SEI TAX EXEMPT TRUST, 485BPOS, 1998-12-31

SEI TAX EXEMPT TRUST
485BPOS, 1998-12-31

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1998

FILE NO. 2-76990
FILE NO. 811-3447
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 44 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 46 /X/

------------------------

SEI TAX EXEMPT TRUST
(Exact Name of Registrant as Specified in Charter)

C/O CT CORPORATION
2 Oliver Street
Boston, Massachusetts 02109
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (800) 342-5734

EDWARD D. LOUGHLIN
c/o SEI Investments Company
Oaks, Pennsylvania 19456
(Name and Address of Agent for Service)

COPIES TO:

Richard W. Grant, Esquire John H. Grady, Jr., Esquire
Morgan, Lewis & Bockius LLP Morgan, Lewis & Bockius LLP
1701 Market Street 1701 Market Street
Philadelphia, Pennsylvania 19103 Philadelphia, Pennsylvania 19103

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Title of Securities Being Registered...Units of Beneficial Interest

------------------------

It is proposed that the filing will become effective (check appropriate box)

<TABLE>
<C> <S>
/X/ Immediately upon filing pursuant to paragraph (b), or
/ / On [date], pursuant to paragraph (b), or
/ / 60 days after filing pursuant to paragraph (a), or
/ / On [date] pursuant to paragraph (a) of Rule 485
</TABLE>

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<PAGE>

[LOGO]SEI TAX
EXEMPT TRUST

CLASS A SHARES

PROSPECTUS
DECEMBER 31, 1998

-------------------------------------------

FIXED INCOME FUNDS: MONEY MARKET FUNDS:
------------------ ------------------
INTERMEDIATE-TERM MUNICIPAL FUND INSTITUTIONAL TAX FREE FUND
CALIFORNIA MUNICIPAL BOND FUND TAX FREE FUND
MASSACHUSETTS MUNICIPAL BOND FUND CALIFORNIA TAX EXEMPT FUND
NEW JERSEY MUNICIPAL BOND FUND OHIO TAX FREE FUND
NEW YORK MUNICIPAL BOND FUND PENNSYLVANIA TAX FREE FUND
PENNSYLVANIA MUNICIPAL BOND FUND

-------------------------------------------

MANAGERS:
---------
SEI INVESTMENTS MANAGEMENT CORPORATION
MORGAN GRENFELL CAPITAL MANAGEMENT INCORPORATED
STANDISH, AYER & WOOD, INC.
VAN KAMPEN MANAGEMENT, INC.
WEISS, PECK & GREER, L.L.C.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY FUND SHARES OR
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.

<PAGE>

[LOGO]SEI Tax
Exempt Trust

HOW TO READ THIS PROSPECTUS
- --------------------------------------------------------------------------------

SEI Tax Exempt Trust is a mutual fund family that offers different classes of
shares in separate investment portfolios (Funds). The Funds have individual
investment goals and strategies, and are designed primarily for institutional
investors. This prospectus gives you important information about Class A Shares
of the Funds that you should know before investing. Please read this prospectus
and keep it for future reference.

This prospectus has been arranged into different sections so that you can easily
review this important information. On the next page, there is some general
information you should know about the Funds. For more detailed information
about the Funds, please see:

<TABLE>
<S> <C>
INTERMEDIATE-TERM MUNICIPAL FUND. . . . . . . . . . . . . . . . . . . . . . . .
CALIFORNIA MUNICIPAL BOND FUND. . . . . . . . . . . . . . . . . . . . . . . . .
MASSACHUSETTS MUNICIPAL BOND FUND . . . . . . . . . . . . . . . . . . . . . . .
NEW JERSEY MUNICIPAL BOND FUND. . . . . . . . . . . . . . . . . . . . . . . . .
NEW YORK MUNICIPAL BOND FUND. . . . . . . . . . . . . . . . . . . . . . . . . .
PENNSYLVANIA MUNICIPAL BOND FUND. . . . . . . . . . . . . . . . . . . . . . . .
INSTITUTIONAL TAX FREE FUND . . . . . . . . . . . . . . . . . . . . . . . . . .
TAX FREE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CALIFORNIA TAX EXEMPT FUND. . . . . . . . . . . . . . . . . . . . . . . . . . .
OHIO TAX FREE FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PENNSYLVANIA TAX FREE FUND. . . . . . . . . . . . . . . . . . . . . . . . . . .
THE FUNDS' OTHER INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . .
THE ADVISERS AND SUB-ADVISERS . . . . . . . . . . . . . . . . . . . . . . . . .
PURCHASING, SELLING AND EXCHANGING FUND SHARES. . . . . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HOW TO OBTAIN MORE INFORMATION ABOUT SEI TAX EXEMPT TRUST . . . . . . Back Cover
</TABLE>

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MUNICIPAL SECURITIES

Each of the Funds invests primarily in municipal securities. Municipal
securities are bonds and other fixed income securities issued by state and local
governments and their agencies (such as housing or hospital authorities) to
finance capital expenditures and operations. The obligation to pay principal
and interest on municipal securities may be a general obligation of the state or
local government, but may be supported only by an agency or a particular source
of revenues. Therefore, municipal securities vary in credit quality.

Municipal securities, like other fixed income securities, rise and fall in
value in response to economic and market factors, primarily changes in
interest rates, and actual or perceived credit quality. Rising interest
rates will generally cause municipal securities to decline in value.
Longer-term securities respond more sharply to interest rate changes than do
shorter-term securities. A municipal security will also lose value if, due
to rating downgrades or other factors, there are concerns about the issuers
current or future ability to make principal or interest payments. A strategy
to invest in investment grade securities reduces but does not eliminate this
risk.

Generally, the income from municipal securities is exempt from Federal income
taxes, and also may be exempt from certain state or local taxes depending on an
investor's state of residence. Even so, income from certain obligations may be
subject to Federal alternative minimum taxes.
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2
<PAGE>

INTRODUCTION - INFORMATION COMMON TO ALL FUNDS

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Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities like stocks and
bonds. Before you invest, you should know a few things about investing in
mutual funds.

Each Fund has its own investment goal and strategies for reaching that goal.
Each Fund's assets are managed under the direction of its Adviser. For
certain Funds, SEI Investments Management Corporation (SIMC) and a specialist
Sub-Adviser manage the Funds' assets. SIMC acts as "manager of managers" for
these Funds, and attempts to ensure that the Sub-Adviser complies with the
Funds' investment policies and guidelines. SIMC also recommends the
appointment of additional or replacement Sub-Advisers to the Funds' Board.
Still, investing in a Fund involves risks, and there is no guarantee that a
Fund will achieve its goal. SIMC and the Advisers and Sub-Advisers (the
"Advisers") make judgments about the economy, but these judgments may not
anticipate actual market movements or the impact of economic conditions on
issuers. In fact, no matter how good a job the Advisers do, you could lose
money on your investment in a Fund, just as you could with other investments.
A Fund share is not a bank deposit, and it is not insured or guaranteed by
the FDIC or any government agency.

The value of your investment in the Intermediate-Term Municipal, California
Municipal Bond, Massachusetts Municipal Bond, New Jersey Municipal Bond, New
York Municipal Bond and Pennsylvania Municipal Bond Funds (I.E., each fund that
is not a money market fund) is based on the market value (or price) of the
securities the Fund holds. These prices change daily due to economic and other
events that affect the securities markets generally, as well as those that
affect particular companies or governments. These price movements, sometimes
called volatility, will vary depending on the types of securities the Fund owns
and the markets in which they trade. The effect on a Fund's share price of a
change in the value of a single security will depend on how widely the Fund's
holdings are diversified.

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YEAR 2000 RISKS

Like other mutual funds (and most organizations around the world), the Funds
could be affected by computer problems related to the transition to the year
2000. While no one knows if these problems will have any impact on the Funds or
on the financial markets in general, the Funds are taking steps to protect
investors. These include efforts to ensure that the Funds' own systems are
prepared to make the transition to the year 2000, and to determine that the
problem will not affect the systems used by the Funds' major service providers.
Whether these steps will be effective can only be known for certain in the year
2000. There is additional information on these risks in the Statement of
Additional Information.
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3
<PAGE>

INTERMEDIATE-TERM MUNICIPAL FUND
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FUND SUMMARY

INVESTMENT GOAL The highest level of income exempt from
Federal income taxes consistent with the
preservation of capital.
SHARE PRICE VOLATILITY Medium.

PRINCIPAL INVESTMENT STRATEGY Utilizing a sub-adviser experienced in
selecting municipal securities, the Fund
invests in investment grade municipal
securities.

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INVESTMENT STRATEGY

The Intermediate-Term Municipal Fund invests substantially all of its assets
(at least 80%) in investment grade municipal securities that generate income
exempt from federal income taxes. The issuers of these securities are state
and local governments and agencies located in all fifty states, the District
of Columbia, Puerto Rico and other U.S. territories and possessions. The
Fund utilizes a specialist Sub-Adviser to manage the Fund's portfolio under
the general supervision of SIMC. The Sub-Adviser selects securities based on
the Sub-Adviser's view on the future direction of interest rates and the
shape of the yield curve, as well as its views on credit quality and sector
allocation issues. Where possible, the Sub-Adviser will attempt to acquire
securities that are underpriced relative to OTHER ELIGIBLE SECURITIES. The
Sub-Adviser will strive to maintain an average weighted portfolio maturity of
three to ten years. The Fund may, to a limited extent, invest in securities
subject to the alternative minimum tax, or in taxable municipal securities.

WHAT ARE THE RISKS OF INVESTING IN THE INTERMEDIATE-TERM MUNICIPAL FUND?

The prices of fixed income securities respond to economic developments,
particularly interest rate changes, as well as to perceptions about the
creditworthiness of individual issuers, including governments. Generally,
fixed income securities will decrease in value if interest rates rise and
vice versa, and the volatility of lower rated securities is even greater than
that of higher rated securities. Also, longer-term securities are generally
more volatile, so the average maturity or duration of these securities
affects risk. In addition, the Fund is subject to the risk that its market
segment, tax-exempt fixed income securities, may underperform other fixed
income market segments or the fixed income markets as a whole.

Also, there may be economic or political changes that impact the ability of
issuers of municipal securities to repay principal and to make interest
payments on securities owned by the Fund. Changes in the financial condition
or credit ratings of municipal issuers also may adversely affect the value of
the Fund's securities.

4
<PAGE>

INTERMEDIATE-TERM MUNICIPAL FUND
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PERFORMANCE INFORMATION

The bar chart and the performance table below illustrate the volatility of an
investment in the Intermediate-Term Municipal Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.

This bar chart shows changes in the performance of the Fund's CLASS A SHARES
from year to year for eight years.*

[BAR CHART]

<TABLE>

1990 1991 1992 1993 1994 1995 1996 1997

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was 5.04%.

BEST QUARTER WORST QUARTER
<S> <C>
4.81% -4.18%
(3/31/95) (3/31/94)
</TABLE>

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997, to those of the Lehman Brothers 5-Year G.O. Index.

<TABLE>
<CAPTION>
SINCE FUND
1 YEAR 5 YEARS INCEPTION
(9/5/89)
<S> <C> <C> <C>
INTERMEDIATE-TERM
MUNICIPAL FUND
CLASS A SHARES 7.76% 5.89% 6.50%
LEHMAN BROTHERS 5-YEAR
G.O. INDEX* 6.48% 5.89% 7.08%**
</TABLE>

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*An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest
directly in an index. Unlike a mutual Fund, an index does not have an
investment advisor and does not pay any commission or If an index had
expenses, its performance would be lower. The Lehman Brothers 5-Year G.O.
Index is a widely-recognized index consisting of general obligation
municipal bonds with maturities between 4 and 6 years.

**The inception date for the Index is September 30, 1989.

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FUND FEES AND EXPENSES

Every mutual fund has operating expenses to pay for professional advisory,
shareholder, distribution, administration and custody services and other costs
of doing business. This table describes the highest fees and expenses that you
may currently pay if you hold shares of the Fund.

ANNUAL FUND OPERATING EXPENSES
CLASS A
<S> <C>
Investment Advisory Fees 0.33%
Distribution and Service (12b-1) Fees None
Other Expenses 0.55%
-----
Total Annual Fund Operating Expenses 0.88%*
</TABLE>

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* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADMINISTRATOR AND
THE DISTRIBUTOR ARE EACH WAIVING A PORTION OF THEIR FEES IN ORDER TO KEEP TOTAL
OPERATING EXPENSES AT A SPECIFIED LEVEL. THE ADMINISTRATOR AND/OR THE
DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH
THESE FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:

INTERMEDIATE-TERM MUNICIPAL FUND .60%

For more information about these fees, see "Investment Advisers and
Sub-Advisers" and "Distribution of Fund Shares."

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $90 $281 $488 $1,084
</TABLE>

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5
<PAGE>

CALIFORNIA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL The highest level of current income exempt
from Federal and California income taxes
consistent with the preservation of capital.
SHARE PRICE VOLATILITY Medium.

PRINCIPAL INVESTMENT STRATEGY Utilizing a sub-adviser experienced in
selecting California municipal securities,
the Fund invests in investment grade
municipal securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

The California Municipal Bond Fund invests substantially all of its assets
(at least 80%) in investment grade municipal securities that generate income
exempt from Federal and California State income taxes. The principal issuers
of these securities are state and local governments and agencies located in
California, as well as the District of Columbia, Puerto Rico and other U.S.
territories and possessions. The Fund utilizes a specialist Sub-Adviser to
manage the Fund's portfolio under the general supervision of SIMC. The
Sub-Adviser selects securities based on the Sub-Adviser's view on the future
direction of interest rates and the shape of the yield curve, as well as its
views on credit quality and sector allocation issues. Where possible, the
Sub-Adviser will attempt to acquire securities that are underpriced relative
to OTHER ELIGIBLE SECURITIES. The Sub-Adviser will strive to maintain an
average weighted portfolio maturity of three to ten years. The Fund may, to
a limited extent, invest in securities subject to the alternative minimum tax
or in taxable municipal securities.

WHAT ARE THE RISKS OF INVESTING IN THE CALIFORNIA MUNICIPAL BOND FUND?

The prices of fixed income securities respond to economic developments,
particularly interest rate changes, as well as to perceptions about the
creditworthiness of individual issuers, including governments. Generally,
fixed income securities will decrease in value if interest rates rise and
vice versa, and the volatility of lower rated securities is even greater than
that of higher rated securities. Also, longer-term securities are generally
more volatile, so the average maturity or duration of these securities
affects risk. In addition, the Fund is subject to the risk that its market
segment, California tax-exempt fixed income securities, may underperform
other fixed income market segments or the fixed income markets as a whole.

State and local governments rely on taxes and, to some extent, revenues from
private projects financed by municipal securities, to pay interest and
principal on municipal debt. Poor statewide or local economic results or
changing political sentiments may reduce tax revenues and increase the
expenses of California municipal issuers, making it more difficult for them
to meet their obligations. Actual or perceived erosion of the credit
worthiness of California municipal issuers may reduce the value of the Fund's
holdings. As a result, the Fund will be more susceptible to factors which
adversely affect issuers of California obligations than a mutual fund which
does not have as great a concentration in California municipal obligations.

The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or regulatory occurrence affecting one or more of these
issuers, and may experience increased volatility due to its investments in those
securities.

6
<PAGE>

CALIFORNIA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

The California Municipal Bond Fund commenced operations on August 19, 1998, and
does not yet have a substantial performance history.

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES
CLASS A
<S> <C>
Investment Advisory Fees 0.33%
Distribution and Service (12b-1) Fees None
Other Expenses 0.54%
-----
Total Annual Fund Operating Expenses 0.87%*
</TABLE>

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CALIFORNIA MUNICIPAL BOND FUND .60%

For more information about these fees, see "Investment Advisers and
Sub-Advisers" and "Distribution of Fund Shares."

EXAMPLE

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $89 $278 $482 $1,073
</TABLE>

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7
<PAGE>

MASSACHUSETTS MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL The highest level of current income exempt
from Federal and Massachusetts income taxes
while preserving capital.
SHARE PRICE VOLATILITY Medium.

PRINCIPAL INVESTMENT STRATEGY Utilizing a sub-adviser experienced in
selecting Massachusetts municipal securities,
the Fund invests in investment grade
municipal securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

The Massachusetts Municipal Bond Fund invests substantially all of its assets
(at least 80%) in investment grade municipal securities that generate income
exempt from Federal and Massachusetts State income taxes. The principal
issuers of these securities are state and local governments and agencies
located in Massachusetts, as well as the District of Columbia, Puerto Rico
and other U.S. territories and possessions. The Fund utilizes a specialist
Sub-Adviser to manage the Fund's portfolio under the general supervision of
SIMC. The Sub-Adviser selects securities based on the Sub-Adviser's view on
the future direction of interest rates and the shape of the yield curve, as
well as its views on credit quality and sector allocation issues. Where
possible, the Sub-Adviser will attempt to acquire securities that are
underpriced relative to OTHER ELIGIBLE SECURITIES. The Sub-Adviser will
strive to maintain an average weighted portfolio maturity of three to ten
years. The Fund may, to a limited extent, invest in securities subject to
the alternative minimum tax or in taxable municipal securities.

WHAT ARE THE RISKS OF INVESTING IN THE MASSACHUSETTS MUNICIPAL BOND FUND?

The prices of fixed income securities respond to economic developments,
particularly interest rate changes, as well as to perceptions about the
creditworthiness of individual issuers, including governments. Generally,
fixed income securities will decrease in value if interest rates rise and
vice versa, and the volatility of lower rated securities is even greater than
that of higher rated securities. Also, longer-term securities are generally
more volatile, so the average maturity or duration of these securities
affects risk. In addition, the Fund is subject to the risk that its market
segment, Massachusetts tax-exempt fixed income securities, may underperform
other fixed income market segments or the fixed income markets as a whole.

State and local governments rely on taxes and, to some extent, revenues from
private projects financed by municipal securities, to pay interest and
principal on municipal debt. Poor statewide or local economic results or
changing political sentiments may reduce tax revenues and increase the
expenses of Massachusetts municipal issuers, making it more difficult for
them to meet their obligations. Actual or perceived erosion of the credit
worthiness of Massachusetts municipal issuers may reduce the value of the
Fund's holdings. As a result, the Fund will be more susceptible to factors
which adversely affect issuers of Massachusetts obligations than a mutual
fund which does not have as great a concentration in Massachusetts municipal
obligations.

8
<PAGE>

MASSACHUSETTS MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

The Massachusetts Municipal Bond Fund commenced operations on August 19, 1998,
and does not yet have a substantial performance history.

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

- --------------------------------------------------------------------------------

MASSACHUSETTS MUNICIPAL BOND FUND .60%

For more information about these fees, see "Investment Advisers and
Sub-Advisers" and "Distribution of Fund Shares."

EXAMPLE

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $89 $278 $482 $1,073
</TABLE>

- --------------------------------------------------------------------------------

9
<PAGE>

NEW JERSEY MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL The highest level of current income exempt
from Federal and New Jersey income taxes
while preserving capital.
SHARE PRICE VOLATILITY Medium.

PRINCIPAL INVESTMENT STRATEGY Utilizing a sub-adviser experienced in
investing in New Jersey municipal securities,
the Fund invests in investment grade
municipal securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

The New Jersey Municipal Bond Fund invests substantially all of its assets
(at least 80%) in investment grade municipal securities that generate income
exempt from Federal and New Jersey State income taxes. The principal issuers
of these securities are state and local governments and agencies located in
New Jersey, as well as the District of Columbia, Puerto Rico and other U.S.
territories and possessions. The Fund utilizes a specialist Sub-Adviser to
manage the Fund's portfolio under the general supervision of SIMC. The
Sub-Adviser selects securities based on the Sub-Adviser's view on the future
direction of interest rates and the shape of the yield curve, as well as its
views on credit quality and sector allocation issues. Where possible, the
Sub-Adviser will attempt to acquire securities that are underpriced relative
to OTHER ELIGIBLE SECURITIES. The Sub-Adviser will strive to maintain an
average weighted portfolio maturity of three to ten years. The Fund may, to
a limited extent, invest in securities subject to the alternative minimum tax
or in taxable municipal securities.

WHAT ARE THE RISKS OF INVESTING IN THE NEW JERSEY MUNICIPAL BOND FUND?

The prices of fixed income securities respond to economic developments,
particularly interest rate changes, as well as to perceptions about the
creditworthiness of individual issuers, including governments. Generally,
fixed income securities will decrease in value if interest rates rise and
vice versa, and the volatility of lower rated securities is even greater than
that of higher rated securities. Also, longer-term securities are generally
more volatile, so the average maturity or duration of these securities
affects risk. In addition, the Fund is subject to the risk that its market
segment, New Jersey tax-exempt fixed income securities, may underperform
other fixed income market segments or the fixed income markets as a whole.

State and local governments rely on taxes and, to some extent, revenues from
private projects financed by municipal securities, to pay interest and
principal on municipal debt. Poor statewide or local economic results or
changing political sentiments may reduce tax revenues and increase the
expenses of New Jersey municipal issuers, making it more difficult for them
to meet their obligations. Actual or perceived erosion of the credit
worthiness of New Jersey municipal issuers may reduce the value of the Fund's
holdings. As a result, the Fund will be more susceptible to factors which
adversely affect issuers of New Jersey obligations than a mutual fund which
does not have as great a concentration in New Jersey municipal obligations.

The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or regulatory occurence affecting one or more of these
issuers, and may experience increased volatility due to its investments in those
securities.

10
<PAGE>

NEW JERSEY MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

The New Jersey Municipal Bond Fund commenced operations on August 18, 1998, and
does not yet have a substantial performance history.

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

- --------------------------------------------------------------------------------

NEW JERSEY MUNICIPAL BOND FUND .60%

For more information about these fees, see "Investment Advisers and
Sub-Advisers" and "Distribution of Fund Shares."

EXAMPLE

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $89 $278 $482 $1,073
</TABLE>

- --------------------------------------------------------------------------------

11
<PAGE>

NEW YORK MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL The highest level of current income exempt
from Federal and New York State and City
income taxes consistent with the preservation
of capital.
SHARE PRICE VOLATILITY Medium.

PRINCIPAL INVESTMENT STRATEGY Utilizing a sub-adviser experienced in
selecting New York municipal securities, the
Fund invests in investment grade municipal
securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

The New York Municipal Bond Fund invests substantially all of its assets (at
least 80%) in investment grade municipal securities that generate income
exempt from Federal and New York State and City income taxes. The principal
issuers of these securities are state and local governments and agencies
located in New York, as well as the District of Columbia, Puerto Rico and
other U.S. territories and possessions. The Fund utilizes a specialist
Sub-Adviser to manage the Fund's portfolio under the general supervision of
SIMC. The Sub-Adviser selects securities based on the Sub-Adviser's view on
the future direction of interest rates and the shape of the yield curve, as
well as its views on credit quality and sector allocation issues. Where
possible, the Sub-Adviser will attempt to acquire securities that are
underpriced relative to OTHER ELIGIBLE SECURITIES. The Sub-Adviser will
strive to maintain an average weighted portfolio maturity of three to ten
years. The Fund may, to a limited extent, invest assets in securities
subject to the alternative minimum tax or in taxable municipal securities.

WHAT ARE THE RISKS OF INVESTING IN THE NEW YORK MUNICIPAL BOND FUND?

The prices of fixed income securities respond to economic developments,
particularly interest rate changes, as well as to perceptions about the
creditworthiness of individual issuers, including governments. Generally,
fixed income securities will decrease in value if interest rates rise and
vice versa, and the volatility of lower rated securities is even greater than
that of higher rated securities. Also, longer-term securities are generally
more volatile, so the average maturity or duration of these securities
affects risk. In addition, the Fund is also subject to the risk that its
market segment, New York tax-exempt fixed income securities, may underperform
other fixed income market segments or the fixed income markets as a whole.

State and local governments rely on taxes and, to some extent, revenues from
private projects financed by municipal securities, to pay interest and
principal on municipal debt. Poor statewide or local economic results or
changing political sentiments may reduce tax revenues and increase the
expenses of New York municipal issuers, making it more difficult for them to
meet their obligations. Actual or perceived erosion of the credit worthiness
of New York municipal issuers may reduce the value of the Fund's holdings. As
a result, the Fund will be more susceptible to factors which adversely affect
issuers of New York obligations than a mutual fund which does not have as
great a concentration in New York municipal obligations.

The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or regulatory occurence affecting one or more of these
issuers, and may experience increased volatility due to its investments in those
securities.

12
<PAGE>

NEW YORK MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

The New York Municipal Bond Fund commenced operations on August 18, 1998, and
does not yet have a substantial performance history.

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

- --------------------------------------------------------------------------------

NEW YORK MUNICIPAL BOND FUND .60%

For more information about these fees, see "Investment Advisers and
Sub-Advisers" and "Distribution of Fund Shares."

EXAMPLE

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $89 $278 $482 $1,073
</TABLE>

- --------------------------------------------------------------------------------

13
<PAGE>

PENNSYLVANIA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Current income exempt from Federal and
Pennsylvania income taxes consistent with the
preservation of capital.
SHARE PRICE VOLATILITY Medium.

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
Pennsylvania municipal securities, the Fund
invests in investment grade municipal
securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

The Pennsylvania Municipal Bond Fund invests substantially all of its assets
(at least 80%) in investment grade municipal securities that generate income
exempt from Federal and Pennsylvania State income taxes. The principal
issuers of these securities are state and local governments and agencies
located in Pennsylvania, as well as the District of Columbia, Puerto Rico and
other U.S. territories and possessions. The Adviser selects securities based
on the Adviser's view on the future direction of interest rates and the shape
of the yield curve, as well as its views on credit quality and sector
allocation issues. Where possible, the Adviser will attempt to acquire
securities that are underpriced relative to OTHER ELIGIBLE SECURITIES. The
Adviser will strive to maintain an average weighted portfolio maturity of
seven years or less. The Fund may, to a limited extent, invest in securities
subject to the alternative minimum tax or in taxable municipal securities.

WHAT ARE THE RISKS OF INVESTING IN THE PENNSYLVANIA MUNICIPAL BOND FUND?

The prices of fixed income securities respond to economic developments,
particularly interest rate changes, as well as to perceptions about the
creditworthiness of individual issuers, including governments. Generally,
fixed income securities will decrease in value if interest rates rise and
vice versa, and the volatility of lower rated securities is even greater than
that of higher rated securities. Also, longer-term securities are generally
more volatile, so the average maturity or duration of these securities
affects risk. In addition, the Fund is also subject to the risk that its
market segment, Pennsylvania tax-exempt fixed income securities, may
underperform other fixed income market segments or the fixed income markets
as a whole.

State and local governments rely on taxes and, to some extent, revenues from
private projects financed by municipal securities, to pay interest and
principal on municipal debt. Poor statewide or local economics results or
changing political sentiments may reduce tax revenues and increase the
expenses of Pennsylvania municipal issuers, making it more difficult for them
to meet their obligations. Actual or perceived erosion of the credit
worthiness of Pennsylvania municipal issuers may reduce the value of the
Fund's holdings. As a result, the Fund will be more susceptible to factors
which adversely affect issuers of Pennsylvania obligations than a mutual fund
which does not have as great a concentration in Pennsylvania municipal
obligations.

14
<PAGE>

PENNSYLVANIA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

The bar chart and the performance table below illustrate the volatility of an
investment in the Pennsylvania Municipal Bond Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.

This bar chart shows changes in the performance of the Fund's CLASS B SHARES
from year to year for eight years. Since Class B Shares are invested in the same
portfolio of securities, returns for Class A Shares will be substantially
similar to that of the Class B Shares, shown here, and will differ only to the
extent that each Class has different expenses.*

[BAR CHART]

1990 1991 1992 1993 1994 1995 1996 1997

* The performance information shown above is based on a calendar year. The
Fund's Class B total return from 1/1/98 to 9/30/98 was 4.82%.

BEST QUARTER WORST QUARTER
<S> <C>
3.82% -3.23%
(3/31/95) (3/31/94)
</TABLE>

This table compares the Fund's average annual total returns for Class B Shares
for the periods ending December 31, 1997, to those of the Lehman Brothers 5-Year
G.O. Index.

SINCE FUND
1 YEAR 5 YEARS INCEPTION
(8/14/89)
<S> <C> <C> <C>
PENNSYLVANIA
MUNICIPAL
BOND FUND
CLASS B SHARES 8.02% 5.92% 6.68%
LEHMAN BROTHERS 5-YEAR
G.O. INDEX* 6.48% 5.89% 6.95%**
</TABLE>

- --------------------------------------------------------------------------------

*An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest
directly in an index. Unlike a mutual Fund, an index does not have an
investment advisor and does not pay any commission or If an index had
expenses, its performance would be lower. The Lehman Brothers 5-Year G.O.
Index is a widely-recognized index consisting of general obligation municipal
bonds with maturities between 4 and 6 years.

**The inception date for the Index is August 31, 1989.

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES
CLASS A
<S> <C>
Investment Advisory Fees 0.20%
Distribution and Service (12b-1) Fees None
Other Expenses 0.66%
-----
Total Annual Fund Operating Expenses 0.86%*
</TABLE>

- --------------------------------------------------------------------------------

PENNSYLVANIA MUNICIPAL BOND FUND-CLASS A .60%

For more information about these fees, see "Investment Advisers and
Sub-Advisers" and "Distribution of Fund Shares."

EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $88 $274 $477 $1,061
</TABLE>

- --------------------------------------------------------------------------------

15
<PAGE>

INSTITUTIONAL TAX FREE FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Preserving principal and maintaining
liquidity while providing current income
exempt from Federal income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
municipal securities, the Fund invests in
high quality, short-term tax-exempt money
market securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

The Institutional Tax Free Fund is a money market fund that invests
substantially all of its assets (at least 80%) in municipal money market
securities that pay interest that is exempt from Federal income taxes. The
issuers of these securities are state and local government agencies located
in all fifty states, the District of Columbia, Puerto Rico and other U.S.
territories and possessions. The Adviser seeks to choose securities with an
acceptable maturity, that are marketable and liquid, that offer competitive
yields, and that are issued by issuers that are on a sound financial footing.
The Adviser also considers sector allocation and relative valuations in
selecting securities for the Fund. The Fund may, to a limited extent, invest
in securities subject to the alternative minimum tax or in taxable municipal
securities.

The Fund invests in high quality, short-term debt securities, commonly known
as money market instruments. These include municipal bonds, notes and tax
exempt commercial paper, as well as certain taxable securities and repurchase
agreements. The Fund follows strict SEC rules about credit risk, maturity and
diversification of its investments.

WHAT ARE THE RISKS OF INVESTING IN THE INSTITUTIONAL TAX FREE FUND?

There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on securities owned by
the Fund. Changes to the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities. The
Fund's securities may change in value in response to changes in interest rates
and other factors. When interest rates are rising, the Fund's securities might
decline in value.

Since the Fund often purchases securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.

An investment in a money market fund is not a bank deposit. Although the
Fund, like all money market funds, seeks to keep a constant price per share
of $1.00, you may lose money by investing in the Fund.

16
<PAGE>

INSTITUTIONAL TAX FREE FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

The bar chart and the performance table below illustrate the volatility of an
investment in the Institutional Tax Free Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.

This bar chart shows changes in the performance of the Fund's CLASS A SHARES
from year to year for seven years.*

[BAR CHART]

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was 2.51%.

BEST QUARTER WORST QUARTER
<S> <C>
1.63% 0.57%
(6/30/89) (3/31/94)
</TABLE>

This table shows the Fund's average annual total returns for the periods
ending December 31, 1997.

SINCE
FUND
1 YEAR 5 YEARS 10 YEARS INCEPTION
(11/3/82)
<S> <C> <C> <C> <C>
INSTITUTIONAL TAX
FREE FUND
CLASS A SHARES 3.51% 3.20% 4.07% 4.28%
</TABLE>

Please call 1-800-DIAL-SEI to obtain the Fund's current yield.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES
CLASS A
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees None
Other Expenses 0.64%
-----
Total Annual Fund Operating Expenses 0.68%*
</TABLE>

- --------------------------------------------------------------------------------

INSTITUTIONAL TAX FREE FUND .33%

For more information about these fees, see "Investment Advisers and
Sub-Advisers" and "Distribution of Fund Shares."

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $69 $218 $379 $847
</TABLE>

- --------------------------------------------------------------------------------

17
<PAGE>

TAX FREE FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Preserving principal and maintaining
liquidity while providing current income
exempt from Federal income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
municipal securities, the Fund invests in
high quality, short-term tax-exempt money
market securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

The Tax Free Fund is a money market fund that invests substantially all of
its assets (at least 80%) in municipal money market securities that pay
interest that is exempt from Federal income taxes. The issuers of these
securities are state and local governments and agencies located in all fifty
states, the District of Columbia, Puerto Rico and other U.S. territories and
possessions. The Adviser seeks to choose securities with an acceptable
maturity, that are marketable and liquid, that offer competitive yields, and
that are issued by issuers that are on a sound financial footing. The Adviser
also considers sector allocation and relative valuations in selecting
securities for the Fund. The Fund may, to a limited extent, invest in
securities subject to the alternative minimum tax or in taxable municipal
securities.

WHAT ARE THE RISKS OF INVESTING IN THE TAX FREE FUND?

18
<PAGE>

TAX FREE FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

The bar chart and the performance table below illustrate the volatility of an
investment in the Tax Free Fund. Of course, the Fund's past performance does
not necessarily indicate how the Fund will perform in the future.

This bar chart shows changes in the performance of the Fund's CLASS A SHARES
from year to year for ten years.*

[BAR CHART]

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was 2.41%.

BEST QUARTER WORST QUARTER
<S> <C>
1.55% 0.49%
(6/30/89) (3/31/94)
</TABLE>

This table shows the Fund's average annual total returns for the periods
ending December 31, 1997.

SINCE FUND
1 YEAR 5 YEARS 10 YEARS INCEPTION
(11/12/82)
<S> <C> <C> <C> <C>
TAX FREE FUND 3.37% 2.98% 3.84% 4.17%
CLASS A SHARES
</TABLE>

- ---------------

Please call 1-800-DIAL-SEI to obtain the Fund's current yield.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

- --------------------------------------------------------------------------------

TAX FREE FUND .45%

For more information about these fees, see "Investment Advisers and
Sub-Advisers" and "Distribution of Fund Shares."

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $69 $218 $379 $847
</TABLE>

- --------------------------------------------------------------------------------

19
<PAGE>

CALIFORNIA TAX EXEMPT FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Preserving principal and maintaining
liquidity while providing current income
exempt from Federal and California personal
income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
municipal securities, the Fund invests in
high quality, short-term California municipal
money market securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

The California Tax Exempt Fund is a money market fund that invests
substantially all of its assets (at least 80%) in municipal money market
securities that pay interest that is exempt from Federal and California
income taxes. The principal issuers of these securities are state and local
governments and agencies located in California, as well as the District of
Columbia, Puerto Rico and other U.S. territories and possessions. The
Adviser seeks to choose securities with an acceptable maturity, that are
marketable and liquid, that offer competitive yields, and that are issued by
issuers that are on a sound financial footing. The Adviser also considers
sector allocation and relative valuations in selecting securities for the
Fund. The Fund may, to a limited extent, invest in securities subject to the
alternative minimum tax or in taxable municipal securities.

WHAT ARE THE RISKS OF INVESTING IN CALIFORNIA TAX EXEMPT FUND?

There may be economic or political changes that impact the ability of issuers of
California municipal securities to repay principal and to make interest payments
on securities owned by the Fund. Changes to the financial condition of
California municipal issuers also may adversely affect the value of the Fund's
securities. For example, financial difficulties of the State, its counties,
municipalities and school districts that hinder efforts to borrow and credit
ratings are factors which may affect the Fund. As a result, the Fund will be
more susceptible to factors which adversely affect issuers of California
obligations than a mutual fund which does not have as great a concentration in
California municipal obligations.

The Fund's securities may change in value in response to interest rate changes
and other factors. When interest rates are rising, the Fund's securities might
decline in value.

20
<PAGE>

CALIFORNIA TAX EXEMPT FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

The bar chart and the performance table below illustrate the volatility of an
investment in the California Tax Exempt Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.

This bar chart shows changes in the performance of the Fund's CLASS A SHARES
from year to year for seven years.*

[BAR CHART]

1991 1992 1993 1994 1995 1996 1997

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was 2.29%.

BEST QUARTER WORST QUARTER
<S> <C>
1.15% 0.50%
(3/31/91) (3/31/94)
</TABLE>

This table shows the Fund's average annual total returns for the periods
ending December 31, 1997.

SINCE FUND
1 YEAR 5 YEARS INCEPTION
(5/14/90)
<S> <C> <C> <C>
CALIFORNIA TAX EXEMPT
FUND CLASS A SHARES 3.36% 3.03% 3.44%
</TABLE>

Please call 1-800-DIAL-SEI to obtain the Fund's current yield.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES
CLASS A
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees None
Other Expenses 0.51%
-----
Total Annual Fund Operating Expenses 0.55%*
</TABLE>

- --------------------------------------------------------------------------------

CALIFORNIA TAX EXEMPT FUND .28%

For more information about these fees, see "Investment Advisers and
Sub-Advisers" and "Distribution of Fund Shares."

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $56 $176 $303 $689
</TABLE>

- --------------------------------------------------------------------------------

21
<PAGE>

OHIO TAX FREE FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Preserving capital and maintaining liquidity
while providing a high level of current
income exempt from Federal and Ohio personal
income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
municipal securities, the Fund invests in
high quality, short-term Ohio municipal money
market securities.

- --------------------------------------------------------------------------------
INVESTMENT STRATEGY

The Ohio Tax Free Fund is a money market fund that invests substantially all
of its assets (at least 80%) in municipal money market securities that pay
interest that is exempt from Federal and Ohio income taxes. The principal
issuers of these securities are state and local governments and agencies
located in Ohio, as well as the District of Columbia, Puerto Rico and other
U.S. territories and possessions. The Adviser seeks to choose securities with
an acceptable maturity, that are marketable and liquid, that offer
competitive yields, and that are issued by issuers that are on a sound
financial footing. The Adviser also considers sector allocation and relative
valuations in selecting securities for the Fund. The Fund may, to a limited
extent, invest in securities subject to the alternative minimum tax or in
taxable municipal securities.

WHAT ARE THE RISKS OF INVESTING IN OHIO TAX FREE FUND?

There may be economic or political changes that impact the ability of issuers of
Ohio municipal securities to repay principal and to make interest payments on
securities owned by the Fund. Changes to the financial condition of Ohio
municipal issuers also may adversely affect the value of the Fund's securities.
For example, financial difficulties of the State, its counties, municipalities
and school districts that hinder efforts to borrow and lower credit ratings are
factors which may affect the Fund. As a result, the Fund will be more
susceptible to factors which adversely affect issuers of Ohio obligations than a
mutual fund which does not have as great a concentration in Ohio municipal
obligations.

The Fund's securities may change in value in response to interest rate changes
and other factors. When interest rates are rising, the Fund's securities might
decline in value.

An investment in a money market is not a bank deposit. Although the Fund,
like all money market funds, seeks to keep a constant price per share of
$1.00, you may lose money by investing in the Fund.

The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or regulatory occurence affecting one or more of these
issuers, and may experience increased volatility due to its investments in those
securities.

22
<PAGE>

OHIO TAX FREE FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

As of December 31, 1998, the Ohio Tax Free Fund had not commenced operations,
and did not have a performance history.

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES
CLASS A
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees None
Other Expenses 0.67%
-----
Total Annual Fund Operating Expenses 0.71%*
</TABLE>

- --------------------------------------------------------------------------------

* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE CURRENT FISCAL
YEAR ARE EXPECTED TO BE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE
ADMINISTRATOR AND THE DISTRIBUTOR WILL EACH WAIVE A PORTION OF THEIR FEES IN
ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED LEVEL. THE ADMINISTRATOR
AND/OR THE DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME.
WITH THESE FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE EXPECTED
TO BE AS FOLLOWS:

OHIO TAX FREE FUND .35%

For more information about these fees, see "Investment Advisers and
Sub-Advisers" and "Distribution of Fund Shares."

EXAMPLE

1 YEAR 3 YEARS
<S> <C> <C>
CLASS A SHARES $73 $227
</TABLE>

- --------------------------------------------------------------------------------

23
<PAGE>

PENNSYLVANIA TAX FREE FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Preserving capital while providing current
income exempt from Federal and Pennsylvania
State personal income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
municipal securities, the Fund invests in
high quality, short-term Pennsylvania
municipal money market securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

The Pennsylvania Tax Free Fund is a money market fund that invests
substantially all of its assets (at least 80%) in municipal money market
securities that pay interest that is exempt from Federal and Pennsylvania
income taxes. The principal issuers of these securities are state and local
governments and agencies located in Pennsylvania, as well as the District of
Columbia, Puerto Rico and other U.S. territories and possessions. The
Adviser seeks to choose securities with an acceptable maturity, that are
marketable and liquid, that offer competitive yields, and that are issued by
issuers that are on a sound financial footing. The Adviser also considers
sector allocation and relative valuations in selecting securities for the
Fund. The Fund may, to a limited extent, invest in securities subject to the
alternative minimum tax or in taxable municipal securities.

WHAT ARE THE RISKS OF INVESTING IN PENNSYLVANIA TAX FREE FUND?

There may be economic or political changes that impact the ability of issuers of
Pennsylvania municipal securities to repay principal and to make interest
payments on securities owned by the Fund. Changes to the financial condition of
Pennsylvania municipal issuers also may adversely affect the value of the Fund's
securities. For example, financial difficulties of the Commonwealth, its
counties, municipalities and school districts that hinder efforts to borrow and
lower credit ratings are factors which may affect the Fund. As a result, the
Fund will be more susceptible to factors which adversely affect issuers of
Pennsylvania obligations than a mutual fund which does not have as great a
concentration in Pennsylvania municipal obligations.

The Fund's securities may change in value in response to interest rate changes
and other factors. When interest rates are rising, the Fund's securities might
decline in value.

The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or regulatory occurence affecting one or more of these
issuers, and may experience increased volatility due to its investments in those
securities.

24
<PAGE>

PENNSYLVANIA TAX FREE FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

The bar chart and the performance table below illustrate the volatility of an
investment in the Pennsylvania Tax Free Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.

This bar chart shows changes in the
performance of the Fund's CLASS A
SHARES from year to year for three years.*

[BAR CHART]

<TABLE>
<CAPTION>
<S> <C> <C>
1995 1996 1997

3.74% 3.26% 3.46%
</TABLE>

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was 2.48%.

<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
0.98% 0.78%
(6/30/95) (3/31/97)
</TABLE>

This table shows the Fund's average annual total returns for the periods
ending December 31, 1997.

<TABLE>
<CAPTION>
SINCE FUND
1 YEAR INCEPTION
(1/24/94)
<S> <C> <C>
PENNSYLVANIA TAX FREE FUND
CLASS A SHARES 3.46% 3.30%

Please call 1-800-DIAL-SEI to obtain the Fund's current yield.
</TABLE>

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
CLASS A
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees None
Other Expenses 0.64%
-----
Total Annual Fund Operating Expenses 0.68%*
</TABLE>

- --------------------------------------------------------------------------------

PENNSYLVANIA TAX FREE FUND .35%

For more information about these fees, see "Investment Advisers and
Sub-Advisers" and "Distribution of Fund Shares."

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $69 $218 $379 $847
</TABLE>

- --------------------------------------------------------------------------------

25
<PAGE>

THE FUNDS' OTHER INVESTMENTS
- --------------------------------------------------------------------------------

Each Fund may invest in other securities, use other strategies and engage in
investment practices other than those listed in the Fund Summaries, and they are
described in detail in the Statement of Additional Information (SAI). Of
course, there is no guarantee that any Fund will achieve its investment goal.

The investments and strategies described throughout this prospectus are those
that the Funds use under normal conditions. During unusual economic or market
conditions, or for temporary defensive or liquidity purposes, each Fund may
invest up to 100% of its assets in cash, money market instruments, repurchase
agreements and short-term obligations that would not ordinarily be consistent
with the Funds' objectives. The Funds will do so only if the Adviser or
Sub-Adviser believes that the risk of loss outweighs the opportunity for
taxable gains and higher taxable income.

INVESTMENT ADVISERS AND SUB-ADVISERS
- --------------------------------------------------------------------------------

SIMC ACTS AS THE MANAGER OF MANAGERS OF THE INTERMEDIATE-TERM MUNICIPAL,
CALIFORNIA MUNICIPAL BOND, MASSACHUSETTS MUNICIPAL BOND, NEW JERSEY MUNICIPAL
BOND AND NEW YORK MUNICIPAL BOND FUNDS, AND IS RESPONSIBLE FOR THE INVESTMENT
PERFORMANCE OF THOSE FUNDS, SINCE IT ALLOCATES EACH FUND'S ASSETS TO THE
SUB-ADVISERS AND RECOMMENDS HIRING OR CHANGING SUB-ADVISERS TO THE BOARD OF
TRUSTEES. Each Investment Adviser or Sub-Adviser makes investment decisions
for the Funds it manages and continuously reviews, supervises and administers
its investment program. SIMC oversees the Sub-Advisers to ensure compliance
with the Funds' investment policies and guidelines, and monitors each
Sub-Adviser's adherence to its investment style. The Board of Trustees
supervises the Advisers and Sub-Advisers; establishes policies that they must
follow in their management activities; and oversees the hiring and
termination of Sub-Advisers recommended by SIMC. SIMC pays the Sub-Advisers
out of the investment advisory fees it receives (described below).

SEI Investments Management Corporation, serves as the Adviser to the
Intermediate-Term Municipal, California Municipal Bond, Massachusetts Municipal
Bond, New Jersey Municipal Bond, New York Municipal Bond and Pennsylvania
Municipal Bond Funds. As of October 31, 1998, SIMC had approximately $____
billion in assets under management. For the fiscal year ended August 31, 1998,
the Funds paid SIMC advisory fees as follows:

<TABLE>
<S> <C>
INTERMEDIATE-TERM MUNICIPAL FUND .33%
CALIFORNIA MUNICIPAL BOND FUND .33%
MASSACHUSETTS MUNICIPAL BOND FUND .33%
NEW JERSEY MUNICIPAL BOND FUND .33%
NEW YORK MUNICIPAL BOND FUND .33%
</TABLE>

Morgan Grenfell Capital Management Incorporated, serves as the Adviser to the
Pennsylvania Municipal Bond Fund. As of October 31, 1998, Morgan Grenfell
Capital Management Incorporated had approximately $12 billion in assets under
management. For the fiscal year ended August 31, 1998, Morgan Grenfell received
advisory fees of:

<TABLE>
<S> <C>
PENNSYLVANIA MUNICIPAL BOND FUND .20%
</TABLE>

Weiss, Peck & Greer, L.L.C., serves as the Adviser to the California Tax Exempt,
Tax Free, Pennsylvania Tax Free, Institutional Tax Free and Ohio Tax Free Funds.
As of August 31, 1998, Weiss, Peck & Greer, L.L.C. had approximately $15 billion
in assets under management. For the fiscal year ended August 31, 1998, Weiss
Peck received advisory fees of:

<TABLE>
<S> <C>
CALIFORNIA TAX EXEMPT FUND .04%
INSTITUTIONAL TAX FREE FUND .04%
OHIO TAX FREE FUND .04%
PENNSYLVANIA TAX FREE FUND .04%
TAX FREE FUND .04%
</TABLE>

SUB-ADVISERS AND PORTFOLIO MANAGER(S)

INTERMEDIATE-TERM MUNICIPAL FUND
MASSACHUSETTS MUNICIPAL BOND FUND
NEW YORK MUNICIPAL BOND FUND

26
<PAGE>

STANDISH, AYER & WOOD, INC.: Standish, Ayer & Wood, Inc., serves as the
Sub-Adviser to the Intermediate-Term Municipal, Massachusetts Municipal Bond,
and New York Municipal Bond Funds. As of September 30, 1998, Standish, Ayer &
Wood, Inc. had approximately 45.9 billion in assets under management.

Raymond J. Kubiak, CFA, is a portfolio manager at Standish, Ayer & Wood, Inc.
Mr. Kubiak has been with Standish, Ayer & Wood, Inc. since 1988. He manages the
Intermediate-Term Municipal, Massachusetts Municipal Bond and New York Municipal
Bond Funds. He has more than 16 years of investment experience.

CALIFORNIA MUNICIPAL BOND FUND

VAN KAMPEN MANAGEMENT, INC.: Van Kampen Management, Inc., serves as the
Sub-Adviser to the California Municipal Bond and New Jersey Municipal Bond
Funds. As of October 31, 1998, Van Kampen Management, Inc. had approximately
$57 billion in assets under management.

Joseph A. Piraro is a Vice President of Van Kampen Management, Inc. Mr. Piraro
has been with Van Kampen Management, Inc. since 1991. He manages the California
Municipal Bond Fund. He has more than 27 years of investment experience.

NEW JERSEY MUNICIPAL BOND FUND

VAN KAMPEN MANAGEMENT, INC.: Timothy D. Haney is a Vice President of Van Kampen
Management, Inc. Mr. Haney has been with Van Kampen Management, Inc. since
1988. He manages the New Jersey Municipal Bond Fund. He has more than 8 years
of investment experience.

