<PAGE> 1
Registration No. 333-447
811-7505
As filed with the Securities and Exchange Commission on February 21, 1997.
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM N-14
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ____ / /
Post-Effective Amendment No. 1 / x /
INTRUST FUNDS TRUST
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
(Address of Principal Executive Offices)
(800) 717-4568
(Registrant's Telephone Number, including Area Code)
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George O. Martinez, Esq.
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
(Name and Address of Agent for Service)
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Communication and Copies to:
Steven R. Howard, Esq. Edward B. Baer, Esq.
Baker & McKenzie Morgan Lewis & Bockius
805 Third Avenue 1800 M Street, NW
New York, New York 10022 Washington, D.C. 20036
Phillip Owings SEI Fund Management
INTRUST Bank, N.A. Oaks, Pennsylvania 19456
105 North Main Street/Box One
Wichita, Kansas 67201
Sheldon A. Jones, Esq.
Dechert, Price & Rhodes
1500 K Street, NW, Suite 500
Washington, DC 20005
Sequential Numbering System: Page 1 of ___ pages
Exhibit Index appears on Sequentially numbered page ___
Approximate Date of Proposed Public Offering: As soon as practicable following
the effective date of this Registration Statement.
<PAGE> 2
THE INTRUST FUNDS TRUST
Form N-14 Registration Statement
Cross-Reference Sheet Pursuant to
Rule 481(a) under the Securities Act of 1933
<TABLE>
<CAPTION>
Part A Caption Prospectus/Proxy Statement
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<S> <C>
Item 1. Beginning of Registration Statement and Cover Page; Cross-Reference Sheet
Outside Front Cover Page of Prospectus
Item 2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
Item 3. Synopsis Information and Risk Factors Summary; Principal Risk Factors
Item 4. Information About the Transaction Summary; Information Relating to the Proposed
Reorganizations; Comparison of Investment Policies
and Risk Factors; Comparison of the Trusts;
Information Relating to Voting Matters; Appendix A;
Appendix B
Item 5. Information About the Registrant Cover Page; Summary; Additional Information
Item 6. Information About the Company Cover Page; Summary; Additional Information
Item 7. Voting Information Cover Page; Information Relating to Voting Matters
Item 8. Interest of Certain Persons and Experts Not applicable
Item 9. Additional Information Required for Not applicable
Reoffering by Persons Deemed to be
Underwriters
Part B Caption in Statement of Additional Information
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. Additional Information About the Statement of Additional Information for INTRUST
Registrant Funds Trust
Item 13. Additional Information About the Statement of Additional Information for SEI Tax-
Company Being Acquired Exempt Trust
Item 14. Financial Statements Pro Forma Financial Statements; Financial Statement
of Additional Information for SEI Fund; Financial
Statements for SEI Fund
Part C Caption in Part C
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Item 15. Indemnification Indemnification
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
</TABLE>
(i)
<PAGE> 3
It is proposed that this filing will become effective on March 24, 1997
pursuant to Rule 488 under the Securities Act of 1933.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has previously filed a declaration registering an indefinite number
of shares of beneficial interest on Form N-1A (Registration Nos. 333-447 and
811-7505). Accordingly, no filing fee is due in connection with this
Registration statement. A copy of Registrant's earlier Declaration pursuant to
Rule 24f-2 is filed herewith as an exhibit. Pursuant to Rule 429, this
Registration Statement relates to the above-referenced Registration Statement on
Form N-1A.
(ii)
<PAGE> 4
SEI TAX EXEMPT TRUST
KANSAS TAX FREE INCOME PORTFOLIO
Oaks, Pennsylvania 19456
March __, 1997
Dear Shareholder:
A Special Meeting of Shareholders of Kansas Tax Free Income Portfolio (the
"SEI Kansas Portfolio"), a series of the SEI Tax Exempt Trust (the "SEI Trust")
has been called for April __, 1997 to address matters that are important to you.
As you may know, INTRUST Bank, N.A. ("INTRUST"), the investment adviser to
the SEI Kansas Portfolio, has taken steps to consolidate its mutual fund
investment advisory activities. In the first step of its consolidation process,
INTRUST has recently organized its own family of mutual funds, named INTRUST
Funds Trust ("INTRUST Funds"). INTRUST Funds is a Delaware business trust and an
open-end diversified management investment company. INTRUST Funds has multiple
series, one of which will be the Kansas Tax-Exempt Bond Fund (the "INTRUST
Kansas Portfolio"), a series with the same investment objectives as the SEI
Kansas Portfolio. INTRUST Funds have the ability to adopt a "master-feeder"
structure which means that each series of INTRUST Funds will seek to achieve its
investment objective by investing all of that series' investable assets in a
corresponding series of a master portfolio with the same investment objective of
the respective series of INTRUST Funds.
As the next step in the consolidation process, you are being asked to
consider and approve a proposed Agreement and Plan of Reorganization (the
"Reorganization Agreement"). The Reorganization Agreement provides that the SEI
Kansas Portfolio will transfer substantially all of its assets and its stated
liabilities to the newly created INTRUST Kansas Portfolio. If approved by
shareholders, the transaction is expected to occur on or after May __, 1997.
The Board of Trustees of the SEI Trust has considered a variety of factors
and unanimously approved the Reorganization Agreement and transactions
contemplated thereby. The reorganization is expected to benefit shareholders
because:
- Shareholders will have a broader array of INTRUST-advised
investment options and distribution channels available to them.
- Immediately following the reorganization, shareholders will
experience the same actual total expense ratios.
- INTRUST has made a voluntary commitment that through its first year
of operation the actual total expense ratio for the INTRUST Kansas
Portfolio shall be no greater than the actual total expense ratio
of the SEI Kansas Portfolio.
You should consider the following in connection with the proposed
reorganizations:
- The reorganization transaction will not result in a change in
the value of your investment.
- The reorganization transaction will be tax-free and will not
involve any sales loads, commissions or transaction charges.
- The investment policies and objective of the INTRUST Kansas
Portfolio are the same as the objective and policies of SEI Kansas
Portfolio.
- INTRUST will serve as the investment adviser to the INTRUST Kansas
Portfolio, thus providing continuity of investment management.
The Reorganization Agreement and other related matters are discussed in
detail in the enclosed Combined Proxy Statement/Prospectus, which you should
read carefully.
<PAGE> 5
VOTING INSTRUCTIONS
Enclosed is a proxy card for the meeting. We urge you to read the enclosed
Combined Proxy Statement/Prospectus and to vote by completing, signing and
returning the enclosed proxy card in the prepaid envelope. Every vote counts.
We are excited about the reorganization and the potential benefits it
provides to shareholders who invest in INTRUST Funds. Hopefully, you will agree
by voting yes and returning your proxy card as soon as possible.
Sincerely,
David Lee, President
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<PAGE> 6
PRELIMINARY COPY
SEI TAX EXEMPT TRUST
KANSAS TAX FREE INCOME PORTFOLIO
OAKS, PENNSYLVANIA 19456
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL __, 1997
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the Shareholders of Kansas
Tax Free Income Portfolio (the "SEI Kansas Portfolio"), a series of SEI Tax
Exempt Trust (the "SEI Trust") will be held at 105 North Main Street, Wichita,
Kansas 67202, on April __, 1997, at __:00 __.m. Eastern Time for the following
purposes:
ITEM 1. To consider and act upon a proposal to approve an Agreement and
Plan of Reorganization and the transactions contemplated thereby, including (a)
the transfer of substantially all of the assets and stated liabilities of the
SEI Kansas Portfolio to the Kansas Tax-Exempt Bond Fund ("INTRUST Kansas
Portfolio"), a series of the newly organized INTRUST Funds Trust ("INTRUST
Funds") in exchange for shares of INTRUST Kansas Portfolio's Institutional
Service Class; and (b) the distribution of the Shares so received to
shareholders of the SEI Kansas Portfolio.
ITEM 2. To transact such other business as may properly come before the
Special Meeting or any adjournment(s) thereof.
The proposed reorganization and related matters are described in the
attached Combined Proxy Statement/Prospectus. Appendix A to the Combined Proxy
Statement/Prospectus is a copy of the Agreement and Plan of Reorganization. A
copy of the Prospectus for the INTRUST Kansas Portfolio is included with this
Combined Proxy Statement/Prospectus.
Shareholders of record of the SEI Kansas Portfolio as of the close of
business on March 5, 1997 are entitled to notice of, and to vote at, the Special
Meeting or any adjournment(s) thereof.
SHAREHOLDERS OF THE SEI KANSAS PORTFOLIO ARE REQUESTED TO EXECUTE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS
BEING SOLICITED BY THE SEI TRUST'S BOARD OF TRUSTEES. THIS ACTION WILL HELP
ENSURE THAT A QUORUM IS PRESENT AT THE SPECIAL MEETING. PROXIES MAY BE REVOKED
AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO SEI TAX EXEMPT TRUST A
WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING
THE SPECIAL MEETING AND VOTING IN PERSON.
By Order of the Trustees,
Richard W. Grant
Secretary
March __, 1997 SEI TAX EXEMPT TRUST
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<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY......................................................................7
Background..............................................................7
Summary of the Reorganization Agreement.................................7
Federal Income Tax Consequences.........................................7
Overview of the Sei Trust and the Intrust Funds.........................8
Certain Arrangements with Service Providers.............................8
Purchase and Redemption Procedures, Distributions and Exchange
Privilege.............................................................9
Principal Risk Factors ................................................12
INFORMATION RELATING TO THE PROPOSED REORGANIZATION.........................13
Description of The Reorganization Agreement............................13
Capitalization.........................................................14
Federal Income Tax Consequences........................................14
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS..........................15
Investment Policies....................................................15
Risk Factors...........................................................15
OTHER INFORMATION...........................................................16
General................................................................16
Term of Trustees.......................................................16
Liability of Trustees..................................................16
Shareholder Liability..................................................16
Voting.................................................................16
Liquidation or Dissolution.............................................17
Shareholder Meetings...................................................17
Rights of Inspection...................................................17
INFORMATION RELATING TO VOTING MATTERS......................................17
General Information....................................................17
Solicitation of Proxies................................................17
Voting Securities And Principal Holders Thereof........................18
Appraisal Rights.......................................................18
Quorum.................................................................18
ADDITIONAL INFORMATION ABOUT THE SEI TRUST..................................19
FINANCIAL HIGHLIGHTS........................................................19
OTHER BUSINESS..............................................................20
SHAREHOLDER INQUIRIES.......................................................20
APPENDIX A - AGREEMENT AND PLAN OF REORGANIZATION...........................21
APPENDIX B - ADDITIONAL INVESTMENT RESTRICTION..............................41
APPENDIX B - ADDITIONAL INVESTMENT RESTRICTIONS.............................42
</TABLE>
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<PAGE> 8
PRELIMINARY COPY
COMBINED PROXY STATEMENT/PROSPECTUS
DATED MARCH __, 1997
SEI TAX-EXEMPT TRUST
OAKS, PENNSYLVANIA 19456
(800) 342-5734
INTRUST FUNDS TRUST
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(800) 266-8787
This Combined Proxy Statement/Prospectus is furnished in connection
with the solicitation of proxies by the Board of Trustees of SEI Tax-Exempt
Trust ("SEI Trust") in connection with a Special Meeting (the "Meeting") of
shareholders of Kansas Tax Free Income Portfolio (the "SEI Kansas Portfolio"), a
series of the SEI Trust, to be held on April __, 1997 at __:00 _.m. Eastern Time
at the offices of INTRUST Bank, NA, 105 North Main Street, Wichita, Kansas
67202, at which shareholders of the SEI Kansas Portfolio will be asked to
consider and approve a proposed Agreement and Plan of Reorganization dated
______________, 1997 (the "Reorganization Agreement") by and between the SEI
Trust and the newly organized INTRUST Funds Trust (the "INTRUST Funds"), as
further described below.
SEI Trust and the INTRUST Funds are registered, open-end, management
investment companies. INTRUST Bank, N.A. ("INTRUST") currently provides
investment advisory services to the SEI Kansas Portfolio and to the INTRUST
Funds.
The Reorganization Agreement provides that the SEI Kansas Portfolio
(the "Reorganizing Fund") will transfer substantially all its assets and its
stated liabilities to the Kansas Tax-Exempt Bond Fund, (the "INTRUST Kansas
Portfolio") a series of the INTRUST Funds (the "Acquiring Fund"). The INTRUST
Kansas Portfolio is a new fund with no operating history.
In exchange for the transfer of these assets and liabilities of the
Reorganizing Fund pursuant to the Reorganization Agreement, the INTRUST Funds
will simultaneously issue shares of the Acquiring Fund to the Reorganizing Fund.
The Reorganizing Fund will then distribute shares of the Acquiring Fund to its
shareholders, in liquidation of the Reorganizing Fund. As a result, upon
completion of the transaction, the Reorganizing Fund will cease to operate and
its shareholders will be shareholders of the Acquiring Fund.
The SEI Trust offers the following two classes of shares: Class A and
Class B. The Reorganizing Fund currently offers only Class A Shares. Financial
institutions may acquire Class A Shares for their own account, or as a record
owner on behalf of fiduciary agency or custody accounts. The INTRUST Funds
currently offers the following two classes of Shares: Institutional Service
Class and Institutional Premium Class. The INTRUST Funds are offered at net
asset value without a sales load only to certain institutional investors, or
other investors who at the time of purchase have a balance of $1,000 or more
invested in any of the INTRUST Funds, are purchased through a trust investment
manager or account manager or administered by INTRUST, are employees of BISYS,
or any other service provider, or employees of INTRUST Financial Corporation
or any of its affiliates. Shareholders in the Institutional Premium Class
of shares may be subject to an additional shareholder servicing charge of
up to 0.50% of average net assets. As part of the Reorganization, SEI Kansas
Portfolio will receive shares of the INTRUST Kansas Portfolios' Institutional
Service Class shares.
This Combined Proxy Statement/Prospectus sets forth the information
that a Shareholder of the SEI Kansas Portfolio should know before voting on the
Reorganization Agreement, and should be retained for future reference. The
INTRUST Kansas Portfolio's Prospectus dated January 8, 1997 is included with
this Combined Proxy Statement/Prospectus and is incorporated herein by
reference. The Statement of Additional Information relating to INTRUST Kansas
Portfolio dated January 8, 1997, and this Combined Proxy Statement/Prospectus
dated March __, 1997, and the Prospectus and Statement of Additional Information
relating to the SEI Kansas Portfolio dated December 31, 1996, are on file with
the Securities and Exchange Commission (the "SEC"), and are available without
charge upon oral or written request by writing or calling either
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<PAGE> 9
SEI Trust or INTRUST Funds at the applicable address and telephone number
indicated above. The above mentioned Prospectuses and Statements of Additional
Information are incorporated herein by reference.
This Combined Proxy Statement/Prospectus constitutes the proxy statement of
SEI Trust for its meeting of shareholders and INTRUST Funds' prospectus for
shares of the Acquiring Fund that have been registered with the SEC and are
being issued in connection with the Reorganization. This Combined Proxy
Statement/Prospectus is expected to first be sent to shareholders on or about
March __, 1997.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE
IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THE SECURITIES OF THE INTRUST FUNDS HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS COMBINED PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SEI TRUST OR THE INTRUST FUNDS.
SHARES OF THE INTRUST FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, INTRUST OR ANY OF ITS AFFILIATES. SHARES OF THE
INTRUST FUNDS ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL VARY AS A RESULT OF MARKET CONDITIONS
OR OTHER FACTORS SO THAT SHARES OF THE INTRUST FUNDS WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. AN INVESTMENT IN THE INTRUST FUNDS
INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED. IN ADDITION, THE AMOUNT OF DIVIDENDS PAID BY A FUND WILL INCREASE AND
DECREASE.
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<PAGE> 10
SUMMARY
The following is a summary of certain information relating to the proposed
Reorganization, related transactions, and the parties thereto, and is qualified
by reference to the more complete information contained elsewhere in this
Combined Proxy Statement/Prospectus, the Prospectuses and Statements of
Additional Information of the SEI Kansas Portfolio and INTRUST Kansas Portfolio
and the form of Reorganization Agreement attached to this Combined Proxy
Statement/Prospectus as Appendix A.
BACKGROUND.
INTRUST is the investment adviser to the SEI Kansas Portfolio and to the
newly organized INTRUST Funds. After careful consideration of the investment
portfolios of the funds, the multi-class structures of and distribution
functions performed for the funds, the shareholder servicing requirements of
each fund, compliance functions and other factors relating to the operation of
SEI Trust and the INTRUST Funds, INTRUST concluded that the SEI Kansas Portfolio
and the INTRUST Kansas Portfolio could achieve operating efficiencies and would
benefit from being managed and marketed on a coordinated basis.
Accordingly, INTRUST recommended to the Trustees of SEI Trust that they
approve the Reorganization and submit the Reorganization to the shareholders of
the Reorganizing Fund for approval. Likewise, INTRUST recommended to the
Trustees of the INTRUST Funds that they approve the Reorganization. At a meeting
held on September 16, 1996, after due consideration of the information presented
to them concerning the Reorganization, the Trustees of SEI Trust (a) determined
that the Reorganization was in the best interests of the Reorganizing Fund, and
that the interests of shareholders would not be diluted thereby, (b) approved
the Reorganization Agreement and the Reorganization, and (c) authorized the
submission of the Reorganization to shareholders of the Reorganizing Fund for
their approval. At a meeting held on November 25, 1996, after consideration of
information substantially similar to that presented to the Trustees of SEI
Trust, the Trustees of the INTRUST Funds (a) determined, on the basis of
information provided by INTRUST, that the Reorganization was in the best
interests of the Acquiring Fund and that the interests of shareholders would not
be diluted thereby and (b) approved the Reorganization Agreement and the
Reorganization.
SUMMARY OF THE REORGANIZATION AGREEMENT.
The Reorganization will be effected pursuant to a Reorganization Agreement,
a copy of which is included as Appendix A. The Reorganization Agreement
contemplates that the assets of the Reorganizing Fund will be acquired by the
Acquiring Fund in a tax-free exchange for shares issued by the Acquiring Fund
and the assumption by the Acquiring Fund of the stated liabilities of the
Reorganizing Fund.
Immediately following such transfer and exchange, the shares of the
Acquiring Fund then held by the Reorganizing Fund will be distributed to the
Reorganizing Fund's shareholders. Upon consummation of the Reorganization, each
holder of Class A Shares of the Reorganizing Fund will receive full and
fractional shares of the Institutional Service Class of the Acquiring Fund equal
in value to the value of the investor's shares of the Reorganizing Fund
immediately prior to the transaction. In this manner, the Acquiring Fund will
succeed to the assets and stated liabilities formerly held by the Reorganizing
Fund, and the Reorganizing Fund's shareholders will become shareholders of the
Acquiring Fund.
The Reorganization will not be effected until certain conditions are
satisfied. These conditions include: the approval of the shareholders of the
Reorganizing Fund, the receipt by SEI Trust and the INTRUST Funds of certain
opinions of legal counsel, the receipt from the SEC of certain exemptive relief,
the confirmation of the accuracy of various representations and warranties made
in the Reorganization Agreement, and the parties' performance of their
agreements and undertakings made in the Reorganization Agreement. See
"Information Relating to the Proposed Reorganization."
FEDERAL INCOME TAX CONSEQUENCES.
Shareholders of the Reorganizing Fund will recognize no gain or loss for
federal income tax purposes on their receipt of shares of the Acquiring Fund.
Shareholders of the Acquiring Fund will experience no tax consequences from the
Reorganization. The Reorganizing Fund will incur no federal tax liability as a
result of the Reorganization, and the Acquiring Fund will recognize no gain or
loss for federal tax purposes on its issuance of shares in the Reorganization.
See "Information Relating to the Proposed Reorganizations--Federal Income Tax
Consequences" for more information.
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<PAGE> 11
OVERVIEW OF THE SEI TRUST AND THE INTRUST FUNDS.
INVESTMENT OBJECTIVES. The Reorganizing Fund and the Acquiring Fund have
the same investment objectives and policies. Since the Acquiring Fund is a newly
created mutual fund, it is expected that immediately after the reorganization,
the investment portfolio of the Acquiring Fund will be identical to the
Reorganizing Fund.
Each of the Reorganizing Fund and the Acquiring Fund's investment objective
is preservation of capital while producing current income for investors that is
exempt from both federal and Kansas State income taxes.
See "Comparison of Investment Policies and Risk Factors" below, for further
information on the identical investment objectives and policies of the
Reorganizing Fund and the Acquiring Fund. Additional information is also set
forth in the Acquiring Fund's Prospectus, which is included with this Combined
Proxy Statement/Prospectus, the Reorganizing Fund's Prospectus, which is
available upon request (as noted above) and the Statements of Additional
Information of the Acquiring and Reorganizing Funds, which are also available
upon request (as noted above).
CERTAIN ARRANGEMENTS WITH SERVICE PROVIDERS.
SEI TRUST. INTRUST serves as investment adviser to the Reorganizing Fund.
INTRUST is entitled to receive advisory fees from the Reorganizing Fund,
computed daily, at a fixed annual rate, expressed as a percentage of average
daily net assets. CoreStates Bank, N.A. serves as the custodian of the
Reorganizing Fund's assets.
SEI Trust has entered into an Administrative Services Contract with SEI
Fund Management ("SEI") pursuant to which SEI provides certain management and
administrative services necessary for the operation of the Reorganizing Fund.
SEI also assists the Reorganizing Fund with certain transfer and dividend
disbursing agent and fund accounting functions. In addition, the Reorganizing
Fund may pay fees to various service organizations which provide them with other
administrative services, such as maintaining shareholder accounts and records.
SEI Financial Services Company ("SFS") serves as the distributor of the
shares of the Reorganizing Fund.
The Reorganizing Fund has adopted a shareholder servicing plan. Under the
plan, the Reorganizing Fund pays SFS a fee at an annual rate based on the
average daily net assets of the Reorganizing Fund attributable to Class A
Shares, in return for provision of a broad range of shareholder and
administrative services.
See the SEI Trust Prospectus, which is incorporated herein and available
upon request, for more information on the Fund's arrangements with service
providers.
INTRUST FUNDS. INTRUST will serve as investment adviser to the Acquiring
Fund and will be entitled to receive advisory fees from the Acquiring Fund,
computed daily and paid monthly, at a fixed annual rate, expressed as a
percentage of average daily net assets. INTRUST will also serve as the custodian
of the Acquiring Fund's assets.
INTRUST Funds has entered into an Administrative Agreement with BISYS Fund
Services Limited Partnership ("BISYS") pursuant to which BISYS will provide the
Acquiring Fund with a range of management and administrative services necessary
for the operation of the Acquiring Fund. BISYS Fund Services, Inc. (the
"Transfer Agent"), an affiliate of BISYS, acts as transfer and dividend
disbursing agent and fund accountant for the Acquiring Fund. BISYS will be the
distributor for the Acquiring Fund. The Acquiring Fund has adopted a Rule 12b-1
Plan and Agreement pursuant to which the Acquiring Fund may pay BISYS in
connection with the distribution and marketing of the Acquiring Fund's shares.
The Fund has undertaken not to incur any distribution expenses during its first
year of operation.
Acquiring Fund shareholders may also be subject to service organization
fees based on the net asset value of shares owned by shareholders with whom the
service organization has a servicing relationship. See the INTRUST Fund's
Prospectuses, which is included with this Combined Proxy Statement/Prospectus,
for more information on the Acquiring Fund's arrangements with service
providers.
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<PAGE> 12
PURCHASE AND REDEMPTION PROCEDURES, DISTRIBUTIONS AND EXCHANGE PRIVILEGE.
SEI TRUST. Shares may be purchased through SEI, as transfer agent for the
SEI Trust, on each day that the New York Stock Exchange is open for business
("Business Day"). Orders for purchases are executed at the net asset value per
share next determined after the order is received by SEI. Shareholders who
desire to purchase shares must place their orders with SEI prior to the close of
trading on the New York Stock Exchange (presently 4:00 p.m. Eastern Time).
Shares may be redeemed in whole or in part on any Business Day. Redemption
will occur at the net asset value next determined after a redemption request in
good order has been received by the SEI Trust. Shares may be redeemed through
SEI. Shareholders who desire to redeem shares must place their redemption orders
with SEI prior to the closing of the New York stock Exchange.
The Reorganizing Fund pays dividends at least once annually. The
Reorganizing Fund intends to distribute, at least annually, substantially all
net capital gains, if any. Shareholders may elect to receive dividends and
capital gains in additional shares or cash.
THE INTRUST FUNDS. Shares may be purchased on any Business Day through
authorized brokers, investment advisers and service organizations. Orders for
purchase of shares will be executed at the net asset value next determined after
an order has been received. Orders received by your broker, investment advisor
and service organization in proper order and transmitted to BISYS prior to the
close of its Business Day (which is currently 5:00 p.m., Eastern Time), will
become effective that day. Subject to certain limited exceptions, the minimum
initial investment is $1,000 ($50 for IRAs). The minimum subsequent investment
is $50.
Shares may be redeemed in whole or in part on any Business Day. Redemption
will occur at the net asset value determined after a redemption request in good
order has been received by the Transfer Agent. Shareholders may redeem through
an authorized broker, investment adviser or service organization, or by
contacting the Acquiring Fund directly. Shareholders may request that the
proceeds be wired to a shareholder's personal bank. The Acquiring Fund reserves
the right to redeem, on not less than 30 days' notice, an account that has been
reduced by a shareholder to $500 or less.
The Acquiring Fund declares dividends daily and pays them monthly. The
Acquiring Fund declares and pays capital gains, if any, at least once annually.
The Acquiring Fund intends to distribute, at least, annually, substantially all
net capital gains. Shareholders may elect to receive dividends and capital gains
in additional shares or cash.
Shareholders may exchange from one fund in the INTRUST Funds to another
within the same class of shares. The INTRUST Funds retains the right to
terminate or modify the exchange privilege in accordance with relevant
regulatory restrictions.
See "Purchase of Fund Shares," "Redemption of Fund Shares" and "Exchange of
Fund Shares" in the Acquiring Fund's Prospectuses incorporated in and
accompanying this Combined Proxy/Prospectus for additional information on
purchase and redemption procedures and exchange privilege.
COMPARATIVE FEE TABLES. The table below is designed to assist an investor
in understanding the various direct and indirect costs and expenses associated
with an investment in the relevant class of shares of the Reorganizing Fund and
the Acquiring Fund; the table also includes pro forma information for the
combined fund resulting from the Reorganization (the "Combined Fund") assuming
the Reorganization took place on December 31, 1996 and after adjusting such
information to reflect current fees. The expense information for the
Reorganizing Fund is based upon expenses for the fiscal year ended August 31,
1996, and expense information for the Acquiring Fund is based on estimated
expenses for its first year of operation. The Acquiring Fund has not commenced
operations as of the date of this Combined Proxy Statement/Prospectus.
As indicated in the table below, immediately upon consummation of the
Reorganization and absent waivers and reimbursements, the Pro Forma "Total Fund
Operating Expenses" for the Combined Fund are expected to be higher than the
"Total Fund Operating Expenses" for the Reorganizing Fund based on the
information for the respective periods presented. INTRUST has voluntarily agreed
to limit the Combined Fund's actual total operating expense ratio through [May
1, 1998] to the actual total operating expense ratio of the Reorganizing Fund as
of December 31, 1996. Subject to the foregoing, the applicable fee waivers and
expense reimbursements may be reduced or discontinued in the future.
- 9 -
<PAGE> 13
<TABLE>
<CAPTION>
SEI
INTRUST KANSAS PORTFOLIO KANSAS PORTFOLIO PRO FORMA
INSTITUTIONAL SERVICE CLASS CLASS A COMBINED
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C>
Maximum Sales Load Imposed on
Purchases (as a percentage of offering
price) ..................................... None None None
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering price) .............. None None None
Deferred Sales Load (as a percentage
of redemption proceeds) .................... None None None
Redemption Fees ............................ None(1) None None(1)
Exchange Fees .............................. None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waivers and
reimbursements)(2) ......................... 0.00% 0.15% 0.00%
12b-1 Fees (after waiver)(3) ............... 0.00% 0.00% 0.00%
Other Expenses (after waivers and
reimbursements)(2) ......................... 0.21% 0.06% 0.21%
----- ----- -----
Total Portfolio Operating Expenses
(after waivers and reimbursements)(2) ...... 0.21% 0.21% 0.21%
===== ===== =====
</TABLE>
The purpose of this table is to assist a shareholder in understanding the
various costs and expenses that an investor in the Fund will bear.
- --------
(1) Shareholders may be charged a wire redemption fee by their bank for
receiving a wire payment on their behalf.
(2) INTRUST has committed to waive fees and/or reimburse expenses to
maintain Total Portfolio Operating Expenses for the Institutional
Service Class at 0.21% for the Fund's first year of operation. Absent
such waivers and reimbursements, for the INTRUST Kansas Portfolio,
Management Fees would be 0.30%, Other Expenses would be 0.45% and Total
Portfolio Operating Expenses would be 0.75%. For the INTRUST Kansas
Portfolio, Other Expenses includes shareholder servicing fees of 0.08%.
Absent waivers and reimbursements, for the SEI Kansas Portfolio,
Management Fees would be 0.45%, other expenses would be 0.31% and Total
Operating Expenses would be 0.76%. For the SEI Kansas Portfolio, Other
Expenses includes shareholding servicing fees of 0.25%.
(3) The fee under the INTRUST Funds Distribution Plan and Agreement is
calculated on the basis of average net assets of the Fund at an annual
rate not to exceed 0.25%. The INTRUST Kansas Portfolio will not incur
any distribution expenses during its first year of operation.
- 10 -
<PAGE> 14
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
INTRUST KANSAS PORTFOLIO SEI KANSAS PORTFOLIO
INSTITUTIONAL SERVICE CLASS SHARES CLASS A SHARES
---------------------------------- --------------
<C> <C> <C>
1 year .................... $ 2 $ 2
3 years ................... $ 7 $ 7
5 years.................... $12 $12
10 years................... $27 $27
Without waivers and reimbursements
1 year .................... $ 8 $ 8
3 years ................... $24 $24
5 years.................... $42 $42
10 years................... $94 $94
</TABLE>
PRINCIPAL RISK FACTORS
The investment objectives and policies of the Reorganizing and Acquiring
Funds are the same. As a result, the risks associated with an investment in the
Acquiring Fund are substantially similar to those associated with an investment
in the Reorganizing Fund. The investment risks are those typically associated
with an investment in a managed portfolio of the specific types of securities
and other investments in which the Reorganizing and Acquiring Funds invest. The
following highlights the principal risk factors associated with an investment in
the Reorganizing Fund and the Acquiring Fund and is qualified in its entirety by
the more extensive discussion of risk factors in "Comparison of Investment
Policies and Risk Factors" below and in Appendix B and the discussion of risks
in the Prospectus and Statements of Additional Information for the Reorganizing
and Acquiring Funds.
The risk associated with investing in the Acquiring Fund (as in the
Reorganizing Fund) is that it will have considerable investments in Kansas
municipal obligations, and will be more susceptible to factors which adversely
effect issuers of Kansas obligations than a mutual fund which does not have as
great a concentration in the municipal obligations of one particular state.
The Acquiring Fund will be affected by factors that affect the financial
condition of the State of Kansas, its counties, municipalities and school
districts. In addition, since the Acquiring Fund will be invested primarily in
bonds, the value of its assets can be expected to vary inversely to changes in
interest rates.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
- --------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual return; actual return may be greater or less than the assumed amount.
- 11 -
<PAGE> 15
DESCRIPTION OF THE REORGANIZATION AGREEMENT. The following summary of the
Reorganization Agreement is qualified in its entirety by reference to the
Reorganization Agreement attached to this Combined Proxy Statement/Prospectus as
Appendix A. The Reorganization Agreement provides that the Acquiring Fund will
acquire all or substantially all of the assets of the Reorganizing Fund in
exchange for shares of the Acquiring Fund and the assumption by the Acquiring
Fund of certain stated liabilities of the Reorganizing Fund on the Closing Date
(as defined in the Reorganization Agreement) or such later date as the parties
may require as provided for in the Reorganization Agreement.
The number of full and fractional shares of the Acquiring Fund to be
issued to shareholders of the Reorganizing Fund will be determined on the basis
of the relative net asset values per share, computed as of the time on the
Closing Date at which the Acquiring Fund ordinarily determines it net asset
values (currently 4:15 Eastern Time). The net asset value per share for the
Acquiring Fund and the Reorganizing Fund will be determined by dividing each
fund's respective assets, less liabilities, by the total number of its
respective outstanding shares. The assets of the Acquiring Fund and the
Reorganizing Fund will be valued in accordance with the valuation practices of
the Acquiring Fund using the valuation procedures described under "Pricing and
Purchase of Shares" in the current Prospectus of the Acquiring Fund, which
accompanies this Combined Proxy Statement/Prospectus.
Prior to the Closing Date, the Reorganizing Fund will endeavor to
discharge all of its known liabilities and obligations. The Acquiring Fund will
assume only those liabilities, expenses, costs, charges and reserves reflected
on an unaudited statement of assets and liabilities of the Reorganizing Fund as
of the time on the Closing Date at which the Acquiring Fund ordinarily
determines its net asset values (4:15 Eastern Time) prepared by SEI as
administrator of the Reorganizing Fund, in accordance with generally accepted
accounting principles consistently applied from the prior audited period. The
Acquiring Fund will assume only those liabilities of the Reorganizing Fund
reflected in that unaudited statement of assets and liabilities and will not
assume any other liabilities, whether absolute or contingent.
As soon after the Closing Date as practicable, the Reorganizing Fund will
liquidate and distribute pro rata to its shareholders of record as of the close
of business on the Closing Date the full and fractional shares of the Acquiring
Fund received by the Reorganizing Fund. Such liquidation and distribution will
be accomplished by the establishment of accounts in the name of the Reorganizing
Fund's shareholders on the share records of the Acquiring Fund's transfer agent.
Each account will represent the respective pro rata number of full and
fractional shares of the Acquiring Fund due to such Reorganizing Fund's
shareholders.
The consummation of the transaction contemplated by the Reorganization
Agreement is subject to the conditions set forth in the Reorganization
Agreement, including the condition that the parties shall have received
exemptive relief from the SEC with respect to the issues raised by Section 17(a)
of the 1940 Act and concerning the applicability of Rule 17a-8 of the 1940 Act.
On February __, 1997, an application was filed for an exemption that, if
granted, would permit the Reorganization to be completed as described in this
Combined Proxy Statement/Prospectus. There can be no assurance that the relief
sought will be obtained, although the type of relief sought has been obtained by
others in similar situations. The Reorganizing Fund and the Acquiring Fund do
not currently intend to proceed with the Reorganization unless the relief
requested from the SEC has been obtained. The Reorganization Agreement may be
terminated and the Reorganization abandoned prior to January 1, 1998 by mutual
consent of the Boards of Trustees of the SEI Trust and the INTRUST Funds and
after that date, by either party upon written notice to the other. In addition,
either party may terminate if any condition set forth in the Reorganization
Agreement has not been fulfilled or waived by the party entitled to its benefits
any time before the Closing Date.
The obligations of SEI Trust and the INTRUST Funds under the
Reorganization Agreement with respect to the Reorganization are also subject to
various other conditions provided therein, including the approval of the
Reorganization Agreement by the shareholders of the Reorganizing Fund, the
receipt of certain opinions of legal counsel (including an opinion regarding the
Federal income tax consequences of the Reorganization to be provided by Baker &
McKenzie, counsel to the INTRUST Funds), the receipt from the SEC of the
regulatory relief described above, the redemption of all Class B Shares of the
Reorganizing Fund held by SEI, confirmation of the accuracy of various
representations and warranties made therein and the parties' performance of
their agreements and undertakings made in the Reorganization Agreement.
The expenses of the transactions contemplated by the Reorganization,
including the cost of proxy solicitation, will be borne by INTRUST. No portion
of such expenses will be paid by the Reorganizing Fund or Acquiring Fund.
Approval of the Reorganization Agreement with respect to the Reorganizing
Fund will require the affirmative vote of a majority of the outstanding voting
securities present at the Meeting in person or by proxy. If the Reorganization
- 12 -
<PAGE> 16
Agreement is not approved by the Reorganizing Fund, the Board of Trustees of SEI
Trust will consider the possible courses of action, including submission to
shareholders of a proposal to liquidate the Reorganizing Fund.
In its consideration and approval of the Reorganization at a meeting on
September 16, 1996, the Board of Trustees of SEI Trust considered the
recommendation of SEI and INTRUST with respect to the proposed Reorganization;
the fact that INTRUST is the investment adviser of both the Reorganizing and
Acquiring Funds; the fact that the investment objectives, policies, and
portfolios of the Reorganizing and Acquiring Funds will be the same; the fact
that the Acquiring Fund is permitted to adopt the master-feeder structure; the
shareholder servicing requirements of each fund, compliance functions and other
factors relating to the operation of SEI Trust and the INTRUST Funds; the fact
that the Reorganization would constitute a tax-free reorganization; the
Reorganization is in the best interests of the Reorganizing Fund; and that
interests of shareholders would not be diluted as a result of the
Reorganization.
After consideration of all of the foregoing factors, together with certain
other factors and information considered to be relevant, SEI Trust's Board of
Trustees unanimously approved the Reorganization Agreement and directed that it
be submitted to shareholders of the Reorganizing Fund for approval. SEI Trust's
Board of Trustees recommends that shareholders vote "FOR" approval of the
Reorganization Agreement.
At a meeting held on November 25, 1996, the Board of Trustees of the
INTRUST Funds considered the proposed Reorganization with respect to the
Acquiring Funds. Based upon their evaluation of the relevant information
provided to them, and in light of their fiduciary duties under federal and state
law, the Board of Trustees unanimously determined, on the basis of information
provided by INTRUST that the proposed reorganization was in the best interests
of the Acquiring Fund and its shareholders, if any, and that the interests of
existing shareholders of the Acquiring Fund, if any, would not be diluted as a
result of effecting the transaction.
CAPITALIZATION. Because the Reorganizing Fund will be combined in the
Reorganization with the Acquiring Fund and because the Acquiring Fund is a newly
created investment company, the total capitalization of the Acquiring Fund after
the Reorganization is expected to be equal to that of the Reorganizing Fund
before the reorganization. The following table sets forth as of February 18,
1997, (i) the capitalization of the Reorganizing Fund, (ii) the capitalization
of the Acquiring Fund, and (iii) the pro forma capitalization of the Acquiring
Fund giving effect to the Reorganization. At the time the Reorganization is
completed, the resulting capitalization of the Acquired Fund is likely to differ
from the pro forma capitalization shown in the table because of the effects of
shareholder activity and market price fluctuations in the interim.
<TABLE>
<CAPTION>
SEI KANSAS
PORTFOLIO INTRUST KANSAS PRO FORMA
(CLASS A) PORTFOLIO COMBINED
(000) (INSTITUTIONAL CLASS) (000)
---------- ---------------------- ----------
<S> <C> <C> <C>
Total Net Assets............. $81,129 $NONE $81,129
Shares outstanding........... 7,590 $NONE 7,590
Net Asset Value Per Share.... $ 10.69 $NONE $ 10.69
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES. The Reorganization should be a
tax-free transaction from the standpoint of the Reorganizing and Acquiring Fund
and their shareholders within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended, which means that: (1) no gain or loss will
be recognized by the Reorganizing Fund upon the transfer of its assets and
liabilities to the Acquiring Fund; (2) the tax basis of the assets of the
Reorganizing Fund in the hands of the Acquiring Fund will be the same as the tax
basis of such assets in the hands of the Reorganizing Fund immediately prior to
the transfer; (3) the Acquiring Fund's holding period of the assets of the
Reorganizing Fund will include the period during which such assets were held by
the Reorganizing Fund; (4) no gain or loss will be recognized by the Acquiring
Fund upon the receipt of the assets of the Reorganizing Fund in exchange for
shares of the Acquiring Fund and the assumption by the Acquiring Fund of the
liabilities and obligations of the Reorganizing Fund; (5) no gain or loss will
be recognized by the shareholders of the Reorganizing Fund upon the receipt of
shares of the Acquiring Fund in exchange for shares of the Reorganizing Fund;
(6) the basis of the shares of the Acquiring Fund received by the shareholders
of the Reorganizing Fund will be the same as the basis of the shares of the
Reorganizing Fund exchanged therefor; and (7) the holding period of the shares
of the Acquiring Fund received by the shareholders of the Reorganizing Fund will
include the
- 13 -
<PAGE> 17
holding period of the shares of the Reorganizing Fund exchanged therefor,
provided that, at the time of the exchange, the shares of the Reorganizing Fund
were held as capital assets. Pursuant to the Reorganization Agreement, as a
condition to the consummation of the Reorganization, the Reorganizing Fund and
Acquiring Fund must receive a favorable opinion of Baker & McKenzie, counsel to
the INTRUST Funds, as to the foregoing tax consequences.
SEI Trust and the INTRUST Funds have not sought a tax ruling from the
Internal Revenue Service (the "IRS"), but intend to act in reliance upon the
opinion of counsel discussed in the previous paragraph. That opinion will not be
binding on the IRS and will not preclude the IRS from adopting a contrary
position.
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS
INVESTMENT POLICIES. The investment objectives and policies of the
Reorganizing Fund are the same as those of the Acquiring Fund. The following
discussion summarizes the investment policies and risk factors for the
Reorganizing Fund and the Acquiring Fund. A more complete comparison of the
investment restrictions and policies of the Reorganizing and the Acquiring Fund
appears in Appendix B. Both the discussion below and the information in Appendix
B are qualified in its entirety by discussion elsewhere herein, and in the
Prospectus and Statements of Additional Information for the Reorganizing Fund
and the Acquiring Fund.
The Acquiring Fund and the Reorganizing Fund have the same investment
objective. Both the Reorganizing Fund's and the Acquiring Fund's investment
objective is to preserve capital while producing current income that is exempt
from both federal and Kansas state income taxes. Under normal conditions, at
least 80% of their net assets will be invested in municipal obligations which
produce interest that is exempt from Federal income tax. This investment policy
is a fundamental policy of each fund and may only be charged with the approval
of shareholders. At least 65% of their assets will be invested in municipal
obligations which are exempt from Federal and Kansas state income taxes. The
remainder of their assets may be invested in municipal obligation of other
states.
Both the Reorganizing Fund and the Acquiring Fund may purchase (i)
municipal bonds rated A or better by Standard and Poor's Corporation ("S&P") or
Moody's Investors Service, Inc. ("Moody's"), and a maximum of 10% of their total
assets may be invested in municipal bonds rated BBB by S&P or Baa by Moody's;
(ii) municipal notes rated at least SP-2 by S&P or MIG-2 or V-MIG-2 by Moody's;
and (iii) tax-exempt commercial paper rated at least A-1 by S&P or Prime-1 by
Moody's.
The Reorganizing Fund's and the Acquiring Fund's average maturity will be
between seven and twelve years.
RISK FACTORS. The Reorganizing Fund and Acquiring Fund are subject to the
same risk factors. The price per share of each fund will fluctuate with changes
in value of the investments held by the fund. For example, the value of shares
of each fund will generally fluctuate inversely with the movements in interest
rates.
There is, of course, no assurance that either fund will achieve its
investment objective or be successful in preventing or minimizing the risk of
loss that is inherent in investing in particular types of investment products.
Because they concentrate their investments in Kansas municipal
obligations, each fund may be affected by political, economic or regulatory
factors that may impair the ability of Kansas issuers to pay interest on or to
repay the principal of their debt obligations. Kansas municipal obligations may
be subject to greater price volatility than municipal obligations in general as
a result of the effect of supply and demand for these securities which, in turn,
could cause greater volatility in the value of the shares of the respective
fund.
Obligations of issuers of Kansas municipal obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bank Reform Act of 1978. In addition,
the obligations of such issuers may become subject to the laws enacted in the
future by Congress or the Kansas legislature or by referenda extending the time
for payment of principal and/or interest, or imposing other constraints upon
enforcement of such obligations or upon municipalities to levy taxes. There is
also the possibility that, as a result of legislation, litigation involving the
taxation of municipal obligations or the rights of municipal obligation holders,
or other conditions, the power or ability of any issuer to pay, when due, the
principal of and interest on its Kansas municipal obligations may be materially
affected. Additional considerations relating to the risks of investing in Kansas
municipal obligations can be found in the Prospectus and Statement of Additional
Information for the Reorganizing Fund and the Acquiring Fund.
- 14 -
<PAGE> 18
OTHER INFORMATION
GENERAL. SEI Trust and the INTRUST Funds are each open-end management
investment companies registered under the 1940 Act. SEI Trust is organized as a
business trust under the laws of the Commonwealth of Massachusetts; INTRUST
Funds is organized as a business trust under the laws of Delaware. SEI Trust and
the INTRUST Funds are governed by a Declaration of Trust, respectively (each a
"Trust Agreement"), By-Laws and Boards of Trustees.
TERM OF TRUSTEES. The term of office of each Trustee of SEI Trust or the
INTRUST Funds are unlimited as to duration unless the Trustees themselves adopt
a limited term. Assuming that the term remains of unlimited duration, a person
serving as a Trustee of SEI Trust or the INTRUST Funds will continue as Trustee
until such person resigns, dies or is removed by a written instrument signed by
at least two-thirds of the Trustees, by vote of the shareholders holding not
less than two-thirds of the shares then outstanding in person or by proxy at any
meeting called for that purpose, or by a written declaration signed by
shareholders holding not less than two-thirds of the shares then outstanding.
Vacancies on either Board may be filled by a majority of the Trustees remaining
in office.
LIABILITY OF TRUSTEES. A Trustee of SEI Trust or the INTRUST Funds will be
personally liable only for his or her own willful malfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee. Under the Trust Agreements for SEI Trust and the INTRUST
Funds, Trustees and officers will be indemnified for the expenses of litigation
against them unless it is determined that the person did not act in good faith
in the reasonable belief that the person's actions were in or not opposed to
the best interests of the trust or his or her conduct is determined to
constitute willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties.
SHAREHOLDER LIABILITY. Although, as discussed below, the likelihood is
remote, it is possible that, under Massachusetts law, shareholders of a
Massachusetts business trust could, under certain circumstances, be held
personally liable for the obligations of SEI Trust. However, the Trust Agreement
of SEI Trust disclaims shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or the Trustees.
The Trust Agreement also provides for indemnification out of SEI Trust property
for all losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered remote since it is
limited to circumstances in which a disclaimer is inoperative and SEI Trust
itself would be unable to meet its obligations. Under Delaware law, shareholders
of a Delaware business trust, such as the INTRUST Funds, do not have such
potential remote liability. A substantial number of mutual funds in the United
States are organized as Delaware business trusts.
VOTING. On each matter submitted to a vote of the shareholders of SEI
Trust or the INTRUST Funds, each holder of a share of one of the funds is
entitled to one vote for each whole share and to a proportionate fractional vote
for each fractional share outstanding in the shareholder's name on the books of
the respective Trust. Generally, shares of each of the SEI Trust and the INTRUST
Funds vote on a fund-by-fund basis on all matters except (1) matters affecting
only the interests of one or more of the funds, in which case only shares of the
affected fund or funds would be entitled to vote or (2) when the 1940 Act
requires that shares of the funds be voted in the aggregate. There are
ordinarily no meetings of shareholders of the SEI Trust or the INTRUST Funds.
LIQUIDATION OR DISSOLUTION. In the event of the liquidation or dissolution
of the SEI Trust or INTRUST Funds, the shareholders of the funds are entitled to
receive, when, and as declared by the Trustees, the excess of the assets
belonging to the funds over the liabilities belonging to the funds. In either
case, the assets so distributable to shareholders of the funds will be
distributed among the shareholders in proportion to the number of shares of the
funds held by them and recorded on the books of the SEI Trust or INTRUST Funds.
Such action may be taken with respect to the SEI Trust or INTRUST Funds by
action of the Board of Trustees, without shareholder approval.
SHAREHOLDER MEETINGS. Neither the SEI Trust or the INTRUST Funds are
required to hold annual meetings of their shareholders. Special meetings of SEI
Trust and the INTRUST Funds may be called upon written request of shareholders
owning at least one-tenth of the Outstanding shares entitled to vote.
RIGHTS OF INSPECTION. Under Delaware law, shareholders of the INTRUST
Funds have the right to inspect all books and records. Under Massachusetts law,
SEI Trust Shareholder have the same rights to inspect the records accounts and
books of SEI Trust as are permitted shareholders of a Massachusetts Corporation
under Massachusetts Corporate law. Currently, each shareholder of a
Massachusetts corporation is permitted to inspect the articles, bylaws, stock
records, and
- 15 -
<PAGE> 19
minutes of shareholder meetings. In either jurisdiction a court may order
discovery of all information relevant to a litigation claim.
The foregoing is only a summary of certain characteristics of the
operations of SEI Trust and the INTRUST Funds, the Trust Agreement, By-Laws and
applicable state law. The foregoing is not a complete description of the
documents cited. Shareholders should refer to the provisions of the SEI Trust
and the INTRUST Fund's Trust Agreement, By-Laws and Delaware and Massachusetts
law directly for a more complete description.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of proxies by SEI Trust's Board of
Trustees in connection with the Special Meeting. Only shareholders of record at
the close of business on March 5, 1997, will be entitled to vote at the Meeting.
On that date there were outstanding and entitled to be voted ____________ shares
of the Reorganizing Fund.
With respect to Fund shares held in any trust account over which SEI has
voting power, SEI has advised the INTRUST Funds that (a) if such account is
subject to the Employee Retirement Income Security Act of 1974, as amended,
("ERISA") and SEI is not the plan sponsor, SEI will pass voting power through to
the plan sponsor, (b) if such account is subject to ERISA and SEI is the plan
sponsor, SEI will pass its voting power to an independent third party fiduciary,
and (c) with respect to all other such trust accounts, SEI will vote Fund shares
in the same manner and proportion as all other Fund shares are voted.
SOLICITATION OF PROXIES. Proxy solicitations will be made primarily by
mail, but proxy solicitations may also be made by telephone, telegraph or
personal solicitations conducted by officers and employees of SEI or its
affiliates or other representatives of the Reorganizing Fund (who will not be
paid for their solicitation activities). [________________ has been engaged by
SEI to assist in soliciting proxies, and may contact certain shareholders of the
Reorganizing Fund by telephone.] Shareholders who are contacted by ___________
may be asked to cast their vote by telephonic proxy. Such proxies will be
recorded in accordance with the procedures set forth below. SEI believes these
procedures are reasonably designed to ensure that the identity of the
shareholders casting the vote is accurately determined and that the voting
instructions of the shareholder are accurately reflected.
In all cases where a telephonic proxy is solicited, the ___________
representative will ask shareholders for their full name, address, social
security or employer identification number, title (if you are authorized to act
on behalf of an entity, such as a corporation), and number of shares owned. If
the information solicited agrees with the information provided to _________ by
SEI, then the ___________ representative will explain the process, read the
Proposals listed in the proxy card and ask for the shareholders' instructions on
each Proposal. The ___________ representative, although he or she will answer
questions about the process, will not recommend to shareholders how they should
vote, other than to read the recommendations set forth in this Proxy Statement.
Within 72 hours, ____________ will send shareholders a letter or mailgram to
confirm their vote and asking them to call ____________ immediately if your
instructions are not correctly reflected in the confirmation.
If you wish to participate in the Meeting and any adjournments thereof,
but do not wish to give your proxy by telephone, you may still submit the proxy
card included with this Proxy Statement or attend the Meeting in person. Any
proxy given by you, whether in writing or by telephone may be revoked at any
time before it is voted by a written instruction received by the Secretary of
SEI Trust by properly executing a later-dated proxy or by attending the Special
Meeting and voting in person.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF. Based on holdings and
total shares outstanding as of February 18, 1997, the Trustees and officers of
SEI Trust owned as a group less than 1% of the outstanding voting securities of
the Reorganizing Fund. If the Reorganization was consummated as of February 18,
1997, the Trustees and officers of SEI Trust would own less than 1% of the
outstanding voting securities of the resulting pro forma Combined Fund based on
their holdings and total shares outstanding as of February 18, 1997. Based on
holdings and total shares outstanding as of February 18, 1997, and assuming
consummation of the Reorganization on February 18, 1997, the following persons
would own beneficially or of record 5% or more of the outstanding shares of the
Reorganizing Fund or the Combined Fund as indicated:
- 16 -
<PAGE> 20
<TABLE>
<CAPTION>
Percentage Owned Shares Held
---------------- -----------
<S> <C> <C>
Transco & Company 99.10% 7,520,567.357
c/o INTRUST Bank, N.A.
Attn.: Kerry Weis
P.O. Box 48698
Wichita, Kansas 67201
</TABLE>
APPRAISAL RIGHTS. Shareholders are not entitled to any rights of share
appraisal under SEI Trust's Trust Agreement or under the laws of the State of
Massachusetts in connection with the Reorganization. Shareholders have, however,
the right to redeem their Reorganizing Fund shares at net asset value until the
Reorganization and thereafter former Reorganizing Fund shareholders may redeem
the Acquiring Fund shares acquired by them in the Reorganization at net asset
value as in effect from time to time.
QUORUM. A quorum for the transaction of business at the Meeting is
constituted with respect to the Reorganizing Fund by the presence in person or
by proxy of the holders of not less than a majority of the outstanding shares of
such fund entitled to vote at the Meeting. If, by the time scheduled for the
Meeting, a quorum of shareholders of the Reorganizing Fund is not present or if
a quorum of the Reorganizing Fund's shareholders is present but sufficient votes
in favor of the Reorganization are not received, the persons named as proxies
may propose one or more adjournments of the Meeting to permit further
solicitation of proxies from shareholders. Any such adjournment will require the
affirmative vote of a majority of the shares present in person or represented by
proxy. The persons named as proxies will vote in favor of any such adjournment
if they determine that such adjournment and additional solicitation are
reasonable and in the interests of the Reorganizing Fund's shareholders. Notice
of adjournment of the Meeting with another time and place need not be given, if
the time and place are announced at the Meeting and reasonable notice is given
to persons present at the Meeting and the adjourned Meeting is held within a
reasonable time after the date set for the original Meeting.
Shareholders of the Reorganizing Fund will vote separately to
approve or reject the Reorganization with respect to the Acquiring Fund. The
vote of the shareholders of the Acquiring Fund is not being solicited because
their approval or consent is not necessary for the Reorganization to be
consummated. Each share of the Reorganizing Fund is entitled to one vote and
each fractional share thereof is entitled to a fractional vote, on each matter
submitted to a vote of its shareholders at the Meeting; no shares have
cumulative voting rights. Shares held by two or more persons (whether joint
tenants, co-fiduciaries or otherwise) will be voted as follows unless a written
instrument or court order providing to the contrary has been filed with the
Secretary of SEI Trust: (1) If only one votes, his or her vote will bind all;
(2) if more than one votes, the vote of the majority will bind all; and (3) if
more than one votes and the vote is evenly divided, the shares will be voted in
accordance with the determination of a majority of such persons and any person
appointed to act by a court of competent jurisdiction, or in the absence of such
appointment, the vote will be cast proportionately.
Shares represented by duly appointed proxies in the form included with
this Combined Proxy Statement/Prospectus will be voted in accordance with the
specifications made. If no specification is made, shares will be voted in
accordance with the recommendations of the Trustees of SEI Trust. Proxies may be
revoked at any time before they are voted by a written revocation received by
the Secretary of SEI Trust, by properly executing a later-dated proxy or by
attending the Meeting and voting in person. SEI Trust will request broker-dealer
firms, custodians, nominees and fiduciaries to forward proxy material to the
beneficial owners of the shares of record held by such persons.
Approval of the Reorganization requires with respect to the
Reorganizing Fund, the affirmative vote of a majority of the outstanding voting
securities present at the Meeting in person or by proxy.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees which cannot be voted on a
proposal because instructions have not been received from the beneficial owners)
will be counted for purposes of determining whether a quorum is present for the
purposes of convening the Meeting. If a proposal must be approved by a
percentage of "votes cast" on the proposal, abstentions and broker non-votes
will not be counted as "votes cast" on the proposal and will have no effect on
the result of the vote. If a proposal must be approved by (i) a percentage of
voting securities present at the Meeting, or (ii) a majority of the shares
issued and outstanding (i.e., the Reorganization), abstentions and broker
non-votes will be considered to be both present and issued and outstanding and,
as a result, will have the effect of counting as votes against such proposal.
- 17 -
<PAGE> 21
If the accompanying form of proxy is properly executed and returned in
time to be voted at the Meeting, the shares covered thereby will be voted in
accordance with the instructions marked thereon by the shareholder. Executed
proxies that are unmarked will be voted FOR each proposal submitted to a vote of
the shareholders.
ADDITIONAL INFORMATION ABOUT THE SEI TRUST
Information about the INTRUST Funds is included in the Prospectus
accompanying this Combined Proxy Statement/Prospectus. Additional information
about these Funds is included in its Statement of Additional Information dated
January 8, 1997. Copies of the Statement of Additional information and financial
statements may be obtained without charge by writing to INTRUST Funds
Distributors, Inc., 3435 Stelzer Road, Columbus, Ohio 43219, or by calling
INTRUST Funds at 1-888-266-8787. INTRUST Funds is subject to the informational
requirements of the Securities Exchange Act of 1934 and the 1940 Act, as
applicable, and, in accordance with such requirements, files proxy materials,
reports and other information with the SEC. These materials can be inspected and
copied at the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, NW, Washington, D.C. 20549, and at the offices of INTRUST Funds listed
above and at the SEC's Regional Offices at 7 World Trade Center, Suite 1300, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can also be obtained from the Public Reference
Branch, office of Consumer Affairs and Information Services, Securities and
Exchange Commission, Washington, D.C. 20549, at prescribed rates.
Information about SEI Trust is incorporated herein by reference from its
Prospectus and Combined Statement of Additional Information, each dated December
31, 1996. The financial statements for the Reorganizing Fund for the period
ended August 31, 1996, is incorporated by reference in the Funds' Statement of
Additional Information; the Reorganizing Fund's audited financial statements for
the fiscal period ended August 31, 1996, is incorporated by reference into the
statement of Additional Information to this Combined Proxy Statement/Prospectus.
Copies of the Reorganizing Fund's Prospectus, Statement of Additional
Information and financial statements may be obtained without charge by writing
or calling SEI Trust at the address and telephone number shown on the cover page
of this Combined Proxy Statement/Prospectus. Reports and other information filed
by SEI Trust can be inspected and copied at the Public Reference Facilities
maintained by the SEC at 450 Fifth Street, NW, Washington, D.C. 20549, and
copies of such material can be obtained from the Public Reference Branch, office
of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates.
FINANCIAL HIGHLIGHTS
SEI TRUST FINANCIAL HIGHLIGHTS. The tables set forth below present
financial information for the Class A Shares of the Reorganizing Fund. This
information is derived from SEI Trust's audited financial statements for the
fiscal year ended August 31, 1996. The data should be read in conjunction with
the audited financial statements and related notes. The financial highlights for
the Reorganizing Fund for prior periods are contained in SEI Trust's Prospectus
dated December 31, 1996, and the financial statements for the Reorganizing Fund
for prior periods are contained in SEI Trust's Annual Report to Shareholders and
are incorporated by reference into SEI Trust's Statement of Additional
Information dated December 31, 1996, which Prospectus and Statement of
Additional Information are incorporated herein by reference. The INTRUST Funds
have no operating history and therefore no financial highlights or financial
statements.
<TABLE>
<CAPTION>
Investment
Activities Distributions
---------- ----------------------------------------
Net Realized and
Unrealized Gain
Net Asset (Loss) on
Value Net Net Net Investments Net Asset
Beginning Investment Investment Realized Total and Capital Value End of
of Period Income Income Gain Distributions Transactions Period
--------- ---------- ---------- -------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
KANSAS TAX FREE
INCOME PORTFOLIO
- ------------------------
FOR THE YEAR ENDED
AUGUST 31, 1996 $10.63 $0.56 $(0.56) $ -- $ (0.56) $ (0.12) $10.51
</TABLE>
- 18 -
<PAGE> 22
<TABLE>
<CAPTION>
Ratio of Net
Ratio of Ratio of Investment
Expenses to Net Income to
Ratio of Average Net Investment Average Net
Net Assets Expenses to Assets Income to Assets
End of Average Net (Excluding Fee Average Net (Excluding Portfolio
Period (000) Assets Waivers) Assets Fee Waivers) Turnover Rate
------------ ----------- -------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
KANSAS TAX FREE INCOME
PORTFOLIO
- --------------------------
FOR THE YEAR ENDED
AUGUST 31, 1996 $72,066 0.21% 0.51% 5.31% 5.01% 12.71%
- --------------------------
</TABLE>
OTHER BUSINESS
The Board of Trustees of SEI Tax-Exempt Trust knows of no other business
to be brought before the Meeting. However, if any other matters come before the
Meeting, proxies which do not contain specific restrictions to the contrary will
be voted on such maters in accordance with the judgment of the persons named in
the enclosed proxy card.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to SEI Tax-Exempt Trust in writing
at the address on the cover page of this Combined Proxy Statement/Prospectus or
by telephoning 1-800-342-5734.
- 19 -
<PAGE> 23
APPENDIX A - AGREEMENT AND PLAN OF REORGANIZATION
APPENDIX - FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of this ____ day of ______________, 1997, by and between SEI Tax Exempt
Trust, a Massachusetts business trust, with its principal place of business at
_______________, ________, ________ _____ ("SEI Trust"), and The INTRUST Funds
Trust, a Delaware business trust, with its principal place of business at 3435
Stelzer Road, Columbus, Ohio 43219 ("INTRUST Trust").
The INTRUST Trust consists of six separate series, one of which is
the subject of this Agreement (hereinafter, the "Acquiring Fund"). SEI Trust
consists of nine separate series, two of which is the subject of this Agreement
(hereinafter, the "Acquired Fund").
This Agreement governs the proposed issuance of shares of the
Acquiring Fund in exchange for all of the assets of the Acquired Fund.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368 of the United
States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization ("Reorganization") will consist of the transfer of all or
substantially all of the assets of the Acquired Fund in exchange solely for
shares of beneficial interest, $.001 par value per share, of the Institutional
Service Class Shares (the "Institutional Service Class Shares") of the Acquiring
Fund (the "Acquiring Fund's Shares") and the assumption by the Acquiring Fund of
certain liabilities of the Acquired Fund and the distribution, after the closing
date provided in paragraph 3.1 (the "Closing Date"), of the Acquiring Fund's
Shares to the shareholders of the Acquired Fund in liquidation of the Acquired
Fund as provided herein, all upon the terms and conditions hereinafter set forth
in this Agreement. Shareholders of the Acquired Fund's Class A Shares shall
receive only shares of the Acquiring Fund's Institutional Service Class Shares.
WHEREAS, INTRUST Trust and SEI Trust are open-end, registered
investment companies of the management type and the Acquired Fund owns
securities which generally are assets of the character in which the Acquiring
Fund is permitted to invest;
WHEREAS, both INTRUST Trust and SEI Trust are authorized to
issue shares of beneficial interest;
WHEREAS, the Board of Trustees of INTRUST Trust has determined that
the exchange of all or substantially all of the assets of the Acquired Fund for
the Acquiring Fund's Shares and the assumption of the stated liabilities of the
Acquired Fund is in the best interests of the Acquiring Fund's shareholders and
that the interests of the existing shareholders of the Acquiring Fund would not
be diluted as a result of this transaction; and
WHEREAS, the Board of Trustees of SEI Trust has determined that the
exchange of all of the assets and certain of the liabilities of the Acquired
Fund for the Acquiring Fund's Shares and the assumption of such liabilities by
the Acquiring Fund is in the best interests of the Acquired Fund's shareholders
and that the interests of the existing shareholders of the Acquired Fund would
not be diluted as a result of this transaction.
- 20 -
<PAGE> 24
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties hereto covenant and
agree as follows:
1. TRANSFER OF ASSETS, ASSUMPTION OF LIABILITIES AND TERMINATION
1.1 Subject to the requisite approval of the shareholders of the
Acquired Fund and to the other terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, SEI Trust shall
transfer to INTRUST Trust, and INTRUST Trust shall acquire from SEI Trust, at
the Closing Date, all or substantially all of the Assets (as such term is
hereinafter defined) of the Kansas Tax Free Income Portfolio in exchange for
that number of Shares of INTRUST Kansas Tax Exempt Bond Fund determined in
accordance with Section 2.1 hereof, and the assumption by the INTRUST Kansas Tax
Exempt Bond Fund of the Liabilities (as such term is hereinafter defined) of the
SEI Kansas Tax Free Income Portfolio. Such transactions shall take place at the
closing provided for in paragraph 3.1 (the "Closing"). SEI Trust will (i) pay or
cause to be paid to INTRUST Trust on behalf of the Acquiring Fund any interest
received on or after the Closing Date with respect to the Assets of the Acquired
Fund and (ii) transfer to INTRUST Trust on behalf of the Acquiring Fund any
distributions, rights, stock dividends or other property received by SEI Trust
after the Closing Date as distributions on or with respect to the Assets of the
Acquired Fund. Any such interest, distributions, rights, stock dividends or
other property so paid or transferred, or received directly by INTRUST Trust,
shall be allocated by INTRUST Trust to the account of the Acquiring Fund that
acquired the Assets to which such property relates.
1.2 (a) The Assets of the Acquired Fund to be acquired by the
Acquiring Fund (the "Assets") shall consist of all property, including without
limitation, all cash, securities, commodities and futures, interests and
dividends or interest receivables which are owned by the Acquired Fund on the
Closing Date, but shall not include corporate books, records or minutes of the
Acquired Fund.
(b) SEI Trust has provided INTRUST Trust with a list of all
the Assets of the Acquired Fund as of the date of execution of this Agreement.
SEI Trust reserves the right to sell any of the securities held by the Acquired
Fund but will not, without the prior approval of INTRUST Trust, acquire any
additional securities for the Acquired Fund other than securities of the type in
which the Acquiring Fund is permitted to invest and which satisfy the investment
policies, restrictions and other guidelines applicable to the Acquiring Fund.
INTRUST Trust will, within a reasonable time prior to the Closing Date, furnish
SEI Trust with a statement of the Acquiring Fund's investment objectives,
policies and restrictions and a list of the securities, if any, on the Acquired
Fund's lists referred to in the first sentence of this paragraph which do not
conform to the Acquiring Fund's individual investment objectives, policies,
restrictions and guidelines. In the event that the Acquired Fund holds any
investments which the Acquiring Fund may not hold, the Acquired Fund will
dispose of such securities prior to the Closing Date to the extent practicable
and to the extent the Acquired Fund would not be affected adversely by such a
disposition. In addition, if it is determined that the portfolio of the Acquired
Fund and the Acquiring Fund, when aggregated, would contain investments
exceeding certain percentage limitations imposed upon the Acquiring Fund with
respect to such investments, the Acquired Fund, if requested by the Acquiring
Fund, will dispose of and/or reinvest a sufficient amount of such investments as
may be necessary to avoid violating such limitations as of the Closing Date.
- 21 -
<PAGE> 25
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund shall
assume all liabilities, expenses, costs, charges and reserves reflected on
unaudited statements of assets and liabilities of the Acquired Fund prepared by
SEI Fund Management ("SEI"), as administrator of the Acquired Fund, as of the
Valuation Date (as defined in paragraph 2.1), in accordance with generally
accepted accounting principles consistently applied from the prior audited
period. The Acquiring Fund shall assume only those liabilities of the Acquired
Fund reflected in those unaudited statements of assets and liabilities and shall
not assume any other liabilities, whether absolute or contingent (the
"Liabilities").
1.4 As provided in paragraph 3.4, as soon after the Closing Date as
is practicable (the "Liquidation Date"), SEI Trust will effect the liquidation
of the Acquired Fund in the manner provided in its Trust Instrument and
prospectus and in accordance with applicable law, and on and after the Closing
Date it shall not conduct any business on behalf of the Acquired Fund except in
connection with their liquidation and termination. The Acquired Fund shall
distribute pro rata to its shareholders of record determined as of the close of
business on the Closing Date (the "Acquired Fund's Shareholders") the Acquiring
Fund's Shares received by the Acquired Fund pursuant to paragraph 1.1.
Shareholders of the Acquired Fund's Class A Shares shall receive only shares of
the Acquiring Fund's Institutional Service Class Shares. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund's Shares
then credited to the account of the Acquired Fund on the books of the Acquiring
Fund to open accounts on the share records of the Acquiring Fund in the name of
the Acquired Fund's Shareholders and representing the respective pro rata number
and class of the Acquiring Fund's Shares due such shareholders. All issued and
outstanding shares of the Acquired Fund will simultaneously be canceled on the
books of the Acquired Fund, although after the closing any share certificates
representing interests in the Acquired Fund will be deemed to represent the
number of the Acquiring Fund's Shares as may be determined in accordance with
Section 2.3. INTRUST Trust shall not issue certificates representing the
Acquiring Fund's Shares in connection with such exchange.
1.5 Ownership of the Acquiring Fund's Shares will be shown on the
books of the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will
be issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.6 Any transfer taxes payable upon issuance of the Acquiring Fund's
Shares in a name other than the registered holder of the Acquired Fund's shares
on the books of the Acquired Fund as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom the Acquiring Fund's Shares
are to be issued and transferred.
1.7 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of SEI Trust up to and including the Closing Date and
such later dates on which SEI Trust is dissolved and deregistered.
2. VALUATION
2.1 The value of the Assets and Liabilities of the Acquired Fund
shall be the value of such assets, less liabilities, computed on the Closing
Date, using the valuation procedures (including applicable times) set forth in
INTRUST Trust's Trust Agreement and then current
- 22 -
<PAGE> 26
prospectus or statement of additional information applicable to the
Institutional Service Class Shares of the Acquiring Fund.
2.2 The net asset value of the Acquiring Fund's Shares shall be the
net asset value per share of the Institutional Service Class Shares computed on
the Closing Date, using the valuation procedures (including applicable times)
set forth in INTRUST Trust's Trust Agreement and then current prospectus or
statement of additional information applicable to the Institutional Service
Class Shares of the Acquiring Fund.
2.3 The number of the Acquiring Fund's Shares to be issued
(including fractional shares, if any) in exchange for the net assets of the
Acquired Fund and the assumption of its liabilities shall be determined by
dividing the value of the net assets of the Acquired Fund determined by using
the same valuation procedures referred to in paragraph 2.1 by the net asset
value of the Acquiring Fund's Shares determined in accordance with paragraph
2.2.
2.4 All computations of value shall be made by BISYS Fund
Services. Inc. in accordance with its regular practices as administrator for
INTRUST Trust.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be the next Friday that is a full
business day following satisfaction of all of the conditions set forth in
Sections 6, 7 and 8 of this Agreement (other than those conditions which may by
their terms be satisfied only at the Closing), or such later date as the parties
may agree in writing. All acts taking place at the Closing shall be deemed to
take place simultaneously on the Closing Date at 3 p.m. (Central time), unless
otherwise provided. The Closing shall be held at such time on the Closing Date
at the offices of May 19, 1997 or at such other time(s) and/or place as the
parties may agree.
3.2 CoreStates Bank, National Association, as custodian for SEI
Trust (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that: (a) the Acquired Fund's portfolio securities,
cash and any other assets shall have been presented for examination to the
Acquiring Fund prior to the Closing Date and shall have been delivered in proper
form to the Acquiring Fund on the Closing Date and (b) all necessary taxes
including all applicable federal and state stock transfer stamps, if any, shall
have been paid, or provision for payment shall have been made, in conjunction
with the delivery of portfolio securities.
3.3 In the event that on the Closing Date (a) the New York Stock
Exchange or another primary trading market for portfolio securities of the
Acquiring Fund or the Acquired Fund shall be closed to trading or trading
thereon shall be restricted or (b) trading or the reporting of trading on said
Exchange or elsewhere shall be disrupted so that accurate appraisal of the value
of the net assets of the Acquiring Fund or the Acquired Fund is impracticable,
the Closing Date with respect to the Reorganization shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4 SEI Trust shall cause SEI, as transfer agent for SEI Trust, to
deliver at the Closing a certificate of an authorized officer stating that its
records contain the names and addresses of the Acquired Fund's Shareholders and
the number, class and percentage ownership of outstanding
- 23 -
<PAGE> 27
shares owned by each such shareholder immediately prior to the Closing. INTRUST
Trust shall issue and deliver a confirmation evidencing the Acquiring Fund's
Shares to be credited on the Closing Date to the Secretary of SEI Trust, or
provide evidence satisfactory to SEI Trust that the Acquiring Fund's Shares have
been credited to the Acquired Fund's accounts on the books of the Acquiring
Fund. At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, share certificates, if any, receipts or other documents as
such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 SEI Trust, on behalf of the Acquired Fund, represents and
warrants to INTRUST Trust, on behalf of the Acquiring Fund, as follows:
(a) SEI Trust is a voluntary association with transferable
shares of the type commonly referred to as a Massachusetts business trust, duly
organized, validly existing under the laws of the Commonwealth of Massachusetts;
(b) SEI Trust is a registered investment company classified as
a management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act") is in full
force and effect;
(c) The current prospectus and statement of additional
information of SEI Trust with respect to the Acquired Fund conform in all
material respects to the applicable requirements of the Securities Act of 1933,
as amended (the "1933 Act"), and the 1940 Act and the rules and regulations of
the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading;
(d) SEI Trust is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of its
Trust Instrument or By-Laws, as each may have been amended to the date hereof or
of any agreement, indenture, instrument, contract, lease or other undertaking
with respect to the Acquired Fund to which SEI Trust is a party or by which it
or any of its series is bound;
(e) Neither SEI Trust nor any of its series has any material
contracts or other commitments which will be terminated with liability to SEI
Trust or any series thereof prior to the Closing Date;
(f) Except as otherwise disclosed in writing to and accepted
by INTRUST Trust, no litigation or administrative proceeding or investigation of
or before any court or governmental body is presently pending or to its
knowledge threatened against SEI Trust or any of its series with respect to the
Acquired Fund or any of the Acquired Fund's properties or assets which if
adversely determined would materially and adversely affect its financial
condition or the conduct of its business. SEI Trust knows of no facts which
might form the basis for the institution of such proceedings and is not a party
to or subject to the provisions of any order, decree or judgment of any
- 24 -
<PAGE> 28
court or governmental body which materially or adversely affects its business or
its ability to consummate the transactions herein contemplated;
(g) The statements of assets and liabilities of the Acquired
Fund for the period from the commencement of operations to August 31, 1996 (the
"1996 Statement") has been audited by Arthur Andersen L.L.P., independent public
accountants, and is and will be in accordance with generally accepted accounting
principles consistently applied, and the 1996 Statement (copies of which have
been furnished to INTRUST Trust) fairly and accurately reflect the financial
condition of the Acquired Fund as of such date, and there are no known
contingent liabilities of the Acquired Fund as of such date not disclosed
therein;
(h) Since August 31, 1996, there has not been any material
adverse change with respect to the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquired Fund of indebtedness maturing more
than one year from the date that such indebtedness was incurred, provided that
for the purposes of this subparagraph (h), a decline in net asset value per
share of the Acquired Funds shall not constitute a material adverse change;
(i) At the Closing Date, all federal and other tax returns and
reports of the Acquired Fund required by law to have been filed by such dates
shall have been filed, and all federal and other taxes shall have been paid so
far as due, or provision shall have been made for the payment thereof and, to
the best of SEI Trust's knowledge, no such return is currently under audit and
no assessment has been asserted with respect to such returns;
(j) For each fiscal year of its operation, the Acquired Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company;
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable with no personal liability attaching to the
ownership thereof (recognizing that, under Massachusetts law, the Acquired
Fund's Shareholders could, under certain circumstances, be held personally
liable for obligations of the Acquired Fund) by SEI Trust. All of the issued and
outstanding shares of the Acquired Fund will, at the time of Closing, be held by
the persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.4. The Acquired Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Acquired Fund's Shares, nor is there outstanding any security convertible into
any of the Acquired Fund's Shares;
(1) At the Closing Date, SEI Trust, on behalf of the Acquired
Fund, will have good and marketable title to the Assets and full right, power
and authority to sell, assign, transfer and deliver such Assets hereunder and,
upon delivery and payment for such Assets, INTRUST Trust, on behalf of the
Acquiring Fund, will acquire good and marketable title thereto, subject to no
restrictions on the full transfer thereof, including such restrictions as might
arise under the 1933 Act, other than as disclosed to the Acquiring Fund;
- 25 -
<PAGE> 29
(m) The execution, delivery and performance of this Agreement
has been duly authorized as of the date hereof by all necessary action on the
part of SEI Trust's Board of Trustees, and, subject to the receipt of any
necessary exemptive relief or no-action assurances requested from the Commission
or its Staff with respect to Section 17(a) and 17(d) of the 1940 Act and Rule
17d-1 thereunder, this Agreement will constitute a valid and binding obligation
of SEI Trust on behalf of the Acquired Fund, enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general principles of equity;
(n) The information to be furnished by SEI Trust on behalf of
the Acquired Fund for use in no-action requests, applications for orders,
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with federal securities and other laws and regulations thereunder
applicable thereto;
(o) The proxy statement of SEI Trust (the "Proxy Statement")
to be included in the Registration Statement referred to in paragraph 5.7 (only
insofar as it relates to SEI Trust and the Acquired Fund) will, on the effective
date of the Registration Statement and on the Closing Date, (i) comply in all
material respects with the applicable provisions of the 1933 Act, the Securities
Exchange Act of 1934, as amended (the " 1934 Act"), and the 1940 Act and the
regulations thereunder, and (ii) not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which such
statements were made, not materially misleading;
(p) SEI Trust has no authorized series other than the Acquired
Fund, Intermediate-Term Municipal Portfolio, Tax Free Portfolio, Institutional
Tax Free Portfolio, California Intermediate-Term Municipal Portfolio, California
Tax Exempt Portfolio, Pennsylvania Municipal Portfolio, New York
Intermediate-Term Municipal Portfolio and Pennsylvania Tax Free Portfolio;
(q) The Acquired Fund has no authorized classes other than the
Class A Shares and Class B Shares and all of the issued and outstanding shares
of the Class B Shares are, as of the date of this Agreement, held by SEI.
4.2 INTRUST Trust, on behalf of the Acquiring Fund, represents and
warrants to SEI Trust, on behalf of the Acquired Fund, as follows:
(a) INTRUST Trust is a voluntary association with transferable
shares of the type commonly referred to as a Delaware business trust, duly
organized and validly existing under the laws of the State of Delaware;
(b) INTRUST Trust is registered as an investment company
classified as a management company of the open-end type, and its registration
with the Commission as an investment company under the 1940 Act is, or on the
date of the Closing will be, in full force and effect;
- 26 -
<PAGE> 30
(c) The current prospectus and statement of additional
information of INTRUST Trust with respect the Acquiring Fund conform in all
material respects to the applicable requirements of the 1933 Act and the 1940
Act and the rules and regulations of the Commission thereunder and do not
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not materially
misleading;
(d) INTRUST Trust is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of its
Trust Agreement or By-Laws, as each may have been amended to the date hereof or
of any agreement, indenture, instrument, contract, lease or other undertaking
with respect to the Acquiring Fund to which INTRUST Trust is a party or by which
it is bound;
(e) Except as otherwise disclosed in writing to and accepted
by SEI Trust, no litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or threatened against
INTRUST Trust with respect to the Acquiring Fund or the Acquiring Fund's
properties or assets which if adversely determined would materially and
adversely affect its financial condition or the conduct of their business.
