income,
net gains from certain foreign currency transactions,
and net short-term capital gain, if any) and any net
capital gain (the excess of net long-term capital gain
over net short-term capital loss) that it distributes to
its shareholders. It is the intention of each Fund to
distribute all such income and gains.
Fund shares are offered only to separate
accounts of Insurers (which are insurance company
separate accounts that fund the variable contracts). For
a discussion of the taxation of life insurance companies
and the separate accounts, as well as the tax treatment
of the variable contracts and the holders thereof, see
the discussion regarding tax matters included in the
prospectus for the variable contracts under
consideration.
Each Fund intends to comply with the
diversification requirements imposed by Section 817(h)
of the Code and the regulations thereunder. These
requirements are in addition to the diversification
requirements imposed on each Fund by Subchapter M of the
Code and the 1940 Act. These requirements place certain
limitations on the assets of each separate account that
may be invested in securities of a single issuer, and,
because Section 817(h) and the regulations thereunder
treat a Fund's assets as assets of the related separate
account, these limitations also apply to the Fund's
assets that may be invested in securities of a single
issuer. Generally, the regulations provide that, as of
the end of each calendar quarter, or within 30 days
thereafter, no more than 55% of a Fund's total assets
may be represented by any one investment, no more than
70% by any two investments, no more than 80% by any
three investments, and no more than 90% by any four
investments. Failure of a Fund to satisfy the Section
817(h) requirements could result in adverse tax
consequences to the Insurers and holders of variable
contracts.
The foregoing is only a summary of some of the
important Federal income tax considerations generally
affecting the Funds and their shareholders; see the
Statement of Additional Information for a more detailed
discussion. Prospective investors are urged to consult
their tax advisers.
GENERAL
INFORMATION_____________________________________________________________________
The Trust
The Trust was organized as a Massachusetts business
trust under a Declaration of Trust dated June 3, 1994.
The Declaration of Trust permits the Trust to offer
separate series of shares, each corresponding to a
separate Fund, and, as to each series, different classes
of shares. All consideration received by the Trust for
shares of any Fund and all assets of such Fund belong to
that Fund and would be subject to liabilities related
thereto.
Trust Expenses The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation material and
reports to shareholders, costs of custodial services and
registering the shares under federal and any applicable
state securities laws, pricing, insurance expenses,
15
<PAGE>
litigation and other extraordinary expenses, brokerage
costs, interest charges, taxes and organization
expenses.
The Trust has been informed that certain owners
of variable contracts supported by the Trust may obtain
asset allocation services with respect to the allocation
of their contract values among the Funds. If a
sufficient amount of a Fund's assets are subject to such
asset allocation services, the Fund may incur higher
transaction costs and a higher portfolio turnover rate
than would otherwise be anticipated as a result of
redemptions and purchases of Fund shares pursuant to
such services.
Trustees of the Trust The management and affairs of the Trust are supervised
by the Trustees under the laws governing business trusts
in the Commonwealth of Massachusetts. The Trustees have
approved contracts under which, as described above,
certain companies provide essential management services
to the Trust.
Voting Rights
Each share held entitles the shareholder of record to
one vote. Each Fund will vote separately on matters
relating solely to that Fund. 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.
In accordance with current law, the Trust anticipates
that an Insurer whose separate accounts invest in a Fund
will request voting instructions from the owners of
variable contracts supported by the accounts and will
vote shares in proportion to the voting instructions
received. For further information on voting rights, see
the prospectus for the variable contracts under
consideration.
Availability of Shares Currently, shares of the Trust are being offered only to
variable annuity separate accounts of the Insurers.
Shares of the Trust in the future may be sold to
separate accounts established to receive and invest
purchase payments received under variable life insurance
policies. If Trust shares are sold to such variable life
insurance separate accounts, it is conceivable that, in
the future, it may become disadvantageous for variable
life insurance separate accounts and variable annuity
separate accounts to invest in the Trust simultaneously.
Although the Trust does not currently foresee any such
disadvantages, either to variable life insurance
policyowners or to variable annuity contractowners, if
shares are sold to both types of separate accounts, the
Trustees of the Trust intend to monitor events in order
to identify any material conflicts between the variable
life policyowners and the variable annuity
contractowners and to determine what actions, if any,
should be taken in response thereto. Such action could
include the redemption of shares by one or more of the
separate accounts, which could have adverse
consequences. Material conflicts could result from, for
example: (1) changes in state insurance laws; (2)
changes in federal income tax laws; or (3) differences
in voting instructions between those given by variable
life insurance policyowners and those given by variable
annuity contractowners. If, in such circumstances, the
Trustees of the Trust were to conclude that separate
funds should be established for variable life and
variable annuity separate accounts, variable life
insurance policyowners and variable annuity
contractowners would no longer have the economies of
scale resulting from a larger combined fund.
Reporting The Trust issues unaudited financial information
semiannually and audited financial statements annually.
16
<PAGE>
Inquiries Inquiries should be directed to SEI Financial Management
Corporation, 680 E. Swedesford Road, Wayne,
Pennsylvania, 19087.
Dividends
The International Growth Fund periodically declares and
pays its net investment income (inclusive of short-term
capital gains) as a dividend.
Each of the Growth, Income Equity and
Intermediate Fixed Income Funds distributes
substantially all of its net investment income
(exclusive of capital gains) in the form of monthly
dividends. Shareholders of record on the last Business
Day of each month will be entitled to receive the
monthly dividend distribution, which is generally paid
on the 10th Business Day of the following month.
The Aggressive Growth Fund distributes
substantially all of its net investment income
(exclusive of capital gains) in the form of quarterly
dividends. Shareholders of record on the last Business
Day of each quarter will be entitled to receive the
quarterly dividend distribution, which is generally paid
on the 10th Business Day of the following month.
The Money Market Fund determines and declares
net investment income (exclusive of capital gains) on
each Business Day as a dividend for shareholders of
record as of the close of business on that day. The
Money Market Fund pays dividends in additional shares on
the first Business Day of each month (unless the
shareholder requests payment in Federal Funds).
Currently, the Money Market Fund's capital gains, if
any, are distributed at the end of the calendar
year.
With respect to each Fund other than the Money
Market Fund, any net capital gains (the excess of net
long-term capital gain over net short-term capital loss)
realized by a Fund, if any, will be distributed to that
Fund's shareholders at least annually. Shareholders of
each of those Funds automatically receive all income
dividends and capital gain distributions in additional
shares at the net asset value next determined following
the record date, unless the shareholder has elected to
take such payment in cash. Shareholders may change their
election by providing written notice to the Manager at
least 15 days prior to the payment of dividends or
capital gains.
As to each Fund other than the Money Market
Fund, dividends and distributions are paid on a per-
share basis. The value of each share will be reduced by
the amount of any such payment.
Counsel and Sutherland Asbill & Brennan serves as counsel to the
Independent Trust. Arthur Andersen LLP serves as the independent
Accountants auditor of the Trust.
The Distributor SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as the principal
underwriter of the Trust's shares. The Distributor is
located at 680 East Swedesford Road, Wayne, Pennsylvania
19087-1658.
Custodians and Wire Agent
State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA 02110, serves as custodian of the
assets of the International Growth Fund. CoreStates
Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618,
Philadelphia, PA 19101, acts as custodian of the assets
of each Fund except the International Growth Fund and as
wire agent of each Fund. Each custodian holds cash,
securities and other assets of the Funds for which it
acts as custodian, as required by the Investment Company
Act of 1940, as amended.
DESCRIPTION OF
PERMITTED
INVESTMENTS AND
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RELATED
RISK FACTORS____________________________________________________________________
The following is a description of certain of the
permitted investments and related risk factors for the
Funds:
American Depositary
Receipts ("ADRs"),
European Depositary
Receipts ("EDRs") and
Global Depositary
Receipts ("GDRs")
The International Growth, Growth, and Income Equity
Funds may invest in ADRs and the International Growth
Fund may invest in EDRs, Continental Depositary Receipts
("CDRs") and 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 non-U.S. issuer and deposited
with the depositary. ADRs include American Depositary
Shares and New York Shares. EDRs, which are sometimes
referred to as 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 non-U.S. 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 present different risks
than those attendant to investments in securities of
U.S. issuers. These risks include differences in
accounting, auditing and financial reporting standards,
the possibility of expropriation or confiscatory
taxation, and political instability.
ADRs, EDRs and CDRs 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. Although
the International Growth, Growth, and Income Equity
Funds expect to invest primarily in sponsored depositary
receipts, some depositary receipts in which they invest
may be unsponsored. Unlike the holder of a sponsored
depositary receipt, the holder of an unsponsored
depositary receipt generally bears all the costs of the
unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute
shareholder communications received from the issuer of
the deposited security or to pass through to the holders
of the receipts voting rights with respect to the
deposited securities.
Asset Backed Securities
(Non-Mortgage)
The Intermediate Fixed Income Fund may invest in Asset
Backed Securities. This category of permitted
investments consists of securities secured by company
receivables, truck and automobile loans, leases, and
credit card receivables. Such securities are generally
issued as pass-through certificates, which represent
undivided fractional ownership interests in the
underlying pools of assets. Such securities also may be
debt instruments, which are also known as collateralized
obligations and are generally issued as the debt of a
special purpose entity, such as a trust, organized
solely for purpose of owning such assets and issuing
such debt.
Bankers' Acceptances
All of the Funds may invest in bankers acceptances,
which are bills of exchange or time drafts drawn on and
accepted by a commercial bank. Bankers' acceptances are
used by corporations to finance the shipment and storage
of goods and to furnish dollar exchange. Maturities are
generally six months or less.
Certificates of Deposit
All of the Funds may invest in Certificates of Deposit,
which are negotiable interest bearing instruments with a
specific short-term maturity. Certificates of
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deposit are issued by banks and savings and loan
institutions in exchange for the deposit of funds and
normally can be traded in the secondary market prior to
maturity. Certificates of Deposit have penalties for
early withdrawal.
Commercial Paper
All of the Funds may invest in commercial paper. The
term is used to designate unsecured short-term
promissory notes issued by corporations and other
entities. Maturities on these issues vary from a few
days to nine months. Section 4(2) commercial paper is
issued in reliance on an exemption from registration
under Section 4(2) of the Act and is generally sold to
institutional investors who purchase for investment. Any
resale of such commercial paper must be an exempt
transaction, usually to an institutional investor
through the issuer or investment dealers who make a
market in such commercial paper.
Common Stocks
See "Equity Securities."
Convertible Securities
All of the Funds except the Intermediate Fixed Income
and Money Market Funds may invest in convertible
securities, which have characteristics similar to both
fixed income and equity securities. Because of the
conversion feature, the market value of convertible
securities tends to move together with the market value
of the underlying stock. As a result, a Fund's selection
of convertible securities is based, to a great extent,
on the potential for capital appreciation that may exist
in the underlying stock. The value of convertible
securities is also affected by prevailing interest
rates, the credit quality of the issuer, and any call
provisions. Convertible securities in which the
Aggressive Growth Fund may invest include warrants and
rights convertible into common stock.
Demand Instruments
The International Growth and Money Market Funds may
invest in Demand Instruments, which are certain
instruments that involve a conditional or unconditional
demand feature and may include variable amount master
demand notes.
Equity Securities
The International Growth, Growth, Aggressive Growth, and
Income Equity Funds invest in equity securities.
Investments in equity securities in general are subject
to market risks that may cause their prices to fluctuate
over time. Fluctuations in the value of equity
securities in which each of the International Growth,
Growth, Aggressive Growth, and Income Equity Funds
invests will cause the net asset value of the applicable
Fund to fluctuate. The risk of price volatility is
greater for smaller companies, such as those in which
the Aggressive Growth Fund invests, than for larger,
more established companies, due to the greater business
risks of small size, limited markets and financial
resources, narrow product lines and the frequent lack of
depth of management. The securities of small companies
are often traded over-the-counter and may not be traded
in volumes typical on a national securities exchange.
Consequently, the securities of smaller companies may
have limited market stability and may be subject to more
abrupt or erratic market movements than securities of
larger, more established growth companies or the market
averages in general. The Fund will attempt to reduce the
volatility of its share price by diversifying its
investments among many companies and different
industries. An investment in the International Growth,
Growth, Aggressive Growth, or Income Equity Fund may be
more suitable for long-term investors who can bear the
risk of short-term fluctuations.
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<PAGE>
Changes in the value of portfolio securities will not
necessarily affect cash income derived from these
securities but will affect a Fund's net asset value.
Fixed Income Securities
The International Growth, Intermediate Fixed Income and
Money Market Funds may invest in fixed income
securities. Interest rates will affect the market value
of fixed income investments made by the Funds. During
periods of falling interest rates, the values of
outstanding fixed income securities generally rise.
Conversely, during periods of rising interest rates, the
values of such securities generally decline. Changes by
an NRSRO in the ratings of any fixed income security and
in the ability of an issuer to make payments of interest
and principal may also affect the value of these
investments. Changes in the value of portfolio
securities will not affect cash income derived from
these securities, but will affect the applicable Fund's
net asset value.
Forward Foreign
Currency Contracts
The International Growth Fund may conduct its foreign
currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign
currency exchange market or through entering into
forward contracts to protect against uncertainty in the
level of future exchange rates between a particular
foreign currency and the U.S. Dollar or between foreign
currencies in which the Fund's securities are or may be
denominated. A forward foreign currency contract
involves an obligation to purchase or sell a specific
currency amount at a future date, which may be any fixed
number of days from the date of the contract, agreed
upon by the parties, at a price set at the time of the
contract. Under normal circumstances, consideration of
the prospect for changes in currency exchange rates will
be incorporated into the International Growth Fund's
long-term investment strategies. However, the Fund's
advisers believe that it is important to have the
flexibility to enter into forward foreign currency
contracts when they determine that the best interests of
the Fund will be served.
The International Growth Fund will convert
currency on a spot basis from time to time, and
investors should be aware of the costs of currency
conversion.
When the Fund's advisers believe that the
currency of a particular country may suffer a
significant decline against the U.S. Dollar or against
another currency, the Fund may enter into a currency
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
Fund's securities denominated in such foreign
currency.
At the maturity of a forward foreign contract,
the International Growth Fund 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 Fund may realize a gain or loss from
currency transactions.
Generally, the International Growth Fund will
enter into forward foreign currency contracts only as a
hedge against foreign currency exposure affecting the
Fund. If the International Growth Fund enters into
forward foreign currency contracts to cover activities
which are essentially speculative, the Fund will
segregate cash or readily marketable securities with its
custodian, or a designated subcustodian, in an amount at
all times equal to or exceeding the Fund's commitment
with respect to such contracts.
By entering into forward foreign currency
contracts, the International Growth Fund, which invests
primarily in non-U.S. securities, will seek to protect
the value of its investment securities against a decline
in the value of a currency.
20
<PAGE>
However, these forward foreign currency contracts will
not eliminate fluctuations in the underlying prices of
the securities. Rather, they simply establish a rate of
exchange which one can achieve at some future point in
time. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value
of the hedged currency, at the same time, they tend to
limit any potential gain which might result should the
value of such currency increase.
Futures Contracts and
Options on Futures
Contracts
The International Growth Fund may enter into contracts
for the purchase or sale of securities, including index
contracts or foreign currencies. A purchase of a futures
contract means the acquisition of a contractual right to
obtain delivery to the International Growth Fund of the
securities or foreign currency called for by the
contract at a specified price during a specified future
month. When a futures contract on securities or currency
is sold, the Fund incurs a contractual obligation to
deliver the securities or foreign currency underlying
the contract at a specified future month. The Fund may
sell stock index futures contracts in anticipation of,
or during, a market decline to attempt to offset the
decrease in market value of its common stocks that might
otherwise result; and it may purchase such contracts in
order to offset increases in the cost of common stocks
that it intends to purchase. The International Growth
Fund may enter into futures contracts and options
thereon to the extent that not more than 5% of the
Fund's assets are required as futures contract margin
deposits and premiums on options and may engage in
futures contracts to the extent that obligations
relating to such futures contracts represent not more
than 20% of the International Growth Fund's total
assets.
The International Growth Fund may also purchase
and write options to buy or sell futures contracts. The
International Growth Fund may write options on futures
only on a covered basis. Options on futures are similar
to options on securities except that options on futures
give the purchaser the right, in return for the premium
paid, to assume a position in a futures contract, rather
than actually to purchase or sell the futures contract,
at a specified exercise price at any time during the
period of the option. When the International Growth Fund
enters into a futures transaction it must deliver to the
futures commission merchant selected by the Fund, an
amount referred to as "initial margin."
This amount is maintained by the futures
commission merchant in a segregated account at the
custodian bank. Thereafter, a "variation margin" may be
paid by the International Growth Fund to, or drawn by
the Fund from, such account in accordance with controls
set for such accounts, depending upon changes in the
price of the underlying securities subject to the
futures contract.
The International Growth Fund will enter into
such futures and options on futures transactions on
domestic exchanges and, to the extent such transactions
have been approved by the Commodity Futures Trading
Commission ("CFTC"), for sale to customers in the U.S.,
on non-U.S. exchanges.
The Intermediate Fixed Income Fund may enter
into futures contracts and options on futures contracts
traded on an exchange regulated by the CFTC, so long as,
to the extent that such transactions are not for "bona
fide hedging purposes," the aggregate and initial margin
and premiums on such positions (excluding the amount by
which such options are in the money) do not exceed 5% of
the Intermediate Fixed Income Fund's net assets. The
Intermediate Fixed Income Fund may buy and sell futures
contracts and related options to manage its exposure to
changing interest rates and securities prices. Some
strategies reduce the Fund's exposure to price
fluctuations, while others tend to increase its market
exposure. Futures and options on futures can be volatile
instruments and involve certain risks that could
negatively impact the Fund's return.
Illiquid Securities
Illiquid securities are securities that may not be sold
or disposed of in the
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<PAGE>
ordinary course of business within seven business days
at approximately the value at which they are being
carried on the Fund's books. An illiquid security
includes repurchase agreements which have a maturity of
longer than seven days, other securities that are
illiquid by virtue of the absence of a readily available
market, and demand instruments with a demand notice
period exceeding seven days, if there is no secondary
market for such securities. Illiquid securities include
securities that are not registered under the 1933 Act.
However, unregistered securities that can be sold to
"qualified institutional buyers" in accordance with Rule
144A under the 1933 Act (such as Section 4(2) commercial
paper) will not be considered illiquid so long as it is
determined by the applicable Fund's advisers, acting
under guidelines approved and monitored by the Board,
that an adequate trading market exists for that
security. This investment practice could have the effect
of increasing the level of illiquidity in a Fund during
any period that qualified institutional buyers become
uninterested in purchasing Rule 144A securities. The
ability to sell to qualified institutional buyers under
Rule 144A is a recent development, and it is not
possible to predict how this market will develop.
Mortgage-Backed
Securities
The Intermediate Fixed Income Fund may invest in
mortgage-backed securities, including collateralized
mortgage obligations ("CMOs"). The mortgages backing
these securities include conventional thirty-year fixed
rate mortgages, graduated payment mortgages, and
adjustable rate mortgages. However, any guarantees of
the mortgages do not extend to the mortgage-backed
securities' value, which is likely to vary inversely
with fluctuations in interest rates. Mortgage-backed
securities are in most cases "pass-through" instruments,
through which the holder receives a share of all
interest and principal payments from the mortgages
underlying the certificate. Unless the context indicates
otherwise, all references herein to CMOs include multi-
class, pass-through securities. Payments of principal of
and interest on the underlying mortgage assets, and any
reinvestment income thereon, provide the funds to pay
debt service on the CMOs or make scheduled distribution
on the multi-class pass-through securities.
In a CMO, a series of bonds or certificates are
usually issued in multiple classes. Each class of CMOs,
often referred to as a "tranche," is issued with a
specific fixed or floating coupon rate and has a stated
maturity or final distribution date. Principal
prepayments on the underlying mortgage assets may cause
the CMOs to be retired substantially earlier than their
stated maturities or final distribution dates, resulting
in a loss of all or part of any premium paid. Interest
typically is paid or accrues on all classes of the CMOs
on a monthly, quarterly or semiannual basis. The
principal of and interest on the underlying mortgage
assets may be allocated among the several classes of a
series of a CMO in a variety of ways. In a common
structure, payments of principal, including any
principal payments, on the underlying mortgage assets
are applied to the classes of the series of a CMO in the
order of their respective stated maturities or final
distribution dates, so that no payment of principal will
be made on any class of CMOs until all other classes
having an earlier stated maturity of final distribution
date have paid in full.
The Intermediate Fixed Income Fund also may
invest in parallel pay CMOs and Planned Amortization
Class CMOs ("PAC Bonds"). Parallel pay CMOs are
structured to provide payments of principal on each
payment date to more than one class. These simultaneous
payments are taken into account in calculating the
stated maturity date or final distribution date of each
class, which, as with other CMO structures, must be
retired by its stated maturity date or final
distribution date, but may be retired earlier. PAC Bonds
generally require payments of a specified amount of
principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on
such securities having the highest priority after
interest has been paid to all classes.
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<PAGE>
Mortgage-backed securities are subject to the
risk of prepayment of the underlying mortgages.
Prepayment of mortgages which underlie securities
purchased at a premium could result in capital losses,
while prepayments of mortgages purchased at a discount
would result in capital gain. Further, due to
prepayments of the underlying mortgage instruments,
mortgage-backed securities do not have a known actual
maturity. In the absence of a known maturity, market
participants generally refer to an estimated average
life. The Intermediate Fixed Income Fund's advisers
believes that the estimated average life is the most
appropriate measure of the maturity of a mortgage-backed
security. Accordingly, in order to determine the average
maturity of the Intermediate Fixed Income Fund, the
Fund's advisers will use an estimate of the average life
of a mortgage-backed security. An average life estimate
is a function of an assumption regarding anticipated
prepayment patterns. The assumption is based upon
current interest rates, current conditions in the
relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different
market participants could produce somewhat different
average life estimates with regard to the same security.
There can be no assurance that the average life as
estimated by the Fund's advisers will the be actual
average life.
The Fund's advisers may also determine the
maturity of mortgage-backed securities and other fixed
income securities with reference to a call date or the
date the Intermediate Fixed Income Fund may put the
security back to the issuer or to a third party if such
a date is a more appropriate measure of the actual
maturity date.
The Intermediate Fixed Income Fund may acquire
interest-only and principal-only components of mortgage-
backed securities and CMOs. Such securities are often
interest-rate sensitive, and can experience wide swings
in value in response to changes in interest rates and
associated mortgage prepayment rates. During times when
interest rates are experiencing fluctuations, such
securities can be difficult to price on a consistent
basis.
Mortgage Dollar Rolls
The Intermediate Fixed Income Fund may enter into
Mortgage "Dollar Rolls." Mortgage Dollar Rolls are
transactions in which mortgage-backed securities are
sold for delivery in the current month and the seller
simultaneously contracts to repurchase substantially
similar securities on a specified future date. Any
difference between the sale price and the purchase price
is netted against the interest income foregone on the
securities sold to arrive at an implied borrowing rate.
Alternatively, the sale and purchase transactions can be
executed at the same price, with the Fund being paid a
fee as consideration for entering into the commitment to
purchase. Mortgage Dollar Rolls may be renewed prior to
cash settlement and initially may involve only a firm
commitment agreement by the Fund to buy a security. If
the broker-dealer to whom the Fund sells the security
becomes insolvent, the Fund's right to repurchase the
security may be restricted. Other risks involved in
entering into Mortgage Dollar Rolls include the risk
that the value of the security may change adversely over
the term of the Mortgage Dollar Roll and that the
security the Fund is required to repurchase may be worth
less than the security that the Fund originally
held.
To avoid any leveraging concerns, the Fund will
place U.S. Government or other liquid, high grade assets
in a segregated account in an amount sufficient to cover
its repurchase obligation.
