<PAGE>
PROSPECTUS
DECEMBER 31, 1995
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INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
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Please read this Prospectus carefully before investing, and keep it on file for
future reference. It concisely sets forth information that can help you decide
if the Portfolio's investment goals match your own.
A Statement of Additional Information dated December 31, 1995 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, PA 19087 or by calling 1-800-437-6016. The
Statement of Additional Information is incorporated into this Prospectus by
reference.
SEI Tax Exempt Trust (the "Trust") is an open-end investment management compa-
ny, certain classes of which offer shareholders a convenient means of investing
their funds in one or more professionally managed diversified and non-diversi-
fied portfolios of securities. The Intermediate-Term Municipal Portfolio, an
investment portfolio of the Trust, offers two classes of shares, Class A shares
and Class D shares. Class D shares differ from Class A shares primarily in the
imposition of sales charges and 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
the Class D shares of the Trust's Intermediate-Term Municipal Portfolio (the
"Portfolio") listed above.
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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 AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY IN-
SURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RE-
SERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THE SHARES
INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT IN-
VESTED.
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<PAGE>
............................................
TABLE OF
CONTENTS
<TABLE>
<S> <C>
Fund Highlights................ 2
Portfolio Expenses............. 4
Financial Highlights........... 5
Your Account and Doing Business
with Us....................... 6
Investment Objective and
Policies...................... 10
General Investment Policies.... 11
Investment Limitations......... 12
The Manager and Shareholder
Servicing Agent............... 13
Multi-Manager Diversification.. 13
The Adviser.................... 15
The Sub-Adviser................ 15
Distribution................... 16
Performance.................... 17
Taxes.......................... 18
Additional Information About
Doing Business with Us........ 20
General Information............ 24
Description of Permitted
Investments and Risk Factors.. 26
</TABLE>
............................................
HOW TO READ THIS PROSPECTUS ____________________________________________________
This Prospectus gives you 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.
FUND HIGHLIGHTS ________________________________________________________________
The following summary provides basic information about the Class D shares of
the 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 The Intermediate-Term Municipal Portfolio seeks the highest
OBJECTIVE AND level of income exempt from federal income taxes that can be
POLICIES obtained, consistent with preservation of capital, from a
diversified portfolio of investment grade municipal
securities. See "Investment Objective and Policies," "General
Investment Policies" and "Description of Permitted Investments
and Risk Factors."
UNDERSTANDING Shares of the Portfolio, like shares of any mutual fund, will
RISK fluctuate in value and when you sell your shares, they may be
worth more or less than what you paid for them. The Portfolio
invests at least 80% of its assets in municipal securities the
interest on which is exempt from federal income taxes, and
that is not a preference item for purposes of the alternative
minimum tax. The investment policies of the Portfolio entail
certain risks and considerations of which an investor should
be aware. The value of fixed income funds and the fixed income
securities in which they invest tend to vary inversely with
interest rates and may be affected by other market and
economic factors as well. In addition, 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 SEI Financial Management Corporation ("SFM") serves as the
PROFILE investment adviser of the Portfolio. Standish, Ayer & Wood,
Inc. serves as investment sub-adviser to the Portfolio. The
investment adviser and investment sub-adviser to the Portfolio
are referred to collectively as the "advisers." SFM serves as
the manager and shareholder servicing agent of the Trust. 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 acts as
distributor ("Distributor") of the Trust's shares. See "The
Manager and Shareholder Servicing Agent," "The Adviser" and
"Distribution."
2
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................................................................................
[SYMBOL INVESTMENT
APPEARS PHILOSOPHY
HERE]
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.
................................................................................
YOUR ACCOUNT You may open an account with just $1,000 and make additional
AND DOING investments with as little as $100. Class D shares of the
BUSINESS WITH Portfolio are offered at net asset value per share plus a
US maximum sales charge at the time of purchase of 3.50%.
Shareholders who purchase higher amounts may qualify for a
reduced sales charge. Redemptions of the Portfolio's shares
are made at net asset value per share. See "Your Account and
Doing Business with Us."
DIVIDENDS The net investment income (exclusive of capital gains) of the
Portfolio is declared periodically and is paid as a dividend
on the tenth Business Day of each month. Any realized net
capital gain is distributed at least annually. Distributions
are paid in additional shares unless the shareholder elects to
take the payment in cash. See "General Information--
Dividends."
INFORMATION/ For more information about Class D shares, call 1-800-437-
SERVICE 6016.
CONTACTS
3
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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 the Class D shares.
SHAREHOLDER TRANSACTION EXPENSES (as a percentage of offering price)
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<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases 3.50%
Maximum Sales Load Imposed on Reinvested Dividends none
Redemption Fees /1/ none
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
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Management/Advisory Fees (after fee waivers) /2/ .45%
12b-1 Fees (after fee waiver) /3/ .33%
Other Expenses .22%
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Total Operating Expenses (after fee waivers) /4/ 1.00%
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</TABLE>
1 A charge, currently $10.00, is imposed on wires of redemption proceeds of the
Portfolio's Class D shares.
2 SFM has waived, on a voluntary basis, a portion of its fees, and the
Management/Advisory fees shown reflect these voluntary waivers. SFM reserves
the right to terminate its waiver at any time in its sole discretion. Absent
such waivers, the Management/Advisory Fees for the Portfolio would be .75%.
3 The 12b-1 fees shown reflect the Portfolio's current 12b-1 budget for
reimbursement of expenses and the Distributor's voluntary waiver of a portion
of its compensatory fee. The Distributor reserves the right to terminate its
waiver at any time in its sole discretion. The maximum 12b-1 fees payable by
Class D shares of the Portfolio are .60%.
4 Absent the voluntary fee waivers described above, Total Operating Expenses
for Class D shares of the Portfolio would be 1.30%.
EXAMPLE
<TABLE>
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<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a
$1,000 investment assuming (1) imposition of the
maximum sales load, (2) 5% annual return and (3)
redemption at the end of each time period: $45 $66 $88 $153
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</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
A person who purchases shares through a financial institution may be charged
separate fees by that institution. The information set forth in the foregoing
table and example relates only to the Portfolio's Class D shares (a class of
shares of the Portfolio). The Portfolio also offers Class A shares which are
subject to the same expenses, except there are no sales charges and different
distribution and transfer agent costs. Additional information may be found
under "The Manager and Shareholder Servicing Agent," "Distribution" and "The
Adviser."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "Your Account and Doing Business with
Us."
Long-term shareholders may pay more than the economic equivalent of the maximum
front end sales charge permitted by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD").
4
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FINANCIAL HIGHLIGHTS ___________________________________________________________
The following financial highlights, for a share outstanding throughout each
period, have been audited by Arthur Andersen LLP, independent public
accountants, whose report thereon was unqualified. This information should be
read in conjunction with the Trust's financial statements and notes thereto,
which are included in the Trust's Statement of Additional Information and which
appear, along with the report of Arthur Anderson LLP, in the Trust's 1995
Annual Report to Shareholders. Additional performance information is set forth
in the 1995 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 THE PERIOD
<TABLE>
<CAPTION>
Net Realized
Investment and
Net Activities Distributions Unrealized
Asset ---------- --------------------------------- Gain (Loss) on Net Net Ratio
Value, Net Net Net Investments Asset Value, Assets, End of Expenses
Beginning Investment Investment Realized Total and Capital End Total of Period to Average
of Period Income Income Gain Distributions Transactions of Period Return (000) Net Assets
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INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS D
FOR THE YEARS ENDED AUGUST 31,:
1995** $10.36 $0.48 $(0.48) -- $(0.48) $0.23 $10.59 7.11% $ 548 0.95%
1994(1),(**) 10.90 0.45 (0.42) $(0.06) (0.48) (0.51) 10.36 (0.93%)* 1,105 0.93%*
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<CAPTION>
Ratio of
Net
Investment
Ratio Ratio of Income to
of Expenses Net Average
to Average Investment Net Assets
Net Assets Income to Excluding Portfolio
Excluding Average Fee Turnover
Fee Waivers Net Assets Waivers Rate
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<S> <C> <C> <C> <C>
CLASS D
FOR THE YEARS ENDED AUGUST 31,:
1995** 1.12% 4.57% 4.40% 36.05%
1994(1),(**) 1.07%* 4.34%* 4.20%* 58.39%
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</TABLE>
* Annualized.
** Total Return does not reflect the sales charge.
1 The Intermediate-Term Municipal Portfolio--Class D commenced operations on
September 28, 1993.
5
<PAGE>
................................................................................
[SYMBOL WHAT IS AN
APPEARS INTERMEDIARY?
HERE]
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.
................................................................................
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 SEI Financial Services Company ("Intermediaries"). For
more information about the following topics, see "Additional Information About
Doing Business with Us."
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HOW TO BUY, Class D shares of the Portfolio may be purchased through
SELL AND Intermediaries which provide various levels of shareholder
EXCHANGE services to their customers. Contact your Intermediary for
SHARES THROUGH information about the services available to you and for
INTERMEDIARIES 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 Application forms can be obtained by calling 1-800-437-6016.
SHARES FROM Class D shares of the Portfolio are offered only to residents
THE of states in which the shares are eligible for purchase.
DISTRIBUTOR
Opening an You may buy Class D shares by mailing a completed application
Account and a check (or other negotiable bank instrument or money
By Check order) payable to "Class D Shares (Portfolio Name)." 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.
By Fed Wire You may buy shares by Fed Wire by calling 1-800-
437-6016.
Automatic You may systematically buy Class D shares through deductions
Investment from your checking or savings accounts, provided these
Plan ("AIP") 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 maintained balance requirements.