INTRUST Trust knows of no facts which might form the basis for the institution
of such proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the transactions
contemplated herein;
(f) The statement of assets and liabilities of INTRUST Kansas
Tax Exempt Bond Fund as of December 6, 1996 has been audited by KPMG Peat
Marwick LLP, independent public accountants, and are in accordance with
generally accepted accounting principles consistently applied, and such
statement (copies of which have been furnished to SEI Trust), fairly and
accurately reflect the financial condition of the Acquiring Fund as of such
date, and there are no known contingent liabilities of the Acquiring Fund as of
such date not disclosed therein;
(g) Since December 6, 1996, there has not been any material
adverse change with respect to the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing more
than one year from the date that such indebtedness was incurred, except as
otherwise disclosed to and accepted by SEI Trust, provided that for the purposes
of this subparagraph (g), a decline in net asset value per share of the
Acquiring Fund shall not constitute a material adverse change;
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law to have been filed by such dates
shall have been filed, and all federal and other taxes shall have been paid so
far as due, or provision shall have been made for the payment thereof and, to
the best of INTRUST Trust's knowledge, no such return is currently under audit
and no assessment has been asserted with respect to such returns;
(i) Since inception, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company;
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<PAGE> 31
(j) All issued and outstanding shares of the Acquiring Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable with no personal liability attaching to ownership
thereof (recognizing that, under Delaware law, the Acquiring Fund's Shareholders
could, under certain circumstances, be held personally liable for obligations of
the Acquiring Fund) by INTRUST Trust. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund's Shares, nor is there outstanding any security
convertible into any of the Acquiring Fund's Shares;
(k) The execution, delivery and performance of this Agreement
has been duly authorized as of the date hereof by all necessary action on the
part of INTRUST Trust's Board of Trustees, and, subject to receipt of any
necessary exemptive relief or no-action assurances requested from the Commission
or its Staff with respect to Section 17(a) and 17(d) of the 1940 Act and Rule
17d-1 thereunder, this Agreement will constitute a valid and binding obligation
of INTRUST Trust on behalf of the Acquiring Fund, enforceable in accordance with
its terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general principles of equity;
(l) The information to be furnished by INTRUST Trust for use
in no-action requests, application for orders, registration statements, proxy
materials and other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete in all material
respects and shall comply in all material respects with federal securities and
other laws and regulations applicable thereto; and
(m) The Proxy Statement (only insofar as it relates to INTRUST
Trust and the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, (i) comply in all material respects with the
applicable provisions of the 1933 Act, the 1934 Act and the 1940 Act and the
regulations thereunder, and (ii) not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which such
statements were made, not materially misleading.
5. COVENANTS OF INTRUST TRUST AND SEI TRUST
5.1 INTRUST Trust and SEI Trust will operate the businesses of the
Acquiring Fund and the Acquired Fund, respectively, in the ordinary course
between the date hereof and the Closing Date, it being understood that such
ordinary course of business will include the declaration and payment of
customary dividends and distributions.
5.2 SEI Trust will call a meeting of the Acquired Fund's
shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 SEI Trust covenants that the Acquiring Fund's Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
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<PAGE> 32
5.4 SEI Trust will assist INTRUST Trust in obtaining such
information as INTRUST Trust reasonably requests concerning the beneficial
ownership of the Acquired Fund's shares.
5.5 Subject to the provisions of this Agreement, INTRUST Trust and
SEI Trust each will take, or cause to be taken, all action, and do or cause to
be done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement.
5.6 As promptly as practicable, but in any case within sixty days
after the Closing Date, SEI Trust shall furnish INTRUST Trust, in such form as
is reasonably satisfactory to INTRUST Trust, statements of the earnings and
profits of the Acquired Fund for federal income tax purposes which will be
carried over to the Acquiring Fund as a result of Section 381 of the Code, and
which will be certified by SEI Trust's President and its Treasurer.
5.7 SEI Trust will provide INTRUST Trust with information reasonably
necessary for the preparation of a prospectus (the "Prospectus") which will
include the Proxy Statement referred to in paragraph 4.1(o), all to be included
in a Registration Statement on Form N-14 of INTRUST Trust (the "Registration
Statement"), in compliance with the 1933 Act, the 1934 Act and the 1940 Act, in
connection with the meeting of the Acquired Fund's Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.8 INTRUST Trust, on behalf of the Acquiring Fund, agrees to use
all reasonable efforts to obtain the approvals and authorizations required by
the 1933 Act, the 1940 Act and such of the state Blue Sky or securities laws as
it may deem appropriate in order to continue its operations after the Closing
Date.
5.9 From and after the date of this Agreement, SEI Trust will not
issue any additional shares of the Class B Shares of the Acquired Fund. As
contemplated by Section 1.4, the Acquired Fund shall redeem all of its shares of
the Class B Shares held by SEI immediately prior to the Closing with respect to
the Acquired Fund.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SEI TRUST
The obligations of SEI Trust to consummate the transactions provided
for herein shall be subject, at its election, to the performance by INTRUST
Trust of all of the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following further conditions:
6.1 All representations and warranties of INTRUST Trust contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date;
6.2 INTRUST Trust shall have delivered to SEI Trust a certificate
executed in its name by its President or the President and its Treasurer or
Assistant Treasurer, in a form reasonably satisfactory to SEI Trust and dated as
of the Closing Date, to the effect that the representations and
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<PAGE> 33
warranties of INTRUST Trust made in this Agreement are true and correct at and
as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement and as to such other matters as SEI Trust shall
reasonably request;
6.3 SEI Trust shall have received on the Closing Date a favorable
opinion from Baker & McKenzie, counsel to INTRUST Trust, dated as of be Closing
Date, in a form reasonably satisfactory to Morgan Lewis & Bockius, counsel to
SEI Trust, that:
(a) INTRUST Trust is a voluntary association with transferable
shares of the type commonly referred to as a Delaware business trust organized
pursuant to its Trust Agreement and validly existing under the laws of the State
of Delaware with legal power to own all of its properties and assets and to
carry on its business, including that of the Acquiring Fund, as presently
conducted.
(b) The Agreement has been duly authorized, executed and
delivered by INTRUST Trust on behalf of the Acquiring Fund and, assuming that
the Registration Statement complies with the 1933 Act, the 1934 Act and the
rules and regulations thereunder, is a valid and binding obligation of INTRUST
Trust enforceable against INTRUST Trust in accordance with its terms, subject as
to enforcement to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and to general
principles of equity.
(c) The Acquiring Fund's Shares to be issued and delivered to
SEI Trust, which SEI Trust will thereafter transfer to the shareholders of the
Acquired Fund, all as provided by the Agreement, are duly authorized and upon
such delivery will be validly issued and outstanding and fully paid and
nonassessable by INTRUST Trust, and no shareholder of INTRUST Trust has any
preemptive right to subscription or purchase in respect thereof.
(d) The execution and delivery of the Agreement did not, and
the consummation of the transactions contemplated therein will not, violate
INTRUST Trust's Trust Agreement or By-Laws, or any material provision of any
material agreement known to such counsel to which INTRUST Trust is a party or by
which it is bound with respect to the Acquiring Fund or, to such counsel's
knowledge, result in the acceleration of any obligation or the imposition of any
penalty, under any material agreement, judgment or decree to which INTRUST Trust
is a party or by which it is bound with respect to the Acquiring Fund.
(e) No consent, approval, authorization or order of any court
or governmental authority is required for the consummation by INTRUST Trust of
the transaction contemplated in the Agreement, except such as have been obtained
under the 1933 Act, the 1934 Act, and be 1940 Act, and such as may be required
under state securities laws.
(f) The descriptions in the Proxy Statement of statutes, legal
and governmental proceedings and contracts and other documents, if any, only
insofar as they relate to INTRUST Trust or the Acquiring Fund, are accurate and
fairly present the information required to be shown.
(g) The Registration Statement has become effective under the
1933 Act and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration
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<PAGE> 34
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the 1933 Act.
(h) To such counsel's knowledge (A) no legal or governmental
proceedings existing on or before the date of mailing the Proxy Statement, only
insofar as they relate to INTRUST Trust or the Acquiring Fund, are required to
be described in the Proxy Statement which are not described as required and (B)
there are no contracts or documents, only insofar as they relate to INTRUST
Trust or the Acquiring Fund, of a character required to be described in the
Proxy Statement to be as exhibits to the Registration Statement which are not
described or filed as required.
(i) INTRUST Trust is a duly registered investment company and,
to such counsel's knowledge, its registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(j) To such counsel's knowledge (A) no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to INTRUST Trust or any
of its properties or assets and (B) INTRUST Trust is not a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF INTRUST TRUST
The obligations of INTRUST Trust to complete the transactions
provided for herein shall be subject, at its election, to the performance by SEI
Trust of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of SEI Trust contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date;
7.2 SEI Trust shall have delivered to INTRUST Trust the 1996
Statements and related report and certificate as and when contemplated by
Section 5.9 and statements of assets and liabilities of the Acquired Fund
together with a list of the Acquired Fund's portfolio securities showing the tax
costs of such securities by lot and the holding periods of such securities, as
of the Closing Date, certified by the Treasurer or Assistant Treasurer of SEI
Trust;
7.3 SEI Trust shall have delivered to INTRUST Trust on the Closing
Date a certificate executed in its name by its President or Vice President and
its Treasurer or Assistant Treasurer, in form and substance satisfactory to
INTRUST Trust and dated as of the Closing Date, to the effect that the
representations and warranties of SEI Trust made in this Agreement and in the
certificate contemplated by Section 5.9 are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated by
this Agreement, and as to such other matters as INTRUST Trust shall reasonably
request;
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<PAGE> 35
7.4 INTRUST Trust shall have received on the Closing Date a
favorable opinion of Morgan Lewis & Bockius, counsel to SEI Trust, in a form
satisfactory to Baker & McKenzie, counsel to INTRUST Trust, that:
(a) SEI Trust is a voluntary association with transferable
shares of the type commonly referred to as a Massachusetts business trust
organized pursuant to its Trust Agreement and validly existing and in good
standing under the laws of the Commonwealth of Massachusetts with legal power to
own all of its properties and assets and to carry on its business. including
that of the Acquired Fund, as presently conducted.
(b) The Agreement has been duly authorized, executed and
delivered by SEI Trust on behalf of the Acquired Fund and, assuming that the
Registration Statement complies with the 1933 Act, the 1934 Act and the rules
and regulations thereunder, is a valid and binding obligation of SEI Trust
enforceable against SEI Trust in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and to general principles
of equity.
(c) The execution and delivery of the Agreement did not, and
the consummation of the transactions contemplated therein will not, violate SEI
Trust's Trust Instrument or By-Laws, as each may have been amended to the date
hereof, or any material provision of any material agreement known to such
counsel to which SEI Trust is a party or by which it is bound with respect to
the Acquired Fund or, to such counsel's knowledge, result in the acceleration of
any obligation or the imposition of any penalty, under any material agreement,
judgment, or decree to which SEI Trust is a party or by which it is bound with
respect to the Acquired Fund.
(d) No consent, approval, authorization or order of any court
or governmental authority is required for the consummation by SEI Trust of the
transactions contemplated in the Agreement, except such as have been obtained
under the 1933 Act, the 1934 Act, and the 1940 Act, and such as may be required
under state securities laws.
(e) The descriptions in the Proxy Statement of statutes, legal
and governmental proceedings and contracts and other documents, if any, only
insofar as they relate to SEI Trust or the Acquired Fund, are accurate and
fairly present the information required to be shown.
(f) To such counsel's knowledge (A) no legal or governmental
proceedings existing on or before the date of mailing the Proxy Statement, only
insofar as they relate to SEI Trust or the Acquired Fund, are required to be
described in the Proxy Statement which are not described as required and (B)
there are no contracts or documents, only insofar as they relate to SEI Trust or
the Acquired Fund, of a character required to be described in the Proxy
Statement or to be filed as exhibits to the Registration Statement which are not
described and filed as required.
(g) SEI Trust is a duly registered investment company and, to
such counsel's knowledge, its registration with the Commission as an investment
company under the 1940 Act is in full force and effect.
(h) To such counsel's knowledge (A) no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or
- 32 -
<PAGE> 36
threatened as to SEI Trust or any of its properties or assets and (B) SEI Trust
is not a party to or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and adversely affects its
business.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF INTRUST TRUST
AND SEI TRUST
If any of the conditions set forth below have not been satisfied on
or before the Closing Date with respect to SEI Trust or INTRUST Trust, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall
have been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of SEI Trust's
Trust Instrument and the 1940 Act and certified copies of the resolutions
evidencing such approval shall have been delivered to INTRUST Trust.
Notwithstanding anything herein to the contrary, neither INTRUST Trust nor SEI
Trust may waive the conditions set forth in this paragraph 8.1;
8.2 On the Closing Date, no action, suit or other proceeding shall
be pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein;
8.3 (a) The parties shall have received (i) an Order from the
Commission on an Application Pursuant to Section 17(b) of the 1940 Act for an
Order Exempting Proposed Transactions from Section 17(a) of the Act and pursuant
to Section 17(d) of the Act and Rule 17d-1 thereunder or, alternatively, (ii) an
opinion of counsel reasonably satisfactory to all parties that such an order is
not required;
(b) All consents of other parties and all other consents,
orders and permits of federal, state and local regulatory authorities (including
those of the Commission and of state Blue Sky and securities authorities,
including "no-action" positions of and exemptive orders from such federal and
state authorities) deemed necessary by INTRUST Trust or SEI Trust to permit
consummation, in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain any such consent, order
or permit would not involve a risk of a material adverse effect on the assets or
properties of INTRUST Trust or SEI Trust, provided that either party hereto may
for itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued, and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act;
8.5 Except to the extent prohibited by Rule l9b-1 promulgated under
the 1940 Act, the Acquired Fund shall have declared a dividend or dividends
which, together with all previous such dividends, shall have the effect of
distributing to the Acquired Fund's Shareholders all of the Acquired Fund's
investment company taxable income for all taxable years ending on or prior to
the Closing Date (computed without regard to any deduction for dividends paid)
and all of its net capital gain
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<PAGE> 37
realized in all taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carry forward):
8.6 The parties shall have received a favorable opinion of Baker &
McKenzie, addressed to INTRUST Trust and SEI Trust, substantially to the effect
that for federal income tax purposes:
(a) The transfer of all or substantially all of the Acquired
Fund's assets in exchange for the Acquiring Fund's Shares and the assumption by
the Acquiring Fund of certain identified liabilities of the Acquired Fund will
constitute a "reorganization" within the meaning of Section 368 of the Code, and
INTRUST Trust and SEI Trust are each a "party to a reorganization" within the
meaning of Section 368 of the Code:
(b) No gain or loss will be recognized by the Acquired Fund
upon the transfer of the Acquired Fund's Assets to the Acquiring Fund in
exchange for the Acquiring Fund's Shares and the assumption by the Acquiring
Fund of certain identified liabilities of the Acquired Fund or upon the
distribution (whether actual or constructive) of the Acquiring Fund's Shares to
the Acquired Fund's Shareholders in exchange for their shares of the Acquired
Fund;
(c) The tax basis of the Acquired Fund's assets acquired by an
Acquiring Fund will be the same as the tax basis of such assets to the Acquired
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Acquired Fund;
(d) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Acquired Fund solely in exchange for the
Acquiring Fund's Shares and the assumption by the Acquiring Fund of certain
identified liabilities of the Acquired Fund:
(e) No gain or loss will be recognized by shareholders of the
Acquired Fund upon the issuance of the Acquiring Fund's Shares to such
shareholders; and
(f) The aggregate tax basis for the Acquiring Fund's Shares
received by each shareholder of the Acquired Fund pursuant to the Reorganization
will be the same as the aggregate tax basis of the Acquired Fund's Shares held
by such shareholder immediately prior to the Reorganization, and the holding
period of the Acquiring Fund's Shares to be received by each shareholder of the
Acquired Fund will include the period during which the Acquired Fund's Shares
exchanged therefor were held by such shareholder (provided that the Acquired
Fund's Shares were held as capital assets on the date of the Reorganization).
Notwithstanding anything herein to the contrary, neither INTRUST
Trust nor SEI Trust may waive the conditions set forth in this paragraph 8.6
unless the Board of Trustees of either INTRUST Trust or SEI Trust (including the
Trustees who are not "interested persons" thereof), shall have determined that
the waiver thereof would not materially affect the shareholders of the Acquired
Fund or Acquiring Fund.
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<PAGE> 38
9. INDEMNIFICATION
9.1 The Acquired Fund will indemnify and hold harmless the Acquiring
Fund, its trustees and its officers (for purposes of this paragraph 9. 1, the
"Indemnified Parties") against any and all expenses, losses, claims, damages and
liabilities at any time imposed upon or reasonably incurred by any one or more
of the Indemnified Parities in connection with, arising out of, or resulting
from any claim, action, suit or proceeding in which any one or more of the
Indemnified Parties may be involved or with which any one or more of the
Indemnified Parties may be threatened by reason of any untrue statement or
alleged untrue statement of a material fact relating to the Acquired Fund
contained in the Registration Statement, the Prospectus or the Proxy Statement
or any amendment or supplement to any of the foregoing, or arising out of or
based upon the omission or alleged omission to state in any of the foregoing a
material fact relating to the Acquired Fund required to be stated therein or
necessary to make the statements relating to the Acquired Fund therein not
misleading, including, without limitation, any amounts paid by any one or more
of the Indemnified Parties in a reasonable compromise or settlement of any such
claim, action, suit or proceeding, or threatened claim, action, suit or
proceeding made with the consent of the Acquired Fund. The Indemnified Parties
will notify the Acquired Fund in writing within ten days after the receipt by
any one or more of the Indemnified Parties of any notice of legal process or any
suit brought against or claim made against such Indemnified Parties as to any
matters covered by this paragraph 9.1. The Acquired Fund shall be entitled to
participate at its own expense in the defense of any claim, action, suit or
proceeding covered by this paragraph 9.1, or, if it so elects, to assume at its
expense by counsel satisfactory to the Indemnified Parties the defense of any
such claim, action, suit or proceeding, and if the Acquired Fund elects to
assume such defense, the Indemnified Parties shall be entitled to participate in
the defense of any such claim, action, suit or proceeding at their expense. The
Acquired Fund's obligation under this paragraph 9.1 to indemnify and hold
harmless the Indemnified Parties shall constitute a guarantee of payment so that
the Acquired Fund will pay in the first instance any expenses, losses, claims,
damages and liabilities required to be paid by it under this paragraph 9.1
without the necessity of the Indemnified Parties' first paying the same.
9.2 The Acquiring Fund will indemnify and hold harmless, out of its
assets but no other assets, the Acquired Fund, its trustees and its officers
(for purposes of this paragraph 9.2, the "Indemnified Parties") against any and
all expenses, losses, claims, damages and liabilities at any time imposed upon
or reasonably incurred by any one or more of the Indemnified Parties in
connection with, arising out of, or resulting from any claim, action, suit or
proceeding in which any one or more of the Indemnified Parties may be involved
or with which any one or more of the Indemnified Parities may be threatened by
reason of any untrue statement or alleged untrue statement of a material fact
relating to the Acquiring Fund contained in the Registration Statement, the
Prospectus or the Proxy Statement, or any amendment or supplement to any
thereof, or arising out of, or based upon, the omission or alleged omission to
state in any of the foregoing a material fact relating to the Acquiring Fund
required to be stated therein or necessary to make the statements relating to
the Acquiring Fund therein not misleading, including without limitation any
amounts paid by any one or more of the Indemnified Parties in a reasonable
compromise or settlement of any such claim, action, suit or proceeding, or
threatened claim, action, suit or proceeding made with the consent of the
Acquiring Fund. The Indemnified Parties will notify the Acquiring Fund in
writing within ten days after the receipt by any one or more of the Indemnified
Parties of any notice of legal process or any suit brought against or claim made
against such Indemnified Party as to any matters covered by this paragraph 9.2.
The Acquiring Fund shall be entitled to participate at its own expense in the
defense
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<PAGE> 39
of any claim, action, suit or proceeding covered by this paragraph 9.2, or, if
it so elects, to assume at its expense by counsel satisfactory to the
Indemnified Parties the defense of any such claim, action, suit or proceeding,
and, if the Acquiring Fund elects to assume such defense, the Indemnified
Parties shall be entitled to participate in the defense of any such claim,
action, suit or proceeding at their own expense. The Acquiring Fund's obligation
under this paragraph 9.2 to indemnify and hold harmless the Indemnified Parties
shall constitute a guarantee of payment so that the Acquiring Fund will pay in
the first instance any expenses, losses, claim, damages and liabilities required
to be paid by it under this paragraph 9.2 without the necessity of the
Indemnified Parties' first paying the same.
10. BROKERAGE FEES AND DEFENSES
10.1 INTRUST Trust and SEI Trust each represents and warrants to the
other that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
10.2 Except as otherwise provided herein, all expenses of the
Acquiring Fund and the Acquired Fund contemplated by this Agreement will be
borne by INTRUST. Such expenses include, without limitation: (i) expenses
incurred in connection with the entering into and the carrying out of the
provisions of this Agreement; (ii) expenses incurred in filing of exemption
applications, if necessary, with the Securities and Exchange Commission; (iii)
expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the Acquiring Fund's Shares to be issued
pursuant to the provisions of this Agreement; (iv) registration or qualification
fees and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund's Shares to be
issued in connection herewith in each state in which the Acquired Fund's
Shareholders are resident as of the date of the mailing of the Proxy Statement
to such shareholders; (v) postage in connection with the Registration
Statement/Proxy Statement; (vi) printing in connection with the Registration
Statement/Proxy Statement; (vii) accounting fees in connection with the
transactions; (viii) legal fees in connection with the transactions; and (ix)
solicitation costs of the transactions.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1 INTRUST Trust and SEI Trust agree that neither party has made
any representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
11.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
12. TERMINATION
12.1 Prior to January 1, 1998, this Agreement may be
terminated by the mutual agreement of INTRUST Trust and SEI Trust. After that
date, either SEI Trust or INTRUST Trust may terminate this Agreement upon
written notice to the other party. In addition, either INTRUST Trust or SEI
Trust may at its option terminate this Agreement at or prior to the Closing
Date, because:
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<PAGE> 40
(a) of a material breach by the other of any representation,
warranty or agreement contained herein to be performed at or prior to the
Closing Date; or
(b) condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
12.2 In the event of any such termination, there shall be no
liability for damages on the part of either INTRUST Trust or SEI Trust or their
respective Directors, Trustees or officers, to the other party.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by SEI Trust and INTRUST Trust;
provided, however, that following the meeting of the Acquired Fund's
shareholders called by SEI Trust pursuant to paragraph 5.2 of this Agreement, no
such amendment may have the effect of changing the provisions for determining
the number of the Acquiring Fund's Shares to be issued to the Acquired Fund's
Shareholders under this Agreement to the detriment of such shareholders without
their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to INTRUST Trust, 3435 Stelzer
Road, Columbus, Ohio 43219 (with a copy to Baker & McKenzie, 805 Third Avenue,
New York, New York 10022, Attention: Steven R. Howard, Esq.), or to SEI Trust,
Oaks, Pennsylvania 19456 (with a copy to Morgan Lewis Bockius, 1800 M Street,
N.W., Washington, DC 20036, Attention: Edward B. Baer, Esq.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
15.1 The Article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of [Massachusetts].
15.4 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any
- 37 -
<PAGE> 41
person, firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
15.5 (a) It is expressly agreed that the obligations of the
Acquiring Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of INTRUST Trust
personally, but bind only the trust property of INTRUST Trust and the Acquiring
Fund, as provided in the Trust Agreement of INTRUST Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of INTRUST Trust
and executed by authorized officers of INTRUST Trust on behalf of the Acquiring
Fund, acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officers shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Acquiring Fund as provided in the
Trust Agreement of INTRUST Trust.
(b) It is expressly agreed that the obligations of the
Acquired Fund hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of SEI Trust personally,
but bind only the trust property of SEI Trust and the Acquiring Fund, as
provided in the Trust Instrument of SEI Trust. The execution and delivery of
this Agreement have been authorized by the Trustees of SEI Trust and executed by
authorized officers of SEI Trust on behalf of the Acquired Fund, acting as such,
and neither such authorization by such Trustees nor such execution and delivery
by such officers shall be deemed to have been made by any of them individually
or to impose any liability on any of them personally, but shall bind only the
property of the Acquired Fund as provided in the Trust Instrument of SEI Trust.
(c) With respect to the obligations of INTRUST Trust on behalf
of the Acquiring Fund or of SEI Trust on behalf of the Acquired Fund arising out
of this Agreement. the parties hereto shall look for payment or satisfaction of
such obligation solely to the assets of property of the Acquiring Fund or
Acquired Fund (as applicable) to which such obligation relates.
- 38 -
<PAGE> 42
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its Chairman of the Board, President or Vice
President and its seal to be affixed thereto and attested by its Secretary or
Assistant Secretary.
Attest: INTRUST Funds Trust on behalf of the
Acquiring Fund
By:
- --------------------------------- -----------------------------------
Secretary Name:
Title:
Attest: SEI Tax Exempt Trust on behalf of the
Acquired Fund
By:
- --------------------------------- -----------------------------------
Secretary Name:
Title:
Agreed and Acknowledged as to Sections 10.2 and 11.2:
INTRUST BANK, N.A.
By:
-----------------------------------
Name:
Title:
- 39 -
<PAGE> 43
APPENDIX B - ADDITIONAL INVESTMENT RESTRICTIONS
ADDITIONAL INVESTMENT RESTRICTIONS. Both the Reorganizing and Acquiring
Funds have investment policies restricting the scope of their investments in
addition to those discussed in the body of this Combined Proxy
Statement/Prospectus. Neither the Reorganizing Fund nor the Acquiring Fund may
change fundamental investment policies without the affirmative vote of the
holders of a majority of the outstanding shares (as defined in the 1940 Act) of
the particular Reorganizing or corresponding Acquiring Fund. However, investment
policies that are not fundamental may be changed by the Board of Trustees
without shareholder approval. The formal investment restrictions of the
Reorganizing Funds and their corresponding Acquiring Funds are identical. The
tables below presents restrictions of the Reorganizing Fund and corresponding
Acquiring Fund. Fundamental policies are followed by an (F); non-fundamental
policies are followed by an (NF).
THE FUND MAY NOT:
1. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 10% of the value of total assets. This borrowing
provision is included solely to facilitate the orderly sale of portfolio
securities to accommodate heavy redemption requests if they should occur and
is not for investment purposes. All borrowings of the Portfolios, in excess
of 5% of its total assets, will be repaid before making additional
investments and any interest paid on such borrowings will reduce income. (F)
2. Purchase securities of other investment companies except that the Fund
purchase securities of money market funds as permitted by the 1940 Act and
the rules and regulations thereunder. (NF) In addition, notwithstanding any
other policy, unlike the Reorganization Fund Portfolio, the Acquiring Fund
will adopt fundamental policy such that it may invest all of its investable
assets in an investment company.
3. Make loans, except that the Fund may purchase or hold debt instruments in
accordance with its investment objective and policies and may enter into
repurchase agreements, provided that repurchase agreements maturing in more
than seven days, restricted securities and other illiquid securities are not
to exceed, in the aggregate, 10% of the Portfolio's net assets. (F)
4. Pledge, mortgage or hypothecate assets except to secure temporary borrowings
permitted by (1) above in aggregate amounts not to exceed 10% of the net
assets of such Portfolio taken at current value at the time of the
incurrence of such loan. (NF)
5. Invest in companies for the purpose of exercising control. (F)
6. Acquire more than 10% of the voting securities of any one issuer. (NF)
7. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts including futures contracts.(F)
However, subject to its permitted investments, the Fund may invest in
municipal securities or other obligations secured by real estate or other
interests therein.
8. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Fund may obtain short-term credits as
necessary for the clearance of security transactions. (NF)
9. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security. (F)
10. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described in the Prospectuses and its Statement
of Additional Information or as permitted by rule, regulation or order of
the SEC. (F)
11. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, partner or director of the Trust or any
investment adviser of the Trust owns beneficially more than 1/2 of 1% of the
shares or securities of such issuer and all such officers, trustees, shares
or securities of such issuer and all such officers, trustees, partners and
directors owning more than 1/2 of 1% of such shares or securities together
own more than 5% of such shares or securities. (NF)
- 41 -
<PAGE> 44
12. Purchase securities of any company which has (with predecessors) a record of
less than three years continuing operations (except (i) obligations issued
or guaranteed by the United States Government, its agencies or
instrumentalities, or (ii) municipal securities which are rated by at least
two nationally recognized municipal bond rating services or determined by
the Adviser to be of "high quality") if, as a result, more than 5% of the
total assets (taken at current value) would be invested in such securities.
(NF)
13. Purchase warrants, calls, straddles, spreads or combinations thereof. (NF)
14. Invest in interests in oil, gas or other mineral exploration mineral Leases
or development programs. (NF)
The foregoing percentages will apply at the time of the purchase of a
security.
- 42 -
<PAGE> 45
SEI TAX EXEMPT TRUST
KANSAS TAX FREE INCOME PORTFOLIO
Oaks, Pennsylvania 19456
(800) 342-5734
STATEMENT OF ADDITIONAL INFORMATION
RELATING TO SPECIAL MEETING OF
SHAREHOLDERS OF THE SEI TAX EXEMPT TRUST
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Proxy Statement/Prospectus dated March __,
1997 for the Special Meeting of Shareholders of Kansas Tax Free Income Portfolio
(the "Fund" or the "Reorganizing Fund"), a series of SEI Tax Exempt Trust ("SEI
Trust"), to be held on April __, 1997. Copies of the Combined Proxy
Statement/Prospectus may be obtained at no charge by calling SEI Financial
Services Company at 800-341-5734.
Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the Combined Proxy
Statement/Prospectus.
Further information about the Reorganizing Fund is contained in and
incorporated by reference to SEI Tax Exempt Trust's Statement of Additional
Information dated December 31, 1996, which is included herewith. The audited
financial statements for the Reorganizing Fund contained in their Annual Report,
dated August 31, 1996 and their unaudited financial statements contained in
their Semi-Annual Report dated February 29, 1996 are incorporated herein by
reference and included herewith. No other parts of the Annual Report or
Semi-Annual Report are incorporated herein by reference.
Further information about INTRUST Funds Trust contained in, and incorporated
herein by reference to, the Statement of Additional Information for Kansas Tax
Exempt Bond Fund (the "Acquiring Fund"), which is included herewith. The
Acquiring Fund was not operational as of February 21, 1997.
The date of this Statement of Additional Information is March __, 1996.
<PAGE> 46
TABLE OF CONTENTS
General Information...........................................................
Financial Statements for SEI Tax Exempt Trust.................................
Financial Statements for INTRUST Funds Trust..................................
Statement of Additional Information for SEI Tax Exempt Trust..................
Statement of Additional Information for INTRUST Funds Trust...................
- 2 -
<PAGE> 47
GENERAL INFORMATION
The Shareholders of the SEI Tax Exempt Trust are being asked to consider and
approve an Agreement and Plan of Reorganization (the "Reorganization Agreement")
by and between SEI Tax Exempt Trust and INTRUST Funds Trust and the transactions
contemplated thereby.
The Reorganization Agreement provides that the Reorganizing Fund will
transfer substantially all its assets and its stated liabilities to the
Acquiring Fund.
In exchange for the transfers of these assets and liabilities pursuant to
the Reorganization Agreement, INTRUST Funds Trust will simultaneously issue
shares of the Acquiring Fund to the Reorganizing Fund. The Reorganizing Fund
will then distribute shares of the Acquiring Fund to its shareholders, in
liquidation of the Reorganizing Fund. As a result upon effectiveness of the
reorganization, the Reorganizing Fund will cease to exist and its shareholders
will be shareholders of the corresponding Acquiring Fund.
The INTRUST Kansas Tax Exempt Bond Fund will not be operational before the
Reorganization. Accordingly, no pro forma financial information showing the
impact of the Reorganization is presented.
The Special Shareholders Meeting of SEI Tax Exempt Trust to consider the
Reorganization Agreement and the related transactions will be held at the
offices of INTRUST Bank N.A., 105 North Main Street, Box One, Wichita, Kansas
67201, on April __, 1997 at ___ _.m. Eastern Time.
For further information about these transactions, see the Combined Proxy
Statement/Prospectus.
- 3 -
<PAGE> 48
Item 15. Indemnification.
As permitted by Section 17(h) and (i) of the Investment Company Act
of 1940 (the "1940 Act") and pursuant to Article X of the Registrant's Trust
Instrument (Exhibit 1 to the Registration Statement), Section 4 of the Master
Investment Advisory Contract between Registrant and INTRUST (Exhibit 5(a) to
this Registration Statement), and Section 14 of the Master Distribution Contract
between Registrant and BISYS (Exhibit 6 to this Registration Statement),
officers, trustees, employees and agents of the Registrant will not be liable to
the Registrant, any shareholder, officer, trustee, employee, agent or other
person for any action or failure to act, except for bad faith, willful
misfeasance, gross negligence or reckless disregard of duties, and those
individuals may be indemnified against liabilities in connection with the
Registrant, subject to the same exceptions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant understands that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The Registrant will purchase an insurance policy insuring its
officers and trustees against liabilities, and certain costs of defending claims
against such officers and trustees, to the extent such officers and trustees are
not found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers under certain circumstances.
Section 4 of the Master Investment Advisory Contract between
Registrant and INTRUST and Section 9 of the Master Distribution Contract between
Registrant and BISYS limit the liability of INTRUST, and BISYS to liabilities
arising from willful misfeasance, bad faith or gross negligence in the
performance of their respective duties or from reckless disregard by them of
their respective obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its Declaration of Trust, By-Laws, Investment
Advisory Contracts and Distribution Contract in a manner consistent with Release
No. 11330 of the Securities and Exchange Commission under the 1940 Act so long
as the interpretations of Section 17(h) and 17(i) of such Act remain in effect
and are consistently applied.
Item 16. Exhibits
- 5 -
<PAGE> 49
-- (1) Trust Instrument.
-- (2) Bylaws of Registrant.
(3) None.
(4) Agreement and Plan of Reorganization, filed herewith
as Exhibit A to Combined Proxy Statement/Prospectus.
(5) None.
-- (6)(a) Form of Master Investment Advisory Agreement and
Supplements between Registrant and Adviser.
-- (6)(b) Form of Sub-Advisory Agreements between Adviser and Sub-
Advisers.
- (6)(c) Form of Agreement among the Fund, AMR Investment
Services Trust, AMR Investment Services, Inc. and
INTRUST Bank N.A. relating to the International Multi-
Manager Stock Fund.
- (6)(d) Form of Master Administration Agreement and Supplements
between Registrant and Administrator.
- (7) Form of Master Distribution Contract and Supplements
between Registrant and Distributor.
- (8) None.
-- (9) Form of Custodian Contract between Registrant and
Custodian.
- (10)(a) Form of 12b-1 Distribution Plan and Agreements.
- (10)(b) Form of 18f-3 Plan.
(11) Consent of Baker & McKenzie, counsel to Registrant.
(12) To be filed.
- (13)(a) Transfer Agency Agreement and Service Agreement.
-- (13)(b) Form of Service Organization Agreement.
(14)(a) Consent of KPMG Peat Marwick LLP, independent public
accountants for INTRUST Funds Trust.
(14)(b) Consent of Arthur Andersen LLP, independent public
accountants for SEI Tax Exempt Trust.
- 6 -
<PAGE> 50
(15) None.
- (16) Powers of Attorney.
(17)(a) Form of Proxy filed herewith as Exhibit 17(a).
(17)(b) Prospectus dated January 9, 1997 for INTRUST Funds
Trust-Kansas Tax Exempt Bond Fund, Institutional class
shares.
(17)(c) Statement of Additional Information dated January 9, 1997
for INTRUST Funds Trust-Kansas Tax Exempt Bond Fund,
Institutional class shares.
(17)(d) Prospectus dated December 31, 1996 for the SEI Tax Exempt
Trust-Kansas Tax Free Income Fund, Class A Shares.
(17)(e) Statement of Additional Information dated December 31,
1996 for the SEI Tax Exempt Trust-Kansas Tax Free Income
Fund, Class A Shares.
(17)(f) Financial Statements as of and for the year ended
August 31, 1996 and Report of independent public
accountants thereon as contained in the Annual Report
to Shareholders of SEI Kansas Tax Exempt Trust.
- ------------------
- - Incorporated by reference to Pre-effective Amendment No. 2 to Registrant's
Registration Statement.
- -- Incorporated by reference to Pre-effective Amendment No. 3 to Registrant's
Registration.
- 7 -
<PAGE> 51
Item 17. Undertakings.
1. The undersigned Registrant agrees that prior to any public reoffering
of the Securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, as
amended, the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
2. The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment, shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
3. Registrant undertakes to file, by post-effective amendment, an opinion
of counsel supporting the tax consequences of the proposed Reorganizations
within a reasonable time after receipt of such opinion.
- 8 -
<PAGE> 52
SIGNATURES
As required by the Securities Act of 1933, this Registration
Statement has been signed on behalf of the Registrant, in the City of New York,
and State of New York, on February 21, 1997.
INTRUST FUNDS TRUST
By:
---------------------------------
David Bunstine, President
<PAGE> 53
As required by the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/Terry L. Carter*
- -------------------------
Terry L. Carter Trustee February 21,1997
/s/Thomas F. Kice*
- -------------------------
Thomas F. Kice Trustee February 21, 1997
/s/George Mileusnic*
- -------------------------
George Mileusnic Trustee February 21, 1997
/s/John J. Pileggi
- -------------------------
John J. Pileggi Trustee February 21, 1997
/s/Thomas E. Shea*
- -------------------------
Thomas E. Shea Trustee February 21, 1997
/s/David Bunstine
- -------------------------
David Bunstine President and Treasurer February 21, 1997
</TABLE>
*By
----------------------------------
John J. Pileggi, Attorney-In-Fact
*Pursuant to Power of Attorney filed with Pre-Effective Amendment No. 2.
<PAGE> 1
Exhibit 11
February 19, 1997
The INTRUST Funds
3435 Stelzer Road
Columbus, OH 43219
Ladies and Gentlemen:
Reference is made to the registration statement on Form N-14 being
filed herewith with the Securities and Exchange Commission (the "Registration
Statement") with respect to certain shares of beneficial interest (the
"Shares") of the INTRUST Funds, an unincorporated association of the type
commonly referred to as a Delaware business trust (the "Trust"), representing
interests in the Institutional Service Class Shares of the INTRUST Kansas Tax
Exempt Bond Fund, a series of the Trust, to be issued pursuant to a certain
Agreement and Plan of Reorganization (the "Reorganization Agreement") between
the Trust and SEI Tax Exempt Trust described in the Registration Statement.
We have examined such records, documents and other instruments and have
made such other examinations and inquiries as we have deemed necessary to
enable us to express the opinion set forth below.
Based upon and subject to the foregoing, we are of the opinion that the
Shares, when issued in accordance with the terms of the Reorganization
Agreement, will be validly issued, fully paid and non-assessable by the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration.
Very truly yours,
BAKER & McKENZIE
<PAGE> 1
Exhibit 14(a)
AUDITORS' CONSENT
The Board of Trustees of
INTRUST FUNDS Trust:
We consent to the use of our report included herein dated December 6, 1996
for the INTRUST FUNDS Trust Money Market Fund as of December 6, 1996, and to the
reference to our firm under the heading "Experts" in the Statement of Additional
Information.
KPMG Peat Marwick LLP
Columbus, Ohio
February 21, 1997
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated October 11, 1996 on the August 31, 1996 financial statements of the
Kansas Tax Free Income Portfolio of the SEI Tax Exempt Trust included in the
Post-Effective Amendment No. 1 to the Registration Statement on Form N-14 of
the INTRUST Funds Trust (file No. 333-447), and to all references to our firm
included in this Registration Statement.
ARTHUR ANDERSEN LLP
Philadelphia, PA
February 20, 1997
<PAGE> 1
Exhibit 17(a)
SEI TAX EXEMPT TRUST
KANSAS TAX FREE INCOME PORTFOLIO
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS -- APRIL __, 1997
The undersigned appoints __________________ and ____________________
and each of them, attorneys and proxies of the undersigned, with power of
substitution, to vote all shares of KANSAS TAX FREE INCOME PORTFOLIO (the
"Fund") which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on April __, 1997 at __:__.m, New York time, and at any
adjournment thereof.
Please complete, Sign and Date on Reverse Side and Mail in Accompanying
Postpaid Envelope.
(Continued on other side)
<PAGE> 2
(Continued from other side)
THE BOARD OF TRUSTEES FAVORS A VOTE FROM EACH PROPOSAL
1. To approve the proposed Agreement and Plan of Reorganization
with respect to the Fund and the transactions contemplated thereby as described
in the accompanying Combined Proxy Statement/Prospectus.
/ / FOR / / AGAINST / / ABSTAIN
2. To consider and act upon any other business as may properly
come before the Special Meeting and any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. WHEN
PROPERLY EXECUTED, IT SHALL BE VOTED IN THE MANNER SPECIFIED. IF NO
SPECIFICATION IS MADE, IT SHALL BE VOTED "FOR" THE APPROVAL OF PROPOSAL 1 AND
IN THE DISCRETION OF THE PERSONS NAMED AS PROXIES AS TO SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS THEREOF.
Note: This instrument must be signed by
the registered holder(s). When
signing as attorney, administrator,
trustee or guardian, please give
your title as such.
----------------------------------------
Date
----------------------------------------
----------------------------------------
Signature(s)
<PAGE> 1
Exhibit 17(b)
INTRUST FUNDS TRUST
3435 STELZER ROAD, COLUMBUS, OHIO 43219
GENERAL AND ACCOUNT INFORMATION:
(888) 266-8787
KANSAS TAX-EXEMPT BOND FUND
INSTITUTIONAL SERVICE CLASS AND
INSTITUTIONAL PREMIUM CLASS PROSPECTUS
INTRUST BANK, N.A.--INVESTMENT ADVISER
(" INTRUST" OR THE "ADVISER")
BISYS FUND SERVICES--ADMINISTRATOR, SPONSOR AND DISTRIBUTOR
("BISYS")
This Prospectus describes the Kansas Tax-Exempt Bond Fund (the
"Fund") managed by INTRUST. The Fund seeks to provide current income exempt
from Federal and Kansas taxation.
The Fund offers two classes of shares--the Institutional
Service Class and Institutional Premium Class Shares. See "Other Information
- -- Capitalization." The Fund is a separate investment fund of INTRUST Funds
Trust (the "Trust"), a Delaware business trust and registered open-end,
management investment company.
A Statement of Additional Information (the "SAI"), dated
January 9, 1997 containing additional and more detailed information about
the Fund has been filed with the Securities and Exchange Commission ("SEC") and
is hereby incorporated by reference into this Prospectus. It is available
without charge and can be obtained by writing or calling the Fund at the
address and information number printed above.
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, INTRUST OR ANY OF ITS AFFILIATES, AND ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY, AND MAY INVOLVE INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING IN THE FUND AND SHOULD BE
READ AND RETAINED FOR INFORMATION ABOUT THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus is January 9, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
FUND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FEE TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND . . . . . . . . . . 4
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . 7
FUND SHARE VALUATION . . . . . . . . . . . . . . . . . . . . . . . 10
PURCHASE OF FUND SHARES . . . . . . . . . . . . . . . . . . . . . . 11
MINIMUM PURCHASE REQUIREMENTS . . . . . . . . . . . . . . . . . . . 11
EXCHANGE OF FUND SHARES . . . . . . . . . . . . . . . . . . . . . . 12
REDEMPTION OF FUND SHARES . . . . . . . . . . . . . . . . . . . . . 12
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX . . . . . . . . . . 14
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . 15
RISKS OF INVESTING IN THE FUND . . . . . . . . . . . . . . . . . . 16
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 17
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
-i-
<PAGE> 3
FUND EXPENSES
The following expense table lists the costs and expenses that an
investor in the Fund will incur either directly or indirectly as a shareholder
of the Fund. The information is based upon estimated expenses during the first
year of operations.(1)
FEE TABLE
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES INSTITUTIONAL SERVICE CLASS INSTITUTIONAL PREMIUM CLASS
<S> <C> <C>
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price) . . . . . . . . . . None None
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage
of offering price) . . . . . . . . . None None
Deferred Sales Load (as a percentage
of redemption proceeds) . . . . . . None None
Redemption Fees(2) . . . . . . . . . None None
Exchange Fees . . . . . . . . . . . None None
ANNUAL FUND OPERATING EXPENSES (as a
percentage of average net assets)
Management Fees (after waivers and
reimbursements)(3) . . . . . . . . . 0.00% 0.00%
12b-1 Fees (after waiver)(4) . . . . 0.00% 0.00%
Other Expenses (after waivers and
reimbursements)(3) . . . . . . . . . 0.21% 0.71%(5)
----- -----
Total Portfolio Operating Expenses
(after waivers and reimbursements)(3) 0.21% 0.71
===== ====
</TABLE>
The purpose of this table is to assist a shareholder in understanding the
various costs and expenses that an investor in the Fund will bear.
Example:*
- ----------------------------------
(1) Shares are offered only to certain institutional investors or other
investors who at the time of purchase have a balance of $1,000 or more
invested in any of the INTRUST Funds, are purchasers through a trust,
investment manager, or account managed or administered by the Adviser,
are employees or ex-employees of INTRUST Financial Corporation or any
of its affiliates, employees of BISYS, or any other service provider,
or employees of any trust customer of INTRUST Financial Corporation or
any of its affiliates.
(2) Shareholders may be charged a wire redemption fee by their bank for
receiving a wire payment on their behalf.
(3) Absent fee waivers and/or expenses reimbursements, management fees
for each class of the Fund would be 0.30% of the average net assets
(annualized) and Other Expenses are estimated to be 0.45% (annualized)
for each class. "Total Operating Expenses" for the Fund's Institutional
Service and Institutional Premium Class Shares would be 0.75% and
1.25% respectively.
(4) The fee under the Fund's Distribution Plan and Agreement is calculated
on the basis of average net assets of the Fund at an annual rate not to
exceed 0.25%. The Fund will not incur any distribution expenses during
its first year of operation.
(5) Other Expenses of the Institutional Premium Class are higher than Other
Expenses for the Institutional Service Class because of a shareholder
servicing charge of up to 0.50% of average daily net assets. The
shareholder servicing charge is imposed for recordkeeping,
communication with and education of shareholders, fiduciary services
(excluding investment management) and asset allocation services.
Compensation to salespersons may vary depending upon whether
Institutional Service Class or Institutional Premium Class shares are
sold.
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return
is hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the
assumed amount.
<PAGE> 4
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at the end of each
time period:
<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE CLASS SHARES INSTITUTIONAL PREMIUM CLASS SHARES
----------------------------------- ----------------------------------
<S> <C> <C>
1 year . . . . . . . . . $ 2 $ 7
3 years . . . . . . . . $ 7 $ 23
Without waivers and reimbursements
1 year . . . . . . . . . $ 8 $ 13
3 years . . . . . . . . $ 24 $ 40
</TABLE>
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<PAGE> 5
HIGHLIGHTS
This Prospectus describes the Kansas Tax-Exempt Bond Fund (the "Fund")
managed by INTRUST. The Fund has distinct investment objectives and policies.
THE FUND'S INVESTMENT OBJECTIVE
The investment objective of the Fund is to preserve capital while
producing current income for the investor that is exempt from both federal and
Kansas state income taxes. The Fund invests primarily in municipal obligations
with maturities generally ranging 1 to 15 years. It is the intent of the
Adviser to maintain an effective average weighted maturity between 7 and 12
years. As a fundamental policy, at least 80% of the Fund's net assets will be
invested in tax-exempt securities. At least 65% of the Portfolio's total
assets will be invested in municipal obligations exempt from Kansas state
income taxes.
As a matter of Fundamental Policy, notwithstanding any limitation
otherwise, the Fund is authorized to achieve its investment objective by
investing all of its investable assets in an investment company having
substantially the same investment objective and policies as the Fund.
RISKS OF INVESTING IN THE FUND
The price per share of the Fund will fluctuate with changes in value
of the investments held by the Fund. The Kansas Tax-Exempt Bond Fund may
concentrate its investments in securities of Kansas governmental issuers and
may therefore be affected by political, economic or regulatory factors that may
impair the ability of Kansas issuers to pay interest on or to repay the
principal of their debt obligations, for example, financial difficulties of
Kansas, its counties, municipalities and school districts. See "Risks of
Investing in the Fund" and "Kansas Risk Factors" in the SAI. Additionally,
there can be no assurance that the Fund will achieve its investment objective
or be successful in preventing or minimizing the risk of loss that is inherent
in investing in particular types of securities.
MANAGEMENT OF THE FUND
INTRUST Bank, N.A. acts as investment adviser to the Fund. For its
services, INTRUST receives a fee from the Fund based upon the Fund's average
daily net assets. See "Fee Table" and "Management of the Fund" in this
Prospectus.
BISYS Funds Services acts as administrator and sponsor to the Fund.
For its services, BISYS receives a fee from the Fund based on the Fund's
average daily net assets. See "Management of the Fund" in this Prospectus.
BISYS distributes the Fund's shares and may be reimbursed for certain of its
distribution-related expenses.
GUIDE TO INVESTING IN THE INTRUST FAMILY OF FUNDS
Purchase orders for the Fund received by your broker or Service
Organization in proper form prior to 4:00 p.m., Eastern time.
<TABLE>
<S> <C> <C>
- Minimum Initial Investment . . . . . . . . . . . . . . . $1,000
- Minimum Subsequent Investment . . . . . . . . . . . . . $ 50
</TABLE>
The Fund is purchased at net asset value.
Shareholders may exchange shares between Funds in the Trust by
telephone or mail. Shareholders may not exchange shares by facsimile.
-3-
<PAGE> 6
<TABLE>
<S> <C> <C>
- Minimum initial exchange . . . . . . . . . . . . . . . . $ 500
(No minimum for subsequent exchanges)
</TABLE>
Shareholders may redeem shares by telephone, mail or wire.
Shareholders may not redeem shares by facsimile.
- The Fund reserves the right to involuntarily redeem upon not
less than 30 days notice all shares in a Fund's account which
have an aggregate value of $500 or less.
All dividends and distributions will be automatically paid in
additional shares at net asset value of the applicable Fund unless cash payment
is requested.
- Distributions for the Fund are paid monthly.
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND
The Fund is a separate investment fund or portfolio, commonly known as
a mutual fund. The Fund is a portfolio of INTRUST Funds Trust (the "Trust"), a
Delaware business trust, organized under the laws of Delaware as an open-end,
management investment company. The Trust's Board of Trustees oversees the
overall management of the Fund and elects the officers of the Fund.
The Fund follows its own investment policies and practices, including
certain investment restrictions. The SAI contains specific investment
restrictions which govern the Fund's investments. Several of those
restrictions and the Fund's investment objectives are fundamental policies,
which means that they may not be changed without a majority vote of
shareholders of the Fund. Except for the objectives and those restrictions
specifically identified as fundamental, all other investment policies and
practices described in this Prospectus and in the SAI are not fundamental, so
that the Board of Trustees of the Trust may change them without shareholder
approval.
As a matter of fundamental policy, notwithstanding any limitation
otherwise, the Fund is authorized to seek to achieve its objective by investing
all of its investable assets in an investment company having substantially the
same investment objective as the Fund.
The Adviser selects investments and makes investment decisions based
on the investment objective and policies of the Fund. The following is a
description of investment practices of the Fund and securities in which it
invests.
Under normal conditions, the Fund will invest at least 80% of its net
assets in municipal obligations which produce interest that is, in the opinion
of bond counsel, exempt from federal income tax (collectively "Municipal
Obligations"). This investment policy is a fundamental policy of the Fund. At
least 65% of the Fund's total assets will be invested in Municipal Obligations
which are exempt from Kansas state income taxes. The remainder of the Fund may
be invested in Municipal Obligations of other states. Under normal conditions,
the Fund will also invest at least 80% of its net assets in securities the
income from which is not subject to the alternative minimum tax. Although it
has no present intention of doing so, the Fund may invest up to 20% of its
assets in taxable securities for defensive purposes or when sufficient tax
exempt securities considered appropriate by the Adviser are not available for
purchase.
The market value of the Fund's fixed income investments will change in
response to interest rate changes and other factors. During periods of falling
interest rates, the values of outstanding fixed income securities generally
rise. Conversely, during periods of rising interest rates, the values of such
securities generally decline. Changes by recognized rating agencies in the
rating of any fixed income security and in the ability of an issuer to make
payments of interest and principal also affect the value of these investments.
Changes in the value of portfolio securities will not necessarily affect cash
income derived from these securities, but will affect the Fund's net asset
value.
The Fund will maintain a dollar-weighted average portfolio maturity of
7 years to 12 years. However, when the Adviser determines that the market
conditions so warrant, the Fund can maintain an average weighted maturity of
less than 7 years.
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<PAGE> 7
The Fund may purchase the following types of municipal obligations,
but only if such securities, at the time of purchase, either have the requisite
rating, or, if not rated, are of comparable quality as determined by the
Adviser: (i) municipal bonds rated A or better by Standard and Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"), and a
maximum of 10% of the Fund's total assets in municipal bonds rated BBB by S&P
or Baa by Moody's; (ii) municipal notes rated at least SP-2 by S&P or MIG-2 or
V-MIG-2 by Moody's; and (iii) tax-exempt commercial paper rated at least A-1 by
S&P or Prime-1 by Moody's. Municipal notes rated SP-2 by S&P have satisfactory
capacity to pay principal and interest; notes rated MIG-2 or VMIG-2 by Moody's
are considered to be of high quality. Bonds rated BBB by S&P have an adequate
capacity to pay interest and repay principal; bonds rated Baa by Moody's are
considered to be medium-grade obligations (i.e., neither highly protected nor
poorly secured) and have speculative characteristics. Capacity for timely
payment on commercial paper with the S&P designation of A-2 is satisfactory and
commercial paper issuers rated Prime-2 by Moody's have a strong ability for
repayment of senior short-term debt obligations. See the Appendix for a more
complete description of securities ratings.
U.S. Treasury Obligations. The Fund may invest in U.S. Treasury
obligations, which are backed by the full faith and credit of the U.S.
Government as to the timely payment of principal and interest. U.S. Treasury
obligations consist of bills, notes, and bonds and separately traded interest
and principal component parts of such obligations known as STRIPS which
generally differ in their interest rates and maturities. U.S. Treasury bills,
which have maturities of up to one year, notes, which have maturities ranging
from one year to 10 years, and bonds, which have maturities of 10 to 30 years,
are direct obligations of the United States Government.
Municipal Commercial Paper. Municipal commercial paper is a debt
obligation with a stated maturity of one year or less which is issued to
finance seasonal working capital needs or as short-term financing in
anticipation of longer-term debt.
Municipal Notes. Municipal notes are generally sold as interim
financing in anticipation of the collection of taxes, a bond sale or receipt of
other revenue. Municipal notes generally have maturities at the time of
issuance of one year or less.
Municipal Bonds. Municipal bonds generally have a maturity at the
time of issuance of more than one year. Municipal bonds may be issued to raise
money for various public purposes -- such as constructing public facilities and
making loans to public institutions. There are generally two types of
municipal bonds: general obligation bonds and revenue bonds. General
obligation bonds are backed by the taxing power of the issuing municipality and
are considered the safest type of municipal bond. Revenue bonds are backed by
the revenues of a project or facility -- tolls from a toll road, for example.
Certain types of municipal bonds are issued to obtain funding for privately
operated facilities. Industrial development revenue bonds (which are private
activity bonds) are a specific type of revenue bond backed by the credit and
security of a private user, and therefore investments in these bonds have more
potential risk.
Municipal Leases. The Fund may invest in instruments, or
participations in instruments, issued in connection with lease obligations or
installment purchase contract obligations of municipalities. Although
municipal lease obligations do not constitute general obligations of the
issuing municipality, a lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate funds for, and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses, which provide that the municipality has no
obligation to make lease or installment purchase payments in future years
unless money is appropriated for such purpose in the relevant years. Municipal
lease obligations will be treated as liquid only if they satisfy criteria set
forth in guidelines established by the Board of Trustees, and there can be no
assurance that a market will exist or continue to exist for any municipal lease
obligation.
STRIPS and Zero Coupon Securities. The Fund may invest in separately
traded principal and interest components of securities backed by the full faith
and credit of the United States Treasury. The principal and interests
components of United States Treasury bonds with remaining maturities of longer
than ten years are eligible to be traded independently under the Separate
Trading of Registered Interest and Principal of Securities ("STRIPS") program.
Under the STRIPS program, the principal and interest components are separately
issued by the United States Treasury at the request of depository financial
institutions, which then trade the component parts separately. The interest
component of STRIPS may be more volatile than that of United States Treasury
bills with comparable maturities. The Funds will not actively trade in STRIPS.
-5-
<PAGE> 8
The Fund may invest in zero coupon securities. A zero coupon security
pays no interest to its holder during its life and is sold at a discount to its
face value at maturity. The market prices of zero coupon securities generally
are more volatile than the market prices of securities that pay interest
periodically and are more sensitive to changes in interest rates than non-zero
coupon securities having similar maturities and credit qualities.
Variable Rate Demand Obligations. Variable rate demand obligations
have a maturity in the five to twenty year range but carry with them the right
of the holder to put the securities to a remarketing agent or other entity on
short notice, typically seven days or less. Generally, the remarketing agent
will adjust the interest rate every seven days (or at other intervals
corresponding to the notice period for the put), in order to maintain the
interest rate at the prevailing rate for securities with a seven-day maturity.
The remarketing agent is typically a financial intermediary that has agreed to
perform these services. Variable rate master demand obligations permit the
Fund to invest fluctuating amounts at varying rates of interest pursuant to
direct arrangements between the Fund, as lender, and the borrower. Because the
obligations are direct lending arrangements between the Fund and the borrower,
they will not generally be traded, and there is no secondary market for them,
although they are redeemable (and thus immediately repayable by the borrower)
at principal amount, plus accrued interest, at any time. The borrower also may
prepay up to the full amount of the obligation without penalty. While master
demand obligations, as such, are not typically rated by credit rating agencies,
if not so rated, the Fund may, under its minimum rating standards, invest in
them only if, in the opinion of the Adviser, they are of an investment quality
comparable to other debt obligations in which the Fund may invest and are
within the credit quality policies, guidelines and procedures established by
the Board of Trustees. See the SAI for further details on variable rate demand
obligations and variable rate master demand obligations.
Other Mutual Funds. The Fund may invest in shares of other open-end,
management investment companies, subject to the limitations of the Act and
subject to such investments being consistent with the overall objective and
policies of the Fund, provided that any such purchases will be limited to
short-term investments in shares of unaffiliated investment companies. The
Fund has adopted a non-fundamental policy to limit such investment in
investment companies to shares of money market funds. The purchase of
securities of other mutual funds results in duplication of expenses such that
investors indirectly bear a proportionate share of the expenses of such mutual
funds including operating costs, and investment advisory and administrative
fees.
"When-Issued" and "Forward Commitment" Transactions. The Fund may
purchase securities on a when-issued and delayed-delivery basis and may
purchase or sell securities on a forward commitment basis. When-issued or
delayed-delivery transactions arise when securities are purchased by the Fund
with payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at the time of
entering into the transaction. A forward commitment transaction is an
agreement by the Fund to purchase or sell securities at a specified future
date. When the Fund engages in these transactions, the Fund relies on the
buyer or seller, as the case may be, to consummate the sale. Failure to do so
may result in the Fund missing the opportunity to obtain a price or yield
considered to be advantageous. When-issued and delayed-delivery transactions
and forward commitment transactions may be expected to occur a month or more
before delivery is due. However, no payment or delivery is made by the Fund
until it receives payment or delivery from the other party to the transaction.
A separate account of liquid assets equal to the value of purchase commitments
will be maintained until payment is made. A separate account containing only
liquid assets, such as cash, U.S. Government Securities, or other liquid high
grade debt obligations equal to the value of purchase commitments will be
maintained with the Fund's custodian until payment is made. Such transactions
have the effect of leverage on the Fund and may contribute to volatility of the
Fund's net asset value. For further information, see the SAI.
Loans of Portfolio Securities. To increase current income, the Fund
may lend its portfolio securities in an amount up to 33 1/3% of the Fund's
total assets to brokers, dealers and financial institutions, provided certain
conditions are met, including the condition that each loan is secured
continuously by collateral maintained on a daily mark-to-market basis in an
amount at least equal to the current market value of the securities loaned.
Repurchase Agreements. Although it has no present intention of doing
so, the Fund may enter into repurchase agreements with U.S. banks and
broker-dealers under which it acquires securities and obtains a simultaneous
commitment from the seller to repurchase the securities at a specified time and
at an agreed upon yield. The agreements will be fully collateralized and the
value of the collateral, including accrued interest, marked-to-market daily.
The agreements may be considered to be loans made by the purchaser,
collateralized by the underlying securities. If the seller should default on
its obligation to repurchase the securities, the Fund may experience a loss of
income from the loaned securities and a decrease in the value of any collateral
maintained, problems in exercising its rights to the
-6-
<PAGE> 9
underlying securities and costs and time delays in connection with the
disposition of securities. The Fund may not invest more than 10% of its net
assets in repurchase agreements maturing in more than seven business days and
in securities for which market quotations are not readily available. For more
information about repurchase agreements, see "Investment Policies" in the SAI.
Taxable Securities. The taxable instruments in which the Fund may
invest consist of U.S. Treasury obligations; obligations issued or guaranteed
by the U.S. Government or by its agencies or instrumentalities whether or not
backed by the full faith and credit of the U.S. Government; certificates of
deposit, bankers acceptances and time deposits of U.S. commercial banks or
savings and loan institutions (not including foreign branches of U.S. banks or
U.S. branches of foreign banks) which are members of the Federal Reserve
System, the Federal Deposit Insurance Corporation or the Federal Savings and
Loan Insurance Corporation and which have total assets of $1 billion or more as
shown on their last published financial statements at the time of investment;
and repurchase agreements involving any of the foregoing obligations.
Portfolio Turnover. The Fund generally will not engage in the trading
of securities for the purpose of realizing short-term profits, but the Fund
will adjust its portfolio as it deems advisable in view of prevailing or
anticipated market conditions or fluctuations in interest rates to accomplish
its respective investment objective. For example, the Fund may sell portfolio
securities in anticipation of an adverse market movement. Other than for tax
purposes, frequency of portfolio turnover will not be a limiting factor if the
Fund considers it advantageous to purchase or sell securities. The Fund does
not anticipate that the annual portfolio turnover rate will be in excess of
150%. A high rate of portfolio turnover involves correspondingly greater
transaction expenses than a lower rate, which expenses must be borne by the
Fund and its shareholders. High portfolio turnover rates may also make it more
difficult for the Fund to satisfy the requirement for qualification as a
regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"), that less than 30% of the Fund's gross income in any tax
year be derived from gains on the sale of securities held for less than three
months.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction
of the Board of Trustees. Information about the Trustees, as well as the
Trust's executive officers, may be found in the SAI under the heading
"Management--Trustees and Officers."
THE ADVISER: INTRUST BANK, N.A.
INTRUST Bank, N.A. in Wichita, formerly First National Bank in Wichita
(the "Adviser"), serves as the Fund's investment adviser under an Advisory
Agreement with the Trust (the "Advisory Agreement"). Under the Advisory
Agreement, the Adviser invests the assets of the Fund, and continuously
reviews, supervises and administers the Fund's investment program. The Adviser
discharges its responsibilities subject to the supervision of, and policies set
by, the Trustees of the Trust.
The Adviser is a majority-owned subsidiary of INTRUST Financial
Corporation (formerly First Bancorp of Kansas), a bank holding company. The
Adviser is a national banking association which provides a full range of
banking and trust services to clients. As of September 30, 1996, total assets
under management were approximately $1.17 billion. The Adviser's principal
place of business is located at 105 North Main Street, Box One, Wichita, Kansas
67201.
Michael Colgan, Vice President and Trust Investment Officer for the
Adviser since 1985 is responsible for the day-to-day management of the Fund.
Mr. Colgan, has managed the portfolio of the SEI Kansas Tax Free Income
Portfolio since December 1990.
The Adviser is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of 0.30% of the average daily net assets of the
Fund. The Adviser may waive its fee, in its discretion, for competitive
purposes. In addition, the Adviser has voluntarily agreed to waive a portion
of its fee and reimburse the Fund if necessary to limit
-7-
<PAGE> 10
the total operating expenses of the Institutional Service Class shares of the
Fund to not more than 0.21% of the average daily net assets of the
Institutional Service Class shares of the Fund for the Fund's first year of
operation.
Based upon the advice of counsel, INTRUST believes that the
performance of investment advisory services for the Fund will not violate the
Glass-Steagall Act or other applicable banking laws or regulations. However,
future statutory or regulatory changes, as well as future judicial or
administrative decisions and interpretations of present and future statutes and
regulations, could prevent INTRUST from continuing to perform such services for
the Fund. If INTRUST were prohibited from acting as investment adviser to the
Fund, it is expected that the Board of Trustees would recommend to shareholders
approval of a new investment advisory agreement with another qualified
investment adviser selected by the Board or that the Board would recommend
other appropriate action.
THE SPONSOR AND DISTRIBUTOR
BISYS, the Sponsor and Distributor (the "Distributor"), has its
principal office at 3435 Stelzer Road, Columbus, Ohio 43219. The Distributor
will receive orders for, sell, and distribute shares of the Fund. BISYS also
serves as administrator and distributor of other mutual funds
The Distributor may from time to time pay a bonus or other incentive
to dealers that employ registered representatives who sell a minimum dollar
amount of shares of the Fund. Such bonus or other incentive may take the form
of payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and members of their
families to places within or without the United States, or other bonuses, such
as gift certificates or the cash equivalent of such bonuses.
ADMINISTRATIVE SERVICES
The Fund has also entered into an Administrative Services Contract
with BISYS pursuant to which BISYS provides certain management and
administrative services necessary for the Fund's operations, including: (i)
general supervision of the operation of the Fund, including coordination of the
services performed by the Fund's Adviser, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Fund; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports
distributed to the Fund's officers and Board of Trustees; and (iii) furnishing
office space and certain facilities required for conducting the business of the
Fund. For these services, BISYS receives from the Fund a fee, payable monthly,
at the annual rate of 0.20% of the Fund's average daily net assets. Pursuant
to a Services Agreement between the Trust and the Administrator, BISYS assists
the Trust with certain transfer and dividend disbursing agent functions and
receives a fee of $15 per account per year plus out-of-pocket expenses.
Pursuant to a Fund Accounting Agreement between the Trust and the
Administrator, the Administrator assists the Trust in calculating net asset
values and provides certain other accounting services for each Fund described
therein, for an annual fee of $30,000 per Fund plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks, trust companies, broker-dealers (other than BISYS) or
other financial organizations (collectively, "Service Organizations") also may
provide administrative services for the Fund, such as maintaining shareholder
accounts and records. The Fund may pay fees to Service Organizations (which
vary depending upon the services provided) in amounts up to an annual rate of
0.05% of the daily net asset value of the Fund's shares owned by shareholders
with whom the Service Organization has a servicing relationship. Institutional
Premium Class shares may pay additional fees in amounts up to an annual rate of
0.50% of the daily net asset value of the Fund's shares owned by shareholders
with whom the Service Organization has a servicing relationship for
recordkeeping, communicating with and education of shareholders, fiduciary
services (excluding investment management) and asset allocation services.
Some Service Organizations may impose additional or different
conditions on their clients, such as requiring their clients to invest more
than the Fund's minimum initial or subsequent investments or charging a direct
fee for servicing. If imposed, these fees would be in addition to any amounts
which might be paid to the Service Organization
-8-
<PAGE> 11
by the Fund. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged
to consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among
other things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks
from performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or a part of its servicing activities. If a bank
were prohibited from so acting, its shareholder clients would be permitted to
remain shareholders of the Fund and alternative means for continuing the
servicing of such shareholders would be sought. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.
The Fund has adopted a Rule 12b-1 Distribution Plan and Agreement (the
"Plan") pursuant to which the Fund may reimburse the Distributor on a monthly
basis for costs and expenses of the Distribution in connection with the
distribution and marketing of shares. These costs and expenses, which are
subject to a maximum limit of 0.25% per annum of the average daily net assets
of the Fund, include (i) advertising by radio, television, newspapers,
magazines, brochures, sales literature, direct mail or any other form of
advertising, (ii) expenses of employees or agents of the Distributor, including
salary, commissions, travel and related expenses, (iii) payments to
broker-dealers and financial institutions for services in connection with the
distribution of shares, including promotional incentives and fees calculated
with reference to the average daily net asset value of shares held by
shareholders who have a brokerage or other service relationship with the
broker-dealer or other institution receiving such fees, (iv) costs of printing
prospectuses, statements of additional information and other materials to be
given or sent to prospective investors, (v) such other similar services as the
Trustees determine to be reasonably calculated to result in the sale of shares
of the Fund, (vi) costs of shareholder servicing which may be incurred by
broker-dealers, banks or other financial institutions, and (vii) other direct
and indirect distribution-related expenses, including the provision of services
with respect to maintaining the assets of the Fund. The Fund will pay all
costs and expenses in connection with the preparation, printing and
distribution of its Prospectus to current shareholders and the operation of its
Plan, including related legal and accounting fees. The Fund will not be liable
for distribution expenditures made by the Distributor in any given year in
excess of the maximum amount payable under the Plan for that Fund year.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses
specifically assumed by BISYS or INTRUST. The costs borne by the Fund include
legal and accounting expenses; Trustees' fees and expenses; insurance premiums;
custodian and transfer agent fees and expenses; expenses incurred in acquiring
or disposing of the Fund's portfolio securities; expenses of registering and
qualifying the Fund's shares for sale with the SEC and with various state
securities commissions; expenses of obtaining quotations on the Fund's
portfolio securities and pricing of the Fund's shares; expenses of maintaining
the Fund's legal existence and of shareholders' meetings; and expenses of
preparation and distribution to existing shareholders of reports, proxies and
prospectuses. The Fund bears its own expenses associated with its
establishment as a series of the Trust; these expenses are amortized over a
five-year period from the commencement of the Fund's operations. See
"Management" in the SAI. Trust expenses directly attributable to the Fund are
charged to the Fund; other expenses are allocated proportionately among all of
the Funds in the Trust in relation to the net assets of each Fund.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Adviser places
orders for the purchase and sale of portfolio investments for the Fund's
accounts with brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the
account of the Fund, the Adviser will seek the best available price and most
favorable execution of the Fund's orders. Trading does, however, involve
transaction costs. Purchases of underwritten issues may be made, which will
include an underwriting fee paid to the underwriter. The Adviser may cause the
Fund to pay commissions higher than another broker-dealer would have charged if
the Adviser believes the commission paid is reasonable in relation to the value
of the brokerage and research services
-9-
<PAGE> 12
received by the Adviser. Broker-dealers are selected on the basis of a variety
of factors such as reputation, capital strength, size and difficulty of order,
sale of Fund shares and research provided to the Adviser.
FUND SHARE VALUATION
The net asset value per share of the Fund is calculated at 4:00 p.m.
(Eastern time), Monday through Friday, on each day the New York Stock Exchange
is open for trading (a "Business Day"), which excludes the following business
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of each class of the Fund is computed by dividing the value of
the net assets of each class (i.e., the value of the assets less the
liabilities) by the total number of the outstanding shares of each class. All
expenses, including fees paid to the Adviser, Administrator and Distributor,
are accrued daily and taken into account for the purpose of determining the net
asset value. Between classes, expenses are allocated proportionally based on
the net asset value of each class, except class specific expenses which are
allocated directly to the separate class.
Securities listed on an exchange are valued on the basis of the last
sale prior to the time the valuation is made. If there has been no sale since
the immediately previous valuation, then the current bid price is used.
Quotations are taken for the exchange where the security is primarily traded.
Over-the-counter securities are valued on the basis of the bid price at the
close of business on each business day. Securities for which market quotations
are not readily available are valued at fair value as determined in good faith
by or at the direction of the Board of Trustees. Notwithstanding the above,
bonds and other fixed-income securities are valued by using market quotations
and may be valued on the basis of prices provided by a pricing service approved
by the Board of Trustees.
Purchases and sales of securities will often be principal transactions
in the case of debt securities and equity securities traded otherwise than on
an exchange. The purchase or sale of equity securities will frequently involve
the payment of a commission to a broker-dealer who effects the transaction on
behalf of a Fund. Debt securities normally will be purchased or sold from or
to issuers directly or to dealers serving as market makers for the securities
at a net price. Under the 1940 Act, persons affiliated with INTRUST, the
Funds or BISYS Fund Services are prohibited from dealing with the Funds as a
principal in the purchase and sale of securities except in accordance with
regulations adopted by the SEC. The Funds may purchase Municipal Obligations
from underwriting syndicates of which INTRUST,the Distributor or other
affiliate is a member under certain conditions in accordance with the
provisions of a rule adopted under the 1940 Act. Under the 1940 Act, persons
affiliated with INTRUST, the Funds or BISYS Fund Services may act as a broker
for the Funds. In order for such persons to effect any portfolio transactions
for the Funds, the commissions, fees or other remuneration received by such
persons must be reasonable and fair compared to the commissions, fees or other
remunerations paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on an exchange during a
comparable period of time. This standard would allow the affiliate to receive
no more than the remuneration which would be expected to be received by an
unaffiliated broker in a commensurate arms-length transaction. The Trustees of
the Trust regularly review the commissions paid by the Funds to affiliated
brokers.
As permitted by Section 28(e) of the Securities Exchange Act of 1934
(the "Act"), the Adviser and Portfolio Advisers may cause the Funds to pay a
broker-dealer which provides "brokerage and research services" (as defined in
the Act) to the Adviser and Portfolio Advisers an amount of disclosed
commission for effecting a securities transaction for the Funds in excess of
the commission which another broker-dealer would have charged for effecting
that transaction.
INTRUST may, in circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer which has
provided statistical or other research services to INTRUST. By allocating
transactions in this manner, INTRUST is able to supplement its research and
analysis with the views and information of securities firms.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine, the
Adviser and Portfolio Adviser may consider sales of shares of the Funds as a
factor in the selection of broker-dealers to execute portfolio transactions for
the Funds.
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PURCHASE OF FUND SHARES
Orders for the purchase of shares will be executed at the net asset
value per share next determined after an order has been received.
All funds received by the Fund are invested in full and fractional
shares of the Fund. Certificates for shares are not issued. BISYS maintains
records of each shareholder's holdings of Fund shares, and each shareholder
receives a statement of transactions, holdings and dividends. The Fund does
not accept third-party or foreign checks.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. Shares are available to new and existing shareholders through
authorized brokers, investment advisers and Service Organizations. To make an
investment using this method, simply complete a Purchase Application and
contact your broker, investment adviser or Service Organization with
instructions as to the amount you wish to invest. Your broker will then
contact the Distributor to place the order on your behalf on that day.
Orders received by your broker or Service Organization for the Fund in
proper order prior to the determination of net asset value and transmitted to
the Distributor prior to the close of its Business Day (which is currently 4:00
p.m., Eastern time), will become effective that day. Brokers who receive
orders are obligated to transmit them promptly. You should receive written
confirmation of your order within a few days of receipt of instructions from
your broker.
By Mail: Mail completed application and check made payable to the
appropriate fund or to "The INTRUST Funds Trust" to:
INTRUST Funds Trust
P.O. Box 182498
Columbus, OH 43218-2498
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the Fund. In most cases, your bank will either be a member of the
Federal Reserve Banking System or have a relationship with a bank that is. Your
bank will normally charge you a fee for handling the transaction. To purchase
shares by a Federal funds wire, please first contact BISYS at (888) 266-8787.
Application must be overnighted to:
INTRUST Funds Trust
c/o BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219-8021
Other Purchase Information. Request in "good order" must include the
following documentation: (a) a letter of instruction, if required, signed by all
registered owners of the shares in the names in which they are registered; (b)
any required signatures guaranteed and (c) other supporting legal documents, if
required, in the case of estates, trusts, guardianships, custodianships,
corporations, pension and profit sharing plans and other organizations.
Institutional Accounts. Bank trust departments and other
institutional accounts, not subject to sales charges, may place orders directly
with the Distributor by telephone at (888) 266-8787.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Fund is $1,000 unless the
investor is a purchaser who at the time of purchase, has a balance of
$1,000 or more in any of the INTRUST Funds, is a purchaser through a trust
investment manager or account manager or is administered by INTRUST, is an
employee or an ex-employee of INTRUST Financial Corporation or is an employee
of any of its affiliates, BISYS or any other service provider, or is an
employee of any trust customer of INTRUST Financial Corporation or any of its
affiliates. Any subsequent investments must be
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<PAGE> 14
at least $50. All initial investments should be accompanied by a completed
Purchase Application. A Purchase Application accompanies this Prospectus. The
Fund reserves the right to reject purchase orders.
EXCHANGE OF FUND SHARES
The Fund offers two convenient ways to exchange shares in one Fund for
shares in another Fund in the Trust. Before engaging in an exchange
transaction, a shareholder should read carefully the Prospectus describing the
Fund into which the exchange will occur, which is available without charge and
can be obtained by writing to BISYS Fund Services, 3435 Stelzer Road, Columbus,
Ohio 43219 or by calling (888) 266-8787. A shareholder may not exchange
shares of one Fund for shares of another Fund if both or either are not
qualified for sale in the state of the shareholder's residence. The minimum
amount for an initial exchange is $500. No minimum is required in subsequent
exchanges. The Trust may terminate or amend the terms of the exchange
privilege at any time.
A new account opened by exchange must be established with the same
name(s), address and social security number as the existing account. All
exchanges will be made based on the net asset value next determined following
receipt of the request by a Fund in good order.
An exchange is taxable as a sale of a security on which a gain or loss
may be recognized. Shareholders should receive written confirmation of the
exchange within a few days of the completion of the transaction. Shareholders
will receive at least 60 days' prior written notice of any modification or
termination of the exchange privilege.
Exchange by Mail. To exchange Fund shares by mail, simply send a
letter of instruction to BISYS. The letter of instruction must include: (i)
your account number; (ii) the Fund from and the Fund into which you wish to
exchange your investment; (iii) the dollar or share amount you wish to
exchange; and (iv) the signatures of all registered owners or authorized
parties.
Exchange by Telephone. To exchange Fund shares by telephone or if you
have any questions simply call the Funds at (888) 266-8787. You should be
prepared to give the telephone representative the following information: (i)
your account number, social security number and account registration; (ii) the
name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. The
conversation may be recorded to protect you and the Funds. Telephone exchanges
are available only if the shareholder so indicates by checking the "yes" box on
the Purchase Application. See "Redemption of Fund Shares--By Telephone" for a
discussion of telephone transactions generally. This option will be suspended
for a period of 10 days following a telephonic address change.
Automatic Investment Program. An eligible shareholder may also
participate in the Automatic Investment Program, an investment plan that
automatically debits money from the shareholder's bank account and invests it
in one or more of the Funds in the Trust through the use of electronic funds
transfers or automatic bank drafts. Shareholders may elect to make subsequent
investments by transfers of a minimum of $500 on either the fifth or twentieth
day of each month into their established Fund account. Contact the Funds for
more information about the Automatic Investment Program.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any
Business Day. Shares will be redeemed at the net asset value next determined
after a redemption request in good order has been received by the Fund. See
"Determination of Net Asset Value." A redemption may be a taxable transaction
on which gain or loss may be recognized.
