<PAGE> 1
SEI LIQUID ASSET TRUST
OCTOBER 30, 1996
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TREASURY SECURITIES PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
PRIME OBLIGATION PORTFOLIO
INSTITUTIONAL CASH PORTFOLIO
MONEY MARKET PORTFOLIO
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This Prospectus sets forth concisely information about the above-referenced
Portfolios that an investor needs to know before investing. Please read this
Prospectus carefully, and keep it on file for future reference.
A Statement of Additional Information dated October 30, 1996, has been filed
with the Securities and Exchange Commission, and is available upon request and
without charge by writing the Distributor, SEI Financial Services Company, 680
East Swedesford Road, Wayne, Pennsylvania 19087-1658, or by calling
1-800-342-5734. The Statement of Additional Information is incorporated by
reference into this Prospectus.
SEI Liquid Asset Trust (the "Trust") is an open-end management investment
company, certain classes of which offer financial institutions a convenient
means of investing their own funds, or funds for which they act in a fiduciary,
agency or custodial capacity, in one or more professionally managed diversified
portfolios of securities. Some portfolios offer separate classes of units of
beneficial interest that differ from each other primarily in the allocation of
certain distribution expenses and minimum investment amounts. This Prospectus
offers Class A shares of each of the Trust's five money market portfolios (each
a "Portfolio" and, together, the "Portfolios") listed above.
AN INVESTMENT IN A PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT A PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.
<PAGE> 2
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
<CAPTION>
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TREASURY GOVERNMENT PRIME INSTITUTIONAL MONEY
SECURITIES SECURITIES OBLIGATION CASH MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Management/Advisory Fees (after fee waivers) (1) .39% .39% .39% .39% .39%
12b-1 Fees None None None None None
Total Other Expenses .05% .05% .05% .05% .05%(2)
Shareholder Servicing Expenses (after fee waivers)
(3) .00% .00% .00% .00% .00%
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Total Operating Expenses (after fee waivers) (4) .44% .44% .44% .44% .44%
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</TABLE>
(1) The Manager has agreed to waive its fee in an amount necessary to limit the
total operating expenses of each Portfolio to not more than .44% of its
average net assets. In the case of the Institutional Cash Portfolio, this
waiver is voluntary and may be terminated at any time in the Manager's sole
discretion. Absent this waiver, management/advisory fees for the Treasury
Securities, Government Securities, Prime Obligation and Money Market
Portfolios, would be .45%, .45%, .45%, and .45%, respectively.
Management/Advisory fees have been restated to reflect reductions in fee
waivers.
(2) Total Other Expenses for the Money Market Portfolio are based on estimated
amounts for the current fiscal year.
(3) The Distributor has waived, on a voluntary basis, all or a portion of its
shareholder servicing fee, and the Shareholder Servicing Expenses shown
reflect this waiver. The Distributor reserves the right to terminate its
waiver at any time in its sole discretion. Absent such waiver, Shareholder
Servicing Expenses would be .25% for each of the Portfolios.
(4) Absent waivers, Total Operating Expenses for the Treasury Securities,
Government Securities, Prime Obligation, Institutional Cash and Money Market
Portfolios would be .75%, .75%, .75%, .69%, and .75%, respectively.
Additional information may be found under "The Manager," "The Adviser" and
"Distribution and Shareholder Servicing."
EXAMPLE
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<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor in any Portfolio would pay the following expenses on a $1,000 investment
assuming
(1) a 5% annual return and (2) redemption at the end of each time period: $5 $14 $25 $55
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</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in Class A shares of the Portfolios. The Treasury Securities
Portfolio also offers Class D shares, which are subject to the same expenses
except that Class D shares bear different distribution and transfer agent costs.
A person who purchases shares through a financial institution may be charged
separate fees by that institution. Additional information regarding these
differences may be found under "The Manager," "The Adviser" and "Distribution
and Shareholder Servicing".
2
<PAGE> 3
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout each
period have been audited by Price Waterhouse LLP, independent accountants, whose
report dated August 2, 1996, was unqualified. This information should be read in
conjunction with the Trust's financial statements and notes thereto included in
the Statement of Additional Information under the heading "Financial
Information." As of June 30, 1996, the Money Market Portfolio had not commenced
operations. Additional performance information is set forth in the Trust's 1996
Annual Report to Shareholders, which is available upon request and without
charge by calling 1-800-342-5734.
For a Class A Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Realized
and
Net Asset Unrealized Distributions
Value Net Gains from Net Distributions Net Asset Net Assets
Beginning Investment on Investment from Realized Value End Total End of Period
of Period Income Securities Income Capital Gains of Period Return (000)
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- --------------------
TREASURY SECURITIES
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $1.00 $ 0.05 -- $ (0.05) -- $1.00 5.37% $ 832,393
1995 1.00 0.05 -- (0.05) -- 1.00 5.05 1,254,888
1994 1.00 0.03 -- (0.03) -- 1.00 3.00 1,501,510
1993 1.00 0.03 -- (0.03) -- 1.00 3.03 2,219,701
1992 1.00 0.05 -- (0.05) -- 1.00 4.69 2,304,153
1991 1.00 0.07 -- (0.07) -- 1.00 7.04 2,248,497
1990 1.00 0.08 -- (0.08) -- 1.00 8.41 2,076,845
1989 1.00 0.08 -- (0.08) -- 1.00 8.51 2,318,763
1988 1.00 0.06 -- (0.06) -- 1.00 6.56 2,671,802
1987 1.00 0.06 -- (0.06) -- 1.00 5.91 2,580,118
<CAPTION>
- -------------------------
GOVERNMENT SECURITIES
- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $1.00 $ 0.05 -- $ (0.05) -- $1.00 5.30% $ 169,133
1995 1.00 0.05 -- (0.05) -- 1.00 5.18 200,768
1994 1.00 0.03 -- (0.03) -- 1.00 3.04 255,554
1993 1.00 0.03 -- (0.03) -- 1.00 3.05 507,832
1992 1.00 0.05 -- (0.05) -- 1.00 4.72 399,938
1991 1.00 0.07 -- (0.07) -- 1.00 7.08 520,187
1990 1.00 0.08 -- (0.08) -- 1.00 8.48 368,318
1989 1.00 0.08 -- (0.08) -- 1.00 8.69 467,056
1988 1.00 0.07 -- (0.07) -- 1.00 6.83 523,274
1987 1.00 0.06 -- (0.06) -- 1.00 5.99 479,968
<CAPTION>
Ratio of
Ratio of Net Expenses Income
Expenses Investment to Average to Average
to Income Net Assets Net Assets
Average to Average (Excluding (Excluding
Net Assets Net Assets Waivers) Waivers)
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- --------------------
TREASURY SECURITIES
- --------------------
<S> <C> <C> <C> <C>
1996 0.44% 5.27% 0.52% 5.19%
1995 0.44 4.93 0.54 4.83
1994 0.44 2.91 0.51 2.84
1993 0.44 2.99 0.50 2.93
1992 0.44 4.60 0.50 4.50
1991 0.44 6.80 0.47 6.80
1990 0.44 8.10 0.45 8.10
1989 0.44 8.20 0.44 8.20
1988 0.44 6.40 0.44 6.40
1987 0.44 5.70 0.45 5.70
<CAPTION>
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GOVERNMENT SECURITIES
- -------------------------
<S> <C> <C> <C> <C>
1996 0.44% 5.19% 0.54% 5.09%
1995 0.44 5.04 0.53 4.95
1994 0.44 2.96 0.51 2.89
1993 0.44 3.00 0.50 2.94
1992 0.44 4.60 0.50 4.60
1991 0.44 6.80 0.48 6.70
1990 0.44 8.10 0.45 8.10
1989 0.44 8.30 0.46 8.30
1988 0.44 6.70 0.44 6.70
1987 0.44 5.80 0.46 5.80
</TABLE>
3
<PAGE> 4
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
Realized
and
Net Asset Unrealized Distributions
Value Net Gains from Net Distributions Net Asset Net Assets
Beginning Investment on Investment from Realized Value End Total End of Period
of Period Income Securities Income Capital Gains of Period Return (000)
- ---------------------------------------------------------------------------------------------------------------------------------
- ------------------
PRIME OBLIGATION
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $1.00 $ 0.05 -- $ (0.05) -- $1.00 5.39% $ 747,852
1995 1.00 0.05 -- (0.05) -- 1.00 5.20 940,863
1994 1.00 0.03 -- (0.03) -- 1.00 3.08 918,509
1993 1.00 0.03 -- (0.03) -- 1.00 3.07 1,173,109
1992 1.00 0.05 -- (0.05) -- 1.00 4.73 1,515,554
1991 1.00 0.07 -- (0.07) -- 1.00 7.36 1,729,845
1990 1.00 0.08 -- (0.08) -- 1.00 8.57 1,804,367
1989 1.00 0.09 -- (0.09) -- 1.00 8.85 2,160,859
1988 1.00 0.07 -- (0.07) -- 1.00 7.12 2,224,159
1987 1.00 0.06 -- (0.06) -- 1.00 6.08 1,851,072
<CAPTION>
- ---------------------
INSTITUTIONAL CASH*
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $1.00 $ 0.0005 -- $ (0.0005) -- $1.00 4.58% --
1995 1.00 0.0003 -- (0.0003) -- 1.00 4.94 --
1994 1.00 0.0003 -- (0.0003) -- 1.00 2.60 --
1993 1.00 0.0003 -- (0.0003) -- 1.00 2.83 --
1992 1.00 0.0002 -- (0.0002) -- 1.00 3.47 --
1991 1.00 0.0003 0.0001 (0.0003) (0.0001) 1.00 7.12 --
1990 1.00 0.0008 0.0003 (0.0008) (0.0003) 1.00 10.22 --
1989 1.00 0.0007 0.0002 (0.0007) (0.0002) 1.00 8.49 --
1988 1.00 0.0006 0.0001 (0.0006) (0.0001) 1.00 4.02 --
1987(1) 1.00 0.0003 -- (0.0003) -- 1.00 5.48 --
- ----------------
<CAPTION>
Ratio of
Ratio of Net Expenses Income
Expenses Investment to Average to Average
to Income Net Assets Net Assets
Average to Average (Excluding (Excluding
Net Assets Net Assets Waivers) Waivers)
- -------------------------------------------------------------------
- ------------------
PRIME OBLIGATION
- ------------------
<S> <C> <C> <C> <C>
1996 0.44% 5.27% 0.53% 5.18%
1995 0.44 5.21 0.53 5.12
1994 0.44 3.03 0.51 2.96
1993 0.44 3.04 0.50 2.98
1992 0.44 4.70 0.49 4.60
1991 0.44 7.10 0.47 7.10
1990 0.44 8.30 0.45 8.30
1989 0.44 8.50 0.44 8.50
1988 0.44 6.90 0.44 6.90
1987 0.44 5.90 0.45 5.90
<CAPTION>
- ---------------------
INSTITUTIONAL CASH*
- ---------------------
<S> <C> <C> <C> <C>
1996 0.44% 4.58% 0.44% 4.58%
1995 0.44 5.19 0.44 5.19
1994 0.44 2.63 0.44 2.63
1993 0.44 2.66 0.44 2.66
1992 0.44 3.50 0.44 3.50
1991 0.42 5.90 0.42 5.90
1990 0.44 7.80 0.44 7.80
1989 0.44 6.80 0.44 6.80
1988 0.44 5.20 0.44 5.20
1987(1) 0.44 5.30 0.44 5.30
- ---------
<S> <C>
(1) Institutional Cash Fund commenced operations on December 31, 1986.
* Annualized
Amounts designated as "--" are either $0 or have been rounded to $0.
</TABLE>
4
<PAGE> 5
THE TRUST
SEI LIQUID ASSET TRUST (the "Trust") is an open-end management investment
company that offers units of beneficial interest ("shares") in separate
diversified investment portfolios. This Prospectus offers Class A shares of the
Trust's Treasury Securities, Government Securities, Prime Obligation,
Institutional Cash and Money Market Portfolios (each a "Portfolio" and,
together, the "Portfolios"). The Treasury Securities Portfolio also offers Class
D shares. Additional information pertaining to the Trust may be obtained by
writing to SEI Financial Services Company, 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658, or by calling 1-800-342-5734.
INVESTMENT
OBJECTIVES AND
POLICIES
TREASURY SECURITIES
PORTFOLIO The Treasury Securities Portfolio seeks to preserve
principal value and maintain a high degree of liquidity
while providing current income.
The Portfolio invests exclusively in U.S. Treasury
obligations and repurchase agreements involving such
obligations. The repurchase agreement dealers selected for
the Treasury Securities Portfolio must meet certain
creditworthiness criteria established by Standard & Poor's
Corporation ("S&P").
GOVERNMENT
SECURITIES PORTFOLIO The Government Securities Portfolio seeks to preserve
principal value and maintain a high degree of liquidity
while providing current income.
The Portfolio invests exclusively in U.S. Treasury
obligations, obligations issued or guaranteed as to
principal and interest by agencies or instrumentalities of
the U.S. Government, and repurchase agreements involving
such obligations.
PRIME OBLIGATION
PORTFOLIO The Prime Obligation Portfolio seeks to preserve principal
value and maintain a high degree of liquidity while
providing current income.
The Portfolio invests exclusively in: (i)
commercial paper rated at least A-1 by S&P or Prime-1 by
Moody's Investors Service, Inc. ("Moody's") at the time of
investment or, if not rated, determined by the Adviser to
be of comparable quality; (ii) obligations (including
certificates of deposit, time deposits, bankers'
acceptances and bank notes) of U.S. commercial banks or
savings and loan institutions that are members of the
Federal Reserve System or are insured by the Federal
Deposit Insurance Corporation, which banks or institutions
have total assets of $500 million or more as shown on
their most recent public financial statements, at the time
of investment, provided that such obligations are rated in
the top two short-term rating categories by two or more
nationally recognized statistical rating organizations
("NRSROs"), or one NRSRO if only one NRSRO has rated the
security at the time of investment or, if not rated,
determined by the Adviser to be of comparable quality;
(iii) short-term corporate obligations rated AAA or AA by
S&P or Aaa or Aa by Moody's at the time of investment or,
if not rated, determined by the Adviser to be of
comparable quality; (iv) short-term obligations issued by
state
5
<PAGE> 6
and local governmental issuers, which are rated, at the
time of investment, by at least two NRSROs in one of the
two highest municipal bond rating categories, and which
carry yields that are competitive with those of other
types of money market instruments of comparable quality;
(v) U.S. Treasury obligations and obligations issued or
guaranteed as to principal and interest by agencies or
instrumentalities of the U.S. Government; and (vi)
repurchase agreements involving any of the foregoing
obligations.
INSTITUTIONAL CASH
PORTFOLIO The Institutional Cash Portfolio seeks to preserve
principal value and maintain a high degree of liquidity
while providing current income.
The Portfolio invests exclusively in U.S. Treasury
obligations.
MONEY MARKET
PORTFOLIO The Money Market Portfolio seeks to preserve principal
value and maintain a high degree of liquidity while
providing current income.
The Portfolio invests in the following U.S. dollar
denominated obligations: (i) commercial paper issued by
U.S. and foreign issuers rated at the time of investment
in the highest short-term rating category by two or more
NRSROs, or one NRSRO if only one NRSRO has rated the
security or, if not rated, determined by the Adviser to be
of comparable quality; (ii) obligations (including
certificates of deposit, time deposits, bankers'
acceptances and bank notes) of U.S. savings and loan and
thrift institutions, U.S. commercial banks (including
foreign branches of such banks), and U.S. and London
branches of foreign banks, provided that such institutions
(or, in the case of a branch, the parent institution) have
total assets of $1 billion or more as shown on their last
published financial statements, at the time of investment;
(iii) short-term corporate obligations issued by U.S. and
foreign issuers with a remaining term of not more than 397
days that issue commercial paper of comparable priority
and security meeting the above ratings; (iv) short-term
obligations issued by state and local governmental issuers
which are rated, at the time of investment, by at least
two NRSROs in one of the two highest municipal bond rating
categories, or, if not rated, determined by the Adviser to
be of comparable quality, and which carry yields that are
competitive with those of other types of money market
instruments of comparable quality; (v) U.S. Treasury
obligations and obligations issued or guaranteed as to
principal and interest by the agencies or
instrumentalities of the U.S. Government; (vi) U.S. dollar
denominated obligations of foreign governments, including
Canadian and Provincial Government and Crown Agency
obligations; (vii) repurchase agreements involving any of
the foregoing obligations; and (viii) custodial receipts
representing investments in component parts of U.S.
Treasury obligations.
There can be no assurance that the Portfolios will
achieve their respective investment objectives.
6
<PAGE> 7
GENERAL
INVESTMENT
POLICIES
In purchasing obligations, each Portfolio complies with
the requirements of Rule 2a-7 under the 1940 Act, as that
Rule may be amended from time to time. These requirements
currently provide that each Portfolio must limit its
investments to securities with remaining maturities of 397
days or less, and must maintain a dollar-weighted average
maturity of 90 days or less. In addition, each Portfolio
may only invest in securities (other than U.S. Government
Securities) rated in one of the two highest categories for
short-term securities by at least two NRSROs (or by one
NRSRO if only one NRSRO has rated the security), or, if
unrated, determined by the Adviser (in accordance with
procedures adopted by the Trust's Board of Trustees) to be
of equivalent quality to rated securities in which the
Portfolio may invest. Purchases of unrated securities will
be ratified by the Trust's Board of Trustees.