Options
The International Growth Fund may invest in options. A
put option gives the purchaser of the option the right
to sell, and the writer the obligation to buy, the
underlying security at any time during the option
period. A call option gives the purchaser of the option
the right to buy, and the writer of the option the
obligation to sell, the underlying security at any time
during the option period. The premium paid
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<PAGE>
to the writer is the consideration for undertaking the
obligations under the option contract. The initial
purchase (sale) of an option contract is an "opening
transaction". In order to close out an option position,
the Fund may enter into a "closing transaction" the sale
(purchase) of an option contract on the same security
with the same exercise price and expiration date as the
option contract originally opened. If the Fund is unable
to effect a closing transaction with respect to an
option that it has written, it will not be able to sell
the underlying security until the option expires or the
Fund delivers the security upon exercise.
The International Growth Fund will engage in
option transactions only as hedging transactions and not
for speculative purposes. However, even where used for
only hedging purposes, there are risks associated with
such investments including the following: (i) the
success of a hedging strategy may depend on the ability
to predict movements in the prices of the individual
securities, fluctuations in markets and movements in
interest rates; (ii) there may be an imperfect or no
correlation between the changes in market value of the
securities held by a Fund and the prices of options;
(iii) there may not be a liquid secondary market for
options; and (iv) while a Fund will receive a premium
when it writes covered call options, it may not
participate fully in a rise in the market value of the
underlying security.
The International Growth Fund will purchase put
and call options on securities, non-U.S. indices,
financial futures or stock index futures only to the
extent that premiums paid on all outstanding options do
not exceed 20% of the International Growth Fund's net
assets. The aggregate value of the securities or
obligations underlying options on securities written by
the Fund will not exceed 25% of the Fund's net assets at
the time such options are entered into by the Fund.
The International Growth Fund may use options
traded on U.S. exchanges, and to the extent permitted by
law, options traded over-the-counter and on recognized
non-U.S. exchanges. The Fund will write over-the-counter
options only on a covered basis and will not invest more
than 10% of its total assets in over-the-counter
options. It is the position of the Securities and
Exchange Commission that over-the-counter options and
assets used to cover over-the-counter options are deemed
to be illiquid. Accordingly, the Fund will only invest
in such options to the extent consistent with its 15%
limit on investment in illiquid securities.
The Intermediate Fixed Income Fund may purchase
options, but will purchase only options that are listed
on a national securities exchange. Permissible options
for the Intermediate Fixed Income Fund include options
on stock indices.
Options on Currencies
The International Growth Fund may purchase and write put
and call options on foreign currencies (traded on U.S.
and non-U.S. exchanges or over-the-counter markets) to
manage the Fund's exposure to changes in dollar exchange
rates. Call options on foreign currency written by the
Fund will be "covered," which means that the Fund will
own an equal amount of the underlying foreign currency.
With respect to put options on foreign currency written
by the Fund, the Fund will establish a segregated
account with its custodian bank consisting of cash, U.S.
government securities or other high grade liquid debt
securities in an amount equal to the amount the Fund
would be required to pay upon exercise of the put.
Options on Non-U.S.
Indices
The International Growth Fund may purchase and write put
and call options on non-U.S. indices and enter into
related closing transactions in order to hedge against
the risk of market price fluctuations or to increase
income to the Fund.
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<PAGE>
Call and put options on indices are similar to
options on securities except that, rather than the right
to purchase or sell particular securities at a specified
price, 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 (or
in a particular industry or segment of the market)
rather than price movements in individual securities.
All options written on indices must be covered.
When the International Growth Fund writes an option on
an index, it will establish a segregated account
containing cash or high quality, fixed-income 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.
The International Growth Fund may choose to
terminate an option position by entering into a closing
transaction. The ability of the Fund to enter into
closing transactions depends upon the existence of a
liquid secondary market for such transactions.
Receipts-TRs, TIGRs,
CATS, LYONs and
STRIPS
To differing extents, each Fund may invest in Receipts.
Receipts are separately traded interest and principal
component parts of U.S. Treasury obligations that are
issued by banks or brokerage firms and that are created
by depositing U.S. Treasury obligations into a special
account at a custodian bank. The custodian holds the
interest and principal payments for the benefit of the
registered owners of the certificates or receipts. The
custodian arranges for the issuance of the certificates
or receipts evidencing ownership and maintains the
register. Receipts include "Treasury Receipts" ("Trs"),
"Treasury Investment Growth Receipts" ("TIGRs"), "Liquid
Yield Option Notes" ("LYONs"), "Certificates of Accrual
on Treasury Securities" ("CATS") and "Separately Traded
Registered Interest and Principal Securities"
("STRIPS"). TIGRs and CATS are interests in private
proprietary accounts, while TRs and STRIPs are interests
in accounts sponsored by the U.S. Treasury.
STRIPS, TRs, TIGRs, LYONs and CATS 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 amortized over
the life of the security, and such amortization will
constitute the income earned on the security for both
accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate
volatility than interest-paying Permitted
Investments.
All Funds may invest in STRIPS. The Growth,
Income Equity, and Intermediate Fixed Income Funds may
also invest in TRs, TIGRs, CATS, and LYONs.
Repurchase Agreements
All Funds may enter into repurchase agreements, which
are agreements by which a Fund 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. The Custodian or its agent
will hold the security as collateral for the repurchase
agreement. Collateral must be maintained at a value at
least equal to 102% of the price set forth in the
applicable agreement "repurchase." A Fund bears a risk
of loss in the event the other party defaults on its
obligations and the Fund is delayed or prevented from
its right to dispose of the collateral securities or if
the Fund realizes a loss on the sale of the collateral
securities. A Fund's advisers
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will enter into repurchase agreements on behalf of the
Fund only with financial institutions deemed to present
minimal risk of bankruptcy during the term of the
agreement based on guidelines established and
periodically reviewed by the Trustees or, with respect
to the Growth and Income Equity Funds, by dealers
recognized by the Federal Reserve. Repurchase agreements
are considered loans by a Fund under the 1940 Act.
Restricted Securities
See "Illiquid Securities," above.
Rule 144A Securities
See "Illiquid Securities," above.
Section 4(2) Commercial
Paper
See "Commercial Paper" and "Illiquid
Securities,"above.
Securities of Non-U.S.
Issuers
Each of the International Growth, Growth, Income Equity,
and Intermediate Fixed Income Funds may invest in
securities of non-U.S. issuers, including ADRs and
Yankee Obligations. See "American Depositary Receipts,
European Depositary Receipts and Global Depositary
Receipts," above, and "Yankee Obligations," below.
The securities of non-U.S. companies involve
special risks and considerations not typically
associated with investing in U.S. companies. These risks
and considerations include differences in accounting,
auditing and financial reporting standards, generally
higher commission rates on non-U.S. portfolio
transactions, the possibility of expropriation or
confiscatory taxation, adverse changes in investment or
exchange control regulations, political instability
which could affect U.S. investment in foreign countries
and potential restrictions on the flow of international
capital and currencies. Non-U.S. companies may also be
subject to less government regulation than U.S.
companies. Moreover, the dividends payable on a Fund's
non-U.S. securities may be subject to foreign
withholding taxes, thus reducing the amount of net
income available for distribution to the Fund's
shareholders. Further, non-U.S. securities often trade
with less frequency and volume than domestic securities
and, therefore, may exhibit greater price volatility.
Also, changes in foreign exchange rates will affect,
favorably or unfavorably, the value of those securities
which are denominated or quoted in currencies other than
the U.S. dollar.
SWAPS
As a way of managing its exposure to different types of
investments, the International Growth Fund may enter
into interest rate swaps, currency swaps and other types
of swap agreements such as caps, collars and floors. In
a typical interest rate swap, one party agrees to make
regular payments equal to a floating interest rate times
a "notional principal amount", in return for payments
equal to a fixed rate times the same amount, for a
specific period of time, if a swap agreement provides
for payment in different currencies, the parties might
agree to exchange the notional principal amount as well.
Swaps may also depend on other prices or rates, such as
the value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party
agrees to make payments only under specified
circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest
rate cap obtains the right to receive payments to the
extent that a specific interest rate exceeds an agreed-
upon level, while the seller of an interest rate floor
is obligated to make payments to the extent that a
specified interest rate falls below an agreed-upon
level. An interest rate collar combines elements of
buying a cap and selling a floor.
Swap agreements will tend to shift the Fund's
investments exposure from one type of investment to
another. For example, if the Fund agrees to exchange
payments in dollars for payments in foreign currency,
the swap agreement
26
<PAGE>
would tend to decrease the Fund's exposure to U.S.
interest rates and increase its exposure to foreign
currency and interest rates. Caps and floors have an
effect similar to buying or writing options. Depending
on how they are used, swap agreements may increase or
decrease the overall volatility of investments and their
share price and yield.
Swap agreements are sophisticated hedging
instruments that typically involve a small investment of
cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and have a
considerable impact on the Fund's performance. Swap
agreements are subject to risks related to the
counterparty's ability to perform, and may decline in
value if the counterparty's creditworthiness
deteriorates. The Fund may also suffer losses if it is
unable to terminate outstanding swap agreements; or
reduce its exposure through offsetting transactions. Any
obligation the Fund may have under these types of
arrangements will be covered by setting aside high
quality liquid securities in a segregated account. The
International Growth Fund will enter into swaps only
with counterparties deemed creditworthy by the Fund's
advisers.
Time Deposits
The International Growth and Money Market Funds may
invest in time deposits. A time deposit is a non-
negotiable receipt issued by a bank in exchange for the
deposit of funds. Similar to a certificate of deposit, a
time deposit earns a specified rate of interest over a
definite period of time; however, it cannot be traded in
the secondary market. With respect to the International
Growth Fund, time deposits with a withdrawal penalty are
considered to be illiquid securities and, therefore, the
International Growth Fund will not invest more than 15%
of its assets in such time deposits and other illiquid
securities. With respect to the Money Market Fund, time
deposits with a withdrawal penalty are also considered
to be illiquid securities, and, together with other
illiquid securities, may not exceed 10% of the Money
Market Fund's total assets and, as to the time deposits,
must mature within two to seven days.
U.S. Government
Agency Obligations
All Funds may invest in obligations of federal agencies.
Some government agencies, such as the Government
National Mortgage Association ("GNMA"), have been
established as instrumentalities of the United States
Government to supervise and finance certain types of
activities. Issues of these agencies, while not direct
obligations of the United States Government, are either
backed by the full faith and credit of the United States
(e.g., GNMA) or supported by the issuing agencies' right
to borrow from the Treasury. The issues of other
agencies are supported only by the credit of the
instrumentality (e.g., Federal National Mortgage
Association).
U.S. Treasury
Obligations
All Funds may invest in bills, notes and bonds issued by
the U.S. Treasury. The International Growth and Money
Market Funds may also invest in separately traded
interest and principal component parts of such
obligations that are transferable through the Federal
book-entry system known as ("STRIPS").
STRIPS 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 amortized over the life of the security, and
such amortization will constitute the income earned on
the security for both accounting and tax purposes.
Because of these features, STRIPS may be subject to
greater interest rate volatility than interest-paying
Permitted Investments.
Variable and Floating
Rate Instruments
Certain of the obligations purchased by the
International Growth Fund may involve a conditional or
unconditional demand feature and may include variable
amount master demand notes. The Money Market Fund may
invest in certain
27
<PAGE>
instruments issued, guaranteed or sponsored by the U.S.
Government or its agencies, and certain debt instruments
issued by domestic banks or corporations that carry
variable or floating rates of interest. In the case of
each Fund, such instruments bear interest at rates which
are not fixed, but which vary with changes in specified
market rates or indices, such as a Federal Reserve
composite index.
The interest rate on the securities in which the
International Growth Fund may invest may be reset daily,
weekly, quarterly or at some other reset period, and may
have a floor or ceiling on interest rate changes. There
is a risk that the current interest rate on such
obligations may not accurately reflect existing market
interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there
is no secondary market for such securities.
Warrants
The International Growth and Intermediate Fixed Income
Funds may invest in warrants, which are instruments
giving holders the right, but not the obligation, to buy
shares of a company at a given price during a specified
period.
When-Issued Securities
The International Growth and Intermediate Fixed Income
Funds may invest in securities subject to settlement on
a future date. The interest rate realized on these
securities is fixed as of the purchase date and no
interest accrues to the Fund before settlement. These
securities are subject to market fluctuation due to
changes in market interest rates and will have the
effect of leveraging the Fund's assets. Both of the
Funds are permitted to invest in forward commitments or
purchases on a when-issued basis where such purchases
are for investment and not for leveraging purposes. One
or more segregated accounts will be established with the
Fund's Custodian, and the Fund will maintain liquid
assets in such accounts in an amount at least equal in
value to the Fund's commitments to purchase when-issued
securities.
Yankee Obligations
The Intermediate Fixed Income Fund may invest in Yankee
Obligations ("Yankees") which are U.S. dollar-
denominated instruments of foreign issuers who either
register with the Securities and Exchange Commission or
issue under Rule 144(A). These consist of debt
securities (including preferred or preference stock of
non-governmental
issuers), certificates of deposit, fixed time deposits
and bankers' acceptances issued by foreign banks, and
debt obligations of foreign governments or their
subdivisions, agencies and instrumentalities,
international agencies and supranational entities. Some
securities issued by foreign governments or their
subdivisions, agencies and instrumentalities may not be
backed by the full faith and credit of the foreign
government.
The Yankees selected for the Fund will adhere to
the same quality standards as those utilized for the
selection of domestic debt obligations. For a
description of the risks associated with Yankees, see
"Securities of Non-U.S. Issuers."
Additional information on other permitted
investments and related risk factors can be found in the
Statement of Additional Information.
28
<PAGE>
Appendix________________________________________________________________________
Restraints on
Investments by Money
Market Funds
Investments by the Money Market Fund are subject to
limitations imposed under regulations adopted by the
SEC. These regulations generally require money market
funds, such as the Money Market Fund, to acquire only
U.S. dollar denominated obligations maturing in 397 days
or less and to maintain a dollar-weighted average
portfolio maturity of 90 days or less. In addition,
money market funds may acquire only obligations that
present minimal credit risks and that are "eligible
securities" which means they are (i) rated, at the time
of investment, by at least two nationally recognized
security rating organizations (one if it is the only
organization rating such obligation) in the highest
short-term rating category or, if unrated, determined to
be of comparable quality (a "first tier security"), or
(ii) rated according to the foregoing criteria in the
second highest short-term rating category or, if
unrated, determined to be of comparable quality (a
"second tier security"). A security is not considered to
be unrated if its issuer has outstanding obligations of
comparable priority and security that have a short-term
rating. The Money Market Fund's advisers will determine
that an obligation presents minimal credit risks or that
unrated instruments are of comparable quality in
accordance with guidelines established by the Trustees.
The Trustees must also approve or ratify the acquisition
of unrated securities or securities rated by only one
rating organization. In addition, investments in second
tier securities are subject to further constraints that
(i) no more than 5% of the Money Market Fund's assets
may be invested in such securities in the aggregate, and
(ii) any investments in such securities of one issuer is
limited to the greater of 1% of the Money Market Fund's
total assets or $1 million. Ordinarily, the Money Market
Fund will not invest more than 5% of its assets in
first-tier securities of a single issuer but may invest
up to 25% of its total assets in the first-tier
securities of a single issuer for not more than three
business days.
Description of The following descriptions of commercial paper ratings
Short-Term Debt and have been published by Standard & Poor's Corporation
Commercial Paper ("S&P"), Moody's Investors Service, Inc. ("Moody's"),
Ratings Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps,
Inc. ("Duff"), Thomson BankWatch ("Thomson") and IBCA
Limited and IBCA, Inc. (together "IBCA").
Commercial paper rated A by S&P is regarded by
S&P as having the greatest capacity for timely payment.
Issues rated A are further refined by use of the numbers
1+, 1 and 2 to indicate the relative degree of safety.
Issues rated A-1+ are those with an "overwhelming
degree" of credit protection. Those rated A-1 reflect a
"very strong" degree of safety regarding timely payment.
Those rated A-2 reflect a safety regarding timely
payment, but not as high as A-1.
Moody's employs two designations, judged to be
high grade commercial paper, to indicate the relative
repayment capacity of rated issuers as follows:
Prime-1 Highest Quality
Prime-2 Higher Quality
The rating Fitch-1 (Highest Grade) is the
highest commercial paper rating assigned by Fitch. Paper
rated Fitch-1 is regarded as having the strongest degree
of assurance for timely payment. The rating Fitch-2
(Very Good Grade) is the second highest commercial paper
rating assigned by Fitch which reflects an assurance of
timely payment only slightly lower in degree than the
strongest issues.
A-1
<PAGE>
The rating Duff-1 is the highest commercial
paper rating assigned by Duff. Paper rated Duff-1 is
regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by
ample asset protection. Risk factors are minor. Paper
rated Duff-3 is regarded as having good certainty of
timely payment, good access to capital markets and sound
liquidity factors and company fundamentals. Risk factors
are small.
The rating TBW-1 is the highest commercial paper
rating assigned by Thomson. Paper rated TBW-1 indicates
a very high likelihood that principal and interest will
be paid on a timely basis. The rating TBW-2 is the
second-highest rating assigned category by Thomson. The
relative degree of safety regarding timely repayment of
principal and interest is strong. However, the relative
degree of safety is not as high as for issues rated
TBW-1.
The designation A1 by IBCA indicates that the
obligation is supported by a very strong capacity for
timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment.
Obligations rated A2 are supported by a strong capacity
for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or
financial conditions.
Description of Bonds rated AAA have the highest rating S&P assigns
Municipal and to a debt obligation. Such a rating indicates an
Corporate Bond Ratings extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is
very strong, and in the majority of instances they
differ from AAA issues only in small degree.
Debt rated A by S&P has a strong capacity to pay
interest and repay principal although it is somewhat
more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in
higher rated categories. Debt rated BBB by S&P is
regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated
categories.
Bonds which are rated Aaa by Moody's are judged
to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a
large, or an exceptionally stable, margin and principal
is secure. While the various protective elements are
likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong
position of such issues. Bonds rated Aa by Moody's are
judged by Moody's to be of high quality by all
standards. Together with bonds rated Aaa, they comprise
what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in
Aaa securities.
Bonds which are rated A by Moody's possess many
favorable investment attributes and are to be considered
as upper-medium grade obligations. Factors giving
security to principal and interest are considered
adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Bonds which are rated Baa by Moody's are
considered as medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the
present but certain protective elements may be lacking
or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative
characteristics as well.
Bonds rated AAA by Fitch are judged by Fitch to
be strictly high grade, broadly marketable, suitable for
investment by trustees and fiduciary institutions
A-2
<PAGE>
liable to but slight market fluctuation other than
through changes in the money rate. The prime feature of
an AAA bond is a showing of earnings several times or
many times interest requirements, with such stability of
applicable earnings that safety is beyond reasonable
question whatever changes occur in conditions. Bonds
rated AA by Fitch are judged by Fitch to be of safety
virtually beyond question and are readily salable, whose
merits are not unlike those of the AAA class, but whose
margin of safety is less strikingly broad. The issue may
be the obligation of a small company, strongly secured
but influenced as to rating by the lesser financial
power of the enterprise and more local type market.
Bonds rated Duff-1 are judged by Duff to be of
the highest credit quality with negligible risk factors;
only slightly more than U.S. Treasury debt. Bonds rated
Duff-2, are judged by Duff to be of high credit quality
with strong protection factors. Risk is modest but may
vary slightly from time to time because of economic
conditions.
Bonds which are rated AAA by Thomson are judged
to be of the highest category. The ability to repay
principal and interest on a timely basis is very high.
Bonds rated AA by Thomson are judged by Thomson to be of
a superior ability to repay principal and interest on a
timely basis, with limited incremental risk compared to
issues rated in the highest category.
Obligations rated AAA by IBCA have the lowest
expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk
significantly. Obligations for which there is a very low
expectation of investment risk are rated AA by IBCA.
Capacity for timely repayment of principal and interest
is substantial. Adverse changes in business, economic or
financial conditions may increase investment risk albeit
not very significantly.
A-3
<PAGE>
INSURANCE INVESTMENT PRODUCTS TRUST
April 28, 1995
INTERNATIONAL GROWTH
GROWTH
AGGRESSIVE GROWTH
INCOME EQUITY
INTERMEDIATE FIXED INCOME
MONEY MARKET
This STATEMENT OF ADDITIONAL INFORMATION is not a Prospectus. It is intended to
provide additional information regarding the activities and operations of the
Trust and should be read in conjunction with the Trust's Prospectus dated April
28, 1995, as it may be amended from time to time. A Prospectus for the Trust
may be obtained through SEI Financial Management Corporation, 680 East
Swedesford Road, Wayne, PA 19087.
TABLE OF CONTENTS
<TABLE>
<S> <C>
The Trust(2)...................................................................... 2
Additional Information on Permitted Investments and Related Risk Factors(18)...... 2
Investment Limitations(2)......................................................... 7
The Manager and Shareholder Servicing Agent(8).................................... 9
The Advisers and Sub-Advisers(8)..................................................10
The Distributor(17)...............................................................11
Trustees and Officers of the Trust................................................11
Performance(14)...................................................................12
Determination of Net Asset Value..................................................14
Purchase and Redemption of Shares(13).............................................15
Taxes(15).........................................................................16
Fund Transactions.................................................................17
Description of Shares.............................................................19
Limitation of Trustees' Liability.................................................19
Voting(16)........................................................................19
Shareholder Liability.............................................................19
Control Persons and Principal Holders of Securities...............................19
Independent Public Accountants(17)................................................20
Custodians(17)....................................................................20
Financial Statements..............................................................20
</TABLE>
TAP-F-002-02
_______________________________
References to related disclosure in prospectus provided in parentheses.
<PAGE>
THE TRUST
Insurance Investment Products Trust (the "Trust") is an open-end management
investment company established under Massachusetts law as a Massachusetts
business trust under a Declaration of Trust dated June 3, 1994. The Agreement
and Declaration of Trust permits the Trust to offer separate series of units of
beneficial interest ("shares") and separate classes of each series. Each share
of each series represents an equal, proportionate interest in the corresponding
Fund with other share of that series.
This Statement of Additional Information relates to the International Growth,
Growth, Aggressive Growth, Income Equity, Intermediate Fixed Income and Money
Market Funds (each a "Fund," and collectively, the "Funds").
ADDITIONAL INFORMATION ON PERMITTED INVESTMENTS AND RELATED RISK FACTORS
ASSET-BACKED SECURITIES--The Intermediate Fixed Income Fund may, as described in
the Prospectus, invest in securities backed by automobile receivables and
credit-card receivables and other securities backed by other types of
receivables or other assets. Credit support for asset-backed securities may be
based on the underlying assets and/or provided through credit enhancements by a
third party. Credit enhancement techniques include letters of credit, insurance
bonds, limited guarantees (which are generally provided by the issuer), senior-
subordinated structures and overcollateralization. The Intermediate Fixed
Income Fund will only purchase an asset-backed security if it is rated at least
A by S&P or Moody's.
COMMERCIAL PAPER--the term used to designate unsecured short-term promissory
notes issued by corporations and other entities, as described in the Prospectus.
The International Growth Fund may purchase variable amount master demand notes
which may or may not be backed by bank letters of credit. These notes permit
the investment of fluctuating amounts at varying market rates of interest
pursuant to direct arrangements between a Fund, as lender, and the borrower.
Such notes provide that the interest rate on the amount outstanding varies on a
daily, weekly or monthly basis depending upon a stated short-term interest rate
index. There is not a secondary market for the notes.
