<PAGE>
Rule 497(e)
File Nos. 333-16093 and 811-07923
[LOGO]
MONEY MARKET FUND
INSTITUTIONAL CLASS
PROSPECTUS
DATED MAY 10, 1999
INVESTMENT MANAGER:
CITY NATIONAL INVESTMENTS
A division of City National Bank
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary
is a criminal offense.
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MUTUAL FUND SHARES ARE NOT FDIC INSURED. MUTUAL FUND SHARES ARE
NOT BANK DEPOSITS, NOR ARE THEY OBLIGATIONS OF, OR GUARANTEED BY
CITY NATIONAL BANK. INVESTING IN MUTUAL FUNDS INVOLVES RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Overview................................................ 4
OUR GOALS......................................... 4
HOW WE PLAN TO ACHIEVE OUR GOALS.................. 4
TYPES OF SECURITIES............................... 4
CLASSES OF SHARES................................. 4
PRINCIPAL RISKS OF INVESTING IN OUR FUND.......... 5
PAST PERFORMANCE.................................. 6
Understanding Expenses.................................. 7
FEES AND EXPENSES OF THE FUND..................... 7
EXAMPLE........................................... 8
Management of the Fund.................................. 9
INVESTMENT MANAGER................................ 9
ADMINISTRATOR, FUND ACCOUNTANT AND TRANSFER
AGENT................................................. 9
DISTRIBUTOR....................................... 9
Account Policies........................................ 10
Understanding Earnings and Taxes........................ 11
How to Buy and Sell Shares.............................. 12
HOW TO PLACE AN ORDER............................. 12
BUYING SHARES..................................... 13
SELLING SHARES.................................... 14
Financial Highlights.................................... 16
Important Terms to Know................................. 17
KEY DEFINITIONS................................... 17
For More Information .................................. back cover
</TABLE>
More detailed information on all subjects covered in this simplified prospectus
is contained within the STATEMENT OF ADDITIONAL INFORMATION ("SAI"). Investors
seeking more in-depth explanations of the Fund should request the SAI and review
it before purchasing shares.
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OVERVIEW
OUR GOALS
The Fund is a money market fund that seeks to provide current income
through low-risk investments. Also, the Fund seeks to maintain a $1.00
per share net asset value. The goals of the Fund can only be changed with
shareholder approval.
HOW WE PLAN TO ACHIEVE OUR GOALS
OUR PRINCIPAL STRATEGY -- We purchase liquid, high quality, short-term
debt securities in U.S. dollar denominated money market instruments. The
securities must have a maturity period of no more than 397 days and, in
our opinion, present minimal credit risk.
TYPES OF SECURITIES
The Fund's principal investments are as follows:
- Certificates of deposit, time deposits;
- Commercial paper;
- Short-term corporate obligations; and
- Shares of investment companies that invest exclusively in the
same types of securities as we do (up to 10% of the Fund's
total assets, with no more than 5% in any individual investment
company).
Please review the SAI for more detailed descriptions of these principal
investments and other securities in which the Fund may invest.
CLASSES OF SHARES
This Prospectus offers Institutional Class shares of the Fund. Only
financial institutions and financial intermediaries may purchase
Institutional Class shares for their own or on behalf of their customer
accounts. The Fund offers other
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classes of shares which are subject to the same expenses, except they may
be subject to different distribution and/or shareholder servicing costs.
PRINCIPAL RISKS OF INVESTING IN OUR FUND
As with any money market fund, there are risks to investing. We cannot
guarantee that we will meet our investment goals. Here are the principal
risks to consider:
MAINTAINING THE NET ASSET VALUE -- We cannot guarantee that the Fund will
be able to maintain a stable net asset value ("NAV") of $1.00 per share.
You may lose money by investing in the Fund.
NO FEDERAL GUARANTEES -- As with any money market mutual fund, an
investment in the Fund is not a deposit of a bank and is not insured,
guaranteed, or protected by the FDIC, Federal Reserve Board, or any
agency of the U.S. Government.
THE EFFECT OF INTEREST RATES -- A money market fund's yield is affected
by interest rate changes. When rates decline, the fund's yield will tend
to be somewhat higher than prevailing market rates. When rates rise, the
fund's yield will tend to be somewhat lower.
ISSUER DEFAULT -- We may not be able to maintain a $1.00 NAV if the
issuers of securities do not make their principal or interest payments on
time. We attempt to minimize the risk of default by purchasing only
highly rated securities.
YEAR 2000 -- Many computer systems cannot distinguish the year 2000 from
1900. This is known as the "Year 2000" problem. A computer system's
inability to tell the difference could cause problems with the handling
of securities trades, pricing and account services. Our software vendors
and service providers have assured us, but have not guaranteed, that
their systems will be adapted in time to avoid serious problems. We do
not expect Year 2000 conversion costs to have much impact on the Fund
because those costs are
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borne primarily by the vendors and service providers, and not directly by
the Fund. It is also important to keep in mind that the Year 2000 problem
may negatively impact the issuers of the securities in which the Fund
invests and by extension, the value of the securities held by the Fund.
PAST PERFORMANCE
The Fund began operations on March 23, 1998. The Fund's past performance
results have not been provided but will be reported after December 31,
1999, when the Fund will have been in operation for one complete calendar
year (i.e., January-December).
If you would like to know the Fund's current yield, call 1-888-889-0799.
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UNDERSTANDING EXPENSES
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses you may pay if you buy and
hold shares of the Fund. You pay no sales charges or transaction fees for
buying or selling shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<S> <C> <C> <C>
Management Fee* 0.25%
Other Expenses
Shareholder Servicing Fee 0.25%
Other Fund Expenses 0.30%
Total Other Expenses 0.55%
---------
Total Annual Fund Operating Expenses
(before fee waivers and/or expense
reimbursements) 0.80%
Fee Waivers and/or expense
reimbursements by Investment Manager (0.17%)
---------
Total Annual Fund Operating Expenses
(after fee waivers and/or expense
reimbursements)** 0.63%
</TABLE>
* The "Management Fee" is an annual fee, payable monthly out of the
Fund's net assets.
** The investment manager contractually agreed to, for the period prior
to March 31, 2001, limit its fees or reimburse the Fund for expenses to
the extent necessary to keep "Total Annual Fund Operating Expenses" at or
below 0.63%. For the past year, after reductions and reimbursements,
shareholders paid actual Total Annual Fund Operating Expenses of 0.63%.
The investment manager may remove this limit at any time after the end of
the period set forth above. Any fee reductions or reimbursements may be
repaid to the investment manager within 3 years after they occur if such
repayments can be achieved within the Fund's then current expense limit,
if any, for that year and if certain other conditions are satisfied.
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EXAMPLE
The Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other money market funds. It assumes
that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The Example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses are 0.63% for the first two years and 0.80% for
the remaining years in the 3, 5 and 10 year examples. Your actual costs
may be higher or lower. The Example should not be considered a
representation of past or future expenses or performance.
Based on these assumptions your costs would be:
<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ --------- --------- ---------
$64 $221 $410 $957
</TABLE>
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MANAGEMENT OF THE FUND
INVESTMENT MANAGER
City National Bank ("CNB") is the Fund's investment manager. As
investment manager, CNB provides the Fund with investment management
services. CNB has provided trust and fiduciary services to individuals
and businesses for over 30 years through its trust and investment
division, City National Investments ("CNI"). CNI currently provides
investment management services to individuals, pension and profit sharing
plans, endownments, and foundations. As of March 31, 1999, CNI had
approximately $13.5 billion in assets under administration and $1.8
billion in assets under management. CNI receives 0.25% of average annual
net assets of the Fund for its investment management services.
CNB, founded in the early 1950's, is a federally chartered commercial
bank with approximately $6.3 billion in assets as of March 31, 1999. It
is a wholly-owned subsidiary of City National Corporation, a New York
Stock Exchange listed company. CNB's address is 400 North Roxbury Drive,
Beverly Hills, California 90210.
ADMINISTRATOR, FUND ACCOUNTANT AND TRANSFER AGENT
SEI Investments Mutual Funds Services serves as administrator and fund
accountant to the Fund. SEI Investments Fund Management serves as
transfer agent for the Fund. Both are located at One Freedom Valley
Drive, Oaks, Pennsylvania 19456 and can be reached at 1-888-889-0799.
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor") serves as the Fund's
distributor pursuant to a distribution agreement with the Fund. The
Distributor is located at One Freedom Valley Drive, Oaks, Pennsylvania,
19456 and can be reached at 1-888-889-0799.
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ACCOUNT POLICIES
HOW WE PRICE SHARES -- Shares are priced at NAV which is expected to
remain constant at $1.00. The NAV is calculated by adding the values of
all securities and other assets of the Fund, subtracting the liabilities,
and dividing the net amount by the number of outstanding shares.
Securities are valued at amortized cost, which approximates market value.
WHEN SHARES ARE PRICED -- NAV calculations are made once each day,
usually by 1:30 p.m. Eastern time. Shares may be purchased on any day
that the New York Stock Exchange and the Federal Reserve are open for
business. Shares, however, cannot be purchased by Federal Reserve wire on
days when either the New York Stock Exchange or the Federal Reserve is
closed.