Securities rated in the highest rating category
(e.g., A-1 by S&P) by at least two NRSROs (or by one NRSRO
if only one NRSRO has rated the security, or, if unrated,
determined by the Adviser to be of comparable quality) are
"first tier" securities. Securities rated in the second
highest rating category (e.g., A-2 by S&P) by at least one
NRSRO (or, if unrated, determined by the Adviser to be of
comparable quality) are considered to be "second tier"
securities. Each Portfolio will invest, in the aggregate,
no more than 5% of its assets in second tier securities,
and any investment in any one second tier security is
limited to the greater of 1% of a Portfolio's total assets
or $1 million.
The quality, maturity and diversification
requirements of the Government Securities and Prime
Obligation Portfolios are more restrictive than those
imposed by Rule 2a-7. The Government Securities and Prime
Obligation Portfolios may only purchase securities with a
remaining maturity of 365 days or less, and, as a matter
of non-fundamental policy, will maintain a dollar-weighted
average portfolio maturity of 90 days or less. If
Shareholders of these Portfolios elect to modify the
Portfolios' investment limitations in the future, the
Portfolios could take advantage of certain provisions in
the Rule that are more liberal than the Portfolios'
policies and that are followed by the Trust's other
Portfolios.
The Money Market and Prime Obligation Portfolios
may invest up to 10% of their net assets in illiquid
securities. However, restricted securities, including Rule
144A securities and Section 4(2) commercial paper, that
meet the criteria established by the Board of Trustees of
the Trust will be considered liquid.
7
<PAGE> 8
Each Portfolio may purchase securities on a
when-issued or delayed delivery basis.
For additional information regarding the
Portfolios' permitted investments and the ratings referred
to above, see "Description of Permitted Investments and
Risk Factors" and the Statement of Additional Information.
INVESTMENT
LIMITATIONS
The investment objective and certain of the investment
limitations are fundamental policies of the Portfolios.
Fundamental policies cannot be changed with respect to a
Portfolio without the consent of the holders of a majority
of the Trust's or that Portfolio's outstanding shares.
It is a fundamental policy of each Portfolio to use
its best efforts to maintain a constant net asset value of
$1.00 per share. In addition, it is a fundamental policy
of each of the Government Securities and Prime Obligation
Portfolios to invest its assets solely in the securities
listed as appropriate investments for that Portfolio.
Each Portfolio may not:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and any securities
guaranteed thereby) if as a result more than 5% of the
total assets of the Portfolio (based on fair market
value at the time of investment) would be invested in
the securities of such issuer; provided, however, that
the Treasury Securities, Money Market and Institutional
Cash Portfolios may temporarily invest up to 25% of
their total assets without regard to this restriction
as permitted by Rule 2a-7.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio to be invested in
the securities of one or more issuers conducting their
principal business activities in the same industry,
provided that this limitation does not apply to
investments in (a) domestic banks and (b) obligations
issued or guaranteed by the U.S. Government or its
agencies and instrumentalities.
3. Borrow money except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the
value of the total assets of that Portfolio. This
borrowing provision is included solely to facilitate
the orderly sale of portfolio securities to accommodate
substantial redemption requests if they should occur
and is not for investment purposes. All borrowings will
be repaid before making additional investments for that
Portfolio and any interest paid on such borrowings will
reduce the income of that Portfolio.
The foregoing percentage limitations will apply at the
time of the purchase of a security. Additional investment
limitations are set forth in the Statement of Additional
Information.
8
<PAGE> 9
THE MANAGER
SEI Fund Management ("SEI Management"), provides the Trust
with overall management services, regulatory reporting,
all necessary office space, equipment, personnel and
facilities, and acts as dividend disbursing agent and
shareholder servicing agent. SEI Management also serves as
transfer agent (the "Transfer Agent") to certain classes
of the Trust.
For its management services, SEI Management is
entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .42% of the average daily
net assets of each Portfolio, except the Institutional
Cash Portfolio, for which SEI Management is entitled to a
fee of .36% of the Portfolio's average daily net assets.
SEI Management has contractually agreed to waive all or a
portion of its fee with respect to each Portfolio, except
the Institutional Cash Portfolio, in order to limit the
total operating expenses of the Class A shares of such
Portfolios to not more than .44% of its average daily net
assets. For the Institutional Cash Portfolio only, this
waiver is voluntary and may be terminated at any time in
SEI Management's sole discretion.
For the fiscal year ended June 30, 1996, the
Treasury Securities, Government Securities, Prime
Obligation, and Institutional Cash Portfolios paid
management fees, after waivers, of .33%, .33%, .33% and
.36%, respectively, of their average daily net assets. As
of June 30, 1996, the Money Market Portfolio had not
commenced operations.
THE ADVISER
Wellington Management Company, LLP (the "Adviser"), 75
State Street, Boston, Massachusetts 02109, serves as the
investment adviser to each Portfolio. The Adviser, under
an investment advisory agreement with the Trust, invests
the assets of the Portfolios and continuously reviews,
supervises and administers each Portfolio's investment
program, subject to the supervision of, and policies
established by, the Trustees of the Trust.
As of September 30, 1996, the Adviser had
investment management authority with respect to
approximately $123.8 billion of assets, including the
assets of the Trust and SEI Daily Income Trust, which is
an open-end management investment company administered by
the Manager. The Adviser is a professional investment
counseling firm which provides investment services to
investment companies, employee benefit plans, endowments,
foundations, and other institutions and individuals. The
Adviser's predecessor organizations have provided
investment advisory services to investment companies since
1933, and to investment counseling clients since 1960. The
Adviser is a Massachusetts limited liability partnership,
of which the following persons are managing partners:
Robert W. Doran, Duncan M. McFarland and John R. Ryan.
9
<PAGE> 10
The Adviser is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of
.075% of the combined average daily net assets of the
Trust's Portfolios up to $500 million, and .02% of such
average daily net assets in excess of $500 million. Such
fees are allocated daily among the Portfolios of the Trust
on the basis of their relative net assets. For the fiscal
year ended June 30, 1996, the Treasury Securities,
Government Securities, Prime Obligation, and Institutional
Cash Portfolios paid advisory fees, after fee waivers, of
.03%, .03%, .03%, and .00%, respectively, of their
relative net assets. As of June 30, 1996, the Money Market
Portfolio had not commenced operations.
DISTRIBUTION
AND SHAREHOLDER
SERVICING
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI Corporation, serves as each
Portfolio's distributor pursuant to a distribution
agreement with the Trust. The Portfolios have adopted a
shareholder service plan for their Class A shares (the
"Class A Plan"). The Treasury Securities Portfolio has
adopted a distribution plan for its Class D shares (the
"Class D Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940
Act").
Under the Class A Plan, a shareholder servicing fee
of up to .25% of average daily net assets attributable to
Class A shares will be paid to the Distributor. Under the
Class A Plan, the Distributor may perform, or may
compensate other service providers for performing, the
following shareholder and administrative services:
maintaining client accounts; arranging for bank wires;
responding to client inquiries concerning services
provided on investments; assisting clients in changing
dividend options, account designations and addresses; sub-
accounting; providing information on share positions to
clients; forwarding shareholder communications to clients;
processing purchase, exchange and redemption orders; and
processing dividend payments. Under the Class A Plan, the
Distributor may retain as a profit any difference between
the fee it receives and the amount it pays to third
parties. The Distributor is currently waiving all
shareholder servicing fees payable under the Class A Plan
for each Portfolio.
It is possible that an institution may offer
different classes of shares to its customers and thus
receive different compensation with respect to different
classes. These financial institutions may also charge
separate fees to their customers.
The Trust may also execute brokerage or other
agency transactions through the Distributor for which the
Distributor may receive usual and customary compensation.
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<PAGE> 11
In addition, the Distributor may, from time to time
in its sole discretion, institute one or more promotional
incentive programs, which will be paid by the Distributor
from its own resources. Under any such program, the
Distributor will provide promotional incentives, in the
form of cash or other compensation, including merchandise,
airline vouchers, trips and vacation packages, to all
dealers selling shares of the Portfolios. Such promotional
incentives will be offered uniformly to all dealers and
predicated upon the amount of shares of the Portfolios
sold by the dealer.
PURCHASE AND
REDEMPTION OF
SHARES
Financial institutions may acquire Class A shares of the
Portfolios for their own account, or as a record owner on
behalf of fiduciary, agency or custody accounts, by
placing orders with the Transfer Agent. Institutions that
use certain SEI proprietary systems may place orders
electronically through those systems. State securities
laws may require banks and financial institutions
purchasing shares for their customers to register as
dealers pursuant to state laws. Financial institutions may
impose an earlier cut-off time for receipt of purchase
orders directed through them to allow time for processing
and transmittal of these orders to the Transfer Agent for
effectiveness on the same day. Financial institutions
which purchase shares for the accounts of their customers
may impose separate charges on these customers for account
services. Shares of the Portfolios are offered only to
residents of states in which the shares are eligible for
purchase.
Shares of each Portfolio may be purchased or
redeemed on days on which the New York Stock Exchange is
open for business ("Business Days"). However, money market
fund shares cannot be purchased by Federal Reserve wire on
Federal holidays on which wire transfers are restricted.
Shareholders who desire to purchase shares must
place their orders with the Transfer Agent prior to 2:00
p.m., Eastern time (12:00 p.m., Eastern time for the
Institutional Cash Portfolio), on any Business Day for the
order to be accepted on that Business Day. Cash
investments must be transmitted or delivered in federal
funds to the wire agent by the close of business on the
same day the order is placed. The Trust reserves the right
to reject a purchase order when the Distributor determines
that it is not in the best interest of the Trust or
shareholders to accept such purchase order.
The Trust will send shareholders a statement after
each purchase or redemption transaction. The purchase
price of shares is the net asset value next determined
after a purchase order is received and accepted by the
Trust. The net asset value per share of each Portfolio is
determined by dividing the total market
11
<PAGE> 12
value of the Portfolio's investments and other assets,
less any liabilities, by the total number of outstanding
shares of that Portfolio. Net asset value per share is
determined daily as of 2:00 p.m., Eastern time (12:00
p.m., Eastern time for the Institutional Cash Portfolio),
on each Business Day.
Shareholders who desire to redeem shares of a
Portfolio must place their redemption orders with the
Transfer Agent prior to 2:00 p.m., Eastern time (12:00
p.m., Eastern time for the Institutional Cash Portfolio),
on any Business Day. The redemption price is the net asset
value per share of the Portfolio next determined after
receipt by the Transfer Agent of the redemption order.
Payment on redemptions will be made as promptly as
possible and, in any event, within seven days after the
redemption order is received.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Trust's Transfer
Agent will be responsible for any loss, liability, cost or
expense for acting upon wire instructions or upon
telephone instructions that it reasonably believes to be
genuine. The Trust and the Trust's Transfer Agent will
each employ reasonable procedures to confirm that
instructions communicated by telephone are genuine,
including requiring a form of personal identification
prior to acting upon instructions received by telephone
and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by
other means.
PERFORMANCE
From time to time, the Portfolios may advertise "current
yield" and "effective compound yield." These figures will
fluctuate, as they are based on historical earnings and
are not intended to indicate future performance. The
"current yield" of the Portfolios refers to the income
generated by an investment over a seven-day period which
is then "annualized." That is, the amount of income
generated by an investment during that week is assumed to
be generated each week over a 52-week period, and is shown
as a percentage of the investment. The "effective yield"
is calculated similarly but, when annualized, the income
earned by an investment is assumed to be reinvested. The
"effective yield" will be slightly higher than the
"current yield" because of the compounding effect of this
assumed reinvestment.
A Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives.
12
<PAGE> 13
The performance of the Class A shares will normally
be higher than the performance of the Class D shares of
the Portfolio because of additional distribution and
transfer agent expenses charged to Class D shares.
TAXES
The following summary of federal income tax consequences
is based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No attempt has been made to present a detailed explanation
of the federal, state, or local income tax treatment of
the Portfolios or their shareholders. In addition, state
and local tax consequences of an investment in a Portfolio
may differ from the federal income tax consequences
described below. Accordingly, shareholders are urged to
consult their tax advisers regarding specific questions as
to federal, state and local income taxes. Additional
information concerning taxes is set forth in the Statement
of Additional Information.
Tax Status
of the Portfolios Each Portfolio is treated as a separate entity for federal
tax purposes and is not combined with the Trust's other
Portfolios. Each Portfolio intends to qualify for the
special tax treatment afforded regulated investment
companies under Subchapter M of the Internal Revenue Code
of 1986, as amended, so as to be relieved of federal
income tax on net investment company taxable income and
net capital gains (the excess of net long-term capital
gain over net short-term capital losses) distributed to
shareholders.
Tax Status
of Distributions Each Portfolio distributes substantially all of its net
investment income (including net short-term capital gains)
to shareholders. Dividends from a Portfolio's net
investment income are taxable to its shareholders as
ordinary income (whether received in cash or in additional
shares). Distributions of net capital gains are taxable as
long-term capital gains, regardless of how long
shareholders have held their shares and regardless of
whether the distributions are received in cash or in
additional shares. Dividends and distributions of capital
gains paid by each Portfolio do not qualify for the
dividends-received deduction for corporate shareholders.
Each Portfolio will provide annual reports to shareholders
of the federal income tax status of all distributions.
Dividends declared by a Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in such a month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of the year declared if
paid by the Portfolio at any time during the following
January.
Each Portfolio intends to make sufficient
distributions prior to the end of each calendar year to
avoid liability for the federal excise tax applicable to
regulated investment companies.
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<PAGE> 14
With respect to investments in U.S. Treasury
STRIPS, which are sold at original issue discount and thus
do not make periodic cash interest payments, each
Portfolio will be required to include as part of its
current income, the imputed interest on such obligations
even though the Portfolio has not received any interest
payments on such obligations during that period. Because
each Portfolio distributes all of its net investment
income to its shareholders, a Portfolio may have to sell
portfolio securities in order to distribute such imputed
income, which may occur at a time when the Adviser would
not have chosen to sell such securities and, which may
result in a taxable gain or loss.
Investment income received by the Portfolios on
direct U.S. Government obligations is exempt from tax at
the state level when received directly by a Portfolio, and
may be exempt, depending on the state, when received by a
shareholder as income dividends from any Portfolio
provided certain state-specific conditions are satisfied.
Interest received on repurchase agreements collateralized
by U.S. Government obligations normally is not exempt from
state taxation. Each Portfolio will inform shareholders
annually of the percentage of income and distributions
derived from direct U.S. Government obligations.
Shareholders should consult their tax advisers to
determine whether any portion of the income dividends
received from a Portfolio is considered tax exempt in
their particular states.
Each sale, exchange, or redemption of any
Portfolio's shares is a taxable transaction to the
shareholder.
GENERAL
INFORMATION
The Trust SEI Liquid Asset Trust (the "Trust") was organized as a
Massachusetts business trust under a Declaration of Trust
dated July 20, 1981. The Declaration of Trust permits the
Trust to offer separate Portfolios of shares and different
classes of each Portfolio. All consideration received by
the Trust for shares of any portfolio and all assets of
such portfolio belong to that portfolio or class and are
subject to liabilities related thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation material and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
Trustees of the Trust The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
14
<PAGE> 15
Voting Rights Each share held entitles the shareholder of record to one
vote. The shareholders of each Portfolio or class of the
Trust will vote separately on matters relating solely to
that Portfolio or class. As a Massachusetts business
trust, the Trust is not required to hold annual meetings
of shareholders, but approval will be sought for certain
changes in the operation of the Trust and for the election
of Trustees under certain circumstances. In addition, a
Trustee may be removed by the remaining Trustees or by
shareholders at a special meeting called upon written
request of shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a
meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
As of August 1, 1996, Vose & Co. and Repub & Co.
owned a controlling interest (as defined by the Investment
Company Act of 1940) in the Trust's Government Securities
Portfolio.
Reporting The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
Shareholder Inquiries Shareholder inquiries should be directed to the Manager,
SEI Fund Management, 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658.
Dividends Substantially all of the net investment income (exclusive
of capital gains) of each Portfolio is periodically
declared and paid as a dividend. Dividends are paid by the
Portfolio in federal funds or in additional shares at the
discretion of the shareholder on the first Business Day of
each month. Currently, capital gains (the excess of net
long-term capital gain over net short-term capital loss)
realized, if any, are distributed at least annually.
Counsel and
Independent
Accountants Morgan, Lewis & Bockius LLP serves as counsel to the
Trust. Price Waterhouse LLP serves as the independent
accountants to the Trust.
Custodian and Wire
Agent CoreStates Bank, N.A., Broad and Chestnut Streets, P.O.
Box 7618, Philadelphia, Pennsylvania 19101 (the
"Custodian"), serves as custodian of the Trust's assets
and as wire agent of the Trust. The Custodian holds cash,
securities and other assets of the Trust as required by
the 1940 Act.
15
<PAGE> 16
DESCRIPTION
OF PERMITTED
INVESTMENTS
AND RISK FACTORS
The following is a description of certain of the permitted
investments for the Portfolios, and the associated risk
factors:
Bank Notes Bank notes are notes used to represent debt obligations
issued by banks in large denominations.
Bankers' Acceptance A bankers' acceptance is a bill of exchange or time drafts
drawn on and accepted by a commercial bank. It is used by
corporations to finance the shipment and storage of goods
and to furnish dollar exchange. Maturities are generally
six months or less.
Certificates of
Deposit Certificates of deposit are negotiable interest-bearing
instruments with a specific maturity. They are issued by
banks and savings and loan institutions in exchange for
the deposit of funds, and normally can be traded in the
secondary market prior to maturity. Certificates of
deposit have penalties for early withdrawal.