FORWARD FOREIGN CURRENCY CONTRACTS--The International Growth Fund may enter into
forward foreign currency contracts, which involve an obligation to purchase or
sell a specified currency at a future date at a price set at the time of the
contract. Forward currency contracts do not eliminate fluctuations in the
values of portfolio securities but rather allow the Fund to establish a rate of
exchange for a future point in time.
When entering into a contract for the purchase or sale of a security in a
foreign currency, the International Growth Fund may enter into a foreign forward
currency contract for the amount of the purchase or sale price to protect
against variations, between the date on which the security is purchased or sold
and the date on which payment is made or received, in the value of the foreign
currency relative to the U.S. Dollar or other foreign currency.
Also, when the Fund's advisers anticipate that a particular foreign currency may
decline substantially relative to the U.S. Dollar or other leading currencies,
in order to reduce risk, the Fund may enter into a forward contract to sell, for
a fixed amount, the amount of foreign currency approximating the value of its
securities denominated in such foreign currency. With respect to any such
forward foreign currency contract, it will not generally be possible to match
precisely the amount covered by that contract and the value of the securities
involved due to changes in the values of such securities resulting from market
movements between the date the forward contract is entered into and the date it
matures. In addition, while forward currency contracts may offer protection
from losses resulting from declines in the value of a particular foreign
currency, they also limit potential gains which might result from increases in
the value of such currency. The International Growth Fund will also incur costs
in connection with forward foreign currency contracts and conversions of foreign
currencies into U.S. Dollars.
<PAGE>
MORTGAGE-BACKED SECURITIES--As described in the Prospectus, the Intermediate
Fixed Income Fund may invest in mortgage-backed securities. Mortgage-backed
securities in which the Fund may invest represent pools of mortgage loans
assembled for sale to investors by various governmental agencies such as the
Government National Mortgage Association and government-related organizations
such as the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation, as well as by nongovernmental issuers such as commercial
banks, savings and loan institutions, mortgage bankers, and private mortgage
insurance companies. The Intermediate Fixed Income Fund will only purchase
mortgage-backed securities issued or guaranteed by either the U.S. Government,
or its agencies or instrumentalities. Although certain mortgage-backed
securities are guaranteed by a third party or otherwise similarly secured, the
market value of the security, which may fluctuate, is not so secured. If the
Fund purchases a mortgage-backed security at a premium, that portion may be lost
if there is a decline in the market value of the security whether resulting from
changes in interest rates or prepayments in the underlying mortgage collateral.
As with other interest-bearing securities, the prices of such securities are
inversely affected by changes in interest rates. However, though the value of a
mortgage-backed security may decline when interest rates rise, the converse is
not necessarily true since in periods of declining interest rates the mortgages
underlying the securities are prone to prepayment. For this and other reasons,
mortgage-backed securities' stated maturity may be shortened by unscheduled
prepayments on the underlying mortgages and, therefore, it is not possible to
predict accurately the securities' return to the Fund. In addition, regular
payments received in respect of mortgage-backed securities include both interest
and principal. No assurance can be given as to the return the Fund will receive
when these amounts are reinvested.
The Fund may also invest in mortgage-backed securities which are collateralized
mortgage obligations structured on pools of mortgage pass-through certificates
or mortgage loans. Collateralized mortgage obligations will be purchased only
if rated in the three highest rating categories by a nationally recognized
statistical rating organization such as Moody's Investors Services, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P"). For purposes of
determining the average maturity of a mortgage-backed security in its investment
portfolio, the Intermediate Fixed Income Fund will utilize the expected average
life of the security, as estimated in good faith by the Fund's advisers. The
Intermediate Fixed Income Fund will not invest in mortgage-backed securities
with an expected average maturity of over seven years.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-backed securities
and among the securities that they issue. Mortgage-backed securities issued by
the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-
owned U.S. Government corporation within the Department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-backed securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States. The
FNMA is a government-sponsored organization owned entirely by private
stockholders. Fannie Maes are guaranteed as to timely payment of the principal
and interest by FNMA. Mortgage-backed securities issued by the Federal Home
Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs" or "PC's"). The FHLMC is a corporate
instrumentality of the United States, created pursuant to an Act of Congress,
which is owned entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying mortgage loans. When
the FHLMC does not guarantee timely payment of principal, FHLMC may remit the
amount due on account of its guarantee of ultimate payment of principal at any
time after default on an underlying mortgage, but in no event later than one
year after it becomes payable.
-3-
<PAGE>
OBLIGATIONS OF SUPRANATIONAL AGENCIES--may be purchased by the International
Growth Fund. Currently, the International Growth Fund intends to invest only in
obligations issued or guaranteed by the Asian Development Bank, Inter-American
Development Bank, International Bank for Reconstruction and Development (World
Bank), African Development Bank, European Coal and Steel Community, European
Economic Community, European Investment Bank and the Nordic Investment
Bank.
PUT TRANSACTIONS--As described in the Prospectus, the Intermediate Fixed Income
Fund may purchase securities at a price which would result in a yield to
maturity lower than generally offered by the seller at the time of purchase when
the Fund can simultaneously acquire the right to sell the securities back to the
seller, the issuer, or a third party (the "writer") at an agreed-upon price at
any time during a stated period or on a certain date. Such a right is generally
denoted as a "standby commitment" or a "put". The purpose of engaging in
transactions involving puts is to maintain flexibility and liquidity to permit
the Fund to meet redemptions and remain as fully invested as possible in fixed
income securities. The right to put the securities depends on the writer's
ability to pay for the securities at the time the put is exercised. The Fund
would limit its put transactions to institutions which its advisers believe
present minimum credit risks, and the advisers would use their best efforts to
initially determine and continue to monitor the financial strength of the
sellers of the options by evaluating their financial statements and such other
information as is available in the marketplace. It may, however, be difficult to
monitor the financial strength of the writers because adequate current financial
information may not be available. In the event that any writer is unable to
honor a put for financial reasons, the Fund would be a general creditor (i.e.,
on a parity with all other unsecured creditors) of the writer. Furthermore,
particular provisions of the contract between the Fund and the writer may excuse
the writer from repurchasing the securities; for example, a change in the
published rating of the underlying fixed income securities or any similar event
that has an adverse effect on the issuer's credit or a provision in the contract
that the put will not be exercised except in certain special cases, for example,
to maintain portfolio liquidity. The Fund could, however, at any time sell the
underlying portfolio security in the open market or wait until the portfolio
security matures, at which time it should realize the full par value of the
security .
The securities purchased subject to a put may be sold to third persons at any
time, even though the put is outstanding, but the put itself, unless it is an
integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Fund. Sale
of the securities to third parties or lapse of time with the put unexercised may
terminate the right to put the securities. Prior to the expiration of any put
option, the Fund could seek to negotiate terms for the extension of such an
option. If such a renewal cannot be negotiated on terms satisfactory to the
Fund, the Fund could, of course, sell the portfolio security. The maturity of
the underlying security will generally be different from that of the put. There
will be no limit to the percentage of portfolio securities that the Fund may
purchase subject to a put but the amount paid directly or indirectly for puts
which are not integral parts of the security as originally issued will not
exceed 1/2 of 1% of the value of the total assets of value of the total assets
of the Fund calculated immediately after any such put is acquired. For the
purpose of determining the "maturity" of securities purchased subject to an
option to put, and for the purpose of determining the dollar-weighted average
maturity of the Fund including such securities, the Trust will consider
"maturity" to be the first date on which it has the right to demand payment from
the writer of the put although the final maturity of the security is later than
such date .
RECEIPTS--interests in separately traded interest and principal component parts
of U.S. Government obligations that are issued by banks or brokerage firms and
are created by depositing U.S. Government obligations into a special account at
a custodian bank, as described in the Prospectus. The custodian holds the
interest and principal payments for the benefit of the registered owners of the
certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register.
Receipts include "Treasury Receipts" ("TRs"), "Treasury Investment Growth
Receipts" ("TIGRs"), and "Certificates of Accrual on Treasury Securities"
("CATS"). TIGRs and CATS are interests in private proprietary accounts while TRs
and STRIPS (See "U.S. Treasury Obligations") are interests in accounts sponsored
by the U.S. Treasury. Receipts are sold as zero coupon securities; for more
information, see "Zero Coupon Securities.
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REPURCHASE AGREEMENTS--agreements under which securities are acquired from a
securities dealer or bank subject to resale on an agreed upon date and at an
agreed upon price which includes principal and interest, as described in the
Prospectus. The Fund involved bears a risk of loss in the event that the other
party to a repurchase agreement defaults on its obligations and the Fund is
delayed or prevented from exercising its rights to dispose of the collateral
securities. A Fund's advisers enter into repurchase agreements only with
financial institutions which they deem to present minimal risk of bankruptcy
during the term of the agreement based on guidelines which are periodically
reviewed by the Board of Trustees. These guidelines currently permit the Funds
to enter into repurchase agreements only with approved banks and primary
securities dealers, as recognized by the Federal Reserve Bank of New York, which
have minimum net capital of $100 million, or with a member bank of the Federal
Reserve System. Repurchase agreements are considered to be loans collateralized
by the underlying security. Repurchase agreements entered into by the Funds will
provide that the underlying security at all times shall have a value at least
equal to 102% of the price stated in the agreement.This underlying security will
be marked to market daily. The Fund's advisers monitor compliance with this
requirement. Under all repurchase agreements entered into by the Funds, the
Custodian or its agent must take possession of the underlying collateral.
However, if the seller defaults, the Funds could realize a loss on the sale of
the underlying security to the extent the proceeds of the sale are less than the
resale price. In addition, even though the Bankruptcy Code provides protection
for most repurchase agreements, if the seller should be involved in bankruptcy
or insolvency proceedings, the Funds may incur delay and costs in selling the
security and may suffer a loss of principal and interest if the Funds are
treated as an unsecured creditor .
SECURITIES OF NON-U.S. ISSUERS--The International Growth, Growth, Income Equity,
and Intermediate Fixed Income Funds may invest in U.S. Dollar denominated
obligations or securities of non-U.S. issuers. Permissible investments may
consist of obligations of foreign branches of U.S. banks and non-U.S. banks,
including European Certificates of Deposit, European Time Deposits, Canadian
Time Deposits and Yankee Certificates of Deposit and investments in Canadian
Commercial Paper, non-U.S. securities and Europaper. In addition, the Funds may
invest in American Depositary Receipts ("ADRs") traded on registered exchanges
or NASDAQ. While the Funds expect to invest primarily in sponsored ADRs, a
joint arrangement between the issuer and the depositary, some ADRs may be
unsponsored. Unlike sponsored ADRs, the holders of unsponsored ADRs bear all
expenses and the depositary may not be obligated to distribute shareholder
communications or to pass through the voting rights on the deposited securities.
These instruments may subject the Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic developments,
the possible imposition of withholding taxes on interest or other income,
possible seizure, nationalization, or expropriation of non-U.S. deposits, the
possible establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in the exchange rates, or the adoption of
other non-U.S. governmental restrictions which might adversely affect the
payment of principal and interest on such obligations. Such investments may
also entail higher custodial fees and sales commissions than domestic
investments. Non-U.S. issuers of securities or obligations are often subject to
accounting treatment and engage in business practices different from those
respecting domestic issuers of similar securities or obligations. Non-U.S.
branches of U.S. banks and non-U.S. banks may be subject to less stringent
reserve requirements than those applicable to domestic branches of U.S.
banks.
SECURITIES LENDING--in order to generate additional income, each of the Growth,
Income Equity, and Aggressive Growth Funds may lend the securities in which it
is invested pursuant to agreements requiring that the loans be continuously
secured by cash, securities of the U.S. Government or its agencies, or any
combination of cash and such securities, as collateral equal to at least the
market value at all times of the securities lent. Such loans will not be made
if, as a result, the aggregate amount of all outstanding securities loans for a
Fund exceeds 20% of the value of that Fund's total assets taken at fair market
value. A Fund will continue to receive interest on the securities lent while
simultaneously earning interest on the investment of the cash collateral in U.S.
government securities. However, a Fund will normally pay lending fees to such
broker-dealers and related expenses from the interest earned on invested
collateral. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Fund's advisers
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to be of good standing and when, in the judgment of the advisers, the
consideration which can be earned currently from such securities loans justifies
the attendant risk. Any loan may be terminated by either party upon reasonable
notice to the other party. The Funds may use the Distributor as a broker in
these transactions .
TIME DEPOSITS--a non-negotiable receipt issued by a bank in exchange for the
deposit of funds, as described in the Prospectus. Like a certificate of
deposit, it earns a specified rate of interest over a definite period of time;
however, it cannot be traded in the secondary market.
Time deposits with a withdrawal penalty are considered to be illiquid
securities; no Fund will invest more than 15% of its net assets in such time
deposits and other illiquid securities.
U.S. GOVERNMENT AGENCY OBLIGATIONS--As described in the Prospectus, agencies of
the United States Government, which issue obligations consist of, among others,
Export Import Bank of the United States, Farmers Home Administration, Federal
Farm Credit System, Federal Housing Administration, Government National Mortgage
Association, Maritime Administration, Small Business Administration, and The
Tennessee Valley Authority. The Funds may purchase securities issued or
guaranteed by the Government National Mortgage Association which represent
participations in Veterans Administration and Federal Housing Administration
backed mortgage pools. Obligations of instrumentalities of the United States
Government include securities issued by, among others, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks,
Federal Land Banks, Federal National Mortgage Association and the United States
Postal Service. Some of these securities are supported by the full faith and
credit of the United States Treasury (e.g., Government National Mortgage
Association), others are supported by the right of the issuer to borrow from the
Treasury and still others are supported only by the credit of the
instrumentality (e.g., Federal National Mortgage Association). Guarantees of
principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation so that in the event of a
default prior to maturity there might not be a market and thus no means of
realizing the value of the obligation prior to maturity. Guarantees as to the
timely payment of principal and interest do not extend to the value or yield of
these securities nor to the value of a Fund's shares. The Money Market Fund
does not intend to purchase securities issued by the World Bank, the Inter-
American Development Bank or the Asian Development Bank.
U.S. TREASURY OBLIGATIONS--bills, notes and bonds issued by the U.S. Treasury
and separately traded interest and principal component parts of such obligations
that are transferable through the Federal book-entry system known as Separately
Traded Registered Interest and Principal Securities ("STRIPS"), as described in
the Prospectus. No Fund may actively trade STRIPS. STRIPS are sold as zero
coupon securities; for more information, see "Zero Coupon Securities."
VARIABLE OR FLOATING RATE INSTRUMENTS--may involve a demand feature and may
include variable amount master demand notes available through the Custodian, or
otherwise (which may not be booked by bank letters of credit), as described in
the Prospectus. Variable or floating rate instruments bear interest at a rate
which varies with changes in market rates. The holder of an instrument with a
demand feature may tender the instrument back to the issuer at par prior to
maturity. A variable amount master demand note is issued pursuant to a written
agreement between the issuer and the holder, its amount may be increased by the
holder or decreased by the holder, its amount may be increased by the holder or
decreased by the holder or issuer, it is payable on demand, and the rate of
interest varies based upon an agreed formula. The quality of the underlying
credit must, in the opinion of the Fund's advisers, be equivalent to the long-
term bond or commercial paper ratings applicable to permitted investments for
each Fund. Each Fund's advisers will monitor on an ongoing basis the earning
power, cash flow, and liquidity ratios of the issuers of such instruments and
will similarly monitor the ability of an issuer of a demand instrument to pay
principal and interest on demand.
In case of obligations which include a put feature at the option of the debt
holder, the date of the put may be used as an effective maturity date for the
purpose of determining weighted average portfolio maturity.
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WHEN-ISSUED SECURITIES--As described in the Prospectus, the International Growth
and Intermediate Fixed Income Funds may purchase when-issued securities which
involve the purchase of debt obligations on a when-issued basis, in which case
delivery and payment normally take place within 45 days after the date of
commitment to purchase. The Funds will only make commitments to purchase
obligations on a when-issued basis with the intention of actually acquiring the
securities, but may sell them before the settlement date. The when-issued
securities are subject to market fluctuation, and no interest accrues to the
purchaser during this period. The payment obligation and the interest rate that
will be received on the securities are each fixed at the time the purchaser
enters into the commitment. Purchasing obligations on a when-issued basis is a
form of leveraging and can involve a risk that the yields available in the
market when the delivery takes place may actually be higher than those obtained
in the transaction itself. In that case there could be an unrealized loss at
the time of delivery. The Funds will establish a segregated account with the
Custodian and maintain liquid assets in an amount at least equal in value to
that Fund's commitments to purchase when-issued securities. If the value of
these assets declines, the Fund involved will place additional liquid assets in
the account on a daily basis so that the value of the assets in the account is
equal to the amount of such commitments.
ZERO COUPON SECURITIES--STRIPS and Receipts (TRs, TIGRs and CATS) are sold as
zero coupon securities, that is, fixed income securities that have been stripped
of their unmatured interest coupons. Zero coupon securities are sold at a
(usually substantial) discount and redeemed at face value at their maturity date
without interim cash payments of interest or principal. The amount of this
discount is credited over the life of the security, and the accretion
constitutes the income earned on the security for both accounting and tax
purposes. Because of these features, the market prices of zero coupon
securities are generally more volatile than the market prices of securities that
have similar maturity but that pay interest periodically. Zero coupon
securities are likely to respond to a greater degree to interest rate changes
than are non-zero coupon securities with similar maturity and credit qualities.
OTHER INVESTMENTS
The Trust is not prohibited from investing in obligations of banks which are
clients of SEI Corporation ("SEI"). However, the purchase of shares of the
Trust by them or by their customers will not be a consideration in determining
which bank obligations the Trust will purchase. The Trust will not purchase
obligations of any of the Investment Advisers to the Trust.
INVESTMENT LIMITATIONS
FUNDAMENTAL POLICIES
A Fund may not:
1. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 10% of the value of total assets. This borrowing
provision is included solely to facilitate the orderly sale of portfolio
securities to accommodate heavy redemption requests if they should occur
and is not for investment purposes. All borrowing will be repaid before
making additional investments, and any interest paid on such borrowing will
reduce income. For purposes of this provision, the use of investment
techniques described in the Prospectus and this Statement of Additional
Information will not be considered to involve the borrowing of money
subject to the restrictions of this provision.
2. Make loans, except that (i) each Fund may purchase or hold debt instruments
in accordance with its investment objective and policies; (ii) each Fund
may enter into repurchase agreements, provided that repurchase agreements
maturing in more than seven days, restricted securities and other
securities which are not readily marketable are not to exceed, in the
aggregate, 15% of the Fund's total assets, except for the Money Market Fund
for which such investments cannot exceed 10% of the Fund's total assets;
(iii)
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the International Growth, Growth, Aggressive Growth and Income Equity Funds
may engage in securities lending as described in the Prospectus and this
Statement of Additional Information; and (iv) the International Growth Fund
may enter into forward foreign currency contracts as described in the
Prospectus.
3. Pledge, mortgage or hypothecate assets except to secure temporary borrowing
permitted by (1) above in aggregate amounts not to exceed 10% of total
assets of such Fund taken at current value at the time of the incurrence of
such loan.
4. Invest in companies for the purpose of exercising control.
5. Acquire more than 10% of the voting securities of any one issuer.
6. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts. However, subject to the permitted
investments, a Fund may purchase obligations issued by companies which
invest in real estate, commodities or commodities contracts.
7. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Fund may obtain short-term credits as
necessary for the clearance of security transactions, provided that the
International Growth Fund's use of forward foreign currency contracts as
described herein shall not be deemed to be selling securities short or to
be maintaining a short position and that the use of margin payments in
connection with such forward contracts shall not be deemed to constitute
purchasing securities on margin.
8. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
9. Issue senior securities (as defined in the Investment Company Act of 1940,
as amended ("1940 Act")) except in connection with permitted borrowing as
described in the Prospectus and this Statement of Additional Information or
as permitted by rule, regulation or order of the Securities and Exchange
Commission (the "SEC").
The foregoing percentages will apply at the time of the purchase of a security
and shall not be considered violated unless an excess or deficiency occurs
immediately after or as a result of a purchase of such security. These
investment limitations and the investment limitations in each Prospectus are
fundamental policies of the Trust and may not be changed without shareholder
approval.
NON-FUNDAMENTAL POLICIES
In addition to the Fundamental Policies described above, each Fund is subject to
non-fundamental investment limitations described in the Prospectus, which, as
operating policies of the Funds, may be changed by the Trustees of the Trust
without prior approval of or notice to shareholders. Under these non-
fundamental policies, a Fund may not:
1. Purchase securities of other investment companies except as permitted by the
1940 Act and the rules and regulations thereunder and may only purchase
securities of money market open-end investment companies. Under these rules
and regulations, a Fund is prohibited from acquiring the securities of other
investment companies if, as a result of such acquisition, the Fund owns more
than 3% of the total voting stock of the company; securities issued by any
one investment company represent more than 5% of the total Fund assets; or
securities (other than treasury stock) issued by all investment companies
represent more than 10% of the total assets of the Fund. A Fund's purchase
of such investment company securities results in the bearing of expenses
such that shareholders would indirectly bear a proportionate share of the
operating expenses of such investment companies, including advisory
fees.
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2. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, partner or director of the Trust or any
investment adviser of the Trust ("Adviser") owns beneficially more than 1/2
of 1% of the shares or securities of such issuer and all such officers,
trustees, partners and directors owning more than 1/2 of 1% of such shares
or securities together own more than 5% of such shares or securities.
3. Purchase securities of any company which has (with predecessors) a record of
less than three years continuing operations if as a result, more than 5% of
the total assets (taken at fair market value) would be invested in such
securities. However, the Money Market Fund may purchase such securities if
they are (i) obligations issued or guaranteed by the United States
government, its agencies or instrumentalities or (ii) municipal securities
which are rated by at least two nationally recognized municipal bond rating
services.
4. Purchase warrants, puts, calls, straddles, spreads or combinations thereof,
except that the International Growth and Intermediate Fixed Income Funds may
purchase investments with put features as described in the Prospectus and
this Statement of Additional Information, that the Aggressive Growth and
Intermediate Fixed Income Funds may invest in warrants as described in the
Prospectus and in this Statement of Additional Information, and that the
International Growth Fund may enter into forward foreign currency contracts
as described in the Prospectus and in this Statement of Additional
Information.
5. Invest in interests in oil, gas or other mineral exploration or development
programs and oil, gas or mineral leases.
6. The Funds may not purchase restricted securities (securities which must be
registered under the Securities Act of 1933 before they may be offered or
sold to the public) or other illiquid securities except as described in the
Prospectus and this Statement of Additional Information.
The Trust also intends, as a non-fundamental investment policy, to comply in all
material respects with state law insurance limitations in accordance with
instructions the Trust receives from Insurers whose separate accounts purchase
shares of the Trust.
THE MANAGER AND SHAREHOLDER SERVICING AGENT
The Manager has entered into a management agreement with the Trust (the
"Management Agreement"). The Management Agreement provides that the Manager
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which the Management
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Manager in the performance of its duties
or from reckless disregard of its duties and obligations thereunder.
The continuance of the Management Agreement must be specifically approved at
least annually (i) by the vote of a majority of the Trustees or by the vote of a
majority of the outstanding voting securities of the Fund, and (ii) by the vote
of a majority of the Trustees of the Trust who are not parties to the Management
Agreement or an "interested person" (as that term is defined in the 1940 Act) of
any party thereto, cast in person at a meeting called for the purpose of voting
on such approval. The Management Agreement is terminable at any time as to any
Fund without penalty by the Trustees of the Trust, by a vote of a majority of
the outstanding shares of the Fund or by the Manager on not less than 30 days
nor more than 60 days written notice.
The Manager, a wholly-owned subsidiary of SEI Corporation ("SEI"), was organized
as a Delaware corporation in 1969 and has its principal business offices at 680
East Swedesford Road, Wayne, Pennsylvania 19087. Alfred P. West, Jr., Henry H.