6
<PAGE>
OTHER Your purchase is subject to a sales charge which varies
INFORMATION depending on the size of your purchase. The following table
ABOUT BUYING shows the regular sales charges on Class D shares of the
SHARES Portfolio to a "single purchaser," together with the
reallowance paid to dealers and the agency commission paid
Sales Charges to brokers (collectively the "commission"):
<TABLE>
<CAPTION>
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SALES CHARGE REALLOWANCE AND
SALES CHARGE AS AS APPROPRIATE BROKERAGE COMMISSION
A PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE NET AMOUNT INVESTED OFFERING PRICE
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<S> <C> <C> <C>
less than $50,000 3.50% 3.63% 3.00%
$50,000 but less than $100,000 3.00% 3.09% 2.50%
$100,000 but less than $250,000 2.50% 2.56% 2.00%
$250,000 but less than $500,000 2.00% 2.04% 1.50%
$500,000 but less than $1,000,000 1.50% 1.52% 1.25%
$1,000,000 but less than $2,000,000 1.00% 1.01% 1.00%
$2,000,000 but less than $4,000,000 .50% .50% .50%
Over $4,000,000 none none none
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</TABLE>
The commissions shown in the table above apply to sales
through Intermediaries. Under certain circumstances,
commissions up to the amount of the entire sales charge may
be re-allowed to certain Intermediaries, who might then be
deemed to be "underwriters" under the Securities Act of
1933, as amended. Commission rates may vary among the
Trust's portfolios.
Right of A Right of Accumulation allows you, under certain
Accumulation circumstances, to combine your current purchase with the
current market value of previously purchased shares of the
Portfolio and Class D shares of other portfolios ("Eligible
Portfolios") in order to obtain a reduced sales charge.
Letter of A Letter of Intent allows you, under certain circumstances,
Intent to aggregate anticipated purchases over a 13-month period to
obtain a reduced sales charge.
Sales Charge Certain shareholders may qualify for a sales charge waiver.
Waiver To determine whether or not you qualify for a sales charge
waiver see "Additional Information About Doing Business with
Us." Shareholders who qualify for a sales charge waiver must
notify the Transfer Agent before purchasing shares.
7
<PAGE>
................................................................................
[SYMBOL HOW DOES AN
APPEARS EXCHANGE TAKE
HERE] 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.
................................................................................
EXCHANGING Once good payment for your shares has been received and
SHARES accepted (i.e., an account has been established), you may
When Can You exchange some or all of your shares for Class D shares of the
Exchange Trust or of SEI Liquid Asset Trust, SEI Daily Income Trust,
Shares? 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 SEI Funds' portfolios that are not money market
Charges Apply portfolios currently impose a sales charge on Class D
to an shares. If you exchange into one of these "non-money
Exchange? 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 chargewill 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 To request an exchange, you must provide proper instructions
Exchange of in writing to the Transfer Agent. Telephone exchanges will
Shares 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.
8
<PAGE>
................................................................................
[SYMBOL WHAT IS A
APPEARS SIGNATURE
HERE] 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.
................................................................................
HOW TO SELL To sell your shares, a written request for redemption in good
SHARES THROUGH order must be received by the Transfer Agent. Valid written
THE redemption requests will be effective on receipt. All
DISTRIBUTOR shareholders of record must sign the redemption request.
For information about the proper form of redemption
By Mail 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, or 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 You may establish a systematic withdrawal plan for an account
Withdrawal with a $10,000 minimum balance. Under the plan, redemptions
Plan ("SWP") can be automatically processed from accounts (monthly,
quarterly, semi-annually or annually) by check or by ACH with
a minimum redemption amount of $50.
9
<PAGE>
................................................................................
[SYMBOL WHAT ARE
APPEARS INVESTMENT
HERE] OBJECTIVES AND
POLICIES?
The 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.
................................................................................
INVESTMENT
OBJECTIVE AND
POLICIES _______________________________________________________________________
The investment objective of the Intermediate-Term Municipal
Portfolio (the "Portfolio") is to seek the highest level of
income exempt from federal income taxes that can be obtained,
consistent with the preservation of capital, from a
diversified portfolio of investment grade municipal
securities. However, the Portfolio's income might not be as
high as it would be if the Portfolio had minimum investment
rating requirements lower than those discussed below. There
can be no assurance that the Portfolio will achieve its
investment objective.
The Portfolio invests at least 80% of its assets in
municipal securities the interest on which is exempt from
federal income taxes (collectively "Municipal Securities"),
based on opinions from bond counsel for the issuers. This
investment policy is a fundamental policy of the Portfolio.
The issuers of these securities can be located in all fifty
states, the District of Columbia, Puerto Rico, and other U.S.
territories and possessions. Under normal conditions, the
Portfolio will invest at least 80% of its net assets in
securities the interest on which is not a preference item for
purposes of the alternative minimum tax. Although the
advisers have no present intention of doing so, up to 20% of
all assets in the Portfolio can be invested in taxable debt
securities for defensive purposes or when sufficient tax
exempt securities considered appropriate by the advisers are
not available for purchase.
The market value of the Portfolio's fixed income
investments will change in response to interest rate changes
and other factors. During periods of falling interest rates,
the values of outstanding fixed income securities generally
rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. Changes by
recognized rating agencies in the rating of any fixed income
security and in the ability of an issuer to make payments of
interest and principal also affect the value of these
investments. Changes in the value of portfolio securities
will not necessarily affect cash income derived from these
securities, but will affect the Portfolio's net asset value.
The Portfolio may purchase the following types of
municipal obligations, but only if such securities, at the
time of purchase, either have the requisite rating, or, if
not rated, are of comparable quality as determined by the
advisers: (i) municipal bonds rated A or better by Standard
and Poor's Corporation ("S&P") or by Moody's Investors
Service, Inc. ("Moody's"), and the Portfolio may invest up to
10% of its total assets in municipal bonds rated BBB by S&P
or Baa by Moody's; (ii) municipal notes rated at least SP-1
by S&P or MIG-1 or VMIG-1 by Moody's; and (iii) tax-exempt
commercial paper rated at least A-1 by S&P or Prime-1 by
Moody's. Bonds rated BBB by S&P or Baa by Moody's have
speculative
10
<PAGE>
characteristics. Municipal obligations owned by the Portfolio
which become less than the prescribed investment quality
shall be sold at a time when, in the judgment of the advisers,
it does not substantially impact the market value of the
Portfolio.
Not more than 25% of Portfolio assets will be invested in
(a) municipal securities whose issuers are located in the
same state, (b) municipal securities the interest on which is
derived from revenues of similar type projects, or (c)
municipal securities subject to the alternative minimum tax.
This restriction does not apply to municipal securities in
any of the following categories: public housing authorities;
general obligations of states and localities; state and local
housing finance authorities, or municipal utilities systems.
There could be economic, business, or political
developments which might affect all municipal securities of a
similar type. To the extent that a significant portion of the
Portfolio's assets are invested in municipal securities
payable from revenues on similar projects, the Portfolio will
be subject to the peculiar risks presented by such projects
to a greater extent than it would be if the Portfolio's
assets were not so invested.
The Portfolio will maintain a dollar-weighted average
portfolio maturity of three to ten years. However, when the
advisers determine that market conditions so warrant, the
Portfolio can maintain an average weighted maturity of less
than three years.
GENERAL
INVESTMENT
POLICIES _______________________________________________________________________
The Portfolio may invest in variable and floating rate
obligations, may purchase securities on a "when-issued"
basis, and reserves the right to engage in transactions
involving standby commitments. The Portfolio may also
purchase other types of tax-exempt instruments as long as
they are of a quality equivalent to the long-term bond or
commercial paper ratings stated above. Although permitted to
do so, the Portfolio has no present intention to invest in
repurchase agreements or purchase securities subject to the
alternative minimum tax. The Portfolio will not invest more
than 15% of its net assets in illiquid securities.
The taxable securities in which the Portfolio may invest
consist of U.S. Treasury obligations; obligations issued or
guaranteed by the U.S. Government or by its agencies or
instrumentalities whether or not backed by the full faith and
credit of the U.S. Government; obligations of U.S. commercial
banks or savings and loan institutions (not including foreign
branches of U.S. banks or U.S. branches of foreign banks)
which are members of the Federal Reserve System or the
Federal Deposit Insurance Corporation and which have total
assets of $1 billion or more as shown on their last published
financial statements at the time of investment, and
repurchase agreements involving any of such obligations.
11
<PAGE>
Municipal notes rated SP-1 by S&P have strong capacity to
pay principal and interest; notes rated MIG-1 or VMIG-1 by
Moody's are considered to be of the best quality. Bonds
rated BBB by S&P have an adequate capacity to pay interest
and repay principal; bonds rated Baa by Moody's are
considered to be medium-grade obligations (i.e., neither
highly protected nor poorly secured). The highest S&P
commercial paper rating category, A-1, indicates that the
degree of safety regarding timely payment is strong and
commercial paper issuers rated Prime-1 by Moody's have a
superior ability for repayment.
For a description of the permitted investments and
ratings, see the "Description of Permitted Investments and
Risk Factors" and the Statement of Additional Information.
INVESTMENT
LIMITATIONS __________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolio. Fundamental policies
cannot be changed with respect to the Trust or the Portfolio
without the consent of the holders of a majority of the
Trust's or the Portfolio's outstanding shares.
The Portfolio may not:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the United States Government, its
agencies or instrumentalities and any security guaranteed
thereby) if, as a result, more than 5% of the total
assets of the 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 invest up to 25% of its total assets
without regard to this restriction.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio, based on current
value at the time of such purchase, to be invested in the
securities of one or more issuers conducting their
principal business activities in the same industry,
provided that this limitation does not apply to
investments in obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities or
to investments in tax-exempt securities issued by
governments or political subdivisions of governments.
3. Borrow money except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the value
of the total assets of the Portfolio. All borrowings will
be repaid before making additional investments and any
interest paid on such borrowings will reduce the income
of the Portfolio.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional investment
limitations are set forth in the Statement of Additional
Information.
12
<PAGE>
................................................................................
[SYMBOL INVESTMENT
APPEARS ADVISER
HERE]
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.
................................................................................
THE MANAGER
AND SHAREHOLDER
SERVICING AGENT ______________________________________________________________
SEI Financial Management Corporation ("SFM"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), provides the Trust
with overall management services, regulatory reporting, all
necessary office space, equipment, personnel, and facilities,
and serves as shareholder servicing agent.
For these services, SFM is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of .24%
of the average daily net assets of the Portfolio. SFM has
voluntarily agreed to waive a portion of its fees
proportionately in order to limit the total operating
expenses of the Class D shares of the Portfolio to not more
than .95% of the Portfolio's average daily net assets
attributable to the Class D shares on an annualized basis.
SFM reserves the right, in its sole discretion, to terminate
this voluntary fee waiver at any time. For the fiscal year
ended August 31, 1995, the Portfolio paid management fees,
after waivers, of .27% of its average daily net assets.
