UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-22107
SEI STRUCTURED CREDIT FUND, LP
(Exact name of registrant as specified in charter)
--------
One Freedom Valley Drive
Oaks, PA 19456
(Address of principal executive offices) (Zip code)
Michael T. Pang
c/o SEI Investments Management Corporation
One Freedom Valley Drive
Oaks, PA 19456
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (610) 676-3257
DATE OF FISCAL YEAR END: DECEMBER 31, 2008
DATE OF REPORTING PERIOD: DECEMBER 31, 2008
ITEM 1. REPORTS TO STOCKHOLDERS.
SEI STRUCTURED CREDIT FUND, L.P.
Financial Statements
For the year ended December 31, 2008
With report of Independent Registered Public Accounting Firm
SEI Structured Credit Fund, L.P.
Financial Statements
For the year ended December 31, 2008
CONTENTS
Report of Independent Registered Public Accounting Firm................... 1
Audited Financial Statements
Schedule of Investments................................................... 2
Statement of Assets and Liabilities....................................... 9
Statement of Operations................................................... 10
Statement of Changes in Partners' Capital................................. 11
Statement of Cash Flows................................................... 12
Notes to Financial Statements............................................. 13
Additional Information (Unaudited)
Directors and Officers of the Partnership................................. 25
The Fund files its complete schedule of Fund holdings with the Securities and
Exchange Commission for the first and third quarters of each fiscal year on Form
N-Q within sixty days after the end of the period. The Fund's Form N-Q is
available on the Commission's website at http://www.sec.gov, and may be reviewed
and copied at the Commission's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities, as well as information
relating to how the Fund voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30, is available (i) without charge,
upon request, by calling (888) 786-9977; and (ii) on the Commission's website at
http://www.sec.gov.
Report of Independent Registered Public Accounting Firm
To the Partners and Board of Directors of
SEI Structured Credit Fund, LP
We have audited the accompanying statement of assets and liabilities of SEI
Structured Credit Fund, L.P. (the "Fund"), including the schedule of
investments, as of December 31, 2008, and the related statements of operations,
and cash flows for the year then ended and the statement of changes in partners'
capital for each of periods indicated therein. These financial statements are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Partnership's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2008, by correspondence with
the custodian and management of the underlying investment funds. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SEI Structured Credit Fund,
L.P. at December 31, 2008, the results of its operations, and its cash flows for
the year then ended and the changes in its partners' capital for each of the
periods indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst Young LLP
Philadelphia, Pennsylvania
February 26, 2009
1
SEI Structured Credit Fund, L.P.
Schedule of Investments
December 31, 2008
SECTOR WEIGHTINGS (BASED ON PERCENTAGE OF PARTNERS' CAPITAL)
(BAR CHART)
Mutual Funds 3.7%
Cash Equivalent 13.5%
Hedge Funds 13.8%
Asset-Backed Securities 57.5%
DESCRIPTION PAR VALUE FAIR VALUE
- ----------- ---------- -----------
ASSET-BACKED SECURITIES -- 57.5%
CAYMAN ISLANDS -- 44.1%
Ares IX CLO (a) (b) (c)
20.930%, 04/20/17 $3,050,000 $ 244,000
Atrium CDO, Ser 4A, Cl D (b) (c)
2.942%, 06/08/19 5,500,000 687,500
Babson CLO, Ser 2006-2A, Cl INC (a) (b)
25.520%, 10/16/20 1,000,000 125,000
Babson CLO, Ser 2007-2A, Cl D (a) (b) (c)
4.413%, 04/15/21 900,000 135,000
Babson CLO, Ser 2004-2A, Cl SUB (a) (b)
20.027%, 11/15/16 1,000,000 50,000
Babson CLO, Ser 2007-1A, Cl INC (a) (b)
24.000%, 01/18/21 5,000,000 500,000
Ballyrock, Ser 2005-3A, Cl B (b) (c)
3.915%, 07/25/17 2,500,000 875,000
Blue Mountain CDO, Ser 2005-1A, Cl A2 (b) (c)
2.519%, 11/15/17 3,000,000 1,422,600
Brentwood, Ser 2006-1A, Cl B (a) (b) (c)
4.012%, 02/01/22 2,500,000 250,000
Brentwood, Ser 2006-1A, Cl C (b) (c)
4.793%, 02/21/22 900,000 45,000
Brentwood, Ser 2006-1I, Cl D (b) (c)
6.942%, 02/01/22 7,250,000 362,500
Carlyle High Yield Partners VII CLO (a) (b) (c)
17.300%, 09/21/19 3,650,000 292,000
Carlyle High Yield Partners VII CLO (b)
17.307%, 09/30/19 1,850,000 148,000
Carlyle High Yield Partners VII CLO (b)
13.580%, 05/21/21 1,000,000 50,000
2
SEI Structured Credit Fund, L.P.
Schedule of Investments (continued)
December 31, 2008
DESCRIPTION PAR VALUE FAIR VALUE
- ----------- ---------- -----------
ASSET-BACKED SECURITIES -- (CONTINUED)
CENT CDO, Ser 2007-15A, Cl SUB (a) (b)
18.020%, 09/20/19 $5,000,000 $ 400,000
Centurion CDO VII (a) (b) (c)
5.200%, 06/08/19 500,000 40,000
CIFC Funding, Ser 2006-I (b) (c)
0.000%, 10/22/20 2,000,000 140,000
CIFC Funding, Ser 2006-1BA, Cl A2L (a) (b) (c)
1.945%, 12/22/20 5,000,000 936,600
CIFC Funding, Ser 2006-1BA, Cl A3L (b) (c)
2.356%, 12/22/20 2,500,000 342,750
CIFC Funding, Ser 2006-1BA, Cl B2L (b) (c)
5.525%, 12/22/20 6,000,000 586,800
CIFC Funding, Ser 2006-2A, Cl A1L (a) (b) (c)
2.463%, 03/01/21 4,000,000 2,257,200
CIFC Funding, Ser 2006-2A, Cl B2L (b) (c)
6.203%, 03/01/21 1,700,000 167,280
CIFC Funding, Ser 2007-1A, Cl A1LB (b) (c)
2.728%, 05/10/21 3,000,000 569,340
CIFC Funding, Ser 2007-1A, Cl A3L (a) (b) (c)
3.553%, 05/10/21 330,000 39,600
CIFC Funding, Ser 2007-1A, CB1L (b) (c)
3.138%, 05/10/21 2,800,000 532,000
CIFC Funding, Ser 2007-1A, Cl INC (b)
23.380%, 05/10/21 1,000,000 100,000
CIFC Funding, Ser 2007-3A, Cl B (a) (b) (c)
4.785%, 07/26/21 2,000,000 257,080
CIFC Funding, Ser 2007-IV (b) (c)
18.570%, 09/20/19 2,000,000 350,000
De Meer Middle Market CLO, Ser 2006-1A, Cl B (a) (b) (c)
4.902%, 10/20/18 1,885,626 654,621
De Meer Middle Market CLO, Ser 2006-1A, Cl C (a) (b) (c)
5.102%, 10/20/18 4,714,064 919,902
De Meer Middle Market CLO, Ser 2006-1A, Cl E (a) (b) (c)
8.503%, 10/20/18 1,482,787 144,171
De Meer Middle Market CLO, Ser 2006-1A, Cl INC (a) (b)
9.460%, 10/20/18 1,062,901 95,661
Duane Street CLO, Ser 2005-1A, Cl SUB (a) (b)
12.510%, 11/08/17 2,000,000 200,000
Duane Street CLO, Ser 2005-1X, Cl SUB (b)
12.510%, 11/08/17 1,000,000 100,000
3
SEI Structured Credit Fund, L.P.
Schedule of Investments (continued)
December 31, 2008
DESCRIPTION PAR VALUE FAIR VALUE
- ----------- ---------- -----------
ASSET-BACKED SECURITIES -- (CONTINUED)
Duane Street CLO II, Ser 2006-2A, Cl SUB (a) (b)
12.510%, 10/14/21 $4,000,000 $ 180,000
Duane Street CLO V, Ser 2007-5A, Cl SN (a) (b) (c)
12.510%, 10/14/21 2,500,000 287,500
Fairway Loan Funding Ser 2006-1A, Cl C1 (b)
11.830%, 10/17/18 3,297,462 329,746
FM Leveraged Captial Fund, Ser 2006-2A, Cl D (a) (b) (c)
3.749%, 11/15/20 4,605,000 287,168
Franklin CLO (b) (c)
5.200%, 09/20/15 2,000,000 110,000
Friedberg Milstein Preferred (b) (c)
0.000%, 01/15/19 10,000 50,000
Gale Force 2 CLO (b)
20.300%, 04/15/18 1,000,000 100,000
Gale Force CLO, Ser 2005-1A, Cl COM1 (b) (c)
14.620%, 11/15/17 6,000,000 1,065,000
Gale Force CLO, Ser 2007-3A, Cl E (a) (b) (c)
8.003%, 04/19/21 1,000,000 91,100
Gale Force CLO, Ser 2007-4A, Cl E (b) (c)
8.618%, 08/20/21 1,500,000 150,000
Gale Force CLO, Ser 2007-4A, Cl INC (b) (c)
14.620%, 08/20/21 3,000,000 360,000
Granite Ventures, Ser 2006-3A, Cl AB (b) (c)
5.253%, 04/20/18 4,000,000 1,136,400
Greenbriar CLO, Ser 2007-1A, Cl D (b) (c)
5.942%, 11/01/21 4,000,000 240,000
GSC Partners CDO Fund, Ser 2004-5A, Cl A2 (b) (c)
2.868%, 11/20/16 4,000,000 1,440,000
Hamlet, Ser 2006-2A, Cl A2B (b) (c)
2.620%, 11/20/16 3,000,000 1,134,000
Harch CLO, Ser 2005-2A, Cl C (b) (c)
4.859%, 10/22/17 4,000,000 560,000
Harch CLO, Ser 2007-1A, Cl C (b) (c)
4.258%, 04/17/20 5,000,000 650,000
ING Investment Management I CLO (a) (b) (c)
14.520%, 12/01/17 1,500,000 150,000
Lafayette Square CDO, Ser 2005-1A, Cl A2 (b) (c)
2.549%, 11/15/19 3,500,000 1,762,250
Lightpoint CLO, Ser 2005-3A, Cl C (b) (c)
4.719%, 09/15/17 1,000,000 140,000
4
SEI Structured Credit Fund, L.P.
