<PAGE>
SEI TAX EXEMPT TRUST
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
INSTITUTIONAL TAX FREE PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely information about the above-referenced
Portfolio that an investor needs to know before investing. Please read this
Prospectus carefully, and keep it on file for future reference.
A Statement of Additional Information dated December 31, 1997, has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing the Distributor, SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Tax Exempt Trust (the "Trust") is an open-end management investment company,
certain classes of which offer financial institutions a convenient means of
investing their own funds, or funds for which they act in a fiduciary, agency or
custodial capacity, in one or more professionally managed diversified and
non-diversified portfolios of securities. A portfolio may offer separate classes
of shares that differ from each other primarily in the allocation of certain
expenses and minimum investment amounts. This Prospectus offers Class C shares
of the Institutional Tax Free Portfolio (the "Portfolio"), a money market
portfolio.
AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) CLASS C
<S> <C>
- --------------------------------------------------------------------------------
Management/Advisory Fees (AFTER FEE WAIVER) (1) .29%
12b-1 Fees None
Total Other Expenses .54%
Shareholder Servicing Fees .25%
- --------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVER) (2) .83%
- --------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER HAS WAIVED, ON A VOLUNTARY BASIS, A PORTION OF ITS FEE, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THIS VOLUNTARY WAIVER. THE MANAGER
RESERVES THE RIGHT TO TERMINATE ITS WAIVER AT ANY TIME IN ITS SOLE
DISCRETION. ABSENT SUCH FEE WAIVER, MANAGEMENT/ADVISORY FEES FOR THE
PORTFOLIO WOULD BE .40%.
(2) ABSENT THIS FEE WAIVER, TOTAL OPERATING EXPENSES OF THE PORTFOLIO WOULD BE
.94%. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE ADVISER" AND "THE
MANAGER."
EXAMPLE
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<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
-------- -------- -------- --------
<S> <C> <C> <C> <C>
An investor in Class C shares of the Portfolio would pay the following expenses
on a $1,000 investment assuming (1) a 5% annual return and (2) redemption at
the end of each time period:
Class C $ 8 $ 26 $ 46 $ 103
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE PORTFOLIO'S CLASS C SHARES. THE PORTFOLIO ALSO OFFERS
CLASS A AND CLASS B SHARES, WHICH ARE SUBJECT TO THE SAME EXPENSES, EXCEPT THAT
CLASS A AND CLASS B SHARES BEAR DIFFERENT SHAREHOLDER SERVICING COSTS. A PERSON
WHO PURCHASES SHARES THROUGH AN ACCOUNT WITH A FINANCIAL INSTITUTION MAY BE
CHARGED SEPARATE FEES BY THAT INSTITUTION. ADDITIONAL INFORMATION MAY BE FOUND
UNDER "THE MANAGER," "DISTRIBUTION AND SHAREHOLDER SERVICING" AND "THE ADVISER."
2
<PAGE>
FINANCIAL HIGHLIGHTS
______________________________________________________________
The following financial highlights for a share outstanding throughout each
period have been derived from the Trust's financial statements which were
audited by Arthur Andersen LLP, independent accountants, whose report thereon,
dated October 17, 1997, was unqualified. This information should be read in
conjunction with the Trust's financial statements for the fiscal year ended
August 31, 1997, and notes thereto which are incorporated by reference to the
Trust's Statement of Additional Information. Additional performance information
is set forth in the Trust's 1997 Annual Report to Shareholders, which is
available upon request and without charge by calling 1-800-342-5734.
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET
REALIZED
AND
UNREALIZED
INVESTMENT GAIN
ACTIVITIES DISTRIBUTIONS (LOSS) ON
NET ASSET ----------- ---------------------------------------- INVESTMENTS NET ASSET
VALUE, NET NET NET AND VALUE,
BEGINNING INVESTMENT INVESTMENT REALIZED TOTAL CAPITAL END OF
OF PERIOD INCOME INCOME GAIN DISTRIBUTIONS TRANSACTIONS PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------
INSTITUTIONAL TAX FREE PORTFOLIO
- ------------------------------
Class C
FOR THE YEARS ENDED AUGUST 31,
1997 $ 1.00 $ 0.029 $ (0.029) $ -- $(0.029) $ -- $ 1.00
1996(1) 1.00 0.029 (0.029) -- (0.029) -- 1.00
<CAPTION>
RATIO OF
RATIO OF NET
EXPENSES INVESTMENT
TO RATIO OF INCOME TO
RATIO OF AVERAGE NET AVERAGE
NET EXPENSES NET INVESTMENT NET
ASSETS, TO ASSETS INCOME TO ASSETS
END OF AVERAGE (EXCLUDING AVERAGE (EXCLUDING
TOTAL PERIOD NET FEE NET FEE
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS)
- -------------------------------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------
INSTITUTIONAL TAX FREE PORTFOLIO
- ------------------------------
Class C
FOR THE YEARS ENDED AUGUST 31,
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
+ RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) THE INSTITUTIONAL TAX FREE PORTFOLIO--CLASS C COMMENCED OPERATIONS ON
SEPTEMBER 11, 1995.
3
<PAGE>
THE TRUST
__________________________________________________________________________
SEI TAX EXEMPT TRUST (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in separate diversified and
non-diversified investment portfolios. This Prospectus offers Class C shares of
the Trust's Institutional Tax Free Portfolio (the "Portfolio"). As of September
30, 1997, the aggregate net assets of all classes of the Institutional Tax Free
Portfolio was $992,670,088. Investors may also purchase Class A and Class B
shares of the Portfolio. Each class provides for variations in shareholder
servicing expenses, voting rights and dividends. Additional information
pertaining to the Trust may be obtained by writing to SEI Investments
Distribution Co., Oaks, Pennsylvania 19456, or by calling 1-800-342-5734.
INVESTMENT OBJECTIVE
AND POLICIES
___________________________________________________________________________
The Portfolio'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 Portfolio will
meet its investment objective.
The Portfolio 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 (collectively, "Municipal
Securities"). It is a fundamental policy of the Portfolio
to invest at least 80% of its net assets in securities the
interest on which is exempt from federal income taxes,
based on opinions from bond counsel for the issuers, and
the Portfolio 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.
The Portfolio 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. See "General Investment Policies."
The Adviser will not invest more than 25% of
Portfolio 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 Portfolio's assets are invested in Municipal Securities
payable from revenues on similar projects, the Portfolio
will be subject to the peculiar risks presented by such
projects to a greater extent than it would be if the
Portfolio's assets were not so invested. Moreover, in
4
<PAGE>
seeking to attain its investment objective, the Portfolio
may invest all or any part of its assets in Municipal
Securities that are industrial development bonds.
GENERAL INVESTMENT
POLICIES
___________________________________________________________________________
In purchasing obligations, the Portfolio complies with the
requirements of Rule 2a-7 under the Investment Company Act
of 1940 (the "1940 Act"), as that Rule may be amended from
time to time. These requirements currently provide that the
Portfolio must limit its investments to securities with
remaining maturities of 397 days or less, and must maintain
a dollar-weighted average maturity of 90 days or less. In
addition, the Portfolio may only invest in eligible
securities. In general, this means securities rated in one
of the two highest categories for short-term securities by
at least two nationally recognized statistical rating
organizations ("NRSROs") (or by one NRSRO if only one NRSRO
has rated the security), or, if unrated, determined by
Weiss, Peck & Greer, L.L.C. (the "Adviser"), to be of
equivalent quality. Since the Portfolio 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 Portfolio
and affect its share price.
Securities rated in the highest rating category
(E.G., A-1 by Standard & Poor's Corporation ("S&P")) by at
least two NRSROs (or, if unrated, determined by the Adviser
to be of comparable quality) are "first tier" securities.
Non-first tier securities rated in the second highest
rating category (E.G., A-2 by S&P) by at least one NRSRO
(or, if unrated, determined by the Adviser to be of
comparable quality) are considered to be "second tier"
securities. The Portfolio's investments in non-first tier
conduit securities will be limited to 5% of the Portfolio's
assets. Conduit securities are securities issued to finance
non-governmental private projects, such as housing
developments and retirement homes, and for which the
ultimate obligor is not a governmental issuer.
The Portfolio may purchase securities on a
"when-issued" basis, and reserves the right to engage in
transactions involving standby commitments. While the
Portfolio generally intends to be fully invested in
federally tax-exempt securities, the Portfolio may invest
up to 20% of its net assets in taxable money market
instruments (including repurchase agreements) and
securities the interest on which is a preference item for
purposes of the federal alternative minimum tax. The
Portfolio will not invest more than 10% of its total assets
in securities which are considered to be illiquid.
For a description of the permitted investments and
ratings, see the "Description of Permitted Investments and
Risk Factors" and the Statement of Additional Information.
5
<PAGE>
INVESTMENT
LIMITATIONS
________________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolio. Fundamental policies
cannot be changed with respect to the Trust or the
Portfolio without the consent of the holders of a majority
of the Trust's or the Portfolio's outstanding shares. It is
a fundamental policy of the Portfolio to use its best
efforts to maintain a constant net asset value of $1.00 per
share.
THE PORTFOLIO MAY NOT:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the United States Government,
its agencies or instrumentalities) if, as a result, more
than 5% of the total assets of the Portfolio (based on
current market value at the time of investment) would be
invested in the securities of such issuer; provided,
however, that the Portfolio may invest up to 25% of its
total assets without regard to this restriction of, and
as permitted by, Rule 2a-7.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio, based on 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 the total assets of the Portfolio. All
borrowings will be repaid before making additional
investments and any interest paid on such borrowings
will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional fundamental
investment limitations are set forth in the Statement of
Additional Information.
THE MANAGER
______________________________________________________________________
SEI Fund Management (the "Manager" and the "Transfer
Agent") provides the Trust with overall management
services, regulatory reporting, all necessary office space,
equipment, personnel and facilities, and serves as
institutional transfer agent and dividend disbursing agent.
For these services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .36% of the average daily net assets of the
Portfolio. The Manager has voluntarily agreed to waive a
portion of its fee in order to limit the total operating
expenses to not more than .83% of the average daily net
assets of Class C shares of the Portfolio, on an annualized
basis. The Manager reserves the right, in its sole
discretion, to terminate this voluntary fee waiver at any
time. For the fiscal year ended
6
<PAGE>
August 31, 1997, the Portfolio paid management fees, after
waivers, of .25% of its average daily net assets.
THE ADVISER
_______________________________________________________________________
Weiss, Peck & Greer, L.L.C., serves as the Portfolio's
investment adviser under an investment advisory agreement
with the Trust (the "Advisory Agreement"). Under the
Advisory Agreement, the Adviser invests the assets of the
Portfolio, and continuously reviews, supervises and
administers the Portfolio's investment program. The Adviser
is independent of the Manager and discharges its
responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust.
The Adviser is a limited liability company founded as
a limited partnership in 1970, and engages in investment
management, venture capital management and management
buyouts. The Adviser has been active since its founding in
managing portfolios of tax exempt securities. As of
September 30, 1997, total assets under management were
approximately $14.6 billion. The principal business address
of the Adviser is One New York Plaza, New York, New York
10004.
Janet Fiorenza acts as the portfolio manager for the
Portfolio. Ms. Fiorenza, a Principal of the Adviser, has
been associated with the Adviser's Tax Exempt Fixed Income
group since 1988, and with its predecessor since 1980.
For its services, the Adviser is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .05% of the combined average daily net assets of
the money market portfolios of the Trust that are advised
by the Adviser up to $500 million, .04% of such assets from
$500 million to $1 billion and .03% of such assets in
excess of $1 billion. Such fees are allocated daily among
these portfolios based on their relative net assets. For
the fiscal year ended August 31, 1997, the Portfolio paid
advisory fees, after waivers, of .04% of its relative net
assets.
DISTRIBUTION AND
SHAREHOLDER
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), a
wholly owned subsidiary of SEI Investments Company ("SEI
Investments"), serves as the Portfolio's distributor
pursuant to a distribution agreement (the "Distribution
Agreement") with the Trust.
The Portfolio has adopted plans under which firms,
including the Distributor, that provide shareholder and
administrative services may receive compensation therefor.
The Class A, B and C plans differ in a number of ways,
including the amounts that may be paid. Under each plan,
the Distributor may provide those services itself or may
enter into arrangements under which third parties provide
such services and are compensated by the Distributor. Under
such arrangements the Distributor may retain as a profit
any difference between the fee it receives and the amount
it pays such third parties. In addition, the Portfolio may
enter into such arrangements directly.
7
<PAGE>
Under the Class C shareholder service plan, the
Distributor is entitled to receive shareholder service fees
at an annual rate of up to .25% of average daily net assets
in return for the Distributor's (or its agent's) efforts in
maintaining client accounts; arranging for bank wires;
responding to client inquiries concerning services provided
or investment; and assisting clients in changing dividend
options, account designations and addresses. In addition,
under their administrative services plans, Class C shares
will pay the Distributor administrative services fees at
specified percentages of the average daily net assets of
the shares of the Class (up to .25%). Administrative
services include sub-accounting; providing information on
share positions to clients; forwarding shareholder
communications to clients; processing purchase, exchange
and redemption orders and processing divided payments.
It is possible that an institution may offer
different classes of shares to its customers and differing
services to the Classes of the Portfolio and thus receive
compensation with respect to different classes. These
financial institutions may also charge separate fees to
their customers.
The Trust may execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive compensation.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation, to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolio's
shares.
PURCHASE AND
REDEMPTION OF SHARES
____________________________________________________________________________
Financial institutions may acquire shares of the Portfolio
for their own account, or as a record owner on behalf of
fiduciary, agency or custody accounts, by placing orders
with the Transfer Agent (or its authorized agent).
Institutions that use certain SEI proprietary systems may
place orders electronically through those systems.
Financial institutions which purchase shares for the
accounts of their customers may impose separate charges on
these customers for account services. Financial
institutions may impose an earlier cut-off time for receipt
of purchase orders directed through them to allow for
processing and transmittal of these orders to the Transfer
Agent for effectiveness on the same day.
Shares of the Portfolio may be purchased or redeemed
on days on which the New York Stock Exchange is open for
business ("Business Days"). However, money market fund
shares cannot be purchased by Federal Reserve wire on
federal holidays restricting wire transfers.
Shareholders who desire to purchase shares for cash
must place their orders with the Transfer Agent (or its
authorized agent) prior to the determination of net asset
value and in accordance with the procedures described below
for the order to be accepted on
8
<PAGE>
that Business Day. Cash investments must be transmitted or
delivered in federal funds to the wire agent by the close
of business on the same day the order is placed.
The Trust reserves the right to reject a purchase
order when the Transfer Agent determines that it is not in
the best interest of the Trust or shareholders to accept
such purchase order.
The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust, which
is expected to remain constant at $1.00. The net asset
value per share of the Portfolio is determined by dividing
the total value of its investments and other assets, less
any liabilities, by the total number of outstanding shares
of the Portfolio. The Portfolio's investments will be
valued by the amortized cost method described in the
Statement of Additional Information. Net asset value per
share is determined daily as of 2:00 p.m., Eastern time, on
each Business Day.
Shareholders who desire to redeem shares of the
Portfolio must place their redemption orders with the
Transfer Agent (or its authorized agent) prior to 12:30
p.m., Eastern time, on any Business Day. Otherwise, the
redemption order will be effective on the next Business
Day. The redemption price is the net asset value per share
of the Portfolio next determined after receipt by the
Transfer Agent, and effectiveness, of the redemption order.
For redemption orders received before 12:30 p.m., Eastern
time, on any Business Day, payment will be made the same
day by transfer of federal funds. Otherwise, the redemption
will be effective on the next Business Day.
If a shareholder's aggregate balance is less than $45
million as a result of redemption or transfer, for a period
of seven consecutive days, the Trust reserves the right to
redeem that shareholder's shares in the Portfolio for their
current net asset value. Before the Trust redeems such
shares, the shareholder will be given notice that the value
of its shares is less than the minimum amount, and will be
allowed sixty days to make an additional investment in an
amount that will increase the value of the account to at
least $50 million.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The
Trust and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by other
means.
9
<PAGE>
PERFORMANCE
______________________________________________________________________
From time to time the Portfolio advertises its "current
yield," "tax equivalent yield" and "effective yield." These
figures are based on historical earnings and are not
intended to indicate future performance. The "current
yield" of the Portfolio refers to the income generated by
an investment over a seven-day period which is then
"annualized." That is, the amount of income generated by
the investment during the week is assumed to be generated
each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" (also
called "effective compound yield") is calculated similarly
but, when annualized, the income earned by an investment is
assumed to be reinvested. The "effective yield" will be
slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment. The "tax
equivalent yield" is calculated by determining the rate of
return that would have been achieved on a fully taxable
investment to produce the after-tax equivalent of the
Portfolio's yield, assuming certain tax brackets for a
shareholder.
The Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives.
The Portfolio may also quote financial and business
publications and periodicals as they relate to fund
management, investment philosophy and investment
techniques.
The performance of Class A shares will normally be
higher than that of Class B and Class C shares because of
the additional administrative services expenses charged to
Class B and Class C shares.
TAXES
______________________________________________________________________________
The following summary of federal income tax consequences is
based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No attempt has been made to present a detailed explanation
of the federal income tax treatment of the Portfolio or its
shareholders, and state and local tax consequences of an
investment in the Portfolio may differ from the federal
income tax consequences described below. Accordingly,
shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state and local
income taxes. Additional information concerning taxes is
set forth in the Statement of Additional Information.
TAX STATUS OF THE
PORTFOLIO
The Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), so as to be
relieved of
10
<PAGE>
federal income tax on net investment company taxable income
and net capital gain (the excess of net long-term capital
gain over net short-term capital loss) distributed to
shareholders.