The Trust and DST Systems, Inc., 210 W. 10th Street,
Kansas City, Missouri 64105 ("DST"), 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 for the
Class D shares of the Trust.
MULTI-MANAGER
DIVERSIFICATION _______________________________________________________________
SFM serves as investment adviser (the "Adviser") to the
Portfolio. Within the Portfolio one or more investment sub-
advisers (each, a "Sub-Adviser," and together, the "Sub-
Advisers") who specialize in the distinct investment style or
styles that the Portfolio is designed to capture may be
utilized to select that Portfolio's investments.
The Adviser has general oversight responsibility for the
investment advisory services provided to the Portfolio,
including formulating the Portfolio's investment policies and
analyzing economic trends affecting the Portfolio. In
addition, SFM is responsible for (i) managing the allocation
of assets among the Portfolio's Sub-Advisers, if applicable,
(ii) directing and evaluating the investment services provided
by a Sub-Adviser, including their adherence to the Portfolio's
respective investment objective and policies and the
Portfolio's investment performance, and (iii) managing the
cash portion of the Portfolio's assets. In accordance with the
Portfolio's investment objective and policies, and under the
supervision of the Adviser and the Trust's Board of Trustees,
a Sub-Adviser is responsible for the day-to-day investment
management
13
<PAGE>
of all or a discrete portion of the assets of a Portfolio.
The Adviser and the Sub-Adviser are authorized to make
investment decisions for the Portfolio and place orders on
behalf of the Portfolios to effect the investment decisions
made.
SFM monitors the compliance of the Sub-Adviser of the
Portfolio with regulatory and tax regulations, such as
portfolio concentration and diversification. For the most
part compliance with these requirements by a Sub-Adviser
with respect to its portion of the Portfolio will assure
compliance by that Portfolio as a whole. In addition, SFM
monitors positions taken by each of the Portfolio's Sub-
Advisers and will notify the Sub-Advisers of any developing
situations to help ensure that investments do not run afoul
of the short-short test or the wash sale rules. To the
extent that having multiple Sub-Advisers responsible for
investing separate portions of the Portfolio's assets
creates the need for coordination among such Sub-Advisers,
there is an increased risk that the Portfolio will not
comply with these regulatory and tax requirements.
It is possible that different Sub-Advisers of the
Portfolio could take opposite actions within a short period
of time with respect to a particular security. For example,
one Sub-Adviser could buy a security for the Portfolio and
shortly thereafter another Sub-Adviser could sell the same
security from the portion of the Portfolio allocated to it.
If in these circumstances the securities could be
transferred from one Sub-Adviser's portion of the Portfolio
to another, the Portfolio could avoid transaction costs and
could avoid creating possible wash sales and short-short
gains under the Internal Revenue Code of 1986, as amended
(the "Code"). Such transfers are not practicable but the
Sub-Advisers do not believe that there will be material
adverse effects on the Portfolio as a result. First, it does
not appear likely that there will be substantial overlap in
the securities acquired for the Portfolio by the various
Sub-Advisers. Moreover, the Sub-Advisers would probably only
rarely engage in the types of offsetting transactions
described above, especially within a short time period.
Therefore, it is a matter of speculation whether offsetting
transactions would result in any significant increases in
transaction costs or have significant tax consequences. With
respect to the latter, SFM has established procedures with
respect to the short-short test which are designed to
prevent realization of short-short gains in excess of Code
limits. It is true that wash sales could occur in spite of
the efforts of SFM, but the Board of Trustees believes that
the benefit of using multiple advisers outweighs the
consequences of any wash sales.
SFM is currently seeking an exemptive order from the
Securities and Exchange Commission (the "SEC") that would
permit SFM, with the approval of the Trust's Board of
Trustees, to retain sub-advisers for the Portfolio without
submitting the sub-advisory agreement to a vote of the
Portfolio's shareholders. If granted, the exemptive relief
will permit the non-disclosure of amounts payable by SFM
under such sub-advisory agreements. The Trust will notify
shareholders in the event of any change in the identity of
the Sub-Adviser for the Portfolio. Until or unless this
exemptive order is granted, if one of the Sub-Advisers is
terminated or departs from a Portfolio, the Portfolio will
handle such
14
<PAGE>
termination or departure in one of two ways. First, the
Portfolio may propose that a Sub-Adviser be appointed to
manage that portion of the Portfolio's assets managed by the
departing adviser. In this case, the Portfolio would be
required to submit to the vote of the Portfolio's
shareholders the approval of an investment advisory contract
with the new Sub-Adviser. In the alternative, the Portfolio
may decide to allocate the departing sub-adviser's assets
among the remaining advisers. This allocation would not
require new investment advisory contracts with the remaining
Sub-Advisers, and consequently no shareholder approval would
be necessary.
THE ADVISER ____________________________________________________________________
SEI Financial SEI Financial Management Corporation ("SFM") serves as
Management investment adviser to the Portfolio. SFM is a wholly-owned
Corporation subsidiary of SEI Corporation ("SEI"), a financial services
company located in Wayne, PA. The principal business address
of SFM is 680 East Swedesford Road, Wayne, PA 19087-1658.
SEI was founded in 1968 and is a leading provider of
investment solutions to banks, institutional investors,
investment advisers and insurance companies. Affiliates of
SFM have provided consulting advice to institutional
investors for more than 20 years, including advice regarding
the selection and evaluation of investment advisers. SFM
currently serves as manager or administrator to more than 26
investment companies, including more than 220 portfolios,
which investment companies have more than $51 billion in
assets as of September 30, 1995.
For these advisory services, SFM is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .33% of the Portfolio's average daily net assets.
THE SUB-ADVISER ________________________________________________________________
Standish, Ayer Standish Ayer & Wood, Inc. ("SAW") serves as Sub-Adviser for
& Wood, Inc. the Portfolio. SAW's principal offices are located at One
Financial Center, Boston, MA 02111. SAW was founded in 1933
and is a Subchapter S Corporation organized under the laws
of the Commonwealth of Massachusetts and is completely owned
by its 23 directors, all of whom are actively engaged in the
management of the corporation. SAW has been providing
investment management services to institutions and managing
municipal securities since 1934. SAW manages assets for
pensions, funds, corporate and public, insurance companies;
banks; and individuals. Total assets under management as of
September 30, 1995 were $29 billion.
Raymond J. Kubiak, CFA serves as portfolio manager to the
Portfolio. Mr. Kubiak has 15 years experience in public
finance and is a Vice President and Director of the Sub-
Adviser. He has been with SAW since March, 1988.
SFM pays SAW a fee which is calculated and paid monthly,
based on an annual note of .18% for assets of up to $125
million and .15% for assets over $125 million.
15
<PAGE>
DISTRIBUTION ___________________________________________________________________
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as each Portfolio's
distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust. Each Class of the
Trust has adopted a distribution plan (the "Class A" and
"Class D Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act").
The Class D Plan provides for reimbursement for expenses
incurred by the Distributor, in an amount not to exceed .30%
of the average daily net assets of each Portfolio on an
annualized basis, and provided those expenses are
permissible as to both type and amount under a budget
adopted by the Board of Trustees, including those who are
not interested persons and have no financial interest in the
Plan or any related agreement ("Qualified Trustees").
Currently, the budget (shown here as a percentage of daily
net assets) for the Portfolio is set at an annual rate of
.08%.
Distribution-related expenses reimbursable to the
Distributor under the budget include those related to the
costs of the printing of reports, prospectuses, notices and
similar materials for persons other than current
shareholders, advertising expenses and promotional and sales
expenses including expenses for travel, communication and
compensation and benefits for sales personnel. Distribution
expenses not attributable to a specific portfolio of the
Trust are allocated among each of the portfolios of the
Trust based on the basis of their relative average net
assets. The Trust is not obligated to reimburse the
Distributor for any expenditures in excess of the approved
budget.
The Class D Plan, in addition to providing for the
reimbursement payments described above, provides for
payments to the Distributor at an annual rate of .30% of the
Portfolio's average daily net assets attributable to Class D
shares. This additional 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 additional 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 additional compensation payment
under the Class D Plan at a rate of .25% of the Portfolio's
average daily net assets, on an annualized basis,
attributable to Class D shares.
16
<PAGE>
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 the
sales charge it receives or from any other source available
to it. 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 yield and
total return. These figures will be based on historical
earnings and are not intended to indicate future
performance.
From time to time, the Portfolio may also advertise yield
and tax equivalent yield. The yield of these Portfolios
refers to the annualized income generated by a hypothetical
investment, net of any sales charge imposed in the case of
Class D shares, in the Portfolio over a specified 30-day
period. The yield is calculated by assuming that the income
generated by the investment during that period generated
each period over one year and is shown as a percentage of
the investment. A tax equivalent yield is calculated by
determining the rate of return that would have been achieved
on a fully taxable investment to produce the after-tax
equivalent of the Portfolio's yield, assuming certain tax
brackets for a shareholder.
The total return of the Portfolio refers to the average
compounded rate of return to a hypothetical investment for
designated time periods (including, but not limited to, the
period from which the Portfolio commenced operations through
the specified date), assuming that the entire investment is
redeemed at the end of each period and assuming the
reinvestment of all dividend and capital gain distributions.
The Portfolio may periodically compare its performance to
that of: (i) other mutual funds tracked by mutual fund
rating services (such as Lipper Analytical), financial and
business publications and periodicals; (ii) broad groups of
comparable mutual funds; (iii) unmanaged indices which may
assume investment of dividends but generally do not reflect
deductions for administrative and management costs; or (iv)
to other investment alternatives. The Portfolio may quote
Morningstar, Inc., a service that ranks mutual funds on the
basis of risk-adjusted performance. The Portfolio may quote
Ibbotson Associates of Chicago, Illinois, which provides
historical returns of the capital markets in the U.S. The
Portfolio may use long-term performance of these capital
markets to demonstrate general
17
<PAGE>
long-term risk versus reward scenarios and could include the
value of a hypothetical investment in any of the capital
markets. The Portfolio may also quote financial and business
publications and periodicals as they relate to fund
management, investment philosophy, and investment techniques.
The Portfolio may quote various measures of volatility and
benchmark correlation in advertising and may compare these
measures to those of other funds. Measures of volatility
attempt to compare historical share price fluctuations or
total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might
be. Measures of volatility and correlation are calculated
using averages of historical data and cannot be calculated
precisely.