REPORTING FUND PERFORMANCE -- From time to time the Fund may advertise
its yield and effective yield. Performance figures are based upon
historical results and are not intended to indicate future performance.
If you have any questions about the Fund, please call the Fund at
1-888-889-0799.
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UNDERSTANDING EARNINGS AND TAXES
DECLARING AND PAYING DIVIDENDS -- Dividends are declared each day the NAV
is calculated. Dividends are normally paid on the last business day of
each month. Net capital gain, if any, will be paid once a year.
WHEN DO DIVIDENDS ACCRUE? -- Your dividends begin to accrue on the day of
purchase for shares bought before 1:30 p.m. Eastern time. They begin to
accrue on the following day for shares purchased after 1:30 p.m. Eastern
time. You will not be credited with dividends for shares on the day you
sell them.
DISTRIBUTION OPTIONS -- Your dividends will be automatically reinvested
in additional full or fractional shares, unless you instruct the Fund in
writing prior to the date of distribution of your election to receive
payment in cash. Your election will be effective for all dividends and
distributions paid after the Fund receives your written notice. To cancel
your election, please send the Fund another written notice. Proceeds from
distributions will normally be wired to your financial institution on the
business day after distributions are credited to your account.
TAX CONSIDERATIONS -- The Fund intends to distribute substantially all of
its net investment income (including net short-term capital gain) to
shareholders. Generally, all distributions, whether received in cash or
reinvested in additional shares of the Fund, may be subject to federal
and state income tax. Dividends, distributions, purchases and sales will
appear on your account statements. You will be notified at least annually
about the tax consequences of distributions made each year. BE SURE TO
CONSULT YOUR TAX ADVISOR ABOUT THE SPECIFIC TAX IMPLICATIONS OF YOUR
INVESTMENTS. FOR ADDITIONAL INFORMATION REGARDING TAX CONSIDERATIONS, SEE
THE SAI.
BACKUP WITHHOLDING -- You must provide your financial institution or us
with your social security or tax identification number and specify
whether or not you are subject to backup withholding. Otherwise, you may
be subject to backup withholding at a rate of 31%.
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HOW TO BUY AND SELL SHARES
Here are the details you should know about buying and selling shares:
HOW TO PLACE AN ORDER
You may place an order with:
- an approved broker-dealer;
- any other approved financial institution; or
- the transfer agent as described below.
ORDERING THROUGH A BROKER-DEALER OR FINANCIAL INSTITUTION -- You may
purchase shares through accounts with brokers and other financial
institutions that are authorized to place trades in Fund shares for their
customers. If you invest through an authorized financial institution, you
will have to follow its procedures, which may be different from the
procedures for investing directly. Your financial institution may charge
a fee for its services, in addition to the fees charged by the Fund. You
will also generally have to address your correspondence or questions
regarding the Fund to your financial institution.
ORDERING THROUGH THE TRANSFER AGENT -- Financial institutions and
intermediaries may purchase shares of the Fund by placing orders directly
with the Transfer Agent. Financial institutions and intermediaries should
call the Transfer Agent at 1-888-889-0799 for further information and to
coordinate the establishment of an account directly with the Transfer
Agent.
WHEN ORDERS WILL BE COMPLETED -- You may have to transmit purchase or
exchange requests to your financial institution at an earlier time for
your transaction to become effective that day. This allows the financial
institution time to process your request and transmit it to the Fund. For
more information
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about how to purchase or exchange fund shares through your financial
institution, you should contact your financial institution directly.
If we receive your purchase order before 1:30 p.m. Eastern time, the
order will be executed that same day. Orders received after 1:30 p.m.
Eastern time will be executed the following business day. Your shares
will be bought only after we receive a properly completed order with full
payment.
PURCHASE MINIMUMS -- You may buy shares for:
- an initial amount of $100,000; and,
- additional investments of $1,000 or more.
Exceptions may be made at our discretion.
MINIMUM ACCOUNT BALANCES -- If your account balance drops below $100,000
because of redemptions, the Fund may redeem your shares. However, the
Fund will always give you at least 30 days' written notice to give you
time to add to your account and avoid the involuntary redemption of your
shares.
PAYMENT RESTRICTIONS -- We only accept payments by wire in U.S. funds.
Cash, checks and third-party checks will not be accepted. Consult with
your financial institution about their acceptable methods of payment.
BUYING SHARES
FIRST TIME AND SUBSEQUENT PURCHASES -- If you do not place your order
through the Transfer Agent as explained above, you will have to follow
your financial institution's procedures for transacting with the Fund.
Contact your financial institution for more information.
BY WIRE -- If you order through the Transfer Agent you may call the Fund
at 1-888-889-0799 to buy shares by wire. Wires must be received by us
through the Federal Reserve wire system before it closes (generally, 4:00
p.m. Eastern time) or we will not be able to process your order that day.
If you buy shares
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through your financial institution, your financial institution may charge
its own wiring fees.
SELLING SHARES
GENERAL INFORMATION -- If you have bought shares through the Transfer
Agent, you may sell those shares by calling the Transfer Agent at
1-888-889-0799. You may also sell your shares through your financial
institution. You will have to follow their procedures. Contact your
financial institution for more information.
GENERAL RESTRICTIONS -- We may suspend the right to sell shares or
postpone payment for a sale of shares when either the New York Stock
Exchange or the Federal Reserve's Fedline System is closed or restricted.
We reserve the right to reject any order that is not received in proper
form. For example, if we are unable to determine how many shares you wish
to sell, we may not execute your order.
OTHER REDEMPTION OPTIONS -- Under conditions where cash redemptions are
detrimental to the Fund and its shareholders, we reserve the right to
make redemptions in readily marketable securities other than cash. In
unusual circumstances, the Fund may temporarily suspend the processing of
sell requests, or postpone payments of proceeds for up to five business
days, as permitted by federal securities laws. Please see the SAI for a
more detailed discussion.
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CONFIRMING AUTHENTICITY -- We will take steps in an effort to verify that
an order is authentic.
To do so, we may:
- ask for a form of personal identification or written
confirmation of instructions; and
- tape record your telephone instructions.
We reserve the right to refuse an order if we cannot reasonably confirm
the authenticity of the instructions.
LIABILITY -- We may be liable for losses from unauthorized or fraudulent
orders only if reasonable steps are not taken to verify an order's
authenticity.
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FINANCIAL HIGHLIGHTS
The following financial highlights table is intended to help you
understand the Fund's financial performance for the period of March 23,
1998 (1) through October 31, 1998. Most of the information reflects
results based on one share of the Fund. The total return shown below
represents the rate an investor would have earned from an investment in
the Fund, assuming all dividends and distributions were reinvested. This
information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, are included in the 1998
Annual Report (available upon request; see the back cover of this
prospectus).
<TABLE>
<S> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $1.00
----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03
----
Total from investment operations 0.03
----
LESS DISTRIBUTION TO SHAREHOLDERS:
Dividends from net investment income (0.03)
----
Total distributions (0.03)
----
NET ASSET VALUE AT END OF PERIOD $1.00
----
----
TOTAL RETURN (NOT ANNUALIZED) 3.11%
SUPPLEMENTAL DATA AND RATIOS:
Net assets at end of period $133,427,960
Ratio of net expenses to average net assets (2) 0.63%
Ratio of net investment income to average net
assets (2) 4.99%
</TABLE>
(1) Commencement of operations.
(2) Annualized. Net of fees waived amounting to 0.15% of average net
assets.
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IMPORTANT TERMS TO KNOW
KEY DEFINITIONS
"We", "Us" and "Our" means the CNI Charter Money Market Fund.
"You" and "Your" means the prospective investor or current shareholder.
"Liquidity" means the ability to turn investments into cash.
"Quality" means the credit rating given to a security by a nationally
recognized statistical rating organization.
"Yield" means the interest rate you would receive if you kept your
investment in the Fund for a year. It is based on the current interest
rate for a trailing seven-day period.
"Effective Yield" means the interest rate, compounded weekly, you would
receive if you kept your investment in the Fund for a year.
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FOR MORE INFORMATION
CNI CHARTER MONEY MARKET FUND
Additional information is available free of charge in the STATEMENT OF
ADDITIONAL INFORMATION ("SAI"). The SAI is incorporated by reference (legally
considered part of this document). Additional information about the Fund's
investments is available in the Fund's Annual and Semi-Annual Reports to
shareholders. In the Fund's Annual Report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year. To receive a free copy of this
prospectus, the SAI, or the Annual or Semi-Annual Reports (when available),
please contact:
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
1-888-889-0799
INFORMATION ABOUT THE FUND MAY BE REVIEWED AND COPIED:
- - at the SEC's Public Reference Room in Washington, D.C. at 1-800-SEC-0330;
- - on the SEC's Internet site at www.sec.gov; or
- - by written request (including duplication fee) to the Public Reference
Section of the SEC, Washington, D.C. 20549-6009.
FOR THE CURRENT SEVEN-DAY YIELD, OR IF YOU HAVE QUESTIONS ABOUT THE FUND, PLEASE
CALL 1-888-889-0799.
The Fund's Investment Company Act
file number: 811-07923.