Redemption of shares purchased by check will be effected immediately
upon clearance of the purchase check, which may take up to 15 days after those
shares have been credited to the shareholder's account. Shareholders may avoid
this delay by investing through wire transfers of Federal funds. During the
period prior to the time the shares are
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<PAGE> 15
redeemed, dividends on the shares will continue to accrue and be payable and
the shareholder will be entitled to exercise all other beneficial rights of
ownership.
Once the shares are redeemed, the Fund will ordinarily send the
proceeds by check to the shareholder at the address of record on the next
Business Day. The Fund may, however, take up to seven days to make payment.
This will not be the customary practice. Also, if the New York Stock Exchange
is closed (or when trading is restricted) for any reason other than the
customary weekend or holiday closing or if an emergency condition as determined
by the SEC merits such action, the Funds may suspend redemptions or postpone
payment dates.
Redemption Methods. To ensure acceptance of your redemption request,
it is important to follow the procedures described below. Although the Fund
has no present intention to do so, the Fund reserves the right to refuse or to
limit the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communications, such as couriers. The Fund's services and their provisions may
be modified or terminated at any time by the Fund. If the Fund terminates any
particular service, they will do so only after giving written notice to
shareholders. Redemption by mail will always be available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. You may redeem your shares by contacting your broker or
investment adviser or Service Organization representative and instructing him
or her to redeem your shares. He or she will then contact the Distributor and
place a redemption trade on your behalf. You may be charged a fee for this
service.
By Mail. You may redeem your shares by sending a letter directly to
the Distributor. To be accepted, a letter requesting redemption must include:
(i) the Fund name and account registration from which you are redeeming shares;
(ii) your account number; (iii) the amount to be redeemed, (iv) the signatures
of all registered owners; and (v) a signature guarantee by any eligible
guarantor institution including a member of a national securities exchange or a
commercial bank or trust company, broker-dealers, credit unions and savings
associations. Corporations, partnerships, trusts or other legal entities will
be required to submit additional documentation (only required if proceeds are
to be sent to an address other than the registered address on record).
By Telephone. You may redeem your shares by calling the Funds toll
free at (888) 266-8787. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the Fund name from which you are
redeeming shares; and (iii) the amount to be redeemed. The conversation may be
recorded to protect you and the Fund. Telephone redemptions are available only
if the shareholder so indicates by checking the "yes" box on the Purchase
Application or on the Optional Services Form. The Fund employs reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If the Fund fails to employ such reasonable procedures, they may be liable for
any loss, damage or expense arising out of any telephone transactions
purporting to be on a shareholder's behalf. In order to assure the accuracy of
instructions received by telephone, the Fund requires some form of personal
identification prior to acting upon instructions received by telephone, record
telephone instructions and provide written confirmation to investors of such
transactions. Redemption requests transmitted via facsimile will not be
accepted. This option will be suspended for a period of 10 days following a
telephonic address change.
By Wire. You may redeem your shares by contacting the Fund by mail or
telephone and instructing them to send a wire transmission to your personal
bank.
Your instructions should include: (i) your account number, social
security or tax identification number and account registration; (ii) the Fund
name from which you are redeeming shares; and (iii) the amount to be redeemed.
Wire redemptions can be made only if the "yes" box has been checked on your
Purchase Application, and attach a copy of a void check of account where
proceeds are to be wired. Your bank may charge you a fee for receiving a wire
payment on your behalf.
Systematic Withdrawal Plan. An owner of $10,000 or more of shares of
the Fund may elect to have periodic redemptions from his account to be paid on
a monthly, quarterly, semiannual or annual basis. The minimum periodic payment
is $100. A sufficient number of shares to make the scheduled redemption will
normally be redeemed on the date selected by the shareholder. Depending on the
size of the payment requested and fluctuation in the net asset value, if any,
of the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the
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<PAGE> 16
account. A shareholder may request that these payments be sent to a
predesignated bank or other designated party. Capital gains and dividend
distributions paid to the account will automatically be reinvested at net asset
value on the distribution payment date.
Redemption of Small Accounts. Due to the disproportionately higher
cost of servicing small accounts, the Fund reserves the right to redeem, on not
less than 30 days' notice, an account in the Fund that has been reduced by a
shareholder to $500 or less. However, if during the 30-day notice period the
shareholder purchases sufficient shares to bring the value of the account above
$500, this restriction will not apply.
Redemption in Kind. All redemptions of shares of the Fund shall be
made in cash, except that the commitment to redeem shares in cash extends only
to redemption requests made by each shareholder of the Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of the Fund
at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC and is a fundamental policy of the Fund that may not
be changed without shareholder approval. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Trustees reserves the
right to have the Fund make payment, in whole or in part, in securities or
other assets, in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing shareholders.
In this event, the securities would be valued in the same manner as the
securities of the Fund are valued. If the recipient were to sell such
securities, he or she could receive less than the redemption value of the
securities and could incur certain transaction costs.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund intends to distribute to its shareholders substantially all
of their net tax-exempt interest income and their investment company taxable
income (which includes, among other items, dividends and taxable interest in
excess of expenses and, if any, net short-term capital gains over net long-term
capital losses). The Fund will declare distributions of such income daily and
pay those dividends monthly. The Fund intends to distribute, at least
annually, substantially all net capital gain (the excess of net long-term
capital gains over net short-term capital losses). In determining amounts of
capital gains to be distributed, any capital loss carryovers from prior years
will be applied against capital gains.
On _________, shareholders of the SEI Kansas Tax Free Income Portfolio
(the "SEI Fund") voted to reorganize with and into the Fund (the
"Reorganization"). As part of the Reorganization, the Fund received
securities that are appropriate investments in exchange for shares of the Fund.
The Reorganization may result in adverse tax consequences under certain
circumstances to either the investors transferring shares of the SEI Fund for
shares of the Fund ("Reorganizing Shareholders") or to investors who acquire
shares of the Fund after a transfer ("new shareholders"). As a result of the
Reorganization, the Fund acquired some securities that have appreciated in
value or depreciated in value from the date they were acquired. If appreciated
securities are sold after the Reorganization, the amount of the gain would be
taxable to new shareholders as well as to reorganizing shareholders. The
effect of this for new shareholders would be to tax them on a distribution that
represents a return of the purchase price of their shares rather than an
increase in the value of their investment. The effect on Reorganizing
Shareholders would be to reduce their potential liability for tax on capital
gains by spreading it over a larger asset base. The opposite may occur if the
Fund acquires securities having an unrealized capital loss. In that case,
Reorganizing Shareholders will be unable to utilize the loss to offset gains,
but, because a Reorganization will not result in any gains, the inability of
Reorganizing Shareholders to utilize unrealized losses will have no immediate
tax effect. For new shareholders, to the extent that unrealized losses are
realized by the Fund, new shareholders may benefit by any reduction in net tax
liability attributable to the losses.
If you elect to receive distribution in cash and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
your cash election will be changed automatically and your future dividend and
capital gains distributions will be reinvested in the Fund at the per share net
asset value determined as of the date of payment of the distribution. In
addition, any undeliverable checks or checks that remain uncashed for six
months will be canceled and will be reinvested in the Fund at the per share net
asset value determined as of the date of cancellation.
Distributions will be paid in additional Fund shares based on the net
asset value at the close of business on the payment date of the distribution,
unless the shareholder elects in writing, not less than five full business days
prior to the record date, to receive such distributions in cash. Dividends
declared in, and attributable to, the preceding month will be paid within five
business days after the end of each month. Shares purchased will begin earning
dividends on the day after the purchase order is executed, and shares redeemed
will earn dividends through the day the redemption is executed. Investors who
redeem all or a portion of Fund shares prior to a dividend payment date will be
entitled on the next dividend payment date to all dividends declared but unpaid
on those shares at the time of their redemption.
The Fund intends to be treated as a regulated investment company under
the Internal Revenue Code of 1986 (the "Code"). As such, the Fund generally
will not pay Federal income tax on the income and gains the Fund pays as
dividends to its shareholders. In order to avoid a 4% Federal excise tax, the
Fund intends to distribute each year all of its income and gains.
To the extent that the Fund's dividends distributed to shareholders
are derived from interest income exempt from Federal income tax and are
designated as exempt-interest dividends by the Fund, they will be excludable
from a shareholder's gross income for regular Federal income tax purposes. The
Fund will qualify to pay exempt-interest dividends if, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets
consists of securities on which interest payments are exempt from Federal
income tax under section 103 of the Code. The Fund will inform shareholders
annually as to the portion of the distribution paid which constitutes
exempt-interest dividends. The Fund is authorized to make investments which
will give rise to taxable rather that tax-exempt income. To the extent that
the Fund's dividends are derived from income from its taxable investments and
from gain recognized by it, they will be taxable to shareholders in the manner
described above.
Tax-exempt interest on private activity bonds and exempt-interest
dividends attributable to private activity bonds generally are treated as tax
preference items for purposes of the Federal alternative minimum tax. The Fund
may
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<PAGE> 17
purchase private activity bonds, such as industrial development bonds that may
be subject to the alternative minimum tax.
The entire amount of exempt-interest dividends received from the Fund
will be part of an adjustment in computing Federal alternative minimum taxable
income for purposes of the Alternative Minimum Tax and the Environmental Tax
under Code Section 59A.
Up to 85% of an individual's social security benefits and certain
railroad retirement benefits may be subject to Federal income tax. Along with
other factors, total tax-exempt income, including exempt-interest dividends, is
used to calculate the portion of such benefits that are taxed.
There could be retroactive revocation of the tax-exempt status of
certain municipal obligations after their issuance. It is not possible to
predict the precise impact of these provisions, but they may affect the value
of the securities in the Fund's portfolio.
Shareholders should be aware that redeeming shares of the Fund after
tax-exempt interest income has been accrued by the Fund but before that income
has been declared as a dividend may be disadvantageous. This is because the
gain, if any, on the redemption will be taxable, even though such gain may be
attributable in part to the accrued tax-exempt interest which, if distributed
to the shareholder as a dividend rather that as redemption proceeds, might have
qualified as an exempt interest dividend. All or a portion of interest on
indebtedness incurred or continued (or deemed under tax rules to be incurred or
continued) by shareholders to purchase or carry shares of the Fund may not be
deductible for Federal income tax purposes.
The treatment for state, local and municipal tax purposes of
distributions of exempt-interest dividends and dividends derived from interest
on certain Federal obligations will vary according to the laws of state and
local taxing authorities. Exempt-interest dividends and other dividends may be
subject to state and local taxation. Investors should consult with their tax
advisers as to the availability of any exemptions from such taxes. Persons who
may be "substantial users" (or "related persons" of substantial users) of
facilities financed by private activity bonds may suffer adverse tax
consequences from investing in the Fund and, therefore, should consult their
tax advisers before purchasing the Fund's shares. In some instances, a state
or city may exempt from tax the portion of the distribution from the Fund that
represents interest received on obligations of that state or its political
subdivisions and on certain Federal obligations. Under the laws of certain
other states and cities, the entire amount of any such distribution may be
taxable.
The preceding discussion primarily relates to Federal income taxes;
the consequences under other tax laws may differ.
The following is a general, abbreviated summary of certain of the
provisions of the Kansas tax code presently in effect as they directly govern
the taxation of shareholders subject to Kansas personal income tax. These
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive.
Under Kansas law, interest on all obligations issued by the State of
Kansas or its political subdivisions after December 31, 1987, is excluded from
Kansas adjusted gross income in determining Kansas tax liability, and interest
from obligations issued prior to January 1, 1988, is exempt from Kansas income
tax only if there is statutory authority exempting the interest from the
particular obligations in question. For Kansas income tax purposes, interest
on the above-described obligations is exempt for both the Fund and its
shareholders who are Kansas residents.
For additional information relating to taxation, see the SAI.
INVESTMENT RESTRICTIONS
The Fund also operates under certain investment restrictions. Certain
of the Fund's investment restrictions are set forth below. For a complete list
of all the Fund's investment restrictions, see the section in the Fund's SAI
entitled "Investment Restrictions." The following investment restrictions are
fundamental policies of the Fund, which can be changed only when permitted by
law and approved by a majority of the Fund's outstanding voting securities.
The non-fundamental investment restrictions can be changed by approval of a
majority of the Board of Trustees. A "majority of the outstanding voting
securities" means the lesser of (i) 67% of the shares represented at a meeting
at which more
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<PAGE> 18
than 50% of the outstanding shares are represented in person or by proxy or
(ii) more than 50% of the outstanding shares. See "Other Information--Voting"
herein
(1) The Fund may not borrow money or pledge or mortgage its assets,
except that the Fund may enter into reverse repurchase agreements or borrow
from banks up to 10% of the current value of its total net assets for temporary
or emergency purposes and those borrowings may be secured by the pledge of not
more than 15% of the current value of the Fund's total net assets (but
investments may not be purchased by the Fund while any such borrowings exist).
(2) The Fund may not make loans, except that the Fund may enter into
repurchase agreements with respect to portfolio securities and may purchase the
types of debt instruments described in this Prospectus.
(3) With respect to 75% of its assets, purchase a security if as a
result, (1) more than 5% of its total assets would be invested in any one
issuer other than the U.S. Government or its agencies or instrumentalities, or
(2) the Fund would own more than 10% of the outstanding voting securities of
such issues.
If a percentage restriction on investment policies or the investment
or use of assets set forth in this Prospectus are adhered to at the time a
transaction is effected, later changes in percentage resulting from changing
values will not be considered a violation.
As a matter of Fundamental Policy, notwithstanding any limitation
otherwise, the Fund is authorized to seek to achieve its investment objective
by investing all of its investible assets in an investment company having
substantially the same investment objective and policies as the Fund.
RISKS OF INVESTING IN THE FUND
CERTAIN RISK CONSIDERATIONS
The price per share of the Fund will fluctuate with changes in value
of the investments held by the Fund. For example, the value of shares of the
Fund will generally fluctuate inversely with the movements in interest rates.
There is, of course, no assurance that the Fund will achieve its
investment objective or be successful in preventing or minimizing the risk of
loss that is inherent in investing in particular types of investment products.
In order to attempt to minimize that risk, the Adviser monitors developments in
the economy, the securities markets, and with each particular issuer.
Because the Fund will concentrate its investment in Kansas Municipal
Obligations, it may be affected by political, economic or regulatory factors
that may impair the ability of Kansas issuers to pay interest on or to repay
the principal of their debt obligations. Kansas Municipal Obligations may be
subject to greater price volatility than municipal obligations in general as a
result of the effect of supply and demand for these securities which, in turn,
could cause greater volatility in the value of the shares of the Fund.
Kansas ranks as the 14th largest state in terms of size with an area
in excess of 82,000 square miles. As of 1994 population is estimated to be
2,554,047 which is up from a population of 2,477,588 in 1990. This represents
a percentage increase of 3.1%. In comparison, the growth in population in the
U.S. was 4.7%.
Kansas' economy is based primarily on agriculture, manufacturing, and
services. Kansas projected a positive general fund balance for its 1996 fiscal
year (on estimated general fund revenues of approximately $3.367 billion).
Currently there are no general obligation ratings for Kansas.
Obligations of issuers of Kansas Municipal Obligations are subject to
the provisions of bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors, such as the Federal Bank Reform Act of 1978. In
addition, the obligations of such issuers may become subject to the laws
enacted in the future by Congress or the Kansas legislatures or by referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation,
litigation involving the taxation of municipal obligations or the rights of
municipal obligation holders,
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<PAGE> 19
or other conditions, the power or ability of any issuer to pay, when due, the
principal of and interest on its Kansas Municipal Obligations may be materially
affected. Additional considerations relating to the risks of investing in
Kansas Municipal Obligations are presented in the SAI.
OTHER INFORMATION
CAPITALIZATION
INTRUST Funds Trust was organized as a Delaware business trust on
January 26, 1996, and currently consists of six separately managed portfolios,
one of which is described in this Prospectus. The Board of Trustees may
establish additional portfolios in the future. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Fund are fully paid,
non-assessable and freely transferable.
The Funds are offered at net asset value only to certain institutional
investors, or other investors who at the time of purchase have a balance of
$1,000 or more invested in any of the INTRUST Funds, are purchasers through a
trust investment manager or account manager or administered by INTRUST, are
employees or ex-employees of INTRUST Financial Corporation or any of its
affiliates, employees of BISYS or any other service provider, or employees of
any trust customer of INTRUST Financial Corporation or any of its affiliates.
Shares in the Institutional Premium Class of shares may be subject to an
additional shareholder servicing charge of up to 0.50% of average net assets.
Call 888-266-8787 or contact your sales representative, broker-dealer or bank
to obtain more information about the Fund's Classes of shares.
Under Delaware law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for
indemnification out of Trust property for all loss and expense of any
shareholder held personally liable for the obligations of the Trust. The risk
of a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the Trust itself would be unable to meet
its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on
any and all matters on which, by law or under the provisions of the Declaration
of Trust, they may be entitled to vote. The Trust is not required to hold
regular annual meetings of the Funds' shareholders and does not intend to do
so. The Trustees are required to call a meeting for the purpose of considering
the removal of a person serving as Trustee if requested in writing to do so by
the holders of not less than 10% of the outstanding shares of the Trust and in
connection with such meeting to comply with the shareholders' communications
provisions of Section 16(c) of the Act. See "Other Information--Voting Rights"
in the SAI.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of
a majority of the outstanding shares" of the Fund (or the Trust) means the vote
of the lesser of: (1) 67% of the shares of the Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present
in person or by proxy; or (2) more than 50% of the outstanding shares of the
Fund (or the Trust).
-17-
<PAGE> 20
PERFORMANCE INFORMATION
The Fund may, from time to time, include yield and total return
information in advertisements or reports to shareholders or prospective
investors. Shareholders of the Institutional Premium Class of shares will
experience a lower net return on their investment than shareholders of the
Institutional Service Class of shares because of the additional shareholder
servicing charge to which Institutional Premium Class shareholders are subject.
The methods used to calculate the yield and total return of the Fund are
mandated by the SEC.
Quotations of "yield" will be based on the investment income per share
during a particular 30-day (or one month) period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and will be computed by dividing net investment income by the maximum public
offering price per share on the last day of the period.
Quotations of yield and effective yield reflect only the Fund's
performance during the particular period on which the calculations are based.
Yield and effective yield for the Fund will vary based on changes in market
conditions, the level of interest rates and the level of the Fund's expenses,
and no reported performance figure should be considered an indication of
performance which may be expected in the future.
Quotations of average annual total return for the Fund will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in that Fund over periods of 1, 5 and 10 years (up to
the life of that Fund), reflect the deduction of a proportional share of Fund
expenses (on an annual basis), and assume that all dividends and distributions
are reinvested when paid.
The Fund may also advertise its "taxable equivalent yield." Taxable
equivalent yield is the yield that an investment, subject to Federal and Kansas
personal income taxes, would need to earn in order to equal, on an after-tax
basis, the yield on an investment exempt from such taxes (normally calculated
assuming the maximum combined Federal and Kansas marginal tax rate). A taxable
equivalent yield quotation for the Fund will be higher than the yield or the
effective yield quotations for the Fund.
The following table shows how to translate the yield of an investment
that is exempt from both Federal and Kansas personal income taxes into a
taxable equivalent yield for the 1996 taxable year. The last four columns of
the table show approximately how much a taxable investment would have to yield
in order to generate an after-tax (Federal and Kansas personal income taxes)
yield of 5%, 6%, 7% or 8%. For example, the table shows that a married
taxpayer filing a joint return with taxable income of $50,000 would have to
earn a yield of approximately 10.39% before Federal and Kansas personal income
taxes in order to earn a yield after such taxes of 7%.
1996 Taxable Year
Taxable Equivalent Yield Table - Federal and Kansas Personal
Income Taxes*
<TABLE>
<CAPTION>
Taxable Income (1)
- -------------------------------------------- Combined
Marginal To Equal Hypothetical Tax-Free Yield of
Tax 5%, 6%, 7% or 8% A Taxable Investment
Single Married Filing Jointly Rate(2)(3) Would Have to Yield Approximately
- ---------------------- ---------------------------- ------------ -------------------------------------------
5% 6% 7% 8%
--------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 0 - $ 30,000 17.98% 6.10% 7.31% 8.53% 9.75%
$ 0 - $ 20,000 18.74% 6.15% 7.38% 8.61% 9.84%
$30,001 - $ 60,000 20.31% 6.27% 7.53% 8.78% 10.04%
$ 20,001 - $ 30,000 21.38% 6.36% 7.63% 8.90% 10.17%
$60,001 - $ 96,900 32.64% 7.42% 8.91% 10.39% 11.88%
$ 30,001 - $ 58,150 33.58% 7.53% 9.03% 10.54% 12.04%
$96,901 - $147,700 35.45% 7.75% 9.30% 10.84% 12.39%
$ 58,151 - $121.300 36.35% 7.86% 9.43% 11.00% 12.57%
$147,701 -$263,750 40.13% 8.35% 10.02% 11.69% 13.36%
</TABLE>
-18-
<PAGE> 21
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
$121,301 - $263,750 40.96% 8.47% 10.16% 11.86% 13.55%
Over $263,750 43.50% 8.85% 10.62% 12.39% 14.16%
Over $263,750 44.28% 8.97% 10.77% 12.56% 14.36%
</TABLE>
(1) Assuming the Federal alternative minimum tax is not applicable.
(2) The combined marginal rates were calculated using Federal tax rate
tables for the 1996 taxable year and Kansas tax rates for the 1996
taxable year. The Federal tax rate table is indexed each year to
reflect changes in the Consumer Price Index and the Kansas tax rate
table is constant until changed by statute.
(3) The combined Federal and Kansas personal income tax marginal rates
assume that Kansas income taxes are fully deductible for Federal
income tax purposes as an itemized deduction. However, the ability to
deduct itemized deductions (including state income taxes) for Federal
income tax purposes is limited for those taxpayers whose Federal
adjusted gross income for 1996 exceeds $117,950 ($58,975 in the case
of a married individual filing a separate return).
* This chart is prepared for general information purposes only. Tax
equivalent yields are a useful tool in determining the benefits of a
tax-exempt investment; however, tax equivalent yields should not be
regarded as determinative of the desirability of such an investment.
In addition, this chart is based on a number of assumptions which may
not apply in each individual case. An investor should therefore
consult a competent tax adviser regarding tax equivalent yields in
individual circumstances.
The Kansas Tax-Exempt Bond Fund is the successor to the Kansas Tax
Free Income Portfolio of the SEI Tax Exempt Trust (the "SEI Fund") a registered
investment company for which the Adviser was the investment adviser until the
SEI Fund was reorganized into the Kansas Tax-Exempt Bond Fund. The Kansas
Tax-Exempt Bond Fund has the same investment objectives and policies as the SEI
Fund. Investors in the SEI Fund were invited to invest in the Kansas Tax
Exempt Bond Fund at its inception. Set forth below are certain performance
data for the SEI Fund. The data shown below reflects total return for the
periods shown, reduced by the actual expense ratio for such SEI Fund. To the
extent expense waivers or reimbursements were in effect during the periods
indicated below, actual returns would have been lower had such expense waivers
or reimbursements not been in effect. However, this performance data is not
necessarily indicative of the future performance of the Funds. The SEI Fund
performance reflects fees and expenses that may be lower than fees for the
Kansas Tax-Exempt Bond Fund after its first year of operation. The performance
shown would have been lower if such higher fees and expenses were in effect.
ANNUALIZED TOTAL RETURN FOR
THE PERIOD ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Lehman 7 Year General Obligation Index*
--------------------------------------
<S> <C> <C>
1 Year 4.64% 4.46%
3 Years 4.24% 4.64%
5 Years 6.56% 6.86%
Since Inception (2/10/90) 6.68% not available
</TABLE>
* The Adviser selected the Lehman 7 Year General Obligation Index
because, although the SEI Fund states that it will seek to maintain a
dollar-weighted average portfolio maturity of between 7 and 12 years,
the actual dollar-weighted average portfolio maturity of the SEI Fund
since its inception was 8.21 years.
-19-
<PAGE> 22
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a
statement for each shareholder. In those cases where a Service Organization or
its nominee is shareholder of record of shares purchased for its customer, the
Fund has been advised that the statement may be transmitted to the customer at
the discretion of the Service Organization.
BISYS acts as the Fund's transfer agent. The Trust compensates BISYS,
the Trust's administrator, pursuant to a Services Agreement, for providing
personnel and facilities to perform dividend disbursing and transfer
agency-related services for the Trust. See "Management of the Fund."
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to BISYS Fund Services.
-20-
<PAGE> 23
APPENDIX
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa -- judged to be the best quality and they carry the
smallest degree of investment risk; Aa--judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds; A--possess many favorable investment attributes and are to
be considered as "upper medium grade obligations"; Baa--considered to be medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time.
Moody's also supplies numerical indicators 1, 2 and 3 to rating
categories. The modifier 1 indicates that the security is in the higher end of
its rating category; the modifier 2 indicates a mid-range ranking; and modifier
3 indicates a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its four highest bond ratings are
listed as follows: AAA-- highest grade obligations, in which capacity to pay
interest and repay principal is extremely strong; AA--also qualify as high
grade obligations, having a very strong capacity to pay interest and repay
principal, and differs from AAA issues only in a small degree; A--regarded as
upper medium grade, having a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher rated
categories; BBB--regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
S&P applies indicators "+, -," no character, and relative standing
within the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF NOTES AND VARIABLE RATE DEMAND INSTRUMENTS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
DESCRIPTION OF MOODY'S TAX-EXEMPT COMMERCIAL PAPER RATINGS:
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations which have an original
maturity not exceeding nine months. Moody's makes no representation that such
obligations are exempt from registration under the Securities Act of 1933, nor
does it represent that any specific note is a valid obligation of a rated
issuer or issued in conformity with any applicable law. The following
designations, all judged to be investment grade, indicate the relative
repayment ability of rated issuers of securities in which the Trust may invest.
A-1
<PAGE> 24
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term promissory obligations.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term promissory obligations.
DESCRIPTION OF S&P'S RATINGS FOR MUNICIPAL BONDS:
INVESTMENT GRADE
AAA: Debt rated "AAA" has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in a small
degree.
A: Debt rated "A" has strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
DESCRIPTION OF S&P'S RATINGS FOR INVESTMENT GRADE MUNICIPAL NOTES AND
SHORT-TERM DEMAND OBLIGATIONS:
SP-1: Issues carrying this designation have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation.
SP-2: Issues carrying this designation have a satisfactory capacity
to pay principal and interest.
DESCRIPTION OF S&P'S RATINGS FOR DEMAND OBLIGATIONS AND TAX-EXEMPT COMMERCIAL
PAPER:
An S&P commercial paper rating is a current assessment of the
likelihood of timely repayment of debt having an original maturity of no more
than 365 days. The two rating categories for securities in which the Trust may
invest are as follows:
A-L: This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics will be denoted with a plus (+)
designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-2
<PAGE> 25
<TABLE>
<S> <C>
INTRUST FUNDS TRUST
A FAMILY OF
Address for MUTUAL FUNDS
Trust Clients of INTRUST Bank, N.A.
- -------------------------------------------
INTRUST Bank, N.A.
105 North Main Street KANSAS TAX-EXEMPT BOND FUND SEEKS TO PROVIDE
Box One CURRENT INCOME EXEMPT FROM FEDERAL AND KANSAS
Wichita, Kansas, 67202 TAXATION.
Investment Adviser
- ------------------
INTRUST Bank, N.A.
105 North Main Street
Box One
Wichita, Kansas, 67202
Administrator and Sponsor and Distributor
- -----------------------------------------
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
Custodian
- ---------
INTRUST Bank, N.A.
105 North Main Street
Box One
Wichita, Kansas, 67202
Counsel
- -------
Baker & McKenzie
805 Third Avenue
New York, New York 10022
Independent Accountants PROSPECTUS
- -----------------------
KPMG Peat Marwick LLP DECEMBER __, 1996
Two Nationwide Plaza
Columbus, Ohio 43215 Investment Adviser
INTRUST BANK, N.A.
</TABLE>
<PAGE> 1
INTRUST FUNDS TRUST
3435 Stelzer Road, Columbus, Ohio 43219
General and Account Information: (888) 266-8787
- --------------------------------------------------------------------------------
INTRUST BANK, N.A.--Investment Adviser
("INTRUST" or the "Adviser")
BISYS FUND SERVICES
Administrator, Sponsor and Distributor
("BISYS" or the "Administrator" or the "Distributor")
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information (the "SAI") describes
one money market fund (the "Money Market Fund") and five non-money market funds
(the "Non-Money Market Funds") (collectively, the "Funds"), all of which are
managed by INTRUST Bank, N.A. The Funds are:
MONEY MARKET FUND
- Money Market Fund
NON MONEY MARKET FUNDS
- Short-Term Bond Fund
- Intermediate Bond Fund
- Stock Fund
- Kansas Tax-Exempt Bond Fund
- International Multi-Manager Stock Fund
Each Fund constitutes a separate investment portfolio with
distinct investment objectives and policies. Shares of the Funds are sold to
the public by BISYS as an investment vehicle for individuals, institutions,
corporations and fiduciaries, including customers of INTRUST or its affiliates.
The International Multi-Manager Stock Fund seeks its
investment objective by investing all of its investable assets in the
International Equity Portfolio ("Portfolio") of the AMR Investment Services
Trust ("AMR Trust") that has an identical investment objective to the
International Multi-Manager Stock Fund.
This SAI is not a prospectus and is only authorized for
distribution when preceded or accompanied by a prospectus for the applicable
Fund dated January 8, 1997 (the "Prospectus"). This SAI contains additional
and more detailed information than that set forth in each Prospectus and should
be read in conjunction with the applicable Prospectus. The Prospectuses may be
obtained without charge by writing or calling the Funds at the address and
information number printed above.
January 8, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 16
KANSAS RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . 29
Trustees and Officers of AMR Investment
Services Trust . . . . . . . . . . . . . . . . . . . . . . . . . 31
Investment Advisers . . . . . . . . . . . . . . . . . . . . . . 35
The Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 36
Distribution of Fund Shares . . . . . . . . . . . . . . . . . . 39
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . 40
Administrative Services . . . . . . . . . . . . . . . . . . . . 41
Service Organizations . . . . . . . . . . . . . . . . . . . . . 41
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . 43
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 45
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . 47
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Taxation of the Portfolio . . . . . . . . . . . . . . . . . . . 48
Kansas Tax-Exempt Bond Fund. . . . . . . . . . . . . . . . . . . 55
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 58
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . 59
Custodian Transfer Agent and Dividend
Disbursing Agent . . . . . . . . . . . . . . . . . . . . . . . . 60
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Yield and Performance Information . . . . . . . . . . . . . . . 60
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
-i-
<PAGE> 3
INVESTMENT POLICIES
The Prospectuses discuss the investment objectives of the
Funds and the policies to be employed to achieve those objectives. This
section contains supplemental information concerning certain types of
securities and other instruments in which the Funds may invest, the investment
policies and portfolio strategies that the Funds may utilize, and certain risks
attendant to such investments, policies and strategies.
As a matter of fundamental policy, notwithstanding any
limitation otherwise noted, each Fund is authorized to seek to achieve its
investment objective by investing all of its investable assets in an investment
company having substantially the same investment objective as the Fund.
References below to "All Funds" include the International Equity Portfolio of
the AMR Investment Services Trust (the "AMR Trust") (the "Portfolio") except
where noted otherwise.
U.S. Government Agency Obligations (All Funds). These Funds
may invest in obligations of agencies of the United States Government. Such
agencies include, among others, Farmers Home Administration, Federal Farm
Credit System, Federal Housing Administration, Government National Mortgage
Association, Maritime Administration, Small Business Administration, and The
Tennessee Valley Authority. The Funds may purchase securities issued or
guaranteed by the Government National Mortgage Association which represent
participations in Veterans Administration and Federal Housing Administration
backed mortgage pools. Obligations of instrumentalities of the United States
Government include securities issued by, among others, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation, Federal Land Banks, Federal National
Mortgage Association and the United States Postal Service. Some of these
securities are supported by the full faith and credit of the United States
Treasury (e.g., Government National Mortgage Association). Guarantees of
principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation so that in the event of
a default prior to maturity there might not be a market and thus no means of
realizing the value of the obligation prior to maturity.
Mortgage-Related Securities. (All Funds). These Funds may,
consistent with their respective investment objective and policies, invest in
mortgage-related securities issued or
<PAGE> 4
guaranteed by the U.S. Government or its agencies or instrumentalities.
Mortgage-related securities, for purposes of the Fund's
Prospectus and this SAI, represent pools of mortgage loans assembled for sale
to investors by various governmental agencies such as the Government National
Mortgage Association and government-related organizations such as the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation,
as well as by nongovernmental issuers such as commercial banks, savings and
loan institutions, mortgage bankers, and private mortgage insurance companies.
Although certain mortgage-related securities are guaranteed by a third party or
otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. If the Fund purchases a mortgage-related
security at a premium, that portion may be lost if there is a decline in the
market value of the security whether resulting from changes in interest rates
or prepayments in the underlying mortgage collateral. As with other
interest-bearing securities, the prices of such securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true since in periods of declining interest rates the mortgages
underlying the securities are prone to prepayment. For this and other reasons,
a mortgage-related security's stated maturity may be shortened by unscheduled
prepayments on the underlying mortgages and, therefore, it is not possible to
predict accurately the security's return to the Fund. In addition, regular
payments received in respect of mortgage-related securities include both
interest and principal. No assurance can be given as to the return a Fund will
receive when these amounts are reinvested.
There are a number of important differences among the agencies
and instrumentalities of the U.S. Government that issue mortgage-related
securities and among the securities that they issue. Mortgage-related
securities created by the Government National Mortgage Association ("GNMA")
include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes")
which are guaranteed as to the timely payment of principal and interest and
such guarantee is backed by the full faith and credit of the United States.
GNMA is a wholly-owned U.S. Government corporation within the Department of
Housing and Urban
-3-
<PAGE> 5
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Government to make payments under its guarantee.
Mortgage-related securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States. The
FNMA is a government-sponsored organization owned entirely by private
stock-holders. Fannie Maes are guaranteed as to timely payment of the
principal and interest by FNMA. Mortgage-related securities issued by the
Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage
Participation Certificates (also known as ("Freddie Macs" or "PCs"). The FHLMC
is a corporate instrumentality of the United States, created pursuant to an Act
of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs
are not guaranteed by the United States or by any Federal Home Loan Banks and
do not constitute a debt or obligation of the United States or of any Federal
Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest,
which is guaranteed by the FHLMC. The FHLMC currently guarantees timely
payment of interest and either timely payment of principal or eventual payment
of principal, depending upon the date of issue. When the FHLMC does not
guarantee timely payment of principal, FHLMC may remit the amount due on
account of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable.
Commercial Paper (All Funds). Commercial paper includes
short-term unsecured promissory notes, variable rate demand notes and variable
rate master demand notes issued by domestic and foreign bank holding companies,
corporations and financial institutions and similar taxable instruments issued
by government agencies and instrumentalities. All commercial paper purchased
by the Funds is, at the time of investment, rated in one of the top two (top
three with respect to the Short-Term Bond Fund) rating categories of at least
one Nationally Recognized Statistical Rating Organization ("NRSRO") or, if not
rated, are, in the opinion of the Adviser or the Portfolio Advisers, as
applicable, of an investment quality comparable to rated commercial paper in
which the Funds may invest, or, with respect to the Money Market Fund, (i)
rated "P-1" by Moody's Investors Service, Inc. ("Moody's") and "A-1" or better
by
-4-
<PAGE> 6
Standard & Poor's Corporation ("S&P") or in a comparable rating category by any
two NRSROs that have rated the commercial paper or (ii) rated in a comparable
category by only one such organization if it is the only organization that has
rated the commercial paper (and provided the purchase is approved or ratified
by the Fund's Board of Trustees or the AMR Trust's Board of Trustees, as
applicable).
Corporate Debt Securities (All Funds, except Kansas
Tax-Exempt Bond Fund). Fund investments in these securities are limited to
corporate debt securities (corporate bonds, debentures, notes and similar
corporate debt instruments) which meet the rating criteria established for each
Fund.
After purchase by a Fund, a security may cease to be rated or
its rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require a sale of such security by the Fund. However, the
Fund's Adviser or Portfolio Advisers, as applicable, will consider such event in
its determination of whether the Fund should continue to hold the security. To
the extent the ratings given by a NRSRO may change as a result of changes in
such organizations or their rating systems, the Fund will attempt to use
comparable ratings as standards for investments in accordance with the
investment policies contained in the Prospectus and in this SAI.
Foreign Securities (Short-Term Bond Fund, Intermediate Bond
Fund, Stock Fund, and International Multi-Manager Stock Fund). Changes in
foreign exchange rates will affect the value of securities denominated or quoted
in currencies other than the U.S. dollar.
Since the Funds may invest in securities denominated in
currencies other than the U.S. dollar, and since those Funds may temporarily
hold funds in bank deposits or other money market investments denominated in
foreign currencies, a Fund may be affected favorably or unfavorably by exchange
control regulations or changes in the exchange rate between such currencies and
the dollar. Changes in foreign currency exchange rates will influence values
within the Fund from the perspective of U.S. investors. Changes in foreign
currency exchange rates may also affect the value of dividends and interest
earned, gains and losses realized on the sale of securities, and net investment
income and gains, if any, to be distributed to shareholders by the Fund. The
rate of exchange between the U.S. dollar and other
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<PAGE> 7
currencies is determined by the forces of supply and demand in the foreign
exchange markets. These forces are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors.
Those Funds that purchase foreign currency-denominated
securities may enter into foreign currency exchange contracts in order to
protect against uncertainty in the level of future foreign exchange rates. A
forward foreign currency exchange contract involves an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set
at the time of the contract. These contracts are entered into in the interbank
market conducted between currency traders (usually large commercial banks) and
their customers. Forward foreign currency exchange contracts may be bought or
sold to protect a Fund against a possible loss resulting from an adverse change
in the relationship between foreign currencies and the U.S. dollar, or between
foreign currencies. Although such contracts are intended to minimize the risk
of loss due to a decline in the value of the hedged currency, at the same time,
they tend to limit any potential gain which might result should the value of
such currency increase.
Bank Obligations. (All Funds). A description of the bank
obligations which the Funds may purchase is set forth in the Prospectuses.
These obligations include, but are not limited to, domestic, Eurodollar and
Yankeedollar certificates of deposits, time deposits, bankers' acceptances,
commercial paper, bank deposit notes and other promissory notes including
floating or variable rate obligations issued by U.S. or foreign bank holding
companies and their bank subsidiaries, branches and agencies. Certificates of
deposit are issued against funds deposited in an eligible bank (including its
domestic and foreign branches, subsidiaries and agencies), are for a definite
period of time, earn a specified rate of return and are normally negotiable. A
bankers' acceptance is a short-term draft drawn on a commercial bank by a
borrower, usually in connection with a commercial transaction. The borrower is
liable for payment as is the bank, which unconditionally guarantees to pay the
draft at its face amount on the maturity date. Eurodollar obligations are U.S.
Dollar obligations issued outside the United States by domestic
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<PAGE> 8
or foreign entities. Yankeedollar obligations are U.S. dollar obligations
issued inside the United States by foreign entities. Bearer deposit notes are
obligations of a bank, rather than a bank holding company. Similar to
certificates of deposit, deposit notes represent bank level investments and,
therefore, are senior to all holding company corporate debt.
Variable and Floating Rate Demand and Master Demand
Obligations (All Funds). The Funds may, from time to time, buy variable rate
demand obligations issued by corporations, bank holding companies and financial
institutions and similar taxable and tax-exempt instruments issued by
government agencies and instrumentalities. These securities will typically
have a maturity of 397 days or less with respect to the Money Market Fund or
five to twenty years with respect to the Non-Money Market Funds, but carry with
them the right of the holder to put the securities to a remarketing agent or
other entity on short notice, typically seven days or less. The obligation of
the issuer of the put to repurchase the securities may or may not be backed by
a letter of credit or other obligation issued by a financial institution. The
purchase price is ordinarily par plus accrued and unpaid interest.
The Funds may also buy variable rate master demand
obligations. The terms of these obligations permit the investment of
fluctuating amounts by the Funds at varying rates of interest pursuant to
direct arrangements between a Fund, as lender, and the borrower. They permit
weekly, and in some instances, daily, changes in the amounts borrowed. The
Funds have the right to increase the amount under the obligation at any time up
to the full amount provided by the note agreement, or to decrease the amount,
and the borrower may prepay up to the full amount of the obligation without
penalty. The obligations may or may not be backed by bank letters of credit.
Because the obligations are direct lending arrangements between the lender and
the borrower, it is not generally contemplated that they will be traded, and
there is no secondary market for them, although they are redeemable (and thus,
immediately repayable by the borrower) at principal amount, plus accrued
interest, upon demand. The Funds have no limitations on the type of issuer
from whom the obligations will be purchased. The Funds will invest in variable
rate master demand obligations only when such obligations are determined by the
Adviser or Portfolio Advisers,
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<PAGE> 9
as applicable or, pursuant to guidelines established by the Board of Trustees
or the AMR Trust Board, as applicable, to be of comparable quality to rated
issuers or instruments eligible for investment by the Funds.
When-Issued and Delayed-Delivery Securities (All Funds). The
Funds may purchase securities on a when-issued or delayed-delivery basis. For
example, delivery of and payment for these securities can take place a month or
more after the date of the transaction. The securities so purchased are
subject to market fluctuation during this period and no income accrues to the
Fund until settlement takes place. To facilitate such acquisitions, the Funds
will maintain with the custodian a separate account with a segregated portfolio
of securities in an amount at least equal to the value of such commitments. On
the delivery dates for such transactions, each Fund will meet obligations from
maturities or sales of the securities held in the separate account and/or from
cash flow. While the Funds normally enter into these transactions with the
intention of actually receiving or delivering the securities, they may sell
these securities before the settlement date or enter into new commitments to
extend the delivery date into the future, if the Adviser or Portfolio Advisers
consider such action advisable as a matter of investment strategy. Such
securities have the effect of leverage on the Funds and may contribute to
volatility of a Fund's net asset value.
Loans of Portfolio Securities (All Funds). The Funds may
lend their portfolio securities to brokers, dealers and financial institutions,
provided: (1) the loan is secured continuously by collateral consisting of
U.S. Government securities or cash or approved bank letters of credit
maintained on a daily mark-to-market basis in an amount at least equal to the
current market value of the securities loaned; (2) the Funds may at any time
call the loan and obtain the return of the securities loaned within five
business days; (3) the Funds will receive any interest or dividends paid on the
loaned securities; and (4) the aggregate market value of securities loaned will
not at any time exceed 33 1/3% of the total assets of a particular Fund.
The Funds will earn income for lending their securities
because cash collateral pursuant to these loans will be invested in short-term
money market instruments. In connection with
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<PAGE> 10
lending securities, the Funds may pay reasonable finders, administrative and
custodial fees. Loans of securities involve a risk that the borrower may fail
to return the securities or may fail to provide additional collateral.
Securities loans will be made in accordance with the following
conditions: (1) the Funds or the Portfolio must receive at least 100%
collateral in the form of cash or cash equivalents, securities of the U.S.
Government and its agencies and instrumentalities, and approved bank letters of
credit; (2) the borrower must increase the collateral whenever the market value
of the loaned securities (determined on a daily basis) rises above the level of
collateral; (3) the Funds or the Portfolio must be able to terminate the loan
after notice, at any time; (4) the Funds or the Portfolio must receive
reasonable interest on the loan or a flat fee from the borrower, as well as
amounts equivalent to any dividends, interest or other distributions on the
securities loaned, and any increase in market value of the loaned securities;
(5) the Funds or the Portfolio may pay only reasonable custodian fees in
connection with the loan; and (6) voting rights on the securities loaned may
pass to the borrower, provided, however, that if a material event affecting the
investment occurs, the Board of Trustees or AMR Trust Board, as applicable, must
be able to terminate the loan and vote proxies or enter into an alternative
arrangement with the borrower to enable to Board of Trustees or AMR Trust Board,
as applicable, to vote proxies.
Repurchase Agreements (All Funds). The Funds may invest in
securities subject to repurchase agreements with any bank or registered
broker-dealer who, in the opinion of the Trustees or the AMR Trust Board, as
applicable, present a minimum risk of bankruptcy. Such agreements may be
considered to be loans by the Funds for purposes of the Investment Company Act
of 1940, as amended (the "1940 Act"). A repurchase agreement is a transaction
in which the seller of a security commits itself at the time of the sale to
repurchase that security from the buyer at a mutually agreed-upon time and
price. The repurchase price exceeds the sale price, reflecting an agreed-upon
interest rate effective for the period the buyer owns the security subject to
repurchase. The agreed-upon rate is unrelated to the interest rate on that
security. The Adviser and the Portfolio Advisers will monitor the value of the
underlying security at the time the
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<PAGE> 11
transaction is entered into and at all times during the term of the repurchase
agreement to insure that the value of the security always equals or exceeds the
repurchase price. In the event of default by the seller under the repurchase
agreement, the Funds may have problems in exercising their rights to the
underlying securities and may incur costs and experience time delays in
connection with the disposition of such securities.
Reverse Repurchase Agreements (All Funds). The Funds may also
enter into reverse repurchase agreements to avoid selling securities during
unfavorable market conditions to meet redemptions. Pursuant to a reverse
repurchase agreement, a Fund will sell portfolio securities and agree to
repurchase them from the buyer at a particular date and price. Whenever a Fund
enters into a reverse repurchase agreement, it will establish a segregated
account in which it will maintain liquid assets in an amount at least equal to
the repurchase price marked to market daily (including accrued interest), and
will subsequently monitor the account to ensure that such equivalent value is
maintained. The Fund pays interest on amounts obtained pursuant to reverse
repurchase agreements. Reverse repurchase agreements are considered to be
borrowings by a Fund under the 1940 Act.
Guaranteed Investment Contracts (Short-Term Bond Fund). The
Fund may invest in guaranteed investment contracts ("GICs") issued by insurance
companies. Pursuant to such contracts, the Fund makes cash contributions to a
deposit fund of the insurance company's general account. The insurance company
then credits to the deposit fund on a monthly basis guaranteed interest at a
rate based on an index. The GICs provide that this guaranteed interest will
not be less than a certain minimum rate. The insurance company may assess
periodic charges against a GIC for expense and service costs allocable to it,
and these charges will be deducted from the value of the deposit fund. The
Fund will purchase a GIC only when the Adviser has determined that the GIC
presents minimal credit risks to the Fund and is of comparable quality to
instruments in which the Fund may otherwise invest. Because the Fund may not
receive the principal amount of a GIC from the insurance company on seven days'
notice or less, a GIC may be considered an illiquid investment. The term of a
GIC will be one year or less.
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<PAGE> 12
In determining the average weighted portfolio maturity of the
Fund, a GIC will be deemed to have a maturity equal to the period of time
remaining until the next readjustment of the guaranteed interest rate. The
interest rate on a GIC may be tied to a specified market index and is
guaranteed not to be less than a certain minimum rate.
Illiquid Securities (All Funds). Each Fund, except for the
International Multi-Manager Stock Fund, has adopted a fundamental policy with
respect to investments in illiquid securities. Historically, illiquid
securities have included securities subject to contractual or legal
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended ("Securities Act"), securities that are
otherwise not readily marketable and repurchase agreements having a maturity of
longer than seven days. Securities that have not been registered under the
Securities Act are referred to as private placements or restricted securities
and are purchased directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.
In recent years, however, a large institutional market has
developed for certain securities that are not registered under the Securities
Act, including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on either an efficient institutional market in which the unregistered
security can be readily resold or on the issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on resale
to the general public or to certain institutions may not be indicative of the
liquidity of such investments.
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<PAGE> 13
Each Fund may also invest in restricted securities issued
under Section 4(2) of the Securities Act, which exempts from registration
"transactions by an issuer not involving any public offering." Section 4(2)
instruments are restricted in the sense that they can only be resold through
the issuing dealer and only to institutional investors; they cannot be resold
to the general public without registration. Restricted securities issued under
Section 4(2) of the Securities Act will be treated as illiquid and subject to
the Fund's investment restriction on illiquid securities.
The Commission has adopted Rule 144A, which allows a broader
institutional trading market for securities otherwise subject to restrictions
on resale to the general public. Rule 144A establishes a "safe harbor" from
the registration requirements of the Securities Act applicable to resales of
certain securities to qualified institutional buyers. It is the intent of the
Funds' to invest, pursuant to procedures established by the Board of Trustees
or the AMR Trust Board, as applicable, and subject to applicable investment
restrictions, in securities eligible for resale under Rule 144A which are
determined to be liquid based upon the trading markets for the securities.
Pursuant to guidelines set forth by and under the supervision of the
Board of Trustees or the AMR Trust Board, as applicable, the Adviser or the
Portfolio Advisers, will monitor the liquidity of restricted securities in a
Fund's portfolio. In reaching liquidity decisions, the Adviser will consider,
among other things, the following factors: (1) the frequency of trades and
quotes for the security over the course of six months or as determined in the
discretion of the Adviser or the Portfolio Advisers, as applicable; (2) the
number of dealers wishing to purchase or sell the security and the number of
other potential purchasers over the course of six months or as determined in
the discretion of the Investment Adviser; (3) dealer undertakings to make a
market in the security; (4) the nature of the security and the marketplace in
which it trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer); and (5) other factors,
if any, which the Adviser deems relevant. The Adviser will also monitor the
purchase of Rule 144A securities to assure that the total of all Rule 144A
securities held by a Fund does not exceed 10% of the
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<PAGE> 14
Fund's average daily net assets. Rule 144A securities which are determined to
be liquid based upon their trading markets will not, however, be required to be
included among the securities considered to be illiquid for purposes of
Investment Restriction No. 1. Investments in Rule 144A securities could have
the effect of increasing Fund illiquidity.
Foreign Currency Transactions (International Multi-Manager
Stock Fund). Investments by the Portfolio in securities of foreign companies
will usually involve the currencies of foreign countries. In addition, the
Portfolio may temporarily hold funds in bank deposits in foreign currencies
pending the completion of certain investment programs. Accordingly, the value
of the assets of the Portfolio, as measured in U.S. dollars, may be affected by
changes in foreign currency exchange rates and exchange control regulations.
In addition, the Portfolio may incur costs in connection with conversions
between various currencies. The Portfolio may conduct foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or by entering into foreign
currency forward basis at the spot rate prevailing in the foreign currency
exchange market or by entering into foreign currency forward contracts
("forward contracts") to purchase or sell foreign currencies. A forward
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days (usually less than one year)
from the date of the contract agreed upon by the parties, at a price at the
time of the contract. Forward contracts in the principal foreign currencies
are traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers and involve the risk that
the other party to the contract may fail to deliver currency when due, which
could result in losses to the Portfolio. A forward contract generally has no
requirement, and no commissions are charged at any stage for trades. Foreign
exchange dealers realize a profit based on the difference between the price at
which they buy and sell various currencies.
The Portfolio may enter into forward contracts under two
circumstances. First, with respect to specific transactions, when the
Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock in" the U.S. dollar
price of the security. By
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<PAGE> 15
entering into a forward contract for the purchase or sale, for a fixed amount
of dollars, of the amount of foreign currency involved in the underlying
security transactions, the Portfolio may be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
the security is purchased or sold and the date on which payment is made or
received.
Second, the Portfolio may enter into forward contracts in
connection with existing portfolio positions. For example, when the Portfolio
Advisers of the Portfolio believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, the Portfolio
may enter into a forward contract to sell, for a fixed amount of dollars, the
amount of foreign currency approximating the value of some or all of the
Portfolio's investment securities denominated in such foreign currency.
The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible since the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The
projection of short-term currency market movement is extremely difficult, and
the successful execution of a short-term hedging strategy is highly uncertain.
Forward contracts involve the risk of inaccurate predictions of currency price
movements, which may cause the Portfolio to incur losses on these contracts and
transaction costs. The Portfolio Advisers do not intend to enter into forward
contracts on a regular or continuous basis.
There is no systematic reporting of last sale information for
foreign currencies, and there is no regulatory requirement that quotations
available through dealers or other market sources be firm or revised on a
timely basis. Quotation information available is generally representative of
very large transactions in the interbank market. The interbank market is
foreign currencies in a global around-the-clock market.
When required by applicable regulatory guidelines, the
Portfolio will set aside cash, U.S. Government Securities or
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<PAGE> 16
other liquid, high-grade debt securities in a segregated account with its
custodian in the prescribed amount.
Foreign Currency Options and Related Risks (International
Multi-Manager Stock Fund). The Portfolio may take positions in options on
foreign currencies in order to hedge against the risk of foreign exchange
fluctuation on foreign securities the Portfolio holds in its portfolio or which
it intends to purchase. Options on foreign currencies are affected by the
factors discussed in "Options Strategies" and "Foreign Currency Transactions"
above which influence foreign exchange sales and investments generally.
The value of foreign currency options is dependent upon the
value of the foreign currency relative to the U.S. dollar and has no
relationship to the investment merits of a foreign security. Because foreign
currency transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign currency
options, the Portfolio may be disadvantaged by having to deal in an odd lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
To the extent that the U.S. options markets are closed while
the market for the underlying currencies remains open, significant price and
rate movements may take place in the underlying markets that cannot be
reflected in the options markets.
The Portfolio Adviser's Approach to Stock Selection. The
Portfolio Advisers will select equity securities which, in their opinion, have
above average growth potential and are also selling at a discount to the
market. This approach focuses on the purchase of a diverse group of stocks
below their perceived economic value. Each of the Portfolio Advisers
determines the growth prospects of firms based upon a combination of internal
and external research using fundamental economic cycle analysis and considering
changing economic trends. The determination of value is based upon the
analysis of several characteristics of the issuer and its equity securities
including price to earnings ratio, price to book value ratio, assets carried
below market value, financial strength and dividend yield.
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<PAGE> 17
INVESTMENT RESTRICTIONS
The following restrictions apply to each Fund except the
International Multi-Manager Stock Fund and restate or are in addition to those
restrictions described under "Investment Restrictions" in the Prospectuses.
Unless otherwise indicated, only Investment Restriction Nos. 2, 3, 4, 7, 8, 12
and 16 are fundamental policies of the Funds, which can be changed only when
permitted by law and approved by a majority of the Funds' outstanding voting
securities. The non-fundamental investment restrictions can be changed by
approval of a majority of the Board of Trustees. A "majority of the
outstanding voting securities" means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented in person or by proxy or (ii) more than 50% of the outstanding
shares.
Each Fund, except as indicated, may not:
(1) Invest more than 15% (10% with respect to the Money
Market Fund and Kansas Tax-Exempt Bond Fund) of the value of its net
assets in investments which are illiquid (including repurchase
agreements having maturities of more than seven calendar days,
variable and floating rate demand and master demand notes not
requiring receipt of principal note amount within seven days notice
and securities of foreign issuers which are not listed on a recognized
domestic or foreign securities exchange);
(2) Borrow money or pledge, mortgage or hypothecate its
assets, except that a Fund may enter into reverse repurchase
agreements or borrow from banks up to 33-1/3% (10% for Kansas
Tax-Exempt Bond Fund) of the current value of its net assets for
temporary or emergency purposes or to meet redemptions. Each Fund
(except Kansas Tax-Exempt Bond Fund) has adopted a non-fundamental
policy to limit such borrowing to 10% of its net assets and those
borrowings may be secured by the pledge of not more than 15% of the
current value of its total net assets (but investments may not be
purchased by the Fund while any such borrowings exist). With respect
to the Kansas Tax-Exempt Bond Fund, all
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<PAGE> 18
borrowings in excess of 5% will be repaid before additional
investments are made. The Short-Term Bond Fund has adopted a
non-fundamental policy to limit its borrowings for other than
temporary or defensive purpose or to meet redemptions to an amount not
to exceed an amount equal to 5% of its net assets.
(3) Issue senior securities, except insofar as a Fund may
be deemed to have issued a senior security in connection with any
repurchase agreement or any permitted borrowing;
(4) Make loans, except loans of portfolio securities and
except that a Fund may enter into repurchase agreements with respect
to its portfolio securities and may purchase the types of debt
instruments described in its Prospectus or the SAI;
(5) Invest in companies for the purpose of exercising
control or management. This restriction is a fundamental policy of
the Kansas Tax-Exempt Bond Fund;
(6) Invest more than 10% of its net assets in shares of
other investment companies, except that the Kansas Tax-Exempt Bond
Fund may only purchase money market fund securities and that each Fund
may invest all of its assets in another investment company;
(7) Invest in real property (including limited
partnership interests but excluding real estate investment trusts and
master limited partnerships, debt obligations secured by real estate
or interests therein, and securities issued by other companies that
invest in real estate or interest therein), commodities, commodity
contracts, or oil, gas and other mineral resource, exploration,
development, lease or arbitrage transactions. The Kansas Tax-Exempt
Bond Fund's policy with respect to oil, gas and other mineral
resource, exploration, development or leases is a non-fundamental
policy;
(8) Engage in the business of underwriting securities of
other issuers, except to the extent that the disposal of an investment
position may technically cause it to be
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<PAGE> 19
considered an underwriter as that term is defined under the Securities
Act of 1933;
(9) Sell securities short, except to the extent that a
Fund contemporaneously owns or has the right to acquire at no
additional cost securities identical to those sold short. The Kansas
Tax-Exempt Bond Fund may not sell securities short;
(10) Purchase securities on margin, except that a Fund may
obtain such short-term credits as may be necessary for the clearance
of purchases and sales of securities;
(11) Purchase or retain the securities of any issuer, if
those individual officers and Trustees of the Trust, the Adviser, the
Sponsor, or the Distributor, each owning beneficially more than 1/2
of 1% of the securities of such issuer, together own more than 5% of
the securities of such issuer;
(12) Purchase a security if, as a result, more than 25% of
the value of its total assets would be invested in securities of one
or more issuers conducting their principal business activities in the
same industry (except that this restriction does not apply to the
Money Market Fund which will concentrate its investments in
obligations issued by the banking industry), provided that (a) this
limitation shall not apply to obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities; (b)
wholly-owned finance companies will be considered to be in the
industries of their parents; and (c) utilities will be divided
according to their services. For example, gas, gas transmission,
electric and gas, electric, and telephone will each be considered a
separate industry;
(13) Invest more than 5% of its net assets in warrants
which are unattached to securities, included within that amount, no
more than 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York or American Stock Exchanges. The
Kansas Tax-Exempt Bond Fund may not purchase warrants.
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<PAGE> 20
(14) Write, purchase or sell puts, calls or combinations
thereof, except that the Funds may purchase or sell puts and calls as
otherwise described in the Prospectus or SAI; however, no Fund will
invest more than 5% of its total assets in these classes of securities
for purposes other than bona fide hedging; or
(15) Invest more than 5% of the current value of its total
assets in the securities of companies which, including predecessors,
have a record of less than three years' continuous operation (except
(i) obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or (ii) municipal securities which are
rated by at least two NRSRO's or determined by the Adviser to be of
comparable quality) provided each Fund may invest all or a portion of
its assets in another open end management investment company with
substantially the same investment objective, policies and investment
restrictions as the Fund; or
(16) With respect to 75% of its assets purchase a security if
as a result, (1) more than 5% of its total assets would be invested in
any one issuer other than the U.S. Government or its agencies or
instrumentalities, or (2) the Fund would own more than 10% of the
outstanding voting securities of such issues. The Money Market Fund
is subject to the above restriction with respect to 100% of its assets.
The Kansas Tax-Exempt Bond Fund will not purchase more than 10% of the
voting securities of any one issuer.
The following restrictions apply to the International
Multi-Manager Stock Fund. All fundamental investment policies and
non-fundamental policies of the Fund and the Portfolio are identical.
Therefore, although the following discusses the investment policies of the
Portfolio and the AMR Trust Board, it applies equally to the Fund and the
Trust's Board of Trustees.
The following seven restrictions have been adopted by the
Portfolio and may be changed with respect to the Portfolio only by the majority
vote of the Portfolio's outstanding interests, which as used herein means the
lesser of (a) 67% of the interests of the Portfolio present at the meeting if
the holders of more than 50% of the interests are present and
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<PAGE> 21
represented at the interest holders' meeting or (b) more than 50% of the
interests of the Portfolio. Whenever the Fund is requested to vote on a change
in the investment restrictions of the Portfolio, the Fund will hold a meeting
of its shareholders and will cast its votes as instructed by its shareholders.
The Portfolio may not:
1. With respect to 75% of its total assets purchase a
security if as a result, (1) more than 5% of its total assets would be
invested in securities of any one issuer other than obligations issued
by the U.S. Government, its agencies and instrumentalities, or (2) the
Fund would own more than 10% of the voting securities of any one
issuer.
2. Invest more than 25% of its total assets in the
securities of companies primarily engaged in any one industry other
than the U.S. Government, its agencies and instrumentalities. In
addition, finance companies as a group are not considered a single
industry for purposes of this Policy. Wholly-owned subsidiaries of
finance companies will be considered to be in the industries of their
parent companies if their activities are primarily related to
financing the activities of their parent.
3. Purchase or sell real estate or real estate limited
partnership interests, provided, however, that the Portfolio may
invest in securities secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein
when consistent with the other policies and limitations described in
the Prospectus.
4. Purchase or sell commodities (including direct
interests and/or leases in oil, gas or minerals) or commodities
contracts, except with respect to forward foreign currency exchange
contracts, foreign currency futures contracts and "when-issued"
securities when consistent with the other policies and limitations
described in the Prospectus.
5. Engage in the business of underwriting securities
issued by others, except to the extent that, in connection
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<PAGE> 22
with the disposition of securities, the Portfolio may be deemed an
underwriter under federal securities law.
6. Make loans to any person or firm, provided, however,
that the making of a loan shall not be construed to include (i) the
acquisition for investment of bonds, debentures, notes or other
evidences of indebtedness of any corporation or government which are
publicly distributed or (ii) the entry into repurchase agreements and
further provided, however, that the Portfolio may lend its portfolio
securities to broker-dealers or other institutional investors in
accordance with the guidelines stated in the Prospectus.
7. Purchase from or sell portfolio securities to its
officers, Trustees or other "interested persons," as defined under the
1940 Act, of the AMR Trust, including its investment advisers and
their affiliates, except as permitted by the 1940 Act and exemptive
rules or orders thereunder.
8. Issue senior securities except that the Portfolio may
engage in when-issued securities and forward commitment transactions
and may engage in currency futures and forward currency contracts; or
9. Borrow money, except from banks or through reverse
repurchase agreements for temporary purposes in an aggregate amount
not to exceed 10% of the value of its total assets at the time of
borrowing. In addition, although not a fundamental policy, the
Portfolio intends to repay any money borrowed before any additional
portfolio securities are purchased.
The following non-fundamental investment restrictions apply to
the Portfolio and may be changed with respect to the Portfolio by a majority
vote of the AMR Trust Board. The Portfolio may not:
1. Purchase securities on margin, effect short sales
(except that the Portfolio may obtain such short-term credits as may
be necessary for the clearance of purchases
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<PAGE> 23
or sales of securities) or purchase or sell call options or engage in
the writing of such options; or
2. Purchase or retain the securities of an issuer if, to
the AMR Trust's knowledge, one or more of the trustees or officers of
the AMR Trust, or the investment adviser responsible for the
investment of the AMR Trust's assets or its directors or officers,
individually own beneficially more than 1/2 of 1% of the securities
of such issuer and together own beneficially more than 5% of such
securities.
The Portfolio may invest up to 10% of its total assets in the
securities of other investment companies to the extent permitted by law. The
Portfolio may incur duplicate advisory or management fees when investing in
another mutual fund.
In addition, the Portfolio may not invest in warrants, except
as permitted by its investment policies as described in the Prospectus,
provided that the Portfolio shall not invest more than 5% of its net assets,
valued at the lower of cost or market, in warrants or more than 2% of its net
assets in warrants which are not listed on the New York or American Stock
Exchanges.
As a matter of fundamental policy, notwithstanding any
limitation otherwise noted, each Fund is authorized to seek to achieve its
investment objective by investing all of its investable assets in an investment
company having substantially the same investment objective and policies as the
Fund.
KANSAS RISK FACTORS
The following information is a brief summary of particular
Kansas state factors effecting the Kansas Tax-Exempt Bond Fund and does not
purport to be a complete description of such factors. The financial condition
of the state, its public authorities and local governments could affect the
market values and marketability of, and therefore the net asset value per share
and the interest income of the Fund, or result in the default of existing
obligations, including obligations which may be held by the Fund. Further, the
state faces numerous forms of litigation seeking significant damages which, if
awarded, may adversely affect the financial situation of the state or issuers
located in
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<PAGE> 24
such state. It should be noted that the creditworthiness of obligations issued
by local issues may be unrelated to the creditworthiness of a state, and there
is no obligation on the part of the state to make payment on such local
obligations in the event of default in the absence of a specific guarantee or
pledge provided by a state. The information contained below is based primarily
upon information derived from state official statements, Certified Annual
Financial Reports, state and industry trade publications, newspaper articles,
other public documents relating to securities offerings of issuers of such
states, and other historically reliable sources. It has not been independently
verified by the Fund. The Fund makes no representation or warranty regarding
the completeness or accuracy of such information. The market value of shares
of the Fund may fluctuate due to factors such as change in interest rates,
matters affecting a particular state, or for other reasons.
General Economic Conditions. Kansas is the 14th largest state
in terms of size with an area in excess of 82,000 square miles. It is
rectangular in shape and is 411 miles long from east to west and 208 miles
wide. The geographic center of the 48 contiguous states lies within its
borders. Kansas became the 34th state in 1861 and Topeka was chosen to be the
capitol later that year. The population of the State of Kansas has grown from
2,477,588 in 1990 to 2,554,047 in 1994. This represents a percentage increase
of 3.1%. In comparison, the growth in population of the United States was 4.7%.
Relatively strong growth in manufacturing and construction
employment propelled the state's 1995 employment growth. Employment growth
exceeded the national rate of increase, a rarity in recent years. In only three
of the prior 13 years had Kansas employment growth exceeded that of the nation.
All but one of the state's major labor markets (finance, insurance and real
estate) had employment gain between 1994 and 1995. There are two measures of
employment in Kansas: place-of-residence data and place-of-work data. The
former are based on a sample survey of Kansas households, while the latter are
based on data primarily obtained directly from firms as part of the
unemployment insurance program. In 1995, place-of-residence data indicated that
Kansas employment grew 2.8%, while place-of-work data showed
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<PAGE> 25
a 5.4% increase. The growth rates exceeded the corresponding national growth
rates of 1.6% and 2.3%. Average monthly unemployment fell from 70,000 in 1994
to 56,200 in 1995. Likewise the average monthly unemployment rate fell from
5.3% to 4.2% from 1994 to 1995.
Budgetary Process. The Governor is statutorily mandated to
present spending recommendations to the Legislature. "The Governor's Budget
Report" reflects expenditures for both the current and upcoming fiscal years
and identifies the sources of financing for those expenditures. The Legislature
uses "The Governor's Budget Report" as a guide as it appropriates the money
necessary for state agencies to operate. Only the Legislature can authorize
expenditures by the State of Kansas. The Governor recommends spending levels,
while the Legislature chooses whether to accept or modify those
recommendations. The Governor may veto legislative appropriations, although the
Legislature may override any veto by two-thirds majority vote.
The state "fiscal year" runs from July 1 to the following June
30 and is numbered for the calendar year in which it ends. The "current fiscal
year" is the one which ends the coming June. The "actual fiscal year" is the
year which concluded the previous June. The "budget year" refers to the next
fiscal year, which begins the July following the Legislature's adjournment.
In "The FY 1997 Governor's Budget Report," the actual fiscal
year is fiscal year 1995, the current fiscal year is fiscal year 1996, and the
budget year is fiscal year 1997. By law, "The Governor's Budget Report" must
reflect actual year spending, the Governor's revised spending recommendations
for the current fiscal year, state agency spending requests for the budget
year, and the Governor's spending recommendations for the budget year. The
budget recommendations cannot include the expenditure of anticipated income
attributable to proposed legislation.
Revenues and Expenditures. The State General Fund is the
largest of the "uncommitted" revenue sources available to the state. It is also
the fund to which most general tax receipts are credited. The Legislature may
spend State General Fund dollars for any purpose. All revenues coming into the
state treasury not
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<PAGE> 26
specifically authorized by statute or the constitution to be placed in a
separate fund are deposited in the State General Fund.
Fiscal Year 1996. The Governor's fiscal year 1996 budget
recommendations total $7.9 billion from all funding sources and approximately
$3.47 billion from the State General Fund. The budget includes a total of
44,697 state employees, a reduction of 118 from the amount approved by the
1995 Legislature. These recommendations reflect significant changes to the
budget approved by the 1995 Legislature. In September 1995, the Governor
announced the need for a 1.5% across-the-board reduction to the budgets of most
agencies funded through the State General Fund. This action was necessary
because of a shortfall of approximately $25 million in estimated fiscal year
1995 receipts and resulting downward revisions to the consensus revenue
estimate made for fiscal year 1996. In addition to the 1.5% reduction,
significant savings were available in agency budgets because of a reduction in
the funding requirements for group health insurance rates for state employees
and in the funding necessary for the state share of local option school
budgets. In total, these adjustments allow the Governor to recommend a budget
which maintains the targeted 7.5% ending balance for fiscal year 1996 while
providing only necessary supplemental appropriations to maintain commitments to
higher education and public schools. In addition, the Governor directed all
agencies under his supervision to reduce their workforce by 2% in fiscal year
1996 through attrition and retirements. The salary savings attributable to
those reductions will be identified at the end of the fiscal year.
Fiscal Year 1997. The fiscal year 1997 budget recommendations
include all funding source expenditures of $7.8 billion, a reduction of almost
$100 million from fiscal year 1996. The largest single source of fiscal year
1997 receipts is the State General Fund, with 46.6% of the total receipts.
Individual income taxes account for the largest source of State General Fund
revenue, totaling $1.410 billion (39.9%) in fiscal year 1997. The next largest
category, sales and use taxes, is projected to generate $1.392 billion (39.5%)
for the State General Fund during fiscal year 1997. State General Fund
expenditure recommendations for fiscal year 1997 are $3.52 billion, an increase
of 1.4%. The Governor recommends that
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<PAGE> 27
$1,923.7 million, or 54.6% of State General Fund expenditures be used for aid
to local units of government.
Federal grants represent 21.9% of total receipts from all
funding sources, with 42 state agencies receiving $1.7 billion in fiscal year
1997. Of the $1.7 billion, 50.4% will go to the Department of Social and
Rehabilitation Services. This is followed by the Department of Transportation,
15.4%, the Department of Education, 12%, the Regents institutions, 5.8%, and
the Department of Health and Environment, 4.3%. The remaining 12.1% is
distributed to 29 other agencies. Agency service charges include revenues
received for services provided by state agencies. This includes charges for
inspections, examinations, and audits; fees collected for tuition and fees at
the Regents institutions; and admissions to the Kansas State Fair. This revenue
category represents 6.6% of total receipts for fiscal year 1997.
Dedicated sales tax receipts represent revenues from four
taxes that are collected for a specific purpose and are deposited in special
revenue funds, rather than the State General Fund. Taxes on motor fuels and
vehicle registrations as well as a dedicated sales tax of one-quarter of a cent
are credited to the State Highway Fund. A statewide property tax of 1.5 mills
is assessed for construction and maintenance of state buildings at Regents
institutions and state hospitals. This revenue category represents 5.1% of
total receipts for fiscal year 1997.
Other special revenue receipts include license fees, interest
earnings on special revenue funds, non-federal grants, the sale of state
property, and numerous other miscellaneous revenue sources. This revenue
category represents 8.9% of total receipts for fiscal year 1997. Non revenue
receipts are collections and reimbursements not considered revenue. Examples
include collections by the Department of Human Resources for the payment of
unemployment benefits and collections by KPERSS for payment of retirement
benefits. Collections made by SRS from absent parents for child support are
also included in this category. This category represents 8.5% of total receipts
for fiscal year 1997. Lottery ticket sales account for the remaining 2.4% of
total receipts for fiscal year 1997 from all funding sources.
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<PAGE> 28
It was clear from the beginning of the fiscal year 1997 budget
process that the revenues available to state government could not support
continuation of existing levels of service for all agencies. A variety of
factors contributed to the austerity of the fiscal year 1997 budget. First and
most important, for the past two fiscal years, the State General Fund ending
balance was significantly above the 7.5% ending balance target, allowing
expenditures to exceed receipts in both fiscal years 1995 and 1996. In simple
terms, fiscal year 1997 cannot exceed receipts while complying with the ending
balance requirements. The expenditures in fiscal year exceeded receipts by
$106.6 million. In effect, the first claim on projected increases in State
General Fund receipts for fiscal year 1997 will be to correct this imbalance.
Second, a variety of factors required significant additional funding for the
school finance formula including enrollment growth, the second year of
increased aid requirements to offset motor vehicle tax reductions passed by the
1995 Legislature, the remainder of the Real Estate Settlement Procedures Act
(RESPA) adjustment, and growth in capital improvement aid. In addition, growth
in inmate populations required additional staff and funding for correctional
institutions. Further, caseload and cost increases in various populations
served by SRS seriously affected the fiscal year 1997 budget.
Debt Administration and Limitation. The State of Kansas
finances a portion of its capital expenditures with various debt instruments.
Of capital expenditures that are debt-financed, revenue bonds and loans from
the Pooled Money Investment Board finance most capital improvements for
buildings, and certificates of participation and "third-party" financing pay
for most capital equipment. The Kansas Constitution makes provision for the
issuance of general obligation bonds subject to certain restrictions; however,
no bonds have been issued under this provision for many years. No other
provision of the Constitution or state statute limits the amount of debt that
can be issued. As of June 30, 1995, the state had authorized but unissued debt
of $27,230,000.
Although the state has no General Obligation rating, it seeks
an underlying rating on specific issues of at least "AA-" from Standard &
Poor's and "A1" from Moodys. The ratings for the most recently issued fixed
rate bonds issued by the Kansas
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<PAGE> 29
Department of Transportation were "Aa" and "AA" from Moodys and Standard &
Poor's respectively. The Kansas Development Finance Authority is currently
working with the rating agencies to obtain a rating indicator for the State of
Kansas.
The Kansas Department of Transportation issues debt to finance
highway projects. The Comprehensive Highway Program began during fiscal year
1989. The 20-year bonds will be retired with motor fuel taxes, motor vehicle
registration fees, retail sales and compensating use taxes, and accrued
interest. During fiscal years 1994 and 1995, the state sold bonds totaling
approximately $151 million and $167.1 million, respectively. Again, the largest
use of the bond proceeds was $125 million and $140 million for the
Comprehensive Highway Program for these two years, respectively.
Other State of Kansas debt is issued by the Kansas Development
Finance Authority (KDFA), an independent instrumentality of the state which was
created in 1987 for this purpose. The Governor's budget recommendations for
Regents institutions are a significant departure from the traditional way
revenues from the Educational Building Fund (EBF) have been used for
construction projects at the state's universities. Based on concerns for the
aging buildings on the state's campuses, the Governor recommends that KDFA
issue bonds in fiscal year 1997 in the amount of $156.5 million to address a
wide variety of rehabilitation and repair projects at the universities. With
interest earnings, the total project costs would be an estimated $163.6
million. Debt service over the 15-year period will total $228.4 million, with
each year's debt service payment over the next 15 years totaling $15 million.
No project paid with bond proceeds will have a life-expectancy of less than 20
years, so as to "keep ahead" of the bonded indebtedness. Because the current
cost of borrowing money is less than the projected cost of inflation for
construction, it is more cost-effective to perform the repairs now and leverage
the EBF, rather than incurring higher annual repair costs in the future.
Rehabilitation and repair projects at the campuses include compliance with the
Americans with Disability Act Accessibility Guidelines and life safety codes,
energy conservation projects, and improvements to classrooms, in addition to
the typical repairs made to aging buildings.
Bonds totaling $4.4 million were issued by KDFA in November
1990 to begin Energy Conservation Improvements Program authorized by the 1990
Legislature. The bonds are retired by utility cost savings from the energy
conservation improvements undertaken. Projects financed with the bond proceeds
consist of
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<PAGE> 30
improvements at many of the state universities, the Department of
Administration, the Department of Social and Rehabilitation Services, the
Highway Patrol, and the Department of Corrections. An amount of $5,000 was
appropriated from the State General Fund to the Department of Administration,
the paying agent, for fiscal year 1992 to begin retirement of the debt service.
The second series of bonds, issued in June 1992, totaled $3.6 million. On
October 1, 1993, a third series of bonds totaling $4,370,000 under the Energy
Conservation Improvements Program was issued. In August 1995, the fourth series
of bond, totaling $2,734,000 was issued. For fiscal year 1997, the debt service
totals $1,785,007 from the State General Fund, $1,340,000 for principal and
$445,007 for interest. To date, $15.1 million in bonds has been issued by the
Kansas Development Finance Authority for those projects. A fifth bond issue
estimated to total $4.8 million is scheduled for early 1996.
MANAGEMENT
Trustees and Officers
The age, address and principal occupations for the past five
years of each Trustee and executive officers of the Trust are listed below.
[The address of each, unless otherwise indicated, is 3435 Stelzer Road,
Columbus, Ohio 43219.]
G.L. BEST, Age: 48, Trustee. Vice President, Finance and Administration, of
Williams Energy Services Company; Treasurer of The Williams Companies
(1992-1995).
TERRY L. CARTER, Age: 47, Trustee. Senior Vice President of QuikTrip
Corporation.
THOMAS F. KICE, Age: 47, Trustee. President of Kice Industries Inc.
GEORGE MILEUSNIC, Age: 42, Trustee. Executive Vice President of Operations of
North American Advisory of The Coleman Co., Inc.; Chief Financial
Officer of The Coleman Co., Inc.
JOHN J. PILEGGI, Age: 37, Chairman of the Board of Trustees. Director of
Furman Selz LLC since 1994; Senior Managing Director of Furman Selz LLC
(1992-1994); Managing Director of Furman Selz LLC (1984-1992).
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<PAGE> 31
THOMAS E. SHEA, Age: 47, Trustee. Treasurer of Western Resources, Inc., a
diversified energy company.
Eric Rubin, Age: 30, President and Treasurer. Managing Director, Furman Selz
LLC, since June 1995; Vice President and Managing Director, Bank One Investment
Adviser, November 1993 to June 1995; Associate Director, Furman Selz LLC, 1989
to 1993.
CARRIE ZUCKERMAN, Age: 29, Assistant Secretary. Associate Director, Corporate
Secretary Services of Furman Selz LLC, since 1995; Associate of Furman Selz
1993-1995.
Bruce Treff, Age: 30, Assistant Secretary. Counsel, BISYS Fund Services, Inc.
since 1995; Manager, Alliance Capital Management, L.P.
Alaina Metz, Age: 29, Assistant Secretary. Chief Administrator, Administrative
and Regulatory Services, BISYS Fund Services, Limited Partnership, since June
1995; Supervisor, Mutual Fund Legal Department, Alliance Capital Management,
L.P., May 1989 to June 1995.
COMPENSATION TABLE*
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Accrued Estimated Total Compensation
Compensation from as Part of Fund Annual Benefits from the Fund
the Fund Expenses Upon Retirement complex
----------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C>
G.L. Best, Trustee $7,000 0 N/A $ 7,000
Terry L. Carter, Trustee $7,000 0 N/A $ 7,000
Thomas F. Kice, Trustee $7,000 0 N/A $ 7,000
George Mileusnic, Trustee $7,000 0 N/A $ 7,000
John J. Pileggi, Trustee $7,000 0 N/A $ 7,000
Thomas E. Shea, Trustee $7,000 0 N/A $ 7,000
</TABLE>
- -----------------------
* Represents the total compensation estimated to be paid for a full
fiscal year.