TAX STATUS OF
DISTRIBUTIONS
The Portfolio intends to distribute substantially all of
its net investment income (including net short-term capital
gain) to shareholders. If, at the close of each quarter of
its taxable year, at least 50% of the value of the
Portfolio's total assets consists of obligations the
interest on which is excludable from gross income, the
Portfolio may pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends are excludable from
a shareholder's gross income for federal income tax
purposes but may have certain collateral federal tax
consequences including alternative minimum tax
consequences. In addition, the receipt of exempt-interest
dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxable on a portion of
such benefits. See the Statement of Additional Information.
Any dividends paid out of income realized by the
Portfolio on taxable securities will be taxable to
shareholders as ordinary income (whether received in cash
or in additional shares) to the extent of the Portfolio's
earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders.
Distributions to shareholders of net capital gains of the
Portfolio also will not qualify for the dividends received
deduction and will be taxable to shareholders as long-term
capital gain, whether received in cash or additional
shares, and regardless of how long a shareholder has held
the shares.
Dividends declared by the Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in any such month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if paid by the
Portfolio at any time during the following January. The
Portfolio intends to make sufficient distributions prior to
the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment
companies.
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of the
Portfolio is not deductible for federal income tax purposes
to the extent that it relates to exempt-interest dividends
distributed to the shareholder during the taxable year.
Furthermore, the Portfolio may not be an appropriate
investment for persons (including corporations and other
business entities) who are "substantial users" (or persons
related to "substantial users") of facilities financed by
industrial development bonds or private activity bonds.
Such persons should consult their tax advisers before
purchasing shares.
The Portfolio will report annually to its
shareholders the portion of dividends that is taxable and
the portion that is tax-exempt based on income received by
the Portfolio during the year to which the dividends
relate.
Each sale, exchange, or redemption of the Portfolio's
shares is a taxable transaction to the shareholder.
11
<PAGE>
GENERAL INFORMATION
_______________________________________________________________________
THE TRUST
The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated March 15, 1982. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. In addition to the Portfolio, the Trust consists
of the following portfolios: Tax Free Portfolio, California
Tax Exempt Portfolio, Intermediate-Term Municipal
Portfolio, Pennsylvania Municipal Portfolio, New York
Intermediate-Term Municipal Portfolio, and Pennsylvania Tax
Free Portfolio. All consideration received by the Trust for
shares of any portfolio and all assets of such portfolio
belong to that portfolio and would be subject to
liabilities related thereto.
The Trust pay its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will vote
separately on matters relating solely to that Portfolio or
class, such as any distribution plan. As a Massachusetts
business trust, the Trust is not required to hold annual
meetings of shareholders, but approval will be sought for
certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining
Trustees or by shareholders at a special meeting called
upon written request of shareholders owning at least 10% of
the outstanding shares of the Trust. In the event that such
a meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
REPORTING
The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Manager.
SEI Fund Management, Oaks, Pennsylvania, 19456.
DIVIDENDS
The net investment income (exclusive of capital gains) of
the Portfolio is determined and declared on each Business
Day as a dividend for shareholders of record as of the
close of business on that day. Dividends are paid by the
Portfolio in federal funds or in additional shares at the
discretion of the shareholder on the first Business Day of
each month. Dividends will be paid on the next Business Day
to shareholders who redeem all of their
12
<PAGE>
shares of the Portfolio at any time during the month.
Currently, capital gains, if any, are distributed at the
end of the calendar year.
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares, unless the shareholder has elected to take such
payment in cash. Shareholders may change their election by
providing written notice to the Manager at least 15 days
prior to the distribution.
The dividends on Class A shares of the Portfolio are
normally higher than those on Class B and Class C shares
because of the additional administrative services expenses
charged to Class B and Class C shares.
COUNSEL AND INDEPENDENT
PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
CUSTODIAN AND WIRE AGENT
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, serves as Custodian
of the Trust's assets and acts as wire agent of the Trust.
The Custodian holds cash, securities and other assets of
the Trust as required by the 1940 Act.
DESCRIPTION OF
PERMITTED
INVESTMENTS AND RISK
FACTORS ______________________________________________________________________
The following is a description of certain of the permitted
investments for the Portfolio, and the associated risk
factors:
MONEY MARKET SECURITIES
Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks; (ii) U.S. Treasury obligations and obligations
issued by the agencies and instrumentalities of the U.S.
Government; and (iii) repurchase agreements involving any
of the foregoing obligations entered into with highly-rated
banks and broker-dealers.
MUNICIPAL SECURITIES
Municipal Securities consist of (i) debt obligations issued
by or on behalf of public authorities to obtain funds to be
used for various public facilities, for refunding
outstanding obligations, for general operating expenses and
for lending such funds to other public institutions and
facilities, and (ii) certain private activity and
industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately
operated facilities.
General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed
by the revenues of a project or facility, tolls from a toll
bridge, for example. Certificates of participation
represent an interest in an underlying obligation or
commitment such as an obligation issued in connection with
a leasing arrangement. The payment of principal and
interest on private activity and industrial
13
<PAGE>
development bonds generally is dependent solely on the
ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal
property so financed as security for such payment.
Municipal notes include general obligation notes, tax
anticipation notes, revenue anticipation notes, bond
anticipation notes, certificates of indebtedness, demand
notes and construction loan notes and participation
interests in municipal notes. Municipal bonds include
general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds
and participation interests in municipal bonds.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements by which a Portfolio
obtains a security and simultaneously commits to return the
security to the seller at an agreed upon price (including
principal and interest) on an agreed upon date within a
number of days from the date of purchase. Repurchase
agreements are considered loans under the 1940 Act.
STANDBY COMMITMENTS AND
PUTS
Securities subject to standby commitments or puts permit
the holder thereof to sell the securities at a fixed price
prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current
market price. However, unless the standby commitment or put
was an integral part of the security as originally issued,
it may not be marketable or assignable; therefore, the
standby commitment or put would only have value to the
Portfolio owning the security to which it relates. In
certain cases, a premium may be paid for a standby
commitment or put, which premium will have the effect of
reducing the yield otherwise payable on the underlying
security. The Portfolio will limit standby commitment or
put transactions to institutions believed to present
minimal credit risks.
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 Portfolio may
carry variable or floating rates of interest and may
involve a conditional or unconditional demand feature. Such
obligations may include variable amount master demand
notes. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities
may be reset daily, weekly, quarterly or at some other
interval, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing market
interest rates. A demand instrument with a demand notice
period exceeding seven days may be considered illiquid if
there is no secondary market for such security.
14
<PAGE>
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. The Portfolio will maintain with the
custodian a separate account with liquid securities or cash
in an amount at least equal to these commitments. The
interest rate realized on these securities is fixed as of
the purchase date, and no interest accrues to the Portfolio
before settlement.
15
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 3
The Trust................................................................. 4
Investment Objective and Policies......................................... 4
General Investment Policies............................................... 5
Investment Limitations.................................................... 6
The Manager............................................................... 6
The Adviser............................................................... 7
Distribution and Shareholder Servicing.................................... 7
Purchase and Redemption of Shares......................................... 8
Performance............................................................... 10
Taxes..................................................................... 10
General Information....................................................... 12
Description of Permitted Investments and Risk Factors..................... 13
</TABLE>
16
<PAGE>
SEI TAX EXEMPT TRUST
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
TAX FREE PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely information about the above-referenced
Portfolio that an investor needs to know before investing. Please read this
Prospectus carefully, and keep it on file for future reference.
A Statement of Additional Information dated December 31, 1997, has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing the Distributor, SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Tax Exempt Trust (the "Trust") is an open-end investment management company,
certain classes of which offer financial institutions a convenient means of
investing their own funds, or funds for which they act in a fiduciary, agency or
custodial capacity, in one or more professionally managed diversified and
non-diversified portfolios of securities. A portfolio may offer separate classes
of shares that differ from each other primarily in the allocation of certain
expenses and minimum investment amounts. This Prospectus offers Class A shares
of the Trust's Tax Free Portfolio (the "Portfolio"), a money market portfolio.
AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) CLASS A
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Management/Advisory Fees .40%
12b-1 Fees None
Total Other Expenses .05%
Shareholder Servicing Fees (AFTER FEE WAIVER) (1) .01%
- --------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVER) (2) .45%
- --------------------------------------------------------------------------
</TABLE>
(1) THE DISTRIBUTOR HAS WAIVED, ON A VOLUNTARY BASIS, A PORTION OF ITS
SHAREHOLDER SERVICING FEE, AND THE SHAREHOLDER SERVICING FEES SHOWN REFLECT
THIS WAIVER. THE DISTRIBUTOR RESERVES THE RIGHT TO TERMINATE ITS WAIVER AT
ANY TIME IN ITS SOLE DISCRETION. ABSENT SUCH WAIVER, SHAREHOLDER SERVICING
FEES FOR THE PORTFOLIO WOULD BE .25%.
(2) ABSENT THIS FEE WAIVER, TOTAL OPERATING EXPENSES FOR CLASS A SHARES OF THE
PORTFOLIO WOULD BE .69%. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE
ADVISER" AND "THE MANAGER."
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
-------- -------- -------- --------
<S> <C> <C> <C> <C>
An investor in Class A shares of the Portfolio would pay the following expenses
on a $1,000 investment assuming (1) a 5% annual return and (2) redemption at
the end of each time period: $ 5 $ 14 $ 25 $ 57
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE PORTFOLIO'S CLASS A SHARES. THE PORTFOLIO ALSO OFFERS
CLASS D SHARES, WHICH ARE SUBJECT TO THE SAME EXPENSES, EXCEPT THAT CLASS D
SHARES BEAR DIFFERENT DISTRIBUTION AND TRANSFER AGENT COSTS. A PERSON WHO
PURCHASES SHARES THROUGH A FINANCIAL INSTITUTION MAY BE CHARGED SEPARATE FEES BY
THAT INSTITUTION. ADDITIONAL INFORMATION REGARDING THESE DIFFERENCES MAY BE
FOUND UNDER "THE MANAGER," "DISTRIBUTION AND SHAREHOLDER SERVICING" AND "THE
ADVISER."
2
<PAGE>
FINANCIAL HIGHLIGHTS
______________________________________________________________
The following financial highlights for a share outstanding throughout each
period have been derived from the Trust's financial statements which were
audited by Arthur Andersen LLP, independent accountants, whose report thereon,
dated October 17, 1997, was unqualified. This information should be read in
conjunction with the Trust's financial statements for the fiscal year ended
August 31, 1997, and notes thereto which are incorporated by reference to the
Trust's Statement of Additional Information. Additional performance information
is set forth in the Trust's 1997 Annual Report to Shareholders, which is
available upon request and without charge by calling 1-800-342-5734.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET REALIZED
AND
NET INVESTMENT UNREALIZED
ASSET ACTIVITIES DISTRIBUTIONS GAIN (LOSS)
VALUE, --------- ------------------------------------------- ON
BEGINNING NET NET NET INVESTMENTS
OF INVESTMENT INVESTMENT REALIZED TOTAL AND CAPITAL
PERIOD INCOME INCOME GAIN DISTRIBUTIONS TRANSACTIONS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
TAX FREE PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
CLASS A
FOR THE YEARS ENDED AUGUST 31,
1997 $ 1.00 $0.033 $(0.033) $ -- $ (0.033) $ --
1996 1.00 0.033 (0.033) -- (0.033) --
1995 1.00 0.034 (0.034) -- (0.034) --
1994 1.00 0.022 (0.022) -- (0.022) --
1993 1.00 0.023 (0.023) -- (0.023) --
1992 1.00 0.033 (0.033) -- (0.033) --
1991 1.00 0.047 (0.047) -- (0.047) --
1990(1) 1.00 0.032 (0.032) -- (0.032) --
FOR THE YEARS ENDED JANUARY 31,
1990 $ 1.00 $0.059 $(0.059) $ -- $ (0.059) $ --
1989 1.00 0.049 (0.049) -- (0.049) --
1988 1.00 0.042 (0.042) -- (0.042) --
<CAPTION>
RATIO OF
RATIO OF NET
RATIO OF NET INVESTMENT
EXPENSES INVESTMENT INCOME TO
RATIO OF TO INCOME TO AVERAGE
NET EXPENSES AVERAGE AVERAGE NET
NET ASSET ASSETS, TO NET NET ASSETS
VALUE, END OF AVERAGE ASSETS ASSETS (EXCLUDING
END OF TOTAL PERIOD NET (EXCLUDING (EXCLUDING FEE
PERIOD RETURN* (000) ASSETS WAIVERS) WAIVERS) WAIVERS)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------- -----------------------------------------------------------------------
TAX FREE PORTFOLIO
- -------------------------------- -----------------------------------------------------------------------
CLASS A
FOR THE YEARS ENDED AUGUST 31,
1997 $ 1.00 3.31% $431,016 0.45% 0.69% 3.26% 3.02%
1996 1.00 3.35% 339,906 0.45% 0.50% 3.30% 3.25%
1995 1.00 3.48% 377,152 0.45% 0.51% 3.43% 3.37%
1994 1.00 2.20% 358,299 0.45% 0.53% 2.17% 2.09%
1993 1.00 2.29% 414,975 0.45% 0.53% 2.24% 2.16%
1992 1.00 3.32% 293,982 0.45% 0.55% 3.30% 3.20%
1991 1.00 4.81% 343,300 0.37% 0.55% 4.70% 4.52%
1990(1) 1.00 3.20%+ 356,814 0.45%* 0.56%* 5.46%* 5.35%*
FOR THE YEARS ENDED JANUARY 31,
1990 $ 1.00 5.97% $464,389 0.54% 0.59% 5.90% 5.85%
1989 1.00 4.98% 790,629 0.46% 0.58% 4.90% 4.78%
1988 1.00 4.34% 938,484 0.53% 0.54% 4.20% 4.19%
</TABLE>
* ANNUALIZED
+ RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) IN AUGUST 1990, THE TRUSTEES CHANGED THE FISCAL YEAR END OF THE TRUST FROM
JANUARY 31 TO AUGUST 31.
3
<PAGE>
THE TRUST
__________________________________________________________________________
SEI TAX EXEMPT TRUST (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in separate diversified and
non-diversified investment portfolios. This Prospectus offers Class A shares of
the Trust's Tax Free Portfolio (the "Portfolio"). Investors may also purchase
Class D shares of the Portfolio. Additional information pertaining to the Trust
may be obtained by writing to SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-342-5734.
INVESTMENT OBJECTIVE
AND POLICIES
___________________________________________________________________________
The Portfolio'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 Portfolio will
meet its investment objective.
The Portfolio 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 (collectively, "Municipal
Securities"). At least 80% of the Portfolio's net assets
will be invested in securities the interest on 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 Portfolio. Under normal
conditions, the Portfolio will invest at least 80% of its
net assets in securities the interest on which is not a
preference item for purposes of the federal alternative
minimum tax.
The Portfolio 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. See "General Investment Policies."
The Adviser will not invest more than 25% of
Portfolio 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 Portfolio's assets are invested in Municipal Securities
payable from revenues on similar projects, the Portfolio
will be subject to the peculiar risks presented by such
projects to a greater extent than it would be if the
Portfolio's assets were not so invested. Moreover, in
seeking to attain its investment objective the Portfolio
may invest all or any part of its assets in Municipal
Securities that are industrial development bonds.
4
<PAGE>
GENERAL INVESTMENT
POLICIES
___________________________________________________________________________
In purchasing obligations, the Portfolio complies with the
requirements of Rule 2a-7 under the Investment Company Act
of 1940 (the "1940 Act"), as that Rule may be amended from
time to time. These requirements currently provide that the
Portfolio must limit its investments to securities with
remaining maturities of 397 days or less, and must maintain
a dollar-weighted average maturity of 90 days or less. In
addition, the Portfolio may only invest in eligible
securities. In general, this means securities rated in one
of the two highest categories for short-term securities by
at least two nationally recognized statistical rating
organizations ("NRSROs") (or by one NRSRO if only one NRSRO
has rated the security), or, if unrated, determined by
Weiss, Peck & Greer, L.L.C. (the "Adviser") to be of
equivalent quality. Since the Portfolio 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 Portfolio
and affect its share price.
Securities rated in the highest rating category
(E.G., A-1 by Standard & Poor's Corporation ("S&P")) by at
least two NRSROs (or, if unrated, determined by the Adviser
to be of comparable quality) are "first tier" securities.
Non-first tier securities rated in the second highest
rating category (E.G., A-2 by S&P) by at least one NRSRO
(or, if unrated, determined by the Adviser to be of
comparable quality) are considered to be "second tier"
securities. The Portfolio's investments in non-first tier
conduit securities will be limited to 5% of the Portfolio's
assets. Conduit securities are securities issued to finance
non-governmental private projects, such as housing
developments and retirement homes, and for which the
ultimate obligor is not a governmental issuer.
The Portfolio may invest in variable and floating
rate obligations, may purchase securities on a
"when-issued" basis, and reserves the right to engage in
transactions involving standby commitments. While the
Portfolio generally intends to be fully invested in
federally tax-exempt securities, the Portfolio may invest
up to 20% of its net assets in taxable money market
instruments and securities the interest on which is a
preference item for purposes of the alternative minimum
tax. The Portfolio will not invest more than 10% of its net
assets in illiquid securities.
For a description of the permitted investments and
ratings, see the "Description of Permitted Investments and
Risk Factors" and the Statement of Additional Information.
INVESTMENT
LIMITATIONS
________________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolio. Fundamental policies
cannot be changed with respect to the Trust or the
Portfolio without the consent of the holders of a majority
of the Trust's or the Portfolio's
5
<PAGE>
outstanding shares. It is a fundamental policy of the
Portfolio to use its best efforts to maintain a constant
net asset value of $1.00 per share.
THE PORTFOLIO MAY NOT:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the United States Government,
its agencies or instrumentalities) if, as a result, more
than 5% of the total assets of the Portfolio (based on
current market value at the time of investment) would be
invested in the securities of such issuer; provided,
however, that the Portfolio may invest up to 25% of its
total assets without regard to this restriction of, and
as permitted by, Rule 2a-7.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio, based on 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 the total assets of the Portfolio. All
borrowings will be repaid before making additional
investments and any interest paid on such borrowings
will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional investment
limitations are set forth in the Statement of Additional
Information.