[LOGO]
MONEY MARKET FUND
INSTITUTIONAL CLASS
PROSPECTUS
DATED MAY 10, 1999
CNI-F-001-01
<PAGE>
Rule 497(e)
File Nos. 333-16093 and 811-07923
STATEMENT OF ADDITIONAL INFORMATION
CNI CHARTER FUNDS
400 North Roxbury Drive, Beverly Hills, California 90210
CNI CHARTER MONEY MARKET FUND
May 10, 1999
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the CNI Charter Money Market Fund Prospectus dated
May 10, 1999, which may be amended from time to time. The Fund is a
diversified investment portfolio of CNI Charter Funds (the "Trust"), an
open-end, management investment company. The Fund was formerly called
Berkeley Money Market Fund and the Trust was formerly called Berkeley Funds.
To obtain a free copy of the above-referenced Prospectus, please contact SEI
Investments Fund Management (the "Transfer Agent") at 1-888-889-0799.
TABLE OF CONTENTS
Page
INVESTMENT TECHNIQUES.......................................................2
INVESTMENT RESTRICTIONS.....................................................6
RISK CONSIDERATIONS.........................................................9
MANAGEMENT OF THE TRUST....................................................10
PORTFOLIO TRANSACTIONS AND TURNOVER........................................15
DISTRIBUTIONS AND TAXES....................................................16
SHARE PRICE CALCULATION....................................................19
YIELD......................................................................19
GENERAL INFORMATION........................................................20
PRINCIPAL HOLDERS OF SECURITIES............................................20
PURCHASE AND REDEMPTION OF SHARES..........................................21
OTHER INFORMATION..........................................................21
FINANCIAL STATEMENTS.......................................................22
APPENDIX - RATINGS OF INVESTMENT SECURITIES...............................A-1
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INVESTMENT TECHNIQUES
The Fund invests exclusively in the following types of U.S. dollar-denominated
money market instruments which are deemed to mature in 397 days or less in
accordance with federal securities regulations and which the Investment Manager
has determined present minimal credit risk:
- Certificates of deposit, time deposits, notes and bankers' acceptances of
U.S. domestic banks (including their foreign branches), Canadian chartered
banks, U.S. branches of foreign banks and foreign branches of foreign
banks having total assets of $5 billion or greater.
- Commercial paper, including asset-backed commercial paper, rated in one of
the two highest rating categories by Moody's Investors Services
("Moody's), Standard and Poor's Corporation ("S&P"), Duff and Phelps
Credit Rating Co. ("Duff"), Fitch Investors Service, Inc. ("Fitch"), or
any other nationally recognized statistical rating organization ("NRSRO"),
or commercial paper or notes of issuers with an unsecured debt issue
outstanding currently rated in one of the two highest rating categories by
any NRSRO where the obligation is on the same or a higher level of
priority and collateralized to the same extent as the rated issue.
- The Fund may also invest in other corporate obligations such as publicly
traded bonds, debentures, and notes rated in one of the two highest rating
categories by any NRSRO and other similar securities which, if unrated by
any NRSRO, are determined by the Investment Manager, using guidelines
approved by the Trust's Board of Trustees, to be at least equal in quality
to one or more of the above referenced securities.
- Obligations of, or guaranteed by, the U.S. or Canadian governments,
their agencies or instrumentalities.
- Repurchase agreements involving obligations that are suitable for
investment under the categories listed above.
ASSET-BACKED COMMERCIAL PAPER. The Fund can invest a portion of its assets in
asset-backed commercial paper and other money market fund Eligible Securities
(as that term is defined on page 7). The credit quality of most asset-backed
commercial paper depends primarily on the credit quality of the assets
underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator (or any other affiliated
entities), and the amount and quality of any credit support provided to the
securities.
Repayment of asset-backed commercial paper is intended to be obtained from an
identified pool of assets including automobile receivables, credit-card
receivables, and other types of assets. Asset-backed commercial paper is issued
by a special purpose vehicle (usually a corporation) that has been established
for the purpose of issuing the commercial paper and purchasing the underlying
pool of assets. The issuer of commercial paper bears the direct risk of
prepayment on the receivables constituting the underlying pool of assets.
To lessen the effect of failures by obligors on these underlying assets to make
payments, such securities may contain elements of credit support. Credit support
for asset-backed securities may be based on the underlying assets or credit
enhancements provided by a third party. Credit enhancement techniques include
letters of credit, insurance bonds, limited guarantees, and
over-collateralization.
Credit support falls into two classes: liquidity protection and protection
against ultimate default on the underlying assets. Liquidity protection refers
to the provision of advances, generally by the entity administering the pool of
assets, to ensure that scheduled payments on the underlying pool are made in a
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timely fashion. Protection against ultimate default ensures payment on at least
a portion of the assets in the pool. This protection may be provided through
guarantees, insurance policies, or letters of credit obtained from third
parties, through various means of structuring the transaction, or through a
combination of such approaches. The degree of credit support provided on each
issue is based generally on historical information respecting the level of
credit risk associated with such payments. Delinquency or loss in excess of that
anticipated could adversely affect the return on an investment in an
asset-backed security.
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed securities. These
types of securities represent a direct or indirect participation in, or are
secured by and payable from, pools of assets, such as motor vehicle installment
sales contracts, installment loan contracts, leases of various types of real and
personal property, and receivables from revolving credit (e.g., credit card)
agreements. Payments or distributions of principal and interest on asset-backed
securities may be supported by credit enhancements, such as various forms of
cash collateral accounts or letters of credit. These securities are subject to
the risk of prepayment. Prepayments of principal of asset-backed securities
affect the average life of the asset-backed securities in the Fund's portfolio.
Prepayments are affected by the level of interest rates and other factors,
including general economic conditions. In periods of rising interest rates, the
prepayment rate tends to decrease, lengthening the average life of a pool of
asset-backed securities. In periods of falling interest rates, the prepayment
rate tends to increase, shortening the average life of a pool. Reinvestment of
prepayments may occur at higher or lower interest rates than the original
investment, affecting the Fund's yield. Thus, asset-backed securities may have
less potential for capital appreciation in periods of falling interest rates
than other fixed-income securities of comparable duration, although they may
have a comparable risk of decline in market value in periods of rising interest
rates. Payment of principal and interest may be largely dependent upon the cash
flows generated by the assets backing the securities.
SECTION 4(2) COMMERCIAL PAPER. The Fund may invest in commercial paper and other
securities that are issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended (the "1933 Act") ("Section 4(2) paper"). Federal securities
laws restrict the disposition of Section 4(2) paper. Section 4(2) paper
generally is sold to institutional investors such as the Fund who agree that
they are purchasing the paper for investment and not for public distribution.
Any resale of Section 4(2) paper by the purchaser must be in an exempt
transaction and may be accomplished in accordance with Rule 144A under the 1933
Act. Section 4(2) paper normally may be resold to other institutional investors
such as the Fund through or with the assistance of the issuer or investment
dealers who make a market in the Section 4(2) paper, thus providing liquidity.
Because it is not possible to predict with assurance exactly how this market for
Section 4(2) paper sold and offered under Rule 144A will continue to develop,
the Investment Manager, pursuant to guidelines approved by the Trust's Board of
Trustees, will monitor the Fund's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity, and availability
of information.
RULE 144A SECURITIES. Rule 144A under the 1933 Act establishes a safe harbor
from the registration requirements of the 1933 Act for resales of certain
securities to qualified institutional buyers. Institutional markets for
restricted securities sold pursuant to Rule 144A in many cases provide both
readily ascertainable values for restricted securities and the ability to
liquidate an investment to satisfy share redemption orders. Such markets might
include automated systems for the trading, clearance, and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. An
insufficient number of qualified buyers interested in purchasing Rule
144A-eligible restricted securities, however, could adversely affect the
marketability of such portfolio securities and result in the Fund's inability to
dispose of such securities promptly or at favorable prices.
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The Board of Trustees may, in the future, delegate the function of making
day-to-day determination of liquidity to the Fund's Investment Manager pursuant
to guidelines approved by the Board. The Investment Manager will take into
account a number of factors in reaching liquidity decisions, including, but not
limited to: (i) the frequency of trades for the security, (ii) the number of
dealers that quote prices for the security, (iii) the number of dealers that
have undertaken to make a market in the security, (iv) the number of other
potential purchasers, and (v) the nature of the security and how trading is
effected (e.g., the time needed to see the security, how bids are solicited, and
the mechanics of transfer). To the extent the Investment Manager, according to
guidelines approved by the Board, determines a Rule 144A-eligible security to be
liquid, such a security, would not be subject to the Fund's percentage limit on
illiquid securities investment.
ILLIQUID SECURITIES. The Fund will not purchase illiquid securities, including
time deposits and repurchase agreements maturing in more than seven days, if, as
a result of the purchase, more than 10% of the Fund's net assets valued at the
time of the transaction are invested in such securities. The Fund will monitor
the level of liquidity and take appropriate action, if necessary, to attempt to
maintain adequate liquidity. The investment policy on the purchase of illiquid
securities is nonfundamental.
BANK NOTES. The Fund may invest in bank notes, which are unsecured promissory
notes representing debt obligations that are issued by banks in large
denominations.