Trustees of the Trust not affiliated with the Sponsor receive from the
Trust an annual retainer of $1,000 and a fee of
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<PAGE> 32
$1,000 for each Board of Trustees meeting and $1,000 for each Board committee
meeting of the Trust attended and are reimbursed for all out-of-pocket expenses
relating to attendance at such meetings. Trustees who are affiliated with the
Sponsor do not receive compensation from the Trust.
Officers and Trustees of the Trust, as a group, own less than
1% of the outstanding shares of the Funds.
Trustees and Officers of AMR Investment Services Trust ("AMR Trust")
The following information relates to the principal occupations
of each Trustee and executive officer of the AMR Trust during the past five
years.
Unless otherwise indicated, the address of each person listed
below is 4333 Amon Carter Boulevard, MD 5645, Fort Worth, Texas 76155.
<TABLE>
<CAPTION>
Position with
Name, Age and Address AMR Trust Principal Occupation During Past 5 Years
------------------------------- --------------------- -------------------------------------------
<S> <C> <C>
William F. Quinn* (49) Trustee and President, AMR Investment Services, Inc.
President (November 1986-Present); Chairman, American
Airlines Employees Federal Credit Union
(October 1989-Present); Trustee, American
Performance Funds (September 1990-July
1994); Director, Crescent Real Estate
Equities, Inc. (April 1994-Present);
Trustee, American AAdvantage Funds and
American AAdvantage Mileage Funds
(1995-Present).
Alan D. Feld (59) Trustee Partner, Akin, Gump, Strauss, Hauer & Feld
1700 Pacific Ave., LLP (1960-Present)**, Director, Clear
Suite 4100 Channel Communications (1984-Present);
Dallas, TX 75201-4618 Director, CenterPoint Properties, Inc.
(1994-Present); Trustee, American
AAdvantage Funds and American AAdvantage
Mileage Funds (October 1996-Present).
</TABLE>
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<PAGE> 33
<TABLE>
<S> <C> <C>
Ben J. Fortson (64) Trustee President and CEO, Fortson Oil Company
301 Commerce St., (1958-Present); Director, Kimbell Art
Suite 3301 Foundation (1964-Present); Director,
FortWorth, TX 76102 Burnett Foundation (1987-Present); Honorary
Trustee, Texas Christian University
(1986-Present); Trustee, American
AAdvantage Funds and American AAdvantage
Mileage Funds (October 1996-Present).
</TABLE>
<TABLE>
<S> <C> <C>
John S. Justin (80) Trustee Chairman and Chief Executive Officer,
2821 West Seventh Street Justin Industries, Inc. (a diversified
Fort Worth, Texas 76107 holding company) (1969-Present); Executive
Board Member, Blue Cross/Blue Shield of
Texas (1985-Present); Board Member, Zale
Lipshy Hospital (June 1993-Present);
Trustee, Texas Christian University
(1980-Present); Director and Executive
Board Member, Moncrief Radiation Center
(1985-Present); Director, Texas New Mexico
Enterprises (1984-1993); Director, Texas
New Mexico Power Company (1979-1993);
Trustee, American AAdvantage Funds and
American AAdvantage Mileage Funds
(1995-Present).
Stephen D. O'Sullivan*(61) Trustee Consultant (July 1994-Present); Vice
President and Controller, American
Airlines, Inc. (April 1985-June 1994),
Trustee, American AAdvantage Funds and
American AAdvantage Mileage Funds
(1995-Present)
</TABLE>
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<PAGE> 34
<TABLE>
<S> <C> <C>
Roger T. Staubach (55) Trustee Chairman of the Board and Chief Executive
6750 LBJ Freeway Officer (1982-Present) and President
Dallas, Texas 75240 (1983-1991) of The Staubach Company (a
commercial real estate company); Director,
Halliburton Company (1991-present);
director, First USA, Inc. (1993-present);
Director, Brinker International
(1993-present); Director, Columbus Realty
Trust (1994-present); Member of the
Advisory Board, The Salvation Army; Member
of the Advisory Board, Dallas International
Sports Commission; Member of the Advisory
Board, Hartford Whalers Hockey Club;
Trustee, Institute for Aerobics Research;
Member of Executive Council, Daytop/Dallas;
former quarterback of the Dallas Cowboys
professional football team; Trustee,
American AAdvantage Funds and American
AAdvantage Mileage Funds (1995-Present).
Nancy A. Eckl (34) Vice President Vice President, AMR Investment Services,
Inc. (December 1990-Present).
Michael W. Fields (42) Vice President Vice President, AMR Investment Services,
Inc. (August 1988-Present).
Barry Y. Greenberg (33) Vice President and Director, Legal and Compliance, AMR
Assistant Secretary Investment Services, Inc. (July
1995-Present); Branch Chief (May 1992-June
1995) and Staff Attorney (August 1988-May
1992), Securities and Exchange Commission.
Rebecca L. Harris (29) Treasurer Director of Finance (May 1995-Present),
Controller (November 1991-April 1995), AMR
Investment Services, Inc.
John B. Robertson (38) Vice President Vice President, AMR Investment Services,
Inc. (June 1991-Present)
</TABLE>
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<PAGE> 35
<TABLE>
<S> <C> <C>
Janice B. Schwarz (37) Assistant Secretary Senior Business Systems Coordinator
(September 1996-Present), Senior Compliance
Analyst, AMR Investment Services, Inc.
(December 1990-September 1996).
Clifford J. Alexander (53) Secretary Partner, Kirkpatrick & Lockhart LLP (law
firm)
Robert J. Zutz (44) Assistant Secretary Partner, Kirkpatrick & Lockhart LLP (law
firm)
</TABLE>
* Messrs. Quinn and O'Sullivan, by virtue of their current or former
positions, are deemed to be "interested persons" of the AMR Trust as
defined by the 1940 Act.
** The law firm of Akin, Gump, Strauss, Hauer & Feld LLP ("Akin, Gump")
provides legal services to American Airlines, Inc., an affiliate of AMR
Investment Services, Inc. Mr. Feld has advised the AMR Trust that he has had
no material involvement in the services provided by Akin, Gump to American
Airlines, Inc. and that he has received no material benefit in connection with
these services. Akin, Gump does not provide legal services to AMR Investment
Services, Inc. or AMR Corporation.
All Trustees and officers as a group own less than 1% of the
outstanding shares of the AMR Trust.
As compensation for their service to the AMR Trust, the Independent
Trustees and their spouses receive free air travel from American Airlines,
Inc., an affiliate of AMR. Trustees are also reimbursed for any expenses
incurred in attending Board meetings. Mr. O'Sullivan, who as a retiree of
American Airlines, Inc. already receives free airline travel, receives
compensation annually of up to three round-trip airline tickets for each of his
three adult children. The Trust does not pay for these travel arrangements.
However, the Trust compensates each Trustee with payments in an amount equal to
the Trustees' income tax on the value of this free airline travel. These
amounts are reflected in the following table for the fiscal year ended October
31, 1995.
<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Benefits Estimated
Compensation Accrued as Part of Annual Total Compensation
From the the AMR Benefits Upon From AMR's
Name of Trustee Trust Trust's Expenses Retirement Fund Complex
----------------------------------- ---------------- ---------------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
William F. Quinn $0 $0 $0 $0
David G. Fox $27,510 $0 $0 $27,510
John S. Justin $14,475 $0 $0 $14,475
Stephen D. O'Sullivan $0 $0 $0 $0
Roger T. Staubach(1) $0 $0 $0 $0
</TABLE>
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<PAGE> 36
(1) Mr. Staubach became a Trustee in May 1995 and did not receive tax
reimbursement payments during fiscal year 1995 for his travel during
that year.
Investment Advisers
INTRUST BANK, N.A.
INTRUST Bank, N.A. ("INTRUST") has provided investment
advisory services to the Funds since inception pursuant to an Advisory
Agreement with the Trust (the "Advisory Agreement"). Subject to such policies
as the Trust's Board of Trustees may determine, INTRUST makes investment
decisions for the Funds. The Advisory Agreement provides that, as compensation
for services thereunder, INTRUST is entitled to receive from each Fund it
manages a monthly fee at an annual rate based upon average daily net assets of
the Fund as set forth in the table of Fund Expenses in the Prospectus.
INTRUST is a majority-owned subsidiary of INTRUST Financial
Corporation (formerly First Bancorp of Kansas), a bank holding company.
INTRUST is a national banking association which provides a full range of
banking and trust services to clients. As of September 30, 1996, total assets
under management were approximately $1.17 billion. The principal place of
business address of the Adviser is 105 North Main Street, Box One, Wichita,
Kansas 67201.
The Investment Advisory Contracts for the Funds will continue
in effect for a period beyond two years from the date of their execution only
as long as such continuance is approved annually (i) by the holders of a
majority of the outstanding voting securities of the Funds or by the Board of
Trustees and (ii) by a majority of the Trustees who are not parties to such
Contract or "interested persons" (as defined in the 1940 Act) of any such
party. The Contracts may be terminated without penalty by vote of the Trustees
or the shareholders of the Funds, or by the Adviser, on 60 days' written notice
by either party to the Contract and will terminate automatically if assigned.
ARK Asset Management Co., Inc. ("ARK") serves as sub-adviser
to the Stock Fund. Located in New York, ARK's predecessor was established in
1929 as the private money management division of Lehman Brothers. In 1989, the
division became an independent company when the employees purchased the
institutional money management business from Lehman Brothers. As of September
30, 1996, ARK managed approximately $22.6 billion, including $12.4 billion in
large capitalization value portfolios,
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<PAGE> 37
for more than 260 institutional and individual clients, with a minimum
investment size for private accounts of $10 million.
Galliard Capital Management ("Galliard") serves as sub-adviser
to the Short-Term Bond Fund and the Intermediate Bond Fund. Galliard, a
wholly-owned subsidiary of Norwest Bank Minnesota, was formed July 1, 1995 to
specialize in the management of institutional fixed income portfolios.
AMR Investment Services, Inc. serves as sub-advisor to the
Money Market Fund. AMR, located at 4333 Amon Carter Boulevard, MD 5645, Fort
Worth, Texas 76155, is a wholly-owned subsidiary of AMR Corporation, the parent
company of American Airlines, Inc., and was organized in 1986 to provide
business management, advisory, administrative and asset management consulting
services. American Airlines, Inc. is not responsible for investments made by
AMR. As of September 30, 1996, AMR provides investment advice with respect to
approximately $15.3 billion in assets, including approximately $10.8 billion of
assets on behalf of AMR Corporation and its primary subsidiary, American
Airlines, Inc. For the subadvisory services it provides to the Money Market
Fund, AMR receives from the Adviser and not the Funds monthly fees based upon
average daily net assets at the annual rate of 0.20%.
The Portfolio
AMR oversees all administrative, investment advisory and
portfolio management services to the Portfolio. The assets of the Portfolio
are allocated by AMR among one or more investment advisers. AMR also acts as
investment adviser to the Portfolio and is required to furnish at its expense
all services, facilities and personnel necessary in connection with managing
and administering the Portfolio's investments and effecting portfolio
transactions for the Portfolio.
AMR provides the Portfolio with office space, office equipment
and personnel necessary to manage and administer the Portfolio's operations.
This includes complying with reporting requirements; corresponding with
shareholders; maintaining internal bookkeeping, accounting and auditing
services and records; and supervising the provision of services to the
Portfolio by third parties. AMR also develops the investment program for the
Portfolio, selects and changes investment advisers (subject to approval by the
AMR Trust Board and appropriate interest holders), allocates assets among
investment advisers, monitors the investment advisers' investment programs and
results, and coordinates the investment activities of the
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investment advisers to ensure compliance with regulatory restrictions.
AMR pays the fees of the investment advisers of the Portfolio.
As compensation for paying the investment advisory fees and for providing the
Portfolio with advisory and asset allocation services, AMR receives from AMR
Trust an annualized fee which is calculated and accrued daily, equal to the sum
of 0.10% of the net assets of the Portfolio, plus all fees payable by AMR to
the Portfolio Advisers.
AMR may enter into new or modified advisory agreements with
existing or new investment advisers without approval of International
Multi-Manager Stock Fund shareholders or Portfolio interest holders, but
subject to approval of the Board and the AMR Trust Board. The SEC issued an
exemptive order which eliminates the need for shareholder/interest holder
approval, subject to compliance with certain conditions.
The Advisory Agreement between the Portfolio and AMR will
continue in effect only if such continuance is specifically approved at least
annually by the Board of Trustees of the AMR Trust or by vote of the holders of
beneficial interest of the Portfolio, and in either case by a majority of the
Trustees of the AMR Trust who are not parties to the Advisory Agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on the Advisory Agreement.
The Advisory Agreement with respect to the Portfolio is
terminable without penalty by the Portfolio on 60 days' written notice when
authorized either by vote of the Portfolio's shareholders or by a vote of a
majority of the Board of Trustees of the AMR Trust, or by AMR on not more than
60 days' nor less than 30 days' written notice, and will automatically
terminate in the event of its assignment. The Advisory Agreement also provides
that, with respect to the Portfolio, neither AMR nor its personnel shall be
liable for any error of judgment or mistake of law or for any act or omission
in the performance if its or their duties to the Portfolio, except for willful
misfeasance, bad faith or gross negligence in the performance of AMR's or their
duties or by reason of reckless disregard of its or their obligations and
duties under the Advisory Agreement. The Advisory Agreement provides that AMR
may render services to others.
The advisory fees are accrued daily and paid monthly. The
Adviser, in its sole discretion, may waive all or any portion of its advisory
fee with respect to the Portfolio.
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Following is a description of the Portfolio Advisers, each of
which has been retained by AMR, on behalf of the Portfolio, to provide advisory
services to the Portfolio.
HOTCHKIS AND WILEY, 800 West Sixth Street, 5th Floor, Los Angeles,
California 90017, is a professional investment counseling firm which was
founded in 1980 by John F. Hotchkis and George Wiley. Hotchkis and Wiley is
now a division of Merrill Lynch Capital Management Group, a wholly-owned
subsidiary of Merrill Lynch & Co., Inc., who are the firm's founding General
Partners. Assets under management as of December 31, 1995 were approximately
$9.0 billion, which included approximately $988 million of assets of AMR and
its subsidiaries and affiliated entities. Hotchkis and Wiley also serves as an
investment adviser to the Balanced Portfolio and the Growth and Income
Portfolio of the AMR Trust. The advisory contract provides for AMR to pay
Hotchkis and Wiley an annualized fee equal to .60% of the first $10 million of
assets under its discretionary management, .50% of the next $140 million of
assets .30% on the next $50 million of assets, .20% of the next $800 million of
assets, and .15% of all excess AMR Trust assets managed by Hotchkis and Wiley.
MORGAN STANLEY ASSET MANAGEMENT INC. ("MSAM"), 1221 Avenue of the
Americas, New York, New York 10020, is a wholly owned subsidiary of Morgan
Stanley Group Inc. MSAM provides portfolio management and named fiduciary
services to taxable and nontaxable institutions, international organizations
and individuals investing in United States and international equity and debt
securities. As of September 30, 1995, MSAM had assets under management
totaling approximately $55.2 billion, including approximately $40.1 billion
under active management and $ 15.1 billion as named fiduciary or fiduciary
adviser. As of December 31, 1995, MSAM had investment authority over
approximately $404 million of assets of AMR and its subsidiaries and affiliated
entities. For its services, AMR pays MSAM an annual fee equal to 0.80% of the
first $25 million in AMR Trust assets under its discretionary management, 0.60%
of the next $25 million in assets, 0.50% of the next $24 million in assets and
0.40% on all excess assets.
ROWE PRICE-FLEMING INTERNATIONAL, INC. ("Fleming"), 100 East Pratt
Street, Baltimore, Maryland 21020, is a professional investment counseling firm
founded in 1979. Fleming is a joint venture owned entirely by its three parent
companies. T. Rowe Price, Robert Fleming and Jardine Fleming. As of December
31, 1995, Fleming had assets under management totaling approximately $22.2
billion, including approximately $ 197 million of assets of AMR and its
subsidiaries and affiliates entities. Fleming serves as an investment adviser
to the Portfolio, although AMR does not presently intend to allocate assets
from the Portfolio to
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Fleming. For its services to the Portfolio when total assets under Fleming's
management are less than $200 million, AMR will pay Fleming an annualized fee
equal to 0.75% of the first $20 million, 0.60% of the next $30 million and
0.50% on amounts over $50 million. When assets under Fleming's management
exceed $200 million but are less than $500 million, AMR will pay Fleming an
annualized fee equal to 0.50% on all assets. When assets under Fleming's
management exceed $500 million but are less than $750 million, AMR will pay an
annualized fee equal to 0.45% on all assets, and when assets exceed $750
million, AMR will pay Fleming a flat fee of 0.40% on all assets. When asset
levels are between $184 million and $200 million, Fleming will credit AMR with
an adjustment for the difference between the two fee schedules. The credit is
determined by pro-rating the difference between the original tiered fee and the
flat fee ($80,000 per annum at all asset levels) over the difference between
$200 million and the current asset size for billing purposes.
TEMPLETON INVESTMENT COUNSEL, INC. ("Templeton"), 500 East Broward
Blvd., Suite 2100, Fort Lauderdale, Florida 33394-3091, is a professional
investment counseling firm which has been providing investment services since
1979. Templeton is indirectly owned by Franklin Resources, Inc. As of December
31, 1995, Templeton had discretionary investment management authority with
respect to approximately $ 14.4 billion of assets, including approximately $288
million of assets of AMR and its subsidiaries and affiliated entities. For its
services, AMR pays Templeton an annualized fee equal to 0.50% of the first $
100 million in AMR Trust assets under its discretionary management, 0.35% of
the next $50 million in assets, 0.30% of the next $250 million in assets and
0.25% on assets over $400 million.
The AMR Trust and AMR also entered into a Management Agreement dated
October 1, 1995 that obligates AMR to provide or oversee all administrative,
investment advisory and portfolio management services for the AMR Trust.
Distribution of Fund Shares
The Trust retains BISYS to serve as principal underwriter for
the shares of the Funds pursuant to a Distribution Contract. The Distribution
Contract provides that the Distributor will use its best efforts to maintain a
broad distribution of the Funds' shares among bona fide investors and may enter
into selling group agreements with responsible dealers and dealer managers as
well as sell the Funds' shares to
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individual investors. The Distributor is not obligated to sell any specific
amount of shares.
Distribution Plan
The Trustees of the Fund have voted to adopt a Master
Distribution Plan (the "Plan") pursuant to Rule l2b-1 of the Investment Company
Act of 1940 (the "1940 Act") after having concluded that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders. The Plan
provides for a monthly payment by the Fund to the Distributor in such amounts
that the Distributor may request or for direct payment by the Fund, for certain
costs incurred under the Plan, subject to periodic Board approval, provided
that each such payment is based on the average daily value of the Fund's net
assets during the preceding month and is calculated at an annual rate not to
exceed 0.25%. The Distributor will use all amounts received under the Plan for
payments to broker-dealers or financial institutions (but not including banks)
for their assistance in distributing shares of the Fund and otherwise promoting
the sale of Fund shares, including payments in amounts based on the average
daily value of Fund shares owned by shareholders in respect of which the
broker-dealer or financial institution has a distributing relationship. The
Distributor may also use all or any portion of such fees to pay Fund expenses
such as the printing and distribution of prospectuses sent to prospective
investors; the preparation, printing and distribution of sales literature and
expenses associated with media advertisements.
The Plan provides for the Distributor to prepare and submit to
the Board of Trustees on a quarterly basis written reports of all amounts
expended pursuant to the Plan and the purpose for which such expenditures were
made. The Plan provides that it may not be amended to increase materially the
costs which the Fund may bear pursuant to the Plan without shareholder approval
and that other material amendments of the Plan must be approved by the Board of
Trustees, and by the Trustees who neither are "interested persons" (as defined
in the 1940 Act) of the Trust nor have any direct or indirect financial
interest in the operation of the Plan or in any related agreement, by vote cast
in person at a meeting called for the purpose of considering such amendments.
The selection and nomination of the Trustees of the Trust has been committed to
the discretion of the Trustees who are not "interested persons" of the Trust.
The Plan and the related Administrative Services Contract between the Trust and
the Sponsor have been approved, and are subject to annual approval, by the
Board of Trustees and by the Trustees who neither are "interested persons" nor
have any direct or indirect
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<PAGE> 42
financial interest in the operation of the Plan or in the Administrative
Services Contract, by vote cast in person at a meeting called for the purpose
of voting on the Plan. The Board of Trustees and the Trustees who are not
"interested persons" and who have no direct or indirect financial interest in
the operation of the Plan or in the Administrative Services Contract voted to
approve the Plan at a meeting held on November 25, 1996. The Plan was
submitted to the shareholders of the Fund and approved at a special meeting
held on November 25, 1996. The Plan is terminable with respect to the Fund at
any time by a vote of a majority of the Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or in the Administrative Services Contract or by vote
of the holders of a majority of the shares of the Fund.
Administrative Services
BISYS provides management and administrative services necessary for
the operation of the Funds, including, among other things: (i) preparation of
shareholder reports and communications; (ii) regulatory compliance, such as
reports to and filings with the SEC and state securities commissions; and (iii)
general supervision of the operation of the Funds, including coordination of
the services performed by the Adviser, the Distributor, transfer agent,
custodians, independent accountants, legal counsel and others. In addition,
BISYS furnishes office space and facilities required for conducting the
business of the Funds and pays the compensation of the Funds' officers,
employees and Trustees affiliated with BISYS. For these services, BISYS
receives from each Fund a fee, payable monthly, at the annual rate of 0.20%
(15% for International Multi-Manager Fund) of
each Fund's average daily net assets.
The Administrative Services Contract is for a one year term and is
subject to annual approval by a majority of the Trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the operation of the Administrative Services Contract. The
Administrative Services Contract will terminate automatically in the event of
its assignment.
Service Organizations
The Trust also contracts with banks (including the Adviser),
trust companies, broker-dealers (other than BISYS) or other financial
organizations ("Service Organizations") to provide certain administrative
services for the Funds. Services
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provided by Service Organizations may include among other things: providing
necessary personnel and facilities to establish and maintain certain
shareholder accounts and records; assisting in processing purchase and
redemption transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with shareholders orders to purchase or redeem
shares; verifying and guaranteeing client signatures in connection with
redemption orders, transfers among and changes in shareholders designating
accounts; providing periodic statements showing a shareholder's account balance
and, to the extent practicable, integrating such information with other client
transactions; furnishing periodic and annual statements and confirmations of
all purchases and redemptions of shares in a shareholder's account;
transmitting proxy statements, annual reports, and updating prospectuses and
other communications from the Funds to shareholders; and providing such other
services as the Funds or a shareholder reasonably may request, to the extent
permitted by applicable statute, rule or regulation. Neither BISYS, nor the
Distributor will be a Service Organization or receive fees for servicing.
Service Organizations for Institution Premium Class shareholders may also
provide record keeping, communication with and education of shareholders,
fiduciary services (exclusive of investment management) and asset allocation
services.
Some Service Organizations may impose additional or different
conditions on their clients, such as requiring their clients to invest more
than the minimum initial or subsequent investments specified by the Funds or
charging a direct fee for servicing. If imposed, these fees would be in
addition to any amounts which might be paid to the Service Organization by the
Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged
to consult them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws, among other
things, prohibit banks from engaging in the business of underwriting, selling
or distributing securities. There currently is no precedent prohibiting banks
from performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
statutes or regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, could prevent a bank from continuing to
perform all or a part of its servicing activities. In addition, state
securities laws on this issue may differ from the interpretations of federal
law expressed herein and banks and financial
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institutions may be required to register as dealers pursuant to state law.
If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders of the Trust and alternative
means for continuing the servicing of such shareholders would be sought. In
that event, changes in the operation of the Trust might occur and a shareholder
serviced by such a bank might no longer be able to avail itself of any services
then being provided by the bank. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
EXPENSES
Except for the expenses paid by INTRUST and BISYS, the Funds
bear all costs of their operations.
DETERMINATION OF NET ASSET VALUE
As indicated under "Fund Share Valuation" in the applicable
Prospectus, the Money Market Fund uses the amortized cost method to determine
the value of its portfolio securities pursuant to Rule 2a-7 under the 1940 Act.
The amortized cost method involves valuing a security at its cost and
amortizing any discount or premium over the period until maturity regardless of
the impact of fluctuating interest rates on the market value of the security.
While this method provides certainty in valuation, it may result in periods
during which the value, as determined by amortized cost, is higher or lower
than the price which the Fund would receive if the security were sold. During
these periods, the yield to a shareholder may differ somewhat from that which
could be obtained from a similar fund which utilizes a method of valuation
based upon market prices. Thus, during periods of declining interest rates, if
the use of the amortized cost method resulted in lower value of a Fund's
portfolio on a particular day, a prospective investor in the Fund would be able
to obtain a somewhat higher yield than would result from an investment in a
fund utilizing solely market values and existing Fund shareholders would
receive correspondingly less income. The converse would apply during periods
of rising interest rates.
Rule 2a-7 provides that in order to value its portfolio using
the amortized cost method, the Money Market Fund must maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase
securities having remaining maturities of 397
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days or less and invest only in U.S. dollar denominated eligible securities
determined by the Trust's Board of Trustees to be of minimal credit risks and
which (1) have received the highest short-term rating by at least two
Nationally Recognized Statistical Rating Organizations ("NRSROs"), such as
"A-1" by Standard & Poor's and "P-1" by Moody's; (2) are single rated and have
received the highest short-term rating by a NRSRO; or (3) are unrated, but are
determined to be of comparable quality by the Adviser or the Adviser pursuant
to guidelines approved by the Board and subject to the ratification of the
Board.
In addition, the Fund will not invest more than 5% of its
total assets in the securities (including the securities collateralizing a
repurchase agreement) of, or subject to puts issued by, a single issuer, except
that, the Fund may invest in U.S. Government securities or repurchase
agreements that are collateralized by U.S. Government securities without any
such limitation, and the limitation with respect to puts does not apply to
unconditional puts if no more than 10% of a Fund's total assets are invested in
securities issued or guaranteed by the issuer of the unconditional put.
Investments in rated securities not rated in the highest category by at least
two rating organizations (or one rating organization if the instrument was
rated by only one such organization), and unrated securities not determined by
the Board of Trustees to be comparable to those rated in the highest rating
category, will be limited to 5% of a Fund's total assets, with investment in
any one such issuer being limited to no more than the greater of 1% of a Fund's
total assets or $1,000,000.
Pursuant to Rule 2a-7, the Board of Trustees is also required
to establish procedures designed to stabilize, to the extent reasonably
possible, the price per share of the Funds, as computed for the purpose of
sales and redemptions, at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Board of Trustees, at such intervals as it may deem
appropriate, to determine whether the net asset value of the Funds calculated
by using available market quotations deviates from $l.00 per share based on
amortized cost. The extent of any deviation will be examined by the Board of
Trustees. If such deviation exceeds 1/2 of 1%, the Board of Trustees will
promptly consider what action, if any, will be initiated. In the event the
Board of Trustees determines that a deviation exists which may result in
material dilution or other unfair results to investors or existing
shareholders, the Board of Trustees will take such corrective action as it
regards as necessary and appropriate, which may include selling portfolio
instruments prior to maturity to realize capital gains or losses or to
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shorten average portfolio maturity, withholding dividends or establishing a net
asset value per share by using available market quotations.
The Non-Money Market Funds value their portfolio securities in
accordance with the procedures described in the Prospectus.
PORTFOLIO TRANSACTIONS
Investment decisions for the Funds and the Portfolio and for
the other investment advisory clients of the Adviser and the Portfolio Advisers
are made with a view to achieving their respective investment objectives.
Investment decisions are the product of many factors in addition to basic
suitability for the particular client involved. Thus, a particular security
may be bought or sold for certain clients even though it could have been bought
or sold for other clients at the same time. Likewise, a particular security
may be bought for one or more clients when one or more clients are selling the
security. In some instances, one client may sell a particular security to
another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged as to price
and allocated between such clients in a manner which in the opinion of the
Adviser and the Portfolio Advisers, is equitable to each and in accordance with
the amount being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients.
The Funds and the Portfolio have no obligation to deal with
any dealer or group of dealers in the execution of transactions in portfolio
securities. Subject to policies established by the Trust's Board of Trustees
and the AMR Trust Board, the Adviser and Portfolio Advisers, as appropriate,
are primarily responsible for portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Funds and the
Portfolio to obtain the best results taking into account the broker-dealer's
general execution and operational facilities, the type of transaction involved
and other factors such as the dealer's risk in positioning the securities.
While the Adviser and Portfolio Advisers generally seek reasonably competitive
spreads or commissions, the Funds will not necessarily be paying the lowest
spread or commission available.
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Purchases and sales of securities will often be principal
transactions in the case of debt securities and equity securities traded
otherwise than on an exchange. The purchase or sale of equity securities will
frequently involve the payment of a commission to a broker-dealer who effects
the transaction on behalf of a Fund. Debt securities normally will be
purchased or sold from or to issuers directly or to dealers serving as market
makers for the securities at a net price. Generally, money market securities
are traded on a net basis and do not involve brokerage commissions.
The cost of executing portfolio securities transactions for
the Money Market Fund primarily consists of dealer spreads and underwriting
commissions. Under the 1940 Act, persons affiliated with the Funds or the
Sponsor are prohibited from dealing with the Funds as a principal in the
purchase and sale of securities unless a permissive order allowing such
transactions is obtained from the SEC.
The Adviser and Portfolio Advisers may, in circumstances in
which two or more broker-dealers are in a position to offer comparable results,
give preference to a dealer which has provided statistical or other research
services to the Adviser or Portfolio Advisers. By allocating transactions in
this manner, the Adviser and the Portfolio Advisers are able to supplement
their research and analysis with the views and information of securities firms.
These items, which in some cases may also be purchased for cash, include such
matters as general economic and securities market reviews, industry and company
reviews, evaluations of securities and recommendations as to the purchase and
sale of securities.
Some of these services are of value to the Adviser and
Portfolio Advisers in advising various of their clients (including the Funds),
although not all of these services are necessarily useful and of value in
managing the Funds. The management fees paid by the Funds and the Portfolio
are not reduced because the Adviser or Portfolio Advisers or their affiliates
receive such services.
As permitted by Section 28(e) of the Securities Exchange Act
of 1934 (the "Act"), the Adviser and Portfolio Advisers may cause the Funds to
pay a broker-dealer which provides "brokerage and research services" (as
defined in the Act) to the Adviser and Portfolio Advisers an amount of
disclosed commission for effecting a securities transaction for the Funds in
excess of the commission which another broker-dealer would have charged for
effecting that transaction.
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Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking the most
favorable price and execution available and such other policies as the Trustees
may determine, the Adviser and Portfolio Adviser may consider sales of shares
of the Funds as a factor in the selection of broker-dealers to execute
portfolio transactions for the Funds.
Portfolio Turnover
Changes may be made in the portfolio consistent with the
investment objectives and policies of the Funds whenever such changes are
believed to be in the best interests of the Funds and their shareholders. It
is anticipated that the annual portfolio turnover rate normally will not exceed
the amounts stated in the Funds' Prospectuses and financial statements. The
portfolio turnover rate is calculated by dividing the lesser of purchases or
sales of portfolio securities by the average monthly value of the Fund's
portfolio securities. For purposes of this calculation, portfolio securities
exclude all securities having a maturity when purchased of one year or less.
TAXATION
The Funds intend to qualify and elect annually to be treated
as regulated investment companies under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). To qualify as a regulated investment
company, a Fund must (a) distribute to shareholders at least 90% of its
investment company taxable income (which includes, among other items,
dividends, taxable interest and the excess of net short-term capital gains over
net long-term capital losses); (b) derive in each taxable year at least 90% of
its gross income from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of stock, securities or
foreign currencies or other income derived with respect to its business of
investing in such stock, securities or currencies; (c) derive less than 30% of
its gross income from the sale or other disposition of certain assets (namely,
(i) stock or securities; (ii) options, futures, and forward contracts (other
than those on foreign currencies), and (iii) foreign currencies (including
options, futures, and forward contracts on such currencies) not directly
related to the Fund's principal business of investing in stock or securities
(or options and futures with respect to stocks or securities)) held less than 3
months; and (d) diversify its holdings so that, at
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the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash and cash items (including
receivables), U.S. Government securities, the securities of other regulated
investment companies and other securities, with such other securities of any
one issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of the Fund's total assets and not greater than
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of its total assets is invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other
regulated investment companies). In addition, a Fund earning tax-exempt
interest must, in each year, distribute at least 90% of its net tax-exempt
income. By meeting these requirements, the Funds generally will not be subject
to Federal income tax on their investment company taxable income and net
capital gains which are distributed to shareholders. If the Funds do not meet
all of these Code requirements, they will be taxed as ordinary corporations and
their distributions will be taxed to shareholders as ordinary income.
TAXATION OF THE PORTFOLIO
The Portfolio has received a ruling from the IRS to the effect
that, among other things, the Portfolio is treated as a separate partnership for
federal income tax purposes and is not a "publicly traded partnership." As a
result, the Portfolio is not subject to federal income tax; instead, each
investor in the Portfolio, such as the International Multi-Manager Stock Fund
(the "Fund"), is required to take into account in determining its federal income
tax liability its share of the Portfolio's income, gains, losses, deductions,
credits and tax preference items, without regard to whether it has received any
cash distributions from the Portfolio.
The Fund will be deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
satisfies the requirements to qualify as a Regulated Investment Company.
Accordingly, the Portfolio intends to conduct its operations so that its
corresponding Funds will be able to satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant
to a partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that
(1) gain will be recognized to the extent any cash that is distributed exceeds
the Fund's basis for its interest in the Portfolio before the
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distribution, (2) income or gain will be recognized if the distribution is in
liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio and
(3) loss will be recognized if a liquidation distribution consists solely of
cash and/or unrealized receivables. The Fund's basis for its interest in its
the Portfolio generally will equal the amount of cash and the basis of any
property the Fund invests in the Portfolio, increased by the Fund's share of
the Portfolio's net income and gains and decreased by (a) the amount of cash
and the basis of any property the Portfolio distributes to the Fund and (b) the
Fund's share of the Portfolio's losses.
Amounts, other than tax-exempt interest, not distributed on a timely
basis in accordance with a calendar year distribution requirement are subject
to a nondeductible 4% excise tax. To prevent imposition of the excise tax,
each Fund must distribute for each calendar year an amount equal to the sum of
(1) at least 98% of its ordinary income (excluding any capital gains or losses)
for the calendar year, (2) at least 98% of the excess of its capital gains over
capital losses (adjusted for certain ordinary losses) for the one-year period
ending October 31 of such year, and (3) all ordinary income and capital gains
net income (adjusted for certain ordinary losses) for previous years that were
not distributed during such years. A distribution, including an
"exempt-interest dividend," will be treated as paid on December 31 of a
calendar year if it is declared by a Fund during October, November or December
of that year to shareholders of record on a date in such a month and paid by
the Fund during January of the following year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are
received.
Some Funds and the Portfolio may invest in stocks of foreign
companies that are classified under the Code as passive foreign investment
companies ("PFICs"). In general, a foreign company is classified as a PFIC under
the Code if at least one-half of its assets constitutes investment-type assets
or 75% or more of its gross income is investment-type income. Under the PFIC
rules, an "excess distribution" received with respect to PFIC stock is treated
as having been realized ratably over the period during which the Fund or the
Portfolio held the PFIC stock. A Fund itself will be subject to tax on the
portion, if any, of the excess distribution that is allocated to the Fund's or,
in the case of the International Multi-Manager Stock Fund, the Portfolio's
holding period in prior taxable years (and an interest factor will be added to
the tax, as if the tax had actually been payable in such prior taxable years)
and the International Multi-Manager Stock Fund will be taxed on its
proportionate
share of the Portfolio's excess distributions allocated to that even
though the Fund distributes the
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corresponding income to shareholders. Excess distributions include any gain
from the sale of PFIC stock as well as certain distributions from a PFIC. All
excess distributions are taxable as ordinary income.
A Fund or the Portfolio may be able to elect alternative tax
treatment with respect to PFIC stock. Under an election that currently may be
available, a Fund or the Portfolio generally would be required to include in
its gross income its share of the earnings of a PFIC on a current basis,
regardless of whether any distributions are received from the PFIC. If this
election is made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, other elections may
become available that would affect the tax treatment of PFIC stock held by a
Fund. Each Fund's and the Portfolio's intention to qualify annually as a
regulated investment company may limit its elections with respect to PFIC
stock.
Because the application of the PFIC rules may affect, among
other things, the character of gains, the amount of gain or loss and the timing
of the recognition of income with respect to PFIC stock, as well as subject a
Fund itself or the Portfolio to tax on certain income from PFIC stock, the
amount that must be distributed to shareholders, and which will be taxed to
shareholders as ordinary income or long-term capital gain, may be increased or
decreased substantially as compared to a fund that did not invest in PFIC
stock. Investors should consult their own tax advisors in this regard. The
Portfolio does not intend to acquire stock of issuers that are considered
PFICs.
Distributions of investment company taxable income generally
are taxable to shareholders as ordinary income. Distributions from certain of
the Funds may be eligible for the dividends-received deduction available to
corporations. To the extent dividends received by a Fund are attributable to
foreign corporations, a corporation that owns shares will not be entitled to
the dividends-received deduction with respect to its pro rata portion of such
dividends, since the dividends-received deduction is generally available only
with respect to dividends paid by domestic corporations. Proposed legislation,
if enacted, would reduce the dividends received deduction from 70 to 50
percent.
Distributions of net long term capital gains, if any,
designated by the Funds as long term capital gain dividends are taxable to
shareholders as long-term capital gain, regardless of the length of time the
Funds' shares have been held by a shareholder. All distributions are taxable
to the shareholder in the same manner whether reinvested in additional shares
or
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<PAGE> 52
received in cash. Shareholders will be notified annually as to the Federal tax
status of distributions.
Distributions by a Fund reduce the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution, nevertheless, would be taxable to
the shareholder as ordinary income or capital gain as described above, even
though, from an investment standpoint, it may constitute a partial return of
capital. In particular, investors should be careful to consider the tax
implications of buying shares just prior to a distribution by the Funds. The
price of shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will receive a
distribution which will nevertheless generally be taxable to them.
Upon the taxable disposition (including a sale or redemption)
of shares of a Fund, a shareholder may realize a gain or loss depending upon
his basis in his shares. Such gain or loss generally will be treated as
capital gain or loss if the shares are capital assets in the shareholders
hands. Such gain or loss will be long-term or short-term, generally depending
upon the shareholder's holding period for the shares. However, a loss realized
by a shareholder on the disposition of Fund shares with respect to which
capital gain dividends have been paid will, to the extent of such capital gain
dividends, be treated as long-term capital loss if such shares have been held
by the shareholder for six months or less. A loss realized on the redemption,
sale or exchange of Fund shares will be disallowed to the extent an
exempt-interest dividend was received with respect to those shares if the
shares have been held by the shareholder for six months or less. Further, a
loss realized on a disposition will be disallowed to the extent the shares
disposed of are replaced (whether by reinvestment of distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Shareholders
receiving distributions in the form of additional shares will have a cost basis
for Federal income tax purposes in each share received equal to the net asset
value of a share of the Funds on the reinvestment date.
The taxation of equity options is governed by Code section
1234. Pursuant to Code section 1234, the premium received by a Fund for
selling a put or call option is not
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<PAGE> 53
included in income at the time of receipt. If the option expires, the premium
is short-term capital gain to the Fund. If the Fund enters into a closing
transaction, the difference between the amount paid to close out its position
and the premium received is short-term capital gain or loss. If a call option
written by a Fund is exercised, thereby requiring the Fund to sell the
underlying security, the premium will increase the amount realized upon the
sale of such security and any resulting gain or loss will be a capital gain or
loss, and will be long-term or short-term depending upon the holding period of
the security. With respect to a put or call option that is purchased by a Fund,
if the option is sold, any resulting gain or loss will be a capital gain or
loss, and will be long-term or short-term, depending upon the holding period of
the option. If the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the option. If
the option is exercised, the cost of the option, in the case of a call Option,
is added to the basis of the purchased security and, in the case of a put
option, reduces the amount realized on the underlying security in determining
gain or loss.
Certain of the options, futures contracts, and forward foreign
currency exchange contracts that several of the Funds and the Portfolio may
invest in are so-called "section 1256 contracts." With certain exceptions,
gains or losses on section 1256 contracts generally are considered 60% long-term
and 40% short-term capital gains or losses ("60/40"). Also, section 1256
contracts held by a Fund or the Portfolio at the end of each taxable year
(and, generally, for purposes of the 4% excise tax, on October 31 of each year)
are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized and the resulting gain or loss is treated
as 60/40 gain or loss. Investors should contact their own tax advisors in this
regard.
Generally, the hedging transactions undertaken by a Fund
or the Portfolio may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains (or losses) realized by a Fund
or the Portfolio. In addition, losses realized by a Fund or the Portfolio on a
position that are part of a straddle may be deferred under the straddle rules,
rather than being taken into account in calculating the taxable income for the
taxable year in which such losses are realized. Because only a few regulations
implementing the straddle rules have been promulgated, the tax consequences to a
Fund of hedging transactions are not entirely clear. Hedging transactions may
increase the amount of short-term capital gain realized by a Fund or the
Portfolio which is taxed as ordinary income when distributed to stockholders.
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<PAGE> 54
A Fund or the Portfolio may make one or more of the elections
available under the Code which are applicable to straddles. If a Fund or the
Portfolio makes any of the elections, the amount, character and timing of the
recognition of gains or losses from the affected straddle positions will be
determined under rules that vary according to the election(s) made. The rules
applicable under certain of the elections may operate to accelerate the
recognition of gains or losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the recognition of
gains or losses from the affected straddle positions, the amount which must be
distributed to shareholders, and which will be taxed to shareholders as
ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not engage in such hedging
transactions. Investors should contact their own tax advisors in this regard.
Certain requirements that must be met under the Code in order
for a Fund to qualify as a regulated investment company may limit the extent to
which a Fund or, in the case of the International Multi-Manager Stock Fund, the
Portfolio, will be able to engage in transactions in options, futures, and
forward contracts.
Under the Code, gains or losses attributable to fluctuations
in exchange rates which occur between the time a Fund or the Portfolio accrues
interest, dividends or other receivables, or accrues expenses or other
liabilities denominated in a foreign currency, and the time the Fund or the
Portfolio actually collects such receivables, or pays such liabilities,
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain options and forward and futures contracts, gains or
losses attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "section 988" gains or losses, may increase, decrease, or eliminate
the amount of a Fund's investment company taxable income to be distributed to
its shareholders as ordinary income. Investors should contact their own tax
advisors in this regard.
Income received by a Fund or the Portfolio from sources within
foreign countries may be subject to withholding and other similar income taxes
imposed by the foreign country. If more than 50% of the value of a Fund's total
assets at the close of its taxable year consists of securities of foreign
governments and corporations, the Fund will be eligible and intends to elect to
"pass-through"
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<PAGE> 55
to its shareholders the amount of such foreign taxes paid by the Fund or, in the
case of the International Multi-Manager Stock Fund, its proportionate share of
such taxes paid by the Portfolio. Pursuant to this election, a shareholder would
be required to include in gross income (in addition to taxable dividends
actually received) his pro rata share of the foreign taxes paid (or deemed paid)
by a Fund, and would be entitled either to deduct his pro rata share of foreign
taxes in computing his taxable income or to use it as a foreign tax credit
against his U.S. Federal income tax liability, subject to limitations. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions, but such a shareholder may be eligible to claim the foreign tax
credit (see below). Each shareholder will be notified within 60 days after the
close of a Fund's taxable year whether the foreign taxes paid by a Fund or the
Portfolio will "pass-through" for that year and, if so, such notification will
designate (a) the shareholder's portion of the foreign taxes paid to each such
country and (b) the portion of the dividend which represents income derived from
foreign sources.
Generally, a credit for foreign taxes is subject to the
limitation that it may not exceed the shareholder's U.S. tax attributable to
his total foreign source taxable income. For this purpose, if a Fund makes the
election described in the preceding paragraph, the source of the Fund's income
flows through to its shareholders. Gains from the sale of securities will be
treated as derived from U.S. sources and certain currency fluctuations gains,
including fluctuation gains from foreign currency-denominated debt securities,
receivables and payables, will be treated as ordinary income derived from U.S.
sources. The limitation on the foreign tax credit is applied separately to
foreign source passive income as defined for purposes of the foreign tax credit)
including foreign source passive income of a Fund (including, in the case of the
International Multi-Manager Stock Fund, its proportionate share of the
Portfolio's foreign source passive income). The foreign tax credit may offset
only 90% of the alternative minimum tax imposed on corporations and individuals,
and foreign taxes generally may not be deducted in computing alternative minimum
taxable income.
The Funds are required to report to the IRS all distributions
except in the case of certain exempt shareholders. All such distributions
generally are subject to withholding of Federal income tax at a rate of 31%
("backup withholding") in the case of non-exempt shareholders if (1) the
shareholder fails to furnish the Funds with and to certify the shareholder's
correct taxpayer identification number or social security number, (2) the IRS
notifies the Funds or a shareholder that the shareholder has failed to report
properly certain interest and dividend income to the IRS and to respond to
notices to that effect, or (3) when required to do so, the shareholder fails to
certify that he is not subject to backup withholding. If the withholding
provisions
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<PAGE> 56
are applicable, any such distributions, whether reinvested in additional shares
or taken in cash, will be reduced by the amounts required to be withheld.
Backup withholding is not an additional tax. Any amount withheld may be
credited against the shareholders U.S. Federal income tax liability. Investors
may wish to consult their tax advisors about the applicability of the backup
withholding provisions.
The foregoing discussion relates only to Federal income tax
law as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
corporations, partnerships, trusts and estates). Distributions by the Funds
also may be subject to state and local taxes and their treatment under state
and local income tax laws may differ from the Federal income tax treatment.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult
their tax advisors with respect to particular questions of Federal, state and
local taxation. Shareholders who are not U.S. persons should consult their tax
advisers regarding U.S. and foreign tax consequences of ownership of shares of
the Funds including the likelihood that distributions to them would be subject
to withholding of U.S. tax at a rate of 30% (or at a lower rate under a tax
treaty).
Kansas Tax-Exempt Bond Fund. This Fund intends to manage its
portfolio so that it will be eligible to pay "exempt-interest dividends" to
shareholders. The Fund will so qualify if, at the close of each quarter of its
taxable year, at least 50% of the value of its total assets consists of state,
municipal, and certain other securities, the interest on which is exempt from
the regular Federal income tax. To the extent that the Fund's dividends
distributed to shareholders are derived from such interest income and are
designated as exempt-interest dividends by the Fund, they will be excludable
from a shareholder's gross income for Federal income tax purposes.
Exempt-interest dividends, however, must be taken into account by shareholders
in determining whether their total incomes are large enough to result in
taxation of up to 85% of their Social Security benefits and certain railroad
retirement benefits. The Fund will inform shareholders annually as to the
portion of the distributions from the Fund which constitute exempt-interest
dividends. In addition, for corporate shareholders of the Fund, exempt
interest dividends may comprise part or all of an adjustment to alternative
minimum taxable income. Exempt-interest dividends that are attributable to
certain private activity bonds, while not subject to the regular Federal
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<PAGE> 57
income tax, may constitute an item of tax preference for purposes of the
alternative minimum tax.
To the extent that the Fund's dividends are derived from its
investment company taxable income (which includes interest on its temporary
taxable investments and the excess of net short-term capital gain over net
long-term capital loss), they are considered ordinary (taxable) income for
Federal income tax purposes. Such dividends will not qualify for the
dividends-received deduction for corporations. Distributions, if any, of net
long-term capital gains (the excess of net long-term capital gain over net
short-term capital loss) designated by a Fund as long-term capital gain
dividends are taxable to shareholders as long-term capital gain regardless of
the length of time the shareholder has owned shares of the Fund.
Upon redemption, sale or exchange of shares in this Fund, a
shareholder will realize a taxable gain or loss, depending on whether the gross
proceeds are more or less than the shareholder's tax basis for the shares. The
discussion above provides additional detail about the income tax consequences
of disposing of Fund shares.
Deductions for interest expense incurred to acquire or carry
shares of the Fund may be subject to limitations that reduce, defer, or
eliminate such deductions. This includes limitations on deducting interest on
indebtedness properly allocable to investment property (which may include
shares of the Fund). In addition, a shareholder may not deduct a portion of
interest on indebtedness incurred or continue to purchase or carry shares of an
investment company (such as this Fund) paying exempt-interest dividends. Such
disallowance would be in an amount which bears the same ratio to the total of
such interest as the exempt-interest dividends bear to the total dividends,
excluding net capital gain dividends received by the shareholder. Under rules
issued by the IRS for determining when borrowed funds are considered used for
the purposes of purchasing or carrying particular assets, the purchase of
shares may be considered to have been made with borrowed funds even though the
borrowed funds are not directly traceable to the purchase of shares.
Certain of the debt securities acquired by the Fund may be
treated as debt securities that were originally issued at a discount. Original
issue discount can generally be defined as the difference between the price at
which a security was issued and its stated redemption price at maturity.
Although no cash income is actually received by the Fund, original issue
discount on a taxable debt security earned in a given year generally is
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<PAGE> 58
treated for Federal income tax purposes as interest and, therefore, such income
would be subject to the distribution requirements of the Code. Original issue
discount on an obligation, the interest from which is exempt from Federal
income tax, generally will constitute tax-exempt interest income.
Some of the debt securities may be purchased by the Fund at a
discount which exceeds the original issue discount on such securities, if any.
This additional discount represents market discount for Federal income tax
purposes. The gain realized on the disposition of any debt security having
market discount will be treated as ordinary taxable income to the extent it
does not exceed the accrued market discount on such debt security. Generally,
market discount accrues on a daily basis for each day the debt security is held
by the Fund at a constant rate over the time remaining to the debt security's
maturity or, at the election of the Fund, at a constant yield to maturity which
takes into account the semi-annual compounding of interest.
Under Kansas law, a mutual fund which qualifies as a regulated
investment company generally must have at least 50% of its total assets in
Kansas state and local issues at the end of each quarter of its taxable year in
order to be eligible to pay dividends which will be exempt from Kansas personal
income tax. Generally, shareholders who are Kansas residents will not incur
Kansas personal income tax on the amount of exempt-interest dividends received
by them from the Fund and derived from Kansas state and local issues, whether
taken in cash or paid in additional shares. Gain on the sale or redemption of
Fund shares is subject to Kansas personal income tax.
Shareholders will normally be subject to Kansas personal
income tax on dividends paid from income derived from taxable securities and
other taxable investments, and from securities issued by states other than
Kansas and on distribution of capital and other taxable gains.
The Fund will be required to report to the IRS all
distributions of investment company taxable income and net capital gains and
gross proceeds from the redemption or exchange of the Fund's shares, except in
the case of certain exempt shareholders. All such distributions and proceeds
from the redemption or exchange of the Fund's shares may be subject to
withholding of Federal income tax at the rate of 31% in the case of non-exempt
shareholders who fail to furnish a Fund with their taxpayer identification
numbers and with required certifications regarding their status under Federal
income tax laws.
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<PAGE> 59
A deductible "environmental tax" of 0.12% is imposed on a
corporation's modified alternative minimum taxable income in excess of $2
million. The environmental tax will be imposed even if the corporation is not
required to pay an alternative minimum tax because the corporation's regular
income tax liability exceeds its minimum tax liability. To the extent that
exempt-interest dividends paid by a Fund are included in alternative minimum
taxable income, corporate shareholders may be subject to the environmental tax.
Opinions relating to the validity of municipal securities and
the exemption of interest thereon from Federal income tax are rendered by bond
counsel to the issuers. The Fund, the Adviser and its affiliates, and the
Funds' counsel make no review of proceedings relating to the issuance of state
or municipal securities on the bases of such opinions.
Persons who may be "substantial users" (or "related persons"
to substantial users) of facilities financed by private activity bonds should
consult their tax advisers before purchasing shares of this Fund since the
acquisition of shares of the Fund may result in adverse tax consequences to
them. In addition, all shareholders of a Fund should consult their tax
advisers about the tax consequences to them of their investments in the Fund.
Changes in the tax law, including provisions relating to
tax-exempt income, frequently come under consideration. If such changes are
enacted, the tax consequences arising from an investment in Kansas Tax-Exempt
Bond Fund may be affected. Since the Trust does not undertake to furnish tax
advice, it is important for shareholders to consult their tax advisers
regularly about the tax consequences to them of investing in one or more of the
INTRUST Funds.
OTHER INFORMATION
Capitalization
The Trust is a Delaware business trust established under a
Declaration of Trust dated January 26, 1996 and currently consists of six
separately managed portfolios. Each portfolio is comprised of two classes of
shares -- the "Institutional Service Class" and the "Institutional Premium
Class." The two classes are identical with the exception that the shareholders
in the Institutional Premium Class may pay additional Service Organization fees
in an amount up to 0.50% of the daily net asset
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<PAGE> 60
value of the Fund's shares owned by shareholders with whom the Service
Organization has a servicing relationship for record keeping, communications
with and education of shareholders, fiduciary services (excluding investment
management) and asset allocation services. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. The Board of Trustees may establish additional Funds
(with different investment objectives and fundamental policies) at any time in
the future. Establishment and offering of additional Funds will not alter the
rights of the Trust's shareholders. When issued, shares are fully paid,
non-assessable, redeemable and freely transferable. Shares do not have
preemptive rights or subscription rights. In any liquidation of a Fund, each
shareholder is entitled to receive his pro rata share of the net assets of that
Fund.
Expenses incurred in connection with each Fund's organization
and the public offering of its shares have been deferred and are being
amortized on a straight-line basis over a period of not more than five years.
Voting Rights
Under the Declaration of Trust, the Trust is not required to
hold annual meetings of each Fund's shareholders to elect Trustees or for other
purposes. When certain matters affect only one class of shares but not
another, the shareholders would vote as a class regarding such matters. It is
not anticipated that the Trust will hold shareholders' meetings unless required
by law or the Declaration of Trust. In this regard, the Trust will be required
to hold a meeting to elect Trustees to fill any existing vacancies on the Board
if, at any time, fewer than a majority of the Trustees have been elected by the
shareholders of the Trust. In addition, the Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares of the Trust
may remove persons serving as Trustee either by declaration in writing or at a
meeting called for such purpose. The Trustees are required to call a meeting
for the purpose of considering the removal of persons serving as Trustee if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust. To the extent required by applicable law, the
Trustees shall assist shareholders who seek to remove any person serving as
Trustee.
The Trust's shares do not have cumulative voting rights, so
that the holders of more than 50% of the outstanding shares may elect the
entire Board of Trustees, in which case the
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<PAGE> 61
holders of the remaining shares would not be able to elect any Trustees.
Custodian Transfer Agent and Dividend Disbursing Agent
INTRUST acts as custodian of the Trust's assets. An
affiliate of BISYS acts as transfer agent for the Funds. The Trust compensates
BISYS for providing personnel and facilities to perform transfer agency related
services for the Trust at a rate intended to represent the cost of providing
such services. The International Multi-Manager Stock Fund pays no custodian
fees as long as all of its assets are invested in another mutual fund, but
incurs its pro-rata portion of the custody fees of Chase Manhattan Bank, N.A. as
Portfolio Custodian. The AMR Trust Board has reviewed and approved custodial
arrangements for securities held outside of the United States in accordance with
Rule 17f-5 of the 1940 Act.
Experts
KPMG Peat Marwick LLP has been selected as the independent
accountants for the Trust. KPMG Peat Marwick LLP provides audit services, tax
return preparation and assistance and consultation in connection with certain
SEC filings. KPMG Peat Marwick LLP is located at Nationwide Plaza, Columbus,
Ohio, 43215.
Yield and Performance Information
The Funds may, from time to time, include their yield,
effective yield, tax equivalent yield and average annual total return in
advertisements or reports to shareholders or prospective investors.
Current yield for the Money Market Fund will be based on the
change in the value of a hypothetical investment (exclusive of capital changes
such as gains or losses from the sale of securities and unrealized appreciation
and depreciation) over a particular seven-day period, less a pro-rata share of
each Fund's expenses accrued over that period (the "base period"), and stated
as a percentage of the investment at the start of the base period (the "base
period return"). The base period return is then annualized by multiplying by
365/7, with the resulting yield figure carried to at least the nearest
hundredth of one percent. "Effective yield" for the Money Market Fund assumes
that all dividends received during the base period have been reinvested.
Calculation of "effective yield" begins with the same "base period return" used
in the calculation of yield, which is then
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annualized to reflect weekly compounding pursuant to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1.
Quotations of yield for the Non-Money Market Fund will be
based on the investment income per share earned during a particular 30-day
period, less expenses accrued during a period ("net investment income") and
will be computed by dividing net investment income by the maximum offering
price per share on the last day of the period, according to the following
formula:
6
YIELD = 2[(a-b + 1) -l]
---
cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price per share on the last day of the period.
Quotations of tax-equivalent yield for the Kansas Tax-Exempt
Bond Fund will be calculated according to the following formula:
TAX EQUIVALENT YIELD = ( E )
---
1-p
E = tax-exempt yield
p = stated income tax rate
Quotations of average annual total return will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in a Fund over periods of 1, 5 and 10 years and since
inception (up to the life of the Fund), calculated pursuant to the following
formula:
n
P (1 + T) = ERV
(where P = a hypothetical initial payment of $l,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of the maximum sales charge and a
proportional share of Fund expenses (net of certain reimbursed
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<PAGE> 63
expenses) on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
Quotations of yield and total return will reflect only the
performance of a hypothetical investment in the Funds during the particular
time period shown. Yield and total return for the Funds will vary based on
changes in the market conditions and the level of the Fund's expenses, and no
reported performance figure should be considered an indication of performance
which may be expected in the future.
In connection with communicating its yields or total return to
current or prospective unit holders, the Funds also may compare these figures
to the performance of other mutual funds tracked by mutual fund rating services
or to other unmanaged indexed which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.
Performance information for the Funds may be compared, in
reports and promotional literature, to: (i) the Standard & Poor's 500 Stock
Index, Dow Jones Industrial Average, or other unmanaged indices so that
investors may compare the Funds' results with those of a group of unmanaged
securities widely regarded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks mutual
funds by overall performance, investment objectives, and assets, or tracked by
other services, companies, publications, or persons who rank mutual funds on
overall performance or other criteria; and (iii) the Consumer Price Index
(measure for inflation) to assess the real rate of return from an investment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses.
Investors who purchase and redeem shares of the Funds through
a customer account maintained at a Service Organization may be charged one or
more of the following types of fees as agreed upon by the Service Organization
and the investor, with respect to the customer services provided by the Service
Organization: account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid
on those assets). Such fees will have the effect of reducing the yield and
average annual total return of the Funds for those investors. Investors who
maintain accounts with the Trust as transfer agent will not pay these fees.
Financial Statements
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<PAGE> 64
INTRUST FUNDS TRUST
Money Market Fund
Statement of Assets and Liabilities
As of December 6, 1996
<TABLE>
<S> <C>
ASSETS:
Cash $100,000
Deferred organization expenses 30,000
--------
Total Assets 130,000
LIABILITIES:
Accrued organization expenses 30,000
--------
NET ASSETS: $100,000
========
NET ASSETS CONSIST OF:
Capital - 100,000 shares of
beneficial interest issued and
outstanding; unlimited shares
authorized (par value $0.001) -
Institutional Service Class $100,000
========
NET ASSET VALUE:
Institutional Service Shares
($100,000/100,000 shares issued
and outstanding) - offering and
redemption price per share $1.00
========
</TABLE>
See notes to financial statements.
<PAGE> 65
INTRUST FUNDS TRUST
Money Market Fund
NOTES TO FINANCIAL STATEMENTS
December 6, 1996
1. ORGANIZATION
INTRUST Funds Trust (the "Company"), an open-end management investment
company established as a Delaware business trust, is registered under
the Investment Company Act of 1940 (the "1940 Act"). The Company offers
shares of the following funds: Money Market Fund, Short-Term Bond Fund,
Intermediate Bond Fund, Stock Fund, Kansas Tax-Exempt Bond Fund and
International Multi-Manager Stock Fund each of which offers
Institutional Service Shares and Institutional Premium Shares. Both
classes of shares have identical rights and privileges except with
respect to Service Organization fees and voting rights on matters
affecting a single class of shares. The accompanying financial statement
relates only to the Money Market Fund (the "Fund"). The Fund had no
operations other than those actions relating to organizational matters.
As of December 6, 1996, all outstanding shares of the Fund are owned by
BISYS Fund Services, Ohio, Inc.
The investment objective of the Fund is to seek to provide investors
with current income, liquidity and the maintenance of a stable net asset
value of $1.00 per share by investing in high quality, short-term
obligations.
2. ORGANIZATION EXPENSES
All costs incurred by the Company in connection with the organization of
the Fund and the initial public offering of shares of the Fund,
principally professional fees and printing, have been deferred. Upon
commencement of operations of the Fund, the deferred organization
expenses will be amortized on a straight-line basis over a period of
five years. In the event that any of the initial shares of the Fund are
redeemed during the amortization period by any holder thereof, the
redemption proceeds will be reduced by any unamortized organization
expenses in the same proportion as the number of said shares being
redeemed bears to the number of initial shares that are outstanding at
the time of the redemption.
3. RELATED PARTY TRANSACTIONS
INTRUST Bank, N.A. ("Intrust") serves as the Company's Investment
Advisor. Under an advisory agreement with the Company, Intrust is
entitled to receive fees at an annualized rate of 0.25% of the Fund's
average daily net assets. AMR Investment Services, Inc. serves as
investment sub-adviser to the Fund. BISYS
<PAGE> 66
Fund Services ("BISYS") serves the Funds as Administrator and Sponsor.
For its services as Administrator, BISYS receives a fee at an amount of
0.20% of the Fund's average daily net assets. BISYS also serves as
Distributor for the Fund's shares.
Various banks, trust companies, broker-dealers (other than the Sponsor)
or other financial organizations (collectively, "Service Organizations")
may provide administrative services for the Fund, such as maintaining
shareholder accounts and records. The Fund may pay fees to Service
Organizations in amounts up to an annual rate of 0.05% of the daily net
asset value of the Fund's shares owned by shareholders with whom the
Service Organization has a servicing relationship. The Institutional
Premium Class may pay fees to Service Organizations in amounts up to an
annual rate of 0.50% of the daily net asset value of the Fund's shares
owned by shareholders with whom the Service Organization has a servicing
relationship.
Certain officers of the Company are affiliated with BISYS. Such persons
are not paid directly by the Company for serving in those capacities.
4. ESTIMATES
The preparation of this financial statement requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statement.
<PAGE> 1
SEI TAX EXEMPT TRUST
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
KANSAS TAX FREE INCOME PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely information about above-referenced
Portfolio that an investor needs to know before investing. Please read this
Prospectus carefully, and keep it on file for future reference.
A Statement of Additional Information dated December 31, 1996 has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing the Distributor, SEI Financial Services Company, 680
East Swedesford Road, Wayne, Pennsylvania 19087, or by calling 1-800-342-5734.
The Statement of Additional Information is incorporated into this Prospectus by
reference.
SEI Tax Exempt Trust (the "Trust") is an open-end management investment company,
certain classes of which offer financial institutions a convenient means of
investing their own funds, or funds for which they act in a fiduciary, agency or
custodial capacity, in professionally managed diversified and non-diversified
portfolios of securities. A portfolio may offer separate classes of shares that
differ from each other primarily in the allocation of certain shareholder
servicing expenses and minimum investment amounts. This Prospectus offers Class
A and Class B shares of the Trust's Kansas Tax Free Income Portfolio (the
"Portfolio"), a fixed income portfolio.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE> 2
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
-------- -------
<S> <C> <C> <C> <C>
Management/Advisory Fees (after fee waiver) (1) .15% .15%
12b-1 Fees None None
Total Other Expenses .06% .36%
Shareholder Servicing Fees (after fee waiver) (2) .00% (2) .25%
- ---------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (3) .21% .51%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Adviser has waived, on a voluntary basis, a portion of its fee, and the
Management/Advisory fee shown reflect these voluntary waivers. The Adviser
reserves the right to terminate its waiver at any time in its sole
discretion. Absent such waiver, the Management/Advisory fee would be .45%
for both Class A and Class B shares of the Portfolio.
(2) The Distributor has waived, on a voluntary basis, all or a portion of its
shareholder servicing fee for the Class A shares, and the Shareholder
Servicing Fees shown reflect this waiver. The Distributor reserves the right
to terminate its waiver at any time in its sole discretion. Absent such
waiver, Shareholder Servicing Fees would be .25% for the Class A shares of
the Portfolio.
(3) Absent these fee waivers, Total Operating Expenses of the Portfolio would
be .76% and .81% for Class A and Class B shares, respectively. Additional
information may be found under "The Adviser" and "The Manager."
EXAMPLE
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1 yr. 3 yrs. 5 yrs. 10 yrs.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end of each time period:
Class A $ 2 $ 7 $ 12 $27
Class B $ 5 $ 16 $ 29 $64
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in the Portfolio's Class A and Class B shares. A person who
purchases shares through a financial institution may be charged separate fees by
that institution. Additional information may be found under "The Manager,"
"Distribution and Shareholder Servicing" and "The Adviser."
Long-term Class B shareholders may pay more than the economic equivalent of the
maximum front-end sales charges otherwise permitted by the Conduct Rules of the
National Association of Securities Dealers, Inc.
2 +
<PAGE> 3
FINANCIAL HIGHLIGHTS
The following financial highlights have been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon was unqualified. This
information should be read in conjunction with the Trust's financial statements
and notes thereto which appear, along with the report of Arthur Andersen LLP, in
the Trust's 1996 Annual Report to Shareholders. Additional performance
information is set forth in the 1996 Annual Report to Shareholders, which is
available upon request and without charge by calling 1-800-342-5734. As of
August 31, 1996, Class B shares of the Kansas Tax Free Portfolio had not
commenced operations.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Net Realized
Investment and
Net Activities Distributions Unrealized
Asset ----- -------------------- Gain (Loss) on Net
Value Net Net Net Investments Asset Value
Beginning Investment Investment Realized Total and Capital End Total
of Period Income Income Gain Distributions Transactions of Period Return
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------
KANSAS TAX FREE INCOME PORTFOLIO
- -------------------------------------
FOR THE YEARS ENDED AUGUST 31,
1996 $ 10.63 $ 0.56 $(0.56) $ -- $ (0.56) $(0.12) $ 10.51 4.23%
1995 10.47 0.57 (0.57) -- (0.57) 0.16 10.63 7.23%
1994 10.91 0.57 (0.57) (0.02) (0.59) (0.42) 10.47 1.41%
1993 10.50 0.58 (0.58) (0.05) (0.63) 0.46 10.91 10.38%
1992 10.13 0.60 (0.59) (0.01) (0.60) 0.37 10.50 9.78%
1991 (1) 10.00 0.42 (0.37) -- (0.37) 0.08 10.13 5.12%+
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Ratio of Net
Ratio of Ratio of Investment
Expenses Net Income to
Ratio of to Average Investment Average
Net Assets Expenses Net Assets Income to Net Assets Portfolio
End of Period to Average (Excluding Average (Excluding Turnover
(000) Net Assets Fee Waivers) Net Assets Fee Waivers) Rate
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------
KANSAS TAX FREE INCOME PORTFOLIO
- --------------------------------
FOR THE YEARS ENDED AUGUST 31,
1996 $72,066 0.21% 0.51% 5.31% 5.01% 12.71%
1995 65,834 0.21% 0.51% 5.47% 5.17% 17.60%
1994 62,346 0.21% 0.54% 5.36% 5.03% 10.57%
1993 58,197 0.21% 0.51% 5.56% 5.26% 23.04%
1992 45,609 0.22% 0.52% 5.87% 5.57% 12.69%
1991 (1) 29,242 0.31%* 0.61%* 5.85%* 5.55%* 21.82%
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Return is for period indicated and has not been annualized.
(1) The Kansas Tax Free Income Portfolio (Class A) commenced operations on
December 10, 1990.
3 +
<PAGE> 4
THE TRUST
SEI TAX EXEMPT TRUST (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in separate diversified and
non-diversified investment portfolios. This prospectus offers Class A and Class
B shares of the Trust's Kansas Tax Free Income Portfolio (the "Portfolio").
Additional information pertaining to the Trust may be obtained by writing to SEI
Financial Services Company, 680 East Swedesford Road, Wayne, Pennsylvania 19087,
or by calling 1-800-342-5734.
INVESTMENT
OBJECTIVE AND
POLICIES
The Portfolio's investment objective is to preserve
capital while producing current income for the investor
that is exempt from both federal and Kansas state income
taxes. There can be no assurance that the Portfolio will
meet its investment objective.
Under normal conditions the Portfolio will invest
at least 80% of its net assets in municipal obligations
which produce interest that is, in the opinion of bond
counsel for the issuer, exempt from federal income tax
(collectively, "Municipal Securities"). This investment
policy is a fundamental policy of the Portfolio. At least
65% of the Portfolio's total assets will be invested in
Municipal Securities which are exempt from Kansas state
income taxes. The remainder of the Portfolio may be
invested in Municipal Securities of other states. Under
normal conditions, the Portfolio will also invest at least
80% of its net assets in securities the income from which
is not subject to the federal alternative minimum tax.
Although it has no present intention of doing so, the
Portfolio may invest up to 20% of its assets in taxable
securities for defensive purposes or when sufficient tax
exempt securities considered appropriate by INTRUST, N.A.,
the Portfolio's investment adviser (the "Adviser"), are
not available for purchase.
The Portfolio will maintain a dollar-weighted
average portfolio maturity of seven years to twelve years.
However, when the Adviser determines that the market
conditions so warrant, the Portfolio can maintain an
average weighted maturity of less than seven years.
The Portfolio may purchase the following types of
municipal obligations, but only if such securities, at the
time of purchase, either have the requisite rating, or, if
not rated, are of comparable quality as determined by the
Adviser: (i) municipal bonds rated A or better by Standard
and Poor's Corporation ("S&P") or Moody's Investors
Service, Inc. ("Moody's"), and a maximum of 10% of the
Portfolio's total assets in municipal bonds rated BBB by
S&P or Baa by Moody's; (ii) municipal notes rated at least
SP-2 by S&P or MIG-2 or V-MIG-2 by Moody's; and (iii)
tax-exempt commercial paper rated at least A-1 by S&P or
Prime-1 by Moody's. Municipal notes rated SP-2 by S&P have
satisfactory capacity to pay principal and interest;
4 +
<PAGE> 5
notes rated MIG-2 or VMIG-2 by Moody's are considered to
be of high quality. Bonds rated BBB by S&P have an
adequate capacity to pay interest and repay principal;
bonds rated Baa by Moody's are considered to be
medium-grade obligations (i.e., neither highly protected
nor poorly secured) and have speculative characteristics.
For a description of the permitted investments and
ratings, see the "Description of Permitted Investments and
Risk Factors" and the Statement of Additional Information.
GENERAL
INVESTMENT
POLICIES
The Portfolio may invest in variable and floating rate
obligations, may purchase securities on a "when-issued"
basis, and reserves the right to engage in standby
commitments. The Portfolio may also purchase other types
of tax exempt instruments as long as they are of a quality
equivalent to the long-term bond or commercial paper
ratings stated above. Although permitted to do so, the
Portfolio has no present intention to invest in repurchase
agreements. The Portfolio will not invest more than 10% of
its total assets in securities which are considered to be
illiquid.
The taxable instruments in which the Portfolio may
invest consist of U.S. Treasury obligations; obligations
issued or guaranteed by the U.S. Government or by its
agencies or instrumentalities whether or not backed by the
full faith and credit of the U.S. Government; certificates
of deposit, bankers acceptances and time deposits of U.S.
commercial banks or savings and loan institutions (not
including foreign branches of U.S. banks or U.S. branches
of foreign banks) which are members of the Federal Reserve
System or the Federal Deposit Insurance Corporation and
which have total assets of $1 billion or more as shown on
their last published financial statements at the time of
investment; and repurchase agreements involving any of the
foregoing obligations.
Kansas Risk Factors Under normal conditions, the Portfolio will be primarily
invested in municipal obligations which produce income
which is exempt from federal and Kansas state income
taxes. Accordingly, the Portfolio will have considerable
investments in Kansas municipal obligations, and will be
more susceptible to factors which adversely affect issuers
of Kansas obligations than a mutual fund which does not
have as great a concentration in the municipal obligations
of one particular state. Such factors include the
financial difficulties of Kansas, its counties,
municipalities and school districts, if any. See "Special
Considerations Relating to Kansas Municipal Securities" in
the Statement of Additional Information.
5 +
<PAGE> 6
INVESTMENT
LIMITATIONS
The investment objective and investment limitations are
fundamental policies of the Portfolio. Fundamental
policies cannot be changed with respect to the Trust or
the Portfolio without the consent of the holders of a
majority of the Trust's or the Portfolio's outstanding
shares.
The Portfolio may not:
1. Purchase securities of any issuer (except the
securities issued or guaranteed by the United States
Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total assets of the
Portfolio would be invested in the securities of such
issuer. This restriction applies to 75% of the
Portfolio's assets.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio based on current
value at the time of such purchase, to be invested in
the securities of one or more issuers conducting their
principal business activities in the same industry,
provided that this limitation does not apply to
investments in obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities
or to investments in tax-exempt securities issued by
governments or political subdivisions of governments.
3. Borrow money except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the
value of the total assets of the Portfolio. All
borrowings will be repaid before making additional
investments and any interest paid on such borrowings
will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the
time of the purchase of a security. Additional fundamental
investment limitations are set forth in the Statement of
Additional Information.
THE MANAGER
SEI Fund Management (the "Manager" and the "Transfer
Agent") provides the Trust with overall management
services, regulatory reporting, all necessary office
space, equipment, personnel and facilities, and serves as
institutional transfer agent, dividend disbursing agent,
and shareholder servicing agent.
For these services, the Manager is entitled to a
fee, which is calculated daily and paid monthly, at an
annual rate of .15% of the average daily net assets of the
Portfolio. For the fiscal year ended August 31, 1996, the
Portfolio paid management fees, after waivers, of .15% of
its average daily net assets.
THE ADVISER
INTRUST Bank, N.A. in Wichita, formerly First National
Bank in Wichita (the "Adviser"), serves as the Portfolio's
investment adviser under an advisory agreement
6 +
<PAGE> 7
with the Trust (the "Advisory Agreement"). Under the
Advisory Agreement, the Adviser invests the assets of the
Portfolio, and continuously reviews, supervises and
administers the Portfolio's investment program. The
Adviser is independent of the Manager, and discharges its
responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust.
The Adviser is a majority-owned subsidiary of
INTRUST Financial Corporation (formerly First Bancorp of
Kansas), a bank holding company. The Adviser is a national
banking association which provides a full range of banking
and trust services to clients. As of September 30, 1996,
total assets under management were approximately $1.2
billion. The principal place of business address of the
Adviser is 105 North Main Street, Box One, Wichita, Kansas
67201.
Michael Colgan, Vice President and Trust Investment
Officer for the Adviser since 1985, has managed the
portfolio of the Kansas Tax Free Income Portfolio since
December 1990.
The Adviser is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of
.30% of the average daily net assets of the Portfolio. The
Adviser may waive its fee, in its discretion, for
competitive purposes. In addition, the Adviser has
voluntarily agreed to waive a portion of its fee to limit
the total operating expenses to not more than .21% of the
average daily net assets for Class A and no more than .51%
of the average daily net assets for Class B on an
annualized basis. The Adviser reserves the right, in its
sole discretion, to terminate this voluntary fee waiver at
any time. For the fiscal year ended August 31, 1996, the
Portfolio paid advisory fees, after waivers, of .00% of
its relative net assets.
DISTRIBUTION
AND SHAREHOLDER
SERVICING
SEI Financial Services Company (the "Distributor"), a
wholly owned subsidiary of SEI Investments Company
("SEI"), serves as the Portfolio's distributor pursuant to
a distribution agreement (the "Distribution Agreement")
with the Trust.
The Portfolio has adopted plans under which firms,
including the Distributor, that provide shareholder and
administrative services may receive compensation therefor.
The Class A and B plans differ in a number of ways,
including the amounts that may be paid. Under each plan,
the Distributor may provide those services itself or may
enter into arrangements under which third parties provide
such services and are compensated by the Distributor.
Under such arrangements the Distributor may retain as a
profit any difference between the fee it receives and the
amount it pays such third party. In addition, the
Portfolio may enter into such arrangements directly.
7 +
<PAGE> 8
Under the Class A plan, the Portfolio will pay the
Distributor a fee at an annual rate of up to .25% of the
average daily net assets of the Portfolio attributable to
Class A shares, in return for provision of a broad range
of shareholder and administrative services. Under the
Class B shareholder service plan, the Portfolio will pay
shareholder service fees to the Distributor at an annual
rate of up to .25% of average daily net assets in return
for the Distributor's (or its agent's) efforts in
maintaining client accounts; arranging for bank wires;
responding to client inquiries concerning services
provided or investment; and assisting clients in changing
dividend options, account designations and addresses. In
addition, under their administrative services plan, Class
B shares will pay administrative services fees of up to
.05% of the average daily net assets of the shares.
Administrative services include sub-accounting; providing
information on share positions to clients; forwarding
shareholder communications to clients; processing
purchase, exchange and redemption orders; and processing
dividend payments.
It is possible that an institution may offer
different classes of shares to its customers and differing
services to the Classes of the Portfolio and thus receive
compensation with respect to different classes. These
financial institutions may also charge separate fees to
their customers. Certain financial institutions offering
shares to their customers may be required to register as
dealers pursuant to state laws.
The Trust may execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive compensation.
The Distributor may, from time to time in its sole
discretion, institute one or more promotional incentive
programs, which will be paid by the Distributor from its
own resources. Under any such program, the Distributor
will provide promotional incentives, in the form of cash
or other compensation, including merchandise, airline
vouchers, trips and vacation packages, to all dealers
selling shares of the Portfolios. Such promotional
incentives will be offered uniformly to all dealers and
predicated upon the amount of shares of the Portfolio sold
by the dealer.
PURCHASE AND
REDEMPTION OF
SHARES
Financial institutions may acquire shares of the Portfolio
for their own account, or as a record owner on behalf of
fiduciary, agency or custody accounts, by placing orders
with the Transfer Agent. Institutions that use certain SEI
proprietary systems may place orders electronically
through those systems. State securities laws may require
banks and financial institutions purchasing shares for
their customers to register as dealers pursuant to state
laws. Financial institutions which purchase shares for the
accounts of their customers may impose separate charges on
these customers for account services. Financial
institutions may impose an earlier cut-off
8 +
<PAGE> 9
time for receipt of purchase orders directed through them
to allow for processing and transmittal of these orders to
the Transfer Agent for effectiveness on the same day.
Shares of the Portfolio are offered only to residents of
states in which the shares are eligible for purchase.
Shares of the Portfolio may be purchased or
redeemed on days on which the New York Stock Exchange is
open for business ("Business Day"). However, money market
fund shares cannot be purchased by Federal Reserve wire on
federal holidays restricting wire transfers.
Shareholders who desire to purchase shares for cash
must place their orders with the Transfer Agent (or its
authorized agent) prior to the close of trading on the New
York Stock Exchange (presently 4:00 p.m. Eastern time) on
any Business Day for the order to be accepted on that
Business Day. Cash investments must be transmitted or
delivered in federal funds to the wire agent on the next
Business Day following the date the order is placed. The
Trust reserves the right to reject a purchase order when
the Distributor determines that it is not in the best
interest of the Trust and/or shareholders to accept such
purchase order.