THE MANAGER
______________________________________________________________________
SEI Fund Management (the "Manager" and the "Transfer
Agent") provides the Trust with overall management
services, regulatory reporting, all necessary office space,
equipment, personnel and facilities, and serves as
institutional transfer agent and dividend disbursing agent.
For these services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .36% of the average daily net assets of the
Portfolio. The Manager has voluntarily agreed to waive a
portion of its fee in order to limit the total operating
expenses of the Class A shares of the Portfolio to not more
than .45% of the Portfolio's average daily net assets
attributable to Class A shares, on an annualized basis. The
Manager reserves the right, in its sole discretion, to
terminate this voluntary fee waiver at any time. For the
fiscal year ended August 31, 1997, the Portfolio paid
management fees, after waivers, of .36% of its average
daily net assets.
THE ADVISER
_______________________________________________________________________
Weiss, Peck & Greer, L.L.C., acts as the Portfolio's
investment adviser under an investment advisory agreement
with the Trust (the "Advisory Agreement"). Under the
Advisory Agreement, the Adviser invests the assets of the
Portfolio, and continuously reviews,
6
<PAGE>
supervises and administers the Portfolio's investment
program. The Adviser is independent of the Manager and SEI
Investments, and discharges its responsibilities subject to
the supervision of, and policies set by, the Trustees of
the Trust.
The Adviser is a limited liability company founded as
a limited partnership in 1970, and engages in investment
management, venture capital management and management
buyouts. The Adviser has been active since its founding in
managing portfolios of tax exempt securities. As of
September 30, 1997, total assets under management were
approximately $14.6 billion. The principal business address
of the Adviser is One New York Plaza, New York, New York
10004.
Janet Fiorenza acts as the portfolio manager for the
Portfolio. Ms. Fiorenza, a Principal of the Adviser, has
been associated with the Adviser's Tax Exempt Fixed Income
group since 1988, and with its predecessor since 1980.
For its services, the Adviser is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .05% of the combined average daily net assets of
the money market portfolios of the Trust that are advised
by the Adviser up to $500 million, .04% of such assets from
$500 million to $1 billion, and .03% of such assets in
excess of $1 billion. Such fees are allocated daily among
these portfolios based on their relative net assets. For
the fiscal year ended August 31, 1997, the Portfolio paid
advisory fees, after waivers, of .04% of its relative daily
net assets.
DISTRIBUTION AND
SHAREHOLDER
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), a
wholly-owned subsidiary of SEI Investments Company ("SEI
Investments"), serves as the Portfolio's distributor
pursuant to a distribution agreement with the Trust. The
Portfolio has adopted a distribution plan for its Class D
shares (the "Class D Plan") pursuant to Rule 12b-1 under
the 1940 Act.
The Portfolio has adopted a shareholder servicing
plan for Class A shares (the "Service Plan") under which
the Distributor is entitled to receive a shareholder
servicing fee of up to .25% of average daily net assets
attributable to Class A shares. Under the Service Plan, the
Distributor may perform, or may compensate other service
providers for performing, the following shareholder and
administrative services: maintaining client accounts;
arranging for bank wires; responding to client inquiries
concerning services provided on investments; assisting
clients in changing dividend options, account designations
and addresses; sub-accounting; providing information on
share positions to clients; forwarding shareholder
communications to clients; processing purchase, exchange
and redemption orders; and processing dividend payments.
Under the Service Plan, the Distributor may retain as a
profit any difference between the fee it receives and the
amount it pays to third parties.
7
<PAGE>
It is possible that an institution may offer
different classes of shares to its customers and thus
receive different compensation with respect to different
classes. These financial institutions may also charge
separate fees to their customers.
The Trust may also execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive usual and customary compensation.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation, to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolio's
shares.
PURCHASE AND
REDEMPTION OF SHARES
____________________________________________________________________________
Financial institutions may acquire shares of the Portfolio
for their own account, or as a record owner on behalf of
fiduciary, agency or custody accounts, by placing orders
with the Transfer Agent (or its authorized agent).
Institutions that use certain SEI proprietary systems may
place orders electronically through those systems.
Financial institutions which purchase shares for the
accounts of their customers may impose separate charges on
these customers for account services. Financial
institutions may impose an earlier cut-off time for receipt
of purchase orders directed through them to allow for
processing and transmittal of these orders to the Transfer
Agent for effectiveness on the same day.
Shares of the Portfolio may be purchased or redeemed
on days on which the New York Stock Exchange is open for
business ("Business Days"). However, money market fund
shares cannot be purchased by Federal Reserve wire on
federal holidays restricting wire transfers.
Shareholders who desire to purchase shares for cash
must place their orders with the Transfer Agent (or its
authorized agent) prior to the determination of net asset
value and in accordance with the procedures described below
for the order to be accepted on that Business Day. Cash
investments must be transmitted or delivered in federal
funds to the wire agent by the close of business on the
same day the order is placed. The Trust reserves the right
to reject a purchase order when the Distributor determines
that it is not in the best interest of the Trust or
shareholders to accept such purchase order.
The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust, which
is expected to remain constant at $1.00. The net asset
value per share of the Portfolio is determined by dividing
the total value of its investments and other assets, less
any liabilities, by the total number of outstanding shares
of the Portfolio. The Portfolio's investments will be
valued by the amortized cost method described in the
Statement of Additional Information. Net asset value per
share is determined daily as of 2:00 p.m., Eastern time, on
each Business Day.
8
<PAGE>
Shareholders who desire to redeem shares of the
Portfolio must place their redemption orders with the
Transfer Agent (or its authorized agent) prior to 12:30
p.m., Eastern time, on any Business Day. Otherwise, the
redemption order will be effective on the next Business
Day. The redemption price is the net asset value per share
of the Portfolio next determined after receipt by the
Transfer Agent, and effectiveness, of the redemption order.
For redemption orders received before 12:30 p.m., Eastern
time, on any Business Day, payment will be made the same
day by transfer of federal funds. Otherwise, the redemption
order will be effective on the next Business Day.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The
Trust and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by other
means.
PERFORMANCE
______________________________________________________________________
From time to time the Portfolio advertises its "current
yield", "tax equivalent yield" and "effective yield." These
figures are based on historical earnings and are not
intended to indicate future performance. The "current
yield" of the Portfolio refers to the income generated by
an investment over a seven-day period which is then
"annualized." That is, the amount of income generated by
the investment during the week is assumed to be generated
each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" (also
called "effective compound yield") is calculated similarly
but, when annualized, the income earned by an investment is
assumed to be reinvested. The "effective yield" will be
slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment. The "tax
equivalent yield" is calculated by determining the rate of
return that would have been achieved on a fully taxable
investment to produce the after-tax equivalent of the
Portfolio's yield, assuming certain tax brackets for a
shareholder.
The Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives.
The Portfolio may also quote financial and business
publications and
9
<PAGE>
periodicals as they relate to fund management, investment
philosophy and investment techniques.
The performance of Class A shares will normally be
higher than that of the Class D shares of the Portfolio
because of the additional distribution and transfer agent
expenses charged to Class D shares.
TAXES
______________________________________________________________________________
The following summary of federal income tax consequences is
based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No attempt has been made to present a detailed explanation
of the federal income tax treatment of the Portfolio or its
shareholders, and state and local tax consequences of an
investment in the Portfolio may differ from the federal
income tax consequences described below. Accordingly,
shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state and local
income taxes. Additional information concerning taxes is
set forth in the Statement of Additional Information.
TAX STATUS OF THE
PORTFOLIO
The Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), so as to be
relieved of federal income tax on net investment company
taxable income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss)
distributed to shareholders.
TAX STATUS OF
DISTRIBUTIONS
The Portfolio intends to distribute substantially all of
its net investment income (including net short-term capital
gain) to shareholders. If, at the close of each quarter of
its taxable year, at least 50% of the value of the
Portfolio's total assets consists of obligations the
interest on which is excludable from gross income, the
Portfolio may pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends are excludable from
a shareholder's gross income for federal income tax
purposes but may have certain collateral federal tax
consequences including alternative minimum tax
consequences. In addition, the receipt of exempt-interest
dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxable on a portion of
such benefits. See the Statement of Additional Information.
Any dividends paid out of income realized by the
Portfolio on taxable securities will be taxable to
shareholders as ordinary income (whether received in cash
or in additional shares) to the extent of the Portfolio's
earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders.
Distributions to shareholders of net capital gains of the
Portfolio also will not qualify for the dividends received
deduction and will be taxable to shareholders as long-term
capital gain, whether received in cash or additional
shares, and regardless of how long a shareholder has held
the shares.
10
<PAGE>
Dividends declared by the Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in any such month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if paid by the
Portfolio at any time during the following January. The
Portfolio intends to make sufficient distributions prior to
the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment
companies.
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of the
Portfolio is not deductible for federal income tax purposes
to the extent that it relates to exempt-interest dividends
distributed to the shareholder during the taxable year.
Furthermore, the Portfolio may not be an appropriate
investment for persons (including corporations and other
business entities) who are "substantial users" (or persons
related to "substantial users") of facilities financed by
industrial development bonds or private activity bonds.
Such persons should consult their tax advisers before
purchasing shares.
The Portfolio will report annually to its
shareholders the portion of dividends that is taxable and
the portion that is tax-exempt based on income received by
the Portfolio during the year to which the dividends
relate.
Each sale, exchange or redemption of the Portfolio's
shares is a taxable transaction for the shareholder.
GENERAL INFORMATION
_______________________________________________________________________
THE TRUST
The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated March 15, 1982. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. In addition to the Portfolio, the Trust consists
of the following portfolios: Institutional Tax Free
Portfolio, California Tax Exempt Portfolio,
Intermediate-Term Municipal Portfolio, Pennsylvania
Municipal Portfolio, New York Intermediate-Term Municipal
Portfolio, and Pennsylvania Tax Free Portfolio. All
consideration received by the Trust for shares of any
portfolio and all assets of such portfolio belong to that
portfolio and would be subject to liabilities related
thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will vote
separately on matters relating solely to that portfolio or
class,
11
<PAGE>
such as any distribution plan. As a Massachusetts business
trust, the Trust is not required to hold annual meetings of
shareholders but approval will be sought for certain
changes in the operation of the Trust and for the election
of Trustees under certain circumstances. In addition, a
Trustee may be removed by the remaining Trustees or by
shareholders at a special meeting called upon written
request of shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a
meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
REPORTING
The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Manager.
SEI Fund Management, Oaks, Pennsylvania, 19456.
DIVIDENDS
The net investment income (exclusive of capital gains) of
the Portfolio is determined and declared on each Business
Day as a dividend for shareholders of record as of the
close of business on that day. Dividends are paid by the
Portfolio in federal funds or in additional shares at the
discretion of the shareholder on the first Business Day of
each month. Dividends will be paid on the next Business Day
to shareholders who redeem all of their shares of the
Portfolio at any time during the month. Currently, capital
gains, if any, are distributed at the end of the calendar
year.
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares, unless the shareholder has elected to take such
payment in cash. Shareholders may change their election by
providing written notice to the Manager at least 15 days
prior to the distribution.
The dividends on Class A shares of the Portfolio are
normally higher than those on Class D shares because of the
additional distribution and transfer agent expenses charged
to Class D shares.
COUNSEL AND INDEPENDENT
PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
CUSTODIAN AND WIRE AGENT
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, serves as Custodian
of the Trust's assets and acts as wire agent of the Trust.
The Custodian holds cash, securities and other assets of
the Trust as required by the 1940 Act.
12
<PAGE>
DESCRIPTION OF
PERMITTED
INVESTMENTS AND RISK
FACTORS ______________________________________________________________________
The following is a description of certain of the permitted
investments for the Portfolio, and the associated risk
factors:
MONEY MARKET SECURITIES
Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks; (ii) U.S. Treasury obligations and obligations
issued by the agencies and instrumentalities of the U.S.
Government; and (iii) repurchase agreements involving any
of the foregoing obligations entered into with highly-rated
banks and broker-dealers.
MUNICIPAL SECURITIES
Municipal Securities consist of (i) debt obligations issued
by or on behalf of public authorities to obtain funds to be
used for various public facilities, for refunding
outstanding obligations, for general operating expenses and
for lending such funds to other public institutions and
facilities, and (ii) certain private activity and
industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately
operated facilities.
General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed
by the revenues of a project or facility, tolls from a toll
bridge, for example. Certificates of participation
represent an interest in an underlying obligation or
commitment such as an obligation issued in connection with
a leasing arrangement. The payment of principal and
interest on private activity and industrial development
bonds generally is dependent solely on the ability of the
facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed
as security for such payment.
Municipal notes include general obligation notes, tax
anticipation notes, revenue anticipation notes, bond
anticipation notes, certificates of indebtedness, demand
notes and construction loan notes and participation
interests in municipal notes. Municipal bonds include
general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds
and participation interests in municipal bonds.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements by which a Portfolio
obtains a security and simultaneously commits to return the
security to the seller at an agreed upon price (including
principal and interest) on an agreed upon date within a
number of days from the date of purchase. Repurchase
agreements are considered loans under the 1940 Act.
STANDBY COMMITMENTS AND
PUTS
Securities subject to standby commitments or puts permit
the holder thereof to sell the securities at a fixed price
prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current
market price. However, unless the standby commitment or put
was an integral part of the security as originally issued,
it may not be marketable or assignable; therefore, the
standby commitment or put would only have value to the
Portfolio owning the security to which it relates. In
certain cases, a premium
13
<PAGE>
may be paid for a standby commitment or put, which premium
will have the effect of reducing the yield otherwise
payable on the underlying security. The Portfolio will
limit standby commitment or put transactions to
institutions believed to present minimal credit risks.
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 Portfolio may
carry variable or floating rates of interest and may
involve a conditional or unconditional demand feature. Such
obligations may include variable amount master demand
notes. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities
may be reset daily, weekly, quarterly or at some other
interval, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing market
interest rates. A demand instrument with a demand notice
period exceeding seven days may be considered illiquid if
there is no secondary market for such security.
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. The Portfolio will maintain with the
custodian a separate account with liquid securities or cash
in an amount at least equal to these commitments. The
interest rate realized on these securities is fixed as of
the purchase date, and no interest accrues to the Portfolio
before settlement.
14
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 3
The Trust................................................................. 4
Investment Objective and Policies......................................... 4
General Investment Policies............................................... 5
Investment Limitations.................................................... 5
The Manager............................................................... 6
The Adviser............................................................... 6
Distribution and Shareholder Servicing.................................... 7
Purchase and Redemption of Shares......................................... 8
Performance............................................................... 9
Taxes..................................................................... 10
General Information....................................................... 11
Description of Permitted Investments and Risk Factors..................... 13
</TABLE>
15
<PAGE>
SEI TAX EXEMPT TRUST
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely information about the above-referenced
Portfolio that an investor needs to know before investing. Please read this
Prospectus carefully, and keep it on file for future reference.
A Statement of Additional Information dated December 31, 1997, has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing the Distributor, SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Tax Exempt Trust (the "Trust") is an open-end investment management company,
certain classes of which offer financial institutions a convenient means of
investing their own funds, or funds for which they act in a fiduciary, agency or
custodial capacity, in one or more professionally managed diversified and
non-diversified portfolios of securities. A portfolio may offer separate classes
of shares that differ from each other primarily in the allocation of certain
expenses and minimum investment amounts. This Prospectus offers Class A, Class B
and Class C shares of the Trust's California Tax Exempt Portfolio, a money
market portfolio (the "Portfolio").
AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. IN ADDITION, THE PORTFOLIO
MAY INVEST A SIGNIFICANT PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER, AND
INVESTING IN THE PORTFOLIO MAY BE RISKIER THAN INVESTING IN OTHER TYPES OF MONEY
MARKET FUNDS.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------ ---------- ----------
<S> <C> <C> <C>
Management/Advisory Fees (AFTER FEE WAIVER) (1) .23% .23% .23%
12b-1 Fees None None None
Total Other Expenses .05% .35% .55%
Shareholder Servicing Fees (AFTER FEE WAIVER) .00%(2) .25% .25%
- ---------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVERS) (3) .28% .58% .78%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER HAS WAIVED, ON A VOLUNTARY BASIS, A PORTION OF ITS FEES FOR THE
PORTFOLIO. THE MANAGEMENT/ADVISORY FEES SHOWN REFLECT THESE VOLUNTARY
WAIVERS. THE MANAGER RESERVES THE RIGHT TO TERMINATE ITS WAIVER AT ANY TIME
IN ITS SOLE DISCRETION. ABSENT SUCH FEE WAIVERS, MANAGEMENT/ADVISORY FEES
FOR THE PORTFOLIO WOULD BE .27%.
(2) THE DISTRIBUTOR HAS WAIVED, ON A VOLUNTARY BASIS, ALL OR A PORTION OF ITS
SHAREHOLDER SERVICING FEE FOR THE CLASS A SHARES, AND THE SHAREHOLDER
SERVICING FEES SHOWN REFLECT THIS WAIVER. THE DISTRIBUTOR RESERVES THE RIGHT
TO TERMINATE ITS WAIVER AT ANYTIME IN ITS SOLE DISCRETION. ABSENT SUCH
WAIVER, SHAREHOLDER SERVICING FEES WOULD BE .25% FOR CLASS A SHARES OF THE
PORTFOLIO.
(3) ABSENT THESE FEE WAIVERS, TOTAL OPERATING EXPENSES OF THE CLASS A, B AND C
SHARES OF THE PORTFOLIO WOULD BE .57%, .62% AND .82%, RESPECTIVELY.
ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE ADVISER" AND "THE MANAGER."