The performance on the Class D shares will normally be
lower than the performance on the Class A shares of the
Portfolio because of the imposition of the sales charge and
additional distribution and transfer agent expenses charged
to the Class D shares.
................................................................................
[SYMBOL
APPEARS TAXES
HERE]
You must pay taxes on your Portfolio's earnings, whether you take your
payments in cash or additional 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 income tax treatment of the Portfolio or its
shareholders and, 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 is treated as a separate entity for federal
the Portfolio: income tax purposes and is not combined with the Trust's other
Portfolios. The Portfolio intends to continue to qualify for
the special tax treatment afforded regulated investment
companies ("RICs") under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), so as to be relieved of
federal income tax on net investment company taxable income
and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) distributed to shareholders.
Tax Status of The Portfolio intends to distribute substantially all of its
Distributions: net investment income (including net short-term capital gain)
to shareholders. If, at the close of each quarter of its
taxable year, at least 50% of the value of the Portfolio's
total assets consists of obligations the interest on which is
excludable from gross income, the Portfolio may pay "exempt-
interest dividends" to its shareholders. Those dividends
constitute the portion of the aggregate dividends designated
by the Portfolio equal to the excess of the excludable
interest over
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<PAGE>
................................................................................
[SYMBOL
APPEARS DISTRIBUTIONS
HERE]
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.
................................................................................
certain amounts disallowed as deductions. In determining net
exempt-interest income, expenses of each Portfolio are
allocated to gross tax-exempt interest income in the proportion
that the gross amount of such interest income bears to the
Portfolio's total gross income, excluding net capital gains.
Exempt-interest dividends are excludable from a shareholder's
gross income for federal income tax purposes but may have
certain collateral federal tax consequences including
alternative minimum tax consequences. In addition, the receipt
of exempt-interest dividends may cause persons receiving Social
Security or Railroad Retirement benefits to be taxable on a
portion of such benefits. See the Statement of Additional
Information.
Current federal tax law limits the types and volume of
bonds qualifying for the federal income tax exemption of
interest, which may have an effect on the ability of the
Portfolio to purchase sufficient amounts of tax-exempt
securities to satisfy the Code's requirements for the payment
of "exempt-interest" dividends.
Any dividends paid out of income realized by the Portfolio
on taxable securities will be taxable to shareholders as
ordinary income (whether received in cash or in additional
shares) to the extent of the Portfolio's earnings and profits
and will not qualify for the dividends-received deduction for
corporate shareholders. Distributions to shareholders of net
capital gains of the Portfolio also will not qualify for that
deduction and will be taxable to shareholders as long-term
capital gain, whether received in cash or additional shares,
and regardless of how long a shareholder has held the shares.
Dividends declared by the Portfolio in October, November,
or December of any year and payable to shareholders of record
on a date in any such month will be deemed to have been paid
by the Portfolio and received by the shareholders on December
31 of that year if paid by the Portfolio during the following
January. The Portfolio intends to make sufficient
distributions prior to the end of each calendar year to avoid
liability for federal excise tax applicable to regulated
investment companies.
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of the
Portfolio is not deductible for federal income tax purposes.
Furthermore, the Portfolio may not be an appropriate
investment for persons (including corporations and other
business entities) who are "substantial users" (or persons
related to "substantial users") of facilities financed by
industrial development bonds or private activity bonds. Such
persons should consult their tax advisers before purchasing
shares. The Portfolio will report annually to its
shareholders the portion of dividends that is taxable and the
portion that is tax-exempt based on income received by the
Portfolio during the year to which the dividends relate.
Each sale, exchange, or redemption of the Portfolio's
shares is a taxable transaction to the shareholder.
19
<PAGE>
................................................................................
[SYMBOL BUY, EXCHANGE AND
APPEARS SELL REQUESTS ARE IN
HERE] "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
................................................................................
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 (a "Business Day").
However, shares cannot be purchased by Federal Reserve wire on
federal holidays restricting wire transfers. 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 the close of
trading on the New York Stock Exchange (presently 4:00 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 the
close of trading on the New York Stock Exchange (presently 4:00
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 The minimum initial investment in the Portfolio's Class D
Investments 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 Due to the relatively high cost of handling small
Minimum investments, the Portfolio reserves the right to redeem, at
Account net asset value, the shares of any shareholder if, because of
Balance 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 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 the Portfolio in an amount that will
20
<PAGE>
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 plus any
applicable sales charge (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 as of the close of trading on the New
York Stock Exchange (presently 4:00 p.m. Eastern time) on
each 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 The net asset value per share of the Portfolio is determined
Asset Value is by dividing the total market value of its investments and
Determined other assets, less any liabilities, by the total number of
outstanding shares of the Portfolio. The Portfolio may use a
pricing service to obtain the most recently quoted bid price
of each equity or fixed income security held by the
Portfolio. Unlisted securities for which market quotations
are readily available are valued at the most recent quoted
bid price. Net asset value per share is determined daily as
of 4:00 p.m. Eastern time on each Business Day. Purchases
will be made in full and fractional shares of the Portfolio
calculated to three decimal places. 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 charged to
each class and the incremental transfer agent fees charged
to Class D shares.
Rights of In calculating the sales charge rates applicable to current
Accumulation purchases of the Portfolio's shares, a "single purchaser"
(defined below) is entitled to combine current purchases
with the current market value of previously purchased shares
of the Portfolio and Class D shares of other portfolios
("Eligible Portfolios") which are sold subject to a
comparable sales charge.
The term "single purchaser" refers to (i) an individual,
(ii) an individual and spouse purchasing shares of the
Portfolio for their own account or for trust or custodial
accounts of their minor children, or (iii) a fiduciary
purchasing for any one trust, estate, or fiduciary account,
including employee benefit plans created under Sections 401
or 457 of the Code,
21
<PAGE>
including related plans of the same employer. Furthermore,
under this provision, purchases by a single purchaser shall
include purchases by an individual for his or her own
account in combination with (i) purchases of that individual
and spouse for their joint accounts or for trust and
custodial accounts for their minor children and (ii)
purchases of that individual's spouse for his or her own
account. To be entitled to a reduced sales charge based upon
shares already owned, the investor must ask the Transfer
Agent for such reduction at the time of purchase and provide
the account number(s) of the investor, the investor and
spouse, and their children (under age 21). The Portfolio may
amend or terminate this right of accumulation at any time as
to subsequent purchases.
Letter of By submitting a Letter of Intent (the "Letter") to the
Intent Transfer Agent, a single purchaser may purchase shares of
the Portfolio and the other Eligible Portfolios during a 13-
month period at the reduced sales charge rates applying to
the aggregate amount of the intended purchases stated in the
Letter. The Letter may apply to purchases made up to 90 days
before the date of the Letter. It is the shareholder's
responsibility to notify the Transfer Agent at the time the
Letter is submitted that there are prior purchases that may
apply.
Five percent (5%) of the total amount intended to be
purchased will be held in escrow by the Transfer Agent until
such purchase is completed within the 13-month period. The
13-month period begins on the date of the earliest purchase.
If the intended investment is not completed, the Manager
will surrender an appropriate number of the escrowed shares
for redemption in order to realize the difference between
the sales charge on the shares purchased at the reduced rate
and the sales charge otherwise applicable to the total
shares purchased. Such purchasers may include the value of
all their shares of the Portfolio and of any of the other
Eligible Portfolios in the Trust towards the completion of
such Letter.
Reinstatement A shareholder who has redeemed shares of any portfolio of
Privilege the Trust has a one-time right to reinvest the redemption
proceeds in shares of another portfolio of the Trust 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
portfolio 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.
Sales Charge No sales charge is imposed on shares of the Portfolio: (i)
Waivers issued in plans of reorganization, such as mergers, asset
acquisitions, and exchange offers, to which the Trust is a
party; (ii) sold to dealers or brokers that have a sales
agreement with the Distributor ("participating broker-
dealers") for their own account or for retirement plans for
employees or sold to present employees of dealers or brokers
that certify to the Distributor at the time of purchase that
such purchase is for their own account; (iii) sold to
present employees of SEI or one of its affiliates, or of any
entity which is a current
22
<PAGE>
service provider to the Trust; (iv) sold to tax-exempt
organizations enumerated in Section 501(c) of the Code or
qualified employee benefit plans created under Sections 401,
403(b)(7), or 457 of the Code (but not IRAs or SEPs); (v)
sold to fee-based clients of banks, financial planners, and
investment advisers; (vi) sold to clients of trust companies
and bank trust departments; (vii) sold to trustees and
officers of the Trust; (viii) purchased with proceeds from
the recent redemption of another class of shares of a
portfolio of the Trust, SEI Institutional Managed Trust, SEI
International Trust, SEI Liquid Asset Trust, or SEI Daily
Income Trust; (ix) purchased with the proceeds from the
recent redemption of shares of a mutual fund with similar
investment objectives and policies (other than Class D
shares) for which a front-end sales charge was paid (this
offer will be extended, to cover shares on which a deferred
sales charge was paid, if permitted under regulatory
authorities' interpretation of applicable law); or (x) sold
to participants or members of certain affinity groups, such
as trade associations or membership organizations, which
have entered into arrangements with the Distributor.
Members of affinity groups such as trade associations or
membership organizations which have entered into
arrangements relating to waivers of sales charges with the
Distributor should call 1-800-437-6016 for more information.
The Distributor has also entered into arrangements with
certain affinity groups and broker dealers wherein their
members or clients are entitled to percentage-based
discounts from the otherwise applicable sales charge for
purchase of Class D shares. Currently, the only percentage-
based discount equals 50%. Please call 1-800-437-6016 for
more information.
An investor relying upon any of the categories of waivers
of the sales charge must qualify such waiver in advance of
the purchase with the Transfer Agent or the financial
institution or intermediary through which shares are
purchased by the investor.
The waiver of the sales charge under circumstances (viii)
and (ix) above applies only if the following conditions are
met: the purchase must be made within 60 days of the
redemption; the Transfer Agent must be notified in writing
by the investor, or his or her agent, at the time a purchase
is made; and a copy of the investor's account statement
showing such redemption must accompany such notice. The
waiver policy with respect to the purchase of shares through
the use of proceeds from a recent redemption as described in
clauses (viii) and (ix) above will not be continued
indefinitely and may be discontinued at any time without
notice. Investors should call 1-800-437-6016 to confirm
availability prior to initiating the procedures described in
clauses (viii) and (ix) above.