Greer and Carmen V. Romeo constitute the Board of Directors of the Manager. Mr.
West serves as the Chairman of the Board of Directors and Chief Executive
Officer of the Manager and SEI. Mr. Greer serves as President and Chief
Operating Officer of the Manager and SEI. SEI and its subsidiaries are leading
providers of fund evaluation services, trust accounting systems, and brokerage
and information services to financial institutions,
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institutional investors and money managers. The Manager also serves as manager
to the following other mutual funds: SEI Liquid Asset Trust; SEI Daily Income
Trust (formerly SEI Cash+Plus Trust); SEI Tax Exempt Trust; SEI Institutional
Managed Trust; SEI Index Funds; SEI International Trust; Stepstone Funds
(formerly Union Investors Funds); The Compass Capital Group of Funds; FFB
Lexicon Funds; The Advisors' Inner Circle Fund; The Pillar Funds; CUFUND; STI
Classic Funds; CoreFunds, Inc.; First American Funds, Inc.; First American
Investment Funds, Inc.; First American Mutual Funds; Rembrandt Funds; The Arbor
Fund; 1784 Funds; The PBHG Funds, Inc. (formerly, The Advisors' Inner Circle II
Fund, Inc.); Marquis Funds; Morgan Grenfell Investment Trust; National Funds,
Inc.; Inventor Funds, Inc.; Nationar Funds, Inc; and The Achievement Funds
Trust.
As to any Fund, the Manager may, from time to time voluntarily waive a portion
of its fees, which waiver may be terminated at any time.
If operating expenses of any Fund exceed limitations established by certain
states, the Manager will pay such excess. The Manager will not be required to
bear expenses of any Fund to an extent which would result in the Fund's
inability to qualify as a regulated investment company under provisions of the
Internal Revenue Code. The term "expenses" is defined in such laws or
regulations, and generally excludes brokerage commissions, distribution
expenses, taxes, interest and extraordinary expenses.
THE ADVISERS AND SUB-ADVISERS
Each Adviser has entered into an advisory agreement with the Trust (the
"Advisory Agreement"). One Adviser (SEI Financial Management Corporation
("SFM")) in turn has entered into a sub-advisory agreement (a "Sub-Advisory
Agreement") with each Sub-Adviser. The Advisory Agreements and each Sub-Advisory
Agreement (collectively, the "advisory agreements") provide that the applicable
Adviser or Sub-Adviser shall not be protected against any liability to the Trust
or the Trust shareholders by reason of willful misfeasance, bad faith or
negligence on its part in the performance of its duties or from reckless
disregard of its obligations or duties thereunder.
The continuance of each advisory agreement must be specifically approved at
least annually (i) by the vote of a majority of the outstanding shares of that
Fund or by the Trustees, and (ii) by the vote of a majority of the Trustees who
are not parties to such advisory agreement or "interested persons" of any party
thereto, cast in person at a meeting called for the purpose of voting on such
approval. Each advisory agreement will terminate automatically in the event of
its assignment, and is terminable at any time without penalty by the Trustees of
the Trust or, with respect to a Fund, by a majority of the outstanding shares of
that Fund, on not less than 30 days nor more than 60 days written notice to the
applicable adviser, or by the adviser on 90 days written notice to the Trust.
The Advisers and the Sub-Advisers, pursuant to the applicable advisory
agreement, make investment decisions for the assets of the applicable Fund (or
allocated portion of assets), and each continuously reviews, supervises, and
administers the Fund's investment program. Each Sub-Adviser (other than LSV
Asset Management as to SFM) is independent of the Advisers and SEI and
discharges its responsibilities with respect to the applicable Fund subject to
the ultimate supervision of, and policies set by, the Trustees of the Trust.
Each Adviser and Sub-Adviser may, from time to time, voluntarily waive a portion
of its fees, which waiver may be terminated at any time.
LSV Asset Management is an affiliate of SFM.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, serves as the principal underwriter of the Trust's shares. The Distributor
is located at 680 East Swedesford Road, Wayne, Pennsylvania
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19087-1658.
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees and executive officers of the Trust and their principal occupations
for the last five years are set forth below. Each may have held other positions
with the named companies during that period. Unless otherwise noted, the
business address of each Trustee and executive officer is SEI Financial
Management Corporation, 680 East Swedesford Road, Wayne, PA 19087. Certain
trustees and officers of the Trust also serve as trustees and officers of some
or all of the following: SEI Liquid Asset Trust; SEI Daily Income Trust
(formerly SEI Cash+Plus Trust); SEI Tax Exempt Trust; SEI Institutional Managed
Trust; SEI Index Funds; SEI International Trust; Stepstone Funds (formerly Union
Investors Funds); The Compass Capital Group of Funds; FFB Lexicon Funds; The
Advisors' Inner Circle Fund; The Pillar Funds; CUFUND; STI Classic Funds;
CoreFunds, Inc.; First American Funds, Inc.; First American Investment Funds,
Inc.; First American Mutual Funds; Rembrandt Funds; The Arbor Fund; 1784 Funds;
The PBHG Funds, Inc. (formerly, The Advisors' Inner Circle II Fund, Inc.);
Marquis Funds; Morgan Grenfell Investment Trust; and Inventor Funds, Inc.
ROBERT A. NESHER - Chairman of the Board of Trustees. Retired since 1994.* -
Executive Vice President of SEI, 1986 - 1994. Director and Executive Vice
President of the Manager and Executive Vice President of the Distributor since
September 1981.
RICHARD F. BLANCHARD - Trustee** - P.O. Box 76, Canfield Road, Convent Station,
NJ 07961. Private Investor. Director of AEA Investors Inc. (acquisition and
investment firm) June 1981-86, Director of Baker Hughes Corp. (oil service
company) 1976-88. Director of Imperial Clevite Industries (transportation
equipment company) 1981-87. Executive Vice President of American Express
Company (financial services company), responsible for the investment function,
before June 1981.
WILLIAM M. DORAN - Trustee* - 2000 One Logan Square, Philadelphia, PA 19103.
Partner of Morgan, Lewis & Bockius, counsel to the Trust, Manager and
Distributor, Director and Secretary of SEI and Secretary of the Manager and
Distributor.
F. WENDELL GOOCH - Trustee** - P.O. Box 190, Paoli, IN 47454. President, Orange
County Publishing Co., Inc., since October 1981. Publisher of the Paoli News
and the Paoli Republican and Editor of the Paoli Republican since January 1981,
President, H & W Distribution, Inc. since July 1984. Executive Vice President,
Trust Department, Harris Trust and Savings Bank and Chairman of the Board of
Directors of The Harris Trust Company of Arizona before January 1981. Trustee of
STI Classic Funds.
FRANK E. MORRIS - Trustee** - 105 Walpole Street, Dover, MA 02030. Retired
since 1990. Peter Drucker Professor of Management, Boston College, since 1989.
President, Federal Reserve Bank of Boston, 1968-1988. Trustee of The Arbor Fund,
Marquis Funds, Advisors' Inner Circle Fund, Advisors' Inner Circle Fund II, Inc.
and FFB Lexicon Funds.
JAMES M. STOREY - Trustee** - Ten Post Office Square, Boston, MA 02109. Partner
of Dechert Price & Rhodes (law firm).
DAVID LEE - President since 1994 - Senior Vice President of the Distributor
since 1993. Vice President of the Distributor since 1991. President, GW Sierra
Trust Funds prior to 1991.
CARMEN V. ROMEO - Treasurer, Assistant Secretary - Director, Executive Vice
President, Chief Financial Officer and Treasurer of SEI since 1977. Director
and Treasurer of the Manager and Distributor since 1981.
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SANDRA K. ORLOW - Vice President, Assistant Secretary - Vice President and
Assistant Secretary of the Manager and Distributor since 1988. Corporate Legal
Assistant, Omni Exploration (oil and gas investment) prior to 1983.
KEVIN P. ROBINS - Vice President, Assistant Secretary - Vice President and
Assistant Secretary of the Manager and the Distributor 1992 - 1994. Associate,
Morgan, Lewis & Bockius (law firm) prior to 1992.
ROBERT B. CARROLL - Vice President, Assistant Secretary - Vice President,
Assistant Secretary of SEI. The Administrator and Distributor since 1994.
United States Securities and Exchange Commission, Division of Investment
Management, 1990-1994, Associate, McGuire, Woods, Battle & Boothe (law firm)
before 1990.
KATHRYN L. STANTON - Vice President, Assistant Secretary - Vice President,
Assistant Secretary of SEI, the Administrator and Distributor since 1994.
Associate, Morgan, Lewis & Bockius (law firm), 1989 - 1994.
JEFFREY A. COHEN - Controller, Assistant Secretary - Director of Funds
Accounting of SEI since 1991. Senior Accountant of Price Waterhouse
1988-1991.
RICHARD W. GRANT - Secretary - 2000 One Logan Square, Philadelphia, PA 19103,
Partner, Morgan, Lewis & Bockius, counsel to the Trust, Manager and Distributor.
__________________________
* Messrs. Nesher and Doran are Trustees who may be deemed to be "interested
persons" of the Trust as the term is defined in the 1940 Act.
** Messrs. Blanchard, Gooch, Morris and Storey serve as members of the Audit
Committee of the Trust.
The Trustees and officers of the Trust do not own variable contracts
representing 1% or more of the outstanding shares of the Trust. The Trust pays
the fees for unaffiliated Trustees. Compensation of officers and affiliated
Trustees of the Trust is paid by the Manager. For the fiscal year ended
December 31, 1993, the Trust was not in operation and therefore paid no fees to
the unaffiliated Trustees.
PERFORMANCE
From time to time, the yield and/or total return of any Fund may be advertised.
These figures will be based on historical earnings and are not intended to
indicate future performance.
The yield of a Fund, other than the Money Market Fund, refers to the annualized
income generated by an investment in the Fund over a specified 30-day period.
The yield is calculated by assuming that the income generated by the investment
during that period generated each period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula: Yield = 2[((a-b)/cd) + 1)/6/-l], where a = dividends
and interest earned during the period; b = expenses accrued for the period (net
of reimbursements); c = the average daily number of shares outstanding during
the period that were entitled to receive dividends; and d = the maximum offering
price per share on the last day of the period.
The current yield of the Money Market Fund is calculated daily based upon the
seven days ending on the date of calculation ("base period"). The yield is
computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing shareholder account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts and dividing such net change by
the value of the account at the beginning of the same period to obtain the base
period return and
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multiplying the result by 365/7). Realized and unrealized gains and losses are
not included in the calculation of the yield.
The Money Market Fund computes its effective compound yield by determining the
net changes, exclusive of capital changes, in the value of a hypothetical pre-
existing account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula: Effective Yield = (Base Period Return + 1) /365/7/ - 1.
The current and the effective yields reflect the reinvestment of net income
earned daily on the Money Market Fund's assets.
Actual yields will depend on such variables as asset quality, average asset
maturity, the type of instruments the Money Market Fund invests in, changes in
interest rates on money market instruments, changes in the expenses of the Money
Market Fund and other factors.
Yields are one basis upon which investors may compare the Money Market Fund with
other money market funds; however, yields of other money market mutual funds and
other investment vehicles may not be comparable because of the factors set forth
above and differences in the methods used in valuing portfolio instruments.
The total return of a Fund refers to the average compounded rate of return to a
hypothetical investment for designated time periods (including, but not limited
to, the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each
period. In particular, total return will be calculated according to the
following formula:
P(1 + T)/n/ = ERV, where P = a hypothetical initial payment of $1,000; T =
average annual total return; n = number of years; and ERV = ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the designated
time period as of the end of such period.
The performance of the Funds may, from time to time, be compared to that of
other mutual funds tracked by mutual fund rating services, to broad groups of
comparable mutual funds, or to unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs.
From time to time indications of the Funds' past performance may be published.
Such performance will be measured by independent sources such as (but not
limited to) Lipper Analytical Services, Incorporated, Weisenberger Investment
Companies Service, IBC/Donoghue's Money Fund Report, Bank Rate Monitor,
Financial Planning Magazine, Standard & Poor's Indices, Dow Jones Industrial
Averages, VARDS, Barron's, Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Personal Investor, Sylvia Porter's Personal Finance and
The Wall Street Journal. Information provided to the NASD for review may be
used as advertisements for publication in regional and local newspapers. In
addition, Fund performance may be advertised relative to certain indices and
benchmark investments, including: (a) the Lipper Analytical Services, Inc.
Mutual Fund Performance Analysis, Fixed-Income Analysis and Mutual Fund Indices
(which measure total return and average current yield for the mutual fund
industry and rank mutual fund performance); (b) the CDA Mutual Fund Report
published by CDA Investment Technologies, Inc. (which analyzes price, risk and
various measures of return for the mutual fund industry); (c) the Consumer Price
Index published by the U.S. Bureau of Labor Statistics (which measures changes
in the price of goods and services); (d) Stocks, Bonds, Bills and Inflation
published by Ibbotson Associates (which provides historical performance figures
for stocks, government securities and inflation); (e) the Hambrecht & Quist
Growth Stock Index; (f) the NASDAQ OTC Composite Prime Return; (g) the Russell
Midcap Index; (h) the Russell 2000 Index - Total Return; (i) the ValueLine
Composite-Price Return; (j) the Wilshire 4500 Index; (k) the Salomon Brothers'
World Bond Index (which measures the total return in U.S. dollar terms of
government bonds, Eurobonds and non-U.S. bonds of ten countries, with all such
bonds having a minimum maturity of five years); (l) the Shearson Lehman Brothers
Aggregate Bond Index or its component indices (the Aggregate Bond Index measures
the
-13-
<PAGE>
performance of Treasury, U.S. Government agencies, mortgage and Yankee bonds);
(m) the S&P Bond indices (which measure yield and price of corporate, municipal
and U.S. Government bonds); (n) the J.P. Morgan Global Government Bond Index;
(o) Donoghue's Money Market Fund Report (which provides industry averages of 7-
day annualized and compounded yields of taxable, tax-free and U.S. Government
money market funds); (p) other taxable investments including certificates of
deposit, money market deposit accounts, checking accounts, savings accounts,
money market mutual funds and repurchase agreements; (q) historical investment
data supplied by the research departments of Goldman Sachs, Lehman Brothers,
First Boston Corporation, Morgan Stanley (including EAFE), Salomon Brothers,
Merrill Lynch, Donaldson Lufkin and Jenrette or other providers of such data;
(r) the FT-Actuaries Europe and Pacific Index; (s) mutual fund performance
indices published by Variable Annuity Research & Data Service; and (t) mutual
fund performance indices published by Morningstar, Inc. The composition of the
investments in such indices and the characteristics of such benchmark
investments are not identical to, and in some cases are very different from,
those of a Fund. These indices and averages are generally unmanaged and the
items included in the calculations of such indices and averages may be different
from those of the equations used by the Trust to calculate a Fund's performance
figures.
A Fund's investment results will vary from time to time depending upon market
conditions, the composition of its investment portfolio and its operating
expenses. Yield and performance information of any Fund will not be compared
with such information for funds that offer their shares directly to the public,
because Fund performance data do not reflect charges imposed by Insurers on the
variable contracts. The effective yield and total return for a Fund should be
distinguished from the rate of return of a corresponding division of an
Insurer's separate account, which rate will reflect the deduction of additional
charges, including mortality and expense risk charges, and will therefore be
lower. Accordingly, performance figures for a Fund will only be advertised if
comparable performance figures for the corresponding division of the separate
account are included in the advertisements. Variable contractholders should
consult the variable contract prospectus for further information. Each Fund's
results also should be considered relative to the risks associated with its
investment objectives and policies.
DETERMINATION OF NET ASSET VALUE
Securities of the Money Market Fund will be valued by the amortized cost method
which involves valuing a security at its cost on the date of purchase and
thereafter (absent unusual circumstances) assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuations in
general market rates of interest on the value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by this method, is higher or lower than the price the Fund
would receive if it sold the instrument. During periods of declining interest
rates, the daily yield of the Fund may tend to be higher than a like computation
made by a company with identical investments utilizing a method of valuation
based upon market prices and estimates of market prices for all of its portfolio
securities. Thus, if the use of amortized costs by the Money Market Fund
resulted in a lower aggregate portfolio value on a particular day, a prospective
investor in the Fund would be able to obtain a somewhat higher yield than would
result from investment in a company utilizing solely market values, and existing
shareholders in the Fund would experience a lower yield. The converse would
apply in a period of rising interest rates.
The Money Market Fund's use of amortized cost valuation and the maintenance of
its net asset value at $1.00 are permitted by Rule 2a-7, promulgated by the SEC
under the 1940 Act, as amended, provided that certain conditions are met. Under
Rule 2a-7 as amended, a money market portfolio must maintain a dollar-weighted
average maturity in the Fund of 90 days or less and not purchase any instrument
having a remaining maturity of more than 397 days. In addition, money market
funds may acquire only U.S. dollar denominated obligations that present minimal
credit risks and that are "eligible securities" which means they are (i) rated,
at the time of investment, by at least two nationally recognized security rating
organizations (one, if it is the only organization rating such obligation) in
the highest short-term rating category or, if unrated, determined to be of
comparable quality (a "first
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<PAGE>
tier security"), or (ii) rated according to the foregoing criteria in the second
highest short-term rating category or, if unrated, determined to be of
comparable quality ("second tier security"). The Money Market Fund's advisers
will determine that an obligation presents minimal credit risks or that unrated
instruments are of comparable quality in accordance with guidelines established
by the Trustees. The Trustees must approve or ratify the purchase of any unrated
securities or securities rated by only one rating organization. In addition,
investments in second tier securities are subject to the further constraints
that (i) no more than 5% of the Fund's assets may be invested in such securities
in the aggregate, and (ii) any investment in such securities of one issuer is
limited to the greater of 1% of the Fund's total assets or $1 million. The
regulations also require the Trustees to establish procedures which are
reasonably designed to stabilize the net asset value per unit at $1.00 for the
Fund. However, there is no assurance that the Trust will be able to meet this
objective. The Trust's procedures include the determination of the extent of
deviation, if any, of the Fund's current net asset value per unit calculated
using available market quotations from the Fund's amortized cost price per unit
at such intervals as the Trustees deem appropriate and reasonable in light of
market conditions and periodic reviews of the amount of the deviation and the
methods used to calculate such deviation. In the event that such deviation
exceeds 1/2 of 1%, the Trustees are required to consider promptly what action,
if any, should be initiated, and, if the Trustees believe that the extent of any
deviation may result in material dilution or other unfair results to
shareholders, the Trustees are required to take such corrective action as they
deem appropriate to eliminate or reduce such dilution or unfair results to the
extent reasonably practicable. In addition, if the Fund incurs a significant
loss or liability, the Trustees have the authority to reduce pro rata the number
of shares of the Fund in each shareholder's account and to offset each
shareholder's pro rata portion of such loss or liability from the shareholder's
accrued but unpaid dividends or from future dividends.
PURCHASE AND REDEMPTION OF SHARES
The purchase and redemption price of shares is the net asset value of each
share. A Fund's securities are valued by the Manager pursuant to valuations
provided by an independent pricing service. Fund securities listed on a
securities exchange for which market quotations are available are valued at the
last quoted sale price on each Business Day or, if there is no such reported
sale, at the most recently quoted bid price. Unlisted securities for which
market quotations are readily available are valued at the most recently quoted
bid price. The pricing service may also use a matrix system to determine
valuations. This system considers such factors as security prices, yields,
maturities, call features, ratings and developments relating to specific
securities in arriving at valuations. The procedures of the pricing service and
its valuations are reviewed by the officers of the Trust under the general
supervision of the Trustees.
It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in kind of readily marketable securities held
by a Fund in lieu of cash. Shareholders may incur brokerage charges on the sale
of any such securities so received in payment of redemptions. However, a
shareholder will at all times be entitled to aggregate cash redemptions from all
Funds of the Trust during any 90-day period of up to the lesser of $250,000 or
1% of the Trust's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period during which trading
on the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or evaluation of the portfolio securities is not reasonably
practicable, or for such other periods as the SEC may by order permit. The
Trust also reserves the right to suspend sales of shares of the Funds for any
period during which the New York Stock Exchange, the Manager, the Distributor,
the Adviser, a Sub-Adviser and/or a Custodian are not open for business.
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<PAGE>
Fund securities may be traded on non-U.S. markets on days other than Business
Days or the net asset value of a Fund may be computed on days when such non-U.S.
markets are closed. In addition, non-U.S. markets may close at times other than
4:00 p.m. Eastern time. As a consequence, the net asset value of a share of a
Fund may not reflect all events that may affect the value of a Fund's non-U.S.
securities unless the Fund advisers determine that such events materially affect
net asset value in which case net asset value will be determined by
consideration of other factors.
TAXES
QUALIFICATION AS A RIC
Shares of the Funds are offered only to separate accounts that fund variable
contracts. Refer to the prospectus for the variable contracts for a discussion
of the special taxation of insurance companies with respect to the separate
accounts and the variable contracts, and the holders thereof.
Each Fund intends to qualify and to continue to qualify for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify for that treatment, the Fund must
distribute to variable contract owners for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. These requirements include the following: (1) the Fund must
derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of securities or foreign currencies, or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in securities or those currencies ("Income
Requirement"); (2) the Fund must derive less than 30% of its gross income each
taxable year from the sale or other disposition of securities, or any of the
following, that were held for less than three months -- options, futures or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the Fund's principal business of investing in securities (or
options and futures with respect thereto) ("Short-Short Limitation"); (3) at the
close of each quarter of the Fund's taxable year, at least 50% of the value of
its total assets must be represented by cash or cash items, U.S. Government
securities, securities of other RICs, and other securities that, with respect to
any one issuer, do not exceed 5% of the value of the Fund's total assets and
that do not represent more than 10% of the outstanding voting securities of the
issuer; and (4) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. Government securities or the securities of other RICs) of any
one issuer.
As noted in the Prospectus, each Fund must, and intends to, comply with the
diversification requirements imposed by Section 817(h) of the Code and the
regulations thereunder. For information concerning the consequences of failure
to meet the requirements of Section 817(h), see the prospectus for the variable
contracts.
No Fund will be subject to the 4% Federal excise tax imposed on RICs that do not
distribute substantially all their income and gains each calendar year because
that tax does not apply to a RIC whose only shareholders are segregated asset
accounts of life insurance companies held in connection with variable annuity
contracts and/or variable life insurance policies.
A Fund is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by the Fund
to shareholders and the ownership of shares may be subject to state and local
taxes.
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<PAGE>
Accordingly, potential investors are urged to consult their own tax advisers for
more detailed information and for information regarding any state, local, or
non-U.S. taxes applicable to the variable contracts and the holders thereof.
FOREIGN TAXES
Dividends and interest received by a Fund may be subject to income, withholding
or other taxes imposed by non-U.S. countries and U.S. possessions that would
reduce the yield on a Fund's securities. Tax conventions between certain
countries and the United States may reduce or eliminate these taxes. If more
than 50% of the value of a Fund's total assets at the close of its taxable year
consists of securities of non-U.S. corporations, a Fund will be eligible to, and
will, file an election with the Internal Revenue Service that will enable
shareholders, in effect, to receive the benefit of the foreign tax credit with
respect to any non-U.S. countries' and U.S. possessions' income taxes paid by a
Fund. Pursuant to the election, a Fund will treat those taxes as additional
dividends paid to its shareholders. Each shareholder will be required to
include a proportionate share of those taxes in gross income as income received
from a non-U.S. source and must treat the amount so included as if the
shareholder had paid the foreign tax directly. The shareholder may then either
deduct the taxes deemed paid by him or her in computing his or her taxable
income or, alternatively, use the foregoing information in calculating the
foreign tax credit against the shareholder's federal income tax. If a Fund
makes the election, it will report annually to its shareholders the respective
amounts per share of a Fund's income from sources within, and taxes paid to,
non-U.S. countries and U.S. possessions.