PENNSYLVANIA MUNICIPAL BOND FUND

MORGAN GRENFELL CAPITAL MANAGEMENT INCORPORATED: David W. Baldt is a Director
and Executive Vice President of Morgan Grenfell Capital Management Incorporated.
Mr. Baldt has been with Morgan Grenfell Capital Management since 1989. He has
managed the Pennsylvania Municipal Bond Fund since July, 1995. He has more than
nine years of investment experience.

INSTITUTIONAL TAX FREE FUND
TAX FREE FUND
CALIFORNIA TAX EXEMPT FUND
OHIO TAX FREE FUND
PENNSYLVANIA TAX FREE FUND

WEISS, PECK & GREER, L.L.C.: Janet Fiorenza is a portfolio manager at Weiss,
Peck & Greer, L.L.C. Ms. Fiorenza has been with Weiss, Peck & Greer, L.L.C.
since 1988, and with its predecessor since 1980. She manages the California Tax
Exempt, Tax Free, Pennsylvania Tax Free, Institutional Tax Free and Ohio Tax
Free Funds. She has more than 18 years of investment experience.

27
<PAGE>

PURCHASING, SELLING AND EXCHANGING FUND SHARES
- --------------------------------------------------------------------------------

HOW TO PURCHASE FUND SHARES

You may purchase shares on any day that the New York Stock Exchange is open for
business (a Business Day). The Funds offer Class A shares only to financial
institutions and intermediaries for their own or their customers' accounts.

Financial institutions and intermediaries may purchase Class A Shares by placing
orders with the Funds' Transfer Agent (or its authorized agent). Institutions
and intermediaries that use certain SEI proprietary systems may place orders
electronically through those systems.

Certain investors who deal directly with a financial institution or financial
intermediary will have to follow the institution's or intermediary's
procedures for transacting with the Funds. If you purchase, sell or exchange
Fund shares through a financial institution or intermediary (rather than
directly from the Funds), you may have to transmit your purchase, sale and
exchange requests to your financial institution or intermediary at an earlier
time for your transaction to become effective that day. This allows the
financial institution or intermediary time to process your request and
transmit it to us. For more information about how to purchase, sell or
exchange Fund shares through your financial institution or intermediary, you
should contact your financial institution or intermediary directly.

You may purchase shares through financial intermediaries or other financial
institutions that have executed dealer agreements. You cannot purchase money
market fund shares by Federal Reserve wire or Federal holiday on which wire
transfers are restricted. The Funds may reject any purchase order if they
determine that accepting the order would not be in the best interests of the
Funds or their shareholders.

The price per share (the offering price) will be the net asset value per
share (NAV) next determined after the Funds receive your purchase order. NAV
for one Fund share is the value of that share's portion of all of the assets
in the Fund. The Funds calculate each non-money market fund's NAV once each
Business Day at the regularly-scheduled close of normal trading on the New
York Stock Exchange (normally, 4:00 p.m. Eastern time). Each money market
fund calculates its NAV at 2:00 p.m., Eastern time, except for the
Institutional Tax Free and Tax Free Funds, which calculate their NAV at 3:00
p.m. Eastern time. If you want to receive the current Business Day's NAV,
generally the Funds must receive your purchase order before 4:00 p.m. Eastern
time for each non-money market fund, and by 12:30 p.m. for each money market
fund (except for the California Tax Exempt Fund and the Ohio Tax Free Fund,
for which the cut-off time is the time that NAV is determined, usually 2:00
p.m. Eastern time, and for the Institutional Tax Free and Tax Free Funds,
for which the cutoff time is 1:30 p.m. Eastern time).

HOW THE FUNDS CALCULATE NAV

In calculating NAV, the Funds generally value a non-money market Fund's
portfolio securities at their market price. If market prices are unavailable
or are unreliable, fair value prices may be determined in good faith using
methods approved by the Board of Trustees.

For the money market funds, the Funds value securities by utilizing the
amortized cost valuation method (as described in the SAI). If amortized cost
is unreliable, fair value prices may be determined in good faith using
methods approved by the Board of Trustees. The Funds expect each money
market fund's NAV to remain constant at $1.00 per share, although there is no
guarantee that the Funds can accomplish this.

MINIMUM PURCHASES

To purchase Class A Shares of the non-money market funds for the first time,
you must invest at least $100,000 in any such Fund. To purchase additional
shares of the non-money market funds, you must invest at least $1,000. The
Funds may accept investments of smaller amounts at their discretion.

28
<PAGE>

SELLING FUND SHARES

HOW TO SELL YOUR FUND SHARES

You may sell (sometimes called "redeem") your shares on any Business Day by
contacting the Funds directly by mail or telephone. You may also sell your
shares by contacting your financial institution or intermediary by mail or
telephone. If you would like to sell your shares, please notify the Funds in
writing and include a signature guarantee (a notarized signature is not
sufficient). The sale price of each share will be the next NAV determined
after the Funds receive your request.

TELEPHONE TRANSACTIONS

Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although we have certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, the Funds are not responsible for any losses or costs incurred by
following telephone instructions the Funds reasonably believe to be genuine. If
you or your financial institution transact with the Funds over the telephone,
you will generally bear the risk of any loss.

RECEIVING YOUR MONEY

Normally, the Funds will send your sale proceeds within five Business Days after
they receive your request. Your proceeds can be wired to a bank account or sent
to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH,
REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY
TAKE UP TO 15 BUSINESS DAYS).

REDEMPTIONS IN KIND

The Funds generally pay sale proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Fund's remaining shareholders) the Funds might pay all or part of your
redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). Although it is highly unlikely that your
shares would ever be redeemed in kind, you would probably have to pay
transaction costs to sell the securities distributed to you, as well as taxes on
any capital gains from the sale as with any redemption.

INVOLUNTARY SALES OF YOUR SHARES

If your account balance drops below the required minimum, $45 million for Class
A Shares of the Institutional Tax Free Fund, you may be required to sell your
shares. You will always be given at least 60 days' written notice to give you
time to add to your account and avoid selling your shares.

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

The Funds may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in the SAI.

EXCHANGING FUND SHARES
- --------------------------------------------------------------------------------

HOW TO EXCHANGE YOUR SHARES

You may exchange your Class A shares of any Fund for Class A shares of any
other Fund on any Business Day by contacting the Funds directly by mail or
telephone. You may also exchange shares through your financial institution
by mail or telephone. IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH
ACH, YOU MAY NOT BE ABLE TO EXCHANGE YOUR

29
<PAGE>

SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS).
This exchange privilege may be changed or canceled at any time upon 60 days'
notice. When you exchange shares, you are really selling your shares and buying
other Fund shares. So, your sale price and purchase price will be based on the
NAV next calculated after the Funds receive your exchange request.

DISTRIBUTION OF FUND SHARES

SEI Investments Distribution Co. (SIDCo.) is the distributor of the shares of
the Funds. SIDCo. receives no compensation for distributing the Funds' Class A
shares.

For Class A Shares, shareholder servicing fees, as a percentage of average daily
net assets, may be up to .25%.

DIVIDENDS, DISTRIBUTIONS AND TAXES

- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

Each Fund distributes its income monthly. The Funds make distributions of
capital gains, if any, at least annually.

You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Funds in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Funds
receive your written notice. To cancel your election, simply send the Funds
written notice.

TAXES

PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.

Each Fund will distribute substantially all of its income and capital gains,
if any. The dividends and distributions you receive may be subject to
federal, state and local taxation, depending upon your tax situation.
Capital gains distributions may be taxable at different rates depending on
the length of time a Fund holds its portfolio securities. EACH SALE OR
EXCHANGE OF FUND SHARES IS A TAXABLE EVENT.

The Funds intend to distribute federally tax-exempt income. Each Fund may
invest a portion of its assets in securities that generate taxable income for
federal or state income taxes. Income exempt from federal tax may be subject
to state and local taxes. Any capital gains distributed by these Funds may
be taxable.

The Funds are not liable for any income or franchise taxes in the Commonwealth
of Massachusetts as long as they qualify as regulated investment companies under
Federal tax law.

MORE INFORMATION ABOUT TAXES IS IN THE FUNDS' STATEMENT OF ADDITIONAL
INFORMATION.

30
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The tables that follow present performance information about Class A Shares of
each Fund. This information is intended to help you understand each Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Some of this information reflects financial information for
a single Fund share. The total returns in the tables represent the rate that
you would have earned [or lost] on an investment in a Fund, assuming you
reinvested all of your dividends and distributions. As of August 31, 1998, the
Ohio Tax Free Fund was not open to investors.

This information has been audited by Arthur Andersen LLP, independent public
accountants. Their report, along with each Fund's financial statements, appears
in the annual report that accompanies the Statement of Additional Information.
You can obtain the annual report, which contains more performance information,
at no charge by calling 1-800-DIAL-SEI.

<TABLE>
<CAPTION>
INTERMEDIATE-TERM MUNICIPAL FUND
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized and Net Asset
Value, Activities/ Net Investment Net Realized Distributions Unrealized Gain Value, End of
Beginning of Net Investment Income Gain (Loss) on Period
Period Income Investments
and Capital
Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $10.77 $0.46 $(0.46) --- $(0.46) $0.31 $11.08
- --------------------------------------------------------------------------------------------------------------------------------
1997 10.45 0.48 (0.48) --- (0.48) 0.32 10.77
- --------------------------------------------------------------------------------------------------------------------------------
1996 10.59 0.49 (0.53) --- (0.53) (0.10) 10.45
- --------------------------------------------------------------------------------------------------------------------------------
1995 10.36 0.52 (0.52) --- (0.52) 0.23 10.59
- --------------------------------------------------------------------------------------------------------------------------------
1994 10.84 0.49 (0.49) $(0.06) (0.55) (0.42) 10.36
- --------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Total Net Assets, End Ratio of Ratio of Ratio of Net Ratio of Net Portfolio
Return of Period (000) Expenses to Expenses to Investment Investment Income Turnover
Average Net Average Net Income to to Average Net Rate
Assets Assets Average Net Assets Excluding
Excluding Fee Assets Fee Waivers
Waivers
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 7.20% $516,324 0.60% 0.88% 4.23% 3.95% 8.98%
- ----------------------------------------------------------------------------------------------------------------------
1997 7.93% 259,238 0.60 0.88 4.53 4.25 16.02
- ----------------------------------------------------------------------------------------------------------------------
1996 3.76% 134,563 0.59 0.66 4.66 4.59 40.66
- ----------------------------------------------------------------------------------------------------------------------
1995 7.53% 95,675 0.55 0.72 4.96 4.79 36.05
- ----------------------------------------------------------------------------------------------------------------------
1994 0.65% 127,509 0.53 0.71 4.65 4.47 58.90
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

31
<PAGE>

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CALIFORNIA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized and Net Asset
Value, Activities/ Net Investment Net Realized Distributions Unrealized Gain Value, End of
Beginning of Net Investment Income Gain (Loss) on Period
Period Income Investments
and Capital
Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998(1) $10.00 $0.01 $(0.01) --- $(0.01) $0.07 $10.07
- --------------------------------------------------------------------------------------------------------------------------------

* Annualized.

(1) The California Municipal Bond Fund- Class A commenced operations on
August 19, 1998.

32
<PAGE>

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS MASSACHUSETTS MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized and Net Asset
Value, Activities/ Net Investment Net Realized Distributions Unrealized Gain Value, End of
Beginning of Net Investment Income Gain (Loss) on Period
Period Income Investments
and Capital
Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998(2) $10.00 --- --- --- --- $0.05 $10.05
- --------------------------------------------------------------------------------------------------------------------------------

* Annualized.

(2) The Massachusetts Municipal Bond Fund- Class A commenced operations on
August 19, 1998.

33
<PAGE>

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS NEW JERSEY MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized and Net Asset
Value, Activities/ Net Investment Net Realized Distributions Unrealized Gain Value, End of
Beginning of Net Investment Income Gain (Loss) on Period
Period Income Investments
and Capital
Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998(3) $10.00 $0.01 $(0.01) --- $(0.01) $0.05 $10.05
- --------------------------------------------------------------------------------------------------------------------------------

* Annualized.

(3) The New Jersey Municipal Bond Fund- Class A commenced operations on
August 18, 1998.

34
<PAGE>

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS NEW YORK MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized and Net Asset
Value, Activities/ Net Investment Net Realized Distributions Unrealized Gain Value, End of
Beginning of Net Investment Income Gain (Loss) on Period
Period Income Investments
and Capital
Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998(4) $10.00 --- --- --- --- $0.05 $10.05
- --------------------------------------------------------------------------------------------------------------------------------

1998(4) 0.55% $1,375 0.60%* 0.87%* 2.27%* 2.00%* 0.92%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

* Annualized.

(4) The New York Municipal Bond Fund- Class A commenced operations on
August 18, 1998.

35
<PAGE>

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS PENNSYLVANIA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized and Net Asset
Value, Activities/ Net Investment Net Realized Distributions Unrealized Gain Value, End of
Beginning of Net Investment Income Gain (Loss) on Period
Period Income Investments
and Capital
Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998(5) $10.72 $0.01 $(0.01) __ $(0.01) $0.03 $10.75
- --------------------------------------------------------------------------------------------------------------------------------

* Annualized.

(5) The Pennsylvania Municipal Bond Fund- Class A commenced operations on
August 25, 1998.

36
<PAGE>

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS INSTITUTIONAL TAX FREE FUND
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized and Net Asset
Value, Activities/ Net Investment Net Realized Distributions Unrealized Gain Value, End of
Beginning of Net Investment Income Gain (Loss) on Period
Period Income Investments
and Capital
Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $1.00 $0.034 $(0.034) --- $(0.034) --- $1.00
- --------------------------------------------------------------------------------------------------------------------------------
1997 1.00 0.034 (0.034) --- (0.034) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1996 1.00 0.035 (0.035) --- (0.035) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1995 1.00 0.036 (0.036) --- (0.036) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1994 1.00 0.025 (0.025) --- (0.025) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Assets, End Ratio of Ratio of Ratio of Net Ratio of Net Portfolio
Return of Period (000) Expenses to Expenses to Investment Investment Income Turnover
Average Net Average Net Income to to Average Net Rate
Assets Assets Average Net Assets Excluding
Excluding Fee Assets Fee Waivers
Waivers
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 3.46% $813,261 0.33% 0.68% 3.39% 3.04% ---
- ---------------------------------------------------------------------------------------------------------------------------
1997 3.44 999,946 0.33 0.69 3.39 3.03 ---
- ---------------------------------------------------------------------------------------------------------------------------
1996 3.52 835,388 0.33 0.49 3.46 3.30 ---
- ---------------------------------------------------------------------------------------------------------------------------
1995 3.70 788,877 0.33 0.52 3.64 3.45 ---
- ---------------------------------------------------------------------------------------------------------------------------
1994 2.51 835,516 0.33 0.50 2.48 2.31 ---
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

37
<PAGE>

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS TAX FREE FUND
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized and Net Asset
Value, Activities/ Net Investment Net Realized Distributions Unrealized Gain Value, End of
Beginning of Net Investment Income Gain (Loss) on Period
Period Income Investments
and Capital
Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $1.00 $0.033 $(0.033) --- $(0.033) --- $1.00
- --------------------------------------------------------------------------------------------------------------------------------
1997 1.00 0.033 (0.033) --- (0.033) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1996 1.00 0.033 (0.033) --- (0.033) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1995 1.00 0.034 (0.034) --- (0.034) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1994 1.00 0.022 (0.022) --- (0.022) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Assets, End Ratio of Ratio of Ratio of Net Ratio of Net Portfolio
Return of Period (000) Expenses to Expenses to Investment Investment Income Turnover
Average Net Average Net Income to to Average Net Rate
Assets Assets Average Net Assets Excluding
Excluding Fee Assets Fee Waivers
Waivers
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 3.30% $543,276 0.45% 0.68% 3.25% 3.02% ---
- ---------------------------------------------------------------------------------------------------------------------------
1997 3.31 431,016 0.45 0.69 3.26 3.02 ---
- ---------------------------------------------------------------------------------------------------------------------------
1996 3.35 339,906 0.45 0.50 3.30 3.25 ---
- ---------------------------------------------------------------------------------------------------------------------------
1995 3.48 377,152 0.45 0.51 3.43 3.37 ---
- ---------------------------------------------------------------------------------------------------------------------------
1994 2.20 358,299 0.45 0.53 2.17 2.09 ---
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

38
<PAGE>

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CALIFORNIA TAX EXEMPT FUND
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized and Net Asset
Value, Activities/ Net Investment Net Realized Distributions Unrealized Gain Value, End of
Beginning of Net Investment Income Gain (Loss) on Period
Period Income Investments
and Capital
Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $1.00 $0.032 (0.032) --- (0.032) --- $1.00
- --------------------------------------------------------------------------------------------------------------------------------
1997 1.00 0.033 (0.033) --- (0.033) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1996 1.00 0.034 (0.034) --- (0.034) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1995 1.00 0.033 (0.033) --- (0.033) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1994 1.00 0.023 (0.023) --- (0.023) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Assets, End Ratio of Ratio of Ratio of Net Ratio of Net Portfolio
Return of Period (000) Expenses to Expenses to Investment Investment Income Turnover
Average Net Average Net Income to to Average Net Rate
Assets Assets Average Net Assets Excluding
Excluding Fee Assets Fee Waivers
Waivers
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 3.20% $39,508 0.28% 0.55% 3.17% 2.90% ---
- ---------------------------------------------------------------------------------------------------------------------------
1997 3.30 51,314 0.28 0.57 3.26 2.97 ---
- ---------------------------------------------------------------------------------------------------------------------------
1996 3.41 44,729 0.28 0.36 3.33 3.25 ---
- ---------------------------------------------------------------------------------------------------------------------------
1995 3.49 30,921 0.28 0.42 3.43 3.29 ---
- ---------------------------------------------------------------------------------------------------------------------------
1994 2.32 32,015 0.27 0.38 2.28 2.17 ---
- ---------------------------------------------------------------------------------------------------------------------------

</TABLE>

39
<PAGE>

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS PENNSYLVANIA TAX FREE FUND
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized and Net Asset
Value, Activities/ Net Investment Net Realized Distributions Unrealized Gain Value, End of
Beginning of Net Investment Income Gain (Loss) on Period
Period Income Investments
and Capital
Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $1.00 $0.034 (0.034) --- (0.034) --- $1.00
- --------------------------------------------------------------------------------------------------------------------------------
1997 1.00 0.033 (0.033) --- (0.033) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1996 1.00 0.034 (0.034) --- (0.034) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1995 1.00 0.035 (0.035) --- (0.035) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1994(6) 1.00 0.014 (0.014) --- (0.014) --- 1.00
- --------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Assets, End Ratio of Ratio of Ratio of Net Ratio of Net Portfolio
Return of Period (000) Expenses to Expenses to Investment Investment Income Turnover
Average Net Average Net Income to to Average Net Rate
Assets Assets Average Net Assets Excluding
Excluding Fee Assets Fee Waivers
Waivers
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 3.41% $50,068 0.35% 0.68% 3.36% 3.03% ---
- ---------------------------------------------------------------------------------------------------------------------------
1997 3.39 49,563 0.35 0.71 3.33 2.97 ---
- ---------------------------------------------------------------------------------------------------------------------------
1996 3.40 42,971 0.35 0.49 3.33 3.19 ---
- ---------------------------------------------------------------------------------------------------------------------------
1995 3.60 26,058 0.35 0.51 3.54 3.38 ---
- ---------------------------------------------------------------------------------------------------------------------------
1994(6) 2.37* 18,712 0.35* 0.65* 2.37* 2.07* ---
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Annualized.

(6) The Pennsylvania Tax Free Fund- Class A commenced operations on
January 21, 1994.

40
<PAGE>

[LOGO]
SEI Tax Exempt Trust

ADVISERS

SEI INVESTMENTS MANAGEMENT CORPORATION
MORGAN GRENFELL CAPITAL MANAGEMENT,
INCORPORATED
STANDISH, AYER & WOOD, INC.
VAN KAMPEN MANAGEMENT, INC.
WEISS, PECK & GREER, L.L.C.

DISTRIBUTOR

SEI INVESTMENTS DISTRIBUTION CO.

LEGAL COUNSEL

MORGAN, LEWIS & BOCKIUS LLP

More information about the Funds is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)
- --------------------------------------------------------------------------------

The SAI dated December 31, 1998, includes more detailed information about SEI
Tax Exempt Trust. The SAI is on file with the SEC and is incorporated by
reference into this prospectus. This means that the SAI, for legal purposes, is
a part of this prospectus.

ANNUAL AND SEMI-ANNUAL REPORTS

- --------------------------------------------------------------------------------

These reports list the Funds' holdings and contain information from the Funds'
managers about fund strategies and recent market conditions and trends. The
reports also contain detailed financial information about the Funds.

TO OBTAIN MORE INFORMATION:
- --------------------------------------------------------------------------------

BY TELEPHONE: Call 1-800-DIAL-SEI

BY MAIL: Write to the Funds at:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456.

BY INTERNET: http://www.seic.com

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual
Reports, as well as other information about SEI Tax Exempt Trust, from the
SEC's website ("http://www.sec.gov"). You may review and copy documents at
the SEC Public Reference Room in Washington, DC (for information call
1-800-SEC-0330). You may request documents by mail from the SEC, upon payment
of a duplicating fee, by writing to: Securities and Exchange Commission,
Public Reference Section, Washington, DC 20549-6009. The Funds' Investment
Company Act registration number is 811-3447.

41
<PAGE>

[LOGO]SEI Tax
Exempt Trust
CLASS B SHARES

PROSPECTUS
DECEMBER 31, 1998

-----------------------------------------------

PENNSYLVANIA MUNICIPAL BOND FUND
INSTITUTIONAL TAX FREE FUND
CALIFORNIA TAX EXEMPT FUND
OHIO TAX FREE FUND
PENNSYLVANIA TAX FREE FUND

-----------------------------------------------

ADVISERS:
MORGAN GRENFELL CAPITAL MANAGEMENT INCORPORATED
WEISS, PECK & GREER, L.L.C.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY FUND SHARES OR
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.

<PAGE>

[LOGO]SEI Tax
Exempt Trust

HOW TO READ THIS PROSPECTUS
- --------------------------------------------------------------------------------

SEI Tax Exempt Trust is a mutual fund family that offers different classes of
shares in separate investment portfolios (Funds). The Funds have individual
investment goals and strategies, and are designed primarily for institutional
investors. This prospectus gives you important information about Class B Shares
of the Funds that you should know before investing. Please read this prospectus
and keep it for future reference.

<TABLE>
<S> <C>
PENNSYLVANIA MUNICIPAL BOND FUND. . . . . . . . . . . . . . . . . . . . . .
INSTITUTIONAL TAX FREE FUND . . . . . . . . . . . . . . . . . . . . . . . .
CALIFORNIA TAX EXEMPT FUND. . . . . . . . . . . . . . . . . . . . . . . . .
OHIO TAX FREE FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PENNSYLVANIA TAX FREE FUND. . . . . . . . . . . . . . . . . . . . . . . . .
THE FUNDS' OTHER INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . .
THE ADVISERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PURCHASING, SELLING AND EXCHANGING FUND SHARES. . . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . . . .
FINANCIAL HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
HOW TO OBTAIN MORE INFORMATION ABOUT SEI TAX EXEMPT TRUST . . . .Back Cover
</TABLE>

- --------------------------------------------------------------------------------

MUNICIPAL SECURITIES

2
<PAGE>

INTRODUCTION - INFORMATION COMMON TO ALL FUNDS
- --------------------------------------------------------------------------------

Each Fund has its own investment goal and strategies for reaching that goal.
Each Fund's assets are managed under the direction of its Adviser. The Adviser
invests each Fund's assets in a way it believes will help the Funds achieve
their goals. Still, investing in a Fund involves risks, and there is no
guarantee that a Fund will achieve its goal. The Advisers make judgments about
the economy, but these judgments may not anticipate actual market movements or
the impact of economic conditions on issuers. In fact, no matter how good a job
the Advisers do, you could lose money on your investment in a Fund, just as you
could with other investments. A Fund share is not a bank deposit, and it is not
insured or guaranteed by the FDIC or any government agency.

The value of your investment in the Pennsylvania Municipal Bond Fund (but not
any of the money market funds), is based on the market value (or price) of the
securities the Fund holds. These prices change daily due to economic and other
events that affect the securities markets generally, as well as those that
affect particular companies or governments. These price movements, sometimes
called volatility, will vary depending on the types of securities the Fund owns
and the markets in which they trade. The effect on a Fund's share price of a
change in the value of a single security will depend on how widely the Fund's
holdings are diversified.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
YEAR 2000 RISKS

3
<PAGE>

PENNSYLVANIA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Current income exempt from Federal and Pennsylvania
income taxes consistent with the preservation of
capital.
SHARE PRICE VOLATILITY Medium.

PRINCIPAL INVESTMENT Utilizing an adviser experienced in selecting
STRATEGY Pennsylvania municipal securities,
the Fund invests in investment grade municipal
securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

The Pennsylvania Municipal Bond Fund invests substantially all of its assets
(at least 80%) in investment grade municipal securities that generate income
exempt from Federal and Pennsylvania State income taxes. The principal
issuers of these securities are state and local governments and agencies
located in Pennsylvania, as well as the District of Columbia, Puerto Rico and
other U.S. territories and possessions. The Adviser selects securities based
on the Adviser's view on the future direction of interest rates and the shape
of the yield curve, as well as its views on credit quality and sector
allocation issues. Where possible, the Adviser will attempt to acquire
securities that are underpriced relative to OTHER ELIGIBLE SECURITIES. The
Adviser will strive to maintain an average weighted portfolio maturity of
seven years or less. The Fund may, to a limited extent, invest in
securities subject to the alternative minimum tax or in taxable municipal
securities.

WHAT ARE THE RISKS OF INVESTING IN THE PENNSYLVANIA MUNICIPAL BOND FUND?

The prices of fixed income securities respond to economic developments,
particularly interest rate changes, as well as to perceptions about the
creditworthiness of individual issuers, including governments. Generally,
fixed income securities will decrease in value if interest rates rise and
vice versa, and the volatility of lower rated securities is even greater than
that of higher rated securities. Also, longer-term securities are generally
more volatile, so the average maturity or duration of these securities
affects risk. In addition, the Fund is subject to the risk that its market
segment, Pennsylvania tax-exempt fixed income securities, may underperform
other fixed income market segments or the fixed income markets as a whole.

State and local governments rely on taxes and, to some extent, revenues from
private projects financed by municipal securities, to pay interest and
principal on municipal debt. Poor statewide or local economic results or
changing political sentiments may reduce tax revenues and increase the
expenses of Pennsylvania municipal issuers, making it more difficult for them
to meet their obligations. Actual or perceived erosion of the credit
worthiness of Pennsylvania municipal issuers may reduce the value of the
Fund's holdings. As a result, the Fund will be more susceptible to factors
which adversely affect issuers of Pennsylvania obligations than a mutual fund
which does not have as great a concentration in Pennsylvania municipal
obligations.

4
<PAGE>

PENNSYLVANIA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Class B Shares
from year to year for eight years.*

[BAR CHART]

1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
6.08% 10.41% 7.06% 8.49% -1.97% 11.22% 4.33% 8.02%
</TABLE>

This table compares the Fund's average annual total returns for Class B Shares
for the periods ending December 31, 1997, to those of the Lehman Brothers 5-Year
G.O. Index.

<TABLE>
<CAPTION>
SINCE FUND
1 YEAR 5 YEARS INCEPTION
(8/14/89)
<S> <C> <C> <C>
PENNSYLVANIA
MUNICIPAL
BOND FUND
CLASS B SHARES 8.02% 5.92% 6.68%
LEHMAN BROTHERS 5-YEAR
G.O. INDEX* 6.48% 5.89% 6.95%**
</TABLE>

- --------------------------------------------------------------------------------

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was 4.82%.

*An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual Fund, an index does not have an investment advisor
and does not pay any commission or If an index had expenses, its performance
would be lower. The Lehman Brothers 5-Year G.O. Index is a widely-recognized
index consisting of general obligation municipal bonds with maturities
between 4 and 6 years.

**The inception date for the Index is August 31, 1989.

BEST QUARTER WORST QUARTER
<S> <C>
3.82% -3.23%
(3/31/95) (3/31/94)
- --------------------------------------------------------------------------------
</TABLE>

FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

CLASS B
<S> <C>
Investment Advisory Fees 0.20%
Distribution and Service (12b-1) Fees None
Other Expenses 0.71%
-----
Total Annual Fund Operating Expenses 0.91%*
</TABLE>

- --------------------------------------------------------------------------------

PENNSYLVANIA MUNICIPAL BOND .48%

For more information about these fees, see "Investment Advisers" and
"Distribution of Fund Shares."

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>

CLASS B SHARES $- $- $- $-
- --------------------------------------------------------------------------------
</TABLE>

5
<PAGE>

INSTITUTIONAL TAX FREE FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Preserving principal and maintaining
liquidity while providing current income
exempt from Federal income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
municipal securities, the Fund invests in
high quality, short-term tax-exempt money
market securities.
- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

WHAT ARE THE RISKS OF INVESTING IN THE INSTITUTIONAL TAX FREE FUND?

An investment in a money market fund is not a bank deposit. Although the
Fund, like all money market funds, seeks to maintain a constant price per
share of $1.00, you may lose money by investing in the Fund.

6
<PAGE>

INSTITUTIONAL TAX FREE FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's CLASS B SHARES
from year to year for seven years.*

[BAR CHART]

1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
4.36% 2.79% 2.17% 2.51% 3.52% 3.08% 3.21%
</TABLE>

* The performance information shown above is based market on a calendar year.
The Fund's total return from 1/1/98 to 9/30/98 was 2.28%.

<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
1.16% 0.49%
(3/31/91) (3/31/94)
</TABLE>

This table shows the Fund's average annual total returns for the periods
ending December 31, 1997.

<TABLE>
<CAPTION>
SINCE
FUND
1 YEAR 5 YEARS INCEPTION
(10/15/90)
<S> <C> <C> <C>
INSTITUTIONAL TAX
FREE FUND
CLASS B SHARES 3.21% 2.90% 3.16%
</TABLE>

Please call 1-800-DIAL-SEI to obtain the Fund's current yield.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES CLASS B

<TABLE>
<CAPTION>
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees None
Other Expenses 0.69%
-----
Total Annual Fund Operating Expenses 0.73%*
</TABLE>

- --------------------------------------------------------------------------------

INSTITUTIONAL TAX FREE FUND .63%

For more information about these fees, see "Investment Advisers" and
"Distribution of Fund Shares."

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS B SHARES $75 $233 $406 $906
</TABLE>

- --------------------------------------------------------------------------------

7
<PAGE>

CALIFORNIA TAX EXEMPT FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Preserving principal and maintaining
liquidity while providing current income
exempt from Federal and California personal
income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
municipal securities, the Fund invests in
high quality, short-term California municipal
money market securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

WHAT ARE THE RISKS OF INVESTING IN CALIFORNIA TAX EXEMPT FUND?

The Fund's securities may change in value in response to interest rate changes
and other factors. When interest rates are rising, the Fund's securities might
decline in value.

8
<PAGE>

CALIFORNIA TAX EXEMPT FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the California Tax Exempt Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.

This bar chart shows changes in the performance of the Fund's CLASS A SHARES
from year to year for seven years.* Since Class A Shares are invested in the
same portfolio of securities, returns for Class B Shares will be substantially
similar to that of the Class A shares, shown here, and will differ only to the
extent that each Class has different expenses.

[BAR CHART]

1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
4.44% 2.89% 2.26% 2.68% 3.60% 3.28% 3.26%
</TABLE>

* The performance information shown above is based on a calendar year. The
Fund's Class A total return from 1/1/98 to 9/30/98 was 2.29%.

<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
1.15% 0.50%
(3/31/91) (3/31/94)

</TABLE>

This table shows the Fund's average annual total returns for Class A Shares
for the periods ending December 31, 1997.

<TABLE>
<CAPTION>
SINCE FUND
1 YEAR 5 YEARS INCEPTION
(5/14/90)
<S> <C> <C> <C>
CALIFORNIA TAX EXEMPT
FUND CLASS A SHARES 3.36% 3.03% 3.44%
</TABLE>

Please call 1-800-DIAL-SEI to obtain the Fund's current yield.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

CLASS B
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees None
Other Expenses 0.55%
-----
Total Annual Fund Operating Expenses 0.60%*
</TABLE>

- --------------------------------------------------------------------------------

CALIFORNIA TAX EXEMPT FUND .58%

For more information about these fees, see "Investment Advisers" and
"Distribution of Fund Shares."

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS B SHARES $61 $192 $335 $750

</TABLE>

- --------------------------------------------------------------------------------

9
<PAGE>

OHIO TAX FREE FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Preserving capital and maintaining liquidity
while providing a high level of current
income exempt from Federal and Ohio personal
income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
municipal securities, the Fund invests
in high quality, short-term Ohio municipal
money market securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

The Ohio Tax Free Fund is a money market fund that invests substantially all
of its assets (at least 80%) in municipal money market securities that pay
interest that is exempt from Federal and Ohio income taxes. The principal
issuers of these securities are state and local governments and agencies
located in Ohio, as well as the District of Columbia, Puerto Rico and other
U.S. territories and possessions. The Adviser seeks to choose securities
with an acceptable maturity, that are marketable and liquid, that offer
competitive yields, and that are issued by issuers that are on a sound
financial footing. The Adviser also considers sector allocation and relative
valuations in selecting securities for the Fund. The Fund may, to a limited
extent, invest in securities subject to the alternative minimum tax or in
taxable municipal securities.

WHAT ARE THE RISKS OF INVESTING IN OHIO TAX FREE FUND?

The Fund's securities may change in value in response to interest rate changes
and other factors. When interest rates are rising, the Fund's securities might
decline in value.

An investment in a money market is not a bank deposit. Although the Fund,
like all money market funds, seeks to maintain a constant price per share of
$1.00, you may lose money by investing in the Fund.

10
<PAGE>

OHIO TAX FREE FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

As of December 31, 1998, the Ohio Tax Free Fund had not commenced operations,
and did not have a performance history.

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

CLASS B
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees None
Other Expenses 0.72%
-----
Total Annual Fund Operating Expenses 0.76%*
</TABLE>

- --------------------------------------------------------------------------------

OHIO TAX FREE FUND .65

For more information about these fees, see "Investment Advisers" and
"Distribution of Fund Shares."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS B SHARES $78 $243 $422 $942

</TABLE>

- --------------------------------------------------------------------------------

11
<PAGE>

PENNSYLVANIA TAX FREE FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Preserving capital while providing current
income exempt from Federal and Pennsylvania
state personal income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
municipal securities, the Fund invests in
high quality, short-term Pennsylvania
municipal money market securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

WHAT ARE THE RISKS OF INVESTING IN PENNSYLVANIA TAX FREE FUND?

The Fund's securities may change in value in response to interest rate changes
and other factors. When interest rates are rising, the Fund's securities might
decline in value.

12
<PAGE>

PENNSYLVANIA TAX FREE FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's CLASS A SHARES
from year to year for three years.* Since Class A Shares are invested in the
same portfolio of securities, returns for Class B Shares will be substantially
similar to that of the Class A shares, shown here, and will differ only to the
extent that each Class has different expenses.

[BAR CHART]

1995 1996 1997
<S> <C> <C>
3.74% 3.26% 3.46%

</TABLE>

* The performance information shown above is based on a calendar year. The
Fund's Class A total return from 1/1/98 to 9/30/98 was 2.48%.

BEST QUARTER WORST QUARTER
<S> <C>
0.98% 0.78%
(6/30/95) (3/31/97)
</TABLE>

This table shows the Fund's average annual total returns for Class A Shares
for the periods ending December 31, 1997.

SINCE FUND
1 YEAR INCEPTION
(1/24/94)
<S> <C> <C>
PENNSYLVANIA TAX FREE FUND
CLASS A SHARES 3.46% 3.30%
</TABLE>

Please call 1-800-DIAL-SEI to obtain the Fund's current yield.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

CLASS B
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees None
Other Expenses 0.69%
-----
Total Annual Fund Operating Expenses 0.73%*

</TABLE>

- --------------------------------------------------------------------------------

PENNSYLVANIA TAX FREE FUND .65

For more information about these fees, see "Investment Advisers" and
"Distribution of Fund Shares."

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS B SHARES $75 $233 $406 $906
- -----------------------------------------------------------------------------------
</TABLE>

13
<PAGE>

THE FUNDS' OTHER INVESTMENTS
- --------------------------------------------------------------------------------

The investments and strategies described throughout this prospectus are those
that we use under normal conditions. During unusual economic or market
conditions or for temporary defensive or liquidity purposes, each Fund may
invest up to 100% of its assets in cash, money market instruments, repurchase
agreements and short-term obligations that would not ordinarily be consistent
with the Funds' objectives. The Funds will do so only if the Advisers
believe that the risk of loss outweighs the opportunity for taxable gains and
higher taxable income.

INVESTMENT ADVISERS
- --------------------------------------------------------------------------------

Each Investment Adviser makes investment decisions for the Funds it manages and
continuously reviews, supervises and administers its investment program.
The Board of Trustees supervises the Advisers and establishes policies that they
must follow in their management activities.

PENNSYLVANIA MUNICIPAL BOND FUND .20%

CALIFORNIA TAX EXEMPT FUND .04%
INSTITUTIONAL TAX FREE FUND .04%
OHIO TAX FREE FUND .04%
PENNSYLVANIA TAX FREE FUND .04%

PORTFOLIO MANAGERS

PENNSYLVANIA MUNICIPAL BOND FUND

INSTITUTIONAL TAX FREE FUND
CALIFORNIA TAX EXEMPT FUND
OHIO TAX FREE FUND
PENNSYLVANIA TAX FREE FUND

PURCHASING, SELLING AND EXCHANGING FUND SHARES

- --------------------------------------------------------------------------------

HOW TO PURCHASE FUND SHARES

You may purchase shares on any day that the New York Stock Exchange is open for
business (a Business Day). The Funds offer Class B shares only to financial
institutions and financial intermediaries for their own or their customers'
accounts.

14
<PAGE>

Financial institutions and intermediaries may purchase Class B Shares by placing
orders with the Funds' Transfer Agent (or its authorized agent). Institutions
and intermediaries that use certain SEI proprietary systems may place orders
electronically through those systems.

Certain investors who deal directly with a financial institution or financial
intermediary will have to follow the institution's or intermediary's procedures
for transacting with the Funds. If you purchase, sell or exchange Fund shares
through a financial institution or intermediary (rather than directly from the
Funds), you may have to transmit your purchase, sale and exchange requests to
your financial institution or intermediary at an earlier time for your
transaction to become effective that day. This allows the financial institution
or intermediary time to process your request and transmit it to the Funds. For
more information about how to purchase, sell or exchange Fund shares through
your financial institution or intermediary, you should contact your financial
institution or intermediary directly.

You may purchase shares through financial intermediaries or other financial
institutions that have executed dealer agreements. You cannot purchase money
market fund shares by Federal Reserve wire or Federal holiday on which wire
transfers are restricted. The Funds may reject any purchase order if the
Funds determine that accepting the order would not be in the best interests
of the Funds or their shareholders.

The price per share (the offering price) will be the net asset value per
share (NAV) next determined after the Funds receive your purchase order. NAV
for one Fund share is the value of that share's portion of all of the assets
in the Fund. The Pennsylvania Municipal Bond Fund calculates NAV once each
Business Day at the regularly-scheduled close of normal trading on the New
York Stock Exchange (normally, 4:00 p.m. Eastern time). Each money market
fund calculates its NAV at 2:00 p.m., Eastern time, except for the
Institutional Tax Free Fund, which calculates its NAV at 3:00 p.m. Eastern
time. If you want to receive the current Business Day's NAV, generally the
Funds must receive your purchase order before 4:00 p.m. Eastern time for the
Pennsylvania Municipal Bond Fund and by 12:30 p.m. for each money market fund
(except for the California Tax Exempt Fund and the Ohio Tax Free Fund, for
which the cut-off time is the time that NAV is determined, usually 2:00 p.m.
Eastern time, and for the Institutional Tax Free Fund, for which the cut-off
time is 1:30 p.m. Eastern time).

HOW THE FUNDS CALCULATE NAV

In calculating NAV, the Pennsylvania Municipal Bond Fund's portfolio
securities are generally valued at their market price. If market prices are
unavailable or are unreliable, fair value prices may be determined in good
faith using methods approved by the Board of Trustees.

The money market funds value their securities by utilizing the amortized cost
valuation method (as described in the SAI). If amortized cost is unreliable,
fair value prices may be determined in good faith using methods approved by
the Board of Trustees. The Funds expect each money market fund's NAV to
remain constant at $1.00 per share, although there is no guarantee that the
Funds can accomplish this.

15
<PAGE>

MINIMUM PURCHASES

To purchase Class B Shares of the non-money market funds for the first time,
you must invest at least $100,000 in any such Fund. To purchase additional
shares of the Pennsylvania Municipal Bond Fund, you must invest at least
$1,000. The Funds may accept investments of smaller amounts at their
discretion.

SELLING FUND SHARES

HOW TO SELL YOUR FUND SHARES

TELEPHONE TRANSACTIONS

Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Funds have certain safeguards
and procedures to confirm the identity of callers and the authenticity of
instructions, the Funds are not responsible for any losses or costs incurred by
following telephone instructions the Funds reasonably believed to be genuine.
If you or your financial institution or intermediary transact with the Funds
over the telephone, you will generally bear the risk of any loss.

RECEIVING YOUR MONEY

Normally, the Funds will send your sale proceeds within five Business Days they
receive your request. Your proceeds can be wired to a bank account or sent to
you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH,
REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY
TAKE UP TO 15 BUSINESS DAYS).

REDEMPTIONS IN KIND

INVOLUNTARY SALES OF YOUR SHARES

If your account balance drops below the required minimum, $45 million for Class
B Shares of the Institutional Tax Free Fund, you may be required to sell your
shares. You will always be given at least 60 days' written notice to give you
time to add to your account and avoid selling your shares.

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

The Funds may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in the SAI.

16
<PAGE>

EXCHANGING FUND SHARES

HOW TO EXCHANGE YOUR SHARES

You may exchange your Class B shares of any Fund for Class B shares of any
other Fund on any Business Day by contacting the Funds directly by mail or
telephone. You may also exchange shares through your financial institution by
mail or telephone. IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH,
YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED
(WHICH MAY TAKE UP TO 15 BUSINESS DAYS). This exchange privilege may be
changed or canceled at any time upon 60 days' notice. When you exchange
shares, you are really selling your shares and buying other Fund shares. So,
your sale price and purchase price will be based on the NAV next calculated
after the Funds receive your exchange request.

DISTRIBUTION OF FUND SHARES

SEI Investments Distribution Co. (SIDCo.) is the distributor of the shares of
the Funds. SIDCo. receives no compensation for distributing the Funds' Class B
shares.

For Class B Shares, shareholder servicing fees and administrative servicing
fees, as a percentage of average daily net assets, may be up to .25% and .05%,
respectively.

DIVIDENDS, DISTRIBUTIONS AND TAXES

- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

Each Fund distributes its income monthly. The Funds make distributions of
capital gains, if any, at least annually.

TAXES

PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below is a summary some important tax issues that
affect the Funds and their shareholders. This summary is based on current tax
laws, which may change.

The Funds are not liable for any income or franchise taxes in the Commonwealth
of Massachusetts as long as they qualify as regulated investment companies under
Federal tax law.

MORE INFORMATION ABOUT TAXES IS IN THE FUNDS' STATEMENT OF ADDITIONAL
INFORMATION.

17
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The tables that follow present performance information about Class B Shares of
each Fund. This information is intended to help you understand each Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Some of this information reflects financial information for
a single Fund share. The total returns in the tables represent the rate that
you would have earned [or lost] on an investment in a Fund, assuming you
reinvested all of your dividends and distributions. As of August 31, 1998, the
Ohio Tax Free Fund was not open to investors.

PENNSYLVANIA MUNICIPAL BOND FUND - CLASS B
- --------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized Net
Value, Activities/ Net Net Realized Distributions and Asset
Beginning Net Investment Gain Unrealized Value,
of Period Investment Income Gain (Loss) End of
Income on Period
Investments
and Capital
Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $10.58 $0.52 $(0.52) $(0.04) $(0.56) $0.22 $10.76
- ------------------------------------------------------------------------------------------------------------------------------------
1997 10.48 0.53 (0.53) (0.19) (0.72) 0.29 10.58
- ------------------------------------------------------------------------------------------------------------------------------------
1996 10.66 0.55 (0.59) -- (0.59) (0.14) 10.48
- ------------------------------------------------------------------------------------------------------------------------------------
1995 10.52 0.55 (0.55) -- (0.55) 0.14 10.66
- ------------------------------------------------------------------------------------------------------------------------------------
1994 10.94 0.53 (0.53) -- (0.53) (0.42) 10.52
- ------------------------------------------------------------------------------------------------------------------------------------

Total Net Assets, Ratio of Ratio of Ratio of Ratio of Net Portfolio
Return End of Expenses Expenses Net Investment Turnover
Period to Average to Average Investment Income to Rate
(000) Net Assets Net Assets Income to Average Net
Excluding Average Assets
Fee Net Assets Excluding
Waivers Fee Waivers
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 7.24% $101,029 0.48% 0.86% 4.87% 4.49% 26.85%
- ---------------------------------------------------------------------------------------------------------------------------
1997 8.08 98,079 0.48 0.86 5.08 4.70 34.48
- ---------------------------------------------------------------------------------------------------------------------------
1996 3.96 97,228 0.48 0.65 5.15 4.98 65.75
- ---------------------------------------------------------------------------------------------------------------------------
1995 6.81 104,094 0.48 0.72 5.21 4.97 22.62
- ---------------------------------------------------------------------------------------------------------------------------
1994 1.14 125,081 0.47 0.71 4.90 4.66 25.13
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

18
<PAGE>

FINANCIAL HIGHLIGHTS INSTITUTIONAL TAX FREE FUND - CLASS B
- --------------------------------------------------------------------------------

- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment/ Distributions/ Distributions/ Total Net Realized Net
Value, Activities Net Net Realized Distributions and Asset
Beginning of Net Investment Gain Unrealized Value,
Period Investment Income Gain (Loss) End of
Income on Period
Investments
and Capital
Transactions
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $1.00 $0.031 $(0.031) -- $(0.031) -- $1.00
- ----------------------------------------------------------------------------------------------------------------------------------
1997 1.00 0.031 (0.031) -- (0.031) -- 1.00
- ----------------------------------------------------------------------------------------------------------------------------------
1996 1.00 0.032 (0.032) -- (0.032) -- 1.00
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1.00 0.033 (0.033) -- (0.033) -- 1.00
- ----------------------------------------------------------------------------------------------------------------------------------
1994 1.00 0.022 (0.022) -- (0.022) -- 1.00
- ----------------------------------------------------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------------------------------------------------
Total Net Assets, Ratio of Ratio of Ratio of Ratio of Net Portfolio
Return End of Expenses Expenses Net Investment Turnover
Period to Average to Average Investment Income to Rate
(000) Net Assets Net Assets Income to Average Net
Excluding Average Assets
Fee Net Assets Excluding
Waivers Fee Waivers
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 3.15% $95,004 0.63% 0.73% 3.06% 2.96% --
- ---------------------------------------------------------------------------------------------------------------------------------
1997 3.13 34,783 0.63 0.73 3.10 3.00 --
- ---------------------------------------------------------------------------------------------------------------------------------
1996 3.21 14,156 0.63 0.80 3.16 2.99 --
- ---------------------------------------------------------------------------------------------------------------------------------
1995 3.39 15,084 0.63 0.82 3.32 3.13 --
- ---------------------------------------------------------------------------------------------------------------------------------
1994 2.21 21,725 0.63 0.81 2.31 2.13 --
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

19
<PAGE>

SEI TAX EXEMPT TRUST

ADVISERS

MORGAN GRENFELL CAPITAL MANAGEMENT,
INCORPORATED
WEISS, PECK & GREER, L.L.C.

DISTRIBUTOR

SEI INVESTMENTS DISTRIBUTION CO.

LEGAL COUNSEL

MORGAN, LEWIS & BOCKIUS LLP

More information about the Funds is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)
- --------------------------------------------------------------------------------

ANNUAL AND SEMI-ANNUAL REPORTS

- --------------------------------------------------------------------------------

TO OBTAIN MORE INFORMATION:
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
BY TELEPHONE: Call 1-800-DIAL-SEI

BY MAIL: Write to the Funds at:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456.

BY INTERNET: http://www.seic.com

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual
Reports, as well as other information about SEI Tax Exempt Trust, from the SEC's
website ("http://www.sec.gov"). You may review and copy documents at the SEC
Public Reference Room in Washington, DC (for information call 1-800-SEC-0330).
You may request documents by mail from the SEC, upon payment of a duplicating
fee, by writing to: Securities and Exchange Commission, Public Reference
Section, Washington, DC 20549-6009. The Funds' Investment Company Act
registration number is 811-3447.