Commercial Paper Commercial paper is the term used to designate unsecured
short-term promissory notes issued by municipalities,
corporations and other entities. Maturities on these
issues vary from one to 270 days. Section 4(2) commercial
paper is issued in reliance on an exemption from
registration under Section 4(2) of the Securities Act of
1933 (the "1933 Act"), and is generally sold to
institutional investors who purchase for investment. Any
resale of such commercial paper must be in an exempt
transaction, usually to an institutional investor through
the issuer or investment dealers who make a market in such
commercial paper.
Demand Instruments Demand instruments are instruments which may involve a
conditional or unconditional demand feature which permits
the holder to demand payment of the principal amount of
the instrument. They may include variable amount master
demand notes.
Foreign Securities The Money Market Portfolio may invest in U.S. dollar
denominated obligations of issuers domiciled outside of
the United States ("Yankees"), securities issued by
foreign branches of U.S. commercial banks and of U.S. and
London branches of foreign banks, and obligations and
securities of foreign governments, including Canadian and
Provincial Government and Crown Agency obligations.
Investments in such instruments involve risks that are
different from investments in securities of U.S. banks.
These risks may include future unfavorable political and
economic developments, possible withholding taxes, seizure
of foreign deposits, currency controls, interest
limitations or other governmental restrictions which might
affect payment of principal or interest. Foreign branches
of foreign banks are not regulated by U.S. banking
authorities and generally are not bound by accounting,
16
<PAGE> 17
auditing and financial reporting standards comparable
to U.S. banks. Additionally, there may be less public
information available about foreign banks and their
branches. However, the Adviser attempts to minimize these
risks by investing only in those instruments which
satisfy the quality and maturity restrictions applicable
to the Portfolio.
Illiquid Securities Illiquid securities are securities which cannot be sold or
disposed of within seven business days at approximately
the value at which they are being carried on a Portfolio's
books. Illiquid securities may include demand instruments
with demand notice periods exceeding seven days for which
there is no secondary market, and repurchase agreements
with maturities over seven days in length.
Municipal Securities Municipal Securities consist of: (i) debt obligations
issued by or on behalf of public authorities to obtain
funds to be used for various public facilities, for
refunding outstanding obligations, for general operating
expenses, and for lending such funds to other public
institutions and facilities, and (ii) certain private
activity and industrial development bonds issued by or on
behalf of public authorities to obtain funds to provide
for the construction, equipment, repair or improvement of
privately operated facilities.
Municipal Securities include both municipal notes
and municipal bonds. Municipal notes include general
obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates
of indebtedness, demand notes and construction loan notes
and participation interests in municipal notes. Municipal
bonds include general obligation bonds, revenue or special
obligation bonds, private activity and industrial
development bonds and participation interests in municipal
bonds.
General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are
backed by the revenues of a project or facility (tolls
from a bridge, for example). Certificates of participation
represent an interest in an underlying obligation or
commitment, such as an obligation issued in connection
with a leasing arrangement. The payment of principal and
interest on private activity and industrial development
bonds generally is dependent solely on the ability of a
facility's user to meet its financial obligations and the
pledge, if any, of real and personal property as security
for such payment.
Taxable Municipal Securities: Taxable Municipal
Securities are Municipal Securities the interest on which
is not exempt from federal income tax. Taxable Municipal
Securities include "private activity bonds" that are
issued by or on behalf of states or political subdivisions
thereof to finance privately-owned or operated facilities
for business and manufacturing, housing, sports, and
pollution control and to finance activities of and
facilities for charitable institutions. Private activity
bonds are also used to finance public facilities such as
airports, mass transit systems, ports, parking lots, and
low income housing. The payment of the principal and
interest on
17
<PAGE> 18
private activity bonds is not backed by a pledge of tax
revenues, and is dependent solely on the ability of the
facility's user to meet its financial obligations, and
may be secured by a pledge of real and personal property
so financed. Interest on these bonds may not be exempt
from federal income tax.
Repurchase Agreements Repurchase agreements are agreements by which a Portfolio
obtains a security and simultaneously commits to return
the security to the seller at an agreed upon price on an
agreed upon date within a number of days from the date of
purchase. The Portfolio or its agent will have actual or
constructive possession of the securities held as
collateral for the repurchase agreement. Collateral must
be maintained at a value at least equal to 100% of the
resale price. A Portfolio bears a risk of loss in the
event the other party defaults on its obligations and the
Portfolio is delayed or prevented from exercising its
right to dispose of the collateral securities or if the
Portfolio realizes a loss on the sale of the collateral
securities. A Portfolio will enter into repurchase
agreements only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the
agreement based on established guidelines. Repurchase
agreements are considered loans under the 1940 Act.
Restricted Securities Restricted securities are securities that may not be sold
freely to the public absent registration under the 1933
Act, or an exemption from registration.
Time Deposits Time deposits are non-negotiable receipts issued by a bank
in exchange for the deposit of funds. Similar to a
certificate of deposit, a time deposit earns a specified
rate of interest over a definite period of time; however,
it cannot be traded in the secondary market.
U.S. Government
Agency Obligations Certain federal agencies, such as the Government National
Mortgage Association ("GNMA"), have been established as
instrumentalities of the U.S. Government to supervise and
finance certain types of activities. Issues of these
agencies, while not direct obligations of the U.S.
Government, are either backed by the full faith and credit
of the United States (such as GNMA securities) or
supported by the issuing agency's right to borrow from the
Treasury. The issues of other agencies are supported only
by the credit of the instrumentality (such as Federal
National Mortgage Association securities). Any guarantee
by the U.S. Government agencies or instrumentalities of
all securities in which a Portfolio invests guarantees
only the payment of principal and interest on the
guaranteed security and does not guarantee the yield or
value of the security or the yield or value of shares of
that Portfolio.
U.S. Treasury
Obligations U.S. Treasury obligations consist of bills, notes and
bonds issued by the U.S. Treasury, as well as separately
traded interest and principal component parts of such
obligations, known as Separately Traded Registered
Interest and Principal Securities ("STRIPS"), that are
transferable through the federal book-entry system.
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<PAGE> 19
STRIPS are sold as zero coupon securities, which
means that they are sold at a substantial discount and
redeemed at face value at their maturity date without
interim payments of interest or principal. This discount
is accreted over the life of the security, and such
accretion will constitute the income earned on the
security for both accounting and tax purposes. Because of
these features, such securities may be subject to greater
interest rate volatility than interest-paying investments.
See also "Taxes."
Variable and Floating
Rate
Instruments Certain of the obligations purchased by a Portfolio may
carry variable or floating rates of interest and may
involve a conditional or unconditional demand feature.
Such obligations may include variable amount master demand
notes. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities
may be reset daily, weekly, quarterly or at some other
interval, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing
market interest rates. A demand instrument with a demand
notice period exceeding seven days may be considered
illiquid if there is no secondary market for such
security.
When-Issued and
Delayed Delivery
Securities When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. A Portfolio will maintain with the
custodian a separate account with liquid, high grade debt
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these
securities is fixed as of the purchase date, and no
interest accrues to a Portfolio before settlement. These
securities are subject to market fluctuation due to
changes in market interest rates, and it is possible that
the market value at the time of settlement could be higher
or lower than the purchase price if the general level of
interest rates has changed. Although a Portfolio generally
purchases securities on a when-issued or forward
commitment basis with the intention of actually acquiring
securities, a Portfolio may dispose of a when-issued
security or forward commitment prior to settlement if the
Adviser deems it appropriate to do so.
19
<PAGE> 20
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Annual Operating Expenses......................... 2
Financial Highlights.............................. 3
The Trust......................................... 5
Investment Objectives and Policies................ 5
General Investment Policies....................... 7
Investment Limitations............................ 8
The Manager....................................... 9
The Adviser....................................... 9
Distribution and Shareholder Servicing............ 10
Purchase and Redemption of Shares................. 11
Performance....................................... 12
Taxes............................................. 13
General Information............................... 14
Description of Permitted Investments and Risk
Factors......................................... 16
</TABLE>
20
<PAGE> 21
PROSPECTUS
OCTOBER 30, 1996
- --------------------------------------------------------------------------------
TREASURY SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
Please read this prospectus carefully before investing, and keep it on file for
future reference. It contains information that can help you decide if the
Portfolio's investment goals match your own.
A Statement of Additional Information dated October 30, 1996, has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing the Distributor, SEI Financial Services Company, 680
East Swedesford Road, Wayne, Pennsylvania 19087-5734, or by calling
1-800-437-6016. The Statement of Additional Information is incorporated by
reference into this Prospectus.
SEI Liquid Asset Trust (the "Trust") is an open-end management investment
company, certain classes of which offer shareholders a convenient means of
investing their funds in one or more professionally managed diversified
portfolios of securities. The Treasury Securities Portfolio offers two classes
of shares, Class A shares and Class D shares. Class D shares differ from Class A
shares primarily in the allocation of certain distribution expenses and transfer
agent fees. Class D shares are available through SEI Financial Services Company
(the Trust's distributor), and through participating broker-dealers, financial
institutions and other organizations. This Prospectus offers Class D shares of
the Trust's Treasury Securities Portfolio (the "Portfolio").
AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.
<PAGE> 22
HOW TO READ THIS PROSPECTUS
This Prospectus provides information that you should know about the Portfolio
before investing. Brief descriptions are also provided throughout the Prospectus
to better explain certain key points. To find these helpful guides, look for
this symbol. [SYMBOL]
FUND HIGHLIGHTS
The following summary provides basic information about the Class D shares of the
Trust's Treasury Securities Portfolio. This summary is qualified in its entirety
by reference to the more detailed information provided elsewhere in this
Prospectus and in the Statement of Additional Information.
INVESTMENT
OBJECTIVE AND
POLICIES The Treasury Securities Portfolio seeks to preserve
principal value and maintain a high degree of liquidity
while providing current income. See "Investment Objective
and Policies" and "Description of Permitted Investments
and Risk Factors."
UNDERSTANDING RISK There can be no assurance that the Portfolio will achieve
its investment objective. See "Investment Objective and
Policies" and "Description of Permitted Investments and
Risk Factors."
MANAGEMENT PROFILE Wellington Management Company, LLP (the "Adviser")
serves as the investment adviser to the Portfolio. The
Adviser is a professional investment counseling firm
which has been providing investment advisory services to
mutual funds since 1933. SEI Fund Management serves as
the manager and shareholder servicing agent of the Trust
(the "Manager"). DST Systems, Inc. ("DST") serves as
transfer agent (the "Transfer Agent") and dividend
disbursing agent for the Class D shares of the Trust. SEI
Financial Services Company serves as distributor (the
"Distributor") of the Trust's shares. See "The Manager,"
"The Adviser" and "Distribution and Shareholder
Servicing."
TABLE OF
CONTENTS
Fund Highlights........ 2
Portfolio Expenses..... 4
Financial Highlights... 5
Your Account and Doing
Business with Us..... 6
Investment Objective and
Policies............. 9
General Investment
Policies............... 9
Investment
Limitations............ 9
The Manager........... 10
The Adviser........... 11
Distribution and
Shareholder
Servicing........... 11
Performance........... 12
Taxes................. 13
Additional Information
About
Doing Business With
Us.................... 15
General Information... 17
Description of Permitted
Investments and Risk
Factors............. 19
2
<PAGE> 23
YOUR ACCOUNT
AND DOING BUSINESS
WITH US You may open an account with just $1,000 and make
additional investments with as little as $100. Redemptions
of the Portfolio's shares are made at net asset value per
share. See "Purchase of Shares" and "Redemption of
Shares."
DIVIDENDS Substantially all of the net investment income
(exclusive of capital gains) of the Portfolio is
distributed in the form of dividends that will be
declared daily and paid monthly on the first Business Day
of each month. Any realized net capital gain is
distributed at least annually. Distributions are paid in
additional shares unless you elect to take the payment in
cash. See "Dividends."
INFORMATION/
SERVICE CONTACTS For more information about Class D shares, call SEI
Financial Services Company at 1-800-437-6016.
[SYMBOL] INVESTMENT
PHILOSOPHY
Believing that no single
investment adviser can
deliver outstanding
performance in every
investment category, only
those advisers who have
distinguished themselves
within their areas of
specialization are selected
to advise our mutual funds.
3
<PAGE> 24
PORTFOLIO EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class D shares.
SHAREHOLDER TRANSACTION EXPENSES (as a percentage of offering price)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Treasury
Securities
Portfolio
-----------
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Maximum Sales Charge Imposed on Reinvested Dividends None
Redemption Fees (1) None
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Treasury
Securities
Portfolio
-----------
<S> <C>
Management/Advisory fees (after fee waiver) (2) .39%
12b-1 fees (after fee waivers) (3) .20%
Other Expenses .20%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (2) (3) (4) .79%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A charge, currently $10.00, is imposed on wires of redemption proceeds of
the Portfolio's Class D shares.
(2) The Manager has agreed to waive its fee in an amount necessary to limit the
total operating expenses for Class D shares of the Portfolio to not more
than .84% of its average daily net assets. Absent this waiver,
management/advisory fees, would have been .45%. The Portfolio's
Management/Advisory fees have been restated to reflect reductions in fee
waivers.
(3) The Distributor has waived, on a voluntary basis, all or a portion of its
12b-1 fee, and the 12b-1 Fees shown reflect this waiver. The Distributor
reserves its right to terminate this waiver at any time in its sole
discretion. Absent such waiver, 12b-1 Fees would be .25% for the Portfolio.
(4) Absent waivers, Total Operating Expenses of the Class D shares of the
Portfolio would be .90%. Additional information may be found under "The
Manager and Shareholder Servicing Agent," "The Adviser" and "Distribution."
EXAMPLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor in the Class D shares of the Portfolio would pay the following expenses on
a $1,000 investment assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
Treasury Securities Portfolio $ 8 $ 25 $ 44 $98
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to the
Class D shares. The Portfolio also offers Class A shares, which are subject to
the same expenses, except there are no transfer agent costs, and there are
different shareholder servicing costs. A person who purchases shares through an
account with a financial institution may be charged separate fees by that
institution. Additional information may be found under "The Manager," "The
Adviser" and "Distribution and Shareholder Servicing." Long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales charge
otherwise permitted by the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD").
4
<PAGE> 25
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout each
period have been audited by Price Waterhouse LLP, independent accountants, whose
report dated August 2, 1996, was unqualified. This information should be read in
conjunction with the Trust's financial statements and notes thereto included in
the Statement of Additional Information under the heading "Financial
Information." Additional performance information is set forth in the Trust's
1996 Annual Report to Shareholders, which is available upon request and without
charge by calling 1-800-437-6016.
For a Class D Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Distributions
Net Asset Distributions from
Value Net Realized from Net Realized Net Asset
Beginning Investment and Unrealized Gains Investment Capital Value End
of Period Income on Securities Income Gains of Period
- ---------------------------------------------------------------------------------------------------------------------------
- --------------------
TREASURY SECURITIES
- --------------------
<S> <C> <C> <C> <C> <C> <C>
1996 $1.00 $ 0.05 -- $ (0.05) -- $1.00
1995 1.00 0.05 -- (0.05) -- 1.00
1994 (1) 1.00 0.01 -- (0.01) -- 1.00
<CAPTION>
Ratio of
Ratio of Investment to Average to Average
Net Asset Expenses to Income Net Assets Net Assets
Total End of Period Average to Average (Excluding (Excluding
Return (000) Net Assets Net Assets Waivers) Waivers)
- ---------------------------------------------------------------------------------------------------------------------------
- --------------------
TREASURY SECURITIES
- --------------------
<S> <C> <C> <C> <C> <C> <C>
1996 5.01% $ 219 0.79% 4.92% 0.87% 4.84%
1995 4.69 9.798 0.79 5.15 0.89 5.05
1994 (1) 0.50** 23 0.79* 3.23* 0.98* 3.04*
</TABLE>
(1) Treasury Securities Class D commenced operations on May 4, 1994.
* Annualized
** Not Annualized
Amounts designated as "--" are either $0 or have been rounded to $0.
5
<PAGE> 26
YOUR ACCOUNT AND DOING BUSINESS
WITH US
Class D shares of the Portfolio are sold on a continuous basis and may be
purchased directly from the Trust's Distributor, SEI Financial Services Company.
Shares may also be purchased through financial institutions, broker-dealers, or
other organizations which have established a dealer agreement or other
arrangement with the Distributor ("Intermediaries"). For more information about
the following topics, see "Additional Information About Doing Business with Us."
- --------------------------------------------------------------------------------
HOW TO BUY, SELL
AND EXCHANGE
SHARES THROUGH
INTERMEDIARIES Class D shares of the Portfolio may be purchased through
Intermediaries which provide various levels of shareholder
services to their customers. Contact your Intermediary for
information about the services available to you and for
specific instructions on how to buy, sell and exchange
shares. To allow for processing and transmittal of orders
to the Transfer Agent on the same day, Intermediaries may
impose earlier cut-off times for receipt of purchase
orders. Certain Intermediaries may charge customer
account fees. Information concerning shareholder services
and any charges will be provided to the customer by the
Intermediary. Certain of these Intermediaries may be
required to register as broker-dealers under state law.
The shares you purchase through an Intermediary may
be held "of record" by that Intermediary. If you want to
transfer the registration of shares beneficially owned by
you, but held "of record" by an Intermediary, you should
call the Intermediary to request this change.
HOW TO BUY SHARES
FROM THE DISTRIBUTOR Application forms can be obtained by calling
1-800-437-6016. Class D shares of the Portfolio are
offered only to residents of states in which the shares
are eligible for purchase.