The foregoing is only a general summary of some of the important Federal income
tax considerations generally affecting the Funds and their shareholders. No
attempt is made to present a complete explanation of the Federal tax treatment
of the Funds' activities, and this discussion and the discussion in the
prospectuses and/or statements of additional information for variable contracts
are not intended as a substitute for careful tax planning.
FUND TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the advisers are responsible for placing orders to
execute Fund transactions. In placing orders, it is the Trust's policy to seek
to obtain the best execution taking into account such factors as price
(including the applicable dealer spread), size, type and difficulty of the
transaction involved, the firm's general execution and operational facilities,
and the firm's risk in positioning the securities involved. While the advisers
generally seek reasonably competitive spreads or commissions, the Trust will not
necessarily be realizing the lowest spread or commission available. The Trust
will not purchase portfolio securities from any affiliated person acting as
principal except in conformity with the regulations of the SEC.
It is expected that the Funds may execute brokerage or other agency transactions
through the Distributor, a registered broker-dealer, for a commission, in
conformity with the 1940 Act, the Securities Exchange Act of 1934, as amended,
and rules of the SEC. Under these provisions, the Distributor is permitted to
receive and retain compensation for effecting portfolio transactions for a Fund
on an exchange if a written contract is in effect between the Distributor and
the Trust expressly permitting the Distributor to receive and retain such
compensation. These provisions further require that commissions paid to the
Distributor by the Trust for exchange transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commission to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." The Trustees, including those who are not "interested persons" of the
Trust, have adopted procedures for evaluating the reasonableness of commissions
paid to the Distributor and will review these procedures periodically. In
addition, the Fund may direct commission business to one or more designated
broker-dealers, including the Distributor, in connection with such broker-
dealer's payment of certain of the Fund's expenses. However, if an expense cap
arrangement is then in place for a Fund, the Fund's advisers are not permitted
to direct brokerage to pay for Fund expenses.
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<PAGE>
The money market securities in which a Fund invests are traded primarily in the
over-the-counter market. Bonds and debentures are usually traded over-the-
counter, but may be traded on an exchange. Where possible, the Adviser and each
Sub-Adviser will deal directly with the dealers who make a market in the
securities involved except in those circumstances where better prices and
execution are available elsewhere. Such dealers usually are acting as principal
for their own account. On occasion, securities may be purchased directly from
the issuer. Money market securities are generally traded on a net basis and do
not normally involve either brokerage commissions or transfer taxes. The cost of
executing portfolio transactions in such over-the-counter securities for a Fund
will primarily consist of dealer spreads between the bid and asked prices.
It is expected that the portfolio turnover rate for each Fund will normally not
exceed 100% for a Fund except for the Intermediate Fixed Income Fund. The
portfolio turnover rate for a Fund would exceed 100% if all of its securities,
exclusive of U.S. Government securities and other securities whose maturities at
the time of acquisition are one year or less, are replaced in the period of one
year. Turnover rates may vary from year to year and may be affected by cash
requirements for redemptions and by requirements which enable the Fund to
receive favorable tax treatment.
As stated above, each adviser's overriding objective in effecting portfolio
transactions for the Fund it advises is to seek to obtain the best combination
of price and execution. However, consistent with the provisions of the Rules of
Fair Practice of the National Association of Securities Dealers, the Advisers
may, in selecting brokers and dealers to effect portfolio transactions for their
respective Funds, and where more than one broker or dealer is believed capable
of providing the best combination of price and execution with respect to a
particular transaction, select a broker or dealer in recognition of its sales of
variable contracts offered by Insurers. Each adviser maintains an internal
procedure to identify broker and dealers which have sold variable contracts, and
the amount of variable contracts sold by them. Neither the Fund nor any adviser
has entered into any agreement with, or made any commitment to, any broker or
dealer which would bind the adviser(s) or the Funds to compensate any broker or
dealer, directly or indirectly, for sales of variable contracts. The advisers
do not cause their respective Funds to pay brokerage commissions higher than
those obtainable from other brokers or dealers in recognition of such sales of
variable contracts.
In light of the fact that the adviser may also provide advisory services to
Insurers, and to other advisory accounts that may or may not be registered
investment companies, securities of the same issuer may be included, from time
to time, in the Funds and these other entities where it is consistent with their
respective investment objectives. If these entities desire to buy or sell the
same portfolio security at about the same time, combined purchases and sales may
be made, and in such event the security purchased or sold normally will be
allocated at the average price and as nearly as practicable on a pro-rata basis
in proportion to the amounts desired to be purchased or sold by each entity.
While it is possible that in certain instances this procedure could adversely
affect the price or number of shares involved in the Funds' transactions, it is
believed that the procedure generally contributes to better overall execution of
the Funds' portfolio transactions.
Because an adviser's personnel may also provide investment advisory services to
Insurers, and other advisory clients, it may be difficult to quantify the
relative benefits received by the Trust and these other entities from research
provided by brokers or dealers.
The Trust does not expect to use one particular dealer, but advisers may,
consistent with the interests of the Funds, select brokers on the basis of the
research services they provide to the adviser. Such services may include
analysis of the business or prospects of a company, industry or economic sector
or statistical and pricing services. Information so received by the advisers
will be in addition to and not in lieu of the services required to be performed
by an adviser under the applicable Advisory Agreement or Sub-Advisory Agreement.
If in the judgment of a Fund's advisers the Funds, or other accounts managed by
the Adviser, will be benefitted by supplemental research services, the adviser
is authorized to pay brokerage commissions to a broker furnishing such services
which are in excess of commissions which another broker may have charged for
effecting the same transaction. The expenses of an adviser will not necessarily
be reduced as a result of the receipt of such supplemental information.
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<PAGE>
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of each Fund, each of which represents an equal proportionate interest in
that Fund. Each share upon liquidation entitles a shareholder to a pro rata
share in the net assets of that Fund. Shareholders have no preemptive rights.
The Declaration of Trust provides that the Trustees of the Trust may create
additional series of shares or separate classes of portfolios. Share
certificates representing the shares will not be issued.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and shall not be liable for any neglect or wrongdoing of
any officer, agent, employee, investment adviser, or administrator. The
Declaration of Trust also provides that the Trust will indemnify its Trustees
and officers against liabilities and expenses incurred in connection with actual
or threatened litigation in which they may be involved because of their offices
with the Trust unless it is determined in the manner provided in the Declaration
of Trust that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust. However, nothing in the
Declaration of Trust shall protect or indemnify a Trustee against any liability
for his wilful misfeasance, bad faith, gross negligence or reckless disregard of
his duties.
VOTING
Where the Prospectuses for the Funds or Statement of Additional Information
state that an investment limitation or a fundamental policy may not be changed
without shareholder approval, such approval means the vote of (i) 67% or more of
the Fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by Proxy, or (ii) more
than 50% of the Fund's outstanding shares, whichever is less.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a Trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the Trust. Even if, however, the Trust were held to be a partnership, the
possibility of the shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because, the Declaration of Trust provides for indemnification out
of the Trust property for any shareholders held personally liable for the
obligations of the Trust.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The Trust sells its shares to insurance companies as the funding vehicle for
variable contracts. Pursuant to agreements with the Trust, insurance companies
are required to vote such shares in accordance with the instructions of variable
contract owners.
As of April 20, 1995, SEI Corporation, 680 East Swedesford Road, Wayne, PA
19087, owned more than 90% of the outstanding shares of each class of stock.
The remaining shares were held by Connecticut Mutual Life Insurance Company, 301
West 11th Street, Kansas City, MO 64105.
INDEPENDENT PUBLIC ACCOUNTANTS
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Arthur Andersen LLP, independent public accountants, 1601 Market Street,
Philadelphia, PA 19103 serves as auditor of the Trust.
CUSTODIANS
State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110,
serves as Custodian of the assets of the International Growth Fund. CoreStates
Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia, PA 19101,
acts as Custodian of the assets of each Fund except the International Growth
Fund. Each Custodian holds cash, securities and other assets of the Funds for
which it acts as Custodian, as required by the Investment Company Act of 1940,
as amended.
FINANCIAL STATEMENTS
The unaudited financial statements of the Trust for the period ending March 31,
1995 are included herein.
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________________COMPARISON OF NOTES_________________
References to related disclosure in prospectus provided in parentheses.
-21-
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<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
International Growth Portfolio Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Common Stocks (93.5%)
- --------------------------------------------------------------------------------
Australia (6.8%)
Australia & New Zealand Bank Group .................... 3,000 $ 10,570
Boral ................................................. 4,200 10,583
Caltex Australia ...................................... 2,500 6,940
National Australia Bank ............................... 1,900 16,033
Newscorp .............................................. 3,200 15,306
Westpac Banking ....................................... 3,600 12,868
Total Australia ............................................ 72,300
Belgium (0.6%)
D'Ieteren Trading ..................................... 100 6,581
Total Belgium .............................................. 6,581
Canada (2.9%)
Bank of Montreal ...................................... 300 5,737
Canadian Imperial Bank of Commerce .................... 400 9,651
Imasco Holdings ....................................... 300 9,571
Royal Bank of Canada .................................. 300 6,166
Total Canada ............................................... 31,125
France (12.1%)
Alcatel Alsthom ....................................... 150 13,557
Christian Dior ........................................ 150 13,853
Cie de Saint Gobain ................................... 100 12,441
Cie Generale D'Industrie Et de Part ................... 50 11,266
Elf Gabon ............................................. 50 9,986
Lafarge Coppee ........................................ 150 11,366
Nord Est .............................................. 400 11,484
Peugeot ............................................... 100 14,064
Saint Louis-Bouchon ................................... 50 15,677
Total Compaigne "B" ................................... 250 14,917
Total France ................................................... 128,611
Germany (7.5%)
BASF .................................................. 50 10,178
Bayer ................................................. 50 12,323
Daimler Benz .......................................... 50 22,610
Hoechst ............................................... 50 10,360
Siemens ............................................... 50 23,555
Total Germany .............................................. 79,026
Hong Kong (0.9%)
HSBC Holdings ......................................... 800 9,028
Total Hong Kong ........................................... 9,028
Italy (2.0%)
Banca Commericale Italiana ............................ 4,400 8,585
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
International Growth Portfolio Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Comau Finanziaria ..................................... 3,100 $ 4,715
Stet Di Risp .......................................... 3,800 7,649
Total Italy ................................................. 20,949
Japan (29.3%)
Aoyama Trading ........................................ 1,000 14,516
Chiyoda Fire & Marine ................................. 2,000 12,097
Cosmo Oil ............................................. 2,000 14,401
Daikyo ................................................ 1,000 7,604
Daito Trust Construction .............................. 1,000 8,825
Daiwa Securities ...................................... 1,000 11,452
Fuji Photo Film ....................................... 1,000 23,733
Hitachi ............................................... 2,000 20,737
Hokkaido Takushoku Bank ............................... 3,000 10,576
Honda Motor ........................................... 1,000 17,051
Jaccs ................................................. 1,000 9,562
Kirin Brewery ......................................... 1,000 10,829
Matsushita Electric ................................... 1,000 16,129
Mitsubishi Oil ........................................ 1,000 9,217
Mitsui Trust & Banking ................................ 1,000 9,562
NEC ................................................... 1,000 10,703
Nippondenso ........................................... 1,000 19,470
Nissan Fire & Marine Insurance ........................ 2,000 13,825
Sakura Bank ........................................... 1,000 12,212
Sumitomo .............................................. 1,000 9,101
Tohoku Electric Power ................................. 500 13,306
Toshiba ............................................... 1,000 6,786
Toyota Motor .......................................... 1,000 20,392
Toyota Tsusho ......................................... 1,000 7,316
Total Japan ................................................. 309,402
Malaysia (5.3%)
Arab-Malaysian Merchant Bank .......................... 1,000 10,277
Edaran Otomobil ....................................... 1,000 7,312
Malaysian Airline System .............................. 3,000 9,901
Oriental Holdings ..................................... 2,000 10,435
Perusahaan Otomobil ................................... 3,000 10,435
Sime Darby ............................................ 3,000 7,470
Total Malaysia .............................................. 55,830
Netherlands (6.9%)
ABN Amro Holdings ..................................... 400 14,658
Aegon ................................................. 200 14,215
International Nederlanden ............................. 300 14,779
Koninklijke ........................................... 400 11,756
KPN ................................................... 500 17,672
Total Netherlands ......................................... 73,080
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
International Growth Portfolio Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
New Zealand (0.8%)
Lion Nathan ........................................... 4,100 $ 8,161
Total New Zealand ......................................... 8,161
Norway (0.9%)
Den Norske Bank * ..................................... 3,700 9,906
Total Norway ............................................... 9,906
Spain (1.2%)
Banco Popular ......................................... 100 12,964
Total Spain ............................................... 12,964
Sweden (2.5%)
Stora Kopparberg "B" .................................. 200 11,924
Svenskt Stal "B" ...................................... 200 8,184
Sydkraft * ............................................ 500 6,233
Total Sweden ............................................... 26,341
Switzerland (2.2%)
CS Holdings ........................................... 30 12,270
Elektrowatt ........................................... 40 10,565
Total Switzerland ......................................... 22,835
United Kingdom (11.6%)
Anglian Water ......................................... 1,400 10,862
ASDA Group ............................................ 9,800 11,786
Bass .................................................. 1,400 12,449
British Gas ........................................... 3,000 13,921
British Steel ......................................... 4,600 11,958
Hanson ................................................ 3,700 13,903
Norweb ................................................ 500 4,964
Rothman ............................................... 1,400 10,658
Southern Electric ..................................... 900 8,528
Tesco ................................................. 3,000 12,974
Yorkshire Water ....................................... 1,300 11,075
Total United Kingdom ....................................... 123,078
- --------------------------------------------------------------------------------
Total Foreign Common Stocks
(Cost $964,971) ......................................... 989,217
- --------------------------------------------------------------------------------
Face
Amount
- --------------------------------------------------------------------------------
Foreign Preferred Stocks (1.2%)
- --------------------------------------------------------------------------------
Australia (1.2%)
Newscorp
.................................................. $ 3,000 13,009
Total Australia ........................................... 13,009
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Face Market
International Growth Portfolio Amount Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Total Foreign Preferred Stocks
(Cost $11,283) ........................................ $ 13,009
- --------------------------------------------------------------------------------
Repurchase Agreement (6.1%)
- --------------------------------------------------------------------------------
Lehman Brothers Incorporated
5.94%, dated 3/31/95, matures 4/3/95, repurchase
price $64,932 (collateralized by U.S. Treasury
Bill, par value $65,120, maturity date 3/7/96,
market value: $67,054) .............................. 64,932 64,932
Total Repurchase Agreement
(Cost $64,932) .......................................... 64,932
- --------------------------------------------------------------------------------
Total Investments (100.8%)
(Cost $1,041,186) ......................................... 1,067,158
- --------------------------------------------------------------------------------
Other Assets and Liabilities (-0.8%)
- --------------------------------------------------------------------------------
Other Assets and Liabilities, Net ..............................( 8,557)
- --------------------------------------------------------------------------------
Total Other Assets and Liabilities .............................( 8,557)
- --------------------------------------------------------------------------------
Net Assets:
Portfolio shares (unlimited authorization - no par
value) based on 106,763 outstanding shares of
beneficial interest .......................................... 1,064,595
Accumulated Net Realized Gain on Investments ................... 653
Net Realized Loss on Forward Foreign Currency
Contracts and Foreign Currency Transactions ..................( 24,834)
Net Unrealized Depreciation on Forward Foreign
Currency Contracts, Foreign Currency and
Translation of Other Assets and Liabilities ..................( 11,252)
Net Unrealized Appreciation on Investments ..................... 25,972
Undistributed Net Investment Income ............................ 3,467
- --------------------------------------------------------------------------------
Total Net Assets: (100.0%) .....................................$ 1,058,601
- --------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption
Price Per Share ..............................................$ 9.92
- --------------------------------------------------------------------------------
</TABLE>
* Non-Income Producing Security
The accompanying notes are an integral part of
the financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
Growth Portfolio Shares Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock (96.2%)
- -------------------------------------------------------------------------------------
Aircraft (2.0%)
Allied Signal .......................................... 580 $ 22,765
Total Aircraft .................................................... 22,765
Automotive (1.1%)
Magna International, Class A ........................... 330 12,581
Total Automotive .................................................. 12,581
Beauty Products (5.8%)
Avon Products .......................................... 150 9,075
Colgate Palmolive ...................................... 320 21,120
Procter & Gamble ....................................... 540 35,775
Total Beauty Products ............................................. 65,970
Broadcasting, Newspapers & Advertising (2.6%)
Comcast Special, Class A ............................... 1,000 15,625
Tele-Communications, Class A * ......................... 640 13,440
Total Broadcasting, Newspapers & Advertising ...................... 29,065
Chemicals (1.9%)
Monsanto ............................................... 260 20,865
Total Chemicals ................................................... 20,865
Communications Equipment (2.0%)
Motorola ............................................... 420 22,943
Total Communications Equipment .................................... 22,943
Computers & Services (4.0%)
Cisco Systems * ........................................ 650 24,781
Compaq Computer * ...................................... 385 13,283
Silicon Graphics ....................................... 240 8,520
Total Computers & Services ........................................ 46,584
Drugs (10.2%)
Abbott Laboratories .................................... 570 20,306
Centocor * ............................................. 380 6,033
Forest Labs * .......................................... 190 9,049
Merck & Co ............................................. 1,240 52,855
Pfizer ................................................. 310 26,583
Total Drugs ....................................................... 114,826
Entertainment (1.8%)
Walt Disney ............................................ 370 19,749
Total Entertainment ............................................... 19,749
Financial Services (2.2%)
Federal Home Loan Mortgage ............................. 280 16,940
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Product Trust
March 31, 1995 Unaudited
Market
Growth Portfolio Shares Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Federal National Mortgage Association .................. 100 $ 8,138
Total Financial Services .......................................... 25,078
Food, Beverages & Tobacco (12.0%)
Coca Cola .............................................. 720 40,680
Kellogg ................................................ 280 16,345
Pepsico ................................................ 860 33,540
Philip Morris Companies ................................ 680 44,370
Total Food, Beverage & Tobacco .................................... 134,935
Gas/Natural Gas (1.5%)
Enron .................................................. 510 16,830
Total Gas/Natural Gas ............................................. 16,830
Household Products (4.1%)
Gillette ............................................... 130 10,611
Rohm & Haas ............................................ 510 30,090
Union Carbide .......................................... 180 5,513
Total Household Products .......................................... 46,214
Insurance (9.0%)
American International Group ........................... 280 29,190
General Re ............................................. 125 16,500
MGIC Investment ........................................ 100 4,075
NAC Re ................................................. 185 5,596
Travelers .............................................. 430 16,609
United Healthcare ...................................... 635 29,686
Total Insurance ................................................... 101,656
Machinery (8.7%)
General Electric ....................................... 1,390 75,234
General Instrument * ................................... 650 22,588
Total Machinery ................................................... 97,822
Medical Products & Services (2.4%)
Columbia HCA Healthcare ................................ 640 27,520
Total Medical Products & Services ................................. 27,520
Miscellaneous Business Services (3.1%)
Informix * ............................................. 320 11,000
Oracle Systems * ....................................... 765 23,906
Total Miscellaneous Business Services ............................. 34,906
Paper & Paper Products (0.7%)
Scott Paper ............................................ 90 8,044
Total Paper & Paper Products ...................................... 8,044
Petroleum & Fuel products (1.5%)
Apache ................................................. 200 5,450
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Product Trust
March 31, 1995 Unaudited
Market
Growth Portfolio Shares Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Western Atlas * ........................................ 265 $ 11,428
Total Petroleum & Fuel products ................................... 16,878
Photographic Equipment & Supplies (2.8%)
Eastman Kodak .......................................... 430 22,844
Xerox .................................................. 75 8,803
Total Photographic Equipment & Supplies ........................... 31,647
Railroads (1.5%)
Burlington Northern .................................... 190 11,281
Conrail ................................................ 100 5,613
Total Railroads ................................................... 16,894
Retail (8.0%)
Autozone * ............................................. 190 4,726
Home Depot ............................................. 400 17,700
Kohl's * ............................................... 340 15,045
McDonald's ............................................. 610 20,816
Wal-Mart Stores ........................................ 1,250 31,875
Total Retail ...................................................... 90,162
Semi-Conductors/Instrments (3.1%)
Intel .................................................. 410 34,799
Total Semi-Conductors/Instrments .................................. 34,799
Telephones & Telecommunication (4.2%)
AT&T ................................................... 580 30,015
MCI Communications ..................................... 840 17,325
Total Telephones & Telecommunication .............................. 47,340
- ------------------------------------------------------------------------------------
Total Common Stock
(Cost $1,055,516) ............................................. 1,086,073
- ------------------------------------------------------------------------------------
<CAPTION>
Face
Amount
- ------------------------------------------------------------------------------------
<S> <C> <C>
Government Bond (4.7%)
- ------------------------------------------------------------------------------------
FNMA Discount Note
6.000%, 04/03/95 ................................... $ 53,000 52,974
- ------------------------------------------------------------------------------------
Total Government Bond
(Cost $52,982) ................................................ 52,974
- ------------------------------------------------------------------------------------
Total Investments (100.9%)
(Cost $1,108,498) 1,139,047
- ------------------------------------------------------------------------------------
Other Assets and Liabilities (-0.9%)
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Product Trust
March 31, 1995 Unaudited
Market
Growth Portfolio Value
- ------------------------------------------------------------------------------------
<S> <C>
Other Assets and Liabilities, Net ......................................( 10,114)
- ------------------------------------------------------------------------------------
Total Other Assets and Liabilities .....................................( 10,114)
- ------------------------------------------------------------------------------------
Net Assets:
Portfolio shares (unlimited authorization - no par
value) based on 109,555 outstanding shares of
beneficial interest .................................................. 1,098,293
Accumulated Net Realized Gain on Investments ........................... 92
Accumulated Net Unrealized Gain on Investments ......................... 30,549
Distributions in excess of Net Investment Income .......................( 1)
- ------------------------------------------------------------------------------------
Total Net Assets: (100.0%) .............................................$ 1,128,933
- ------------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption
Price Per Share ......................................................$ 10.30
- ------------------------------------------------------------------------------------
</TABLE>
FNMA - Federal National Mortgage Association
* Non-Income Producing Security
The accompanying notes are an integral part of the
financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
Aggressive Growth Portfolio Shares Value
- --------------------------------------------------------------------------------
Common Stock (84.8%)
- --------------------------------------------------------------------------------
<S> <C> <C>
Apparel/Textiles (2.5%)
Nautica Enterprises * ............................... 200 $ 6,250
Tommy Hilfiger * .................................... 400 8,800
Total Apparel/Textiles ........................................ 15,050
Broadcasting, Newspapers & Advertising (1.0%)
Clear Channel Communications * ...................... 100 5,950
Total Broadcasting, Newspapers & Advertising .................. 5,950
Communications Equipment (7.0%)
Glenayre Technologies * ............................. 200 9,100
Stratacom ........................................... 500 21,500
U.S. Robotics * ..................................... 100 6,250
Ultratech Stepper * ................................. 100 4,863
Total Communications Equipment ................................ 41,713
Computers & Services (9.9%)
ALANTEC * ........................................... 100 4,475
Atria Software * .................................... 100 4,750
Chipcom * ........................................... 300 11,325
Electroglas * ....................................... 100 4,375
Hyperion Software * ................................. 600 28,050
Microtouch Systems * ................................ 100 3,000
Proxima * ........................................... 100 2,588
Total Computers & Services .................................... 58,563
Drugs (1.2%)
Dura Pharmaceuticals * .............................. 200 2,975