INVESTMENT COMPANIES. The Fund may invest up to 10% of its total assets in
shares of other investment companies investing exclusively in securities in
which it may otherwise invest. The Fund does not intend to invest in investment
companies unless, in the Investment Manager's judgment, the potential benefits
exceed associated costs. As a shareholder in an investment company, the Fund
bears its ratable share of that investment company's expenses, including
advisory and administration fees.
TAX-EXEMPT COMMERCIAL PAPER. Tax-exempt commercial paper is unsecured short-term
obligations issued by a government or political sub-division thereof. It is not
currently expected that the Fund will invest more than 5% of its net assets in
tax-exempt commercial paper.
EURODOLLAR CERTIFICATES OF DEPOSIT AND FOREIGN SECURITIES. Before investing in
Eurodollar certificates of deposit, the Fund will consider their marketability,
possible restrictions on international currency transactions, and any
regulations imposed by the domicile country of the foreign issuer. Eurodollar
certificates of deposit may not be subject to the same regulatory requirements
as certificates of deposit issued by U.S. banks, and associated income may be
subject to the imposition of foreign taxes, including withholding taxes.
Investments in securities of foreign issuers or securities principally traded
overseas may involve certain special risks due to foreign economic, political,
and legal developments, including expropriation of assets or nationalization,
imposition of withholding taxes on dividend or interest payments, and possible
difficulty in obtaining and enforcing judgments against foreign entities.
Furthermore, issuers of foreign securities are subject to different, often less
comprehensive, accounting, reporting, and disclosure requirements than domestic
issuers. The securities of some foreign companies and foreign securities markets
are less liquid and at times more volatile than securities of comparable U.S.
companies and U.S. securities markets. Foreign brokerage commissions and other
fees are also generally higher than in the United States. There are also special
tax considerations which apply to securities of foreign issuers and securities
principally traded overseas. All such securities will be U.S. dollar
denominated.
REPURCHASE TRANSACTIONS. The Fund may engage in repurchase agreements, which are
instruments under which the Fund acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the
4
<PAGE>
purchase price), thereby determining the yield during the Fund's holding period.
Maturity of the securities subject to repurchase agreements may exceed one year.
If the seller in a repurchase agreement becomes bankrupt or otherwise defaults,
the Fund might incur expenses in enforcing its rights, and could experience
losses, including a decline in the value of the underlying securities and loss
of income. The Fund will enter into repurchase agreements only with banks and
broker-dealers that the Investment Manager deems creditworthy.
It is not currently anticipated that the Fund will engage in reverse repurchase
agreements.
VARIABLE RATE SECURITIES. The Fund may invest in instruments having rates of
interest that are adjusted periodically, or which "float" continuously according
to formulas intended to minimize any fluctuation in the values of the
instruments ("Variable Rate Securities"). The interest rate of Variable Rate
Securities ordinarily is determined by reference to, or is a percentage of, an
objective standard such as a bank's prime rate, the 90-day U.S. Treasury Bill
rate, or the rate of return on commercial paper or bank certificates of deposit.
As interest rates decrease or increase, Variable Rate Securities can be expected
to experience less appreciation or depreciation than fixed-rate obligations.
Some Variable Rate Securities ("Variable Rate Demand Securities") have a demand
feature entitling the purchaser to resell the securities at an amount
approximately equal to amortized cost, or the principal amount thereof plus
accrued interest. As is the case for other Variable Rate Securities, the
interest rate on Variable Rate Demand Securities varies according to some
objective standard intended to minimize fluctuation in the values of the
instruments. The Fund determines the maturity of Variable Rate Securities in
accordance with Securities and Exchange Commission ("SEC") rules.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase securities on
a "when-issued" or "delayed delivery" basis. When-issued or delayed delivery
securities are securities purchased for future delivery at a stated price and
yield. The Fund generally will not pay for such securities or start earning
interest on them until they are received. Securities purchased on a when-issued
or delayed delivery basis are recorded as an asset. The value of such securities
may change as the general level of interest rates changes.
The Fund will not invest more than 25% of its assets in when-issued or delayed
delivery securities. The Fund will not purchase these types of securities for
speculative purposes and will expect to acquire the securities when purchased.
However, the Fund reserves the right to sell any of these securities before
their settlement dates if the Investment Manager deems such a sale advisable.
BORROWING POLICY. The Fund may not borrow money except as a temporary measure
for extraordinary or emergency purposes, and then only in an amount up to
one-third of the value of its total assets in order to meet redemption requests
without immediately selling any portfolio securities. The Fund will not borrow
for leverage purposes or purchase securities or make investments while
borrowings are outstanding. If for any reason the current value of the total
assets of the Fund falls below an amount equal to three times the amount of
indebtedness for money borrowed, the Fund will, within three days, (not
including Sundays and holidays), reduce its indebtedness to the extent necessary
to meet that limitation. Any borrowings under this provision will not be
collateralized.
5
<PAGE>
INVESTMENT RESTRICTIONS
EXCEPT AS OTHERWISE NOTED WITH AN *, THE RESTRICTIONS BELOW ARE NONFUNDAMENTAL
AND CAN BE CHANGED WITHOUT APPROVAL OF THE HOLDERS OF A MAJORITY OF THE
OUTSTANDING VOTING SECURITIES (AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED, HEREINAFTER THE "1940 ACT") OF THE FUND. THE FUND MAY NOT:
(1)* Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities) if, as a result
thereof, more than 5% of the value of its assets would be invested in the
securities of such issuer.
(2) Purchase more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as one class.
(3)* Concentrate 25% or more of the value of its total assets in any one
industry; provided, however, that the Fund may invest up to 100% of its assets
in certificates of deposit or bankers' acceptances issued by domestic branches
of U.S. banks and U.S. branches of foreign banks (which the Fund has determined
to be subject to the same regulation as U.S. banks), or obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities in
accordance with its investment objective and policies.
(4) Enter into repurchase agreements if, as a result thereof, more than 10% of
its net assets valued at the time of the transaction would be subject to
repurchase agreements maturing in more than seven days and invested in
securities restricted as to disposition under the federal securities laws
(except commercial paper issued under Section 4(2) of the Securities Act of
1933). The Fund will invest no more than 10% of its net assets in illiquid
securities.
(5) Invest more than 5% of its total assets in securities restricted as to
disposition under the federal securities laws (except (i) commercial paper
issued under Section 4(2) of the Securities Act of 1933 and (ii) liquid Rule
144A - eligible restricted securities).
(6)* Invest in commodities or commodity contracts, futures contracts, real
estate or real estate limited partnerships, although it may invest in securities
which are secured by real estate and securities of issuers which invest or deal
in real estate.
(7) Invest for the purpose of exercising control or management of another
issuer.
(8) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization, or acquisition of assets, or as
may otherwise be permitted by the prospectus and the 1940 Act.
(9)* Make loans to others (except through the purchase of debt obligations or
repurchase agreements in accordance with its investment objectives and
policies).
(10)*Borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only in an amount up to one-third of the value of its total
assets in order to meet redemption requests without immediately selling any
portfolio securities. The Fund will not borrow for leverage purposes or purchase
securities or make investments while borrowings are outstanding. Any borrowings
by the Fund will not be collateralized. If for any reason the current value of
the total assets of the Fund falls below an amount equal to three times the
amount of indebtedness for money borrowed, the Fund will, within three business
days, reduce its indebtedness to the extent necessary to meet that limitation.
6
<PAGE>
(11) Write, purchase, or sell puts, calls, or combinations thereof.
(12) Make short sales of securities or purchase any securities on margin,
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
(13)* Underwrite securities issued by others, except to the extent it may be
deemed to be an underwriter under the federal securities laws in connection with
the disposition of securities from its investment portfolio.
(14)* Issue senior securities as defined in the 1940 Act.
Except for restrictions (3), (4) and (10), if a percentage restriction is
adhered to at the time of investment, a later increase in percentage resulting
from a change in values or net or total assets will not be considered a
violation of that restriction.
The Fund will only purchase securities that the Investment Manager has
determined, according to procedures approved by the Board and factors set forth
in Rule 2a-7 under the Investment Company Act of 1940, to present minimal credit
risk and which are First Tier or Second Tier Securities (otherwise referred to
as "Eligible Securities"). An Eligible Security is:
(1) a security with a remaining maturity of 397 days or less: (a) that is
rated by the requisite nationally recognized statistical rating
organizations ("NRSROs") designated by the Securities and Exchange
Commission (the "SEC") (currently Moody's Investors Service
("Moody's"), Standard & Poor's Ratings Group ("S&P"), Duff and Phelps
Credit Rating Co. ("Duff"), Fitch Investors Service, Inc. ("Fitch"),
Thomson BankWatch, and, with respect to debt issued by banks, bank
holding companies, United Kingdom building societies, broker-dealers
and broker-dealers' parent companies, and bank-supported debt, IBCA
Limited and its affiliate, IBCA, Inc.) in one of the two highest rating
categories for short-term debt obligations (two NRSROs are required but
one rating suffices if only one NRSRO rates the security), or (b) that
itself was unrated by any NRSRO, but was issued by an issuer that has
outstanding a class of short-term debt obligations (or any security
within that class) meeting the requirements of subparagraph 1(a) above
that is of comparable priority and security;
(2) a security that at the time of issuance was a long-term security but
has a remaining maturity of 397 days or less, and whose issuer received
a rating within one of the two highest rating categories from the
requisite NRSROs for short-term debt obligations with respect to a
class of short-term debt obligations (or any security within that
class) that is now comparable in priority and security with the subject
security; or
(3) a security not rated by an NRSRO but deemed by the Investment Manager,
pursuant to guidelines adopted by the Trust's Board of Trustees, to be
of comparable quality to securities described in (1) and (2) above and
to represent minimal credit risk.