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
An investor in a Portfolio would pay the following expenses on a $1,000
investment assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
Class A $ 3 $ 9 $ 16 $ 36
Class B $ 6 $ 19 $ 32 $ 73
Class C $ 8 $ 25 $ 43 $ 97
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE PORTFOLIO'S CLASS A, CLASS B AND CLASS C SHARES. THE
PORTFOLIO ALSO OFFERS CNI CLASS SHARES, WHICH ARE SUBJECT TO THE SAME EXPENSES,
EXCEPT FOR DIFFERENT DISTRIBUTION AND SHAREHOLDER SERVICING EXPENSES. A PERSON
WHO PURCHASES SHARES THROUGH A FINANCIAL INSTITUTION MAY BE CHARGED SEPARATE
FEES BY THAT INSTITUTION. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE
MANAGER," "THE ADVISER" AND "DISTRIBUTION AND SHAREHOLDER SERVICING."
2
<PAGE>
FINANCIAL HIGHLIGHTS
______________________________________________________________
The following financial highlights for a share outstanding throughout each
period have been derived from the Trust's financial statements which were
audited by Arthur Andersen LLP, independent accountants, whose report thereon,
dated October 17, 1997 was unqualified. This information should be read in
conjunction with the Trust's financial statements for the fiscal year ended
August 31, 1997, and notes thereto which are incorporated by reference to the
Trust's Statement of Additional Information. Additional performance information
is set forth in the Trust's 1997 Annual Report to Shareholders, which is
available upon request and without charge by calling 1-800-342-5734. As of
August 31, 1997, the Class C shares of the California Tax Exempt Portfolio had
not commenced operations.
FOR A CLASS A AND CLASS B SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET REALIZED
AND
INVESTMENT UNREALIZED
ACTIVITIES DISTRIBUTIONS GAIN (LOSS)
NET ASSET ---------- -------------------------------------- ON NET ASSET
VALUE NET NET NET INVESTMENTS VALUE END
BEGINNING INVESTMENT INVESTMENT REALIZED TOTAL AND CAPITAL OF
OF PERIOD INCOME INCOME GAIN DISTRIBUTIONS TRANSACTIONS PERIOD
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT PORTFOLIO
- ---------------------------------------------------------------------------
Class A
FOR THE YEARS ENDED AUGUST 31,
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
1993 1.00 0.024 (0.024) -- (0.024) -- 1.00
1992 1.00 0.034 (0.034) -- (0.034) -- 1.00
1991 1.00 0.047 (0.047) -- (0.047) -- 1.00
1990(1) 1.00 0.016 (0.016) -- (0.016) -- 1.00
Class B
FOR THE YEARS ENDED AUGUST 31,
1995(2) $ 1.00 $0.027 $ (0.027) $ -- $(0.027) $ -- $ 1.00
1994(3) 1.00 0.013 (0.013) -- (0.013) -- 1.00
<CAPTION>
RATIO OF
NET
RATIO OF INVESTMENT
EXPENSES RATIO OF INCOME TO
TO AVERAGE NET AVERAGE
RATIO OF NET ASSETS INVESTMENT NET ASSETS
NET ASSETS EXPENSES (EXCLUDING INCOME TO (EXCLUDING
TOTAL END OF TO AVERAGE FEE AVERAGE FEE
RETURN PERIOD (000) NET ASSETS WAIVERS) NET ASSETS WAIVERS)
- ------------------------------ ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------ ---------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT PORTFOLIO
- ------------------------------ ---------------------------------------------------------------------------
Class A
FOR THE YEARS ENDED AUGUST 3
1997 3.30% $ 51,314 0.28% 0.57%(4) 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%
1993 2.41% 540,285 0.28% 0.37% 2.37% 2.28%
1992 3.44% 445,936 0.28% 0.38% 3.34% 3.24%
1991 4.92% 376,653 0.28% 0.40% 4.74% 4.62%
1990(1) 1.81%+ 275,095 0.28%* 0.51%* 5.27%* 5.04%*
Class B
FOR THE YEARS ENDED AUGUST 3
1995(2) 2.65%+ $ 0 0.58%* 0.69%* 3.16%* 3.05%*
1994(3) 2.07%* 3,257 0.51%* 0.81%* 2.05%* 1.75%*
</TABLE>
* ANNUALIZED.
+ RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) THE CALIFORNIA TAX EXEMPT PORTFOLIO-CLASS A COMMENCED OPERATIONS ON MAY 14,
1990.
(2) THE CALIFORNIA TAX EXEMPT PORTFOLIO-CLASS B CLOSED ON JULY 12, 1995.
(3) THE CALIFORNIA TAX EXEMPT PORTFOLIO-CLASS B COMMENCED OPERATIONS ON JANUARY
5, 1994.
(4) THE 1997 RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING FEE WAIVERS
INCLUDES GROSS FEES RELATED TO THE SHAREHOLDER SERVICING PLAN ADOPTED MAY 1,
1996. PRIOR TO THIS DATE FEES WERE LEVIED UNDER A DISTRIBUTION REIMBURSEMENT
PLAN. SEE FOOTNOTE 3 IN THE NOTES TO THE FINANCIAL STATEMENTS IN THE ANNUAL
REPORT FOR A MORE COMPLETE DESCRIPTION OF THE PLAN.
3
<PAGE>
THE TRUST
__________________________________________________________________________
SEI TAX EXEMPT TRUST (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in separate diversified and
non-diversified investment portfolios. This Prospectus offers Class A, Class B
and Class C shares of the Trust's California Tax Exempt Portfolio (the
"Portfolio"). As of September 30, 1997, the aggregate net assets of all classes
of the California Tax Exempt Portfolio was $429,919,818. Investors may also
purchase CNI Class shares of the Portfolio. Each class provides for variation in
distribution, shareholder servicing and/or transfer agent costs, voting rights,
and dividends. Additional information pertaining to the Trust may be obtained by
writing to SEI Investments Distribution Co., Oaks, Pennsylvania 19456, or by
calling 1-800-342-5734.
INVESTMENT OBJECTIVE
AND POLICIES
___________________________________________________________________________
The Portfolio'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 Portfolio will
achieve its investment objective.
It is a fundamental policy of the Portfolio 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 (collectively, "Municipal Securities"), and the
Portfolio 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 Portfolio'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 or municipal authorities and municipal
obligations issued by territories or possessions of the
United States. The Portfolio 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 Portfolio 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 Portfolio's investment adviser (the "Adviser"
or "WPG"), determines that market conditions warrant, the
Portfolio 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
Portfolio'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.
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GENERAL INVESTMENT
POLICIES
___________________________________________________________________________
In purchasing obligations, the Portfolio complies with the
requirements of Rule 2a-7 under the Investment Company Act
of 1940 (the "1940 Act"), as that Rule may be amended from
time to time. These requirements currently provide that the
Portfolio must limit its investments to securities with
remaining maturities of 397 days or less, and must maintain
a dollar-weighted average maturity of 90 days or less. In
addition, the Portfolio may only invest in eligible
securities. In general, this means securities rated in one
of the two highest categories for short-term securities by
at least two nationally recognized statistical rating
organizations ("NRSROs") (or by one NRSRO if only one NRSRO
has rated the security), or, if unrated, determined by the
Adviser to be of equivalent quality. Since the Portfolio
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 Portfolio and affect its share price.
Securities rated in the highest rating category
(E.G., A-1 by Standard & Poor's Corporation ("S&P")) by at
least two NRSROs (or, if unrated, determined by the Adviser
to be of comparable quality) are "first tier" securities.
Non-first tier securities rated in the second highest
rating category (E.G., A-2 by S&P) by at least one NRSRO
(or, if unrated, determined by the Adviser to be of
comparable quality) are considered to be "second tier"
securities. The Portfolio's investments in non-first tier
conduit securities will be limited to 5% of the Portfolio's
assets. Conduit securities are securities issued to finance
non-governmental private projects, such as housing
developments and retirement homes, and for which the
ultimate obligor is not a governmental issuer.
The Portfolio may purchase municipal bonds, municipal
notes and tax-exempt commercial paper, but only if such
securities, at the time of purchase, either meet the rating
requirements imposed by Rule 2a-7 or, if not rated, are of
comparable quality as determined by the Adviser. See
"General Investment Policies."
The portfolio may invest in variable and floating
rate obligations, may purchase securities on a
"when-issued" basis, and reserves the right to engage in
transactions involving standby commitments. The Portfolio
will not invest more than 10% of its net assets in illiquid
securities.
For a description of the Portfolio's permitted
investments and ratings, see the "Description of Permitted
Investments and Risk Factors" and the Statement of
Additional Information.
RISK FACTORS
______________________________________________________________________
CALIFORNIA RISK FACTORS
THE PORTFOLIO'S CONCENTRATION IN INVESTMENTS IN MUNICIPAL
SECURITIES OF A SINGLE STATE INVOLVES GREATER RISKS THAN
MONEY MARKET FUNDS THAT ARE DIVERSIFIED ACROSS ISSUERS
LOCATED IN A NUMBER OF STATES. Certain additional risks are
inherent in the Portfolio's concentrated
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investments in California Municipal Securities. These risks
result primarily from (1) amendments to the California
Constitution and other statutes that limit the taxing and
spending authority of California government entities, and
(2) a variety of California laws and regulations that may
affect, directly or indirectly, the issuer of California
Municipal Securities.
There could be economic, business, or political
developments which might affect all Municipal Securities of
a similar type. To the extent that a significant portion of
the Portfolio's assets are invested in Municipal Securities
payable from revenues on similar projects, the Portfolio
will be subject to the risks presented by such projects to
a greater extent than it would be if the Portfolio's assets
were not so invested. Moreover, in seeking to attain its
investment objective the Portfolio may invest all or any
part of its assets in Municipal Securities that are
industrial development bonds.
INVESTMENT
LIMITATIONS
________________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolio. Fundamental policies
cannot be changed with respect to the Trust or the
Portfolio without the consent of the holders of a majority
of the Trust's or the Portfolio's outstanding shares. It is
a fundamental policy of the Portfolio to use its best
efforts to maintain a constant net asset value of $1.00 per
share.
THE PORTFOLIO MAY NOT:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the United States Government,
its agencies or instrumentalities) if, as a result, more
than 5% of the total assets of the Portfolio (based on
current value at the time of investment) would be
invested in the securities of such issuer. This
restriction applies to 75% of the Portfolio's assets.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio, based on fair
market value at the time of such purchase, to be
invested in the securities of one or more issuers
conducting their principal business activities in the
same industry, provided that this limitation does not
apply to investments in obligations issued or guaranteed
by the United States Government or its agencies and
instrumentalities or to investments in tax-exempt
securities issued by governments or political
subdivisions of governments.
3. Borrow money except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the
value of the total assets of the Portfolio. All
borrowings will be repaid before making additional
investments and any interest paid on such borrowings
will reduce the income of the Portfolio.
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The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional fundamental
investment limitations are set forth in the Statement of
Additional Information.
THE MANAGER
______________________________________________________________________
SEI Fund Management (the "Manager" and the "Transfer
Agent") provides the Trust with overall management
services, regulatory reporting, all necessary office space,
equipment, personnel and facilities, and serves as
institutional transfer agent and dividend disbursing agent.
For these services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .23% of the average daily net assets of the
Portfolio. The Manager has voluntarily agreed to waive a
portion of its fees in order to limit the total operating
expenses of Class A, Class B and Class C shares of the
Portfolio to not more than .28%, .58% and .78% as a
percentage of the Portfolio's average daily net assets
attributable to Class A, Class B and Class C shares, on an
annualized basis, respectively. The Manager reserves the
right, in its sole discretion, to terminate these voluntary
fee waivers at any time. For the fiscal year ended August
31, 1997, the Portfolio paid management fees, after
waivers, of .19% of its average daily net assets.
THE ADVISER
_______________________________________________________________________
Weiss, Peck & Greer, L.L.C., serves as the Portfolio's
investment adviser under an advisory agreement (the
"Advisory Agreement") with the Trust. Under the Advisory
Agreement, the Adviser invests the assets of the Portfolio,
and continuously reviews, supervises and administers the
investment program of the Portfolio. The Adviser is
independent of the Manager and SEI and discharges its
responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust.
The Adviser is a limited liability company founded as
a limited partnership in 1970, and engages in investment
management, venture capital management and management
buyouts. The Adviser has been active since its founding in
managing portfolios of tax exempt securities. As of
September 30, 1997, total assets under management were
approximately $14.6 billion. The principal business address
of the Adviser is One New York Plaza, New York, New York
10004.
Janet Fiorenza acts as the portfolio manager for the
Portfolio. Ms. Fiorenza, a Principal of the Adviser, has
been associated with the Adviser's Tax Exempt Fixed Income
Group since 1988, and with its predecessor since 1980.
For its services to the Portfolio, the Adviser is
entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .05% of the combined average
daily net assets of the money market portfolios of the
Trust advised by the Adviser up to $500 million, .04% of
such assets from $500 million to 1 billion, and .03% of
such assets in excess of $1 billion. Such fees are
allocated daily among these portfolios on the basis of
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their relative net assets. For the fiscal year ended August
31, 1997, the Portfolio paid advisory fees, after waivers,
of .04% of its relative net assets.
DISTRIBUTION AND
SHAREHOLDER
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), a
wholly owned subsidiary of SEI Investments Company ("SEI
Investments"), serves as the Portfolio's distributor
pursuant to a distribution agreement (the "Distribution
Agreement") with the Trust.
The Portfolio has adopted plans under which firms,
including the Distributor, that provide shareholder and
administrative services may receive compensation therefor.
As discussed below, the Class A, B and C plans differ in a
number of ways, including the amounts that may be paid
under each plan. The Distributor may provide those services
itself or may enter into arrangements under which third
parties provide such services and are compensated by the
Distributor. Under such arrangements the Distributor may
retain as a profit any difference between the fee it
receives and the amount it pays to third parties.
Under the Class A plan, the Distributor is entitled
to receive a fee at an annual rate of up to .25% of the
average daily net assets of the Portfolio attributable to
Class A shares, in return for provision of a broad range of
shareholder and administrative services. Under the Class B
and Class C shareholder service plans, the Distributor is
entitled to receive shareholder service fees at an annual
rate of up to .25% of average daily net assets in return
for the Distributor's (or its agent's) efforts in
maintaining client accounts; arranging for bank wires;
responding to client inquiries concerning services provided
or investment; and assisting clients in changing dividend
options, account designations and addresses. In addition,
under their administrative service plans, Class B and Class
C shares also pay administrative services fees at specified
percentages of the average daily net assets of the shares
of the Class (up to .05% and .25%, respectively).
Administrative services include sub-accounting; providing
information on share positions to clients; forwarding
shareholder communications to clients; processing purchase,
exchange and redemption orders; and processing dividend
payments.
It is possible that an institution may offer
different classes of shares to its customers and differing
services to the classes of each Portfolio, and thus receive
different compensation with respect to different classes.
These financial institutions may also charge separate fees
to their customers.
The Trust may execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive usual and customary compensation.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolio's
shares.
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PURCHASE AND
REDEMPTION OF SHARES
____________________________________________________________________________
Financial institutions may acquire shares of the Portfolio
for their own account, or as a record owner on behalf of
fiduciary, agency or custody accounts, by placing orders
with the Transfer Agent (or its authorized agent).
Institutions that use certain SEI proprietary systems may
place orders electronically through those systems.
Financial institutions may impose an earlier cut-off time
for receipt of purchase orders directed through them to
allow for processing and transmittal of these orders to the
Transfer Agent for effectiveness on the same day. Financial
institutions which purchase shares for the accounts of
their customers may impose separate charges on these
customers for account services.
Shares of the Portfolio may be purchased or redeemed
on days on which the New York Stock Exchange is open for
business ("Business Days"). However, money market fund
shares cannot be purchased by Federal Reserve wire on
Federal holidays on which wire transfers are restricted.
Shareholders who desire to purchase shares for cash
must place their orders with the Transfer Agent (or its
authorized agent) prior to the calculation of net asset
value on any Business Day for the order to be accepted on
that Business Day. Cash investments must be transmitted or
delivered in federal funds to the wire agent by the close
of business on the same day the order is placed. The Trust
reserves the right to reject a purchase order when the
Distributor determines that it is not in the best interest
of the Trust or shareholders to accept such purchase order.
The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust. The
purchase price of shares is expected to remain constant at
$1.00. The net asset value per share of the Portfolio is
determined by dividing the total value of its investments
and other assets, less any liabilities, by the total
outstanding shares of the Portfolio. The Portfolio's
investments will be valued by the amortized cost method
described in the Statement of Additional Information. Net
asset value per share is determined on each Business Day as
of 2:00 p.m., Eastern time.
Shareholders who desire to redeem shares of the
Portfolio must place their redemption orders with the
Transfer Agent (or its authorized agent) prior to the
calculation of net asset value on any Business Day in order
to be effective on that day. Otherwise, redemption orders
will be effective on the next Business Day. Payment for
redemption orders received before the calculation of net
asset value will be made the same day by transfer of
federal funds. The redemption price is the net asset value
per share of the Portfolio next determined after receipt by
the Transfer Agent (or its authorized agent) of an
effective redemption order.
9
<PAGE>
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The
Trust and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by other
means.
PERFORMANCE
______________________________________________________________________
From time to time the Portfolio advertises its "current
yield," "tax equivalent yield" and "effective yield." These
figures are based on historical earnings and are not
intended to indicate future performance. The "current
yield" of the Portfolio refers to the income generated by
an investment over a seven-day period which is then
"annualized." That is, the amount of income generated by
the investment during the week is assumed to be generated
each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" (also
called "effective compound yield") is calculated similarly
but, when annualized, the income earned by an investment is
assumed to be reinvested. The "effective yield" will be
slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment. The "tax
equivalent yield" is calculated by determining the rate of
return that would have been achieved on a fully taxable
investment to produce the after-tax equivalent of the
Portfolio's yield, assuming certain tax brackets for a
shareholder.
The Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives.
The performance of Class A shares of the Portfolio
will normally be higher than that of Class B, Class C or
CNI Class shares because of the additional distribution
and/or administrative services expenses charged to Class B,
Class C and CNI Class shares.
TAXES
______________________________________________________________________________
The following summary of federal and state income tax
consequences is based on current tax laws and regulations,
which may be changed by legislative, judicial or
administrative
10
<PAGE>
action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax
treatment of the Portfolio or its shareholders.