- --------------------------------------------------------------------------------

<PAGE>

[LOGO]SEI TAX
EXEMPT TRUST

CLASS C SHARES

PROSPECTUS
DECEMBER 31, 1998

--------------------------------

INSTITUTIONAL TAX FREE FUND
CALIFORNIA TAX EXEMPT FUND
OHIO TAX FREE FUND
PENNSYLVANIA TAX FREE FUND

--------------------------------

ADVISER:
WEISS, PECK & GREER, L.L.C.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY FUND SHARES OR
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.
<PAGE>

[LOGO]SEI Tax
Exempt Trust

HOW TO READ THIS PROSPECTUS
- --------------------------------------------------------------------------------

SEI Tax Exempt Trust is a mutual fund family that offers different classes of
shares in separate investment portfolios (Funds). The Funds have individual
investment goals and strategies, and are designed primarily for institutional
investors. This prospectus gives you important information about Class C Shares
of the Funds that you should know before investing. Please read this prospectus
and keep it for future reference.

INSTITUTIONAL TAX FREE FUND . . . . . . . . . . . . . . . . . . . . . . .
CALIFORNIA TAX EXEMPT FUND. . . . . . . . . . . . . . . . . . . . . . . .
OHIO TAX FREE FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . .
PENNSYLVANIA TAX FREE FUND. . . . . . . . . . . . . . . . . . . . . . . .
THE FUNDS' OTHER INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . .
THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PURCHASING, SELLING AND EXCHANGING FUND SHARES. . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . . .
FINANCIAL HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . .
HOW TO OBTAIN MORE INFORMATION ABOUT SEI TAX EXEMPT TRUST . . . Back Cover

- --------------------------------------------------------------------------------

----------------------------------------------------------------------
MUNICIPAL SECURITIES

Each of the Funds invests primarily in municipal securities. Municipal
securities are bonds and other fixed income securities issued by state and
local governments and their agencies (such as housing or hospital
authorities) to finance capital expenditures and operations. The
obligation to pay principal and interest on municipal securities may be a
general obligation of the state or local government, but may be supported
only by an agency or a particular source of revenues. Therefore, municipal
securities vary in credit quality.

Municipal securities, like other fixed income securities, rise and fall in
value in response to economic and market factors, primarily changes in
interest rates, and actual or perceived credit quality. Rising interest
rates will generally cause municipal securities to decline in value.
Longer-term securities respond more sharply to interest rate changes than
do shorter-term securities. A municipal security will also lose value if,
due to rating downgrades or other factors, there are concerns about the
issuers current or future ability to make principal or interest payments.
A strategy to invest in investment grade securities reduces but does not
eliminate this risk.

Generally, the income from municipal securities is exempt from Federal
income taxes, and also may be exempt from certain state or local taxes
depending on an investor's state of residence. Even so, income from
certain obligations may be subject to Federal alternative minimum taxes.
----------------------------------------------------------------------

2
<PAGE>

INTRODUCTION - INFORMATION COMMON TO ALL FUNDS
- --------------------------------------------------------------------------------

Each Fund has its own investment goal and strategies for reaching that goal.
Each Fund's assets are managed under the direction of its Adviser. The Adviser
invests each Fund's assets in a way it believes will help the Funds achieve
their goals. Still, investing in a Fund involves risks, and there is no
guarantee that a Fund will achieve its goal. The Adviser makes judgments about
the economy, but these judgments may not anticipate actual market movements or
the impact of economic conditions on issuers. In fact, no matter how good a job
the Adviser does, you could lose money on your investment in a Fund, just as you
could with other investments. A Fund share is not a bank deposit, and it is not
insured or guaranteed by the FDIC or any government agency.

- --------------------------------------------------------------------------------

----------------------------------------------------------------------
YEAR 2000 RISKS

Like other mutual funds (and most organizations around the world), the
Funds could be affected by computer problems related to the transition to
the year 2000. While no one knows if these problems will have any impact
on the Funds or on the financial markets in general, the Funds are taking
steps to protect investors. These include efforts to ensure that the
Funds' own systems are prepared to make the transition to the year 2000,
and to determine that the problem will not affect the systems used by the
Funds' major service providers. Whether these steps will be effective can
only be known for certain in the year 2000. There is additional
information on these risks in the Statement of Additional Information.

----------------------------------------------------------------------

3
<PAGE>

INSTITUTIONAL TAX FREE FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Preserving principal and maintaining
liquidity while providing current income
exempt from Federal income taxes.

SHARE PRICE VOLATILITY Very low

INVESTMENT STRATEGY

WHAT ARE THE RISKS OF INVESTING IN THE INSTITUTIONAL TAX FREE FUND?

4
<PAGE>

INSTITUTIONAL TAX FREE FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Class C Shares
from year to year for two years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was 2.13%.

<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
0.78% 0.67%
(12/31/97) (3/31/97)
</TABLE>

This table shows the Fund's average annual total returns for Class C Shares
for the periods ending December 31, 1997.

<TABLE>
<CAPTION>
SINCE
FUND
1 YEAR INCEPTION
(9/11/95)
<S> <C> <C>
INSTITUTIONAL TAX
FREE FUND
CLASS C SHARES 3.00% 2.99%
</TABLE>

Please call 1-800-DIAL-SEI to obtain the Fund's current yield.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

<TABLE>
<CAPTION>
CLASS C
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees None
Other Expenses 0.89%
------
Total Annual Fund Operating Expenses 0.93%*
</TABLE>

- --------------------------------------------------------------------------------

INSTITUTIONAL TAX FREE FUND .83%

For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS C SHARES $95 $296 $515 $1,143
- --------------------------------------------------------------------------------
</TABLE>

5
<PAGE>

CALIFORNIA TAX EXEMPT FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY
INVESTMENT GOAL Preserving principal and maintaining
liquidity while providing current income
exempt from Federal and California
personal income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in
selecting municipal securities, the Fund
invests in high quality, short-term
California municipal money market
securities.
- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

WHAT ARE THE RISKS OF INVESTING IN CALIFORNIA TAX EXEMPT FUND?

The Fund's securities may change in value in response to interest rate changes
and other factors. When interest rates are rising, the Fund's securities might
decline in value.

6
<PAGE>

This bar chart shows changes in the performance of the Fund's CLASS A SHARES
from year to year for seven years.* Since Class A Shares are invested in the
same portfolio of securities, returns for Class C Shares will be substantially
similar to that of the Class A shares, shown here, and will differ only to the
extent that each Class has different expenses.

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's Class A total return from 1/1/98 to 9/30/98 was 2.29%.

<TABLE>
<CAPTION>
Best Quarter Worst Quarter
<S> <C>
1.15% 0.50%
(3/31/91) (3/31/94)
</TABLE>

This table shows the Fund's average annual total returns for Class A shares
for the periods ending December 31, 1997.

<TABLE>
<CAPTION>
SINCE FUND
1 YEAR 5 YEARS INCEPTION
(5/14/90)
<S> <C> <C> <C>
CALIFORNIA TAX EXEMPT
FUND CLASS A SHARES 3.36% 3.03% 3.44%
</TABLE>

Please call 1-800-DIAL-SET to obtain the Fund's current yield.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

<TABLE>
<CAPTION>
CLASS C
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees None
Other Expenses 0.76%
-----
Total Annual Fund Operating Expenses 0.80%*
</TABLE>

- --------------------------------------------------------------------------------

CALIFORNIA TAX EXEMPT FUND .78%

For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS C SHARES $82 $255 $444 $990
- --------------------------------------------------------------------------------
</TABLE>

7
<PAGE>

OHIO TAX FREE FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY
INVESTMENT GOAL Preserving capital and maintaining liquidity
while providing a high level of current income
exempt from Federal and Ohio personal income
taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
municipal securities, the Fund invests in high
quality, short-term Ohio municipal money market
securities.
- --------------------------------------------------------------------------------
INVESTMENT STRATEGY

The Fund invests in high quality, short-term debt securities,
commonly known as money market instruments. These include municipal bonds,
notes and tax exempt commercial paper, as well as certain taxable securities
and repurchase agreements. The Fund follows strict SEC rules about credit
risk, maturity and diversification of its investments.

WHAT ARE THE RISKS OF INVESTING IN OHIO TAX FREE FUND?

The Fund's securities may change in value in response to interest rate changes
and other factors. When interest rates are rising, the Fund's securities might
decline in value.

8
<PAGE>

OHIO TAX FREE FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

As of December 31, 1998, the Ohio Tax Free Fund had not commenced operations,
and did not have a performance history.

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

<TABLE>
<CAPTION>
CLASS C
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees None
Other Expenses 0.92%
-----
Total Annual Fund Operating Expenses 0.96%*
</TABLE>

- --------------------------------------------------------------------------------

OHIO TAX FREE FUND .85%

For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS C SHARES $98 $306 $531 $1,178
- --------------------------------------------------------------------------------
</TABLE>

9
<PAGE>

PENNSYLVANIA TAX FREE FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY
INVESTMENT GOAL Preserving capital while providing current
income exempt from Federal and Pennsylvania
state personal income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
municipal securities, the Fund invests in
high quality, short-term Pennsylvania
municipal money market securities.
- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

WHAT ARE THE RISKS OF INVESTING IN PENNSYLVANIA TAX FREE FUND?

The Fund's securities may change in value in response to interest rate changes
and other factors. When interest rates are rising, the Fund's securities might
decline in value.

10
<PAGE>

PENNSYLVANIA TAX FREE FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's CLASS A SHARES
from year to year for three years.* Since Class A Shares are invested in the
same portfolio of securities, returns for Class C Shares will be substantially
similar to that of the Class A shares, shown here, and will differ only to the
extent that each Class has different expenses.

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was 2.48%.

<TABLE>
<CAPTION>
Best Quarter Worst Quarter
<S> <C>
0.98% 0.78%
(6/30/95) (3/31/97)
</TABLE>

This table shows the Fund's average annual total returns for Class A Shares
for the periods ending December 31, 1997.

<TABLE>
<CAPTION>
SINCE FUND
1 YEAR INCEPTION
(1/24/94)
<S> <C>
PENNSYLVANIA TAX FREE FUND
CLASS A SHARES 3.46% 3.30%

</TABLE>

Please call 1-800-DIAL-SEI to obtain the Fund's current yield.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

<TABLE>
<CAPTION>
CLASS C
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees None
Other Expenses 0.89%
-----
Total Annual Fund Operating Expenses 0.93%*
</TABLE>

- --------------------------------------------------------------------------------

PENNSYLVANIA TAX FREE FUND .85%

For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS C SHARES $95 $296 $515 $1,143
- --------------------------------------------------------------------------------
</TABLE>

11
<PAGE>

THE FUNDS' OTHER INVESTMENTS

- --------------------------------------------------------------------------------

The investments and strategies described throughout this prospectus are those
that we use under normal conditions. During unusual economic or market
conditions or for temporary defensive or liquidity purposes, each Fund may
invest up to 100% of its assets in cash, money market instruments, repurchase
agreements and short-term obligations that would not ordinarily be consistent
with the Funds' objectives. The Funds will do so only if the Adviser
believes that the risk of loss outweighs the opportunity for taxable gains
and higher taxable income.

INVESTMENT ADVISER
- --------------------------------------------------------------------------------

The Investment Adviser makes investment decisions for the Funds and
continuously reviews, supervises and administers its investment program. The
Board of Trustees supervises the Adviser and establishes policies that they
must follow in their management activities.

INSTITUTIONAL TAX FREE FUND .04%
CALIFORNIA TAX EXEMPT FUND .04%
OHIO TAX FREE FUND .04%
PENNSYLVANIA TAX FREE FUND .04%

INSTITUTIONAL TAX FREE FUND
CALIFORNIA TAX EXEMPT FUND
OHIO TAX FREE FUND
PENNSYLVANIA TAX FREE FUND

12
<PAGE>

PURCHASING, SELLING AND EXCHANGING FUND SHARES

- --------------------------------------------------------------------------------

HOW TO PURCHASE FUND SHARES

You may purchase shares on any day that the New York Stock Exchange is open for
business (a Business Day). The Funds offer Class C shares only to financial
institutions and financial intermediaries for their own or their customers'
accounts.

Financial institutions and intermediaries may purchase Class C Shares by placing
orders with the Funds' Transfer Agent (or its authorized agent). Institutions
and intermediaries that use certain SEI proprietary systems may place orders
electronically through those systems.

Certain investors who deal directly with a financial institution or financial
intermediary will have to follow the institution's or intermediary's
procedures for transacting with the Funds. If you purchase, sell or exchange
Fund shares through a financial institution or intermediary (rather than
directly from the Funds), you may have to transmit your purchase, sale and
exchange requests to your financial institution or intermediary at an earlier
time for your transaction to become effective that day. This allows the
financial institution or intermediary time to process your request and
transmit it to the Funds. For more information about how to purchase, sell
or exchange Fund shares through your financial institution or intermediary,
you should contact your financial institution or intermediary directly.

You may purchase shares through financial intermediaries, or other financial
institutions that have executed dealer agreements. You cannot purchase money
market fund shares by Federal Reserve wire or Federal holiday on which wire
transfers are restricted. The Funds may reject any purchase order if the Funds
determine that accepting the order would not be in the best interests of the
Funds or their shareholders.

The price per share (the offering price) will be the net asset value per
share (NAV) next determined after the Funds receive your purchase order. NAV
for one Fund share is the value of that share's portion of all of the assets
in the Fund. Each money market fund calculates its NAV at 2:00 p.m., Eastern
time, except for the Institutional Tax Free Fund, which calculates its NAV at
3:00 p.m. Eastern time. If you want to receive the current Business Day's
NAV, generally the Funds must receive your purchase order before 12:30 p.m.
for each money market fund (except for the California Tax Exempt Fund and the
Ohio Tax Free Fund, for which the cut-off time is the time that NAV is
determined, usually 2:00 p.m. Eastern time, and for the Institutional Tax
Free Fund, for which the cutoff time is 1:30 p.m. Eastern time).

HOW THE FUNDS CALCULATE NAV

The Funds value their securities by utilizing the amortized cost valuation
method (as described in the SAI). If amortized cost is unreliable, fair
value prices may be determined in good faith using methods approved by the
Board of Trustees. The Funds expect each money market fund's NAV to remain
constant at $1.00 per share, although there is no guarantee that the Funds
can accomplish this.

13
<PAGE>

MINIMUM PURCHASES

To purchase Class C Shares of the non-money market funds for the first time, you
must invest at least $100,000 in any such Fund. The Funds may accept
investments of smaller amounts at their discretion.

SELLING FUND SHARES

HOW TO SELL YOUR FUND SHARES

You may sell (sometimes called "redeem") your shares on any Business Day by
contacting the Funds directly by mail or telephone. You may also sell your
shares by contacting your financial institution by mail or telephone. If you
would like to sell your shares, please notify the Funds in writing and
include a signature guarantee (a notarized signature is not sufficient).
The sale price of each share will be the next NAV determined after the Funds
receive your request.

TELEPHONE TRANSACTIONS

Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Funds have certain safeguards
and procedures to confirm the identity of callers and the authenticity of
instructions, the Funds are not responsible for any losses or costs incurred by
following telephone instructions the Funds reasonably believed to be genuine.
If you or your financial institution transact with the Funds over the telephone,
you will generally bear the risk of any loss.

RECEIVING YOUR MONEY

REDEMPTIONS IN KIND

The Funds generally pay sale proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Funds' remaining shareholders) the Funds might pay all or part of your
redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). Although it is highly unlikely that your
shares would ever be redeemed in kind, you would probably have to pay
transaction costs to sell the securities distributed to you, as well as taxes on
any capital gains from the sale as with any redemption.

INVOLUNTARY SALES OF YOUR SHARES

If your account balance drops below the required minimum, $45 million for Class
C Shares of the Institutional Tax Free Fund, you may be required to sell your
shares. You will always be given at least 60 days' written notice to give you
time to add to your account and avoid selling your shares.

14
<PAGE>

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

The Funds may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in the SAI.

EXCHANGING FUND SHARES

HOW TO EXCHANGE YOUR SHARES

You may exchange your Class C shares of any Fund for Class C shares of any
other Fund on any Business Day by contacting the Funds directly by mail or
telephone. You may also exchange shares through your financial institution by
mail or telephone. IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH,
YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED
(WHICH MAY TAKE UP TO 15 BUSINESS DAYS). This exchange privilege may be
changed or canceled at any time upon 60 days' notice. When you exchange
shares, you are really selling your shares and buying other Fund shares. So,
your sale price and purchase price will be based on the NAV next calculated
after the Funds receive your exchange request.

DISTRIBUTION OF FUND SHARES

SEI Investments Distribution Co. (SIDCo.) is the distributor of the shares of
the Funds. SIDCo. receives no compensation for distributing the Funds' Class C
shares.

For Class C Shares, shareholder servicing fees and administrative servicing
fees, as a percentage of average daily net assets, may be up to .25% and .25%,
respectively.

DIVIDENDS, DISTRIBUTIONS AND TAXES

- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

Each Fund distributes its income monthly. The Funds make distributions of
capital gains, if any, at least annually.

You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment,
you must notify the Funds in writing prior to the date of the distribution.
Your election will be effective for dividends and distributions paid after
the Funds receive your written notice. To cancel your election, simply send
the Funds written notice.

TAXES

15
<PAGE>

Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Capital gains
distributions may be taxable at different rates depending on the length of time
a Fund holds its portfolio securities. EACH SALE OR EXCHANGE
OF FUND SHARES IS A TAXABLE EVENT.

The Funds are not liable for any income or franchise taxes in the Commonwealth
of Massachusetts as long as they qualify as regulated investment companies under
Federal tax law.

MORE INFORMATION ABOUT TAXES IS IN THE FUNDS' STATEMENT OF ADDITIONAL
INFORMATION.

16
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The tables that follow present performance information about the Class C Shares
of each Fund. This information is intended to help you understand each Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Some of this information reflects financial information for
a single Fund share. The total returns in the tables represent the rate that
you would have earned [or lost] on an investment in a Fund, assuming you
reinvested all of your dividends and distributions. As of August 31, 1998, the
Ohio Tax Free Fund was not open to investors.

INSTITUTIONAL TAX FREE FUND - CLASS C
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized and Net Asset
Value, Activities/ Net Investment Net Realized Distributions Unrealized Gain Value, End of
Beginning of Net Investment Income Gain (Loss) on Period
Period Income Investments
and Capital
Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $1.00 $0.029 $(0.029) -- $(0.029) -- $1.00
- --------------------------------------------------------------------------------------------------------------------------------
1997 1.00 0.029 (0.029) -- (0.029) -- 1.00
- --------------------------------------------------------------------------------------------------------------------------------
1996(1) 1.00 0.029 (0.029) -- (0.029) -- 1.00
- --------------------------------------------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------------------------------------------------
Total Net Assets, End Ratio of Ratio of Ratio of Net Ratio of Net Portfolio
Return of Period (000) Expenses to Expenses to Investment Investment Income Turnover
Average Net Average Net Income to to Average Net Rate
Assets Assets Average Net Assets Excluding
Excluding Fee Assets Fee Waivers
Waivers
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 2.94% $22,676 0.83% 0.93% 2.89% 2.79% --
- ----------------------------------------------------------------------------------------------------------------
1997 2.93 9,382 0.83 0.95 2.85 2.73 --
- ----------------------------------------------------------------------------------------------------------------
1996(1) 2.92 19,208 0.83* 0.96* 2.89* 2.76* --
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

* Annualized.
(1) The Institutional Tax Free Fund- Class C commenced operations on
September 11, 1995.

17
<PAGE>

SEI Tax Exempt Trust

ADVISER

WEISS, PECK & GREER, L.L.C.

DISTRIBUTOR

SEI INVESTMENTS DISTRIBUTION CO.

LEGAL COUNSEL

MORGAN, LEWIS & BOCKIUS LLP

More information about the Funds is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)
- --------------------------------------------------------------------------------

ANNUAL AND SEMI-ANNUAL REPORTS

- --------------------------------------------------------------------------------

TO OBTAIN MORE INFORMATION:
- --------------------------------------------------------------------------------

BY TELEPHONE: Call 1-800-DIAL-SEI

BY MAIL: Write to the Funds at:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456.

BY INTERNET: http://www.seic.com

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual
Reports, as well as other information about SEI Tax Exempt Trust, from the SEC's
website ("http://www.sec.gov"). You may review and copy documents at the SEC
Public Reference Room in Washington, DC (for information call 1-800-SEC-0330).
You may request documents by mail from the SEC, upon payment of a duplicating
fee, by writing to: Securities and Exchange Commission, Public Reference
Section, Washington, DC 20549-6009. The Fund's Investment Company Act
registration number is 811-3447.

18
<PAGE>

SEI TAX
EXEMPT TRUST

CLASS D SHARES

PROSPECTUS
DECEMBER 31, 1998

------------------------------------

TAX FREE FUND

------------------------------------

ADVISER:
WEISS, PECK & GREER, L.L.C.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY FUND SHARES OR
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.

<PAGE>

SEI Tax
Exempt Trust

HOW TO READ THIS PROSPECTUS
- --------------------------------------------------------------------------------

SEI Tax Exempt Trust is a mutual fund family that offers different classes of
shares in separate investment portfolios (Funds). The Funds have individual
investment goals and strategies, and are designed primarily for institutional
investors. This prospectus gives you important information about Class D Shares
of the Tax Free Fund that you should know before investing. Please read this
prospectus and keep it for future reference.

This prospectus has been arranged into different sections so that you can easily
review this important information. On the next page, there is some general
information you should know about the Fund. For more detailed information about
the Fund, please see:

TAX FREE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE FUND'S OTHER INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . .
THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PURCHASING, SELLING AND EXCHANGING FUND SHARES. . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . . .
FINANCIAL HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . .
HOW TO OBTAIN MORE INFORMATION ABOUT SEI TAX EXEMPT TRUST . . . Back Cover

- --------------------------------------------------------------------------------

---------------------------------------------------------------------
MUNICIPAL SECURITIES

The Fund invests primarily in municipal securities. Municipal securities
are bonds and other fixed income securities issued by state and local
governments and their agencies (such as housing or hospital authorities) to
finance capital expenditures and operations. The obligation to pay
principal and interest on municipal securities may be a general obligation
of the state or local government, but may be supported only by an agency or
a particular source of revenues. Therefore, municipal securities vary in
credit quality.

Municipal securities, like other fixed income securities, rise and fall in
value in response to economic and market factors, primarily changes in
interest rates, and actual or perceived credit quality. Rising interest
rates will generally cause municipal securities to decline in value.
Longer-term securities respond more sharply to interest rate changes than
do shorter-term securities. A municipal security will also lose value if,
due to rating downgrades or other factors, there are concerns about the
issuers current or future ability to make principal or interest payments.
A strategy to invest in investment grade securities reduces but does not
eliminate this risk.

Generally, the income from municipal securities is exempt from Federal
income taxes, and also may be exempt from certain state or local taxes
depending on an investor's state of residence. Even so, income from
certain obligations may be subject to Federal alternative minimum taxes.
---------------------------------------------------------------------

2
<PAGE>

INTRODUCTION
- --------------------------------------------------------------------------------

The Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities like stocks and
bonds. Before you invest, you should know a few things about investing in
mutual funds.

The Fund has its own investment goal and strategies for reaching that goal. The
Fund's assets are managed under the direction of its Adviser. The Adviser
invests the Fund's assets in a way it believes will help the Fund achieve its
goals. Still, investing in the Fund involves risks, and there is no guarantee
that the Fund will achieve its goal. The Adviser makes judgments about the
economy, but these judgments may not anticipate actual market movements or the
impact of economic conditions on issuers. In fact, no matter how good a job the
Adviser does, you could lose money on your investment in the Fund, just as you
could with other investments. A Fund share is not a bank deposit, and it is not
insured or guaranteed by the FDIC or any government agency.

- --------------------------------------------------------------------------------

---------------------------------------------------------------------

YEAR 2000 RISKS

Like other mutual funds (and most organizations around the world), the Fund
could be affected by computer problems related to the transition to the
year 2000. While no one knows if these problems will have any impact on
the Fund or on the financial markets in general, the Fund is taking steps
to protect investors. These include efforts to ensure that the Fund's own
systems are prepared to make the transition to the year 2000, and to
determine that the problem will not affect the systems used by the Fund's
major service providers. Whether these steps will be effective can only
be known for certain in the year 2000. There is additional information on
these risks in the Statement of Additional Information.

---------------------------------------------------------------------

3
<PAGE>

TAX FREE FUND
- --------------------------------------------------------------------------------
INVESTMENT SUMMARY

INVESTMENT GOAL Preserving principal and maintaining
liquidity while providing current income
exempt from Federal income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an Adviser experienced in selecting
municipal securities, the Fund invests in
high quality, short-term tax-exempt money
market securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

The Tax Free Fund is a money market fund that invests substantially all of
its assets (at least 80%) in municipal money market securities that pay
interest that is exempt from Federal income taxes. The issuers of these
securities are state and local governments and agencies located in all fifty
states, the District of Columbia, Puerto Rico and other U.S. territories and
possessions. The Adviser seeks to choose securities with an acceptable
maturity, that are marketable and liquid, that offer competitive yields, and
that are issued by issuers that are on a sound financial footing. The
Adviser also considers sector allocation and relative valuations in selecting
securities for the Fund. The Fund may, to a limited extent, invest in
securities subject to the alternative minimum tax or in taxable municipal
securities.

WHAT ARE THE RISKS OF INVESTING IN THE TAX FREE FUND?

An investment in a money market fund is not a bank deposit. Although the
Fund, like all money market funds, seeks to keep a constant price per share of
$1.00, you may lose money by investing in the Fund.

4
<PAGE>

TAX FREE FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's CLASS D SHARES
from year to year for three years.*

[BAR CHART]

1995 1996 1997
- ---- ---- ----
<S> <C> <C>
3.26% 2.87% 2.89%
</TABLE>

* The performance information shown above is based a calendar year. The Fund's
total return from 1/1/98 to 9/30/98 was 2.14%.

BEST QUARTER WORST QUARTER
<S> <C>
0 .86% 0.68%
(6/30/95) (3/31/97)
</TABLE>

This table shows the Fund's average annual total returns for Class D Shares
for the periods ending December 31, 1997.

SINCE
FUND
1 YEAR INCEPTION
(11/01/94)
<S> <C> <C>
TAX FREE FUND
CLASS D SHARES 2.89% 3.02%
</TABLE>

Please call 1-800-DIAL-SEI to obtain the Fund's current yield.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

CLASS D
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.51%
-----
Total Annual Fund Operating Expenses 0.80%*
</TABLE>

- --------------------------------------------------------------------------------

TAX FREE FUND .59%

For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS D SHARES $82 $255 $444 $990
</TABLE>

- --------------------------------------------------------------------------------

5
<PAGE>

THE FUND'S OTHER INVESTMENTS

- --------------------------------------------------------------------------------

The Fund may invest in other securities, use other strategies and engage in
investment practices other than those listed in the Fund Summary, and they are
described in detail in the Statement of Additional Information (SAI). Of
course, there is no guarantee that the Fund will achieve its investment goal.

The investments and strategies described throughout this prospectus are those
that we use under normal conditions. During unusual economic or market
conditions or for temporary defensive or liquidity purposes, the Fund may
invest up to 100% of its assets in cash, money market instruments, repurchase
agreements and short-term obligations that would not ordinarily be consistent
with the Fund's objectives. The Fund will do so only if the Adviser believes
that the risk of loss outweighs the opportunity for taxable gains and higher
taxable income.

INVESTMENT ADVISER
- --------------------------------------------------------------------------------

The Investment Adviser makes investment decisions for the Fund and continuously
reviews, supervises and administers its investment program. The Board of
Trustees supervises the Adviser and establishes policies that it must follow
in its management activities.

TAX FREE FUND .04%

PORTFOLIO MANAGER

TAX FREE FUND

WEISS, PECK & GREER, L.L.C.: Janet Fiorenza is a portfolio manager at Weiss,
Peck & Greer, L.L.C. Ms. Fiorenza has been with Weiss, Peck & Greer, L.L.C.
since 1988, and with its predecessor since 1980. She manages the Tax Free Fund.
She has more than 18 years of investment experience.

6
<PAGE>

PURCHASING, SELLING AND EXCHANGING FUND SHARES

- --------------------------------------------------------------------------------

For Class D Shares, the minimum initial investment for IRAs is $500. If you
participate in the Systematic Investment Plan, the minimum initial investment is
$250. Additional investments into Class D Shares must be at least $100 ($50 per
month for the Systematic Investment Plan).

HOW TO PURCHASE FUND SHARES

You may purchase shares on any day that the New York Stock Exchange is open for
business (a Business Day).

You may purchase Class D Shares directly from us by:

- - mail
- - telephone
- - wire, or
- - Automated Clearing House (ACH).

To purchase shares directly from us, please call 1-800-DIAL-SEI. Write your
check, payable in U.S. dollars, to "SEI Tax Exempt Trust" and include the name
of the appropriate Fund(s) on the check. We cannot accept third-party checks,
credit cards, credit card checks or cash. We may reject any purchase order if
we determine that accepting the order would not be in the best interests of the
Funds or their shareholders.

The price per share (the offering price) will be the net asset value per share
(NAV) next determined after we receive your purchase order. NAV for one Fund
share is the value of that share's portion of all of the assets in the Fund. We
calculate the Fund's NAV at 3:00 p.m., Eastern time. If you want to receive the
current Business Day's NAV, generally we must receive your purchase order before
1:30 p.m.

HOW WE CALCULATE NAV

The Fund values securities by utilizing the amortized cost valuation method (as
described in the SAI). If the Fund thinks amortized cost is unreliable, fair
value prices may be determined in good faith using methods approved by the Board
of Trustees. The Fund expects each money market fund's NAV to remain constant
at $1.00 per share, although the Fund cannot guarantee this.

MINIMUM PURCHASES

To purchase Class D Shares for the first time, you must invest at least $1,000
in the Fund. All subsequent purchases must be at least $100 ($25 for payroll
deductions authorized pursuant to pre-approved payroll deductions plans). The
Fund may accept investments of smaller amounts at our discretion.

SYSTEMATIC INVESTMENT PLAN

If you have a checking or savings account with certain banks, you may purchase
Class D Shares automatically through regular deductions from your account.
Please call 1-800-DIAL-SEI for information regarding participating banks. With
a $250 minimum initial investment, you may begin regularly scheduled investments
from $50 up to $250 once or twice a month. The Distributor may close your
account if you do not maintain a minimum investment of $1,000 at the end of two
years.

7
<PAGE>

SELLING FUND SHARES

HOW TO SELL YOUR FUND SHARES

You may sell (sometimes called "redeem") your shares on any Business Day by
contacting us directly by mail or telephone. You may also sell your shares by
contacting your financial institution by mail or telephone. If you would like
to sell your shares, please notify us in writing and include a signature
guarantee (a notarized signature is not sufficient). The sale price of each
share will be the next NAV determined after we receive your request.

TELEPHONE TRANSACTIONS

Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Fund has certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, The Fund is not responsible for any losses or costs incurred by
following telephone instructions the Fund reasonably believes to be genuine. If
you or your financial institution transact with the Fund over the telephone, you
will generally bear the risk of any loss.

SYSTEMATIC WITHDRAWAL PLAN

If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $50 from any Fund. The proceeds of
each withdrawal will be mailed to you by check or, if you have an account with
certain banks, electronically transferred to your account. Please call
1-800-DIAL-SEI for information regarding banks that participate in the
Systematic Withdrawal Plan.

RECEIVING YOUR MONEY

Normally, the Fund will send your sale proceeds within five Business Days after
the Fund receives your request, but it may take up to seven Business Days. Your
proceeds can be wired to a bank account or sent to you by check. IF YOU
RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY
NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS
DAYS).

REDEMPTIONS IN KIND

The Fund generally pays sale proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Fund's remaining shareholders) the Fund might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). Although it is highly unlikely that your shares would
ever be redeemed in kind, you would probably have to pay transaction costs to
sell the securities distributed to you, as well as taxes on any capital gains
from the sale as with any redemption.

INVOLUNTARY SALES OF YOUR SHARES

If your account balance drops below the required minimum of $1,000 for Class D
Shares, you may be required to sell your shares. You will always be given at
least 60 days' written notice to give you time to add to your account and avoid
selling your shares.

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

The Fund may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in the SAI.

8
<PAGE>

EXCHANGING FUND SHARES

HOW TO EXCHANGE YOUR SHARES

You may exchange Class D Shares of the Fund for Class D Shares of any other SEI
Fund. If you exchange shares that you purchased without a sales charge or with
a lower sales charge into a Fund with a sales charge or with a higher sales
charge, the exchange is subject to an incremental sales charge (e.g., the
difference between the lower and higher applicable sales charges). If you
exchange shares into a Fund with the same, lower or no sales charge there is no
incremental sales charge for the exchange.

IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT BE ABLE TO
EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15
BUSINESS DAYS). This exchange privilege may be changed or canceled at any time
upon 60 days' notice. When you exchange shares, you are really selling your
shares and buying other Fund shares. So, your sale price and purchase price
will be based on the NAV next calculated after the Fund receives your exchange
request.

DISTRIBUTION OF FUND SHARES

SEI Investments Distribution Co. (SIDCo.) is the distributor of the shares of
the Fund. The Fund has adopted a distribution plan that allows the Fund to pay
SIDCo. distribution and service fees for the sale and distribution of its Class
D shares, and for services provided to shareholders. Because these fees are
paid out of a Fund's assets continuously, over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
charges.

The Distribution Fee for Class D Shares, as a percentage of average daily net
assets, may be up to .25%.

DIVIDENDS, DISTRIBUTIONS AND TAXES

- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

The Fund distributes its income monthly, and makes distributions of capital
gains, if any, at least annually.

You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify us in writing prior to the date of the distribution. Your election
will be effective for dividends and distributions paid after we receive your
written notice. To cancel your election, simply send us written notice.

TAXES

PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Fund and its shareholders. This summary is based on current tax
laws, which may change.

The Fund will distribute substantially all of its income and capital gains,
if any. The dividends and distributions you receive may be subject to
federal, state and local taxation, depending upon your tax situation.
Capital gains distributions may be taxable at different rates depending on
the length of time the Fund holds its portfolio securities. EACH SALE OR
EXCHANGE OF FUND SHARES IS A TAXABLE EVENT.

9
<PAGE>

The Fund intends to distribute federally tax-exempt income. The Fund may
invest a portion of its assets in securities that generate taxable income for
federal or state income taxes. Income exempt from federal tax may be subject
to state and local taxes. Any capital gains distributed by the Fund may be
taxable.

The Fund is not liable for any income or franchise taxes in the Commonwealth of
Massachusetts as long as it qualifies as a regulated investment company under
Federal tax law.

MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION.

10
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The tables that follow present performance information about the Class D Shares
of the Fund. This information is intended to help you understand the Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Some of this information reflects financial information for
a single Fund share. The total returns in the tables represent the rate that
you would have earned [or lost] on an investment in the Fund, assuming you
reinvested all of your dividends and distributions.

This information has been audited by Arthur Andersen LLP, independent public
accountants. Their report, along with the Fund's financial statements, appears
in the annual report that accompanies the Statement of Additional Information.
You can obtain the annual report, which contains more performance information,
at no charge by calling 1-800-DIAL-SEI.

TAX FREE FUND - CLASS D
- --------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Investment Distributions/ Distributions/ Total Net Realized Net
Value, Activities/ Net Investment Net Realized Gain Distributions and Unrealized Asset
Beginning Net Investment Income Gain (Loss) on Value,
of Period Income Investments End of
and Capital Period
Transactions
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $1.00 $0.029 $(0.029) -- $(0.029) -- $1.00
- ------------------------------------------------------------------------------------------------------------------------------
1997 1.00 0.028 (0.028) -- (0.028) -- 1.00
- ------------------------------------------------------------------------------------------------------------------------------
1996 1.00 0.030 (0.030) -- (0.030) -- 1.00
- ------------------------------------------------------------------------------------------------------------------------------
1995(1) 1.00 0.026 (0.026) -- (0.026) -- 1.00
- ------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------
Total Net Assets, Ratio of Ratio of Ratio Ratio Portfolio
Return End of Expenses Expenses of Net of Net Turnover
Period (000) to Average to Average Investment Investment Rate
Net Assets Net Assets Income to Income to
Excluding Average Average
Fee Waivers Net Assets Net Assets
Excluding
Fee Waivers
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>

1998 2.91% $ 1 0.59% 0.59% 3.13% 3.13% --
- ------------------------------------------------------------------------------------------------------------------------------
1997 2.86 1 0.74 0.74 3.04 3.04 --
- ------------------------------------------------------------------------------------------------------------------------------
1996 2.99 6 0.80 0.88 3.18 3.10 --
- ------------------------------------------------------------------------------------------------------------------------------
1995(1) 2.68 272 0.80* 0.86* 3.13* 3.07* --
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Annualized.
(1) The Tax Free Fund- Class D commenced operations on November 1, 1994.

11
<PAGE>

SEI Tax Exempt Trust

ADVISER

WEISS, PECK & GREER, L.L.C.

DISTRIBUTOR

SEI INVESTMENTS DISTRIBUTION CO.

LEGAL COUNSEL

MORGAN, LEWIS & BOCKIUS LLP

More information about the Fund is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)
- --------------------------------------------------------------------------------

ANNUAL AND SEMI-ANNUAL REPORTS
- --------------------------------------------------------------------------------

These reports list the Fund's holdings and contain information from the Fund's
managers about fund strategies and recent market conditions and trends. The
reports also contain detailed financial information about the Fund.

TO OBTAIN MORE INFORMATION:
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
BY TELEPHONE: Call 1-800-DIAL-SEI

BY MAIL: Write to the Fund at:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456.

BY INTERNET: http://www.seic.com

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual
Reports, as well as other information about SEI Tax Exempt Trust, from the SEC's
website ("http://www.sec.gov"). You may review and copy documents at the SEC
Public Reference Room in Washington, DC (for information call 1-800-SEC-0330).
You may request documents by mail from the SEC, upon payment of a duplicating
fee, by writing to: Securities and Exchange Commission, Public Reference
Section, Washington, DC 20549-6009. The Fund's Investment Company Act
registration number is 811-3447.

- --------------------------------------------------------------------------------

<PAGE>

---------------------------------------------------------
SEI Tax
EXEMPT TRUST
---------------------------------------------------------

CNI CLASS SHARES

PROSPECTUS
DECEMBER 31, 1998

CALIFORNIA TAX EXEMPT FUND

ADVISER:
WEISS, PECK & GREER, L.L.C.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY FUND SHARES OR
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.

<PAGE>

- --------------------
SEI Tax
Exempt
Trust
- --------------------

HOW TO READ THIS PROSPECTUS
- --------------------------------------------------------------------------------

SEI Tax Exempt Trust is a mutual fund family that offers different classes of
shares in separate investment portfolios (Funds). The Funds have individual
investment goals and strategies, and are designed primarily for institutional
investors. This prospectus gives you important information about CNI Class
Shares of the California Tax Exempt Fund that you should know before investing.
Please read this prospectus and keep it for future reference.

This prospectus has been arranged into different sections so that you can easily
review this important information. On the next page, there is some general
information you should know about the Fund. For more detailed information about
the Fund, please see:

<TABLE>

<S> <C>
California Tax Exempt Fund............................................
The Fund's other investments..........................................
The Adviser...........................................................
Purchasing, selling and exchanging Fund shares........................
Dividends, distributions and taxes....................................
Financial Highlights..................................................
How to obtain more information about SEI Tax Exempt Trust.............Back Cover

</TABLE>

- --------------------------------------------------------------------------------

MUNICIPAL SECURITIES

The Fund invests primarily in municipal securities. Municipal securities are
bonds and other fixed income securities issued by state and local governments
and their agencies (such as housing or hospital authorities) to finance capital
expenditures and operations. The obligation to pay principal and interest on
municipal securities may be a general obligation of the state or local
government, but may be supported only by an agency or a particular source of
revenues. Therefore, municipal securities vary in credit quality.

Municipal securities, like other fixed income securities, rise and fall in
value in response to economic and market factors, primarily changes in
interest rates, and actual or perceived credit quality. Rising interest rates
will generally cause municipal securities to decline in value. Longer-term
securities respond more sharply to interest rate changes than do shorter-term
securities. A municipal security will also lose value if, due to rating
downgrades or other factors, there are concerns about the issuers current or
future ability to make principal or interest payments. A strategy to invest
in investment grade securities reduces but does not eliminate this risk.

2
<PAGE>

INTRODUCTION
- --------------------------------------------------------------------------------

The Fund has its own investment goal and strategies for reaching that goal. The
Fund's assets are managed under the direction of its Adviser. The Adviser
invests the Fund's assets in a way it believes will help the Fund achieve its
goals. Still, investing in a Fund invloves risks, and there is no guarantee that
the Fund will achieve its goal. The Adviser makes judgments about the economy,
but these judgments may not anticipate actual market movements or the impact of
economic conditions on issuers. In fact, no matter how good a job the Adviser
does, you could lose money on your investment in the Fund, just as you could
with other investments. A Fund share is not a bank deposit, and it is not
insured or guaranteed by the FDIC or any government agency.

- --------------------------------------------------------------------------------

YEAR 2000 RISKS

Like other mutual funds (and most organizations around the world), the Fund
could be affected by computer problems related to the transition to the year
2000. While no one knows if these problems will have any impact on the Fund or
on the financial markets in general, the Fund is taking steps to protect
investors. These include efforts to ensure that the Fund's own systems are
prepared to make the transition to the year 2000, and to determine that the
problem will not affect the systems used by the Fund's major service providers.
Whether these steps will be effective can only be known for certain in the year
2000. There is additional information on these risks in the Statement of
Additional Information.

<PAGE>

CALIFORNIA TAX EXEMPT FUND
- --------------------------------------------------------------------------------

INVESTMENT SUMMARY

INVESTMENT GOAL Preserving principal and maintaining liquidity
while providing current income exempt from
Federal and California personal income taxes.

SHARE PRICE VOLATILITY Very low

PRINCIPAL INVESTMENT STRATEGY Utilizing an adviser experienced in selecting
municipal securities, the Fund invests
in high quality, short-term California
municipal money market securities.

- --------------------------------------------------------------------------------

INVESTMENT STRATEGY

WHAT ARE THE RISKS OF INVESTING IN CALIFORNIA TAX EXEMPT FUND?

The Fund's securities may change in value in response to interest rate changes
and other factors. When interest rates are rising, the Fund's securities might
decline in value.

4
<PAGE>

CALIFORNIA TAX EXEMPT FUND
- --------------------------------------------------------------------------------

PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the California Tax Exempt Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.

This bar chart shows changes in the
performance of the Fund's CNI CLASS
SHARES from year to year for three years.*

1995 1996 1997
<S> <C> <C>
3.09% 2.76% 2.84%

</TABLE>

* The performance information shown above is based
on a calendar year. The Fund's total return from
1/1/98 to 9/30/98 was 1.91%.

Best Quarter Worst Quarter
<S> <C>
0.81% 0.64%
(3/31/95) (3/31/97)

</TABLE>

This table shows the Fund's average annual total returns for CNI Class
shares for the periods ending December 31, 1997.

<TABLE>
<CAPTION>
SINCE FUND
1 YEAR INCEPTION
(5/11/94)
<S> <C> <C>
CALIFORNIA TAX EXEMPT
FUND CNI CLASS SHARES 2.84% 2.82%
</TABLE>

Please call 1-800-DIAL-SEI to obtain the Fund's current yield.

- ------------------------------------------------------------------

FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

CNI CLASS
<S> <C>
Investment Advisory Fees 0.04%
Distribution and Service (12b-1) Fees 0.50%
Other Expenses 0.51%
Total Annual Fund Operating Expenses 1.05%*

</TABLE>

- --------------------------------------------------------------------------------

* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADMINISTRATOR AND
THE DISTRIBUTOR ARE EACH WAIVING A PORTION OF THEIR FEES IN ORDER TO KEEP TOTAL
OPERATING EXPENSES AT A SPECIFIED LEVEL. THE ADMINISTRATOR AND/OR THE
DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:

CALIFORNIA TAX EXEMPT FUND .78%

For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

1 Year 3 Years 5 Years 10 Years

<S> <C> <C> <C> <C>
CNI Class shares $107 $334 $579 $1,283

</TABLE>

5
<PAGE>

THE FUND'S OTHER INVESTMENTS

- --------------------------------------------------------------------------------

The Fund may invest in other securities, use other strategies and engage in
investment practices other than those listed in the Fund Summary, and they are
described in detail in the Statement of Additional Information (SAI). Of course,
there is no guarantee that the Fund will achieve its investment goal.

The investments and strategies described throughout this prospectus are those
that the Fund uses under normal conditions. During unusual economic or market
conditions or for temporary defensive or liquidity purposes, the Fund may
invest up to 100% of its assets in cash, money market instruments, repurchase
agreements and short-term obligations that would not ordinarily be consistent
with the Fund's objectives. The Fund will do so only if the Adviser believes
that the risk of loss outweighs the opportunity for taxable gains and higher
taxable income.

INVESTMENT ADVISER
- --------------------------------------------------------------------------------

The Investment Adviser makes investment decisions for the Fund and
continuously reviews, supervises and administers its investment program. The
Board of Trustees supervises the Adviser and establishes policies that it
must follow in their management activities.

CALIFORNIA TAX EXEMPT FUND .04%

PORTFOLIO MANAGER

CALIFORNIA TAX EXEMPT FUND

WEISS, PECK & GREER, L.L.C.: Janet Fiorenza is a portfolio manager at
Weiss, Peck & Greer, L.L.C. Ms. Fiorenza has been with Weiss, Peck &
Greer, L.L.C. since 1988, and with its predecessor since 1980. She manages
the California Tax Exempt Fund. She has more than 18 years of investment
experience.

6
<PAGE>

PURCHASING, SELLING AND EXCHANGING FUND SHARES

- --------------------------------------------------------------------------------

HOW TO PURCHASE FUND SHARES

You may purchase shares on any day that the New York Stock Exchange is open for
business (a Business Day). The Fund offers CNI Class Shares only to financial
institutions and financial intermediaries for their own or their customers'
accounts.

Financial institutions and intermediaries may purchase CNI Class Shares by
placing orders with the Fund's Transfer Agent (or its authorized agent).
Institutions and intermediaries that use certain SEI proprietary systems may
place orders electronically through those systems.

Certain investors who deal directly with a financial institution or financial
intermediary will have to follow the institution's or intermediary's procedures
for transacting with the Fund. If you purchase, sell or exchange Fund shares
through a financial institution or intermediary (rather than directly from the
Fund), you may have to transmit your purchase, sale and exchange requests to
your financial institution or intermediary at an earlier time for your
transaction to become effective that day. This allows the financial institution
or intemerdiary time to process your request and transmit it to the Fund. For
more information about how to purchase, sell or exchange Fund shares through
your financial institution or intermediary, you should contact your financial
institution or intermediary directly.

You may purchase shares through financial intermediaries or other financial
institutions that have executed dealer agreements. You cannot purchase money
market fund shares by Federal Reserve wire or Federal holiday on which wire
transfers are restricted. The Fund may reject any purchase order if the Fund
determines that accepting the order would not be in the best interests of the
Fund or its shareholders.

The price per share (the offering price) will be the net asset value per share
(NAV) next determined after the Fund receives your purchase order. NAV for one
Fund share is the value of that share's portion of all of the assets in the
Fund. The Fund calculates its NAV at 2:00 p.m., Eastern time. If you want to
receive the current Business Day's NAV, generally the Fund must receive your
purchase order before the time that NAV is determined (usually 2:00 p.m.
Eastern time).

HOW THE FUND CALCULATES NAV

The Fund values securities by utilizing the amortized cost valuation method
(as described in the SAI). If amortized cost is unreliable, fair value prices
may be determined in good faith using methods approved by the Board of
Trustees. The Fund expects NAV to remain constant at $1.00 per share,
although there is no guarantee that the Fund can accomplish this.

7
<PAGE>

SELLING FUND SHARES

HOW TO SELL YOUR FUND SHARES

You may sell (sometimes called "redeem") your shares on any Business Day by
contacting the Fund directly by mail or telephone. You may also sell your
shares by contacting your financial institution by mail or telephone. If you
would like to sell your shares, please notify the Fund in writing and include
a signature guarantee (a notarized signature is not sufficient). The sale
price of each share will be the next NAV determined after the Fund receives
your request.

TELEPHONE TRANSACTIONS

Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Fund has certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, the Fund is not responsible for any losses or costs incurred by
following telephone instructions the Fund reasonably believed to be genuine. If
you or your financial institution transact with the Fund over the telephone, you
will generally bear the risk of any loss.

RECEIVING YOUR MONEY

Normally, the Fund will send your sale proceeds within five Business Days they
receive your request. Your proceeds can be wired to a bank account or sent to
you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH,
REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY
TAKE UP TO 15 BUSINESS DAYS).

REDEMPTIONS IN KIND

The Fund generally pays sale proceeds in cash. However, under unusual conditions
that make the payment of cash unwise (and for the protection of the Fund's
remaining shareholders) the Fund might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). Although it is highly unlikely that your shares would ever
be redeemed in kind, you would probably have to pay transaction costs to sell
the securities distributed to you, as well as taxes on any capital gains from
the sale as with any redemption.

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

The Fund may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More
information about this is in the SAI.