A First Tier Security is any Eligible Security that carries (or if other
relevant securities issued by its issuer carry) top NRSRO ratings from at least
two NRSROs (a single top rating suffices if only one NRSRO rates the security),
that has been determined by the Investment Manager, pursuant to guidelines
adopted by the Trust's Board of Trustees, to be of comparable quality to such a
security, that is a security issued by a registered investment company that is a
money market fund, or that is a U.S. government security (a "Government
security"). A Second Tier Security is any other Eligible Security.
The Fund will limit its investments in the First Tier Securities of any one
issuer to no more than 5% of its total assets. (Repurchase agreements
collateralized by non-Government securities will be taken into account when
making this calculation.) Moreover, the Fund's total holdings of Second Tier
Securities
7
<PAGE>
will not exceed 5% of its total assets, with investment in the Second
Tier Securities of any one issuer being limited to the greater of 1% of the
Fund's total assets or $1 million. In addition, the underlying securities
involved in repurchase agreements collateralized by non-Government securities
will be First Tier Securities at the time the repurchase agreements are
executed.
8
<PAGE>
RISK CONSIDERATIONS
The Fund's portfolio will be affected by general changes in interest rates which
will result in increases or decreases in the market value of the obligations
held by the Fund. The market value of the obligations in the Fund's portfolio
can be expected to vary inversely to changes in prevailing interest rates.
Investors also should recognize that, in periods of declining interest rates,
the Fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates, the Fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to the Fund from the continuous sale of its shares will likely be invested
in portfolio instruments producing lower yields than the balance of its
portfolio, thereby reducing the Fund's current yield. In periods of rising
interest rates, the opposite can be expected to occur. In addition, securities
in which the Fund may invest may not yield as high a level of current income as
might be achieved by investing in securities with less liquidity and safety and
longer maturities.
The value of commercial paper and other securities in the Fund's portfolio may
be adversely affected by the inability of the issuers (or related supporting
institutions) to make principal or interest payments on the obligations in a
timely manner. As discussed above, the Fund will invest in securities which the
Investment Manager has determined, according to procedures approved by the
Board, and factors set forth under Rule 2a-7 under the Investment Company Act of
1940, as amended, to present minimal credit risk. The ratings assigned to
commercial paper and other corporate obligations, as well as the guidelines
approved by the Trust's Board of Trustees, are intended to enable the Investment
Manager to minimize the credit risk with respect to the securities in the Fund's
portfolio, but there can be no absolute assurance that the Investment Manager
will be successful in this regard. If issuer defaults nevertheless occur
respecting a sufficiently large portion of the Fund's portfolio, the Fund may be
unable to maintain a stable net asset value of $1.00 per share.
The Fund's performance also may be affected by changes in market or economic
conditions and other circumstances affecting the financial services industry.
Government regulation of banks, savings and loan associations, and finance
companies may limit both the amounts and types of loans and other financial
commitments these entities can make and the interest rates and fees they can
charge. The profitability of the financial services industry, which is largely
dependent on the availability and, cost of capital funds, has fluctuated in
response to volatility in interest rate levels. In addition, the financial
services industry is subject to risks resulting from general economic conditions
and the potential exposure to credit losses.
9
<PAGE>
MANAGEMENT OF THE TRUST
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their principal occupations during the
past five years, and their affiliations, if any, with the Investment Manager or
SEI Investment Distribution Co. are as follows:
<TABLE>
<CAPTION>
Principal Occupation
Name Age Position with the Trust for the Past Five Years
- ---- --- ----------------------- -----------------------
<S> <C> <C> <C>
Irwin G. Barnet, Esq.* 61 Trustee An attorney and a principal of
Sanders, Barnet, Goldman, Sanders, Barnet, Goldman, Simons &
Simons & Mosk Mosk, a law firm
1901 Avenue of the Stars, Suite 850
Los Angeles, California 90067
Maria D. Hummer, Esq. 54 Trustee An attorney with Manatt, Phelps &
Manatt, Phelps & Phillips, LLP Phillips and Chair of the Land Use
11355 West Olympic Boulevard Section of that law firm
Los Angeles, California 90064-1614
Victor Meschures, CPA 61 Trustee A Certified Public Accountant with
Meschures, Campeas, Thompson Meschures, Campeas, Thompson &
& Snyder, LLP Snyder, an accounting firm
760 North La Cienega Boulevard
Los Angeles, California 90069-5231
William R. Sweet 61 Trustee Retired; formerly, Executive Vice
81 Mt. Tiburon Road President, The Bank of California
Tiburon, California 94920 (1985-1996)
10
<PAGE>
Principal Occupation
Name Age Position with the Trust for the Past Five Years
- ---- --- ----------------------- -----------------------
James R. Wolford 45 Trustee Senior Vice President and Chief
Bixby Ranch Company Financial Officer, Bixby Ranch
3010 Old Ranch Parkway, Suite 100 Company, an owner, operator and
Seal Beach, California 90740 developer of real estate
Mark Nagle 39 President and Chief President, Vice President and
400 North Roxbury Drive Executive Officer Controller, Funds Accounting; Vice
Beverly Hills, California 90210 President of the Administrator and
Distributor (1996-Present); BiSYS
Fund Services, Vice President of
Fund Accounting (1995-1996); Fidelity
Investments, Senior Vice President
(1981-1995).
Kathy Heilig 38 Controller and Chief Vice President and Assistant
400 North Roxbury Drive Accounting Officer Secretary-Treasurer of SEI
Beverly Hills, California 90210 Investments (1997-Present);
Assistant Controller of SEI
Investments Company (1995-1997; Vice
President of SEI Investments
Company (1991-1995).
11
<PAGE>
Principal Occupation
Name Age Position with the Trust for the Past Five Years
- ---- --- ----------------------- -----------------------
Joseph M. O'Donnell, Esq. 44 Vice President and Vice President and Assistant
400 North Roxbury Drive Assistant Secretary Secretary of the Administrator and
Beverly Hills, California 90210 the Distributor (1998-Present);
Vice President and General
Counsel, FPS Services, Inc.
(1993-1997).
Lydia A. Gavalis, Esq. 34 Vice President and Vice President and Assistant
400 North Roxbury Drive Assistant Secretary Secretary of the Administrator and
Beverly Hills, California 90210 the Distributor (1998-Present);
Assistant General Counsel and
Director of Arbitration,
Philadelphia Stock Exchange
(1989-1998)
Lynda J. Striegel, Esq. 50 Vice President and Vice President and Assistant
400 North Roxbury Drive Assistant Secretary Secretary of the Administrator and
Beverly Hills, California 90210 Distributor (1998-Present); Senior
Asset Management Counsel, Barnett
Banks, Inc. (1997-1998); Partner,
Groom and Nordberg, Chartered
(1996-1997); Associate General
Counsel, Riggs Bank, N.A. (1991-1995).
James R. Foggo, Esq. 34 Vice President and Vice President and Assistant
400 North Roxbury Drive Assistant Secretary Secretary of the Administrator and
Beverly Hills, California 90210 Distributor (1998-Present); Associate,
Paul Weiss, Rifkind, Wharton & Garrison
(1998); Associate, Baker & McKenzie
(1995-1998); Associate, Battle Fowler
LLP (1993-1995).
</TABLE>
12
<PAGE>
*This individual is considered an interested person of the Trust as defined in
Section 2(a)(19) of the 1940 Act. The address of each individual listed above,
unless otherwise indicated, is 400 North Roxbury Drive, Beverly Hills,
California 90210.
<TABLE>
<CAPTION>
COMPENSATION TABLE(1)
Aggregate
Compensation Total Compensation From Registrant
Name, Position From Registrant and Fund Complex Paid to Trustees
- -------------- --------------- ---------------------------------
<S> <C> <C>
Irwin G. Barnet, Trustee $4,000 $4,000
Maria D. Hummer, Trustee $4,000 $4,000
Victor Meschures, Trustee $4,000 $4,000
William R. Sweet, Trustee $4,000 $4,000
James R. Wolford, Trustee $4,000 $4,000
</TABLE>
----------------------
(1) Estimated for current fiscal year.
INVESTMENT MANAGER
City National Bank ("CNB") serves as the Fund's discretionary investment
manager, through its division City National Investments ("CNI"), pursuant to
an Investment Management Agreement dated April __, 1999 between it and the
Trust on behalf of the Fund. The Investment Manager provides a continuous
investment program including general investment and economic advice regarding
the Fund's investment strategies, manages the Fund's investment portfolio and
provides other services necessary to the operation of the Fund and the Trust.
The Investment Manager is exempt from the registration requirement as an
investment adviser under the Investment Advisers Act of 1940 because of its
status as a bank. CNI currently provides investment management services to
individuals, pension and profit sharing plans, endowments, and foundations.
As of March 31, 1999, CNI had approximately $13.5 billion in assets under
administration and $1.8 billion in assets under management.