Opening an Account
By Check You may buy Class D shares by mailing a completed
application and a check (or other negotiable bank
instrument or money order) payable to "Class D (Treasury
Securities Portfolio)". If you send a check that does not
clear, the purchase will be canceled and you could be
liable for any losses or fees incurred. Third-party
checks, credit cards, credit card checks and cash will not
be accepted.
By Fed Wire To buy shares by Fed Wire call the Transfer Agent
toll-free at 1-800-437-6016.
[SYMBOL] WHAT IS AN
INTERMEDIARY?
Any entity, such as a
bank, broker-dealer,
other financial
institution, association
or organization which
has entered into an
arrangement with the
Distributor to sell
Class D shares to its
customers.
6
<PAGE> 27
Automatic
Investment Plan
("AIP") You may systematically buy Class D shares through
deductions from your checking or savings account, provided
these accounts are maintained through banks which are part
of the Automated Clearing House ("ACH") system. You may
purchase shares on a fixed schedule (semi-monthly or
monthly) with amounts as low as $25, or as high as
$100,000. Upon notice, the amount you commit to the AIP
may be changed or canceled at any time. The AIP is subject
to account minimum initial purchase amounts and minimum
balance maintenance requirements.
EXCHANGING SHARES
When Can You
Exchange Shares? Once payment for your shares has been received and
accepted (i.e., an account has been established), you may
exchange some or all of your shares for Class D shares of
SEI International Trust and SEI Institutional Managed
Trust ("SEI Funds"). Exchanges are made at net asset value
plus any applicable sales charge.
When Do Sales Charges
Apply to an Exchange? SEI Funds' portfolios that are not money market
portfolios currently impose a sales charge on Class D
shares. If you exchange into one of these "non-money
market" portfolios, you will have to pay a sales charge
on any portion of your exchanged Class D shares for which
you have not previously paid a sales charge.
If you previously paid a sales charge on your
Class D shares, no additional sales charge will be
assessed when you exchange those Class D shares for other
Class D shares.
If you buy Class D shares of a "non-money market"
fund and you receive a sales charge waiver, you will be
deemed to have paid the sales charge for purposes of this
exchange privilege. In calculating any sales charge
payable on your exchange, the Trust will assume that the
first shares you exchange are those on which you have
already paid a sales charge. Sales charge waivers may also
be available under certain circumstances described in the
SEI Funds' prospectuses.
The Trust reserves the right to change the terms
and conditions of the exchange privilege discussed herein,
or to terminate the exchange privilege, upon 60 days'
notice. The Trust also reserves the right to deny an
exchange request made within 60 days of the purchase of a
"non-money market" portfolio.
Requesting an Exchange
of Shares To request an exchange, you must provide proper
instructions in writing to the Transfer Agent. Telephone
exchanges will also be accepted if you previously elected
this option on your account application.
In the case of shares held "of record" by an
Intermediary but beneficially owned by you, you should
contact the Intermediary who will contact the Transfer
Agent and effect the exchange on your behalf.
[SYMBOL] HOW DOES AN
EXCHANGE
TAKE PLACE?
When making an exchange,
you authorize the sale
of your shares of one or
more Portfolios in order
to purchase the shares
of another Portfolio. In
other words, you are
executing a sell order
and then a buy order.
This sale of your shares
is a taxable event which
could result in a
taxable gain or loss.
7
<PAGE> 28
HOW TO SELL SHARES
THROUGH THE
DISTRIBUTOR
By Mail
To sell your shares, a written request for redemption in
good order must be received by the Transfer Agent. Valid
written redemption requests will be effective on receipt.
All shareholders of record must sign the redemption
request. The Transfer Agent may require that the
signatures on written requests be guaranteed.
For information about the proper form of redemption
requests, call 1-800-437-6016. You may also have the
proceeds mailed to an address of record or mailed (or sent
by ACH) to a commercial bank account previously designated
on the Account Application or specified by written
instruction to the Transfer Agent. There is no charge for
having redemption requests mailed to a designated bank
account.
By Telephone You may sell your shares by telephone if you previously
elected that option on the Account Application. You may
have the proceeds mailed to the address of record, wired
or sent by ACH to a commercial bank account previously
designated on the Account Application. Under most
circumstances, payments will be transmitted on the next
Business Day following receipt of a valid telephone
request for redemption. Wire redemption requests may be
made by calling 1-800-437-6016. A wire redemption charge
(presently $10.00) will be deducted from the amount of
the redemption.
Systematic
Withdrawal Plan
("SWP") You may establish a systematic withdrawal plan for an
account with a $10,000 minimum balance. Under the plan,
redemptions can be automatically processed from accounts
(monthly, quarterly, semi-annually or annually) by check
or by ACH with a minimum redemption amount of $50.
Check-Writing Check-Writing Service is offered free of charge to Class D
shareholders in the Portfolio. You may redeem shares by
writing checks on your account for $500 or more. Once you
have signed and returned a signature card, you will
receive a supply of checks. A check may be made payable to
any person, and your account will continue to earn
dividends until the check clears.
Because of the difficulty of determining in advance
the exact value of your account, you may not use a check
to close your account. The checks are free, but your
account will be charged a fee for stopping payment of a
check upon your request or if the check cannot be honored
because of insufficient funds or other valid reasons.
[SYMBOL] WHAT IS A
SIGNATURE
GUARANTEE?
A signature guarantee
verifies the
authenticity of your
signature and may be
obtained from any of the
following: banks,
brokers, dealers,
certain credit unions,
securities exchange or
association, clearing
agency or savings
association. A notary
public cannot provide a
signature guarantee.
8
<PAGE> 29
INVESTMENT
OBJECTIVE AND
POLICIES
TREASURY SECURITIES
PORTFOLIO The investment objective of the Treasury Securities
Portfolio is to preserve principal value and maintain a
high degree of liquidity while providing current income.
The Treasury Securities Portfolio invests
exclusively in U.S. Treasury obligations and repurchase
agreements involving such obligations. The repurchase
agreement dealers selected for the Treasury Securities
Portfolio must meet certain creditworthiness criteria
established by Standard & Poor's Corporation ("S&P").
There can be no assurance that the Portfolio
will achieve its investment objective.
GENERAL
INVESTMENT
POLICIES
In purchasing obligations, the Portfolio complies with the
requirements of Rule 2a-7 under the 1940 Act, as that Rule
may be amended from time to time. These requirements
currently provide that the Portfolio must limit its
investments to securities with remaining maturities of 397
days or less, and must maintain a dollar-weighted average
maturity of 90 days or less.
For additional information regarding the
Portfolio's permitted investments, see "Description of
Permitted Investments and Risk Factors" and the Statement
of Additional Information.
INVESTMENT
LIMITATIONS
The investment objective and certain of the investment
limitations are fundamental policies of the Portfolio.
Fundamental policies cannot be changed with respect to the
Portfolio without the consent of the holders of a majority
of the Trust's or the Portfolio's outstanding shares. It
is a fundamental policy of the Portfolio to use its best
efforts to maintain a constant net asset value of $1.00
per share.
The Portfolio may not:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and any securities
guaranteed
[SYMBOL] WHAT ARE
INVESTMENT
OBJECTIVES AND
POLICIES?
A Portfolio's investment
objective is a statement
of what it seeks to
achieve. It is important
to make sure that the
investment objective
matches your own
financial needs and
circumstances. The
investment policies
section spells out the
types of securities in
which the Portfolio
invests.
9
<PAGE> 30
thereby) if as a result more than 5% of total
assets of the Portfolio (based on fair market value at
the time of investment) would be invested in the
securities of such issuer; provided, however, that the
Portfolio may temporarily invest up to 25% of its
total assets without regard to this restriction as
permitted by Rule 2a-7.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio based on fair
market value at the time of such purchase, to be
invested in the securities of one or more issuers
conducting their principal business activities in the
same industry, provided that this limitation does not
apply to investments in (a) domestic banks and (b)
obligations issued or guaranteed by the U.S. Government
or its agencies and instrumentalities.
3. Borrow money except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the
value of the total assets of the Portfolio. This
borrowing provision is included solely to facilitate
the orderly sale of portfolio securities to accommodate
substantial redemption requests if they should occur
and is not for investment purposes. All borrowings will
be repaid before making additional investments for the
Portfolio and any interest paid on such borrowings will
reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the
time of the purchase of a security. Additional investment
limitations are set forth in the Statement of Additional
Information.
THE MANAGER
SEI Fund Management ("SEI Management"), provides the Trust
with overall management services, regulatory reporting,
all necessary office space, equipment, personnel and
facilities and for acting as shareholder servicing agent.
For its management services, SEI Management is
entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .42% of the average daily
net assets of the Treasury Securities Portfolio. SEI
Management has contractually agreed to waive a portion of
its fee in order to limit total operating expenses on an
annualized basis to not more than .84% of the average
daily net assets of the Class D shares of the Portfolio on
an annualized basis. For the fiscal year ended June 30,
1996, the Portfolio paid management fees, after fee
waivers, of .33% of the Portfolio's average daily net
assets.
The Trust and DST Systems, Inc., 1004 Baltimore
St., 2nd Floor, Kansas City, Missouri, 64105, have entered
into a separate transfer agent agreement with respect to
the Class D shares of the Portfolio. Under this agreement,
DST acts as the transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Class D shares of the
Trust.
10
<PAGE> 31
THE ADVISER
Wellington Management Company, LLP (the "Adviser") 75
State Street, Boston, Massachusetts 02109, serves as the
investment adviser to the Portfolio.
The Adviser, under an
investment advisory
agreement with the Trust,
invests the assets of the
Portfolio and continuously
reviews, supervises and
administers the Portfolio's
investment program, subject
to the supervision of, and
policies set by, the Trustees
of the Trust.
As of September 30,
1996, the Adviser had
investment management
authority with respect to
approximately $123.8 billion
of assets, including the
assets of the Trust and SEI
Daily Income Trust, which is
an open-end money market investment company administered
by the Manager. The Adviser is a professional investment
counseling firm which provides investment services to
investment companies, employee benefit plans, endowments,
foundations, and other institutions and individuals. The
Adviser's predecessor organizations have provided
investment advisory services to investment companies since
1933, and to investment counseling clients since 1960. The
Adviser is a Massachusetts limited liability partnership,
of which the following persons are managing partners:
Robert W. Doran, Duncan M. McFarland and John R. Ryan.
The Adviser is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of
.075% of the combined average daily net assets of the
Trust's Portfolios up to $500 million, and .02% of such
assets in excess of $500 million. Such fees are allocated
daily among the Portfolios of the Trust on the basis of
their relative net assets. For the fiscal year ended June
30, 1996, the Treasury Securities Portfolio paid advisory
fees, after fee waivers, of .03% of its relative net
assets.
DISTRIBUTION AND SHAREHOLDER SERVICING
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI Corporation, serves as each
Portfolio's distributor pursuant to a distribution
agreement (the "Distribution Agreement") with the Trust.
The Portfolio has adopted a distribution plan for its
Class D shares (the "Class D Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Portfolio has adopted a shareholder
servicing plan for its Class A shares (the "Class A
Plan").
The Class D Plan provides for payments to the
Distributor at an annual rate of .25% of the Portfolio's
average daily net assets attributable to Class D Shares.
INVESTMENT
ADVISER
A Portfolio's investment
adviser manages the
investment activities
and is responsible for
the performance of the
Portfolio. The adviser
conducts investment
research, executes
investment strategies
based on an assessment
of economic and market
conditions, and
determines which
securities to buy, hold
or sell.
<PAGE> 32
This payment may be used to compensate financial
institutions that provide distribution-related services
to their customers. These payments are characterized as
"compensation," and are not directly tied to expenses
incurred by the Distributor; the payments the Distributor
receives during any year may therefore be higher or lower
than its actual expenses. These payments compensate the
Distributor for its services in connection with
distribution assistance or the provision of shareholder
services, and some or all of it may be used to pay
financial institutions and intermediaries such as banks,
savings and loan associations, insurance companies, and
investment counselors, broker-dealers (including the
Distributor's affiliates and subsidiaries) for services
or reimbursement of expenses incurred in connection with
distribution assistance or the provision of shareholder
services. If the Distributor's expenses are less than its
fees under the Class D Plan, the Trust will still pay the
full fee and the Distributor will realize a profit, but
the Trust will not be obligated to pay in excess of the
full fee, even if the Distributor's actual expenses are
higher. Currently, the Distributor is taking this
compensation payment under the Class D Plan at a rate of
.20% of the Portfolio's average daily net assets, on an
annualized basis, attributable to Class D shares.
It is possible that an institution may offer
different classes of shares to its customers and thus
receive different compensation with respect to different
classes. These financial institutions may also charge
separate fees to their customers.
The Trust may execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive compensation.
The Distributor may, from time to time in its sole
discretion, institute one or more promotional incentive
programs, which will be paid for by the Distributor from
its own resources. Under any such program, the Distributor
will provide promotional incentives, in the form of cash
or other compensation, including merchandise, airline
vouchers, trips and vacation packages, to all dealers
selling shares of the Portfolio. Such promotional
incentives will be offered uniformly to all shares of the
Portfolio, and also will be offered uniformly to all
dealers, predicated upon the amount of shares of the
Portfolio sold by such dealer.
PERFORMANCE
From time to time, the Portfolio may advertise "current
yield" and "effective compound yield." These figures will
fluctuate, as they are based on historical earnings and
are not intended to indicate future performance. The
"current yield" of the Portfolio refers to the income
generated by an investment over a seven-day period which
is then "annualized." That is, the amount of income
generated by an investment during that week is assumed to
be generated each week over a 52-week period and is shown
as a percentage of the investment. The "effective yield"
is calculated similarly but, when annualized, the income
earned by an investment is
12
<PAGE> 33
assumed to be reinvested. The "effective yield" will be
slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment.
The Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives.
For the Portfolio, the performance of the Class A
shares will normally be higher than the performance of the
Class D shares of the Portfolio because of additional
distribution and transfer agent expenses charged to Class
D shares.
TAXES
The following summary of federal income tax consequences
is based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No attempt has been made to present a detailed explanation
of the federal, state, or local income tax treatment of
the Portfolio or its shareholders. In addition, state and
local tax consequences of an investment in the Portfolio
may differ from the federal income tax consequences
described below. Accordingly, Shareholders are urged to
consult their tax advisers regarding specific questions
as to federal, state and local income taxes. Additional
information concerning taxes is set forth in the
Statement of Additional Information.
Tax Status
of the Portfolio The Portfolio is treated as a separate entity for federal
tax purposes and is not combined with the Trust's other
Portfolios. The Portfolio intends to continue to qualify
for the special tax treatment afforded regulated
investment companies under subchapter M of the Internal
Revenue Code of 1986, as amended, so as to be relieved of
federal income tax on net investment company taxable
income and net capital gains (the excess of net long-term
capital gain over net short-term capital losses)
distributed to shareholders.
Tax Status
of Distributions
The Portfolio will distribute substantially all of its net
investment income (including net short-term capital gains)
and net capital gain to shareholders. Dividends from net
investment company taxable income are taxable to
shareholders as ordinary income, whether received in cash
or in additional shares, to the extent of the Portfolio's
earning and profits. Distributions of net capital gains
are taxable to shareholders as long-term capital gains
regardless of how long shareholders have held their shares
and regardless of whether the distributions are received
in cash or
[SYMBOL] TAXES
You must pay taxes on
your Portfolio's
earnings whether you
take your payments in
cash or additional
shares.
13
<PAGE> 34
in additional shares. Dividends and distributions of
capital gains paid by the Portfolio do not qualify for
the dividends-received deduction for corporate
shareholders. The Portfolio will make annual reports to
shareholders on the federal income tax status of all
distributions.
Dividends declared by the Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in such a month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of the year declared if
paid by the Portfolio at any time during the following
January.
[SYMBOL] DISTRIBUTIONS
The Portfolio
distributes income
dividends and capital
gains. Income dividends
represent the earnings
from the Portfolio's
investments; capital
gains distributions
occur when investments
in the Portfolio are
sold for more than the
original purchase price.
The Portfolio intends to make sufficient
distributions prior to the end of each calendar year, to
avoid liability for the federal excise tax applicable to
regulated investment companies.
With respect to investments in U.S. Treasury
STRIPS, which are sold at original issue discount and thus
do not make periodic cash interest payments, the Portfolio
will be required to include as part of its current income
the imputed interest on such obligations even though the
Portfolio has not received any interest payments on such
obligations during that period. Because the Portfolio
distributes all of its net investment income to its
shareholders, the Portfolio may have to sell portfolio
securities to distribute such imputed income, which may
occur at a time when the Adviser would not have chosen to
sell such securities and, which may result in a taxable
gain or loss.
Investment income received by the Portfolio on
direct U.S. Government obligations is exempt from tax at
the state level when received directly by the Portfolio
and may be exempt, depending on the state, when received
by a shareholder as income dividends from the Portfolio
provided certain state-specific conditions are satisfied.
Interest received on repurchase agreements collateralized
by U.S. Government obligations normally is not exempt from
state taxation. The Portfolio will inform shareholders
annually of the percentage of income and distributions
derived from direct U.S. Government obligations.
Shareholders should consult their tax advisers to
determine whether any portion of the income dividends
received from the Portfolio is considered tax exempt in
their particular states.
Each sale, exchange, or redemption of the
Portfolio's shares is a taxable transaction to the
shareholder.