Accordingly, shareholders are urged to consult their tax
advisers regarding specific questions as to federal, state
and local income taxes. Additional information concerning
taxes is set forth in the Statement of Additional
Information.
TAX STATUS OF EACH
PORTFOLIO
The Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), so as to be
relieved of federal income tax on net investment company
taxable income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss)
distributed to shareholders.
TAX STATUS OF
DISTRIBUTIONS
The Portfolio intends to distribute substantially all of
its net investment income (including net short-term capital
gain) to shareholders. If, at the close of each quarter of
its taxable year, at least 50% of the value of the
Portfolio's total assets consists of obligations the
interest on which is excludable from gross income, the
Portfolio may pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends are excludable from
a shareholder's gross income for federal income tax
purposes but may have certain collateral federal tax
consequences including alternative minimum tax
consequences. In addition, the receipt of exempt-interest
dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxable on a portion of
such benefits. See the Statement of Additional Information.
Any dividends paid out of income realized by the
Portfolio on taxable securities will be taxable to
shareholders as ordinary income (whether received in cash
or in additional shares) to the extent of the Portfolio's
earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders.
Distributions to shareholders of net capital gains of the
Portfolio also will not qualify for the dividends received
deduction and will be taxable to shareholders as long-term
capital gain, whether received in cash or additional
shares, and regardless of how long a shareholder has held
the shares.
Dividends declared by the Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in any such month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if paid by the
Portfolio at any time during the following January. The
Portfolio intends to make sufficient distributions prior to
the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment
companies.
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of the
Portfolio is not deductible for federal income tax purposes
to the extent that it relates to exempt-interest dividends
distributed to the shareholder during the taxable year.
Furthermore, the Portfolio may not be an appropriate
investment
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<PAGE>
for persons (including corporations and other business
entities) who are "substantial users" (or persons related
to "substantial users") of facilities financed by
industrial development bonds or private activity bonds.
Such persons should consult their tax advisers before
purchasing shares. The Portfolio will report annually to
its shareholders the portion of dividends that is taxable
and the portion that is tax-exempt based on income received
by the Portfolio during the year to which the dividends
relate.
Each sale, exchange or redemption of the Portfolio's
shares is a taxable transaction to the shareholder.
CALIFORNIA TAXES
The following 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.
The Portfolio intends to qualify to pay dividends to
shareholders that are exempt from California personal
income tax ("California exempt-interest dividends"). The
Portfolio will qualify to pay California exempt-interest
dividends if (1) at the close of each quarter of the
Portfolio's taxable year, at least 50% of the value of the
Portfolio'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 Portfolio
continues to qualify as a regulated investment company. The
Portfolio will notify its shareholders of the amount of
exempt-interest dividends each year.
If the Portfolio qualifies to pay California
exempt-interest dividends, dividends distributed to
shareholders will be considered California exempt-interest
dividends if they meet certain requirements. See the
Statement of Additional Information.
Corporations subject to California franchise tax that
invest in the Portfolio may not be entitled to exclude
California exempt-interest dividends from income.
Distributions that do not qualify for treatment as
California exempt-interest dividends (including those
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
Portfolio's earnings and profits.
Interest on indebtedness incurred or continued by a
shareholder in connection with the purchase of shares of
the Portfolio will not be deductible for California
personal income tax purposes if the Portfolio distributes
California exempt-interest dividends.
GENERAL INFORMATION
_______________________________________________________________________
THE TRUST
The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated March 15, 1982. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. In addition to the Portfolios, the
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Trust consists of the following portfolios: Tax Free
Portfolio, Institutional Tax Free Portfolio,
Intermediate-Term Municipal Portfolio, Pennsylvania
Municipal Portfolio, New York Intermediate-Term Municipal
Portfolio, and Pennsylvania Tax Free Portfolio. All
consideration received by the Trust for shares of any
portfolio and all assets of such portfolio belong to that
portfolio and would be subject to liabilities related
thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will vote
separately on matters relating solely to that portfolio or
class, such as any distribution plan. As a Massachusetts
business trust, the Trust is not required to hold annual
meetings of shareholders, but approval will be sought for
certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining
Trustees or by shareholders at a special meeting called
upon written request of shareholders owning at least 10% of
the outstanding shares of the Trust. In the event that such
a meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
REPORTING
The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Manager.
SEI Fund Management. Oaks, Pennsylvania, 19456.
DIVIDENDS
The net investment income (exclusive of capital gains) of
the Portfolio is distributed in the form of dividends. The
Portfolio declares dividends daily, and shareholders of
record at the close of each Business Day will be entitled
to receive that day's dividend. Dividends are paid on the
first Business Day of each month. Dividends will be paid on
the next Business Day to shareholders who redeem all of
their shares of the Portfolio at any time during the month.
If any net capital gains are realized by the Portfolio,
they will be distributed annually. Shareholders
automatically receive all income dividends and capital gain
distributions in additional shares, unless the shareholder
has elected to take such payment in cash. Shareholders may
change their election by providing written notice to the
Manager at least 15 days prior to the distribution.
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The dividends on Class A shares of the Portfolio are
normally higher than those on Class B, Class C or CNI Class
shares because of the additional distribution and/or
administrative services expenses charged to Class B, Class
C and CNI Class shares.
COUNSEL AND INDEPENDENT
PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
CUSTODIAN AND WIRE AGENT
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, serves as Custodian
of the Trust's assets and acts as wire agent of the Trust.
The Custodian holds cash, securities and other assets of
the Trust as required by the 1940 Act.
DESCRIPTION OF
PERMITTED
INVESTMENTS AND RISK
FACTORS ______________________________________________________________________
The following is a description of certain of the permitted
investments for the Portfolios, and the associated risk
factors:
MONEY MARKET SECURITIES
Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks; (ii) U.S. Treasury obligations and obligations
issued by the agencies and instrumentalities of the U.S.
Government; and (iii) repurchase agreements involving any
of the foregoing obligations entered into with highly-rated
banks and broker-dealers.
MUNICIPAL SECURITIES
Municipal Securities consist of (i) debt obligations issued
by or on behalf of public authorities to obtain funds to be
used for various public facilities, for refunding
outstanding obligations, for general operating expenses and
for lending such funds to other public institutions and
facilities, and (ii) certain private activity and
industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately
operated facilities.
General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed
by the revenues of a project or facility, tolls from a toll
bridge, for example. Certificates of participation
represent an interest in an underlying obligation or
commitment such as an obligation issued in connection with
a leasing arrangement. The payment of principal and
interest on private activity and industrial development
bonds generally is dependent solely on the ability of the
facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed
as security for such payment.
Municipal notes include general obligation notes, tax
anticipation notes, revenue anticipation notes, bond
anticipation notes, certificates of indebtedness, demand
notes and construction loan notes and participation
interests in municipal notes. Municipal bonds
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<PAGE>
include general obligation bonds, revenue or special
obligation bonds, private activity and industrial
development bonds and participation interests in municipal
bonds.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements by which a Portfolio
obtains a security and simultaneously commits to return the
security to the seller at an agreed upon price (including
principal and interest) on an agreed upon date within a
number of days from the date of purchase. Repurchase
agreements are considered loans under the 1940 Act.
STANDBY COMMITMENTS AND
PUTS
Securities subject to standby commitments or puts permit
the holder thereof to sell the securities at a fixed price
prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current
market price. However, unless the standby commitment or put
was an integral part of the security as originally issued,
it may not be marketable or assignable; therefore, the
standby commitment or put would only have value to the
Portfolio owning the security to which it relates. In
certain cases, a premium may be paid for a standby
commitment or put, which premium will have the effect of
reducing the yield otherwise payable on the underlying
security. The Portfolio will limit standby commitment or
put transactions to institutions believed to present
minimal credit risks.
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 Portfolio may
carry variable or floating rates of interest and may
involve a conditional or unconditional demand feature. Such
obligations may include variable amount master demand
notes. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities
may be reset daily, weekly, quarterly or at some other
interval, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing market
interest rates. A demand instrument with a demand notice
period exceeding seven days may be considered illiquid if
there is no secondary market for such security.
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. The Portfolio will maintain with the
custodian a separate account with liquid securities or cash
in an amount at least equal to these commitments. The
interest rate realized on these securities is fixed as of
the purchase date, and no interest accrues to the Portfolio
before settlement.
15
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 3
The Trust................................................................. 4
Investment Objectives and Policies........................................ 4
General Investment Policies............................................... 5
Risk Factors.............................................................. 5
Investment Limitations.................................................... 6
The Manager............................................................... 7
The Adviser............................................................... 7
Distribution and Shareholder Servicing.................................... 8
Purchase and Redemption of Shares......................................... 9
Performance............................................................... 10
Taxes..................................................................... 10
General Information....................................................... 12
Description of Permitted Investments and Risk Factors..................... 14
</TABLE>
16
<PAGE>
SEI TAX EXEMPT TRUST
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely information about the above-referenced
Portfolio that an investor needs to know before investing. Please read this
Prospectus carefully, and keep it on file for future reference.
A Statement of Additional Information dated December 31, 1997, has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing the Distributor, SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Tax Exempt Trust (the "Trust") is an open-end investment management company,
certain classes of which offer financial institutions a convenient means of
investing their own funds, or funds for which they act in a fiduciary, agency or
custodial capacity, in professionally managed diversified and non-diversified
portfolios of securities. A portfolio may offer separate classes of shares that
differ from each other primarily in the allocation of certain expenses and
minimum investment amounts. This Prospectus offers Class A shares of the Trust's
Intermediate-Term Municipal Portfolio (the "Portfolio"), a fixed income
portfolio.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) CLASS A
<S> <C>
- ------------------------------------------------------------------------------
Management/Advisory Fees (AFTER FEE WAIVER) (1) .55%
12b-1 Fees None
Total Other Expenses .05%
Shareholder Servicing Fees (AFTER FEE WAIVER) (2) .00%
- ------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVERS) (3) .60%
- ------------------------------------------------------------------------------
</TABLE>
(1) SEI INVESTMENTS MANAGEMENT CORPORATION ("SIMC") HAS WAIVED, ON A VOLUNTARY
BASIS, A PORTION OF ITS FEE, AND THE MANAGEMENT/ADVISORY FEES SHOWN REFLECT
THESE VOLUNTARY WAIVERS. SIMC RESERVES THE RIGHT TO TERMINATE THIS WAIVER AT
ANY TIME IN ITS SOLE DISCRETION. ABSENT SUCH FEE WAIVER, MANAGEMENT/
ADVISORY FEES FOR THE PORTFOLIO WOULD BE .57%.
(2) THE DISTRIBUTOR HAS WAIVED, ON A VOLUNTARY BASIS, ALL OR A PORTION OF ITS
SHAREHOLDER SERVICING FEE, AND THE SHAREHOLDER SERVICING FEES SHOWN REFLECT
THIS WAIVER. THE DISTRIBUTOR RESERVES THE RIGHT TO TERMINATE ITS WAIVER AT
ANYTIME IN ITS SOLE DISCRETION. ABSENT SUCH WAIVER, SHAREHOLDER SERVICING
FEES WOULD BE .25%.
(3) ABSENT THESE WAIVERS, TOTAL OPERATING EXPENSES OF THE PORTFOLIO WOULD BE
.87%. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE ADVISER" AND "THE
MANAGER."
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
------- ------- ------- -------
<S> <C> <C> <C> <C>
An investor in Class A shares of the Portfolio would pay the following expenses
on a $1,000 investment assuming (1) a 5% annual return and (2) redemption at
the end of each time period: $ 6 $ 19 $ 33 $ 75
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE PURPOSE OF THE TABLE AND THIS EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE PORTFOLIO. A PERSON WHO PURCHASES SHARES THROUGH A
FINANCIAL INSTITUTION MAY BE CHARGED SEPARATE FEES BY THAT INSTITUTION.
ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE MANAGER," "THE ADVISER" AND
"DISTRIBUTION AND SHAREHOLDER SERVICING."
2
<PAGE>
FINANCIAL HIGHLIGHTS
______________________________________________________________
The following financial highlights for a share outstanding throughout each
period have been derived from the Trust's financial statements which were
audited by Arthur Andersen LLP, independent accountants, whose report thereon,
dated October 17, 1997, was unqualified. This information should be read in
conjunction with the Trust's financial statements for the fiscal year ended
August 31, 1997, and notes thereto which are incorporated by reference to the
Trust's Statement of Additional Information. Additional performance information
is set forth in the Trust's 1997 Annual Report to Shareholders, which is
available upon request and without charge by calling 1-800-342-5734.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET INVESTMENT NET REALIZED
ASSET ACTIVITIES DISTRIBUTIONS AND UNREALIZED NET
VALUE, --------- ----------------------------------- GAIN (LOSS) ON ASSET
BEGINNING NET NET NET INVESTMENTS VALUE,
OF INVESTMENT INVESTMENT REALIZED TOTAL AND CAPITAL END OF
PERIOD INCOME INCOME GAIN DISTRIBUTIONS TRANSACTIONS PERIOD
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------
INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
- --------------------------------------
Class A
FOR THE YEARS ENDED AUGUST 31,
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
1993 10.49 0.49 (0.50) (0.02) (0.52) 0.38 10.84
1992 10.20 0.56 (0.54) (0.01) (0.55) 0.28 10.49
1991 9.98 0.61 (0.63) -- (0.63) 0.24 10.20
1990(2) 10.01 0.38 (0.37) -- (0.37) (0.04) 9.98
FOR THE YEAR ENDED JANUARY 31,
1990(1) $ 10.00 $ 0.21 $ (0.16) $(0.002) $(0.16) $(0.04) $ 10.01
<CAPTION>
RATIO OF
EXPENSES RATIO OF NET
TO RATIO OF INVESTMENT
RATIO OF AVERAGE NET INCOME TO
EXPENSES NET INVESTMENT AVERAGE
TO ASSETS INCOME TO NET ASSETS
NET ASSETS, AVERAGE (EXCLUDING AVERAGE (EXCLUDING PORTFOLIO
TOTAL END OF NET FEE NET FEE TURNOVER
RETURN PERIOD (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
- -------------------------------- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------
INTERMEDIATE-TERM MUNICIPAL PORT
- --------------------------------
Class A
FOR THE YEARS ENDED AUGUST 31,
1997 7.93% $ 259,238 0.60% 0.88% 4.53% 4.25% 16%
1996 3.76% 134,563 0.59% 0.66% 4.66% 4.59% 41%
1995 7.53% 95,675 0.55% 0.72% 4.96% 4.79% 36%
1994 0.65% 127,509 0.53% 0.71% 4.65% 4.47% 58%
1993 8.62% 122,649 0.55% 0.69% 4.79% 4.65% 63%
1992 8.56% 63,210 0.55% 0.71% 5.56% 5.40% 62%
1991 8.82% 36,699 0.55% 0.78% 6.18% 5.95% 112%
1990(2) 3.44%+ 12,781 0.55%* 0.90%* 6.63%* 6.28%* 63%
FOR THE YEAR ENDED JANUARY 31,
1990(1) 1.72%+ $9,106 0.56%* 1.36%* 5.80%* 5.00%* 352%
</TABLE>
* ANNUALIZED
+ RETURN IS FOR PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) THE INTERMEDIATE-TERM MUNICIPAL PORTFOLIO COMMENCED OPERATIONS ON SEPTEMBER
5, 1989.
(2) IN AUGUST 1990, THE TRUSTEES CHANGED THE FISCAL YEAR END OF THE TRUST FROM
JANUARY 31 TO AUGUST 31.
3
<PAGE>
THE TRUST
__________________________________________________________________________
SEI TAX EXEMPT TRUST (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in separate diversified and
non-diversified investment portfolios. This prospectus offers Class A shares of
the Trust's Intermediate-Term Municipal Portfolio (the "Portfolio"). The
investment adviser and investment sub-adviser to the Portfolio are referred to
collectively as the "advisers." Additional information pertaining to the Trust
may be obtained by writing to SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-342-5734.
INVESTMENT
OBJECTIVES AND
POLICIES
___________________________________________________________________________
The Portfolio's investment objective is to seek the highest
level of income exempt from federal income taxes that can
be obtained, consistent with the preservation of capital,
from a diversified portfolio of investment grade municipal
securities. There can be no assurance that the Portfolio
will achieve its investment objective.
The Portfolio invests at least 80% of its net assets
in municipal securities the interest of which is exempt
from federal income taxes (collectively "Municipal
Securities"), based on opinions from bond counsel for the
issuers. This investment policy is a fundamental policy of
the Portfolio. The issuers of these securities can be
located in all fifty states, the District of Columbia,
Puerto Rico, and other U.S. territories and possessions.
Under normal conditions, the Portfolio will invest at least
80% of its net assets in securities the interest on which
is not a preference item for purposes of the federal
alternative minimum tax. Although the advisers have no
present intention of doing so, up to 20% of all assets in
the Portfolio can be invested in taxable debt securities
for defensive purposes or when sufficient tax exempt
securities considered appropriate by the advisers are not
available for purchase.
The Portfolio may purchase the following types of
municipal obligations, but only if such securities, at the
time of purchase, either have the requisite rating, or, if
not rated, are of comparable quality as determined by the
advisers: (i) municipal bonds rated A or better by Standard
and Poor's Corporation ("S&P") or by Moody's Investors
Service, Inc. ("Moody's"), and the Portfolio may invest up
to 10% of its total assets in municipal bonds rated BBB by
S&P or Baa by Moody's; (ii) municipal notes rated at least
SP-1 by S&P or MIG-1 or VMIG-1 by Moody's; and (iii)
tax-exempt commercial paper rated at least A-1 by S&P or
Prime-1 by Moody's. Bonds rated BBB by S&P or Baa by
Moody's have speculative characteristics. Municipal
obligations owned by the Portfolio which become less than
the prescribed investment quality shall be sold at a time
when, in the judgment of the advisers, it does not
substantially impact the market value of the Portfolio.