Schedule of Investments (continued)
December 31, 2008
DESCRIPTION PAR VALUE FAIR VALUE
- ----------- ---------- -----------
ASSET-BACKED SECURITIES -- (CONTINUED)
Lightpoint CLO, Ser 2006-4A, Cl C (b) (c)
4.591%, 04/15/18 $6,750,000 $ 1,080,000
Marlborough Street CLO, Ser 2007-1A, Cl A2B (b) (c)
4.853%, 04/18/19 4,500,000 2,034,583
Marathon CLO, Ser 2005-2A, Cl B (b) (c)
4.00%, 12/20/19 2,000,000 475,000
NACM CLO, Ser 2006-1X, Cl D (b) (c)
8.109%, 06/20/19 250,000 22,500
NOB Hill CLO, Ser 2007-1A, Cl C (b) (c)
2.475%, 06/21/22 5,000,000 550,000
Northwoods Capital, Ser 2006-6A, Cl SUB (a) (b)
14.280%, 03/16/21 1,000,000 10,000
Northwoods Capital, Ser 2007-8A, Cl SUB (b)
8.360%, 07/28/22 6,000,000 60,000
Octagon Investment Partners XI, Ser 2007-1X, Cl INC (b)
5.200%, 08/25/21 5,000,000 393,750
Osprey CDO, Ser 2006-1A, Cl B1L (a) (b) (c)
4.952%, 04/08/22 2,811,900 140,595
Osprey CDO, Ser 2006-1A, Cl B2L (b) (c)
7.053%, 04/08/22 2,348,333 46,967
Rockwall, Ser 2007-8A, Cl SUB (a) (b) (c)
5.051%, 08/01/21 3,300,000 132,000
Saturn CLO, Ser 2007-1A, Cl D (b) (c)
6.175%, 05/13/22 1,070,000 107,000
Stanfield Daytona, Ser 2007-8A, Cl SUB (b)
5.545%, 04/27/21 5,000,000 575,000
Stone Tower CDO, Ser 2007-8A, Cl SUB (a) (b) (c)
6.804%, 01/29/40 3,677,264 441,272
Tralee CDO, Ser 2007-1A, Cl C (b) (c)
6.135%, 04/16/22 6,000,000 600,000
Tralee CLO, Ser 2007-1X, Cl COM3 (b)
4.382%, 04/16/22 7,000,000 899,500
Venture CDO, Ser 2007-9A, Cl SUB (b)
5.200%, 10/12/21 3,000,000 135,000
Vitesse CLO (b) (c)
5.200%, 08/17/20 4,000,000 240,000
-----------
Total Cayman Islands 32,185,936
-----------
5
SEI Structured Credit Fund, L.P.
Schedule of Investments (continued)
December 31, 2008
DESCRIPTION PAR VALUE FAIR VALUE
- ----------- ---------- -----------
ASSET-BACKED SECURITIES -- (CONTINUED)
UNITED STATES -- 13.4%
ACAS Business Loan Trust Ser 2007-3RA, Cl SUB (b) (c)
2.549%, 11/18/19 $4,282,749 $ 2,738,198
Ares IIIR/IVR CLO, Ser 2007-3RA, Cl E (b) (c)
12.380%, 04/16/21 5,000,000 750,000
Ares IIIR/IVR CLO, Ser 2007-3RA, Cl SUB (b)
11.460%, 04/16/21 2,000,000 240,000
Ares XI CLO, Ser 2007-11A, Cl SUB (b)
14.850%, 10/11/21 5,000,000 900,000
Battalion CLO, Ser 2007-1A, Cl E (a) (b) (c)
9.069%, 07/14/22 2,000,000 340,000
Battalion CLO, Ser 2007-1A, Cl SUB (a) (b) (c)
8.870%, 07/14/22 4,200,000 588,000
CIT CLO, Ser 2007-1A, Cl D (b) (c)
3.530%, 06/20/21 3,000,000 221,557
CIT CLO, Ser 2007-1A, Cl E (b) (c)
6.530%, 06/20/21 3,000,000 283,228
Denali Captial CLO VI, Ser 2006-6A, Cl B2L (b) (c)
8.669%, 06/20/21 1,000,000 102,520
Foxe Basin CLO (a) (b) (c)
5.200%, 12/15/15 9,150,000 915,000
Goldentree Loan Opportunities III, Ser 2007-3X, Cl SUB (b) (c)
5.200%, 11/15/17 3,000,000 450,000
Nautique Funding CLO, Ser 2006-1A, Cl INC (a) (b)
22.460%, 04/15/20 1,500,000 60,000
Sands Point Funding, Ser 2006-1A, Cl C (a) (b) (c)
3.534%, 07/18/20 5,100,000 918,000
Summit Lake CLO, Ser 4A, Cl D (b) (c)
20.060%, 02/24/18 1,800,000 72,000
Summit Lake CLO, Ser 2005-1A, Cl 1A (b)
5.200%, 02/24/18 2,000,000 80,000
Stanfield Azure CLO (b) (c)
0.000%, 05/27/20 5,000,000 418,750
White Horse II (a) (b) (c)
14.510%, 06/15/17 6,000,000 600,000
Wind River CLO II - Tate Investors (b)
15.170%, 10/19/17 1,000,000 80,000
-----------
Total United States 9,757,253
-----------
Total Asset-Backed Securities (Cost $112,854,094) $41,943,189
-----------
6
SEI Structured Credit Fund, L.P.
Schedule of Investments (continued)
December 31, 2008
DESCRIPTION SHARES FAIR VALUE
- ----------- --------- -----------
MUTUAL FUNDS -- 3.7%
UNITED STATES -- 3.7%
ING Prime Rate Trust 549,241 $ 1,801,511
Pioneer Floating Rate Trust 127,005 892,845
-----------
Total United States 2,694,356
-----------
Total Mutual Funds (Cost $3,838,353) $ 2,694,356
-----------
HEDGE FUNDS -- 13.8%
UNITED STATES -- 13.8%
Ares Enhanced Credit Opportunities, L.P. (b) (d) 7,500,000 3,168,030
Goldentree Credit Opportunities, L.P. (b) (d) 7,500,000 3,037,950
Highland Financial Partners, L.P. (b) (d) 7,500,000 --
Stone Tower Credit, L.P. (b) (d) 8,500,000 3,837,580
-----------
Total United States 10,043,560
-----------
Total Hedge Funds (Cost $31,000,000) $10,043,560
-----------
MONEY MARKET FUND -- 13.5%
UNITED STATES -- 13.5%
SDIT Prime Obligation Fund, Cl A, 0.930% (e) (f) 9,875,545 9,875,545
-----------
Total United States 9,875,545
-----------
Total Money Market Fund (Cost $9,875,545) $ 9,875,545
-----------
Total Investments -- 88.5%
(Cost $157,567,992) $64,556,650
===========
7
SEI Structured Credit Fund, L.P.
Schedule of Investments (concluded)
December 31, 2008
The following restricted securities were held by the Portfolio as of December
31, 2008:
% OF
ACQUISITION RIGHT TO MARKET PARTNERS'
SHARES DATE ACQUIRE DATE COST VALUE CAPITAL
--------- ----------- ------------ --------- --------- ---------
Ares Enhanced Credit
Opportunities, L.P. 7,500,000 5/1/2008 5/1/2008 7,500,000 3,168,030 4.3%
Goldentree Credit
Opportunities, L.P. 7,500,000 12/4/2007 12/4/2007 7,500,000 3,037,950 4.2%
Highland Financial
Partners, L.P. 7,500,000 6/11/2008 6/11/2008 7,500,000 -- 0.0%
Stone Tower
Credit, L.P. 8,500,000 8/1/2008 8/1/2008 8,500,000 3,837,580 5.3%
Percentages based on Partners' Capital of $72,892,797.
CDO -- Collateralized Debt Obligation
Cl -- Class
CLO -- Collateralized Loan Obligation
CIFC -- Commercial Industrial Finance Corporation
L.P. -- Limited Partnership
Ser -- Series
(a) Security sold within the terms of a private placement memorandum, exempt
from registration under Section 144A of the Securities Act of 1933, as
amended, and may be sold only to the dealers in that program or other
"accredited investors."
(b) Security considered illiquid. The total market value is $51,986,749 and
represents 71.3% of Partners' Capital.
(c) Variable rate security. The rate reported is the rate in effect as of
December 31, 2008.
(d) Security considered restricted.
(e) Rate shown is the 7-day effective yield as of December 31, 2008.
(f) Investment in affiliated security.
Amounts designated as "--" are $0 or have been rounded to $0.
SEE ACCOMPANYING NOTES.
8
SEI Structured Credit Fund, L.P.
Statement of Assets and Liabilities
December 31, 2008
ASSETS
Cash and cash equivalents $12,007,893
Investments, at fair value (cost $147,692,447) 54,681,105
Affiliated investment, at fair value (cost $9,875,545) 9,875,545
Interest receivable and other assets 2,127,190
-----------
Total assets $78,691,733
===========
LIABILITIES
Capital contributions received in advance $ 5,000,000
Payable for investments purchased 705,000
Administration fees payable 13,100
Other liabilities 80,836
-----------
Total liabilities 5,798,936
PARTNERS' CAPITAL
Limited partners' capital $72,892,797
-----------
Total liabilities and partners' capital $78,691,733
===========
SEE ACCOMPANYING NOTES.
9
SEI Structured Credit Fund, L.P.
Statement of Operations
For the year ended December 31, 2008
INVESTMENT INCOME
Interest income $ 11,126,883
EXPENSES
Administration fee 62,138
Professional fees 35,000
Offering costs 39,682
Miscellaneous expenses 163,002
------------
Total expenses 299,822
Less: Administration fee waiver and/or reimbursements (7,658)
------------
Net expenses 292,164
------------
Net investment income 10,834,719
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 364,266
Net change in unrealized appreciation (depreciation) on investments (93,212,134)
------------
Net realized and unrealized loss on investments (92,847,868)
------------
Net decrease in partners' capital resulting from operations $(82,013,149)
============
SEE ACCOMPANYING NOTES.
10
SEI Structured Credit Fund, L.P.
Statement of Changes in Partners' Capital
For the period
August 1, 2007
(commencement
For the year of operations)
ended through
December 31, 2008 December 31, 2007
----------------- -----------------
FROM OPERATIONS
Net investment income $ 10,834,719 $ 762,397
Net realized gain on investments 364,266 128,400
Net change in unrealized appreciation (depreciation)
on investments (93,212,134) 200,792
------------ -----------
Net increase (decrease) in partners' capital
resulting from operations (82,013,149) 1,091,589
PARTNERS' CAPITAL TRANSACTIONS
Capital contributions 129,891,587 23,942,770
Capital redemptions (20,000) --
------------ -----------
Net increase in partners' capital
derived from capital transactions 129,871,587 23,942,770
Net increase in partners' capital 47,858,438 25,034,359
Partners' capital beginning of year 25,034,359 --
------------ -----------
Partners' capital end of year $ 72,892,797 $25,034,359
============ ===========
Amounts designated as "--" are $0 or have been rounded to $0.
SEE ACCOMPANYING NOTES.
11
SEI Structured Credit Fund, L.P.
Statement of Cash Flows
For the year ended December 31, 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net decrease in partners' capital from operations $ (82,013,149)
Adjustments to reconcile net decrease in partners' capital
from operations to net cash used in operating activities:
Purchases of long-term investments (130,228,540)
Proceeds from sales of long-term investments 7,452,656
Net purchases of short-term investments (8,773,044)
Net realized gain on investments (364,266)
Net change in unrealized appreciation (depreciation) on investments 93,212,134
Changes in operating assets and liabilities:
Increase in interest receivable and other assets (1,592,191)
Increase in payable for investment securities purchased (601,893)
Increase in administration fees payable 9,238
Decrease in other liabilities (11,201)
-------------
Net cash used in operating activities (122,910,256)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 129,891,587
Capital redemptions (20,000)
Net change in capital contributions received in advance (800,000)
-------------
Net cash provided by financing activities 129,071,587
-------------
Net increase in cash and cash equivalents 6,161,331
CASH AND CASH EQUIVALENTS
Beginning of year 5,846,562
-------------
End of year $ 12,007,893
=============
SEE ACCOMPANYING NOTES.
12
SEI Structured Credit Fund, L.P.
Notes to Financial Statements
December 31, 2008
1. ORGANIZATION
SEI Structured Credit Fund, LP (the "Fund") is a Delaware limited partnership
established on June 26, 2007 and commenced operations on August 1, 2007. The
Fund is registered under the Investment Company Act of 1940, as amended (the
"1940 Act") as a closed-end, non-diversified, management investment company. The
Fund offers limited partnership interest ("Interests") of the Fund solely
through private placement transactions to investors ("limited partners") that
have signed an investment management agreement with SEI Investments Management
Corporation ("SIMC" or the "Adviser"), the investment adviser to the Fund. The
Fund is a master fund in a master/feeder structure into which a shareholder, SEI
Structured Credit Segregated Portfolio (the "Offshore Feeder"), has invested
substantially all of its assets. The master/feeder structure is designed to
permit the pooling of assets of shareholders that have similar investment
objectives, in an effort to achieve economies of scale and efficiencies in
portfolio management, while preserving the separate identities of the
shareholders. As of December 31, 2008, SEI Structured Credit Segregated
Portfolio owned 69% of the Fund; while the remaining limited partner owned 31%
of the Fund.