14
<PAGE> 35
ADDITIONAL
INFORMATION ABOUT
DOING BUSINESS
WITH US
Business Days You may buy, sell or exchange shares on days on which the
New York Stock Exchange is open for business ("Business
Days"). However, shares of the Portfolio cannot be
purchased by Federal Reserve wire on Federal holidays. All
purchase, exchange and redemption requests received in
"good order" will be effective as of the Business Day
received by the Transfer Agent as long as the Transfer
Agent receives the order and, in the case of a purchase
request, payment before 2:00 p.m., Eastern time.
Otherwise the purchase will be effective when payment is
received. Broker-dealers may have separate arrangements
with the Trust regarding the sale of Class D shares.
If an exchange request is for shares of a
portfolio whose net asset value is calculated as of a
time earlier than 2:00 p.m., Eastern time, the exchange
request will not be effective until the next Business
Day. Anyone who wishes to make an exchange must have
received a current prospectus of the portfolio into which
the exchange is being made before the exchange will be
effected.
Minimum Investments The minimum initial investment in the Portfolio's Class D
shares is $1,000; however, the minimum investment may be
waived at the Distributor's discretion. All subsequent
purchases must be at least $100 ($25 for payroll
deductions authorized pursuant to pre-approved payroll
deduction plans). The Trust reserves the right to reject a
purchase order when the Distributor determines that it is
not in the best interest of the Trust or its shareholders
to accept such order.
Maintaining a
Minimum Account Balance
Due to the relatively high cost of handling small
investments, the Portfolio reserves the right to redeem,
at net asset value, the shares of any shareholder if,
because of redemptions of shares by or on behalf of the
shareholder, the account of such shareholder in the
Portfolio has a value of less than $1,000, the minimum
initial purchase amount. Accordingly, an investor
purchasing shares of the Portfolio in only the minimum
investment amount may be subject to such involuntary
redemption if he or she thereafter redeems any of these
shares. Before the Portfolio exercises its right to redeem
such shares and to send the proceeds to the shareholder,
the
[SYMBOL] BUY, EXCHANGE AND
SELL REQUESTS ARE
IN "GOOD ORDER"
WHEN:
- The account number and
portfolio name are
shown
- The amount of the
transaction is
specified in dollars
or shares
- Signatures of all
owners appear exactly
as they are registered
on the account
- Any required signature
guarantees (if
applicable) are
included
- Other supporting legal
documents (as
necessary) are present
15
<PAGE> 36
shareholder will be given notice that the value of the
shares in his or her account is less than the minimum
amount and will be allowed 60 days to make an additional
investment in that Portfolio in an amount that will
increase the value of the account to at least $1,000. See
"Purchase and Redemption of Shares" in the Statement of
Additional Information for examples of when the right of
redemption may be suspended.
At various times, the Portfolio may receive a
request to redeem shares for which it has not yet received
good payment. In such circumstances, redemption proceeds
will be forwarded upon collection of payment for the
shares; collection of payment may take 10 or more days.
The Portfolio intends to pay cash for all shares redeemed,
but under abnormal conditions that make payment in cash
unwise, payment may be made wholly or partly in portfolio
securities with a market value equal to the redemption
price. In such cases, an investor may incur brokerage
costs in converting such securities to cash.
Net Asset Value An order to buy shares will be executed at a per share
price equal to the net asset value next determined after
the receipt of the purchase order by the Transfer Agent
(the "offering price"). No certificates representing
shares will be issued. An order to sell shares will be
executed at the net asset value per share next determined
after receipt and effectiveness of a request for
redemption in good order. Net asset value per share is
determined daily as of 2:00 p.m., Eastern time on any
Business Day. Payment to shareholders for shares redeemed
will be made within 7 days after receipt by the Transfer
Agent of the redemption order.
How the
Net Asset Value
is Determined
The net asset value per share of the Portfolio is
determined by dividing the total market value of its
investments and other assets, less any liabilities, by the
total number of outstanding shares of the Portfolio.
Although the methodology and procedures for determining
net asset value per share are identical for both classes
of the Portfolio, the net asset value per share of one
class may differ from that of another class because of the
different distribution fees and/or shareholder servicing
fees charged to each class and the incremental transfer
agent fees charged to Class D shares.
Signature Guarantees The Transfer Agent may require that the signatures on the
written request be guaranteed. You should be able to
obtain a signature guarantee from a bank, broker, dealer,
certain credit unions, securities exchange or association,
clearing agency or savings association. A Notary public
cannot guarantee signatures. The signature guarantee
requirement will be waived if all of the following
conditions apply: (1) the redemption is for not more than
$5,000 worth of shares, (2) the redemption check is
payable to the shareholder(s) of record, and (3) the
redemption check is mailed to the shareholder(s) at his or
her address of record. The Trust and the Transfer Agent
reserve the right to amend these requirements without
notice.
16
<PAGE> 37
Telephone/Wire
Instructions Redemption orders may be placed by telephone. Neither the
Trust nor the Transfer Agent will be responsible for any
loss, liability, cost or expense for acting upon wire
instructions or upon telephone instructions that it
reasonably believes to be genuine. The Trust and the
Transfer Agent will each employ reasonable procedures to
confirm that instructions communicated by telephone are
genuine, including requiring a form of personal
identification prior to acting upon instructions received
by telephone and recording telephone instructions. If
market conditions are extraordinarily active, or other
extraordinary circumstances exist, and you experience
difficulties placing redemption orders by telephone and
may wish to consider placing orders by other means.
Systematic
Withdrawal
Plan ("SWP")
Please note that if withdrawals exceed income dividends,
your invested principal in the account will be depleted.
Thus, depending upon the frequency and amounts of the
withdrawal payments and/or any fluctuations in the net
asset value per share, your original investment could be
exhausted entirely. To participate in the SWP, you must
have your dividends automatically reinvested. You may
change or cancel the SWP at any time, upon written notice
to the Transfer Agent.
How to
Close your Account An account may be closed by providing written notice to
the Transfer Agent. You may also close your account by
telephone if you have previously elected telephone options
on your account application.
GENERAL
INFORMATION
The Trust SEI Liquid Asset Trust was organized as a Massachusetts
business trust under a Declaration of Trust dated July 20,
1981. The Declaration of Trust permits the Trust to offer
separate Portfolios of shares and different classes of
each Portfolio. Shareholders may purchase shares in
Portfolios through two separate classes: Class A and Class
D, which provide for variation in distribution,
shareholder servicing and transfer agent costs, voting
rights, dividends. This Prospectus offers the Class D
shares of the Trust's Treasury Securities Portfolio. In
addition to the Portfolio, the Trust consists of the
following other portfolios: Government Securities
Portfolio, Institutional Cash Portfolio, Prime Obligation
Portfolio, and Money Market Portfolio. Additional
information pertaining to the Trust may be obtained by
writing to SEI Fund Management, 680 East Swedesford Road,
Wayne, Pennsylvania 19087-1658, or by calling
1-800-437-6016. All consideration received by the Trust
for shares of any Portfolio or class and all assets of
such Portfolio or class belong to that Portfolio or class
and are subject to liabilities related thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation material and
reports to shareholders, costs of custodial services and
registering the shares under
17
<PAGE> 38
federal and state securities laws, pricing, insurance
expenses, litigation and other extraordinary expenses,
brokerage costs, interest charges, taxes and organization
expenses.
Trustees of the Trust The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
Voting Rights Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class of the
Trust will vote separately on matters relating solely to
that Portfolio or class. As a Massachusetts business
trust, the Trust is not required to hold annual meetings
of shareholders, but approval will be sought for certain
changes in the operation of the Trust and for the election
of Trustees under certain circumstances. In addition, a
Trustee may be removed by the remaining Trustees or by
shareholders at a special meeting called upon written
request of shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a
meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
Reporting The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
Shareholder Inquiries Shareholder inquiries should be directed to DST Systems,
Inc., P.O. Box 419240, Kansas City, MO 64141-6240.
Dividends Substantially all of the net investment income (exclusive
of capital gains) of the Portfolio is distributed in the
form of dividends that will be declared daily and paid
monthly on the first Business Day of each month.
Currently, capital gains (the excess of net long-term
capital gain over net short-term capital loss) realized,
if any, are distributed at least annually.
Shareholders in the Portfolio automatically receive
all income dividends and capital gain distributions in
additional shares at the net asset value next determined
following the record date, unless the shareholder has
elected to take such payment in cash. Shareholders may
change their election by providing written notice to the
Manager at least 15 days prior to the distribution.
Dividends and distributions of the Portfolio are
paid by the Portfolio on a per-share basis. The value of
each share will be reduced by the amount of any such
payment. If shares are purchased shortly before the record
date for a dividend or the distribution of capital gains,
a shareholder will pay the full price for the shares and
receive some portion of the price back as a taxable
dividend or distribution.
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<PAGE> 39
Counsel and Independent
Accountants Morgan, Lewis & Bockius LLP serves as counsel to the
Trust. Price Waterhouse LLP serves as the independent
accountants to the Trust.
Custodian and Wire Agent
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O.
Box 7618, Philadelphia, Pennsylvania 19101 (the
"Custodian"), serves as custodian of the Trust's assets
and as wire agent of the Trust. The Custodian holds cash,
securities and other assets of the Trust as required by
the 1940 Act.
DESCRIPTION OF
PERMITTED
INVESTMENTS
AND RISK FACTORS
The following is a description of certain of the permitted
investments for the Portfolio, and the associated risk
factors:
Repurchase Agreements Repurchase agreements are agreements by which the
Portfolio obtains a security and simultaneously commits to
return the security to the seller at an agreed upon price
on an agreed upon date within a number of days from the
date of purchase. The Portfolio or its agent will have
actual or constructive possession of the securities held
as collateral for the repurchase agreement. Collateral
must be maintained at a value at least equal to 100% of
the resale price. The Portfolio bears a risk of loss in
the event the other party defaults on its obligations and
the Portfolio is delayed or prevented from exercising its
right to dispose of the collateral securities or if the
Portfolio realizes a loss on the sale of the collateral
securities. The Portfolio will enter into repurchase
agreements only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the
agreement based on established guidelines. Repurchase
agreements are considered loans under the 1940 Act.
U.S. Treasury
Obligations U.S. Treasury Obligations consist of bills, notes and
bonds issued by the U.S. Treasury, as well as separately
traded interest and principal component parts of such
obligations, known as Separately Traded Registered
Interest and Principal Securities ("STRIPS"), that are
transferable through the federal book-entry system.
STRIPS are sold as zero coupon securities which
means that they are sold at a substantial discount and
redeemed at face value at their maturity date without
interim cash payments of interest or principal. This
discount is accreted over the life of the security, and
such accretion will constitute the income earned on the
security for both accounting and tax purposes. Because of
these features, such securities may be subject to greater
interest rate volatility than interest paying permitted
investments. See also "Taxes."
19
<PAGE> 40
When-Issued and Delayed
Delivery Securities
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. The Portfolio will maintain with the
custodian a separate account, with liquid, high grade debt
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these
securities is fixed as of the purchase date and no
interest accrues to the Portfolio before settlement. These
securities are subject to market fluctuation due to
changes in market interest rates, and it is possible that
the market value at the time of settlement could be higher
or lower than the purchase price if the general level of
interest rates has changed. Although the Portfolio
generally purchases securities on a when-issued or forward
commitment basis with the intention of actually acquiring
securities, the Portfolio may dispose of a when-issued
security or forward commitment prior to settlement if the
Adviser deems it appropriate to do so.
20
<PAGE> 41
SEI LIQUID ASSET TRUST
Manager:
SEI FUND MANAGEMENT
Distributor:
SEI FINANCIAL SERVICES COMPANY
Investment Adviser:
WELLINGTON MANAGEMENT COMPANY, LLP
This Statement of Additional Information is not a Prospectus. It is intended
to provide additional information regarding the activities and operations of
SEI Liquid Asset Trust (the "Trust"), and should be read in conjunction with
the Trust's Class A and Class D Prospectuses, each of which is dated October
30, 1996. Prospectuses may be obtained upon request and without charge by
writing the Trust's distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, Pennsylvania 19087-1658, or by calling 1-800-342-5734.
TABLE OF CONTENTS
<TABLE>
<S> <C>
The Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Description of Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
The Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8
The Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Distribution and Shareholder Servicing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
Trustees and Officers of the Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Fundamental Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-18
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-19
Purchase and Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-20
Shareholder Services (Class D Shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-21
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-22
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-24
Description of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-25
Limitation of Trustees' Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-25
Shareholder Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-25
5% Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-26
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-27
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-28
</TABLE>
October 30, 1996
SEI-F-004-07
<PAGE> 42
THE TRUST
SEI Liquid Asset Trust (the "Trust") is a diversified, open-end management
investment company established as a Massachusetts business trust pursuant to a
Declaration of Trust dated July 20, 1981. The Declaration of Trust permits the
Trust to offer separate series ("portfolios") of units of beneficial interest
("shares") and separate classes of portfolios. Except for differences between
Class A and Class D shares pertaining to distribution and shareholder servicing
plans, voting rights, dividends and transfer agent expenses, each share of each
portfolio represents an equal proportionate interest in that portfolio with
each other share of that portfolio.
This Statement of Additional Information relates to the shares of the following
Portfolios: Treasury Securities, Government Securities, Prime Obligation,
Institutional Cash and Money Market Portfolios (each a "Portfolio" and,
together, the "Portfolios"), and any classes of the Portfolios.
DESCRIPTION OF PERMITTED INVESTMENTS
COMMERCIAL PAPER -- The Prime Obligation and Money Market Portfolios may
invest in commercial paper. Commercial paper is the term used to designate
unsecured, short-term promissory notes issued by corporations and other
entities.
COMMERCIAL PAPER RATINGS -- The following descriptions of commercial paper
ratings have been published by Standard & Poor's Corporation ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc. ("Fitch"),
Duff & Phelps, Inc. ("Duff"), Thomson BankWatch ("Thomson") and IBCA Limited
and IBCA, Inc. (together, "IBCA").
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1 and 2 to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1, the highest rating category, reflect a "very strong" degree of safety
regarding timely payment. Those rated A-2, the second highest rating category,
reflect a safety regarding timely payment, but not as high as A-1.
Moody's employs two designations, judged to be high grade commercial paper, to
indicate the relative repayment capacity of rated issuers as follows:
Prime-1 Superior Quality
Prime-2 Strong Quality
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade)
is the second highest commercial paper rating assigned by Fitch which reflects
an assurance of timely payment only slightly lower in degree than the strongest
issues.
S-2
<PAGE> 43
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2, the second highest rating
category, is regarded as having good certainty of timely payment, good access
to capital markets and sound liquidity factors and company fundamentals. Risk
factors are small.
The rating TBW-1 is the highest commercial paper rating assigned by Thomson.
Paper rated TBW-1 indicates a very high likelihood that principal and interest
will be paid on a timely basis. The rating TBW-2 is the second-highest rating
assigned category by Thomson. The relative degree of safety regarding timely
repayment of principal and interest is strong. However, the relative degree of
safety is not as high as for issues rated TBW-1.
The designation A1, the highest rating category established by IBCA, indicates
that the obligation is supported by a very strong capacity for timely
repayment. Those obligations rated A1+ are supported by the highest capacity
for timely repayment. Obligations rated A2, the second highest rating
category, are supported by a strong capacity for timely repayment, although
such capacity may be susceptible to adverse changes in business, economic or
financial conditions.
DESCRIPTION OF MUNICIPAL AND CORPORATE BOND RATINGS -- Bonds rated AAA have
the highest rating S&P assigns to a debt obligation. Such a rating indicates
an extremely strong capacity to pay principal and interest. Bonds rate AA also
qualify as high-quality debt obligations. Capacity to pay principal and
interest is very strong, and in the majority of instances, they differ from AAA
issues only in small degree.
Bonds which are rated Aaa by Moody's are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
sable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa are
judged by Moody's to be of high quality by all standards. Together with bonds
rated Aaa, they comprise what are generally known as high-grade bonds. They
are rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
Bonds rated AAA are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions
liable to but slight market fluctuation other than through changes in the money
rate. The prime feature of an AAA bond is a showing of earnings several times
or many times interest requirements, with such stability of applicable earnings
that safety is beyond reasonable question whatever changes occur in conditions.
Bonds rate AA are judged by Fitch to be of safety virtually beyond question and
are readily salable, whose merits are not unlike those of the AAA class, but
whose margin of safety is less strikingly broad. The issue
S-3
<PAGE> 44
may be the obligation of a small company, strongly secured but influenced as to
rating by the lesser financial power of the enterprise and more local type
market.
Bonds rated Duff-1 are judged by Duff to be of the highest credit quality with
negligible risk factors; only slightly more than U.S. Treasury debt. Bonds
rated Duff-2, are judged by Duff to be of high credit quality with strong
protection factors. Risk is modest but may vary slightly from time to time
because of economic conditions.
Bonds which are rated AAA are judged by Thomson to be of the highest category.
The ability to repay principal and interest on a timely basis is very high.
Bonds rated AA are judged by Thomson to be of a superior ability to repay
principal and interest on a timely basis, with limited incremental risk
compared to issues rated in the highest category.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a
very low expectation of investment risk are rated AA by IBCA. Capacity for
timely repayment of principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase investment risk albeit
not very significantly.