Purchases will be made in full and fractional
shares of the Portfolio calculated to three decimal
places. The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust. The
net asset value per share of the Portfolio is determined
by dividing the total value of its investments and other
assets, less any liability, by the total number of
outstanding shares of the Portfolio. Net asset value per
share is determined daily as of the close of trading on
the New York Stock Exchange (presently 4:00 p.m. Eastern
time) on each Business Day. Although the methodology and
procedures for determining net asset value per share are
identical for each class of the Portfolio, the net asset
value per share of one class may differ from that of
another class because of the different shareholder
servicing fees charged to each class.
The market value of each security is obtained by
the Manager from an independent pricing service.
Securities having maturities of 60 days or less at the
time of purchase will be valued using the amortized cost
method (described in the Statement of Additional
Information), which approximates the securities' market
value. The pricing service may use a matrix system to
determine valuations of fixed income securities. This
system considers such factors as security prices, yields,
maturities, call features, ratings and developments
relating to specific securities in arriving at valuations.
The pricing service may also provide market quotations.
The procedures of the pricing service and its valuation
are reviewed by the officers of the Trust under the
general supervision of the Trustees. Portfolio securities
for which market quotations are available are valued at
the most recently quoted bid price on each Business Day.
9 +
<PAGE> 10
Shareholders who desire to redeem shares of the
Portfolio must place their redemption orders with the
Transfer Agent (or its authorized agent) prior to the
close of trading on the New York Stock Exchange (presently
4:00 p.m. Eastern time) on any Business Day. The
redemption price is the net asset value per share of the
Portfolio next determined after receipt by the Transfer
Agent of the redemption order. Payment on redemption will
be made as promptly as possible and, in any event, within
five Business Days after the redemption order is received.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Transfer Agent will
be responsible for any loss, liability, cost or expense
for acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine.
The Trust and the Transfer Agent will each employ
reasonable procedures to confirm that instructions
communicated by telephone are genuine, including requiring
a form of personal identification prior to acting upon
instructions received by telephone and recording telephone
instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by
other means.
PERFORMANCE
From time to time, the Portfolio may advertise yield,
total return and tax equivalent yield. These figures will
be based on historical earnings and are not intended to
indicate future performance.
The yield of the Portfolio refers to the annualized
income generated by an investment in the Portfolio over a
specified 30-day period. The yield is calculated by
assuming that the income generated by the investment
during that period generated each period over one year and
is shown as a percentage of the investment. The tax
equivalent yield is calculated by determining the rate of
return that would have been achieved on a fully taxable
investment to produce the after-tax equivalent of the
Portfolio's yield, assuming certain tax brackets for a
shareholder.
The total return of the Portfolio refers to the
average compounded rate of return to a hypothetical
investment for designated time periods (including, but not
limited to, the period from which the Portfolio commenced
operations through the specified date), assuming that the
entire investment is redeemed at the end of each period
and assuming the reinvestment of all dividend and capital
gain distributions.
The Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives.
The Portfolio may quote Morningstar, Inc., a
10 +
<PAGE> 11
service that ranks mutual funds on the basis of
risk-adjusted performance, and Ibbotson Associates of
Chicago, Illinois, which provides historical returns of
the capital markets in the U.S. The Portfolio may use
long-term performance of these capital markets to
demonstrate general long-term risk versus reward scenarios
and could include the value of a hypothetical investment
in any of the capital markets. The Portfolio may also
quote financial and business publications and periodicals
as they relate to fund management, investment philosophy,
and investment techniques.
The Portfolio may quote various measures of
volatility and benchmark correlation in advertising and
may compare these measures to those of other funds.
Measures of volatility attempt to compare historical share
price fluctuations or total returns to a benchmark while
measures of benchmark correlation indicate how valid a
comparative benchmark might be. Measures of volatility and
correlation are calculated using averages of historical
data and cannot be calculated precisely.
The performance of Class A shares will normally be
higher than that of Class B shares because of the
additional administrative services expenses charged to
Class B shares.
TAXES
The following summary of federal and state income tax
consequences is based on current tax laws and regulations,
which may be changed by legislative, judicial or
administrative action. No attempt has been made to present
a detailed explanation of the federal, state or local
income tax treatment of the Portfolio or its shareholders.
Accordingly, shareholders are urged to consult their tax
advisers regarding specific questions as to federal, state
and local income taxes. Additional information concerning
taxes is set forth in the Statement of Additional
Information.
Tax Status
of the Portfolio The Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies ("RICs") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), so
as to be relieved of federal income tax on net investment
company taxable income and net capital gain (the excess of
net long-term capital gain over net short-term capital
loss) distributed to shareholders.
Tax Status
of Distributions The Portfolio intends to distribute substantially all of
its net investment income (including net short-term
capital gain) to shareholders. If, at the close of each
quarter of its taxable year, at least 50% of the value of
the Portfolio's total assets consists of obligations the
interest on which is excludable from gross income, the
Portfolio may pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends are excludable
from a shareholder's gross income for federal income tax
purposes but may have certain collateral federal tax
consequences including alternative minimum tax
consequences. In addition, the receipt of exempt-interest
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dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxable on a portion of
such benefits. See the Statement of Additional
Information.
Any dividends paid out of income realized by the
Portfolio on taxable securities will be taxable to
shareholders as ordinary income (whether received in cash
or in additional shares) to the extent of the Portfolio's
earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders.
Distributions to shareholders of net capital gains of the
Portfolio also will not qualify for the dividends received
deduction and will be taxable to shareholders as long-term
capital gain, whether received in cash or additional
shares, and regardless of how long a shareholder has held
the shares.
Dividends declared by the Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in any such month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if paid by
the Portfolio at any time during the following January.
The Portfolio intends to make sufficient distributions
prior to the end of each calendar year to avoid liability
for the federal excise tax applicable to RICs.
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of the
Portfolio is not deductible for federal income tax
purposes. Furthermore, the Portfolio may not be an
appropriate investment for persons (including corporations
and other business entities) who are "substantial users"
(or persons related to "substantial users") of facilities
financed by industrial development bonds or private
activity bonds. Such persons should consult their tax
advisers before purchasing shares.
The Portfolio will report annually to its
shareholders the portion of dividends that is taxable and
the portion that is tax-exempt based on income received by
the Portfolio during the year to which the dividends
relate.
Each sale, exchange or redemption of the
Portfolio's shares is a taxable transaction to the
shareholder.
State Taxes The following is a general, abbreviated summary of certain
of the provisions of the Kansas tax code presently in
effect as they directly govern the taxation of
shareholders subject to Kansas personal income tax. These
provisions are subject to change by legislative or
administrative action, and any such change may be
retroactive.
Under Kansas law, interest on all obligations
issued by the State of Kansas or its political
subdivisions after December 31, 1987 is excluded from
Kansas adjusted gross income in determining Kansas tax
liability, and interest from obligations issued prior to
January 1, 1988, is exempt from Kansas income tax only if
there is statutory authority exempting the interest from
the particular obligations in question. For Kansas income
tax purposes, interest on the above-described
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obligations is exempt for both the Portfolio and its
shareholders who are Kansas residents.
GENERAL INFORMATION
The Trust The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated March 15, 1982. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. In addition to the Portfolio, the Trust
consists of the following portfolios: Intermediate-Term
Municipal Portfolio, Tax Free Portfolio, Institutional Tax
Free Portfolio, California Tax Exempt Portfolio,
Pennsylvania Municipal Portfolio, New York Intermediate-
Term Municipal Portfolio, and Pennsylvania Tax Free
Portfolio. All consideration received by the Trust for
shares of any portfolio and all assets of such portfolio
belong to that portfolio and would be subject to
liabilities related thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
Trustees of the Trust The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
Voting Rights Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will
vote separately on matters relating solely to that
portfolio or class, such as any distribution plan. As a
Massachusetts business trust, the Trust is not required to
hold annual meetings of shareholders, but approval will be
sought for certain changes in the operation of the Trust
and for the election of Trustees under certain
circumstances. In addition, a Trustee may be removed by
the remaining Trustees or by shareholders at a special
meeting called upon written request of shareholders owning
at least 10% of the outstanding shares of the Trust. In
the event that such a meeting is requested the Trust will
provide appropriate assistance and information to the
shareholders requesting the meeting.
Reporting The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
Shareholder Inquiries Shareholder inquiries should be directed to the Manager,
SEI Fund Management, 680 E. Swedesford Road, Wayne,
Pennsylvania, 19087.
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Dividends Substantially all of the net investment income (exclusive
of capital gains) of the Portfolio is periodically
declared and paid as a dividend. Shareholders of record on
the last record date of each period will be entitled to
receive the periodic dividend distribution, which is
generally paid on the 10th Business Day of the following
month. If any net capital gains are realized, they will be
distributed by the Portfolio annually.
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares at the net asset value next determined following
the record date, unless the shareholder has elected to
take such payment in cash. Shareholders may change their
election by providing written notice to the Manager at
least 15 days prior to the distribution.
The dividends on Class A shares are normally higher
than on Class B shares of the Portfolio because of the
additional administrative services expenses charged to
Class B shares.
Counsel and Independent
Public Accountants Morgan, Lewis & Bockius LLP serves as counsel to the
Trust. Arthur Andersen LLP serves as the independent
public accountants of the Trust.
Custodian and Wire Agent
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O.
Box 7618, Philadelphia, Pennsylvania 19101, serves as
Custodian of the Trust's assets and acts as wire agent of
the Trust. The Custodian holds cash, securities and other
assets of the Trust as required by the 1940 Act.
DESCRIPTION
OF PERMITTED
INVESTMENTS
AND RISK FACTORS
The following is a description of certain of the permitted
investments for the Portfolio, and the associated risk
factors:
Money Market Securities
Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks; (ii) U.S. Treasury obligations and obligations
issued by the agencies and instrumentalities of the U.S.
Government; and (iii) repurchase agreements involving any
of the foregoing obligations entered into with
highly-rated banks and broker-dealers.
Municipal Securities Municipal Securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain
funds to be used for various public facilities, for
refunding outstanding obligations, for general operating
expenses and for lending such funds to other public
institutions and facilities, and (ii) certain private
activity and industrial development bonds issued by or on
behalf of public authorities to obtain funds to provide
for the construction, equipment, repair or improvement of
privately operated facilities.
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General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are
backed by the revenues of a project or facility, tolls
from a toll bridge, for example. Certificates of
participation represent an interest in an underlying
obligation or commitment such as an obligation issued in
connection with a leasing arrangement. The payment of
principal and interest on private activity and industrial
development bonds generally is dependent solely on the
ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal
property so financed as security for such payment.
Municipal notes include general obligation notes,
tax anticipation notes, revenue anticipation notes, bond
anticipation notes, certificates of indebtedness, demand
notes and construction loan notes and participation
interests in municipal notes. Municipal bonds include
general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds
and participation interests in municipal bonds.
Repurchase Agreements Repurchase agreements are arrangements by which a
Portfolio obtains a security and simultaneously commits to
return the security to the seller at an agreed upon price
(including principal and interest) on an agreed upon date
within a number of days from the date of purchase.
Repurchase agreements are considered loans under the 1940
Act.
Standby Commitments
and Puts Securities subject to standby commitments or puts permit
the holder thereof to sell the securities at a fixed price
prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current
market price. However, unless the standby commitment or
put was an integral part of the security as originally
issued, it may not be marketable or assignable; therefore,
the standby commitment or put would only have value to the
Portfolio owning the security to which it relates. In
certain cases, a premium may be paid for a standby
commitment or put, which premium will have the effect of
reducing the yield otherwise payable on the underlying
security. The Portfolio will limit standby commitment or
put transactions to institutions believed to present
minimal credit risk.
U.S. Government
Obligations Obligations issued by the U.S. Treasury or issued or
guaranteed by agencies of the U.S. Government, including,
among others, the Federal Farm Credit Bank, the Federal
Housing Administration and the Small Business
Administration, and obligations issued or guaranteed by
instrumentalities of the U.S. Government, including, among
others, the Federal Home Loan Mortgage Corporation, the
Federal Land Banks and the U.S. Post Service. Some of
these securities are supported by the full faith and
credit of the U.S. Treasury (e.g., Government National
Mortgage Association securities), others are supported by
the right of the issuer to borrow from the Treasury (e.g.,
Federal Farm Credit Bank securities), while still others
are supported only by the credit of the instrumentality
(e.g., Federal National Mortgage
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<PAGE> 16
Association securities). Guarantees of principal by
agencies or instrumentalities of the U.S. Government may
be a guarantee of payment at the maturity of the
obligation so that in the event of a default prior to
maturity there might not be a market and thus no means of
realizing on the obligation prior to maturity. Guarantees
as to the timely payment of principal and interest do not
extend to the value or yield of these securities not to
the value of the Fund's shares.
Variable and Floating
Rate Instruments Certain of the obligations purchased by the Portfolio may
carry variable or floating rates of interest and may
involve a conditional or unconditional demand feature.
Such obligations may include variable amount master demand
notes. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities
may be reset daily, weekly, quarterly or at some other
interval, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing
market interest rates. A demand instrument with a demand
notice period exceeding seven days may be considered
illiquid if there is no secondary market for such
security.
When-Issued and Delayed
Delivery Securities When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. The Portfolio will maintain with the
custodian a separate account with liquid, high grade debt
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these
securities is fixed as of the purchase date, and no
interest accrues to the Portfolio before settlement.
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Annual Operating Expenses................... 2
Financial Highlights........................ 3
The Trust................................... 4
Investment Objective and Policies........... 4
General Investment Policies................. 5
Investment Limitations...................... 6
The Manager................................. 6
The Adviser................................. 6
Distribution and Shareholder Servicing...... 7
Purchase and Redemption of Shares........... 8
Performance................................. 10
Taxes....................................... 11
General Information......................... 13
Description of Permitted Investments and
Risk Factors.............................. 14
</TABLE>
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<PAGE> 1
SEI TAX EXEMPT TRUST
MANAGER:
SEI FUND MANAGEMENT
DISTRIBUTOR:
SEI FINANCIAL SERVICES COMPANY
INVESTMENT ADVISERS AND SUB-ADVISERS:
INTRUST BANK, N.A.
MORGAN GRENFELL CAPITAL MANAGEMENT INCORPORATED
SEI FINANCIAL MANAGEMENT CORPORATION
STANDISH, AYER & WOOD, INC.
WEISS, PECK & GREER L.L.C.
This Statement of Additional Information is not a Prospectus. It is intended to
provide additional information regarding the activities and operations of SEI
Tax Exempt Trust (the "Trust") and should be read in conjunction with the
Trust's Prospectuses dated December 31, 1996. Prospectuses may be obtained by
writing the Trust's distributor, SEI Financial Services Company, Oaks,
Pennsylvania 19456, or by calling 1-800-342-5734.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE TRUST.......................................................................................................S-2
DESCRIPTION OF PERMITTED INVESTMENTS............................................................................S-2
DESCRIPTION OF RATINGS..........................................................................................S-5
THE MANAGER....................................................................................................S-10
THE ADVISERS AND SUB-ADVISER...................................................................................S-11
DISTRIBUTION AND SHAREHOLDER SERVICING.........................................................................S-12
TRUSTEES AND OFFICERS OF THE TRUST.............................................................................S-15
PERFORMANCE....................................................................................................S-17
DETERMINATION OF NET ASSET VALUE...............................................................................S-20
PURCHASE AND REDEMPTION OF SHARES..............................................................................S-21
SHAREHOLDER SERVICES...........................................................................................S-22
TAXES ......................................................................................................S-23
PORTFOLIO TRANSACTIONS.........................................................................................S-25
DESCRIPTION OF SHARES..........................................................................................S-28
LIMITATION OF TRUSTEES' LIABILITY..............................................................................S-28
SHAREHOLDER LIABILITY..........................................................................................S-29
5% SHAREHOLDERS................................................................................................S-29
EXPERTS ......................................................................................................S-31
FINANCIAL STATEMENTS...........................................................................................S-31
</TABLE>
December 31, 1996
<PAGE> 2
THE TRUST
SEI Tax Exempt Trust (the "Trust") is an open-end management investment company
established as a Massachusetts business trust pursuant to a Declaration of Trust
dated March 15, 1982. The Declaration of Trust permits the Trust to offer
separate series ("portfolios") of units of beneficial interest ("shares") and
separate classes of portfolios. This Statement of Additional Information relates
to the following portfolios: Tax Free, Institutional Tax Free, California Tax
Exempt, Intermediate-Term Municipal, Pennsylvania Municipal, Pennsylvania Tax
Free, Kansas Tax Free Income and New York Intermediate-Term Municipal Portfolios
(each a "Portfolio," and collectively, the "Portfolios"), and any different
classes of the Portfolios. Except for differences between the Class A, Class B,
Class C, Class D and Class G shares of any Portfolio pertaining to sales loads,
shareholder servicing and administrative services plans, distribution plans,
transfer agency costs, voting rights and/or dividends, each share of each
Portfolio represents an equal proportionate interest in that Portfolio with each
other share of that Portfolio.
DESCRIPTION OF PERMITTED INVESTMENTS
ALL PORTFOLIOS
BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by a commercial bank. Bankers' acceptances are
issued by corporations to finance the shipment and storage of goods.
Maturities are generally six months or less.
CERTIFICATES OF DEPOSIT -- Certificates of deposit is an interest-bearing
instrument with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER -- Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from one to 270 days.
FIXED INCOME SECURITIES -- Fixed income securities are debt obligations issued
by corporations, municipalities and other borrowers. The market value of the
Portfolio's fixed income investments will change in response to interest rate
changes and other factors. During periods of falling interest rates, the values
of outstanding fixed income securities generally rise. Conversely, during
periods of rising interest rates, the values of such securities generally
decline. Changes by recognized rating agencies in the rating of any fixed income
security and in the ability of an issuer to make payments of interest and
principal also affect the value of these investments. Changes in the value of
portfolio securities will not necessarily affect cash income derived from these
securities, but will affect the Portfolio's net asset value.
INVESTMENT COMPANY SHARES - Each Portfolio may invest in shares of other
investment companies, to the extent permitted by applicable law and subject to
certain restrictions set forth in this statement of additional information.
These investment companies typically incur fees that are separate from those
fees incurred directly by the Portfolio. A Portfolio's purchase of such
investment company securities results in the layering of expenses, such that
shareholders would indirectly bear a proportionate share of the operating
expenses of such investment companies, including advisory fees, in addition to
paying Portfolio expenses. Under applicable regulations, a Portfolio is
prohibited from acquiring the securities of another investment company if, as a
result of such acquisition: (1) the Portfolio owns more than 3% of the total
voting stock of the other company; (2) securities issued by any one investment
company represent more than 5% of the Portfolio's total assets; or (3)
securities (other than treasury stock) issued by all investment companies
represent more than 10% of the total assets of the Portfolio.
MUNICIPAL LEASES -- Each Portfolio may invest in instruments, or participations
in instruments, issued in connection with lease obligations or installment
purchase contract obligations of municipalities ("municipal lease obligations").
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<PAGE> 3
Although municipal lease obligations do not constitute general obligations of
the issuing municipality, a lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate funds for, and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses, which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose in the relevant years. Municipal lease
obligations are a relatively new form of financing, and the market for such
obligations is still developing. Municipal leases will be treated as liquid only
if they satisfy criteria set forth in guidelines established by the Board of
Trustees, and there can be no assurance that a market will exist or continue to
exist for any municipal lease obligation.
MUNICIPAL NOTES -- Municipal notes consist of general obligation notes, tax
anticipation notes (notes sold to finance working capital needs of the issuer in
anticipation of receiving taxes on a future date), revenue anticipation notes
(notes sold to provide needed cash prior receipt of expected non-tax revenues
from a specific source), bond anticipation notes, tax and revenue anticipation
notes, certificates of indebtedness, demand notes, and construction loan notes.
The maturities of the instruments at the time of issue will generally range from
three months to one year.
MUNICIPAL BONDS -- Municipal bonds are debt obligations issued to obtain funds
for various public purposes. A Portfolio may purchase private activity or
industrial development bonds if the interest paid is exempt from federal income
tax. These bonds are issued by or on behalf of public authorities to raise money
to finance various privately-owned or -operated facilities for business and
manufacturing, housing, sports, and pollution control. These bonds are also used
to finance public facilities such as airports, mass transit systems, ports,
parking or sewage or solid waste disposal facilities, as well as certain other
categories. The payment of the principal and interest on such bonds is dependent
solely on the ability of the facility's user to meet its financial obligations
and the pledge, if any, of real and personal property so financed as security
for such payment.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements under which
securities are acquired from a securities dealer or bank subject to resale on an
agreed upon date and at an agreed upon price which includes principal and
interest. The Portfolio or its agent will have actual or constructive possession
of the securities held as collateral for the repurchase agreement. The Portfolio
bears a risk of loss in the event the other party defaults on its obligations
and the Portfolio is delayed or prevented from exercising its right to dispose
of the collateral securities, or if the Portfolio realizes a loss on the sale of
the collateral securities. The Advisers or Sub-Adviser will enter into
repurchase agreements on behalf of the Portfolio only with financial
institutions deemed to present minimal risk of bankruptcy during the term of the
agreement based on guidelines established and periodically reviewed by the Board
of Trustees. These guidelines currently permit the Portfolios to enter into
repurchase agreements only with approved banks and primary securities dealers,
as recognized by the Federal Reserve Bank of New York, which have minimum net
capital of $100 million, or with a member bank of the Federal Reserve System.
Repurchase agreements are considered to be loans collateralized by the
underlying security. Repurchase agreements entered into by the Portfolios will
provide that the underlying security at all times shall have a value at least
equal to 102% of the price stated in the agreement. This underlying security
will be marked to market daily. The Advisers or Sub-Adviser will monitor
compliance with this requirement. Under all repurchase agreements entered into
by the Portfolios, the Custodian or its agent must take possession of the
underlying collateral. However, if the seller defaults, the Portfolios could
realize a loss on the sale of the underlying security to the extent the proceeds
of the sale are less than the resale price. In addition, even though the
Bankruptcy Code provides protection for most repurchase agreements, if the
seller should be involved in bankruptcy or insolvency proceedings, the
Portfolios may incur delays and costs in selling the security and may suffer a
loss of principal and interest if the Portfolios are treated as unsecured
creditors.
STANDBY COMMITMENTS-PUT TRANSACTIONS - The Portfolios reserve the right to
engage in put transactions. The Advisers and Sub-Adviser have the authority to
purchase securities at a price which would result in a yield to maturity lower
than that generally offered by the seller at the time of purchase when the
Portfolios can simultaneously acquire the right to sell the securities back to
the seller, the issuer, or a third party (the "writer") at an
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<PAGE> 4
agreed-upon price at any time during a stated period or on a certain date. Such
a right is generally denoted as a "standby commitment" or a "put." The purpose
of engaging in transactions involving puts is to maintain flexibility and
liquidity to permit the Portfolios to meet redemptions and remain as fully
invested as possible in municipal securities. The right to put the securities
depends on the writer's ability to pay for the securities at the time the put is
exercised. The Portfolios would limit their put transactions to institutions
which the Adviser or Sub-Adviser believes present minimum credit risks, and the
Adviser or Sub-Adviser would use its best efforts to initially determine and
continue to monitor the financial strength of the sellers of the options by
evaluating their financial statements and such other information as is available
in the marketplace. It may, however, be difficult to monitor the financial
strength of the writers because adequate current financial information may not
be available. In the event that any writer is unable to honor a put for
financial reasons, a Portfolio would be a general creditor (i.e., on a parity
with all other unsecured creditors) of the writer. Furthermore, particular
provisions of the contract between a Portfolio and the writer may excuse the
writer from repurchasing the securities; for example, a change in the published
rating of the underlying securities or any similar event that has an adverse
effect on the issuer's credit or a provision in the contract that the put will
not be exercised except in certain special cases, for example, to maintain
portfolio liquidity. A Portfolio could, however, at any time sell the underlying
portfolio security in the open market or wait until the portfolio security
matures, at which time it should realize the full par value of the security.
The securities purchased subject to a put, may be sold to third persons at any
time, even though the put is outstanding, but the put itself, unless it is an
integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Portfolio.
Sale of the securities to third parties or lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, a Portfolio could seek to negotiate terms for the
extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to the Portfolio, the Portfolio could, of course, sell the
security. The maturity of the underlying security will generally be different
from that of the put. The Intermediate-Term Municipal, Pennsylvania Municipal
and Kansas Tax Free Income Portfolios will consider the "maturity" of a security
subject to a put to be the first date on which it has the right to demand
payment from the writer of the put although the final maturity of the security
is later than such date.
The Trust has received a private letter ruling from the Internal Revenue Service
that, to the extent it purchases securities subject to the right to put them
back to the seller in order to maintain liquidity to meet redemption
requirements, it will be treated as the owner of those securities for federal
income tax purposes. No assurance can be given that legislative, judicial or
administrative changes may not be forthcoming which could modify the Trust's
private letter ruling.
TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time deposits with a withdrawal penalty are
considered to be illiquid securities.
WHEN-ISSUED SECURITIES -- These securities involve the purchase of debt
obligations on a when-issued basis, in which case delivery and payment normally
take place within 45 days after the date of commitment to purchase. The
Portfolios will only make commitments to purchase obligations on a when-issued
basis with the intention of actually acquiring the securities, but may sell them
before the settlement date. The when-issued securities are subject to market
fluctuation, and no interest accrues to the purchaser during this period. The
payment obligation and the interest rate that will be received on the securities
are each fixed at the time the purchaser enters into the commitment. Purchasing
obligations on a when-issued basis is a form of leveraging and can involve a
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself. In that case
there could be an unrealized loss at the time of delivery.
The Portfolios will establish segregated accounts with the Custodian and will
maintain liquid, high grade assets in an amount at least equal in value to the
Portfolios' commitments to purchase when-issued securities.
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<PAGE> 5
DESCRIPTION OF RATINGS
MUNICIPAL NOTE RATINGS. A Standard & Poor's Corporation ("S&P") note rating
reflects the liquidity concerns and market access risks unique to notes. Notes
due in 3 years or less will likely receive a note rating. Notes maturing beyond
3 years will most likely receive a long-term debt rating. The following criteria
will be used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
Moody's Investors Service, Inc. ("Moody's") highest rating for state and
municipal and other short-term notes is MIG-1 and VMIG-1. Short-term municipal
securities rated MIG-1 or VMIG-1 are of the best quality. They have strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing or both.
Municipal obligations rated MIG-2 and VMIG-2 are high quality. Margins of
protection are ample although not so large as in the preceding group.
MUNICIPAL AND CORPORATE BOND RATINGS. Bonds rated AAA have the highest rating
S&P assigns to a debt obligation. Such a rating indicates an extremely strong
capacity to pay principal and interest. Bonds rated AA also qualify as
high-quality debt obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from AAA issues only in
small degrees.
Bonds rated A by S&P have a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories. Debt
rated BBB is regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins or protection
may not be as large as in Aaa-rated securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa-rated
securities.
Bonds which are rated A by Moody's possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
S-5
<PAGE> 6
Bonds which are rated Baa by Moody's are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
COMMERCIAL PAPER RATINGS. Commercial paper rated A by S&P is regarded by S&P as
having the greatest capacity for timely payment. Issues rated A are further
refined by use of the numbers 1+, 1, 2 and 3 to indicate the relative degree of
safety, issues rated A-1+ are those with an "overwhelming degree" of credit
protection. Those rated A-1 reflect a "very strong" degree of safety regarding
timely payment. Those rated A-2 reflect a "satisfactory" degree of safety
regarding timely payment.
Commercial paper issuers rated Prime-1 or Prime-2 by Moody's are judged by
Moody's to be of "superior" quality and "strong" quality, respectively, on the
basis of relative repayment capacity.
INVESTMENT LIMITATIONS
No Portfolio may:
1. Borrow money except for temporary or emergency purposes and then only in
an amount not exceeding 10% of the value of total assets. The California
Tax Exempt Portfolio has a fundamental policy that to the extent such
borrowing exceeds 5% of the value of the Portfolio's total assets,
borrowing will be done from a bank and in accordance with the requirements
of the 1940 Act. This borrowing provision is included solely to facilitate
the orderly sale of portfolio securities to accommodate heavy redemption
requests if they should occur and is not for investment purposes. All
borrowings of the Portfolios, in excess of 5% of its total assets, will be
repaid before making additional investments and any interest paid on such
borrowings will reduce income.
2. Purchase securities of other investment companies, except that the
Intermediate-Term Municipal, Pennsylvania Municipal, Pennsylvania Tax Free
and Kansas Tax Free Income Portfolios may only purchase securities of
money market funds and the New York Intermediate-Term Municipal Portfolio
may purchase securities of other investment companies, in either case, as
permitted by the 1940 Act and the rules and regulations thereunder.
3. Make loans, except that any Portfolio may purchase or hold debt
instruments in accordance with its investment objective and policies and
may enter into repurchase agreements, provided that repurchase agreements
maturing in more than seven days, restricted securities and other illiquid
securities are not to exceed, in the aggregate, 10% of the Portfolio's net
assets, except for the Intermediate-Term Municipal and New York
Intermediate-Term Municipal Portfolios, for which it cannot exceed 15% of
the Portfolio's net assets.
4. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (1) above in aggregate amounts not to exceed 10%
of the net assets of such Portfolio taken at current value at the time of
the incurrence of such loan.
5. Invest in companies for the purpose of exercising control.
6. Acquire more than 10% of the voting securities of any one issuer.
7. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts including futures contracts. However,
subject to its permitted investments, any Portfolio may invest in
municipal securities or other obligations secured by real estate or other
interests therein.
S-6
<PAGE> 7
8. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Portfolio may obtain short-term
credits as necessary for the clearance of security transactions.
9. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
10. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described in the Prospectuses and this
Statement of Additional Information or as permitted by rule, regulation or
order of the SEC.
11. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, partner or director of the Trust or any
investment adviser of the Trust owns beneficially more than 1/2 of 1% of
the shares or securities of such issuer and all such officers, trustees,
partners and directors owning more than 1/2 of 1% of such shares or
securities together own more than 5% of such shares or securities.
12. Purchase securities of any company which has (with predecessors) a record
of less than three years continuing operations (except (i) obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities, or (ii) municipal securities which are rated by at
least two nationally recognized municipal bond rating services or
determined by the Adviser or Sub-Adviser to be of "high quality") if, as a
result, more than 5% of the total assets (taken at current value) would be
invested in such securities.
13. Purchase warrants, calls, straddles, spreads or combinations thereof,
except as permitted by its Prospectus and this Statement of Additional
Information.
14. Invest in interests in oil, gas or other mineral exploration or
development programs. The Institutional Tax Free Portfolio, the Kansas Tax
Free Income Portfolio and the California Tax Exempt Portfolio may not
invest in oil, gas or mineral leases.
15. Invest more than 25% of total assets in issues within the same state or
similar type projects (except in specified categories). This investment
limitation applies to the Intermediate-Term Municipal Portfolio, Tax Free
Portfolio, Institutional Tax Free Portfolio, and Pennsylvania Municipal
Portfolio. For the Pennsylvania Municipal Portfolio, this limitation does
not apply to the extent stated in its investment objective and policies.
The foregoing percentages will apply at the time of the purchase of a security.
These investment limitations and the investment limitations in each Prospectus
are fundamental policies of the Trust and may not be changed without shareholder
approval, except that for the Kansas Tax Free Income Portfolio and New York
Intermediate-Term Municipal Portfolio and investment limitations 2, 4, 8, 11,
12, 13 and 14 are not fundamental and do not require shareholder approval to be
amended. It is a fundamental policy of the Intermediate-Term Municipal and
Pennsylvania Municipal Portfolios to abide by the maturity restrictions and to
invest solely in the permitted investments described in this Statement of
Additional Information and in their respective Prospectuses.
STATE SPECIFIC DISCLOSURE
The following information constitutes only a brief summary, and is not intended
as a complete description.
SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA MUNICIPAL SECURITIES
The ability of issuers to pay interest on, and repay principal of, California
municipal securities ("California Municipal Securities") may be affected by (1)
amendments to the California Constitution and related statutes that limit the
taxing and spending authority of California government entities, and related
civil actions, (2) a wide variety of California laws and regulations, and (3)
the general financial condition of the State of California.
S-7
<PAGE> 8
AMENDMENTS TO THE CALIFORNIA CONSTITUTION AND RELATED STATUTES. Certain of the
California Municipal Securities may be obligations of issuers who rely in whole
or in part on ad valorem real property taxes as a source of revenue. On June 6,
1978, California voters approved an amendment to the California Constitution
known as Proposition 13, which added Article XIIIA to the California
Constitution. The effect of Article XIIIA is to limit ad valorem taxes on real
property, and to restrict the ability of taxing entities to increase real
property tax revenues. On November 7, 1978, California voters approved
Proposition 8, and on June 3, 1986, California voters approved Proposition 46,
both of which amended Article XIIIA. Article XIIIA may require further
interpretation by both the Legislature and the courts to determine its
applicability to specific situations involving the State and local taxing
authorities.
OTHER RELEVANT CALIFORNIA LAWS. A wide variety of California laws and
regulations may affect, directly or indirectly, the payment of interest on, or
the repayment of the principal of, California Municipal Securities in which the
Portfolio may invest. The impact of such laws and regulations on particular
California Municipal Securities may vary depending upon numerous factors
including, among others, the particular type of Municipal Security involved, the
public purpose funded by the Municipal Security and the nature and extent of
insurance or other security for payment of principal and interest on the
Municipal Security. For example, California Municipal Securities which are
payable only from the revenues derived from a particular facility may be
adversely affected by California laws or regulations which make it more
difficult for the particular facility to generate revenues sufficient to pay
such interest and principal, including, among others, laws and regulations which
limit the amount of fees, rates or other charges which may be imposed for use of
the facility or which increase competition among facilities of that type or
which limit or otherwise have the effect of reducing the use of such facilities
generally, thereby reducing the revenues generated by the particular facility.
California Municipal Securities, the payment of interest and principal on which
is insured in whole or in part by a California governmentally created fund, may
be adversely affected by California laws or regulations which restrict the
aggregate insurance proceeds available for payment of principal and interest in
the event of a default on such Municipal Securities.
THE GENERAL FINANCIAL CONDITION OF THE STATE OF CALIFORNIA. Since the start of
the 1990-91 Fiscal Year, the State has faced the worst economic, fiscal, and
budget conditions since the 1930s. Construction, manufacturing (especially
aerospace), exports and financial services, among others, have all been severely
affected.
The recession has seriously affected State tax revenues, which basically mirror
economic conditions. It also caused increased expenditures for health and
welfare programs. The State has been facing a structural imbalance in its budget
with the largest programs supported by the General Fund - K-12 schools and
community colleges, health and welfare, and corrections - growing at rates
significantly higher than the growth rates for the principal revenue sources of
the General Fund. As a result, the State has experienced recurring budget
deficits.
ADDITIONAL CONSIDERATIONS. With respect to Municipal Securities issued by the
State of California and its political subdivisions, as well as certain other
governmental issuers such as the Commonwealth of Puerto Rico, the Trust cannot
predict what legislation, if any, may be proposed in the California State
Legislature as regards the California State personal income tax status of
interest on such obligations, or which proposals, if any, might be enacted. Such
proposals, if enacted, might materially adversely affect the availability of
California Municipal Securities for investment by the Portfolios and the value
of the Portfolios' investments.
SPECIAL CONSIDERATIONS RELATING TO KANSAS MUNICIPAL SECURITIES
STATE DEBT. The State does not issue general obligation debt but has issued
certificates of participation which are subject to annual legislative
appropriation. The State has also issued revenue bonds for the Highway and
Turnpike systems, for various Regents system higher education facilities and for
various state agency projects.
LOCAL GOVERNMENT DEBT. Local government in Kansas consists of numerous
individual units. Each unit is distinct and independent of other local units,
although they may overlap geographically. These various local governmental units
are empowered by statute to issue general obligation and/or revenue supported
debt. The degree to which
S-8
<PAGE> 9
overlapping debt exists will vary considerably across the state and is a factor
in evaluating the risk involved in a given bond issue. Debt can be levied by
counties, cities or townships, schools and districts (e.g., fire, sewer, rural
water, drainage, etc.). The county treasurer is authorized to collect for and
remit to the various issuers in the county the tax receipts due.
TAX LAW CHANGES. The State Legislature passed a statute that made all Kansas
bond issues dated after December 31, 1987 exempt from Kansas income taxes. Prior
to the passage of that statute only certain issues, primarily state and
industrial development revenue bonds were exempt from Kansas income tax. This
change in the law has made the Kansas municipal bond market more homogenous and
deeper rather than segmented by tax status, as was the case previously. The
change has increased the number and amount of high quality, rated issues
available in the Kansas income tax-exempt market. The Legislature could change
the situation by reverting to a narrower base of Kansas income tax-exempt
issues, perhaps in response to budgetary constraints. This would make it more
difficult for the Kansas Tax Free Income Portfolio to invest in Kansas income
tax-exempt issues and would likely decrease the yield on the Portfolio's
subsequent purchases.
SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL SECURITIES
REVENUES AND EXPENDITURES. New York's Governmental Funds receive a majority of
their revenues from taxes levied by the State. Investment income, fees and
assessments, abandoned property collections, and other varied sources supply the
balance of the receipts for these Funds. New York's major expenditures are
grants to local governments. These grants include disbursements for elementary,
secondary and higher education, social services, drug abuse control, and mass
transportation programs.
STATE DEBT. Under the State Constitution, the State may not, with limited
exceptions for emergencies, undertake long term borrowing (i.e., borrowing for
more than one year) unless the borrowing is authorized in a specific amount for
a single work or purpose by the Legislature and approved by the voters. There is
no limitation on the amount of long term debt that may be so authorized and
subsequently incurred by the State. The State may undertake short term
borrowings without voter approval (i) in the anticipation of the receipt of
taxes and revenues, by issuing tax and revenue anticipation notes, and (ii) in
anticipation of the receipt of proceeds from the sale of duly authorized but
unissued bonds, by issuing bond anticipation notes. The State Constitution
provides that the State may guarantee the repayment of certain borrowings to
carry out designated projects by the New York State Thruway Authority, the Job
Development Authority and the Port Authority of New York and New Jersey.
NEW YORK CITY. The fiscal health of the State is closely related to the fiscal
health of its localities, particularly the City, which has required and
continues to require significant financial assistance from the State.
SPECIAL CONSIDERATIONS RELATING TO PENNSYLVANIA MUNICIPAL SECURITIES
REVENUES AND EXPENDITURES. The Constitution of Pennsylvania provides that
operating budget appropriations may not exceed the estimated revenues and
available surplus in the fiscal year for which funds are appropriated. Annual
budgets are enacted for the General Fund and for certain special revenue funds
which represent the majority of expenditures of the Commonwealth. Pennsylvania's
Governmental Funds receive a majority of their revenues from taxes levied by the
Commonwealth. Interest earnings, licenses and fees, lottery ticket sales, liquor
store profits, miscellaneous revenues, augmentations and federal government
grants supply the balance of the receipts of these funds. Revenues not required
to be deposited in another fund are deposited in the General Fund.
Pennsylvania's major expenditures include funding for education and public
health and human services.
COMMONWEALTH DEBT. Current constitutional provisions permit Pennsylvania to
issue the following types of debt: (i) debt to suppress insurrection or
rehabilitate areas affected by disaster, (ii) electorate approved debt, (iii)
debt for capital projects subject to an aggregate debt limit of 1.75 times the
annual average tax revenues of the preceding
S-9
<PAGE> 10
five fiscal years and (iv) tax anticipation notes payable in the fiscal year of
issuance. All debt except tax anticipation notes must be amortized in
substantial and regular amounts.
Pennsylvania engages in short-term borrowing to fund expenses within a fiscal
year through the sale of tax anticipation notes which must mature within the
fiscal year of issuance. The principal amount issued, when added to that already
outstanding, may not exceed in the aggregate 20% of the revenues estimated to
accrue to the appropriate fund in the fiscal year. The Commonwealth is not
permitted to fund deficits between fiscal years with any form of debt. All
year-end deficit balances must be funded within the succeeding fiscal year's
budget. Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed three
years. The Commonwealth currently has no bond anticipation notes outstanding.
STATE-RELATED OBLIGATIONS. Certain state-created agencies have statutory
authorization to incur debt for which legislation providing for state
appropriations to pay debt service thereon is not required. The debt of these
agencies is supported by assets of, or revenues derived from, the various
projects financed and the debt of such agencies is not an obligation of
Pennsylvania although some of the agencies are indirectly dependent on
Commonwealth appropriations.
LOCAL GOVERNMENT DEBT. Local government in Pennsylvania consists of numerous
individual units. Each unit is distinct and independent of other local units,
although they may overlap geographically. There is extensive general legislation
applying to local government. Municipalities may also issue revenue obligations
without limit and without affecting their general obligation borrowing capacity
if the obligations are projected to be paid solely from project revenues.
Municipal authorities and industrial development authorities are also widespread
in Pennsylvania. An authority is organized by a municipality acting singly or
jointly with another municipality and is governed by a Board appointed by the
governing unit of the creating municipality or municipalities. Typically,
authorities are established to acquire, own and lease or operate one or more
projects and to borrow money and issue revenue bonds to finance them.
THE MANAGER
The Management Agreement provides that SEI Fund Management (the "Manager") shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which the Management
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Manager in the performance of its duties
or from reckless disregard of its duties and obligations thereunder.
The continuance of the Management Agreement must be specifically approved at
least annually (i) by the vote of a majority of the Trustees or by the vote of a
majority of the outstanding voting securities of the Portfolio, and (ii) by the
vote of a majority of the Trustees of the Trust who are not parties to the
Management Agreement or an "interested person" (as that term is defined in the
1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval. The Management Agreement is terminable at
any time as to any Portfolio without penalty by the Trustees of the Trust, by a
vote of a majority of the outstanding shares of the Portfolio or by the Manager
on not less than 30 days' nor more than 60 days' written notice.
The Manager, a Delaware business trust, has its principal business offices at
Oaks, Pennsylvania 19452. SEI Financial Management Corporation ("SFM"), a
wholly-owned subsidiary of SEI Investments Company ("SEI"), is the owner of all
beneficial interest in the Manager. SEI and its subsidiaries, including the
Manager, are leading providers of funds evaluation services, trust accounting
systems, and brokerage and information services to financial institutions,
institutional investors and money managers. The Manager and its affiliates also
serve as administrator to the following other mutual funds: The Achievement
Funds Trust; The Advisors' Inner Circle Fund; The Arbor Fund; ARK Funds; Bishop
Street Funds; CoreFunds, Inc.; CrestFunds, Inc.; CUFUND; FMB Funds, Inc.; First
S-10
<PAGE> 11
American Funds, Inc.; First American Investment Funds, Inc.; First American
Strategy Funds; Marquis Funds(R); Monitor Funds; Morgan Grenfell Investment
Trust; The Pillar Funds; The PBHG Funds, Inc.; Profit Funds Investment Trust;
Rembrandt Funds(R); Santa Barbara Group of Mutual Funds, Inc.; 1784 Funds(R);
SEI Asset Allocation Trust; SEI Daily Income Trust; SEI Index Funds; SEI
Institutional Investments Trust; SEI Institutional Managed Trust; SEI
International Trust; SEI Liquid Asset Trust; Stepstone Funds; STI Classic Funds;
STI Classic Variable Trust; and Turner Funds.
For the fiscal years ended August 31, 1994, 1995, and 1996 the Portfolios paid
management fees, after waivers and/or reimbursements as follows:
<TABLE>
<CAPTION>
FEES PAID (000) FEES WAIVED OR REIMBURSED
(000)
------------------------------ -------------------------------
PORTFOLIO
1994 1995 1996 1994 1995 1996
=============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Tax Free Portfolio $1,128 $ 991 $1,099 $ 353 $ 207 $ 158
- -------------------------------------------------------------------------------------------------------------
Institutional Tax Free $1,569 $ 1,548 $1,697 $1,482 $ 1,567 $1,283
Portfolio
- -------------------------------------------------------------------------------------------------------------
California Tax Exempt $ 145 $ 486 $ 581 $ 334 $ 330 $ 305
Portfolio
- -------------------------------------------------------------------------------------------------------------
Intermediate-Term $ 357 $ 288 $ 279 $ 177 $ 125 $ 74
Municipal Portfolio
- -------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal $ 338 $ 132 $ 183 $ 224 $ 253 $ 174
Portfolio
- -------------------------------------------------------------------------------------------------------------
Pennsylvania Tax Free $ 6 $ 42 $ 66 $ 27 $ 33 $ 43
Portfolio
- -------------------------------------------------------------------------------------------------------------
Kansas Tax Free Income $ 68 $ 91 $ 101 $ 22 $ 3 $ 0
Portfolio
- -------------------------------------------------------------------------------------------------------------
New York Intermediate- * * * * * *
Term Municipal Portfolio
=============================================================================================================
</TABLE>
*Not in operation during the period.
THE ADVISERS AND SUB-ADVISER
Each Advisory Agreement or Sub-Advisory Agreement provides that each Adviser or
Sub-Adviser shall not be protected against any liability to the Trust or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
The continuance of each Advisory or Sub-Advisory Agreement after the first two
(2) years must be specifically approved at least annually (i) by the vote of a
majority of the outstanding shares of that Portfolio or by the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to such
Advisory or Sub-Advisory Agreement or "interested persons" of any party thereto,
cast in person at a meeting called for the purpose of voting on such approval.
Each Advisory or Sub-Advisory Agreement will terminate automatically in the
event of its assignment, and is terminable at any time without penalty by the
Trustees of the Trust or, with respect to a Portfolio, by a
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<PAGE> 12
majority of the outstanding shares of that Portfolio, on not less than 30 days'
nor more than 60 days' written notice to the Adviser or Sub-Adviser, or by the
Adviser or Sub-Adviser on 90 days' written notice to the Trust.
For the fiscal years ended August 31, 1994, 1995 and 1996, the Portfolios paid
advisory fees, after waivers and/or reimbursements as follows:
<TABLE>
<CAPTION>
FEES PAID (000) FEES WAIVED OR REIMBURSED (000)
--------------------------------- ----------------------------------
PORTFOLIO
1994 1995 1996 1994 1995 1996
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Tax Free Portfolio $ 259 $ 129 $ 137 $ 0 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------------
Institutional Tax Free $ 360 $ 334 $ 325 $ 0 $ 0 $ 0
Portfolio
- -----------------------------------------------------------------------------------------------------------------------
California Tax Exempt $ 91 $ 137 $ 151 $ 0 $ 0 $ 0
Portfolio
- -----------------------------------------------------------------------------------------------------------------------
Intermediate-Term Municipal $ 163 $ 131 $ 254 $ 73 $ 60 $ 0
Portfolio+
- -----------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal $ 233 $ 262 $ 202 $ 161 $ 4 $ 0
Portfolio
- -----------------------------------------------------------------------------------------------------------------------
Pennsylvania Tax Free $ 4 $ 8 $ 12 0 $ 0 $ 0
Portfolio
- -----------------------------------------------------------------------------------------------------------------------
Kansas Tax Free Income $ 0 $ 0 $ 0 $ 180 $ 188 $ 202
Portfolio
- -----------------------------------------------------------------------------------------------------------------------
New York Intermediate-Term * * * * * *
Municipal Portfolio
=======================================================================================================================
</TABLE>
* Not in operation during the period.
+ Amounts paid for the Portfolio since April 16, 1996 were paid to SFM, who paid
Standish, Ayer & Wood out this advisory fee.
DISTRIBUTION AND SHAREHOLDER SERVICING
The Trust has adopted Distribution Plans for Class D and Class G shares of the
Portfolios (the "Plans") in accordance with the provisions of Rule 12b-1 under
the 1940 Act, which regulates circumstances under which an investment company
may directly or indirectly bear expenses relating to the distribution of its
shares. In this regard, the Board of Trustees has determined that the Plans and
the Distribution Agreement are in the best interests of the shareholders.
Continuance of the Plans must be approved annually by a majority of the Trustees
of the Trust and by a majority of the trustees who are not "interested persons"
of the Trust as that term is defined in the 1940 Act and who have no direct or
indirect financial interest in the operation of a Distribution Plan or in any
agreements related thereto ("Qualified Trustees"). The Plans require that
quarterly written reports of amounts spent under the Plans and the purposes of
such expenditures be furnished to and reviewed by the Trustees. The Plans may
not be amended to increase materially the amount which may be spent thereunder
without approval by a majority of the outstanding shares of the Portfolio or
class affected. All material amendments of the Plans will require approval by a
majority of the Trustees of the Trust and of the Qualified Trustees.
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<PAGE> 13
The Plans provide that the Trust will pay the Distributor a fee on the Class D
and Class G shares of the Portfolio. The Distributor may use this fee for: (i)
compensation for its services in connection with distribution assistance or
provision of shareholder services or (ii) payments to financial institutions and
intermediaries such as banks, savings and loan associations, insurance companies
and investment counselors, broker-dealers and the Distributor's affiliates and
subsidiaries as compensation for services or reimbursement of expenses incurred
in connection with distribution assistance or provision of shareholder services.
The Portfolios have also adopted shareholder servicing plans for its Class A,
Class B, Class C and Class G shares (the "Service Plans"), and Administrative
Services Plans for its Class B and Class C shares. Under these Service and
Administrative Services Plans, the Distributor may perform, or may compensate
other service providers for performing, the following shareholder and
administrative services: maintaining client accounts; arranging for bank wires;
responding to client inquiries concerning services provided on investments;
assisting clients in changing dividend options, account designations and
addresses; sub-accounting; providing information on share positions to clients;
forwarding shareholder communications to clients; processing purchase, exchange
and redemption orders; and processing dividend payments. Under the Service and
Administrative Services Plans, the Distributor may retain as a profit any
difference between the fee it receives and the amount it pays to third parties.
For the fiscal year ended August 31, 1996, the Portfolios paid the following
amounts pursuant to the Distribution Plans:
<TABLE>
<CAPTION>
Amount Paid to
Third Parties
by Distributor Prospectus Costs
of Distribution- Printing & Associated
Total Basis Related Sales Mailing with
Portfolio/Class Amount Points Services Expenses Costs Registration
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax Free Portfolio - $200,621 .06% $ 0 $149,491 $14,595 36,535
Class A**
- ------------------------------------------------------------------------------------------------------------------------------
Institutional Tax $477,463 .06% $43,099 $328,981 $33,453 $71,930
Free Portfolio -
Class A**
- ------------------------------------------------------------------------------------------------------------------------------
Institutional Tax $ 66,597 .36% $56,587 $ 7,557 $ 789 $ 1,664
Free Portfolio -
Class B**
- ------------------------------------------------------------------------------------------------------------------------------
California Tax $ 25,267 .06% $ 0 $ 19,087 $1,889 $ 4,291
Exempt Portfolio -
Class A**
- ------------------------------------------------------------------------------------------------------------------------------
California Tax * * * * * *
Exempt Portfolio -
Class B*
- ------------------------------------------------------------------------------------------------------------------------------
California Tax * * * * * *
Exempt Portfolio -
Class C**
- ------------------------------------------------------------------------------------------------------------------------------
California Tax $1,891,757 .56% $1,701,171 $140,169 $18,726 $31,691
Exempt Portfolio
Class G+
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 14
<TABLE>
<CAPTION>
Amount Paid to
Third Parties
by Distributor Prospectus Costs
of Distribution- Printing & Associated
Total Basis Related Sales Mailing with
Portfolio/Class Amount Points Services Expenses Costs Registration
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Institutional Tax $ 4,150 .56% $ 0 $ 3,105 $ 371 $ 674
Free Portfolio
Class C**
- --------------------------------------------------------------------------------------------------------------------------------
New York * * * * * *
Intermediate-Term
Municipal Portfolio
- - Class A
- --------------------------------------------------------------------------------------------------------------------------------
Pennsylvania $57,636 .06% $ 0 $ 43,371 $4,462 $ 9,803
Municipal Portfolio
- - Class A**
- --------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Tax $15,084 .05% $ 0 $ 11,169 $1,274 $ 2,641
Free Portfolio**
- --------------------------------------------------------------------------------------------------------------------------------
Intermediate-Term $50,572 .05% $ 0 $ 39,775 $ 18 $10,779
Municipal Portfolio
- - Class A**
- --------------------------------------------------------------------------------------------------------------------------------
Kansas Tax Free $12,015 .02% $ 0 $ 0 $5,965 $6,050
Income Portfolio -
Class A**
- --------------------------------------------------------------------------------------------------------------------------------
Kansas Tax Free * * * * * *
Income Portfolio -
Class B**
- --------------------------------------------------------------------------------------------------------------------------------
Tax Free Portfolio - $ 527 .40% $ 429 $ 79 $ 5 $ 14
Class D
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not in operation during the period.
** As of March 18, 1996, the Distribution Plans for the Trust's Class A,
Class B and Class C shares were eliminated.
+ Formerly the Class C shares; converted to Class G shares on March 18, 1996.
Except to the extent that the Manager or Advisers benefitted through increased
fees from an increase in the net assets of the Trust which may have resulted in
part from the expenditures, no interested person of the Trust nor any Trustee of
the Trust who is not an interested person of the Trust had a direct or indirect
financial interest in the operation of the Distribution Plans or related
agreements.
For the fiscal years ended August 31, 1994, 1995 and 1996, the aggregate sales
charges payable to the Distributor with respect to the Class D shares for the
Tax Free Portfolio were as follows:
S-14
<PAGE> 15
<TABLE>
<CAPTION>
Aggregate Sales Charge Amount Retained
Year Payable to Distributor By Distributor
- ---------------------------------------------------------------------------------
<S> <C> <C>
1994 $21,795 $ 508
- ---------------------------------------------------------------------------------
1995 $38,648 $3,468
- ---------------------------------------------------------------------------------
1996 $17,368 $1,614
- ---------------------------------------------------------------------------------
</TABLE>
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees and executive officers of the Trust and their principal occupations
for the last five years are set forth below. Each may have held other positions
with the named companies during that period. Unless otherwise noted, the
business address of each Trustee and executive officer is SEI Fund Management,
Oaks, Pennsylvania 19456. Certain trustees and officers of the Trust also serve
as trustees and officers of some or all of the following: The Achievement Funds
Trust; The Advisors' Inner Circle Fund; The Arbor Fund; ARK Funds; Bishop Street
Funds; CoreFunds, Inc.; CrestFunds, Inc.; CUFUND; First American Funds, Inc.;
First American Investment Funds, Inc.; First American Strategy Funds, Inc.; FMB
Funds, Inc.; Marquis Funds(R); Monitor Funds; Morgan Grenfell Investment Trust;
The PBHG Funds, Inc.; The Pillar Funds; Profit Funds Investment Trust; Rembrandt
Funds(R); Santa Barbara Group of Mutual Funds, Inc.; 1784 Funds(R); SEI Asset
Allocation Trust; SEI Daily Income Trust; SEI Index Funds; SEI Institutional
Investment Trust; SEI Institutional Managed Trust; SEI International Trust; SEI
Liquid Asset Trust; Stepstone Funds; STI Classic Funds; STI Classic Variable
Trust; and Turner Funds, open-end management investment companies managed by SEI
Financial Management Corporation and its affiliates and, with the exception of
Profit Funds Investment Trust, Rembrandt(sm) Funds, and Santa Barbara Group of
Mutual Funds, Inc., distributed by SEI Financial Services Company.
ROBERT A. NESHER (DOB 08/17/46) - Chairman of the Board of Trustees* - Retired
since 1994. Executive Vice President of SEI, 1986-1994. Director and Executive
Vice President of the Manager and the Distributor, September, 1981-1994. Trustee
of the Arbor Fund, Marquis Funds(R),Advisors' Inner Circle Fund, SEI Asset
Allocation Trust, SEI Liquid Asset Trust, SEI Daily Income Trust, SEI Tax Exempt
Trust, SEI Index Funds, SEI Institutional Managed Trust, SEI Institutional
Investments Trust, SEI International Trust, Insurance Investment Products Trust,
1784 Funds(R), Pillar Funds, Rembrandt Funds(R) and Stepstone Funds.
WILLIAM M. DORAN (DOB 5/26/40) - Trustee* - 2000 One Logan Square, Philadelphia,
PA 19103. Partner, Morgan, Lewis & Bockius LLP, (law firm), counsel to the
Trust, Manager and Distributor, Director and Secretary of SEI and Secretary of
the Manager and Distributor. Trustee of the Arbor Fund, Marquis Funds(R),
Advisors' Inner Circle Fund, SEI Asset Allocation Trust, SEI Liquid Asset Trust,
SEI Daily Income Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI Institutional
Managed Trust, SEI Institutional Investments Trust, SEI International Trust,
Insurance Investment Products Trust.
F. WENDELL GOOCH (DOB 12/03/37) - Trustee** - P.O. Box 190, Paoli, IN 47454.
President, Orange County Publishing Co., Inc., since October 1981. Publisher of
the Paoli News and the Paoli Republican and Editor of the Paoli Republican since
January 1981; President, H & W Distribution, Inc. since July 1984. Executive
Vice President, Trust Department, Harris Trust and Savings Bank and Chairman of
the Board of Directors of The Harris Trust Company of Arizona before January
1981. Trustee of STI Classic Funds, SEI Asset Allocation Trust, SEI Liquid Asset
Trust, SEI Daily Income Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI
Institutional Managed Trust, SEI Institutional Investments Trust, and SEI
International Trust.
FRANK E. MORRIS (DOB 12/30/23) - Trustee** - 105 Walpole Street, Dover, MA
02030. Retired since 1990. Peter Drucker Professor of Management, Boston
College, 1989-1990. President, Federal Reserve Bank of Boston, 1968-1988.
Trustee of The Arbor Fund, Marquis Funds(R), Advisors' Inner Circle Fund, SEI
Asset Allocation Trust,
S-15
<PAGE> 16
SEI Liquid Asset Trust, SEI Daily Income Trust, SEI Tax Exempt Trust, SEI Index
Funds, SEI Institutional Managed Trust, SEI Institutional Investments Trust, and
SEI International Trust.
JAMES M. STOREY (DOB 04/12/31) - Trustee - Partner of Dechert Price & Rhoads
from September 1987 - December 1993. Trustee of the Arbor Fund, Marquis
Funds(R), Advisors' Inner Circle Fund, SEI Asset Allocation Trust, SEI Liquid
Asset Trust, SEI Daily Income Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI
Institutional Managed Trust, SEI Institutional Investments Trust, SEI
International Trust, Insurance Investment Products Trust.
GEORGE J. SULLIVAN, JR. (DOB 11/13/42) - Trustee - General Partner, Teto
Partners, L.P. since 1991. Chief Financial Officer, Noble Partners, L.P. since
1991. Treasurer and Clerk, Peak Asset Management, Inc. since 1991. Trustee,
Navigator Securities Lending Trust since 1995. Trustee, SEI Asset Allocation
Trust, SEI Liquid Asset Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional Managed Trust, SEI Institutional Investments Trust and SEI
International Trust.
DAVID G. LEE (DOB 04/16/52) - President, Chief Executive Officer - Senior Vice
President of the Distributor since 1993. Vice President of the Manager and
Distributor 1991-1993. President, GW Sierra Trust Funds before 1991.
SANDRA K. ORLOW (DOB 10/18/53) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of the Manager and Distributor since 1988.
KEVIN P. ROBINS (DOB 04/15/61) - Vice President, Assistant Secretary - Senior
Vice President, General Counsel of SEI, the Administrator and Distributor since
1994. Vice President and Assistant Secretary of SEI, the Administrator and
Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius LLP (law firm)
1988-1992.
KATHRYN L. STANTON (DOB 11/19/58) - Vice President, Assistant Secretary - Deputy
General Counsel, Vice President and Assistant Secretary of SEI, Vice President
and Assistant Secretary of SEI, the Administrator and Distributor since 1994.
Associate, Morgan, Lewis & Bockius LLP (law firm) 1989-1994.
JOSEPH M. LYDON (DOB 09/27/59) - Vice President, Assistant Secretary - Director,
Business Administration of Fund Resources, April 1995. Vice President, Fund
Group, Dreman Value Management, LP, President, Dreman Financial Services, Inc.
prior to 1995.
STEPHEN G. MEYER (DOB 7/12/65) - controller, Chief Financial Officer-Vice
President and Controller of SEI Investments Company since 1994. Director,
International Audit and Risk Management, SEI Corporation, 1992- 1994. Senior
Associate, Coopers and Lybrand, 1990-1992. Internal Audit, Vanguard Group prior
to 1992.
TODD CIPPERMAN (DOB 1/14/66) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI, the Manager and the Distributor since
1995. Associate, Dewey Ballantine (law firm), (1994- 1995). Associate, Winston &
Strawn (law firm), (1991-1994).
BARBARA A. NUGENT (DOB 6/18/56) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI, the Manager and Distributor since
1996. Associate, Drinker, Biddle & Reath (law firm). Assistant Vice
President/Administration, Delaware Service Company, Inc. (1992-1993), Assistant
Vice President - Operations, Delaware Service Company, Inc. (1988-1992).
MARC H. CAHN (DOB 6/19/57) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI, the Administrator and Distributor
since 1996. Associate General Counsel, Barclays Bank PLC (1995-1996). ERISA
counsel, First Fidelity Bancorporation (1994-1995), Associate, Morgan, Lewis &
Bockius LLP (1989-1994).
S-16
<PAGE> 17
RICHARD W. GRANT (DOB 10/25/45) - Secretary - 2000 One Logan Square,
Philadelphia, PA 19103, Partner, Morgan, Lewis & Bockius LLP (law firm), counsel
to the Trust, Manager and Distributor.
- ------------
* Messrs. Nesher and Doran are Trustees who may be deemed to be "interested
persons" of the Trust as the term is defined in the 1940 Act.
** Messrs. Gooch, Storey, Sullivan and Morris serve as members of the Audit
Committee of the Trust.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for unaffiliated Trustees.
Compensation of officers and affiliated Trustees of the Trust is paid by the
Manager. For the fiscal year ended August 31, 1996, the Trust paid the following
amounts to the Trustees.
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Estimated from Registrant and
Compensation Benefits Accrued Annual Fund Complex Paid
Name of Person and From Registrant as Part of Fund Benefits Upon to Directors for FYE
Position for FYE 8/31/96 Expenses Retirement 8/31/96
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard F. Blanchard, $ 9,200 $ 0 $ 0 $90,000 for services
Trustee(1) on 7 boards
- ----------------------------------------------------------------------------------------------------------------------
William M. Doran, $ 0 $ 0 $ 0 $ 0
Trustee
- ----------------------------------------------------------------------------------------------------------------------
F. Wendell Gooch, $ 12,695 $ 0 $ 0 $90,000 for services
Trustee on 7 boards
- ----------------------------------------------------------------------------------------------------------------------
Frank E. Morris, Trustee $ 12,695 $ 0 $ 0 $90,000 for services
on 7 boards
- ----------------------------------------------------------------------------------------------------------------------
Robert A. Nesher, $ 0 $ 0 $ 0 $ 0
Trustee
- ----------------------------------------------------------------------------------------------------------------------
James M. Storey(2), $ 12,695 $ 0 $ 0 $90,000 for services
Trustee on 7 boards
- ----------------------------------------------------------------------------------------------------------------------
George J. Sullivan, Jr., $ 3,005 $ 0 $ 0 $22,500 for services
Trustee(3) on 7 boards
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Deceased May 7, 1996
(2) Mr. Storey received the stated amounts as compensation for service as an
Honorary Trustee for the Trust during the most recent fisal year.
(3) Mr. Sullivan was elected as Trustee to the Trust on
PERFORMANCE
From time to time, the Portfolios may advertise yield and/or total return. These
figures will be based on historical earnings and are not intended to indicate
future performance.
The current yield of the Portfolios that are money market funds is calculated
daily based upon the 7 days ending on the date of calculation ("base period").
The yield is computed by determining the net change (exclusive of capital
changes) in the value of a hypothetical pre-existing shareholder account having
a balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts and
S-17
<PAGE> 18
dividing such net change by the value of the account at the beginning of the
same period to obtain the base period return and multiplying the result by
(365/7). Realized and unrealized gains and losses are not included in the
calculation of the yield.
The Portfolios compute their effective compound yield by determining the net
changes, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula: Effective Yield = {(Base Period Return + 1)365/7} - 1. The
current and the effective yields reflect the reinvestment of net income earned
daily on portfolio assets.
From time to time, the Intermediate-Term Municipal, Pennsylvania Municipal,
Kansas Tax Free Income and New York Intermediate-Term Portfolios may advertise
yield. These figures will be based on historical earnings and are not intended
to indicate future performance. The yield of these Portfolios refers to the
annualized income generated by an investment in the Portfolios over a specified
30-day period. The yield is calculated by assuming that the income generated by
the investment during that period generated each period over one year and is
shown as a percentage of the investment. In particular, yield will be calculated
according to the following formula:
Yield = 2([(a-b)/(cd) + 1)]degree symbol - 1) where a = dividends and interest
earned during the period; b = expenses accrued for the period (net of
reimbursement); c = the current daily number of shares outstanding during the
period that were entitled to receive dividends; and d = the maximum offering
price per share on the last day of the period.
Actual yields will depend on such variables as asset quality, average asset
maturity, the type of instruments a Portfolio invests in, changes in interest
rates on money market instruments, changes in the expenses of the Portfolios and
other factors.
Yields are one basis upon which investors may compare the Portfolios with other
money market funds; however, yields of other money market mutual funds and other
investment vehicles may not be comparable because of the factors set forth above
and differences in the methods used in valuing portfolio instruments.
For the 7-day period ended August 31, 1996, the end of the Trust's most recent
fiscal year, the money market Portfolios' current effective and tax-equivalent
yields were as follows:
<TABLE>
<CAPTION>
7-DAY TAX- 7-DAY
7-DAY EQUIVALENT TAX-EQUIVALENT
PORTFOLIO CLASS 7-DAY YIELD EFFECTIVE YIELD YIELD EFFECTIVE YIELD
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tax Free Portfolio Class A 3.21% 3.26% 5.35% 5.43%
-------------------------------------------------------------------------------------------------
Class D 2.87% 2.91% 4.78% 4.85%
- ------------------------------------------------------------------------------------------------------------------------------
Institutional Tax Free Class A 3.37% 3.43% 5.62% 5.72%
Portfolio -------------------------------------------------------------------------------------------------
Class B 3.07% 3.12% 5.12% 5.20%
-------------------------------------------------------------------------------------------------
Class C 2.87% 2.91% 4.78% 4.85%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-18
<PAGE> 19
<TABLE>
<CAPTION>
7-DAY TAX- 7-DAY
7-DAY EQUIVALENT TAX-EQUIVALENT
PORTFOLIO CLASS 7-DAY YIELD EFFECTIVE YIELD YIELD EFFECTIVE YIELD
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
California Tax Exempt Class A 3.22% 3.27% 6.44% 6.54%
Portfolio ---------------------------------------------------------------------------------------------------
Class B * * * *
---------------------------------------------------------------------------------------------------
Class C * * * *
---------------------------------------------------------------------------------------------------
Class G*+ 2.72% 2.76% 5.44% 5.52%
- --------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Tax Free Class A 3.22% 3.27% 5.60% 5.69%
Portfolio
================================================================================================================================
</TABLE>
* Not in operation during the period
+ Formerly the Class C shares; converted to Class G shares on March 18, 1996.
For the 30-day period ended August 31, 1996, yields on the Portfolios other than
the money market Portfolios were as follows:
<TABLE>
<CAPTION>
YIELD
---------------------
30 DAY TAX
PORTFOLIO CLASS 30 DAY EQUIVALENT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York Intermediate-Term Municipal Class A * *
Portfolio
- --------------------------------------------------------------------------------------------------
Pennsylvania Municipal Portfolio Class A 4.96% 8.63%
- --------------------------------------------------------------------------------------------------
Intermediate-Term Municipal Portfolio Class A 4.56% 7.60%
- --------------------------------------------------------------------------------------------------
Kansas Tax Free Income Portfolio Class A 5.02 9.30%
-------------------------------------------------
Class B * *
==================================================================================================
</TABLE>
*Not in operation during the period.
From time to time, the Intermediate-Term Municipal, Pennsylvania Municipal,
Kansas Tax Free Income and New York Intermediate-Term Municipal Portfolios may
advertise total return. The total return of a Portfolio refers to the average
compounded rate of return to a hypothetical investment for designated time
periods (including, but not limited to, the period from which the Portfolio
commenced operations through the specified date), assuming that the entire
investment is redeemed at the end of each period. In particular, total return
will be calculated according to the following formula: P(1 + T)n = ERV, where P
= a hypothetical initial payment of $1,000; T = average annual total return; n =
number of years; and ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the designated time period as of the end of
such period.
Based on the foregoing, the average annual total returns for the Portfolios from
inception through August 31, 1996 and for the one, five and ten year periods
ended August 31, 1996 were as follows:
S-19
<PAGE> 20
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------------------
PORTFOLIO CLASS ONE FIVE TEN SINCE
YEAR YEAR YEAR INCEPTION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tax Free Portfolio Class A(1) 3.35% 2.93% 3.95% 4.25%
----------------------------------------------------------------------------------------
Class D--Offering Price(10) 2.99% * * 3.11%
- ------------------------------------------------------------------------------------------------------------------------
Institutional Tax Free Class A(1) 3.52% 3.20% 4.15% 4.36%
Portfolio ----------------------------------------------------------------------------------------
Class B(2) 3.21% 2.89% * 3.14%
----------------------------------------------------------------------------------------
Class C 1.90% * * 3.00%
- ------------------------------------------------------------------------------------------------------------------------
California Tax Exempt Class A(3) 3.41% 3.01% * 3.46%
Portfolio ----------------------------------------------------------------------------------------
Class B(4) (closed 7/12/95) * * * *
----------------------------------------------------------------------------------------
Class C(5) * * * *
----------------------------------------------------------------------------------------
Class G(+) 1.84% * * 2.83%
- ------------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Class A(6) 3.96% 5.90% * 6.32%
Portfolio
- ------------------------------------------------------------------------------------------------------------------------
Pennsylvania Tax Free Class A(7) 3.40% * * 3.24%
Portfolio
- ------------------------------------------------------------------------------------------------------------------------
Intermediate-Term Class A(8) 3.76% 5.78% * 6.14%
Municipal Portfolio
- ------------------------------------------------------------------------------------------------------------------------
Kansas Tax Free Income Class A(9) 4.23% 6.55% * 6.63%
Portfolio ----------------------------------------------------------------------------------------
Class B * * * *
========================================================================================================================
</TABLE>
(1) Commenced operations 2/1/84 (6) Commenced operations 8/14/89
(2) Commenced operations 10/15/90 (7) Commenced operations 1/21/94
(3) Commenced operations 5/14/90 (8) Commenced operations 9/5/89
(4) Commenced operations 1/5/94 (9) Commenced operations 12/10/90
(5) Commenced operations 5/11/94 (10) Commenced operations 11/1/94
* Not in operation during period.
+ Formerly the Class C shares; converted to Class G shares on March 18, 1996.
Each Portfolio may, from time to time, compare its performance to other mutual
funds tracked by mutual fund rating services, to broad groups of comparable
mutual funds or to unmanaged indices which may assume investment of dividends
but generally do not reflect deductions for sales charges, administrative and
management costs.
DETERMINATION OF NET ASSET VALUE
Securities of the Tax Free, Institutional Tax Free, California Tax Exempt and
the Pennsylvania Tax Free Portfolios will be valued by the amortized cost method
which involves valuing a security at its cost on the date of purchase and
thereafter (absent unusual circumstances) assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuations in
general market rates of interest on the value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by this method is higher or lower than the price the Trust
would receive if it sold the instrument. During periods of declining interest
rates, the daily yield of a Portfolio may tend to be higher than a like
computation made by a company with identical
S-20
<PAGE> 21
investments utilizing a method of valuation based upon market prices and
estimates of market prices for all of its portfolio securities. Thus, if the use
of amortized cost by a Portfolio resulted in a lower aggregate portfolio value
on a particular day, a prospective investor in a Portfolio would be able to
obtain a somewhat higher yield than would result from investment in a company
utilizing solely market values, and existing shareholders in the Portfolio would
experience a lower yield. The converse would apply in a period of rising
interest rates.
A Portfolio's use of amortized cost valuation and the maintenance of the
Portfolio's net asset value at $1.00 are permitted by Rule 2a-7 under the 1940
Act, provided that certain conditions are met. Under Rule 2a-7 a money market
portfolio must maintain a dollar-weighted average maturity of 90 days or less,
and not purchase any instrument having a remaining maturity of more than 397
days. In addition, money market funds may acquire only U.S. dollar denominated
obligations that present minimal credit risks and that are "eligible
securities," which means they are: (i) rated, at the time of investment, by at
least two nationally recognized statistical rating organizations (one if it is
the only organization rating such obligation) in the highest short-term rating
category or, if unrated, determined to be of comparable quality (a "first tier
security"), or (ii) rated according to the foregoing criteria in the second
highest short-term rating category or, if unrated, determined to be of
comparable quality ("second tier security"). The Advisers will determine that an
obligation presents minimal credit risk or that unrated instruments are of
comparable quality in accordance with guidelines established by the Trustees. In
the event a first tier security of the Tax Free Portfolio, Institutional Tax
Free Portfolio, California Tax Exempt Portfolio or the Pennsylvania Tax Free
Portfolio is downgraded below first tier security status after purchase, or the
Adviser of the of any such Portfolio becomes aware that an unrated or second
tier security has received any rating below the second highest rating category
after purchase, the Portfolio's Adviser will either dispose of the security
within five business days or the Board of Trustees will reassess whether the
security continues to present minimal credit risks. The Board may also delegate
this responsibility to the Portfolio's Adviser with respect to the downgrade of
a first tier security. The regulations also require the Trustees to establish
procedures which are reasonably designed to stabilize the net asset value per
unit at $1.00 for each Portfolio. However, there is no assurance that the Trust
will be able to meet this objective. The Trust's procedures include the
determination of the extent of deviation, if any, of each Portfolio's current
net asset value per unit calculated using available market quotations from each
Portfolio's amortized cost price per unit at such intervals as the Trustees deem
appropriate and reasonable in light of market conditions and periodic reviews of
the amount of the deviation and the methods used to calculate such deviation. In
the event that such deviation exceeds 1/2 of 1%, the Trustees are required to
consider promptly what action, if any, should be initiated; and, if the Trustees
believe that the extent of any deviation may result in material dilution or
other unfair results to shareholders, the Trustees are required to take such
corrective action as they deem appropriate to eliminate or reduce such dilution
or unfair results to the extent reasonably practicable. In addition, if any
Portfolio incurs a significant loss or liability, the Trustees have the
authority to reduce pro rata the number of shares of that Portfolio in each
shareholder's account and to offset each shareholder's pro rata portion of such
loss or liability from the shareholder's accrued but unpaid dividends or from
future dividends.
Securities of the Intermediate-Term Municipal, Pennsylvania Municipal, Kansas
Tax Free Income and New York Intermediate-Term Municipal Portfolios are valued
by the Manager pursuant to valuations provided by an independent pricing
service. The pricing service relies primarily on prices of actual market
transactions as well as trader quotations. However, the service may also use a
matrix system to determine valuations, which system considers such factors as
security prices, yields, maturities, call features, ratings and developments
relating to specific securities in arriving at valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
PURCHASE AND REDEMPTION OF SHARES
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period during which trading
on the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or evaluation of the portfolio securities is not reasonably
practicable, or for such other periods as the SEC may be order permit. The Trust
also
S-21
<PAGE> 22
reserves the right to suspend sales of shares of a Portfolio for any period
during which the New York Stock Exchange, the Manager, a Portfolio's Adviser,
the Distributor and/or the Custodian are not open for business.
In calculating the sales charge rates applicable to current purchases of Class D
shares, members of the following affinity groups and clients of the following
broker-dealers, each of which has entered into an agreement with the
Distributor, are entitled to the following percentage-based discounts from the
otherwise applicable sales charge:
<TABLE>
<CAPTION>
Date Date
Offer Offer
Name of Group Percentage Discount Starts Terminates
- ------------- ------------------- ------ ----------
<S> <C> <C> <C>
Countrywide Funding Corp. 100% July 27, 1994 September 19, 1994
50% September 23, 1994 November 22, 1994
</TABLE>
Those members or clients who take advantage of a percentage-based reduction in
the sales charge during the offering period noted above may continue to purchase
shares at the reduced sales charge rate after the offering period relating to
each such purchaser's affinity group or broker-dealer relationship has
terminated.
Please contact the Distributor at 1-800-437-6016.
SHAREHOLDER SERVICES
Stop-Payment Requests (Money Market Portfolios only): Investors may request a
stop payment on checks by providing the Trust with a written authorization to do
so. Oral requests will be accepted provided that the Trust promptly receives a
written authorization. Such requests will remain in effect for six months unless
renewed or canceled. The Trust will use its best efforts to effect stop-payment
instructions, but does not promise or guarantee that such instructions will be
effective. Shareholders requesting stop payment will be charged a $20 service
fee per check which will be deducted from their accounts.
The following is a description of plans and privileges by which the sales
charges imposed on the Class D shares of the Tax Free Portfolio may be reduced.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity discounts
when his new investment, together with the current market value of all holdings
of that shareholder in the Portfolios reaches a discount level. See "Additional
Information About Doing Business With Us" in the Prospectuses for the sales
charge on quantity purchases.
LETTER OF INTENT: The reduced sales charges are also applicable to the aggregate
amount of purchases made by any such purchaser previously enumerated within a
13-month period pursuant to a written Letter of Intent provided by the
Distributor, and not legally binding on the signer or a Portfolio which provides
for the holding in escrow by the Distributor of 5% of the total amount intended
to be purchased until such purchase is completed within the 13-month period. A
Letter of Intent may be dated to include shares purchased up to 90 days prior to
the date the Letter of Intent is signed. The 13-month period begins on the date
of the earliest purchase. If the intended investment is not completed, the
Manager will surrender an appropriate number of the escrowed shares for
redemption in order to realize the difference.
DISTRIBUTION INVESTMENT OPTION: Distributions of dividends and capital gains
made by the Portfolios may be automatically invested in shares of one of the
Portfolios if shares of the Portfolio are available for sale. Such investments
will be subject to initial investment minimums, as well as additional purchase
minimums. A shareholder considering the Distribution Investment Option should
obtain and read the prospectus of the other Portfolios and consider the
differences in objectives and policies before making any investment.
S-22
<PAGE> 23
REINSTATEMENT PRIVILEGE: A shareholder who has redeemed shares of any of the
Portfolios has a one-time right to reinvest the redemption proceeds in shares of
the Portfolios at their net asset value as of the time of reinvestment. Such a
reinvestment must be made within 30 days of the redemption and is limited to the
amount of the redemption proceeds. Although redemptions and repurchases of
shares are taxable events, a reinvestment within such 30-day period in the same
fund is considered a "wash sale" and results in the inability to recognize
currently all or a portion of a loss realized on the original redemption for
federal income tax purposes. The investor must notify the Transfer Agent at the
time the trade is placed that the transaction is a reinvestment.
EXCHANGE PRIVILEGE: A shareholder may exchange the shares of these Portfolios,
for which good payment has been received, in his account at any time, regardless
of how long he has held his shares.