The Fund's objective is to seek to generate high total returns. There can be no
assurance that the Fund will achieve its objective. The Fund pursues its
investment objective by investing in a portfolio comprised of collateralized
debt obligations ("CDOs") and other structured credit investments. CDOs involve
special purpose investment vehicles formed to acquire and manage a pool of
loans, bonds and/or other fixed income assets of various types. The CDO funds
its investments by issuing several classes of securities, the repayment of which
is linked to the performance of the underlying assets, which serve as collateral
for certain securities issued by the CDO. In addition to CDOs, the Fund's
investments may include fixed income securities, loan participations,
credit-linked notes, medium term notes, registered and unregistered investment
companies or pooled investment vehicles, and derivative instruments, such as
credit default swaps and total return swaps (collectively with CDOs, "Structured
Credit Investments").
SEI Investment Strategies, LLC (the "General Partner"), a Delaware limited
liability company, serves as the General Partner to the Fund and has no
investment in the Fund as of December 31, 2008. The General Partner has
delegated the management and control of the business and affairs of the Fund to
the Board of Directors (the "Board"). A majority of the Board is and will be
persons who are not "interested persons" (as defined in the 1940 Act) with
respect to the Fund.
13
SEI Structured Credit Fund, L.P.
Notes to Financial Statements (continued)
December 31, 2008
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund:
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Management believes that the estimates utilized in preparing
the Fund's financial statements are reasonable and prudent; however, actual
results could differ from these estimates.
VALUATION OF INVESTMENTS
CDOs and other structured credit investments are priced based upon valuations
provided by independent, third-party pricing agents, if available. Such values
generally reflect the last reported sales price if the security is actively
traded. The third-party pricing agents may also value structured credit
investments at an evaluated bid price by employing methodologies that utilize
actual market transactions, broker-supplied valuations, or other methodologies
designed to identify the market value for such securities. Such methodologies
generally consider such factors as security prices, yields, maturities, call
features, ratings and developments relating to specific securities in arriving
at valuations.
If a price for a CDO or other structured credit investment cannot be obtained
from an independent, third-party pricing agent, the Fund shall seek to obtain a
bid price from at least one independent broker. In such cases, it is possible
that the independent broker providing the price on the CDO or structured credit
investment is also a market maker, and in many cases the only market maker, with
respect to that security.
Securities listed on a securities exchange, market or automated quotation system
for which quotations are readily available (except for securities traded on
NASDAQ) are valued at the last quoted sale price on the primary exchange or
market (foreign or domestic) on which they are traded, or, if there is no such
reported sale, at the most recent quoted bid price. For securities traded on
NASDAQ, the NASDAQ Official Closing Price will be used. The prices of foreign
securities are reported in local currency and converted to U.S. dollars using
currency exchange rates. Debt obligations with remaining maturities of sixty
days or less may be valued at their amortized cost, which approximates fair
value.
14
SEI Structured Credit Fund, L.P.
Notes to Financial Statements (continued)
December 31, 2008
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
VALUATION OF INVESTMENTS (CONTINUED)
Securities for which market prices are not "readily available" or may be
unreliable are valued in accordance with Fair Value Procedures established by
the Board. The Fund's Fair Value Procedures are implemented through a Fair Value
Committee (the "Committee") designated by the Board. When a security is valued
in accordance with the Fair Value Procedures, the Committee will determine the
value after taking into consideration relevant information reasonably available
to the Committee. Examples of factors the Committee may consider are: the last
trade price, the performance of the market or of the issuer's industry, the
liquidity of the security, the size of the holding in the Fund, or any other
appropriate information. The determination of a security's fair value price
often involves the consideration of a number of subjective factors, and is
therefore subject to the unavoidable risk that the value assigned to a security
may be higher or lower than the security's value would be if a reliable market
quotation for the security was readily available.
Certain structured credit investments may be structured as private investment
partnerships. Traditionally, a trading market for holdings of this type does not
exist. As a general matter, the fair value of the Fund's interest in such a
private investment fund will represent the amount that the Fund could reasonable
expect to receive from the private investment fund if the Fund's interest were
sold at the time of valuation, determined based on information reasonably
available at the time the valuation is made and that the Fund believes to be
reliable. Unless determined otherwise in accordance with the Fund's fair value
procedures, the fair value of the Fund's interest in a private investment fund
will usually be the value attributed to such interest, as of that time of
valuation, as reported to the Fund by the private investment fund's manager,
administrator, or other designed agent. As a practical matter, the Adviser and
the Board have little or no means of independently verifying the valuations
provided by such private investment funds. As a result, information available to
the Fund concerning the value of such investments may not reflect market prices
or quotations for the underlying assets. In the unlikely event that a private
investment fund does not report a value to the Fund on a timely basis and such
fund is not priced by independent pricing agents of the Fund, the Fund would
determine the fair value of the private investment fund based on the most recent
value reported by the private
15
SEI Structured Credit Fund, L.P.
Notes to Financial Statements (continued)
December 31, 2008
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
VALUATION OF INVESTMENTS (CONTINUED)
investment fund, as well as any other relevant information available at the time
the Fund values its portfolio.
The Board will periodically review the Fund's valuation policies and will update
them as necessary to reflect changes in the types of securities in which the
Fund invests.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Fund's assets and liabilities, which qualify as financial
instruments under Statement of Financial Accounting Standards No. 107,
Disclosures About Fair Value of Financial Instruments, approximates the carrying
amounts presented on the Statement of Assets and Liabilities. Management of the
Partnership deems these estimates reasonable.
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 157, Fair Value Measurements ("FAS 157"), is effective for the Fund's
financial statements issued after December 31, 2007. In accordance with FAS 157,
fair value is defined as the price that the Fund would receive upon selling an
investment in a timely transaction to an independent buyer in the principal or
most advantageous market of the investment. FAS 157 established a three-tier
hierarchy to maximize the use of the observable market data and minimize the use
of unobservable inputs and to establish classification of the fair value
measurements for disclosure purposes. Inputs refer broadly to the assumptions
that market participants would use in pricing an asset. Inputs may be observable
or unobservable. Observable inputs are inputs that reflect the assumptions
market participants would use in pricing the asset or liability developed based
on market data obtained from sources independent of the reporting entity.
Unobservable inputs are inputs that reflect the reporting entity's own
assumptions about the assumptions market participants would use in pricing the
asset or liability developed based on the best information available in the
circumstances.
The three-tier hierarchy of inputs is summarized in the three broad levels
listed below:
Level 1 - quoted prices in active markets for identical investments
Level 2 - other significant observable inputs (including quoted prices for
similar investments, interest rates, prepayment speeds, credit risks, etc.)
Level 3 - significant unobservable inputs (including the Fund's own assumptions
in determining the fair value of investments)
16
SEI Structured Credit Fund, L.P.
Notes to Financial Statements (continued)
December 31, 2008
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Where possible, the valuation techniques used by the Fund to measure fair value
in accordance with FAS 157 during the year ended December 31, 2008 maximized the
use of observable inputs and minimized the use of unobservable inputs.
The following is a summary of the inputs used as of December 31, 2008 in valuing
the Fund's investments in accordance with FAS 157:
VALUATION INPUTS INVESTMENTS
--------------------------------------------- -----------
Level 1 - Quoted Prices $12,569,901
Level 2 - Other Significant Observable Inputs 3,562,500
Level 3 - Significant Unobservable Inputs 48,424,249
-----------
TOTAL $64,556,650
===========
The following is a reconciliation of the investments in which significant
unobservable inputs (Level 3) were used in determining value:
INVESTMENTS IN
SECURITIES
--------------
Beginning balance as of 12/31/07 $ 17,681,750
Unrealized loss on investments (17,978,531)
Realized gain on investments 3,210
Proceeds from sales (1,719,606)
Purchases & Issuances & Settlements 8,812,288
Net transfers in/and or out of Level 3 41,625,138
------------
Ending balance as of 12/31/08 $ 48,424,249
============
Net change in unrealized appreciation/depreciation from
investments still held as of December 31, 2008 $(86,843,166)
------------
17
SEI Structured Credit Fund, L.P.
Notes to Financial Statements (continued)
December 31, 2008
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME RECOGNITION AND SECURITY TRANSACTIONS
Security transactions are recorded on the trade date. Costs used in determining
net realized capital gains and losses on the sale of securities are on the basis
of specific identification. Dividend income is recognized on the ex-dividend
date, and interest income is recognized using the accrual basis of accounting.
Amortization and accretion is calculated using the scientific interest method,
which approximates the effective interest method over the holding period of the
security. Amortization of premiums and discounts is included in interest income.
COLLATERALIZED DEBT OBLIGATIONS
The Fund invests in CDOs which include collateralized loan obligations ("CLOs")
and other similarly structured securities. CLOs are a type of asset-backed
securities. A CLO is a trust typically collateralized by a pool of loans, which
may include, among others, domestic and foreign senior secured loans, senior
unsecured loans, and subordinate corporate loans, including loans that may be
rated below investment grade or equivalent unrated loans. CDOs may charge
management fees and administrative expenses. For CDOs, the cashflows from the
trust are split into two or more portions, called tranches, varying in risk and
yield. The riskiest portion is the "equity" tranche which bears the bulk of
defaults from the bonds or loans in the trust and serves to protect the other,
more senior tranches from default in all but the most severe circumstances.
Since it is partially protected from defaults, a senior tranche from a CDO trust
typically has a higher rating and lower yield than their underlying securities,
and can be rated investment grade. Despite the protection from the equity
tranche, CDO tranches can experience substantial losses due to actual defaults,
increased sensitivity to defaults due to collateral default and disappearance of
protecting tranches, market anticipation of defaults, as well as aversion to CDO
securities as a class.
The risks of an investment in a CDO depend largely on the type of the collateral
securities and the class of the CDO in which the Fund invests. Normally, CLOs
and other CDOs are privately offered and sold, and thus, are not registered
under the securities laws. As a result, investments in CDOs may be characterized
by the Fund as illiquid securities; however, an active dealer market may exist
for CDOs, allowing a CDO to qualify for Rule 144A transactions. In addition to
the normal risks associated with fixed income securities (e.g., interest rate
risk and default risk), CDOs carry additional risks including, but are not
limited to: (i) the possibility that distributions from collateral securities
will not be adequate to make interest or other payments; (ii) the quality of the
18
SEI Structured Credit Fund, L.P.
Notes to Financial Statements (continued)
December 31, 2008
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COLLATERALIZED DEBT OBLIGATIONS (CONTINUED)
collateral may decline in value or default; (iii) the Funds may invest in CDOs
that are subordinate to other classes; and (iv) the complex structure of the
security may not be fully understood at the time of investment and may produce
disputes with the issuer or unexpected investment results.
FEDERAL TAXES
The Fund's taxable income or loss is reported by the limited partners
individually. The liability for payment of federal and state income tax on the
Fund's earnings is the responsibility of its partners, rather than that of the
Fund. Accordingly, no provision on liability for U.S. federal income taxes has
been recorded in the financial statements.