FOREIGN SECURITIES -- The Money Market Portfolio may invest in U.S. dollar
denominated obligations of foreign issuers, including foreign branches of U.S.
commercial banks, and of U.S. and London branches of foreign banks. These
instruments may subject the Portfolio to investment risks that differ in some
respects from those related to investments in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic
developments, the possible imposition of withholding taxes on interest or other
income, possible seizure, nationalization, or expropriation of foreign
deposits, the possible establishment of exchange controls or taxation at the
source, greater fluctuations in value due to changes in exchange rates, or the
adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on such obligations. Such
investments may also entail higher custodial fees and sales commissions than
domestic investments. Foreign issuers of securities or obligations are often
subject to accounting treatment and engage in business practices different from
those respecting domestic issuers of similar securities or obligations.
Foreign branches of U.S. banks and foreign banks may be subject to less
stringent reserve requirements than those applicable to domestic branches of
U.S. banks.
GNMA SECURITIES -- The Prime Obligation, Money Market and Government Securities
Portfolios may invest in securities issued by the Government National Mortgage
Association ("GNMA"), a wholly-owned U.S. Government Securities corporation
which guarantees the timely payment of principal and interest. However, any
premiums paid to purchase these instruments are not subject to GNMA guarantees.
The market value and interest yield of these instruments can vary due to market
interest rate fluctuations and early prepayments of underlying mortgages.
S-4
<PAGE> 45
These securities represent ownership in a pool of Federally insured mortgage
loans. GNMA certificates consist of underlying mortgages with a maximum
maturity of 30 years. However, due to scheduled and unscheduled principal
payments, GNMA certificates have a shorter average maturity and, therefore,
less principal volatility than a comparable 30-year mortgage-backed bond. Since
prepayment rates vary widely, it is not possible to accurately predict the
average maturity of a particular GNMA pool. The scheduled monthly interest and
principal payments relating to mortgages in the pool will be "passed through"
to investors. GNMA securities differ from conventional bonds in that principal
is paid back to the certificate holders over the life of the loan rather than
at maturity. As a result, the Portfolios will receive monthly scheduled
payments of principal and interest. In addition, the Portfolios may receive
unscheduled principal payments representing prepayments on the underlying
mortgages. Any prepayments will be reinvested at the then-prevailing interest
rate.
Although GNMA certificates may offer yields higher than those available from
other types of U.S. Government Securities, GNMA certificates may be less
effective than other types of securities as a means of "locking in" attractive
long-term rates because of the prepayment feature. Due to this prepayment
feature, GNMA certificates tend not to increase in value as much as most other
debt securities when interest rates decline.
MUNICIPAL SECURITIES --The Money Market Portfolio may invest in Municipal
Securities. The two principal classifications of Municipal Securities are
"general obligation" and "revenue" issues. General obligation issues are
issues involving the credit of an issuer possessing taxing power and are
payable from the issuer's general unrestricted revenues, although the
characteristics and method of enforcement of general obligation issues may vary
according to the law applicable to the particular issuer. Revenue issues are
payable only from the revenues derived from a particular facility or class of
facilities or other specific revenue source. A Portfolio may also invest in
"moral obligation" issues, which are normally issued by special purpose
authorities. Moral obligation issues are not backed by the full faith and
credit of the state but are generally backed by the agreement of the issuing
authority to request appropriations from the state legislative body. Municipal
Securities include debt obligations issued by governmental entities to obtain
funds for various public purposes, such as the construction of a wide range of
public facilities, the refunding of outstanding obligations, the payment of
general operating expenses, and the extension of loans to other public
institutions and facilities. Certain private activity bonds that are issued by
or on behalf of public authorities to finance various privately-owned or
operated facilities are included within the term "Municipal Securities."
Private activity bonds and industrial development bonds are generally revenue
bonds, the credit and quality of which are directly related to the credit of
the private user of the facilities.
Municipal Securities may also include general obligation notes, tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
project notes, certificates of indebtedness, demand notes, tax-exempt
commercial paper, construction loan notes and other forms of short-term,
tax-exempt loans. Such instruments are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues. Project notes are issued by a
S-5
<PAGE> 46
state or local housing agency and are sold by the Department of Housing and
Urban Development. While the issuing agency has the primary obligation with
respect to its project notes, they are also secured by the full faith and
credit of the United States through agreements with the issuing authority which
provide that, if required, the federal government will lend the issuer an
amount equal to the principal of and interest on the project notes.
The quality of Municipal Securities, both within a particular classification
and between classifications, will vary, and the yields on Municipal Securities
depend upon a variety of factors, including general money market conditions,
the financial condition of the issuer (or other entity whose financial
resources are supporting the securities), general conditions of the municipal
bond market, the size of a particular offering, the maturity of the obligation
and the rating(s) of the issue. In this regard, it should be emphasized that
the ratings of any nationally recognized statistical rating organization
("NRSRO") are general and are not absolute standards of quality. Municipal
Securities with the same maturity, interest rate and rating(s) may have
different yields, while Municipal Securities of the same maturity and interest
rate with different rating(s) may have the same yield.
An issuer's obligations under its Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Securities may be
materially adversely affected by litigation or other conditions.
MUNICIPAL NOTE RATINGS: Moody's highest rating for state and municipal and
other short-term notes is MIG-1 and VMIG-1. Short-term Municipal Securities
rated MIG-1 or VMIG-1 are of the best quality and such securities have strong
protection afforded by established cash flows, superior liquidity support
and/or demonstrated access to the market for refinancing. Short-term Municipal
Securities rated MIG-2 and VMIG-2 are of high quality and their margins of
protection are ample, although not so large as in the preceding group.
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment.
o Amortization schedule (the larger the final maturity relative
to other maturities, the more likely it will be treated as a
note).
o Source of payment (the more dependent the issue is on the
market for its refinancing, the more likely it will be treated
as a note).
S-6
<PAGE> 47
Note rate symbols are as follows:
SP-1. Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given
a plus (+) designation.
SP-2. Satisfactory capacity to pay principal and interest.
REPURCHASE AGREEMENTS -- The Treasury Securities, Government Securities, Prime
Obligation, and Money Market Portfolios may enter into repurchase agreements,
which are agreements under which securities are acquired from a securities
dealer or bank subject to resale on an agreed upon date and at an agreed upon
price which includes principal and interest. The Portfolio involved bears a
risk of loss in the event that the other party to a repurchase agreement
defaults on its obligations and the Portfolio is delayed or prevented from
exercising its rights to dispose of the securities held as collateral.
Wellington Management Company, LLP (the "Adviser") enters into repurchase
agreements only with financial institutions which it deems to present minimal
risk of bankruptcy during the term of the agreement based on guidelines
established by and periodically reviewed by the Board of Trustees. These
guidelines currently permit the Portfolios to enter into repurchase agreements
only with approved banks and primary securities dealers, as recognized by the
Federal Reserve Bank of New York, which have minimum net capital of $100
million, or with a member bank of the Federal Reserve System. Repurchase
agreements are considered to be loans collateralized by the underlying
security. Repurchase agreements entered into by the Portfolios will provide
that the underlying security at all times shall have a value at least equal to
102% of the price stated in the agreement. This underlying security will be
marked to market daily. The Adviser monitors compliance with this requirement.
Under all repurchase agreements entered into by the Portfolios, the Portfolios
will take actual or constructive possession of the underlying collateral.
However, if the seller defaults, the Portfolios could realize a loss on the
sale of the underlying security to the extent the proceeds of the sale are less
than the resale price. In addition, even though the Bankruptcy Code provides
protection for most repurchase agreements, if the seller should be involved in
bankruptcy or insolvency proceedings, the Portfolios may incur delay and costs
in selling the security and may suffer a loss of principal and interest if the
Portfolios are treated as an unsecured creditor.
U.S. GOVERNMENT AGENCY OBLIGATIONS -- The Government Securities, Prime
Obligation, and Money Market Portfolios may invest in obligations of agencies
of the United States Government, which consist of obligations issued by, among
others, the Export Import Bank of the United States, Farmers Home
Administration, Federal Farm Credit Bank, Federal Housing Administration,
Government National Mortgage Association, Maritime Administration, Small
Business Administration, and The Tennessee Valley Authority. The Government
Securities, Prime Obligation, and Money Market Portfolios may purchase
securities guaranteed by the Government National Mortgage Association, which
represent participation in Veterans Administration and Federal Housing
Administration backed mortgage pools. Obligations of instrumentalities of the
United States Government include securities issued by, among others, Federal
Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, Federal Land Banks,
S-7
<PAGE> 48
Federal National Mortgage Association and the United States Postal Service.
Some of these securities are supported by the full faith and credit of the
United States Treasury (e.g., GNMA Securities), others are supported by the
right of the issuer to borrow from the Treasury, and still others are supported
only by the credit of the instrumentality (e.g., FNMA Securities). Guarantees
of principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation, so that in the event of
a default prior to maturity, there might not be a market, and thus no means of
realizing the value of the obligation prior to maturity. The Portfolios do not
intend to purchase securities issued by the World Bank, the Inter-American
Development Bank or the Asian Development Bank.
VARIABLE OR FLOATING RATE INSTRUMENTS -- Each Portfolio may invest in variable
or floating rate instruments, which may involve a demand feature and may
include variable amount master demand notes which may or may not be backed by
bank letters of credit. Variable or floating rate instruments bear interest at
a rate which varies with changes in market rates. The holder of an instrument
with a demand feature may tender the instrument back to the issuer at par prior
to maturity. A variable amount master demand note is issued pursuant to a
written agreement between the issuer and the holder, its amount may be
increased by the holder or decreased by the holder or issuer, it is payable on
demand, and the rate of interest varies based upon an agreed formula. The
quality of the underlying credit must, in the opinion of the Adviser, be
equivalent to the quality ratings applicable to permitted investments for each
Portfolio. The Adviser will monitor on an ongoing basis the earning power,
cash flow, and liquidity ratios of the issuers of such instruments and will
similarly monitor the ability of an issuer of a demand instrument to pay
principal and interest on demand.
THE MANAGER
The Management Agreement, provides that SEI Fund Management (the "Manager")
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which the Management
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Manager in the performance of its duties
or from reckless disregard of its duties and obligations thereunder.
The Management Agreement, unless terminated sooner as provided therein, shall
remain in effect for two years after the date of the Agreement and shall
continue in effect for successive periods of one year if such continuance is
specifically approved at least annually (i) by the Trustees of the Trust and
(ii) by the vote of a majority of the Trustees of the Trust, who are not
parties to the Management Agreement or interested persons (as that term is
defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of
any such party, cast in person at a Board of Trustees meeting called for the
purpose of voting on such approval. The Agreement may be terminated at any
time and without penalty by the Trustees of the Trust or by the Manager on not
less than 30 days' nor more than 60 days' written notice to the other party
thereto. Any notice under the Management Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at the
designated mailing address of such party.
S-8
<PAGE> 49
The Manager, a Delaware business trust, has its principal business offices at
680 East Swedesford Road, Wayne, Pennsylvania 19087-1658. SEI Financial
Management Corporation ("SFM"), a wholly-owned subsidiary of SEI Corporation
("SEI"), is the owner of all of the beneficial interests in the Manager. SEI
and its affiliates, including the Manager, are leading providers of funds
evaluation services, trust accounting systems, and brokerage and information
services to financial institutions, institutional investors, and money
managers. The Manager and its affiliates also serve as Manager to the
following other mutual funds: The Achievement Funds Trust, The Advisors' Inner
Circle Fund, The Arbor Fund, ARK Funds, Bishop Street Funds, CoreFunds, Inc.,
CrestFunds, Inc., CUFUND, FMB Funds, Inc., First American Funds, Inc., First
American Investment Funds, Inc., Inventor Funds, Inc., Marquis Funds(R),
Monitor Funds, Morgan Grenfell Investment Trust, The PBHG Funds, Inc., The
Pillar Funds, Profit Funds Investment Trust, Rembrandt Funds(R), Santa Barbara
Group of Mutual Funds, Inc., 1784 Funds(R), SEI Asset Allocation Trust, SEI
Daily Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI International Trust, SEI Tax Exempt Trust,
Stepstone Funds, STI Classic Funds, STI Classic Variable Trust, and Turner
Funds.
The Manager has agreed contractually to waive its fee in order to limit
operating expenses of the Portfolios to not more than .44% of average net
assets of the Class A shares and .84% of average net assets of the Class D
shares. As to the Institutional Cash Portfolio only, this waiver is voluntary
and may be terminated at any time. Shareholders will be notified in advance if
and when the waiver is terminated. The Manager will not be required to bear
expenses of any Portfolio to an extent which would result in the Portfolio's
inability to qualify as a regulated investment company under provisions of the
Internal Revenue Code of 1986, as amended (the "Code"). The term "expenses" is
defined in such laws or regulations, and generally excludes brokerage
commissions, distribution expenses, taxes, interest, litigation and
extraordinary expenses.
For the fiscal years ended June 30, 1994, 1995 and 1996, the Portfolios paid
fees to the Manager as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES PAID MANAGEMENT FEES WAIVED
1994 1995 1996 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Treasury Securities $7,482,000 $4,160,873.22 $3,979,872.45 $1,252,000 $1,226,700.66 $981,184.74
Portfolio
Prime Obligation $4,330,000 $3,352,356.97 $2,773,884.30 $ 763,000 $ 884,036.50 $786,431.18
Portfolio
Government $1,505,000 $ 794,731.78 $ 621,433.39 $ 264,000 $ 221,071.85 $198,391.84
Securities
Portfolio
Institutional Cash $ 10,000 $ 7,878.60 $ 9,292.33 $ 0 $ 0 $ 0
Portfolio
Money Market * * * * * *
Portfolio
</TABLE>
* Not in operation during such period.
S-9
<PAGE> 50
THE ADVISER
The Trust and Wellington Management Company, LLP ("the Adviser") have entered
into an investment advisory agreement (the "Advisory Agreement") dated October
30, 1985. The Advisory Agreement provides that the Adviser shall not be
protected against any liability to the Trust or its shareholders by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder.
The continuance of the Advisory Agreement after the first two (2) years of the
Agreement must be specifically approved at least annually (i) by the vote of a
majority of the outstanding shares of that Portfolio or by the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to the
Advisory Agreement or "interested persons" of any party thereto, cast in person
at a meeting called for the purpose of voting on such approval. The Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Trust or, with
respect to a Portfolio, by a majority of the outstanding shares of that
Portfolio, on not less than 30 days' nor more than 60 days' written notice to
the Adviser, or by the Adviser on 90 days' written notice to the Trust.
The Adviser is entitled to a fee for its investment advisory services, which is
calculated daily and paid monthly, at the following annual rates: .075% of the
Trust's daily net assets up to $500 million, and .02% of the Trust's daily net
assets in excess of $500 million. The fee is allocated among the Portfolios
based upon their relative net assets.
For the fiscal years ended June 30, 1994, 1995 and 1996 the Portfolios paid the
Adviser advisory fees as follows:
<TABLE>
<CAPTION>
ADVISORY FEES PAID
1994 1995 1996
<S> <C> <C> <C>
Treasury Securities Portfolio $ 514,000 $395,983.29 $381,950.77
Prime Obligation Portfolio $ 299,000 $311,042.13 $274,922.00
Government Securities Portfolio $ 103,000 $ 74,686.68 $ 63,381.43
Institutional Cash Portfolio $ 0 $ 0 $ 0
Money Market Portfolio * * *
</TABLE>
* Not in operation during such period.
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<PAGE> 51
DISTRIBUTION AND SHAREHOLDER SERVICING
The Trust has adopted a Distribution Agreement for the Portfolios dated
November 29, 1982. The Trust has also adopted a Class D Distribution Plan (the
"Class D Plan") for the Treasury Securities Portfolio in accordance with Rule
12b-1 under the 1940 Act, which regulates the circumstances under which an
investment company may directly or indirectly bear expenses relating to the
distribution of its shares. In this regard, the Board of Trustees has
determined that the Class D Plan and the Distribution Agreement are in the best
interests of the Shareholders. Continuance of the Class D Plan must be
approved annually by a majority of the Trustees of the Trust, and by a majority
of the Trustees who are not "interested persons" of the Trust as that term is
defined in the 1940 Act, and who have no direct or indirect financial interest
in the operation of a Distribution Plan or in any agreements related thereto
("Qualified Trustees"). The Class D Plan requires that quarterly written
reports of amounts spent under the Plan and the purposes of such expenditures
be furnished to and reviewed by the Trustees. The Class D Plan may not be
amended to increase materially the amount which may be spent thereunder without
approval by a majority of the outstanding shares of the Portfolio. All
material amendments of the Class D Plan will require approval by a majority of
the Trustees of the Trust and of the Qualified Trustees.
The Class D Plan provides that the Trust will pay the Distributor a fee on the
Class D shares of the Portfolio. The Distributor may use this fee for: (i)
compensation for its services in connection with distribution assistance or
provision of shareholder services or (ii) payments to financial institutions
and intermediaries such as banks, savings and loan associations, insurance
companies and investment counselors, broker- dealers and the Distributor's
affiliates and subsidiaries as compensation for services or reimbursement of
expenses incurred in connection with distribution assistance or provision of
shareholder services.
The Portfolios have adopted a shareholder servicing plan for its Class A shares
(the "Class A Plan"). Under this Plan, the Distributor may perform, or may
compensate other service providers for performing, the following shareholder
and administrative services: maintaining client accounts; arranging for bank
wires; responding to client inquiries concerning services provided on
investments; assisting clients in changing dividend options, account
designations and addresses; sub-accounting; providing information on share
positions to clients; forwarding shareholder communications to clients;
processing purchase, exchange and redemption orders; and processing dividend
payments. Under the Service Plan, the Distributor may retain as a profit any
difference between the fee it receives and the amount it pays to third parties.