Idexx Laboratories * ................................ 100 4,150
Total Drugs ................................................... 7,125
Environmental Services (1.9%)
Sanifill * .......................................... 100 2,463
United Waste Systems * .............................. 300 8,475
Total Environmental Services .................................. 10,938
Financial Services (1.1%)
Credit Acceptance * ................................. 300 6,600
Total Financial Services ...................................... 6,600
Hotels & Lodging (0.7%)
Doubletree * ........................................ 200 4,050
Total Hotels & Lodging ........................................ 4,050
Insurance (4.1%)
Healthsource * ...................................... 200 9,475
Phycor * ............................................ 200 6,850
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
Aggressive Growth Portfolio Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Value Health * ..................................... 200 $ 7,650
Total Insurance ............................................... 23,975
Local and Suburban Transit and Highway Transit (0.4%)
American Medical Responses * ........................ 100 2,513
Total Local and Suburban Transit and Highway Transit .............. 2,513
Machinery (4.9%)
FSI International * ................................. 100 4,038
Input/Output * ...................................... 300 7,913
Lam Research * ...................................... 200 8,950
Zebra Technology * .................................. 200 8,200
Total Machinery ............................................... 29,101
Measuring Devices (4.0%)
Cognex * ........................................... 400 11,500
KLA Instruments * .................................. 100 6,325
Tencor Instrument * ................................ 100 5,925
Total Measuring Devices ....................................... 23,750
Medical Products & Services (8.1%)
Coventry * .......................................... 300 8,700
Genesis Health Ventures * ........................... 200 6,250
Integrated Health Services .......................... 100 3,788
Mariner Health Group * .............................. 200 3,875
Sun Healthcare Group * .............................. 300 7,650
Theratx * ........................................... 200 3,350
Vencor * ............................................ 400 14,250
Total Medical Products & Services ............................. 47,863
Miscellaneous Business Services (13.0%)
Acxiom * ............................................ 400 6,700
Blyth Industries * .................................. 100 2,750
Cambridge Technology Partners * ..................... 300 9,000
Electronics for Imaging * ........................... 200 10,700
Frame Technology * .................................. 300 5,700
McAfee Associates * ................................. 200 5,800
Medic Computer Sytems * ............................. 100 4,350
Netmanage * ......................................... 200 8,400
Network General * ................................... 300 8,550
Network Peripherals * ............................... 200 4,300
Platinum Technology * ............................... 200 4,175
Wonderware * ........................................ 200 6,350
Total Miscellaneous Business Services ......................... 76,775
Miscellaneous Consumer Services (1.0%)
Corrections of America * ............................ 200 6,125
Total Miscellaneous Consumer Services ......................... 6,125
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
Aggressive Growth Portfolio Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Miscellaneous Manufacturing (1.4%)
Department 56 * ..................................... 200 $ 7,975
Total Miscellaneous Manufacturing ............................. 7,975
Professional Services (3.3%)
Health Management Associates, Class A * ............. 400 11,550
Tetra Tech * ........................................ 400 7,800
Total Professional Services ................................... 19,350
Railroads (1.7%)
Railtex * ........................................... 200 5,200
Wisconsin Central * ................................. 100 4,763
Total Railroads .............................................. 9,963
Retail (8.6%)
Bed Bath & Beyond * ................................. 100 2,475
Corporate Express * ................................. 200 5,300
Discount Auto Parts * ............................... 200 4,800
General Nutrition Companies * ....................... 300 8,325
Hollywood Entertainment * ........................... 100 3,500
Micro Warehouse * ................................... 300 9,300
Omnicare ............................................ 100 5,250
Sunglass Hut International * ........................ 200 5,925
Viking Office Products * ............................ 200 6,200
Total Retail .................................................. 51,075
Semi-Conductors/Instrments (3.4%)
Altera * ............................................ 100 5,588
Atmel * ............................................. 100 3,863
Integrated Device Technology * ...................... 200 7,400
Sanmina * ........................................... 100 3,250
Total Semi-Conductors/Instrments .............................. 20,101
Sporting and Athletic Goods (0.5%)
Callaway Golf ....................................... 200 2,800
Total Sporting and Athletic Goods ............................. 2,800
Telephones & Telecommunication (2.4%)
Aspect Telecommunications * ......................... 100 3,675
Cidco * ............................................. 200 6,025
Pairgain Technologies * ............................. 200 4,775
Total Telephones & Telecommunication .......................... 14,475
Transportation Services (1.1%)
Fritz Companies * ................................... 100 6,425
Total Transportation Services ................................. 6,425
Wholesale (1.6%)
FTP Software * ...................................... 300 9,525
Total Wholesale ............................................... 9,525
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
Aggressive Growth Portfolio Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Total Common Stock
(Cost $473,207) ............................................ $ 501,780
- --------------------------------------------------------------------------------
<CAPTION>
Face
Amount
<S> <C> <C>
- --------------------------------------------------------------------------------
Repurchase Agreement (17.0%)
- --------------------------------------------------------------------------------
Lehman Brothers Incorporated
5.94%, dated 03/31/95, matures 04/03/95,
repurchase price $116,887.55
(collateralized by U.S. Treasury Bill, due
03/07/96 par value $127,673.34, market value
$120,359.11) ...........................................101,741 101,741
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $101,741) ............................................ 101,741
- --------------------------------------------------------------------------------
Total Investments (101.8%)
(Cost $574,948) 603,521
- --------------------------------------------------------------------------------
Other Assets and Liabilities (-1.8%)
- --------------------------------------------------------------------------------
Other Assets and Liabilities, Net .................................( 10,857)
- --------------------------------------------------------------------------------
Total Other Assets and Liabilities ................................( 10,857)
Net Assets:
Portfolio shares (unlimited authorization - no par
value) based on 56,556 outstanding shares of
beneficial interest ............................................. 567,788
Accumulated Net Realized Loss on Investments ......................( 3,698)
Accumulated Net Unrealized Gain on Investments .................... 28,573
Undistributed Net Investment Income ............................... 1
- --------------------------------------------------------------------------------
Total Net Assets: (100.0%) ....................................... $ 592,664
- --------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption
Price Per Share ...................................................$ 10.48
- --------------------------------------------------------------------------------
</TABLE>
* Non-Income Producing Security
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
Income Equity Portfolio Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock (89.6%)
- --------------------------------------------------------------------------------
Aerospace & Defense (1.6%)
Lockheed Martin ..................................... 150 $ 7,931
Raytheon ............................................ 50 3,644
Rockwell International .............................. 150 5,850
Total Aerospace & Defense ..................................... 17,425
Air Courier Services (0.3%)
Federal Express * ................................... 50 3,381
Total Air Courier Services .................................... 3,381
Air Transportation (0.3%)
AMR * ............................................... 50 3,238
Total Air Transportation ...................................... 3,238
Aircraft (2.3%)
McDonnell Douglas ................................... 250 13,938
Textron ............................................. 200 11,325
Total Aircraft ................................................ 25,263
Apparel/Textiles (0.8%)
Springs Industries, Class A ......................... 100 3,750
VF .................................................. 100 5,313
Total Apparel/Textiles ........................................ 9,063
Automotive (4.1%)
Chrysler ............................................ 200 8,375
Dana ................................................ 150 3,825
Ford Motor .......................................... 650 17,550
General Motors ...................................... 350 15,488
Total Automotive .............................................. 45,238
Banks (9.8%)
Bank of Boston ...................................... 150 4,463
BankAmerica ......................................... 350 16,888
Chemical Banking .................................... 400 15,100
Citicorp ............................................ 350 14,875
First Interstate Bancorp ............................ 100 7,900
First Union ......................................... 300 13,013
National City ....................................... 225 5,991
NationsBank ......................................... 300 15,225
NBD Bancorp ......................................... 500 16,250
Total Banks ................................................... 109,705
Beauty Products (0.4%)
Alberto Culver, Class B ............................. 150 4,444
Total Beauty Products ......................................... 4,444
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
Income Equity Portfolio Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Building & Construction (0.5%)
Halliburton ......................................... 150 $ 5,456
Total Building & Construction ................................. 5,456
Chemicals (5.2%)
Dow Chemical ........................................ 300 21,900
Du Pont (E.I.) De Nemours ........................... 400 24,200
First Mississippi ................................... 100 2,625
Union Carbide ....................................... 300 9,188
Total Chemicals ............................................... 57,913
Communications Equipment (1.3%)
Harris .............................................. 150 7,181
ITT ................................................. 75 7,697
Total Communications Equipment ................................ 14,878
Computers & Services (4.5%)
Apple Computer ...................................... 150 5,288
IBM ................................................. 400 32,750
Tandem Computers * .................................. 200 3,100
Tandy ............................................... 200 9,550
Total Computers & Services .................................... 50,688
Drugs (0.4%)
Baxter International ................................ 125 4,094
Total Drugs ................................................... 4,094
Electric Lighting and Wiring Equipment (0.2%)
Raychem ............................................. 50 2,031
Total Electric Lighting and Wiring Equipment .................. 2,031
Electrical Services (6.9%)
Baltimore Gas & Electric ............................ 200 4,725
Central & South West ................................ 250 6,063
Consolidated Edison ................................. 400 10,900
Detroit Edison ...................................... 350 9,581
Duke Power .......................................... 200 7,700
Entergy ............................................. 150 3,131
Peco Energy ......................................... 350 8,794
Public Service Enterprise Group ..................... 500 13,688
Scecorp ............................................. 650 10,156
Unicom .............................................. 100 2,375
Total Electrical Services ..................................... 77,113
Financial Services (3.0%)
American Express .................................... 250 8,719
Dean Witter Discover ................................ 250 10,188
Household International ............................. 200 8,700
Transamerica ........................................ 100 5,663
Total Financial Services ...................................... 33,270
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
Income Equity Portfolio Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Food, Beverage & Tobacco (1.2%)
Archer Daniels Midland .............................. 400 $ 7,450
Coors Adolph, Class B ............................... 100 1,638
Seagram ............................................. 150 4,763
Total Food, Beverage & Tobacco ................................ 13,851
Gas/Natural Gas (2.5%)
Coastal ............................................. 100 2,875
Eastern Enterprises ................................. 200 5,550
Oneok ............................................... 100 1,888
Panhandle Eastern ................................... 450 10,350
Williams Companies .................................. 250 7,656
Total Gas/Natural Gas ......................................... 28,319
Household Products (0.5%)
Whirlpool ........................................... 100 5,475
Total Household Products ...................................... 5,475
Insurance (4.9%)
American General .................................... 200 6,450
Cigna ............................................... 250 18,688
Safeco .............................................. 100 5,475
Saint Paul Companies ................................ 100 5,000
Travelers ........................................... 400 15,450
US Life ............................................. 100 3,813
Total Insurance ............................................... 54,876
Machinery (2.6%)
Clark Equipment * ................................... 100 8,250
Deere ............................................... 100 8,125
Outboard Marine ..................................... 200 4,200
Parker-Hannifin ..................................... 100 4,425
Timken .............................................. 100 3,550
Total Machinery ............................................... 28,550
Measuring Devices (0.2%)
Johnson Controls .................................... 50 2,544
Total Measuring Devices ....................................... 2,544
Medical Products & Services (1.1%)
Becton Dickinson .................................... 200 10,850
United States Surgical .............................. 75 1,706
Total Medical Products & Services ............................. 12,556
Miscellaneous Business Services (0.3%)
Sun Microsystems * .................................. 100 3,475
Total Miscellaneous Business Services ......................... 3,475
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
Income Equity Portfolio Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Paper & Paper Products (2.7%)
Champion International .............................. 250 $ 10,813
International Paper ................................. 150 11,269
Temple-Inland ....................................... 100 4,488
Weyerhaeuser ........................................ 100 3,888
Total Paper & Paper Products .................................. 30,458
Petroleum Refining (14.6%)
Amoco ............................................... 200 12,725
Atlantic Richfield .................................. 150 17,250
Exxon ............................................... 650 43,388
Mobil ............................................... 450 41,681
Royal Dutch Petroleum ............................... 400 48,000
Total Petroleum Refining ...................................... 163,044
Printing & Publishing (0.5%)
American Greetings .................................. 100 2,988
Meredith ............................................ 100 2,600
Total Printing & Publishing ................................... 5,588
Railroads (1.9%)
Conrail ............................................. 250 14,031
Norfolk Southern .................................... 100 6,688
Total Railroads ............................................... 20,719
Retail (2.8%)
Dillard Department Stores, Class A .................. 150 4,144
Rite Aid ............................................ 150 3,675
Sears Roebuck ....................................... 400 21,350
Wendy's International ............................... 150 2,456
Total Retail .................................................. 31,625
Rubber & Plastic (0.3%)
Goodyear Tire & Rubber .............................. 100 3,675
Total Rubber & Plastic ........................................ 3,675
Semi-Conductors/Instruments (0.3%)
Advanced Micro Devices * ............................ 100 3,388
Total Semi-Conductors/Instruments ............................. 3,388
Specialty Machinery (0.2%)
Cooper Industries ................................... 50 1,938
Total Specialty Machinery ..................................... 1,938
Steel & Steel Works (1.7%)
Alcan Aluminum ...................................... 300 7,988
Asarco .............................................. 200 5,275
Reynolds Metals ..................................... 50 2,463
USX-U.S. Steel Group ................................ 100 3,375
Total Steel & Steel Works ..................................... 19,101
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Market
Income Equity Portfolio Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Telephones & Telecommunication (8.2%)
Ameritech ........................................... 600 $ 24,750
Bellsouth ........................................... 300 17,850
GTE ................................................. 700 23,275
Pacific Telesis Group ............................... 850 25,713
Total Telephones & Telecommunication .......................... 91,588
Trucking (1.0%)
Consolidated Freightways ............................ 100 2,663
Pittston Services Group ............................. 300 8,250
Total Trucking ................................................ 10,913
Wholesale (0.5%)
Fleming Companies ................................... 250 5,656
Total Wholesale ............................................... 5,656
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $976,057) ............................................ 1,000,539
- --------------------------------------------------------------------------------
<CAPTION>
Face Amount
<S> <C> <C>
- --------------------------------------------------------------------------------
Repurchase Agreement (10.5%)
- --------------------------------------------------------------------------------
Lehman Brothers Incorporated
5.94%, dated 03/31/95, matures 04/03/95,
repurchase price $116,887.55
(collateralized by U.S.Treasury Bill, due
03/07/96 par value $127,673.34, market value
$120,359.11) ..........................................116,888 116,888
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $116,888) 116,888
- --------------------------------------------------------------------------------
Total Investments (100.1%)
(Cost $1,092,945) .......................................... 1,117,427
- --------------------------------------------------------------------------------
Other Assets and Liabilities (-0.1%)
- --------------------------------------------------------------------------------
Other Assets and Liabilities, Net ................................. ( 588)
- --------------------------------------------------------------------------------
Total Other Assets and Liabilities ................................ ( 588)
- --------------------------------------------------------------------------------
Net Assets:
Portfolio shares (unlimited authorization - no par
value) based on 109,266 outstanding shares of
beneficial interest ........................................... 1,092,927
Accumulated Net Realized Loss on Investments ...................... ( 567)
Accumulated Net Unrealized Gain on Investments .................... 24,482
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Face Market
Income Equity Portfolio Amount Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Distributions in excess of Net Investment Income .................. ( 3)
- --------------------------------------------------------------------------------
Total Net Assets: (100.0%) ........................................ $ 1,116,839
- --------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption
Price Per Share ............................................... $ 10.22
- --------------------------------------------------------------------------------
</TABLE>
* Non-income producing security
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Face Market
INTERMEDIATE FIXED INCOME PORTFOLIO Amount Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
U. S. Treasury Obligations (81.9%)
- ---------------------------------------------------------------------------------
U.S. Treasury Bond
7.500%, 11/15/24 ............................... $ 65,000 $ 65,105
U.S. Treasury Note
7.500%, 02/15/05 ............................... 750,000 765,653
- ---------------------------------------------------------------------------------
Total U. S. Treasury Obligations
(Cost $818,621) ............................................ 830,758
- ---------------------------------------------------------------------------------
Government Bond (7.9%)
- ---------------------------------------------------------------------------------
FNMA Discount Note
6.000%, 04/03/95 ............................... 80,000 79,960
- ---------------------------------------------------------------------------------
Total Government Bond
(Cost $79,973) ............................................. 79,960
- ---------------------------------------------------------------------------------
Repurchase Agreement (10.0%)
- ---------------------------------------------------------------------------------
Lehman Brothers Incorporated
5.94%, dated 03/31/95, matures 04/03/95,
repurchase price $101,382.60 (collateralized by
U.S.Treasury Bill, due 03/07/96 par value
$110,738.13, market value $120,359.11) ........... 101,383 101,383
- ---------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $101,383) ........................................... 101,383
- ---------------------------------------------------------------------------------
Total Investments (99.8%)
(Cost $999,977) 1,012,101
- ---------------------------------------------------------------------------------
Other Assets and Liabilities (0.2%)
- ---------------------------------------------------------------------------------
Other Assets and Liabilities, Net ................................. 2,575
- ---------------------------------------------------------------------------------
Total Other Assets and Liabilities ................................ 2,575
- ---------------------------------------------------------------------------------
Net Assets:
Portfolio shares (unlimited authorization - no par
value) based on 100,253 outstanding shares of
beneficial interest ............................................. 1,002,550
Accumulated Net Unrealized Gain on Investments .................... 12,124
Undistributed Net Investment Income ............................... 2
- ---------------------------------------------------------------------------------
Total Net Assets: (100.0%) ........................................ $ 1,014,676
- ---------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption
Price Per Share ................................................. $ 10.12
- ---------------------------------------------------------------------------------
FNMA - Federal National Mortgage Association
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Face Market
Intermediate Fixed Income Portfolio Amount Value
- --------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Face Market
Money Market Portfolio Amount Value
- --------------------------------------------------------------------------------
Government Bonds (90.4%)
- --------------------------------------------------------------------------------
<S> <C> <C>
FFCB Discount Note
6.013%, 04/03/95 ............................. $ 155,000 $ 154,949
FHLB Discount Note
5.996%, 04/05/95 ............................. 100,000 99,934
FHLMC Discount Note
6.033%, 04/10/95 ............................. 85,000 84,874
FNMA Discount Notes
5.998%, 04/07/95 ............................. 65,000 64,936
6.000%, 04/11/95 ............................. 30,000 29,951
TVA Discount Note
5.994%, 04/03/95 ............................. 110,000 109,964
- --------------------------------------------------------------------------------
Total Government Bonds
(Cost $544,608) .......................................... 544,608
- --------------------------------------------------------------------------------
U. S. Treasury Obligations (10.0%)
- --------------------------------------------------------------------------------
U.S. Treasury Bill
5.620%, 04/06/95 ............................ 60,000 59,954
- --------------------------------------------------------------------------------
Total U. S. Treasury Obligations
(Cost $59,954) ........................... 59,954
- --------------------------------------------------------------------------------
Total Investments (100.4%)
(Cost $604,562) 604,562
- --------------------------------------------------------------------------------
Other Assets and Liabilities (-0.4%)
- --------------------------------------------------------------------------------
Other Assets and Liabilities, Net ............................... ( 2,434)
- --------------------------------------------------------------------------------
Total Other Assets and Liabilities .............................. ( 2,434)
- --------------------------------------------------------------------------------
Net Assets:
Portfolio shares (unlimited authorization - no par
value) based on 602,128 outstanding shares of
beneficial interest ........................................... 602,128
- --------------------------------------------------------------------------------
Total Net Assets: (100.0%) ...................................... $ 602,128
- --------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption
Price Per Share ............................................... $ 1.00
- --------------------------------------------------------------------------------
</TABLE>
FFCB - Federal Farm Credit Bank
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Insurance Investment Products Trust
March 31, 1995 Unaudited
Face Market
Money Market Portfolio Amount Value
- --------------------------------------------------------------------------------
<S> <C> <C>
TVA - Tennessee Valley Authority
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS INSURANCE INVESTMENT PRODUCTS TRUST
FOR THE PERIOD ENDED MARCH 31,1995 UNAUDITED
<TABLE>
<CAPTION>
---------------- ------------------- -------------------
INTERNATIONAL AGGRESSIVE
GROWTH GROWTH GROWTH (1)
PORTFOLIO (1) PORTFOLIO (1) PORTFOLIO (1)
---------------- ------------------- -------------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest $ 1,992 $ 1,437 $ 1,365
Dividends 3,987 3,036 5
Less: Foreign taxes withheld (653) - -
---------------- ------------------- -------------------
Total investment income 5,326 4,473 1,370
---------------- ------------------- -------------------
EXPENSES:
Management fees 730 622 312
Less management fees waived (730) (622) (312)
Reimbursement from management (2,019) (61) (332)
Investment advisory fees 631 553 450
Custody fees 908 222 277
Professional fees 154 260 180
Printing fees 123 128 65
Organizational costs 100 100 100
Transfer agent fees & expenses 93 97 49
Registration fees 1,374 50 25
Trustees fees 16 17 8
Pricing fees 479 15 10
---------------- ------------------- -------------------
Total expenses 1,859 1,381 832
---------------- ------------------- -------------------
NET INVESTMENT INCOME 3,467 3,092 538
---------------- ------------------- -------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on
investments 653 92 (3,698)
Net realized loss in forward foreign
currency
contracts and foreign currency
transactions (24,834) - -
Net change in unrealized appreciation
of
investments 25,972 30,549 28,573
Net change in unrealized depreciation
on forward
foreign currency contracts, foreign
currency and
translation of other assets and
liabilities in foreign
currency (11,252) - -
---------------- ------------------- -------------------
Total net realized and unrealized
gain (loss) on investments (9,461) 30,641 24,875
---------------- ------------------- -------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (5,994) $ 33,733 $ 25,413
================ =================== ===================
</TABLE>
=================================================
1 Commenced operations on February 10, 1995.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS INSURANCE INVESTMENT PRODUCTS TRUST
FOR THE PERIOD ENDED MARCH 31,1995 UNAUDITED
<TABLE>
<CAPTION>
---------------- ------------------- -------------------
INTERMEDIATE
INCOME FIXED MONEY
EQUITY INCOME MARKET
PORTFOLIO (1) PORTFOLIO (1) PORTFOLIO (1)
---------------- ------------------- -------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 3,357 $ - $ -
Interest 2,114 8,806 5,365
---------------- ------------------- -------------------
Total investment income 5,471 8,806 5,365
---------------- ------------------- -------------------
EXPENSES:
Management fees 614 516 242
Less management fees waived (598) (516) (242)
Reimbursement from management - (177) (247)
Investment advisory fees 477 374 201
Custody fees 216 104 56
Professional fees 258 258 154
Printing fees 127 126 83
Organizational costs 100 100 100
Transfer agent fees & expenses 96 95 63
Registration fees 50 50 25
Trustees fees 16 16 11
Pricing fees 8 5 2
---------------- ------------------- -------------------
Total expenses 1,364 951 448
---------------- ------------------- -------------------
NET INVESTMENT INCOME 4,107 7,855 4,917
---------------- ------------------- -------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments (567) - -
Net change in unrealized appreciation 24,482 12,124 -
of investments
---------------- ------------------- -------------------
Total net realized and unrealized
gain on investments 23,915 12,124 -
---------------- ------------------- -------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 28,022 $ 19,979 $ 4,917
================ =================== ===================
</TABLE>
========================================
1 Commenced operations on February 10, 1995.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS INSURANCE INVESTMENT PRODUCTS TRUST
FOR THE PERIOD ENDED MARCH 31,1995 UNAUDITED
<TABLE>
<CAPTION>
------------- ------------- -------------
INTERNATIONAL AGGRESSIVE
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
2/10/95 (1) 2/10/95 (1) 2/10/95 (1)
TO 3/31/95 TO 3/31/95 TO 3/31/95
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 3,467 $ 3,092 $ 538
Net realized gain (loss) on
investments (24,181) 92 (3,698)
Net change in unrealized
appreciation of investments 14,720 30,549 28,573
------------- ------------- -------------
Net increase (decrease) in net
assets resulting from operations (5,994) 33,733 25,413
------------- ------------- -------------
DIVIDENDS DISTRIBUTED FROM:
Net investment income - (3,093) (537)
Net realized gains - - -
------------- ------------- -------------
Total dividends distributed - (3,093) (537)
------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 1,064,495 1,096,743 567,688
Shares issued in lieu of cash
distributions - 1,450 -
Cost of shares repurchased - - -
------------- ------------- -------------
Increase in net assets derived
from capital share
transactions 1,064,495 1,098,193 567,688
------------- ------------- -------------
Net increase in net assets 1,058,501 1,128,833 592,564
NET ASSETS:
Beginning of period 100 100 100
------------- ------------- -------------
End of period (2) $ 1,058,601 $ 1,128,933 $ 592,664
============= ============= =============
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at
beginning of period 10 10 10
------------- ------------- -------------
Shares issued 106,753 109,401 56,546
Shares issued in lieu of cash
distributions - 144 -
Shares repurchased - - -
------------- ------------- -------------
Net increase from capital
share transactions 106,753 109,545 56,546
------------- ------------- -------------
Capital shares outstanding at end of
period 106,763 109,555 56,556
============= ============= =============
</TABLE>
===============================
1 Commenced operations on February 10, 1995.
2 Including undistributed (distributions in excess of) net investment income of
$(21,367) for International Growth, $(1) for Growth and $1 for Aggressive
Growth at March 31, 1995.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS INSURANCE INVESTMENT PRODUCTS TRUST
FOR THE PERIOD ENDED MARCH 31,1995 UNAUDITED
<TABLE>
<CAPTION>
------------- ------------- -------------
INCOME INTERMEDIATE MONEY
EQUITY FIXED INCOME MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
2/10/95 (1) 2/10/95 (1) 2/10/95 (1)
TO 3/31/95 TO 3/31/95 TO 3/31/95
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 4,107 $ 7,855 $ 4,917
Net realized loss on investments (567) - -
Net change in unrealized
appreciation of investments 24,482 12,124 -
------------- ------------- -------------
Net increase in net assets
resulting from operations 28,022 19,979 4,917
------------- ------------- -------------
DIVIDENDS DISTRIBUTED FROM:
Net investment income (4,110) (7,853) (4,917)
Net realized gains - - -
------------- ------------- -------------
Total dividends distributed (4,110) (7,853) (4,917)
------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 1,090,357 1,000,000 821,911
Shares issued in lieu of cash
distributions 2,470 2,450 -
Cost of shares repurchased - - (319,283)
------------- ------------- -------------
Increase in net assets derived
from capital share transactions 1,092,827 1,002,450 502,628
------------- ------------- -------------
Net increase in net assets 1,116,739 1,014,576 502,628
NET ASSETS:
Beginning of period 100 100 99,500
------------- ------------- -------------
End of period (2) $ 1,116,839 $ 1,014,676 $ 602,128
============= ============= =============
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at
beginning of period 10 10 99,500
------------- ------------- -------------
Shares issued 109,009 100,000 821,911
Shares issued in lieu of cash
distributions 247 243 -
Shares repurchased - - (319,283)
------------- ------------- -------------
Net increase from capital
share transactions 109,256 100,243 502,628
------------- ------------- -------------
Capital shares outstanding at end of
period 109,266 100,253 602,128
============= ============= =============
</TABLE>
===============================
1 Commenced operations on February 10, 1995.
2 Including undistributed (distributions in excess of) net investment income of
$(3) for Income Equity, $2 for Intermediate Fixed Income and $0 for Money
Market at March 31, 1995.
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS INSURANCE INVESTMENT PRODUCTS TRUST
FOR THE PERIOD ENDED MARCH 31, 1995 UNAUDITED
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Intermediate
International Aggressive Income Fixed Money
Growth Growth Growth Equity Income Market
Portfolio (1) Portfolio (1) Portfolio (1) Portfolio (1) Portfolio (1) Portfolio (1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income 0.03 0.03 0.01 0.04 0.08 0.01
Net Realized and
Unrealized
Gain (Loss) on
Investments (0.11) 0.30 0.48 0.22 0.12 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment
Operations (0.08) 0.33 0.49 0.26 0.20 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions from:
Net Investment Income - (0.03) (0.01) (0.04) (0.08) (0.01)
Realized Capital Gains - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions - (0.03) (0.01) (0.04) (0.08) (0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 9.92 $ 10.30 $ 10.48 $ 10.22 $ 10.12 $ 1.00
====================================================================================================================================
====================================================================================================================================
Total Return + (0.80)% 3.30% 4.90% 2.60% 1.99% 0.71%
====================================================================================================================================
====================================================================================================================================
Ratios/Supplemental Data
Net Assets End of Period $ 1,058,601 $ 1,128,933 $ 592,664 $ 1,116,839 $ 1,014,676 $ 602,128
Ratio of Expenses to
Average Net Assets 1.40% 1.00% 1.20% 1.00% 0.70% 0.50%
Ratio of Expenses to
Average Net Assets
(Excluding
Waivers/Reimbursements) 3.40% 1.49% 2.13% 1.44% 1.21% 1.05%
Ratio of Net Income to
Average Net Assets 2.55% 2.23% 0.77% 3.00% 5.79% 5.49%
Ratio of Net Income
(Loss) to Average
Net Assets (Excluding
Waivers/Reimbursements) 0.55% 1.74% (0.16)% 2.56% 5.28% 4.94%
Portfolio Turnover Rate 2% 14% 14% 1% 0% N/A
====================================================================================================================================
====================================================================================================================================
</TABLE>
+ Total Return is for the period indicated and has not been annualized.
1 Commenced operations on February 10, 1995. All ratios for the period have been
annualized.
The accompanying notes are an integral part of the statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS INSURANCE INVESTMENT PRODUCTS TRUST
MARCH 31, 1995 UNAUDITED
1. ORGANIZATION:
Insurance Investment Products Trust, (the "Trust") was organized as a
Massachusetts business trust under a Declaration of Trust dated June 3, 1994.
The Trust is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company with six portfolios: International
Growth Portfolio, Growth Portfolio, Aggressive Growth Portfolio, Income Equity
Portfolio and Intermediate Fixed Income Portfolio (the "Non-Money Market
Portfolios"), and the Money Market Portfolio. The assets of each Portfolio are
segregated, and a shareholder's interest is limited to the Portfolio in which
shares are held. Shares of the Trust are currently offered only to National Home
Life Assurance Company Separate Account V and Connecticut Mutual Life Insurance
Company, through the C.M. Multi-Account A.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Trust.
Security Valuation - Investment securities of the " Non-Money Market
Portfolios" which are listed on a securities exchange for which market
quotations are available are valued by an independent pricing service at the
last quoted sales price for such securities on each business day. If there is no
such reported sale, these securities and unlisted securities for which market
quotations are readily available are valued at the most recent quoted bid price.
Foreign securities in the International Growth Portfolio are valued based upon
quotations from the primary market in which they are traded.
Investment securities of the Money Market Portfolio are stated at amortized
cost which approximates market value. Under this valuation method, purchase
discounts and premiums are accreted and amortized ratably to maturity and are
included in interest income.
Security Transactions and Investment Income - Security transactions are
accounted for on the trade date of the security purchase or sale. Cost used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts and premiums during the respective holding
period which is calculated using the effective interest method. Interest income
is recorded on the accrual basis. Dividend income is recorded on ex-dividend
date.
Repurchase Agreements - Securities pledged as collateral for Repurchase
Agreements are held by each Portfolio's custodian bank until maturity of the
Repurchase Agreements. Provisions of the Agreements and procedures adopted by
the Adviser ensure that the market value of the collateral, including interest
thereon, is sufficient in the event of default by the counterparty. If the
counterparty defaults and the value of the collateral declines or if the
counterparty enters an insolvency proceeding, realization of the collateral by
the Portfolio may be delayed or limited.
Foreign Currency Translation- The books and records of the International
Growth Portfolio are maintained in U.S. dollars on the following basis:
(I) market value of investment securities, assets and liabilities at
the current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses
at the relevant rates of exchange prevailing on the respective
dates of such transactions.
The International Growth Portfolio does not isolate that portion of gains
and losses on investments in equity securities which is due to changes in the
foreign exchange rates from that which is due to change in market prices of
equity securities.
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED INSURANCE INVESTMENT PRODUCTS TRUST
MARCH 31, 1995 UNAUDITED
The International Growth Portfolio reports certain foreign currency related
transactions as components of realized gains for financial reporting purposes,
whereas such components are treated as ordinary income for Federal income tax
purposes.
Forward Foreign Currency Contracts- The International Growth Portfolio
enters into forward foreign currency contracts as hedges against either specific
transactions or portfolio positions. The aggregate principal amount of the
contracts are not recorded as the International Growth Portfolio intends to
settle the contracts prior to delivery. All commitments are "marked-to-market"
daily at the applicable foreign exchange rate and any resulting unrealized gains
or losses are recorded currently. The International Growth Portfolio realizes
gains or losses at the time the forward contracts are extinguished. Unrealized
gains or losses on outstanding positions in forward foreign currency contracts
held at the close of the year will be recognized as ordinary income or loss for
Federal income tax purposes.
Expenses - Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses of the Trust are
prorated to the Portfolios on the basis of relative net assets.
Distributions to Shareholders - The International Growth Portfolio declares
and pays dividends from net investment income periodically. The Growth, Income
Equity and Intermediate Fixed Income Portfolios declare and pay dividends from
net investment income monthly. The Aggressive Growth Portfolio declares and pays
dividends from net investment income quarterly. The Money Market Portfolio's
distributions from net investment income are declared on a daily basis. Any net
realized capital gains on sales of securities from the Portfolios are
distributed to its shareholders at least annually.
Federal Income Taxes - It is the Trust's intention to qualify as a regulated
investment company for Federal income tax purposes and distribute all of its
taxable income and net capital gains. Accordingly, no provision for Federal
income taxes is required.
3. ORGANIZATION COSTS AND TRANSACTIONS WITH AFFILIATES:
Organizational costs have been capitalized by the Trust and are being
amortized over sixty months commencing with operations. In the event any of the
initial shares of the Trust are redeemed by any holder thereof during the period
that the Trust is amortizing its organizational costs, the redemption proceeds
payable to the holder thereof by the Trust will be reduced by the unamortized
organizational costs in the same ratio as the number of initial shares being
redeemed bears to the number of initial shares outstanding at the time of
redemption. These costs include legal fees of approximately $1,400 for
organizational work performed by a law firm of which an officer and trustee of
the Trust is a partner.
The Trust and SEI Financial Management Corporation ("SFM") are parties to a
Management Agreement dated December 30, 1994, under which SFM provides
management, administrative and shareholder services to the Portfolios for a fee
calculated as a percentage of each Portfolio's average daily net assets at an
annual rate of 0.55% for the International Growth Portfolio, 0.45% for the
Growth, Aggressive Growth and Income Equity Portfolios, 0.38% for the
Intermediate Fixed Income Portfolio and 0.42% for the Money Market Portfolio.
SFM also serves as Adviser to certain portfolios of the Trust pursuant to an
Investment Advisory Agreement dated December 30, 1994, under which SFM receives
a fee calculated as a percentage of each Portfolio's average daily net assets at
an annual rate of 0.475% for the International Growth Portfolio, 0.40% for the
Growth Portfolio, 0.65% for the Aggressive Growth Portfolio, 0.35% for the
Income Equity Portfolio and 0.275% for the Intermediate Fixed Income Portfolio.
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED INSURANCE INVESTMENT PRODUCTS TRUST
MARCH 31, 1995 UNAUDITED
Wellington Management Company ("WMC") serves as Adviser to the Money Market
Portfolio pursuant to an agreement dated March 7, 1995, under which WMC
receives a fee calculated as a percentage of the Money Market Portfolio's
average daily net assets at an annual rate of 0.075% up to $500 million and
0.020% over $500 million.
SFM may voluntarily waive a portion of its fee and reimburse the Trust, if
necessary, in order to limit the total operating expenses of each Portfolio.
LSV Asset Management ("LSV"), sub-adviser to a portion of the assets of the
Income Equity Portfolio is organized as a Delaware general partnership in which
an affiliate of SFM owns a majority interest.
Certain officers of the Trust are also officers of the Manager, Adviser and/or
Distributor. Such officers are paid no fees by the Trust for serving as officers
of the Trust.
4. SUB-ADVISORY AGREEMENTS:
Sub-Advisory services are provided to the Adviser for the International
Growth Portfolio by Acadian Asset Management, Inc. and WorldInvest Limited, for
the Growth Portfolio by Alliance Capital Management L.P. and IDS Advisory Group
Inc., for the Aggressive Growth Portfolio by Pilgrim Baxter & Associates, LTD.,
for the Income Equity Portfolio by LSV, Mellon Equity Associates and Merus
Capital Management, and for the Intermediate Fixed Income Portfolio by Western
Asset Management Company. Under the terms of such agreements, the Sub-Advisers
are entitled to receive a fee from the Adviser. Such a fee is computed daily and
paid monthly. The Adviser is responsible for the supervision of, and payment of
fees to, the Sub-Advisers in connection with their services
5. INVESTMENT TRANSACTIONS:
During the period ended March 31, 1995, purchases of securities and
proceeds from sales of securities, other than temporary investments in short-
term securities, were as follows:
<TABLE>
<CAPTION>
Intermediate
International Aggressive Income Fixed
Growth Growth Growth Equity Income
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PURCHASES
U.S. Government $ - $ - $ - $ - $818,729
Other 993,897 1,199,290 543,794 984,451 -
SALES
U.S. Government $ - $ - $ - $ - $ -
Other 18,295 143,870 66,894 7,841 -
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONCLUDED INSURANCE INVESTMENT PRODUCTS TRUST
MARCH 31, 1995 UNAUDITED
At March 31, 1995, the total cost of securities and net realized gains or losses
on securities sold for Federal income tax purposes was not materially different
from amounts reported for financial reporting purposes. The aggregate gross
unrealized appreciation and depreciation for securities held by the "Non-Money
Market Portfolios" at March 31, 1995 is as follows :
<TABLE>
<CAPTION>
Intermediate
International Aggressive Income Fixed
Growth Growth Growth Equity Income
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Aggregate gross
unrealized appreciation $51,088 $42,296 $35,712 $36,733 $12,137
Aggregate gross
unrealized depreciation (25,116) (11,747) (7,139) (12,252) (13)
-------- -------- ------- -------- --------
Net unrealized
appreciation $25,972 $30,549 $28,573 $24,481 $12,124
======= ======= ======= ======== =======
</TABLE>
6. FORWARD FOREIGN CURRENCY CONTRACTS:
The International Growth Portfolio enters into forward foreign currency
exchange contracts as hedges against portfolio positions. Such contracts, which
protect the value of the Portfolio's investment securities against the decline
in the value of currency, do not eliminate fluctuations in the underlying prices
of the securities. They simply establish an exchange rate at a future date.
Also, although such contracts tend to minimize the risk of loss due to a decline
in the value of a hedged currency, at the same time they tend to limit any
potential gain that might be realized should the value of such foreign currency
increase.
The following forward foreign currency contract in the International Growth
Portfolio was outstanding at March 31, 1995:
<TABLE>
<CAPTION>
In Net
Settlement Contracts Exchange Unrealized
Dates to Deliver For Depreciation
----- ---------- --- ------------
<S> <C> <C> <C> <C>
Foreign Currency Sales 4/20/95 JY 9,655,000 $100,000 $(11,536)
======== =========
Currency Legend:
- ----------------
JY Japanese Yen
</TABLE>
<PAGE>
INSURANCE INVESTMENT PRODUCTS TRUST
PART C
------
Item 24. Financial Statements and Exhibits
- ------- ---------------------------------
(a) Financial Statements:
The following unaudited financial statements, for the period ending March
31, 1995, are included in Part A of this Registration Statement:
Financial Highlights
The following unaudited financial statements, for the period ending March
31, 1995, are included in Part B of this Registration Statement:
Statement of Net Assets
Statement of Operations
Statement of Changes in Financial Position
Notes to Financial Statements
(b) Exhibits
1 Declaration of Trust. (Filed with original filing.)
2 By-Laws. (Filed with original filing.)
3 Not Applicable
4 Not Applicable
5(a) Management Agreement between the Trust and SEI Financial Management
Corporation. (Filed with pre-effective amendment no. 1.)
5(b) Form of Advisory Agreement between the Trust and SEI Financial
Management Corporation (the "Adviser"). (Filed with pre-effective
amendment no. 1.)
5(c) Form of Sub-Advisory Agreement for the International Growth Fund
between the Adviser and Acadian Asset Management, Inc. (Filed with
pre-effective amendment no. 1.)
5(d) Form of Sub-Advisory Agreement for the International Growth Fund
between the Adviser and WorldInvest Limited. (Filed with pre-
effective amendment no. 1.)
5(e) Form of Sub-Advisory Agreement for the Growth Fund between the
Adviser and IDS Advisory Group, Inc. (Filed with pre-effective
amendment no. 1.)
5(f) Form of Sub-Advisory Agreement for the Growth Fund between the
Adviser and Alliance Capital Management, L.P. (Filed with pre-
effective amendment no. 1.)
5(g) Form of Sub-Advisory Agreement for the Aggressive Growth Fund
between the Adviser and Pilgrim Baxter & Associates, Ltd. (Filed
with pre-effective amendment no. 1.)
<PAGE>
5(h) Form of Sub-Advisory Agreement for the Income Equity Fund between
the Adviser and Merus Capital Management. (Filed with pre-effective
amendment no. 1.)
5(i) Form of Sub-Advisory Agreement for the Income Equity Fund between
the Adviser and Mellon Equity Associates. (Filed with pre-effective
amendment no. 1.)
5(j) Form of Sub-Advisory Agreement for the Income Equity Fund between
the Adviser and LSV Asset Management. (Filed with pre-effective
amendment no. 1.)
5(k) Form of Sub-Advisory Agreement for the Intermediate Fixed Income
Fund between the Adviser and Western Asset Management Company.
(Filed with pre-effective amendment no. 1.)
5(l) Form of Sub-Advisory Agreement for the Money Market Fund between the
Adviser and Wellington Management Company. (Filed with pre-effective
amendment no. 1.)
5(m) Form of Advisory Agreement for the Money Market Fund between the
Trust and Wellington Management Company.
6 Distribution Agreement between the Trust and SEI Financial Services
Company. (Filed with pre-effective amendment no. 1.)
7 Not Applicable
8(a) Custody Agreement between the Trust and CoreStates Bank, N.A. (Filed
with pre-effective amendment no. 1.)
8(b) International Custodian Agreement between the Trust and State Street
Bank and Trust Company. (Filed with pre-effective amendment no.
1.)
9 Form of Participation Agreement between the Trust and Participating
Insurance Company. (Filed with pre-effective amendment no. 1.)
10 Opinion of counsel regarding the legality of the securities being
registered, together with consent to the inclusion of that opinion
in this Registration Statement.
11 Consent of Independent Auditors.
12 Not Applicable
13 Not Applicable
14 Not Applicable
15 Not Applicable
16 Schedules of Calculation of Performance Data. (Filed with pre-
effective amendment no. 1.)
17 Not Applicable.
18 Powers of Attorney. (Filed with pre-effective amendment no.
1.)
27 Financial Data Schedules.
C-2
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant
- ------- -------------------------------------------------------------
Registrant is controlled by its Trustees.
Item 26. Number of Holders of Securities
- ------- -------------------------------
The following information is as of April 10, 1995.
<TABLE>
<CAPTION>
Number of
Title of Series Record Holders
--------------- --------------
<S> <C>
International Growth Fund 2
Growth Fund 2
Aggressive Growth Fund 2
Income Equity Fund 2
Intermediate Fixed Income Fund 1
Money Market Fund 2
</TABLE>
Item 27. Indemnification
- ------- ---------------
Article X, Sections 2 and 3 of the Registrant's Agreement and
Declaration of Trust and Article VII of the Registrant's By-laws, provide for
the indemnification of the Registrant's directors and officers in accordance
with, and to the extent permitted by, Massachusetts law. Registrant has obtained
from a major insurance carrier a directors' and officers' liability policy
covering certain types of errors and omissions. In no event will Registrant
indemnify any of its directors, officers, employees, or agents against any
liability to which such person would otherwise be subject by reason of his
willful misfeasance, bad faith, gross negligence in the performance of his
duties, or by reason of his reckless disregard of the duties involved in the
conduct of his office or arising under his agreement with Registrant. Registrant
will comply with Rule 484 under the Securities Act of 1933, as amended, and
Release No. 11330 under the Investment Company Act of 1940, as amended, in
connection with any indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the 1940 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in connection with the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1940 Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Advisers
- ------- -----------------------------------------------------
(a) SEI Financial Management Corporation
------------------------------------
SEI Financial Management Corporation ("SFM") is the Registrant's
adviser. SFM acts as investment adviser to numerous investment counseling
accounts in addition to other registered investment companies, including the
Registrant. The principal business address of SFM is 680 East Swedesford Road,
Wayne, PA 19087-1658. SFM is an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the "Advisers Act").
C-3
<PAGE>
The list required by this Item 28 of officers and directors of SFM,
together with information as to any other business, profession, vocation or
employment of substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by SFM pursuant to the Advisers Act (SEC File No. 801-24593).
(b) Acadian Asset Management, Inc.
------------------------------
Acadian Asset Management, Inc. ("Acadian") is a sub-investment
adviser for Registrant's International Growth Fund. Acadian acts as investment
adviser to numerous investment counseling accounts in addition to other
registered investment companies, including the Registrant. The principal
business address of Acadian is 260 Franklin Street, Suite 1750, Boston, MA
02110. Acadian is an investment adviser registered under the Advisers Act.
The list required by this Item 28 of officers and directors of
Acadian, together with information as to any other business, profession,
vocation or employment of substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules A
and D of Form ADV filed by Acadian pursuant to the Advisers Act (SEC File No.
801-28078).
(c) WorldInvest Limited
-------------------
WorldInvest Limited ("WorldInvest") is a sub-investment adviser for
Registrant's International Growth Fund. WorldInvest acts as investment adviser
to numerous investment counseling accounts in addition to other registered
investment companies, including the Registrant. The principal business address
of WorldInvest is 56 Russell Square, London, WC1B 4HP England. WorldInvest is an
investment adviser registered under the Advisers Act.
The list required by this Item 28 of officers and directors of
WorldInvest, together with information as to any other business, profession,
vocation or employment of substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules A
and D of Form ADV filed by WorldInvest pursuant to the Advisers Act (SEC File
No. 801-26315).
(d) IDS Advisory Group, Inc.
------------------------
IDS Advisory Group, Inc. ("IDS") is a sub-investment adviser for
Registrant's Growth Fund. IDS acts as investment adviser to numerous investment
counseling accounts in addition to other registered investment companies,
including the Registrant. The principal business address of IDS is IDS Tower 10,
Minneapolis, MN 55440. IDS is an investment adviser registered under the
Advisers Act.
The list required by this Item 28 of officers and directors of IDS,
together with information as to any other business, profession, vocation or
employment of substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by IDS pursuant to the Advisers Act (SEC File No. 801-25943).
(e) Alliance Capital Management, L.P.