Upon commencement of operations, the Fund adopted Financial Accounting Standards
Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income
Taxes" ("FIN 48"). FIN 48 defines the threshold for recognizing the benefits of
tax return positions in the financial statements as "more-likely-than-not" to be
sustained by the applicable taxing authority and requires measurement of a tax
position meeting the "more-likely-than-not" threshold, based on the largest
benefit that is more than 50 percent likely to be realized. The implementation
and continued application of FIN 48 did not result in any unrecognized tax
benefits in the accompanying financial statements. The Fund recognizes interest
and penalties, if any, related to unrecognized tax benefits as income tax
expense in the Statement of Operations. The Fund's federal tax returns for the
prior year remains subject to examination by the Internal Revenue Service.
However, management's conclusions regarding FIN 48 may be subject to review and
adjustment at a later date based on factors including, but not limited to,
on-going analyses of and changes to tax laws, regulations and interpretations
thereof.
ORGANIZATION AND OFFERING COSTS
Costs incurred in connection with the organization of the Fund were expensed as
incurred. Initial offering costs have been deferred and were amortized on a
straight-line basis over the first twelve months of the Fund's operations.
INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, since
inception the Fund has not had claims or losses pursuant to these contracts and
expects the risk of loss to be remote.
19
SEI Structured Credit Fund, L.P.
Notes to Financial Statements (continued)
December 31, 2008
2. SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
RESTRICTED SECURITIES
At December 31, 2008, the Fund owned private placement investments that were
purchased through private offerings or acquired through initial public offerings
and cannot be sold without prior registration under the Securities Act of 1933
or pursuant to an exemption therefrom. In addition, the Fund has generally
agreed to further restrictions on the disposition of certain holdings as set
forth in various agreements entered into in connection with the purchase of this
investment. These investments are valued at fair value as determined in
accordance with the procedures approved by the Board of Trustees. For the
acquisition dates of these investments, the enforceable right to acquire these
securities, along with the cost and value at December 31, 2008, see the Schedule
of Investments.
3. ADVISER, ADMINISTRATOR AND OTHER TRANSACTIONS
The Adviser does not charge a management fee to the Fund. Limited partners are
responsible for paying the fees of the Adviser directly under their individual
investment management agreement with the Adviser. Each agreement sets forth the
fees to be paid to the Adviser, which are ordinarily expressed as a percentage
of the limited partners assets managed by the Adviser. This fee, which is
negotiated between the limited partner and the Adviser, may include a
performance-based fee and/or a fixed-dollar fee for certain specified services.
The Adviser has voluntarily agreed that certain expenses of the Fund, including
custody fees and administrative fees shall not in the aggregate exceed 0.50% per
annum of the Fund's net asset value, and the Adviser or its affiliates will
waive Fund fees or reimburse Fund expenses to the extent necessary so that such
0.50% limit is not exceeded. The following expenses of the Fund are specifically
excluded from the expense limit: organizational expenses; extraordinary,
non-recurring and certain other unusual expenses; taxes and fees; and expenses
incurred indirectly by the Fund through its investments in Structured Credit
Investments. The Adviser may discontinue all or part of this waiver at any time.
SEI Global Services, Inc. (the "Administrator"), serves as the Fund's
administrator. The Administrator is a wholly-owned subsidiary of SEI Investments
Company. The Administrator provides certain administrative, accounting, and
transfer agency services to the Fund. The services to be performed by the
Administrator may be completed by one or more of its affiliated companies. The
Fund pays the Administrator a fee equal to 0.10% (on an annualized basis) of the
Fund's Net Asset Value which is accrued monthly
20
SEI Structured Credit Fund, L.P.
Notes to Financial Statements (continued)
December 31, 2008
3. ADVISER, ADMINISTRATOR AND OTHER TRANSACTIONS (CONTINUED)
based on month-end net assets and is paid monthly, and reimburses the
Administrator for certain out-of-pocket expenses.
SEI Investments Distribution Co. (the "Placement Agent") serves as the Fund's
placement agent pursuant to an agreement with the Fund. The Placement Agent is a
wholly owned subsidiary of SEI Investments Company. It is not anticipated that
the Placement Agent will be compensated by the Fund for its services rendered
under the agreement.
4. ALLOCATION OF PROFITS AND LOSSES
The Fund maintains a separate capital account for each of its limited partners.
As of the last day of each fiscal period, the Fund shall allocate net profits or
losses for that fiscal period to the capital accounts of all limited partners,
in proportion to their respective opening capital account balances for such
fiscal period (after taking into account any capital contributions deemed to be
made as of the first day of such fiscal period).
5. PARTNERS' CAPITAL
The Fund, in the discretion of the Board, may sell interests to new limited
partners and may allow existing limited partners to purchase additional
interests in the Fund on such days as are determined by the Board in its sole
discretion. It is the Fund's intention to allow limited purchases of interests
only during designated subscriptions periods as may be established by the Board
or its designees (currently, the Adviser) and communicated to limited partners.
The Board or its designee will determine the amount of Interests offered to
limited partners during a subscription period at its discretion. During the
established subscription periods, interests may be purchased on a business day,
or at such other times as the Board may determine, at the offering price (which
is net asset value). The Fund may discontinue its offering at any time.
The Fund is a closed-end investment company, and therefore no limited partner
will have the right to require the Fund to redeem its Interests. The Fund from
time to time may offer to repurchase outstanding Interests pursuant to written
tenders by limited partners. Repurchase offers will be made at such times and on
such terms as may be determined by the Board in its sole discretion. In
determining whether the Fund should repurchase interests from limited partners
pursuant to written tenders, the Board will consider the recommendations of the
Adviser.
21
SEI Structured Credit Fund, L.P.
Notes to Financial Statements (continued)
December 31, 2008
5. PARTNERS' CAPITAL (CONTINUED)
The Fund does not intend to conduct any repurchase offers until two years after
the commencement of the Fund's operation. After the initial two year period, the
Adviser expects that it will recommend to the Board that the Fund offer to
repurchase interests four times each year, as of the last business day of March,
June, September, and December. However, limited partners will not be permitted
to tender for repurchase interests that were acquired less than two years prior
to the effective date of the proposed repurchase.
Capital contributions received in advance, on the Statement of Assets and
Liabilities, are comprised of cash received prior December 31, 2008, for which
limited partner Interests of the Fund were issued on January 2, 2009. Capital
contributions received in advance do not participate in the earnings of the Fund
until the related limited partner Interests are issued.
6. INVESTMENT TRANSACTIONS
The cost of security purchases and proceeds from the sale and maturity of
securities, other than temporary cash investments, during the period from
January 1, 2008 through December 31, 2008 were $130,228,540 and $7,452,656,
respectively.
As of December 31, 2008, the aggregate cost of investments for tax purposes was
expected to be similar to book cost of $157,567,992. Net unrealized depreciation
on investments for tax purposes was $93,011,342 consisting of $956,174 of gross
unrealized appreciation and $93,967,516 of gross unrealized depreciation.
7. CONCENTRATIONS OF RISK
In the normal course of business, the Fund trades various financial instruments
and enters into various investment activities with off-balance sheet risk. The
Fund's satisfaction of the obligations may exceed the amount recognized in the
statement of assets and liabilities.
(A) MARKET RISK
Market risk encompasses the potential for both losses and gains and includes
price risk and interest rate risk. The Fund's market risk management strategy is
driven by the Fund's investment objective. The investment manager oversees
each of the risks in accordance with policies and procedures.
22
SEI Structured Credit Fund, L.P.
Notes to Financial Statements (continued)
December 31, 2008
7. CONCENTRATIONS OF RISK (CONTINUED)
(A) MARKET RISK (CONTINUED)
(i) Price risk
Price risk is the risk the value of the instrument will fluctuate as a result of
changes in market prices, whether caused by factors specific to an individual
investment, its issuer or any factor affecting financial instruments traded in
the market. As all of the Fund's financial instruments are carried at fair value
with fair value changes recognized in the Statement of Operations, all changes
in market conditions directly affect net assets.
(ii) Interest rate risk
The fair value of the Fund's investments will change in response to interest
rate changes and other factors. During periods of falling interest rates, the
values of fixed income securities generally rise. Conversely, during periods of
rising interest rates, the values of such securities generally decline. Changes
by recognized rating agencies 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.
(B) COUNTERPARTY CREDIT RISK
Counterparty credit risk is the risk a counterparty to a financial instrument
could fail on a commitment that it has entered into with the Fund. The Fund
minimized counterparty credit risk by undertaking transactions with large
well-capitalized counterparties or brokers and by monitoring the
creditworthiness of these counterparties.
23
SEI Structured Credit Fund, L.P.
Notes to Financial Statements (continued)
December 31, 2008
8. FINANCIAL HIGHLIGHTS
The following represents the ratios to average net assets and other supplemental
information for the following periods:
For the period
August 1, 2007
(commencement of
For the year operations)
ended through
December 31, 2008 December 31, 2007
----------------- -----------------
TOTAL RETURN (1) (62.03)% 5.82%(3)
Partners' capital, end of period (000's) $72,893 $25,034
RATIOS TO AVERAGE PARTNERS' CAPITAL
NET INVESTMENT INCOME RATIO
Net investment income, net of waivers 18.28% 9.13%(2)
EXPENSE RATIO
Operating expenses, before waivers 0.51% 1.54%(2)(4)
Operating expenses, net of waivers 0.49% 0.37%(2)(4)
Portfolio turnover rate 13.88% 21.85%(3)
(1) Total return is calculated for all the limited partners taken as a whole. A
limited partner's return may vary from these returns based on the timing of
capital transactions.
(2) Annualized.
(3) Not annualized.
(4) Expense ratios include offering costs and tax liability costs, which are
not annualized. Had the offering costs and tax liability costs been
annualized, the ratio for "Operating expenses, before waivers" and
"Operating expenses, net of waivers" would have been 1.67% and 0.50%,
respectively.
24
SEI Structured Credit Fund, L.P.
Notes to Financial Statements (concluded)
December 31, 2008
9. RECENT ACCOUNTING PRONOUNCEMENTS
On March 19, 2008, the Financial Accounting Standards Board (FASB) released
Statement of Financial Accounting Standards No. 161, "Disclosures about
Derivatives Instruments and Hedging Activities" ("FAS 161). FAS 161 requires
qualitative disclosures about objective and strategies for using derivatives,
quantitative disclosures about fair value amounts of and gains and losses on
derivative instruments, and disclosures about credit-risk-related contingent
features in derivative agreements. The application of FAS 161 is required for
fiscal years beginning after November 15, 2008 and interim periods within those
fiscal years. At this time, management is evaluation the implications of FAS 161
and its impact on the financial statements has not yet been determined.
25
SEI Structured Credit Fund, L.P.
Additional Information
Directors and Officers of the Partnership (Unaudited)
December 31, 2008
Set forth below are the Names, Age, Addresses, Position with the Partnership,
Length of Time Served, the Principal Occupations During the Past Five Years,
Number of Portfolios in Fund Complex Overseen by the Director, and Other
Directorships Outside the Fund Complex of each of the persons currently serving
as Directors and Officers of the Partnership. The Partnership's Statement of
Additional Information ("SAI") includes additional information about the
Directors and Officers. The SAI may be obtained without charge by calling
1-800-342-5734.
NUMBER OF
PORTFOLIOS IN
PRINCIPAL FUND
NAME, AGE AND LENGTH OF OCCUPATION(S) COMPLEX OTHER
ADDRESS OF TIME DURING PAST 5 OVERSEEN BY DIRECTORSHIPS
INDEPENDENT DIRECTORS SERVED YEARS DIRECTOR** HELD BY DIRECTOR
- --------------------- --------- --------------------- ------------- -------------------------------------
Nina Lesavoy (51) Since Founder & Managing 80 Trustee of SEI Alpha Strategy
840 Park Avenue 2007 Director, Avec Portfolios, L.P., SEI Opportunity
New York, NY Capital since April Fund, L.P., SEI Asset Allocation
10021 2008, Partner, Cue Trust, SEI Daily Income Trust, SEI
Capital since 2002. Institutional International Trust,
SEI Liquid Asset Trust, SEI
Institutional Investments Trust, SEI
Tax Exempt Trust, and SEI
Institutional Managed Trust.