For the fiscal year ended June 30, 1996, the Portfolios incurred the following
distribution expenses:
S-11
<PAGE> 52
<TABLE>
<CAPTION>
PORTFOLIO/CLASS TOTAL BASIS SALES ADVERTISING PROSPECTUS COSTS OTHER
($AMOUNT) POINTS EXPENSES ($AMOUNT) PRINTING & ASSOCIATED
($AMOUNT) MAILING COSTS WITH
(NEW REGISTRATION
SHAREHOLDERS FEES
ONLY ($AMOUNT)
($ AMOUNT)
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A**
Treasury $370,517.91 .03 % $370,517.91 $0 $0 $0 $0
Securities
Government $58,962.37 .03 % $58,962.37 $0 $0 $0 $0
Securities
Prime $263,404.42 .03 % $263,404.42 $0 $0 $0 $0
Obligation
Institutional $0 .00 % $0 $0 $0 $0 $0
Cash
Money Market * * * * * * *
CLASS D
Treasury $2,141.76 .20 % $2,141.76
Securities
</TABLE>
* Not in operation during such period.
** As of May 1, 1996, the distribution plan for the Trust's Class A shares was
eliminated. The amounts shown above for Class A relate only to the period from
July 1, 1995 to April 30, 1996.
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees and executive officers of the Trust and their principal
occupations for the last five years are set forth below. Each may have held
other positions with the named companies during that period. Unless otherwise
noted, the business address of each Trustee and executive officer is SEI
Financial Management Corporation, 680 East Swedesford Road, Wayne, Pennsylvania
19087-1658. Certain officers of the Trust also serve as trustees and/or
officers of The Achievement Funds Trust, The Advisors' Inner Circle Fund, The
Arbor Fund, ARK Funds, Bishop Street Funds, CoreFunds, Inc., CrestFunds, Inc.,
CUFUND, First American Funds, Inc., First American Investment Funds, Inc.,
First American Strategy Funds, Inc., FMB Funds, Inc., Insurance Investment
Products Trust, Inventor Funds, Inc., Marquis Funds(R), Monitor Funds, Morgan
Grenfell Investment Trust, The PBHG Funds, Inc., The Pillar Funds, Profit
Funds Investment Trust, Rembrandt Funds(R), Santa Barbara Group of Mutual
Funds, Inc., 1784 Funds, SEI Asset Allocation Trust, SEI Daily Income Trust,
SEI Institutional Managed Trust, SEI International Trust, SEI Tax Exempt Trust,
Stepstone Funds, STI Classic Funds, STI Classic Variable Trust and Turner
Funds, open-end management investment companies which are managed by SEI
Financial Management Corporation and with the exception of Profit Funds
Investment Trust, Rembrandt Funds(R), and Santa Barbara Group of Mutual Funds,
Inc., are distributed by SEI Financial Services Company.
S-12
<PAGE> 53
ROBERT A. NESHER (DOB 08/17/46) - Chairman of the Board of Trustees* - Retired
since 1994. Executive Vice President of SEI, 1986-1994. Director and Executive
Vice President of the Manager and the Distributor, 1981-1994. Trustee of the
Arbor Fund, Marquis Funds(R), Advisors' Inner Circle Fund, SEI Asset Allocation
Trust, SEI Liquid Asset Trust, SEI Daily Income Trust, SEI Tax Exempt Trust,
SEI Index Funds, SEI Institutional Managed Trust, SEI Institutional Investments
Trust, SEI International Trust, Insurance Investment Products Trust, 1784
Funds(R), Pillar Funds, Rembrandt Funds(R) and Stepstone Funds.
WILLIAM M. DORAN (DOB 05/26/40) - Trustee* - 2000 One Logan Square,
Philadelphia, PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm),
counsel to the Trust, Manager and Distributor, Director and Secretary of SEI
and Secretary of the Manager and Distributor. Trustee of the Arbor Fund,
Marquis Funds(R), Advisors' Inner Circle Fund, SEI Asset Allocation Trust, SEI
Liquid Asset Trust, SEI Daily Income Trust, SEI Tax Exempt Trust, SEI Index
Funds, SEI Institutional Managed Trust, SEI Institutional Investments Trust,
SEI International Trust and Insurance Investment Products Trust.
F. WENDELL GOOCH (DOB 12/03/37) - Trustee** - P.O. Box 190, Paoli, IN 47454.
President, Orange County Publishing Co., Inc. since October 1981. Publisher of
the Paoli News and the Paoli Republican and Editor of the Paoli Republican
since January 1981. President, H & W Distribution, Inc. since July 1984.
Executive Vice President, Trust Department, Harris Trust and Savings Bank and
Chairman of the Board of Directors of The Harris Trust Company of Arizona
before January 1981. Trustee of STI Classic Funds, SEI Asset Allocation Trust,
SEI Liquid Asset Trust, SEI Daily Income Trust, SEI Tax Exempt Trust, SEI Index
Funds, SEI Institutional Managed Trust, SEI Institutional Investments Trust and
SEI International Trust.
FRANK E. MORRIS (DOB 12/30/23) - Trustee** - 105 Walpole Street, Dover, MA
02030. Retired since 1990. Peter Drucker Professor of Management, Boston
College, 1989-1990. President, Federal Reserve Bank of Boston, 1968-1988.
Trustee of The Arbor Fund, Marquis Funds(R), Advisors' Inner Circle Fund, SEI
Asset Allocation Trust, SEI Liquid Asset Trust, SEI Daily Income Trust, SEI Tax
Exempt Trust, SEI Index Funds, SEI Institutional Managed Trust, SEI
Institutional Investments Trust, and SEI International Trust.
JAMES M. STOREY (DOB 04/12//31) - Trustee - Partner, Dechert Price & Rhoads,
from September 1987 - December 1993. Trustee of the Arbor Fund, Marquis
Funds(R), Advisors' Inner Circle Fund, SEI Asset Allocation Trust, SEI Liquid
Asset Trust, SEI Daily Income Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI
Institutional Managed Trust, SEI Institutional Investments Trust, SEI
International Trust and Insurance Investment Products Trust.
GEORGE J. SULLIVAN, JR. (DOB 11/13/42) - Trustee- General Partner, Teton
Partners, L.P., since 1991; Chief Financial Officer, Noble Partners, L.P.,
since 1991; Treasurer and Clerk, Peak Asset Management, Inc., since 1991;
Trustee, Navigator Securities Lending Trust, since 1995. Trustee of SEI Asset
Allocation Trust, SEI Liquid Asset Trust, SEI Daily Income Trust,
S-13
<PAGE> 54
SEI Tax Exempt Trust, SEI Index Funds, SEI Institutional Managed Trust, SEI
Institutional Investments Trust, and SEI International Trust.
DAVID G. LEE (DOB 04/16/52) - President and Chief Executive Officer - Senior
Vice President of the Manager and Distributor since 1993. Vice President of
the Manager and Distributor, 1991-1993. President, GW Sierra Trust Funds
before 1991.
SANDRA K. ORLOW (DOB 10/18/53) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Manager and Distributor since 1988.
KEVIN P. ROBINS (DOB 04/15/61) - Vice President and Assistant Secretary -
Senior Vice President, General Counsel of SEI, the Administrator and
Distributor since 1994. Vice President and Assistant Secretary of SEI, the
Administrator and Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius
LLP (law firm), 1988-1992.
RICHARD W. GRANT (DOB 10/25/45) - Secretary - 2000 One Logan Square,
Philadelphia, PA 19103, Partner, Morgan, Lewis & Bockius LLP (law firm),
counsel to the Trust, Manager and Distributor.
KATHRYN L. STANTON (DOB 11/19/58) - Vice President and Assistant Secretary,
Deputy General Counsel, Vice President and Assistant Secretary of SEI, Vice
President and Assistant Secretary of SEI, the Administrator and Distributor
since 1994. Associate, Morgan, Lewis & Bockius LLP (law firm), 1989-1994.
JOSEPH P. LYDON (DOB 09/27/59) - Vice President and Assistant Secretary -
Director, Business Administration of Fund Resources, April 1995. Vice
President, Fund Group, Dremen Value Management, LP, President Dremen Financial
Services, Inc. prior to 1995.
STEPHEN G. MEYER (DOB 7/12/65) - Controller, Chief Financial Officer-Vice
President and Controller of SEI Corporation since 1994. Director,
International Audit and Risk Management, SEI Corporation, 1992-1994. Senior
Associate, Coopers and Lybrand, 1990-1992. Internal Audit, Vanguard Group
prior to 1992.
TODD CIPPERMAN (DOB 01/14/66) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI, the Manager and the Distributor since
1995. Associate, Dewey Ballantine (law firm) (1994-1995). Associate, Winston
& Strawn (law firm) (1991-1994).
BARBARA A. NUGENT (DOB 06/18/56) - Vice President and Assistant Secretary -
Vice President and Assistant Secretary of SEI, the Manager and Distributor
since 1996. Associate, Drinker, Biddle & Reath (law firm). Assistant Vice
President/Administration, Delaware Service Company, Inc. (1992-1993), Assistant
Vice President - Operations, Delaware Service Company, Inc. (1988-1992).
S-14
<PAGE> 55
MARC H. CAHN (DOB 06/19/57) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI, the Administrator and Distributor
since 1996. Associate General Counsel, Barclays Bank PLC (1995-1996). ERISA
counsel, First Fidelity Bancorporation (1994-1995), Associate, Morgan, Lewis &
Bockius LLP (1989-1994).
*Messrs. Nesher and Doran are Trustees who may be deemed to be "interested
persons" of the Trust as the term is defined in the 1940 Act.
**Messrs. Gooch, Storey, Sullivan and Morris serve as members of the Audit
Committee of the Trust.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for unaffiliated Trustees.
Compensation of officers and affiliated Trustees of the Trust is paid by the
Manager.
The following table sets forth information about the compensation paid to the
Trustees for the fiscal year ended June 30, 1996:
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT TOTAL COMPENSATION FROM
COMPENSATION BENEFITS ACCRUED ESTIMATED REGISTRANT AND FUND
FROM AS PART OF FUND ANNUAL COMPLEX PAID TO
NAME OF PERSON AND REGISTRANT FOR EXPENSES BENEFITS UPON DIRECTORS FOR FYE
POSITION FYE 6/30/96 RETIREMENT 6/30/96
<S> <C> <C> <C> <C>
Robert A. Nesher, $0 N/A N/A $0
Trustee*
Richard F. Blanchard, $5,689.37 N/A N/A $67,500 for service on
Trustee** 8 boards
William M. Doran, $0 N/A N/A $0
Trustee*
F. Wendell Gooch, $7,501.75 N/A N/A $90,000 on services on
Trustee 9 boards
Frank E. Morris, Trustee $7,501.75 N/A N/A $90,000 on service on 9
boards
James M. Storey, $7,501.75 N/A N/A $90,000 on service on 9
Trustee*** boards
</TABLE>
*Messrs. Nesher and Doran are Trustees who may be deemed to be "interested
persons" of the Trust as the term is defined in the 1940 Act.
**Deceased as of May 7, 1996.
***Mr. Storey received the stated amounts as compensation for service as an
Honorary Trustee for the Trust during the most recent fiscal year.
S-15
<PAGE> 56
FUNDAMENTAL INVESTMENT LIMITATIONS
The following investment limitations are fundamental policies of each Portfolio
which cannot be changed with respect to a Portfolio without the consent of the
holders of a majority of that Portfolio's outstanding shares. The term
"majority of outstanding shares" means the vote of (i) 67% or more of a
Portfolio's shares present at a meeting, if not more than 50% of the
outstanding shares of a Portfolio are present or represented by proxy, or (ii)
more than 50% of a Portfolio's outstanding shares, whichever is less.
No Portfolio may:
1. Borrow money except for temporary or emergency purposes and then only
in an amount not exceeding 10% of the value of the total assets of
that Portfolio. This borrowing provision is included solely to
facilitate the orderly sale of portfolio securities to accommodate
substantial redemption requests if they should occur and is not for
investment purposes. All borrowings by a Portfolio will be repaid
before making additional investments for that Portfolio and any
interest on such borrowings will reduce the income of that Portfolio.
2. Make loans, except that any Portfolio may purchase or hold debt
instruments in accordance with its investment objective and policies
and may enter into repurchase agreements, provided that repurchase
agreements maturing in more than seven days, restricted securities and
other illiquid securities are not to exceed, in the aggregate, 10% of
the Portfolio's total assets.
3. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings, as described in the Prospectus, in aggregate amounts not
to exceed 10% of the net assets of such Portfolio taken at fair market
value at the time such loan is incurred.
4. Invest in companies for the purpose of exercising control.
5. Acquire more than 10% of the voting securities of any one issuer.
6. Purchase or sell real estate, real estate limited partnership
interests, commodities or commodities contracts including futures
contracts. However, subject to its permitted investments, any
Portfolio may purchase obligations issued by companies which invest in
real estate, real estate limited partnerships, commodities or
commodities contracts.
7. Make short sales of securities, maintain a short position or purchase
securities on margin, except that a Portfolio may obtain short-term
credits as necessary for the clearance of security transactions.
8. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a portfolio security.
S-16
<PAGE> 57
9. Purchase securities of other investment companies except as permitted
by the 1940 Act and the rules and regulations thereunder and, in any
event, may not purchase securities of other open-end investment
companies. Under these rules and regulations, the Portfolios are
prohibited from acquiring the securities of other investment companies
if, as a result of such acquisition, a Portfolio owns more than 3% of
the total voting stock of an investment company; securities issued by
any one investment company represent more than 5% of the total
Portfolio assets; or securities (other than treasury stock) issued by
all investment companies represent more than 10% of the total assets
of a Portfolio. These investment companies typically incur fees that
are separate from those fees incurred directly by a Portfolio. A
Portfolio's purchase of such investment companies results in the
layering of expenses such that shareholders would indirectly bear a
proportionate share of such investment companies' expenses, including
advisory fees.
10. Issue senior securities (as defined in the Investment Company Act of
1940) except in connection with permitted borrowings as described in
the Prospectus and this Statement of Additional Information or as
permitted by rule, regulation or order of the Securities and Exchange
Commission.
11. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, partner or director of the Trust or any
investment adviser of the Trust owns beneficially more than 1/2 of 1%
of the shares or securities of such issuer and all such officers,
trustees, partners and directors owning more than 1/2 of 1% of such
shares or securities together own more than 5% of such shares or
securities.
12. Purchase securities of any company which has (with predecessors) a
record of less than three years' continuing operations, except (i)
obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, or (ii) municipal securities which are rated by
at least two nationally recognized municipal bond rating services, if,
as a result, more than 5% of the total assets (taken at fair market
value) of the Portfolio would be invested in such securities.
13. Purchase warrants, puts, calls, straddles, spreads or combinations
thereof.
14. Invest in interests in oil, gas or other mineral exploration or
development programs.
15. Purchase restricted securities (securities which must be registered
under the Securities Act of 1933 before they may be offered or sold to
the public) or other illiquid securities except as described in the
Prospectus and this Statement of Additional Information.
Except with respect to the limitation on investing in illiquid securities, the
foregoing percentages will apply at the time of the purchase of a security and
shall not be considered violated unless an excess or deficiency occurs or
exists immediately after and as a result of a purchase of such security.
S-17
<PAGE> 58
NON-FUNDAMENTAL INVESTMENT LIMITATIONS
The following investment limitation is a non-fundamental policy of the Trust
and may be changed without shareholder approval.
1. The Government Securities and Prime Obligations Portfolios must
maintain an average dollar-weighted portfolio maturity of 90 days or
less.
PERFORMANCE
From time to time, each Portfolio may advertise its yield. These figures will
be based on historical earnings and are not intended to indicate future
performance.
The current yield of each Portfolio is calculated daily based upon the seven
days ending on the date of calculation ("base period"). The yield is computed
by determining the net change (exclusive of capital changes) in the value of a
hypothetical pre-existing shareholder account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts and dividing such net change by the value
of the account at the beginning of the same period to obtain the base period
return and multiplying the result by (365/7). Realized and unrealized gains
and losses are not included in the calculation of the yield.
The Portfolios compute their effective compound yield by determining the net
changes, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power
equal to 365 divided by 7, and subtracting 1 from the result, according to the
following formula: Effective Yield = [(Base Period Return + 1)365/7 - 1]. The
current and the effective yields reflect the reinvestment of net income earned
daily on portfolio assets.
Actual yields will depend on such variables as asset quality, average asset
maturity, the type of instruments a Portfolio invests in, changes in interest
rates on money market instruments, changes in the expenses of the Portfolios
and other factors.
Yields are one basis upon which investors may compare the Portfolios with other
money market funds; however, yields of other money market mutual funds and
other investment vehicles may not be comparable because of the factors set
forth above and differences in the methods used in valuing portfolio
instruments.
For the seven-day period ended June 30, 1996 the Portfolios' yield and
effective yield were as follows:
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<PAGE> 59
<TABLE>
<CAPTION>
7-DAY EFFECTIVE
PORTFOLIO/CLASS CLASS 7-DAY YIELD YIELD
<S> <C> <C> <C>
Treasury Securities Class A 4.98 5.11
Class D 4.63 4.74
Government Securities Class A 4.94 5.06
Prime Obligation Class A 5.01 5.13
Institutional Cash Class A N/A N/A
Money Market Class A N/A N/A
</TABLE>
DETERMINATION OF NET ASSET VALUE
Securities of the Portfolios will be valued by the amortized cost method, which
involves valuing a security at its cost on the date of purchase and thereafter
(absent unusual circumstances) assuming a constant amortization to maturity of
any discount or premium, regardless of the impact of fluctuations in general
market rates of interest on the value of the instrument. While this method
provides certainty in valuation, it may result in periods during which value,
as determined by this method is higher or lower than the price a Portfolio
would receive if it sold the instrument. During periods of declining interest
rates, the daily yield of a Portfolio may tend to be higher than a like
computation made by a company with identical investments utilizing a method of
valuation based upon market prices and estimates of market prices for all of
its portfolio securities. Thus, if the use of amortized cost by the Trust
resulted in a lower aggregate portfolio value on a particular day, a
prospective investor in a Portfolio would be able to obtain a somewhat higher
yield than would result from investment in a company utilizing solely market
values, and existing shareholders in the Portfolio would experience a lower
yield. The converse would apply in a period of rising interest rates.