Not more than 25% of Portfolio assets will be
invested in (a) Municipal Securities whose issuers are
located in the same state and, (b) Municipal Securities the
interest on which is derived from revenues of similar type
projects. This restriction does not apply to
4
<PAGE>
Municipal Securities in any of the following categories:
public housing authorities; general obligations of states
and localities; state and local housing finance
authorities, or municipal utilities systems.
There could be economic, business, or political
developments which might affect all Municipal Securities of
a similar type. To the extent that a significant portion of
the Portfolio's assets are invested in Municipal Securities
payable from revenues on similar projects, the Portfolio
will be subject to the peculiar risks presented by such
projects to a greater extent than it would be if the
Portfolio's assets were not so invested.
The Portfolio will typically maintain a
dollar-weighted average portfolio maturity of three to ten
years. However, when the advisers determine that market
conditions so warrant, the Portfolio can maintain an
average weighted maturity of less than three years.
GENERAL INVESTMENT
POLICIES
___________________________________________________________________________
The Portfolio may invest in variable and floating rate
obligations, may purchase securities on a "when-issued"
basis, and reserves the right to engage in transactions
involving standby commitments. The Portfolio may also
purchase other types of tax-exempt instruments as long as
they are of a quality equivalent to the long-term bond or
commercial paper ratings stated above. Although permitted
to do so, the Portfolio has no present intention to invest
in repurchase agreements or to purchase securities subject
to the federal alternative minimum tax. The Portfolio will
not invest more than 15% of its net assets in illiquid
securities.
The taxable securities in which the Portfolio may
invest consist of U.S. Treasury obligations; obligations
issued or guaranteed by the U.S. Government or by its
agencies or instrumentalities whether or not backed by the
full faith and credit of the U.S. Government; instruments
of U.S. commercial banks or savings and loan institutions
(not including foreign branches of U.S. banks or U.S.
branches of foreign banks) which are members of the Federal
Reserve System or the Federal Deposit Insurance Corporation
and which have total assets of $1 billion or more as shown
on their last published financial statements at the time of
investment; and repurchase agreements involving any of such
obligations.
For a description of the permitted investments and
ratings, see the "Description of Permitted Investments and
Risk Factors" and the Statement of Additional Information.
INVESTMENT
LIMITATIONS
________________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolio. Fundamental policies
cannot be changed with respect to the Trust or the
5
<PAGE>
Portfolio without the consent of the holders of a majority
of the Trust's or the Portfolio's outstanding shares.
THE PORTFOLIO MAY NOT:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the United States Government,
its agencies or instrumentalities and any security
guaranteed thereby) if, as a result, more than 5% of the
total assets of the Portfolio (based on fair market
value at time of investment) would be invested in the
securities of such issuer; provided, however, that the
Portfolio may invest up to 25% of its total assets
without regard to this restriction.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio, based on current
value at the time of such purchase, to be invested in
the securities of one or more issuers conducting their
principal business activities in the same industry,
provided that this limitation does not apply to
investments in obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities or
to investments in tax-exempt securities issued by
governments or political subdivisions of governments.
3. Borrow money except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the
value of the total assets of the Portfolio. All
borrowings will be repaid before making additional
investments and any interest paid on such borrowings
will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional fundamental
investment limitations are set forth in the Statement of
Additional Information.
THE MANAGER
______________________________________________________________________
SEI Fund Management (the "Manager" and the "Transfer
Agent") provides the Trust with overall management
services, regulatory reporting, all necessary office space,
equipment, personnel and facilities, and serves as
institutional transfer agent and dividend disbursing agent.
For these services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .24% of the average daily net assets of the
Portfolio. In addition, the Manager has voluntarily agreed
to waive a portion of its fees proportionately in order to
limit total operating expenses of the Class A shares of the
Portfolio to not more than .60% of the Portfolio's average
daily net assets attributable to Class A shares, on an
annualized basis. The Manager reserves the right, in its
sole discretion, to terminate its waiver at any time. For
the fiscal year ended August 31, 1997, the Portfolio paid
management fees, after waivers, of .22% of its average
daily net assets.
6
<PAGE>
THE ADVISER
_______________________________________________________________________
SEI INVESTMENTS
MANAGEMENT CORPORATION
SEI Investments Management Corporation ("SIMC") serves as
investment adviser to the Portfolio. SIMC is a wholly-owned
subsidiary of SEI Investments Company ("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 provided 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 or administrator
to more than 46 investment companies, including more than
345 portfolios, which investment companies have more than
$99.9 billion in assets as of September 30, 1997.
SIMC acts as the investment adviser to the Portfolio
and operates as a "manager of managers." As Adviser, SIMC
oversees the investment advisory services provided to the
Portfolio and manages the cash portion of the Portfolio's
assets. Pursuant to a separate sub-advisory agreement with
SIMC, and under the supervision of the Adviser and the
Board of Trustees, the sub-adviser is responsible for the
day-to-day investment management of all or a discrete
portion of the assets of the Portfolio. Sub-advisers are
selected based primarily upon the research and
recommendations of SIMC, which evaluate 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
Portfolio's assets to the sub-advisers, monitors and
evaluates the sub-advisers' performance, and oversees
sub-adviser compliance with the Portfolio's investment
objectives, policies and restrictions. SIMC HAS THE
ULTIMATE RESPONSIBILITY FOR THE INVESTMENT PERFORMANCE OF
THE PORTFOLIO DUE TO ITS RESPONSIBILITY TO OVERSEE
SUB-ADVISERS AND RECOMMEND THEIR HIRING, TERMINATION AND
REPLACEMENT.
For these advisory 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. For the fiscal year ended August 31, 1997, the
Portfolio 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 Portfolio without submitting the sub-advisory
agreements to a vote of the Portfolio's shareholders. The
exemptive relief permits the disclosure of only the
aggregate amount payable by SIMC under all such
sub-advisory agreements. The Portfolio will notify
shareholders in the event of any addition or change in the
identity of its sub-advisers.
7
<PAGE>
THE SUB-ADVISER
__________________________________________________________________
STANDISH, AYER & WOOD,
INC.
Standish Ayer & Wood, Inc. ("SAW" or the "Sub-Adviser"),
serves as Sub-Adviser to the Portfolio. SAW's principal
offices are located at One Financial Center, Boston,
Massachusetts 02111. 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. SAW manages assets for
pensions, funds, corporate and public, insurance companies;
banks; and individuals. Total assets under management as of
September 30, 1997 were $36.7 billion.
Raymond J. Kubiak, CFA serves as portfolio manager to
the Portfolio. Mr. Kubiak has 16 years experience in public
finance and is a Vice President and Director of the Sub-
Adviser. He has been with SAW since March, 1988.
SIMC pays SAW a fee based on a percentage of average
the monthly market value of the assets of the Portfolio
managed by SAW.
DISTRIBUTION AND
SHAREHOLDER
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), a
wholly-owned subsidiary of SEI Investments, serves as the
Portfolio's distributor pursuant to a distribution
agreement with the Trust.
The Portfolio has adopted a shareholder servicing
plan for Class A shares (the "Service Plan") under which
the Distributor is entitled to receive a shareholder
servicing fee of up to .25% of average daily net assets
attributable to Class A shares. Under the Service Plan, the
Distributor may perform, or may compensate other service
providers for performing the following shareholder and
administrative services: maintaining client accounts;
arranging for bank wires; responding to client inquiries
concerning services provided on investments; assisting
clients in changing dividend options; account designations
and addresses; sub-accounting; providing information on
share positions to clients; forwarding shareholder
communications to clients; processing purchase, exchange
and redemption orders; and processing dividend payments.
Under the Service Plan, the Distributor may retain as a
profit any difference between the fee it receives and the
amount it pays to third parties.
It is possible that an institution may offer
different classes of shares to its customers and thus
receive different compensation with respect to different
classes. These financial institutions may also charge
separate fees to their customers.
The Trust may also execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive usual and customary compensation.
8
<PAGE>
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolio's
shares.
PURCHASE AND
REDEMPTION OF SHARES
____________________________________________________________________________
Financial institutions may acquire shares of the Portfolio
for their own account, or as a record owner on behalf of
fiduciary, agency or custody accounts, by placing orders
with the Transfer Agent (or its authorized agent).
Institutions that use certain SEI proprietary systems may
place orders electronically through those systems.
Financial institutions which purchase shares for the
accounts of their customers may impose separate charges on
these customers for account services. Financial
institutions may impose an earlier cut-off time for receipt
of purchase orders directed through them to allow for
processing and transmittal of these orders to the Transfer
Agent for effectiveness on the same day.
Shares of the Portfolio may be purchased or redeemed
on days on which the New York Stock Exchange is open for
business ("Business Days").
Shareholders who desire to purchase shares for cash
must place their orders with the Transfer Agent (or its
authorized agent) prior to the determination of net asset
value and in accordance with the procedures described below
for the order to be accepted on that Business Day. Cash
investments must be transmitted or delivered in federal
funds to the wire agent by the close of business on the
same day the order is placed. The Trust reserves the right
to reject a purchase order when the Distributor determines
that it is not in the best interest of the Trust and/or
shareholders to accept such purchase order.
Purchases will be made in full and fractional shares
of the Portfolio calculated to three decimal places. The
Trust will send shareholders a statement of shares owned
after each transaction. The purchase price of shares is the
net asset value next determined after a purchase order is
received and accepted by the Trust. The net asset value per
share of the Portfolio is determined by dividing the total
value of its investments and other assets, less any
liabilities, by the total number of outstanding shares of
the Portfolio. Net asset value per share is determined
daily as of the close of trading on the New York Stock
Exchange (presently 4:00 p.m., Eastern time) on each
Business Day.
Information about the market value of each portfolio
security may be obtained by the Manager from an independent
pricing service. Securities having maturities of 60 days or
less at the time of purchase will be valued using the
amortized cost method (described in the Statement of
Additional Information), which approximates the securities'
market value. The pricing service may use a matrix system
to determine valuations of fixed income securities. This
system considers such factors as security prices, yields,
maturities, call features, ratings and developments
relating to specific securities in arriving at valuations.
9
<PAGE>
The pricing service may also provide market quotations. The
procedures used by the pricing service and its valuations
are reviewed by the officers of the Trust under the general
supervision of the Trustees. Portfolio securities for which
market quotations are available are valued at the last
quoted sale price on each Business Day or, if there is no
such reported sale, at the most recently quoted bid price.
Shareholders who desire to redeem shares of the
Portfolio must place their redemption orders with the
Transfer Agent (or its authorized agent) prior to the
determination of net asset value and in accordance with the
procedures described below on any Business Day. The
redemption price is the net asset value per share of the
Portfolio next determined after receipt by the Transfer
Agent of the redemption order. Payment on redemption will
be made as promptly as possible and, in any event, within
five Business Days after the redemption order is received.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The
Trust and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by other
means.
PERFORMANCE
______________________________________________________________________
From time to time, the Portfolio may advertise yield, tax
equivalent yield and total return. These figures will be
based on historical earnings and are not intended to
indicate future performance.
The yield of the Portfolio refers to the annualized
income generated by a hypothetical investment in the
Portfolio over a specified 30-day period. The yield is
calculated by assuming that the income generated by the
investment during that period generated each period over
one year and is shown as a percentage of the investment. A
tax equivalent yield is calculated by determining the rate
of return that would have been achieved on a fully taxable
investment to produce the after-tax equivalent of the
Portfolio's yield, assuming certain tax brackets for a
shareholder.
The total return of the Portfolio refers to the
average compounded rate of return to a hypothetical
investment for designated time periods (including, but not
limited to, the period from which the Portfolio commenced
operations through the specified date), assuming that the
entire investment is redeemed at the end of each period and
assuming the reinvestment of all dividend and capital gain
distributions.
10
<PAGE>
The Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives.
The Portfolio may quote Morningstar, Inc., a service that
ranks mutual funds on the basis of risk-adjusted
performance, and Ibbotson Associates of Chicago, Illinois,
which provides historical returns of the capital markets in
the U.S. The Portfolio may use long-term performance of
these capital markets to demonstrate general long-term risk
versus reward scenarios and could include the value of a
hypothetical investment in any of the capital markets. The
Portfolio may also quote financial and business
publications and periodicals as they relate to fund
management, investment philosophy, and investment
techniques.
The Portfolio may quote various measures of
volatility and benchmark correlation in advertising and may
compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while measures
of benchmark correlation indicate how valid a comparative
benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot
be calculated precisely.
TAXES
______________________________________________________________________________
The following summary of federal income tax consequences is
based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No attempt has been made to present a detailed explanation
of the federal income tax treatment of the Portfolio or its
shareholders, and state and local tax consequences of an
investment in the Portfolio may differ from the federal
income tax consequences described below. Accordingly,
shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state and local
income taxes. Additional information concerning taxes is
set forth in the Statement of Additional Information.
TAX STATUS OF THE
PORTFOLIO
The Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), so as to be
relieved of federal income tax on net investment company
taxable income) and net capital gain (the excess of net
long-term capital gain over net short-term capital loss)
distributed to shareholders.
TAX STATUS OF
DISTRIBUTIONS
The Portfolio intends to distribute substantially all of
its net investment income (including net short-term capital
gain) to shareholders. If, at the close of each quarter of
its taxable year, at least 50% of the value of the
Portfolio's total assets consists of obligations the
interest on which is excludable from gross income, the
Portfolio may pay "exempt-interest
11
<PAGE>
dividends" to its shareholders. Exempt-interest dividends
are excludable from a shareholder's gross income for
federal income tax purposes but may have certain collateral
federal tax consequences including alternative minimum tax
consequences. In addition, the receipt of exempt-interest
dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxable on a portion of
such benefits. See the Statement of Additional Information.
Any dividends paid out of income realized by the
Portfolio on taxable securities will be taxable to
shareholders as ordinary income (whether received in cash
or in additional shares) to the extent of the Portfolio's
earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders.
Distributions to shareholders of net capital gains of the
Portfolio also will not qualify for the dividends received
deduction and will be taxable to shareholders as long-term
capital gain, whether received in cash or additional
shares, and regardless of how long a shareholder has held
the shares.
Dividends declared by the Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in any such month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if paid by the
Portfolio at any time during the following January. The
Portfolio intends to make sufficient distributions prior to
the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment
companies.
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of the
Portfolio is not deductible for federal income tax purposes
to the extent that it relates to exempt-interest dividends
distributed to the shareholder during the taxable year.
Furthermore, the Portfolio may not be an appropriate
investment for persons (including corporations and other
business entities) who are "substantial users" (or persons
related to "substantial users") of facilities financed by
industrial development bonds or private activity bonds.
Such persons should consult their tax advisers before
purchasing shares.
The Portfolio will report annually to its
shareholders the portion of dividends that is taxable and
the portion that is tax-exempt based on income received by
the Portfolio during the year to which the dividends
relate.
Each sale, exchange, or redemption of the Portfolio's
shares is a taxable transaction to the shareholder.
GENERAL INFORMATION
_______________________________________________________________________
THE TRUST
The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated March 15, 1982. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. In addition to the Portfolio, the Trust consists
of the following portfolios: Tax Free Portfolio,
Institutional Tax Free Portfolio, California Tax Exempt
Portfolio, Pennsylvania Municipal Portfolio, New York
Intermediate-
12
<PAGE>
Term Municipal Portfolio, and Pennsylvania Tax Free
Portfolio. All consideration received by the Trust for
shares of any portfolio and all assets of such portfolio
belong to that portfolio and would be subject to
liabilities related thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will vote
separately on matters relating solely to that portfolio or
class, such as any distribution plan. As a Massachusetts
business trust, the Trust is not required to hold annual
meetings of shareholders, but approval will be sought for
certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining
Trustees or by shareholders at a special meeting called
upon written request of shareholders owning at least 10% of
the outstanding shares of the Trust. In the event that such
a meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
REPORTING
The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Manager,
SEI Fund Management, Oaks, Pennsylvania, 19456.
DIVIDENDS
Substantially all of the net investment income (exclusive
of capital gains) of the Portfolio is declared daily and
paid monthly as a dividend. Shareholders of record on the
last record date of each period will be entitled to receive
the dividend distribution, which is generally paid on the
10th Business Day of the following month. If any net
capital gains are realized, they will be distributed by the
Portfolio annually.
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares at the net asset value next determined following the
record date, unless the shareholder has elected to take
such payment in cash. Shareholders may change their
election by providing written notice to the Manager at
least 15 days prior to the distribution.
COUNSEL AND INDEPENDENT
PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
13
<PAGE>
CUSTODIAN AND WIRE AGENT
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, serves as Custodian
of the Trust's assets and acts as wire agent of the Trust.
The Custodian holds cash, securities and other assets of
the Trust as required by the 1940 Act.
DESCRIPTION OF
PERMITTED
INVESTMENTS AND RISK
FACTORS ______________________________________________________________________
The following is a description of certain of the permitted
investments for the Portfolio, and the associated risk
factors:
MONEY MARKET SECURITIES
Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks; (ii) U.S. Treasury obligations and obligations
issued by the agencies and instrumentalities of the U.S.
Government; and (iii) repurchase agreements involving any
of the foregoing obligations entered into with highly-rated
banks and broker-dealers.
MUNICIPAL SECURITIES
Municipal Securities consist of (i) debt obligations issued
by or on behalf of public authorities to obtain funds to be
used for various public facilities, for refunding
outstanding obligations, for general operating expenses and
for lending such funds to other public institutions and
facilities, and (ii) certain private activity and
industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately
operated facilities.
General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed
by the revenues of a project or facility, tolls from a toll
bridge, for example. Certificates of participation
represent an interest in an underlying obligation or
commitment such as an obligation issued in connection with
a leasing arrangement. The payment of principal and
interest on private activity and industrial development
bonds generally is dependent solely on the ability of the
facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed
as security for such payment.
Municipal notes include general obligation notes, tax
anticipation notes, revenue anticipation notes, bond
anticipation notes, certificates of indebtedness, demand
notes and construction loan notes and participation
interests in municipal notes. Municipal bonds include
general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds
and participation interests in municipal bonds.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements by which the
Portfolio obtains a security and simultaneously commits to
return the security to the seller at an agreed upon price
14
<PAGE>
(including principal and interest) on an agreed upon date
within a number of days from the date of purchase.