Each Exchange Request must be in proper form (i.e., if in writing, signed by the
record owner(s) exactly as the shares are registered; if by telephone, proper
account identification is given by the dealer or shareholder of record), and
each exchange must involve either shares having an aggregate value of at least
$1,000 or all the shares in the account. Each exchange involves the redemption
of the shares of a Portfolio (the "Old Portfolio") to be exchanged and the
purchase at net asset value of the shares of the other portfolios (the "New
Portfolios") plus in certain cases, as disclosed in each Prospectus, any
applicable sales charge. Any gain or loss on the redemption of the shares
exchanged is reportable on the shareholder's federal income tax return, unless
such shares were held in a tax-deferred retirement plan or other tax-exempt
account. If the Exchange Request is received by the Distributor in writing or by
telephone on any business day prior to the redemption cut-off time specified in
each Prospectus, the exchange usually will occur on that day if all the
restrictions set forth above have been complied with at that time. However,
payment of the redemption proceeds by the Old Portfolio, and thus the purchase
of shares of the New Portfolios, may be delayed for up to seven days if the
Portfolios determine that such delay would be in the best interest of all of its
shareholders. Investment dealers which have satisfied criteria established by
the Portfolios may also communicate a shareholder's Exchange Request to the
Portfolios subject to the restrictions set forth above. No more than five
exchange requests may be made in any one telephone Exchange Request.
TAXES
FEDERAL INCOME TAX
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.
Each Portfolio will decide whether to distribute or retain all or part of any
net capital gains (the excess of net long-term capital gains over net short-term
capital losses) in any year for reinvestment. If any such gains are retained,
the Portfolio will pay federal income tax thereon, and, if the Portfolio makes
an election, the shareholders will include such undistributed gains in their
income and shareholders subject to tax will be able to claim their share of the
tax paid by the Portfolio as a credit against their federal income tax
liability.
A gain or loss realized by a shareholder on the sale or exchange of shares of a
Portfolio held as a capital asset will be capital gain or loss, and such gain or
loss will be long-term if the holding period for the shares exceeds one year,
and otherwise will be short-term. Any loss realized on a sale or exchange will
be disallowed to the extent the shares disposed of are replaced within the
61-day period beginning 30 days before and ending 30 days after the shares are
disposed of. Any loss realized by a shareholder on the disposition of shares
held 6 months or less is treated as a long-term capital loss to the extent of
any distributions of net long-term capital gains received by the shareholder
with respect to such shares or any inclusion of undistributed capital gain with
respect to such shares.
S-23
<PAGE> 24
Each Portfolio will generally be subject to a nondeductible 4% federal excise
tax to the extent it fails to distribute by the end of any calendar year at
least 98% of its ordinary income and 98% of its capital gain net income (the
excess of short-and long-term capital gains over short- and long-term capital
losses) for the one-year period ending on October 31 of that year, plus certain
other amounts.
Each Portfolio is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions, and redemptions) paid
individual or non-corporate to shareholders who have not certified on the
Account Registration Form or on a separate form supplied by the Portfolio, that
the Social Security or Taxpayer Identification Number provided is correct and
that the shareholder is exempt from backup withholding or is not currently
subject to backup withholding.
Each Portfolio within the Trust is generally treated as a separate corporation
for federal income tax purposes, and thus the provisions of the Code generally
will be applied to each Portfolio separately, rather than to the Trust as a
whole. Net long-term and short-term capital gains, net income, and operating
expenses therefore will be determined separately for each Portfolio.
If a Portfolio fails to qualify as a regulated investment company ("RIC") for
any year, all of its income will be subject to tax at corporate rates, and its
distributions (including capital gains distributions) will be taxable as
ordinary income dividends to its shareholders, subject to the corporate
dividends received deduction for corporate shareholders. No dividends of any
Portfolio are expected to qualify for that deduction.
As noted in the Prospectuses for the Portfolios, exempt-interest dividends are
excludable from a shareholder's gross income for regular federal income tax
purposes. Exempt-interest dividends may nevertheless be subject to the alterna
tive minimum tax (the "Alternative Minimum Tax") imposed by Section 55 of the
Code or the environmental tax (the "Environmental Tax") imposed by Section 59A
of the Code. The Alternative Minimum Tax is imposed at the rate of 26% to 28% in
the case of non-corporate taxpayers and at the rate of 20% in the case of
corporate taxpayers, to the extent it exceeds the taxpayer's regular tax
liability. The Environmental Tax is imposed at the rate of 0.12% and applies
only to corporate taxpayers. The Alternative Minimum Tax and the Environmental
Tax may be imposed in two circumstances. First, exempt-interest dividends
derived from certain "private activity bonds" issued after August 7, 1986, will
generally be an item of tax preference and therefore potentially subject to the
Alternative Minimum Tax for both corporate and non-corporate taxpayers and the
Environmental Tax for corporate taxpayers only. The Portfolios intend, when
possible, to avoid investing in private activity bonds. Second, in the case of
exempt-interest dividends received by corporate shareholders, all
exempt-interest dividends, regardless of when the bonds from which they are
derived were issued or whether they are derived from private activity bonds,
will be included in the corporation's "adjusted current earnings," as defined in
Section 56(g) of the Code, in calculating the corporation's alternative minimum
taxable income for purposes of determining the Alternative Minimum Tax and the
Environmental Tax.
The percentage of income that constitutes "exempt-interest dividends" will be
determined for each year for the Portfolios and will be applied uniformly to all
dividends declared with respect to the Portfolios during that year. This
percentage may differ from the actual percentage for any particular day.
Interest on indebtedness incurred by shareholders to purchase or carry shares of
the Portfolios will not be deductible for federal income tax purposes to the
extent that the Portfolios distribute exempt-interest dividends during the
taxable year. The deduction otherwise allowable to property and casualty
insurance companies for "losses incurred" will be reduced by an amount equal to
a portion of exempt-interest dividends received or accrued during any taxable
year. Certain foreign corporations engaged in a trade or business in the United
States will be subject to a "branch profits tax" on their "dividend equivalent
amount" for the taxable year, which will include exempt-interest dividends.
Certain Subchapter S corporations may also be subject to taxes on their "passive
investment income," which could include exempt-interest dividends. Up to 85% of
the Social Security benefits or railroad retirement benefits received by an
individual during any taxable year will be included in the gross income of such
individual if the individual's "modified adjusted gross income"
S-24
<PAGE> 25
(which includes exempt-interest dividends) plus one-half of the Social Security
benefits or railroad retirement benefits received by such individual during that
taxable year exceeds the base amount described in Section 86 of the Code.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development bonds or
private activity bonds should consult their tax advisors before purchasing
shares of the Portfolios. "Substantial user" is defined generally as including a
"non-exempt person" who regularly uses in a trade or business a part of a
facility financed from the proceeds of industrial development bonds or private
activity bonds.
Issuers of bonds purchased by the Portfolios (or the beneficiary of such bonds)
may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Investors should be aware
that exempt-interest dividends derived from such bonds may become subject to
federal income taxation retroactively to the date of issuance of the bonds to
which such dividends are attributable if such representations are determined to
have been inaccurate or if the issuer of such bonds (or the beneficiary of such
bonds) fails to comply with such covenants.
STATE TAXES
A Portfolio is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Depending upon applicable
state and local law, shareholders of a Portfolio may be exempt from state and
local taxes on distributions of tax-exempt interest income derived from
obligations of the state and/or municipalities in which they reside, but
shareholders may be subject to tax on income derived from obligations of other
jurisdictions. Each Portfolio will make periodic reports to shareholders of the
source of distributions on a state-by-state basis. Shareholders should consult
their tax advisors concerning the state and local tax consequences of
investments in the Trust, which may differ from the federal income tax
consequences described above.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Advisers and Sub-Adviser are responsible for
placing orders to execute Portfolio transactions. In placing orders, it is the
Trust's policy to seek to obtain the best net results taking into account such
factors as price (including the applicable dealer spread), size, type and
difficulty of the transaction involved, the firm's general execution and
operational facilities, and the firm's risk in positioning the securities
involved. While the Advisers and Sub-Adviser generally seek reasonably
competitive spreads or commissions, the Trust will not necessarily be paying the
lowest spread or commission available. The Trust's policy of investing in
securities with short maturities will result in high portfolio turnover. The
Trust will not purchase portfolio securities from any affiliated person acting
as principal except in conformity with the regulations of the SEC.
The Trust does not expect to use one particular dealer, but, subject to the
Trust's policy of seeking the best net results, dealers who provide supplemental
investment research to the Advisers and Sub-Adviser may receive orders for
transactions by the Trust. Information so received will be in addition to and
not in lieu of the services required to be performed by the Advisers or
Sub-Adviser under the Advisory or Sub-Advisory Agreements, and the expenses of
the Advisers and Sub-Adviser will not necessarily be reduced as a result of the
receipt of such supplemental information.
The money market securities in which certain of the Portfolios invest are traded
primarily in the over-the-counter market. Bonds and debentures are usually
traded over-the-counter, but may be traded on an exchange. Where possible, a
Portfolio's Adviser or Sub-Adviser will deal directly with the dealers who make
a market in the securities involved except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting as
principal for their own account. On occasion, securities may be purchased
directly from the issuer. Money market securities are generally traded on a net
basis, and do not normally involve either brokerage commissions or transfer
taxes. The cost of executing portfolio securities transactions of the Portfolio
will primarily consist of dealer spreads and underwriting commissions.
S-25
<PAGE> 26
It is expected that certain of the Portfolios may execute brokerage or other
agency transactions through the Distributor, a registered broker-dealer, for a
commission, in conformity with the 1940 Act, the Securities Exchange Act of
1934, as amended, and rules of the SEC. Under these provisions, the Distributor
is permitted to receive and retain compensation for effecting portfolio
transactions for a Portfolio on an exchange if a written contract is in effect
between the Distributor and the Trust expressly permitting the Distributor to
receive and retain such compensation. These provisions further require that
commissions paid to the Distributor by the Trust for exchange transactions not
exceed "usual and customary" brokerage commissions. The rules define "usual and
customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time." In addition, the Portfolios may direct commission business to
one or more designated broker-dealers, including the Distributor, in connection
with payment of certain of the Portfolios' expenses by such broker-dealers. The
Trustees, including those who are not "interested persons" of the Trust, have
adopted procedures for evaluating the reasonableness of commissions paid to the
Distributor and will review these procedures periodically.
Since the Trust does not market its shares through intermediary brokers or
dealers, it is not the Trust's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, the Advisers and Sub-Adviser may place portfolio orders with
qualified broker-dealers who recommend the Trust to clients, and may, when a
number of brokers and dealers can provide best price and execution on a
particular transaction, consider such recommendations by a broker or dealer in
selecting among broker-dealers.
The Advisers and Sub-Adviser may, consistent with the interests of the
Portfolios, select brokers on the basis of the research services they provide to
the Adviser or Sub-Adviser. Such services may include analysis of the business
or prospects of a company, industry or economic sector or statistical and
pricing services. Information so received by the Advisers or Sub-Adviser will be
in addition to and not in lieu of the services required to be performed by an
Adviser or Sub-Adviser under the Advisory or Sub-Advisory Agreements. If in the
judgement of an Adviser or Sub-Adviser the Portfolios, or other accounts managed
by the Adviser or Sub-Adviser, will be benefitted by supplemental research
services, the Adviser or Sub-Adviser is authorized to pay brokerage commissions
to a broker furnishing such services which are in excess of commissions which
another broker may have charged for effecting the same transaction. The expenses
of an Adviser or Sub-Adviser will not necessarily be reduced as a result of the
receipt of such supplemental information.
For the fiscal year ended August 31, 1996 the Portfolios paid brokerage fees as
follows:
<TABLE>
<CAPTION>
Total
Brokerage
Total $ % of Total Commissions
Total $ Amount of Total Brokerage Paid to SFS in
Total $ Amount of Brokerage Brokerage Transactions Connection
Amount of Brokerage Total $ Effected Commissions Effected with
Brokerage Commissions Amount of Through Paid to Through Repurchase
Commission Paid to Brokered Affiliated Affiliated Affiliated Agreement
s Paid in Affiliated Transactions Brokers in Brokers for Brokers for Transactions
PORTFOLIO Last Year Brokers in for Last Year Last Year Last year Last Year for Last Year
Last Year
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Tax Free $ 0 $ 0 $1,271,181,915 $ 0 $ 0 $ 0 $ 0
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
Institutional $ 0 $ 0 $2,622,150,531 $ 0 $ 0 $ 0 $ 0
Tax Free
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-26
<PAGE> 27
<TABLE>
<CAPTION>
Total $ % of Total Commissions
Total $ Amount of Total Brokerage Paid to SFS in
Total $ Amount of Brokerage Brokerage Transactions Connection
Amount of Brokerage Total $ Effected Commissions Effected with
Brokerage Commissions Amount of Through Paid to Through Repurchase
Commission Paid to Brokered Affiliated Affiliated Affiliated Agreement
s Paid in Affiliated Transactions Brokers in Brokers for Brokers for Transactions
PORTFOLIO Last Year Brokers in for Last Year Last Year Last year Last Year for Last Year
Last Year
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
California Tax $ 0 $ 0 $922,166,186 $ 0 $ 0 $ 0 $ 0
Exempt
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
Intermediate- $ 0 $ 0 $237,804,382 $ 0 $ 0 $ 0 $ 0
Term
Municipal
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania $ 0 $ 0 $238,540,174 $ 0 $ 0 $ 0 $ 0
Municipal
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
Kansas Tax $ 0 $ 0 $ 64,476,842 $ 0 $ 0 $ 0 $ 0
Free Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
New York * * * * * * *
Intermediate-
Term Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania $ 0 $ 0 $174,412,406 $ 0 $ 0 $ 0 $ 0
Tax Free
Portfolio
==================================================================================================================================
</TABLE>
For the fiscal years ended August 31, 1994 and 1995, the Portfolios paid the
following brokerage commissions:
<TABLE>
<CAPTION>
TOTAL $ AMOUNT OF TOTAL $ AMOUNT OF BROKERAGE
BROKERAGE COMMISSIONS COMMISSIONS PAID TO
PORTFOLIO PAID IN AFFILIATES IN
1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Free Portfolio $ 0 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------------------------------
Institutional Tax Free Portfolio $ 0 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------------------------------
California Tax Exempt Portfolio $ 0 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------------------------------
Intermediate-Term Municipal Portfolio $ 0 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Portfolio $ 0 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------------------------------
</TABLE>
S-27
<PAGE> 28
<TABLE>
<CAPTION>
TOTAL $ AMOUNT OF TOTAL $ AMOUNT OF BROKERAGE
BROKERAGE COMMISSIONS COMMISSIONS PAID TO
PORTFOLIO PAID IN AFFILIATES IN
1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kansas Tax Free Income Portfolio $ 0 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------------------------------
New York Intermediate-Term Portfolio * * * *
- --------------------------------------------------------------------------------------------------------------
Pennsylvania Tax Free Portfolio $ 0 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------------------------------
</TABLE>
*Not in operation during the period.
It is expected that the portfolio turnover rate will normally not exceed 100%
for any Portfolio. A portfolio turnover rate would exceed 100% if all of its
securities, exclusive of U.S. Government securities and other securities whose
maturities at the time of acquisition are one year or less, are replaced in the
period of one year. Turnover rates may vary from year to year and may be
affected by cash requirements for redemptions and by requirements which enable a
Portfolio to receive favorable tax treatment.
For each of the fiscal years ending August 31, 1995 and 1996, the portfolio
turnover rate for each of the following Portfolios was:
<TABLE>
<CAPTION>
TURNOVER RATE
---------------------------
PORTFOLIO 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Pennsylvania Municipal Portfolio 66% 23%
- ---------------------------------------------------------------------------------------------
Intermediate-Term Municipal Portfolio 41% 36%
- ---------------------------------------------------------------------------------------------
Kansas Tax Free Income Portfolio 13% 18%
- ---------------------------------------------------------------------------------------------
New York Intermediate-Term Municipal Portfolio * *
=============================================================================================
</TABLE>
* Not in operation during the period.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of each Portfolio, each of which represents an equal proportionate
interest in that Portfolio. Each share upon liquidation entitles a shareholder
to a pro rata share in the net assets of that Portfolio, after taking into
account the Class D and Class G distribution expenses. Shareholders have no
preemptive rights. The Declaration of Trust provides that the Trustees of the
Trust may create additional portfolios of shares or classes of portfolios. Share
certificates representing the shares will not be issued.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or administrators, shall not be liable for any
S-28
<PAGE> 29
neglect or wrongdoing of any such person. The Declaration of Trust also provides
that the Trust will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with actual or threatened litigation in which
they may be involved because of their offices with the Trust unless it is
determined in the manner provided in the Declaration of Trust that they have not
acted in good faith in the reasonable belief that their actions were in the best
interests of the Trust. However, nothing in the Declaration of Trust shall
protect or indemnify a Trustee against any liability for his wilful misfeasance,
bad faith, gross negligence or reckless disregard of his duties.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a Trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the Trust. Even if, however, the Trust were held to be a partnership, the
possibility of the shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because, the Declaration of Trust provides for indemnification out
of the Trust property for any shareholders held personally liable for the
obligations of the Trust.
5% SHAREHOLDERS
As of December 6, 1996, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Portfolios. The Trust believes that most of the shares
referred to below were held by the persons indicated in accounts for their
fiduciary, agency, or custodial customers.
TAX FREE PORTFOLIO
<TABLE>
<CAPTION>
<S> <C> <C>
Naidot & Co. 14.08% 53,284,900.00
c/o Bessemer Trust Company
Attn: Peter Scully
630 Fifth Avenue, 38th Floor
New York, New York 10111-0100
Vose & Co. 18.33% 69,389,135.31
159 E. Main Street
NY/RO/TO3C
Rochester, New York 14604-1605
Smith & Co. 17.59% 66,569,005.42
c/o First Security Bank of Utah
Attn: Rick Parr
P.O. Box 30007
Salt Lake City, Utah 84130
INSTITUTIONAL TAX FREE PORTFOLIO
Bank of America NT & SA 7.41% 82,057,024.66
Attn: Common Trust Funds, Unit #8329
P.O. Box 3577 Terminal Annex
Los Angeles, California 90051
</TABLE>
S-29
<PAGE> 30
<TABLE>
<CAPTION>
<S> <C> <C>
First American National Bank 5.49% 60,874,451.56
Attn: Jeff Eubanks
800 First American Center
Nashville, Tennessee 37237-0801
Fifth Third Bank 5.03% 55,761,952.00
Attn: Jennifer Burrell
38 Fountain Square
Cincinnati, Ohio 45263-0001
Calhoun & Co. 13.36% 148,047,986.92
c/o Comerica Bank
Attn: Dennis Miriani
P.O. Box 1319, 7th Floor
Detroit, Michigan 48231
River Oaks Trust Company 14.96% 165,706,737.00
Attn: Trust Operations
Securities Movement & Control
P.O. Box 4886
Houston, Texas 77210-4886
Unit & Co. 7.57% 83,855,669.89
c/o US National Bank of Oregon
Attn: Jeanene Wine
P.O. Box 3168
Portland, Oregon 97208
CALIFORNIA TAX EXEMPT PORTFOLIO
The Bank of California NA 6.32% 28,079,566.31
Cash Management Services
475 Samsome Street, 11th Floor
Attn: Elena Aguba
San Francisco, California 94111
Southwest Securities 75.10% 333,670,816.31
Special Custodial Account for Exclusive
Benefit of Our Customers
Attn: Cathy Reames
P.O. Box 509002
Dallas, Texas 75250-9002
City National Bank 15.20% 67,521,249.56
Attn: Michael Nunnelee
400 N. Roxbury Drive, Suite 700
Beverly Hills, California 90210
</TABLE>
S-30
<PAGE> 31
<TABLE>
<CAPTION>
INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
<S> <C> <C>
Transco & Company 10.21% 1,496,084.61
c/o Intrust Bank, N.A.
Attn: Pat Wills
P.O. Box 48698
Wichita, Kansas 67201
SEI Trust Company 37.65% 5,518,621.47
Attn: Jacqueline Esposito
680 E. Swedesford Road
Wayne, Pennsylvania 19087
PENNSYLVANIA MUNICIPAL PORTFOLIO
Sheldon & Co. (Integra) 77.53% 7,050,282.09
c/o National City
Attn: Trust Mutual Funds
P.O. Box 94777, Loc 5312
Cleveland, Ohio 44101-4777
SEI Trust Company 6.78% 616,189.52
Attn: Jacqueline Esposito
680 E. Swedesford Road
Wayne, Pennsylvania 19087
Meg and Co. 8.24% 749,047.35
c/o United States National bank
Attn: Debbie Moraca
P.O. Box 520
Johnstown, Pennsylvania 15907-0520
PENNSYLVANIA TAX FREE PORTFOLIO
The Farmers Company 7.35% 3,201,900.00
c/o Farmers First Bank - Lititz
Attn: Wendy Basehoar
P.O. Box 1000
Lititz, Pennsylvania 17543-7000
The Fulton Company 89.17% 38,858,961.20
c/o Fulton Bank Trust Dept.
Attn: Dennis Patrick
One Penn Square
Lancaster, Pennsylvania 17602-2853
</TABLE>
S-31
<PAGE> 32
KANSAS TAX FREE PORTFOLIO
<TABLE>
<CAPTION>
<S> <C> <C>
Transco & Company 99.19% 6,964,666.79
c/o Intrust Bank, N.A.
Attn: Pat Wills
P.O. Box 48698
Wichita, Kansas 67201
</TABLE>
EXPERTS
The financial statements and the financial highlights have been audited by
Arthur Andersen LLP, independent public accountants.
FINANCIAL STATEMENTS
The Trust's financial statements for the fiscal year ended August 31, 1996,
including notes thereto and the report of Arthur Andersen LLP thereon, are
herein incorporated by reference. A copy of the 1996 Annual Report must
accompany the delivery of this Statement of Additional Information.
S-32
<PAGE> 1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
SEI TAX EXEMPT TRUST:
We have audited the accompanying statements of net assets of the Tax Free,
California Tax Exempt, Institutional Tax Free, Pennsylvania Tax Free,
Intermediate-Term Municipal, Pennsylvania Municipal and Kansas Tax Free Income
Portfolios of SEI Tax Exempt Trust as of August 31, 1996 and the related
statements of operations, statements of changes in net assets, and financial
highlights for the periods presented. We have also audited the statement of
operations of the Bainbridge Tax Exempt Portfolio of SEI Tax Exempt Trust for
the period ended December 15, 1995, and the related statement of changes in net
assets and financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996, by correspondence with the custodians. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Tax Free, California Tax Exempt, Institutional Tax Free, Pennsylvania Tax Free,
Intermediate-Term Municipal, Pennsylvania Municipal and Kansas Tax Free Income
Portfolios of SEI Tax Exempt Trust as of August 31, 1996, the results of their
operations, changes in their net assets, and financial highlights for the
periods presented, and the results of operations of the Bainbridge Tax Exempt
Portfolio of SEI Tax Exempt Trust for the period ended December 15, 1995, and
the changes in its net assets and financial highlights for the periods
presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, PA
October 11, 1996
6
<PAGE> 2
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
TAX FREE PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Municipal Bonds -- 104.1%
Alabama -- 0.6%
Tuscaloosa Industrial
Development Board,
Industrial Development
Revenue, Field Container
Corporation, VRDN,
RB (A) (B) (C)
3.550%, 09/07/96 $1,950 $1,950
------
Arkansas -- 0.3%
Little Rock Unified
School District, TRAN
3.850%, 12/30/96 1,000 1,000
------
Arizona -- 1.5%
Chandler Industrial
Development Authority,
Parsons Municipal Series
Project, VRDN, RB (A) (B) (C)
3.700%, 09/15/96 3,900 3,900
Tuscon Industrial Development
Authority, Tuscon City Center
Parking, VRDN, RB (A) (B) (C)
3.625%, 09/07/96 1,250 1,250
------
5,150
------
California -- 2.5%
California School Cash
Reserve Program Authority,
Pool, Ser A, RAN
4.750%, 07/02/97 5,000 5,036
California State, Ser
96-97, RAN
4.500%, 06/30/97 2,500 2,511
Western Placer, USD, TRAN
4.700%, 09/05/96 1,000 1,000
------
8,547
------
Colorado -- 3.6%
Colorado Housing Finance
Authority, Multi-Family
Housing, Woodstream Project,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 2,500 2,500
Colorado Housing Finance
Authority, Multi-Family
Housing, Cambray Park,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 2,900 2,900
Colorado Housing Finance
Authority, Multi-Family
Housing, Grants Plaza
Project 91-A, VRDN,
RB (A) (B) (C)
3.525%, 09/07/96 $1,500 $1,500
Denver City & County,
Multi-Family Housing,
Ogden Residence Project, Ser 85,
VRDN, RB (A) (B) (C)
3.950%, 09/01/96 2,965 2,965
Fraser Industrial Development
Revenue, Safeway Project,
VRDN, RB (A) (B) (C)
3.650%, 12/01/96 1,785 1,785
Jefferson County Industrial
Development Revenue,
Southwest Medpro Project,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 550 550
------
12,200
------
District of Columbia -- 1.9%
District of Columbia, Washington,
Ser B-1, VRDN, RB (A) (B) (C)
3.950%, 09/07/96 600 600
District of Columbia, Washington,
Ser B-2, VRDN, RB (A) (B) (C)
3.950%, 09/07/96 5,300 5,300
District of Columbia, Washington,
Ser B-3, VRDN, RB (A) (B) (C)
3.950%, 09/07/96 500 500
-----
6,400
-----
Florida -- 3.9%
Boca Raton Industrial
Development Authority,
Parking Garage, Ser 84-A,
VRDN, RB (A) (B) (C)
3.875%, 09/07/96 3,125 3,125
Florida Housing Finance Agency,
VRDN, RB (A) (B) (C)
3.850%, 09/07/96 2,300 2,300
Florida Housing Finance Authority,
Sarasota Beneva Place, Ser C,
VRDN, RB (A) (B) (C)
3.525%, 09/07/96 4,955 4,955
Halifax Hospital Medical Center,
Ser 96, TAN (C)
3.800%, 04/15/97 2,000 2,001
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 3
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
TAX FREE PORTFOLIO -- CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Pasco County Housing Facility
Authority, Multi-Family
Housing, Carlton Arms/
Magnolia Valley, VRDN,
RB (A) (B) (C)
3.625%, 09/07/96 $1,000 $1,000
------
13,381
------
Georgia -- 3.6%
Dekalb County, Development
Authority Revenue, Dart
Container Project, VRDN,
RB (A) (B) (C)
3.850%, 09/07/96 1,000 1,000
DeKalb County, Multi-Family
Housing, Wood Terrace
Apartments Project, Ser 95,
VRDN, RB (A) (B)
3.450%, 09/07/96 400 400
Fulton County Development
Authority, Robert W. Woodruff
Arts Center,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 3,500 3,500
Gordon Industrial Development
Authority, Federal Paper Board
Incorporated Project, Ser 92,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 2,000 2,000
Newton, Industrial Development
Revenue, H.B. Fuller Project,
Ser 84, VRDN, RB (A) (B) (C)
3.650%, 09/07/96 3,100 3,100
Richmond County, Industrial
Development Authority,
Federal Paper Board Company
Project, Ser 92,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 1,000 1,000
Rome City, Ser 96, TAN, G.O.
3.270%, 12/31/96 1,150 1,150
-----
12,150
------
Illinois -- 7.0%
Chicago O'Hare International
Airport, American Airlines,
Ser A, VRDN, RB (A) (B) (C)
3.750%, 09/01/96 600 600
Chicago Park District, Ser A, TAW
5.000%, 10/30/96 1,000 1,002
Chicago, Multi-Family Housing
Authority, Waveland Project B,
VRDN, RB (A) (B)(C)
3.450%, 09/07/96 6,100 6,100
East Peoria, Multi-Family
Housing Revenue, Radnor
East Project, VRDN, RB (A) (B) (C)
3.750%, 09/07/96 $1,720 $1,720
Hoffman Estates, Park District, G.O.
4.000%, 12/01/96 1,815 1,815
Illinois State Development
Financial Authority, Dart
Container Project, VRDN,
RB (A) (B) (C)
3.548%, 09/07/96 1,300 1,300
Illinois State Financial
Development Authority,
Diamond Star Motors Project,
VRDN, RB (A) (B) (C)
3.850%, 09/01/96 1,900 1,900
Peoria Economic Development,
North Point Shopping Center
Project, VRDN, RB (A) (B) (C)
3.700%, 12/01/96 2,395 2,395
Skokie, Industrial Development
Authority, Fashion Square
Project, VRDN, RB (A) (B) (C)
3.875%, 09/07/96 2,800 2,800
Springfield, Community
Improvement Revenue,
Kent Family Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 1,000 1,000
St. Clair County, Industrial
Building Authority,
Winchester Apartments Project,
Ser 94, VRDN, RB (A) (B)
3.900%, 09/07/96 3,000 3,000
------
23,632
------
Indiana -- 8.6%
Bartholomew Consolidated
Schools, TAW
4.000%, 12/31/96 1,738 1,739
East Chicago, School City TAW
4.000%, 12/31/96 3,000 3,002
Gary Environmental Improvement,
US Steel, VRDN, RB (A) (B) (C)
3.700%, 01/15/97 9,800 9,800
Hamilton Southeastern
Independent Schools,
Consolidated School
Building, BAN
3.900%, 12/31/96 750 751
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 4
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Indiana Development Finance
Authority, Industrial
Development Revenue,
Goodwill Industries Center
Project, VRDN, RB (A) (B) (C)
3.550%, 09/07/96 $1,400 $1,400
Indiana Health Facilities Finance
Authority, Lutherwood Project,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 1,000 1,000
Lake County, Calumet Township,
Ser 95, G.O.
5.000%, 01/15/97 1,750 1,759
Michigan City, TAW
3.900%, 12/31/96 1,100 1,100
Portage Township Schools, TAW
4.150%, 12/31/96 1,350 1,352
Portage, Economic Development
Revenue, VRDN, RB (A) (B) (C)
3.650%, 09/07/96 780 780
South Bend Community School
District, G.O.
3.850%, 01/15/97 570 570
Tri-Creek School District, TAW
4.000%, 12/31/96 1,100 1,101
Valpariso Community School
District, TAW
4.100%, 12/31/96 3,500 3,504
Whitko Community School
District, TAW
4.000%, 12/31/96 1,490 1,491
-------
29,349
-------
Kansas -- 0.2%
Salina, Central Mall Dillard,
Ser 84, VRDN, RB (A) (B) (C)
3.750%, 09/07/96 495 495
Shawnee County, Ser 96-1, BAN
4.800%, 03/01/97 280 280
-------
775
-------
Louisiana -- 0.6%
Ascension Parish, Pollution
Control Revenue, BASF
Wyandotte Corporation,
VRDN, RB, (A) (B) (C)
3.850%, 09/01/96 1,600 1,600
Louisiana State Public Facilities
Authority, Willis Knighton
Medical Project, VRDN, RB
AMBAC Insured (A) (B)
3.400%, 09/07/96 600 600
-------
2,200
-------
Maine -- 0.6%
Maine State, TAN, G.O.
4.500%, 06/27/97 2,000 2,010
-------
Maryland -- 5.2%
Baltimore County, G.O., TECP
3.500%, 10/02/96 (C) 2,000 2,000
Howard County Multi-Family
Housing, Sherwood Crossing
Limited, Ser A, VRDN, RB,
G.O. (A) (B)
3.750%, 06/01/97 1,500 1,500
Maryland State Health & Higher
Education Facilities Authority,
Kennedy Krieger, VRDN,
RB (A) (B) (C)
3.500%, 09/07/96 400 400
Maryland State Health & Higher
Education Facilities Authority,
Pooled Loan Program, Ser B,
VRDN, RB (A) (B) (C)
3.450%, 09/07/96 8,100 8,100
Montgomery County, Multi-Family
Housing Opportunities,
Community Housing,
VRDN, RB (A) (B) (C)
3.650%, 09/07/96 5,000 5,000
Prince Georges County Housing
Authority, VRDN, RB (A) (B) (C)
3.525%, 09/07/96 625 625
-------
17,625
-------
Michigan -- 1.0%
Sterling Heights Economic
Development, Sterling Shopping
Center, VRDN, RB (A) (B) (C)
3.500%, 09/07/96 500 500
University of Michigan, University
Revenue, Ser A, VRDN,
RB (A) (B)
3.850%, 09/01/96 800 800
Wayne County, Sewer
System, TECP (B) (C)
3.650%, 09/27/96 2,000 2,000
-------
3,300
-------
Minnesota -- 3.2%
Bloomington Commercial
Development Revenue, Park
Project, VRDN, RB (A) (B) (C)
3.770%, 09/07/96 3,150 3,150
</TABLE>
9
<PAGE> 5
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
TAX FREE PORTFOLIO -- CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Golden Valley Industrial
Development Revenue, Graco
Project, VRDN, RB (A) (B) (C)
3.750%, 09/07/96 $1,620 $ 1,620
Minneapolis, Highway
Improvement, VRDN,
G.O. (A) (B) (C)
3.500%, 09/07/96 3,500 3,500
Minnesota Housing Finance
Agency, Single Family Mortgage,
RB (A) (B) (C)
3.500%, 12/12/96 1,575 1,575
Minnesota School Districts,
Tax & Aid Anticipation
Borrowing Program 1996, Ser B, COP
4.500%, 09/09/97 900 906
-------
10,751
-------
Missouri -- 1.8%
Kansas City Industrial
Development Authority,
Baptist Health System, Ser A,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 5,975 5,975
-------
Nevada -- 2.8%
Henderson, Public Improvement
Trust, Multi-Family Housing,
Pueblo Verde I & II-B Apartment
Project, #1071, VRDN,
RB (A) (B) (C)
3.500%, 09/07/96 9,500 9,500
-------
New Hampshire -- 0.3%
New Hampshire Higher Education
& Health Facility Authority,
Dartmouth College, RB (A) (B)
3.800%, 06/01/97 1,080 1,080
-------
New Jersey -- 0.9%
New Jersey Economic
Development Authority,
Cincinnati Gear Company,
RB (A) (B) (C)
3.600%, 10/01/96 1,405 1,405
New Jersey State, G.O.,
Pre-Refunded @ 101 (D)
7.200%, 04/15/97 1,500 1,547
-------
2,952
-------
New Mexico -- 0.6%
Albuquerque Industrial
Development Revenue,
Plastech Project, Ser 94-B,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 2,155 2,155
------
New York -- 2.3%
Nassau County, Ser A, RAN
4.000%, 03/05/97 2,500 2,508
North Hempstead, BAN
4.250%, 05/29/97 2,000 2,006
North Hempstead, Ser B, BAN
3.850%, 02/27/97 1,000 1,002
Ontario County Industrial
Development Authority,
Seneca Foods, RB (A) (B) (C)
3.850%, 09/07/96 2,185 2,185
------
7,701
------
North Carolina -- 0.9%
Beafort Industrial Facility,
Pollution Control Revenue,
Texas Gulf Corporation,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 3,000 3,000
------
North Dakota -- 0.6%
Fargo, Commercial Development
Revenue, Cass Oil Project,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 2,200 2,200
------
Ohio -- 3.5%
Brecksville-Broadview Heights
School District, Ohio School
Improvement, Ser 96, BAN
3.900%, 01/17/97 1,000 1,001
Cincinnati & Hamilton County
Port Authority, CEI Realty
Project, VRDN, G.O. (A) (B) (C)
3.600%, 11/01/96 105 105
Cleveland Waterworks Revenue,
First Mortgage Improvement,
Ser E, VRDN, RB,
MBIA Insured,
Pre-Refunded @ 101 (A) (D)
7.625%, 01/01/97 485 501
Highland County Industrial
Development Revenue,
Lancaster Colony Corporation,
VRDN, RB (A) (C)
3.150%, 09/07/96 1,000 1,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE> 6
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Montgomery County Economic
Development Revenue, Wayne
Town Center, VRDN, RB (A) (B) (C)
3.550%, 10/01/96 $1,045 $ 1,045
North Olmsted, BAN
4.600%, 12/19/96 5,000 5,007
Summit County Industrial
Development Authority,
SGS Tool Project, RB (A) (B) (C)
3.700%, 11/01/96 190 190
Summit County Industrial
Development Revenue,
Arlington Plaza Project,
RB (A) (B) (C)
3.150%, 09/07/96 2,285 2,285
Toledo, Industrial Development
Revenue, Countymark Cooperative
Project, VRDN, RB (A) (B) (C)
3.550%, 09/07/96 900 900
-------
12,034
-------
Oklahoma -- 4.4%
Bartlesville Development Authority,
Heritage Villa Nursing Center,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 3,000 3,000
Oklahoma County Industrial
Development Authority, Baptist
General Convention, Ser 89,
VRDN, RB (A) (B) (C)
3.850%, 09/01/96 2,500 2,500
Oklahoma State Water Reserve Board
State Loan Program Revenue, RB
(A) (B)
3.700%, 03/03/97 3,500 3,500
Tulsa County Industrial
Development Authority,
Healthcare Revenue, Laureate
Psychiatric Project, RB (A) (B)
3.850%, 12/15/96 3,500 3,500
Tulsa Parking Authority,
Refunding First Mortgage
Williams Project 84, Ser A,
VRDN, RB (A) (B) (C)
3.750%, 11/15/96 2,310 2,310
-------
14,810
-------
Oregon -- 0.8%
Port of Portland, Public Grain
Elevator, Columbia Grain,
VRDN, RB (A) (B) (C)
3.750%, 09/07/96 2,565 2,565
-------
Pennsylvania -- 19.2%
Allegheny County Education
Building Authority, University
of Pittsburgh Project, Ser 85-B,
VRDN, RB (A) (B) (C)
3.300%, 09/07/96 950 950
Allegheny County Hospital
Development Authority, Ser 88-D,
VRDN, RB (A) (B) (C)
3.400%, 09/07/96 600 600
Berks County Industrial
Development Authority, Rilsaw
Industrial Project, Elf Aquitaine,
VRDN, RB (A) (B) (C)
3.625%, 09/07/96 2,400 2,400
Bucks County Industrial
Development Authority,
Edgcomb Metals Project,
VRDN, RB (A) (B) (C)
3.400%, 09/07/96 3,955 3,955
Clarion County Industrial
Development Authority,
Specialized Development
Meritcare, MTC Project, Ser A,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 1,000 1,000
Cumberland County Municipal
Authority, United Methodist
Homes Aging Project, VRDN,
RB (A) (B) (C)
3.680%, 09/07/96 2,000 2,000
Delaware County Airport Facility,
Airport Facility Revenue, UPS
Project, Ser 85, VRDN, RB (A) (B)
3.650%, 09/07/96 1,500 1,500
Delaware County Industrial
Development Authority, British
Petroleum Project, Ser 95,
VRDN, RB (A) (B)
3.750%, 09/07/96 600 600
Delaware County Industrial
Development Authority,
Scott Paper Project, Ser A,
VRDN, RB (A) (B)
3.400%, 09/07/96 1,000 1,000
Emmaus General Authority
Revenue, Subseries D-8,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 7,000 7,000
Langhorne Hospital Revenue
Authority, Franciscan Health
Systems Project, Ser C, VRDN,
RB (A) (B) (C)
3.650%, 09/07/96 1,300 1,300
</TABLE>
11
<PAGE> 7
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
TAX FREE PORTFOLIO -- CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Montgomery County Higher
Education & Health Facility
Authority, Higher Education
& Loan, Ser 96-A,
VRDN, RB (A) (B) (C)
3.650%, 09/07/96 $6,000 $6,000
Moon Township Industrial
Development Revenue,
Executive Office Project,
Ser 91-A, VRDN, RB (A) (B) (C)
3.550%, 09/07/96 800 800
North Umberland County,
Industrial Development
Authority, Atlas Development,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 1,025 1,025
Northeastern Hospital &
Education Authority, Allhealth
Pooled Financing Program,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 3,500 3,500
Pennsylvania Higher Education
Facility, Thomas Jefferson
University, Ser B, VRDN,
RB (A) (B) (C)
3.700%, 02/26/97 1,000 1,000
Pennsylvania Higher Education
Facility, Thomas Jefferson
University, Ser C, VRDN,
RB (A) (B) (C)
3.700%, 01/01/97 1,500 1,500
Pennsylvania Higher Education
Facility, Allegheny College
Project, VRDN, RB (A) (B) (C)
3.500%, 09/07/96 1,000 1,000
Pennsylvania Higher Education
Facility, Carnegie Mellon
University Project, Ser C,
VRDN, RB (A) (B)
3.750%, 09/01/96 2,500 2,500
Pennsylvania State Turnpike
Commission, Turnpike
Revenue, Ser A, RB,
Pre-Refunded @ 102 (D)
7.875%, 12/01/96 2,000 2,061
Philadelphia Industrial
Development Authority,
Multi-Family Housing,
Harbor View Towers Project,
VRDN, RB (A) (B) (C)
3.800%, 09/07/96 280 280
Philadelphia Redevelopment
Authority, Pennsylvania
School For The Deaf,
VRDN, RB (A) (B) (C)
3.700%, 09/07/96 2,000 2,000
Philadelphia School
District, TRAN
4.500%, 06/30/97 1,500 1,507
Philadelphia, Ser A, TRAN
4.500%, 06/30/97 3,025 3,038
Sayre Health Care Facilities
Authority, Pennsylvania VHA
Capital Finance Project, Ser A,
VRDN, RB, AMBAC
Insured (A) (B)
3.350%, 09/07/96 700 700
Sayre Health Care Facilities
Authority, Pennsylvania Capital
VHA
Finance Project, Ser F, VRDN,
RB, AMBAC Insured (A) (B)
3.350%, 09/07/96 1,000 1,000
Schuylkill County, Industrial
Development Authority,
Gilberton Power Project,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 1,200 1,200
Schuylkill County, Industrial
Development Authority,
Northeastern Power Project,
VRDN, RB (A) (B) (C)
3.850%, 09/01/96 3,100 3,100
Schuylkill County, Industrial
Development Authority,
Westwood Energy Project,
VRDN, RB (A) (B) (C)
3.950%, 09/01/96 2,900 2,900
Scranton-Lackawana, Health &
Welfare Authority, University
of Scranton Project, VRDN,
RB (A) (B) (C)
3.650%, 11/01/96 575 575
Shenango Valley Osteopathic
Hospital Authority, Shenango
Valley Medical Center, RB,
Pre-Refunded @ 102 (D)
7.875%, 04/01/97 1,755 1,831
Temple University, University
Funding, Ser 96, RAN
4.625%, 05/20/97 500 503
York General Authority,
Pooled Financing Revenue,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 5,000 5,000
------
65,325
------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE> 8
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
South Carolina -- 1.5%
Florence County Industrial
Development Revenue,
La-Z-Boy Chair Project,
VRDN, RB (A) (B)
3.671%, 09/07/96 $5,000 $ 5,000
-------
Tennessee -- 0.9%
Greenville Industrial Development
Revenue, Pet Inc. Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 3,000 3,000
-------
Texas -- 3.5%
Brazo River, Hoffman-Laroche
Project, Ser 85, VRDN,
RB (A) (B) (C)
3.525%, 09/07/96 1,000 1,000
Harris County, Multi-Family
Housing, Arbor II Project,
VRDN, RB (A) (B)
3.950%, 10/01/96 1,000 1,000
Harris County, Multi-Family
Housing, Glenhollow Project,
VRDN, RB (A) (B) (C)
3.775%, 09/07/96 2,300 2,300
Houston Health Facilities
Development Authority,
Corporate Revenue, Memorial
Northwest Pavillion,
VRDN, RB (A) (B) (C)
3.700%, 09/07/96 845 845
Texas State, TECP
3.700%, 02/05/97 4,000 4,000
Trinity River, Industrial
Development Authority,
Trinity River Project,
VRDN, RB (A) (B) (C)
3.525%, 09/07/96 2,900 2,900
-------
12,045
-------
Utah -- 3.7%
Castle Dale Industrial
Development Revenue,
Safeway Project, VRDN,
RB (A) (B) (C)
3.850%, 02/01/97 1,475 1,475
Nephi Industrial Development
Authority, Safeway Project,
VRDN, RB (A) (B) (C)
3.350%, 09/01/96 $1,260 $ 1,260
Salt Lake City, Industrial
Development Authority,
Devereaux Partners Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 5,000 5,000
Salt Lake City, Industrial
Development Authority,
Park View Plaza Project,
VRDN, RB (A) (B) (C)
3.720%, 09/07/96 3,625 3,625
Tremonton City Industrial
Development Revenue,
Safeway Project, VRDN,
RB (A) (B) (C)
3.650%, 12/01/96 1,075 1,075
-------
12,435
-------
Vermont -- 1.7%
Vermont State Student Assistance
Student Loan Bonds, Ser 85,
VRDN, RB (A) (B) (C)
3.750%, 09/07/96 5,825 5,825
-------
Virginia -- 2.7%
Fairfax County, Multi-Family
Housing Revenue, Chase
Commons Project, VRDN,
RB (A) (B) (C)
3.625%, 09/07/96 5,000 5,000
Henrico County, Industrial
Development Authority,
Hermitage Project, VRDN,
RB (A) (B) (C)
3.900%, 09/01/96 2,100 2,100
Stafford County, Industrial
Development Authority,
Safeway Project, VRDN,
RB (A) (B) (C)
3.650%, 12/01/96 2,095 2,095
-------
9,195
-------
Washington -- 0.2%
Washington State, Ser 86-D, G.O.,
Pre-Refunded @ 100 (D)
7.800%, 09/01/96 800 800
-------
</TABLE>
13
<PAGE> 9
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
TAX FREE PORTFOLIO -- CONCLUDED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
West Virginia -- 2.9%
Keyser Industrial Development
Revenue, Keyser Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 $2,050 $ 2,050
West Virginia State Hospital
Finance Authority, Hospital
Revenue, VHA Mid-Atlantic,
Ser B, VRDN, RB,
AMBAC Insured (A) (B)
3.400%, 09/07/96 1,600 1,600
West Virginia State Hospital
Finance Authority, Hospital
Revenue, VHA Mid-Atlantic,
Ser F, VRDN, RB,
AMBAC Insured (A) (B)
3.400%, 09/07/96 5,700 5,700
West Virginia State Hospital
Finance Authority, St. Joseph's
Hospital Project, VRDN,
RB (A) (B) (C)
3.500%, 09/07/96 500 500
-------
9,850
-------
Wisconsin -- 4.6%
Beaver Dam, USD, TRAN
4.140%, 08/27/97 1,000 1,000
Burlington Area School District,
TRAN
4.220%, 08/29/97 1,000 1,002
Kettle-Moraine School District,
TRAN
4.010%, 08/22/97 1,150 1,150
LaCrosse Industrial Development
Revenue, LaCrosse Properties,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 5,355 5,355
Mayville Area School
District, BAN
3.500%, 11/01/96 1,640 1,640
Mount Horeb Area School
District, BAN
3.500%, 11/01/96 1,750 1,750
Village of Menomonee, Industrial
Development Revenue,
Maysteel Corporation
VRDN, RB (A) (B) (C)
3.630%, 09/07/96 1,900 1,900
Watertown, USD, TRAN
3.975%, 10/25/96 2,000 2,000
-------
15,797
-------
</TABLE>
<TABLE>
<S> <C>
Total Municipal Bonds
(Cost $353,664) $ 353,664
---------
Total Investments -- 104.1%
(Cost $353,664) 353,664
---------
Other Assets and Liabilities, Net-- (4.1%) (13,752)
---------
Net Assets:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
340,065,680 outstanding shares of
beneficial interest 339,921
Portfolio Shares of Class D (unlimited
authorization -- no par value) based on
5,951 outstanding shares of
beneficial interest 6
Undistributed Net Investment Income 3
Accumulated Net Realized Loss on
Investments (18)
---------
Total Net Assets--100.0% $ 339,912
=========
Net Asset Value, Offering Price and
Redemption Price Per Share-- Class A $ 1.00
=========
Net Asset Value, Offering Price and
Redemption Price Per Share-- Class D $ 1.00
=========
</TABLE>
AMBAC American Municipal Bond Assurance Corporation
BAN Bond Anticipation Note
COP Certificate of Participation
GO General Obligation
MBIA Municipal Bond Investors Assurance
RAN Revenue Anticipation Note
RB Revenue Bond
SER Series
TAN Tax Anticipation Note
TAW Tax Anticipation Warrant
TECP Tax Exempt Commercial Paper
TRAN Tax & Revenue Anticipation Note
UPS United Parcel Service
USD Unified School District
VRDN Variable Rate Demand Note
(A) Floating Rate Security--the rate reflected on the Statement of Net Assets is
the rate in effect on August 31, 1996.
(B) Put and Demand Feature--the maturity date reported on the Statement of Net
Assets is the lesser of the maturity date or the put date.
(C) Securities are held in conjunction with a letter of credit from a major
commercial bank or financial institution.
(D) Pre-Refunded Security--the maturity date shown is the Pre-Refunded date.
The accompanying notes are an integral part of the financial statements.
14
<PAGE> 10
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
CALIFORNIA TAX EXEMPT PORTFOLIO--CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Face
Amount(000) Value(000)
- ----------------------------------------------------------------
<S> <C> <C>
Contra Costa County, Multi-
Family Mortgage Revenue,
VRDN, RB (A) (B)
3.900%, 09/07/96 $ 3,500 $ 3,500
Contra Costa County, Multi-
Family Housing, Delta Square
Project, Ser A, VRDN,
RB (A) (B) (C)
3.400%, 09/07/96 3,400 3,400
Contra Costa, TRAN
4.500%, 06/30/97 5,000 5,028
Corona Redevelopment Agency,
Crown Point Project, Ser 85,
RB (A) (B) (C)
4.000%, 05/01/97 7,740 7,740
Downey Civic Center Project,
COP, MBIA Insured
4.000%, 02/01/97 280 280
Dry Creek, Joint Elementry
School District #1, Special Tax,
G.O., CGIC Insured
4.200%, 09/01/96 365 365
Escondido, Multi-Family Housing
Project, Heritage House Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 7,250 7,250
Fairfield County, TRAN
4.750%, 06/30/97 2,275 2,288
Folsom Cordova, USD, TRAN
4.750%, 10/18/96 6,500 6,506
Folsom Public Finance Authority,
Ser B, RB, Pre-Refunded
@ 103 (D)
7.900%, 10/01/96 1,000 1,033
Fontana, Gaf Tax Exempt Bond
Grantor Trust, Ser GA-7,
VRDN, (A) (B) (C)
3.650%, 09/07/96 6,325 6,325
Irvine Ranch Water District, Ser B,
VRDN, RB (A) (B) (C)
3.700%, 09/01/96 15,900 15,900
Irwindale Industrial Development
Revenue, Toys "R" Us Project,
VRDN, RB (A) (B) (C)
3.625%, 09/07/96 500 500
Kern County, Panama-Buena
Vista Union School District,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 9,000 9,000
Kern County, Public Facilities
Project, Ser D, VRDN,
RB (A) (B) (C)
3.250%, 09/07/96 2,500 2,500
Livermore Housing Authority,
Multi-Family Housing,
Refunding-Housing-Richards
Manor A, VRDN, RB (A) (B) (C)
3.550%, 09/07/96 7,370 7,370
Long Beach Housing Authority,
Channel Point Apartments,
Ser A , VRDN, RB, (A) (B) (C)
3.550%, 09/07/96 2,500 2,500
Los Angeles, USD, Ser A, TRAN
4.500%, 06/30/97 5,350 5,380
Los Angeles County, Metropolitan
Transportation Commission,
TECP (C)
3.600%, 12/05/96 4,000 4,000
Los Angeles County, Pension
Obligation, Ser A, VRDN, G.O.,
AMBAC Insured (A) (B)
3.200%, 09/07/96 7,300 7,300
Los Angeles County, Pension
Obligation, Ser B, VRDN, G.O.,
AMBAC Insured (A) (B)
3.200%, 09/07/96 1,000 1,000
Los Angeles County, Pension
Obligation, Ser C, VRDN, G.O.,
AMBAC Insured (A) (B)
3.200%, 09/07/96 5,000 5,000
Los Angeles County, Community
Redevelopment Agency,
Willowbrook Project, VRDN,
RB (A) (B) (C)
3.450%, 09/07/96 1,600 1,600
Los Angeles Department of
Water & Power, Electric Plant
Revenue, RB
9.000%, 01/15/97 500 511
Los Angeles Redevelopment
Agency, Baldwin Hills Public
Park, VRDN, RB (A) (B) (C)
3.450%, 09/07/96 600 600
Los Angeles Multi-Family Housing
Revenue, Ser K, VRDN,
RB (A) (B) (C)
3.350%, 09/07/96 16,500 16,500
Los Angeles Department of
Airports, Airport Revenue,
Ser B, RB, Pre-Refunded
@ 102 (D)
7.300%, 05/01/97 1,500 1,563
Lucia Mar, USD # 87, Facilities
Financing Project, RB,
Pre-Refunded @ 102 (D)
8.300%, 05/01/97 500 525
Modesto, High School & City
School District, VRDN,
COP (A) (B) (C)
3.400%, 09/07/96 2,880 2,880
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 11
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Face
Amount(000) Value(000)
- -----------------------------------------------------------------------
<S> <C> <C>
Monterey County, Finance
Authority Revenue, Reclamation
& Distribution Program,
Ser 95-A, VRDN, RB (A) (B) (C)
3.500%, 09/07/96 $ 5,000 $ 5,000
Monterey Regional Waste
Management Authority,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 3,500 3,500
Moulton Niguel Water District,
Improvement District # 6, Ser 1,
RB, Pre-Refunded @ 102 (D)
7.875%, 02/01/97 2,500 2,594
New Haven, USD, RB, TRAN
4.500%, 07/01/97 3,625 3,638
Oakland, Revenue Assessment
Bay Area Government, VRDN,
RB (A) (B) (C)
3.500%, 09/07/96 2,275 2,275
Ontario, TRAN
4.500%, 06/30/97 6,495 6,521
Orange County, Apartment
Development Revenue, Radnor/
Aragon Corporation Project-D,
RB, (A) (B) (C)
3.525%, 09/07/96 3,400 3,400
Oxnard Redevelopment Agency,
Channel Islands Business,
VRDN, RB (A) (B) (C)
3.775%, 09/07/96 4,685 4,685
Palm Springs Community
Redevelopment Agency,
Headquarters Hotel-1, VRDN,
COP (A) (B) (C)
3.450%, 09/07/96 2,070 2,070
Palm Springs Community
Redevelopment Agency,
Headquarters Hotel-4, VRDN,
COP (A) (B) (C)
3.450%, 09/07/96 2,800 2,800
Palm Springs Community
Redevelopment Agency,
Headquarters Hotel-6, VRDN,
COP (A) (B) (C)
3.450%, 09/07/96 900 900
Pasadena Historical Rehabilitation,
Dodsworth Building Project,
VRDN, RB (A) (B) (C)
3.250%, 09/07/96 3,900 3,900
Placer County, Loomis Union
Elementary School District,
TRAN
4.450%, 09/04/97 1,170 1,176
Placer County, Placer County
Office of Education, TRAN
4.450%, 09/04/97 475 477
Placer County, Roseville City
School District, TRAN
4.450%, 09/04/97 1,350 1,357
Placer County, Roseville Joint
Union High School District,
TRAN
4.450%, 09/04/97 850 854
Placer County, TRAN
4.450%, 09/04/97 1,660 1,668
Pomona Public Finance Authority,
Southwest Pomona, VRDN,
RB (A) (B) (C)
3.500%, 09/07/96 2,200 2,200
Redlands Redevelopment Agency,
Parking Lease, VRDN,
RB (A) (B) (C)
3.720%, 09/07/96 4,610 4,610
Redlands Redevelopment
Refunding Project, Ser A,
VRDN, RB (A) (B) (C)
3.720%, 09/07/96 11,120 11,120
Riverside County, Ser B, G.O.,
TRAN (C)
3.200%, 06/30/97 3,000 3,000
Riverside County, Industrial
Development Advanced
Business Forms Project,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 1,950 1,950
Roseville, Joint Union High School
District, VRDN, COP (A) (B) (C)
3.400%, 09/07/96 3,485 3,485
Sacramento City Financing
Authority, Gas Tax, Ser A, RB,
AMBAC Insured
6.500%, 12/01/96 535 539
Sacramento County, TRAN
4.750%, 10/04/96 1,500 1,501
Sacramento Municipal Utility
District, Electric Revenue, Ser S,
RB, Pre-Refunded @ 102 (D)
6.625%, 02/01/97 1,000 1,034
San Bernadino County, County
Center Refunding Project,
VRDN, RB (A) (B) (C)
3.300%, 09/07/96 6,200 6,200
San Bernadino County, Glen Helen
Blockbuster, Ser E,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 4,340 4,340
</TABLE>
17
<PAGE> 12
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
CALIFORNIA TAX EXEMPT PORTFOLIO--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Face
Amount(000) Value(000)
- ------------------------------------------------------------------------
<S> <C> <C>
San Bernadino County,
Industrial Development
Authority, Sandpiper
Investments Project, VRDN,
RB (A) (B) (C)
3.700%, 09/07/96 $ 3,400 $ 3,400
San Bernadino County, Multi-
Family Housing Revenue,
Alta Loma Heritage Project,
Ser A, VRDN, RB (A) (B) (C)
3.400%, 09/07/96 1,264 1,264
San Bernadino County, Multi-
Family Housing Revenue,
Gold West Apartments, Ser A,
VRDN, RB (A) (B) (C)
3.400%, 09/07/96 500 500
San Bernadino Industrial
Development Revenue, Gate
City Beverage District, VRDN,
RB (A) (B) (C)
3.700%, 09/07/96 515 515
San Bernardino County, Multi-
Family Revenue, VRDN,
RB, (A) (B) (C)
3.750%, 09/07/96 4,300 4,300
San Diego County, Water Authority
Revenue Center, Ser A, RB,
Pre-Refunded @102 (D)
7.000%, 05/01/97 225 234
San Diego Multi-Family Housing
Revenue, LA Cima Apartments
Project, Ser K, VRDN,
RB (A) (B) (C)
3.250%, 09/07/96 1,550 1,550
San Diego Water Authority, Water
Revenue, Ser A, COP,
Pre-Refunded @ 102 (D)
7.300%, 05/01/97 1,900 1,981
San Dimas Multi-Family Housing
Revenue, Ser 88-A, VRDN,
RB (A) (B) (C)
3.570%, 09/07/96 5,670 5,670
San Francisco, City & County, TRAN
4.750%, 09/19/96 1,000 1,000
San Jose, USD, Santa Clara
County, TRAN
4.500%, 08/05/97 3,000 3,015
San Jose Finance Authority,
Hayes Mansion Improvement
Project B, VRDN, RB (A) (B) (C)
3.550%, 09/07/96 1,545 1,545
San Marcos Industrial Development
Authority, Amistar Project,
VRDN, RB (A) (B) (C)
3.700%, 09/07/96 4,500 4,500
Santa Ana Housing Authority,
Harbor Points Apartments,
Ser 95-A, VRDN,
RB (A) (B) (C)
3.250%, 09/07/96 2,650 2,650
Santa Clara, Electric Revenue,
Ser A, VRDN, RB (A) (B) (C)
3.300%, 09/07/96 860 860
Santa Rosa, Wastewater Revenue,
Subregional Wastewater Project A,
RB, FGIC Insured
4.000%, 09/01/96 890 890
Simi Valley Multi-Family Housing,
Lincoln Wood Ranch, VRDN,
RB (A) (B) (C)
3.450%, 09/07/96 9,700 9,700
Simi Valley Public Finance
Authority, Lease Revenue,
VRDN, RB (A) (B) (C)
3.300%, 09/07/96 9,000 9,000
Simi Valley, West End Community
Development Project,
RB, Pre-Refunded @ 102 (D)
7.550%, 09/01/96 500 510
Solano County, USD, TRAN
4.500%, 11/01/96 5,000 5,005
Sonoma County, TRAN
4.250%, 11/01/96 1,000 1,002
Sonoma Valley, USD, TRAN
4.500%, 07/03/97 3,000 3,014
South California Public Power
Authority, Transmission Project,
Ser 91, RB, AMBAC
Insured (A) (B)
3.200%, 09/07/96 6,800 6,800
Tracy, Hospital Revenue, Tracy
Community Memorial Hospital,
Ser A, RB, Pre-Refunded @ 102 (D)
8.625%, 01/01/97 3,000 3,107
University of California, Various
Capital Projects, Ser B, COP,
MBIA Insured
3.950%, 09/01/96 1,000 1,000
Upland Community Redevelopment
Agency, Multi-Family Housing
Revenue, Northwoods Project,
Ser B, VRDN, RB (A) (B) (C)
3.900%, 09/07/96 2,300 2,300
Vacaville Multi-Family Housing,
Quail Run Apartments, Ser 88-A,
VRDN, RB (A) (B)
3.300%, 09/07/96 10,100 10,100
Visalia Convention Center,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 100 100
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 13
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Face
Amount(000) Value(000)
- ------------------------------------------------------------------------
<S> <C> <C>
Visalia Convention Center,
VRDN, COP (A) (B) (C)
3.550%, 09/07/96 $ 9,475 $ 9,475
---------
Total Municipal Bonds
(Cost $411,856) 411,856
---------
Total Investments -- 104.2%
(Cost $411,856) 411,856
---------
OTHER ASSETS AND LIABILITIES, NET-- (4.2%) (16,443)
---------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value)
based on 44,720,592 outstanding
shares of beneficial interest 44,721
Portfolio Shares of Class G (unlimited
authorization -- no par value) based
on 350,731,620 outstanding shares
of beneficial interest 350,731
Overdistributed Net Investment Income (34)
Accumulated Net Realized Loss
on Investments (5)
--------
Total Net Assets--100.0% $395,413
========
Net Asset Value, Offering Price and
Redemption Price Per Share-- Class A $ 1.00
========
Net Asset Value, Offering Price and
Redemption Price Per Share-- Class G $ 1.00
========
</TABLE>
AMBAC American Municipal Bond Assurance Corporation
CGIC Capital Guaranty Insurance Corporation
COP Certificate of Participation
FGIC Financial Guaranty Insurance Corporation
GO General Obligation
MBIA Municipal Bond Investors Assurance
RAN Revenue Anticipation Note
RB Revenue Bond
SER Series
TECP Tax Exempt Commercial Paper
TRAN Tax & Revenue Anticipation Note
USD Unified School District
VRDN Variable Rate Demand Note
(A) Floating Rate Security--the rate reflected on the Statement of Net
Assets is the rate in effect on August 31, 1996.
(B) Put and Demand Feature--the maturity date reported on the Statement of
Net Assets is the lesser of the maturity date or the put date.
(C) Securities are held in conjunction with a letter of credit from a major
commercial bank or financial institution.
(D) Pre-Refunded Security--the maturity date shown is the Pre-Refunded date.
================================================================================
INSTITUTIONAL TAX
FREE PORTFOLIO
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Face
Amount(000) Value(000)
- ------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 103.4%
ALABAMA -- 1.9%
Birmingham Historical Reservation
Authority, Tutwiler Hotel Project,
VRDN, RB (A) (B) (C)
3.700%, 09/07/96 $ 5,480 $ 5,480
Birmingham Medical Clinic
Revenue, St. Martins In The
Pines Project, Ser 89, VRDN,
RB (A) (B) (C)
3.600%, 09/07/96 3,375 3,375
Mobile Industrial Development,
IB Chemical Company,
VRDN, RB (A) (B) (C)
3.750%, 09/07/96 1,350 1,350
Montgomery BMC Special Care
Facilities Finance Authority,
Baptist Medical Center, Ser A,
VRDN, RB (A) (B) (C)
3.450%, 09/07/96 5,000 5,000
Russelville Industrial Development
Revenue, Clark Pulley Project,
Ser 94, VRDN, RB (A) (B) (C)
3.600%, 09/07/96 1,675 1,675
-------
16,880
-------
ALASKA -- 0.5%
Alaska Industrial Development
Export Authority, Safeway
Incorporated Project, RB
(A) (B) (C)
3.650%, 12/01/96 4,580 4,580
-------
ARIZONA -- 0.2%
Maricopa County Industrial
Development Authority,
McLane Company Project,
VRDN, RB (A) (B) (C)
3.900%, 09/07/96 870 870
Pinal County Industrial
Development Authority,
Pollution Control Project,
VRDN, RB (A) (B) (C)
3.750%, 09/01/96 300 300
Tuscon Industrial Development
Authority, Tuscon City Center
Parking, VRDN, RB (A) (B) (C)
3.625%, 09/07/96 900 900
-------
2,070
-------
</TABLE>
19
<PAGE> 14
STATEMENT OF NET ASSETS
================================================================================
SEI TAX EXEMPT TRUST -- AUGUST 31, 1996
INSTITUTIONAL TAX FREE PORTFOLIO--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Face
Amount(000) Value(000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
ARKANSAS -- 1.6%
Little Rock Southwest Hospital,
Ser 88, VRDN, RB (A) (B) (C)
3.450%, 09/07/96 $ 7,300 $ 7,300
Little Rock USD, TRAN
3.850%, 12/30/96 3,000 3,000
Pine Bluff Industrial Development
Revenue, Camden Wire Project,
VRDN, RB, (A) (B) (C)
3.550%, 09/07/96 3,700 3,700
--------
14,000
--------
CALIFORNIA -- 3.7%
California School Cash Reserve
Pool, Ser A, RAN
4.750%, 07/02/97 10,000 10,072
California State, Ser 96-97,
RAN
4.500%, 06/30/97 6,000 6,025
Placer Union High School
District, TRAN
4.700%, 09/05/96 3,000 3,000
Redlands Redevelopment
Agency, Parking Lease,
VRDN, RB (A) (B) (C)
3.720%, 09/07/96 1,900 1,900
Redlands Redevelopment
Refunding Project, Ser A,
VRDN, RB (A) (B) (C)
3.720%, 09/07/96 8,880 8,880
Rocklin USD, TRAN
4.700%, 09/05/96 2,000 2,000
--------
31,877
--------
COLORADO -- 1.7%
Colorado Housing Finance
Authority, Multi-Family
Housing, Grants Plaza Project
91-A, VRDN, RB (A) (B) (C)
3.525%, 09/07/96 875 875
Colorado State Health Facilities
Authority, Rocky Mountain
Project, VRDN, RB, (A) (B) (C)
3.550%, 09/07/96 2,000 2,000
Denver City & County Multi-
Family Housing, Ogden
Residence Project, VRDN,
Ser 85-B, RB (A) (B) (C)
3.950%, 09/01/96 5,485 5,485
Denver City & County
Revenue, Children's Hospital
Association Project, Ser B,
Pre-Refunded @ 101,
FGIC Insured (D)
8.000%, 10/01/96 1,350 1,368
Englewood Industrial
Development Revenue,
Safeway Incorporated Project,
VRDN, RB (A) (B) (C)
3.650%, 12/01/96 3,050 3,050
Idaho Springs Industrial
Development Revenue, Safeway
Incorporated Project, VRDN,
RB (A) (B) (C)
3.650%, 12/01/96 2,230 2,230
--------
15,008
--------
DELAWARE -- 0.1%
Delaware Economic Development
Authority, Commercial
Development, Congoleum
Project, VRDN, RB (A) (B) (C)
3.650%, 09/07/96 1,000 1,000
--------
DISTRICT OF COLUMBIA -- 0.3%
District of Columbia, Washington,
Ser B-1, VRDN, RB (A) (B) (C)
3.950%, 09/01/96 2,500 2,500
--------
FLORIDA -- 4.1%
Boca Raton Industrial Development
Revenue, Parking Garage Project,
Ser 84-A, VRDN, RB (A) (B) (C)
3.875%, 09/07/96 7,950 7,950
Brevard County Housing Finance
Authority, Park Village &
Malobar Lakes Project,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 900 900
Broward County Multi-Family
Housing, Parkview Partnership,
VRDN, RB (A) (B) (C)
3.750%, 09/07/96 5,525 5,525
Broward County Housing Finance
Authority, Multi-Family Housing
Revenue, Landings Inverray
Apartments Project, VRDN,
RB (A) (B) (C)
3.550%, 09/07/96 1,000 1,000
Florida Housing Finance Authority,
Multi-Family Housing, Kings
County Project, Ser D, VRDN,
RB (A) (B) (C)
3.525%, 09/07/96 1,000 1,000
Florida Housing Finance Agency,
Multi-Family Housing, Lakeside
South Association, VRDN,
RB (A) (B) (C)
3.525%, 09/07/96 2,000 2,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE> 15
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Face
Amount(000) Value(000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Florida Housing Finance
Authority, Sarasota Beneva
Place Association, Ser C,
VRDN, RB (A) (B) (C)
3.525%, 09/07/96 $ 3,645 $ 3,645
Florida Housing Finance
Authority, Ser 84, VRDN,
RB (A) (B) (C)
3.850%, 09/07/96 1,900 1,900
Halifax Hospital Medical
Center, Ser 96, TAN
3.800%, 04/15/97 6,000 6,002
Jacksonville Hospital Finance
Authority, University Medical
Center, VRDN, RB (A) (B) (C)
3.600%, 09/07/96 800 800
Jacksonville Industrial
Development, University of
Florida Health Science Center,
Ser 89, VRDN, RB (A) (B) (C)
3.650%, 09/07/96 1,000 1,000
Jacksonville University Hospital
Center Project,VRDN,
RB (A) (B) (C)
3.600%, 09/07/96 400 400
Orange County Industrial
Development Authority,
Orlando International Drive
Partnership Project, VRDN,
RB (A) (B) (C)
3.700%, 09/07/96 1,700 1,700
Pasco City Housing Finance
Authority, Multi-Family
Housing, Carlton Arms of
Magnolin Valley, Ser 85,
VRDN, RB (A) (B) (C)
3.625%, 09/07/96 2,000 2,000
--------
35,822
--------
GEORGIA -- 6.9%
Athens Multi-Family Housing,
Georgian Apartments,
VRDN, RB (A) (B) (C)
3.775%, 09/07/96 1,400 1,400
Cobb County Multi-Family
Housing, Tibairen Associates
Project, Ser 85-D, VRDN,
RB (A) (B) (C)
3.600%, 09/07/96 8,600 8,600
DeKalb County Industrial
Development Revenue,
Weyerhaeuser County Project,
VRDN, RB (A) (B)
3.548%, 09/07/96 3,500 3,500
DeKalb County Multi-Family
Housing Revenue, Camden
Brook Project, VRDN, RB (A) (B)
3.450%, 09/07/96 500 500
DeKalb County Multi-Family
Housing, Terrace Club Project,
Ser 93-B, VRDN, RB
(A) (B) (C)
3.600%, 09/07/96 4,430 4,430
DeKalb County Multi-Family
Housing, Wood Terrace
Apartments Project, VRDN,
RB (A) (B)
3.450%, 09/07/96 13,400 13,400
Downtown Athens Housing
Development Authority,
Georgian Apartments
Association, VRDN,
RB (A) (B) (C)
3.900%, 09/07/96 1,000 1,000
Evans County Industrial
Development Authority,
Sherman Utilities Structures,
VRDN, RB (A) (B) (C)
3.600%, 12/01/96 400 400
Federal Paper Board Company,
Tax-Exempt Bond Grantor
Trust, VRDN, RB (A) (B) (C)
3.900%, 09/07/96 7,200 7,200
Glynn-Brunswick Memorial
Hospital Authority, Georgia
Southeast Georgia Project,
VRDN, RB, MBIA
Insured (A) (B) (C)
3.350%, 09/07/96 500 500
Gwinnett Housing Authority,
Multi-Family Housing Revenue,
VRDN, RB (A) (B)
3.450%, 09/07/96 1,000 1,000
Jefferson & Twiggs County
Pollution Control, Nord Kaolin
Project, VRDN, RB (A) (B) (C)
3.550%, 09/07/96 1,220 1,220
Marietta Housing Finance
Authority, Multi-Family
Housing, Franklin Walk
Apartments Project,
VRDN, RB (A) (B) (C)
3.525%, 09/07/96 5,240 5,240
Rome, Ser 96, TAN, G.O.
3.270%, 12/31/96 3,000 3,000
Roswell Multi-Family Housing
Revenue, Belcourt Limited
Project, VRDN, RB (A) (B) (C)
3.750%, 09/07/96 9,000 9,000
--------
60,390
--------
</TABLE>
21
<PAGE> 16
STATEMENT OF NET ASSETS
================================================================================
SEI TAX EXEMPT TRUST -- AUGUST 31, 1996
INSTITUTIONAL TAX FREE PORTFOLIO--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Face
Amount(000) Value(000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
ILLINOIS -- 6.1%
Chicago O'Hare International
Airport, American Airlines,
Ser A, VRDN, RB (A) (B) (C)
3.750%, 09/01/96 $ 1,500 $ 1,500
Chicago O'Hare International
Airport, American Airlines,
Ser D, VRDN, RB (A) (B) (C)
3.750%, 09/01/96 1,000 1,000
Chicago Tender Notes, Ser C (C)
3.700%, 11/25/96 10,000 10,000
Chicago Multi-Family Housing,
Waveland Association Project,
Ser A, VRDN, RB (A) (B) (C)
3.450%, 09/07/96 8,400 8,400
Chicago Multi-Family Housing,
Waveland Association Project,
Ser B, VRDN, RB (A) (B) (C)
3.450%, 09/07/96 825 825
Hazel Crest Hospital Facilities
Refunding & Improvement,
South Suburban Project,
Pre-Refunded @ 102, RB (D)
9.125%, 07/01/97 300 319
Illinois Development Finance
Authority, Pollution Control
Revenue, Commonwealth Edison
Project, Ser A, VRDN, RB,
AMBAC Insured (A) (B) (C)
3.550%, 09/07/96 9,300 9,300
Illinois State Health Facility
Authority, Lutheran Institution,
Ser C, VRDN, RB (A) (B)
3.500%, 09/07/96 1,000 1,000
Illinois State Industrial
Development, Miyano Machinery,
VRDN, RB (A) (B) (C)
4.000%, 09/07/96 4,250 4,250
Kave, Cook, & Dupage Counties
School District, Ser #46, G.O.,
FGIC Insured
6.300%, 01/01/97 1,000 1,010
Northwest Mutual Life Tax Exempt
Mortgage Trust, Illinois,
VRDN, RB (A) (B) (C)
4.500%, 02/15/97 485 485
Orland Hills Mortgage Authority,
Multi-Family Housing, Ser 88-A,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 1,400 1,400
Paxton Industrial Development
Authority, Merck & Aircoil,
VRDN, RB (A) (B)
3.900%, 09/07/96 900 900
Saint Clair Industrial Building
Authority, Winchester
Apartments Project, Ser 94,
VRDN, RB (A) (B)
3.900%, 09/07/96 8,000 8,000
Springfield Multi-Family Housing,
Oak Center Limited Project,
VRDN, RB (A) (B)
3.750%, 09/07/96 4,900 4,900
--------
53,289
--------
INDIANA -- 5.0%
Bartholomew Consolidated
Schools, TAW
4.000%, 12/31/96 6,417 6,422
Beach Grove, TAW
3.850%, 12/31/96 1,400 1,400
East Chicago School City, TAW
4.000%, 12/31/96 7,500 7,505
Fort Wayne, Ser 83, VRDN,
RB (A) (B) (C)
3.625%, 09/07/96 4,750 4,750
GAF Tax Exempt Bond Grantor
Trust, Indiana, Ser A,
VRDN, RB (A) (B) (C)
4.050%, 09/07/96 2,520 2,520
Gary Indiana, Environmental
Improvement, United States
Steel Corporation,
VRDN, RB (A) (B) (C)
3.700%, 09/07/96 3,000 3,000
Kokomo Center Township, TAW
4.250%, 12/31/96 4,963 4,969
Merrillville Community School
Corporation, TAW
4.000%, 12/31/96 3,650 3,652
Michigan City Economic
Development, Marley Company
Project, Ser 84, VRDN,
RB (A) (B) (C)
3.625%, 09/07/96 1,525 1,525
Michigan City Economic
Development, Marley Company
Project, VRDN, RB (A) (B) (C)
3.625%, 09/07/96 1,225 1,225
Michigan City, TAW
3.900%, 12/31/96 3,000 3,001
Northwest Mutual Life Tax Exempt
Mortgage Trust, VRDN,
RB (A) (B) (C)
4.500%, 02/15/97 55 55
South Bend Community School
Corporation, G.O.
3.850%, 01/15/97 1,500 1,500
Westfield-Washington School, TAW
4.000%, 12/31/96 1,500 1,501
-------
43,025
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 17
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Face
Amount(000) Value(000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
KANSAS -- 0.9%
Merriam Municipal Temporary
Notes, Ser A, G.O.
4.150%, 06/01/97 $ 2,100 $ 2,102
Merriam Municipal Temporary
Notes, Ser B, G.O.