The Trust's use of amortized cost valuation and the maintenance of the net
asset value of each Portfolio at $1.00 are permitted by Rule 2a-7, under the
1940 Act, provided that certain conditions are met. Under Rule 2a-7, a money
market portfolio must maintain a dollar-weighted average maturity in the
Portfolio of 90 days or less and not purchase any instrument having a remaining
maturity of more than 397 days. In addition, money market funds may acquire
only U.S. dollar denominated obligations that present minimal credit risks and
that are "eligible securities," which means they are (i) rated, at the time of
investment, by at least two nationally recognized statistical rating
organizations (one if it is the only organization rating such obligation) in
the highest short-term rating category or, if unrated, determined to be of
comparable quality (a "first tier security"), or (ii) rated according to the
foregoing criteria in the second highest short-term rating category or, if
unrated, determined to be of comparable quality ("second tier security"). The
Adviser will determine that an obligation presents minimal credit risks or that
unrated instruments are of
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<PAGE> 60
comparable quality in accordance with guidelines established by the Trustees.
The Trustees must approve or ratify the purchase of any unrated securities. In
addition, investments in second tier securities are subject to the further
constraints that (i) no more than 5% of a Portfolio's assets may be invested in
such securities in the aggregate, and (ii) any investment in such securities of
one issuer is limited to the greater of 1% of the Portfolio's total assets or
$1 million. The regulations also require the Trustees to establish procedures
which are reasonably designed to stabilize the net asset value per unit at
$1.00 for each Portfolio. However, there is no assurance that the Trust will
be able to meet this objective. The Trust's procedures include the
determination of the extent of deviation, if any, of each Portfolio's current
net asset value per unit calculated using available market quotations from each
Portfolio's amortized cost price per unit at such intervals as the Trustees
deem appropriate and reasonable in light of market conditions and periodic
reviews of the amount of the deviation and the methods used to calculate such
deviation. In the event that such deviation exceeds 1/2 of 1%, the Trustees
are required to consider promptly what action, if any, should be initiated,
and, if the Trustees believe that the extent of any deviation may result in
material dilution or other unfair results to shareholders, the Trustees are
required to take such corrective action as they deem appropriate to eliminate
or reduce such dilution or unfair results to the extent reasonably practicable.
In addition, if any Portfolio incurs a significant loss or liability, the
Trustees have the authority to reduce pro rata the number of shares of that
Portfolio in each shareholder's account and to offset each shareholder's pro
rata portion of such loss or liability from the shareholder's accrued but
unpaid dividends or from future dividends.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions of shares of the Funds may be made on any day the New
York Stock Exchange is open for business. Currently, the following holidays
are observed by the Trust: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period during which
trading on the New York Stock Exchange is restricted, or during the existence
of an emergency (as determined by the SEC by rule or regulation) as a result of
which disposal or evaluation of the portfolio securities is not reasonably
practicable, or for such other periods as the SEC may by order permit. The
Trust also reserves the right to suspend sales of shares of the Portfolio for
any period during which the New York Stock Exchange, the Manager, the Adviser,
the Distributor and/or the Custodian are not open for business.
State Securities laws regarding sub-administrators may differ from the
interpretations of federal law expressed herein and banks and financial
institutions acting in that capacity may be required to register as dealers
pursuant to state law.
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<PAGE> 61
SHAREHOLDER SERVICES (CLASS D SHARES)
STOP-PAYMENT REQUESTS: Investors may request a stop payment on checks by
providing the Trust with a written authorization to do so. Oral requests will
be accepted provided that the Trust promptly receives a written authorization.
Such requests will remain in effect for six months unless renewed or canceled.
The Trust will use its best efforts to effect stop-payment instructions, but
does not promise or guarantee that such instructions will be effective.
Shareholders requesting stop payment will be charged a $20 service fee per
check which will be deducted from their accounts.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts when his new investment, together with the current market value of
all holdings of that shareholder in certain eligible portfolios reaches a
discount level. See "Purchase and Redemption of Shares" in the Prospectuses
for the sales charge on quantity purchases.
LETTER OF INTENT: The reduced sales shares are also applicable to the
aggregate amount of purchases made by any such purchaser previously enumerated
within a 13-month period pursuant to a written Letter of Intent provided by the
Distributor, and not legally binding on the signer or a Portfolio which
provides for the holder in escrow by the Manager of 5% of the total amount
intended to be purchased until such purchase is completed within the 13-month
period. A Letter of Intent may be dated to include shares purchased up to 90
days prior to the date of the Letter of Intent is signed. The 13-month period
begins on the date of the earliest purchase. If the intended investment is not
completed, the Manager will surrender an appropriate number of the escrowed
shares for redemption.
DISTRIBUTION INVESTMENT OPTION: Distributions of dividends and capital gains
made by the Portfolios may be automatically invested in shares of one of the
Portfolios if shares of the Portfolio are available for sale. Such investments
will be subject to initial investment minimums, as well as additional purchase
minimums. A shareholder considering the Distribution Investment Option should
obtain and read the prospectus of the Portfolios and/or classes in which such
automatic investments are to be made and consider the differences in investment
objectives and policies before making any investment.
REINSTATEMENT PRIVILEGE: A shareholder who has redeemed shares of any of the
Portfolios has a one-time right to reinvest the redemption proceeds in shares
of the Portfolio at their net asset value as of the time of reinvestment. Such
a reinvestment must be made within 30 days of the redemption and is limited to
the amount of the redemption proceeds. Although redemptions and repurchases of
shares are taxable events, a reinvestment within such 30-day period in the same
fund is considered a "wash sale" and results in the inability to recognize
currently all or a portion of a loss realized on the original redemption for
federal income tax purposes. The investor must notify the Transfer Agent at
the time the trade is placed that the transaction is a reinvestment.
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<PAGE> 62
EXCHANGE PRIVILEGE: Some or all of the shares of the Portfolio for which
payment has been received (i.e., an established account) may be exchanged, at
their net asset value, plus any applicable sales charge, for Class D shares of
the Trust, SEI Tax Exempt Trust, SEI International Trust and SEI Institutional
Managed Trust or at their net asset value for Class D shares of other
portfolios of such trusts that do not have sales charges. Exchanges will be
made only after proper instructions in writing or by telephone (an "Exchange
Request") are received for an established account by the Distributor.
A shareholder may exchange a Portfolio's Class D shares, for which good payment
has been received, in his account at any time, regardless of how long he has
held his shares.
Each Exchange Request must be in proper form (i.e., if in writing, signed by
the record owner(s) exactly as the shares are registered; if by telephone,
proper account identification is given by the dealer or shareholder of record),
and each exchange must involve either shares having an aggregate value of at
least $1,000 or all the shares in the account. Each exchange involves the
redemption of the shares of a Portfolio to be exchanged and the purchase of the
shares of the other Portfolio. Any gain or loss on the redemption of the
shares exchanged is reportable on the shareholder's Federal income tax return,
unless such shares were held in a tax-deferred retirement plan or other
tax-exempt account. If the Exchange Request is received by the Distributor in
writing or by telephone on any Business Day, as defined in the Prospectuses of
the Trust, prior to the close of the New York Stock Exchange, the exchange
will be effective on that day if all the restrictions set forth above have been
complied with at that time. However, payment of the redemption proceeds by the
Portfolios, and thus the purchase of shares of the other Portfolios, may be
delayed for up to seven days if the Portfolios determine that such delay would
be in the best interest of all of its shareholders. Investment dealers which
have satisfied criteria established by the Portfolios may also communicate a
shareholder's Exchange Request to the Portfolios subject to the restrictions
set forth above. No more than five exchange requests may be made in any one
telephone Exchange Request.
TAXES
The following is only a summary of certain tax considerations generally
affecting a Portfolio and its shareholders, and is not intended as a substitute
for careful tax planning. Shareholders are urged to consult their tax advisors
with specific reference to their own tax situations, including their state and
local tax liabilities.
FEDERAL INCOME TAXES
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.
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<PAGE> 63
Each Portfolio intends to qualify as a regulated investment company ("RIC") as
defined under Subchapter M of the Code. By following such a policy, each of the
Portfolios expects to eliminate or reduce to a nominal amount the federal
income taxes to which such Portfolio may be subject.
In order to qualify for treatment as a RIC, a Portfolio must distribute
annually to its shareholders at least the sum of 90% of its net interest income
excludable from gross income plus 90% of its investment company taxable income
(generally, net investment income plus net short-term capital gain) (the
"Distribution Requirement") and also must meet several additional requirements.
Among these requirements are the following: (i) at least 90% of a Portfolio's
gross income each taxable year must be derived from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of stock or securities, or other income derived with respect to its
business of investing in such stock or securities; (ii) less than 30% of a
Portfolio's gross income each taxable year must be derived from the sale or
other disposition of stocks, securities or certain other investments held for
less than three months; (iii) at the close of each quarter of a Portfolio's
taxable year, at least 50% of the value of its total assets must be represented
by cash and cash items, U.S. government securities, securities of other RIC's,
and other securities, with such other securities limited, in respect of any one
issuer, to an amount that does not exceed 5% of the value of a Portfolio's
assets and that does not represent more than 10% of the outstanding voting
securities of such issuer; and (iv) at the close of each quarter of a
Portfolio's taxable year, not more than 25% of the value of its assets may be
invested in securities (other than U.S. government securities or the securities
of other RIC's) of any one issuer or of two or more issuers which are engaged
in the same, similar or related trades or businesses if the Portfolio owns at
least 20% of the voting power of such issuers.
Notwithstanding the Distribution Requirement described above, which only
requires a Portfolio to distribute at least 90% of its annual investment
company taxable income and does not require any minimum distribution of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), a Portfolio will be subject to a nondeductible 4% federal excise
tax to the extent it fails to distribute by the end of any calendar year at
least 98% of its ordinary income for that year and 98% of its capital gain net
income (the excess of short and long-term capital gains over short and
long-term capital losses) for the one-year period ending on October 31 of that
year, plus certain other amounts.
If capital gain distributions have been made with respect to shares that are
sold at a loss after being held for six months or less, the loss is treated as
a long-term capital loss to the extent of the previous capital gain
distributions.
If a Portfolio fails to qualify as a RIC for any year, all of its taxable
income will be subject to tax at regular corporate rates without any deduction
for distributions to shareholders, and its distributions (including capital
gains distributions) will be taxable as ordinary income dividends to its
shareholders, subject to the dividends received deduction for corporate
shareholders. Otherwise, distributions to shareholders generally will not be
eligible for the dividends received deduction.
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<PAGE> 64
STATE TAXES
A Portfolio is not liable for any income or franchise tax in Massachusetts if
it qualifies as a RIC for federal income tax purposes. Depending upon state and
local law, distributions by the Portfolio to shareholders and the ownership of
shares may be subject to state and local taxes.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Adviser is responsible for placing orders to
execute Portfolio transactions. In placing orders, it is the Trust's policy to
seek to obtain the best net results taking into account such factors as price
(including the applicable dealer spread), size, type and difficulty of the
transaction involved, the firm's general execution and operational facilities,
and the firm's risk in positioning the securities involved. While the Adviser
generally seeks reasonably competitive spreads or commissions, the Trust will
not necessarily be paying the lowest spread or commission available. The
Trust's policy of investing in securities with short maturities will result in
high portfolio turnover. The Trust will not purchase portfolio securities from
any affiliated person acting as principal except in conformity with the
regulations of the Securities and Exchange Commission.
The Trust does not expect to use one particular dealer, but, subject to the
Trust's policy of seeking the best net results, dealers who provide
supplemental investment research to the Adviser may receive orders for
transactions by the Trust. Information so received will be in addition to and
not in lieu of the services required to be performed by the Adviser under the
Advisory Agreements, and the expenses of the Adviser will not necessarily be
reduced as a result of the receipt of such supplemental information.
The money market securities in which certain of the Portfolios invest are
traded primarily in the over-the-counter market. Where possible, the Adviser
will deal directly with the dealers who make a market in the securities
involved, except in those circumstances where better prices and execution are
available elsewhere. Such dealers usually are acting as principal for their
own account. On occasion, securities may be purchased directly from the
issuer. Money market securities generally are traded on a net basis and
normally do not involve either brokerage commissions or transfer taxes. The
cost of executing portfolio securities transactions of the Portfolio will
primarily consist of dealer spreads and underwriting commissions.
Since the Trust does not market its shares through intermediary brokers or
dealers, it is not the Trust's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, the Adviser may place portfolio orders with qualified
broker-dealers who recommend the Trust to clients, and may, when a number of
brokers and dealers can provide best price and execution on a particular
transaction, consider such recommendations by a broker or dealer in selecting
among broker-dealers.
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<PAGE> 65
For the Trust's fiscal years ended June 30, 1994, 1995 and 1996, no brokerage
fees were paid.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of each Portfolio, each of which represents an equal proportionate
interest in that Portfolio. Each share of a Portfolio upon liquidation of that
Portfolio entitles a shareholder to a pro rata share in the net assets of that
Portfolio, after taking into account certain distribution expenses.
Shareholders have no preemptive rights. The Declaration of Trust provides that
the Trustees of the Trust may create additional portfolios of shares or classes
of portfolios. Any consideration received by the Trust for shares of any
additional Portfolio and assets in which such consideration is invested would
belong to that Portfolio and would be subject to the liabilities related
thereto. Share certificates representing the shares will not be issued.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or administrators, shall not be liable
for any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the
Trust unless it is determined in the manner provided in the Declaration of
Trust that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust. However, nothing in the
Declaration of Trust shall protect or indemnify a Trustee against any liability
for his willful misfeasance, bad faith, gross negligence or reckless disregard
of his duties.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of the Trust could, under
certain circumstances, be held personally liable for the obligations of the
Trust. However, the possibility of the shareholders' incurring financial loss
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for obligations of the Trust, and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of the
Trust's property for any shareholder held personally liable for the obligations
of the Trust.
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<PAGE> 66
5% SHAREHOLDERS
As of August 1, 1996, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Portfolios. The Trust believes that most of the
shares referred to below were held by the persons indicated in accounts for
their fiduciary, agency, or custodial customers.
TREASURY SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Funds
- ---------------- ---------------- -----------------
<S> <C> <C>
First Union National Bank 47,841,795.91 6.02%
Attn: Funds Group
CMG 2-1151
401 South Tryon Street
Charlotte N.C. 28202-1911
First Hawaiian Bank 55,308,584.33 6.96%
Financial Management Group (FIDAC)
Attn: Dolores Mollring
P.O. Box 3200
Honolulu, HI 96847
Bank of America NT&SA 93,673,836.83 11.79%
Attn: Common Trust Funds Unit #8239
P.O. Box 3577, Terminal Annex
Los Angeles, CA 90051
North American Trust Company 93,541,550.25 11.77%
Attn: David Hilbish
225 Broadway, Suite 200
San Diego, CA 92101
First Security Bank of Utah NA 39,980,097.89 5.03%
Cash Management (Cash Sweep Acct)
Attn: Paul Messervy
41 East 100 South
Salt Lake City, UT 84111-1912
GOVERNMENT SECURITIES PORTFOLIO:
United Jersey Bank 26,782,877.78 16.63%
Attn: Joseph Guittari
</TABLE>
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<PAGE> 67
<TABLE>
<S> <C> <C>
P.O. Box 547
Hackensack, NJ 07602-0547
Vose & Co. 51,779,535.72 32.16%
c/o Fleet/Norstar Services
One East Avenue
Funds Central NY/RO/3090
Rochester, NY 14638-0001
Repub & Co. 40,435,761.40 25.11%
c/o Imperial Trust Company
Attn: Shirley Matthews
201 N. Figueroa Street, #610
Los Angeles, CA 90012-2629
PRIME OBLIGATION PORTFOLIO:
BHC Securities Inc. 90,725,187.62 12.19%
Attn: Cash Sweeps Department
2005 Market Street
One Commerce Square, 11th Floor
Philadelphia, PA 19103
SEI Trust Company 68,056,882.06 9.15%
Attn: Jacqueline Esposito
680 East Swedesford Road
Wayne, PA 19087
CoreStates Bank, N.A. 92,724,896.34 12.46%
Attn: James Quinlan
Penn Mutual Insurance Building
Philadelphia, PA 19106
Smith & Co. 133,602,359.97 17.96%
c/o First Security Bank of Utah, N.A.
Attn: Money Market/Mutual Fund Desk
P.O. Box 25297
Salt Lake City, UT 84125
</TABLE>
EXPERTS
The financial statements and the financial highlights have been audited by
Price Waterhouse LLP, independent public accountants.
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<PAGE> 68
FINANCIAL STATEMENTS
The Trust's financial statements for the fiscal year ended June 30, 1996,
including notes thereto and the report of Price Waterhouse LLP thereon, are
herein incorporated by reference. A copy of the 1996 Annual Report must
accompany the delivery of this Statement of Additional Information.
S-28