8
<PAGE>

EXCHANGING FUND SHARES

HOW TO EXCHANGE YOUR SHARES

You may exchange your CNI Class Shares of the Fund for CNI Class Shares of
any other SEI Fund on any Business Day by contacting the Fund directly by
mail or telephone. You may also exchange shares through your financial
institution by mail or telephone. IF YOU RECENTLY PURCHASED SHARES BY CHECK
OR THROUGH ACH, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK
HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS). This exchange privilege
may be changed or canceled at any time upon 60 days' notice. When you
exchange shares, you are really selling your shares and buying other Fund
shares. So, your sale price and purchase price will be based on the NAV next
calculated after the Fund receives your exchange request.

DISTRIBUTION OF FUND SHARES

SEI Investments Distribution Co. (SIDCo.) is the distributor of the shares of
the Fund. The Fund has adopted a distribution plan that allows the Fund to pay
SIDCo. distribution and service fees for the sale and distribution of its Class
D shares, and for services provided to shareholders. Because these fees are paid
out of a Fund's assets continuously, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales
charges.

The Distribution Fee for Class D Shares, as a percentage of average daily net
assets, may be up to .50%.

DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

The Fund distributes its income monthly. The Fund makes distributions of capital
gains, if any, at least annually.

You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Fund
receives your written notice. To cancel your election, simply send us written
notice.

9
<PAGE>

TAXES

PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below is a summary some important tax issues that
affect the Fund and its shareholders. This summary is based on current tax laws,
which may change.

The Fund will distribute substantially all of its income and capital gains,
if any. The dividends and distributions you receive may be subject to
federal, state and local taxation, depending upon your tax situation. Capital
gains distributions may be taxable at different rates depending on the length
of time the Fund holds its portfolio securities. EACH SALE OR EXCHANGE OF
FUND SHARES IS A TAXABLE EVENT.

The Fund is not liable for any income or franchise taxes in the Commonwealth of
Massachusetts as long as it qualifies as a regulated investment company under
Federal tax law.

MORE INFORMATION ABOUT TAXES IS IN THE FUND'S STATEMENT OF ADDITIONAL
INFORMATION.

10
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The tables that follow present performance information about the shares of the
Fund. This information is intended to help you understand the Fund's financial
performance for the past five years, or, if shorter, the period of the Fund's
operations. Some of this information reflects financial information for a single
Fund share. The total returns in the tables represent the rate that you would
have earned [or lost] on an investment in the Fund, assuming you reinvested all
of your dividends and distributions.

CALIFORNIA TAX EXEMPT FUND - CNI CLASS

- --------------------------------------------------------------------------------

Net Investment Distributions/ Distributions/ Total Net Realized
Asset Activities Net Net Realized Distribution and
Value Net Investment Gain Unrealized
Beginning Investment Income Gain (Loss) on
of Period Income Investments
and Capital
Transactions

<S> <C> <C> <C> <C> <C> <C>
1998 $ 1.00 $ 0.02 $ (0.027) __ $ (0.027) __

1997 1.00 0.02 (0.028) __ (0.028) __

1996 1.00 0.02 (0.028) __ (0.028) __

1995 1.00 0.02 (0.029) __ (0.029) __

1994(1) 1.00 0.00 (0.006) __ (0.006) __

</TABLE>

Net Asset Total Net Assets Ratio of Ratio of Ratio of Net Ratio of Net Portfolio
Value, Return End of Expenses Expenses to Investment Investment Turnover
End of Period to Average Average Net Income to Income to Rate
Period (000) Net Assets Assets Excluding Average Average Net
Fee Waivers Net Assets Assets Excluding
Fee Waivers

<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $ 1.00 2.69% $474,040 0.78% 1.05%+ 2.64% 2.37%+ __

1997 1.00 2.79 412,142 0.78 1.06 2.75 2.47 __

1996 1.00 2.90 350,684 0.78 0.86 2.84 2.76 __

1995 1.00 2.97 328,035 0.78 0.93 2.93 2.78 __

1994 1.00 2.14* 318,122 0.67* 0.87* 2.06* 1.86* __

</TABLE>

+ Ratios of expenses and net investment income to average net assets
excluding fee waivers has been restated to reflect the .25% for Shareholder
Servicing Fees currently waived.
* Annualized.
(1) The California Tax Exempt Fund- CNI Class (formerly, Class G) commenced
operations on May 11, 1994.

11
<PAGE>

- -------------------------------------
SEI TAX EXEMPT TRUST
- -------------------------------------

ADVISER

WEISS, PECK & GREER, L.L.C.

DISTRIBUTOR

SEI INVESTMENTS DISTRIBUTION CO.

LEGAL COUNSEL

MORGAN, LEWIS & BOCKIUS LLP

More information about the Fund is available without
charge through the following:

STATEMENT OF ADDITIONAL
INFORMATION (SAI)
- --------------------------------------------------------------------------------

ANNUAL AND SEMI-ANNUAL REPORTS

- --------------------------------------------------------------------------------

TO OBTAIN MORE INFORMATION:
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
BY TELEPHONE: Call 1-800-DIAL-SEI

BY MAIL: Write to the Fund at:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456.

BY INTERNET: http://www.seic.com

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual Reports,
as well as other information about SEI Tax Exempt Trust, from the SEC's website
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC- 0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009. The Fund's Investment Company Act registration number
is 811- 3447.

- --------------------------------------------------------------------------------

<PAGE>
SEI TAX EXEMPT TRUST

Manager:

SEI Investments Fund Management

Distributor:

SEI Investments Distribution Co.

Investment Advisers and Sub-Advisers:

SEI Investments Management Corporation

Morgan Grenfell Capital Management Incorporated

Standish, Ayer & Wood, Inc.

Van Kampen Management, Inc.

Weiss, Peck & Greer L.L.C.

This STATEMENT OF ADDITIONAL INFORMATION is not a Prospectus. It is intended
to provide additional information regarding the activities and operations of SEI
Tax Exempt Trust (the "Trust") and should be read in conjunction with the
Trust's Prospectuses dated December 31, 1998. Prospectuses may be obtained by
writing the Trust's distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-342-5734.

TABLE OF CONTENTS

<TABLE>
<S> <C>
The Trust............................................................................. S-2
Investment Objectives and Policies.................................................... S-2
Description of Permitted Investments.................................................. S-8
Description of Ratings................................................................ S-13
Risk Factors.......................................................................... S-14
Investment Limitations................................................................ S-15
State Specific Disclosure............................................................. S-17
The Manager........................................................................... S-19
The Advisers and Sub-Advisers......................................................... S-20
Distribution and Shareholder Servicing................................................ S-22
Trustees and Officers of the Trust.................................................... S-24
Performance........................................................................... S-26
Determination of Net Asset Value...................................................... S-29
Purchase and Redemption of Shares..................................................... S-30
Shareholder Services.................................................................. S-30
Taxes................................................................................. S-31
Portfolio Transactions................................................................ S-35
Description of Shares................................................................. S-37
Limitation of Trustees' Liability..................................................... S-37
Shareholder Liability................................................................. S-37
5% Shareholders....................................................................... S-38
Legal Counsel......................................................................... S-43
Experts............................................................................... S-43
</TABLE>

December 31, 1998
<PAGE>
THE TRUST

SEI Tax Exempt Trust (the "Trust") is an open-end management investment
company established as a Massachusetts business trust pursuant to a Declaration
of Trust dated March 15, 1982. The Declaration of Trust permits the Trust to
offer separate series ("funds") of units of beneficial interest ("shares") and
separate classes of funds. This Statement of Additional Information relates to
the following funds: Tax Free, Institutional Tax Free, California Tax Exempt,
Intermediate-Term Municipal, Pennsylvania Municipal Bond, Pennsylvania Tax Free,
Ohio Tax Free, California Municipal Bond, Massachusetts Municipal Bond, New
Jersey Municipal Bond and New York Municipal Bond Funds (each a "Fund," and
collectively, the "Funds"), and any different classes of the Funds. Except for
differences between the Class A, Class B, Class C, Class D and CNI Class shares
of any Fund pertaining to sales loads, shareholder servicing and administrative
services plans, distribution plans, transfer agency costs, voting rights and/or
dividends, each share of each Fund represents an equal proportionate interest in
that Fund with each other share of that Fund.

INVESTMENT OBJECTIVES AND POLICIES

INTERMEDIATE-TERM MUNICIPAL FUND--The Fund'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. There can be no assurance
that the Fund will achieve its investment objective.

The Fund invests at least 80% of its net assets in municipal securities the
interest of which is exempt from federal income taxes based on opinions from
bond counsel for the issuers. This investment policy is a fundamental policy of
the Fund. 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 Fund will invest at least 80% of its
net assets in securities the interest on which is not a preference item for
purposes of the federal alternative minimum tax. Although the advisers have no
present intention of doing so, up to 20% of all assets in the Fund 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 Fund may purchase the following types of municipal obligations, but only
if such securities, at the time of purchase, either have the requisite rating,
or if not rated are of comparable quality as determined by the 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 Fund may invest up to
10% of its total assets in municipal bonds rated BBB or 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 rate BBB by S&P or Baa by Moody's have speculative
characteristics. Municipal obligations owned by the Fund 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 Fund.

Not more than 25% of Fund assets will be invested in (a) municipal
securities whose issuers are located in the same state and, (b) municipal
securities the interest on which is derived from revenues of similar type
projects. 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 Fund's assets are invested in municipal securities
payable from revenues on similar projects, the Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if the Fund's assets where not so invested.

S-2
<PAGE>
The Fund will typically maintain a dollar-weighted average portfolio
maturity of three to ten years. However, when the advisers determine that market
conditions so warrant, the Fund can maintain an average weighted maturity of
less than three years.

CALIFORNIA MUNICIPAL BOND FUND--The Fund's investment objective is to seek
as high a level of current income exempt from both federal and California income
taxes as is consistent with the preservation of capital, from a diversified
portfolio of investment grade municipal securities. There can be no assurance
that the Fund will achieve its investment objective.

The Fund has a fundamental policy, under normal conditions, to be fully
invested in obligations which produce interest that is exempt from both federal
and California state income tax. Under normal circumstances, the Fund will
invest at least 80% of its net assets in securities the interest on which is not
a preference item for purposes of the federal alternative minimum tax. The Fund
will invest at least 65% of its total assets in municipal obligations the
interest on which is exempt from California personal income tax ("California
Securities"). California Securities constitute municipal obligations of the
State of California and its political subdivisions or municipal authorities, as
well as municipal obligations issued by territories or possessions of the United
States, such as Puerto Rico. In addition, for temporary defensive purposes when,
in the opinion of its investment adviser, such securities are not readily
available or of sufficient quality, the Fund can invest up to 100% of its assets
in securities which pay interest which is exempt only from federal income taxes
or in taxable securities as described below.

The Fund may purchase the following types of municipal obligations, but only
if such securities, at the time of purchase, either have the requisite rating
or, if not rated, are of comparable quality as determined by Van Kampen
Management Inc., the Fund's investment sub-adviser ("Van Kampen"): (i) municipal
bonds rated BBB or better by S&P or Baa or better 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 Fund which become less than the prescribed
investment quality will be sold at a time when, in the judgment of Van Kampen,
it does not substantially impact the market value of the Fund.

The Fund will typically maintain a dollar-weighted average portfolio
maturity of three to ten years. However, when the advisers determine that market
conditions so warrants, the Fund can maintain an average weighted maturity of
less than three years.

MASSACHUSETTS MUNICIPAL BOND FUND--The Fund's investment objective is to
seek as high a level of income exempt from federal and Massachusetts income
taxes that can be obtained, as is consistent with the preservation of capital,
from a diversified portfolio of investment grade municipal securities. There can
be no assurance that the Fund will achieve its investment objective.

The Fund has a fundamental policy, under normal conditions, to be fully
invested in obligations which produce interest that is exempt from both federal
and Massachusetts state income tax. Under normal circumstances, the Fund will
invest at least 80% of its net assets in securities the interest on which is not
a preference item for purposes of the federal alternative minimum tax. The Fund
will invest at least 65% of its total assets in municipal obligations the
interest on which is exempt from Massachusetts personal income tax
("Massachusetts Securities"). Massachusetts Securities constitute municipal
obligations of the Commonwealth of Massachusetts and its political subdivisions
or municipal authorities, as well as municipal obligations issued by territories
or possessions of the United States, such as Puerto Rico. In addition, for
temporary defensive purposes when, in the opinion of its investment adviser,
such securities are not readily available or of sufficient quality, the Fund can
invest up to 100% of its assets in securities which pay interest which is exempt
only from federal income taxes or in taxable securities as described below.

S-3
<PAGE>
The Fund may purchase the following types of municipal obligations, but only
if such securities, at the time of purchase, either have the requisite rating
or, if not rated, are of comparable quality as determined by Standish, Ayer &
Wood, Inc., the Fund's investment sub-adviser ("SAW"): (i) municipal bonds rated
BBB or better by S&P or Baa or better 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 Fund which become less than the prescribed investment quality will be sold
at a time when, in the judgment of SAW, it does not substantially impact the
market value of the Fund.

NEW JERSEY MUNICIPAL BOND FUND--The Fund's investment objective is to seek
as high a level of income exempt from federal and New Jersey income taxes that
can be obtained, as is consistent with the preservation of capital, from a
diversified portfolio of investment grade municipal securities. There can be no
assurance that the Fund will achieve its investment objective.

The Fund has a fundamental policy, under normal conditions, to be fully
invested in obligations which produce interest that is exempt from both federal
and New Jersey state income tax. Under normal circumstances, the Fund will
invest at least 80% of its net assets in securities the interest on which is not
a preference item or purposes of the federal alternative minimum tax. The Fund
will invest at least 65% of its total assets in municipal obligations the
interest on which is exempt form New Jersey personal income tax ("New Jersey
Securities"). New Jersey Securities constitute municipal obligations of the
State of New Jersey and its political subdivisions or municipal authorities, as
well as municipal obligations issued by territories or possessions of the United
States, such as Puerto Rico. In addition, for temporary defensive purposes when,
in the opinion of its advisers, such securities are not readily available or of
sufficient quality, the Fund can invest up to 100% of its assets in securities
which pay interest which is exempt only from federal income taxes or in taxable
securities as described below.

The Fund may purchase the following types of municipal obligations, but only
if such securities, at the time of purchase, either have the requisite rating
or, if not rated, are of comparable quality as determined by Van Kampen, the
Fund's investment sub-adviser ("Van Kampen"): (i) municipal bonds rated BBB or
better by S&P or Baa or better 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
Fund which become less than the prescribed investment quality will be sold at a
time when, in the judgment of Van Kampen, it does not substantially impact the
market value of the Fund.

NEW YORK MUNICIPAL BOND FUND--The investment objective of the Fund is as
high a level of current income, exempt from both federal and New York state and
city personal income taxes, as is consistent with the preservation of principal.
There can be no assurance that the Fund will achieve its investment objective.

The Fund has a fundamental policy, under normal conditions, to be fully
invested in obligations which produce interest that is exempt from both federal
and New York state and city income tax. Under normal circumstances, the Fund
will invest at least 80% of its net assets in securities the interest on which
is not a preference item for purposes of the federal alternative minimum tax.
The Fund will invest at least 65% of its total assets in municipal obligations
the interest on which is exempt from New York and New York City personal income
tax ("New York Securities"). New York Securities constitute municipal
obligations of the

S-4
<PAGE>
State of New York and its political subdivisions or municipal authorities, as
well as municipal obligations issued by territories or possessions of the United
States, such as Puerto Rico. In addition, for temporary defensive purposes when,
in the opinion of its investment adviser, such securities are not readily
available or of sufficient quality, the Fund can invest up to 100% of its assets
in securities which pay interest which is exempt only from federal income taxes
or in taxable securities as described below.

The Fund may purchase the following types of municipal obligations, but only
if such securities, at the time of purchase, either have the requisite rating
or, if not rated, are of comparable quality as determined by SAW, the Fund's
investment sub-adviser: (i) municipal bonds rated BBB or better by S&P or Baa or
better 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 Fund which
become less than the prescribed investment quality will be sold at a time when,
in the judgment of SAW, it does not substantially impact the market value of the
Fund.

PENNSYLVANIA MUNICIPAL BOND FUND--The Fund's investment objective is to
provide current income exempt from both federal and Pennsylvania state income
taxes while preserving capital by investing primarily in municipal securities
within the guidelines presented below.

The Fund has a fundamental policy, under normal conditions, to be fully
invested in obligations which produce interest that is exempt from both federal
and Pennsylvania state income tax (state tax-free obligations). Under normal
circumstances, the Fund will invest at least 90% (and intends to invest 100%) of
its net assets in securities the interest on which is not a preference item for
purposes of the federal alternative minimum tax. In addition, for temporary
defensive purposes when, in the opinion of its investment adviser, such
securities are not readily available or of sufficient quality, the Fund can
invest up to 100% of its assets in securities which pay interest which is exempt
only from federal income taxes or in taxable securities as described below.

The Fund may purchase the following types of municipal obligations, but only
if such securities, at the time of purchase, either have the requisite rating
or, if not rated, are of comparable quality as determined by Morgan Grenfell
Capital Management Incorporated, the Fund's investment adviser ("Morgan
Grenfell"): (i) municipal bonds rated BBB or better by S&P or Baa or better 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 Fund which become less than
the prescribed investment quality will be sold at a time when, in the judgment
of Morgan Grenfell, it does not substantially impact the market value of the
Fund.

The Fund will typically maintain a dollar-weighted average portfolio
maturity of seven years or less. Each security purchased will typically have an
average maturity of no longer than fifteen years.

INSTITUTIONAL TAX FREE FUND--The Fund's investment objective is to preserve
principal value and maintain a high degree of liquidity while providing current
income exempt from federal income taxes. There can be no assurance that the Fund
will meet its investment objective.

The Fund invests in U.S. dollar denominated municipal securities of issuers
located in all fifty states, the District of Columbia, Puerto Rico and other
U.S. territories and possessions. It is a fundamental policy of the Fund to
invest at least 80% of its net assets in securities the interest on which is
exempt for federal income taxes, based on opinions from bond counsel for the
issuers, and the Fund will invest, under normal conditions, at least 80% of its
net assets in securities the interest on which is not a preference item for
purposes of the federal alternative minimum tax.

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The Fund may purchase municipal bonds, municipal notes and tax-exempt
commercial paper, but only if such securities, at the time of purchase, meet the
quality, maturity and diversification requirements imposed by Rule 2a-7.

The Adviser will not invest more than 25% of Fund assets in municipal
securities (a) whose issuers are located in the same state or (b) the interest
on which is derived from revenues of similar type projects. 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 Fund's assets are invested in municipal securities
payable from a revenues on similar projects, the Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if the Fund's assets were not so invested. Moreover, in seeking to attain its
investment objective, the Fund may invest all of any part of its assets in
municipal securities that are industrial development bonds.

There can be no assurance that the Fund will be able to achieve its
investment objective, or that the Fund will be able to maintain a constant $1.00
net asset value per share.

TAX FREE FUND--The Fund's investment objective is to preserve principal
value and maintain a high degree of liquidity while providing current income
exempt from federal income taxes. There can be no assurance that the Fund will
meet its investment objective.

The Fund invests in U.S. dollar denominated municipal securities of issuers
located in all fifty states, the District of Columbia, Puerto Rico and other
U.S. territories and possessions. At least 80% of the Fund's net assets will be
in securities the interest on which is exempt from federal income taxes, based
on opinions from bond counsel for the issuers. The investment policy is a
fundamental policy of the Fund. Under normal conditions, the Fund will invest at
least 80% of its net assets in securities the interest on which is not a
preference item for purposes of the federal alternative minimum tax.

The Fund may purchase municipal bonds, municipal notes and tax-exempt
commercial paper, but only if such securities, at the time of purchase, meet the
quality, maturity and diversification requirements imposed by Rule 2a-7.

The Adviser will not invest more than 25% of the Fund's assets in municipal
securities (a) whose issuers are located in the same state or (b) the interest
on which is derived from revenues of similar type projects. 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 Fund's assets are invested in municipal securities
payable from a revenues on similar projects, the Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if the Fund's assets were not so invested. Moreover, in seeking to attain its
investment objective, the Fund may invest all of any part of its assets in
municipal securities that are industrial development bonds.

There can be no assurance that the Fund will be able to achieve its
investment objective, or that the Fund will be able to maintain a constant $1.00
net asset value per share.

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CALIFORNIA TAX EXEMPT FUND--The Fund's investment objective is to preserve
principal value and maintain a high degree of liquidity while providing current
income exempt from federal and, to the extent possible, California state
personal income taxes. There can be no assurance that the Fund will achieve its
investment objective.

It is a fundamental policy of the Fund to invest, under normal conditions,
at least 80% of its net assets in municipal securities that produce interest
that, in the opinion of bond counsel, is exempt from federal income tax, and the
Fund will invest, under normal conditions, at least 80% of its net assets in
securities the interest on which is not a preference item for purposes of the
federal alternative minimum tax. Under normal conditions, at least 65% of the
Fund's assets will be invested in municipal obligations the interest on which is
exempt from California state personal income tax. These constitute municipal
obligations of the state of California and its political subdivisions of
municipal authorities and municipal obligations issued by territories or
possessions of the United States. The Fund may invest, under normal conditions,
up to 20% of its net assets in (1) municipal securities the interest on which is
a preference item for purposes of the federal alternative minimum tax (although
the Fund has no present intention of investing in such securities) and (2)
taxable investments. In addition, for temporary defensive purposes when Weiss,
Peck & Greer, L.L.C., the Fund's investment adviser (the "Adviser" or "WPG"),
determines that market conditions warrant, the Fund may invest up to 100% of its
assets in municipal obligations of states other than California or taxable money
market securities.

The Adviser will not invest more than 25% of the Fund's assets in municipal
securities the interest on which is derived from revenues of similar type
projects. 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 can be no assurance that the Fund will be able to achieve its
investment objective, or that the Fund will be able to maintain a constant $1.00
net asset value per share.

OHIO TAX FREE FUND--The Fund's investment objective is a high level of
current income, free from federal income tax and, to the extent possible, Ohio
income taxes, consistent with preservation of capital. The Fund will also
attempt to maintain a constant net asset value of $1.00 per share.

It is a fundamental policy of the Fund to invest, under normal conditions,
at least 80% of its net assets in municipal securities the interest on which, in
the opinion of bond counsel for the issuer, is exempt from federal income tax
(collectively, "Municipal Securities"). This Fund will, under normal conditions,
invest at least 80% of its net assets in securities the interest on which is not
a preference item for purposes of the federal alternative minimum tax and invest
at least 65% of its total assets in municipal obligations the interest on which
is exempt from Ohio income tax ("Ohio Securities"). Ohio Securities constitute
municipal obligations of the State of Ohio and its political subdivisions or
municipal authorities, as well as municipal obligations issued by territories or
possessions of the United States, such as Puerto Rico. This Fund may invest,
under normal conditions, up to 20% of its net assets in (1) Municipal Securities
the interest on which is a preference item for purposes of the federal
alternative minimum tax (although the Fund has no present intention of investing
in such securities), and (2) taxable securities, including shares of other
mutual funds to the extent permitted by regulations of the SEC. In addition, for
temporary defensive purposes when its investment adviser determines that market
conditions warrant, the Fund may invest up to 100% of its assets in municipal
obligations of states other than Ohio or taxable money market instruments.

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<PAGE>
There can be no assurance that the Fund will be able to achieve its
investment objective, or that the Fund will be able to maintain a constant $1.00
net asset value per share.

PENNSYLVANIA TAX FREE FUND--The Fund's investment objective is a high level
of current income, free from federal income tax and, to the extent possible,
Pennsylvania personal income taxes, consistent with preservation of capital. The
Fund will also attempt to maintain a constant net asset value of $1.00 per
share.

It is a fundamental policy of the Fund to invest, under normal conditions,
at least 80% of its net assets in municipal securities the interest on which, in
the opinion of bond counsel for the issuer, is exempt from federal income tax.
This Fund will under normal conditions, invest at least 80% of its net assets in
securities the interest on which is not a preference item for purposes of the
federal alternative minimum tax and invest at least 65% of its total assets in
municipal obligations the interest on which is exempt from Pennsylvania personal
income tax ("Pennsylvania Securities"). Pennsylvania Securities constitute
municipal obligations of the Commonwealth of Pennsylvania and its political
subdivisions or municipal authorities, as will as municipal obligations issued
by territories or possessions of the United States, such as Puerto Rico. This
Fund may invest, under normal conditions, up to 20% of its net assets in (1)
municipal securities the interest on which is a preference item for purposes of
the federal alternative minimum tax (although the Fund has no present intention
of investing in such securities), and (2) taxable securities, including shares
of other mutual funds to the extent permitted by regulations of the SEC. In
addition, for temporary defensive purposes when its investment adviser
determines that market conditions warrant, the Fund may invest up to 100% of its
assets in municipal obligations of states other than Pennsylvania or taxable
money market instruments.

There can be no assurance that the Fund will be able to maintain a constant
$1.00 net asset value per share.

DESCRIPTION OF PERMITTED INVESTMENTS

BANKERS' ACCEPTANCES--Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by a commercial bank. Bankers' acceptances are
issued by corporations to finance the shipment and storage of goods. Maturities
are generally six months or less.

CERTIFICATES OF DEPOSIT--Certificates of deposit is an interest-bearing
instrument with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.

COMMERCIAL PAPER--Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from one to 270 days.

FIXED INCOME SECURITIES--Fixed income securities are debt obligations issued
by corporations, municipalities and other borrowers. The market value of a
Fund's fixed income investments will change in response to interest rate changes
and other factors. During periods of falling interest rates, the values of
outstanding fixed income securities generally rise. Conversely, during periods
of rising interest rates, the values of such securities generally decline.
Changes by recognized rating agencies in the rating of any fixed income security
and in the ability of an issuer to make payments of interest and principal also
affect the value of these investments. Changes in the value of portfolio
securities will not necessarily affect cash income derived from these
securities, but will affect a Fund's net asset value.

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<PAGE>
FUTURES AND OPTIONS ON FUTURES--Futures contracts provide for the future
sale by one party and purchase by another party of a specified amount of a
specific security at a specified future time and at a specified price. An option
on a futures contract give the purchaser the right, in exchange for a premium,
to assume a position in a futures contract at a specified exercise price during
the term of the option. A Fund may use futures contracts and related options for
BONA FIDE hedging purposes, to offset changes in the value of securities held or
expected to be acquired or be disposed of, to minimize fluctuations in foreign
currencies, or to gain exposure to a particular market or instrument. A Fund
will minimize the risk that it will be unable to close out a futures contract by
only entering into futures contracts that are traded on national futures
exchanges.

An index futures contract is a bilateral agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the bond index value at the close of
trading of the contract and the price at which the futures contract is
originally struck. No physical delivery of the bonds comprising the index is
made: generally contracts are closed out prior to the expiration date of the
contract.

In order to avoid leveraging and related risks, when a Fund invests in
futures contracts, it will cover its position by depositing an amount of cash or
liquid securities equal to the market value of the futures positions held, less
margin deposits, in a segregated account and that amount will be marked to
market on a daily basis.

A Fund may enter into futures contracts and options on futures contracts
traded on an exchange regulated by the Commodities Futures Trading Commission
("CFTC"), so long as, to the extent that such transactions are not for "BONA
FIDE hedging purposes," the aggregate initial margin and premiums on such
positions (excluding the amount by which such options are in the money) do not
exceed 5% of the Fund's net assets.

There are risks associated with these activities, including the following:
(1) the success of a hedging strategy may depend on an ability to predict
movements in the prices of individual securities, fluctuations in markets and
movements in interest rates, (2) there may be an imperfect or no correlation
between the changes in market value of the securities held by the Fund and the
prices of futures and options on futures, (3) there may not be a liquid
secondary market for a futures contract or option, (4) trading restrictions or
limitations may be imposed by an exchange and (5) government regulations may
restrict trading in futures contracts and options on futures.

A Fund may buy and sell futures contracts and related options to manage its
exposure to changing interest rates and securities prices. Some strategies
reduce a Fund's exposure to price fluctuations, while others tend to increase
its market exposure. Futures and options on futures can be volatile instruments
and involve certain risks that could negatively impact a Fund's return. No price
is paid upon entering into futures contracts. Instead, a Fund would be required
to deposit an amount of cash or U.S. Treasury securities known as "initial
margin." Subsequent payments, called "variation margin," to and from the broker,
would be made on a daily basis as the value of the future position varies (a
process known as "market to market"). The margin is in the nature of performance
bond or good-faith deposit on a futures contract.

INVESTMENT COMPANY SHARES--Each Fund may invest in shares of other
investment companies, to the extent permitted by applicable law and subject to
certain restrictions set forth in this Statement of Additional Information.
These investment companies typically incur fees that are separate from those
fees incurred directly by a Fund. A Fund's purchase of such investment company
securities results in the layering of expenses, such that shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees, in addition to paying Fund
expenses. Under applicable regulations, a Fund is prohibited from acquiring the
securities of another investment company if, as a result of such acquisition:
(1) the Fund owns more than 3% of the total voting stock of the other company;
(2) securities issued by any one investment company represent more than 5% of
the Fund's

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total assets; or (3) securities (other than treasury stock) issued by all
investment companies represent more than 10% of the total assets of the Fund.

MUNICIPAL SECURITIES--Municipal Securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities.

General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by there venues 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.

MUNICIPAL LEASES--Each Fund may invest in instruments, or participations in
instruments, issued in connection with lease obligations or installment purchase
contract obligations of municipalities ("municipal lease obligations"). Although
municipal lease obligations do not constitute general obligations of the issuing
municipality, a lease obligation is ordinarily backed by the municipality's
covenant to budget for, appropriate funds for, and make the payments due under
the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses, which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose in the relevant years. Municipal lease
obligations are a relatively new form of financing, and the market for such
obligations is still developing. Municipal leases will be treated as liquid only
if they satisfy criteria set forth in guidelines established by the Board of
Trustees, and there can be no assurance that a market will exist or continue to
exist for any municipal lease obligation.

MUNICIPAL NOTES--Municipal notes consist of general obligation notes, tax
anticipation notes (notes sold to finance working capital needs of the issuer in
anticipation of receiving taxes on a future date), revenue anticipation notes
(notes sold to provide needed cash prior receipt of expected non-tax revenues
from a specific source), bond anticipation notes, tax and revenue anticipation
notes, certificates of indebtedness, demand notes, and construction loan notes.
The maturities of the instruments at the time of issue will generally range from
three months to one year.

MUNICIPAL BONDS--Municipal bonds are debt obligations issued to obtain funds
for various public purposes. A Fund may purchase private activity or industrial
development bonds if the interest paid is exempt from federal income tax. These
bonds are issued by or on behalf of public authorities to raise money to finance
various privately-owned or -operated facilities for business and manufacturing,
housing, sports, and pollution control. These bonds are also used to finance
public facilities such as airports, mass transit systems, ports, parking or
sewage or solid waste disposal facilities, as well as certain other categories.
The payment of the principal and interest on such bonds is dependent solely on
the ability of the facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed as security for such
payment.

S-10
<PAGE>
REPURCHASE AGREEMENTS--Repurchase agreements are agreements under which
securities are acquired from a securities dealer or bank subject to resale on an
agreed upon date and at an agreed upon price which includes principal and
interest. Each Fund or its agent will have actual or constructive possession of
the securities held as collateral for the repurchase agreement. Each Fund bears
a risk of loss in the event the other party defaults on its obligations and the
Fund is delayed or prevented from exercising its right to dispose of the
collateral securities, or if the Fund realizes a loss on the sale of the
collateral securities. The Advisers or Sub-Advisers will enter into repurchase
agreements on behalf of a Fund only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Board of Trustees. These
guidelines currently permit the Funds to enter into repurchase agreements only
with approved banks and primary securities dealers, as recognized by the Federal
Reserve Bank of New York, which have minimum net capital of $100 million, or
with a member bank of the Federal Reserve System. Repurchase agreements are
considered to be loans collateralized by the underlying security. Repurchase
agreements entered into by the Funds will provide that the underlying security
at all times shall have a value at least equal to 102% of the price stated in
the agreement. This underlying security will be marked to market daily. The
Advisers or Sub-Adviser will monitor compliance with this requirement. Under all
repurchase agreements entered into by the Funds, the Custodian or its agent must
take possession of the underlying collateral. However, if the seller defaults,
the Funds could realize a loss on the sale of the underlying security to the
extent the proceeds of the sale are less than the resale price. In addition,
even though the Bankruptcy Code provides protection for most repurchase
agreements, if the seller should be involved in bankruptcy or insolvency
proceedings, the Funds may incur delays and costs in selling the security and
may suffer a loss of principal and interest if the Funds are treated as
unsecured creditors.

STANDBY COMMITMENTS AND PUT TRANSACTIONS--The Funds reserve the right to
engage in put transactions. The Advisers and Sub-Advisers have the authority to
purchase securities at a price which would result in a yield to maturity lower
than that generally offered by the seller at the time of purchase when the Funds
can simultaneously acquire the right to sell the securities back to the seller,
the issuer, or a third party (the "writer") at an agreed-upon price at any time
during a stated period or on a certain date. Such a right is generally denoted
as a "standby commitment" or a "put." The purpose of engaging in transactions
involving puts is to maintain flexibility and liquidity to permit the Funds to
meet redemptions and remain as fully invested as possible in municipal
securities. The right to put the securities depends on the writer's ability to
pay for the securities at the time the put is exercised. The Funds would limit
their put transactions to institutions which the Adviser or Sub-Adviser believes
present minimum credit risks, and the Adviser or Sub-Adviser would use its best
efforts to initially determine and continue to monitor the financial strength of
the sellers of the options by evaluating their financial statements and such
other information as is available in the marketplace. It may, however, be
difficult to monitor the financial strength of the writers because adequate
current financial information may not be available. In the event that any writer
is unable to honor a put for financial reasons, a Fund would be a general
creditor (I.E., on a parity with all other unsecured creditors) of the writer.
Furthermore, particular provisions of the contract between a Fund and the writer
may excuse the writer from repurchasing the securities; for example, a change in
the published rating of the underlying securities or any similar event that has
an adverse effect on the issuer's credit or a provision in the contract that the
put will not be exercised except in certain special cases, for example, to
maintain portfolio liquidity. A Fund could, however, at any time sell the
underlying portfolio security in the open market or wait until the portfolio
security matures, at which time it should realize the full par value of the
security.

The securities purchased subject to a put, may be sold to third persons at
any time, even though the put is outstanding, but the put itself, unless it is
an integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Fund. Sale
of the securities to third parties or lapse of time with the put unexercised may
terminate the right to put the securities. Prior to the expiration of any put
option, a Fund could seek to negotiate terms for the extension of such an
option. If such a renewal cannot be negotiated on terms satisfactory to the
Fund, the Fund

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<PAGE>
could, of course, sell the security. The maturity of the underlying security
will generally be different from that of the put. The Intermediate-Term
Municipal and Pennsylvania Municipal Bond Funds will consider the "maturity" of
a security subject to a put to be the first date on which it has the right to
demand payment from the writer of the put although the final maturity of the
security is later than such date.

The Trust has received a private letter ruling from the Internal Revenue
Service that, to the extent it purchases securities subject to the right to put
them back to the seller in order to maintain liquidity to meet redemption
requirements, it will be treated as the owner of those securities for federal
income tax purposes. No assurance can be given that legislative, judicial or
administrative changes may not be forthcoming which could modify the Trust's
private letter ruling.

TIME DEPOSITS--Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time deposits with a withdrawal penalty are
considered to be illiquid securities.

U.S. GOVERNMENT OBLIGATIONS--Obligations issued by the U.S. Treasury or
issued or guaranteed by agencies of the U.S. Government, and obligations issued
or guaranteed by instrumentalities of the U.S. Government. Some of these
securities are supported by the full faith and credit of the U.S. Treasury
(E.G., Government National Mortgage Association securities), others are
supported by the right of the issuer to borrow from the Treasury (E.G., Federal
Farm Credit Bank securities), while still others are supported only by the
credit of the instrumentality (E.G., Fannie Mae securities).

VARIABLE AND FLOATING RATE INSTRUMENTS--Certain of the obligations purchased
by the Fund may carry variable or floating rates of interest and may involve a
conditional or unconditional demand feature. Such obligations may include
variable amount master demand notes. Such instruments bear interest at rates
which are not fixed, but which vary with changes in specified market rates or
indices. The interest rates on these securities may be reset daily, weekly,
quarterly or at some other interval, and may have a floor or ceiling on interest
rate changes. There is a risk that the current interest rate on such obligations
may not accurately reflect existing market interest rates. A demand instrument
with a demand notice period exceeding seven days may be considered illiquid if
there is no secondary market for such security.

WHEN-ISSUED SECURITIES--These securities involve the purchase of debt
obligations on a when-issued basis, in which case delivery and payment normally
take place within 45 days after the date of commitment to purchase. 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. Delivery of and payment for these securities may occur a
month or more after the date of the purchase commitment. The Fund will maintain
with the custodian a separate account with liquid 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 Fund
before settlement. Although a Fund generally purchases securities on a
when-issued or forward commitment basis with the intention of actually acquiring
securities for its portfolio, a Fund may dispose of a when-issued security or
forward commitment prior to settlement if the Adviser deems it appropriate to do
so.

The Funds will only make commitments to purchase obligations on a
when-issued basis with the intention of actually acquiring the securities, but
may sell them before the settlement date. The when-issued securities are subject
to market fluctuation, and no interest accrues to the purchaser during this
period. The payment obligation and the interest rate that will be received on
the securities are each fixed at the time the purchaser enters into the
commitment. Purchasing obligations on a when-issued basis is a form of
leveraging and can involve a risk that the yields available in the market when
the delivery takes

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place may actually be higher than those obtained in the transaction itself. In
that case there could be an unrealized loss at the time of delivery.

The Funds will establish segregated accounts with the Custodian and will
maintain liquid assets in an amount at least equal in value to the Funds'
commitments to purchase when-issued securities.

DESCRIPTION OF RATINGS

MUNICIPAL NOTE RATINGS. A Standard & Poor's Corporation ("S&P") note rating
reflects the liquidity concerns and market access risks unique to notes. Notes
due in 3 years or less will likely receive a note rating. Notes maturing beyond
3 years will most likely receive a long-term debt rating. The following criteria
will be used in making that assessment:

- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).

- Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).

Note rating symbols are as follows:

SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest.

Moody's Investors Service, Inc. ("Moody's") highest rating for state and
municipal and other short-term notes is MIG-1 and VMIG-1. Short-term municipal
securities rated MIG-1 or VMIG-1 are of the best quality. They have strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing or both.
Municipal obligations rated MIG-2 and VMIG-2 are high quality. Margins of
protection are ample although not so large as in the preceding group.

MUNICIPAL AND CORPORATE BOND RATINGS. Bonds rated AAA have the highest
rating S&P assigns to a debt obligation. Such a rating indicates an extremely
strong capacity to pay principal and interest. Bonds rated AA also qualify as
high-quality debt obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from AAA issues only in
small degrees.

Bonds rated A by S&P have a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories. Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

Bonds which are rated Aaa by Moody's are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins or protection
may not be as large as in Aaa-rated securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa-rated
securities.

S-13
<PAGE>
Bonds which are rated A by Moody's possess many favorable investment
attributes and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Bonds which are rated Baa by Moody's are considered as medium-grade
obligations (I.E., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

COMMERCIAL PAPER RATINGS. Commercial paper rated A by S&P is regarded by
S&P as having the greatest capacity for timely payment. Issues rated A are
further refined by use of the numbers 1+, 1, 2 and 3 to indicate the relative
degree of safety, issues rated A-1+ are those with an "overwhelming degree" of
credit protection. Those rated A-1 reflect a "very strong" degree of safety
regarding timely payment. Those rated A-2 reflect a "satisfactory" degree of
safety regarding timely payment.

Commercial paper issuers rated Prime-1 or Prime-2 by Moody's are judged by
Moody's to be of "superior" quality and "strong" quality, respectively, on the
basis of relative repayment capacity.

RISK FACTORS

NON-DIVERSIFICATION

The California Municipal Bond, Massachusetts Municipal Bond, New Jersey
Municipal Bond, New York Municipal Bond, Ohio Tax Free, and Pennsylvania Tax
Free Funds are non-diversified investment companies, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), which means that a
relatively high percentage of assets of the Funds may be invested in the
obligations of a limited number of issuers. Although the advisers generally do
not intend to invest more than 5% of each Fund's assets in any single issuer
(with the exception of securities which are issued or guaranteed by a national
government), the value of shares of the Funds may be more susceptible to any
single economic, political or regulatory occurrence than the shares of a
diversified investment company would be. The Funds intend to satisfy the
diversification requirements necessary to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code"), which
requires that the Funds be diversified (I.E., not invest more than 5% of their
assets in the securities in any one issuer) as to 50% of their assets.

YEAR 2000

The Trust depends on the smooth functioning of computer systems in almost
every aspect of its business. Like other mutual funds, business and individuals
around the world, the Trust could be adversely affected if the computer systems
used by its service providers do not properly process dates on and after January
1, 2000 and distinguish between the year 2000 and the year 1900. The Trust has
asked its service providers whether they expect to have their computer systems
adjusted for the year 2000 transition, and received assurances from each that
its system is expected to accommodate the year 2000 without material adverse
consequences to the Trust. The Trust and its shareholders may experience losses
if these assurances prove to be incorrect or as a result of year 2000 computer
difficulties experienced by issuers of portfolio securities or third parties,
such as custodians, banks, broker-dealers or others with which the Trust does
business.

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<PAGE>
INVESTMENT LIMITATIONS

The following investment limitations apply to the Tax Free, Institutional Tax
Free, California Tax Exempt, Intermediate-Term Municipal, Pennsylvania Municipal
Bond, and Pennsylvania Tax Free Funds.

No Fund may:

1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total assets of the Fund (based on current
market value at the time of investment) would be invested in the securities
of such issuer: provided, however, that the Fund may invest up to 25% of its
total assets without regard to this restriction of, and as permitted by,
Rule 2a-7.

2. Purchase any securities which would cause more than 25% of the total assets
of the Fund, 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.

3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 10% of the value of total assets. The California Tax
Exempt Fund has a fundamental policy that to the extent such borrowing
exceeds 5% of the value of the Fund's total assets, borrowing will be done
from a bank and in accordance with the requirements of the 1940 Act. This
borrowing provision is included solely to facilitate the orderly sale of
portfolio securities to accommodate heavy redemption requests if they should
occur and is not for investment purposes. All borrowings of the Funds, in
excess of 5% of its total assets, will be repaid before making additional
investments and any interest paid on such borrowings will reduce income.

4. Purchase securities of other investment companies, except that the
Intermediate-Term Municipal, Pennsylvania Municipal Bond and Pennsylvania
Tax Free Funds may only purchase securities of money market funds, as
permitted by the 1940 Act and the rules and regulations thereunder.

5. Make loans, except that each Fund may purchase or hold debt instruments in
accordance with its investment objective and policies and may enter into
repurchase agreements, provided that repurchase agreements maturing in more
than seven days, restricted securities and other illiquid securities are not
to exceed, in the aggregate, 10% of the Fund's net assets, except for the
Intermediate-Term Municipal Fund, for which it cannot exceed 15% of the
Fund's net assets.

6. Pledge, mortgage or hypothecate assets except to secure temporary borrowings
permitted by (1) above in aggregate amounts not to exceed 10% of the net
assets of such Fund taken at current value at the time of the incurrence of
such loan.

7. Invest in companies for the purpose of exercising control.

8. Acquire more than 10% of the voting securities of any one issuer.

9. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts including futures contracts. However,
subject to its permitted investments, any Fund may invest in municipal
securities or other obligations secured by real estate or other interests
therein.

10. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Fund may obtain short-term credits as
necessary for the clearance of security transactions.

11. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.

S-15
<PAGE>

12. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described in this Statement of Additional
Information or as permitted by rule, regulation or order of the SEC.

13. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, partner or director of the Trust or any
investment adviser of the Trust owns beneficially more than 1/2 of 1% of the
shares or securities of such issuer and all such officers, trustees,
partners and directors owning more than 1/2 of 1% of such shares or
securities together own more than 5% of such shares or securities.

14. Purchase securities of any company which has (with predecessors) a record of
less than three years continuing operations (except (i) obligations issued
or guaranteed by the United States Government, its agencies or
instrumentalities, or (ii) municipal securities which are rated by at least
two nationally recognized municipal bond rating services or determined by
the Adviser or Sub-Adviser to be of "high quality") if, as a result, more
than 5% of the total assets (taken at current value) would be invested in
such securities.

15. Purchase warrants, calls, straddles, spreads or combinations thereof, except
as permitted by this Statement of Additional Information.

16. Invest in interests in oil, gas or other mineral exploration or development
programs. The Institutional Tax Free Fund and the California Tax Exempt Fund
may not invest in oil, gas or mineral leases.

17. Invest more than 25% of total assets in issues within the same state or
similar type projects (except in specified categories). This investment
limitation applies to the Intermediate-Term Municipal Fund, Tax Free Fund,
Institutional Tax Free Fund, and Pennsylvania Municipal Bond Fund. For the
Pennsylvania Municipal Bond Fund, this limitation does not apply to the
extent stated in its investment objective and policies.

The foregoing percentages (except the limitation on borrowing) will apply at
the time of the purchase of a security. These investment limitations and the
investment limitations in each Prospectus are fundamental policies of the Trust
and may not be changed without shareholder approval. It is a fundamental policy
of the Intermediate-Term Municipal and Pennsylvania Municipal Bond Funds to
abide by the maturity restrictions and to invest solely in the permitted
investments described in this Statement of Additional Information and in their
respective Prospectuses.

------------------------

The following investment limitations and non-fundamental policies apply to
the California Municipal Bond, Massachusetts Municipal Bond, New Jersey
Municipal Bond, Ohio Tax Free and New York Municipal Bond Funds.

No Fund may:

1. Purchase any securities which would cause more than 25% of the total assets
of the Fund, 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.

2. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that for purposes of this limitation, investment strategies
which either obligate the Fund to purchase securities or require the Fund to
segregate assets are not considered to be borrowings. To the extent that its
borrowings exceed 5% of its assets (i) all borrowings will be repaid before
making additional investments and any interest paid on such borrowings will
reduce income; and (ii) asset coverage of at least 300% is required.

S-16
<PAGE>
3. Make loans if, as a result, more than 33 1/3% of its total assets would be
lent to other parties, except that each Portfolio may (i) purchase or hold
debt instruments in accordance with its investment objective and policies;
(ii) enter into repurchase agreements; and (iii) lend its securities.

4. Purchase or sell real estate, physical commodities, or commodities
contracts, except that each Portfolio may purchase (i) marketable securities
issued by companies which own or invest in real estate (including real
estate investment trusts), commodities, or commodities contracts, and (ii)
commodities contracts relating to financial instruments, such as financial
futures contracts and options on such contracts.

5. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.

6. Issue senior securities (as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"), except as permitted by rule, regulation or
order of the SEC.

7. Invest in interests in oil, gas or other mineral exploration or development
programs and oil, gas or mineral leases.

NON-FUNDAMENTAL POLICIES

The following investment limitations are non-fundamental policies and may be
changed without shareholder approval.

1. Pledge, mortgage or hypothecate assets except to secure borrowings permitted
by the Portfolio's fundamental limitation on borrowing.

2. Invest in companies for the purpose of exercising control.

3. Purchase securities on margin or effect short sales, except that each Fund
may (i) obtain short-term credits as necessary for the clearance of security
transactions, (ii) provide initial and variation margin payments in
connection with transactions involving futures contracts and options on such
contracts, and (iii) make short sales "against the box" or in compliance
with the SEC's position regarding the asset segregation requirements of
Section 18 of the 1940 Act.

4. Purchase securities which are not readily marketable if, in the aggregate,
more than 15% (10% for the Ohio Tax Free Fund) of its total assets would be
invested in such securities.

5. Purchase or hold illiquid securities, I.E., securities that cannot be
disposed of for their approximate carrying value in seven days or less
(which term includes repurchase agreements and time deposits maturing in
more than seven days) if, in the aggregate, more than 15% of its total
assets would be invested in illiquid securities.

6. Invest its assets in securities of any investment company, except as
permitted by the 1940 Act.

The foregoing percentages will apply at the time of the purchase of a
security and shall not be violated unless an excess or deficiency occurs,
immediately after or as a result of a purchase of such security.

STATE SPECIFIC DISCLOSURE

The following information constitutes only a brief summary, and is not
intended as a complete description.

SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA MUNICIPAL SECURITIES

The ability of issuers to pay interest on, and repay principal of,
California municipal securities ("California Municipal Securities") may be
affected by (1) amendments to the California Constitution and related statutes
that limit the taxing and spending authority of California government entities,
and related civil actions, (2) a wide variety of California laws and
regulations, and (3) the general financial condition of the State of California.

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 Fund's assets are invested in

S-17
<PAGE>
Municipal Securities payable from revenues on similar projects, the Fund will be
subject to the risks presented by such projects to a greater extent than it
would be if the Fund's assets were not so invested. Moreover, in seeking to
attain its investment objective the Fund may invest all or any part of its
assets in Municipal Securities that are industrial development bonds.