4.150%, 06/01/97 2,640 2,643
Shawnee County, Ser 96-1,
BAN, Callable 07/01/96 @ 100
4.800%, 03/01/97 415 415
Topeka Multi-Family Housing
Revenue, Ser 85, VRDN,
RB (A) (B) (C)
3.400%, 09/07/96 870 870
Wichita Pollution Control, CIC
Industries Incorporated,
VRDN, RB (A) (B) (C)
3.875%, 09/07/96 1,590 1,590
-------
7,620
-------
KENTUCKY -- 0.6%
Covington Industrial Building
Revenue, Atkins & Pearce
Incorporated, Ser 95,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 1,770 1,770
Georgetown Educational
Institution Improvement,
Georgetown College Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 2,000 2,000
Newport City Multi-Family
Housing Revenue, Hannaford
Project, (A) (B)
3.750%, 12/01/96 1,785 1,785
-------
5,555
-------
LOUISIANA -- 0.7%
Louisiana Water Project, VRDN,
RB (A) (B) (C)
3.600%, 09/07/96 3,000 3,000
New Orleans Industrial
Development Bond, Spectrum
Control Technology Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 2,000 2,000
South Louisiana Port Common
Marine Term Revenue Refunding,
Occidental Petroleum Project,
VRDN, RB (A) (B) (C)
3.400%, 09/07/96 1,000 1,000
-------
6,000
-------
MAINE -- 0.2%
Portland Industrial Development
Revenue, W.W. Grainger Project,
Ser 85, VRDN, RB (A) (B) (C)
3.800%, 09/07/96 1,315 1,315
-------
MARYLAND -- 4.9%
Annapolis Forest Gemini Facilities,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 2,450 2,450
Baltimore County, TECP (C)
3.500%, 10/02/96 6,000 6,000
Baltimore County Pollution Control
Revenue, Baltimore Gas and
Electric Project, TECP
3.550%, 10/03/96 6,000 6,000
Baltimore Industrial Development
Refunding Revenue, Field
Container Corporation, VRDN,
RB (A) (B) (C)
3.550%, 09/07/96 1,200 1,200
Howard County Maryland Multi-
Family Housing Authority,
Sherwood Crossing Limited
Project, Ser A (A)
3.750%, 06/01/97 2,500 2,500
Hyattsville Industrial Development
Revenue, Refunding Safeway
Project, RB (A) (C)
3.650%, 12/02/96 2,465 2,465
Maryland State Health & Higher
Education Facilities Authority,
Greater Baltimore Medical,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 1,000 1,000
Maryland State Health & Higher
Education Facilities Authority,
North Arundel Project, Ser B,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 2,000 2,000
Maryland State Health & Higher
Education Facilities Authority,
Pooled Loan Program, Ser B,
VRDN, RB (A) (B) (C)
3.450%, 09/07/96 5,000 5,000
Montgomery County Multi-
Family Housing Opportunities,
VRDN, RB (A) (B)
3.650%, 09/07/96 13,000 13,000
Prince George County Housing
Authority, Laurel Oxford Project,
VRDN, RB (A) (B) (C)
3.525%, 09/07/96 925 925
-------
42,540
-------
</TABLE>
23
<PAGE> 18
STATEMENT OF NET ASSETS
================================================================================
SEI TAX EXEMPT TRUST -- AUGUST 31, 1996
INSTITUTIONAL TAX FREE PORTFOLIO--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Face
Amount(000) Value(000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
MICHIGAN -- 1.5%
Benton Harbor School District,
Student Aid Anticipation Notes
4.000%, 03/31/97 $ 2,600 $ 2,601
Birmingham Economic
Development Corporation,
Brown Street Project, Ser 83,
VRDN, RB (A) (B) (C)
3.875%, 09/07/96 1,195 1,195
Detroit Downtown Development
Authority, Millender Center
Program Project, VRDN,
RB (A) (B) (C)
3.500%, 09/07/96 1,000 1,000
McDonalds Tax-Exempt Mortgage
Trust #1, VRDN, RB (A) (B) (C)
4.250%, 02/15/97 533 533
Michigan State Job Development
Authority, VRDN, RB (A) (B) (C)
3.700%, 09/07/96 1,300 1,300
Michigan State Job Development
Authority, Pollution Control
Revenue, Ser 85, Mazda Motor
Manufacturing Corporation #384,
VRDN, RB (A) (B) (C)
3.650%, 09/07/96 825 825
Michigan State Strategic Fund
Limited Obligation, Freezer
Services of Michigan, Ser 93,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 870 870
Northwest Mutual Life Tax-Exempt
Mortgage Trust, Michigan,
VRDN, RB (A) (B) (C)
4.500%, 02/15/97 135 135
University of Michigan Hospital,
Ser A, VRDN, RB (A) (B)
3.850%, 09/01/96 4,300 4,300
-------
12,759
-------
MINNESOTA -- 7.1%
Bloomington Commercial
Development, ATS II Project,
VRDN, RB (A) (B) (C)
3.795%, 09/07/96 4,125 4,125
Bloomington Multi-Family
Housing, Revenue Refunding,
Hampshire Apartments Project,
VRDN, RB (A) (B)
3.620%, 09/07/96 15,000 15,000
Brooklyn Center Development
Project, Brookdale Office Park,
Ser 84, VRDN, RB (A) (B) (C)
3.620%, 09/07/96 2,860 2,860
Minneapolis, Ser A, VRDN,
RB (A) (B) (C)
3.500%, 09/07/96 17,700 17,700
Minneapolis, Various Purpose,
Ser 95-B, VRDN,
G.O. (A) (B) (C)
3.500%, 09/07/96 2,050 2,050
Minneapolis, VRDN,
G.O. (A) (B) (C)
3.500%, 09/07/96 6,500 6,500
Minnesota School District Credit
Enhancement, Tax & Aid
Anticipation Borrowing Program,
Ser 96-B, COP
4.500%, 09/09/97 1,700 1,711
New Brighton Commercial
Development Revenue, Business
Center, VRDN, RB (A) (B)
3.770%, 09/07/96 2,810 2,810
New Brighton Commercial
Development Revenue,
Venture I Project, Ser A,
VRDN, RB (A) (B)
3.770%, 09/07/96 1,740 1,740
Plymouth Industrial Development
Revenue, Banner Engineering
Project, VRDN, RB (A) (B) (C)
3.650%, 09/07/96 1,800 1,800
Plymouth Refunding Revenue,
Woodland Village Project,
VRDN, RB (A) (B) (C)
3.650%, 09/07/96 1,580 1,580
Saint Paul Housing &
Redevelopment Authority,
Lutheran Social Service Project,
VRDN, RB (A) (B) (C)
3.650%, 09/07/96 790 790
Saint Paul Housing &
Redevelopment Authority,
Multi-Family Housing,
Kendrick Housing Project,
VRDN, RB (A) (B) (C)
4.950%, 09/07/96 3,360 3,360
-------
62,026
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE> 19
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Face
Amount(000) Value(000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
MISSISSIPPI -- 0.3%
Desoto County Industrial
Development Revenue,
American Soap Company
Project, VRDN, RB (A) (B) (C)
4.867%, 09/07/96 $ 2,400 $ 2,400
-------
MISSOURI -- 4.1%
Howell County Industrial
Development Authority,
Safeway Incorporated Project,
VRDN, RB (A) (B) (C)
3.850%, 02/01/97 4,015 4,015
Macon City Industrial
Development Authority, Health
Care Realty Macon Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 1,640 1,640
Missouri State Health &
Educational Facilities Authority,
Health Care Project, VRDN,
RB, MBIA Insured (A) (B) (C)
3.500%, 09/07/96 18,400 18,400
Saint Louis County Industrial
Development Authority,
Riverport Associates Project,
VRDN, RB (A) (B) (C)
3.700%, 09/07/96 2,900 2,900
Saint Louis County Industrial
Development Authority, Schnuck
Markets Kirkwood Incorporated,
VRDN, RB (A) (B) (C)
3.625%, 09/07/96 3,350 3,350
St. Louis Grantor Trust #1,
Ser 96-A, COP (A) (B) (C)
3.700%, 09/07/96 3,000 3,000
West Plains Industrial
Development Authority, West
Plains Manor Project, VRDN,
RB (A) (B) (C)
3.750%, 09/07/96 2,200 2,200
-------
35,505
-------
MONTANA -- 0.4%
Great Falls Industrial Development
Revenue, Safeway Incorporated
Project (A) (B) (C)
3.650%, 12/01/96 2,210 2,210
Montana State Board of Investments,
Municipal Finance Consolidation
Act, Intercap Revolving Project,
Ser 94, G.O. (A) (B)
3.350%, 03/01/97 1,000 1,000
-------
3,210
-------
NEBRASKA -- 0.0%
Northwest Mutual Life Tax
Exempt Mortgage Trust,
VRDN, RB (A) (B) (C)
4.500%, 02/15/97 44 44
-------
NEVADA -- 0.2%
Henderson Public Improvement
Trust, Multi-Family Housing,
Pueblo Verde I+II Apartment
Project, Ser 95-A/95-B #1071,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 1,900 1,900
-------
NEW HAMPSHIRE -- 0.7%
New Hampshire Education &
Health Facilities Authority,
Dartmouth Education Loan
Project, VRDN, RB (A) (B)
3.800%, 06/01/97 1,015 1,015
New Hampshire Higher Education
& Health Facilities, Dartmouth
College, Mandatory
Put 06/01/97 @ 100 (A) (B)
3.750%, 06/01/97 2,500 2,500
New Hampshire State Housing
Finance Authority, Hampshire
Estates MHJ Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 2,500 2,500
-------
6,015
-------
NEW JERSEY -- 0.4%
New Jersey State, G.O.,
Pre-Refunded @ 101 (D)
7.200%, 04/15/97 3,500 3,610
Northwest Mutual Life Tax
Exempt Mortgage Trust,
VRDN, RB (A) (B) (C)
4.500%, 02/15/97 243 243
-------
3,853
-------
NEW MEXICO -- 0.6%
Albuquerque Metropolitan
Redevelopment, Springer Square
Project, VRDN, RB (A) (B) (C)
3.900%, 09/07/96 3,000 3,000
</TABLE>
25
<PAGE> 20
STATEMENT OF NET ASSETS
================================================================================
SEI TAX EXEMPT TRUST -- AUGUST 31, 1996
INSTITUTIONAL TAX FREE PORTFOLIO--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Face
Amount(000) Value(000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Dona Ana County Industrial
Development Authority,
Foamex Products Incorporated
Project, VRDN, RB (A) (B) (C)
3.400%, 09/07/96 $ 2,100 $ 2,100
-------
5,100
-------
NEW YORK -- 3.6%
Monroe County Industrial
Development Authority,
Rochester District Project,
VRDN, RB (A) (B) (C)
3.450%, 09/07/96 2,200 2,200
Nassau County, Ser A, RAN
4.000%, 03/05/97 9,500 9,530
Nassau Library System
Project, RAN
4.000%, 12/30/96 1,200 1,201
New York State Job Development
Authority, VRDN, RB (A) (B) (C)
3.700%, 09/07/96 1,610 1,610
New York State Power
Authority, TECP (C)
3.500%, 09/09/96 1,000 1,000
North Hempstead, BAN
4.250%, 05/29/97 5,000 5,014
North Hempstead, Ser B, BAN
3.850%, 02/27/97 2,500 2,504
Ontario County Industrial
Development Authority, Seneca
Foods Project, Ser 92,
VRDN, RB (A) (B)
3.850%, 09/01/97 3,000 3,000
Wayne County Industrial
Development Authority, Seneca
Foods Project, Ser 92,
VRDN, RB (A) (B)
3.850%, 09/07/96 5,060 5,060
-------
31,119
-------
NORTH CAROLINA -- 2.5%
North Carolina Medical Care
Community, Hospital Revenue,
Pooled Finance Project, Ser A,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 19,400 19,400
Winston Salem, VRDN,
COP (A) (B) (C)
3.500%, 09/07/96 2,000 2,000
-------
21,400
-------
NORTH DAKOTA -- 0.1%
Fargo Kelly Inn, Fargo Project,
Ser 93, VRDN, RB (A) (B) (C)
3.750%, 09/07/96 1,225 1,225
-------
OHIO -- 4.4%
Brecksville-Broadview Heights
School District, Ohio School
Improvement, Ser 96, BAN
3.900%, 01/17/97 2,500 2,503
Cleveland Waterworks Revenue,
Ser E, RB, Pre-Refunded @ 102,
MBIA Insured (D)
7.750%, 01/01/97 1,250 1,291
Franklin County Industrial
Development Revenue, Leveque
& Associates Project, RB, (A) (C)
3.650%, 12/01/96 1,445 1,445
Highland County Industrial
Development Revenue, Lancaster
Colony Corporation, VRDN,
RB (A) (C)
3.150%, 09/01/96 2,000 2,000
Marion County, Hospital Revenue,
Pooled Lease Progam, Ser 91,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 2,650 2,650
McDonalds Tax-Exempt Mortgage
Trust #1, VRDN, RB, Mandatory
(A) (B) (C)
4.250%, 02/15/97 2,489 2,489
Montgomery County Educational
Development Authority, ND
Motels Project, Mandatory
(A) (B) (C)
3.800%, 12/15/96 1,650 1,650
North Olmsted, BAN
4.600%, 12/19/96 16,250 16,274
Ohio Higher Education Facility
Commission, Ashland University
Project, Ser 95, VRDN,
RB (A) (B) (C)
3.550%, 09/07/96 2,820 2,820
Scioto County Healthcare Facilities
Revenue, Hillview Retirement
Project, (A) (B)
3.650%, 12/01/96 1,930 1,930
Stark County Healthcare Facilities,
Canton Christian Home Project,
VRDN, RB, (A) (B) (C)
3.150%, 09/01/96 1,380 1,380
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE> 21
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Face
Amount(000) Value(000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Stark County Healthcare Facilities,
Canton Christian Home Project,
VRDN, RB (A) (B) (C)
3.350%, 09/15/96 $ 1,615 $ 1,615
-------
38,047
-------
OKLAHOMA -- 4.5%
Oklahoma City, Oklahoma
University, Ser 65, VRDN,
RB (A) (B) (C)
3.650%, 09/07/96 7,500 7,500
Oklahoma City, University City
Project, Ser 85, VRDN,
RB (A) (B) (C)
3.650%, 09/07/96 400 400
Oklahoma County Industrial
Development Authority, Baptist
General Convention Project,
Ser 89, VRDN, RB, Optional Put
09/01/96 @ 100 (A) (B) (C)
3.850%, 09/01/96 6,225 6,225
Oklahoma Mid-West Tax-Exempt
Mortgage Bond Trust,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 263 263
Oklahoma State Water Revenue
Board, State Loan Program
Revenue, RB (A) (B) (C)
3.700%, 03/03/97 10,000 10,000
Tulsa County Industrial
Development Authority,
Healthcare Revenue Laureate
Psychiatric Project, RB (A)
3.850%, 12/15/96 8,500 8,500
Tulsa Parking Authority,
Refunding First Mortgage
Williams Project 84, Ser A,
VRDN, RB (A) (B) (C)
3.750%, 11/15/96 3,000 3,000
Tulsa Public Facilities Authority,
Capital Improvement Project,
Ser 87-B, VRDN, RB (A) (B) (C)
3.800%, 11/15/96 2,910 2,910
-------
38,798
-------
OREGON -- 0.7%
Lane County Industrial
Development Revenue,
Weyerhaeuser Project,
VRDN, RB (A) (B)
3.548%, 09/07/96 1,000 1,000
Port of Portland, Public Grain
Elevator Columbia,
VRDN, RB (A) (B) (C)
3.750%, 09/07/96 4,945 4,945
-------
5,945
-------
PENNSYLVANIA -- 14.0%
Allegheny County Hospital
Development Authority
Revenue, South Hills Health
System Project, Ser B (A) (B) (C)
3.400%, 09/07/96 1,850 1,850
Allegheny County, Hospital
Development Presbyterian
University, Ser B-1, VRDN,
RB (A) (B) (C)
3.500%, 09/01/96 200 200
Bucks County Industrial
Development Authority,
Edgecomb Metals Project,
VRDN, RB (A) (B) (C)
3.400%, 09/07/96 1,600 1,600
Chester County Industrial
Development Authority,
The Woods Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 1,200 1,200
Cumberland County Municipal
Authority, United Methodist
Homes Aging Project,
VRDN, RB (A) (B) (C)
3.620%, 09/07/96 3,735 3,735
Delaware County, VRDN,
RB (A) (B)
3.400%, 09/07/96 3,500 3,500
Delaware County Industrial
Development Authority, British
Petroleum Project, Ser 95,
VRDN, RB (A) (B) (C)
3.750%, 09/01/96 700 700
Delaware County Industrial
Development Authority,
United Parcel Services Project,
Ser 85, VRDN, RB (A) (B)
3.650%, 09/01/96 2,000 2,000
Delaware Valley, Regional
Government Finance, Ser A,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 11,100 11,100
Emmaus General Authority,
Local Government, Ser B,
Goldman FGIC Insured,
VRDN, RB (A) (B)
3.550%, 09/07/96 900 900
Emmaus General Authority,
Local Government, Ser G-7,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 200 200
Emmaus General Authority,
Local Government, Ser H-5,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 600 600
</TABLE>
27
<PAGE> 22
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
INSTITUTIONAL TAX FREE PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Emmaus General Authority,
Sub Ser B-11, VRDN,
RB (A) (B) (C)
3.600%, 09/07/96 $ 10,000 $ 10,000
Emmaus General Authority,
Sub Ser D-8, VRDN,
RB (A) (B) (C)
3.600%, 09/07/96 3,000 3,000
Erie County, Senior Living Services
Project, VRDN, RB (A) (B) (C)
3.550%, 09/07/96 1,930 1,930
Langhorne Hospital Revenue
Authority, Franciscan Health
Systems Project, Ser C, VRDN,
RB (A) (B) (C)
3.650%, 09/01/96 1,520 1,520
McCandless Industrial Development Authority,
Bradford Foundation Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 1,730 1,730
McDonalds Tax-Exempt Mortgage
Trust, Pennsylvania #1,
VRDN, RB (A) (C)
4.250%, 02/15/97 533 533
Montgomery County Higher
Education & Health Authority,
Hospital Revenue, VRDN, RB,
AMBAC Insured (A) (B)
3.350%, 09/07/96 2,300 2,300
Montgomery County Higher
Education & Health Authority,
Hospital Revenue,
VRDN, RB (A) (B) (C)
3.650%, 09/07/96 20,000 20,000
Montgomery County, Industrial
Development Authority, Ikea
Property Project, VRDN,
RB (A) (B) (C)
3.550%, 09/07/96 3,300 3,300
Montgomery County, Industrial
Development Authority,
Plymouth Woods Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 4,500 4,500
Northeastern Hospital &
Education Authority, Allhealth
Pooled Finance Program,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 5,000 5,000
Northwest Mutual Life Tax-Exempt
Mortgage Trust,VRDN,
RB, (A) (B) (C)
4.500%, 02/15/97 99 99
Pennsylvania Higher Education
Facilities Authority, Thomas
Jefferson University, Ser B,
VRDN, RB, Put 02/26/97
@ 100 (A) (B) (C)
3.700%, 02/26/97 1,000 1,000
Pennsylvania Higher Education
Facilities Authority, Thomas
Jefferson University, Ser C,
VRDN, RB (A) (B) (C)
3.700%, 02/26/97 3,000 3,000
Pennsylvania Hospital & Higher
Education Facility, Children's
Hospital Project, VRDN,
RB (A) (B) (C)
3.750%, 09/01/96 1,000 1,000
Pennsylvania Intergovernmental
Authority, Special Tax Revenue,
Philadelphia Funding Program,
FGIC Insured
5.000%, 06/15/97 2,700 2,727
Pennsylvania State Higher
Education Facility, Carnegie
Mellon University Project,
Ser C, VRDN, RB (A) (B) (C)
3.750%, 09/01/96 500 500
Philadelphia Redevelopment
Authority, Pennsylvania
School For The Deaf, VRDN,
RB (A) (B) (C)
3.700%, 09/07/96 1,095 1,095
Philadelphia School
District, TRAN
4.500%, 06/30/97 3,000 3,015
Philadelphia, Ser A, TRAN
4.500%, 06/30/97 6,000 6,026
Schuykill County, VRDN,
RB (A) (B) (C)
3.950%, 09/01/96 200 200
Schuylkill County Industrial
Development Authority,
Northeastern Power Project,
VRDN, RB (A) (B) (C)
3.850%, 09/01/96 1,000 1,000
Shenango Valley Osteopathic
Hospital Authority, Shenango
Valley Medical Center Project,
Pre-Refunded @ 102 (D)
7.875%, 04/01/97 3,900 4,069
Temple University of The
Commonwealth, University
Funding Project, Ser 96, RB
4.625%, 05/20/97 1,000 1,006
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE> 23
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Warren County, Warren General
Hospital Project, Ser 94-B,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 $ 400 $ 400
York County Industrial
Development, New Edgecomb
Corporation Project,
VRDN, RB (A) (B) (C)
3.400%, 09/07/96 1,300 1,300
York General Authority Pooled
Revenue, VRDN, RB (A) (B) (C)
3.500%, 09/07/96 14,000 14,000
--------
121,835
--------
SOUTH CAROLINA -- 2.6%
Charleston Center Tax Exempt
Bond Grantor Trust #1,
VRDN, RB (A) (B) (C)
3.900%, 02/01/97 7,263 7,263
Charleston Center Tax-Exempt
Mortgage Bond Grantor Trust #2
(A) (B) (C)
3.700%, 11/01/96 4,000 4,000
Charleston Center Tax-Exempt
Bond Grantor Trust #4,
VRDN, RB (A) (B) (C)
3.700%, 12/01/96 7,267 7,267
Charleston Center Tax-Exempt
Bond Grantor Trust #5,
VRDN, RB (A) (B) (C)
3.150%, 09/01/96 4,035 4,035
--------
22,565
--------
SOUTH DAKOTA -- 0.2%
Watertown Industrial
Development Authority,
Ramkota Project, Ser 93,
VRDN, RB (A) (B) (C)
3.750%, 09/07/96 1,315 1,315
--------
TENNESSEE -- 1.0%
GAF Tax-Exempt Bond Grantor
Trust, Ser A, VRDN, RB (A) (B) (C)
4.100%, 09/07/96 4,480 4,480
Nashville Metropolitan
Government, Toys "R" Us Project,
Ser 84, VRDN, RB (A)(B) (C)
3.750%, 09/07/96 1,030 1,030
Shelby County Health Education
Housing, Metropolitan
Government Industrial
Development, Rhodes College,
VRDN, RB (A) (B) (C)
3.850%, 09/07/96 3,000 3,000
--------
8,510
--------
TEXAS -- 4.4%
Arlington Industrial Development
Revenue, Dallas-Fort Worth
Newspaper, Ser 85,
VRDN, RB (A) (B) (C)
3.900%, 09/07/96 6,200 6,200
Brazo River, Hoffman-Laroche
Project, Ser 85,
VRDN, RB (A) (B) (C)
3.525%, 09/07/96 1,000 1,000
Corpus Christi Industrial
Development Committee,
Texas-Air Project,
VRDN, RB (A) (B) (C)
3.850%, 02/01/97 4,800 4,800
Harris County Housing Finance
Authority, Multi-Family Housing,
Arbor II Project, VRDN, RB (A) (B)
3.950%, 09/07/96 2,070 2,070
Harris County Multi-Family
Housing, Glenhollow Project,
VRDN, RB (A) (B) (C)
3.775%, 09/07/96 1,900 1,900
Harris County Multi-Family
Housing, Greenhouse Project,
VRDN, RB (A) (B) (C)
3.775%, 09/07/96 2,400 2,400
Nacogdocles Health Finance
Development Committee,
South Central Health Services
Project, VRDN, RB (A) (B) (C)
3.600%, 09/07/96 3,000 3,000
North Carolina National Bank
Tax-Exempt Trust, Texas,
Ser 90-B, VRDN, RB (A) (B) (C)
4.125%, 09/07/96 3,865 3,865
Texas State, TECP
3.700%, 02/05/97 11,000 11,000
Trinity River Industrial
Development Authority,
Trinity River Project,
VRDN, RB (A) (B) (C)
3.525%, 09/07/96 2,000 2,000
--------
38,235
--------
UTAH -- 0.4%
Northwest Mutual Life Tax-Exempt
Mortgage Trust,
VRDN, RB, (A) (B) (C)
4.500%, 02/15/97 113 113
</TABLE>
29
<PAGE> 24
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
INSTITUTIONAL TAX FREE PORTFOLIO - CONCLUDED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value (000)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Salt Lake City Industrial
Development Authority,
Deveraux Partners Project,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 $ 2,500 $ 2,500
Salt Lake City Industrial
Development Authority,
Park View Plaza Project,
VRDN, RB (A) (B) (C)
3.720%, 09/07/96 1,275 1,275
--------
3,888
--------
VIRGINIA -- 0.7%
Henrico County Industrial
Development Authority,
Hermitage Project,
VRDN, RB (A) (B) (C)
3.900%, 09/01/96 2,600 2,600
Northwest Mutual Life
Tax-Exempt Mortgage Trust,
VRDN, RB, (A) (B) (C)
4.500%, 02/15/97 77 77
Norfolk Industrial Development
Authority, Toys "R" Us Project,
Ser 84, VRDN, RB, (A) (B) (C)
3.625%, 09/07/96 1,425 1,425
Virginia State Housing
Development Authority,
AHC Services Corporation, Ser A,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 2,100 2,100
--------
6,202
--------
WASHINGTON -- 1.7%
Kent Economic Development
Revenue, Northwest Aluminum
Products, VRDN, RB (A) (B) (C)
3.950%, 09/07/96 1,600 1,600
Redmond Public Corporation
Industrial Development Revenue,
Integrated Circuit Project,
Ser 88, VRDN, RB (A) (B) (C)
3.820%, 09/07/96 620 620
Washington State Housing Finance
Commission, VRDN,
RB (A) (B) (C)
3.650%, 09/07/96 5,550 5,550
Washington State Housing Finance
Community, Nonprofit Housing
YMCA, Snobonish County Project,
VRDN, RB (A) (B) (C)
3.550%, 09/01/96 3,250 3,250
Washington State Housing Finance
Community, Pioneer Human
Services Project, Ser 91,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 1,855 1,855
Washington State Student Loan
Finance Association Project,
Second Series, VRDN,
RB (A) (B) (C)
3.650%, 09/07/96 1,605 1,605
--------
14,480
--------
WEST VIRGINIA -- 1.9%
Charleston Building Community
Parking Facility, Charleston
Town Center,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 10,920 10,920
Charleston Community Parking
Facility Revenue,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 400 400
Parkersburg Industrial Development Revenue,
B-H Associates Project,
VRDN, RB
(A) (B) (C)
3.775%, 09/07/96 3,500 3,500
West Virginia State Hospital
Financing Authority, VHA
Mid-Atlantic/Cap Project,
Ser G, VRDN, RB,
AMBAC Insured (A) (B)
3.400%, 09/07/96 1,500 1,500
--------
16,320
--------
WISCONSIN -- 5.4%
Beaver Dam USD, TRAN
4.140%, 08/27/97 3,000 3,001
Burlington Area School
District, TRAN
4.220%, 08/29/97 3,000 3,005
Eau Claire Area School
District, TRAN
4.015%, 09/23/96 11,000 11,000
Hartford Industrial Development
Revenue, IC Products Company
Project, VRDN, RB (A) (B) (C)
3.700%, 09/07/96 5,000 5,000
Kettle - Moraine School
District, TRAN
4.010%, 08/22/97 3,200 3,200
Mayville Area School
District, BAN
3.500%, 11/01/96 5,000 5,000
Mount Horeb Area School
District, BAN
3.500%, 11/01/96 3,750 3,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE> 25
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount (000) Value (000)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Northwest Mutual Life
Tax-Exempt Mortgage Trust,
VRDN, RB, (A) (B) (C)
4.500%, 02/15/97 $ 118 $ 118
Village of Menomonee Industrial
Development Revenue,
Maysteel Corporation,
VRDN, RB (A) (B) (C)
3.630%, 09/07/96 3,000 3,000
Wausau Industrial Development
Revenue, Venture Partnership
Project, VRDN, RB (A) (B) (C)
3.600%, 09/07/96 10,000 10,000
--------
47,074
--------
WYOMING -- 0.6%
Cheyenne County Revenue
Refunding, Holiday Inn Project,
VRDN (A) (B) (C)
3.700%, 10/01/96 1,355 1,355
Evanston Industrial Development
Revenue, Safeway Project,
Optional Put 12/01/96
@ 100 (A) (B) (C)
3.650%, 12/01/96 3,700 3,700
Northwest Mutual Life
Tax-Exempt Mortgage
Trust, VRDN, RB, (A) (B) (C)
4.500%, 02/15/97 85 86
--------
5,141
--------
Total Municipal Bonds
(Cost $898,382) 898,382
--------
Total Investments -- 103.4%
(Cost $898,382) 898,382
--------
OTHER ASSETS AND LIABILITIES, NET -- (3.4%) (29,630)
--------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
835,524,839 outstanding shares of
beneficial interest 835,356
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
14,150,080 outstanding shares of
beneficial interest 14,150
Portfolio Shares of Class C (unlimited
authorization -- no par value) based on
19,205,806 outstanding shares of
beneficial interest 19,206
Undistributed Net Investment Income 4
Accumulated Net Realized Gain
on Investments 36
--------
Total Net Assets -- 100.0% $868,752
========
Net Asset Value, Offering Price and
Redemption Price Per Share -- Class A $ 1.00
========
Net Asset Value, Offering Price and
Redemption Price Per Share -- Class B $ 1.00
========
Net Asset Value, Offering Price and
Redemption Price Per Share -- Class C $ 1.00
========
</TABLE>
<TABLE>
<S> <C>
AMBAC American Municipal Bond Assurance Corporation
BAN Bond Anticipation Note
COP Certificate of Participation
FGIC Financial Guaranty Insurance Corporation
GO General Obligation
MBIA Municipal Bond Investor Assurance
RAN Revenue Anticipation Note
RB Revenue Bond
SER Series
TAN Tax Anticipation Note
TAW Tax Anticipation Warrant
TECP Tax Exempt Commercial Paper
TRAN Tax & Revenue Anticipation Note
USD Unified School District
VRDN Variable Rate Demand Note
</TABLE>
(A) Floating Rate Security -- the rate reflected on the Statement of Net Assets
is the rate in effect on August 31, 1996.
(B) Put and Demand Feature -- the maturity date reported on the Statement of Net
Assets is the lesser of the maturity date or the put date.
(C) Securities are held in conjunction with a letter of credit from a major
commercial bank or financial institution.
(D) Pre-Refunded Security -- the maturity date shown is the Pre-Refunded date.
PENNSYLVANIA TAX
FREE PORTFOLIO
<TABLE>
<S> <C> <C>
Municipal Bonds -- 103.9%
Pennsylvania -- 103.9%
Allegheny County Hospital
Development Authority,
Children's Hospital of Pittsburgh,
Ser 85 B, VRDN, RB,
MBIA Insured (A) (B)
3.350%, 09/07/96 $ 200 $ 200
Allegheny County Education
Building Authority, University
of Pittsburgh Project, Ser 85 B,
VRDN, RB (A) (B) (C)
3.300%, 09/07/96 850 850
Allegheny County Hospital
Development Authority,
Children's Hospital, Ser B,
VRDN, RB, MBIA Insured (A) (B)
3.350%, 09/07/96 1,000 1,000
</TABLE>
31
<PAGE> 26
STATEMENT OF NET ASSETS
================================================================================
SEI TAX EXEMPT TRUST -- AUGUST 31, 1996
PENNSYLVANIA TAX FREE PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount (000) Value (000)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Athens Area School District, TRAN
4.100%, 06/30/97 $ 800 $ 800
Beaver County Industrial
Development Authority,
Pollution Control Revenue,
Ser C, TECP (C)
3.500%, 10/24/96 1,000 1,000
Berks County Industrial
Development Authority, Rilsaw
Industrial Project, Elf Aquitaine,
VRDN, RB (A) (B) (C)
3.625%, 09/07/96 900 900
Bucks County Industrial
Development Authority,
Edgecomb Metals Project,
VRDN, RB (A) (B) (C)
3.400%, 09/07/96 1,275 1,275
Bucks County Industrial
Development Authority,
USX Project, VRDN, RB (B) (C)
3.550%, 11/01/96 1,000 1,000
Butler County Industrial
Development Authority,
Pennzoil Project, VRDN,
RB (A) (B) (C)
3.850%, 09/07/96 600 600
Chartiers Valley Industrial &
Commercial Development
Authority, Commercial
Development Revenue, Parkay
Center West Project A,
VRDN, RB (A) (B) (C)
3.700%, 09/07/96 1,250 1,250
Chester County Hospital Authority,
Paoli Memorial Hospital Project,
RB, Pre-Refunded @ 102 (D)
7.625%, 10/01/96 400 409
Chester County Health & Education
Facilities Authority, Barclay
Friends Project, Ser A,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 500 500
Cumberland Valley School
District, Ser A, G.O.
6.150%, 09/01/97 95 97
Cumberland Valley School
District, Ser B, G.O.
5.750%, 09/01/97 385 392
Delaware County Airport Facility,
Airport Facility Revenue, Ser 85,
VRDN, RB (A) (B) (C)
3.650%, 09/01/96 600 600
Delaware County Industrial
Development Authority, British
Petroleum Project, Ser 95,
VRDN, RB (A) (B)
3.750%, 09/01/96 1,000 1,000
Delaware County Industrial
Development Authority, Scott
Paper Project, Ser A,
VRDN, RB (A) (B)
3.400%, 09/07/96 1,000 1,000
Delaware Valley Regional
Finance Authority, Local
Government Revenue, Ser D,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 100 100
Delaware Valley Regional Finance
Authority, Local Government
Revenue, Ser B,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 1,000 1,000
East Penn School District
Authority, Ser A, G.O.,
FGIC Insured (C)
3.500%, 09/01/96 255 255
Emmaus General Authority,
Local Government, Ser B,
Goldman FGIC Insured (A) (B)
3.550%, 09/07/96 1,500 1,500
Emmaus General Authority,
Revenue Credit Enhancement,
RB (A) (B) (C)
3.550%, 09/07/96 500 500
Johnsonburg Area School District,
Elk County, G.O., FSA Insured
4.000%, 04/01/97 135 135
Lancaster Higher Education
Authority, Franklin & Marshall
Project, Ser 95, VRDN, RB (A) (B)
3.700%, 09/07/96 575 575
Lancaster, Ser A, G.O., FGIC Insured
3.400%, 10/01/96 300 300
Lebanon County Industrial
Development Authority,
Aluminum Company of America
Project, Ser 92, VRDN, RB (A) (B)
3.550%, 09/07/96 2,020 2,020
Lehigh County Water Authority,
VRDN, RB, FGIC Insured (A) (B)
3.350%, 09/07/96 835 835
Montgomery County, PECO
Energy Project, TECP (C)
3.550%, 09/10/96 1,200 1,200
</TABLE>
32
<PAGE> 27
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount (000) Value (000)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Montgomery County Higher
Education & Health Authority,
Holy Redeemer Hospital, VRDN,
RB, AMBAC Insured, (A) (B)
3.350%, 09/07/96 $ 900 $ 900
Montgomery County Higher
Education & Health Facility
Authority, Higher Education
& Loan, Ser 96-A, VRDN,
RB (A) (B) (C)
3.650%, 09/07/96 1,700 1,700
Montgomery County Industrial
Development Authority, Ikea
Property Project, VRDN,
RB (A) (B)
3.550%, 09/07/96 1,500 1,500
Montgomery County Industrial
Development Authority, Valley
Square Project, VRDN,
RB (A) (B) (C)
3.450%, 09/07/96 755 755
Montgomery County Higher
Education & Health Authority,
Frankford Hospital Project, RB,
Pre-Refunded @ 102 (D)
7.875%, 01/01/97 600 620
Mount Carmel School District,
Unlimited Tax G.O.,
AMBAC Insured
3.300%, 10/15/96 230 230
North Umberland County
Industrial Development Authority,
Atlas Development Association,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 100 100
Northeastern Hospital & Education
Authority, Allhealth Pooled
Financing Program,
VRDN, RB (A) (B) (C)
3.600%, 09/07/96 1,850 1,850
Pennsylvania Higher Education
Facilities, Thomas Jefferson
University, Ser B, RB, (A) (B) (C)
3.700%, 02/26/97 1,750 1,750
Pennsylvania Intergovernmental
Authority, Special Tax Revenue,
Philadelphia Funding Program,
RB, FGIC Insured
5.000%, 06/15/97 300 303
Pennsylvania State Higher
Education Facility, Allegheny
College Project, VRDN,
RB (A) (B) (C)
3.500%, 09/07/96 1,800 1,800
Philadelphia Industrial
Development Authority, Multi-
Family Housing, Harbor View
Towers Project,
VRDN, RB (A) (B) (C)
3.800%, 09/07/96 1,065 1,065
Philadelphia School District, TRAN
4.500%, 06/30/97 1,250 1,256
Philadelphia Redevelopment
Authority, Rivers Edge Project,
VRDN, RB (A) (B) (C)
3.850%, 09/07/96 500 500
Philadelphia, TRAN
4.500%, 06/30/97 1,000 1,004
Pittsburgh, University of Pittsburgh,
Ser 89-A,VRDN, RB (A) (B) (C)
3.300%, 09/07/96 500 500
Sayre Health Facilities Authority
Revenue, VHR Pennsylvania
Capital Financing Project, Ser D,
VRDN, RB, AMBAC
Insured (A) (B)
3.350%, 09/07/96 200 200
Schuylkill County Industrial
Development Authority,
Gilberton Power Project,
VRDN, RB (A) (B) (C)
3.500%, 09/07/96 1,000 1,000
Scranton Lackawana Health &
Welfare Authority, University
of Scranton Project, RB (B) (C)
3.650%, 11/01/96 685 685
Shaler Township, TRAN
3.810%, 12/31/96 800 801
Temple University, University
Funding, Ser 96, RB
4.625%, 05/20/97 1,000 1,006
Warren County Hospital
Authority, Warren General
Hospital Project, Ser 94-B,
VRDN, RB (A) (B) (C)
3.550%, 09/07/96 1,500 1,500
West York School District
Authority, TRAN
4.375%, 06/30/97 534 535
York General Authority, Pooled
Revenue, VRDN, RB (A) (B) (C)
3.500%, 09/07/96 1,800 1,800
--------
Total Municipal Bonds
(Cost $44,653) 44,653
--------
</TABLE>
33
<PAGE> 28
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
PENNSYLVANIA TAX FREE PORTFOLIO - CONCLUDED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value (000)
- ---------------------------------------------------------------------------------------------
<S> <C>
Total Investments -- 103.9%
(Cost $44,653) $ 44,653
--------
Other Assets and Liabilities, Net -- (3.9%) (1,682)
--------
Net Assets:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
42,985,216 outstanding shares of
beneficial interest 42,985
Accumulated Net Realized Loss
on Investments (14)
--------
Total Net Assets -- 100.0% $ 42,971
========
Net Asset Value, Offering Price and
Redemption Price Per Share -- Class A $ 1.00
========
</TABLE>
<TABLE>
<S> <C>
AMBAC American Municipal Bond Assurance Corporation
FGIC Financial Guaranty Insurance Corporation
FSA Financial Security Assurance
GO General Obligation
MBIA Municipal Bond Investors Assurance
RB Revenue Bond
SER Series
TECP Tax Exempt Commercial Paper
TRAN Tax & Revenue Anticipation Note
VRDN Variable Rate Demand Note
</TABLE>
(A) Floating Rate Security -- the rate reflected on the Statement of Net Assets
is the rate in effect on August 31, 1996.
(B) Put and Demand Feature -- the maturity date reported on the Statement of Net
Assets is the lesser of the maturity date or the put date.
(C) Securities are held in conjunction with a letter of credit from a major
commercial bank or financial institution.
(D) Pre-Refunded Security -- the maturity date shown is the Pre-Refunded date.
INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value (000)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Municipal Bonds -- 99.9%
Alabama -- 1.2%
Alabama State Private Colleges
& Tuskegee University Project,
RB, Asset Guaranty
5.700%, 09/01/10 $ 825 $ 798
5.700%, 09/01/11 870 840
--------
1,638
--------
Alaska -- 2.8%
Anchorage Electric Utility,
RB, MBIA Insured
8.000%, 12/01/06 1,775 2,150
8.000%, 12/01/07 1,310 1,595
--------
3,745
--------
Arizona -- 0.6% Tempe, G.O.
8.000%, 07/01/01 735 837
--------
Arkansas -- 0.2%
Little Rock Capital Improvement
Refunding Bonds, Ser 95-A,
RB, Callable 02/01/00 @ 100
5.950%, 02/01/12 305 307
--------
California -- 17.1%
Anaheim Public Finance
Authority, Electric Utility
Project, RB, MBIA Insured,
Callable 04/01/03 @ 102
5.400%, 10/01/08 2,000 1,982
California Education Facility
Authority, University of San
Francisco, RB, MBIA Insured
6.000%, 10/01/08 1,000 1,057
California Health Facilities
Finance Authority, Sisters of
Providence, RB
5.500%, 10/01/05 1,100 1,107
California Housing Finance
Agency, RB, MBIA Insured
5.300%, 08/01/14 500 490
California Housing Finance
Authority, RB, MBIA Insured,
Callable 08/01/04 @ 102
7.250%, 08/01/17 1,250 1,322
California State Health Facilities
Summit Medical Center, Ser A,
RB, FSA Insured
5.250%, 05/01/04 1,500 1,504
California Statewide Communities
Development Authority, San
Gabriel Valley-A, COP
6.000%, 09/01/06 1,000 1,019
</TABLE>
34
<PAGE> 29
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value (000)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Elk Grove, Unified School
District, G.O., AMBAC Insured
6.500%, 12/01/07 $ 1,000 $ 1,105
Irvine Special Assessment
District 89-10, VRDN,
G.O. (A) (B) (E)
3.750%, 09/07/96 100 100
Los Angeles County Public
Leasing, RB
5.125%, 09/01/08 1,380 1,335
Los Angeles Department of
Water & Power, RB
9.000%, 10/15/02 2,000 2,432
Modesto Irrigation, RB,
MBIA Insured
5.150%, 10/01/04 2,000 2,028
Mojave Water Agency, G.O.,
FGIC Insured, Callable
09/01/06 @ 102
5.600%, 09/01/12 1,000 990
Oakland Health Facilities
Authority, Childrens
Hospital Project, RB
5.000%, 07/01/01 1,175 1,179
Orange County Transportation
Authority, Sales Tax Revenue,
First Ser-Measure M, RB
5.400%, 02/15/00 1,000 1,020
Orange County, Water District
Project B, COP,
VRDN (A) (B)
3.600%, 09/07/96 200 200
Orange County, COP, MBIA
Insured, Callable 7/1/06 @ 102
5.800%, 07/01/16 1,000 984
Riverside Electric, RB,
Callable 10/01/01 @ 102
6.600%, 10/01/05 1,000 1,069
University of California,
Board of Regents, RB
6.500%, 09/01/02 1,995 2,122
--------
23,045
--------
Colorado -- 2.6%
Colorado Health Facilities
Authority, RB
6.250%, 02/01/04 1,500 1,526
Colorado Student Loan, RB (E)
6.100%, 09/01/02 1,845 1,910
--------
3,436
--------
Connecticut -- 0.4%
Connecticut State, Industrial
Development Authority,
Pollution Control Revenue,
Frito-Lay/Pepsi Project, RB
6.375%, 07/01/04 560 571
--------
Delaware -- 0.4%
Wilmington Hospital, VRDN,
RB (A) (E)
3.700%, 09/07/96 500 500
--------
District of Columbia -- 3.3%
District of Columbia Hospital
Revenue, Washington Hospital
Center, RB, MBIA Insured,
Callable 08/05/02 @ 102
7.000%, 08/15/05 1,500 1,646
District of Columbia, Ser A, G.O.
5.125%, 06/01/99 1,000 990
District of Columbia, Ser A-3, G.O.
4.250%, 06/01/97 1,790 1,776
--------
4,412
--------
Florida -- 3.8%
Florida Housing Finance
Authority, Capital Appreciation,
Single Family Mortgage, RB
5.500%, 07/15/16 2,000 215
Florida State Finance Department,
Environmental-Preservation
Department, RB, AMBAC Insured,
Callable 07/01/05 @ 101
5.500%, 07/01/07 1,000 1,019
Hillsborough County Utility
Authority, RB, MBIA Insured (D)
9.750%, 12/01/03 1,425 1,733
Orlando & Orange County
Expressway Authority, Florida
Expressway Revenue, Linked
Security, RB, FGIC Insured
5.097%, 07/01/04 2,200 2,181
--------
5,148
--------
Georgia -- 0.9%
Gwinette County, G.O.,
9.500%, 02/01/02 1,000 1,200
--------
Idaho -- 0.1%
Power County, Pollution Control
Revenue, FMC Corporation
Project, VRDN, RB (A) (E)
3.850%, 09/07/96 100 100
--------
</TABLE>
35
<PAGE> 30
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
SEI Tax Exempt Trust - August 31, 1996
INTERMEDIATE-TERM MUNICIPAL PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount (000) Value (000)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Illinois -- 9.0%
Chicago Equipment Notes,
G.O., AMBAC Insured
5.600%, 01/01/06 $ 2,000 $ 2,035
Cook County, G.O., MBIA Insured
7.250%, 11/01/07 2,000 2,277
Illinois Hospital Facilities,
Metropolitan Pier & State
Exposition Authority, McCormick
Plaza Convention, RB
6.250%, 07/01/17 450 435
Illinois Housing Development
Authority RB,
Callable 2/1/06 @ 102
5.650%, 02/01/16 1,390 1,366
Illinois State Health Facility
Authority, RB, MBIA Insured
7.900%, 08/15/03 597 617
Illinois State, G.O., Callable
08/01/99 @ 102
6.375%, 08/01/00 1,000 1,051
Kane & DeKalb County, Unified
School District #301, G.O.,
AMBAC Insured
6.300%, 12/01/04 2,640 2,871
McClean County Public Building
Commission, Lease Receipts,
Law & Justice Center, G.O.
7.300%, 11/01/02 1,280 1,434
--------
12,086
--------
Indiana -- 1.3%
Indiana State Health Facilities, RB
7.100%, 09/01/00 1,555 1,691
Rockport Pollution Control
Revenue, Aep Generating
Company, Project B, VRDN,
RB, AMBAC Insured (A)
3.850%, 09/07/96 100 100
--------
1,791
--------
Kentucky -- 1.2%
Kentucky State Turnpike Authority,
Ser A, RB
8.500%, 07/01/04 410 424
Kentucky State Turnpike Authority,
TRAN, AMBAC Insured
5.500%, 07/01/06 1,200 1,225
--------
1,649
--------
Louisiana -- 1.8%
Louisiana State Housing Finance
Agency, RB, MBIA Insured
5.125%, 12/01/10 $ 500 $ 491
Louisiana State Recovery District
Sales Tax, RB, FGIC Insured,
VRDN (A)
3.850%, 09/01/96 400 400
Louisiana State Ser A, G.O.,
Callable 08/01/97 @ 102
7.000%, 08/01/02 1,500 1,568
--------
2,459
--------
Massachusetts -- 13.2%
Commonwealth of Massachusetts
VRDN, RB (A) (B)
3.650%, 09/07/96 1,800 1,800
Holyoke G.O.
5.500%, 06/15/03 1,640 1,679
Lowell, G.O., FSA Insured,
Callable 02/15/01 @ 103
8.300%, 02/15/05 1,855 2,124
Massachusetts State Health &
Education Facilities Authority, RB
5.500%, 07/01/01 1,325 1,307
Massachusetts Bay
Transportation Authority,
RB,Callable 3/1/06 @ 101
5.625%, 03/01/26 2,000 1,882
Massachusetts Bay Transportation
Authority, General
Transportation System, G.O.
7.000%, 03/01/07 3,000 3,405
Massachusetts Municipal
Wholesale Electric Company,
Ser A, RB, Mandatory
Redemption @100 (B)
8.750%, 07/01/98 5 5
8.750%, 01/01/99 5 5
8.750%, 07/01/99 5 5
8.750%, 07/01/00 5 6
8.750%, 01/01/02 5 6
8.750%, 07/01/02 5 6
8.750%, 01/01/03 5 6
8.750%, 07/01/03 5 6
8.750%, 01/01/04 5 6
8.750%, 07/01/04 10 12
8.750%, 07/01/05 5 6
Massachusetts Single Family
Housing, Ser 14, RB,
Callable 06/01/00 @ 102
7.600%, 12/01/14 1,000 1,071
</TABLE>
36
<PAGE> 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount (000) Value (000)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Massachusetts State, G.O., Ser B
6.250%, 07/01/02 $ 1,155 $ 1,236
Massachusetts State Water
Resource Authority, Ser B, RB
5.250%, 03/01/13 1,000 926
New England Education Loan
Marketing, RB
5.800%, 03/01/02 1,175 1,212
Springfield G.O., AMBAC Insured
6.375%, 08/01/04 1,000 1,079
--------
17,790
--------
Michigan -- 1.2%
Greater Detroit Resource
Recovery, RB, AMBAC Insured
5.500%, 12/13/03 1,525 1,563
--------
Mississippi -- 1.2%
Mississippi State Capital
Improvement, Ser A, G.O.,
Callable 08/01/03 @ 100
5.100%, 08/01/07 1,685 1,658
--------
New Mexico -- 1.7%
New Mexico Mortgage Finance
Authority, Single Family
Mortgage, RB
Callable 07/01/02 @ 102 (E)
6.850%, 07/01/10 1,325 1,378
Santa Fe, Saint Vincent's Hospital
Project, RB, FGIC Insured,
Pre-Refunded @ 100 (C)
7.500%, 07/01/02 785 888
--------
2,266
--------
New York -- 6.7%
New York State Dormitory
Authority, RB,
Callable 5/15/03 @ 102,
6.000%, 05/15/22 1,200 1,156
New York State Dormitory
Authority, Rosewell Park, RB
5.500%, 07/01/03 1,000 996
New York State Local Government
Assistance, G.O., Callable
4/01/02 @ 100
5.500%, 04/01/22 1,500 1,395
New York State Medical Care
Facility Finance Agency,
Adult Day Care, RB
5.350%, 11/15/05 825 819
New York State Medical Care
Facility Finance Agency,
Ser C, RB, FHA Insured
5.200%, 08/15/05 $ 615 $ 620
New York State Urban
Development Authority,
Correctional Facilities, Ser G, RB,
Callable 01/01/00 @ 102
7.100%, 01/01/03 2,500 2,669
New York State Urban
Development, G.O.
6.250%, 01/01/09 1,325 1,352
--------
9,007
--------
Ohio -- 0.6%
Hamilton County
Health System, RB, VRDN (A)
3.750%, 09/07/96 800 800
--------
Oklahoma -- 3.0%
Central Oklahoma Transportation
& Parking Authority, RB (D)
6.000%, 07/01/03 170 173
McAlester Public Works Authority,
RB, FSA Insured
8.100%, 12/01/08 875 1,049
Oklahoma State Industrial
Development Authority, Integris
Health, RB, AMBAC Insured
5.250%, 08/15/06 1,255 1,236
Tulsa Industrial Development
Authority, St Johns Medical
Center, RB (D)
6.875%, 01/01/02 500 536
Tulsa Port Industrial
Development, RB
5.350%, 09/01/06 1,000 995
--------
3,989
--------
Pennsylvania -- 2.1%
Easton Joint School
Authority, RB (D)
5.350%, 04/15/02 290 298
Pennsylvania State Health
Services Allegheny/Delaware
Valley, RB, MBIA Insured
5.500%, 11/15/08 2,000 2,000
Westmoreland County Municipal
Authority, Special Obligation (D)
9.125%, 07/01/10 500 594
--------
2,892
--------
</TABLE>
37
<PAGE> 32
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
SEI Tax Exempt Trust - August 31, 1996
INTERMEDIATE-TERM MUNICIPAL PORTFOLIO - CONCLUDED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount (000) Value (000)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
South Carolina -- 1.8%
South Carolina Jobs Economic
Development Authority,
St. Francis Hospital, VRDN (A)
3.700%, 09/07/96 $ 100 $ 100
South Carolina Public Service
Authority, Electric Improvement
Revenue, Ser B, RB,
Callable 07/01/01 @ 102
6.700%, 07/01/02 1,220 1,318
Spartanburg County, School
District #5, COP, MBIA Insured
5.400%, 07/01/08 1,000 970
--------
2,388
--------
South Dakota -- 1.7%
South Dakota Health & Educational
Facilities Authority, RB MBIA
Insured Callable 7/1/06 @ 102
6.000%, 07/01/08 1,025 1,066
South Dakota Housing Authority,
Ser A, RB
5.500%, 05/01/10 1,000 1,002
South Dakota Student Loan
Assistance Corporation, Ser A, RB
7.000%, 08/01/98 180 185
--------
2,253
--------
Texas -- 10.0%
Austin Independent School
District, RB (D)
9.000%, 07/01/99 645 721
Austin Utility Systems, Ser 92-B,
RB, Callable 11/15/98 @ 102
7.250%, 11/15/03 1,175 1,251
7.750%, 11/15/08 600 654
Fort Worth Water & Sewer
Authority, RB
5.250%, 02/15/06 1,360 1,362
Harris County, G.O.
10.000%, 10/01/00 1,850 2,204
7.000%, 10/01/01 2,000 2,197
Lone Star Airport Improvement
Authority, VRDN, RB (A) (E)
3.700%, 09/07/96 700 700
Plano, G.O.
5.625%, 09/01/06 1,020 1,056
Texas Municipal Power Agency,
RB, MBIA Insured
5.500%, 09/01/10 1,000 994
Texas State Water Development
Board State Revolving Funds --
Senior Lien
5.250%, 07/15/17 $ 2,500 $ 2,316
--------
13,455
--------
Utah -- 0.9%
Salt Lake City Airport, RB,
FGIC Insured
7.400%, 06/01/00 1,100 1,154
--------
Virginia -- 0.5%
Virginia Housing, Multi-Family
Housing, RB
5.250%, 05/01/03 685 694
--------
Washington -- 3.8%
Clark County, Public Utility
District # 001, RB, FGIC Insured
6.000%, 01/01/04 2,525 2,645
Grant County, Public Utility
District #2, RB
5.625%, 01/01/07 2,470 2,495
--------
5,140
--------
Wisconsin -- 4.0%
Wisconsin Housing & Economic
Development Authority, Home
Ownership, Ser 1, RB,
FHA Insured, Callable
07/01/02 @ 102
6.600%, 09/01/07 1,300 1,350
Wisconsin Public Power, RB,
Pre-Refunded @ 102,
AMBAC Insured (C)
6.875%, 07/01/01 2,000 2,210
Wisconsin State, Clean Water
Revenue, Ser 1, RB
6.875%, 06/01/11 1,640 1,833
--------
5,393
--------
Wyoming -- 0.8%
Wyoming Student Loan
Corporation, RB
6.250%, 12/01/99 1,000 1,035
--------
Total Municipal Bonds
(Cost $134,570) 134,401
--------
Total Investments -- 99.9%
(Cost $134,570) 134,401
--------
Other Assets and Liabilities, Net -- 0.1% 162
--------
</TABLE>
38
<PAGE> 33
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C>
Net Assets:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
12,870,920 outstanding shares of
beneficial interest $135,894
Undistributed Net Investment Income 2
Accumulated Net Realized Loss
on Investments (1,164)
Net Unrealized Depreciation on Investments (169)
--------
Total Net Assets -- 100.0% $134,563
========
Net Asset Value, Offering Price and
Redemption Price Per Share -- Class A $ 10.45
========
</TABLE>
AMBAC American Municipal Bond Assurance Corporation
COP Certificate of Participation
FGIC Financial Guaranty Insurance Corporation
FHA Federal Housing Agency
FSA Financial Security Assurance
GO General Obligation
MBIA Municipal Bond Investors Assurance
RB Revenue Bond
SER Series
TRAN Tax & Revenue Anticipation Note
VRDN Variable Rate Demand Note
(A) Floating Rate Security -- the rate reflected on the Statement of Net Assets
is the rate in effect on August 31, 1996.
(B) Mandatory Redemption -- the maturity date reported on the Statement of Net
Assets is the mandatory redemption date.
(C) Pre-Refunded Security -- the maturity date reported on the Statement of Net
Assets is the Pre-Refunded date.
(D) Security is escrowed to maturity
(E) Security is held in conjunction with a letter of credit from a major
commercial bank or financial institution.
PENNSYLVANIA MUNICIPAL PORTFOLIO
<TABLE>
<CAPTION>
<S> <C> <C>
Municipal Bonds -- 99.0%
Pennsylvania -- 99.0%
Allegheny County Hospital
Development Authority,
Allegheny General
Hospital, RB (C)
6.750%, 05/01/04 $ 10 $ 10
Allegheny County Redevelopment
Authority, Home Improvement, RB
6.700%, 08/01/99 485 500
Allegheny County Hospital
Development Authority,
Allegheny General, RB (C)
7.250%, 07/01/03 185 194
Allegheny County Hospital
Development Authority, Children's
Hospital of Pittsburgh, Ser 91,
RB, MBIA Insured
6.600%, 07/01/01 $ 1,000 $ 1,064
Allegheny County Hospital
Development Authority, Magee
Women's Hospital, Ser 93,
RB, FGIC Insured
5.200%, 10/01/05 1,000 1,000
Allegheny County Hospital
Development Authority, Mercy
Hospital of Pittsburgh, AMT
RB, BIGI Insured
6.875%, 10/01/99 1,000 1,022
Allegheny County Hospital
Development Authority,
Montefiore Hospital, RB (C)
6.875%, 07/01/09 520 555
Allegheny County Hospital
Development Authority,
St. Margaret Memorial
Hospital, RB (C)
6.750%, 07/01/10 475 510
Allegheny County Industrial
Development Authority, Home
Improvement Project, RB
6.700%, 02/01/99 800 822
Allegheny County Industrial
Development Authority, RB, AMT (B)
6.000%, 10/01/04 150 150
Allentown Hospital Authority,
Sacred Heart Project, RB (C)
8.000%, 03/01/09 105 120
Allentown Hospital Authority,
Sacred Heart Hospital of
Allentown, Ser A, RB
6.500%, 11/15/08 1,200 1,211
Altoona Area School District
Authority, Blair County,
Pennsylvania School Revenue,
Ser 78, RB, Pre-Refunded @ 100 (A)
6.500%, 07/01/06 155 165
Altoona School District, RB (C)
6.250%, 01/01/03 10 10
Baldwin Whitehall School
Building Revenue, RB (C)
6.625%, 11/15/02 105 110
Beaver County Housing Authority,
First Mortgage Guaranteed,
Section 8, RB, MBIA Insured,
Callable 03/19/97 @ 100
7.875%, 07/01/99 345 343
</TABLE>
39
<PAGE> 34
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
PENNSYLVANIA MUNICIPAL PORTFOLIO -- CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Bensalem Township Water &
Sewer Authority, RB (C)
6.750%, 12/01/14 $ 75 $ 84
Blair County Hospital
Authority, RB (C)
6.900%, 07/01/08 570 602
Borough of Tarentum, Pennsylvania
Guaranteed Electric Revenue
Bond, Ser 93-A, RB, Asset
Guaranty Insured
5.500%, 09/01/08 645 630
Bucks County Industrial
Development Authority,
Grandview Hospital, Ser 91,
RB, AMBAC Insured (C)
6.600%, 07/01/01 250 269
Bucks County Redevelopment
Authority, Mortgage Revenue,
Warminster Heights, Section 8-A,
Ser 92-A, RB, FHA Insured,
Callable 02/01/02 @ 100
6.250%, 08/01/02 315 325
Bucks County Redevelopment
Authority, Mortgage Revenue,
Warminster Heights, Section 8,
Ser 92-A, RB, FHA Insured
5.750%, 08/01/97 50 50
Bucks County Industrial
Development Authority
Revenue, RB (C)
8.750%, 09/01/04 15 17
Butler Area Sewer Authority, RB,
Pre-Refunded @ 100 (A)
7.250%, 01/01/04 75 83
Cambria County Hospital
Authority, Conemaugh Valley
Memorial Hospital, RB (C)
7.625%, 09/01/11 235 275
Chartiers Valley Industrial
Development Authority, Colonial
Building, RB, Mandatory
Put 12/01/97 @ 100 (B) (D)
5.625%, 12/01/97 690 691
Chester County Hospital
Authority, Paoli Memorial
Hospital, RB (C)
5.500%, 02/01/03 105 104
Chester County, Pennsylvania
Health & Education Authority,
RB, Ser 96-B, (B) (D)
4.900%, 08/01/99 2,575 2,575
City of Aliquippa, Beaver County,
RB, Asset Guaranty Insured
8.250%, 09/15/01 1,220 1,295
Cresswell Heights, Joint Water
Authority Revenue, RB (C)
7.375%, 03/01/07 $ 95 $ 103
Dauphin County General
School Authority, RB,
Mandatory Put 06/01/98 @100
6.000%, 06/01/26 50 49
Dauphin County General School
Authority, G.O., Mandatory
Put 06/01/04 @ 100 (D)
6.700%, 06/01/04 1,220 1,299
Dauphin County General
Authority, Phoenixville Hospital,
Hapsco Group Incorporated,
Ser 92-A, RB, FGIC Insured
5.900%, 07/01/05 845 882
Dauphin County General School
Authority, Penncrest School
Project, RB, Mandatory
Put 06/01/03 @ 100 (D)
6.600%, 06/01/26 915 974
Delaware County Authority,
Villanova University, RB (C)
9.625%, 08/01/02 165 187
Delaware County Hospital
Authority, Chester Crozer, RB (C)
7.250%, 12/15/10 115 123
Delaware County Industrial
Development Authority,
Resource-Recovery Project, RB (B)
8.100%, 12/01/13 405 420
Delaware County, Pennsylvania
Industrial Development Authority,
Resource Recovery Project,
Ser A, RB, Callable
12/01/96 @ 103.50 (C)
7.900%, 12/01/05 25 26
Delaware County, Pennsylvania
Industrial Development Authority,
Resource Recovery Project,
Ser A, RB, Callable
12/01/96 @ 103.50 (C)
7.650%, 12/01/01 20 21
Delaware River Port Authority, RB (C)
6.000%, 01/15/10 90 92
Delaware River Port Authority,
PA & NJ River Bridges
Revenue, RB (B) (C)
6.500%, 01/15/11 265 277
Derry Township Sanitation Sewer
Authority, RB (C)
6.250%, 08/01/12 65 67
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE> 35
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
East Marlboro Township Sewer
Authority, Guaranteed Sewer
Revenue, RB
5.200%, 12/01/01 $ 55 $ 55
5.300%, 12/01/02 200 198
Economy Municipal Authority,
Sewer Revenue, RB,
Callable 12/15/99 @100
6.000%, 12/15/03 55 56
Erie County Hospital Authority,
RB (C)
6.750%, 07/01/11 320 344
Erie County Hospital Authority,
Hamot Health Systems, RB,
AMBAC Insured
6.700%, 02/15/02 500 539
Fayette County Hospital Authority,
Uniontown Hospital, RB,
Connie Lee Insured
4.850%, 06/15/01 1,000 988
5.000%, 06/15/02 300 296
5.100%, 06/15/03 1,065 1,053
5.200%, 06/15/04 100 98
5.300%, 06/15/05 1,000 984
Fort Le Boeuf School District,
Ser 93-A, G.O., MBIA Insured
5.150%, 01/01/02 500 510
Fox Chapel Sanitation Sewer
Authority, RB
5.900%, 05/01/05 275 274
Franklin Hospital, Pennsylvania
State, Special Obligation, RB (C)
7.125%, 10/01/08 20 21
Greene County Industrial
Development Authority, Pollution
Control Revenue, Monogahela
Power-Hatfield Ferry, Ser A, RB
6.300%, 02/01/02 865 869
Hampton Township, G.O.
6.300%, 06/01/02 775 822
Harrisburg Authority, Lease
Revenue, RB, Cross Over
Pre-Refunded @ 101,
CGIC Insured (A)
6.250%, 06/01/01 1,000 1,059
Hopewell Township, Guaranteed
Sewer Revenue, RB,
Callable 11/01/03 @ 100
5.800%, 11/01/08 815 768
Jefferson County Municipal
Authority Revenue, RB,
MBIA Insured (C)
7.000%, 12/01/02 20 21
Jersey Shore Area School District,
G.O., MBIA Insured (C)
9.375%, 03/01/03 $ 95 $ 109
Lehigh County Community
College, School Lease, RB
5.750%, 01/15/02 1,285 1,287
Lehigh County Industrial
Development Authority,
Strawbridge Project, RB (C)
7.200%, 12/15/01 1,150 1,235
Lehigh County General Purpose
Authority, Muhlenberg Medical
Center Project, RB (C)
7.000%, 07/01/04 20 21
Luzerne County, Ser 91, G.O.,
FGIC Insured
6.800%, 09/15/02 500 543
Lycoming County Authority,
Hospital Revenue, Williamsport
Hospital, RB, Connie Lee Insured
5.250%, 11/15/06 1,300 1,279
Lycoming County Hospital
Authority, RB (C)
5.750%, 07/01/02 125 125
McCandless Township Sanitation
Authority, Sewer Revenue, RB (C)
6.750%, 11/15/05 85 92
Montgomery County Higher
Education & Health Authority,
Abington Memorial Hospital,
Ser 91-A, RB, AMBAC Insured
6.200%, 06/01/00 800 841
Montgomery County Industrial
Development Authority,
Ecri Project, RB
6.850%, 06/01/13 2,165 2,124
Montgomery County, G.O. (C)
9.000%, 08/15/04 165 185
Moon School District, School
Building Revenue, RB,
MBIA Insured (C)
6.375%, 11/15/98 40 40
Moon Transportation Authority,
Pre-Refunded @100, RB (A) (C)
9.000%, 02/01/98 10 11
Mount Lebanon Hospital
Authority, RB (C)
7.000%, 07/01/06 185 197
Norristown Area School District,
Ser 91, Bank Qualified, G.O.,
Pre-Refunded @ 100 (A)
6.650%, 09/01/01 100 108
</TABLE>
41
<PAGE> 36
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
PENNSYLVANIA MUNICIPAL PORTFOLIO -- CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Northampton County Industrial
Development Authority,
Moravian Hall Square Project,
Ser A, RB, Asset Guaranty Insured
5.000%, 07/01/05 $ 575 $ 554
5.000%, 07/01/06 560 532
5.250%, 07/01/08 595 566
5.350%, 07/01/10 1,470 1,384
Northeast Allegheny County, RB (C)
6.000%, 05/01/02 60 61
Northeast Hospital Authority, RB (C)
6.375%, 09/01/07 60 61
Northeastern Hospital, Hospital
Revenue Authority, RB (C)
7.000%, 06/01/06 210 223
Pennsylvania Housing Finance
Authority, RB (C)
7.750%, 12/01/07 45 50
Pennsylvania Higher Education
Authority, Ser 95, RB,
Asset Guaranty Insured (C)
4.750%, 09/15/02 270 264
4.850%, 09/15/03 250 244
4.950%, 09/15/04 515 501
5.150%, 09/15/06 345 334
Pennsylvania Higher Education
Facilities Authority,
Commonwealth of Pennsylvania,
Ser E, RB, MBIA Insured
6.450%, 06/15/01 400 428
Pennsylvania Higher Education
Facilities Authority, Hahnemann
University Project, Ser-91, RB,
MBIA Insured
6.400%, 07/01/01 570 611
Pre-Refunded 07/01/01 @ 102 (A)
6.600%, 07/01/01 535 586
Pennsylvania Higher Education
Facilities Authority, Philadelphia
College of Pharmacy, Ser A,
RB, MBIA Insured,
Pre-Refunded @ 101 (A)
6.750%, 09/01/98 500 529
Pennsylvania Housing Finance
Agency, RB, AMT,
Callable 10/01/00 @ 102
7.800%, 10/01/20 100 105
Pennsylvania Housing Finance
Agency, Rental Housing,
Ser 91, RB, Callable 07/01/03
@ 102, FNMA Collateral
5.450%, 07/01/06 2,000 2,010
Pennsylvania Housing Finance
Agency, Single Family
Mortgage, Ser 92-33, RB
5.700%, 04/01/98 $ 330 $ 332
Pennsylvania State Higher
Education, Philadelphia
College of Textiles & Science,
Ser 96, RB
5.900%, 04/01/02 225 226
6.050%, 04/01/03 240 242
6.150%, 04/01/04 250 252
6.250%, 04/01/05 265 268
6.350%, 04/01/06 285 288
6.450%, 04/01/07 295 299
6.550%, 04/01/08 320 325
6.600%, 04/01/09 340 345
Pennsylvania State Higher
Education Facilities Authority,
College & University Revenue,
Tenth Series, RB (C)
6.900%, 07/01/07 75 80
Pennsylvania State Higher
Education Facilities, Drexel
University, RB,
6.375%, 05/01/17 1,450 1,434
Pennsylvania State Higher
Education, College &
University, RB (C)
9.375%, 07/01/10 120 145
Pennsylvania State Higher
Education, Student Loan,
Ser A, RB, AMT,
AMBAC Insured
7.050%, 10/01/16 3,500 3,645
Pennsylvania State Higher
Education, Student Loan,
Ser C, RB, AMT,
AMBAC Insured
7.150%, 09/01/21 500 522
Pennsylvania State Housing
Finance Authority, Single
Family Mortgage, Ser N, RB,
Callable 10/01/97 @ 102
7.500%, 10/01/99 200 204
Peters Township School District,
G.O., MBIA Insured,
Callable 11/15/02 @ 100 (C)
0.00%, 11/15/07 100 54
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE> 37
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Philadelphia Gas Works Revenue,
Fourteenth Series, RB, FSA Insured,
Callable 07/01/03 @ 102
6.250%, 07/01/08 $ 1,000 $ 1,076
Philadelphia Hospital & Higher
Education Authority, Presbyterian
Medical Center, RB (C)
6.100%, 12/01/03 410 435
Philadelphia Hospital & Higher
Education Facilities, Philadelphia
MR Project, RB
5.500%, 08/01/01 1,175 1,160
Philadelphia Hospital, Graduate
Hospital Project, RB (C)
7.000%, 07/01/10 335 359
Philadelphia Industrial
Development Authority,
Convention Project, PGH
Development Corporation,
Ser 89, RB, AMBAC Insured (C)
7.000%, 07/01/99 885 925
Philadelphia Industrial
Development Authority,
National Board of Medical
Examiners Project, RB,
Callable 05/01/02 @ 102
6.750%, 05/01/12 950 1,008
Philadelphia Municipal Authority,
Justice Lease Revenue, Ser B,
RB, FGIC Insured
6.700%, 11/15/01 1,000 1,088
Philadelphia Municipal Authority,
Services Building Lease Rental
Revenue, Ser 90, RB,
FSA Insured
6.900%, 03/15/99 1,000 1,056
Philadelphia Hospital & Higher
Education Facilities Authority,
St. Agnes Medical Center, RB,
MBIA Insured
4.900%, 07/01/04 820 810
Philadelphia Redevelopment
Authority, Home Improvement
Loan, Ser 95-A, RB, AMT
5.100%, 06/01/01 140 139
5.100%, 12/01/01 110 109
5.250%, 06/01/02 200 198
5.250%, 12/01/02 220 218
5.400%, 06/01/03 160 158
5.400%, 12/01/03 185 183
5.550%, 06/01/04 65 64
5.650%, 12/01/05 70 69
6.100%, 12/01/10 1,000 984
Philadelphia Redevelopment
Authority, West Philadelphia
Project, RB, FNMA Collateral
6.750%, 05/15/04 $ 765 $ 797
Philadelphia School District,
Ser 91-B, G.O., MBIA Insured
7.000%, 07/01/05 250 276
Philadelphia United Hospitals
Project, RB, Pre-Refunded @ 100 (A)
10.875%, 07/01/05 660 859
Philadelphia Water & Sewer
Authority, Ser 10, RB (C)
7.350%, 09/01/04 5,485 6,150
Pittsburgh Parking Authority,
Ser 92-A, RB, FGIC Insured,
Callable 12/14/04 @ 100
5.750%, 12/01/05 500 518
Pittsburgh, G.O., FGIC Insured
7.000%, 03/01/01 775 800
Pittsburgh Stadium Authority,
Lease Revenue, RB (C)
6.500%, 04/01/11 815 849
Pittsburgh Urban Redevelopment
Authority Mortgage Revenue,
Ser 96-C, RB, AMT
5.700%, 10/01/05 240 239
Pittsburgh Urban Redevelopment
Authority Mortgage Revenue,
Ser 96-D, RB
5.900%, 04/01/08 285 284
5.900%, 10/01/08 290 289
6.000%, 10/01/09 310 310
6.100%, 10/01/10 330 330
Pittsburgh Urban Redevelopment
Authority, Home Improvement
Loans, RB, Callable 08/14/03 @ 100
7.125%, 08/01/04 835 859
Pittsburgh Urban Redevelopment
Authority, Mortgage Revenue,
Ser A, RB, AMT
5.000%, 10/01/02 70 68
5.100%, 10/01/03 70 68
5.750%, 10/01/10 55 53
Pittsburgh Urban Redevelopment
Authority, Ser A, RB, AMT
5.300%, 04/01/05 75 72
5.400%, 04/01/06 80 77
5.400%, 10/01/06 80 76
5.500%, 04/01/07 85 81
5.500%, 10/01/07 85 81
5.600%, 04/01/08 90 86
5.700%, 04/01/09 90 86
5.700%, 10/01/09 95 90
</TABLE>
43
<PAGE> 38
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
PENNSYLVANIA MUNICIPAL PORTFOLIO -- CONCLUDED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Pittsburgh Urban Redevelopment
Authority, Ser B, RB,
Callable 04/01/03 @ 100
6.700%, 04/01/10 $ 40 $ 40
Pittsburgh Urban Redevelopment
Authority, Ser B, RB
5.700%, 10/01/11 110 104
Pittsburgh Urban Redevelopment
Center, Triangle Tax Increment,
Ser A, RB (B)
5.125%, 06/01/00 1,175 1,157
5.750%, 12/01/06 1,980 1,896
Pittsburgh Urban Redevelopment
Center, Triangle Tax Increment,
Ser B, RB (B)
5.750%, 03/15/06 1,185 1,138
Pittsburgh, RB, Pre-Refunded
@ 102, FGIC Insured (A)
7.000%, 03/01/97 100 103
Potter County Hospital Authority,
Charles Cole Memorial, RB,
Asset Guaranty Insured
4.750%, 08/01/99 260 258
4.850%, 06/01/00 270 268
5.100%, 08/01/02 290 287
5.200%, 08/01/03 245 242
5.400%, 08/01/04 325 321
5.400%, 08/01/05 320 316
5.500%, 08/01/06 160 157
Pottsville Hospital Authority,
Pottsville Hospital &
Warner Clinic, RB
6.400%, 07/01/03 930 927
Quakertown Pennsylvania
Hospital Authority, Quakertown
Community Hospital, RB (C)
7.125%, 01/01/11 10 11
Sayre Health Facilities Authority,
Guthrie Health Care,
Ser 91-A, RB, AMBAC Insured
6.800%, 03/01/03 1,000 1,086
Scranton Lackawanna Health &
Welfare Authority, Community
Medical Center, RB, FGIC Insured
6.900%, 07/01/98 500 522
7.000%, 07/01/99 250 266
Scranton Lackawanna Health &
Welfare Authority, Moses Taylor
Hospital, RB (C)
6.625%, 07/01/09 485 509
Scranton Lackawanna Health &
Welfare Authority, RB, BIGI Insured
7.250%, 07/01/99 $ 790 $ 841
Scranton Lackawana Health &
Welfare Allied Services,
Rehabilitation Hospital, RB,
Callable 07/01/04 @ 102
7.125%, 07/15/05 1,500 1,524
Shaler School District, RB (C)
6.250%, 04/15/08 50 52
Shaler Township, G.O. (C)
6.400%, 08/01/01 30 31
South Side Area School
District, Ser 91, G.O.,
AMBAC Insured,
Pre-Refunded @ 100 (A)
6.550%, 04/15/98 260 269
Southeastern Greene
School District, G.O. (C)
9.375%, 07/01/03 60 70
University Area Joint Authority,
Sewer Revenue, Ser 90, RB,
MBIA Insured,
Pre-Refunded @ 101 (A)
7.000%, 09/01/00 750 815
Upper Allegheny Joint Sanitation
Authority, RB, AMBAC Insured (C)
9.000%, 09/01/00 10 11
Washington County Authority,
Municipal Facilities Lease
Revenue, Pooled Capital,
Ser C, Subseries C-1A, RB,
AMBAC Insured,
Pre-Refunded @ 100 (A)
7.000%, 06/15/00 400 435
Washington County Hospital
Authority, Shadyside Hospital
Project, Ser 92, RB,
AMBAC Insured
5.875%, 12/15/04 1,000 1,052
Westmoreland County Industrial
Development Authority, Henry
Clay Frick Hospital, RB
7.000%, 12/01/05 830 832
Westmoreland County Industrial
Development Authority, Hospital
Revenue, Ser 92-A, RB,
AMBAC Insured
5.900%, 07/01/05 595 614
Westmoreland County Industrial
Development Authority,
Hospital Revenue, Ser 99-A,
AMBAC Insured
5.800%, 07/01/04 565 583
</TABLE>
The accompanying notes are an integral part of the financial statements.
44
<PAGE> 39
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Windber Area Authority, Hospital
Revenue, RB, FHA Insured
5.900%, 02/01/10 $ 355 $ 363
Wyoming County Hospital
Authority, RB (C)
7.400%, 01/01/05 45 48
Wyoming County Hospital Authority,
Tyler Memorial, RB (C)
7.400%, 01/01/05 60 63
York County Hospital Authority,
Lutheran Social Services, RB
5.400%, 04/01/04 500 486
5.600%, 04/01/05 500 485
5.800%, 04/01/06 500 484
Total Municipal Bonds -------
(Cost $96,024) 96,265
-------
Total Investments -- 99.0%
(Cost $96,024) 96,265
-------
Other Assets and Liabilities, Net -- 1.0% 963
-------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
9,275,192 outstanding shares of
beneficial interest 95,265
Undistributed Net Investment Income 1
Accumulated Net Realized Gain
on Investments 1,721
Net Unrealized Appreciation
on Investments 241
-------
Total Net Assets -- 100.0% $97,228
=======
Net Asset Value, Offering Price and
Redemption Price Per Share -- Class A $ 10.48
</TABLE> =======
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
BIGI Bond Investors Guaranty Insurance Corporation
CGIC Capital Guaranty Insurance Corporation
FGIC Financial Guaranty Insurance Corporation
FHA Federal Housing Agency
FNMA Federal National Mortgage Association
FSA Financial Security Assurance
GO General Obligation
MBIA Municipal Bond Investors Assurance
RB Revenue Bond
SER Series
(A) Pre-Refunded Security -- the maturity date reported on the Statement of Net
Assets is the Pre-Refunded date.
(B) Security is held in conjunction with a letter of credit from a major
commercial bank or financial institution.
(C) Security is escrowed to maturity.
(D) Put and Demand feature -- the maturity date reported on the Statement of Net
Assets is the lesser of the maturity date or the put date.
KANSAS TAX FREE INCOME PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 98.4%
KANSAS -- 95.9%
Anderson County, USD #365
Garnett, Ser 91, G.O.,
AMBAC Insured
6.400%, 09/01/05 $ 250 $ 263
6.500%, 09/01/06 250 264
Arkansas City, G.O.
3.800%, 12/01/99 285 271
Belleville Electric & Gas,
Ser A, RB
5.000%, 12/01/98 150 151
5.500%, 12/01/02 175 180
5.700%, 12/01/04 150 155
Bourbon County, G.O.
5.500%, 09/01/09 195 194
Bourbon County, USD # 234,
Fort Scott , Ser B, G.O.
5.625%, 09/01/11 285 280
Bourbon County, USD # 234,
G.O., Callable 09/01/06 @ 100
5.600%, 09/01/10 215 212
Butler County, Bank Qualified,
G.O., CGIC Insured
4.150%, 10/01/01 250 241
4.300%, 10/01/02 250 241
Chanute Electric Light Water &
Gas, RB, MBIA Insured
Pre-Refunded @ 100 (A)
6.900%, 11/01/05 600 633
Cherokee County, USD #499, G.O.,
AMBAC Insured
5.800%, 10/01/09 200 204
5.900%, 10/01/10 215 220
5.950%, 10/01/11 225 230
Clay County, Clay Center, Ser 92,
Bank Qualified, G.O.
5.300%, 04/01/00 250 255
5.400%, 04/01/01 250 254
Clay County, Ser 94-B, G.O.
6.200%, 10/01/15 250 253
Coffeyville Water and Sewer, Ser 93,
RB, AMBAC Insured
4.600%, 10/01/04 465 446
4.700%, 10/01/05 490 469
Coffeyville, COP
5.875%, 10/01/14 250 250
Cowley County, USD #470, G.O.,
Callable 12/01/06 @ 100
5.450%, 12/01/12 500 493
Cowley County, USD #465 School
Improvement Bonds, Winfields,
Ser 91, G.O.
6.000%, 11/01/97 250 255
</TABLE>
45
<PAGE> 40
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
KANSAS TAX FREE INCOME PORTFOLIO -- CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Decatur County, Ser 92, Bank
Qualified, G.O.
6.000%, 09/01/01 $ 250 $ 260
Dickinson County, Abilene School
District, Ser 92, Bank
Qualified, G.O.
5.400%, 04/01/01 265 267
5.600%, 04/01/03 300 300
Dodge City, Pollution Control
Revenue, Excel Project, RB
6.625%, 05/01/05 700 760
Dodge, USD #443, Ford County,
G.O., CGIC Insured
4.700%, 03/01/07 180 167
4.800%, 03/01/08 360 337
5.000%, 03/01/14 250 228
Douglas County, USD #497, Ser 93-A, G.O.
4.500%, 09/01/02 250 246
Douglas County, USD #497,
Ser A, G.O.
5.400%, 09/01/15 600 574
Emporia Sewer System, Ser 90,
RB, Pre-Refunded @ 100.50 (A)
7.100%, 06/01/04 300 316
Emporia, Ser B, G.O.