Signature The Transfer Agent may require that the signatures on the
Guarantees 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. Notaries 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
23
<PAGE>
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.
Telephone/Wire Redemption orders may be placed by telephone. Neither the
Instructions 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, you may
wish to consider placing your order by other means.
Systematic Please note that if withdrawals exceed income dividends,
Withdrawal Plan your invested principal in the account will be depleted.
("SWP") 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 An account may be closed by providing written notice to the
your Account 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 Tax Exempt Trust (the "Trust") was organized as a
Massachusetts business trust under a Declaration of Trust
dated March 15, 1982. The Declaration of Trust permits the
Trust to offer separate portfolios of shares and different
classes of each portfolio. Shareholders may purchase shares
in the Portfolio through two separate classes: Class A and
Class D, which provide for variation in distribution and
transfer agent costs, voting rights, dividends, and the
imposition of a sales load on the Class D Shares. This
Prospectus relates to the Class D Shares of the Trust's
Intermediate-Term Municipal Portfolio. In addition to the
Portfolio, the Trust consists of the following portfolios:
Tax Free Portfolio, Institutional Tax Free Portfolio,
California Tax Exempt Portfolio, Pennsylvania Municipal
Portfolio, Kansas Tax Free Income Portfolio, California
Intermediate-Term Municipal Portfolio, Bainbridge Tax Exempt
Portfolio, New York Intermediate-Term Municipal Portfolio,
and Pennsylvania Tax Free Portfolio. Additional information
pertaining to the Trust may be obtained by writing to SEI
Financial Management Corporation, 680 East Swedesford Road,
Wayne, Pennsylvania 19087 or by calling 1-800-437-6016. All
consideration received by the Trust for shares of any
portfolio and all assets of such portfolio belong to that
portfolio and would be subject to liabilities related
thereto.
24
<PAGE>
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 The management and affairs of the Trust are supervised by
Trust the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
Voting Rights Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will vote
separately on matters relating solely to that portfolio or
class, such as any distribution plan. As a Massachusetts
business trust, the Trust is not required to hold annual
meetings of shareholders but approval will be sought for
certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining Trustees
or by shareholders at a special meeting called upon written
request of shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a
meeting is requested the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
Reporting The Trust issues unaudited financial statements semi-
annually and audited financial statements annually. The
Trust furnishes proxy statements and other reports to
shareholders of record.
Shareholder Shareholder inquiries should be directed to the Transfer
Inquiries Agent, DST Systems, Inc., P.O. Box 419240, Kansas City,
Missouri, 64141-6240.
Dividends The net investment income (exclusive of capital gains) of
the Portfolio is determined and declared daily as a dividend
for shareholders of record as of the close of business on
that day. Dividends are paid by the Portfolio in cash or in
additional shares at the discretion of the shareholder on
the tenth Business Day of each month. If any net capital
gains are realized, they will be distributed by the
Portfolio annually.
Shareholders automatically receive all income dividends
and capital gain distributions in additional shares at the
net asset value next determined following the record date,
unless the shareholder has elected to take such payment in
cash. Shareholders may change their election by providing
written notice to the Manager at least 15 days prior to the
distribution.
The dividends on Class D Shares will normally be lower
than on Class A shares of the Portfolio because of the
additional distribution and transfer agent expenses charged
to Class D Shares.
Counsel and Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Independent Arthur Andersen, L.L.P. serves as the independent public
Public accountants of the Trust.
Accountants
Custodian and CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
Wire Agent 7618, Philadelphia, PA 19101, serves as Custodian of the
Trust's assets and acts as wire agent of certain cash of
25
<PAGE>
the Trust. The Custodian holds cash, securities, and other
assets of the Trust as required by the Investment Company
Act of 1940, as amended (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.
Commercial Commercial Paper is a term used to describe unsecured short-
Paper term promissory notes issued by banks, municipalities,
corporations and other entities. Maturities on these issues
vary from one to 270 days.
Municipal Municipal Securities consist of (i) debt obligations issued
Securities 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.
General obligation bonds are backed by the taxing power
of the issuing municipality. Revenue bonds are backed by the
revenues of a project or facility (tolls from a toll bridge,
for example). Certificates of participation represent an
interest in an underlying obligation or commitment such as
an obligation issued in connection with a leasing
arrangement. The payment of principal and interest on
private activity and industrial development bonds generally
is dependent solely on the ability of the facility's user to
meet its financial obligations and the pledge, if any, of
real and personal property so financed as security for such
payment.
Municipal notes include general obligation notes, tax
anticipation notes, revenue anticipation notes, bond
anticipation notes, certificates of indebtedness, demand
notes and construction loan notes and participation
interests in municipal notes. Municipal bonds include
general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds and
participation interests in municipal bonds.
Repurchase Repurchase Agreements are agreements by which the Portfolio
Agreements obtains a security and simultaneously commits to return the
security to the seller at an agreed-upon price on an agreed-
upon date. The Custodian will hold the security as
collateral for the repurchase agreement. The Portfolio bears
a risk of loss in the event the other party defaults on its
obligations and the Portfolio is delayed or prevented from
exercising its right to dispose of the collateral or if the
Portfolio realizes a loss on the sale of the collateral. 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.
26
<PAGE>
Standby Securities subject to standby commitments or puts permit the
Commitmentsand holder thereof to sell the securities at a fixed price prior
Puts to maturity. Securities subject to a standby commitment or
put may be sold at any time at the current market price.
However, unless the standby commitment or put was an
integral part of the security as originally issued, it may
not be marketable or assignable; therefore, the standby
commitment or put would only have value to the Portfolio
owning the security to which it relates. In certain cases, a
premium may be paid for a standby commitment or put. This
premium will have the effect of reducing the yield otherwise
payable on the underlying security. The Portfolio will limit
standby commitment or put transactions to institutions
believed to present minimal credit risk.
Variable and Certain of the obligations purchased by the Portfolio may
Floating Rate carry variable or floating rates of interest and may involve
Instruments 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 charges. 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 When-issued or delayed delivery transactions involve the
and Delayed purchase of an instrument with payment and delivery taking
Delivery place in the future. Delivery of and payment for these
Securities 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 for its
portfolio, the Portfolio may dispose of a when-issued
security or forward commitment prior to settlement if the
advisers deem it appropriate to do so.
27
<PAGE>
SEI TAX EXEMPT TRUST
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely information about the above-referenced
Portfolio that an investor needs to know before investing. Please read this
Prospectus carefully, and keep it on file for future reference.
A Statement of Additional Information dated December 31, 1995 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, PA 19087 or by calling 1-800-342-5734. The
Statement of Additional Information is incorporated into this Prospectus by
reference.
SEI Tax Exempt Trust (the "Trust") is an open-end investment management
company, certain classes of which offer financial institutions a convenient
means of investing their own funds, or funds for which they act in a fiduciary,
agency or custodial capacity, in professionally managed diversified and non-
diversified portfolios of securities. A portfolio may offer separate classes of
shares that differ from each other primarily in the allocation of certain
distribution expenses and minimum investment amounts. This Prospectus offers
Class A shares of the Trust's Intermediate-Term Municipal Portfolio (the
"Portfolio"), a fixed income portfolio.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY IN-
SURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RE-
SERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THE SHARES
INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT IN-
VESTED.
- --------------------------------------------------------------------------------
<PAGE>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Management/Advisory Fees (after fee waivers) /1/ .45%
12b-1 Fees /2/ .08%
Other Expenses .07%
- --------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) /3/ .60%
- --------------------------------------------------------------------------------
</TABLE>
1 SFM has waived, on a voluntary basis, a portion of its fees, and the
Management/Advisory fees shown reflect these voluntary waivers. SFM reserves
the right to terminate this waiver at any time in its sole discretion. Absent
such waiver, the Management/Advisory fees for the Portfolio would be .75%.
2 The 12b-1 fees shown effect the Portfolio's current 12b-1 budget for
reimbursement of expenses. The maximum 12b-1 fees payable by Class A shares
of the Portfolio are .30%.
3 Absent the voluntary fee waivers described above, Total Operating Expenses
for Class A shares of the Portfolio would be .90%.
EXAMPLE
- --------------------------------------------------------------------------------
An investor in Class A shares of the Portfolio would pay the following expenses
on a $1,000 investment assuming (1) 5% annual return and (2) redemption at the
end of each time period:
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C>
$6 $19 $33 $75
- --------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the table and this example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in the Portfolio's Class A shares. A person who purchases
shares through a financial institution may be charged separate fees by that
institution. The 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 and are subject to a sales load. Additional information may
be found under "The Manager and Shareholder Servicing Agent", "Distribution" and
"The Adviser".
Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges otherwise permitted by the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. ("NASD").
2
<PAGE>
FINANCIAL HIGHLIGHTS ___________________________________________________________
The following financial highlights, for a share outstanding throughout each
period, have been audited by Arthur Andersen LLP, independent public
accountants, whose report thereon was unqualified. This information should be
read in conjunction with the Trust's financial statements and notes thereto,
which are included in the Trust's Statement of Additional Information and which
appear, along with the report of Arthur Andersen LLP, in the Trust's 1995
Annual Report to Shareholders. Additional performance information is set forth
in the 1995 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>
Net Realized
Investment and
Net Activities Distributions Unrealized
Asset ---------- ---------------------------------- Gain (Loss) on Net Net Ratio of
Value, Net Net Net Investments Asset Value, Assets, End Expenses
Beginning Investment Investment Realized Total and Capital End Total of Period to Average
of Period Income Income Gain Distributions Transactions of Period Return (000) Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
- ------------------------------
INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
FOR THE YEARS ENDED AUGUST 31,:
1995 $10.36 $0.52 $(0.52) -- $(0.52) $0.23 $10.59 7.53% $ 95,675 0.55%
1994 10.84 0.49 (0.49) $ (0.06) (0.55) (0.42) 10.36 0.65% 127,509 0.53%
1993 10.49 0.49 (0.50) (0.02) (0.52) 0.38 10.84 8.62% 122,649 0.55%
1992 10.20 0.56 (0.54) (0.01) (0.55) 0.28 10.49 8.56% 63,210 0.55%
1991 9.98 0.61 (0.63) -- (0.63) 0.24 10.20 8.82% 36,699 0.55%
1990(2) 10.01 0.38 (0.37) -- (0.37) (0.04) 9.98 3.44%+ 12,781 0.55%*
FOR THE YEAR ENDED JANUARY 31,:
1990(1) 10.00 0.21 (0.16) (0.002) (0.16) (0.04) 10.01 1.72%+ 9,106 0.56%*
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of
Net
Investment
Ratio Ratio of Income to
of Expenses Net Average
to Average Investment Net Assets
Net Assets Income to Excluding Portfolio
Excluding Average Fee Turnover
Fee Waivers Net Assets Waivers Rate
- ---------------------------------------------------------------------------------------------------------------------------
1993 0.69% 4.79% 4.65% 63.04%
1992 0.71% 5.56% 5.40% 61.56%
1991 0.78% 6.18% 5.95% 111.82%
1990(2) 0.90%* 6.63%* 6.28%* 63.45%
FOR THE YEAR ENDED JANUARY 31,:
1990(1) 1.36%* 5.80%* 5.00%* 352.00%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Return is for period indicated and has not been annualized.