CALIFORNIA RISK FACTORS. Under normal conditions, the Fund will be fully
invested in obligations which produce income exempt from federal income tax and
California state income tax. Accordingly, the Fund will have considerable
investments in California municipal obligations. As a result, the Fund will be
more susceptible to factors which adversely affect issuers of California
obligations than a mutual fund which does not have as great a concentration in
California municipal obligations.

An investment in the Fund will be affected by the many factors that affect
the financial condition of the State of California. For example, financial
difficulties of the State, its counties, municipalities and school districts
that hinder efforts to borrow and credit ratings are factors which may affect
the Fund.

ADDITIONAL CONSIDERATIONS. With respect to Municipal Securities issued by
the State of California and its political subdivisions, as well as certain other
governmental issuers such as the Commonwealth of Puerto Rico, the Trust cannot
predict what legislation, if any, may be proposed in the California State
Legislature as regards the California State personal income tax status of
interest on such obligations, or which proposals, if any, might be enacted. Such
proposals, if enacted, might materially adversely affect the availability of
California Municipal Securities for investment by the Portfolios and the value
of the Portfolios' investments.

SPECIAL CONSIDERATIONS RELATING TO MASSACHUSETTS MUNICIPAL SECURITIES

MASSACHUSETTS RISK FACTORS. Under normal conditions, the Fund will be fully
invested in obligations which produce income exempt from federal income tax and
Massachusetts state tax. Accordingly, the Fund will have considerable
investments in Massachusetts municipal obligations. As a result, the Fund will
be more susceptible to factors which adversely affect issuers of Massachusetts
obligations than a mutual fund which does not have as great a concentration in
Massachusetts municipal obligations.

An investment in the Fund will be affected by the many factors that affect
the financial condition of the Commonwealth of Massachusetts. For example,
financial difficulties of the Commonwealth, its counties, municipalities and
school districts that hinder efforts to borrow and credit ratings are factors
which may affect the Fund.

SPECIAL CONSIDERATIONS RELATING TO NEW JERSEY MUNICIPAL SECURITIES

NEW JERSEY RISK FACTORS. Under normal conditions, the Fund will be fully
invested in obligations which produce income exempt from federal income tax and
New Jersey state tax. Accordingly, the Fund will have considerable investments
in New Jersey municipal obligations. As a result, the Fund will be more
susceptible to factors which adversely affect issuers of New Jersey obligations
than a mutual fund which does not have a great concentration in New Jersey
municipal obligations.

An investment in the Fund will be affected by the many factors that affect
the financial condition of the State of New Jersey. For example, financial
difficulties of the State, its counties, municipalities and school districts,
that hinder efforts to borrow and credit ratings are factors which may affect
the Fund.

SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL SECURITIES

REVENUES AND EXPENDITURES. New York's Governmental Funds receive a majority
of their revenues from taxes levied by the State. Investment income, fees and
assessments, abandoned property collections, and other varied sources supply the
balance of the receipts for these Funds. New York's major expenditures are
grants to local governments.

S-18
<PAGE>
NEW YORK RISK FACTORS. The Fund's concentration in investments in New York
Municipal Securities involves greater risk than if their investments were more
diversified. These risks result from (1) amendments to the New York Constitution
and other statutes that limit the taxing and spending authority of New York
government entities; (2) the general financial condition of the State of New
York, and (3) a variety of New York laws and regulations that may affect,
directly or indirectly, New York municipal securities. The ability of issuers of
Municipal Securities to pay interest on, or repay principal of, Municipal
Securities may be impaired as a result. The Fund's yield and share price are
sensitive to political and economic developments within the State of New York,
and to the financial condition of the State, its public authorities, and
political subdivisions, particularly the City of New York. In the recent past,
both the State and the City experienced financial difficulties related to the
poor economic performance and recurring deficits. The State's credit standing
has been reduced, and its ability to provide assistance to its public
authorities and political subdivisions could be impaired.

NEW YORK CITY. The fiscal health of the State is closely related to the
fiscal health of its localities, particularly the City, which has required
significant financial assistance from the State in recent years.

SPECIAL CONSIDERATIONS RELATING TO PENNSYLVANIA MUNICIPAL SECURITIES

REVENUES AND EXPENDITURES. The Constitution of Pennsylvania provides that
operating budget appropriations may not exceed the estimated revenues and
available surplus in the fiscal year for which funds are appropriated. Annual
budgets are enacted for the General Fund and for certain special revenue funds
which represent the majority of expenditures of the Commonwealth. Pennsylvania's
Governmental Funds receive a majority of their revenues from taxes levied by the
Commonwealth. Interest earnings, licenses and fees, lottery ticket sales, liquor
store profits, miscellaneous revenues, augmentations and federal government
grants supply the balance of the receipts of these funds.

PENNSYLVANIA RISK FACTORS. Under normal conditions the Fund will be fully
invested in obligations which produce interest income from federal income tax
and Pennsylvania state income tax. Accordingly, the Fund will have considerable
investments in Pennsylvania municipal obligations. As a result, the Fund will be
more susceptible to factors which adversely affect issuers of Pennsylvania
obligations than a mutual fund which does not have as great a concentration in
Pennsylvania municipal obligations.

An investment in the Fund will be affected by the many factors that affect
the financial condition of the Commonwealth of Pennsylvania. For example,
financial difficulties of the Commonwealth, its counties, municipalities and
school districts that hinder efforts to borrow and lower credit ratings are
factors which may affect the Fund.

LOCAL GOVERNMENT DEBT. Local government in Pennsylvania consists of
numerous individual units. Each unit is distinct and independent of other local
units, although they may overlap geographically. There is extensive general
legislation applying to local government. Municipalities may also issue revenue
obligations without limit and without affecting their general obligation
borrowing capacity if the obligations are projected to be paid solely from
project revenues. Municipal authorities and industrial development authorities
are also widespread in Pennsylvania.

THE MANAGER

The Trust and SEI Investments Fund Management ("SEI Management" or the
"Manager") have entered into a Management Agreement (the "Management
Agreement"). The Management Agreement provides that the Manager shall not be
liable for any error of judgement or mistake of law or for any loss suffered by
the Trust in connection with the matters to which the Management Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Manager in the performance of its duties or from
reckless disregard of its duties and obligations thereunder.

S-19
<PAGE>

The continuance of the Management Agreement must be specifically approved at
least annually (i) by the vote of a majority of the Trustees or by the vote of a
majority of the outstanding voting securities of the Fund, and (ii) by the vote
of a majority of the Trustees of the Trust who are not parties to the Management
Agreement or an "interested person" (as that term is defined in the 1940 Act) of
any party thereto, cast in person at a meeting called for the purpose of voting
on such approval. The Management Agreement is terminable at any time as to any
Fund without penalty by the Trustees of the Trust, by a vote of a majority of
the outstanding shares of the Fund or by the Manager on not less than 30 days'
nor more than 60 days' written notice.

The Manager, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation, a
wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the
owner of all beneficial interest in the Manager. SEI Investments and its
subsidiaries and affiliates, including the Manager, serve as administrator or
sub-administrator to the following other mutual funds: The Achievement Funds
Trust, The Advisors' Inner Circle Fund, Alpha Select Funds, The Arbor Fund, ARK
Funds, Armada Funds, Bishop Street Funds, Boston 1784
Funds-Registered Trademark-, CrestFunds, Inc., CUFUND, The Expedition Funds,
First American Funds, Inc., First American Investment Funds, Inc., First
American Strategy Funds, Inc., HighMark Funds, Monitor Funds, The Nevis Funds,
Oak Associates Funds, The PBHG Funds, Inc., PBHG Advisor Funds, Inc., PBHG
Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI
Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid
Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust
and TIP Funds.

For the fiscal years ended August 31, 1996, 1997, and 1998, the Funds paid
management fees, after waivers and/or reimbursements as follows:

<TABLE>
<CAPTION>
FEES WAIVED OR
FEES PAID (000) REIMBURSED (000)
---------------------- ----------------------
FUND 1996 1997 1998 1996 1997 1998
- -------------------------------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Tax Free Fund..................................... $1,099 $1,420 $$1,852 $ 158 $ 0 $ 0
Institutional Tax Free Fund....................... $1,697 $2,472 $2,706 $1,283 $1,080 $1,032
California Tax Exempt Fund........................ $ 581 $ 848 $1,085 $ 305 $ 158 $ 101
Intermediate-Term Municipal Fund.................. $ 279 $ 412 $ 793 $ 74 $ 40 $ 95
Pennsylvania Municipal Bond Fund.................. $ 183 $ 200 $ 221 $ 174 $ 140 $ 124
Pennsylvania Tax Free Fund........................ $ 66 $ 93 $ 112 $ 43 $ 43 $ 34
Ohio Tax Free Bond Fund........................... * * * * * *
California Municipal Bond Fund.................... * * $ .081 * * $ .007
Massachusetts Municipal Bond Fund................. * * $ .045 * * $ .003
New Jersey Municipal Bond Fund.................... * * $ .054 * * $ .005
New York Municipal Bond Fund...................... * * $ .058 * * $ .005
</TABLE>

- ------------------------

* Not in operation during the period.

THE ADVISERS AND SUB-ADVISERS

SEI Investments Management Corporation ("SIMC" or the "Adviser") serves as
investment adviser to the Fund. SIMC is a wholly-owned subsidiary of SEI
Investments, a financial services company. The principal business address of
SIMC and SEI Investments is Oaks, Pennsylvania 19456. SEI Investments was
founded in 1968 and is a leading provider of investment solutions to banks,
institutional investors, investment advisers and insurance companies. Affiliates
of SIMC have provide consulting advice to institutional investors for more than
20 years, including advice regarding the selection and evaluation of investment
advisers. SIMC currently serves as manager to more than 46 investment companies,
including more than 387 funds, with more than $128 billion in assets as of May
31, 1998.

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<PAGE>

SIMC acts as the investment adviser to the Massachusetts Municipal Bond, New
York Municipal Bond, California Municipal Bond, New Jersey Municipal Bond and
Intermediate-Term Municipal Funds and operates as a "manager of managers." As
Adviser, SIMC oversees the investment advisory services provided to the Funds
and manages the cash portion of the Funds' assets. Pursuant to separate sub-
advisory agreements with SIMC, and under the supervision of the Adviser and the
Board of Trustees, the sub-advisers are responsible for the day-to-day
investment management of all or a discrete portion of the assets of the Funds.
Sub-advisers are selected based primarily upon the research and recommendations
of SIMC, which evaluates quantitatively and qualitatively the sub-advisers'
skills and investment results in managing assets for specific asset classes,
investment styles and strategies. Subject to Board review, SIMC allocates and,
when appropriate, reallocates the Funds' assets to the sub-advisers, monitors
and evaluates the sub-advisers' performance, and oversees sub-adviser compliance
with the Funds' investment objectives, policies and restrictions. SIMC HAS THE
ULTIMATE RESPONSIBILITY FOR THE INVESTMENT PERFORMANCE OF THE INTERMEDIATE TERM
MUNICIPAL, CALIFORNIA MUNICIPAL BOND, MASSACHUSETTS MUNICIPAL BOND, NEW JERSEY
MUNICIPAL BOND, AND NEW YORK MUNICIPAL BOND FUNDS DUE TO ITS RESPONSIBILITY TO
OVERSEE SUB-ADVISERS AND RECOMMEND THEIR HIRING, TERMINATION AND REPLACEMENT.

For the fiscal year ended August 31, 1998, the Intermediate Term Municipal,
California Municipal Bond, Massachusetts Municipal Bond, New Jersey Municipal
Bond, and New York Municipal Bond Funds paid advisory fees, after waivers, of
.33% of its average daily net assets. SIMC pays the sub-advisers out its
investment advisory fees.

SIMC and the Trust have obtained an exemptive order from the Securities and
Exchange Commission ("SEC") that permits SIMC, with the approval of the Trust's
Board of Trustees, to retain sub-advisers unaffiliated with SIMC for the Funds
without submitting the sub-advisory agreements to a vote of the Funds'
shareholders. The exemptive relief permits the disclosure of only the aggregate
amount payable by SIMC under all such sub-advisory agreements. The Funds will
notify shareholders in the event of any additional or change in the identity of
their sub-advisers.

Morgan Grenfell Capital Management Incorporated ("Morgan Grenfell"), acts as
investment adviser to the Pennsylvania Municipal Bond Fund. Morgan Grenfell is a
wholly-owned, U.S. based subsidiary of Morgan Grenfell Asset Management and was
organized in 1985. As of October 30, 1998, total assets under management by
Morgan Grenfell were approximately $12.6 million. The principal business address
of Morgan Grenfell is 885 Third Avenue, 32nd Floor, New York, New York 10022.

Weiss, Peck & Greer, L.L.C., ("Weiss Peck"), serves as investment adviser to
the California Tax Exempt, Pennsylvania Tax Free, Institutional Tax Free and Tax
Free Funds. The Weiss Peck invests the assets of the Fund, and continuously
reviews, supervises and administers the investment program of the Fund. Weiss
Peck is a limited liability company founded as a limited partnership in 1970,
and engages in investment management, venture capital management and management
buyouts. Weiss Peck has been active since its founding in managing portfolios of
tax exempt securities. As of August 31, 1998, total assets under management were
approximately $15 billion. The principal business address of Weiss Peck is One
New York Plaza, New York, New York 10004.

Standish, Ayer & Wood, Inc. ("SAW"), serves as investment sub-adviser to the
Massachusetts Municipal Bond, New York Municipal Bond and Intermediate-Term
Municipal Funds. SAW which was founded in 1933, is a Subchapter S Corporation
organized under the laws of the Commonwealth of Massachusetts that is completely
owned by its 22 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. As of September 30,
1998, total assets under management were $45.9 billion. The principal offices
are located at One Financial Center, Boston, Massachusetts 02111.

Van Kampen Management, Inc. ("Van Kampen"), serves as investment sub-adviser
to the New Jersey Municipal Bond and California Municipal Bond Funds. Van Kampen
is an indirect, wholly-owned subsidiary of Morgan Stanley Dean Witter & Co., and
was founded in 1974. As of September 30, 1998,

S-21
<PAGE>

assets under management were approximately $57 billion. The principal business
address is One Parkview Plaza, Oakbrook Terrace, Illinois 60181.

Each Advisory Agreement or Sub-Advisory Agreement provides that each Adviser
or Sub-Adviser shall not be protected against any liability to the Trust or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.

The continuance of each Advisory or Sub-Advisory Agreement after the first
two (2) years must be specifically approved at least annually (i) by the vote of
a majority of the outstanding shares of that Fund or by the Trustees, and (ii)
by the vote of a majority of the Trustees who are not parties to such Advisory
or Sub-Advisory Agreement or "interested persons" of any party thereto, cast in
person at a meeting called for the purpose of voting on such approval. Each
Advisory or Sub-Advisory Agreement will terminate automatically in the event of
its assignment, and is terminable at any time without penalty by the Trustees of
the Trust or, with respect to a Fund, by a majority of the outstanding shares of
that Fund, on not less than 30 days' nor more than 60 days' written notice to
the Adviser or Sub-Adviser, or by the Adviser or Sub-Adviser on 90 days' written
notice to the Trust.

For the fiscal years ended August 31, 1996, 1997 and 1998, the Funds paid
advisory fees, after waivers and/or reimbursements as follows:

<TABLE>
<CAPTION>
FEES WAIVED OR
FEES PAID (000) REIMBURSED (000)
------------------ ----------------
FUND 1996 1997 1998 1996 1997 1998
- -------------------------------------------------- ---- ---- ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Tax Free Fund..................................... $137 $153 $ 200 $ 0 $ 0 $ 0
Institutional Tax Free Fund....................... $325 $384 $ 404 $ 0 $ 0 $ 0
California Tax Exempt Fund........................ $151 $170 $ 201 $ 0 $ 0 $ 0
Intermediate-Term Municipal Fund+................. $254 $622 $1,221 $ 0 $ 0 $ 0
Pennsylvania Municipal Bond Fund.................. $202 $195 $ 198 $ 0 $ 0 $ 0
Pennsylvania Tax Free Fund........................ $ 12 $ 15 $ 16 $ 0 $ 0 $ 0
Ohio Tax Free Bond Fund........................... * * * * * *
California Municipal Bond Fund.................... * * $ .055 * * $ 0
Massachusetts Municipal Bond Fund................. * * $ .030 * * $ 0
New Jersey Municipal Bond Fund.................... * * $ .037 * * $ 0
New York Municipal Bond Fund...................... * * $ .039 * * $ 0
</TABLE>

- ------------------------

* Not in operation during the period.

+ Amounts paid for the Fund since April 16, 1996, were paid to SIMC, who paid
Standish, Ayer & Wood out this advisory fee.

DISTRIBUTION AND SHAREHOLDER SERVICING

The Trust has adopted Distribution Plans for Class D and CNI Class shares of
the Funds (the "Plans") in accordance with the provisions of Rule 12b-1 under
the 1940 Act, which regulates circumstances under which an investment company
may directly or indirectly bear expenses relating to the distribution of its
shares. In this regard, the Board of Trustees has determined that the Plans and
the Distribution Agreement are in the best interests of the shareholders.
Continuance of the Plans must be approved annually by a majority of the Trustees
of the Trust and by a majority of the trustees who are not "interested persons"
of the Trust as that term is defined in the 1940 Act and who have no direct or
indirect financial interest in the operation of a Distribution Plan or in any
agreements related thereto ("Qualified Trustees"). The Plans require that
quarterly written reports of amounts spent under the Plans and the purposes of
such expenditures be furnished to and reviewed by the Trustees. The Plans may
not be amended to increase

S-22
<PAGE>

materially the amount which may be spent thereunder without approval by a
majority of the outstanding shares of the Fund or class affected. All material
amendments of the Plans will require approval by a majority of the Trustees of
the Trust and of the Qualified Trustees.

The Plans provide that the Trust will pay the Distributor a fee on the Class
D and CNI Class shares of the Fund. The Distributor may use this fee for: (i)
compensation for its services in connection with distribution assistance or
provision of shareholder services or (ii) payments to financial institutions and
intermediaries such as banks, savings and loan associations, insurance companies
and investment counselors, broker-dealers and the Distributor's affiliates and
subsidiaries as compensation for services or reimbursement of expenses incurred
in connection with distribution assistance or provision of shareholder services.

The Funds have also adopted shareholder servicing plans for their Class A,
Class B, Class C and CNI Class shares (the "Service Plans"), and Administrative
Services Plans for their Class B and Class C shares. Under these Service and
Administrative Services Plans, the Distributor may perform, or may compensate
other service providers for performing, the following shareholder and
administrative services: maintaining client accounts; arranging for bank wires;
responding to client inquiries concerning services provided on investments;
assisting clients in changing dividend options, account designations and
addresses; sub-accounting; providing information on share positions to clients;
forwarding shareholder communications to clients; processing purchase, exchange
and redemption orders; and processing dividend payments. Under the Service and
Administrative Services Plans, the Distributor may retain as a profit any
difference between the fee it receives and the amount it pays to third parties.

For the fiscal year ended August 31, 1998, the Funds paid the following
amounts pursuant to the Distribution Plans:

<TABLE>
<CAPTION>
AMOUNT PAID TO
THIRD PARTIES
BY DISTRIBUTOR
OF PROSPECTUS
DISTRIBUTION- PRINTING & COSTS
TOTAL BASIS RELATED SALES MAILING ASSOCIATED WITH
FUND/CLASS AMOUNT POINTS SERVICES EXPENSES COSTS REGISTRATION
- ------------------------------------ ---------- ------ -------------- -------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
California Tax Exempt Fund -- CNI
Class+............................ $2,317,222 .50% $ 0 $ 0 $ 0 $ 0
Tax Free Fund -- Class D............ $ 4 .25% $ 0 $ 0 $ 0 $ 0
</TABLE>

- ------------------------

+ Formerly the Class C shares; converted to Class G shares on March 18, 1996,
and were renamed CNI Class shares effective on December 31, 1997.

Except to the extent that the Manager or Advisers benefitted through
increased fees from an increase in the net assets of the Trust which may have
resulted in part from the expenditures, no interested person of the Trust nor
any Trustee of the Trust who is not an interested person of the Trust had a
direct or indirect financial interest in the operation of the Distribution Plans
or related agreements.

For the fiscal years ended August 31, 1996, 1997 and 1998, the aggregate
sales charges payable to the Distributor with respect to the Class D shares of
the Tax Free Fund were as follows:

<TABLE>
<CAPTION>
AGGREGATE SALES CHARGE AMOUNT RETAINED
YEAR PAYABLE TO DISTRIBUTOR BY DISTRIBUTOR
---- ---------------------- ---------------
<S> <C> <C>
1996 $17,368 $1,614
1997 $ 0 $ 0
1998 $ 0 $ 0
</TABLE>

S-23
<PAGE>
TRUSTEES AND OFFICERS OF THE TRUST

The Trustees and Executive Officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with the named companies during that
period. Unless otherwise noted, the business address of each Trustee and each
Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as officers of some or all of the following:
The Achievement Funds Trust, The Advisors' Inner Circle Fund, Alpha Select
Funds, The Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784
Funds-Registered Trademark-, CrestFunds, Inc., CUFUND, The Expedition Funds,
First American Funds, Inc., First American Investment Funds, Inc., First
American Strategy Funds, Inc., HighMark Funds, Monitor Funds, The Nervis Fund,
Inc., Oak Associates Funds, The Parkstone Group of Funds, The PBHG Funds, Inc.,
PBHG Advisor Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds,
SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional International Trust, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI Liquid Asset Trust, STI Classic Funds, STI
Classic Variable Trust, and TIP Funds, each of which is an open-end management
investment company managed by SEI Investments Fund Management or its affiliates
and, except for PBHG Advisor Funds, Inc., distributed by SEI Investments
Distribution Co.

ROBERT A. NESHER (DOB 08/17/46)--Chairman of the Board of
Trustees--Currently performs various services on behalf of SEI Investments for
which Mr. Nesher is compensated. Executive Vice President of SEI Investments,
1986-1994. Director and Executive Vice President of SEI Investments Management
Corporation, the Manager and the Distributor, 1981-1994. Trustee of The
Advisors' Inner Circle Fund, The Arbor Fund, Boston 1784
Funds-Registered Trademark-, The Expedition Funds, Marquis
Funds-Registered Trademark-, Oak Associates Funds, Pillar Funds, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Institutional
International Trust, SEI Liquid Asset Trust and SEI Insurance Products Trust.

WILLIAM M. DORAN (DOB 05/26/40)--Trustee*--2000 One Logan Square,
Philadelphia, PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel
to the Trust, SEI Investments, SEI Investments Management Corporation, the
Manager and the Distributor. Director and Secretary of SEI Investments and
Secretary of SEI Investments Management Corporation, the Manager and the
Distributor. Trustee of The Advisors' Inner Circle Fund, The Arbor Fund, The
Expedition Funds, Marquis Funds-Registered Trademark-, Oak Associates Funds, SEI
Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI
Institutional International Trust, SEI Liquid Asset Trust and SEI Insurance
Products Trust.

F. WENDELL GOOCH (DOB 12/03/32)--Trustee**--President, Orange County
Publishing Co., Inc.; Publisher, Paoli News and Paoli Republican; and Editor,
Paoli Republican, October 1981-January 1997. President, H&W Distribution, Inc.,
since July 1984. Executive Vice President, Trust Department, Harris Trust and
Savings Bank and Chairman of the Board of Directors of The Harris Trust Company
of Arizona before January 1981. Trustee of SEI Asset Allocation Trust, SEI Daily
Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI Institutional International Trust, SEI Liquid
Asset Trust, SEI Insurance Products Trust, STI Classic Funds and STI Classic
Variable Trust.

JAMES M. STOREY (DOB 04/12/31)--Trustee**--Partner, Dechert Price & Rhoads,
from September 1987-December 1993. Trustee of The Advisors' Inner Circle Fund,
The Arbor Fund, The Expedition Funds, Marquis Funds-Registered Trademark-, Oak
Associates Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index
Funds, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI
Institutional International Trust, SEI Liquid Asset Trust and SEI Insurance
Products Trust.

GEORGE J. SULLIVAN, JR. (DOB 11/13/42)--Trustee**--Chief Executive Officer,
Newfound Consultants Inc. since April 1997. General Partner, Teton Partners,
L.P., June 1991-December 1996; Chief Financial Officer, Noble Partners, L.P.,
March 1991-December 1996; Treasurer and Clerk, Peak Asset Management, Inc.,
since 1991; Trustee, Navigator Securities Lending Trust, since 1995. Trustee of
SEI

S-24
<PAGE>

Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Liquid
Asset Trust, SEI Institutional Investments Trust, SEI Institutional Managed
Trust, SEI Institutional International Trust and SEI Insurance Products Trust.

EDWARD D. LOUGHLIN (DOB 03/07/51)--President and Chief Executive
Officer--Executive Vice President and President--Asset Management Division of
SEI Investments, SEI Investments Management Corporation, and the Manager since
1994. Senior Vice President, SEI Investments, 1986-1991; Vice President, SEI
Investments, 1981-1986.

TODD B. CIPPERMAN (DOB 02/14/66)--Vice President and Assistant
Secretary--Vice President and Assistant Secretary of SEI Investments, SEI
Investments Management Corporation, the Manager and the Distributor since 1995.
Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston & Strawn
(law firm), 1991-1994.

JAMES R. FOGGO (DOB 06/30/64)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Associate, Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998.
Associate, Baker & McKenzie (law firm), 1995-1998. Associate, Battle Fowler
L.L.P. (law firm), 1993-1995. Operations Manager, The Shareholder Services
Group, Inc., 1986-1990.

LYDIA A. GAVALIS (DOB 06/05/64)--Vice President and Assistant
Secretary--Vice President and Assistant Secretary of the Administrator and the
Distributor since 1998. Assistant General Counsel and Director of Arbitration,
Philadelphia Stock Exchange, 1989-1998.

KATHY HEILIG (DOB 12/21/58)--Vice President and Assistant
Secretary--Treasurer of SEI Investments Company since 1997; Assistant Controller
of SEI Investments Company since 1995; Vice President of SEI Investments Company
since 1991; Director of Taxes of SEI Investments Company 1987 to 1991. Tax
Manager, Arthur Anderson LLP prior to 1987.

JOSEPH M. O'DONNELL (DOB 11/13/54)--Vice President and Assistant
Secretary--Vice President and Assistant Secretary of SEI Investments Management
Corporation, the Administrator and the Distributor since 1998. Vice President
and General Counsel, FPS Services, Inc., 1993-1997. Staff Counsel and Secretary,
Provident Mutual Family of Funds, 1990-1993.

SANDRA K. ORLOW (DOB 10/18/53)--Vice President and Assistant
Secretary--Secretary of the Distributor since 1998; Vice President of the
Distributor since 1988. Vice President and Assistant Secretary of SEI
Investments Management Corporation, and the Manager since 1988. Assistant
Secretary of the Distributor from 1988 to 1998.

CYNTHIA M. PARRISH (DOB 10/23/59)--Vice President and Assistant
Secretary--Vice President and Assistant Secretary of the SEI Investments, SEI
Investments Management Corporation, the Manager and the Distributor since August
1997. Branch Chief, Division of Enforcement, U.S. Securities and Exchange
Commission, January 1995--August 1997. Senior Counsel--Division of Enforcement,
U.S. Securities and Exchange Commission, September 1992--January 1995. Staff
Attorney--Division of Enforcement, U.S. Securities and Exchange Commission,
January 1995--August 1997.

KEVIN P. ROBINS (DOB 04/15/61)--Vice President and Assistant
Secretary--Senior Vice President and General Counsel of SEI Investments, SEI
Investments Management Corporation, the Manager and the Distributor since 1994.
Assistant Secretary of SEI Investments since 1992; Secretary of SEI Investments
Management Corporation, and the Manager since 1994. Vice President, General
Counsel and Assistant Secretary of SEI Investments Management Corporation, the
Manager and the Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius LLP
(law firm), 1988-1992.

LYNDA J. STRIEGEL (DOB 10/30/48)--Vice President and Assistant
Secretary--Vice President and Assistant Secretary of the Administrator and the
Distributor since 1998. Senior Asset Management

S-25
<PAGE>

Counsel, Barnett Banks, Inc. (1997-1998). Partner, Groom and Nordberg,
Chartered, 1996-1997. Associate General Counsel, Riggs Bank, N.A., 1991-1995.

RICHARD W. GRANT (DOB 10/25/45)--Secretary--2000 One Logan Square,
Philadelphia, PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel
to the Trust, SEI Investments, SEI Investments Management Corporation, the
Manager and the Distributor.

MARK E. NAGLE (DOB 10/20/59)--Controller and Chief Financial Officer--Vice
President of Fund Accounting and Administration for SEI Fund Resources and Vice
President of the Manager since 1996. Vice President of the Distributor since
December 1997. Vice President, Fund Accounting, BISYS Fund Services, September
1995 to November 1996. Senior Vice President and Site Manager, Fidelity
Investments 1981 to September 1995.

- ------------------------

* Messrs. Nesher and Doran are Trustees who may be deemed to be "interested
persons" of the Trust as the term is defined in the 1940 Act.

** Messrs. Gooch, Storey, Sullivan and Morris serve as members of the Audit
Committee of the Trust.

The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for unaffiliated Trustees.
Compensation of officers and affiliated Trustees of the Trust is paid by the
Manager.

The following table sets forth information about the compensation paid to
the Trustees for the fiscal year ended August 31, 1998:

<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION FROM
AGGREGATE RETIREMENT ESTIMATED REGISTRANT
COMPENSATION BENEFITS ACCRUED ANNUAL AND FUND COMPLEX
FROM REGISTRANT AS PART OF BENEFITS UPON PAID TO TRUSTEES
NAME OF PERSON AND POSITION FOR FYE 8/31/98 FUND EXPENSES RETIREMENT FOR FYE 8/31/98
- -------------------------------------- --------------- ------------------- --------------- -----------------------
<S> <C> <C> <C> <C>
Robert A. Nesher, Trustee............. $ 0 N/A N/A $0
William M. Doran, Trustee............. $ 0 N/A N/A $0
F. Wendell Gooch, Trustee............. $ 14,086 N/A N/A $101,000 for services
on 8 boards
Frank E. Morris, Trustee.............. $ 14,086 N/A N/A $101,000 for service on
8 boards
James M. Storey, Trustee.............. $ 14,086 N/A N/A $101,000 for service on
8 boards
George J. Sullivan, Trustee........... $ 14,086 N/A N/A $101,000 for services
on 8 boards
</TABLE>

Mr. Edward W. Binshadler is a Trustee Emeritus of the Trust. Mr. Binshadler
serves as a consultant to the Audit Committee and receives as compensation,
$5,000 per Audit Committee meeting attended.

PERFORMANCE

From time to time, the Funds may advertise yield and/or total return. These
figures will be based on historical earnings and are not intended to indicate
future performance.

The current yield of the Funds that are money market funds is calculated
daily based upon the 7 days ending on the date of calculation ("base period").
The yield is computed by determining the net change (exclusive of capital
changes) in the value of a hypothetical pre-existing shareholder account having
a balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts and dividing
such net change by the value of the account at the beginning of the same period
to obtain the base period return and multiplying the result by (365/7). Realized
and unrealized gains and losses are not included in the calculation of the
yield.

S-26
<PAGE>

The Funds compute their effective compound yield by determining the net
changes, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula: Effective Yield = {(Base Period Return + 1)TO THE POWER OF
365/7} - 1. The current and the effective yields reflect the reinvestment of net
income earned daily on fund assets.

From time to time, the Intermediate-Term Municipal, Pennsylvania Municipal
Bond, California Municipal Bond, Massachusetts Municipal Bond, New Jersey
Municipal Bond, and New York Municipal Bond Funds may advertise yield. These
figures will be based on historical earnings and are not intended to indicate
future performance. The yield of these Funds refers to the annualized income
generated by an investment in the Funds over a specified 30-day period. The
yield is calculated by assuming that the income generated by the investment
during that period generated each period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula:

Yield = 2([(a-b)/(cd) + 1)]TO THE POWER OF 6 - 1) where a = dividends and
interest earned during the period; b = expenses accrued for the period (net of
reimbursement); c = the current daily number of shares outstanding during the
period that were entitled to receive dividends; and d = the maximum offering
price per share on the last day of the period.

Actual yields will depend on such variables as asset quality, average asset
maturity, the type of instruments a Fund invests in, changes in interest rates
on money market instruments, changes in the expenses of the Funds and other
factors.

Yields are one basis upon which investors may compare the Funds with other
money market funds; however, yields of other money market mutual funds and other
investment vehicles may not be comparable because of the factors set forth above
and differences in the methods used in valuing portfolio instruments.

For the 7-day period ended August 31, 1998, the end of the Trust's most
recent fiscal year, the money market Funds' current effective and tax-equivalent
yields were as follows:

<TABLE>
<CAPTION>
7-DAY 7-DAY
7-DAY TAX-EQUIVALENT TAX-EQUIVALENT
FUND CLASS 7-DAY YIELD EFFECTIVE YIELD YIELD EFFECTIVE YIELD
- ---------------------------------------- ----------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Tax Free Fund........................... Class A 3.03% 3.08% 5.02% 5.10%
Class D 2.82% 2.86% 4.67% 4.74%

Institutional Tax Free Fund............. Class A 3.20% 3.25% 5.30% 5.38%
Class B 2.90% 2.94% 4.80% 4.87%
Class C 2.70% 2.74% 4.47% 4.54%

California Tax Exempt Fund.............. Class A 2.56% 2.59% 4.24% 4.29%
Class B * * * *
Class C * * * *
CNI Class+ 2.06% 2.08% 3.41% 3.44%

Pennsylvania Tax Free Fund.............. Class A 3.10% 3.15% 5.13% 5.22%

Ohio Tax Free Fund...................... Class A * * * *
</TABLE>

- ------------------------

* Not in operation during the period

+ Formerly the Class C shares; converted to Class G shares on March 18, 1996,
and renamed CNI Class shares effective on December 31, 1997.

S-27
<PAGE>
For the 30-day period ended August 31, 1998, yields on the Funds other than
the money market Funds were as follows:

<TABLE>
<CAPTION>
YIELD
-------------------------
30-DAY
FUND CLASS 30-DAY TAX EQUIVALENT
- ---------------------------------------------------------------------- --------- --------- --------------
<S> <C> <C> <C>
New York Municipal Bond Fund.......................................... Class A * *
New Jersey Municipal Bond Fund........................................ Class A * *
Massachusetts Municipal Bond Fund..................................... Class A * *
California Municipal Bond Fund........................................ Class A * *
Pennsylvania Municipal Bond Fund...................................... Class A * *
Pennsylvania Municipal Bond Fund...................................... Class B 5.03% 8.33%
Intermediate-Term Municipal Fund...................................... Class A 4.02% 6.66%
</TABLE>

- ------------------------

* Not in operation for a sufficient time during the period.

From time to time, the Intermediate-Term Municipal, Pennsylvania Municipal
Bond, California Municipal Bond, Massachusetts Municipal Bond, New Jersey
Municipal Bond, and New York Municipal Bond Fund may advertise total return. The
total return of a Fund 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 Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each
period. In particular, total return will be calculated according to the
following formula: P(1 + T)n = ERV, where P = a hypothetical initial payment of
$1,000; T = average annual total return; n = number of years; and ERV = ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
designated time period as of the end of such period.

Based on the foregoing, the average annual total returns for the Funds from
inception through August 31, 1998, and for the one-, five- and ten-year periods
ended August 31, 1998 were as follows:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
--------------------------------------
TEN SINCE
FUND CLASS ONE YEAR FIVE YEAR YEAR INCEPTION
- ----------------------------------- ----------------------------- -------- --------- --- ---------
<S> <C> <C> <C> <C> <C>
Tax Free Fund...................... Class A(1) 3.30% 3.13% 3.75% 4.13%
Class D -- Offering Price(9) 2.91% * * 2.99%
Institutional Tax Free Fund........ Class A(3) 3.46% 3.32% 3.98% 4.24%
Class B(2) 3.15% 3.02% * 3.15%
Class C(11) 2.94% * * 2.96%
California Tax Exempt Fund......... Class A (4) 3.20% 3.14% * 3.41%
CNI Class (5) 2.69% * * 2.79%
Pennsylvania Municipal Bond Fund... Class A(10) * * * *
Pennsylvania Municipal Bond Fund... Class B (6) 7.24% 5.42% * 6.61%
Pennsylvania Tax Free Fund......... Class A(7) 3.41% * * 3.31%
Intermediate-Term Municipal Fund... Class A(8) 7.20% 5.38% * 6.45%
Ohio Tax Free Fund................. Class A * * * *
California Municipal Bond Fund..... Class A(12) * * * .78%
Massachusetts Municipal Bond
Fund............................. Class A(12) * * * .53%
New Jersey Municipal Bond Fund..... Class A(13) * * * .58%
New York Municipal Bond Fund....... Class A(13) * * * .55%
</TABLE>

- --------------------------

* Not in operation during the period.

+ Formerly the Class C shares; converted to Class G shares on March 18, 1996,
and were renamed CNI Class shares effective on December 31, 1997.

(1) Commenced operations 11/12/82

(2) Commenced operations 10/15/90

(3) Commenced operations 11/03/82

(4) Commenced operations 1/5/94

(5) Commenced operations 5/11/94

(6) Commenced operations 8/14/89

(7) Commenced operations 1/21/94

(8) Commenced operations 9/5/89

(9) Commenced operations 11/1/94

(10) Commenced operations 8/25/98

(11) Commenced operations 9/11/95

(12) Commenced operations 8/19/98

(13) Commenced operations 8/18/98

S-28
<PAGE>
Each Fund may, from time to time, compare its performance to other mutual
funds tracked by mutual fund rating services, to broad groups of comparable
mutual funds or to unmanaged indices which may assume investment of dividends
but generally do not reflect deductions for sales charges, administrative and
management costs.

DETERMINATION OF NET ASSET VALUE

Securities of the Tax Free, Institutional Tax Free, California Tax Exempt,
Pennsylvania Tax Free and Ohio Tax Free Funds will be valued by the amortized
cost method which involves valuing a security at its cost on the date of
purchase and thereafter (absent unusual circumstances) assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuations in general market rates of interest on the value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by this method is higher or lower than the
price the Trust would receive if it sold the instrument. During periods of
declining interest rates, the daily yield of a Fund may tend to be higher than a
like computation made by a company with identical investments utilizing a method
of valuation based upon market prices and estimates of market prices for all of
its portfolio securities. Thus, if the use of amortized cost by a Fund resulted
in a lower aggregate portfolio value on a particular day, a prospective investor
in a Fund would be able to obtain a somewhat higher yield than would result from
investment in a company utilizing solely market values, and existing
shareholders in the Fund would experience a lower yield. The converse would
apply in a period of rising interest rates.

A Fund's use of amortized cost valuation and the maintenance of the Fund's
net asset value at $1.00 are permitted by Rule 2a-7 under the 1940 Act, provided
that certain conditions are met. Under Rule 2a-7 a money market portfolio must
maintain a dollar-weighted average maturity of 90 days or less, and not purchase
any instrument having a remaining maturity of more than 397 days. In addition,
money market funds may acquire only U.S. dollar denominated obligations that
present minimal credit risks and that are "eligible securities," which means
they are: (i) rated, at the time of investment, by at least two nationally
recognized statistical rating organizations (one if it is the only organization
rating such obligation) in the highest short-term rating category or, if
unrated, determined to be of comparable quality (a "first tier security"), or
(ii) rated according to the foregoing criteria in the second highest short-term
rating category or, if unrated, determined to be of comparable quality ("second
tier security"). The Advisers will determine that an obligation presents minimal
credit risk or that unrated instruments are of comparable quality in accordance
with guidelines established by the Trustees.

In the event a first tier security of the Tax Free Fund, Institutional Tax
Free Fund, California Tax Exempt Fund, Pennsylvania Tax Free Fund or the Ohio
Tax Free Fund is downgraded below first tier security status after purchase, or
the Adviser of the of any such Fund becomes aware that an unrated or second tier
security has received any rating below the second highest rating category after
purchase, the Fund's Adviser will either dispose of the security within five
business days or the Board of Trustees will reassess whether the security
continues to present minimal credit risks. The Board may also delegate this
responsibility to the Fund's Adviser with respect to the downgrade of a first
tier security. The regulations also require the Trustees to establish procedures
which are reasonably designed to stabilize the net asset value per unit at $1.00
for each Fund. However, there is no assurance that the Trust will be able to
meet this objective. The Trust's procedures include the determination of the
extent of deviation, if any, of each Fund's current net asset value per unit
calculated using available market quotations from each Fund's amortized cost
price per unit at such intervals as the Trustees deem appropriate and reasonable
in light of market conditions and periodic reviews of the amount of the
deviation and the methods used to calculate such deviation. In the event that
such deviation exceeds 1/2 of 1%, the Trustees are required to consider promptly
what action, if any, should be initiated; and, if the Trustees believe that the
extent of any deviation may result in material dilution or other unfair results
to shareholders, the Trustees are required to take such corrective action as
they deem appropriate to eliminate or reduce such dilution or unfair results to
the extent reasonably practicable. In addition, if any Fund incurs a significant
loss or liability, the Trustees have the authority to reduce pro rata the number
of shares of that Fund in each shareholder's

S-29
<PAGE>
account and to offset each shareholder's pro rata portion of such loss or
liability from the shareholder's accrued but unpaid dividends or from future
dividends.

Securities of the Intermediate-Term Municipal, Pennsylvania Municipal Bond,
California Municipal Bond, Massachusetts Municipal Bond, New Jersey Municipal
Bond, and New York Municipal Bond Funds may be valued by the Manager pursuant to
valuations provided by an independent pricing service. The pricing service
relies primarily on prices of actual market transactions as well as trader
quotations. However, the service may also use a matrix system to determine
valuations, which system considers such factors as security prices, yields,
maturities, call features, ratings and developments relating to specific
securities in arriving at valuations. The procedures of the pricing service and
its valuations are reviewed by the officers of the Trust under the general
supervision of the Trustees.

PURCHASE AND REDEMPTION OF SHARES

The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period during which trading
on the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or evaluation of the portfolio securities is not reasonably
practicable, or for such other periods as the SEC may be order permit. The Trust
also reserves the right to suspend sales of shares of a Fund for any period
during which the New York Stock Exchange, the Manager, a Fund's Adviser, the
Distributor and/or the Custodian are not open for business. Currently, the
following holidays are observed by the Trust: New Year's Day, Martin Luther
King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.

In calculating the sales charge rates applicable to current purchases of
Class D shares, members of the following affinity groups and clients of the
following broker-dealers, each of which has entered into an agreement with the
Distributor, are entitled to the following percentage-based discounts from the
otherwise applicable sales charge:

<TABLE>
<CAPTION>
PERCENTAGE DATE OFFER
NAME OF GROUP DISCOUNT STARTS
- -------------------------------------------------------------------- ----------- ----------------------
<S> <C> <C>
Countrywide Funding Corp............................................ 100% July 27, 1994
</TABLE>

Those members or clients who take advantage of a percentage-based reduction
in the sales charge during the offering period noted above may continue to
purchase shares at the reduced sales charge rate after the offering period
relating to each such purchaser's affinity group or broker-dealer relationship
has terminated.

Please contact the Distributor at 1-800-437-6016.

SHAREHOLDER SERVICES--CLASS D SHARES

STOP-PAYMENT REQUESTS (MONEY MARKET FUNDS ONLY): Investors may request a
stop payment on checks by providing the Trust with a written authorization to do
so. Oral requests will be accepted provided that the Trust promptly receives a
written authorization. Such requests will remain in effect for six months unless
renewed or canceled. The Trust will use its best efforts to effect stop-payment
instructions, but does not promise or guarantee that such instructions will be
effective. Shareholders requesting stop payment will be charged a $20 service
fee per check which will be deducted from their accounts.

EXCHANGE PRIVILEGE: A shareholder may exchange the shares of the Tax Free
Fund for which good payment has been received, in his account at any time,
regardless of how long he has held his shares.

Each Exchange Request must be in proper form (I.E., if in writing, signed by
the record owner(s) exactly as the shares are registered; if by telephone,
proper account identification is given by the dealer or shareholder of record),
and each exchange must involve either shares having an aggregate value of at
least

S-30
<PAGE>
$1,000 or all the shares in the account. Each exchange involves the redemption
of the shares of a Fund (the "Old Fund") to be exchanged and the purchase at net
asset value of the shares of the other portfolios (the "New Funds") plus in
certain cases, as disclosed in each Prospectus, any applicable sales charge. Any
gain or loss on the redemption of the shares exchanged is reportable on the
shareholder's federal income tax return, unless such shares were held in a
tax-deferred retirement plan or other tax-exempt account. If the Exchange
Request is received by the Distributor in writing or by telephone on any
business day prior to the redemption cut-off time specified in each Prospectus,
the exchange usually will occur on that day if all the restrictions set forth
above have been complied with at that time. However, payment of the redemption
proceeds by the Old Fund, and thus the purchase of shares of the New Funds, may
be delayed for up to seven days if the Funds determine that such delay would be
in the best interest of all of its shareholders. Investment dealers which have
satisfied criteria established by the Funds may also communicate a shareholder's
Exchange Request to the Funds subject to the restrictions set forth above. No
more than five exchange requests may be made in any one telephone Exchange
Request.

TAXES

FEDERAL INCOME TAX

The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.

Each Fund will decide whether to distribute or retain all or part of any net
capital gains (the excess of net long-term capital gains over net short-term
capital losses) in any year for reinvestment. If any such gains are retained,
the Fund will pay federal income tax thereon, and, if the Fund makes an
election, the shareholders will include such undistributed gains in their income
and shareholders subject to tax will be able to claim their share of the tax
paid by the Fund as a credit against their federal income tax liability.

A gain or loss realized by a shareholder on the sale or exchange of shares
of a Fund held as a capital asset will be capital gain or loss, and such gain or
loss will be long-term if the holding period for the shares exceeds one year,
and otherwise will be short-term. Any loss realized on a sale or exchange will
be disallowed to the extent the shares disposed of are replaced within the
61-day period beginning 30 days before and ending 30 days after the shares are
disposed of. Any loss realized by a shareholder on the disposition of shares
held 6 months or less is treated as a long-term capital loss to the extent of
any distributions of net long-term capital gains received by the shareholder
with respect to such shares or any inclusion of undistributed capital gain with
respect to such shares.

Each Fund will generally be subject to a nondeductible 4% federal excise tax
to the extent it fails to distribute by the end of any calendar year at least
98% of its ordinary income and 98% of its capital gain net income (the excess of
short- and long-term capital gains over short- and long-term capital losses) for
the one-year period ending on October 31 of that year, plus certain other
amounts.

Each Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions, and redemptions) paid
individual or non-corporate to shareholders who have not certified on the
Account Registration Form or on a separate form supplied by the Fund, that the
Social Security or Taxpayer Identification Number provided is correct and that
the shareholder is exempt from backup withholding or is not currently subject to
backup withholding.

Each Fund within the Trust is generally treated as a separate corporation
for federal income tax purposes, and thus the provisions of the Code generally
will be applied to each Fund separately, rather than to the Trust as a whole.
Net long-term and short-term capital gains, net income, and operating expenses
therefore will be determined separately for each Fund.

S-31
<PAGE>

If a Fund fails to qualify as a regulated investment company ("RIC") for any
year, all of its income will be subject to tax at corporate rates, and its
distributions (including capital gains distributions), to the extent of its
current and accumulated earnings and profits, will be taxable as ordinary income
dividends to its shareholders, subject to the corporate dividends received
deduction for corporate shareholders. No dividends of any Fund are expected to
qualify for that deduction.

Exempt-interest dividends are excludable from a shareholder's gross income
for regular federal income tax purposes. Exempt-interest dividends may
nevertheless be subject to the alternative minimum tax (the "Alternative Minimum
Tax") imposed by Section 55 of the Code. The Alternative Minimum Tax is imposed
at the rate of 26% to 28% in the case of non-corporate taxpayers and at the rate
of 20% in the case of corporate taxpayers, to the extent it exceeds the
taxpayer's regular tax liability. The Alternative Minimum Tax may be imposed in
two circumstances. First, exempt-interest dividends derived from certain
"private activity bonds" issued after August 7, 1986, will generally be an item
of tax preference and therefore potentially subject to the Alternative Minimum
Tax for both corporate and non-corporate taxpayers. The Funds intend, when
possible, to avoid investing in private activity bonds. Second, in the case of
exempt-interest dividends received by corporate shareholders, all
exempt-interest dividends, regardless of when the bonds from which they are
derived were issued or whether they are derived from private activity bonds,
will be included in the corporation's "adjusted current earnings," as defined in
Section 56(g) of the Code, in calculating the corporation's alternative minimum
taxable income for purposes of determining the Alternative Minimum Tax.

The percentage of income that constitutes "exempt-interest dividends" will
be determined for each year for the Funds and will be applied uniformly to all
dividends declared with respect to the Funds during that year. This percentage
may differ from the actual percentage for any particular day.

Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Funds will not be deductible for federal income tax purposes to
the extent that the Funds distribute exempt-interest dividends during the
taxable year. The deduction otherwise allowable to property and casualty
insurance companies for "losses incurred" will be reduced by an amount equal to
a portion of exempt-interest dividends received or accrued during any taxable
year. Certain foreign corporations engaged in a trade or business in the United
States will be subject to a "branch profits tax" on their "dividend equivalent
amount" for the taxable year, which will include exempt-interest dividends.
Certain Subchapter S corporations may also be subject to taxes on their "passive
investment income," which could include exempt-interest dividends. Up to 85% of
the Social Security benefits or railroad retirement benefits received by an
individual during any taxable year will be included in the gross income of such
individual if the individual's "modified adjusted gross income" (which includes
exempt-interest dividends) plus one-half of the Social Security benefits or
railroad retirement benefits received by such individual during that taxable
year exceeds the base amount described in Section 86 of the Code.

Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development bonds or
private activity bonds should consult their tax advisors before purchasing
shares of the Funds. "Substantial user" is defined generally as including a
"non-exempt person" who regularly uses in a trade or business a part of a
facility financed from the proceeds of industrial development bonds or private
activity bonds.

Issuers of bonds purchased by the Funds (or the beneficiary of such bonds)
may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Investors should be aware
that exempt-interest dividends derived from such bonds may become subject to
federal income taxation retroactively to the date of issuance of the bonds to
which such dividends are attributable if such representations are determined to
have been inaccurate or if the issuer of such bonds (or the beneficiary of such
bonds) fails to comply with such covenants.

S-32
<PAGE>
STATE TAXES

A Fund is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Depending upon applicable
state and local law, shareholders of a Fund may be exempt from state and local
taxes on distributions of tax-exempt interest income derived from obligations of
the state and/or municipalities in which they reside, but shareholders may be
subject to tax on income derived from obligations of other jurisdictions. Each
Fund will make periodic reports to shareholders of the source of distributions
on a state-by-state basis.

MASSACHUSETTS INCOME TAXES. Under current law, as long as the Fund
qualifies as a regulated investment company under the Code, distributions from
the Fund which qualify as exempt-interest dividends for federal income tax
purposes are exempt from Massachusetts personal income taxation, to the extent
that the distributions are derived from interest on certain Massachusetts
obligations and are properly designated as such in a written notice mailed to
the Fund's shareholders not later than sixty days after the close of the Fund's
tax year. In addition, as long as the Fund qualifies as a regulated investment
company under the Code, distributions which qualify as capital gain dividends
for federal income tax purposes also are exempt from Massachusetts personal
income taxation, to the extent that the distributions are attributable to gains
from the sale or exchange of certain Massachusetts personal income taxation, and
are properly designated as such in a written notice mailed to the Fund's
shareholders not later than sixty days after the close of the Fund's tax year.

State and local tax consequences in other states may differ from the federal
income tax consequences and Massachusetts tax consequences described above.
Shareholders should consult their own tax advisors regarding the particular tax
consequences of an investment in the Fund.

CALIFORNIA INCOME TAXES. The Fund intends to qualify to pay dividends to
shareholders that are exempt from California personal income tax ("California
exempt-interest dividends"). The Fund will qualify to pay California
exempt-interest dividends if (1) at the close of each quarter of the Fund's
taxable year, at least 50 percent of the value of the Fund's total assets
consists of obligations the interest on which would be exempt from California
personal income tax if the obligations were held by an individual ("California
Tax Exempt Obligations") and (2) the Fund continues to qualify as a regulated
investment company.

If the Fund qualifies to pay California exempt-interest dividends, dividends
distributed to shareholders will be considered California exempt-interest
dividends if they meet certain requirements. The Fund will notify its
shareholders of the amount of exempt-interest dividends each year.

Corporations subject to California franchise tax that invest in the Fund may
not be entitled to exclude California exempt-interest dividends from income.

Dividend distributions that do not qualify for treatment as California
exempt-interest dividends (including those dividend distributions to
shareholders taxable as long-term capital gains for federal income tax purposes)
will be taxable to shareholders at ordinary income tax rates for California
personal income tax purposes to the extent of the Fund's earnings and profits.

Interest on indebtedness incurred or continued by a shareholder in
connection with the purchase of shares of the Fund will not be deductible for
California personal income tax purposes if the Fund distributes California
exempt-interest dividends.

The foregoing is a general, abbreviated summary of certain of the provisions
of the California Revenue and Taxation Code presently in effect as they directly
govern the taxation of Shareholders subject to California personal income tax.
These provisions are subject to change by legislative or administrative action,
and any such change may be retroactive with respect to Fund transactions.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning California tax matters.

S-33
<PAGE>
If a Fund qualifies to pay dividends to shareholders that are exempt from
California personal income tax ("California exempt-interest dividends"),
dividends distributed to shareholders will be considered California
exempt-interest dividends (1) if they are designated as exempt-interest
dividends by the Fund in a written notice to shareholders mailed within 60 days
of the close of the Fund's taxable year and (2) to the extent the interest
received by the Fund during the year on California Tax Exempt Obligations
exceeds expenses of the Fund that would be disallowed under California personal
income tax law as allocable to tax exempt interest if the Fund were an
individual. If the aggregate dividends so designated exceed the amount that may
be treated as California exempt-interest dividends, only that percentage of each
dividend distribution equal to the ratio of aggregate California exempt-interest
dividends to aggregate dividends so designated will be treated as a California
exempt-interest dividend.

For taxable years beginning after August 5, 1997, the Taxpayer Relief Act of
1997 repealed the 30 percent gross income test or "short-short" rules (the
"30-percent test") under which a regulated investment company had to derive less
than 30 percent of its gross income from the sale or disposition of certain
short-term assets held for less than three months. However, California has not
yet conformed to this federal legislation. Although the California legislature
may enact tax conforming legislation in 1998 that would be retroactive to August
5, 1997, no assurances can be given that California will provide a dividends
paid deduction to the Fund, or treat dividends paid by the Fund to its
shareholders as California exempt-interest dividends, if the Fund fails to meet
the 30-percent test. It is the intention of the management of the Fund to
continue to meet the 30-percent test for all years for which California does not
conform to the federal legislation.

PENNSYLVANIA TAXES. The following is a general, abbreviated summary of
certain of the provisions of the Pennsylvania tax code presently in effect as
they directly govern the taxation of shareholders subject to Pennsylvania
personal income tax. These provisions are subject to change by legislative or
administration action, and any such change may be retroactive.

Distributions paid by the Fund to shareholders will not be subject to the
Pennsylvania personal income tax or the Philadelphia School District investment
net income tax to the extent that the distributions are attributable to interest
received by the Fund from its investments in (i) obligations issued by the
Commonwealth of Pennsylvania, any public authority, commission, board of agency
created by the Commonwealth of Pennsylvania or any public authority created by
such political subdivision; and (ii) obligations of the United States, the
interest and gains from which are statutorily free from state taxation in the
Commonwealth. Distributions by the Fund to a Pennsylvania resident that are
attributable to most other sources will not be exempt from the Pennsylvania
personal income tax or (for residents of Philadelphia) the Philadelphia School
District investment net income tax. Distributions paid by the Fund which are
excludable as exempt income for federal tax purposes are not subject to the
Pennsylvania corporate net income tax.

The Fund intends to invest primarily in obligations that produce interest
exempt from federal and Pennsylvania taxes. If the Fund invests in obligations
that pay interest that is not exempt for Pennsylvania purposes but is exempt for
federal purposes, a portion of the Fund's distributions will be subject to
Pennsylvania personal income tax.

NEW YORK STATE AND LOCAL TAXES. The following is a general, abbreviated
summary of certain of the provisions of the New York tax code presently in
effect as they directly govern the taxation of shareholders subject to New York
personal income tax. These provisions are subject to change by legislative or
administrative action, and any such change may be retroactive.

Dividends paid by the Fund that are derived from interest on Municipal
Securities issued by New York State and political subdivisions or any agency or
instrumentality thereof which interest would be exempt from New York State tax
if held by an individual, will be exempt from New York State and new York City
personal income taxes, but not corporate franchise taxes. Other dividends and
distributions from other Municipal Securities, U.S. Government obligations,
taxable income and capital gains will not be exempt

S-34
<PAGE>
from New York State and New York City taxes. In addition, interest or
indebtedness incurred by a shareholder to purchase or carry shares of the Fund
is not deductible for New York personal income tax purposes to the extent that
it relates to New York exempt-interest dividends distributed to a shareholder
during the taxable year.

NEW JERSEY INCOME TAXES. The following is a general, abbreviated summary of
certain of the provisions of the New Jersey tax code presently in effect as they
directly govern the taxation of shareholders subject to New Jersey tax. These
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive.

For purposes of this discussion of New Jersey taxation, it is assumed that
the Fund will continue to qualify as a regulated investment company for federal
tax purposes. Distributions paid by the Fund will not be subject to the New
Jersey Gross Income Tax to the extent they are derived from interest income (and
net gain, if any, from the disposition of New Jersey Securities) attributable to
New Jersey Securities or direct obligations of the United States, its
territories and certain of its agencies and instrumentalities ("Federal
Securities") held by the Fund, either when received by the Fund or when credited
or distributed to the investors, provided that the Fund meets the New Jersey
requirements for a qualified investment fund by: 1) maintaining its registration
as a registered investment company; 2) investing at least 80% of the aggregate
principal amount of the Fund's investments, excluding cash and certain specified
items, in New Jersey Securities or Federal Securities; and 3) investing 100% of
its assets in interest bearing obligations, discount obligations, financial
options, futures, forward contracts or similar financial instruments, and cash,
including receivables. Gain on the disposition of Shares of the Fund is not
subject to New Jersey Gross Income Tax, provided that the Fund meets the
requirements for a qualified investment fund set forth above.

For New Jersey Gross Investment Tax purposes, net income or gains and
distributions derived from investments in other than New Jersey Securities and
Federal Securities, and distributions from net realized capital gains in respect
of such investments, would be taxable. Thus, while the Fund intends to invest
primarily in obligations that produce interest exempt from the Fund intends to
invest primarily in obligations that produce interest exempt from federal and
New Jersey taxes, if the Fund invests in obligations that pay interest that is
not exempt for New Jersey purposes but is exempt for federal purposes, a portion
of the Fund's distributions would be subject to New Jersey tax.

Shareholders should consult their tax advisors concerning the state and
local tax consequences of investments in the Trust, which may differ from the
federal income tax consequences described above.

PORTFOLIO TRANSACTIONS

The Trust has no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Advisers and Sub-Adviser are responsible for
placing orders to execute Fund transactions. In placing orders, it is the
Trust's policy to seek to obtain the best net results taking into account such
factors as price (including the applicable dealer spread), size, type and
difficulty of the transaction involved, the firm's general execution and
operational facilities, and the firm's risk in positioning the securities
involved. While the Advisers and Sub-Adviser generally seek reasonably
competitive spreads or commissions, the Trust will not necessarily be paying the
lowest spread or commission available. The Trust's policy of investing in
securities with short maturities will result in high portfolio turnover. The
Trust will not purchase portfolio securities from any affiliated person acting
as principal except in conformity with the regulations of the SEC.

The Trust does not expect to use one particular dealer, but, subject to the
Trust's policy of seeking the best net results, dealers who provide supplemental
investment research to the Advisers and Sub-Adviser may receive orders for
transactions by the Trust. Information so received will be in addition to and
not in lieu of the services required to be performed by the Advisers or
Sub-Adviser under the Advisory or Sub-

S-35
<PAGE>
Advisory Agreements, and the expenses of the Advisers and Sub-Adviser will not
necessarily be reduced as a result of the receipt of such supplemental
information.

The money market securities in which certain of the Funds invest are traded
primarily in the over-the-counter market. Bonds and debentures are usually
traded over-the-counter, but may be traded on an exchange. Where possible, a
Fund's Adviser or Sub-Adviser will deal directly with the dealers who make a
market in the securities involved except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting as
principal for their own account. On occasion, securities may be purchased
directly from the issuer. Money market securities are generally traded on a net
basis, and do not normally involve either brokerage commissions or transfer
taxes. The cost of executing portfolio securities transactions of the Fund will
primarily consist of dealer spreads and underwriting commissions.

It is expected that certain of the Funds may execute brokerage or other
agency transactions through the Distributor, a registered broker-dealer, for a
commission, in conformity with the 1940 Act, the Securities Exchange Act of
1934, as amended, and rules of the SEC. Under these provisions, the Distributor
is permitted to receive and retain compensation for effecting portfolio
transactions for a Fund on an exchange if a written contract is in effect
between the Distributor and the Trust expressly permitting the Distributor to
receive and retain such compensation. These provisions further require that
commissions paid to the Distributor by the Trust for exchange transactions not
exceed "usual and customary" brokerage commissions. The rules define "usual and
customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time." In addition, the Funds may direct commission business to one or
more designated broker-dealers, including the Distributor, in connection with
payment of certain of the Funds' expenses by such broker-dealers. The Trustees,
including those who are not "interested persons" of the Trust, have adopted
procedures for evaluating the reasonableness of commissions paid to the
Distributor and will review these procedures periodically.

Since the Trust does not market its shares through intermediary brokers or
dealers, it is not the Trust's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, the Advisers and Sub-Adviser may place portfolio orders with
qualified broker-dealers who recommend the Trust to clients, and may, when a
number of brokers and dealers can provide best price and execution on a
particular transaction, consider such recommendations by a broker or dealer in
selecting among broker-dealers.

The Advisers and Sub-Adviser may, consistent with the interests of the
Funds, select brokers on the basis of the research services they provide to the
Adviser or Sub-Adviser. Such services may include analysis of the business or
prospects of a company, industry or economic sector or statistical and pricing
services. Information so received by the Advisers or Sub-Adviser will be in
addition to and not in lieu of the services required to be performed by an
Adviser or Sub-Adviser under the Advisory or Sub-Advisory Agreements. If in the
judgement of an Adviser or Sub-Adviser the Funds, or other accounts managed by
the Adviser or Sub-Adviser, will be benefitted by supplemental research
services, the Adviser or Sub-Adviser is authorized to pay brokerage commissions
to a broker furnishing such services which are in excess of commissions which
another broker may have charged for effecting the same transaction. The expenses
of an Adviser or Sub-Adviser will not necessarily be reduced as a result of the
receipt of such supplemental information.

For the fiscal years ended August 31, 1996, 1997, and 1998, the Funds paid
no brokerage commissions.

It is expected that the portfolio turnover rate will normally not exceed
100% for any Fund. A portfolio turnover rate would exceed 100% if all of its
securities, exclusive of U.S. Government securities and other securities whose
maturities at the time of acquisition are one year or less, are replaced in the
period of one

S-36
<PAGE>

year. Turnover rates may vary from year to year and may be affected by cash
requirements for redemptions and by requirements which enable a Fund to receive
favorable tax treatment.

For each of the fiscal years ending August 31, 1997 and 1998, the portfolio
turnover rate for each of the following Funds was:

<TABLE>
<CAPTION>
TURNOVER RATE
------------------------
FUND 1997 1998
- --------------------------------------------------------------------------------------- ----- -----------
<S> <C> <C>
Pennsylvania Municipal Bond Fund....................................................... 34% 27 %
Intermediate-Term Municipal Fund....................................................... 16% 9 %
New York Municipal Bond Fund........................................................... * 0.9%**
California Municipal Bond Fund......................................................... * 0 %**
Massachusetts Municipal Bond Fund...................................................... * 11 %**
New Jersey Municipal Bond Fund......................................................... * 0 %**
</TABLE>

- ------------------------

* Not in operation during the period.

** Annualized

DESCRIPTION OF SHARES

The Declaration of Trust authorizes the issuance of an unlimited number of
shares of each Fund, each of which represents an equal proportionate interest in
that Fund. Each share upon liquidation entitles a shareholder to a pro rata
share in the net assets of that Fund, after taking into account the Class D and
CNI Class distribution expenses. Shareholders have no preemptive rights. The
Declaration of Trust provides that the Trustees of the Trust may create
additional portfolios of shares or classes of portfolios. Share certificates
representing the shares will not be issued.

LIMITATION OF TRUSTEES' LIABILITY

The Declaration of Trust provides that a Trustee shall be liable only for
his own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or administrators, shall not be liable
for any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his wilful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.

SHAREHOLDER LIABILITY

The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a Trust could,
under certain circumstances, be held personally liable as partners for the
obligations of the Trust. Even if, however, the Trust were held to be a
partnership, the possibility of the shareholders' incurring financial loss for
that reason appears remote because the Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because, the Declaration of Trust provides for indemnification out
of the Trust property for any shareholders held personally liable for the
obligations of the Trust.

S-37
<PAGE>
5% SHAREHOLDERS

As of December 1, 1998, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Funds. The Trust believes that most of the shares
referred to below were held by the persons indicated in accounts for their
fiduciary, agency, or custodial customers.

Naidot & Co. .................................................... 82,838,800 14.68%
c/o Bessemer Trust Company
Attn: Peter Scully
630 Fifth Avenue, 38th Floor
New York, New York 10111-0100

Fleet Investment Services ....................................... 93,159,332 16.51%
159 E. Main Street
Rochester, New York 14604-1605

SEI Trust Company ............................................... 102,827,164 18.22%
c/o SEI Corporation
Attn: Sandra Crawford
P.O. Box 1100
Oaks, PA 19456

Colorado State Bank of Denver ................................... 45,267,777 8.02%
Attn: Leonard Rice
P.O. Box 5945TA
Denver, CO 80217

EAMCO ........................................................... 66,016,960 11.70%
c/o Riggs Bank N.A.
Attn: Pat Murrell
5700 Rivertech Court
Riverdale, MD 20737-1250

Smith & Co. ..................................................... 61,548,814 10.91%
c/o First Security Bank of Utah
Attention Rick Parr
P.O. Box 30007
Salt Lake City, UT 84130-0007

INSTITUTIONAL TAX FREE FUND, CLASS A

Bank of America NT & SA ......................................... 91,718,529 11.58%
Attn: Common Trust Fund Unit #8329
P.O. Box 3577 Terminal Annex
Los Angeles, CA 90051-1577
</TABLE>

S-38
<PAGE>

<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES FUNDS
- ------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
U.S. Bank NA .................................................... 53,538,554 6.68%
First Trust Center
Attn: Linda Fritz
180 E. Fifth Street
St. Paul, MN 55101-1631

First American National Bank .................................... 77,286,022 9.65%
Attn: Jeff Eubanks
800 First American Center
Nashville, TN 37237

Whitcust & Co. .................................................. 51,053,460 6.37%
c/o Whitney National Bank
Attn: Darryl Fricke
228 St. Charles Ave.
New Orleans, LA 70130-2601

Fifth Third Bank ................................................ 62,057,168 7.75%
Attn: Jennifer Burrell
38 Fountain Square
Cincinnati, OH 45263-0001

Calhoun & Co. ................................................... 50,361,260 6.29%
c/o Comerica Bank
Attn: Mutual Funds
P.O. Box 75000
Detroit, MI 48275-0001

INSTITUTIONAL TAX FREE FUND, CLASS B

SEI Trust Company ............................................... 45,184,870 44.87%
Attn: Jacqueline Esposito
One Freedom Valley Drive
Oaks, PA 19456

Muir & Co. ...................................................... 15,025,344 14.92%
c/o Frost National Bank
P.O. Box 2479
San Antonio, TX 78298-2479

Oltrust & Co. ................................................... 6,063,537 6.02%
c/o Old National Bank of Evansville
Attn: David Crow
P.O. Box 207
Evansville, IN 47702-0207

SEI Trust Co. ................................................... 19,343,818 19.21%
c/o The Peoples Bank
Attn: Mutual Fund Admin.
One Freedom Valley Drive
Oaks, PA 19456
</TABLE>

S-39
<PAGE>

<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES FUNDS
- ------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
CENCO ........................................................... 8,370,254 8.31%
c/o Compass Bank
Attn: Bobby Morris
P.O. Box 10566
Birmingham, AL 35296-0001

INSTITUTIONAL TAX FREE FUND, CLASS C

Grand Old Co. ................................................... 2,336,924 8.52%
c/o First National Bank of Zanesville
Attn: Jan Baldwin
P.O. Box 2458
Zanesville, OH 43702-2458

First Victoria National Bank .................................... 1,404,774 5.12%
Attn: Grace Pantel
P.O. Box 1338
Victoria, TX 77902-1338

Progress Bank ................................................... 4,285,535 15.34%
Attn: Marge McAleer
4 Sentry Parkway
P.O. Box 3036
Blue Bell, PA 19422-0764

First Security Bank of Utah ..................................... 20,298,855 74.04%
Cash Management (Cash Sweep Account)
Attn: Bill Walkaways
61 South Main Street
Salt Lake City, UT 84111-1909

CALIFORNIA TAX EXEMPT FUND, CLASS A

Union Investors California Tax Free ............................. 3,064,094 5.75%
c/o SEI Financial Management
One Freedom Valley Drive
Oaks, PA 19456

Bank of America NT & SA ......................................... 3,481,526 6.53%
Attn: Common Trust Funds Unit # 8329
P.O. Box 3577 Terminal Annex
Los Angeles, CA 90051-1577

SEI Trust Company ............................................... 8,661,941 16.24%
c/o SEI Corporation
Attn: Sandra Crawford
P.O. Box 1100
Oaks, PA 19456
</TABLE>

S-40
<PAGE>

<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES FUNDS
- ------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Union Bank of California ........................................ 34,258,279 64.24%
Attn: Jeanne Chizek or Julie Parra
P.O. Box 109
San Diego, CA 92112

CALIFORNIA TAX EXEMPT FUND, CNI CLASS

Southwest Securities ............................................ 414,359,020 79.70%
Special Custodial Account for Exclusive
Benefit of Our Customers
Attn: Barbara Dodd
P.O. Box 509002
Dallas, TX 75250-9002

City National Bank AS ........................................... 121,708,578 23.41%
Agent for Various Accounts
Attn: Bolokowitcz
400 N Roxbury Drive, 7th Floor
Beverly Hills, CA 90210-5021

PENNSYLVANIA MUNICIPAL BOND FUND, CLASS B

Sheldon & Co. (Integra) ......................................... 6,524,924 67.64%
c/o National City
Attn: Trust Mutual Funds
P.O. Box 94777, Loc 5312
Cleveland, OH 44101-4777

SEI Trust Company ............................................... 905,160 9.38%
Attn: Jacqueline Esposito
One Freedom Valley Drive
Oaks, PA 19456

Meg And Co. ..................................................... 854,384 8.85%
c/o United States National Bank
Attn: Debbie Moraca
P.O. Box 520
Johnstown, PA 15907-0520

PENNSYLVANIA TAX FREE FUND, CLASS A

Commonwealth of Pennsylvania .................................... 10,114,216 16.79%
J. Robert Hawkins
Finance Building
Room 126
Harrisburg, PA 17120
</TABLE>

S-41
<PAGE>

<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES FUNDS
- ------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
The Farmers Company ............................................. 5,921,400 9.83%
c/o Farmers First Bank - Lititz
Attn: Wendy Basehoar
P.O. Box 1000
Lititz, PA 17543-7000

The Fulton Company .............................................. 43,663,679 72.48%
c/o Fulton Bank Trust Dept.
Attn: Dennis Patrick
One Penn Square
Lancaster, PA 17602-2853

INTERMEDIATE TERM MUNICIPAL FUND, CLASS A

SEI Trust Company ............................................... 34,570,518 74.71%
Attn: Jacqueline Esposito
One Freedom Valley Drive
Oaks, PA 19456

CALIFORNIA MUNICIPAL BOND FUND, CLASS A

SEI Trust Company ............................................... 148,351 11.32%
Attn: Jacqueline Esposito
One Freedom Valley Drive
Oaks, PA 19456

SEI Trust Company ............................................... 1,127,890 86.03%
Attn: Jacqueline Esposito
One Freedom Valley Drive
Oaks, PA 19456

MASSACHUSETTS MUNICIPAL BOND FUND, CLASS A

SEI Corporation ................................................. 98,257 20.78%
c/o SEI Escrow
Attn: Eileen Bonaduce
P.O. Box 1100
Oaks, PA 19456

SEI Trust Company ............................................... 375,950 79.52%
Attn: Jacqueline Esposito
One Freedom Valley Drive
Oaks, PA 19456

NEW JERSEY MUNICIPAL BOND FUND, CLASS A

SEI Corporation ................................................. 82,916 8.51%
c/o SEI Escrow
Attn: Eileen Bonaduce
P.O. Box 1100
Oaks, PA 19456
</TABLE>

S-42
<PAGE>

<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES FUNDS
- ------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
SEI Trust Company ............................................... 708,510 95.21%
Attn: Jacqueline Esposito
One Freedom Valley Drive
Oaks, PA 19456

NEW YORK MUNICIPAL BOND FUND

SEI Corporation ................................................. 93,335 17.68%
c/o SEI Escrow
Attn: Eileen Bonaduce
P.O. Box 1100
Oaks, PA 19456

SEI Trust Company ............................................... 430,462 81.54%
Attn: Jacqueline Esposito
One Freedom Valley Drive
Oaks, PA 19456
</TABLE>

LEGAL COUNSEL

Morgan, Lewis & Bockius LLP serves as counsel to the Trust.

EXPERTS

The financial statements dated August 31, 1998, in this Statement of
Additional Information have been audited by Arthur Andersen LLP, independent
accountants, as indicated in their report dated October 12, 1998, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing and in giving said report.

S-43
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (000)

SEI TAX EXEMPT TRUST--FOR THE PERIOD ENDED AUGUST 31, 1998

<TABLE>
<CAPTION>
NEW JERSEY NEW YORK CALIFORNIA
MASSACHUSETTS MUNICIPAL MUNICIPAL MUNICIPAL
MUNICIPAL BOND BOND BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value
(Cost $870, $1,209, $1,217 and $1,938,
respectively)............................. $ 875 $ 1,213 $ 1,224 $ 1,946
Cash.......................................... 346 87 270 428
Accrued Income................................ 8 6 14 10
Receivable from Fund Shares Sold.............. -- -- -- 178
Investment Securities Sold.................... 99 -- 11 --
------ ------ ------ ------
Total Assets.................................. 1,328 1,306 1,519 2,562
------ ------ ------ ------

LIABILITIES:
Investment Securities Purchased............... 286 201 142 403
Accrued Expenses.............................. 2 -- 2 1
------ ------ ------ ------
Total Liabilities............................. 288 201 144 404
------ ------ ------ ------
Net Assets:................................... 1,040 1,105 1,375 2,158
------ ------ ------ ------

NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization--no par value) based on
103,388, 109,957, 136,772 and 214,354,
respectively, of outstanding shares of
beneficial interest......................... 1,034 1,101 1,368 2,150
Accumulated Net Realized Gain on
Investments................................. 1 -- -- --
Net Unrealized Appreciation on Investments.... 5 4 7 8
------ ------ ------ ------
TOTAL NET ASSETS................................ $ 1,040 $ 1,105 $ 1,375 $ 2,158
------ ------ ------ ------
------ ------ ------ ------
Net Asset Value, Offering and Redemption Price
Per Share--Class A............................ $ 10.05 $ 10.05 $ 10.05 $ 10.07
------ ------ ------ ------
------ ------ ------ ------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

S-44
<PAGE>
STATEMENT OF OPERATIONS (000)

SEI TAX EXEMPT TRUST--FOR THE YEAR ENDED AUGUST 31, 1998

<TABLE>
<CAPTION>
CALIFORNIA INSTITUTIONAL
TAX FREE TAX EXEMPT TAX FREE
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest Income................................................ $ 19,032 $ 17,647 $ 38,579
------------ ------------- -------
EXPENSES:
Management Fees................................................ 1,852 1,186 3,738
Waiver of Management Fees...................................... -- (101) (1,032)
Investment Advisory Fees....................................... 200 201 404
Waiver of Investment Advisory Fees............................. -- -- --
Custodian/Wire Agent Fees...................................... 37 46 89
Professional Fees.............................................. 11 16 37
Pricing Fees................................................... 4 4 8
Registration Fees.............................................. 77 45 119
Trustee Fees................................................... 8 10 13
Shareholder Servicing Fees(1).................................. 1,286 2,447 2,690
Shareholder Servicing Fee Waivers.............................. (1,173) (130) (2,353)
Printing Fees.................................................. 8 28 28
Insurance Fees................................................. 2 5 8
Other Expenses................................................. 3 4 14
------------ ------------- -------
Total Expenses................................................. 2,315 3,761 3,763
------------ ------------- -------
NET INVESTMENT INCOME............................................ 16,717 13,886 34,816
------------ ------------- -------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net Realized Loss on Investments............................... (8) (45) (15)
------------ ------------- -------
Net Realized and Unrealized Loss on Investments................ (8) (45) (15)
------------ ------------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $ 16,709 $ 13,841 $ 34,801
------------ ------------- -------
------------ ------------- -------
</TABLE>

- ------------------------

(1) INCLUDES CLASS SPECIFIC DISTRIBUTION EXPENSES.

AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

S-45
<PAGE>
STATEMENT OF OPERATIONS (000) (CONTINUED)

SEI TAX EXEMPT TRUST--FOR THE YEAR ENDED AUGUST 31, 1998

<TABLE>
<CAPTION>
PENNSYLVANIA
PENNSYLVANIA TAX INTERMEDIATE- TERM MUNICIPAL BOND
FREE PORTFOLIO MUNICIPAL PORTFOLIO PORTFOLIO
----------------- ------------------- -------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest Income..................................... $ 1,505 $ 17,876 $ 5,284
------ ------- ------
EXPENSES:
Management Fees..................................... 146 888 345
Waiver of Management Fees........................... (34) (95) (124)
Investment Advisory Fees............................ 16 1,221 198
Waiver of Investment Advisory Fees.................. -- -- --
Custodian/Wire Agent Fees........................... 3 45 8
Professional Fees................................... 3 14 6
Pricing Fees........................................ -- 22 13
Registration Fees................................... 2 74 11
Trustee Fees........................................ 1 7 1
Shareholder Servicing Fees(1)....................... 102 925 247
Shareholder Servicing Fee Waivers................... (102) (925) (247)
Printing Fees....................................... 3 43 14
Insurance Fees...................................... -- 3 1
Other Expenses...................................... 2 3 1
------ ------- ------
Total Expenses...................................... 142 2,225 474
------ ------- ------
NET INVESTMENT INCOME................................. 1,363 15,651 4,810
------ ------- ------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net Realized Gain (Loss) on Investments............. (4) 464 583
Net Change in Unrealized Appreciation of
Investments....................................... -- 10,070 1,465
------ ------- ------
Net Realized and Unrealized Gain (Loss) on
Investments....................................... (4) 10,534 2,048
------ ------- ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,359 $ 26,185 $ 6,858
------ ------- ------
------ ------- ------
</TABLE>

- ------------------------

(1) INCLUDES CLASS SPECIFIC DISTRIBUTION EXPENSES.

AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

S-46
<PAGE>
STATEMENT OF OPERATIONS (000) (CONCLUDED)

SEI TAX EXEMPT TRUST--FOR THE YEAR ENDED AUGUST 31, 1998

<TABLE>
<CAPTION>
MASSACHUSETTS NEW JERSEY NEW YORK CALIFORNIA
MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL BOND
PORTFOLIO(2) PORTFOLIO(3) PORTFOLIO(3) PORTFOLIO(2)
--------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income......................... $ -- $ 1 $ 1 $ 1
----- ----- ----- -----
EXPENSES:
Management Fees......................... -- -- -- --
Waiver of Management Fees............... -- -- -- --
Investment Advisory Fees................ -- -- -- --
Waiver of Investment Advisory Fees...... -- -- -- --
Custodian/Wire Agent Fees............... -- -- -- --
Professional Fees....................... -- -- -- --
Pricing Fees............................ -- -- -- --
Registration Fees....................... -- -- -- --
Trustee Fees............................ -- -- -- --
Shareholder Servicing Fees(1)........... -- -- -- --
Shareholder Servicing Fee Waivers....... -- -- -- --
Printing Fees........................... -- -- -- --
Insurance Fees.......................... -- -- -- --
Other Expenses.......................... -- -- -- --
----- ----- ----- -----
Total Expenses.......................... -- -- -- --
----- ----- ----- -----
NET INVESTMENT INCOME..................... -- 1 1 1
----- ----- ----- -----
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net Realized Gain on Investments........ 1 -- -- --
Net Change in Unrealized Appreciation of
Investments........................... 5 4 7 8
----- ----- ----- -----
Net Realized and Unrealized Gain on
Investments........................... 6 4 7 8
----- ----- ----- -----
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.............................. $ 6 $ 5 $ 8 $ 9
----- ----- ----- -----
----- ----- ----- -----
</TABLE>

- ------------------------

(1) INCLUDES CLASS SPECIFIC DISTRIBUTION EXPENSES.

(2) COMMENCED OPERATIONS ON AUGUST 19, 1998.

(3) COMMENCED OPERATIONS ON AUGUST 18, 1998.

AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

S-47
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)

SEI TAX EXEMPT TRUST--FOR THE YEAR ENDED AUGUST 31, 1998

<TABLE>
<CAPTION>
CALIFORNIA INSTITUTIONAL
TAX FREE TAX EXEMPT TAX FREE
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- --------------------- ----------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income................................. $ 16,717 $ 12,882 $ 13,886 $ 12,288 $ 34,816 $ 33,351
Net Realized Gain (Loss) on Investments............... (8) (3) (45) -- (15) (4)
---------- ---------- ---------- --------- ---------- ----------
Net Increase in Net Assets Resulting from
Operations.......................................... 16,709 12,879 13,841 12,288 34,801 33,347
---------- ---------- ---------- --------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Class A............................................. (16,717) (12,895) (1,653) (1,562) (31,995) (32,434)
Class B............................................. -- -- -- -- (2,287) (575)
Class C............................................. -- -- -- -- (652) (227)
Class D............................................. -- -- -- -- -- --
Class CNI(1)........................................ -- -- (12,243) (10,684) -- --
Net Capital Gains
Class A............................................. -- -- -- -- -- (42)
Class B............................................. -- -- -- -- -- (1)
---------- ---------- ---------- --------- ---------- ----------
Total Distributions................................. (16,717) (12,895) (13,896) (12,246) (34,934) (33,279)
---------- ---------- ---------- --------- ---------- ----------
TRANSACTIONS(2):
Class A:
Proceeds from Shares Issued......................... 2,868,542 1,929,474 471,131 378,414 4,812,267 5,109,226
Reinvestment of Cash Distributions.................. 2,527 1,321 76 63 1,150 547
Cost of Shares Redeemed............................. (2,758,801) (1,839,669) (483,007) (371,901) (4,999,980) (4,945,279)
---------- ---------- ---------- --------- ---------- ----------
Total Class A Share Transactions.................... 112,268 91,126 (11,800) 6,576 (186,563) 164,494
---------- ---------- ---------- --------- ---------- ----------
Class B:
Proceeds from Shares Issued......................... -- -- -- -- 404,501 74,602
Reinvestment of Cash Distributions.................. -- -- -- -- 857 73
Cost of Shares Redeemed............................. -- -- -- -- (345,134) (54,051)
---------- ---------- ---------- --------- ---------- ----------
Total Class B Share Transactions.................... -- -- -- -- 60,224 20,624
---------- ---------- ---------- --------- ---------- ----------
Class C:
Proceeds from Shares Issued......................... -- -- -- -- 169,692 66,525
Reinvestment of Cash Distributions.................. -- -- -- -- -- --
Cost of Shares Redeemed............................. -- -- -- -- (156,390) (76,352)
---------- ---------- ---------- --------- ---------- ----------
Total Class C Share Transactions.................... -- -- -- -- 13,302 (9,827)
---------- ---------- ---------- --------- ---------- ----------
Class D(3):
Proceeds from Shares Issued......................... -- 1 -- -- -- --
Reinvestment of Cash Distributions.................. -- -- -- -- -- --
Cost of Shares Redeemed............................. -- (6) -- -- -- --
---------- ---------- ---------- --------- ---------- ----------
Total Class D Share Transactions.................... -- (5) -- -- -- --
---------- ---------- ---------- --------- ---------- ----------
Class CNI(1):
Proceeds from Shares Issued......................... -- -- 1,076,760 817,088 -- --
Reinvestment of Cash Distributions.................. -- -- 9,619 9,680 -- --
Cost of Shares Redeemed............................. -- -- (1,024,432) (765,343) -- --
---------- ---------- ---------- --------- ---------- ----------
Total Class G Share Transactions.................... -- -- 61,947 61,425 -- --
---------- ---------- ---------- --------- ---------- ----------
Increase (Decrease) in Net Assets from Share
Transaction......................................... 112,268 91,121 50,147 68,001 (113,037) 175,291
---------- ---------- ---------- --------- ---------- ----------
Total Increase (Decrease) in Net Assets............... 112,260 91,105 50,092 68,043 (113,170) 175,359
---------- ---------- ---------- --------- ---------- ----------
NET ASSETS:
Beginning of period................................... 431,017 339,912 463,456 395,413 1,044,111 868,752
---------- ---------- ---------- --------- ---------- ----------
End of period......................................... $ 543,277 $ 431,017 $ 513,548 $ 463,456 $ 930,941 $1,044,111
---------- ---------- ---------- --------- ---------- ----------
---------- ---------- ---------- --------- ---------- ----------
</TABLE>

- ------------------------------

(1) FORMERLY CLASS G SHARES

(2) FOR CAPITAL SHARE TRANSACTIONS SEE FOOTNOTE 8 IN THE NOTES TO THE FINANCIAL
STATEMENTS.

(3) ON JUNE 30, 1996, INTERMEDIATE-TERM MUNICIPAL PORTFOLIO CLASS D CLOSED.

AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

S-48
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) (CONTINUED)

SEI TAX EXEMPT TRUST--FOR THE YEAR ENDED AUGUST 31, 1998

<TABLE>
<CAPTION>
INTERMEDIATE- TERM PENNSYLVANIA
PENNSYLVANIA
TAX FREE MUNICIPAL BOND
PORTFOLIO(2) MUNICIPAL PORTFOLIO PORTFOLIO
-------------------- -------------------- --------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income........................... $ 1,363 $ 1,263 $ 15,651 $ 8,537 $ 4,810 $ 4,948
Net Realized Gain (Loss) on Investments......... (4) -- 464 267 583 378
Net Change in Unrealized Appreciation of
Investments................................... -- -- 10,070 5,042 1,465 2,274
--------- --------- --------- --------- --------- ---------
Net Increase in Net Assets Resulting from
Operations.................................... 1,359 1,263 26,185 13,846 6,858 7,600
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Class A....................................... (1,358) (1,267) (15,609) (8,535) -- (4,941)
Class B....................................... -- -- -- -- (4,798) --
Net Capital Gains
Class A....................................... -- -- -- -- -- (1,769)
Class B....................................... -- -- -- -- (365) --
--------- --------- --------- --------- --------- ---------
Total Distributions........................... (1,358) (1,267) (15,609) (8,535) (5,163) (6,710)
--------- --------- --------- --------- --------- ---------
TRANSACTIONS(1):
Class A:
Proceeds from Shares Issued................... 322,613 244,606 327,207 163,672 332 21,575
Reinvestment of Cash Distributions............ 77 42 10,973 4,353 -- 569
Cost of Shares Redeemed....................... (322,186) (238,052) (91,670) (48,661) -- (22,183)
--------- --------- --------- --------- --------- ---------
Total Class A Share Transactions.............. 504 6,596 246,510 119,364 332 (39)
--------- --------- --------- --------- --------- ---------
Class B:
Proceeds from Shares Issued................... -- -- -- -- 19,813 --
Reinvestment of Cash Distributions............ -- -- -- -- 469 --
Cost of Shares Redeemed....................... -- -- -- -- (19,026) --
--------- --------- --------- --------- --------- ---------
Total Class B Share Transactions.............. -- -- -- -- 1,256 --
--------- --------- --------- --------- --------- ---------
Increase (Decrease) in Net Assets from Share
Transactions.................................. 504 6,596 246,510 119,364 1,588 (39)
--------- --------- --------- --------- --------- ---------
Total Increase in Net Assets.................... 505 6,592 257,086 124,675 3,283 851
--------- --------- --------- --------- --------- ---------
NET ASSETS:
Beginning of period............................. 49,563 42,971 259,238 134,563 98,079 97,228
--------- --------- --------- --------- --------- ---------
End of period................................... $ 50,068 $ 49,563 $ 516,324 $ 259,238 $ 101,362 $ 98,079
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>

- ------------------------------

(1) FOR CAPITAL SHARE TRANSACTIONS SEE FOOTNOTE 8 IN THE NOTES TO THE FINANCIAL
STATEMENTS.

(2) THE PENNSYLVANIA TAX FREE PORTFOLIO--CLASS B COMMENCED OPERATIONS ON AUGUST
25, 1998.

AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

S-49
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) (CONCLUDED)

SEI TAX EXEMPT TRUST--FOR THE YEAR ENDED AUGUST 31, 1998

<TABLE>
<CAPTION>
MASSACHUSETTS NEW JERSEY NEW YORK CALIFORNIA
MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL BOND
PORTFOLIO(2) PORTFOLIO(3) PORTFOLIO(3) PORTFOLIO(2)
------------------- ----------------- ----------------- -----------------
1998 1998 1998 1998
------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income................... $ -- $ 1 $ 1 $ 1
Net Realized Gain on Investments........ 1 -- -- --
Net Change in Unrealized Appreciation of
Investments........................... 5 4 7 8
------ ------ ------ ------
Net Increase in Net Assets Resulting
from Operations....................... 6 5 8 9
------ ------ ------ ------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Class A............................... -- (1) (1) (1)
Net Capital Gains
Class A............................... -- -- -- --
------ ------ ------ ------
Total Distributions................... -- (1) (1) (1)
------ ------ ------ ------
TRANSACTIONS(1):
Class A:
Proceeds from Shares Issued........... 1,034 1,100 1,367 2,161
Reinvestment of Cash Distributions.... -- 1 1 1
Cost of Shares Redeemed............... -- -- -- (12)
------ ------ ------ ------
Total Class A Share Transactions...... 1,034 1,101 1,368 2,150
------ ------ ------ ------
Increase in Net Assets from Share
Transactions.......................... 1,034 1,101 1,368 2,150
------ ------ ------ ------
Total Increase in Net Assets............ 1,040 1,105 1,375 2,158
------ ------ ------ ------
NET ASSETS:
Beginning of period..................... -- -- -- --
------ ------ ------ ------
End of period........................... $ 1,040 $ 1,105 $ 1,375 $ 2,158
------ ------ ------ ------
------ ------ ------ ------
</TABLE>

- ------------------------------

(1) FOR CAPITAL SHARE TRANSACTIONS SEE FOOTNOTE 8 IN THE NOTES TO THE FINANCIAL
STATEMENTS.

(2) COMMENCED OPERATIONS ON AUGUST 19, 1998.

(3) COMMENCED OPERATIONS ON AUGUST 18, 1998.

AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

S-50
<PAGE>
FINANCIAL HIGHLIGHTS
SEI TAX EXEMPT TRUST
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
NET REALIZED AND
INVESTMENT DISTRIBUTIONS UNREALIZED GAIN
NET ASSET ACTIVITIES --------------------------------------------- (LOSS) ON
VALUE -------------- NET INVESTMENTS AND NET ASSET
BEGINNING OF NET INVESTMENT NET INVESTMENT REALIZED TOTAL CAPITAL VALUE, END
PERIOD INCOME INCOME GAIN DISTRIBUTIONS TRANSACTIONS OF PERIOD
------------- -------------- -------------- ----------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
TAX FREE PORTFOLIO
CLASS A
1998.............. $ 1.00 $ 0.033 $ (0.033) -- $ (0.033) -- $ 1.00
1997.............. 1.00 0.033 (0.033) -- (0.033) -- 1.00
1996.............. 1.00 0.033 (0.033) -- (0.033) -- 1.00
1995.............. 1.00 0.034 (0.034) -- (0.034) -- 1.00
1994.............. 1.00 0.022 (0.022) -- (0.022) -- 1.00
CLASS D
1998.............. $ 1.00 $ 0.029 $ (0.029) -- $ (0.029) -- $ 1.00
1997.............. 1.00 0.028 (0.028) -- (0.028) -- 1.00
1996.............. 1.00 0.030 (0.030) -- (0.030) -- 1.00
1995(1)........... 1.00 0.026 (0.026) -- (0.026) -- 1.00

CALIFORNIA TAX EXEMPT PORTFOLIO
CLASS A
1998.............. $ 1.00 $ 0.032 $ (0.032 ) -- $ (0.032 ) -- $ 1.00
1997.............. 1.00 0.033 (0.033 ) -- (0.033 ) -- 1.00
1996.............. 1.00 0.034 (0.034 ) -- (0.034 ) -- 1.00
1995.............. 1.00 0.033 (0.033 ) -- (0.033 ) -- 1.00
1994.............. 1.00 0.023 (0.023 ) -- (0.023 ) -- 1.00
CLASS CNI***
1998.............. $ 1.00 $ 0.027 $ (0.027 ) -- $ (0.027 ) -- $ 1.00
1997.............. 1.00 0.028 (0.028 ) -- (0.028 ) -- 1.00
1996.............. 1.00 0.028 (0.028 ) -- (0.028 ) -- 1.00
1995.............. 1.00 0.029 (0.029 ) -- (0.029 ) -- 1.00
1994(2)........... 1.00 0.006 (0.006 ) -- (0.006 ) -- 1.00

<CAPTION>
RATIO OF
NET EXPENSES TO RATIO OF NET
ASSETS, RATIO OF AVERAGE NET RATIO OF NET INVESTMENT INCOME
END OF EXPENSES TO ASSETS INVESTMENT INCOME TO AVERAGE NET
PERIOD AVERAGE NET EXCLUDING FEE TO AVERAGE NET ASSETS EXCLUDING
TOTAL RETURN (000) ASSETS WAIVERS ASSETS FEE WAIVERS
------------ ---------- -------------- --------------- ----------------- -----------------
<S> <C>
TAX FREE PORTFOLIO
CLASS A
1998.............. 3.30% $ 543,276 0.45% 0.68% 3.25% 3.02%
1997.............. 3.31 431,016 0.45 0.69 3.26 3.02
1996.............. 3.35 339,906 0.45 0.50 3.30 3.25
1995.............. 3.48 377,152 0.45 0.51 3.43 3.37
1994.............. 2.20 358,299 0.45 0.53 2.17 2.09
CLASS D
1998.............. 2.91% $ 1 0.59% 0.59% 3.13% 3.13%
1997.............. 2.86 1 0.74 0.74 3.04 3.04
1996.............. 2.99 6 0.80 0.88 3.18 3.10
1995(1)........... 2.68 272 0.80* 0.86* 3.13* 3.07*

CALIFORNIA TAX EXEMP
CLASS A
1998.............. 3.20% $ 39,508 0.28% 0.55% 3.17% 2.90%
1997.............. 3.30 51,314 0.28 0.57 3.26 2.97
1996.............. 3.41 44,729 0.28 0.36 3.33 3.25
1995.............. 3.49 30,921 0.28 0.42 3.43 3.29
1994.............. 2.32 32,015 0.27 0.38 2.28 2.17
CLASS CNI***
1998.............. 2.69% $ 474,040 0.78% 0.80% 2.64% 2.62%
1997.............. 2.79 412,142 0.78 1.06 2.75 2.47
1996.............. 2.90 350,684 0.78 0.86 2.84 2.76
1995.............. 2.97 328,035 0.78 0.93 2.93 2.78
1994(2)........... 2.14 * 318,122 0.67 * 0.87 * 2.06 * 1.86 *

PORTFOLIO
TURNOVER RATE
--------------
TAX FREE PORTFOLIO
CLASS A
1998.............. --
1997.............. --
1996.............. --
1995.............. --
1994.............. --
CLASS D
1998.............. --
1997.............. --
1996.............. --
1995(1)........... --

CALIFORNIA TAX EXEMP
CLASS A
1998.............. --
1997.............. --
1996.............. --
1995.............. --
1994.............. --
CLASS CNI***
1998.............. --
1997.............. --
1996.............. --
1995.............. --
1994(2)........... --
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

S-51
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
SEI TAX EXEMPT TRUST
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
NET REALIZED AND
INVESTMENT DISTRIBUTIONS UNREALIZED GAIN
NET ASSET ACTIVITIES --------------------------------------------- (LOSS) ON
VALUE -------------- NET INVESTMENTS AND NET ASSET
BEGINNING OF NET INVESTMENT NET INVESTMENT REALIZED TOTAL CAPITAL VALUE, END
PERIOD INCOME INCOME GAIN DISTRIBUTIONS TRANSACTIONS OF PERIOD
------------- -------------- -------------- ----------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>

INSTITUTIONAL TAX FREE PORTFOLIO
CLASS A
1998.............. $ 1.00 $ 0.034 $ (0.034) -- $ (0.034) -- $ 1.00
1997.............. 1.00 0.034 (0.034) -- (0.034) -- 1.00
1996.............. 1.00 0.035 (0.035) -- (0.035) -- 1.00
1995.............. 1.00 0.036 (0.036) -- (0.036) -- 1.00
1994.............. 1.00 0.025 (0.025) -- (0.025) -- 1.00
CLASS B
1998.............. $ 1.00 $ 0.031 $ (0.031) -- $ (0.031) -- $ 1.00
1997.............. 1.00 0.031 (0.031) -- (0.031) -- 1.00
1996.............. 1.00 0.032 (0.032) -- (0.032) -- 1.00
1995.............. 1.00 0.033 (0.033) -- (0.033) -- 1.00
1994.............. 1.00 0.022 (0.022) -- (0.022) -- 1.00
CLASS C
1998.............. $ 1.00 $ 0.029 $ (0.029) -- $ (0.029) -- $ 1.00
1997.............. 1.00 0.029 (0.029) -- (0.029) -- 1.00
1996(3)........... 1.00 0.029 (0.029) -- (0.029) -- 1.00

PENNSYLVANIA TAX FREE PORTFOLIO
CLASS A
1998.............. $ 1.00 $ 0.034 $ (0.034 ) -- $ (0.034 ) -- $ 1.00
1997.............. 1.00 0.033 (0.033 ) -- (0.033 ) -- 1.00
1996.............. 1.00 0.034 (0.034 ) -- (0.034 ) -- 1.00
1995.............. 1.00 0.035 (0.035 ) -- (0.035 ) -- 1.00
1994(4)........... 1.00 0.014 (0.014 ) -- (0.014 ) -- 1.00

INSTITUTIONAL TAX FR
CLASS A
1998.............. 3.46% $ 813,261 0.33% 0.68% 3.39% 3.04%
1997.............. 3.44 999,946 0.33 0.69 3.39 3.03
1996.............. 3.52 835,388 0.33 0.49 3.46 3.30
1995.............. 3.70 788,877 0.33 0.52 3.64 3.45
1994.............. 2.51 835,516 0.33 0.50 2.48 2.31
CLASS B
1998.............. 3.15% $ 95,004 0.63% 0.73% 3.06% 2.96%
1997.............. 3.13 34,783 0.63 0.73 3.10 3.00
1996.............. 3.21 14,156 0.63 0.80 3.16 2.99
1995.............. 3.39 15,084 0.63 0.82 3.32 3.13
1994.............. 2.21 21,725 0.63 0.81 2.31 2.13
CLASS C
1998.............. 2.94% $ 22,676 0.83% 0.93% 2.89% 2.79%
1997.............. 2.93 9,382 0.83 0.95 2.85 2.73
1996(3)........... 2.92 19,208 0.83* 0.96* 2.89* 2.76*

PENNSYLVANIA TAX FRE
CLASS A
1998.............. 3.41% $ 50,068 0.35% 0.68% 3.36% 3.03%
1997.............. 3.39 49,563 0.35 0.71 3.33 2.97
1996.............. 3.40 42,971 0.35 0.49 3.33 3.19
1995.............. 3.60 26,058 0.35 0.51 3.54 3.38
1994(4)........... 2.37 * 18,712 0.35 * 0.65 * 2.37 * 2.07 *

PORTFOLIO
TURNOVER RATE
--------------

INSTITUTIONAL TAX FR
CLASS A
1998.............. --
1997.............. --
1996.............. --
1995.............. --
1994.............. --
CLASS B
1998.............. --
1997.............. --
1996.............. --
1995.............. --
1994.............. --
CLASS C
1998.............. --
1997.............. --
1996(3)........... --

PENNSYLVANIA TAX FRE
CLASS A
1998.............. --
1997.............. --
1996.............. --
1995.............. --
1994(4)........... --
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

S-52
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
SEI TAX EXEMPT TRUST
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
NET REALIZED AND
INVESTMENT DISTRIBUTIONS UNREALIZED GAIN
NET ASSET ACTIVITIES --------------------------------------------- (LOSS) ON
VALUE -------------- NET INVESTMENTS AND NET ASSET
BEGINNING OF NET INVESTMENT NET INVESTMENT REALIZED TOTAL CAPITAL VALUE, END
PERIOD INCOME INCOME GAIN DISTRIBUTIONS TRANSACTIONS OF PERIOD
------------- -------------- -------------- ----------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>

INTERMEDIATE-TERM MUNICIPAL
PORTFOLIO
CLASS A
1998.............. $ 10.77 $ 0.46 $ (0.46) -- $ (0.46) $ 0.31 $ 11.08
1997.............. 10.45 0.48 (0.48) -- (0.48) 0.32 10.77
1996.............. 10.59 0.49 (0.53) -- (0.53) (0.10) 10.45
1995.............. 10.36 0.52 (0.52) -- (0.52) 0.23 10.59
1994.............. 10.84 0.49 (0.49) $ (0.06) (0.55) (0.42) 10.36
CLASS D**
1996(5)........... $ 10.59 $ 0.38 $ (0.41) -- $ (0.41) $ (0.10) $ 10.46
1995.............. 10.36 0.48 (0.48) -- (0.48) 0.23 10.59
1994(6)........... 10.90 0.45 (0.42) $ (0.06) (0.48) (0.51) 10.36

PENNSYLVANIA MUNICIPAL BOND
PORTFOLIO
CLASS A
1998(7)........... $ 10.72 $ 0.01 $ (0.01 ) -- $ (0.01 ) $ 0.03 $ 10.75
CLASS B
1998.............. $ 10.58 $ 0.52 $ (0.52 ) $ (0.04 ) $ (0.56 ) $ 0.22 $ 10.76
1997.............. 10.48 0.53 (0.53 ) (0.19 ) (0.72 ) 0.29 10.58
1996.............. 10.66 0.55 (0.59 ) -- (0.59 ) (0.14 ) 10.48
1995.............. 10.52 0.55 (0.55 ) -- (0.55 ) 0.14 10.66
1994.............. 10.94 0.53 (0.53 ) -- (0.53 ) (0.42 ) 10.52

MASSACHUSETTS MUNICIPAL BOND
PORTFOLIO
CLASS A
1998(8)........... $ 10.00 -- -- -- -- $ 0.05 $ 10.05

INTERMEDIATE-TERM MU
PORTFOLIO
CLASS A
1998.............. 7.20% $ 516,324 0.60% 0.88% 4.23% 3.95%
1997.............. 7.93 259,238 0.60 0.88 4.53 4.25
1996.............. 3.76 134,563 0.59 0.66 4.66 4.59
1995.............. 7.53 95,675 0.55 0.72 4.96 4.79
1994.............. 0.65 127,509 0.53 0.71 4.65 4.47
CLASS D**
1996(5)........... 3.22%* -- 0.98%* 1.08%* 4.26%* 4.16%*
1995.............. 7.11 $ 548 0.95 1.12 4.57 4.40
1994(6)........... (0.93)* 1,105 0.93* 1.07* 4.34* 4.20*

PENNSYLVANIA MUNICIP
PORTFOLIO
CLASS A
1998(7)........... 0.26% $ 333 0.60%* 0.79%* 4.56%* 4.25%*
CLASS B
1998.............. 7.24% $ 101,029 0.48% 0.86% 4.87% 4.49%
1997.............. 8.08 98,079 0.48 0.86 5.08 4.70
1996.............. 3.96 97,228 0.48 0.65 5.15 4.98
1995.............. 6.81 104,094 0.48 0.72 5.21 4.97
1994.............. 1.14 125,081 0.47 0.71 4.90 4.66

MASSACHUSETTS MUNICI
PORTFOLIO
CLASS A
1998(8)........... 0.53% $ 1,040 0.60%* 0.87%* 1.13%* 0.86%*

PORTFOLIO
TURNOVER RATE
--------------

INTERMEDIATE-TERM MU
PORTFOLIO
CLASS A
1998.............. 8.98%
1997.............. 16.02
1996.............. 40.66
1995.............. 36.05
1994.............. 58.9
CLASS D**
1996(5)........... 40.66%
1995.............. 36.05
1994(6)........... 58.39

PENNSYLVANIA MUNICIP
PORTFOLIO
CLASS A
1998(7)........... 26.85%
CLASS B
1998.............. 26.85%
1997.............. 34.48
1996.............. 65.75
1995.............. 22.62
1994.............. 25.13

MASSACHUSETTS MUNICI
PORTFOLIO
CLASS A
1998(8)........... 11.35%*
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

S-53
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
SEI TAX EXEMPT TRUST
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
NET REALIZED AND
INVESTMENT DISTRIBUTIONS UNREALIZED GAIN
NET ASSET ACTIVITIES --------------------------------------------- (LOSS) ON
VALUE -------------- NET INVESTMENTS AND NET ASSET
BEGINNING OF NET INVESTMENT NET INVESTMENT REALIZED TOTAL CAPITAL VALUE, END
PERIOD INCOME INCOME GAIN DISTRIBUTIONS TRANSACTIONS OF PERIOD
------------- -------------- -------------- ----------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>

NEW JERSEY MUNICIPAL BOND PORTFOLIO
CLASS A
1998(9)........... $ 10.00 $ 0.01 $ (0.01) -- $ (0.01) $ 0.05 $ 10.05

NEW YORK MUNICIPAL BOND PORTFOLIO
CLASS A
1998(10).......... $ 10.00 -- -- -- -- $ 0.05 $ 10.05

CALIFORNIA MUNICIPAL BOND PORTFOLIO
CLASS A
1998(11).......... $ 10.00 $ 0.01 $ (0.01 ) -- $ (0.01 ) $ 0.07 $ 10.07

NEW JERSEY MUNICIPAL
CLASS A
1998(9)........... 0.58% $ 1,105 0.60%* 0.87%* 2.93%* 2.66%*

NEW YORK MUNICIPAL B
CLASS A
1998(10).......... 0.55% $ 1,375 0.60%* 0.87%* 2.27%* 2.00%*

CALIFORNIA MUNICIPAL
CLASS A
1998(11).......... 0.78% $ 2,158 0.60%* 0.87%* 2.73%* 2.46%*

PORTFOLIO
TURNOVER RATE
--------------

NEW JERSEY MUNICIPAL
CLASS A
1998(9)........... 0.00%*

NEW YORK MUNICIPAL B
CLASS A
1998(10).......... 0.92%*

CALIFORNIA MUNICIPAL
CLASS A
1998(11).......... 0.00%*
</TABLE>

- ------------------------------

* ANNUALIZED.

** TOTAL RETURN DOES NOT REFLECT THE SALES CHARGE ON THE CLASS D SHARES.

*** FORMERLY CLASS G SHARES.

(1) THE TAX FREE PORTFOLIO--CLASS D COMMENCED OPERATIONS ON NOVEMBER 1, 1994.

(2) THE CALIFORNIA TAX EXEMPT PORTFOLIO--CLASS G COMMENCED OPERATIONS ON MAY 11,
1994.

(3) THE INSTITUTIONAL TAX FREE PORTFOLIO--CLASS C COMMENCED OPERATIONS ON
SEPTEMBER 11, 1995.

(4) THE PENNSYLVANIA TAX FREE PORTFOLIO--CLASS A COMMENCED OPERATIONS ON JANUARY
21, 1994.

(5) THE INTERMEDIATE-TERM MUNICIPAL PORTFOLIO CLASS D CLOSED ON JUNE 30, 1996.

(6) THE INTERMEDIATE-TERM MUNICIPAL PORTFOLIO--CLASS D COMMENCED OPERATIONS ON
SEPTEMBER 28, 1993.

(7) THE PENNSYLVANIA MUNICIPAL BOND PORTFOLIO--CLASS A COMMENCED OPERATIONS ON
AUGUST 25, 1998.

(8) THE MASSACHUSETTS MUNICIPAL BOND PORTFOLIO--CLASS A COMMENCED OPERATIONS ON
AUGUST 19, 1998.

(9) THE NEW JERSEY MUNICIPAL BOND PORTFOLIO--CLASS A COMMENCED OPERATIONS ON
AUGUST 18, 1998.

(10) THE NEW YORK MUNICIPAL BOND PORTFOLIO--CLASS A COMMENCED OPERATIONS ON
AUGUST 18, 1998.

(11) THE CALIFORNIA MUNICIPAL BOND PORTFOLIO--CLASS A COMMENCED OPERATIONS ON
AUGUST 19, 1998.

AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

S-54
<PAGE>
NOTES TO FINANCIAL STATEMENTS

SEI TAX EXEMPT TRUST--AUGUST 31, 1998

1. ORGANIZATION

SEI Tax Exempt Trust (the "Trust"), was organized as a Massachusetts
business trust under a Declaration of Trust dated March 15, 1982.

The Trust is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company with eleven portfolios:
the Tax Free Portfolio, the California Tax Exempt Portfolio, the Institutional
Tax Free Portfolio, the Pennsylvania Tax Free Portfolio, Ohio Tax Free Portfolio
(collectively "the Money Market Portfolios"), the Intermediate-Term Municipal
Portfolio, the Pennsylvania Municipal Bond Portfolio, the Massachusetts
Municipal Bond Portfolio, the New Jersey Municipal Bond Portfolio, the New York
Municipal Bond Portfolio, and the California Municipal Bond Portfolio
(collectively "the Fixed Income Portfolios"). The Ohio Tax Free Portfolio had
not commenced operations as of August 31, 1998. The Trust is registered to offer
five classes of shares: Class A, Class B, Class C, Class D and Class CNI. The
Portfolios' prospectus provides a description of each Portfolio's investment
objectives, policies and strategies. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by
the Portfolios.

SECURITY VALUATION--Investment securities of each Money Market Portfolio are
stated at amortized cost which approximates market value. Under this valuation
method, purchase discounts and premiums on securities are accreted and amortized
ratably to maturity.

The market value for each security for each Fixed Income Portfolio is
obtained from an independent pricing service. Debt obligations exceeding sixty
days to maturity for which market quotations are readily available are valued at
the most recently quoted bid price. Debt obligations with sixty days or less
remaining until maturity may be valued at their amortized cost.

FEDERAL INCOME TAXES--It is each Portfolio's intention to continue to
qualify as a regulated investment company and to distribute all of its taxable
income. Accordingly, no provision for Federal income taxes is required in the
accompanying financial statements.

RECLASSIFICATION OF COMPONENTS OF NET ASSETS--The timing and
characterization of certain income and capital gains distributions are
determined annually in accordance with federal tax regulations which may differ
from generally accepted accounting principles. As a result, net investment
income (loss) and net realized gain (loss) on investment transactions for the
reporting period may differ significantly from distributions during such period.
These book/tax differences may be temporary or permanent in nature. To the
extent these differences are permanent, they are charged or credited to paid-
in-capital or accumulated net realized gain, as appropriate, in the period that
the differences arise. Accordingly, the following permanent differences, have
been reclassified to/from the following accounts:

<TABLE>
<CAPTION>
ACCUMULATED REALIZED
PORTFOLIO PAID-IN-CAPITAL (000) GAIN (000)
- -------------------------------------------------------- ----------------------- -----------------------
<S> <C> <C>
Institutional Tax Free.................................. (7) 7
</TABLE>

NET ASSET VALUE PER SHARE--The net asset value per share of each Portfolio
is calculated on each business day. In general, it is computed by dividing the
assets of each Portfolio, less its liabilities, by the number of outstanding
shares of the Portfolio.

S-55
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SEI TAX EXEMPT TRUST--AUGUST 31, 1998

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CLASSES--Class-specific expenses are borne by that class. Income, expenses,
and realized and unrealized gains/losses are allocated to the respective class
on the basis of relative net asset value each day.

SECURITY TRANSACTIONS AND INVESTMENT INCOME--Security transactions are
accounted for on the trade date of the security purchase or sale. Costs used in
determining net realized capital gains and losses on the sale of investment
securities are those of the specific securities sold. Interest income is
recognized on the accrual basis. Purchase discounts and premiums on securities
held by the Fixed Income Portfolios are accreted and amortized to maturity using
the scientific interest method, which approximates the effective interest
method.

USES OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS--The
preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.

DISTRIBUTIONS TO SHAREHOLDERS--Distributions from net investment income are
declared on a daily basis and are payable on the first business day of the
following month for the Tax Free, the California Tax Exempt, the Institutional
Tax Free, the Pennsylvania Tax Free, the Intermediate-Term Municipal and the
Pennsylvania Municipal Bond Portfolios. Any net realized capital gain on sales
of securities after capital loss carryovers is distributed to the shareholders
of the Portfolios at least annually.

3. TRANSACTIONS WITH AFFILIATES

The Trust and SEI Investments Fund Management (the "Manager") are parties to
a Management Agreement dated May 23, 1986, under which the manager provides
management, administrative and shareholder services to the Portfolios for an
annual fee of .36% each of the average daily net assets of the Tax Free,
Institutional Tax Free and Pennsylvania Tax Free Portfolios, .23% of the average
daily net asset value of the California Tax Exempt Portfolio, .24% of the
average daily net asset value of the Intermediate-Term Municipal Massachusetts
Municipal Bond, New Jersey Municipal Bond, New York Municipal Bond, and
California Municipal Bond Portfolios, .35% of the average daily net asset value
of the Pennsylvania Municipal Bond Portfolio. However, the Manager has
voluntarily agreed to waive a portion of its fee so that total expenses of each
Portfolio will not exceed certain annual expense limitations.

For the period September 1, 1995 to April 30, 1996, SEI Investments
Distribution Co. ("the Distributor"), a wholly-owned subsidiary of SEI
Investments and a registered broker-dealer, acted as the distributor of the
shares of the Trust under distribution plans which provide for the Trust to
reimburse certain distribution-related expenses incurred by the Distributor.

Effective May 1, 1996, SEI Investments Distribution Co. continued to act as
the distributor of the shares of the Trust under new Distribution Agreements.
The Trust has adopted plans under which firms, including the Distributor, that
provide shareholder and administrative services may receive compensation
thereof. The Class A, Class B, Class C and Class CNI shareholder servicing plans
(the "Shareholder Servicing Plans") provide for servicing fees payable to the
Distributor of up to .25% of the average daily net assets attributable to that
particular class. For Class CNI, no such fees were levied since the inception of
the plan. Such fees may be levied in the future when the Portfolios are
operating below their voluntary expense caps. In addition to the Shareholder
Servicing Plans, the Class B and Class C shares have adopted

S-56
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SEI TAX EXEMPT TRUST--AUGUST 31, 1998

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
administrative services plans that provide for administrative service fees
payable to the Distributor of up to .05% and .25%, receptively, of the average
daily nets assets attributable to that class. The Trust has adopted a
distribution plan for its Class D and Class CNI shares pursuant to which a 12b-1
fee of up to .25% and .50%, respectively, of the average daily net assets
attributable to that particular class of Class D and CNI Class shares will be
paid to the Distributor. This payment may be used to compensate financial
institutions that provide distribution-related services to their customers.
Under each of the plans adopted by the Trust, the Distributor may retain as a
profit any difference between the fee it receives and the amount it pays to
third parties.

Certain officers of the Trust are also officers and/or Directors of the
Manager. The Trust pays each unaffiliated Trustee an annual fee for attendance
at quarterly, interim and committee meetings. Compensation of officers and
affiliated Trustees is paid by the Manager.

4. INVESTMENT ADVISORY

Weiss, Peck, & Greer L.L.C. ("WPG") act as the Investment Adviser on behalf
of the Tax Free, the California Tax Exempt, the Institutional Tax Free and the
Pennsylvania Tax Free Portfolios. For its services, WPG receives a monthly fee
equal to an annual rate of .05% of the combined daily net assets up to $500
million, .04% on the next $500 million and .03% of such assets in excess of $1
billion of the Tax Free, the California Tax Exempt, the Institutional Tax Free
and the Pennsylvania Tax Free Portfolios. Prior to January 1, 1996, WPG also
served as the Investment Adviser on behalf of the Intermediate-Term Municipal
Portfolio. For the period January 1, 1996 to April 15, 1996, Standish Ayer &
Wood ("SAW") acted as the Investment Adviser on behalf of the Intermediate-Term
Municipal Portfolio. Commencing April 16, 1996, SEI Investments Management
Corporation ("SIMC") was appointed as the Investment Adviser of the
Intermediate-Term Municipal Portfolio. For its services, SIMC 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. Sub-Advisory services are provided to
SIMC for the Intermediate-Term Municipal Portfolio by SAW pursuant to a sub-
advisory agreement dated April 16, 1996. SIMC is responsible for the supervision
of, and payment of fees to, SAW in connection with their services.

Morgan Grenfell Capital Management Incorporated ("MGCM") acts as the
Investment Adviser of the Pennsylvania Municipal Bond Portfolio. For its
services, MGCM receives a monthly fee equal to an annual rate of .20% of the
average daily net assets of the Portfolio.

SIMC acts as the Investment Adviser to the New York, New Jersey,
Massachusetts and California Municipal Bond Portfolios. For its services, SIMC
receives a monthly fee equal to an annual rate of .33% of the average daily net
assets of the Portfolios.

Van Kampen Management Inc. ("Van Kampen"), acts as investment sub-adviser on
behalf of the New Jersey and the California Municipal Bond Portfolios and is
party to an investment sub-advisory agreement with the Trust and SIMC dated June
25, 1998.

SAW acts as an investment sub-adviser on behalf of the New York and
Massachusetts Municipal Bond Portfolios and is party to an investment
sub-advisory agreement with the Trust and SIMC dated June 25, 1998.

SIMC is responsible for the supervision of, and payment of fees, to Van
Kampen and SAW in connection with their services to these Portfolios.

S-57
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SEI TAX EXEMPT TRUST--AUGUST 31, 1998

5. INVESTMENT TRANSACTIONS

The cost of security purchases and the proceeds from the sale of securities,
other than short-term investments for the year ended August 31, 1998, were as
follows:

<TABLE>
<CAPTION>
NEW YORK
MASSACHUSETTS MUNICIPAL
INTERMEDIATE- TERM PENNSYLVANIA MUNICIPAL BOND NEW JERSEY BOND CALIFORNIA
MUNICIPAL MUNICIPAL BOND PORTFOLIO MUNICIPAL BOND PORTFOLIO MUNICIPAL BOND
PORTFOLIO (000) PORTFOLIO (000) (000) PORTFOLIO (000) (000) PORTFOLIO (000)
----------------- ---------------- --------------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Purchases........... $ 292,688 $ 28,496 $ 968 $ 909 $ 1,229 $ 938
Sales............... 31,911 25,822 99 99 11 --
</TABLE>

Subsequent to October 31, 1997, the Portfolios recognized net capital losses
for tax purposes that have been deferred and can be used to offset future
capital gains at August 31, 1998. The Portfolios also had capital loss
carryforwards at August 31, 1998, as follows:

<TABLE>
<CAPTION>
TOTAL CAPITAL
LOSS
CARRYOVER
AUGUST 31, EXPIRES EXPIRES EXPIRES EXPIRES EXPIRES
PORTFOLIO 1998 2002 2003 2004 2005 2006
- ---------------------------------------- ------------- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Tax Free Portfolio...................... $ 21,748 $ 17,406 $ 93 $ -- $ 2,889 $ 1,360
California Tax Exempt Portfolio......... 6,636 -- -- -- 6,636 --
Institutional Tax Free Portfolio........ 4,408 -- -- -- 4,407 1
Intermediate-Term Municipal Portfolio... 433,012 -- 196,956 236,056 -- --
Pennsylvania Tax Free Portfolio......... 11,751 -- -- -- 11,751 --
</TABLE>

For tax purposes, the losses in the Portfolios can be carried forward for a
maximum of eight years to offset any net realized capital gains.

The aggregate gross unrealized appreciation on securities in which there was
an excess of market value over cost, the aggregate gross unrealized depreciation
on securities in which there was an excess of cost over market value and the net
unrealized appreciation (depreciation) at August 31, 1998, for each Portfolio
are as follows:
<TABLE>
<CAPTION>
INTERMEDIATE- TERM
MUNICIPAL PENNSYLVANIA MASSACHUSETTS MUNICIPAL NEW JERSEY NEW YORK
PORTFOLIO MUNICIPAL BOND BOND PORTFOLIO MUNICIPAL BOND MUNICIPAL BOND
(000) PORTFOLIO (000) (000) PORTFOLIO (000) PORTFOLIO (000)
----------------- ----------------- ----------------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Aggregate gross
unrealized
appreciation......... $ 15,203 $ 4,005 $ 5 $ 5 $ 7
Aggregate gross
unrealized
depreciation......... (260) (25) -- (1) --
-- -- --
------- ------
Net unrealized
appreciation......... $ 14,943 $ 3,980 $ 5 $ 4 $ 7
-- -- --
-- -- --
------- ------
------- ------

<CAPTION>
CALIFORNIA
MUNICIPAL BOND
PORTFOLIO (000)
-----------------
<S> <C>
Aggregate gross
unrealized
appreciation......... $ 8
Aggregate gross
unrealized
depreciation......... --
--
Net unrealized
appreciation......... $ 8
--
--
</TABLE>

S-58
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SEI TAX EXEMPT TRUST--AUGUST 31, 1998

6. LINE OF CREDIT

The Portfolios have a bank line of credit. Borrowings under the line of
credit are secured by investment securities of the Portfolios equal to 110% of
such borrowings which may not exceed 10% of the Portfolios' total assets for the
year ended August 31, 1998. As of August 31, 1998 the portfolio did not have any
borrowings under this facility.

7. CONCENTRATION OF CREDIT RISK

The Portfolios invest in debt instruments of municipal issuers. The issuers'
abilities to meet their obligations may be affected by economic developments in
a specific state or region.

The Trust invests in securities which include revenue bonds, tax exempt
commercial paper, tax and revenue anticipation notes, and general obligation
bonds.

Many municipalities insure their obligations with insurance underwritten by
insurance companies which undertake to pay a holder, when due, the interest and
principal amount of an obligation if the issuer defaults on its obligation.
Although bond insurance reduces the risk of loss due to default by an issuer,
there is no assurance that the insurance company will meet its obligations.
Also, some of the securities have credit enhancements (letters of credit or
guarantees issued by third party domestic or foreign banks or other
institutions).

S-59
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
SEI TAX EXEMPT TRUST--AUGUST 31, 1998

8. SHARE TRANSACTIONS (000):
<TABLE>
<CAPTION>
CALIFORNIA TAX EXEMPT INSTITUTIONAL TAX FREE PENNSYLVANIA TAX
TAX FREE PORTFOLIO PORTFOLIO PORTFOLIO FREE PORTFOLIO
------------------------ ---------------------- ------------------------ --------------------
1998 1997 1998 1997 1998 1997 1998 1997
----------- ----------- ----------- --------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Class A:
Shares Issued................... 2,868,542 1,929,474 471,131 378,414 4,812,268 5,109,226 322,613 244,606
Shares Issued in Lieu of Cash
Distributions................. 2,527 1,321 76 63 1,150 547 77 42
Shares Redeemed................. (2,758,801) (1,839,669) (483,007) (371,901) (4,999,980) (4,945,279) (322,186) (238,052)
----------- ----------- ----------- --------- ----------- ----------- --------- ---------
Total Class A Transactions...... 112,268 91,126 (11,800) 6,576 (186,563) 164,494 504 6,596
----------- ----------- ----------- --------- ----------- ----------- --------- ---------
Class B:
Shares Issued................... -- -- -- -- 404,501 74,602 -- --
Shares Issued in Lieu of Cash
Distributions................. -- -- -- -- 857 73 -- --
Shares Redeemed................. -- -- -- -- (345,134) (54,051) -- --
----------- ----------- ----------- --------- ----------- ----------- --------- ---------
Total Class B Transactions...... -- -- -- -- 60,224 20,624 -- --
----------- ----------- ----------- --------- ----------- ----------- --------- ---------
Class C:
Shares Issued................... -- -- -- -- 169,692 66,525 -- --
Shares Issued in Lieu of Cash
Distributions................. -- -- -- -- -- -- -- --
Shares Redeemed................. -- -- -- -- (156,390) (76,352) -- --
----------- ----------- ----------- --------- ----------- ----------- --------- ---------
Total Class C Transactions...... -- -- -- -- 13,302 (9,827) -- --
----------- ----------- ----------- --------- ----------- ----------- --------- ---------
Class D:
Shares Issued................... -- 1 -- -- -- -- -- --
Shares Issued in Lieu of Cash
Distributions................. -- -- -- -- -- -- -- --
Shares Redeemed................. -- (6) -- -- -- -- -- --
----------- ----------- ----------- --------- ----------- ----------- --------- ---------
Total Class D Transactions...... -- (5) -- -- -- -- -- --
----------- ----------- ----------- --------- ----------- ----------- --------- ---------
Class CNI (1):
Shares Issued................... -- -- 1,076,760 817,088 -- -- -- --
Shares Issued in Lieu of Cash
Distributions................. -- -- 9,619 9,680 -- -- -- --
Shares Redeemed................. -- -- (1,024,432) (765,343) -- -- -- --
----------- ----------- ----------- --------- ----------- ----------- --------- ---------
Total CNI Class Transactions.... -- -- 61,947 61,425 -- -- -- --
----------- ----------- ----------- --------- ----------- ----------- --------- ---------
Increase (Decrease) in Capital
Shares........................ 112,268 91,121 50,147 68,001 (113,037) 175,291 504 6,596
----------- ----------- ----------- --------- ----------- ----------- --------- ---------
----------- ----------- ----------- --------- ----------- ----------- --------- ---------

INTERMEDIATE PENNSYLVANIA MASSACHUSETTS
-TERM MUNICIPAL MUNICIPAL NEW JERSEY
MUNICIPAL BOND BOND MUNICIPAL BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------------- -------------------- --------------------- -----------------------
1998 1997 1998 1997 1997 1998
--------- --------- --------- --------- --------------------- -----------------------
<S> <C> <C>
SHARES ISSUED AND REDEEMED:
Class A:
Shares Issued................... 29,899 15,354 31 -- 103 110
Shares Issued in Lieu of Cash
Distributions................. 1,001 408 -- -- -- --
Shares Redeemed................. (8,369) (4,565) -- -- -- --
--------- --------- --------- --------- --- ---
Total Class A Transactions...... 22,531 11,197 31 -- 103 110
--------- --------- --------- --------- --- ---
Class B:
Shares Issued................... -- -- 1,858 2,057 -- --
Shares Issued in Lieu of Cash
Distributions................. -- -- 44 54 -- --
Shares Redeemed................. -- -- (1,783) (2,112) -- --
--------- --------- --------- --------- --- ---
Total Class B Transactions...... -- -- 119 (1) -- --
--------- --------- --------- --------- --- ---
Class C:
Shares Issued................... -- -- -- -- -- --
Shares Issued in Lieu of Cash
Distributions................. -- -- -- -- -- --
Shares Redeemed................. -- -- -- -- -- --
--------- --------- --------- --------- --- ---
Total Class C Transactions...... -- -- -- -- -- --
--------- --------- --------- --------- --- ---
Class D:
Shares Issued................... -- -- -- -- -- --
Shares Issued in Lieu of Cash
Distributions................. -- -- -- -- -- --
Shares Redeemed................. -- -- -- -- -- --
--------- --------- --------- --------- --- ---
Total Class D Transactions...... -- -- -- -- -- --
--------- --------- --------- --------- --- ---
Class CNI (1):
Shares Issued................... -- -- -- -- -- --
Shares Issued in Lieu of Cash
Distributions................. -- -- -- -- -- --
Shares Redeemed................. -- -- -- -- -- --
--------- --------- --------- --------- --- ---
Total CNI Class Transactions.... -- -- -- -- -- --
--------- --------- --------- --------- --- ---
Increase (Decrease) in Capital
Shares........................ 22,531 11,197 150 (1) 103 110
--------- --------- --------- --------- --- ---
--------- --------- --------- --------- --- ---

NEW YORK CALIFORNIA
MUNICIPAL BOND MUNICIPAL BOND
PORTFOLIO PORTFOLIO
----------------------- -----------------------
1998 1998
----------------------- -----------------------
SHARES ISSUED AND REDEEMED:
Class A:
Shares Issued................... 137 215
Shares Issued in Lieu of Cash
Distributions................. -- --
Shares Redeemed................. -- 1
--- ---
Total Class A Transactions...... 137 214
--- ---
Class B:
Shares Issued................... -- --
Shares Issued in Lieu of Cash
Distributions................. -- --
Shares Redeemed................. -- --
--- ---
Total Class B Transactions...... -- --
--- ---
Class C:
Shares Issued................... -- --
Shares Issued in Lieu of Cash
Distributions................. -- --
Shares Redeemed................. -- --
--- ---
Total Class C Transactions...... -- --
--- ---
Class D:
Shares Issued................... -- --
Shares Issued in Lieu of Cash
Distributions................. -- --
Shares Redeemed................. -- --
--- ---
Total Class D Transactions...... -- --
--- ---
Class CNI (1):
Shares Issued................... -- --
Shares Issued in Lieu of Cash
Distributions................. -- --
Shares Redeemed................. -- --
--- ---
Total CNI Class Transactions.... -- --
--- ---
Increase (Decrease) in Capital
Shares........................ 137 214
--- ---
--- ---
</TABLE>

- ----------------------------------------

(1) FORMERLY CLASS G SHARES.

AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.

S-60
<PAGE>
NOTICE TO SHAREHOLDERS (UNAUDITED)
SEI TAX EXEMPT TRUST--AUGUST 31, 1998
SHAREHOLDER VOTING RESULTS

There were special meetings of shareholders of the Tax Free Portfolio, the
Institutional Tax Free Portfolio, the California Tax Exempt Portfolio, and the
Pennsylvania Tax Free Portfolio on July 29, 1998 to approve new advisory
agreements between the Trust, on behalf of the aforementioned Portfolios, and
Weiss, Peck & Greer, L.L.C. relating to the management of the assets of these
Portfolios. The results were as follows:

TAX FREE PORTFOLIO

<TABLE>
<CAPTION>
FOR QUORUM: FOR PROPOSALS
- --------------------------------------- ------------------------
<S> <C> <C> <C>
Record Date Share Positions:........... 532,529,999.00 273,409,994.00 Shares 51.34% of Total Shares
Total Proxies:......................... 4,957 1,253 Proxies 25.28% of Total Proxies
</TABLE>

<TABLE>
<CAPTION>
SHARES VOTED % OF VOTED % OF TOTAL
---------------- ------------- ---------------
<S> <C> <C> <C>
For.............................................................. 273,137,826.00 99.90% 51.29%
Against.......................................................... 155,650.00 0.06% 0.03%
Abstain.......................................................... 116,517.00 0.04% 0.02%
---------------- ------ -----
TOTAL.......................................................... 273,409,993.00 100.00% 51.34%
</TABLE>

INSTITUTIONAL TAX FREE PORTFOLIO

<TABLE>
<CAPTION>
FOR QUORUM: FOR PROPOSALS
- -------------------------------------- ------------------------
<S> <C> <C> <C>
Record Date Share Positions........... 1,029,363,101.00 537,735,003.00 Shares 52.24% of Total Shares
Total Proxies:........................ 767 214 Proxies 27.90% of Total Proxies
</TABLE>

<TABLE>
<CAPTION>
SHARES VOTED % OF VOTED % OF TOTAL
---------------- ------------- ---------------
<S> <C> <C> <C>
For.............................................................. 537,540,218.00 99.96% 52.22%
Against.......................................................... 0.00 0.00% 0.00%
Abstain.......................................................... 194,784.00 0.04% 0.02%
---------------- ------ -----
TOTAL.......................................................... 537,735,002.00 100.00% 52.24%
</TABLE>

CALIFORNIA TAX EXEMPT PORTFOLIO

<TABLE>
<CAPTION>
FOR QUORUM: FOR PROPOSALS
- --------------------------------------- ------------------------
<S> <C> <C> <C>
Record Date Share Positions:........... 502,595,059.00 376,495,175.83 Shares 74.91% of Total Shares
Total Proxies:......................... 2,927 277 Proxies 9.46% of Total Proxies
</TABLE>

<TABLE>
<CAPTION>
SHARES VOTED % OF VOTED % OF TOTAL
---------------- ------------- ---------------
<S> <C> <C> <C>
For.............................................................. 374,966,127.83 99.59% 74.61%
Against.......................................................... 568,699.00 0.15% 0.11%
Abstain.......................................................... 960,349.00 0.26% 0.19%
---------------- ------ -----
TOTAL.......................................................... 376,495,175.83 100.00% 74.91%
</TABLE>

S-61
<PAGE>
PENNSYLVANIA TAX FREE PORTFOLIO

<TABLE>
<CAPTION>
FOR QUORUM: FOR PROPOSALS
- --------------------------------------- ------------------------
<S> <C> <C> <C>
Record Date Share Positions:........... 43,448,909.00 29,560,985.00 Shares 68.04% of Total Shares
Total Proxies:......................... 40 23 Proxies 57.50% of Total Proxies
</TABLE>

<TABLE>
<CAPTION>
SHARES VOTED % OF VOTED % OF TOTAL
---------------- ------------- ---------------
<S> <C> <C> <C>
For.............................................................. 29,560,985.00 100.00% 68.04%
Against.......................................................... 0.00 0.00% 0.00%
Abstain.......................................................... 0.00 0.00% 0.00%
---------------- ------ -----
TOTAL.......................................................... 29,560,985.00 100.00% 68.04%
</TABLE>

For shareholders that do not have an August 31, 1998 taxable year end, this
notice is for informational purposes only. For shareholders with an August 31,
1998 taxable year end, please consult your tax advisor as to the pertinence of
this notice.

For the fiscal year ended August 31, 1998 each fund is designating the
following items with regard to distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A)
LONG TERM (B) (C)
CAPITAL GAINS ORDINARY INCOME (A+B) TOTAL
DISTRIBUTIONS (TAX DISTRIBUTIONS (TAX DISTRIBUTIONS (TAX (D) QUALIFYING
PORTFOLIO BASIS) BASIS) BASIS) DIVIDENDS(1)
- ------------------------ ----------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Tax Free Portfolio...... 0% 100% 100% 0%
California Tax Exempt
Portfolio............. 0% 100% 100% 0%
Institutional Tax Free
Portfolio............. 0% 100% 100% 0%
Pennsylvania Tax Free
Portfolio............. 0% 100% 100% 0%
Intermediate-Term
Municipal Portfolio... 0% 100% 100% 0%
Pennsylvania Municipal
Bond Portfolio........ 5% 95% 100% 0%
Massachusetts Municipal
Bond Portfolio........ 0% 100% 100% 0%
New Jersey Municipal
Bond Portfolio........ 0% 100% 100% 0%
New York Municipal Bond
Portfolio............. 0% 100% 100% 0%
California Municipal
Bond Portfolio........ 0% 100% 100% 0%

(E)
TAX-EXEMPT (F) FOREIGN TAX
PORTFOLIO INTEREST CREDIT
- ------------------------ ----------------- -----------------
<S> <C> <C>
Tax Free Portfolio...... 99% 0%
California Tax Exempt
Portfolio............. 100% 0%
Institutional Tax Free
Portfolio............. 100% 0%
Pennsylvania Tax Free
Portfolio............. 100% 0%
Intermediate-Term
Municipal Portfolio... 100% 0%
Pennsylvania Municipal
Bond Portfolio........ 98% 0%
Massachusetts Municipal
Bond Portfolio........ 100% 0%
New Jersey Municipal
Bond Portfolio........ 100% 0%
New York Municipal Bond
Portfolio............. 100% 0%
California Municipal
Bond Portfolio........ 100% 0%
</TABLE>

- ------------------------------

(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION.

* ITEMS (A) AND (B) ARE BASED ON A PERCENTAGE OF EACH FUND'S TOTAL
DISTRIBUTIONS.

** ITEMS (D) AND (E) ARE BASED ON A PERCENTAGE OF ORDINARY INCOME DISTRIBUTIONS
OF EACH FUND.

S-62
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF SEI TAX EXEMPT TRUST:

We have audited the accompanying statements of net assets of the Tax Free,
California Tax Exempt, Institutional Tax Free, Pennsylvania Tax Free,
Intermediate-Term Municipal, Pennsylvania Municipal Bond, and the statements of
assets and liabilities, including the schedules of investments, of the
Massachusetts Municipal Bond, New Jersey Municipal Bond, New York Municipal
Bond, and California Municipal Bond Portfolios of SEI Tax Exempt Trust (the
"Trust") as of August 31, 1998, and the related statements of operations,
changes in net assets, and financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1998, by correspondence with the custodian and the application of
alternative auditing procedures with respect to unsettled securities
transactions. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Tax Free, California Tax Exempt, Institutional Tax Free, Pennsylvania Tax Free,
Intermediate-Term Municipal, Pennsylvania Municipal Bond, Massachusetts
Municipal Bond, New Jersey Municipal Bond, New York Municipal Bond, and
California Municipal Bond Portfolios of SEI Tax Exempt Trust as of August 31,
1998, the results of their operations, changes in their net assets, and
financial highlights for the periods presented, in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

Philadelphia, Pennsylvania
October 12, 1998

S-63
<PAGE>
--------------------

SEI TAX EXEMPT TRUST
--------------------

ANNUAL REPORT
--------------------

AUGUST 31, 1998

Robert A. Nesher

CHAIRMAN

TRUSTEES

William M. Doran

F. Wendell Gooch

Frank E. Morris

James M. Storey

George J. Sullivan, Jr.

OFFICERS

Edward D. Loughlin

PRESIDENT AND CHIEF EXECUTIVE OFFICER

Mark Nagle

CONTROLLER, CHIEF FINANCIAL OFFICER

Todd Cipperman

VICE PRESIDENT, ASSISTANT SECRETARY

Kathy Heilig

VICE PRESIDENT, ASSISTANT SECRETARY

Joseph M. O'Donnell

VICE PRESIDENT, ASSISTANT SECRETARY

Sandra K. Orlow

VICE PRESIDENT, ASSISTANT SECRETARY

Cynthia M. Parrish

VICE PRESIDENT, ASSISTANT SECRETARY

Kevin P. Robins

VICE PRESIDENT, ASSISTANT SECRETARY

Kathryn L. Stanton

VICE PRESIDENT, ASSISTANT SECRETARY

Richard W. Grant

SECRETARY

INVESTMENT ADVISERS

Morgan Grenfell Capital Management Incorporated

PENNSYLVANIA MUNICIPAL BOND PORTFOLIO

SEI Investments Management Corporation:

INTERMEDIATE-TERM MUNICIPAL PORTFOLIO

MASSACHUSETTS MUNICIPAL BOND PORTFOLIO

NEW JERSEY MUNICIPAL BOND PORTFOLIO

NEW YORK MUNICIPAL BOND PORTFOLIO

CALIFORNIA MUNICIPAL BOND PORTFOLIO

Weiss, Peck & Greer L.L.C.:

TAX FREE PORTFOLIO

CALIFORNIA TAX EXEMPT PORTFOLIO

INSTITUTIONAL TAX FREE PORTFOLIO

PENNSYLVANIA TAX FREE PORTFOLIO

SUB-ADVISERS

Standish, Ayer & Woods, Inc.

INTERMEDIATE-TERM MUNICIPAL PORTFOLIO

MASSACHUSETTS MUNICIPAL BOND PORTFOLIO

NEW YORK MUNICIPAL BOND PORTFOLIO

Van Kampen Management Inc.

CALIFORNIA MUNICIPAL BOND PORTFOLIO

NEW JERSEY MUNICIPAL BOND PORTFOLIO

MANAGER AND SHAREHOLDER SERVICING AGENT

SEI Investments Fund Management

DISTRIBUTOR

SEI Investments Distribution Co.

LEGAL COUNSEL

Morgan, Lewis & Bockius LLP

INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen LLP

THIS ANNUAL REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED
FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE TRUST AND MUST BE
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. SHARES OF THE SEI FUNDS ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THE SHARES
ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC),
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THE
SHARES INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SEI INVESTMENTS
DISTRIBUTION CO., THE DISTRIBUTOR OF THE SEI FUNDS, IS NOT AFFILIATED WITH ANY
BANK.

FOR MORE INFORMATION CALL

1-800-DIAL-SEI/1-800-342-5734

[LOGO OMITTED] INVESTMENTS DISTRIBUTION CO.

Oaks, PA 19456

800-DIAL-SEI/800-342-5734

SEI-F-024-09
<PAGE>
PART C. OTHER INFORMATION

ITEM 23. EXHIBITS:

<TABLE>
<S> <C>
(a)(1) Registrant's Declaration of Trust is incorporated herein by reference to
Exhibit 1(a) of Post Effective Amendment No. 41 to Registrant's
Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.
(a)(2) Amendment to the Registrant's Declaration of Trust, dated July 30, 1982, is
incorporated herein by reference to Exhibit 1(b) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
(a)(3) Amendment to the Registrant's Declaration of Trust, dated May 23, 1986, is
incorporated herein by reference to Exhibit 1(c) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
(a)(4) Amendment to the Registrant's Declaration of Trust, dated April 8, 1987, is
incorporated herein by reference to Exhibit 1(d) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
(a)(5) Amendment to the Registrant's Declaration of Trust, dated December 23, 1988,
is incorporated herein by reference to Exhibit 1(e) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
(a)(6) Amendment to the Registrant's Declaration of Trust, dated June 16, 1989, is
incorporated herein by reference to Exhibit 1(f) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
(a)(7) Amendment to the Registrant's Declaration of Trust, dated July 5, 1989, is
incorporated herein by reference to Exhibit 1(g) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
(a)(8) Amendment to the Registrant's Declaration of Trust, dated November 15, 1989,
is incorporated herein by reference to Exhibit 1(h) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
(b)(1) Registrant's By-Laws are incorporated herein by reference to Exhibit 2(a) of
Post Effective Amendment No. 41 to Registrant's Registration Statement on
Form N-1A (File No. 2-76990) filed with the Securities and Exchange
Commission on December 18, 1997.
(b)(2) Amended By-Laws are incorporated herein by reference to Exhibit 2(b) of Post
Effective Amendment No. 41 to Registrant's Registration Statement on Form
N-1A (File No. 2-76990) filed with the Securities and Exchange Commission
on December 18, 1997.
(c) Not Applicable.
(d)(1) Investment Advisory Agreement with Weiss, Peck and Greer Advisers, Inc. is
incorporated herein by reference to Exhibit 5(a) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
</TABLE>

C-1
<PAGE>
<TABLE>
<S> <C>
(d)(2) Investment Advisory Agreement with Bessemer Trust Company is incorporated by
reference to Exhibit 5(b) as filed with Post Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) as
previously filed with the Securities and Exchange Commission.
(d)(3) Investment Advisory Agreement with First National Bank in Wichita (now
INTRUST Bank, NA in Wichita) is incorporated by reference to Exhibit 5(c)
as filed with Post Effective Amendment No. 29 to Registrant's Registration
Statement on Form N-1A (File No. 2-76990) filed with the Securities and
Exchange Commission on December 28, 1990.
(d)(4) Investment Advisory Agreement with Woodbridge Capital Management, Inc. is
incorporated by reference to Exhibit 5(d) as filed with Post Effective
Amendment No. 35 to Registrant's Registration on Form N-1A (File No.
2-76990) as previously filed with the Securities and Exchange Commission.
(d)(5) Investment Advisory Agreement with State Street Bank and Trust Company is
incorporated by reference to Exhibit 5(e) as filed with Post Effective
Amendment No. 35 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) as previously filed with the Securities and Exchange
Commission.
(d)(6) Schedule E dated August 5, 1992 to Investment Advisory Agreement with Weiss,
Peck & Greer Advisers, Inc. is incorporated by reference to Exhibit 5(f)
as filed with Post Effective Amendment No. 32 to Registrant's Registration
Statement on Form N-1A (File No. 2-76990) filed with the Securities and
Exchange Commission on August 17, 1992 (adding Bainbridge Tax Exempt
Portfolio).
(d)(7) Schedule G, dated December 10, 1993, to Investment Advisory Agreement with
Weiss, Peck & Greer Advisers, Inc. (adding Intermediate-Term Municipal,
California Intermediate-Term Municipal, and New York Intermediate-Term
Municipal Portfolios) is incorporated herein by reference to Exhibit 5(g)
of Post Effective Amendment No. 41 to Registrant's Registration Statement
on Form N-1A (File No. 2-76990) filed with the Securities and Exchange
Commission on December 18, 1997.
(d)(8) Schedule H, dated March 8, 1994, to Investment Advisory Agreement with
Weiss, Peck & Greer Advisers, Inc. (adding Institutional Tax Free,
Pennsylvania Tax Free, California Tax Exempt, Bainbridge and Tax Free
Portfolios) is incorporated herein by reference to Exhibit 5(h) of Post
Effective Amendment No. 41 to Registrant's Registration Statement on Form
N-1A (File No. 2-76990) filed with the Securities and Exchange Commission
on December 18, 1997.
(d)(9) Investment Advisory Agreement with Morgan Grenfell Capital Management, Inc.,
is incorporated herein by reference to Exhibit 5(i) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
(d)(10) Investment Advisory Agreement with SEI Financial Management Corporation, is
incorporated herein by reference to Exhibit 5(j) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
(d)(11) Investment Sub-Advisory Agreement with Standish, Ayer & Wood, Inc., is
incorporated herein by reference to Exhibit 5(k) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
(e) Distribution Agreement is incorporated herein by reference to Exhibit 6 of
Post Effective Amendment No. 41 to Registrant's Registration Statement on
Form N-1A (File No. 2-76990) filed with the Securities and Exchange
Commission on December 18, 1997.
</TABLE>

C-2
<PAGE>

<TABLE>
<S> <C>
(f) Not Applicable.
(g) Custodian Agreement is incorporated herein by reference to Exhibit 8 of Post
Effective Amendment No. 41 to Registrant's Registration Statement on Form
N-1A (File No. 2-76990) filed with the Securities and Exchange Commission
on December 18, 1997.
(h)(1) Management Agreement is incorporated herein by reference to Exhibit 9(a) of
Post Effective Amendment No. 41 to Registrant's Registration Statement on
Form N-1A (File No. 2-76990) filed with the Securities and Exchange
Commission on December 18, 1997.
(h)(2) Schedule E dated August 5, 1992 to Management Agreement is incorporated by
reference to Exhibit 9(b) as filed with Post Effective Amendment No. 32 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed
with the Securities and Exchange Commission on August 17, 1992 (adding
Massachusetts Intermediate-Term Municipal Portfolio).
(h)(3) Schedule F dated August 5, 1992 to Management Agreement is incorporated by
reference to Exhibit 9(c) as filed with Post Effective Amendment No. 32 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed
with the Securities and Exchange Commission on August 17, 1992 (adding
Bainbridge Tax Exempt Portfolio).
(h)(4) Schedule G, dated October 29, 1993, to Management Agreement (adding
Pennsylvania Tax Free Portfolio) is incorporated herein by reference to
Exhibit 9(d) of Post Effective Amendment No. 41 to Registrant's
Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.
(h)(5) Schedule H, dated October 29, 1993, to Management Agreement (adding New York
Intermediate-Term Municipal Portfolio) is incorporated herein by reference
to Exhibit 9(e) of Post Effective Amendment No. 41 to Registrant's
Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.
(h)(6) Schedule I, dated October 29, 1993, to Management Agreement (adding
California Intermediate-Term Municipal Portfolio) is incorporated herein
by reference to Exhibit 9(f) of Post Effective Amendment No. 41 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed
with the Securities and Exchange Commission on December 18, 1997.
(h)(7) Consent to Assignment and Assumption of the Administration Agreement between
the Trust and SEI Financial Management Corporation to SEI Fund Resources,
is incorporated herein by reference to Exhibit 9(g) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
(i) Opinion and Consent of Counsel is incorporated herein by reference to
Exhibit 10 of Post Effective Amendment No. 41 to Registrant's Registration
Statement on Form N-1A (File No. 2-76990) filed with the Securities and
Exchange Commission on December 18, 1997.
(j) Consent of Independent Public Accountants is filed herewith.
(k) Not Applicable.
(l) Not Applicable.
(m)(1) Distribution Plan is incorporated herein by reference to Exhibit 15(a) of
Post Effective Amendment No. 41 to Registrant's Registration Statement on
Form N-1A (File No. 2-76990) filed with the Securities and Exchange
Commission on December 18, 1997.
</TABLE>

C-3
<PAGE>

<TABLE>
<S> <C>
(m)(2) Distribution Plan for Kansas Tax Free Income Portfolio Class B is
incorporated by reference to Exhibit 15(b) as filed with Post Effective
Amendment No. 28 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on October
9, 1990.
(m)(3) Distribution Plan for Class D shares (formerly, ProVantage Funds) is
incorporated herein by reference to Exhibit 15(c) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
(m)(4) Distribution Plan for Class C shares of California Tax Exempt Portfolio and
Institutional Tax Free Portfolio is incorporated herein by reference to
Exhibit 15(d) of Post Effective Amendment No. 41 to Registrant's
Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.
(m)(5) Amended and Restated Class D Distribution Plan is incorporated herein by
reference to Exhibit 15(e) of Post Effective Amendment No. 40 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed
with the Securities and Exchange Commission on December 23, 1996.
(m)(6) Class G Distribution Plan incorporated herein by reference to Exhibit 15(f)
of Post Effective Amendment No. 40 to Registrant's Registration Statement
on Form N-1A (File No. 2-76990) filed with the Securities and Exchange
Commission on December 23, 1996.
(n) Financial Data Schedules are filed herewith.
(o)(1) Rule 18f-3 Plan is incorporated herein by reference to Exhibit 18(a) of Post
Effective Amendment No. 38 to Registrant's Registration Statement on Form
N-1A (File No. 2-76990) filed with the Securities and Exchange Commission
on October 30, 1995.
(o)(2) Amendment No. 1 to Rule 18f-3 Plan relating to Class A, B, C, D and G shares
is incorporated herein by reference to Exhibit 18(b) of Post Effective
Amendment No. 40 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December
23, 1996.
(p) Powers of Attorney for Robert A. Nesher, Mark E. Nagle, William M. Doran, F.
Wendell Gooch, James M. Storey, Edward D. Loughlin and George J. Sullivan,
Jr., are incorporated herein by reference to Exhibit (p) of Post-Effective
Amendment No. 43 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on November
2, 1998.
</TABLE>

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:

None.