---------------------------------
Alliance Capital Management, L.P. ("Alliance") is a sub-investment
adviser for Registrant's Growth Fund. Alliance acts as investment adviser to
numerous investment counseling accounts in addition to other registered
investment companies, including the Registrant. The principal business address
of Alliance is 1345 Avenue of the Americas, New York, NY 10105. Alliance is an
investment adviser registered under the Advisers Act.
The list required by this Item 28 of officers and directors of
Alliance, together with information as to any other business, profession,
vocation or employment of substantial nature engaged in by such officers and
directors
C-4
<PAGE>
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by Alliance pursuant to the Advisers Act (SEC File No. 801-
32361).
(f) Pilgrim Baxter & Associates, Ltd.
---------------------------------
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter") is a sub-
investment adviser for Registrant's Aggressive Growth Fund. Pilgrim Baxter acts
as investment adviser to numerous investment counseling accounts in addition to
other registered investment companies, including the Registrant. The principal
business address of Pilgrim Baxter is 1255 Drummers Lane, Wayne, PA 19087.
Pilgrim Baxter is an investment adviser registered under the Advisers Act.
The list required by this Item 28 of officers and directors of
Pilgrim, together with information as to any other business, profession,
vocation or employment of substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules A
and D of Form ADV filed by Pilgrim pursuant to the Advisers Act (SEC File No.
801-19165).
(g) Merus Capital Management
------------------------
Merus Capital Management ("Merus") is a sub-investment adviser for
Registrant's Income Equity Fund. Merus acts as investment adviser to numerous
investment counseling accounts in addition to other registered investment
companies, including the Registrant. The principal business address of Merus is
475 Sansome Street, San Francisco, CA 94111.
<TABLE>
<CAPTION>
NAME AND POSITION CONNECTION WITH
WITH MERUS NAME OF OTHER COMPANY OTHER COMPANY
----------------- --------------------- ---------------
<S> <C> <C>
Roy A. Henderson
Director of Merus, Senior Executive --- ---
Vice President
Hiroo Nozawa
Director of Merus, Chairman --- ---
President and CEO
Takejiro Sueyoshi
Director of Merus, Executive --- ---
Vice President and General Manager
Stanley F. Farrar
Director of Merus Sullivan & Cromwell Partner
Kazuo Ibuki The Mitsubishi Bank Limited President and CEO
Director
Raymond E. Miles Univ. of California Dean
Director of Merus School of Bus. Admin.
Carl W. Robertson Warland Investments Ltd. Managing Director
Director of Merus
Paul W. Steere Bogle & Gates Partner
Director of Merus
Charles R. Scott Intermark, Inc. President and CEO
Director of Merus
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITIONS CONNECTION WITH
WITH MERUS NAME OF OTHER COMPANY OTHER COMPANY
------------------ --------------------- ---------------
<S> <C> <C>
Henry T. Swigert ESCO Corporation Chairman
Director of Merus
Yasuyuki Hirai The Mitsubishi Bank ---
Director of Merus
Minoru Noda The Mitsubishi Bank ---
Director of Merus
Samuel L. Williams Hufstedler, Miller Partner
Director of Merus Kaus & Beardsley
Tatsunori Imagawa --- ---
Director and General Manager
</TABLE>
(h) Mellon Equity Associates
------------------------
Mellon Equity Associates ("Mellon") is a sub-investment adviser for
Registrant's Income Equity Fund. Mellon acts as investment adviser to numerous
investment counseling accounts in addition to other registered investment
companies, including the Registrant. The principal business address of Mellon is
500 Grant Street, Suite 3700, Pittsburgh, PA 15258. Mellon is an investment
adviser registered under the Advisers Act.
The list required by this Item 28 of officers and directors of
Mellon, together with information as to any other business, profession, vocation
or employment of substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by Mellon pursuant to the Advisers Act (SEC File No. 801-28692).
(i) LSV Asset Management
--------------------
LSV Asset Management ("LSV") is a sub-investment adviser for
Registrant's Income Equity Fund. LSV acts as investment adviser to numerous
investment counseling accounts but not to any other registered investment
companies other than the Registrant. The principal business address of LSV is
181 W. Madison Avenue, Chicago, IL 60602.
The list required by this Item 28 of officers and directors of LSV
together with information as to any other business, profession, vocation or
employment of substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by LSV pursuant to the Advisers Act (SEC File No. 801-47689).
(j) Western Asset Management Company
--------------------------------
Western Asset Management Company ("Western") is a sub-investment
adviser for Registrant's Intermediate Fixed Income Fund. Western acts as
investment adviser to numerous investment counseling accounts in addition to
other registered investment companies, including the Registrant. The principal
business address of Western is 117 East Colorado Boulevard, Pasadena, CA 91105.
Western is an investment adviser registered under the Advisers Act.
The list required by this Item 28 of officers and directors of
Western together with information as to any other business, profession, vocation
or employment of substantial nature engaged in by such officers and directors
C-6
<PAGE>
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by Western pursuant to the Advisers Act (SEC File No. 801-08162).
(k) Wellington Management Company
-----------------------------
Wellington Management Company ("WMC") is the investment adviser for
Registrant's Money Market Fund. WMC acts as investment adviser to numerous
investment counseling accounts in addition to other registered investment
companies, including the Registrant. The principal business address of WMC is 75
State Street, Boston, Massachusetts 02109. WMC is an investment adviser
registered under the Advisers Act.
The list required by this Item 28 of officers and directors of WMC
together with information as to any other business, profession, vocation or
employment of substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by WMC pursuant to the Advisers Act (SEC File No. 801-15908).
Item 29. Principal Underwriter
- ------- ---------------------
(a) Registrant's distributor, SEI Financial Services Company ("SFS"),
acts as distributor for the following funds pursuant to distribution
agreements dated as the dates indicated below:
<TABLE>
<CAPTION>
===========================================================
Name of Fund Date
===========================================================
<S> <C>
SEI Daily Income Trust (formerly, July 15, 1982
SEI Cash+Plus Trust)
-----------------------------------------------------------
SEI Liquid Asset Trust November 29, 1982
-----------------------------------------------------------
SEI Tax Exempt Trust December 3, 1982
-----------------------------------------------------------
SEI Index Funds July 10, 1985
-----------------------------------------------------------
SEI Institutional Managed Trust January 22, 1987
-----------------------------------------------------------
SEI International Trust August 30, 1988
-----------------------------------------------------------
Stepstone Funds January 30, 1991
-----------------------------------------------------------
The Compass Capital Group March 8, 1991
-----------------------------------------------------------
FFB Lexicon Funds October 18, 1991
-----------------------------------------------------------
The Advisors' Inner Circle Fund November 14, 1991
-----------------------------------------------------------
The Pillar Funds February 28, 1992
-----------------------------------------------------------
CUFUND May 1, 1992
-----------------------------------------------------------
STI Classic Funds May 29 1992
-----------------------------------------------------------
CoreFunds, Inc. October 30, 1992
-----------------------------------------------------------
First American Funds, Inc. November 1, 1992
-----------------------------------------------------------
First American Investment Funds, November 1, 1992
Inc.
-----------------------------------------------------------
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
===============================================================
NAME OF FUND DATE
===============================================================
<S> <C>
The Arbor Fund January 28, 1993
---------------------------------------------------------------
1784 Funds June 1, 1993
---------------------------------------------------------------
The PBHG Funds, Inc. July 16, 1993
---------------------------------------------------------------
Marquis Funds August 17, 1993
---------------------------------------------------------------
Morgan Grenfell Investment Trust January 3, 1994
---------------------------------------------------------------
First American Mutual Funds May 1, 1994
---------------------------------------------------------------
National Funds, Inc. June 15, 1994
---------------------------------------------------------------
Inventor Funds, Inc. August 1, 1994
---------------------------------------------------------------
Rembrandt Funds December 31, 1994
---------------------------------------------------------------
The Achievement Funds Trust December 27, 1994
---------------------------------------------------------------
Bishop Street Funds January 27, 1995
---------------------------------------------------------------
CrestFunds, Inc. March 1, 1995
===============================================================
</TABLE>
SFS provides numerous financial services to investment managers, pension
plan sponsors, and bank trust departments. These services include
portfolio evaluation, performance measurement, and consulting services
("Funds Evaluation") and automated execution, clearing and settlement of
securities transactions ("MarketLink").
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
(b) NAME POSITION AND OFFICES WITH UNDERWRITER WITH REGISTRANT
--------- ------------------------------------- ---------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief Executive Officer --
Henry H. Greer Director, President & Chief Operating Officer --
Carmen V. Romeo Director, Executive Vice President & Treasurer Treasurer & Assistant
Secretary
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Charles A. Marsh Executive Vice President - Capital Resources Division --
Kevin P. Robins Senior Vice President, General Counsel & Secretary Vice President & Assistant
Secretary
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jerome Hickey Senior Vice President --
David G. Lee Senior Vice President President
William Madden Senior Vice President --
A. Keith McDowell Senior Vice President --
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME POSITION AND OFFICES WITH UNDERWRITER WITH REGISTRANT
---- ------------------------------------- ---------------------
<S> <C> <C>
Dennis J. McGonigle Senior Vice President --
Hartland J. McKeown Senior Vice President --
James V. Morris Senior Vice President --
Steven Onofrio Senior Vice President --
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Kenneth Zimmer Senior Vice President --
Robert Crudup Managing Director --
Vic Galef Managing Director --
Kim Kirk Managing Director --
John Krzeminski Managing Director --
Carolyn McLauren Managing Director --
Barbara Moore Managing Director --
Donald Pepin Managing Director --
Mark Samuels Managing Director --
Wayne M. Withrow Managing Director --
Mick Duncan Team Leader --
Robert Ludwig Team Leader --
Vicki Malloy Team Leader --
Robert B. Carroll Vice President & Assistant Secretary Vice President &
Assistant Secretary
Sandra K. Orlow Vice President & Assistant Secretary Vice President &
Assistant Secretary
Kathryn L. Stanton Vice President & Assistant Secretary Vice President &
Assistant Secretary
Cris Brookmyer Vice President & Controller --
Robert Aller Vice President --
Charles Baker Vice President --
Steve Bendinelli Vice President --
Gordon W. Carpenter Vice President --
Ed Daly Vice President --
Ward Curtis Vice President --
Lucinda Duncalfe Vice President --
Jeff Drennen Vice President --
Michael Kantor Vice President --
Lawrence Hutchison Vice President --
Donald H. Korytowski Vice President --
Samuel King Vice President --
Robert S. Ludwig Vice President --
Jack May Vice President --
Larry Pokora Vice President --
Kim Rainey Vice President --
Paul Sachs Vice President --
Steve Smith Vice President --
Daniel Spaventa Vice President --
William Zawaski Vice President --
James Dougherty Director, Brokerage Services --
</TABLE>
Item 30. Location of Accounts and Records
- ------- --------------------------------
(1) SEI Financial Management Corporation, 680 Swedwsford Road,
Wayne, PA 19087-1658 19087-1658 (records relating to its functions as Manager
and Shareholder Serving Agent).
C-9
<PAGE>
(2) Acadian Asset Management, Inc. 260 Franklin Street, Suite 1750,
Boston, MA 02110 (records relating to its function as sub-adviser to the
International Growth Fund).
(3) WorldInvest Limited, 56 Russell Square, London WC1B 4HP England
(records relating to its function as sub-adviser to the International Growth
Fund).
(4) IDS Advisory Group, Inc., IDS Tower 10, Minneapolis, MN 55440
(records relating to its function as sub-adviser to the Growth Fund).
(5) Alliance Capital Management, L.P., 1345 Avenue of the Americas,
New York, NY 10105 (records relating to its functions as sub-adviser to the
Growth Fund).
(6) Pilgrim Baxter & Associates, Ltd., 1255 Drummers Lane, Wayne PA
19087(records relating to its function as sub-adviser to the Aggressive Growth
Fund).
(7) Merus Capital Management, 475 Sansome Street, San Francisco,
California 94111 (records relating to its function as sub-adviser to the Income
Equity Fund).
(8) Mellon Equity Associates, 500 Grant Street, Suite 3700,
Pittsburgh, PA 15258 (records relating to its function as sub-adviser to the
Income Equity Fund).
(9) LSV Asset Management, 181 W. Madison Avenue, Chicago, IL 60602
(records relating to its function as sub-adviser to the Income Equity
Fund).
(10) Western Asset Management Company, 117 East Colorado Boulevard,
Pasadena California 91105 (records relating to its function as sub-adviser to
the Intermediate Fixed Income Fund).
(11) Wellington Management Company, 75 State Street, Boston,
Massachusetts 02109 (records relating to its function as sub-adviser to the
Money Market Fund).
Item 31. Management Services
- ------- -------------------
Not applicable.
Item 32. Undertakings
- ------- ------------
The Registrant undertakes to file a post-effective amendment,
including financial statements which need not be certified, within four to six
months from the effective date of the Registrant's 1933 Act Registration
Statement.
The Registrant undertakes to furnish each person to whom a Prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
The Registrant undertakes, if requested to do so by the holders of at
least 10% of the Registrant's outstanding shares, to call a meeting of
shareholders for a purpose requiring action by the shareholders and to assist in
communications with other shareholders as required by Section 16(c).
C-10
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 1 to its Registration
Statement No. 33-80158 to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Wayne, in the Commonwealth of Pennsylvania on
the 26th day of April, 1995.
INSURANCE INVESTMENT PRODUCTS TRUST
By: /s/ David G. Lee
------------------------------
David G. Lee
President
Attest:
/s/ Jeffrey A. Cohen
- -----------------------------
Jeffrey A. Cohen
Controller
Pursuant to the requirements of the Securities Act of 1933, as
amended this Amendment to the Registration Statement has been signed below by
the following persons in the capacity and on the dates indicated.
<TABLE>
<S> <C> <C>
* Trustee April 26, 1995
- --------------------------
Richard F. Blanchard
* Trustee April 26, 1995
- --------------------------
William M. Doran
* Trustee April 26, 1995
- --------------------------
F. Wendell Gooch
* Trustee April 26, 1995
- --------------------------
Frank E. Morris
* Trustee April 26, 1995
- --------------------------
James M. Storey
* Trustee April 26, 1995
- --------------------------
Robert A. Nesher
/s/ Jeffrey A. Cohen Controller and April 26, 1995
- -------------------------- Assistant Secretary
Jeffrey A. Cohen
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Carmen V. Romeo Treasurer & Assistant April 26, 1995
- -------------------------- Secretary
Carmen V. Romeo
*By: /s/ David G. Lee
- --------------------------
David G. Lee
Attorney-in-Fact
</TABLE>
C-12
<PAGE>
Exhibit Index
-------------
Exhibit Number Description
- -------------- -----------
5(m) Form of Advisory Agreement between
the Trust and Wellington Management
Company
10 Consent of Counsel
11 Consent of Independent Auditors
27 Financial Data Schedules
<PAGE>
Exhibit 5(m)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 7th day of March, 1995, by and between Insurance
Investment Products Trust, a Massachusetts business trust (the "Trust"), and
Wellington Management Company, (the "Adviser").
WHEREAS, the Trust is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting of several series of shares, each having its own
investment policies; and
WHEREAS, the Trust has retained SEI Financial Management Corporation (the
"Administrator") to provide administration of the Trust's operations, subject to
the control of the Board of Trustees;
WHEREAS, the Trust desires to retain the Adviser to render investment
management services with respect to its Money Market Portfolio and such other
portfolios as the Trust and the Adviser may agree upon (the "Portfolios"), and
the Adviser is willing to render such services:
NOW, THEREFORE, in consideration of mutual covenants herein contained, the
parties hereto agree as follows:
1. Duties of the Adviser. The Trust employs the Adviser to manage the
investment and reinvestment of the assets, and to continuously review,
supervise, and administer the investment program of the Portfolios, to
determine in its discretion the securities to be purchased or sold, to
provide the Administrator and the Trust with records concerning the
Adviser's activities which the Trust is required to maintain, and to
render regular reports to the Administrator and to the Trust's
Officers and Trustees concerning the Adviser's discharge of the
foregoing responsibilities, and on the Adviser's own initiative, to
inform the Administrator and the Trust's Officers and Trustees of any
developments materially affecting the Portfolios.
The Adviser shall discharge the foregoing responsibilities subject to
the control of the Board of Trustees of the Trust and in compliance
with such policies as the Trustees may from time to time establish,
and in compliance with the objectives, policies, and limitations for
each such Portfolio set forth in the Trust's prospectus and statement
of additional information as amended from time to time (copies of
which have been or will be submitted to the Adviser), and applicable
laws and regulations.
The Adviser accepts such employment and agrees, at its own expense, to
render the services and to provide the office space, furnishings and
equipment and the personnel required by it to perform the services on
the terms and for the compensation provided herein.
1
<PAGE>
2. Portfolio Transactions. The Adviser is authorized to select the
brokers or dealers that will execute the purchases and sales of
portfolio securities for the Portfolios and is directed to use its
best efforts to obtain the best net results as described in the
Trust's prospectus and statement of additional information, as amended
from time to time. The Adviser will promptly communicate to the
Administrator and to the officers and the Trustees of the Trust such
information relating to portfolio transactions as they may reasonably
request.
It is understood that the Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or be in
breach of any obligation owing to the Trust under this Agreement, or
otherwise, solely by reason of its having directed a securities
transaction on behalf of the Trust to a broker-dealer in compliance
with the provisions of Section 28(e) of the Securities Exchange Act of
1934.
3. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Sections 1 and 2 of this Agreement, the Trust
shall pay to the Adviser compensation at the rate specified in the
Schedule(s) which are attached hereto and made a part of this
Agreement. Such compensation shall be paid to the Adviser at the end
of each month, and calculated by applying a daily rate, based on the
annual percentage rates as specified in the attached Schedule(s), to
the assets of the Portfolios. The fee shall be based on the average
daily net assets of the Portfolios for the month (or a pro rata
portion thereof) involved.
All rights of compensation under this Agreement for services performed
as of the termination date shall survive the termination of this
Agreement.
4. Reports. The Trust and the Adviser agree to furnish to each other, if
applicable, current prospectuses, proxy statements, reports to
shareholders, certified copies of their financial statements, and such
other information with regard to their affairs as each may reasonably
request.
5. Status of the Adviser. The services of the Adviser to the Trust are
not to be deemed exclusive, and the Adviser shall be free to render
similar services to others so long as its services to the Trust are
not impaired thereby. The Adviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided
or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.
6. Certain Records. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated
under the 1940 Act which are prepared or maintained by the Adviser on
behalf of the Trust are the property of the Trust and will be
surrendered promptly to the Trust on request.
2
<PAGE>
7. Limitation of Liability of the Adviser. The duties of the Adviser
shall be confined to those expressly set forth herein, and no implied
duties are assumed by or may be asserted against the Adviser
hereunder. The Adviser shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for
any act or omission in carrying out its duties hereunder, except a
loss resulting from willful misfeasance, bad faith or gross negligence
in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable state law which cannot be
waived or modified hereby. (As used in this Paragraph 7, the term
"Adviser" shall include partners, officers, employees and other
corporate agents of the Adviser as well as that partnership itself).
8. Permissible Interests. Trustees, agents, and shareholders of the
Trust are or may be interested in the Adviser (or any successor
thereof) as partners, officers, employees, or otherwise; partners,
officers, and employees of the Adviser are or may be interested in the
Trust as Trustees, shareholders or otherwise; and the Adviser (or any
successor) is or may be interested in the Trust as a shareholder or
otherwise. In addition, brokerage transactions for the Trust may be
effected through affiliates of the Adviser if approved by the Board of
Trustees, subject to the rules and regulations of the Securities and
Exchange Commission.
9. Duration and Termination. This Agreement shall become effective on
the date set forth above if executed and if approved by the holders of
a majority of the outstanding voting securities of each of the
Portfolios, and, unless sooner terminated as provided herein, shall
remain in effect until two years from date of execution, and
thereafter, for periods of one year so long as such continuance
thereafter is specifically approved at least annually (a) by the vote
of a majority of those Trustees of the Trust who are not parties to
this Agreement or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval, and
(b) by the Trustees of the Trust or by vote of the holders of a
majority of the outstanding voting securities of each Portfolio;
provided, however, that if the shareholders of any Portfolio fail to
approve the Agreement as provided herein, the Adviser may continue to
serve hereunder in the manner and to the extent permitted by the 1940
Act and rules and regulations thereunder. The foregoing requirement
that continuance of this Agreement be "specifically approved at least
annually" shall be construed in a manner consistent with the 1940 Act
and the rules and regulations thereunder.
This Agreement may be terminated as to any Portfolio at any time,
without the payment of any penalty, by vote of a majority of the
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Portfolio on not less than 30 days nor more
than 60 days written notice to the Adviser, or by the Adviser at any
time without the payment of any penalty, on 90 days written notice to
the Trust. This Agreement will automatically and immediately
terminate in the
3
<PAGE>
event of its assignment. Any notice under this Agreement shall be
given in writing, addressed and delivered, or mailed postpaid, to the
other party at any office of such party.
As used in this Section 9, the terms "assignment", "interested
persons", and a "vote of a majority of the outstanding voting
securities" shall have the respective meanings set forth in the 1940
Act and the rules and regulations thereunder; subject to such
exemptions as may be granted by the Securities and Exchange Commission
under said Act.
10. Notice. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice
to the other party at the last address furnished by the other party to
the party giving notice: if to the Trust, at 680 East Swedesford
Road, Wayne, PA and if to the Adviser at: 75 State Street, Boston, MA
02109, ATTN: Legal Department.
11. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
A copy of the Agreement and Declaration of Trust of the Trust is on file with
the Secretary of The Commonwealth of Massachusetts, and notice is hereby given
that this agreement is executed on behalf of the Trustees of the Trust as
Trustees, and is not binding upon any of the Trustees, officers, or shareholders
of the Trust individually but binding only upon the assets and property of the
Trust.
In the event there is a change in the partners of the Adviser, the Adviser shall
notify the Trust within a reasonable period of time.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first written above.
Insurance Investment Products Trust Wellington Management Company
By: /s/ Robert B. Carroll By: /s/ Duncan M. McFarland
----------------------- ------------------------
Attest: /s/ Jennifer Klass Attest: /s/ Dana Watkins
--------------------- ---------------------
4
<PAGE>
Schedule A
to the
Investment Advisory Agreement
between
Insurance Investment Products Trust
and
Wellington Management Company
Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual
rate as follows:
Portfolio Annual Fee
- -------------------------------------------------------------
Money Market Portfolio .075% up to $500 million
.020% over $500 million
5
<PAGE>
Exhibit 10
[SUTHERLAND, ASBILL & BRENNAN LETTERHEAD APPEARS HERE]
April 28, 1995
Insurance Investment Products Trust
680 East Swedesford Road
Wayne, Pennsylvania 19087
Re: Insurance Investment Products Trust File No. 33-80150
-----------------------------------------------------
Gentlemen:
We hereby consent to the reference to our name under the caption
"Counsel and Independent Accountants" in the Prospectus filed as part of
Post-Effective Amendment No. 1 for the Insurance Investment Products Trust.
In giving this consent, we do not admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
Sutherland, Asbill & Brennan
By: /s/ Stephen E. Roth
------------------------
Stephen E. Roth
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
[ARTHUR ANDERSEN LLP LETTERHEAD APPEARS HERE]
As independent public accountants, we hereby consent to all references to our
Firm included in Post-Effective Amendment No. 1 to the Registration Statement on
Form N-1A of the Insurance Investments Products Trust (No.33-80158).
Philadelphia, Pa.,
April 28, 1995
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<SERIES>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> FEB-10-1995
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<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 602,128
<DIVIDEND-INCOME> 0
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<OTHER-INCOME> 0
<EXPENSES-NET> (448)
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<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,917
<EQUALIZATION> 0
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 821,911
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<EXPENSE-RATIO> .50
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</TABLE>