1 The Intermediate-Term Municipal Portfolio commenced operations on September
5, 1989.
2 In August 1990, the Trustees changed the fiscal year end of the Trust from
January 31 to August 31.
3
<PAGE>
THE TRUST _____________________________________________________________________
SEI Tax Exempt Trust (the "Trust") is an open-end management investment
company that offers units of beneficial interest ("shares") in separate
diversified and non-diversified investment portfolios. The Trust offers units
of beneficial interest ("shares") in separate investment portfolios. This
prospectus offers Class A shares of the Trust's Intermediate-Term Municipal
Portfolio (the "Portfolio"). Shares in the Portfolio may also be purchased
through the Portfolio's Class D shares. The investment adviser and investment
sub-adviser to the Portfolio are referred to collectively as the "advisers."
Additional information pertaining to the Trust may be obtained by writing to
SEI Financial Services Company, 680 East Swedesford Road, Wayne, PA 19087 or
by calling 1-800-342-5734.
INVESTMENT
OBJECTIVE AND
POLICIES ______________________________________________________________________
The Portfolio's investment objective is to seek the highest
level of income exempt from federal income taxes that can
be obtained, consistent with the preservation of capital,
from a diversified portfolio of investment grade municipal
securities. However, the Portfolio's income might not be as
high as it would be if the Portfolio had minimum investment
rating requirements lower than those discussed below. There
can be no assurance that the Portfolio will be able to
achieve its investment objective.
The Portfolio invests at least 80% of its net assets in
municipal securities the interest of which is exempt from
federal income taxes (collectively "Municipal Securities"),
based on opinions from bond counsel for the issuers. This
investment policy is a fundamental policy of the Portfolio.
The issuers of these securities can be located in all fifty
states, the District of Columbia, Puerto Rico, and other
U.S. territories and possessions. Under normal conditions,
the Portfolio will invest at least 80% of its net assets in
securities the interest on which is not a preference item
for purposes of the alternative minimum tax. Although the
advisers have no present intention of doing so, the up to
20% of all assets in the Portfolio can be invested in
taxable debt securities for defensive purposes or when
sufficient tax exempt securities considered appropriate by
the advisers are not available for purchase.
The market value of the Portfolio's fixed income
investments will change in response to interest rate
changes and other factors. During periods of falling
interest rates, the values of outstanding fixed income
securities generally rise. Conversely, during periods of
rising interest rates, the values of such securities
generally decline. Changes by recognized rating agencies in
the rating of any fixed income security and in the ability
of an issuer to make payments of interest and principal
also affect the value of these investments. Changes in the
value of portfolio securities will not necessarily affect
cash income derived from these securities, but will affect
the Portfolio's net asset value.
The Portfolio may purchase the following types of
municipal obligations, but only if such securities, at the
time of purchase, either have the requisite rating, or, if
not rated, are of comparable quality as determined by the
advisers: (i) municipal bonds rated A or
4
<PAGE>
better by Standard and Poor's Corporation ("S&P") or by
Moody's Investors Service, Inc. ("Moody's"), and the
Portfolio may invest up to 10% of its total assets in
municipal bonds rated BBB by S&P or Baa by Moody's; (ii)
municipal notes rated at least SP-1 by S&P or MIG-1 or
VMIG-1 by Moody's; and (iii) tax-exempt commercial paper
rated at least A-1 by S&P or Prime-1 by Moody's. Bonds
rated BBB by S&P or Baa by Moody's have speculative
characteristics. Municipal obligations owned by the
Portfolio which become less than the prescribed investment
quality shall be sold at a time when, in the judgment of
the advisers, it does not substantially impact the market
value of the Portfolio.
Not more than 25% of Portfolio assets will be invested
in (a) municipal securities whose issuers are located in
the same state, (b) municipal securities the interest on
which is derived from revenues of similar type projects, or
(c) municipal securities subject to the alternative minimum
tax. This restriction does not apply to municipal
securities in any of the following categories: public
housing authorities; general obligations of states and
localities; state and local housing finance authorities, or
municipal utilities systems.
There could be economic, business, or political
developments which might affect all municipal securities of
a similar type. To the extent that a significant portion of
the Portfolio's assets are invested in municipal securities
payable from revenues on similar projects, the Portfolio
will be subject to the peculiar risks presented by such
projects to a greater extent than it would be if the
Portfolio's assets were not so invested.
The Portfolio will maintain a dollar-weighted average
portfolio maturity of three to ten years. However, when the
advisers determine that market conditions so warrant, the
Portfolio can maintain an average weighted maturity of less
than three years.
GENERAL
INVESTMENT
POLICIES _______________________________________________________________________
The Portfolio may invest in variable and floating rate
obligations, may purchase securities on a "when-issued"
basis, and reserves the right to engage in transactions
involving standby commitments. The Portfolio may also
purchase other types of tax-exempt instruments as long as
they are of a quality equivalent to the long-term bond or
commercial paper ratings stated above. Although permitted
to do so, the Portfolio has no present intention to invest
in repurchase agreements or purchase securities subject to
the alternative minimum tax. The Portfolio will not invest
more than 15% of its net assets in illiquid securities.
The taxable securities in which the Portfolio may invest
consist of U.S. Treasury obligations; obligations issued or
guaranteed by the U.S. Government or by its agencies or
instrumentalities whether or not backed by the full faith
and credit of the U.S. Government; instruments of U.S.
commercial banks or savings and loan institutions (not
including foreign branches of U.S. banks or U.S. branches
of foreign banks) which are members of the Federal Reserve
System or the Federal Deposit Insurance Corporation and
5
<PAGE>
which have total assets of $1 billion or more as shown on
their last published financial statements at the time of
investment; and repurchase agreements involving any of such
obligations.
Municipal notes rated SP-1 by S&P have strong capacity
to pay principal and interest; notes rated MIG-1 or VMIG-1
by Moody's are considered to be of the best quality. Bonds
rated BBB by S&P have an adequate capacity to pay interest
and repay principal; bonds rated Baa by Moody's are
considered to be medium-grade obligations (i.e., neither
highly protected nor poorly secured). The highest S&P
commercial paper rating category, A-1, indicates that the
degree of safety regarding timely payment is strong and
commercial paper issuers rated Prime-1 by Moody's have a
superior ability for repayment.
For a description of the permitted investments and
ratings, see the "Description of Permitted Investments and
Risk Factors" and the Statement of Additional Information.
INVESTMENT
LIMITATIONS____________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolio. Fundamental policies
cannot be changed with respect to the Trust or the
Portfolio without the consent of the holders of a majority
of the Trust's or the Portfolio's outstanding shares.
The Portfolio may not:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the United States Government,
its agencies or instrumentalities and any security
guaranteed thereby) if, as a result, more than 5% of the
total assets of the Portfolio (based on fair market
value at time of investment) would be invested in the
securities of such issuer; provided, however, that the
Portfolio may invest up to 25% of its total assets
without regard to this restriction.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio, based on current
value at the time of such purchase, to be invested in
the securities of one or more issuers conducting their
principal business activities in the same industry,
provided that this limitation does not apply to
investments in obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities or
to investments in tax-exempt securities issued by
governments or political subdivisions of governments.
3. Borrow money except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the
value of the total assets of the Portfolio. All
borrowings will be repaid before making additional
investments and any interest paid on such borrowings
will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the
time of the purchase of a security. Additional investment
limitations are set forth in the Statement of Additional
Information.
6
<PAGE>
THE MANAGER AND
SHAREHOLDER
SERVICING AGENT_________________________________________________________________
SEI Financial Management Corporation ("SFM" and the
"Transfer Agent"), a wholly-owned subsidiary of SEI
Corporation ("SEI"), provides the Trust with overall
management services, regulatory reporting, all necessary
office space, equipment, personnel and facilities, and
serves as institutional transfer agent, dividend disbursing
agent, and shareholder servicing agent.
For these services, SFM is entitled to a fee which is
calculated daily and paid monthly at an annual rate of .24%
of the average daily net assets of the Portfolio. In
addition, SFM has voluntarily agreed to waive a portion of
its fees proportionately in order to limit total operating
expenses of the Class A shares of the Portfolio to not more
than .55% of the Portfolio's average daily net assets
attributable to Class A shares, on an annualized basis. SFM
reserves the right, in its sole discretion, to terminate
its waiver at any time. For the fiscal year ended August
31, 1995, the Portfolio paid management fees, after
waivers, of .27% of its average daily net assets.
MULTI-MANAGER
DIVERSIFICATION_________________________________________________________________
SFM serves as investment adviser (the "Adviser") to the
Portfolio. Within the Portfolio one or more investment sub-
advisers (each, a "Sub-Adviser," and together, the "Sub-
Advisers") who specialize in the distinct investment style
or styles that the Portfolio is designed to capture may be
utilized to select that Portfolio's investments.