CNB, founded in the early 1950's, is a federally chartered commercial bank
with approximately $6.4 billion in assets as of December 31, 1998. It is a
wholly-owned subsidiary of City National Corporation, a New York Stock
Exchange listed company. CNB's address is 400 North Roxbury Drive, Beverly
Hills, California 90210.
The Investment Management Agreement will be in effect for a two-year term from
its effective date, and thereafter will continue in effect for one-year terms,
subject to annual approval by: (1) the Trust's Board of Trustees or (2) a vote
of the majority (as defined in the 1940 Act) of the outstanding voting
securities of the Fund. In either event, the continuance must also be approved
by a majority of the Trust's Board of Trustees who are not parties to the
Agreement, or interested persons (as defined in the 1940 Act) of any such party,
by vote cast in person at a meeting called for the purpose of voting on such
approval. The
13
<PAGE>
Investment Management Agreement may be terminated at any time upon 60-days
notice by either party, or by a majority vote of the outstanding shares of the
Fund, and will terminate automatically upon assignment (as defined in the 1940
Act).
Pursuant to the Investment Management Agreement, the Investment Manager is
entitled to receive from the Fund an annual fee, payable monthly, of 0.25% of
the Fund's average daily net assets. The Investment Management Agreement allows
the Investment Manager voluntarily to waive its fees payable under the Agreement
and to reimburse all or a portion of the Fund's expenses. The Investment
Management Agreement further provides that the Investment Manager may seek
reimbursement of any reductions made to its management fee and any payments by
the Investment Manager of operating expenses that the Fund is obligated to pay
within the three-year period following such reduction or payment, subject to the
Fund's ability to effect such reimbursement and remain in compliance with any
applicable expense limitations. The Investment Manager will generally seek
reimbursement for the oldest of any reductions and, or waivers before payment by
the Fund for fees and expenses for the current year. Such reimbursement may be
paid prior to the Fund's payment of current expenses if so requested by the
Investment Manager even if such payment may require the Investment Manager to
waive or reduce its current fees under the Investment Management Agreement or to
pay current Fund expenses.
SHAREHOLDER SERVICES AGREEMENT
The Investment Manager has entered into a Shareholder Services Agreement with
the Trust on behalf of the Fund. Pursuant to the Shareholder Services Agreement,
the Investment Manager will provide, or will arrange for others to provide,
certain specified shareholder services to shareholders of the Fund. As
compensation for the provision of such services, the Fund will pay the
Investment Manager a fee of up to 0.25% of the Fund's average daily net assets
on an annual basis, payable monthly. The Investment Manager will pay certain
banks, trust companies, broker-dealers, and other institutions (each a
"Participating Organization") out of the fees the Investment Manager receives
from the Fund under the Shareholder Services Agreement to the extent that the
Participating Organization performs shareholder servicing functions for the Fund
with respect to shares of the Fund owned from time to time by customers of the
Participating Organization. In certain cases, the Investment Manager may also
pay a fee, out of its own resources and not out of the service fee payable under
the Shareholder Services Agreement, to a Participating Organization for
providing other administrative services to its customers who invest in the Fund.
Pursuant to the Shareholder Services Agreement, the Investment Manager will
provide or arrange with a Participating Organization for the provision of the
following shareholder services: responding to shareholder inquiries; processing
purchases and redemptions of the Fund's shares, including reinvestment of
dividends; assisting shareholders in changing dividend options, account
designations, and addresses; transmitting proxy statements, annual reports,
prospectuses, and other correspondence from the Fund to shareholders (including,
upon request, copies, but not originals, of regular correspondence,
confirmations, or regular statements of account) where such shareholders hold
shares of the Fund registered in the name of the Investment Manager, a
Participating Organization, or their nominees; and providing such other
information and assistance to shareholders as may be reasonably requested by
such shareholders.
The Investment Manager may also enter into agreements with Participating
Organizations that process substantial volumes of purchases and redemptions of
shares of the Fund for their customers. Under these arrangements, the Transfer
Agent will ordinarily maintain an omnibus account for a Participating
Organization and the Participating Organization will maintain sub-accounts for
its customers for whom it processes purchases and redemptions of shares. A
Participating Organization may charge its customers a fee, as agreed upon by the
Participating Organization and the customer, for the services it provides.
Customers of participating Organizations should read the Fund's Prospectus in
conjunction with the service agreement and other literature describing the
services and related fees provided by the Participating Organization to its
customers prior to any purchase of shares.
14
<PAGE>
EXPENSES
The Trust pays the expenses of its operations, including: the fees and expenses
of independent accountants, counsel and the custodian; the cost of reports and
notices to shareholders; the cost of calculating net asset value; registration
fees; the fees and expenses of qualifying the Trust and its shares for
distribution under federal and state securities laws; and membership dues in the
Investment Company Institute and, or other industry association membership dues.
PRINCIPAL UNDERWRITER
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned
subsidiary of SEI Investments, and the Trust are parties to a distribution
agreement (the "Distribution Agreement") with respect to shares of the Fund.
The Distributor receives no compensation for distribution of shares of the
Fund.
The Distribution Agreement shall remain in effect for a
period of two years after the effective date of the agreement and is
renewable annually. The Distribution Agreement may be terminated by the
Distributor, by a majority vote of the Trustees who are not interested
persons and have no financial interest in the Distribution Agreement or by a
majority vote of the outstanding securities of the Trust upon not more than
60 days' written notice by either party or upon assignment by the
Distributor.
TRANSFER AGENT
Pursuant to a Transfer Agent Agreement, SEI Investments Fund Management,
located at One Freedom Valley Drive, Oaks, Pennsylvania, 19456 (the "Transfer
Agent") serves as transfer agent for the Fund. The Transfer Agent provides
information and services to the Fund's shareholders which include reporting
share ownership, sales, and dividend activity (and associated tax
consequences), responding to daily inquiries, and effecting the transfer of
Fund shares. It furnishes such office space and equipment, telephone
facilities, personnel, and informational literature distribution as is
necessary or appropriate in providing shareholder and transfer agency
information and services.
CUSTODIAN AND FUND ACCOUNTANT
Pursuant to a Custodian Agreement, First Union National Bank serves as the
Custodian (the "Custodian") of the Fund's assets. Under the terms of the
Custodian Agreement, the Custodian holds and administers the securities and
cash in the Fund's portfolio.
INDEPENDENT AUDITORS
15
<PAGE>
At a meeting of the Board of Directors of the Fund held on January 14, 1999 the
Board appointed KPMG LLP to serve as independent auditor for the Fund for the
year ended October 31, 1999 and dismissed PriceWaterhouseCoopers LLP, who had
served as the Fund's former independent auditor. KPMG LLP serves as independent
auditor for other investment funds which are managed by CNI Investments.
PriceWaterhouseCoopers LLP issued an unqualified opinion on the financial
statements of the Fund for the period from March 1, 1998 (date of inception) to
October 31, 1998. In addition, there have been no disagreements in regards to
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which if not resolved to the
satisfaction of PriceWaterhouseCoopers LLP would have caused it to make a
reference to the subject matter of the disagreement in connection with its
report.
REPORTS TO SHAREHOLDERS
Shareholders will be sent audited annual and unaudited semi-annual financial
statements. The address of KPMG LLP is 725 South Figueroa Street, Los Angeles
90017.
LEGAL COUNSEL
The validity of the shares of beneficial interest offered hereby will be passed
upon by Paul, Hastings, Janofsky & Walker LLP, 345 California Street, San
Francisco, California 94104.
16
<PAGE>
PORTFOLIO TRANSACTIONS AND TURNOVER
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to: pursue the objective of
the Fund in relation to movements in the general level of interest rates; invest
money obtained from the sale of Fund shares; reinvest proceeds from maturing
portfolio securities; and meet redemptions of Fund shares. Portfolio
transactions may increase or decrease the yield of the Fund depending upon
management's ability correctly to time and execute them.
The Investment Manager, in effecting purchases and sales of portfolio securities
for the account of the Fund, seeks to obtain best price and execution. Subject
to the supervision of the Board of Trustees, the Investment Manager generally
selects broker-dealers for the Fund primarily on the basis of the quality and
reliability of services provided, including execution capability and financial
responsibility.
When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager may, in its discretion, utilize the services
of broker-dealers that provide it with investment information and other research
resources. Such resources may also be used by the Investment Manager when
providing advisory services to other investment advisory clients, including
other mutual funds.
The Trust expects that purchases and sales of portfolio securities will usually
be principal transactions. Securities will normally be purchased directly from
the issuer or from an underwriter or market maker for the securities.
Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
will include the spread between the bid and asked prices.
Investment decisions for the Fund are reached independently from those for other
accounts managed by the Investment Manager. Such other accounts may also make
investments in instruments or securities at the same time as the Fund. On
occasions when the Investment Manager determines the purchase or sale of a
security to be in the best interest of the Fund as well as of other clients, the
Investment Manager, to the extent permitted by applicable laws and regulations,
may aggregate the securities to be so purchased or sold in an attempt to obtain
the most favorable price or lower brokerage commissions and the most efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Investment
Manager in the manner it considers to be the most equitable under the
circumstances and consistent with its fiduciary obligations to the Fund and to
its other participating clients. In some cases this procedure may affect the
size or price of the position obtainable for the Fund.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded from
required portfolio turnover rate calculations, the Fund's portfolio turnover
rate for reporting purposes is expected to be zero.