5.150%, 09/01/00 155 158
5.250%, 09/01/01 165 170
6.000%, 09/01/06 175 182
Finney County, Garden City
Project, Ser 91, G.O.
5.700%, 10/01/98 500 505
Finney County, USD #457, G.O.
5.500%, 10/01/99 185 190
5.550%, 10/01/00 250 258
Ford County, Single Family
Mortgage Ser A, RB
7.900%, 08/01/10 325 341
Garden City, Ser B, G.O.,
MBIA Insured
4.900%, 11/01/99 250 254
5.450%, 11/01/04 250 259
Garden City, Water & Sewer, RB
6.500%, 11/01/00 125 134
6.750%, 11/01/03 125 134
Gardner County, G.O.
5.300%, 09/01/11 330 323
Gardner Electric Utility, Ser 92, RB
7.000%, 11/01/09 500 523
Gove County, G.O., AMBAC Insured,
Callable 10/01/01 @ 101
5.150%, 04/01/12 560 523
Gray County,USD #102, G.O.
6.000%, 09/01/04 100 104
6.200%, 09/01/06 125 131
6.800%, 09/01/15 250 261
Great Bend, Ser B, G.O., FGIC Insured
5.900%, 09/01/98 250 250
Great Bend, Ser B, G.O.,
Pre-Refunded @ 100 (A)
6.300%, 09/01/02 250 250
Halstead Hospital, Active
Sinking Fund, RB
6.750%, 10/01/06 255 274
Hays, Ser A, G.O., FGIC Insured,
Callable 09/01/03 @ 100
5.150%, 09/01/09 250 241
5.250%, 09/01/10 250 246
Hays, Internal Improvement,
Ser A, G.O.
5.200%, 09/01/01 105 108
5.300%, 09/01/02 110 112
5.500%, 09/01/04 120 122
Hays, Water & Sewer, Ser 92,
Bank Qualified, RB,
AMBAC Insured
5.600%, 09/01/99 100 103
5.800%, 09/01/00 100 104
6.200%, 09/01/03 100 106
6.400%, 09/01/05 180 191
Hayes Water & Sewer System, RB
5.200%, 09/01/11 260 247
Holton, Electrical Systems,
Ser 92-A, RB
6.400%, 12/01/06 150 161
6.500%, 12/01/07 150 161
Hutchinson, Ser A, RB
5.450%, 10/01/14 125 121
5.500%, 10/01/15 135 130
Hutchinson, Single Family
Mortgage, Ser 92, RB
6.500%, 12/01/09 175 182
Hutchinson, Water & Sewer,
Ser 93, RB, AMBAC Insured
6.850%, 12/01/05 150 168
5.000%, 12/01/11 225 210
Jackson County, Holton School
Boards USD #336, Ser 92,
Bank Qualified, G.O.
6.200%, 10/01/07 205 219
6.300%, 10/01/08 125 134
Jefferson County, USD #340,
G.O., CGIC Insured
6.000%, 09/01/06 300 317
6.100%, 09/01/07 320 338
6.200%, 09/01/08 330 348
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
<PAGE> 41
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Johnson County, Blue Valley
Recreation Commission,
COP, Ser 91, G.O.
6.000%, 10/01/97 $ 250 $ 253
Johnson County, G.O.
6.800%, 09/01/99 1,000 1,068
Johnson County, Internal
Improvement, Ser A, G.O.
5.600%, 09/01/03 200 209
Johnson County, USD #229
Blue Valley, Ser A, G.O.,
Pre-Refunded @ 100 (A)
6.500%, 10/01/12 300 323
Johnson County, USD #233
Olathe, Ser 89-B, G.O.,
Pre-Refunded @ 100 (A)
7.000%, 03/01/03 500 534
7.000%, 09/01/03 500 534
Johnson County, USD #233,
G.O., AMBAC Insured
5.950%, 09/01/05 500 524
Johnson County, Water
District #001, Ser 90-A, RB
6.800%, 06/01/99 250 264
6.900%, 12/01/00 250 272
5.125%, 12/01/08 250 245
5.250%, 12/01/15 500 463
6.100%, 12/01/16 250 253
Junction City, Industrial
Development, F.W. Woolworth, RB
7.250%, 11/01/98 190 191
Junction City, Ser 00, Bank
Qualified, G.O., AMBAC Insured
6.200%, 09/01/06 515 534
Junction City, Water, Ser A, RB
4.900%, 04/01/01 205 206
4.900%, 10/01/01 210 211
Kansas City, Community
College Center, G.O., MBIA Insured
6.000%, 05/15/10 205 216
6.125%, 05/15/11 215 228
6.125%, 05/15/12 230 244
Kansas City, Improvement Project,
Ser B, MBIA Insured
5.375%, 09/01/10 1,500 1,487
Kansas City, Sisters of Charity
Health Hospital, RB
4.850%, 08/01/97 250 251
Kansas City, Special Obligation (B)
5.500%, 02/15/99 500 514
Kansas Rural Water Finance
Authority, Revenue District # 13,
Ser F, RB, Callable 06/01/01 @ 100
5.900%, 06/01/11 400 403
Kansas Water Pollution Control
Callable 05/01/03 @ 102
5.750%, 05/01/14 370 375
Kansas State Department of
Transportation Highway, RB
5.000%, 03/01/04 250 252
Kansas State Department of
Transportation Highway, Ser 92,
RB, Pre-Refunded @ 102 (A)
6.125%, 03/01/03 500 536
6.500%, 03/01/08 750 818
Kansas State Development
Finance Authority, RB
Callable 05/01/04 @ 101
5.200%, 05/01/07 120 121
5.400%, 05/01/09 135 136
5.450%, 05/01/10 100 101
5.500%, 05/01/11 100 101
5.550%, 05/01/12 100 101
Kansas State Development
Finance Authority, Storemont
Vail Health Care, Ser F, RB,
MBIA Insured
5.800%, 11/15/16 500 491
Kansas State Development Finance
Authority, Storemont Vail Health
Care, Ser G, RB, MBIA Insured
5.750%, 11/15/10 500 500
Kansas State Development Finance
Authority, Department of
Corrections El Dorado Project L,
RB, MBIA Insured
5.625%, 02/01/03 250 255
Kansas State Development Finance
Authority, Kansas Board Regents
Wichita, RB, AMBAC Insured
5.125%, 06/01/06 250 247
Kansas State Development Finance
Authority, Water Pollution
Control, G.O.
4.450%, 05/01/01 355 358
Kansas State Pollution Control, RB
5.450%, 04/01/06 500 499
Kingman, Electric Utility &
Distribution System, RB
5.500%, 09/01/08 250 243
Kingman, Water & Sewer, Utility &
Distribution System, RB
6.125%, 09/01/15 250 255
</TABLE>
47
<PAGE> 42
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
KANSAS TAX FREE INCOME PORTFOLIO -- CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Lawrence Hospital, RB
4.850%, 07/01/97 $ 250 $ 250
Lawrence Water & Sewer
System, RB
5.300%, 11/01/07 315 313
5.700%, 11/01/11 395 392
Lawrence, G.O.
5.100%, 09/01/01 220 223
Lawrence, Ser 91-L, G.O.
5.600%, 09/01/98 175 180
Leavenworth County, USD #449,
Ser A, Bank Qualified, G.O.
6.300%, 09/01/09 150 152
6.400%, 09/01/10 160 163
6.500%, 09/01/12 125 128
6.500%, 09/01/13 100 102
Leavenworth, Ser 91-A,
Bank Qualified, G.O.
5.700%, 09/01/97 160 160
Leavenworth, Ser B, G.O.
5.050%, 09/01/00 210 212
Leawood, Ser 92-A, G.O.
5.000%, 09/01/00 300 305
5.200%, 09/01/01 250 255
6.000%, 09/01/08 135 141
Leawood, Unlimited Tax, Ser B, G.O.
5.000%, 09/01/10 400 377
Lindsborg Electric & Waterworks
System, Callable 10/01/05 @ 100
5.300%, 10/01/07 105 105
5.600%, 10/01/09 120 120
Lindsborg Electric & Waterworks
System, RB
5.000%, 10/01/05 100 100
Lindsborg Temp Nts. Ser A, G.O.
Callable 06/01/97 @ 100
4.750%, 06/01/98 280 280
Lyon County, Hospital Revenue,
Ser 94, RB
5.200%, 02/01/02 115 111
5.200%, 08/01/02 250 240
5.300%, 02/01/03 100 96
Lyon County, USD #253 Emponia, RB
6.250%, 10/01/08 250 262
Manhattan, Unlimited Tax,
Ser 89, G.O.
5.850%, 11/01/02 250 262
6.300%, 11/01/11 100 103
6.300%, 11/01/12 105 109
Marion County, USD #411, RB
5.300%, 04/01/13 660 629
McPherson County, USD #400
Smoky Valley, G.O., FGIC Insured,
Callable 12/01/05 @ 100
5.200%, 12/01/10 250 243
5.250%, 12/01/12 250 241
McPherson, Electric Utility, RB,
AMBAC Insured
5.550%, 03/01/09 550 548
McPherson, Electric Utility-Capital
Appreciation, RB, AMBAC Insured
0.000%, 03/01/10 520 209
McPherson, Refunding &
Improvement, Ser 115, G.O.
5.000%, 11/01/06 500 488
Meade Industrial Development,
Dekalb Agresearch Project, RB
6.500%, 10/01/06 1,000 1,103
Miami County, USD #367, Ser A, G.O.
5.850%, 09/01/13 550 558
Miami County, USD #368 Paola,
Ser 92, G.O., AMBAC Insured
6.500%, 12/01/05 500 533
Miami County, USD #416 Louisburg,
Ser 92, G.O., AMBAC Insured
6.000%, 09/01/02 250 261
Nemaha County, USD #441,
Ser 92, G.O., AMBAC Insured
5.400%, 03/01/02 250 254
5.750%, 03/01/07 250 254
Neosho County, USD #413, G.O.
5.650%, 09/01/01 260 270
Newton, Waste Water Treatment
System, Ser 92, Bank
Qualified, RB
5.750%, 03/01/99 110 113
6.000%, 03/01/00 115 119
6.200%, 03/01/01 120 126
6.400%, 03/01/02 130 138
Olathe & Labette County, GNMA
Collateral Mortgage, Senior
Ser 91-B, RB
7.150%, 02/01/15 55 58
Olathe, Multi-Family Housing,
Deerfield Apartments,
Ser 94-A, RB
5.500%, 06/01/04 435 443
Olathe, Sewer Improvement,
Ser 84, G.O.
4.600%, 10/01/99 275 276
</TABLE>
The accompanying notes are an integral part of the financial statements.
48
<PAGE> 43
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Osborne, Ser 92, Bank
Qualified, G.O.
5.500%, 12/01/01 $ 135 $ 137
5.600%, 12/01/02 140 141
5.700%, 12/01/03 150 151
5.800%, 12/01/04 155 156
Ottawa, Waterworks & Electric
Systems, Ser 91, RB,
MBIA Insured
6.150%, 12/01/00 250 264
6.250%, 12/01/01 250 267
Pawnee County, G.O., CGIC Insured
5.100%, 09/01/04 255 257
Phillip County, USD #325, G.O.
5.200%, 09/01/03 100 102
5.600%, 09/01/07 155 158
Pittsburg, Water & Sewer
Systems, Ser 91-A, RB
6.400%, 09/01/03 105 111
6.500%, 09/01/04 110 116
Pottawatomie County, USD #320
Wamego, Ser 90, G.O.,
AMBAC Insured
6.600%, 10/01/02 500 539
Pratt, Electrical System, Ser 92,
RB, AMBAC Insured
6.600%, 11/01/07 250 276
6.000%, 11/01/12 250 254
Reno County, G.O.
6.250%, 08/01/00 685 706
Reno County, Single Family
Mortgage, Ser B, RB,
Callable 09/01/01 @ 103
8.700%, 09/01/11 205 219
Riley County Hospital, Ser A, RB
4.750%, 09/01/98 110 110
5.000%, 09/01/99 165 165
5.150%, 09/01/00 100 100
Riley County, Ser 92,
Bank Qualified, G.O.
5.000%, 11/01/98 335 338
Riley County, Ser B, G.O.
6.100%, 09/01/06 110 116
6.200%, 09/01/07 110 117
6.300%, 09/01/08 110 117
6.400%, 09/01/09 110 117
Salina County, Sales Tax, RB
3.700%, 12/01/96 100 100
Salina, Internal Improvement
Bonds, Ser P-240, G.O.
4.900%, 10/01/96 125 125
5.500%, 10/01/99 100 103
Salina, Water & Sewer, RB,
MBIA Insured
5.000%, 09/01/07 330 315
Salina, Water & Sewer, RB
6.700%, 10/01/99 250 257
6.750%, 10/01/00 250 256
6.850%, 10/01/02 250 256
Scott City, Water System, Ser A,
Bank Qualified, G.O.
5.250%, 09/01/04 130 129
5.400%, 09/01/05 140 139
5.600%, 09/01/06 140 139
5.700%, 09/01/07 150 150
5.800%, 09/01/08 145 145
Scott County, USD #466, Ser 93, G.O.
5.375%, 09/01/06 685 676
Sedgwick & Shawnee County,
GNMA Collateral Mortgage,
Senior Ser 91-A, RB
7.300%, 12/01/12 610 640
Sedgwick & Shawnee County,
Single Family Housing, RB
8.050%, 05/01/14 440 489
Sedgwick & Shawnee County,
Single Family Mortgage, RB,
Callable 11/01/04 @ 103
7.800%, 05/01/14 185 200
Sedgwick & Shawnee County,
Single Family Mortgage, RB
5.250%, 11/01/04 145 147
Sedgwick County, Airport Facilities,
Beech Aircraft, Ser 93, RB
5.625%, 03/01/99 1,000 1,026
Sedgwick County, Ser B, G.O.
4.050%, 08/01/98 250 249
Sedgwick County, USD #262,
Valley Center, G.O.
0.000%, 11/01/98 100 91
Sedgwick Temp Notes, Ser B,
G.O. Callable 06/01/97 @ 100
4.750%, 06/15/98 250 250
Seward County, Ser B, G.O.,
AMBAC Insured
6.000%, 08/15/08 250 254
6.000%, 08/15/13 250 254
Seward County, Single Family
Mortgage, Ser B, RB
8.000%, 05/01/11 395 420
Seward County, USD# 480, RB,
Ser 92, MBIA Insured
5.000%, 12/01/00 500 503
</TABLE>
49
<PAGE> 44
STATEMENT OF NET ASSETS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
KANSAS TAX FREE INCOME PORTFOLIO -- CONCLUDED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Shawnee County, Ser B, G.O.,
Callable 09/01/03 @100
5.500%, 09/01/09 $ 250 $ 250
5.500%, 09/01/11 250 248
Shawnee County, Health Care
Facilities, G.O., Callable
08/15/05 @ 100
5.150%, 08/15/10 500 472
Shawnee County, Ser 92-C, G.O.
5.600%, 09/01/04 500 513
Shawnee County, Sisters Charity
Leavenworth, RB
4.700%, 12/01/04 230 223
5.000%, 12/01/10 360 330
Shawnee County, USD #345
Seaman, G.O.
7.200%, 09/01/98 250 263
5.750%, 09/01/98 250 252
Shawnee County, USD #437
Auburn-Washburn, Ser 92,
G.O., FGIC Insured
6.250%, 03/01/03 700 748
Sumner County, Bridge
Improvement Bonds, Ser 92,
G.O., AMBAC Insured
6.000%, 11/01/04 435 457
6.000%, 11/01/05 250 263
Thomas County, USD #315,
Ser 93, G.O.
4.200%, 09/01/01 150 145
4.300%, 09/01/02 160 154
4.400%, 09/01/03 165 159
4.600%, 09/01/04 175 168
Topeka Hospital, Storemont
Vail Project, Ser 90-B, RB
6.750%, 11/15/00 500 540
Topeka, Ser C, G.O.
5.500%, 08/15/05 250 253
Wellington Electric & Water,
Bank Qualified, RB,
AMBAC Insured
7.050%, 05/01/06 250 284
6.250%, 05/01/12 250 258
Wichita, Hospital Facility,
St. Joseph Rehabilitation
Center, RB (B)
6.000%, 07/01/04 1,245 1,301
Wichita, Single Family Mortgage,
Ser B, RB, Callable 07/01/98 @ 100
7.100%, 09/01/09 380 394
Wichita, Kansas, Multi-Family
Housing, RB
5.900%, 12/01/16 660 648
Wichita, Water & Sewer
Improvement, Ser B, RB,
FGIC Insured
5.600%, 10/01/05 $ 750 $ 762
Winfield, Sales Tax, RB, Callable
09/01/03 @ 100
5.100%, 09/01/06 100 98
5.250%, 09/01/07 100 98
5.400%, 09/01/08 100 97
Wyandotte County, G.O.
7.000%, 09/01/05 415 435
Wyandotte County, USD #203
Piper, G.O.
5.750%, 09/01/03 140 142
5.900%, 09/01/04 295 298
6.600%, 09/01/13 500 507
------
69,090
------
GUAM -- 1.1%
Guam Government Highway
Bonds, Ser A, G.O., CGIC Insured
5.100%, 05/01/97 250 252
5.500%, 05/01/99 200 206
6.300%, 05/01/12 100 105
Guam Government, Ser A, G.O.
5.900%, 09/01/05 250 250
------
813
------
PUERTO RICO -- 1.4%
Puerto Rico Commonwealth
Highway and Transportation
Authority, RB
5.000%, 07/01/02 500 502
Puerto Rico Public Buildings,
Series I, RB, Callable
07/01/99 @ 100
6.000%, 07/01/12 500 498
------
1,000
------
Total Municipal Bonds
(Cost $69,752) 70,903
------
CASH EQUIVALENT -- 2.1%
Dreyfus Tax Exempt
Money Market Fund 1,512 1,512
------
Total Cash Equivalent
(Cost $1,512) 1,512
------
Total Investments -- 100.5%
(Cost $71,264) 72,415
------
OTHER ASSETS AND LIABILITIES, NET -- (0.5%) (349)
------
</TABLE>
The accompanying notes are an integral part of the financial statements.
50
<PAGE> 45
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value (000)
- --------------------------------------------------------------------------------
<S> <C>
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based
on 6,857,687 outstanding shares of
beneficial interest $ 70,596
Undistributed Net Investment Income 322
Accumulated Net Realized Loss
on Investments (3)
Net Unrealized Appreciation on Investments 1,151
--------
Total Net Assets -- 100.0% $ 72,066
========
Net Asset Value, Offering Price and
Redemption Price Per Share -- Class A $ 10.51
========
</TABLE>
AMBAC American Municipal Bond Assurance Corporation
CGIC Capital Guaranty Insurance Corporation
COP Cerificate of Participation
FGIC Financial Guaranty Insurance Company
GNMA Government National Mortgage Association
GO General Obligation
MBIA Municipal Bond Investors Assurance
RB Revenue Bond
SER Series
USD Unified School District
(A) Pre-Refunded Security -- the maturity date reported on the Statement of Net
Assets is the Pre-Refunded date.
(B) Security is escrowed to maturity
51
<PAGE> 46
STATEMENT OF OPERATIONS (000)
================================================================================
SEI Tax Exempt Trust -- For the year ended August 31, 1996
<TABLE>
<CAPTION>
CALIFORNIA BAINBRIDGE
TAX TAX
TAX FREE EXEMPT EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO(2)
--------- ---------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $ 13,091 $ 13,944 $ 1,592
-------- -------- --------
EXPENSES:
Management Fees 1,257 886 148
Waiver of Management Fees (158) (305) (82)
Investment Advisory Fees 137 151 16
Waiver of Investment Advisory Fees -- -- --
Custodian/Wire Agent Fees 47 52 9
Professional Fees 39 44 2
Pricing Fees 6 7 1
Registration Fees 37 36 12
Trustee Fees 11 11 1
Distribution Fees (1) 150 1,860 --
Printing Fees 37 30 1
Amortization of Deferred Organizational Costs -- -- 13
Insurance Fees 5 5 2
Other Expenses 3 3 --
-------- -------- --------
Total Expenses 1,571 2,780 123
-------- -------- --------
NET INVESTMENT INCOME 11,520 11,164 1,469
-------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net Realized Gain (Loss) on Investments 18 (5) 27
Net Change in Unrealized Depreciation
of Investments -- -- --
-------- -------- --------
Net Realized and Unrealized Gain (Loss)
on Investments 18 (5) 27
-------- -------- --------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 11,538 $ 11,159 $ 1,496
======== ======== ========
</TABLE>
(1) Includes class specific distribution and shareholder servicing expenses.
(2) The Bainbridge Tax Exempt Portfolio closed on December 15, 1995 Amounts
designated as " -- " are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
52
<PAGE> 47
================================================================================
<TABLE>
<CAPTION>
INTERMEDIATE- KANSAS
INSTITUTIONAL PENNSYLVANIA TERM PENNSYLVANIA TAX FREE
TAX FREE TAX FREE MUNICIPAL MUNICIPAL INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------ ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $ 31,291 $ 1,120 $ 5,589 $ 5,726 $ 3,720
-------- -------- -------- -------- --------
EXPENSES:
Management Fees 2,980 110 353 357 101
Waiver of Management Fees (1,282) (43) (74) (172) --
Investment Advisory Fees 325 12 254 204 202
Waiver of Investment Advisory Fees -- -- -- (2) (202)
Custodian/Wire Agent Fees 107 4 20 16 11
Professional Fees 85 5 13 12 9
Pricing Fees 14 -- 2 3 2
Registration Fees 74 3 11 10 6
Trustee Fees 25 1 3 3 2
Distribution Fees (1) 439 11 41 43 --
Printing Fees 43 3 -- 12 7
Amortization of Deferred Organizational Costs -- -- -- -- 2
Insurance Fees 11 -- 1 2 1
Other Expenses 8 -- 1 1 --
-------- -------- -------- -------- --------
Total Expenses 2,829 106 625 489 141
-------- -------- -------- -------- --------
NET INVESTMENT INCOME 28,462 1,014 4,964 5,237 3,579
-------- -------- -------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net Realized Gain (Loss) on Investments 39 (14) 1,014 2,349 132
Net Change in Unrealized Depreciation
of Investments -- -- (1,920) (3,618) (903)
-------- -------- -------- -------- --------
Net Realized and Unrealized Gain (Loss)
on Investments 39 (14) (906) (1,269) (771)
-------- -------- -------- -------- --------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 28,501 $ 1,000 $ 4,058 $ 3,968 $ 2,808
======== ======== ======== ======== ========
</TABLE>
53
<PAGE> 48
STATEMENT OF CHANGES IN NET ASSETS (000)
================================================================================
SEI Tax Exempt Trust -- For the year ended August 31,
<TABLE>
<CAPTION>
BAINBRIDGE
TAX CALIFORNIA TAX
FREE TAX EXEMPT EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO(1)
-------------------------- ------------------------- -------------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income $ 11,520 $ 11,420 $ 11,164 $ 10,554 $ 1,469 $ 5,952
Net Realized Gain (Loss) from
Security Transactions 18 (5) (5) -- 27 4
Net Change in Unrealized Appreciation
(Depreciation)of Investment Securities -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net Increase in Net Assets Resulting
from Operations 11,538 11,415 11,159 10,554 1,496 5,956
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Net Investment Income
Class A (11,513) (11,398) (1,471) (1,158) (1,502) (5,950)
Class B -- -- -- (170) -- --
Class C -- -- -- -- -- --
Class D (4) (23) -- -- -- --
Class G(2) -- -- (9,727) (9,226) -- --
Net Capital Gains
Class A -- -- -- (1) -- --
Class B -- -- -- -- -- --
Class C -- -- -- -- -- --
Class D -- -- -- -- -- --
Class G(2) -- -- -- (8) -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions (11,517) (11,421) (11,198) (10,563) (1,502) (5,950)
----------- ----------- ----------- ----------- ----------- -----------
Transactions:
Class A:
Proceeds from Shares Issued 1,426,417 1,502,741 232,581 193,641 29,983 256,460
Reinvestment of Cash Distributions 357 74 55 8 -- --
Cost of Shares Redeemed (1,464,041) (1,483,956) (218,860) (194,711) (179,210) (268,046)
----------- ----------- ----------- ----------- ----------- -----------
Total Class A Share Transactions (37,267) 18,859 13,776 (1,062) (149,227) (11,586)
----------- ----------- ----------- ----------- ----------- -----------
Class B(2):
Proceeds from Shares Issued -- -- -- 41,150 -- --
Reinvestment of Cash Distributions -- -- -- -- -- --
Cost of Shares Redeemed -- -- -- (44,406) -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Class B Share Transactions -- -- -- (3,256) -- --
----------- ----------- ----------- ----------- ----------- -----------
Class C:
Proceeds from Shares Issued -- -- -- -- -- --
Reinvestment of Cash Distributions -- -- -- -- -- --
Cost of Shares Redeemed -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Class C Share Transactions -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Class D(3):
Proceeds from Shares Issued 1,615 4,827 -- -- -- --
Reinvestment of Cash Distributions -- -- -- -- -- --
Cost of Shares Redeemed (1,881) (4,555) -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Class D Share Transactions (266) 272 -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Class G(4):
Proceeds from Shares Issued -- -- 744,985 675,735 -- --
Reinvestment of Cash Distributions -- -- 8,087 6,682 -- --
Cost of Shares Redeemed -- -- (730,352) (672,528) -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Class G Share Transactions -- -- 22,720 9,889 -- --
----------- ----------- ----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets
from Share Transactions (37,533) 19,131 36,496 5,571 (149,227) (11,586)
----------- ----------- ----------- ----------- ----------- -----------
Total Increase (Decrease) in Net
Assets (37,512) 19,125 36,457 5,562 (149,233) (11,580)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS:
Beginning of period 377,424 358,299 358,956 353,394 149,233 160,813
----------- ----------- ----------- ----------- ----------- -----------
End of period $ 339,912 $ 377,424 $ 395,413 $ 358,956 $ -- $ 149,233
=========== =========== =========== =========== =========== ===========
</TABLE>
(1) The Bainbridge Tax Exempt Portfolio closed on December 15, 1995
(2) On July 12, 1995, California Tax Exempt Portfolio Class B closed.
(3) On June 30, 1996, Intermediate-Term Municipal Portfolio Class D closed.
(4) On May 1, 1996, the California Tax Exempt Portfolio Class C shares were
redesignated Class G shares.
Amounts designated as " -- " are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
54
<PAGE> 49
<TABLE>
<CAPTION>
INSTITUTIONAL PENNSYLVANIA
TAX TAX
FREE FREE
PORTFOLIO PORTFOLIO
------------------------------ ------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income $ 28,462 $ 31,315 $ 1,014 $ 733
Net Realized Gain (Loss) from
Security Transactions 39 (4) (14) (1)
Net Change in Unrealized Appreciation
(Depreciation)of Investment Securities -- -- -- --
----------- ----------- ----------- -----------
Net Increase in Net Assets Resulting
from Operations 28,501 31,311 1,000 732
----------- ----------- ----------- -----------
Distributions to Shareholders:
Net Investment Income
Class A (27,624) (30,581) (1,013) (733)
Class B (596) (724) -- --
Class C (248) -- -- --
Class D -- -- -- --
Class G(2) -- -- -- --
Net Capital Gains
Class A -- -- -- --
Class B -- -- -- --
Class C -- -- -- --
Class D -- -- -- --
Class G(2) -- -- -- --
----------- ----------- ----------- -----------
Total Distributions (28,468) (31,305) (1,013) (733)
----------- ----------- ----------- -----------
Transactions:
Class A:
Proceeds from Shares Issued 4,958,411 5,130,777 209,781 126,868
Reinvestment of Cash Distributions 776 1,645 60 14
Cost of Shares Redeemed (4,912,703) (5,179,065) (192,915) (119,535)
----------- ----------- ----------- -----------
Total Class A Share Transactions 46,484 (46,643) 16,926 7,347
----------- ----------- ----------- -----------
Class B(2):
Proceeds from Shares Issued 69,063 77,163 -- --
Reinvestment of Cash Distributions 58 69 -- --
Cost of Shares Redeemed (70,053) (83,875) -- --
----------- ----------- ----------- -----------
Total Class B Share Transactions (932) (6,643) -- --
----------- ----------- ----------- -----------
Class C:
Proceeds from Shares Issued 82,543 -- -- --
Reinvestment of Cash Distributions -- -- -- --
Cost of Shares Redeemed (63,337) -- -- --
----------- ----------- ----------- -----------
Total Class C Share Transactions 19,206 -- -- --
----------- ----------- ----------- -----------
Class D(3):
Proceeds from Shares Issued -- -- -- --
Reinvestment of Cash Distributions -- -- -- --
Cost of Shares Redeemed -- -- -- --
----------- ----------- ----------- -----------
Total Class D Share Transactions -- -- -- --
----------- ----------- ----------- -----------
Class G(4):
Proceeds from Shares Issued -- -- -- --
Reinvestment of Cash Distributions -- -- -- --
Cost of Shares Redeemed -- -- -- --
----------- ----------- ----------- -----------
Total Class G Share Transactions -- -- -- --
----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets
from Share Transactions 64,758 (53,286) 16,926 7,347
----------- ----------- ----------- -----------
Total Increase (Decrease) in Net
Assets 64,791 (53,280) 16,913 7,346
----------- ----------- ----------- -----------
NET ASSETS:
Beginning of period 803,961 857,241 26,058 18,712
----------- ----------- ----------- -----------
End of period $ 868,752 $ 803,961 $ 42,971 $ 26,058
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE-
TERM PENNSYLVANIA
MUNICIPAL MUNICIPAL
PORTFOLIO PORTFOLIO
------------------------------ ------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income $ 4,964 $ 5,258 $ 5,237 $ 5,733
Net Realized Gain (Loss) from
Security Transactions 1,014 (1,478) 2,349 (311)
Net Change in Unrealized Appreciation
(Depreciation)of Investment Securities (1,920) 3,053 (3,618) 1,299
----------- ----------- ----------- -----------
Net Increase in Net Assets Resulting
from Operations 4,058 6,833 3,968 6,721
----------- ----------- ----------- -----------
Distributions to Shareholders:
Net Investment Income
Class A (5,335) (5,340) (5,686) (5,837)
Class B -- -- -- --
Class C -- -- -- --
Class D (17) (41) -- --
Class G(2) -- -- -- --
Net Capital Gains
Class A -- (15) -- (4)
Class B -- -- -- --
Class C -- -- -- --
Class D -- -- -- --
Class G(2) -- -- -- --
----------- ----------- ----------- -----------
Total Distributions (5,352) (5,396) (5,686) (5,841)
----------- ----------- ----------- -----------
Transactions:
Class A:
Proceeds from Shares Issued 73,397 41,823 14,469 9,245
Reinvestment of Cash Distributions 1,360 1,102 171 153
Cost of Shares Redeemed (34,549) (76,186) (19,788) (31,265)
----------- ----------- ----------- -----------
Total Class A Share Transactions 40,208 (33,261) (5,148) (21,867)
----------- ----------- ----------- -----------
Class B(2):
Proceeds from Shares Issued -- -- -- --
Reinvestment of Cash Distributions -- -- -- --
Cost of Shares Redeemed -- -- -- --
----------- ----------- ----------- -----------
Total Class B Share Transactions -- -- -- --
----------- ----------- ----------- -----------
Class C:
Proceeds from Shares Issued -- -- -- --
Reinvestment of Cash Distributions -- -- -- --
Cost of Shares Redeemed -- -- -- --
----------- ----------- ----------- -----------
Total Class C Share Transactions -- -- -- --
----------- ----------- ----------- -----------
Class D(3):
Proceeds from Shares Issued 1 26 -- --
Reinvestment of Cash Distributions 11 37 -- --
Cost of Shares Redeemed (586) (630) -- --
----------- ----------- ----------- -----------
Total Class D Share Transactions (574) (567) -- --
----------- ----------- ----------- -----------
Class G(4):
Proceeds from Shares Issued -- -- -- --
Reinvestment of Cash Distributions -- -- -- --
Cost of Shares Redeemed -- -- -- --
----------- ----------- ----------- -----------
Total Class G Share Transactions -- -- -- --
----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets
from Share Transactions 39,634 (33,828) (5,148) (21,867)
----------- ----------- ----------- -----------
Total Increase (Decrease) in Net
Assets 38,340 (32,391) (6,866) (20,987)
----------- ----------- ----------- -----------
NET ASSETS:
Beginning of period 96,223 128,614 104,094 125,081
----------- ----------- ----------- -----------
End of period $ 134,563 $ 96,223 $ 97,228 $ 104,094
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
KANSAS
TAX FREE
INCOME
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income $ 3,579 $ 3,420
Net Realized Gain (Loss) from
Security Transactions 132 (121)
Net Change in Unrealized Appreciation
(Depreciation)of Investment Securities (903) 1,095
----------- -----------
Net Increase in Net Assets Resulting
from Operations 2,808 4,394
----------- -----------
Distributions to Shareholders:
Net Investment Income
Class A (3,544) (3,407)
Class B -- --
Class C -- --
Class D -- --
Class G(2) -- --
Net Capital Gains
Class A --
Class B -- --
Class C -- --
Class D -- --
Class G(2) -- --
----------- -----------
Total Distributions (3,544) (3,407)
----------- -----------
Transactions:
Class A:
Proceeds from Shares Issued 18,206 10,341
Reinvestment of Cash Distributions -- --
Cost of Shares Redeemed (11,238) (7,840)
----------- -----------
Total Class A Share Transactions 6,968 2,501
----------- -----------
Class B(2):
Proceeds from Shares Issued -- --
Reinvestment of Cash Distributions -- --
Cost of Shares Redeemed -- --
----------- -----------
Total Class B Share Transactions -- --
----------- -----------
Class C:
Proceeds from Shares Issued -- --
Reinvestment of Cash Distributions -- --
Cost of Shares Redeemed -- --
----------- -----------
Total Class C Share Transactions -- --
----------- -----------
Class D(3):
Proceeds from Shares Issued -- --
Reinvestment of Cash Distributions -- --
Cost of Shares Redeemed -- --
----------- -----------
Total Class D Share Transactions -- --
----------- -----------
Class G(4):
Proceeds from Shares Issued -- --
Reinvestment of Cash Distributions -- --
Cost of Shares Redeemed -- --
----------- -----------
Total Class G Share Transactions -- --
----------- -----------
Increase (Decrease) in Net Assets
from Share Transactions 6,968 2,501
----------- -----------
Total Increase (Decrease) in Net
Assets 6,232 3,488
----------- -----------
NET ASSETS:
Beginning of period 65,834 62,346
----------- -----------
End of period $ 72,066 $ 65,834
=========== ===========
</TABLE>
55
<PAGE> 50
FINANCIAL HIGHLIGHTS
================================================================================
SEI Tax Exempt Trust
For a Share Outstanding Throughout the Year
<TABLE>
<CAPTION>
Net Realized
Investment and
Net Activities Distributions Unrealized
Asset ---------- ------------------------------------ Gain (Loss) on Net Net
Value, Net Net Net Investments Asset Value, Assets, End
Beginning Investment Investment Realized Total and Capital End Total of Period
of Period Income Income Gain Distributions Transactions of Period Return (000)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------
TAX FREE PORTFOLIO
- ------------------
Class A
For the years ended August 31,:
1996 $ 1.00 $ 0.033 $(0.033) -- $(0.033) -- $ 1.00 3.35% $ 339,906
1995 1.00 0.034 (0.034) -- (0.034) -- 1.00 3.48% 377,152
1994 1.00 0.022 (0.022) -- (0.022) -- 1.00 2.20% 358,299
1993 1.00 0.022 (0.023) -- (0.023) -- 1.00 2.29% 414,975
1992 1.00 0.033 (0.033) -- (0.033) -- 1.00 3.32% 293,982
1991 1.00 0.047 (0.047) -- (0.047) -- 1.00 4.81% 343,300
1990(1) 1.00 0.032 (0.032) -- (0.032) -- 1.00 3.20% 356,814
For the years ended January 31,:
1990 $ 1.00 $ 0.059 $(0.059) -- $(0.059) -- $ 1.00 5.97% $ 464,389
1989 1.00 0.049 (0.049) -- (0.049) -- 1.00 4.98% 790,629
1988 1.00 0.042 (0.042) -- (0.042) -- 1.00 4.34% 938,484
1987 1.00 0.041 (0.041) -- (0.041) -- 1.00 4.31% 1,143,083
1986 1.00 0.051 (0.051) -- (0.051) -- 1.00 5.21% 503,891
1985 1.00 0.058 (0.058) -- (0.058) -- 1.00 5.86% 263,325
Class D
For the years ended August 31,:
1996 $ 1.00 $ 0.030 $(0.030) -- $(0.030) -- $ 1.00 2.99% $ 6
1995(2) 1.00 0.026 (0.026) -- (0.026) -- 1.00 2.68%* 272
- -------------------------------
CALIFORNIA TAX EXEMPT PORTFOLIO
- -------------------------------
Class A
For the years ended August 31,:
1996 $ 1.00 $ 0.034 $(0.034) -- $(0.034) -- $ 1.00 3.41% $ 44,729
1995 1.00 0.033 (0.033) -- (0.033) -- 1.00 3.49% 30,921
1994 1.00 0.023 (0.023) -- (0.023) -- 1.00 2.32% 32,015
1993 1.00 0.024 (0.024) -- (0.024) -- 1.00 2.41% 540,285
1992 1.00 0.034 (0.034) -- (0.034) -- 1.00 3.44% 445,936
1991 1.00 0.047 (0.047) -- (0.047) -- 1.00 4.92% 376,653
1990(3) 1.00 0.016 (0.016) -- (0.016) -- 1.00 1.81%* 275,095
Class G***
For the years ended August 31,:
1996 $1.00 $0.028 $(0.028) -- $(0.028) -- $ 1.00 2.90% $350,684
1995 1.00 0.029 (0.029) -- (0.029) -- 1.00 2.97% 328,035
1994(4) 1.00 0.006 (0.006) -- (0.006) -- 1.00 2.14%* 318,122
- -------------------------------
BAINBRIDGE TAX EXEMPT PORTFOLIO
- -------------------------------
Class A
For the years ended August 31,:
1996(5) $1.00 $0.011 $(0.011) -- $(0.011) -- $ 1.00 3.14%* --
1995 1.00 0.036 (0.036) -- (0.036) -- 1.00 3.69% $149,233
1994 1.00 0.025 (0.025) -- (0.025) -- 1.00 2.52% 160,813
1993(6) 1.00 0.019 (0.019) -- (0.019) -- 1.00 1.95%* 160,058
<CAPTION>
Ratio of
Net
Ratio Investment
of Expenses Ratio of Income to
to Average Net Average
Ratio of Net Assets Investment Net Assets
Expenses Excluding Income to Excluding Portfolio
to Average Fee Average Fee Turnover
Net Assets Waivers Net Assets Waivers Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------
TAX FREE PORTFOLIO
- ------------------
Class A
For the years ended August 31,:
1996 0.45% 0.50% 3.30% 3.25% --
1995 0.45% 0.51% 3.43% 3.37% --
1994 0.45% 0.53% 2.17% 2.09% --
1993 0.45% 0.53% 2.24% 2.16% --
1992 0.45% 0.55% 3.30% 3.20% --
1991 0.37% 0.55% 4.70% 4.52% --
1990(1) 0.45%* 0.56%* 5.46%* 5.35%* --
For the years ended January 31,:
1990 0.54% 0.59% 5.90% 5.85% --
1989 0.46% 0.58% 4.90% 4.78% --
1988 0.53% 0.54% 4.20% 4.19% --
1987 0.56% 0.56% 4.10% 4.10% --
1986 0.57% 0.57% 5.10% 5.10% --
1985 0.58% 0.60% 5.80% 5.78% --
Class D
For the years ended August 31,:
1996 0.80% 0.88% 3.18% 3.10% --
1995(2) 0.80%* 0.86%* 3.13%* 3.07%* --
- -------------------------------
CALIFORNIA TAX EXEMPT PORTFOLIO
- -------------------------------
Class A
For the years ended August 31,:
1996 0.28% 0.36% 3.33% 3.25% --
1995 0.28% 0.42% 3.43% 3.29% --
1994 0.27% 0.38% 2.28% 2.17% --
1993 0.28% 0.37% 2.37% 2.28% --
1992 0.28% 0.38% 3.34% 3.24% --
1991 0.28% 0.40% 4.74% 4.62% --
1990 (3) 0.28% 0.51% 5.27% 5.04% --
Class G***
For the years ended August 31,:
1996 0.78% 0.86% 2.84% 2.76% --
1995 0.78% 0.93% 2.93% 2.78% --
1994(4) 0.67%* 0.87%* 2.06%* 1.86%* --
- -------------------------------
BAINBRIDGE TAX EXEMPT PORTFOLIO
- -------------------------------
Class A
For the years ended August 31,:
1996(5) 0.30% 0.50% 3.56% 3.36% --
1995 0.30% 0.46% 3.62% 3.46% --
1994 0.30% 0.47% 2.49% 2.32% --
1993(6) 0.30%* 0.48%* 2.39%* 2.21%* --
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE> 51
================================================================================
<TABLE>
<CAPTION>
Net Realized
Investment and
Net Activities Distributions Unrealized
Asset ---------- ------------------------------------ Gain (Loss) on Net Net
Value, Net Net Net Investments Asset Value, Assets, End
Beginning Investment Investment Realized Total and Capital End Total of Period
of Period Income Income Gain Distributions Transactions of Period Return (000)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------
INSTITUTIONAL TAX FREE PORTFOLIO
- --------------------------------
Class A
For the years ended August 31,:
1996 $1.00 $0.035 $(0.035) -- $(0.035) -- $1.00 3.52% $835,388
1995 1.00 0.036 (0.036) -- (0.036) -- 1.00 3.70% 788,877
1994 1.00 0.025 (0.025) -- (0.025) -- 1.00 2.51% 835,516
1993 1.00 0.026 (0.026) -- (0.026) -- 1.00 2.59% 763,040
1992 1.00 0.036 (0.036) -- (0.036) -- 1.00 3.66% 623,689
1991 1.00 0.049 (0.049) -- (0.049) -- 1.00 5.20% 448,390
1990(1) 1.00 0.033 (0.033) -- (0.033) -- 1.00 3.32%* 226,658
For the years ended January 31,:
1990 $1.00 $0.059 $(0.059) -- $(0.059) -- $1.00 6.11% $177,342
1989 1.00 0.048 (0.048) -- (0.048) -- 1.00 5.05% 99,774
1988 1.00 0.042 (0.042) -- (0.042) -- 1.00 4.28% 223,653
1987 1.00 0.041 (0.041) -- (0.041) -- 1.00 4.23% 255,147
1986 1.00 0.050 (0.050) -- (0.050) -- 1.00 5.11% 198,761
1985 1.00 0.056 (0.056) -- (0.056) -- 1.00 5.71% 162,676
Class B
For the years ended August 31,:
1996 $1.00 $0.032 $(0.032) -- $(0.032) -- $1.00 3.21% $ 14,156
1995 1.00 0.033 (0.033) -- (0.033) -- 1.00 3.39% 15,084
1994 1.00 0.022 (0.022) -- (0.022) -- 1.00 2.21% 21,725
1993 1.00 0.023 (0.023) -- (0.023) -- 1.00 2.29% 3,040
1992 1.00 0.033 (0.033) -- (0.033) -- 1.00 3.35% 686
1991(7) 1.00 0.038 (0.038) -- (0.038) -- 1.00 3.89%* 1,515
Class C
For the year ended August 31,:
1996(8) $1.00 $0.029 $(0.029) -- $(0.029) -- $1.00 $2.92%* $ 19,208
- -------------------------------
PENNSYLVANIA TAX FREE PORTFOLIO
- -------------------------------
Class A
For the years ended August 31,:
1996 $1.00 $0.034 $(0.034) -- $(0.034) -- $1.00 3.40% $ 42,971
1995 1.00 0.035 (0.035) -- (0.035) -- 1.00 3.60% 26,058
1994(9) 1.00 0.014 (0.014) -- (0.014) -- 1.00 2.37%* 18,712
- -------------------------------------
INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
- -------------------------------------
Class A
For the years ended August 31,:
1996 $10.59 $0.49 $(0.53) -- $(0.53) $(0.10) $10.45 3.76% $134,563
1995 10.36 0.52 (0.52) -- (0.52) 0.23 10.59 7.53% 95,675
1994 10.84 0.49 (0.49) $(0.06) (0.55) (0.42) 10.36 0.65% 127,509
1993 10.49 0.49 (0.50) (0.02) (0.52) 0.38 10.84 8.62% 122,649
1992 10.20 0.56 (0.54) (0.01) (0.55) 0.28 10.49 8.56% 63,210
1991 9.98 0.61 (0.63) -- (0.63) 0.24 10.20 8.82% 36,699
1990(1) 10.01 0.38 (0.37) -- (0.37) (0.04) 9.98 3.44%* 12,781
For the year ended January 31,:
1990(10) $10.00 $0.21 $(0.16) $(0.002) $(0.16) $(0.04) $10.01 1.72%* $ 9,106
Class D
For the years ended August 31,:
1996(14) $10.59 $0.38 $(0.41) -- $(0.41) $(0.10) $10.46 3.22%* --
1995 10.36 0.48 (0.48) -- (0.48) 0.23 10.59 7.11% $ 548
1994(11)** 10.90 0.45 (0.42) $(0.06) (0.48) (0.51) 10.36 (0.93%)* 1,105
<CAPTION>
Ratio of
Net
Ratio Investment
of Expenses Ratio of Income to
to Average Net Average
Ratio of Net Assets Investment Net Assets
Expenses Excluding Income to Excluding Portfolio
to Average Fee Average Fee Turnover
Net Assets Waivers Net Assets Waivers Rate
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------
INSTITUTIONAL TAX FREE PORTFOLIO
- --------------------------------
Class A
For the years ended August 31,:
1996 0.33% 0.49% 3.46% 3.30% --
1995 0.33% 0.52% 3.64% 3.45% --
1994 0.33% 0.50% 2.48% 2.31% --
1993 0.33% 0.49% 2.55% 2.39% --
1992 0.33% 0.51% 3.54% 3.36% --
1991 0.33% 0.53% 4.91% 4.71% --
1990(1) 0.33%* 0.56%* 5.64%* 5.41%* --
For the years ended January 31,:
1990 0.52% 0.60% 5.90% 5.82% --
1989 0.55% 0.57% 4.80% 4.78% --
1988 0.55% 0.56% 4.20% 4.19% --
1987 0.55% 0.56% 4.10% 4.09% --
1986 0.57% 0.57% 5.00% 5.00% --
1985 0.57% 0.59% 5.60% 5.58% --
Class B
For the years ended August 31,:
1996 0.63% 0.80% 3.16% 2.99% --
1995 0.63% 0.82% 3.32% 3.13% --
1994 0.63% 0.81% 2.31% 2.13% --
1993 0.63% 0.79% 2.22% 2.06% --
1992 0.63% 0.81% 3.22% 3.04% --
1991(7) 0.63%* 0.84%* 4.34%* 4.13%* --
Class C
For the year ended August 31,:
1996(8) 0.83%* 0.96%* 2.89%* 2.76%* --
- -------------------------------
PENNSYLVANIA TAX FREE PORTFOLIO
- -------------------------------
Class A
For the years ended August 31,:
1996 0.35% 0.49% 3.33% 3.19% --
1995 0.35% 0.51% 3.54% 3.38% --
1994(9) 0.35%* 0.65%* 2.37%* 2.07%* --
- -------------------------------------
INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
- -------------------------------------
Class A
For the years ended August 31,:
1996 0.59% 0.66% 4.66% 4.59% 40.66%
1995 0.55% 0.72% 4.96% 4.79% 36.05%
1994 0.53% 0.71% 4.65% 4.47% 58.39%
1993 0.55% 0.69% 4.79% 4.65% 63.04%
1992 0.55% 0.71% 5.56% 5.40% 61.56%
1991 0.55% 0.78% 6.18% 5.95% 111.82%
1990(1) 0.55%* 0.90%* 6.63%* 6.28%* 63.45%
For the year ended January 31,:
1990(10) 0.56%* 1.36%* 5.80%* 5.00%* 352.00%
Class D
For the years ended August 31,:
1996(14) 0.98% 1.08% 4.26% 4.16% 40.66%
1995 0.95% 1.12% 4.57% 4.40% 36.05%
1994(11)** 0.93%* 1.07%* 4.34%* 4.20%* 58.39%
</TABLE>
57
<PAGE> 52
FINANCIAL HIGHLIGHTS (CONCLUDED)
================================================================================
SEI Tax Exempt Trust
For a Share Outstanding Throughout the Year
<TABLE>
<CAPTION>
Net Realized
Investment and
Net Activities Distributions Unrealized
Asset ---------- ------------------------------------ Gain (Loss) on Net Net
Value, Net Net Net Investments Asset Value, Assets, End
Beginning Investment Investment Realized Total and Capital End Total of Period
of Period Income Income Gain Distributions Transactions of Period Return (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------
PENNSYLVANIA MUNICIPAL PORTFOLIO
- --------------------------------
Class A
For the years ended August 31,:
1996 $10.66 $0.55 $(0.59) -- $(0.59) $(0.14) $10.48 3.96% $ 97,228
1995 10.52 0.55 (0.55) -- (0.55) 0.14 10.66 6.81% 104,094
1994 10.94 0.53 (0.53) -- (0.53) (0.42) 10.52 1.14% 125,081
1993 10.59 0.55 (0.55) $ (0.01) (0.56) 0.36 10.94 8.91% 153,808
1992 10.29 0.57 (0.57) (0.01) (0.58) 0.31 10.59 8.89% 114,461
1991 9.95 0.60 (0.60) (0.003) (0.60) 0.34 10.29 9.80% 83,054
1990(1) 9.98 0.34 (0.34) -- (0.34) (0.03) 9.95 3.12%* 64,531
For the years ended January 31,:
1990(12) $10.00 $0.28 $(0.23) $(0.001) $(0.23) $(0.07) $ 9.98 2.11%* $ 53,042
- --------------------------------
KANSAS TAX FREE INCOME PORTFOLIO
- --------------------------------
Class A
For the years ended August 31,:
1996 $10.63 $0.56 $(0.56) -- $(0.56) $(0.12) $10.51 4.23% $ 72,066
1995 10.47 0.57 (0.57) -- (0.57) 0.16 10.63 7.23% 65,834
1994 10.91 0.57 (0.57) $ (0.02) (0.59) (0.42) 10.47 1.41% 62,346
1993 10.50 0.58 (0.58) (0.05) (0.63) 0.46 10.91 10.38% 58,197
1992 10.13 0.60 (0.59) (0.01) (0.60) 0.37 10.50 9.78% 45,609
1991(13) 10.00 0.42 (0.37) -- (0.37) 0.08 10.13 5.12%* 29,242
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Net
Ratio Investment
of Expenses Ratio of Income to
to Average Net Average
Ratio of Net Assets Investment Net Assets
Expenses Excluding Income to Excluding Portfolio
to Average Fee Average Fee Turnover
Net Assets Waivers Net Assets Waivers Rate
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------
PENNSYLVANIA MUNICIPAL PORTFOLIO
- --------------------------------
Class A
For the years ended August 31,:
1996 0.48% 0.65% 5.15% 4.98% 65.75%
1995 0.48% 0.72% 5.21% 4.97% 22.62%
1994 0.47% 0.71% 4.90% 4.66% 25.13%
1993 0.48% 0.70% 5.15% 4.93% 15.26%
1992 0.48% 0.72% 5.52% 5.28% 10.54%
1991 0.50% 0.73% 5.98% 5.75% 19.17%
1990(1) 0.60%* 0.80%* 5.88%* 5.68%* 20.35%
For the years ended January 31,:
1990(12) 0.60%* 0.86%* 6.05%* 5.79%* 10.00%
- --------------------------------
KANSAS TAX FREE INCOME PORTFOLIO
- --------------------------------
Class A
For the years ended August 31,:
1996 0.21% 0.51% 5.31% 5.01% 12.71%
1995 0.21% 0.51% 5.47% 5.17% 17.60%
1994 0.21% 0.54% 5.36% 5.03% 10.57%
1993 0.21% 0.51% 5.56% 5.26% 23.04%
1992 0.22% 0.52% 5.87% 5.57% 12.69%
1991(13) 0.31%* 0.61%* 5.85%* 5.55%* 21.82%
</TABLE>
* Annualized.
** Total return does not reflect the sales charge on the Class D.
*** On May 1, 1996, Class C shares were redesignated Class G shares.
+ Return is for the period indicated and has not been annualized.
1 In August 1990, the Trustees changed the fiscal year end of the Trust from
January 31 to August 31.
2 The Tax Free Portfolio -- Class D commenced operations on November 1, 1994.
3 The California Tax Exempt Portfolio -- Class A commenced operations on May
14, 1990.
4 The California Tax Exempt Portfolio -- Class C commenced operations on May
11, 1994.
5 The Bainbridge Tax Exempt Portfolio -- Class A closed on December 15, 1995.
6 The Bainbridge Tax Exempt Portfolio -- Class A commenced operations on
November 9, 1992.
7 The Institutional Tax Free Portfolio -- Class B commenced operations on
October 15, 1990.
8 The Institutional Tax Free Portfolio -- Class C commenced operations on
September 11, 1995.
9 The Pennsylvania Tax Free Portfolio -- Class A commenced operations on
January 21, 1994.
10 The Intermediate-Term Municipal Portfolio -- Class A commenced operations
on September 5, 1989.
11 The Intermediate-Term Municipal Portfolio -- Class D commenced operations
on September 28, 1993.
12 The Pennsylvania Municipal Portfolio -- Class A commenced operations on
August 14, 1989.
13 The Kansas Tax Free Income Portfolio -- Class A commenced operations on
December 10, 1990.
14 The Intermediate-Term Municipal Portfolio Class D closed on June 30, 1996.
Amounts designated as " -- " are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
58
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
1. ORGANIZATION
SEI Tax Exempt Trust (the "Trust"), was organized as a Massachusetts business
trust under a Declaration of Trust dated March 15, 1982.
The Trust is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company with nine portfolios: the
Tax Free Portfolio, the California Tax Exempt Portfolio, the Institutional Tax
Free Portfolio, the Pennsylvania Tax Free Portfolio (collectively "the Money
Market Portfolios"), the Intermediate-Term Municipal Portfolio, the Pennsylvania
Municipal Portfolio, the Kansas Tax Free Income Portfolio, the California
Intermediate-Term Municipal Portfolio and the New York Intermediate-Term
Municipal Portfolio (collectively "the Fixed Income Portfolios"). The California
Intermediate-Term Municipal Portfolio and the New York Intermediate-Term
Municipal Portfolio had not commenced operations as of August 31, 1996. The
Trust is registered to offer five classes of shares: Class A, Class B, Class C,
Class D and Class G. The Portfolios' prospectus provides a description of each
Portfolio's investment objectives, policies and strategies. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
On December 15, 1995, the Bainbridge Tax Exempt Portfolio closed and all of
the outstanding shares of the Portfolio were redeemed. SEI Financial Management
Corporation voluntarily agreed to bear the costs associated with the liquidation
of the Portfolio which approximated $13,000 and included the amount of
unamortized organizational expenses.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Portfolios.
Security Valuation -- Investment securities of each Money Market Portfolio
are stated at amortized cost which approximates market value. Under this
valuation method, purchase discounts and premiums on securities are accreted and
amortized ratably to maturity.
The market value for each security for each Fixed Income Portfolio is
obtained from an independent pricing service. Debt obligations exceeding sixty
days to maturity for which market quotations are readily available are valued at
the most recently quoted bid price. Debt obligations with sixty days or less
remaining until maturity may be valued at their amortized cost.
Federal Income Taxes -- It is each Portfolio's intention to continue to
qualify as a regulated investment company and to distribute all of its taxable
income. Accordingly, no provision for Federal income taxes is required in the
accompanying financial statements.
Net Asset Value Per Share -- The net asset value per share of each
Portfolio is calculated on each business day. In general, it is computed by
dividing the assets of each Portfolio, less its liabilities, by the number of
outstanding shares of the Portfolio. The maximum offering price per share for
the Class D shares of the Intermediate-Term Municipal Portfolio is equal to the
net asset value per share plus a sales load of 3.50%. The Intermediate-Term
Municipal Portfolio Class D closed on June 30, 1996.
Classes -- Class-specific expenses are borne by that class. Income,
expenses, and realized and unrealized gains/losses are allocated to the
respective class on the basis of relative net asset value each day.
Security Transactions and Investment Income -- Security transactions are
accounted for on the trade date of the security purchase or sale. Costs used in
determining net realized capital gains and losses on the sale of investment
securities are those of the specific securities sold. Interest income is
recognized on the accrual basis. Purchase discounts and premiums on securities
held by the Fixed Income Portfolios are accreted and amortized to maturity using
the scientific interest method, which approximates the effective interest
method.
Uses of Estimates in the Preparation of Financial Statements -- The
preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported
59
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Distributions to Shareholders -- Distributions from net investment income
are declared on a daily basis and are payable on the first business day of the
following month for the Tax Free, the California Tax Exempt, the Institutional
Tax Free, the Pennsylvania Tax Free, the Intermediate-Term Municipal, and the
Pennsylvania Municipal Portfolios. Distributions from net investment income are
declared each month and paid on the tenth day of the following month for the
Kansas Tax Free Income Portfolio. Any net realized capital gain on sales of
securities after capital loss carryovers is distributed to the shareholders of
the Portfolios at least annually.
3. TRANSACTIONS WITH AFFILIATES
The Trust and SEI Fund Management (the "Manager") are parties to a Management
Agreement dated May 23, 1986, under which the manager provides management,
administrative and shareholder services to the Portfolios for an annual fee of
.36% each of the average daily net assets of the Tax Free, Institutional Tax
Free and Pennsylvania Tax Free Portfolios, .23% of the average daily net asset
value of the California Tax Exempt Portfolio, .24% of the average daily net
asset value of the Intermediate-Term Municipal Portfolio, .35% each of the
average daily net asset value of the Pennsylvania Municipal and .15% of the
average daily net asset value of the Kansas Tax Free Income Portfolio. However,
the Manager has voluntarily agreed to waive a portion of its fee so that total
expenses of each Portfolio will not exceed certain annual expense limitations.
For the period September 1, 1995 to April 30, 1996, SEI Financial Services
Company ("SFS"), a wholly-owned subsidiary of SEI Corporation and a registered
broker-dealer, acted as the distributor of the shares of the Trust under
distribution plans which provide for the Trust to reimburse SFS for certain
distribution-related expenses incurred by SFS.
Effective May 1, 1996, SFS (the "Distributor") continued to act as the
distributor of the shares of the Trust under new Distribution Agreements. The
Trust has adopted plans under which firms, including the Distributor, that
provide shareholder and administrative services may receive compensation
thereof. The Class A, Class B, Class C and Class G shareholder servicing plans
(the "Shareholder Servicing Plans") provide for servicing fees payable to the
Distributor of up to .25% of the average daily net assets attributable to that
particular class. For Class A and Class G, no such fees were levied since the
inception of the plan. Such fees may be levied in the future when the Portfolios
are operating below their voluntary expense caps. In addition to the Shareholder
Servicing Plans, the Class B and Class C shares have adopted administrative
services plans that provide for administrative service fees payable to the
Distributor of up to .05% and .25%, receptively, of the average daily nets
assets attributable to that class. The Trust has adopted a distribution for its
Class D and Class G shares pursuant to which a 12b-1 fee of up to .25% and .50%,
respectively, of the average daily net assets attributable to that particular
class of Class D and Class G shares will be paid to the Distributor. This
payment may be used to compensate financial institutions that provide
distribution-related services to their customers. Under each of the plans
adopted by the Trust, the Distributor may retain as a profit any difference
between the fee it receives and the amount it pays to third parties.
Certain officers of the Trust are also officers and/or Directors of the
Manager. The Trust pays each unaffiliated Trustee an annual fee for attendance
at quarterly, interim and committee meetings. Compensation of officers and
affiliated Trustees is paid by the Manager.
4. INVESTMENT ADVISORY
Weiss, Peck, & Greer L.L.C. ("WPG") act as the Investment Adviser on behalf of
the Tax Free, the California Tax Exempt, the Institutional Tax Free and the
Pennsylvania Tax Free Portfolios. For its services, WPG receives a monthly fee
equal to an annual rate of .05% of the combined daily net assets
60
<PAGE> 55
up to $500 million, .04% on the next $500 million and .03% of such assets in
excess of $1 billion of the Tax Free, the California Tax Exempt, the
Institutional Tax Free and the Pennsylvania Tax Free Portfolios. Prior to
January 1, 1996, WPG also served as the Investment Adviser on behalf of the
Intermediate-Term Municipal Portfolio. For the period January 1, 1996 to April
15, 1996, Standish Ayer & Wood ("SAW") acted as the Investment Adviser on behalf
of the Intermediate-Term Municipal Bond Portfolio. Commencing April 16, 1996,
SEI Financial Management Corporation ("SFM") was appointed as the Investment
Adviser of the Intermediate-Term Municipal Portfolio. For its services, SFM is
entitled to a fee, which is calculated daily and paid monthly, at an annual rate
of .33% of the Portfolios average daily net assets. Sub-Advisory services are
provided to SFM for Intermediate-Term Municipal Portfolio by SAW pursuant to a
sub-advisory agreement dated April 16, 1996. Under the terms of such agreement,
SAW is entitled to receive a fee from SFM. For its services, SAW receives a
monthly fee equal to an annual rate of .18% of the daily net assets up to $125
million and .15% of such assets in excess of $125 million. SFM is responsible
for the supervision of, and payment of fees to, SAW in connection with their
services.
Morgan Grenfell Capital Management Incorporated ("MGCM") acts as the
Investment Adviser of the Pennsylvania Municipal Portfolio. For its services,
MGCM receives a monthly fee equal to an annual rate of .20% of the average daily
net assets of the Portfolio.
Under an Investment Advisory Agreement dated December 7, 1990, INTRUST
Bank, N.A. in Wichita serves as the Investment Adviser on behalf of the Kansas
Tax Free Income Portfolio. For its services INTRUST Bank is entitled to receive
a monthly fee equal to an annual rate of .30% of the average daily net assets of
the Portfolio. INTRUST Bank has voluntarily agreed to waive the full amount of
their fee in order to limit operating expenses. The Manager has voluntarily
agreed to waive a portion of its fee in order to limit operating expenses of the
Kansas Tax Free Income Portfolio.
5. INVESTMENT TRANSACTIONS
The cost of security purchases and the proceeds from the sale of securities,
other than short-term investments for the year ended August 31, 1996, were as
follows:
<TABLE>
<CAPTION>
Intermediate- Kansas
Term Pennsylvania Tax Free
Municipal Municipal Income
Portfolio Portfolio Portfolio
(000) (000) (000)
------------ ------------ ----------
<S> <C> <C> <C>
Purchases ............. $77,347 $64,232 $15,060
Sales ................. 40,710 69,195 8,345
</TABLE>
Subsequent to October 31, 1995, the Portfolios recognized net capital
losses for tax purposes that have been deferred and can be used to offset future
capital gains at August 31, 1997. The Portfolios also had capital loss
carryforwards at August 31, 1996, as follows:
<TABLE>
<CAPTION>
Capital
Loss
Carryover
August 31, Expires Expires Expires
Portfolio 1996 2002 2003 2004
- --------- ---------- ------- ------- -------
<S> <C> <C> <C> <C>
Tax Free
Portfolio $ 17,501 $17,408 $ 93 $ --
Intermediate-
Term
Municipal
Portfolio 1,163,939 -- 927,882 236,057
Pennsylvania
Municipal
Portfolio -- -- -- --
Pennsylvania
Tax Free
Portfolio -- -- -- --
Kansas Tax
Free
Income
Portfolio 3,335 -- 3,335 --
</TABLE>
61
<PAGE> 56
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
<TABLE>
<CAPTION>
Post Capital Loss
October 31, Utilized
1995 Net During the
Deferred Capital Current Wash
Portfolio Losses Losses Year Sales
- --------- ----------- ------- ------------ -------
<S> <C> <C> <C> <C>
Tax Free
Portfolio $ -- $ 17,501 $ 13,466 $ --
Intermediate-
Term
Municipal
Portfolio -- 1,163,939 -- --
Pennsylvania
Municipal
Portfolio -- -- 330,838 14,228
Pennsylvania
Tax Free
Portfolio 13,628 -- -- --
Kansas Tax
Free
Income
Portfolio -- 3,335 14,967 --
</TABLE>
For tax purposes, the losses in the Portfolios can be carried forward for a
maximum of eight years to offset any net realized capital gains.
The aggregate gross unrealized appreciation on securities in which there
was an excess of market value over cost, the aggregate gross unrealized
depreciation on securities in which there was an excess of cost over market
value and the net unrealized appreciation (depreciation) at August 31, 1996, for
each Portfolio are as follows:
<TABLE>
<CAPTION>
Intermediate- Kansas
Term Pennsylvania Tax Free
Municipal Municipal Income
Portfolio Portfolio Portfolio
(000) (000) (000)
------- ------- -------
<S> <C> <C> <C>
Aggregate gross unrealized
appreciation $ 969 $ 1,316 $ 1,652
Aggregate gross unrealized
depreciation 1,138 1,075 501
------- ------- -------
Net unrealized appreciation
(depreciation) $ (169) $ 241 $ 1,151
======= ======= =======
</TABLE>
6. LINE OF CREDIT
The Portfolios have a bank line of credit. Borrowings under the line of credit
are secured by investment securities of the Portfolios equal to 112% of such
borrowings which may not exceed 10% of the Portfolios' total assets.
7. CONCENTRATION OF CREDIT RISK
The Portfolios invest in debt instruments of municipal issuers. The issuers'
abilities to meet their obligations may be affected by economic developments in
a specific state or region.
The Trust invests in securities which include revenue bonds, tax exempt
commercial paper, tax and revenue anticipation notes, and general obligation
bonds. At August 31, 1996, the percentage of portfolio investments by each
revenue source were as follows:
<TABLE>
<CAPTION>
California
Tax Free Tax Exempt
Portfolio Portfolio
--------- ----------
Revenue Bonds:
<S> <C> <C>
Education Revenue 10.3% 7.0%
Health Care Facilities 9.7% 9.2%
Housing Facilities 14.2% 24.5%
Industrial Development 22.1% 5.0%
Lease Rental Bonds 0.0% 0.7%
Pollution Control 1.5% 3.3%
Public Facility 4.7% 6.7%
Resource Recovery 1.2% 0.0%
Transportation 2.7% 2.5%
Utility Revenue 1.9% 8.8%
General Obligation 8.9% 9.1%
Tax Exempt Commercial Paper 0.0% 0.0%
Anticipation Notes:
Bond 3.6% 0.0%
Revenue 0.9% 0.9%
Tax 4.9% 0.0%
Tax & Revenue 2.1% 10.4%
Other 11.3% 11.9%
----- -----
Total 100.0% 100.0%
</TABLE>
62
<PAGE> 57
<TABLE>
<CAPTION>
Intermediate-
Institutional Pennsylvania Term
Tax Free Tax Free Municipal
Portfolio Portfolio Portfolio
------------- ------------ ---------
<S> <C> <C> <C>
Revenue Bonds:
Education Revenue 6.7% 19.3% 10.9%
Health Care Facilities 11.2% 15.6% 12.2%
Housing Facilities 16.6% 3.5% 9.0%
Industrial Development 19.2% 19.5% 3.1%
Lease Rental Bonds 0.0% 0.0% 0.0%
Pollution Control 2.2% 8.1% 0.9%
Public Facility 4.1% 0.2% 2.6%
Resource Recovery 0.0% 0.0% 1.5%
Transportation 1.0% 1.3% 9.1%
Utility Revenue 1.1% 4.1% 23.3%
General Obligation 6.2% 3.2% 27.4%
Tax Exempt Commercial Paper 0.0% 0.0% 0.0%
Anticipation Notes:
Bond 4.2% 0.0% 0.0%
Revenue 0.9% 2.3% 0.0%
Tax 4.4% 2.8% 0.0%
Tax & Revenue 3.9% 5.8% 0.0%
Other 18.3% 14.3% 0.0%
----- ----- -----
Total 100.0% 100.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
Kansas
Pennsylvania Tax Free
Municipal Income
Portfolio Portfolio
------------ ---------
<S> <C> <C>
Revenue Bonds:
Education Revenue 22.0% 2.0%
Health Care Facilities 27.5% 6.8%
Housing Facilities 11.4% 5.8%
Industrial Development 17.6% 3.3%
Lease Rental Bonds 1.1% 3.4%
Pollution Control 0.0% 1.4%
Public Facility 2.5% 4.8%
Resource Recovery 0.1% 3.3%
Transportation 0.4% 1.4%
Utility Revenue 10.9% 16.8%
General Obligation 5.4% 52.9%
Tax Exempt Commercial Paper 0.0% 0.0%
Anticipation Notes:
Bond 0.0% 0.0%
Revenue 0.0% 0.0%
Tax 0.0% 0.0%
Tax & Revenue 0.0% 0.0%
Other 1.1% 2.9%
----- -----
Total 100.0% 100.0%
</TABLE>
Many municipalities insure their obligations with insurance underwritten by
insurance companies which undertake to pay a holder, when due, the interest and
principal amount of an obligation if the issuer defaults on its obligation.
Although bond insurance reduces the risk of loss due to default by an issuer,
there is no assurance that the insurance company will meet its obligations.
Also, some of the securities have credit enhancements (letters of credit or
guarantees issued by third party domestic or foreign banks or other
institutions). At August 31, 1996, the percentage of the Portfolios' investments
that were insured and the percentage of the Portfolios' investments that had
credit enhancements were as follows:
<TABLE>
<CAPTION>
Credit
Insured Enhancements
------- ------------
<S> <C> <C>
Tax Free Portfolio 21.0% 52.8%
California Tax Exempt Portfolio 24.7% 53.9%
Institutional Tax Free Portfolio 23.1% 51.2%
Pennsylvania Tax Free Portfolio 26.1% 49.2%
Intermediate-Term
Municipal Portfolio 46.6% 1.3%
Pennsylvania Municipal Portfolio 45.3% 5.8%
Kansas Tax Free Income Portfolio 33.7% 0.0%
</TABLE>
8. SHAREHOLDER VOTING RESULTS (UNAUDITED)
I. At a special meeting of shareholders held on September 28, 1995,
shareholders of the Pennsylvania Municipal Portfolio (the "Portfolio") of
SEI Tax Exempt Trust (the "Trust") voted to approve the selection of Morgan
Grenfell Capital Management Incorporated ("Morgan Grenfell") as investment
adviser to the Portfolio and the investment advisory agreement between the
Trust and Morgan Grenfell. The proposal and the results of the shareholder
meeting are set forth below.
1. Proposal to approve Morgan Grenfell as investment adviser of the
Portfolio and to approve the new investment advisory agreement relating
to the Portfolio between the Trust and Morgan Grenfell.
Shares Voted
------------
For 8,955,686
Against 71
Abstain 29,339
63
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
SEI Tax Exempt Trust -- August 31, 1996
There were no broker non-votes submitted and no other proposals voted on at such
meeting.
II. At a special meeting of shareholders held on April 16, 1996, shareholders of
the Intermediate-Term Municipal Portfolio (the "Portfolio") voted on a
series of proposals. The proposals and the results of the shareholder
meeting are set forth below .
1. Authorize the Trust's Board of Trustees to appoint additional or
replacement sub-advisers recommended by SEI Financial Management
Corporation ("SFM") for the Portfolio's Shareholders of the contacts
pursuant to which such sub-advisers serve.
Shares Voted
------------
For 4,660,163
Against 261,182
Abstain 3,199
2. Approve the selection of SFM as the investment adviser for the
Portfolio, and to approve the Investment Advisory Agreement between the
Trust, on behalf of the Portfolio, and SFM.
Shares Voted
------------
For 4,178,187
Against 743,158
Abstain 3,199
3. Approve the selection of Standish, Ayer & Wood, Inc. ("SAW") as an
investment sub-adviser for the Portfolio, and to approve the form of
investment sub-advisory agreement between SFM and SAW.
Shares Voted
------------
For 4,776,803
Against 139,371
Abstain 8,381
There were no broker non-votes submitted and no other proposals voted on at such
meeting.
III. At a special meeting of shareholders held on August 14, 1996, shareholders
of the SEI Tax Exempt Trust (the "Trust") voted to approve the selection of
the Trust's Board of Trustees. The proposal and the results of the
shareholder meeting are set forth below.
1. Election of Trustees
Shares Voted
Trustee "For"
------- ------------
Robert A. Nesher 1,321,644,859
Frank E. Morris 1,432,333,985
William M. Doran 1,321,356,731
F. Wendell Gooch 1,321,333,985
James M. Storcy 1,321,333,985
George J. Sullivan, Jr. 1,321,333,985
There were no broker non-votes submitted and no other proposals voted on at such
meeting.
64
<PAGE> 59
This page is left intentionally blank.
65
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS (concluded)
SEI Tax Exempt Trust -- August 31, 1996
9. SHARE TRANSACTIONS (000):
<TABLE>
<CAPTION>
--------------------- ------------------- ------------------
Bainbridge
Tax California Tax
Free Tax Exempt Exempt
Portfolio Portfolio Portfolio(1)
--------------------- ------------------- ------------------
1996 1995 1996 1995 1996 1995
--------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Shares Issued and Redeemed:
Class A:
Shares Issued 1,426,417 1,502,741 232,581 193,641 29,983 256,460
Shares Issued in Lieu of Cash
Distributions 357 74 55 8 -- --
Shares Redeemed (1,464,041) (1,483,956) (218,860) (194,711) (179,210) (268,046)
---------- ---------- -------- -------- --------- --------
Total Class A Transactions (37,267) 18,859 13,776 (1,062) (149,227) (11,586)
---------- ---------- -------- -------- --------- --------
Class B(2):
Shares Issued -- -- -- 41,150 -- --
Shares Issued in Lieu of Cash
Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- (44,406) -- --
--------- ---------- -------- ------- --------- --------
Total Class B Transactions -- -- -- (3,256) -- --
--------- ---------- -------- ------- --------- --------
Class C:
Shares Issued -- -- -- -- -- --
Shares Issued in Lieu of Cash
Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
--------- ---------- -------- -------- --------- --------
Total Class C Transactions -- -- -- -- -- --
--------- ---------- -------- -------- --------- --------
Class D(3):
Shares Issued 1,615 4,827 -- -- -- --
Shares Issued in Lieu of Cash
Distributions -- -- -- -- -- --
Shares Redeemed (1,881) (4,555) -- -- -- --
--------- -------- -------- -------- --------- -------
Total Class D Transactions (266) 272 -- -- -- --
--------- -------- -------- -------- --------- -------
Class G(4):
Shares Issued -- -- 744,985 675,735 -- --
Shares Issued in Lieu of Cash
Distributions -- -- 8,087 6,682 -- --
Shares Redeemed -- -- (730,352) (672,528) -- --
--------- -------- -------- -------- --------- -------
Total Class G Transactions -- -- 22,720 9,889 -- --
-------- -------- -------- -------- -------- -------
Increase (Decrease) in Capital Shares (37,533) 19,131 36,496 5,571 (149,227) (11,586)
======== ======== ======== ======== ======== =======
</TABLE>
(1) The Bainbridge Tax Exempt Portfolio closed on December 15, 1995.
(2) On July 12, 1995, California Tax Exempt Portfolio Class B closed.
(3) On June 30, 1996, Intermediate-Term Municipal Portfolio Class D closed.
(4) On May 1, 1996, the California Tax Exempt Portfolio Class C shares were
redisignated to Class G shares.
Amounts designated as " -- " are either $0 or have been rounded to $0.
66
<PAGE> 61
<TABLE>
<CAPTION>
----------------------- ---------------------- ----------------------
Institutional Pennsylvania Intermediate-
Tax Tax Term
Free Free Municipal
Portfolio Portfolio Portfolio
----------------------- ---------------------- ---------------------
1996 1995 1996 1995 1996 1995
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares Issued and Redeemed:
Class A:
Shares Issued 4,958,411 5,130,777 209,781 126,868 6,976 4,110
Shares Issued in Lieu of Cash
Distributions 776 1,645 60 14 129 108
Shares Redeemed (4,912,703) (5,179,065) (192,915) (119,535) (3,269) (7,494)
---------- ---------- -------- -------- ------ ------
Total Class A Transqctions 46,484 (46,643) 16,926 7,347 3,836 (3,276)
---------- ---------- -------- -------- ------ ------
Class B(2):
Shares Issued 69,063 77,163 -- -- -- --
Shares Issued in Lieu of Cash
Distributions 58 69 -- -- -- --
Shares Redeemed (70,053) (83,875) -- -- -- --
--------- --------- ------- ------- ------ -------
Total Class B Transactions (932) (6,643) -- -- -- --
--------- --------- ------- ------- ------ -------
Class C:
Shares Issued 82,543 -- -- -- -- --
Shares Issued in Lieu of Cash
Distributions -- -- -- -- -- --
Shares Redeemed (63,337) -- -- -- -- --
--------- -------- ------- ------- ------ --------
Total Class C Transactions 19,206 -- -- -- -- --
--------- -------- ------- ------- ------ --------
Class D(3):
Shares Issued -- -- -- -- -- 2
Shares Issued in Lieu of Cash
Distributions -- -- -- -- 1 5
Shares Redeemed -- -- -- -- (53) (61)
-------- -------- ------- ------- ------- -------
Total Class D Transactions -- -- -- -- (52) (54)
-------- -------- ------- ------- ------- -------
Class G(4):
Shares Issued -- -- -- -- -- --
Shares Issued in Lieu of Cash
Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
------- -------- ------- ------- ------ -------
Total Class G Transactions -- -- -- -- -- --
------- -------- ------- ------- ------ -------
Increase (Decrease) in Capital Shares 64,758 (53,286) 16,926 7,347 3,784 (3,330)
======= ======== ======= ======= ====== ======
<CAPTION>
-------------------- -----------------
Kansas
Pennsylvania Tax Free
Municipal Income
Portfolio Portfolio
-------------------- -----------------
1996 1995 1996 1995
---------- -------- ------- --------
<S> <C> <C> <C> <C>
Shares Issued and Redeemed:
Class A:
Shares Issues 1,365 889 1,719 994
Shares Issued in Lieu of Cash
Distributions 16 15 -- --
Shares Redeemed (1,869) (3,027) (1,057) (754)
------- ------ ------ ------
Total Class A Transactions (488) (2,123) 662 240
------- ------ ------ ------
Class B(2):
Shares Issued -- -- -- --
Shares Issued in Lieu of Cash
Distributions -- -- -- --
Shares Redeemed -- -- -- --
------- ------ ------ ------
Total Class B Transactions -- -- -- --
------- ------ ------ ------
Class C:
Shares Issued -- -- -- --
Shares Issued in Lieu of Cash
Distributions -- -- -- --
Shares Redeemed -- -- -- --
------- ------ ------ ------
Total Class C Transactions -- -- -- --
------- ------ ------ ------
Class D(3):
Shares Issued -- -- --
Shares Issued in Lieu of Cash
Distributions -- -- --
Shares Redeemed -- -- -- --
------- ------ ------ ------
Total Class D Transactions -- -- -- --
------- ------ ------ ------
Class G(4):
Shares Issued -- -- -- --
Shares Issued in Lieu of Cash
Distributions -- -- -- --
Shares Redeemed -- -- -- --
------- ------ ------ ------
Total Class G Transactions -- -- -- --
------- ------ ------ ------
Increase (Decrease) in Capital Shares (488) (2,123) 662 240
======= ====== ====== ======
</TABLE>
67