The Adviser has general oversight responsibility for the
investment advisory services provided to the Portfolio,
including formulating the Portfolio's investment policies
and analyzing economic trends affecting the Portfolio. In
addition, SFM is responsible for (i) managing the
allocation of assets among the Portfolio's Sub-Advisers, if
applicable, (ii) directing and evaluating the investment
services provided by a Sub-Adviser, including their
adherence to the Portfolio's respective investment
objective and policies and the Portfolio's investment
performance, and (iii) managing the cash portion of the
Portfolio's assets. In accordance with the Portfolio's
investment objective and policies, and under the
supervision of the Adviser and the Trust's Board of
Trustees, a Sub-Adviser is responsible for the day-to-day
investment management of all or a discrete portion of the
assets of a Portfolio. The Adviser and the Sub-Adviser are
authorized to make investment decisions for the Portfolio
and place orders on behalf of the Portfolios to effect the
investment decisions made.
SFM monitors the compliance of the Sub-Adviser of the
Portfolio with regulatory and tax regulations, such as
portfolio concentration and diversification. For the most
part compliance with these requirements by a Sub-Adviser
with respect to its portion of the Portfolio will assure
compliance by that Portfolio as a whole. In addition, SFM
monitors positions taken by each of the Portfolio's Sub-
Advisers and will notify the Sub-Advisers of
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any developing situations to help ensure that investments
do not run afoul of the short-short test or the wash sale
rules. To the extent that having multiple Sub-Advisers
responsible for investing separate portions of the
Portfolio's assets creates the need for coordination among
such Sub-Advisers, there is an increased risk that the
Portfolio will not comply with these regulatory and tax
requirements.
It is possible that different Sub-Advisers of the
Portfolio could take opposite actions within a short period
of time with respect to a particular security. For example,
one Sub-Adviser could buy a security for the Portfolio and
shortly thereafter another Sub-Adviser could sell the same
security from the portion of the Portfolio allocated to it.
If in these circumstances the securities could be
transferred from one Sub-Adviser's portion of the Portfolio
to another, the Portfolio could avoid transaction costs and
could avoid creating possible wash sales and short-short
gains under the Internal Revenue Code of 1986, as amended
(the "Code"). Such transfers are not practicable but the
Sub-Advisers do not believe that there will be material
adverse effects on the Portfolio as a result. First, it
does not appear likely that there will be substantial
overlap in the securities acquired for the Portfolio by the
various Sub-Advisers. Moreover, the Sub-Advisers would
probably only rarely engage in the types of offsetting
transactions described above, especially within a short
time period. Therefore, it is a matter of speculation
whether offsetting transactions would result in any
significant increases in transaction costs or have
significant tax consequences. With respect to the latter,
SFM has established procedures with respect to the short-
short test which are designed to prevent realization of
short-short gains in excess of Code limits. It is true that
wash sales could occur in spite of the efforts of SFM, but
the Board of Trustees believes that the benefit of using
multiple advisers outweighs the consequences of any wash
sales.
SFM is currently seeking an exemptive order from the
Securities and Exchange Commission (the "SEC") that would
permit SFM, with the approval of the Trust's Board of
Trustees, to retain sub-advisers for the Portfolio without
submitting the sub-advisory agreement to a vote of the
Portfolio's shareholders. If granted, the exemptive relief
will permit the non-disclosure of amounts payable by SFM
under such sub-advisory agreements. The Trust will notify
shareholders in the event of any change in the identity of
the Sub-Adviser for the Portfolio. Until or unless this
exemptive order is granted, if one of the Sub-Advisers is
terminated or departs from ways. First, the Portfolio may
propose that a Sub-Adviser be appointed to manage that
portion of the Portfolio's assets managed by the departing
adviser. In this case, the Portfolio would be required to
submit to the vote of the Portfolio's shareholders the
approval of an investment advisory contract with the new
Sub-Adviser. In the alternative, the Portfolio may decide
to allocate the departing sub-adviser's assets among the
remaining advisers. This allocation would not require new
investment advisory contracts with the remaining Sub-
Advisers, and consequently no shareholder approval would be
necessary.
8
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THE ADVISER____________________________________________________________________
SEI Financial SEI Financial Management Corporation ("SFM") serves as
Management investment adviser to the Portfolio. SFM is a wholly-owned
Corporation subsidiary of SEI Corporation ("SEI"), a financial services
company located in Wayne, PA. The principal business
address of SFM is 680 East Swedesford Road, Wayne, PA
19087-1658. SEI was founded in 1968 and is a leading
provider of investment solutions to banks, institutional
investors, investment advisers and insurance companies.
Affiliates of SFM have provided consulting advice to
institutional investors for more than 20 years, including
advice regarding the selection and evaluation of investment
advisers. SFM currently serves as manager or administrator
to more than 26 investment companies, including more than
220 portfolios, which investment companies have more than
$51 billion in assets as of September 30, 1995.
For these advisory services, SFM is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .33% of the Portfolio's average daily net assets.
THE SUB-ADVISER________________________________________________________________
Standish, Ayer & Standish Ayer & Wood, Inc. ("SAW") serves as Sub-Adviser
Wood, Inc. for the Portfolio. SAW's principal offices are located at
One Financial Center, Boston, MA 02111. SAW was founded in
1933 and is a Subchapter S Corporation organized under the
laws of the Commonwealth of Massachusetts and is completely
owned by its 23 directors, all of whom are actively engaged
in the management of the corporation. SAW has been
providing investment management services to institutions
and managing municipal securities since 1934. SAW manages
assets for pensions, funds, corporate and public, insurance
companies; banks; and individuals. Total assets under
management as of September 30, 1995 were $29 billion.
Raymond J. Kubiak, CFA serves as portfolio manager to
the Portfolio. Mr. Kubiak has 15 years experience in public
finance and is a Vice President and Director of the Sub-
Adviser. He has been with SAW since March, 1988.
SFM pays SAW a fee which is calculated and paid monthly,
based on an annual rate of .18% for assets of up to $125
million and .15% for assets over $125 million.
DISTRIBUTION___________________________________________________________________
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as each Portfolio's
distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust. Each Class of the
Trust has adopted a distribution plan (the "Class A Plan"
and "Class D Plan") pursuant to Rule 12b-1 under the 1940
Act.
The Class A Plan provides for reimbursement for expenses
incurred by the Distributor, in an amount not to exceed
.30% of the average daily net assets of the Portfolio, on
an annualized basis, provided those expenses are
permissible as to both type and amount under a budget
adopted by the Board of Trustees, including those who are
not interested persons and have no financial interest in
the Plan or any related agreement
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<PAGE>
("Qualified Trustees"). Currently, the budget (shown here
as a percentage of daily net assets) for the Portfolio is
set at an annual rate of .08%.
Distribution-related expenses reimbursable to the
Distributor under the budget include those related to the
costs of the printing of reports, prospectuses, notices and
similar materials for persons other than current
shareholders, federal and state securities law registration
and the cost of complying with such laws in the
distribution of the Trust's shares, advertising expenses
and promotional and sales expenses including expenses for
travel, communication and compensation and benefits for
sales personnel. Distribution expenses not attributable to
a specific Portfolio are allocated among each of the
Portfolios of the Trust on the basis of their average net
assets. The Trust is not obligated to reimburse the
Distributor for any expenditures in excess of the approved
budget.
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
the sales charge it receives or from any other source
available to it. 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 shares of the
Portfolios, and also will be offered uniformly to all
dealers, predicated upon the amount of shares of the
Portfolios sold by such dealer.
PURCHASE AND
REDEMPTION
OF SHARES_______________________________________________________________________
Financial institutions may acquire shares of the Portfolio
for their own account, or as a record owner on behalf of
fiduciary, agency or custody accounts, by placing orders
with the Transfer Agent. Institutions that use certain SEI
proprietary systems may place orders electronically through
those systems. State securities laws may require banks and
financial institutions purchasing shares for their
customers to register as dealers pursuant to state laws.
Financial institutions which purchase shares for the
accounts of their customers may impose separate charges on
these customers for account services. Financial
institutions may impose an earlier cut-off time for receipt
of purchase orders directed through them to allow for
processing and transmittal of these orders to the Transfer
Agent for effectiveness on the same day. Shares of the
Portfolio are offered only to residents of states in which
the shares are eligible for purchase.
Shares of the Portfolio may be purchased or redeemed on
days on which the New York Stock Exchange is open for
business ("Business Days").
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<PAGE>
Shareholders who desire to purchase shares for cash must
place their orders with the Distributor prior to the close
of trading on the New York Stock Exchange (presently 4:00
p.m. Eastern time) on any Business Day for the order to be
accepted on that Business Day. Cash investments must be
transmitted or delivered in federal funds to the wire agent
on the next Business Day following the date the order is
placed. The Trust reserves the right to reject a purchase
order when the Distributor determines that it is not in the
best interest of the Trust and/or shareholders to accept
such purchase order.
Purchases will be made in full and fractional shares of
the Portfolio calculated to three decimal places. The Trust
will send shareholders a statement of shares owned after
each transaction. The purchase price of shares is the net
asset value next determined after a purchase order is
received and accepted by the Trust plus, in the case of
Class D Shares of the Portfolio, the applicable sales load.
The net asset value per share of the Portfolio is
determined by dividing the total value of its investments
and other assets, less any liability, by the total
outstanding shares of the Portfolio. Net asset value per
share is determined daily as of the close of trading on the
New York Stock Exchange (presently 4:00 p.m. Eastern time)
on each Business Day. Although the methodology and
procedures for determining net asset value per share are
identical for all classes of the Portfolio, the net asset
value of one class may differ from that of another class
because of the different distribution fees charged to each
class and the incremental transfer agent fees charged to
Class D Shares.
The market value of each security is obtained by the
Manager from an independent pricing service. Securities
having maturities of 60 days or less at the time of
purchase will be valued using the amortized cost method
(described in the Statement of Additional Information),
which approximates the securities' market value. The
pricing service may use a matrix system to determine
valuations of fixed income securities. This system
considers such factors as security prices, yields,
maturities, call features, ratings and developments
relating to specific securities in arriving at valuations.
The pricing service may also provide market quotations. The
procedures of the pricing service and its valuation are
reviewed by the officers of the Trust under the general
supervision of the Trustees. Portfolio securities for which
market quotations are available are valued at the most
recently quoted bid price on each Business Day.
Shareholders who desire to redeem shares of the
Portfolio must place their redemption orders with the
Transfer Agent prior to the close of trading on the New
York Stock Exchange (presently 4:00 p.m. Eastern time) on
any Business Day. The redemption price is the net asset
value per share of the Portfolio next determined after
receipt by the Transfer Agent of the redemption order.