26
SEI Structured Credit Fund, L.P.
Additional Information
Directors and Officers of the Partnership (Unaudited) (continued)
December 31, 2008
NUMBER OF
PORTFOLIOS IN
PRINCIPAL FUND
NAME, AGE AND LENGTH OF OCCUPATION(S) COMPLEX OTHER
ADDRESS OF TIME DURING PAST 5 OVERSEEN BY DIRECTORSHIPS
INDEPENDENT DIRECTORS SERVED YEARS DIRECTOR** HELD BY DIRECTOR
- --------------------- --------- --------------------- ------------- -------------------------------------
George J. Sullivan (66) Since Self Employed 80 Trustee of State Street Navigator
7 Essex Green Drive, 2007 Consultant, Newfound Securities Lending Trust, The
Suite 52B Peabody, MA Consultants Inc., Advisors' Inner Circle Fund, The
01960 since April 1997. Advisors' Inner Circle Fund II (f/k/a
Member of independent The Arbor Fund), Bishop Street Funds,
review committee for SEI Alpha Strategy Portfolios, L.P.,
SEI Investments Group SEI Opportunity Fund, L.P., SEI Asset
of International Allocation Trust, SEI Daily Income
Funds. Trust, SEI Institutional Investments
Trust, SEI Institutional
International Trust, SEI Liquid Asset
Trust, SEI Tax Exempt Trust, and SEI
Institutional Managed Trust.
27
SEI Structured Credit Fund, L.P.
Additional Information
Directors and Officers of the Partnership (Unaudited) (continued)
December 31, 2008
NUMBER OF
PORTFOLIOS IN
PRINCIPAL FUND
NAME, AGE AND LENGTH OF OCCUPATION(S) COMPLEX OTHER
ADDRESS OF TIME DURING PAST 5 OVERSEEN BY DIRECTORSHIPS
INDEPENDENT DIRECTORS SERVED YEARS DIRECTOR** HELD BY DIRECTOR
- --------------------- --------- --------------------- ------------- -------------------------------------
James M. Williams (61) Since Vice President and 80 Trustee of Ariel Mutual Funds, SEI
1200 Getty Drive, 2007 Chief Investment Alpha Strategy Portfolios, L.P., SEI
Suite 400, Officer, J. Paul Opportunity Fund, L.P., SEI Asset
Los Angeles, CA Getty Trust, Non Allocation Trust, SEI Daily Income
90049-1681 Profit Foundation for Trust, SEI Institutional Investments
Visual Arts, since Trust, SEI Institutional
December 2002 International Trust, SEI Liquid Asset
Trust, SEI Tax Exempt Trust, and SEI
Institutional Managed Trust.
28
SEI Structured Credit Fund, L.P.
Additional Information
Directors and Officers of the Partnership (Unaudited) (continued)
December 31, 2008
NUMBER OF
PORTFOLIOS IN
PRINCIPAL FUND
NAME, AGE AND LENGTH OF OCCUPATION(S) COMPLEX OTHER
ADDRESS OF TIME DURING PAST 5 OVERSEEN BY DIRECTORSHIPS
INDEPENDENT DIRECTORS SERVED YEARS DIRECTOR** HELD BY DIRECTOR
- --------------------- --------- --------------------- ------------- -------------------------------------
Robert A. Nesher* (62) Since President of the 80 Trustee of The Advisors' Inner Circle
One Freedom 2007 Fund, Chairman of the Fund, The Advisors' Inner Circle Fund
Valley Drive Board, SEI Funds and II (f/k/a The Arbor Fund) and Bishop
Oaks, PA 19456 The Advisor's Inner Street Funds; Director of SEI Global
Circle Fund. Master Fund, plc, SEI Global Assets
Currently performs Fund, plc, SEI Global Investments
various services on Fund, plc, SEI Islamic Investments
behalf of SEI Fund, plc, SEI Investments Global,
Investments for which Limited, SEI Investments - Global
Mr. Nesher is Fund Services Limited, SEI
compensated. Investments (Europe) Limited, SEI
Investments - Unit Trust Management
(UK) Limited, SEI Global Nominee Ltd,
SEI Alpha Strategy Portfolios, L.P.,
SEI Opportunity Fund, L.P., SEI Asset
Allocation Trust, SEI Daily Income
Trust, SEI Institutional Investments
Trust, SEI Institutional
International Trust, SEI Liquid Asset
Trust, SEI Tax Exempt Trust, and SEI
Institutional Managed Trust.
29
SEI Structured Credit Fund, L.P.
Additional Information
Directors and Officers of the Partnership (Unaudited) (continued)
December 31, 2008
POSITION(S) HELD WITH
NAME AND THE MASTER FUND AND PRINCIPAL OCCUPATION(S) DURING
AGE OF OFFICERS LENGTH OF TIME SERVED PAST 5 YEARS
- --------------- -------------------------- ------------------------------------------------------------
Stephen F. Panner (38) Treasurer, since June 2008 Fund Accounting Director of the Administrator, 2005-present.
Fund Administration Manager, Old Mutual Fund Services,
2000-2005. Chief Financial Officer, Controller and
Treasurer, PBHG Funds and PBHG Insurance Series Fund,
2004-2005. Assistant Treasurer, PBHG Funds and PBHG
Insurance Series Funds and PBHG Insurance Series Fund,
2000-2004. Assistant Treasurer, Old Mutual Fund Advisors
Fund, 2004-2005.
Timothy D. Barto (41) Vice President, since 2007 General Counsel Vice President and Secretary of the Adviser
and Assistant Secretary, since 2004. Vice President and Assistant Secretary of the
since 2008 Administrator since November 1999.
James Ndiaye (40) Vice President and Vice President and Assistant Secretary of Adviser since
Assistant Secretary, since 2005; Vice President, Deutsche Asset Management, 2003 to
2007 2004.
30
SEI Structured Credit Fund, L.P.
Additional Information
Directors and Officers of the Partnership (Unaudited) (concluded)
December 31, 2008
POSITION(S) HELD WITH
NAME AND THE MASTER FUND AND PRINCIPAL OCCUPATION(S) DURING
AGE OF OFFICERS LENGTH OF TIME SERVED PAST 5 YEARS
- --------------- -------------------------- ------------------------------------------------------------
Aaron Buser (38) Vice President and Vice President and Assistant Secretary of Adviser since
Assistant Secretary, since 2007. Associate at Stark & Stark 2004-2007.
June 2008
Michael T. Pang (36) Vice President, since 2007 Vice President and Assistant Secretary of Adviser and the
and Secretary, since 2008 Administrator since 2005; Counsel, Caledonian Bank & Trust's
Mutual Funds Group, 2004; Counsel, Permal Asset Management,
2001 to 2004.
Russell Emery (46) Chief Compliance Officer, Chief Compliance Officer of SEI Opportunity Fund, L.P.,
since 2007 Bishop Street Funds, The Advisors' Inner Circle Fund and the
Advisors' Inner Circle Fund II, since March 2006; Director
of Investment Product Management and Development, SIMC
February 2003- March 2006.
* Mr. Nesher is a trustee who may be deemed to be an "interested" person of
the Fund as that term is defined in the 1940 Act by virtue of his
affiliation with the Fund's Distributor.
** The "Fund Complex" consists of registered investment companies that are
part of the following investment trusts and limited partnerships: SEI
Institutional Investments Trust, SEI Institutional Management Trust, SEI
Institutional International Trust, SEI Liquid Asset Trust, SEI Daily Income
Trust, SEI Tax Exempt Trust, SEI Asset Allocation Trust, SEI Alpha Strategy
Portfolios, L.P. and SEI Opportunity Fund, L.P.
31
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ITEM 2. CODE OF ETHICS.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant's board of directors has determined that the registrant
has at least one audit committee financial expert serving on the audit
committee.
(a)(2) The audit committee financial expert is George Sullivan. Mr. Sullivan is
independent as defined in Form N-CSR Item 3(a)(2).
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Fees billed by Ernst & Young, LLP Related to the registrant.
Ernst & Young, LLP billed the registrant aggregate fees for services rendered to
the registrant for the last two fiscal years as follows:
- ------------------- ------------------------------------------------ ------------------------------------------------
2008 2007
- --------- --------- --------------- ---------------- --------------- ---------------- --------------- ---------------
All fees and All fees and All other All fees and All fees and All other
services to services to fees and services to services to fees and
the Trust service services to the Trust that service services to
that were affiliates service were affiliates service
pre-approved that were affiliates pre-approved that were affiliates
pre-approved that did not pre-approved that did not
require require
pre-approval pre-approval
- --------- --------- --------------- ---------------- --------------- ---------------- --------------- ---------------
(a) Audit $60,000 N/A N/A $35,000 N/A N/A
Fees
- --------- --------- --------------- ---------------- --------------- ---------------- --------------- ---------------
(b) Audit- $0 N/A N/A $0 N/A N/A
Related
Fees
- --------- --------- --------------- ---------------- --------------- ---------------- --------------- ---------------
(c) Tax $0 N/A N/A $0 N/A N/A
Fees
- --------- --------- --------------- ---------------- --------------- ---------------- --------------- ---------------
(d) All $0 N/A N/A $0 N/A N/A
Other
Fees
- --------- --------- --------------- ---------------- --------------- ---------------- --------------- ---------------
Notes:
(1) Audit fees include amounts related to the audit of the registrant's
annual financial statements and services normally provided by the
accountant in connection with statutory and regulatory filings.
(e)(1) Not Applicable.
(e)(2) Percentage of fees billed applicable to non-audit services pursuant to
waiver of pre-approval requirement were as follows:
-------------------------- ----------------- ----------------
FISCAL 2008 FISCAL 2007
-------------------------- ----------------- ----------------
Audit-Related Fees 0% 0%
-------------------------- ----------------- ----------------
Tax Fees 0% 0%
-------------------------- ----------------- ----------------
All Other Fees 0% 0%
-------------------------- ----------------- ----------------
(f) Not Applicable.
(g) The aggregate non-audit fees and services billed by Ernst & Young, LLP
for the fiscal years 2008 and 2007 was $0 and $0, respectively.
(h) During the past fiscal year, all non-audit services provided by
Registrant's principal accountant to either Registrant's investment
adviser or to any entity controlling, controlled by, or under common
control with Registrant's investment adviser that provides ongoing
services to Registrant were pre-approved by the audit committee of
Registrant's board of directors. Included in the audit committee's
pre-approval was the review and consideration as to whether the
provision of these non-audit services is compatible with maintaining
the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
ITEM 6. SCHEDULE OF INVESTMENTS
Included in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
SEI INVESTMENTS MANAGEMENT CORPORATION
PROXY VOTING PROCEDURES
SEI Investments Management Corporation ("SIMC") serves as investment adviser to
multiple clients, including investment companies, institutions and individual
investors. As investment adviser, SIMC has an obligation to vote proxies with
respect to securities held in client portfolios in the best economic interests
of SIMC's clients for which it has proxy voting authority. The following
Procedures are intended to ensure that proxies are voted in the best interests
of clients.
A. ESTABLISHMENT OF PROXY VOTING COMMITTEE
1. SIMC shall establish a Proxy Voting Committee (the "Committee"), comprised of
representatives of SIMC's Investment Management Unit and Legal and/or Compliance
personnel. Currently, the members of the Committee are as follows:
Tom Williams
Gregory Stahl
John Diederich
Kevin McNamera
Noreen Martin
Stephanie Cavanagh
2. The membership of the Committee may be changed at any time upon approval of
the existing members of the Committee or by the President of SIMC.