ITEM 25. INDEMNIFICATION:

Article VIII of the Agreement and Declaration of Trust filed as Exhibit 1 to
the Registration Statement is incorporated by reference. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to trustees, directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection

C-4
<PAGE>
with the shares being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issues.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS:

WEISS, PECK & GREER L.L.C.

The principal address of Weiss, Peck & Greer L.L.C. is One New York Plaza,
New York, NY 10004. Weiss, Peck & Greer L.L.C. is an investment adviser
registered under the Advisers Act.

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Stephen Henry Weiss WPG Tudor Fund Chairman
Senior Managing Director
Weiss, Peck & Greer Funds Trust Chairman

WPG Growth Fund Chairman

WPG International Fund Chairman

WPG Government Money Market Fund Chairman

WPG Tax Free Money Market Fund Chairman

WPG Intermediate Municipal Bond Fund Chairman

WPG Core Bond Fund Chairman

WPG Growth and Income Fund Chairman

WPG Quantitative Equity Fund Chairman

Tomorrow Funds Retirement Trust Chairman

Phillip Greer -- --
Senior Managing Director

Roger James Weiss WPG Fund & Tudor Fund Chairman
Senior Managing Director
Weiss, Peck & Greer Funds Trust Chairman

WPG Growth Fund Chairman

WPG International Fund Chairman

WPG Government Money Market Fund Chairman

WPG Tax Free Money Market Fund Chairman

WPG Intermediate Municipal Bond Fund Chairman

WPG Core Bond Fund Chairman

WPG Growth and Income Fund Chairman

WPG Quantitative Equity Fund Chairman
</TABLE>

C-5
<PAGE>

Nelson Schaenen, Jr. Weiss, Peck & Greer Portfolio Manager
Managing Director

Annette Marie Bianchi Venture Capital
Managing Director

Mitchell E. Cantor -- --
Managing Director

Daniel J. Cardell Weiss, Peck & Greer Director of Quantitative Equities
Managing Director Group

Don William Ceglar Weiss, Peck & Greer Director of International Sales,
Managing Director Marketing and Account Group

Gill Rudy Cogan Weiss, Peck & Greer Director of Venture Capital Group
Managing Director

Ron Danenberg Weiss, Peck & Greer Private Equity
Managing Director

Ellen Marran Feeney Venture Capital
Managing Director

Janet Ann Fiorenza Weiss, Peck & Greer Senior Portfolio Manager
Managing Director

Margery Zash Flicker -- --
Managing Director

Ronald Monroe Hoffner -- --
Managing Director, Chief
Financial Officer

James William Kiley Weiss, Peck & Greer Institutional Sales
Managing Director

Arthur Roy Knutsen Weiss, Peck & Greer Co-Director of Large Cap Growth Group
Managing Director

Alan David Kohn Weiss, Peck & Greer Research Analyst
Managing Director

Cornelis T. L. Korthout -- --
Managing Director

Wesley Warren Lang, Jr. Weiss, Peck & Greer Private Equity
Managing Director

Howard George Mattsson Weiss, Peck & Greer Director of Portfolio Analytics
Managing Director

Marvin Brett Markowitz Weiss, Peck & Greer Head of Trading
Managing Director

Jay Charles Nadel Weiss, Peck & Greer Administrative Director of Operating
Managing Director Departments and Clearing Services

Douglas DiPasquale Weiss, Peck & Greer Head of Trading
Managing Director
</TABLE>

C-6
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Peter Bradley Pfister Weiss, Peck & Greer Private Equity
Managing Director

Richard S. Pollack Weiss, Peck & Greer General Counsel
Managing Director

Steven Pomerantz Weiss, Peck & Greer Director of Quantitative Research
Managing Director Group

Lee McGehee Porter -- --
Managing Director

Francis Henry Powers WPG Tudor Fund E.V.P. & Treasurer
Managing Director, Chief
Operations Officer
WPG Growth Fund E.V.P. & Treasurer

Weiss, Peck & Greer Funds Trust E.V.P. & Treasurer

WPG International Fund E.V.P. & Treasurer

WPG Government Money Market Fund E.V.P. & Treasurer

WPG Tax Free Money Market Fund E.V.P. & Treasurer

WPG Intermediate Municipal Bond Fund E.V.P. & Treasurer

WPG Core Bond Fund E.V.P. & Treasurer

WPG Growth and Income Fund E.V.P. & Treasurer

WPG Quantitative Equity Fund E.V.P. & Treasurer

Tomorrow Funds Retirement Trust E.V.P. & Treasurer

Robert Scott Richter Weiss, Peck & Greer Director of Tax-Exempt Fixed Income
Managing Director

Christopher J. Schaepe Weiss, Peck & Greer Venture Capital
Managing Director

James Steven Schainuck WPG-Shainuck Fund, L.P. General Partner
Managing Director

WPG-Shainuck QP Fund, L.P. Portfolio Manager

Arthur Lasker Schwarz Weiss, Peck & Greer Funds Trust Vice President
Managing Director

Adam Leon Starr -- --
Managing Director

Daniel Swigart Vandivort -- --
Managing Director

Craig S. Whiting -- --
Managing Director

Laurence Zuriff Weiss, Peck & Greer Analyst
Managing Director
</TABLE>

C-7
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Hugh Steven Zurkuhlen Weiss, Peck & Greer Research Analyst
Managing Director
</TABLE>

SEI INVESTMENTS MANAGEMENT CORPORATION

The principal address of SEI Investment Management Corporation ("SIMC") is
Oaks, PA 19456. SIMC is an investment adviser registered under the Advisers Act.

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Alfred P. West, Jr. SEI Investments Company Director, Chairman and CEO
Chairman, CEO, Director
SEI Investments Distribution Co. Director and Chairman

SEI Inc. (Canada) Director

SEI Ventures, Inc. Director, Chairman & President

SEI Funds, Inc. CEO & Chairman of the Board of
Directors

Rembrandt Financial Services Company Chairman of the Board of the Board of
Directors

SEI Global Investment Corp. Director, CEO & Chairman

SEI Investments Global Management Chairman & CEO
(Cayman), Limited

SEI Capital AG Director, Chairman of the Board

SEI Global Capital Investments, Inc. Director, CEO & Chairman

CR Financial Services Company Director, Chairman of the Board

CR Capital Resources, Inc. Director, Chairman of the Board

SEI Investments Mutual Fund Services Chairman & CEO

SEI Investments Fund Management Chairman & CEO

SEI Global Holdings (Cayman) Inc. Chairman & CEO

Henry H. Greer SEI Investments Company Director, President, COO & CFO
President, COO, Director
SEI Investments Distribution Co. Director

SEI Funds, Inc. Director, President & COO

Rembrandt Financial Services Company Director

SEI Global Investment Corp. President & CFO

SEI Investments Global Management Director, President & COO
(Cayman), Limited
</TABLE>

C-8
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
SEI Global Capital Investments, Inc. Director & President

SEI Investments- Global Fund Services Director
Limited

CR Financial Services Company Director

CR Capital Resources, Inc. Director & President

SEI Investments Mutual Fund Services COO

SEI Investments Fund Management COO

SEI Global Holdings (Cayman) Inc. Director, President & COO

SEI Investments Argentina S.A. Director

SEI Investments De Mexico Director

Carmen V. Romeo SEI Investments Company Director, Executive Vice President,
Director, Executive Vice President- Investment Advisory Group
President
SEI Investments Distribution Co. Director

SEI Trust Company Director

SEI Ventures, Inc. Director, Executive Vice President

SEI Investments Developments, Inc. Director, President

SEI Funds, Inc. Executive Vice President

Rembrandt Financial Services Company Director, Executive Vice President

SEI Global Investments Corp. Executive Vice President

SEI Global Investments Inc. Director, Executive Vice President

SEI Primus Holding Corp. Director, President

CR Financial Services Company Director

CR Capital Resources, Inc. Director

SEI Investments Mutual Fund Services Executive Vice President

SEI Investments Fund Management Executive Vice President

Richard B. Lieb SEI Investments Company Director, Executive Vice President,
Executive Vice President President- Investment Systems &
Services Division
SEI Investments Distribution Co. Executive Vice President

SEI Trust Company Director & Chairman of the Board
</TABLE>

C-9
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
SEI Investments Mutual Fund Services Executive Vice President

SEI Investments Fund Management Executive Vice President

Edward Loughlin SEI Investments Company Executive Vice President, President-
Executive Vice President Asset Management Division
SEI Insurance Group, Inc. Director, President & Secretary

SEI Funds, Inc. Executive Vice President

SEI Advanced Capital Management, Inc. Director & President

SEI Investments Mutual Fund Services Executive Vice President

SEI Investments Fund Management Executive Vice President

Dennis J. McGonigle SEI Investments Company Executive Vice President
Executive Vice President
SEI Investments Distribution Co. Executive Vice President

SEI Investments Mutual Fund Services Senior Vice President

SEI Investments Fund Management Senior Vice President

Michael Arizin -- --
Senior Vice President &
Managing Director

Ed Daly -- --
Senior Vice President &
Managing Director

Leo J. Dolan, Jr. SEI Investments Distribution Co. Senior Vice President
Senior Vice President

Rembrandt Financial Services Company Senior Vice President

SEI Investments Mutual Fund Services Senior Vice President

SEI Investments Fund Management Senior Vice President

Mick Duncan SEI Investments Mutual Fund Services Vice President & Team Leader
Senior Vice President &
Managing Director
SEI Investments Fund Management Vice President & Team Leader

Carl A. Guarino SEI Investments Company Senior Vice President
Senior Vice President
SEI Investments Distribution Co. Senior Vice President
</TABLE>

C-10
<PAGE>

SEI Investments De Mexico Director

Larry Hutchison -- --
Senior Vice President

Robert S. Ludwig SEI Funds, Inc. Vice President
Senior Vice President & CIO
SEI Investments Mutual Fund Services Vice President & Team Leader

SEI Investments Fund Management Vice President & Team Leader

Jack May -- --
Senior Vice President

Barbara J. Moore SEI Investments Distribution Co. Senior Vice President
Senior Vice President

SEI Realty Capital Corporation Director, President & Secretary

James V. Morris -- --
Senior Vice President &
Managing Director

Steve Onofrio -- --
Senior Vice President &
Managing Director

Kevin P. Robins SEI Investments Company Senior Vice President, General Counsel
Senior Vice President, General & Assistant Secretary
Counsel & Secretary
SEI Investments Distribution Co. Senior Vice President, General Counsel

SEI Inc. (Canada) Senior Vice President, General Counsel
& Secretary

SEI Trust Company Director, Senior Vice President,
General Counsel & Assistant
Secretary

SEI Investments, Inc. Senior Vice President, General Counsel
& Secretary

SEI Ventures, Inc. Senior Vice President, General Counsel
& Secretary

SEI Investments Developments, Inc. Senior Vice President, General Counsel
& Secretary

SEI Insurance Group, Inc. Senior Vice President, General Counsel

SEI Funds, Inc. Senior Vice President, General Counsel
& Secretary
</TABLE>

C-11
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Rembrandt Financial Services Company Vice President & Assistant Secretary

SEI Global Investments Corp. Senior Vice President, General Counsel
& Secretary

SEI Advanced Capital Management, Inc. Senior Vice President, General Counsel
& Secretary

SEI Investments Global Management Director, General Counsel & Secretary
(Cayman), Limited

SEI Global Capital Investments Inc. Senior Vice President, General Counsel
& Secretary

SEI Primus Holding Corp. Senior Vice President, General Counsel
& Secretary

CR Capital Resources, Inc. Senior Vice President

SEI Investments Mutual Fund Services Senior Vice President, General Counsel
& Secretary

SEI Investments Fund Management Senior Vice President, General Counsel
& Secretary

Kenneth Zimmer -- --
Senior Vice President &
Managing Director
</TABLE>

MORGAN GRENFELL CAPITAL MANAGEMENT INC.

The principal address of Morgan Grenfell Capital Management Inc. ("Morgan
Grenfell") is 885 Third Avenue, 32nd Floor, New York, NY 10022. Morgan Grenfell
is an investment adviser registered under the Advisers Act.

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
David Westover Baldt Morgan Grenfell Asset Management Director
Director, Exec. Vice President Limited

Joan Anne Binstock -- --
Secretary, Treasurer, Director

Michael Bullock Morgan Grenfell Investment Services Chairman, Chief Investment Officer
Chairman

Morgan Grenfell Asset Management and Director
Subsidiaries

Morgan Grenfell Small Cap Fund, Inc. Chairman, Director

Deutsche Bank, AG -- --
Indirect Owner
</TABLE>

C-12
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Deutsche Morgan Grenfell Group -- --
Indirect Owner

Audrey Mary Theresa Jones -- --
Director, Executive Vice
President

James Edward Minnick Morgan Grenfell Asset Management Director
President, Director

Morgan Grenfell Investment Trust President, Trustee

The Morgan Grenfell SMALL Cap Fund, President, Director
Inc.

SEI Investments Distribution Corp. Registered Representative

Morgan Grenfell Asset Management -- --
Holdings, BV
Owner

Morgan Grenfell Asset Management -- --
Limited
Indirect Owner
</TABLE>

STANDISH, AYER & WOOD, INC.

The principal address of Standish, Ayer & Wood, Inc. is One Financial
Center, Suite 26, Boston, Massachusetts 02111. Standish, Ayer & Wood, Inc. is an
investment adviser registered under the Advisers Act.

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Edward Homer Ladd Standish International Management Director
Chairman/Managing Director Company, L.P.

Standish Equity Investments, Inc. Director

Greylock Management Director

Harvard Management Director

New England Electric System Director

George Webb Noyes Standish International Management Director
CEO, President/Managing Company, L.P.
Director
Standish Equity Investments, Inc. Director

Standish Fund Distributors, L.P. Registered Representative

Davis Barr Clayson Standish International Management Chairman, Director
Director, Vice President Company, L.P.

Standish Equity Investments, Inc. Director

CareGroup, Inc. Director
</TABLE>

C-13
<PAGE>

Dolores Stand Driscoll Standish International Management Director
Managing Director, Vice Company, L.P.
President
Standish Equity Investments, Inc. Director

Assembly Guidance Systems, Inc. Director

Maria Dulce Furman Standish Equity Investments, Inc. Director
Managing Director, Vice
President

Richard Sands Wood Standish International Management Executive Vice President, Director
Managing Director, Vice Company, L.P.
President
Standish Equity Investments, Inc. Director

Standish Fund Distributors, L.P. Registered Representative

Caleb Freserci Aldrich Standish Equity Investments, Inc. Treasurer
Managing Director, Vice
President
Standish Fund Distributors, L.P. Registered Representative

Ralph Stewart Tate Standish International Management President
Managing Director, Vice Company, L.P.
President
Standish Equity Investments, Inc. Director, Clerk

Standish Fund Distributors, L.P. Registered Representative

Richard Charles Doll Standish Equity Investments, Inc. Director
Director, Vice President, Clerk
Standish Fund Distributors, L.P. Registered Representative

James Edward Hollis, III Standish Fund Distributors, L.P. Chief Executive Officer, Limited
Director, Vice President Partner

Arthur Holmes Parker, II Standish Equity Investments, Inc. Director
Director, Vice President

Standish Fund Distributors, L.P. Registered Representative

Austin Cheney Smith Standish Equity Investments, Inc. Director
Director, Vice President

Standish Fund Distributors, L.P. Registered Representative

Nicholas Smith Battelle Standish Fund Distributors, L.P. Registered Representative
Director, Vice President

Howard Bruce Rubin Standish Equity Investments, Inc. Director
Director, Vice President

Standish International Management Executive Vice President, Director
Company, L.P.

David Herdman Cameron Standish International Management Director
Director, Vice President Company, L.P.
</TABLE>

C-14
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Karen Kayser Chandor Standish Fund Distributors, L.P. Registered Representative
Director, Vice President

Walter Mason Cabot Standish International Management Director, Senior Advisor
Senior Advisor, Director Company, L.P.

Laurence Alan Manchester Standish Fund Distributors, L.P. Registered Representative
Director, Vice President

Mark Anthony Flagherty Standish International Management Vice President
Director, Vice President Company, L.P.

Raymond Joseph Kubiak Standish Fund Distributors, L.P. Registered Representative
Director, Vice President

David Charles Stuehr -- --
Director, Vice President

Thomas Peter Sorbo Standish Fund Distributors, L.P. Registered Representative
Director, Vice President

Beverly Emma Banfield Standish Fund Distributors, L.P. Chief Operations Officer
Chief Compliance Officer,
Associate Director, Vice
President

Andrew Lloyd Beja Standish Fund Distributors, L.P. Registered Representative
Vice President, Portfolio
Manager

Katherine Schmarsow Bowes Standish Fund Distributors, L.P. Registered Representative
Vice President, Associate
Director

Remi Justin Browne Standish International Management Vice President, Chief Investment
Vice President Company, L.P. Officer

Lavinia Bosworth Chase Standish Fund Distributors, L.P. Registered Representative
Vice President, Associate
Director

Susan Beth Coan Standish Fund Distributors, L.P. Registered Representative
Vice President, Associate
Director, Portfolio Manager

William Charles Cook, II Standish International Management Director
Director, Vice President Company, L.P.

Standish Fund Distributors, L.P. Registered Representative

Joseph Michael Corrado Standish Fund Distributors, L.P. Registered Representative
Director, Vice President

Steven Louis Gold Standish Fund Distributors, L.P. Registered Representative
Associate Director, Analyst

William Robert Hagmeirer Standish Fund Distributors, L.P. Registered Representative
Vice President
</TABLE>

C-15
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
James Edward Hendrickson Standish Fund Distributors, L.P. Registered Representative
Vice President, Analyst

Ann Stuart Higgins Standish Fund Distributors, L.P. Registered Representative
Vice President, Portfolio
Manager

David Christopher Leduc Standish Fund Distributors, L.P. Registered Representative
Vice President, Portfolio
Manager

Phillip Daniel Leonardi Standish Fund Distributors, L.P. Registered Representative
Associate Director, Vice
President

Sheila Rose May -- --
Vice President, Bond Analyst

John Reed McNichols Standish Fund Distributors, L.P. Registered Representative
Associate Director, Vice
President, Security Analyst

John William Murray, Jr. Standish Fund Distributors, L.P. Registered Representative
Vice President, Portfolio
Manager

Jennifer Alice Pline Standish Fund Distributors, L.P. Registered Representative
Associate Director Vice
President/Client Service
Portfolio Manager

Christine Hegenbart Psyhogeos Standish Fund Distributors, L.P. Registered Representative
Vice President

Kathleen Grady Skelly -- --
Vice President, Quant Analyst

Michael Wilson Thompson Standish Fund Distributors, L.P. Registered Representative
Director, Vice President

Richard Paul Vandale -- --
Vice President, Analyst

Edward Ross Walter -- --
Vice President

George Rooney Standish International Management Vice President
Vice President Company, L.P.

Dave Horsfall -- --
Associate Director, Vice
President

Dan LeVan Standish International Management Vice President
Vice President Company, L.P.
</TABLE>

C-16
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Michael Fechter Standish Fund Distributors, L.P. Registered Representative
Vice President

Sean Fitzgibbon -- --
Vice President

John Truschel Standish Fund Distributors, L.P. Registered Representative
Vice President

Dennis Woessner Standish Fund Distributors, L.P. Registered Representative
Vice President

Barbara J. McKenna Standish Fund Distributors, L.P. Registered Representative
Vice President

David F. Belton -- --
Vice President

Robin L. Buhrer Standish Fund Distributors, L.P. Registered Representative
Vice President

Pierre Y. Chung -- --
Assistant Vice President

Christine Marie Quinlan Standish Fund Distributors, L.P. Registered Representative
Assistant Vice President

Stephanie Kim Scherer -- --
Vice President

Jonathan F. Stone Standish Fund Distributors, L.P. Registered Representative
Vice President, Portfolio
Manager

Christopher Ward Van Alstyne Standish Fund Distributors, L.P. Registered Representative
Vice President

Tracey Manzi Standish International Management Vice President
Vice President Company, L.P.

Nevin G. Markwart Standish Fund Distributors, L.P. Registered Representative
Vice President

Anthony C. Criscuolo Standish Fund Distributors, L.P. Registered Representative
Vice President
</TABLE>

VAN KAMPEN MANAGEMENT, INC.

The principal address of Van Kampen Management, Inc. is One Parkview Plaza,
Oakbrook Terrace, IL 60181 is an investment adviser registered under the
Advisers Act.

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Richard F. Powers Van Kampen Advisors Inc. Director, CEO
Director, CEO
Van Kampen Asset Management Inc. Director, CEO

Van Kampen Distributors Inc. Director, CEO
</TABLE>

C-17
<PAGE>

Van Kampen System Inc. Director, CEO

Van Kampen Recordkeeping Services, Director, President, CEO
Inc.

Van Kampen Trust Company Director, CEO

Van Kampen Investor Services, Inc. Director, CEO

American Capital Contractual Services, Director, CEO
Inc.

Van Kampen Investments, Inc. Director, President, CEO

Van Kampen Exchange Corporation Director, President, CEO

Van Kampen Insurance Agency of Director, CEO
Illinois, Inc.

David Richard Kowalski Van Kampen Recordkeeping Services Inc. Vice President, CCO
Vice President, CCO

Van Kampen Insurance Agency of Vice President, CCO
Illinois, Inc.

Van Kampen Asset Management, Inc. Vice President, CCO

Van Kampen Advisors Inc. Vice President, CCO

Van Kampen Investor Services Inc. Vice President, CCO

Van Kampen Investments Inc. Vice President, CCO

Van Kampen Investment Advisory Corp. Vice President, CCO

Van Kampen Funds Inc. Vice President, CCO

Dennis John McDonnell Van Kampen Asset Management Inc. President, COO, Director
President, COO

Van Kampen Advisors Inc. President, COO, Director

Van Kampen Investments Inc. Director, Executive Vice President

Van Kampen Investment Advisory Corp. President, COO, Director

Van Kampen Funds Inc. Agent

Ronald Andrew Nyberg Van Kampen Recordkeeping Services Inc. Director, Executive Vice President,
Director, Executive Vice CLO, Assistant Secretary
President, CLO, Assistant
Secretary
Van Kampen System Inc. Director, Executive Vice President,
CLO, Assistant Secretary
</TABLE>

C-18
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Van Kampen Insurance Company of Director, Executive Vice President,
Illinois, Inc. CLO, Assistant Secretary

Van Kampen Advisors, Inc. Director, Executive Vice President,
CLO, Assistant Secretary

Van Kampen Asset Management Inc. Executive Vice President, CLO,
Director, Assistant Secretary

Van Kampen Investor Services, Inc. Executive Vice President, CLO,
Assistant Secretary

American Capital Contractual Services Director, Executive Vice President,
Inc. CLO, Assistant Secretary

Van Kampen Exchange Corp. Director, Executive Vice President,
CLO, Assistant Secretary

Van Kampen Trust Co. Director, Executive Vice President,
CLO, Assistant Secretary

Van Kampen Investments Inc. Director, Executive Vice President,
CLO, Assistant Secretary

Van Kampen Investment Advisory Corp. Director, Executive Vice President,
CLO, Assistant Secretary

Van Kampen Funds Inc. Director, Executive Vice President,
CLO, Assistant Secretary

Don Graber Powell Van Kampen Recordkeeping Services Inc. Director, Chairman
Director, Chairman

Van Kampen Insurance Company of Director, Chairman
Illinois, Inc.

Van Kampen Systems Inc. Director, Chairman

Van Kampen Investments Inc. Director, Chairman

Van Kampen Investment Advisory Corp. Director, Chairman

Van Kampen Funds Inc. Director, Chairman

Van Kampen Investor Services Inc. Director, Chairman

Van Kampen Trust Co. Director, Chairman

American Capital Contractual Services, Director, Chairman
Inc.

Van Kampen Exchange Corp. Director, Chairman
</TABLE>

C-19
<PAGE>

Van Kampen Asset Management, Inc. Director, Chairman

William Robert Rybak Van Kampen Recordkeeping Services, Director, Executive Vice President,
Director, Executive Vice Inc. CFO
President, CFO
Van Kampen Systems, Inc. Director, Executive Vice President,
CFO

Van Kampen Insurance Company of Director, Executive Vice President,
Illinois, Inc. CFO

Van Kampen Advisors, Inc. Director, Executive Vice President,
CFO

Van Kampen Asset Management, Inc. Director, Executive Vice President,
CFO

Van Kampen Investor Services, Inc. Executive Vice President, CFO

American Capital Contractual Services, Director, Executive Vice President,
Inc. CFO

Van Kampen Exchange Corp. Director, Executive Vice President,
CFO

Van Kampen Trust Co. Executive Vice President, CFO

Van Kampen Investments Inc. Director, Executive Vice President,
CFO

Hinsdale Financial Corp. Chairman of the Board

Van Kampen Investment Advisory Corp. Director, Executive Vice President,
CFO

Van Kampen Funds Inc. Director, Executive Vice President,
CFO

Edward Allen Treichel Van Kampen Investment Advisory Corp. Agent
Senior Vice President

Van Kampen Funds Inc. Agent

Peter Lydon Clerkin Van Kampen Funds Inc. Agent
Vice President

Dirck Dwayne Davis Van Kampen Funds Inc. Agent
Vice President

Mark Joseph Giura Van Kampen Asset Management, Inc. Vice President
Vice President

Van Kampen Funds Inc. Agent

Thomas Gates Hauser Van Kampen Funds Inc. Agent
Assistant Vice President

Michael Paul Kamradt Van Kampen Asset Management, Inc. First Vice President
First Vice President
</TABLE>

C-20
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
- --------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Van Kampen Investment Advisory Corp. First Vice President

Van Kampen Funds Inc. Agent

John Martin McCareins Van Kampen Investment Advisory Corp. Agent
First Vice President

Van Kampen Funds Inc. Agent

Mary Claire McQuillan Van Kampen Funds Inc. Agent
Assistant Vice President

Pete Papageorgakis Van Kampen Investment Advisory Corp. Analyst
Assistant Vice President

Van Kampen Funds Inc. Agent

James Walter Pittinger Van Kampen Investment Advisory Corp. Agent
Vice President

Van Kampen Funds Inc. Agent

Jeffrey Michael Thomas Van Kampen Investment Advisory Corp. Agent
Vice President

Van Kampen Funds Inc. Agent

Daniel Todd Vandevelde Van Kampen Funds Inc Agent
Assistant Vice President

Stephen Wlodarski Van Kampen Advisors, Inc. Vice President
Vice President
Van Kampen Asset Management, Inc. Vice President

Van Kampen Investment Advisory Corp. Vice President

Van Kampen Funds Inc. Agent
</TABLE>

ITEM 27. PRINCIPAL UNDERWRITERS:

(a) Furnish the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing the securities of
the Registrant also acts as a principal underwriter, distributor or investment
adviser.

C-21
<PAGE>
Registrant's distributor, SEI Investments Distribution Co., acts as
distributor for:

<TABLE>
<S> <C>
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
Boston 1784 Funds-Registered Trademark- June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Monitor Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 30, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
PBHG Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
Alpha Select Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc. June 29, 1998
The Parkstone Group of Funds September 14, 1998
</TABLE>

The Distributor provides numerous financial services to investment managers,
pension plan sponsors, and bank trust departments. These services include
portfolio evaluation, performance measurement and consulting services
("Funds Evaluation") and automated execution, clearing and settlement of
securities transactions ("MarketLink").

(b) Furnish the Information required by the following table with respect to
each director, officer or partner of each principal underwriter named in the
answer to Item 21 of Part B. Unless otherwise noted, the business address of
each director or officer is Oaks, PA 19456.

<TABLE>
<CAPTION>
POSITION AND OFFICE POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ------------------------------- ------------------------------------------------------ ------------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief Executive Officer --

Henry H. Greer Director --

Carmen V. Romeo Director --
</TABLE>

C-22
<PAGE>

<TABLE>
<CAPTION>
POSITION AND OFFICE POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ------------------------------- ------------------------------------------------------ ------------------------
<S> <C> <C>
Mark J. Held President & Chief Operating Officer --

Gilbert L. Beebower Executive Vice President --

Richard B. Lieb Executive Vice President --

Dennis J. McGonigle Executive Vice President --

Robert M. Silvestri Chief Financial Officer & Treasurer --

Leo J. Dolan, Jr. Senior Vice President --

Carl A. Guarino Senior Vice President --

Larry Hutchison Senior Vice President --

Jack May Senior Vice President --

Hartland J. McKeown Senior Vice President --

Barbara J. Moore Senior Vice President --

Kevin P. Robins Senior Vice President & General Counsel Vice President and
Assistant Secretary

Patrick K. Walsh Senior Vice President --

Robert Aller Vice President --

Gordon W. Carpenter Vice President --

Todd Cipperman Vice President & Assistant Secretary Vice President and
Assistant Secretary

S. Courtney E. Collier Vice President & Assistant Secretary --

Robert Crudup Vice President & Managing Director --

Barbara Doyne Vice President --

Jeff Drennen Vice President --

James R. Foggo Vice President & Assistant Secretary Vice President &
Assistant Secretary

Vic Galef Vice President & Managing Director --

Lydia A. Gavalis Vice President & Assistant Secretary Vice President &
Assistant Secretary

Greg Gettinger Vice President & Assistant Secretary --

Kathy Heilig Vice President Vice President &
Assistant Secretary

Jeff Jacobs Vice President --

Samuel King Vice President --

Kim Kirk Vice President & Managing Director --

John Krzeminski Vice President & Managing Director --

Carolyn McLaurin Vice President & Managing Director --

W. Kelso Morrill Vice President --

Mark Nagle Vice President Controller and Chief
Financial Officer

Joanne Nelson Vice President --
</TABLE>

C-23
<PAGE>

<TABLE>
<CAPTION>
POSITION AND OFFICE POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ------------------------------- ------------------------------------------------------ ------------------------
<S> <C> <C>
Joseph M. O'Donnell Vice President & Assistant Secretary Vice President and
Assistant Secretary

Sandra K. Orlow Vice President & Secretary Vice President and
Assistant Secretary

Cynthia M. Parrish Vice President & Assistant Secretary Vice President and
Assistant Secretary

Kim Rainey Vice President --

Rob Redican Vice President --

Maria Rinehart Vice President --

Mark Samuels Vice President & Managing Director --

Lynda J. Striegel Vice President & Assistant Secretary Vice President &
Assistant Secretary

Lori L. White Vice President & Assistant Secretary --

Wayne M. Withrow Vice President & Managing Director --
</TABLE>

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS:

Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, as amended ("1940 Act"), and the rules
promulgated thereunder, are maintained as follows:

(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3);
(6); (8); (12); and 31a-1(d), the required books and records are maintained
at the offices of Registrant's Custodians:

First Union National Bank
Broad and Chestnut Street
P.O. Box 7618
Philadelphia, PA 19101

(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1); 31a-1(b)(4); (2)(C)
and (D); (4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required
books and records are maintained at the offices of Registrant's Manager:

SEI Investments Fund Management
Oaks, PA 19456

(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f),
the required books and records are maintained at the principal offices of
the Registrant's Advisers:

SEI Investments Management Corporation
Oaks, PA 19456

Weiss, Peck & Greer L.L.C.
One New York Plaza
New York, NY 10004

Morgan Grenfell Capital Management
Incorporated
885 Third Avenue, 32nd Floor
New York, NY 19102

C-24
<PAGE>
Standish, Ayer & Wood, Inc.
One Financial Center, Suite 26
Boston, MA 02111

Van Kampen American Capital Management, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181

ITEM 29. MANAGEMENT SERVICES:

None

ITEM 30. UNDERTAKINGS:

None

C-25
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 44 to Registration Statement No. 2-76990 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Oaks, Commonwealth of Pennsylvania on the 20th day of December, 1998.

SEI TAX EXEMPT TRUST

By: /s/ EDWARD D. LOUGHLIN
-----------------------------------------
Edward D. Loughlin
PRESIDENT & CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacity on the date(s) indicated.

*
- ------------------------------ Trustee December 20, 1998
William M. Doran

*
- ------------------------------ Trustee December 20, 1998
F. Wendell Gooch

*
- ------------------------------ Trustee December 20, 1998
Frank E. Morris

*
- ------------------------------ Trustee December 20, 1998
George J. Sullivan, Jr.

*
- ------------------------------ Trustee December 20, 1998
James M. Storey

*
- ------------------------------ Trustee December 20, 1998
Robert A. Nesher

/s/ EDWARD D. LOUGHLIN
- ------------------------------ President & Chief December 20, 1998
Edward D. Loughlin Executive Officer

/s/ MARK E. NAGLE
- ------------------------------ Controller & Chief December 20, 1998
Mark E. Nagle Financial Officer

*By: /s/ EDWARD D. LOUGHLIN
-------------------------
Edward D. Loughlin,
ATTORNEY-IN-FACT

<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
- -----------------
<S> <C>
EX-99.Ba1 Registrant's Declaration of Trust is incorporated herein by reference to Exhibit 1(a)
of Post Effective Amendment No. 41 to Registrant's Registration Statement on Form
N-1A (File No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.
EX-99.Ba2 Amendment to the Registrant's Declaration of Trust, dated July 30, 1982, is
incorporated herein by reference to Exhibit 1(b) of Post Effective Amendment No. 41
to Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.
EX-99.Ba3 Amendment to the Registrant's Declaration of Trust, dated May 23, 1986, is incorporated
herein by reference to Exhibit 1(c) of Post Effective Amendment No. 41 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.
EX-99.Ba4 Amendment to the Registrant's Declaration of Trust, dated April 8, 1987, is
incorporated herein by reference to Exhibit 1(d) of Post Effective Amendment No. 41
to Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.
EX-99.Ba5 Amendment to the Registrant's Declaration of Trust, dated December 23, 1988, is
incorporated herein by reference to Exhibit 1(e) of Post Effective Amendment No. 41
to Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.
EX-99.Ba6 Amendment to the Registrant's Declaration of Trust, dated June 16, 1989, is
incorporated herein by reference to Exhibit 1(f) of Post Effective Amendment No. 41
to Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.
EX-99.Ba7 Amendment to the Registrant's Declaration of Trust, dated July 5, 1989, is incorporated
herein by reference to Exhibit 1(g) of Post Effective Amendment No. 41 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.
EX-99.Ba8 Amendment to the Registrant's Declaration of Trust, dated November 15, 1989, is
incorporated herein by reference to Exhibit 1(h) of Post Effective Amendment No. 41
to Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.

EX-99.Bb1 Registrant's By-Laws are incorporated herein by reference to Exhibit 2(a) of Post
Effective Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December 18, 1997.

EX-99.Bb2 Amended By-Laws are incorporated herein by reference to Exhibit 2(b) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File No.
2-76990) filed with the Securities and Exchange Commission on December 18, 1997.

EX-99.Bc Not Applicable.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
- -----------------
<S> <C>
EX-99.Bd1 Investment Advisory Agreement with Weiss, Peck and Greer Advisers, Inc. is incorporated
herein by reference to Exhibit 5(a) of Post Effective Amendment No. 41 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.

EX-99.Bd2 Investment Advisory Agreement with Bessemer Trust Company is incorporated by reference
to Exhibit 5(b) as filed with Post Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (File No. 2-76990) as previously filed with the
Securities and Exchange Commission.

EX-99.Bd3 Investment Advisory Agreement with First National Bank in Wichita (now INTRUST Bank, NA
in Wichita) is incorporated by reference to Exhibit 5(c) as filed with Post Effective
Amendment No. 29 to Registrant's Registration Statement on Form N-1A (File No.
2-76990) filed with the Securities and Exchange Commission on December 28, 1990.

EX-99.Bd4 Investment Advisory Agreement with Woodbridge Capital Management, Inc. is incorporated
by reference to Exhibit 5(d) as filed with Post Effective Amendment No. 35 to
Registrant's Registration on Form N-1A (File No. 2-76990) as previously filed with
the Securities and Exchange Commission.

EX-99.Bd5 Investment Advisory Agreement with State Street Bank and Trust Company is incorporated
by reference to Exhibit 5(e) as filed with Post Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) as previously
filed with the Securities and Exchange Commission.

EX-99.Bd6 Schedule E dated August 5, 1992 to Investment Advisory Agreement with Weiss, Peck &
Greer Advisers, Inc. is incorporated by reference to Exhibit 5(f) as filed with Post
Effective Amendment No. 32 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on August 17, 1992
(adding Bainbridge Tax Exempt Portfolio).

EX-99.Bd7 Schedule G, dated December 10, 1993, to Investment Advisory Agreement with Weiss, Peck
& Greer Advisers, Inc. (adding Intermediate-Term Municipal, California
Intermediate-Term Municipal, and New York Intermediate-Term Municipal Portfolios) is
incorporated herein by reference to Exhibit 5(g) of Post Effective Amendment No. 41
to Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.

EX-99.Bd8 Schedule H, dated March 8, 1994, to Investment Advisory Agreement with Weiss, Peck &
Greer Advisers, Inc. (adding Institutional Tax Free, Pennsylvania Tax Free,
California Tax Exempt, Bainbridge and Tax Free Portfolios) is incorporated herein by
reference to Exhibit 5(h) of Post Effective Amendment No. 41 to Registrant's
Registration Statement on Form N-1A (File No. 2-76990) filed with the Securities and
Exchange Commission on December 18, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
- -----------------
<S> <C>
EX-99.Bd9 Investment Advisory Agreement with Morgan Grenfell Capital Management, Inc., is
incorporated herein by reference to Exhibit 5(i) of Post Effective Amendment No. 41
to Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.

EX-99.Bd10 Investment Advisory Agreement with SEI Financial Management Corporation, is
incorporated herein by reference to Exhibit 5(j) of Post Effective Amendment No. 41
to Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.

EX-99.Bd11 Investment Sub-Advisory Agreement with Standish, Ayer & Wood, Inc, is incorporated
herein by reference to Exhibit 5(k) of Post Effective Amendment No. 41 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.

EX-99.Be Distribution Agreement is incorporated herein by reference to Exhibit 6 of Post
Effective Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December 18, 1997.

EX-99.Bf Not Applicable.

EX-99.Bg Custodian Agreement is incorporated herein by reference to Exhibit 8 of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File No.
2-76990) filed with the Securities and Exchange Commission on December 18, 1997.

EX-99.Bh1 Management Agreement is incorporated herein by reference to Exhibit 9(a) of Post
Effective Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December 18, 1997.

EX-99.Bh2 Schedule E dated August 5, 1992 to Management Agreement is incorporated by reference to
Exhibit 9(b) as filed with Post Effective Amendment No. 32 to Registrant's
Registration Statement on Form N-1A (File No. 2-76990) filed with the Securities and
Exchange Commission on August 17, 1992 (adding Massachusetts Intermediate-Term
Municipal Portfolio).

EX-99.Bh3 Schedule F dated August 5, 1992 to Management Agreement is incorporated by reference to
Exhibit 9(c) as filed with Post Effective Amendment No. 32 to Registrant's
Registration Statement on Form N-1A (File No. 2-76990) filed with the Securities and
Exchange Commission on August 17, 1992 (adding Bainbridge Tax Exempt Portfolio).

EX-99.Bh4 Schedule G, dated October 29, 1993, to Management Agreement (adding Pennsylvania Tax
Free Portfolio) is incorporated herein by reference to Exhibit 9(d) of Post Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File No.
2-76990) filed with the Securities and Exchange Commission on December 18, 1997.

EX-99.Bh5 Schedule H, dated October 29, 1993, to Management Agreement (adding New York
Intermediate-Term Municipal Portfolio) is incorporated herein by reference to Exhibit
9(e) of Post Effective Amendment No. 41 to Registrant's Registration Statement on
Form N-1A (File No. 2-76990) filed with the Securities and Exchange Commission on
December 18, 1997.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
- -----------------
<S> <C>
EX-99.Bh6 Schedule I, dated October 29, 1993, to Management Agreement (adding California
Intermediate-Term Municipal Portfolio) is incorporated herein by reference to Exhibit
9(f) of Post Effective Amendment No. 41 to Registrant's Registration Statement on
Form N-1A (File No. 2-76990) filed with the Securities and Exchange Commission on
December 18, 1997.

EX-99.Bh7 Consent to Assignment and Assumption of the Administration Agreement between the Trust
and SEI Financial Management Corporation to SEI Fund Resources, is incorporated
herein by reference to Exhibit 9(g) of Post Effective Amendment No. 41 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.

EX-99.Bi Opinion and Consent of Counsel is incorporated herein by reference to Exhibit 10 of
Post Effective Amendment No. 41 to Registrant's Registration Statement on Form N-1A
(File No. 2-76990) filed with the Securities and Exchange Commission on December 18,
1997.

EX-99.Bj Consent of Independent Public Accountants is filed herewith.

EX-99.Bk Not Applicable.

EX-99.Bl Not Applicable.

EX-99.Bm1 Distribution Plan is incorporated herein by reference to Exhibit 15(a) of Post
Effective Amendment No. 41 to Registrant's Registration Statement on Form N-1A (File
No. 2-76990) filed with the Securities and Exchange Commission on December 18, 1997.

EX-99.Bm2 Distribution Plan for Kansas Tax Free Income Portfolio Class B is incorporated by
reference to Exhibit 15(b) of as filed with Post Effective Amendment No. 28 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on October 9, 1990.

EX-99.Bm3 Distribution Plan for Class D shares (formerly ProVantage Funds), is incorporated
herein by reference to Exhibit 15(c) of Post Effective Amendment No. 41 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 18, 1997.

EX-99.Bm4 Distribution Plan for Class C shares of California Tax Exempt Portfolio and
Institutional Tax Free Portfolio is incorporated herein by reference to Exhibit 15(d)
of Post Effective Amendment No. 41 to Registrant's Registration Statement on Form
N-1A (File No. 2-76990) filed with the Securities and Exchange Commission on December
18, 1997.

EX-99.Bm5 Amended and Restated Class D Distribution Plan is incorporated herein by reference to
Exhibit 15(e) of Post-Effective Amendment No. 40 to Registrant's Registration
Statement on Form N-1A (File No. 2-76990) filed with the Securities and Exchange
Commission on December 23, 1996.

EX-99.Bm6 Class G Distribution Plan is incorporated herein by reference to Exhibit 15(f) of
Post-Effective Amendment No. 40 to Registrant's Registration Statement on Form N-1A
(File No. 2-76990) filed with the Securities and Exchange Commission on December 23,
1996.

EX-99.Bn1a Financial Data Schedule for Tax Free Fund Class A.

EX-99.Bn1d Financial Data Schedule for Tax Free Fund Class D.

EX-99.Bn2a Financial Data Schedule for Institutional Tax Free Fund Class A.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
- -----------------
<S> <C>
EX-99.Bn2b Financial Data Schedule for Institutional Tax Free Fund Class B.

EX-99.Bn2c Financial Data Schedule for Institutional Tax Free Fund Class C.

EX-99.Bn3a Financial Data Schedule for California Tax Exempt Fund Class A.

EX-99.Bn3cni Financial Data Schedule for California Tax Exempt Fund CNI Class.

EX-99.Bn4 Financial Data Schedule for Intermediate Term Municipal Fund Class A.

EX-99.Bn5a Financial Data Schedule for Pennsylvania Municipal Fund Class A.

EX-99.Bn5b Financial Data Schedule for Pennsylvania Municipal Fund Class B.

EX-99.Bn6 Financial Data Schedule for Pennsylvania Tax Free Money Market Fund Class A.

EX-99.Bn7 Financial Data Schedule for California Municipal Bond Fund Class A.

EX-99.Bn8 Financial Data Schedule for Massachusetts Municipal Bond Fund Class A.

EX-99.Bn9 Financial Data Schedule for New Jersey Municipal Bond Fund Class A.

EX-99.Bn10 Financial Data Schedule for New York Municipal Bond Fund Class A.

EX-99.Bo1 Rule 18f-3 Plan is incorporated herein by reference to Exhibit 18(a) of Post Effective
Amendment No. 38 to Registrant's Registration Statement on Form N-1A (File No.
2-76990) filed with the Securities and Exchange Commission on October 30, 1995.

EX-99.Bo2 Amendment No. 1 to Rule 18f-3 Plan relating to Class A, B, C, D and G shares is
incorporated herein by reference to Exhibit 18(b) of Post-Effective Amendment No. 40
to Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on December 23, 1996.

EX-99.Bp Powers of Attorney for Robert A. Nesher, Mark E. Nagle, William M. Doran, F. Wendell
Gooch, James M. Storey, Edward D. Loughlin and George J. Sullivan, Jr., are
incorporated herein by reference to Exhibit (p) of Post-Effective Amendment No. 43 to
Registrant's Registration Statement on Form N-1A (File No. 2-76990) filed with the
Securities and Exchange Commission on November 2, 1998.
</TABLE>

<PAGE>
Exhibit j

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
dated October 12, 1998, on the August 31, 1998 financial statements of SEI
Tax-Exempt Trust, included in the Post-Effective Amendment No. 44 to the
Registration Statement on Form N-1A of SEI Tax-Exempt Trust (File No.
2-76990), and to all references to our Firm included in or made part of
Post-Effective Amendment No. 44 to Registration Statement File No. 2-76990.

/s/ Arthur Andersen LLP

Philadelphia, Pennsylvania
December 29, 1998

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