Repurchase agreements are considered loans under the 1940
Act.
STANDBY COMMITMENTS AND
PUTS
Securities subject to standby commitments or puts permit
the holder thereof to sell the securities at a fixed price
prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current
market price. However, unless the standby commitment or put
was an integral part of the security as originally issued,
it may not be marketable or assignable; therefore, the
standby commitment or put would only have value to the
Portfolio owning the security to which it relates. In
certain cases, a premium may be paid for a standby
commitment or put, which premium will have the effect of
reducing the yield otherwise payable on the underlying
security. The Portfolio will limit standby commitment or
put transactions to institutions believed to present
minimal credit risks.
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 Portfolio may
carry variable or floating rates of interest and may
involve a conditional or unconditional demand feature. Such
obligations may include variable amount master demand
notes. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities
may be reset daily, weekly, quarterly or at some other
interval, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing market
interest rates. A demand instrument with a demand notice
period exceeding seven days may be considered illiquid if
there is no secondary market for such security.
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. The Portfolio will maintain with the
custodian a separate account with liquid securities or cash
in an amount at least equal to these commitments. The
interest rate realized on these securities is fixed as of
the purchase date, and no interest accrues to the Portfolio
before settlement.
15
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 3
The Trust................................................................. 4
Investment Objective and Policies......................................... 4
General Investment Policies............................................... 5
Investment Limitations.................................................... 5
The Manager............................................................... 6
The Adviser............................................................... 7
The Sub-Adviser........................................................... 8
Distribution and Shareholder Servicing.................................... 8
Purchase and Redemption of Shares......................................... 9
Performance............................................................... 10
Taxes..................................................................... 11
General Information....................................................... 12
Description of Permitted Investments and Risk Factors..................... 14
</TABLE>
16
<PAGE>
SEI TAX EXEMPT TRUST
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL PORTFOLIO
PENNSYLVANIA TAX FREE PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely information about the above-referenced
Portfolios that an investor needs to know before investing. Please read this
Prospectus carefully, and keep it on file for future reference.
A Statement of Additional Information dated December 31, 1997, has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing the Distributor, SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Tax Exempt Trust (the "Trust") is an open-end management investment company,
certain classes of which offer financial institutions a convenient means of
investing their own funds, or funds for which they act in a fiduciary, agency or
custodial capacity, in one or more professionally managed diversified and
non-diversified portfolios of securities. A portfolio may offer separate classes
of shares that differ from each other primarily in the allocation of certain
expenses and minimum investment amounts. This Prospectus offers Class A shares
of the Trust's Pennsylvania Municipal Portfolio (the "Fixed Income Portfolio"),
and Class A, Class B and Class C shares of the Trust's Pennsylvania Tax Free
Portfolio (the "Money Market Portfolio") (each a "Portfolio" and, together, the
"Portfolios").
AN INVESTMENT IN THE PENNSYLVANIA TAX FREE PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
IN ADDITION, THE PENNSYLVANIA TAX FREE PORTFOLIO MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER, AND INVESTING IN THE PORTFOLIO MAY
BE RISKIER THAN INVESTING IN OTHER TYPES OF MONEY MARKET FUNDS.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET
PORTFOLIO FIXED
---------------------------------------- INCOME
CLASS A CLASS B CLASS C PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Management/Advisory Fees (AFTER FEE WAIVER) (1) .29% .29% .29% .41%
12b-1 Fees (2) None None None None
Total Other Expenses .06% .36% .56% .07%
Shareholder Servicing Fees (AFTER FEE WAIVER) .00%(2) .25% .25% .00%(2)
- ------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVERS) (3) .35% .65% .85% .48%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER HAS WAIVED, ON A VOLUNTARY BASIS, A PORTION OF ITS FEE, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THIS VOLUNTARY WAIVER. THE MANAGER
RESERVES THE RIGHT TO TERMINATE ITS WAIVER AT ANY TIME IN ITS SOLE
DISCRETION. ABSENT SUCH WAIVER, MANAGEMENT/ADVISORY FEES FOR THE MONEY
MARKET PORTFOLIO WOULD BE .40% AND FOR THE FIXED INCOME PORTFOLIO WOULD BE
.55%.
(2) THE DISTRIBUTOR HAS WAIVED, ON A VOLUNTARY BASIS, ALL OR A PORTION OF ITS
SHAREHOLDER SERVICING FEE FOR THE CLASS A SHARES, AND THE SHAREHOLDER
SERVICING FEES SHOWN REFLECT THIS WAIVER. THE DISTRIBUTOR RESERVES THE RIGHT
TO TERMINATE ITS WAIVER AT ANY TIME IN ITS SOLE DISCRETION. ABSENT SUCH
WAIVER, SHAREHOLDER SERVICING FEES WOULD BE .25% FOR THE CLASS A SHARES OF
THE MONEY MARKET PORTFOLIO AND .25% FOR THE FIXED INCOME PORTFOLIO.
(3) ABSENT THESE FEE WAIVERS, TOTAL OPERATING EXPENSES FOR CLASS A, CLASS B AND
CLASS C SHARES OF THE MONEY MARKET PORTFOLIO WOULD BE .71%, .76% AND .96%,
RESPECTIVELY, AND FOR THE CLASS A SHARES OF THE FIXED INCOME PORTFOLIO WOULD
BE .87%. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE ADVISER" AND "THE
MANAGER."
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
------- ------- ------- -------
<S> <C> <C> <C> <C>
An investor in the Portfolios would pay the following expenses on a $1,000
investment assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
Money Market Portfolio
Class A $ 4 $ 11 $ 20 $ 44
Class B 7 21 36 81
Class C 9 27 47 105
Fixed Income Portfolio 5 15 27 60
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE PURPOSE OF THE TABLE AND THIS EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE CLASS A, B AND C SHARES OF THE PENNSYLVANIA TAX FREE
PORTFOLIO AND THE CLASS A SHARES OF THE PENNSYLVANIA MUNICIPAL PORTFOLIO. A
PERSON WHO PURCHASES SHARES THROUGH A FINANCIAL INSTITUTION MAY BE CHARGED
SEPARATE FEES BY THAT INSTITUTION. ADDITIONAL INFORMATION MAY BE FOUND UNDER
"THE MANAGER," "THE ADVISER" AND "DISTRIBUTION AND SHAREHOLDER SERVICING."
2
<PAGE>
FINANCIAL HIGHLIGHTS
______________________________________________________________
The following financial highlights for a share outstanding throughout each
period have been derived from the Trust's financial statements which were
audited by Arthur Andersen LLP, independent accountants, whose report thereon,
dated October 17, 1997, was unqualified. This information should be read in
conjunction with the Trust's financial statements for the fiscal year ended
August 31, 1997, and notes thereto which are incorporated by reference to the
Trust's Statement of Additional Information. Additional performance information
is set forth in the Trust's 1997 Annual Report to Shareholders, which is
available upon request and without charge by calling 1-800-342-5734. As of
August 31, 1997 the Class B and Class C shares of the Pennsylvania Tax Free
Portfolio had not commenced operations.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET
REALIZED
AND
UNREALIZED
INVESTMENT GAIN
ACTIVITIES DISTRIBUTIONS (LOSS) ON NET
NET ASSET --------- ---------------------------------------------- INVESTMENTS ASSET
VALUE, NET NET AND VALUE,
BEGINNING INVESTMENT NET INVESTMENT REALIZED TOTAL CAPITAL END OF
OF PERIOD INCOME INCOME GAIN DISTRIBUTIONS TRANSACTIONS PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------
PENNSYLVANIA MUNICIPAL PORTFOLIO
- ---------------------------------
Class A
FOR THE YEARS ENDED AUGUST 31,
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
1993 10.59 0.55 (0.55) (0.01) (0.56) 0.36 10.94
1992 10.29 0.57 (0.57) (0.01) (0.58) 0.31 10.59
1991 9.95 0.60 (0.60) (0.003) (0.60) 0.34 10.29
1990(2) 9.98 0.34 (0.34) -- (0.34) (0.03) 9.95
FOR THE YEAR ENDED JANUARY 31,
1990(1) $ 10.00 $ 0.28 $ (0.23) $ (0.001) $(0.23) $ (0.07) $ 9.98
- --------------------------------
PENNSYLVANIA TAX FREE PORTFOLIO
- --------------------------------
Class A
FOR THE YEARS ENDED AUGUST 31,
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(3) 1.00 0.014 (0.014) -- (0.014) -- 1.00
<CAPTION>
RATIO OF
RATIO OF NET
EXPENSES INVESTMENT
TO RATIO OF INCOME TO
RATIO OF AVERAGE NET AVERAGE
NET EXPENSES NET INVESTMENT NET
ASSETS, TO ASSETS INCOME TO ASSETS
END OF AVERAGE (EXCLUDING AVERAGE (EXCLUDING PORTFOLIO
TOTAL PERIOD NET FEE NET FEE TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
- -------------------------------- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------
PENNSYLVANIA MUNICIPAL PORTFOLIO
- --------------------------------
Class A
FOR THE YEARS ENDED AUGUST 31,
1997 8.08% $ 98,079 0.48% 0.86% 5.08% 4.70% 34%
1996 3.96% 97,228 0.48% 0.65% 5.15% 4.98% 66%
1995 6.81% 104,094 0.48% 0.72% 5.21% 4.97% 23%
1994 1.14% 125,081 0.47% 0.71% 4.90% 4.66% 25%
1993 8.91% 153,808 0.48% 0.70% 5.15% 4.93% 15%
1992 8.89% 114,461 0.48% 0.72% 5.52% 5.28% 11%
1991 9.80% 83,054 0.50% 0.73% 5.98% 5.75% 19%
1990(2) 3.12%+ 64,531 0.60%* 0.80%* 5.88%* 5.68%* 20%
FOR THE YEAR ENDED JANUARY 31,
1990(1) 2.11%+ $ 53,042 0.60%* 0.86%* 6.05%* 5.79%* 10%
- --------------------------------
PENNSYLVANIA TAX FREE PORTFOLIO
- --------------------------------
Class A
FOR THE YEARS ENDED AUGUST 31,
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(3) 2.37%* 18,712 0.35%* 0.65%* 2.37%* 2.07%* --%
</TABLE>
* ANNUALIZED
+ RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) THE PENNSYLVANIA MUNICIPAL PORTFOLIO CLASS A COMMENCED OPERATIONS ON AUGUST
14, 1989.
(2) IN AUGUST 1990, THE TRUSTEES CHANGED THE FISCAL YEAR END OF THE TRUST FROM
JANUARY 31 TO AUGUST 31.
(3) THE PENNSYLVANIA TAX FREE PORTFOLIO (CLASS A) COMMENCED OPERATIONS ON
JANUARY 21, 1994.
3
<PAGE>
THE TRUST
__________________________________________________________________________
SEI TAX EXEMPT TRUST (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in separate diversified and
non-diversified investment portfolios. This Prospectus offers Class A shares of
the Trust's Pennsylvania Municipal Portfolio (the "Fixed Income Portfolio") and
Class A, Class B and Class C shares of the Trust's Pennsylvania Tax Free
Portfolio (the "Money Market Portfolio"). The Fixed Income Portfolio is a
diversified portfolio, and the Money Market Portfolio is a non-diversified
portfolio. Additional information pertaining to the Trust may be obtained by
writing to SEI Investments Distribution Co., Oaks, Pennsylvania 19456, or by
calling 1-800-342-5734.
INVESTMENT
OBJECTIVES AND
POLICIES
___________________________________________________________________________
PENNSYLVANIA
MUNICIPAL PORTFOLIO
The Fixed Income Portfolio'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 Fixed Income Portfolio 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 Portfolio
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 Portfolio 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 Fixed Income Portfolio may purchase the following
types of municipal obligations, but only if such
securities, at the time of purchase, either have the
requisite rating or, if not rated, are of comparable
quality as determined by Morgan Grenfell Capital Management
Incorporated, the Portfolio's investment adviser ("Morgan
Grenfell"): (i) municipal bonds rated BBB or better by
Standard & Poor's Corporation ("S&P") or Baa or better by
Moody's Investors Service, Inc. ("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 Fixed Income Portfolio
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 Portfolio.
The Fixed Income Portfolio 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.
4
<PAGE>
PENNSYLVANIA TAX
FREE PORTFOLIO
The Money Market Portfolio'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 Money Market
Portfolio will also attempt to maintain a constant net
asset value of $1.00 per share.
It is a fundamental policy of the Money Market
Portfolio 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 Portfolio 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 well as municipal obligations issued by
territories or possessions of the United States, such as
Puerto Rico. This Portfolio 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 Portfolio 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 Money Market Portfolio
may invest up to 100% of its assets in municipal
obligations of states other than Pennsylvania or taxable
money market instruments.
The Money Market Portfolio 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. See "General Investment Policies."
There can be no assurance that either Portfolio will
be able to achieve its investment objective, or that the
Money Market Portfolio will be able to maintain a constant
$1.00 net asset value per share.
GENERAL INVESTMENT
POLICIES
___________________________________________________________________________
In purchasing obligations, the Money Market Portfolio
complies with the requirements of Rule 2a-7 under the
Investment Company Act of 1940 (the "1940 Act"), as that
Rule may be amended from time to time. These requirements
currently provide that the Money Market Portfolio must
limit its investments to securities with remaining
maturities of 397 days or less, and must maintain a
dollar-weighted average maturity of 90 days or less. In
addition, the Money Market Portfolio may only invest in
eligible securities. In general, this means securities
rated in one of the two highest categories for short-term
securities by at
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least two nationally recognized statistical rating
organizations ("NRSROs") (or by one NRSRO if only one NRSRO
has rated the security), or, if unrated, determined by
Weiss, Peck & Greer, L.L.C. (the "Adviser") to be of
equivalent quality. Since the Portfolio 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 Portfolio
and affect its share price.
Securities rated in the highest rating category
(e.g., A-1 by S&P) by at least two NRSROs (or, if unrated,
determined by the Adviser to be of comparable quality) are
"first tier" securities. Non-first tier securities rated in
the second highest rating category (e.g., A-2 by S&P) by at
least one NRSRO (or, if unrated, determined by the Adviser
to be of comparable quality) are considered to be "second
tier" securities. The Portfolio's investments in non-first
tier conduit securities will be limited to 5% of the
Portfolio's assets. Conduit securities are securities
issued to finance non-governmental private projects, such
as housing developments and retirement homes, and for which
the ultimate obligor is not a governmental issuer.
Neither Portfolio will invest more than 25% of its
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 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
a Portfolio's assets are invested in Municipal Securities
payable from revenues on similar projects, the Portfolio
will be subject to the peculiar risks presented by such
projects to a greater extent than it would be if the
Portfolio's assets were not so invested. Moreover, in
seeking to attain its investment objective, a Portfolio may
invest all or any part of its assets in Municipal
Securities that are industrial development bonds.
Each Portfolio may invest in variable and floating
rate obligations, may purchase securities on a
"when-issued" basis, and reserves the right to engage in
transactions involving standby commitments. The Fixed
Income Portfolio may also purchase other types of
tax-exempt instruments as long as they are of a quality
equivalent to the long-term bond or commercial paper
ratings stated above. Although permitted to do so, the
Fixed Income Portfolio has no present intention to invest
in repurchase agreements. Each Portfolio will not invest
more than 10% of its net assets in illiquid securities.
For a description of the permitted investments and
ratings, see the "Description of Permitted Investments and
Risk Factors" and the Statement of Additional Information.
RISK FACTORS
______________________________________________________________________
PENNSYLVANIA RISK
FACTORS
Under normal conditions the Fixed Income Portfolio will be
fully invested, and the Money Market Portfolio will invest
primarily, in obligations which produce interest income
exempt
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from federal income tax and Pennsylvania state income tax.
Accordingly, each Portfolio will have considerable
investments in Pennsylvania municipal obligations. As a
result, each Portfolio 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 either Portfolio 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 Portfolio. See "Special Considerations Relating
to Pennsylvania Municipal Securities" in the Statement of
Additional Information.
NON-DIVERSIFICATION
INVESTMENT IN THE MONEY MARKET PORTFOLIO, A NON-DIVERSIFIED
MUTUAL FUND, MAY ENTAIL GREATER RISK THAN WOULD INVESTMENT
IN MONEY MARKET FUNDS THAT ARE DIVERSIFIED ACROSS ISSUERS
LOCATED IN A NUMBER OF STATES BECAUSE OF ITS CONCENTRATION
IN MUNICIPAL SECURITIES OF A SINGLE STATE. Any economic,
political, or regulatory developments affecting the value
of the securities this Portfolio holds could have a greater
impact on the total value of the Portfolio's holdings than
would be the case if the portfolio securities were
diversified among more issuers. The Money Market Portfolio
intends to comply with the diversification requirements of
Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). In accordance with these
requirements, the Portfolio will not invest more than 5% of
its total assets in any one issuer; this limitation applies
to 50% of the Portfolio's total assets.
INVESTMENT
LIMITATIONS
________________________________________________________________________
The investment objectives and investment limitations are
fundamental policies of the Portfolios. Fundamental
policies cannot be changed with respect to the Trust or a
Portfolio without the consent of the holders of a majority
of the Trust's or that Portfolio's outstanding shares. It
is a fundamental policy of the Money Market Portfolio to
use its best efforts to maintain a constant net asset value
of $1.00 per share.
NEITHER PORTFOLIO 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 Portfolio would be
invested in the securities of such issuer. This
limitation does not apply to the Money Market Portfolio
to the extent permitted by Rule 2a-7.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio, based on current
value at the time of such purchase, to be invested in
the securities of one or more issuers conducting their
principal business activities in the
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same industry, provided that this limitation does not
apply to investments in obligations issued or guaranteed
by the U.S. Government or its agencies and
instrumentalities or to investments in tax-exempt
securities issued by governments or political
subdivisions of governments.