3. The Committee shall meet as necessary to perform any of the activities set
forth below.
4. Any action requiring approval of the Committee shall be deemed approved upon
an affirmative vote by a majority of the Committee present or represented.
5. The Committee shall consult with counsel or other experts as it deems
appropriate to carry out its responsibilities.
B. APPROVAL OF PROXY VOTING GUIDELINES
1. The Committee shall approve Guidelines that set forth the manner in which
SIMC shall vote, or the manner in which SIMC shall determine how to vote, with
respect to various matters that may come up for shareholder vote with respect to
securities held in client accounts and for which SIMC has proxy voting
responsibility.
2. In the event that any employee of SIMC recommends a change to SIMC's
Guidelines, the Committee shall meet to consider the proposed change and
consider all relevant factors. If approved by the Committee, the change shall be
accepted, and the Guidelines revised accordingly.
C. CIRCUMSTANCES WHERE SIMC WILL NOT VOTE PROXIES
1. For accounts that engage in securities lending, SIMC believes that the
additional income derived by clients from such activities generally outweighs
the potential economic benefit of recalling securities for the purpose of
voting. Therefore, SIMC generally will not recall securities on loan for the
sole purpose of voting proxies.
2. In accordance with local law or business practices, many foreign companies
prevent the sales of shares that have been voted for a certain period beginning
prior to the shareholder meeting and ending on the day following the meeting
("share blocking"). Depending on the country in which a company is domiciled,
the blocking period may begin a stated number of days prior to the meeting
(e.g., one, three or five days) or on a date established by the company. While
practices vary, in many countries the block period can be continued for a longer
period if the shareholder meeting is adjourned and postponed to a later date.
Similarly, practices vary widely as to the ability of a shareholder to have the
"block" restriction lifted early (e.g., in some countries shares generally can
be "unblocked" up to two days prior to the meeting whereas in other countries
the removal of the block appears to be discretionary with the issuer's transfer
agent). SIMC believes that the disadvantage of being unable to sell the stock
regardless of changing conditions generally outweighs the advantages of voting
at the shareholder meeting for routine items. Accordingly, SIMC generally will
not vote those proxies subject to "share blocking.".
D. CONFLICTS OF INTEREST
1. SIMC has elected to retain a third party proxy voting service (the "Service")
to vote proxies with respect to accounts for which SIMC serves as investment
adviser (and retains proxy voting authority). The Service shall vote proxies in
accordance with the Guidelines approved by the Committee. SIMC reasonably
believes that the Service's implementation of the Guidelines will result in
proxies being voted in the best economic interests of clients. So long as the
Service votes proxies in accordance with the Guidelines, SIMC
believes that there is an appropriate presumption that the manner in which SIMC
voted was not influenced by, and did not result from, a conflict of interest.
2. The Service makes available to SIMC, prior to voting on a proxy, its
recommendation on how to vote with respect to such proxy in light of SIMC's
Guidelines. SIMC retains the authority to overrule the Service's recommendation,
and instruct the Service to vote in a manner at variance with the Service's
recommendation. The exercise of such right could implicate a conflict of
interest. As a result, SIMC may not overrule the Service's recommendation with
respect to a proxy unless the following steps are taken:
a. The Proxy Voting Committee shall meet to consider the proposal to overrule
the Service's recommendation.
b. The Proxy Voting Committee must determine whether SIMC has a conflict of
interest with respect to the issuer that is the subject of the proxy. The
Committee will use the following standards to identify issuers with which it may
have a conflict of interest.
1. SIGNIFICANT BUSINESS RELATIONSHIPS - The Committee will determine
whether SIMC or its affiliates may have a significant business relationship
with the issuer, such as, for example, where SIMC (or an affiliate) manages
a pension plan, administers employee benefit plans, or provide brokerage,
underwriting, insurance, or banking services to the issue. For this
purpose, a "significant business relationship" is one that: (1) represents
1% or $1,000,000 of SIMC's or an affiliate's revenues for the most recent
fiscal year, whichever is less, or is reasonably expected to represent this
amount for the current fiscal year; or (2) may not directly involve revenue
to SIMC or its affiliates but is otherwise determined by the Committee to
be significant to SIMC or its affiliates, such as, for example, the
following:
o SIMC or its affiliates lease significant office space from the company or
have some other real estate-related relationship with the issuer;
o SIMC or an affiliate otherwise has a significant relationship with the
company such that it might create an incentive for SIMC to vote in favor of
management.
2. SIGNIFICANT PERSONAL/FAMILY RELATIONSHIPS - The Committee will determine
whether any employees who are involved in the proxy voting process may have
a significant personal/family relationship with the issuer. For this
purpose, a "significant personal/family relationship" is one that would be
reasonably likely to influence how SIMC votes proxies. To identify any such
relationships, the Committee shall obtain information about any significant
personal/family relationship between any employee of SIMC who is involved
in the proxy voting process (e.g., IMU analysts, members of the Committee,
senior management, as applicable) and senior employees of issuers for which
SIMC may vote proxies.
3. DUTIES OF THE PROXY COMMITTEE - The Committee has a duty to make
reasonable investigation of information relating to conflicts of interest.
For purposes of identifying conflicts, the Committee shall rely on publicly
available information about SIMC and its affiliates, information about SIMC
and its affiliates that is generally known by employees of SIMC,(1) and
other information actually known by a member of the Committee. Absent
actual knowledge, the Committee is not required to investigate possible
conflicts involving SIMC where the information is (i) non-public, (ii)
subject to information blocking procedures, or (iii) otherwise not readily
available to the Committee. In connection with the consideration of any
proxy voting matters under this policy, each member of the Committee has a
duty to disclose to the Committee any material conflicts of interest of
which the member has actual knowledge but which have not been identified by
the Committee pursuant to these Procedures, and, if appropriate, recues
himself/herself from the matter at issue.
c. If SIMC determines that it has a conflict of interest, the Committee shall
determine whether the conflict is "material" to any specific proposal included
within the proxy. If not, then SIMC can vote the proxy as determined by the
Committee. The Committee shall determine whether a proposal is material as
follows:
1. ROUTINE PROXY PROPOSALS - Proxy proposals that are "routine" shall be
presumed not to involve a material conflict of interest for SIMC, unless
the Committee has actual knowledge that a routine proposal should be
treated as material. For this purpose, "routine" proposals would typically
include matters such as the selection of an accountant, uncontested
election of directors, meeting formalities, and approval of an annual
report/financial statements.(2)
2. NON-ROUTINE PROXY PROPOSALS - Proxy proposals that are "non-routine"
shall be presumed to involve a material conflict of interest for SIMC,
unless the Committee determines that SIMC's conflict is unrelated to the
proposal in question (see 3. below). For this purpose, "non-routine"
proposals would typically include any contested matter, including a
contested election of directors, a merger or sale of substantial assets, a
change in the articles of incorporation that materially affects the rights
of shareholders, and compensation matters for management (e.g., stock
option plans, retirement plans, profit sharing or other special
remuneration plans).
3. DETERMINING THAT A NON-ROUTINE PROPOSAL IS NOT MATERIAL - As discussed
above, although non-routine proposals are presumed to involve a material
conflict of interest, the Committee may determine on a case-by-case basis
that particular non-routine proposals do not involve a material conflict of
interest. To make this determination, the Committee must conclude that a
proposal is not directly related to SIMC's conflict with the issuer or that
it otherwise would not be considered important by a reasonable investor.
The Committee shall record in writing the basis for any such determination.
d. For any proposal where the Committee determines that SIMC has a material
conflict of interest, SIMC may vote a proxy regarding that proposal in any of
the following manners:
1. OBTAIN CLIENT CONSENT OR DIRECTION - If the Committee approves the
proposal to overrule the recommendation of the Service, SIMC shall fully
disclose to each client holding the security at issue the nature of the
conflict, and obtain the client's consent to how SIMC will vote on the
proposal (or otherwise obtain instructions from the client as to how the
proxy on the proposal should be voted).
(1) The procedures provide that the Committee should be aware of information
about SIMC or its affiliates that is generally known by employees of SIMC, but
it does not extend this knowledge to information about SIMC's affiliates that is
generally known by employees of SIMC's affiliates (unless such information also
is generally known by SIMC's employees).
(2) For guidance on defining "routine" and "non-routine" matters, SIMC shall
use the standards set forth in NYSE Rule 452 and Special Instruction 12b.viii.
of Form 13F.
2. USE RECOMMENDATION OF THE SERVICE - Vote in accordance with the
Service's recommendation.
e. For any proposal where the Committee determines that SIMC does not have a
material conflict of interest, the Committee may overrule the Service's
recommendation if the Committee reasonably determines that doing so is in the
best interests of SIMC's clients. If the Committee decides to overrule the
Service's recommendation, the Committee shall maintain a written record setting
forth the basis of the Committee's decision.
SEI INVESTMENTS MANAGEMENT CORPORATION
PROXY VOTING GUIDELINES
A. The Board of Directors
1. VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS
Votes on director nominees are made on a case-by-case basis. For uncontested
elections, SIMC will generally vote for the nominees, although the vote may be
withheld for some or all of the nominees if an analysis of the factors discussed
below indicates the Board or nominee has not served the economic long-term
interests of the shareholders. The factors to consider include:
o the company's long-term financial performance;
o independence of the full board and key board committees (full independent
audit, nominating and compensation committees);
o diversity of the board;
o nominees' attendance records (generally votes should be withheld from
directors who have attended less than 75 percent of meetings without valid
reason);
o directors serving on an excessive number of other boards;
o Chapter 7 bankruptcy, SEC violations, and criminal offenses;
o interlocking directorships;
o executive compensation: history of approving excessive compensation or
repricing underwater stock options;
o no action taken by the board in response to majority votes on shareholder
proposals.
2. VOTING FOR DIRECTOR NOMINEES IN CONTESTED ELECTIONS
Contested elections of directors frequently occur when a board candidate or
slate runs for the purpose of seeking a significant change in corporate policy
or control. Competing slates will be evaluated based upon the personal
qualifications of the candidates, the economic impact of the policies that they
advance, and their expressed and demonstrated commitment to the interests of all
shareholders.
Votes in a contested election of directors are evaluated on a case-by-case
basis, considering the following factors:
o consideration of the factors discussed above for uncontested elections;
o management's track record;
o background to the proxy contest;
o qualifications of director nominees (both slates);
o evaluation of what each side is offering shareholders as well as the
likelihood that the proposed objectives and goals can be met;
o stock ownership positions; and
o impact on stakeholders.
3. CHAIRMAN AND CEO IS THE SAME PERSON
Generally vote for shareholder proposals that would require the positions of
chairman and CEO to be held by different persons. However, in certain
circumstances, such as a small-cap company with a limited group of leaders, it
may be appropriate for these positions to be combined for some period of time.
4. MAJORITY OF INDEPENDENT DIRECTORS
o Generally, vote for proposals seeking to require that the board be comprised
of a majority of independent directors.
o Vote for proposals that request that all, or a majority of, the audit,
compensation and/or nominating committees be independent directors.
5. STOCK OWNERSHIP REQUIREMENTS
o Vote against shareholder proposals requiring directors to own a minimum amount
of company stock in order to qualify as a director, or to remain on the board.
6. BOARD STRUCTURE
o Vote against proposals to classify the board.
o Vote for proposals to repeal classified boards and elect all directors
annually.
7. TERM OF OFFICE
Generally vote against shareholder proposals to limit the tenure of outside
directors.
8. CUMULATIVE VOTING
o Generally vote for proposals to permit cumulative voting.
o Vote against proposals to eliminate cumulative voting.