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DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
On each day that the Fund's net asset value per share is determined (each a
"Business Day"), the Fund's net investment income will be declared as a
dividend to shareholders of record as of the last calculation of net asset
value prior to the declaration and to shareholders investing on that day
subject to the following conditions: (1) receipt of the purchase order by the
Transfer Agent before 1:30 p.m. Eastern time; and (2) payment in immediately
available funds wired to the Transfer Agent by the same time. Shareholders
will receive dividends in additional shares unless they elect to receive
cash. Dividends will normally be reinvested monthly in full and fractional
shares of the Fund at the net asset value on the last Business Day of each
month. If cash payment is requested, checks will normally be mailed on the
Business Day following the dividend reinvestment date. The Fund will pay
shareholders who redeem all of their shares all dividends accrued to the time
of the redemption within seven days after the redemption.
The Fund calculates its dividends based on its daily net investment income. For
this purpose, the net investment income of the Fund consists of: (1) accrued
interest income, plus or minus amortized discount or premium, less (2) accrued
expenses allocated to the Fund. If the Fund realizes any capital gains, they
will be distributed at least once during the year as determined by the Board of
Trustees. Any realized capital losses to the extent not offset by realized
capital gains will be carried forward. It is not anticipated that the Fund will
realize any long-term capital gains. Expenses of the Trust are accrued daily.
Should the net asset value of the Fund deviate significantly from market value,
the Board of Trustees could decide to value the investments at market value, and
any unrealized gains and losses could affect the amount of the Fund's
distributions.
FEDERAL INCOME TAXES
It is the policy of the Fund to qualify for taxation, and to elect to be taxed,
as a "regulated investment company" by meeting the requirements of Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"). In order to so
qualify, the Fund will distribute each year substantially all of its investment
company taxable income (if any), its net exempt-interest income (if any), and
its net capital gains (if any), and will seek to meet certain other
requirements. Such qualification relieves the Fund of liability for federal
income taxes to the extent the Fund's earnings are distributed. By following
this policy, the Fund expects to eliminate or reduce to a nominal amount the
federal income tax to which it is subject.
In order to qualify as a regulated investment company, the Fund must, among
other things, annually (1) derive 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 stocks, securities, foreign currencies or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies and (2)
diversify its holdings so that at the end of each quarter of its taxable year
(i) at least 50% of the market value of the Fund's total assets is represented
by cash or cash items, U.S. Government securities, securities of other regulated
investment companies and other securities limited, in respect of any one issuer,
to a value not greater than 5% of the value of the Fund's total assets and 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its assets is invested in the securities of any one issuer
(other than U.S. Government securities or securities of any other regulated
investment company) or of two or more issuers that the Fund controls, within the
meaning of the Code, and that are engaged in the same, similar or related trades
or businesses. If the Fund qualifies as a regulated investment company, it will
not be subject to federal income tax on the
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part of its net investment income and net realized capital gains, if any, which
it distributes to shareholders, provided that the Fund meets certain minimum
distribution requirements. To comply with these requirements, the Fund must
distribute annually at least (a) 90% of its "investment company taxable income"
(as that term is defined in the Code) and (b) 90% of the excess of its (i)
tax-exempt interest income over (ii) certain deductions attributable to that
income (with certain exceptions), for its taxable year. The Fund intends to make
sufficient distributions to shareholders to meet these requirements.
If the Fund fails to distribute in a calendar year (regardless of whether it has
a non-calendar taxable year) at least 98 percent of its (i) ordinary income for
such year; and (ii) capital gain net income for the one-year period ending on
October 31 of that calendar year (or later if the Fund is permitted so to elect
and so elects), plus any retained amount from the prior year, the Fund will be
subject to a nondeductible 4% excise tax on the undistributed amounts. The Fund
intends generally to make distributions sufficient to avoid imposition of this
excise tax.
Any distributions declared by the Fund in October, November, or December to
shareholders of record during those months and paid during the following January
are treated, for tax purposes, as if they were received by each shareholder on
December 31 of the year declared. The Fund may adjust its schedule for the
reinvestment of distributions for the month of December to assist in complying
with the reporting and minimum distribution requirements of the Code.
The Fund does not expect to realize any significant amount of long-term capital
gain. However, any distributions by the Fund of long-term capital gain will be
taxable to the shareholders as long-term capital gain, regardless of how long a
shareholder has held the Fund's shares.
The Fund may engage in investment techniques that may alter the timing and
character of the Fund's income. The Fund may be restricted in its use of these
techniques by rules relating to its qualification as a regulated investment
company.
The Fund may invest in some Variable Rate Demand Securities which have a feature
entitling the purchaser to resell the securities at a specified amount (a "put
option"). The Internal Revenue Service (the "IRS") has issued a revenue ruling
to the effect that, under specified circumstances, a regulated investment
company will be the owner of tax-exempt municipal obligations acquired with a
put option. The IRS subsequently announced that it will not ordinarily issue
advance ruling letters as to the identity of the true owner of property in cases
involving the sale of securities (or participation interests therein) if the
purchaser has the right to cause the security (or participation interest
therein) to be purchased by the seller or a third party. The Fund intends to
take the position that it is the owner of any securities with respect to which
it also holds a put option.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends paid to any shareholder (1) who fails to
provide a correct taxpayer identification number certified under penalty of
perjury; (2) who provides an incorrect taxpayer identification number; (3) who
is subject to withholding for failure to properly report to the IRS all payments
of interest or dividends; or (4) who fails to provide a certified statement that
he or she is not subject to "backup withholding." This "backup withholding" is
not an additional tax and any amounts withheld may be credited against the
shareholder's ultimate U.S. tax liability.
The foregoing discussion relates only to federal income tax law as applicable to
U.S. citizens or residents. Foreign shareholders (i.e., nonresident alien
individuals and foreign corporations, partnerships, trusts and estates)
generally are subject to U.S. withholding tax at the rate of 30% (or a lower tax
treaty rate) on distributions derived from net investment income and short-term
capital gains. Distributions to foreign shareholders of long-term capital gains
and any gains from the sale or disposition of shares of the Fund generally are
not subject to U.S. taxation, unless the recipient is an individual who meets
the Code's definition of "resident alien." Different tax consequences may result
if the foreign shareholder is engaged
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in a trade or business within the U.S. In addition, the tax consequences to a
foreign shareholder entitled to claim the benefits of a tax treaty may be
different than those described above. Distributions by the Fund may also be
subject to state, local and foreign taxes, and their treatment under applicable
tax laws may differ from the U.S. federal income tax treatment.
The information above is only a summary of some of the tax considerations
generally affecting the Fund and its shareholders and is based upon
authorities that are subject to change. No attempt has been made to discuss
individual tax consequences and this discussion should not be construed as
applicable to all shareholders' tax situations. Investors should consult
their own tax advisors to determine the suitability of the Fund and the
applicability of any state, local, or foreign taxation. Paul, Hastings,
Janofsky & Walker has expressed no opinion in respect thereof. Foreign
shareholders should consider, in particular, the possible application of U.S.
withholding taxes on certain taxable distributions from the Fund at rates up
to 30% (subject to reduction under certain income tax treaties).
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SHARE PRICE CALCULATION
The Fund values its portfolio instruments at amortized cost, which means they
are valued at their acquisition cost, as adjusted for amortization of premium or
discount, rather than at current market value. Calculations are made to compare
the value of the Fund's investments at amortized cost with market values. Market
valuations are obtained by using actual quotations provided by market makers,
estimates of market value, or values obtained from yield data relating to
classes of money market instruments published by reputable sources at the bid
prices for the instruments. The amortized cost method of valuation seeks to
maintain a stable $1.00 per share net asset value even where there are
fluctuations in interest rates that affect the value of portfolio instruments.
Accordingly, this method of valuation can in certain circumstances lead to a
dilution of a shareholder's interest.
If a deviation of 1/2 of 1% or more were to occur between the net asset value
per share calculated by reference to market values and the Fund's $1.00 per
share net asset value, or if there were any other deviation that the Board of
Trustees of the Trust believed may result in a material dilution or other unfair
results to investors or existing shareholders, the Board of Trustees is required
to cause the Fund to take such action as it deems appropriate to eliminate or
reduce to the extent reasonably practicable such dilution or unfair results. If
the Fund's net asset value per share (computed using market values) declined, or
were expected to decline, below $1.00 (computed using amortized cost), the Board
of Trustees might temporarily reduce or suspend dividend payments in an effort
to maintain the net asset value at $1.00 per share. As a result of such
reduction or suspension of dividends or other action by the Board of Trustees,
an investor would receive less income during a given period than if such a
reduction or suspension had not taken place. Such action could result in
investors receiving no dividends for the period during which they hold their
shares and receiving, upon redemption, a price per share lower than that which
they paid. On the other hand, if the Fund's net asset value per share (computed
using market values) were to increase, or were anticipated to increase above
$1.00 (computed using amortized cost), the Board of Trustees might supplement
dividends in an effort to maintain the net asset value at $1.00 per share.