Payment on redemption will be made as promptly as possible
and, in any event, within five Business Days after the
redemption order is received.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for
acting
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<PAGE>
upon wire instructions or upon telephone instructions that
it reasonably believes to be genuine. The Trust and the
Transfer Agent will each employ reasonable procedures to
confirm that instructions communicated by telephone are
genuine, including requiring a form of personal
identification prior to acting upon instructions received
by telephone and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by other
means.
PERFORMANCE____________________________________________________________________
From time to time, the Portfolio may advertise yield, tax
equivalent yield and total return. These figures will be
based on historical earnings and are not intended to
indicate future performance.
The yield of the Portfolio refers to the annualized
income generated by a hypothetical investment in the
Portfolio over a specified 30-day period. The yield is
calculated by assuming that the income generated by the
investment during that period generated each period over
one year and is shown as a percentage of the investment. A
tax equivalent yield is calculated by determining the rate
of return that would have been achieved on a fully taxable
investment to produce the after-tax equivalent of the
Portfolio's yield, assuming certain tax brackets for a
shareholder.
The total return of the Portfolio refers to the average
compounded rate of return to a hypothetical investment for
designated time periods (including, but not limited to, the
period from which the Portfolio commenced operations
through the specified date), assuming that the entire
investment is redeemed at the end of each period and
assuming the reinvestment of all dividend and capital gain
distributions.
The Portfolio may periodically compare its performance
to that of: (i) other mutual funds tracked by mutual fund
rating services (such as Lipper Analytical), financial and
business publications and periodicals; (ii) broad groups of
comparable mutual funds; (iii) unmanaged indices which may
assume investment of dividends but generally do not reflect
deductions for administrative and management costs; or (iv)
other investment alternatives. The Portfolio may quote
Morningstar, Inc., a service that ranks mutual funds on the
basis of risk-adjusted performance. The Portfolio may quote
Ibbotson Associates of Chicago, Illinois, which provides
historical returns of the capital markets in the U.S. The
Portfolio may use long-term performance of these capital
markets to demonstrate general long-term risk versus reward
scenarios and could include the value of a hypothetical
investment in any of the capital markets. The Portfolio may
also quote financial and business publications and
periodicals as they relate to fund management, investment
philosophy, and investment techniques.
The Portfolio may quote various measures of volatility
and benchmark correlation in advertising and may compare
these measures to those of other funds. Measures of
volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while
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<PAGE>
measures of benchmark correlation indicate how valid a
comparative benchmark might be. Measures of volatility and
correlation are calculated using averages of historical
data and cannot be calculated precisely.
The performance on Class A shares will normally be
higher than that on the Class D Shares of the Portfolio
because of the imposition of a sales charge and 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 and local tax consequences of an
investment in the Portfolio may differ from the federal
income tax consequences described below or local income tax
treatment of the Portfolio or its shareholders and,
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 is treated as a separate entity for federal
the Portfolio income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies ("RICs") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), so
as to be relieved of federal income tax on net investment
company taxable income) and net capital gain (the excess of
net long-term capital gain over net short-term capital
loss) distributed to shareholders.
Tax Status of The Portfolio intends to distribute substantially all of
Distributions its net investment income (including net short-term capital
gain) to shareholders. If, at the close of each quarter of
its taxable year, at least 50% of the value of the
Portfolio's total assets consists of obligations the
interest on which is excludable from gross income, the
Portfolio may pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends are excludable from
a shareholder's gross income for federal income tax
purposes but may have certain collateral federal tax
consequences including alternative minimum tax
consequences. In addition, the receipt of exempt-interest
dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxable on a portion of
such benefits. See the Statement of Additional Information.
Any dividends paid out of income realized by the
Portfolio on taxable securities will be taxable to
shareholders as ordinary income (whether received in cash
or in additional shares) to the extent of the Portfolio's
earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders.
Distributions to shareholders of net capital gains of the
Portfolio will be taxable to shareholders as long-term
capital gain,
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whether received in cash or additional shares, and
regardless of how long a shareholder has held the shares.
Dividends declared by the Portfolio in October, November
or December of any year and payable to shareholders of
record on a date in any such month will be deemed to have
been paid by the Portfolio and received by the shareholders
on December 31 of that year if paid by the Portfolio at any
time during the following January. The Portfolio intends to
make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax
applicable to regulated investment companies.
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of the
Portfolio is not deductible for federal income tax
purposes. Furthermore, the Portfolio may not be an
appropriate investment for persons (including corporations
and other business entities) who are "substantial users"
(or persons related to "substantial users") of facilities
financed by industrial development bonds or private
activity bonds. Such persons should consult their tax
advisers before purchasing shares. The Portfolio will
report annually to its shareholders the portion of
dividends that is taxable and the portion that is tax-
exempt based on income received by the Portfolio during the
year to which the dividends relate.
Each sale, exchange, or redemption of any Portfolio's
shares is a taxable transaction to the shareholder.
GENERAL
INFORMATION ____________________________________________________________________
The Trust The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated March 15, 1982. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. In addition to the Portfolio, the Trust consists
of the following portfolios: Tax Free Portfolio,
Institutional Tax Free Portfolio, California Tax Exempt
Portfolio, Pennsylvania Municipal Portfolio, Kansas Tax
Free Income Portfolio, Bainbridge Tax Exempt Portfolio,
California Intermediate-Term Municipal Portfolio, New York
Intermediate-Term Municipal Portfolio, and Pennsylvania Tax
Free Portfolio. All consideration received by the Trust for
shares of any portfolio and all assets of such portfolio
belong to that portfolio and would be subject to
liabilities related thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
Trustees of the The management and affairs of the Trust are supervised by
Trust 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.
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<PAGE>
Voting Rights Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will vote
separately on matters relating solely to that portfolio or
class, such as any distribution plan. As a Massachusetts
business trust, the Trust is not required to hold annual
meetings of shareholders but approval will be sought for
certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining
Trustees or by shareholders at a special meeting called
upon written request of shareholders owning at least 10% of
the outstanding shares of the Trust. In the event that such
a meeting is requested the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
Reporting The Trust issues unaudited financial statements semi-
annually and audited financial statements annually. The
Trust furnishes proxy statements and other reports to
shareholders of record.
Shareholder Shareholder inquiries should be directed to the Manager,
Inquiries SEI Financial Management Corporation, 680 E. Swedesford
Road, Wayne, Pennsylvania, 19087.
Dividends Substantially all of the net investment income (exclusive
of capital gains) of the Portfolio is declared daily and
paid monthly as a dividend. Shareholders of record on the
last record date of each period will be entitled to receive
the dividend distribution, which is generally paid on the
10th Business Day of the following month. If any net
capital gains are realized, they will be distributed by the
Portfolio annually.
Shareholders automatically receive all income dividends
and capital gain distributions in additional shares at the
net asset value next determined following the record date,
unless the shareholder has elected to take such payment in
cash. Shareholders may change their election by providing
written notice to the Manager at least 15 days prior to the
distribution.
The dividends on Class A shares of the Portfolio are
normally higher than those on Class D shares because of the
additional distribution and transfer agent expenses charged
to Class D shares.
Counsel and Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Independent Arthur Andersen LLP serves as the independent public
Public accountants of the Trust.
Accountants
Custodian and CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
Wire Agent 7618, Philadelphia, PA 19101, serves as Custodian of the
Trust's assets and acts as wire agent of certain cash of
the Trust. The Custodian holds cash, securities and other
assets of the Trust as required by the 1940 Act.
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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:
Commercial Paper Commercial Paper is a term used to describe unsecured
short-term promissory notes issued by banks,
municipalities, corporations and other entities. Maturities
on these issues vary from one to 270 days.
Municipal Municipal Securities consist of (i) debt obligations issued
Securities 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.
General obligation bonds are backed by the taxing power
of the issuing municipality. Revenue bonds are backed by
the revenues of a project or facility, tolls from a toll
bridge, for example. Certificates of participation
represent an interest in an underlying obligation or
commitment such as an obligation issued in connection with
a leasing arrangement. The payment of principal and
interest on private activity and industrial development
bonds generally is dependent solely on the ability of the
facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed
as security for such payment. Municipal notes include
general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates
of indebtedness, demand notes and construction loan notes
and participation interests in municipal notes. Municipal
bonds include general obligation bonds, revenue or special
obligation bonds, private activity and industrial
development bonds and participation interests in municipal
bonds.
Repurchase Repurchase Agreements are agreements by which the Portfolio
Agreements obtains a security and simultaneously commits to return the
security to the seller at an agreed-upon price on an
agreed-upon date. The Custodian will hold the security as
collateral for the repurchase agreement. The Portfolio
bears a risk of loss in the event the other party defaults
on its obligations and the Portfolio is delayed or
prevented from exercising its right to dispose of the
collateral or if the Portfolio realizes a loss on the sale
of the collateral. 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.
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Standby Securities subject to standby commitments or puts permit
Commitments and the holder thereof to sell the securities at a fixed price
Puts prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current
market price. However, unless the standby commitment or put
was an integral part of the security as originally issued,
it may not be marketable or assignable; therefore, the
standby commitment or put would only have value to the
Portfolio owning the security to which it relates. In
certain cases, a premium may be paid for a standby
commitment or put, which premium will have the effect of
reducing the yield otherwise payable on the underlying
security. The Portfolio will limit standby commitment or
put transactions to institutions believed to present
minimal credit risk.
Variable and Certain of the obligations purchased by the Portfolio may
Floating Rate carry variable or floating rates of interest and may
Instruments 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 When-issued or delayed delivery transactions involve the
Delayed Delivery purchase of an instrument with payment and delivery taking
Securities 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 for its
portfolio, the Portfolio may dispose of a when-issued
security or forward commitment prior to settlement if the
advisers deem it appropriate to do so.
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 3
The Trust................................................................. 4
Investment Objective and Policies......................................... 4
General Investment Policies............................................... 5
Investment Limitations.................................................... 6
The Manager and Shareholder Servicing Agent............................... 7
Multi-Manager Diversification............................................. 7
The Adviser............................................................... 9
The Sub-Adviser........................................................... 9
Distribution.............................................................. 9
Purchase and Redemption of Shares......................................... 10
Performance............................................................... 12
Taxes..................................................................... 13
General Information....................................................... 14
Description of Permitted Investments and Risk Factors..................... 16
</TABLE>