9. DIRECTOR AND OFFICER INDEMNIFICATION AND LIABILITY PROTECTION
o Vote against proposals to limit or eliminate entirely director and officer
liability for (i) a breach of the duty of loyalty, (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of the law,
(iii) acts involving the unlawful purchases or redemptions of stock, (iv) the
payment of unlawful dividends, or (v) the receipt of improper personal benefits.
o Vote against proposals to reduce or eliminate directors' personal liability
when litigation is pending against current board members.
o For other types of proposals seeking to eliminate or limit the personal
liability of directors to the company and its shareholders for monetary damages,
whether to vote for such proposal will be determined on a case-by-case basis.
Generally, SIMC may vote for these proposals when the company persuasively
argues that such action is necessary to attract and retain qualified directors.
10. INDEMNIFICATION
SIMC may support these proposals when the company persuasively argues that such
action is necessary to attract and retain qualified directors, but will
generally oppose indemnification when it is being proposed to insulate directors
from actions they have already taken.
o Vote against indemnification proposals that would expand coverage beyond just
legal expenses to acts, such as negligence, that are more serious violations of
fiduciary obligations than mere carelessness.
o Vote for proposals that provide such expanded coverage in cases when a
director's or officer's legal defense was unsuccessful only if: (1) the director
was found to have acted in good faith and in a manner that he reasonably
believed was in the best interests of the company, and (2) only the director's
legal expenses would be covered.
B. Changes in Control
1. POISON PILLS
Shareholder rights plans, typically known as poison pills, take the form of
rights or warrants issued to shareholders and are triggered when a potential
acquiring stockholder reaches a certain threshold of
ownership. Poison pills insulate management from the threat of a change in
control and provide the target board with veto power over takeover bids.
o Vote for shareholder proposals that ask a company to submit its poison pill
for shareholder ratification.
o Review on a case-by-case basis management proposals to ratify a poison pill or
shareholder proposals to redeem a company's poison pill, taking into
consideration the impact of acquisition attempts that may be detrimental to the
long-term economic best interests of shareholders.
2. GREENMAIL
Greenmail payments are targeted share repurchases by management of company stock
from individuals or groups seeking control of the company. The hostile party
usually receives a substantial premium over the market value of shares.
o Vote for proposals to adopt anti-greenmail charter or bylaw amendments or
otherwise restrict a company's ability to make greenmail payments.
o Review on a case-by-case basis anti-greenmail proposals when they are bundled
with other charter or bylaw amendments.
3. SHAREHOLDER ABILITY TO REMOVE DIRECTORS
o Vote against proposals that provide that directors may be removed only for
cause.
o Vote for proposals to restore shareholder ability to remove directors with or
without cause.
o Vote against proposals that provide that only continuing directors may elect
replacements to fill board vacancies.
o Vote for proposals that permit shareholders to elect directors to fill board
vacancies.
4. SHAREHOLDER ABILITY TO ALTER THE SIZE OF THE BOARD
o Vote for proposals that seek to fix the size of the board.
o Vote against proposals that give management the ability to alter the size of
the board without shareholder approval.
o Vote for management proposals to change the number of directors provided a
satisfactory explanation for the change is given.
C. MERGERS AND CORPORATE RESTRUCTURINGS
1. MERGERS AND ACQUISITIONS
Votes on mergers and acquisitions are considered on a case-by-case basis, taking
into account at least the following:
o anticipated financial and operating benefits;
o offer price (cost vs. premium);
o prospects of the combined companies;
o how the deal was negotiated;
o changes in corporate governance and their impact on shareholder rights;
o impact on community stakeholders and workforce.
2. FAIR PRICE PROVISIONS
Fair price provisions were designed to defend against a two-tiered, front-end
loaded tender offer. In such a hostile takeover, the bidder offers cash for
enough shares to gain control of the target. At the same time, the acquirer
states that once control has been obtained, the target's remaining shares will
be purchased with cash, cash and securities or only securities. Since the
payment offered for the remaining stock is, by design less valuable than the
original offer for the controlling shares, shareholders are forced to sell out
early to maximize their value. Standard fair price provisions require that,
absent board or shareholder approval of the acquisition, the bidder must pay the
remaining shareholders the same price for their shares that brought control.
o Vote for fair price proposals, as long as the shareholder vote requirement
embedded in the provision is no more than a majority of disinterested shares.
o Vote for shareholder proposals to lower the shareholder vote requirement in
existing fair price provisions.
3. CORPORATE RESTRUCTURING
Votes on corporate restructuring proposals, including minority squeeze outs,
leveraged buyouts, spin-offs, liquidations, and asset sales are considered on a
case-by-case basis.
4. APPRAISAL RIGHTS
Vote for proposals to restore, or provide shareholders with, rights of
appraisal.
5. SPIN-OFFS
Votes on spin-offs are considered on a case-by-case basis depending on the tax
and regulatory advantages, planned use of sale proceeds, market focus, and
managerial incentives.
6. ASSET SALES
Votes on asset sales are made on a case-by-case basis after considering the
impact on the balance sheet/working capital, value received for the asset, and
potential elimination of diseconomies.
7. LIQUIDATIONS
Votes on liquidations are made on a case-by-case basis after reviewing
management's efforts to pursue other alternatives, appraisal value of assets,
and the compensation plan for executives managing the liquidation.
8. CHANGING CORPORATE NAME
Vote for changing the corporate name if proposed or supported by management.
D. SHAREHOLDER RIGHTS
1. CONFIDENTIAL VOTING
o Vote for shareholder proposals that request corporations to adopt confidential
voting, use independent tabulators and use independent inspectors of election,
as long as the proposal provides that in the case of a contested election,
management is permitted to request that the dissident group honor its
confidential voting policy, and that if the dissidents do not agree, the
confidential voting policy is waived.
o Vote for management proposals to adopt confidential voting.
2. SHAREHOLDER ABILITY TO CALL SPECIAL MEETINGS
o Vote against proposals to restrict or prohibit shareholder ability to call
special meetings.
o Vote for proposals that remove restrictions on the right of shareholders to
act independently of management.
3. SHAREHOLDER ABILITY TO ACT BY WRITTEN CONSENT
o Vote against proposals to restrict or prohibit shareholder ability to take
action by written consent.
o Vote for proposals to allow or make easier shareholder action by written
consent.
4. EQUAL ACCESS
Vote for shareholder proposals that would allow significant company shareholders
equal access to management's proxy material in order to evaluate and propose
voting recommendations on proxy proposals and director nominees, and in order to
nominate their own candidates to the board.
5. UNEQUAL VOTING RIGHTS
o Vote against dual class exchange offers.
o Vote against dual class recapitalizations.
6. SUPERMAJORITY SHAREHOLDER VOTE REQUIREMENT TO AMEND THE CHARTER OR BYLAWS
o Vote against management proposals to require a supermajority shareholder vote
to approve charter and bylaw amendments.
o Vote for shareholder proposals to lower supermajority shareholder vote
requirements for charter and bylaw amendments.
7. SUPERMAJORITY SHAREHOLDER VOTE REQUIREMENT TO APPROVE MERGERS
o Vote against management proposals to require a supermajority shareholder vote
to approve mergers and other significant business combinations.
o Vote for shareholder proposals to lower supermajority shareholder vote
requirements for mergers and other significant business combinations.
8. REIMBURSE PROXY SOLICITATION EXPENSES
Decisions to provide full reimbursement for dissidents waging a proxy contest
are made on a case-by-case basis.
E. CAPITAL STRUCTURE
1. COMMON STOCK AUTHORIZATION
o Review on a case-by-case basis proposals to increase the number of shares of
common stock authorized for issue.
o Generally vote for management proposals requesting shareholder approval to
increase authorized common stock when management provides persuasive
justification for the increase. Evaluate the amount of additional stock
requested in comparison to the requests of the company's peers as well as the
company's articulated reason for the increase.
o Vote for increases in authorized common stock to fund stock splits that are in
shareholders' interests.
o Evaluate on a case-by-case basis proposals where the company intends to use
the additional stock to implement a poison pill or other takeover defense.
o Vote against proposed common stock authorizations that increase the existing
authorization by more than 50 percent unless a clear need for the excess shares
is presented by the company.
2. REVERSE STOCK SPLITS
Generally vote for a reverse stock split if management provides a reasonable
justification for the split.
3. BLANK CHECK PREFERRED AUTHORIZATION
The terms of "blank check" preferred stock give the board of directors the power
to issue shares of preferred stock at their discretion--with voting rights,
conversion, distribution and other rights to be determined by the board at time
of issue. Blank check preferred stock can be used for sound corporate purposes,
but could be used to thwart hostile takeovers without shareholder approval.
o Generally vote against proposals that would authorize the creation of blank
check preferred stock.
o Vote for proposals to create blank check preferred stock in cases when the
company expressly states that the stock will not be used as a takeover defense
or carry superior voting rights.
o Review on a case-by-case basis proposals to increase the number of authorized
blank check preferred shares. If the company does not have any preferred shares
outstanding, vote against the requested increase.
o Vote for shareholder proposals to have blank check preferred stock placements,
other than those shares issued for the purpose of raising capital or making
acquisitions in the normal course of business, submitted for shareholder
ratification.
4. ADJUST PAR VALUE OF COMMON STOCK
o Vote for management proposals to reduce the par value of common stock.
5. PREEMPTIVE RIGHTS
o Review on a case-by-case basis proposals to create or abolish preemptive
rights. In evaluating proposals on preemptive rights, consider the size of a
company and the characteristics of its shareholder base.
6. DEBT RESTRUCTURING
Review on a case-by-case basis proposals to increase common and/or preferred
shares and to issue shares as part of a debt restructuring plan. Generally
approve proposals that facilitate debt restructuring unless there are clear
signs of self-dealing or other abuses. Factors to consider include:
o dilution - how much will ownership interests of existing shareholders be
reduced, and how extreme will dilution to any future earnings be?
o change in control - will the transaction result in a change in control of the
company?
o bankruptcy - is the threat of bankruptcy, which would result in severe losses
in shareholder value, the main factor driving the debt restructuring?
F. EXECUTIVE AND DIRECTOR COMPENSATION
1. STOCK OPTION PLANS
Vote on a case-by-case basis on stock option plans. When evaluating stock option
plans, review the following factors:
o stock option and other forms of compensation should be performance-based with
an eye toward improving shareholder value.
o support option plans that provide challenging performance objectives and serve
to motivate executives to excellent performance, and oppose plans that offer
unreasonable benefits to executives that are not available to any other
shareholders.
o whether the proposed plan is being offered at fair market value, or at a
discount; excessively dilutes the earnings per share of the outstanding shares;
and gives management the ability to replace or reprice "underwater" options,
which is not available to any other shareholders.
o whether the option plan is generally available to other managers and employees
in the company.
o any other features of the plan that may not be in shareholders' best interest.
o generally, vote for proposals that seek to
provide for indexed and/or premium priced options.
2. OBRA-RELATED COMPENSATION PROPOSALS
The Omnibus Budget Reconciliation Act of 1993 ("OBRA") imposed certain
restrictions in order for a compensation plan to receive favorable tax
treatment.
o Vote for proposals that simply amend shareholder-approved plans to include
administrative features or place a cap on the annual grants any one participant
may receive to comply with the provisions of Section 162(m) of OBRA.
o Vote for amendments to add performance goals to existing compensation plans to
comply with the provisions of Section 162(m) of OBRA.
o Votes on amendments to existing plans to increase shares reserved and to
qualify the plan for favorable tax treatment under the provisions of Section
162(m) should be evaluated on a case-by-case basis.
o Generally, vote for cash or cash-and-stock bonus plans to exempt the
compensation from taxes under the provisions of Section 162(m) of OBRA. Vote
against plans that are deemed to be excessive because they are not justified by
performance measures.