YIELD
The historical performance of the Fund may be shown in the form of yield and
effective yield. These measures of performance are described below.
YIELD Yield refers to the net investment income generated by a hypothetical
investment in the Fund over a specific seven-day period. This net investment
income is then annualized, which means that the net investment income generated
during the seven-day period is assumed to be generated in each seven-day period
over an annual period, and is shown as a percentage of the investment.
EFFECTIVE YIELD Effective yield is calculated similarly, but the net investment
income earned by the investment is assumed to be compounded weekly when
annualized. The effective yield will be slightly higher than the yield due to
this compounding effect.
As of the Fund's fiscal year ended October 31, 1998, the Fund's 7-day yield was
4.73% and the 7-day effective yield was 4.84%.
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GENERAL INFORMATION
The Trust was organized as a business trust under the laws of Delaware on
October 28, 1996 and may issue an unlimited number of shares of beneficial
interest or classes of shares in one or more separate series. Currently, the
Trust offers shares of only one series (the Fund described in this SAI). As of
the date of this Statement of Additional Information, the Trust has two
additional series of shares under registration with the SEC. The Trust's Board
of Trustees may authorize the issuance of shares of additional series or classes
of shares of beneficial interest if it deems it desirable.
The Trust is generally not required to hold shareholder meetings. However, as
provided in its Agreement and Declaration of Trust and its Bylaws, shareholder
meetings may be called by the Trustees for the purpose as may be prescribed by
law, the Agreement and Declaration of Trust, or the Bylaws, or for the purpose
of taking action upon any other matter deemed by the Trustees to be necessary or
desirable including changing fundamental policies, electing or removing
Trustees, or approving or amending an investment advisory agreement. In
addition, a Trustee may be removed by shareholders at a special meeting called
upon written request of shareholders owning in the aggregate at least 10% of the
outstanding shares of the Trust..
Each Trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of his
or her successor or until death, resignation, declaration of bankruptcy or
incompetence by a court of competent jurisdiction, or removal by a majority vote
of the shares entitled to vote (as described below) or of a majority of the
Trustees. In accordance with the 1940 Act (i) the Trust will hold a shareholder
meeting for the election of trustees when less than a majority of the trustees
have been elected by shareholders, and (ii) if, as a result of a vacancy in the
Board of Trustees, less than two-thirds of the trustees have been elected by the
shareholders, that vacancy will be filled by a vote of the shareholders.
The Agreement and Declaration of Trust provides that one-third of the shares
entitled to vote shall be a quorum for the transaction of business at a
shareholders' meeting, except when a larger quorum is required by applicable
law, by the Bylaws or by the Agreement and Declaration of Trust, and except that
where any provision of law, of the Agreement and Declaration of Trust, or of the
Bylaws permits or requires that (i) holders of any series shall vote as a
series, then a majority of the aggregate number of shares of that series
entitled to vote shall be necessary to constitute a quorum for the transaction
of business by that series; or (ii) holders of any class shall vote as a class,
then a majority of the aggregate number of shares of that class entitled to vote
shall be necessary to constitute a quorum for the transaction of business by
that class. Any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting, without the necessity of further notice. The
Agreement and Declaration of Trust specifically authorizes the Board of Trustees
to terminate the Trust (or any of its investment portfolios) by notice to the
shareholders without shareholder approval.
For further information, please refer to the registration statement and exhibits
for the Trust on file with the SEC in Washington, D.C. and available upon
payment of a copying fee. The statements in the Prospectus and this Statement of
Additional Information concerning the contents of contracts or other documents,
copies of which are filed as exhibits to the registration statement, are
qualified by reference to such contracts or documents.
PRINCIPAL HOLDERS OF SECURITIES
As of February 24, 1999, City National Bank, P.O. Box 60520, Los Angeles,
90060-0520, as fiduciary for its various clients, was holder of 99% of the
outstanding shares of the Fund.
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PURCHASE AND REDEMPTION OF SHARES
The Fund's minimum initial investment is $100,000 and subsequent investments of
$1,000 or more may be made. These minimum requirements may be changed at any
time and are not applicable to certain types of investors. Exceptions to the
minimum investment requirements may be made at the discretion of the Investment
Manager including, without limitation, for employees or affiliates of the
Investment Manager or investors who are, or are related to or affiliated with,
clients of the Investment Manager. The Fund will accept investments in cash only
in U.S. dollars.
The Trust reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order in-kind by
making payment in readily marketable securities chosen by the Fund and valued as
they are for purposes of computing the Fund's net asset value. However, the
Trust has elected to commit itself to pay in cash all requests for redemption by
any Shareholder of record, limited in amount with respect to each Shareholder
during any 90-day period to the lesser of: (i) $250,000, or (ii) one percent of
the net asset value of the Fund at the beginning of such period. If payment is
made in securities, a shareholder may incur transaction expenses in converting
these securities into cash.
To minimize administrative costs, share certificates will not be issued. Records
of share ownership are maintained by the Transfer Agent.
Investors should remember that it may be difficult to complete transactions by
telephone during periods of drastic economic or market changes, when phone lines
may become busy with calls from other investors. If you want to buy or sell
shares but have trouble reaching the Fund by telephone, you may want to use
another method for completing a transaction, even though an alternative
procedure may mean that completing your transaction may take a longer period of
time.
The Fund may be required to withhold federal income tax at a rate of 31% (backup
withholding) from dividend payments, distributions, and redemption proceeds if a
shareholder fails to furnish the Fund with his/her certified social security or
tax identification number. The shareholder also must certify that the number is
correct and that he/she is not subject to backup withholding. The certification
is included as part of the share purchase application form. If the shareholder
does not have a social security number, he/she should indicate on the purchase
form that an application to obtain the number is pending. The Fund is required
to withhold taxes if a number is not delivered to the Fund within seven days.
OTHER INFORMATION
The Prospectus of the Fund and this Statement of Additional Information do not
contain all the information included in the Registration Statement filed with
the SEC under the Securities Act of 1933, as amended, with respect to the
securities offered by the Prospectus.
Certain portions of the Registration Statement have been omitted from the
Prospectus and this Statement of Additional Information pursuant to the rules
and regulations of the SEC. The Registration Statement including the exhibits
filed therewith may be examined at the office of the SEC in Washington, DC
Statements contained in the Prospectus or in this Statement of Additional
Information as to the contents of any contract or other document referred to are
not necessarily complete, and, in each instance, reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectus and this Statement of Additional Information
form a part, each such statement being qualified in all respects by such
reference.
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THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN OFFERING BY THE
TRUST, THE FUND, OR BY THE PRINCIPAL UNDERWRITER IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE.
FINANCIAL STATEMENTS
Audited financial statements for the period ended October 31, 1998 for the Fund
(formerly called the "Berkeley Money Market Fund"), as contained in the Annual
Report to Shareholders of such Fund for the period ended October 31, 1998 (the
"Report") are hereby incorporated by reference to the this Statement of
Additional Information.
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APPENDIX A - RATINGS OF INVESTMENT SECURITIES
COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE
Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers (or related supporting institutions) of commercial paper with this
rating are considered to have a superior ability to repay short-term promissory
obligations. Issuers (or related supporting institutions) of securities rated
Prime-2 are viewed as having a strong capacity to repay short-term promissory
obligations. This capacity will normally be evidenced by many of the
characteristics of issuers whose commercial paper is rated Prime-1 but to a
lesser degree.
STANDARD & POOR'S CORPORATION
An S&P A-1 commercial paper rating indicates either an overwhelming or
very strong degree of safety regarding timely payment of principal and interest.
Issues determined to possess overwhelming safety characteristics are denoted
A-1+. Capacity for timely payment on commercial paper rated A-2 is strong, but
the relative degree of safety is not as high as for issues designated A-1.
SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS
MOODY'S INVESTORS SERVICE
Short-term notes and variable rate demand obligations bearing the
designations MIG-1/VMIG-1 are considered to be of the best quality, enjoying
strong protection from established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing. Obligations rated
MIG-2/VMIG-2 are of high quality and enjoy ample margins of protection although
not as large as those of the top rated securities.
STANDARD & POOR'S CORPORATION
An S&P SP-1 rating indicates that the subject securities' issuer has a
very strong capacity to pay principal and interest. Issues determined to possess
overwhelming safety characteristics are given a plus (+) designation. S&P's
determination that an issuer has a satisfactory capacity to pay principal and
interest is denoted by an SP-2 rating.
BONDS
MOODY'S INVESTORS SERVICE
Moody's rates the bonds it judges to be of the best quality Aaa. These
bonds carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or extraordinarily
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 these issues. Bonds carrying an Aa
designation are deemed to be of high quality by all standards. Together with Aaa
rated bonds, they comprise what are generally known as high grade bonds. Aa
bonds are rated lower than the best bonds because they may enjoy relatively
lower margins of protections, fluctuations of protective elements may be of
greater amplitude or there may be other factors present which make them appear
to be subject to somewhat greater long-term risks.
STANDARD & POOR'S CORPORATION
AAA is the highest rating assigned by S&P to a bond and indicates the
issuer's extremely strong capacity to pay interest and repay principal. An AA
rating denotes a bond whose issuer has a very strong capacity to pay interest
and repay principal and differs from an AAA rating only in small degree.
A-1