3. SHAREHOLDER PROPOSALS TO LIMIT EXECUTIVE AND DIRECTOR PAY
o Generally, vote for shareholder proposals that seek additional disclosure of
executive and director pay information.
o Generally, vote for shareholder proposals that seek to eliminate outside
directors' retirement benefits.
o Review on a case-by-case basis all other shareholder proposals that seek to
limit executive and director pay. This includes shareholder proposals that seek
to link executive compensation to customer, employee, or stakeholder
satisfaction.
4. GOLDEN AND TIN PARACHUTES
Golden and tin parachutes are designed to protect the employees of a corporation
in the event of a change in control. With golden parachutes, senior level
management employees receive a pay out during a change
in control at usually two to three times base salary. Increasingly, companies
that have golden parachute agreements for executives are extending coverage for
all their employees via tin parachutes.
o Vote for shareholder proposals to have golden and tin parachutes submitted for
shareholder ratification.
o Generally vote against all proposals to ratify golden parachutes; vote on tin
parachutes on a case by case basis.
5. EMPLOYEE STOCK OWNERSHIP PLANS (ESOPS)
Vote for proposals that request shareholder approval in order to implement an
ESOP or to increase authorized shares for existing ESOPs, except in cases when
the number of shares allocated to the ESOP is excessive.
G. SOCIAL AND ENVIRONMENTAL ISSUES
1. SOCIAL, WORKFORCE AND ENVIRONMENTAL ISSUES GENERALLY
Generally, vote for shareholder social, workforce, and environmental proposals
that create good corporate citizens while enhancing long-term shareholder value.
In determining how to vote on shareholder social, workforce, and environmental
proposals, analyze the following factors:
o whether adoption of the proposal would have either a positive or negative
impact on the company's short-term or long-term share value;
o the percentage of sales, assets and earnings affected;
o the degree to which the company's stated position on the issues could affect
its reputation or sales, or leave it vulnerable to boycott or selective
purchasing;
o whether the issues presented should be dealt with through government or
company-specific action;
o whether the company has already responded in some appropriate manner to the
request embodied in a proposal;
o whether the company's analysis and voting recommendation to shareholders is
persuasive;
o what other companies have done in response to the issue;
o whether the proposal itself is well framed and reasonable;
o whether implementation of the proposal would achieve the objectives sought in
the proposal; and
o whether the subject of the proposal is best left to the discretion of the
board.
Generally, support proposals that request the company to furnish information
helpful to shareholders in evaluating the company's operations.
2. SPECIAL POLICY REVIEW AND SHAREHOLDER ADVISORY COMMITTEES
o Vote for these proposals when they appear to offer a potentially effective
method for enhancing shareholder value.
3. EQUAL EMPLOYMENT OPPORTUNITY AND OTHER WORK PLACE PRACTICE
REPORTING ISSUES
o Vote for proposals calling for action on equal employment opportunity and
antidiscrimination.
o Vote for legal and regulatory compliance and public reporting related to
non-discrimination, affirmative action, workplace health and safety,
environmental issues, and labor policies and practices that effect long-term
corporate performance.
o Vote for nondiscrimination in salary, wages and all benefits.
4. NON-DISCRIMINATION IN RETIREMENT BENEFITS
o Support non-discrimination in retirement benefits.
5. "CERES PRINCIPLES" AND "MACBRIDE PRINCIPLES"
The CERES Principles, formulated by the Coalition of Environmentally Responsible
Economies, require signing companies to address environmental issues. Many
companies have voluntarily adopted these principles.
o Vote on proposals to adopt the CERES Principles or MacBride Principles on a
case-by-case basis based upon an analysis of the factors discussed above for
social, workforce and environmental issues generally.
7. CONTRACT SUPPLIER STANDARDS
o vote on proposals regarding the adoption of "Codes of Conduct" or other
standards for the company's suppliers and licensees on a case-by-case basis
based upon an analysis of the factors discussed above for social, workforce and
environmental issues generally.
8. CORPORATE CONDUCT, HUMAN RIGHTS, AND LABOR CODES
o Generally support proposals that call for the adoption and/or enforcement of
principles or codes relating to countries in which there are systematic
violations of human rights, such as: the use of slave, child, or prison labor; a
government that is illegitimate; or there is a call by human rights advocates,
pro-democracy organizations, or legitimately-elected representatives for
economic sanctions.
o Support Principles or Codes of Conduct relating to company investment in
countries with patterns of human rights abuses.
o Support implementation and reporting on ILO codes of conduct.
o support independent monitoring programs in conjunction with local and
respected religious and human rights groups to monitor supplier and licensee
compliance with Codes.
H. OTHER MISCELLANEOUS MATTERS
1. RATIFYING AUDITORS
Vote for proposals to ratify auditors, unless: (i) an auditor is not
independent; or (ii) there is reason to believe that the independent auditor has
rendered an opinion which is neither accurate nor indicative of the company's
financial position.
2. VOTING ON STATE TAKEOVER STATUTES
Review on a case-by-case basis proposals to opt in or out of state takeover
statutes (including control share acquisition statutes, control share cash-out
statutes, freeze-out provisions, fair price provisions, stakeholder laws, poison
pill endorsements, severance pay and labor contract provisions, anti-greenmail
provisions, and disgorgement provisions).
Generally support opting into stakeholder protection statutes if they provide
comprehensive protections for employees and community stakeholders. Generally
vote against opting into takeover statutes that only serve to protect incumbent
management from accountability to shareholders and which negatively influence
shareholder value.
3. APPROVING OTHER BUSINESS AT SHAREHOLDER MEETING
Vote against proposals to approve other business that may arise at the
shareholder meeting.
4. ADJOURNING SHAREHOLDER MEETINGS
Vote against proposals authorizing the Board to adjourn a shareholder meeting,
unless such proposal limits such authority to circumstances where a quorum is
not present in person or by proxy at the shareholder meeting.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
COMPENSATION. The Adviser compensates each portfolio manager for his management
of the Fund. Each portfolio manager's compensation consists of a fixed annual
salary, plus a discretionary annual bonus calculated on the following factors:
1. Fund performance relative to a return objective and/or benchmark index;
2. SEI corporate performance typically based upon earnings per share for a
fiscal year; and
3. Individual performance relative to annual goals and objectives.
OWNERSHIP OF FUND SHARES. As of the date of this Registration Statement, the
portfolio managers did not beneficially own any shares of the Fund.
OTHER ACCOUNTS. As of December 31, 2008, in addition to the Fund, the portfolio
managers were responsible for the day-to-day management of certain other
accounts, as listed below: The accounts below do not pay performance-based
advisory fees.
- ------------------------------------------------------------------------------------------------------------
REGISTERED INVESTMENT OTHER POOLED INVESTMENT OTHER ACCOUNTS
COMPANIES VEHICLES
- ------------------------ ------------------------------ ------------------------------ ---------------------
PORTFOLIO NUMBER OF TOTAL NUMBER OF TOTAL NUMBER OF TOTAL
MANAGER ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
- ------------------------ ------------ ----------------- ------------- ---------------- ----------- ---------
JAMES F. SMIGIEL 2 $ 73.0 million 1 $ 5.3 million 0 $ 0
- ------------------------ ------------ ----------------- ------------- ---------------- ----------- ---------
GREGORY A. SOEDER 2 $ 73.0 million 1 $ 5.3 million 0 $ 0
- ------------------------ ------------ ----------------- ------------- ---------------- ----------- ---------
DAVID S. ANILOFF 2 $ 73.0 million 1 $ 5.3 million 0 $ 0
- ------------------------ ------------ ----------------- ------------- ---------------- ----------- ---------
CONFLICTS OF INTERESTS. Each portfolio manager's management of "other accounts"
may give rise to potential conflicts of interest in connection with his
management of the Fund's investments, on the one hand, and the investments of
the other accounts, on the other. The other accounts include portions of two
U.S. registered high yield mutual funds and an Irish registered high yield fund
(collectively, the "Other Accounts"). The Other Accounts might have similar
investment objectives as the Fund or hold, purchase, or sell securities that are
eligible to be held, purchased, or sold by the Fund. While the portfolio
managers' management of the Other Accounts may give rise to the following
potential conflicts of interest, the Adviser does not believe that the
conflicts, if any, are material or, to the extent any such conflicts are
material, the Adviser believes that it has designed policies and procedures that
are reasonably designed to manage those conflicts in an appropriate way.
KNOWLEDGE OF THE TIMING AND SIZE OF FUND TRADES. A potential conflict of
interest may arise as a result of the portfolio managers' day-to-day management
of the Fund. Because of their position with the Fund, the portfolio managers
know the size, timing, and possible market impact of Fund trades. It is
theoretically possible that the portfolio managers could use this information to
the advantage of the Other Accounts and to the possible detriment of the Fund.
However, the Adviser has adopted policies and procedures
reasonably designed to allocate investment opportunities on a fair and equitable
basis over time.
INVESTMENT OPPORTUNITIES. A potential conflict of interest may arise as a result
of the portfolio managers' management of the Fund and the Other Accounts which,
in theory, may allow them to allocate investment opportunities in a way that
favors the Other Accounts over the Fund. This conflict of interest may be
exacerbated to the extent that the Adviser or the portfolio managers receive, or
expect to receive, greater compensation from their management of the Other
Accounts than the Fund. Notwithstanding this theoretical conflict of interest,
it is the Adviser's policy to manage each account based on its investment
objectives and related restrictions and, as discussed above, the Adviser has
adopted policies and procedures reasonably designed to allocate investment
opportunities on a fair and equitable basis over time and in a manner consistent
with each account's investment objectives and related restrictions. For example,
while the portfolio managers may buy for an Other Account securities that differ
in identity or quantity from securities bought for the Fund, such an approach
might not be suitable for the Fund given its investment objectives and related
restrictions.
The Adviser may enter into incentive fee arrangements with one or more investors
in the SEI Structured Credit Segregated Portfolio (the "Offshore Feeder Fund"),
a segregated portfolio of SEI Offshore Advanced Strategies Series SPC, a
segregated portfolio company established in the Cayman Islands, that acts as a
feeder fund for the Fund, whereby a portion of the increase in the net asset
value of such investor's investment in the Offshore Feeder Fund over a given
period shall be payable to the Adviser. This arrangement may create an incentive
for the Adviser to make investments for the Fund that are riskier or more
speculative than if the Adviser had no such interest because the Adviser will
not bear an analogous portion of depreciation in the value of the Offshore
Feeder Fund's assets if the value of its investment in the Fund declines.
Notwithstanding this theoretical conflict of interest, it is the Adviser's
policy to manage each account based on its investment objectives and related
restrictions and the Adviser believes that it has designed policies and
procedures that are designed to manage such conflict in an appropriate way.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The certifying officers, whose certifications are included herewith, have
evaluated the registrant's disclosure controls and procedures within 90 days of
the filing date of this report. In their opinion, based on their evaluation, the
registrant's disclosure controls and procedures are adequately designed, and are
operating effectively to ensure, that information required to be disclosed by
the registrant in the reports it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrants internal control over financial reporting.
ITEMS 12. EXHIBITS.
(a)(1) Code of Ethics attached hereto.
(a)(2) A separate certification for the principal executive officer and the
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are filed
herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing
as an Exhibit.
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) SEI Structured Credit Fund, L.P.
By (Signature and Title)* /s/ Robert A. Nesher
--------------------------------
Robert A. Nesher
President
Date: February 25, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Robert A. Nesher
--------------------------------
Robert A. Nesher
President
Date: February 25, 2009
By (Signature and Title)* /s/ Stephen F. Panner
--------------------------------
Stephen F. Panner
Treasurer
Date: February 25, 2009
* Print the name and title of each signing officer under his or her signature.