3. Borrow money except for temporary or emergency purposes,
and then only in an amount not exceeding 10% of the
value of the total assets of the Portfolio. All
borrowings will be repaid before making additional
investments and any interest paid on such borrowings
will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional investment
limitations are set forth in the Statement of Additional
Information.
THE MANAGER
______________________________________________________________________
SEI Fund Management (the "Manager" and the "Transfer
Agent") provides the Trust with overall management
services, regulatory reporting, all necessary office space,
equipment, personnel and facilities, and serves as
institutional transfer agent and dividend disbursing agent.
For these services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .35% of the average daily net assets of the Fixed
Income Portfolio and .36% of the average daily net assets
of the Money Market Portfolio. The Manager has voluntarily
waived a portion of its fees in order to limit the total
operating expenses of the Fixed Income Portfolio to not
more than .48% of that Portfolio's average daily net assets
on an annualized basis, and of Class A shares of the Money
Market Portfolio to not more than .35% of that Portfolio's
average daily net assets on an annualized basis. The
Manager reserves the right, in its sole discretion, to
terminate these voluntary fee waivers at any time. For the
fiscal year ended August 31, 1997, the Fixed Income and
Money Market Portfolios paid management fees, after
waivers, of .21% and .25%, respectively, of their average
daily net assets.
THE ADVISERS
______________________________________________________________________
Under advisory agreements with the Trust (the "Advisory
Agreements"), Morgan Grenfell Capital Management
Incorporated and Weiss, Peck & Greer, L.L.C. (the
"Advisers" and each of these, an "Adviser"), act as the
investment advisers for the Fixed Income and Money Market
Portfolios, respectively. Under the Advisory Agreements,
the Advisers invest the assets of the Portfolios, and
continuously review, supervise and administer the
Portfolios' investment programs. Each Adviser is
independent of the Manager and discharges its
responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust.
MORGAN GRENFELL CAPITAL
MANAGEMENT INCORPORATED
Morgan Grenfell Capital Management Incorporated acts as
investment adviser to the Fixed Income Portfolio. Morgan
Grenfell is a wholly-owned, U.S.-based subsidiary of Morgan
Grenfell Asset Management and was organized in 1985. As of
September 30, 1997, total
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assets under management by Morgan Grenfell were
approximately $9.7 billion. The principal place of business
address of Morgan Grenfell is 885 Third Avenue, 32nd Floor,
New York, New York 10022.
David W. Baldt, Director and Executive Vice President
of Morgan Grenfell, has served as the portfolio manager of
the Fixed Income Portfolio since July, 1995, and has been
with Morgan Grenfell since 1989.
For its services, Morgan Grenfell is entitled to a
fee, which is calculated daily and paid monthly, at an
annual rate of .20% of the average daily net assets. For
the fiscal year ended August 31, 1997, the Portfolio paid
Morgan Grenfell an advisory fee, after waivers, of .20% of
its average daily net assets.
WEISS, PECK & GREER,
L.L.C.
Weiss, Peck & Greer, L.L.C. ("WPG"), acts as investment
adviser for the Money Market Portfolio. WPG is a limited
liability company founded as a limited partnership in 1970,
and engages in investment management, venture capital
management and management buyouts. WPG has been active
since its founding in managing portfolios of tax exempt
securities. As of September 30, 1997, total assets under
management were approximately $14.6 billion. The principal
business address of WPG is One New York Plaza, New York,
New York 10004.
Janet Fiorenza acts as the portfolio manager for the
Portfolio. Ms. Fiorenza, a Principal of WPG, has been
associated with WPG's Tax Exempt Fixed Income group since
1988, and its predecessor since 1980.
For its services, WPG is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of
.05% of the average daily net assets of the money market
portfolios of the Trust that are advised by WPG up to $500
million; .04% of such assets from $500 million to $1
billion; and .03% of such assets over $1 billion. Such fees
are allocated daily among these money market portfolios on
the basis of their relative net assets. For the fiscal year
ended August 31, 1997, the Portfolio paid WPG an advisory
fee, after waivers, of .04% of its average daily net
assets.
DISTRIBUTION AND
SHAREHOLDER
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), a
wholly owned subsidiary of SEI Investments Company ("SEI
Investments"), serves as each Portfolio's distributor
pursuant to a distribution agreement (the "Distribution
Agreement") with the Trust.
The Portfolios have adopted plans under which firms,
including the Distributor, that provide shareholder and
administrative services may receive compensation therefor.
The Class A, B and C plans differ in a number of ways,
including the amounts that may be paid. Under each plan,
the Distributor may provide those services itself or may
enter into arrangements under which third parties provide
such services and are compensated by the Distributor. Under
such arrangements the Distributor may retain as a profit
any difference
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between the fee it receives and the amount it pays such
third party. In addition, the Portfolios may enter into
such arrangements directly.
Under the Class A plan, the Distributor is entitled
to receive a fee at an annual rate of up to .25% of the
average daily net assets of such Portfolio attributable to
Class A shares, in return for provision of a broad range of
shareholder services. Under the Class B and Class C
shareholder service plans, the Distributor is entitled to
receive shareholder service fees to the Distributor at an
annual rate of up to .25% of average daily net assets in
exchange for the Distributor's (or its agent's) efforts in
maintaining client accounts; arranging for bank wires;
responding to client inquiries concerning services provided
or investment; and assisting clients in changing dividend
options, account designations and addresses. In addition,
under their administrative services plans, Class B and
Class C shares will pay the Distributor administrative
services fees at specified percentages of the average daily
net assets of the shares of the Class (up to .05% in the
case of the Class B shares and up to .25% in the case of
the Class C shares). Administrative services include sub-
accounting; providing information on share positions to
clients; forwarding shareholder communications to clients;
processing purchase, exchange and redemption orders; and
processing dividend payments.
It is possible that an institution may offer
different classes of shares to its customers and differing
services to the Classes of each Portfolio and thus receive
compensation with respect to different classes. These
financial institutions may also charge separate fees to
their customers.
The Trust may execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive compensation.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolio's
shares.
PURCHASE AND
REDEMPTION OF SHARES
____________________________________________________________________________
Financial institutions may acquire shares of each Portfolio
for their own account, or as a record owner on behalf of
fiduciary, agency or custody accounts, by placing orders
with the Transfer Agent (or its authorized agent).
Institutions that use certain SEI proprietary systems may
place orders electronically through those systems.
Financial institutions which purchase shares for the
accounts of their customers may impose separate charges on
these customers for account services. Financial
institutions may impose an earlier cut-off time for receipt
of purchase orders directed through them to allow for
processing and transmittal of these orders to the Transfer
Agent for effectiveness on the same day.
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Shares of each Portfolio may be purchased or redeemed
on days on which the New York Stock Exchange is open for
business ("Business Days"). However, Money Market portfolio
shares cannot be purchased by Federal Reserve wire on
federal holidays restricting wire transfers.
Shareholders who desire to purchase shares for cash
must place their orders with the Transfer Agent (or its
authorized agent) prior to the determination of net asset
value and in accordance with the procedures described below
for the order to be accepted on that Business Day; the
specified time is presently 2:00 p.m., Eastern time, for
the Money Market Portfolio and the close of trading on the
New York Stock Exchange (presently 4:00 p.m., Eastern time)
for the Fixed Income Portfolio. Cash investments must be
transmitted or delivered in federal funds to the wire agent
by the close of business on the same day the order is
placed for the Money Market Portfolio and on the next
Business Day following the day the order is placed for the
Fixed Income Portfolio.
Purchases will be made in full or fractional shares
of the Fixed Income Portfolio calculated to three decimal
places. The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust. The
purchase price of shares of the Money Market Portfolio is
expected to remain constant at $1.00. The net asset value
per share of each Portfolio is determined by dividing the
total value of its investments and other assets, less any
liabilities, by the total number of outstanding shares of
the Portfolio. The Money Market Portfolio's investments
will be valued by the amortized cost method described in
the Statement of Additional Information. Net asset value
per share is determined on each Business Day as of 2:00
p.m., Eastern time, for the Money Market Portfolio, and as
of the close of trading on the New York Stock Exchange
(presently 4:00 p.m., Eastern time) for the Fixed Income
Portfolio.
Information about the market value of each portfolio
security of the Fixed Income Portfolio may be obtained by
the Manager from an independent pricing service. Securities
having maturities of 60 days or less at the time of
purchase will be valued using the amortized cost method
(described in the Statement of Additional Information),
which approximates the securities' market value. The
pricing service may use a matrix system to determine
valuations of equity and fixed income securities. This
system considers such factors as security prices, yields,
maturities, call features, ratings and developments
relating to specific securities in arriving at valuations.
The pricing service may also provide market quotations. The
procedures used by the pricing service and its valuations
are reviewed by the officers of the Trust under the general
supervision of the Trustees. Portfolio securities for which
market quotations are available are valued at the last
quoted sale price on each Business Day or, if there is no
such reported sale, at the most recently quoted bid price.
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Shareholders who desire to redeem shares of a
Portfolio must place their redemption orders with the
Transfer Agent (or its authorized agent) prior to the
determination of net asset value and in accordance with the
procedures described below on any Business Day. Otherwise,
the redemption orders will be effective on the next
Business Day. Payment for redemption orders from the Fixed
Income Portfolio will be made as promptly as possible and,
in any event, within five Business Days after the
redemption order is received. Payment for redemption orders
from the Money Market Portfolio received before the
calculation of net asset value will be made the same day by
transfer of federal funds. The redemption price is the net
asset value per share of the Portfolio next determined
after receipt by the Transfer Agent of an effective
redemption order. Financial institutions which redeem
shares for the accounts of their customers may impose their
own procedures and cut-off times for receipt of redemption
requests directed through the financial institution.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The
Trust and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by other
means.
PERFORMANCE
______________________________________________________________________
From time to time, the Money Market Portfolio may advertise
its "current yield" and "effective yield," and the Fixed
Income Portfolio may advertise its yield and total return.
Each Portfolio may also advertise a "tax equivalent yield."
These figures are based on historical earnings and are not
intended to indicate future performance.
The "current yield" of the Money Market Portfolio
refers to the income generated by an investment over a
seven-day period which is then "annualized." That is, the
amount of income generated by the investment during that
week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when
annualized, the income earned by an investment is assumed
to be reinvested. The effective yield will be slightly
higher than the "current yield" because of the compounding
effect of this assumed reinvestment.
The yield of the Fixed Income Portfolio refers to the
annualized income generated by a hypothetical investment,
in the Portfolio over a specified 30-day period. The yield
is calculated by assuming that the income generated by the
investment during that period generated each period over
one year and is shown as a percentage of the investment.
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The total return of the Fixed Income Portfolio refers
to the average compounded rate of return to a hypothetical
investment for designated time periods (including, but not
limited to, the period from which the Portfolio commenced
operations through the specified date), assuming that the
entire investment is redeemed at the end of each period and
assuming the reinvestment of all dividend and capital gain
distributions.
The "tax equivalent yield" is calculated by
determining the rate of return that would have been
achieved on a fully taxable investment to produce the
after-tax equivalent of a Portfolio's yield, assuming
certain tax brackets for a shareholder.
A Portfolio may periodically compare its performance
to that of: (i) other mutual funds tracked by mutual fund
rating services (such as Lipper Analytical), financial and
business publications and periodicals; (ii) broad groups of
comparable mutual funds; (iii) unmanaged indices which may
assume investment of dividends but generally do not reflect
deductions for administrative and management costs; or (iv)
other investment alternatives. The Fixed Income Portfolio
may quote Morningstar, Inc., a service that ranks mutual
funds on the basis of risk-adjusted performance, and
Ibbotson Associates of Chicago, Illinois, which provides
historical returns of the capital markets in the U.S. The
Fixed Income Portfolio may use long-term performance of
these capital markets to demonstrate general long-term risk
versus reward scenarios and could include the value of a
hypothetical investment in any of the capital markets. The
Fixed Income Portfolio may also quote financial and
business publications and periodicals as they relate to
fund management, investment philosophy, and investment
techniques.
The Fixed Income Portfolio may quote various measures
of volatility and benchmark correlation in advertising and
may compare these measures to those of other funds.
Measures of volatility attempt to compare historical share
price fluctuations or total returns to a benchmark while
measures of benchmark correlation indicate how valid a
comparative benchmark might be. Measures of volatility and
correlation are calculated using averages of historical
data and cannot be calculated precisely.
The performance of Class A shares of the Money Market
Portfolio will normally be higher than that of Class B or
Class C shares of the Portfolio because of the additional
administrative services expenses charged to Class B or
Class C shares.
TAXES
______________________________________________________________________________
The following summary of federal and state income tax
consequences is based on current tax laws and regulations,
which may be changed by legislative, judicial or
administrative action. No attempt has been made to present
a detailed explanation of the federal, state or local
income tax treatment of the Portfolio or its shareholders.
Accordingly, shareholders are urged to consult their tax
advisers regarding specific questions as to federal, state
and local income taxes. Additional information concerning
taxes is set forth in the Statement of Additional
Information.
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TAX STATUS OF EACH
PORTFOLIO
Each Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. Each Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), so as to be
relieved of federal income tax on net investment company
taxable income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss)
distributed to shareholders.
TAX STATUS OF
DISTRIBUTIONS
Each Portfolio intends to distribute substantially all of
its net investment income (including net short-term capital
gain) to shareholders. If, at the close of each quarter of
its taxable year, at least 50% of the value of a
Portfolio's total assets consists of obligations the
interest on which is excludable from gross income, the
Portfolio may pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends are excludable from
a shareholder's gross income for federal income tax
purposes but may have certain collateral federal tax
consequences including alternative minimum tax
consequences. In addition, the receipt of exempt-interest
dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxable on a portion of
such benefits. See the Statement of Additional Information.
Any dividends paid out of income realized by a
Portfolio on taxable securities will be taxable to
shareholders as ordinary income (whether received in cash
or in additional shares) to the extent of such Portfolio's
earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders.
Distributions to shareholders of net capital gains of a
Portfolio also will not qualify for the dividends received
deduction and will be taxable to shareholders as long-term
capital gain, whether received in cash or additional
shares, and regardless of how long a shareholder has held
the shares.
Dividends declared by a Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in any such month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if paid by the
Portfolio at any time during the following January. Each
Portfolio intends to make sufficient distributions prior to
the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment
companies.
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of a
Portfolio is not deductible for federal income tax purposes
to the extent that it relates to exempt-interest dividends
distributed to the shareholder during the taxable year.
Furthermore, the Portfolios may not be an appropriate
investment for persons (including corporations and other
business entities) who are "substantial users" (or persons
related to "substantial users") of facilities financed by
industrial development bonds or private activity bonds.
Such persons should consult their tax advisers before
purchasing shares.
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Each Portfolio will report annually to its
shareholders the portion of dividends that is taxable and
the portion that is tax-exempt based on income received by
the Portfolio during the year to which the dividends
relate.
Each sale, exchange or redemption of the Portfolios'
shares is a taxable transaction to the shareholders.
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
administrative action, and any such change may be
retroactive.
Distributions paid by the Portfolios to shareholders
will not be subject to the Pennsylvania personal income tax
or to the Philadelphia School District investment net
income tax to the extent that the distributions are
attributable to interest received by the Portfolio 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 Portfolios 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 a Portfolio which are excludable as
exempt income for federal tax purposes are not subject to
the Pennsylvania corporate net income tax.
Each Portfolio intends to invest primarily in
obligations that produce interest exempt from federal and
Pennsylvania taxes. If the Portfolios invest in obligations
that pay interest that is not exempt for Pennsylvania
purposes but is exempt for federal purposes, a portion of
the Portfolios' distributions will be subject to
Pennsylvania personal income tax.
GENERAL INFORMATION
_______________________________________________________________________
THE TRUST
The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated March 15, 1982. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. In addition to the Portfolios, the Trust
consists of the following portfolios: Tax Free Portfolio,
Institutional Tax Free Portfolio, California Tax Exempt
Portfolio, Intermediate-Term Municipal Portfolio, and New
York Intermediate-Term Municipal Portfolio. All
consideration received by the Trust for shares of any
portfolio and all assets of such portfolio belong to that
portfolio and would be subject to liabilities related
thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state
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securities laws, pricing, insurance expenses, litigation
and other extraordinary expenses, brokerage costs, interest
charges, taxes and organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will vote
separately on matters relating solely to that portfolio or
class, such as any distribution plan. As a Massachusetts
business trust, the Trust is not required to hold annual
meetings of shareholders, but approval will be sought for
certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining
Trustees or by shareholders at a special meeting called
upon written request of shareholders owning at least 10% of
the outstanding shares of the Trust. In the event that such
a meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
REPORTING
The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Manager,
SEI Fund Management, Oaks, Pennsylvania, 19456.
DIVIDENDS
The net investment income (exclusive of capital gains) of
each Portfolio is distributed in the form of dividends. The
Money Market Portfolio declares dividends daily, and
shareholders of record at the close of each Business Day
will be entitled to receive that day's dividend. The Money
Market Portfolio pays dividends on the first Business Day
of each month. Dividends will be paid on the next Business
Day to shareholders who redeem all of their shares of the
Money Market Portfolio at any time during the month.
The Fixed Income Portfolio declares dividends daily,
and shareholders of record on the last record date of each
period will be entitled to receive the periodic dividend
distribution, which is generally paid on the 10th Business
Day of the following month. If any net capital gains are
realized by either Portfolio, they will be distributed
annually. Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares, unless the shareholder has elected to take such
payment in cash. Shareholders may change their election by
providing written notice to the Manager at least 15 days
prior to the distribution.
COUNSEL AND INDEPENDENT
PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
CUSTODIAN AND WIRE AGENT
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, serves as Custodian
of the Trust's assets and acts as wire agent of the Trust.
The Custodian holds cash, securities and other assets of
the Trust as required by the 1940 Act.
16
<PAGE>
DESCRIPTION OF
PERMITTED
INVESTMENTS AND RISK
FACTORS ______________________________________________________________________
The following is a description of certain of the permitted
investments for the Portfolios, and the associated risk
factors:
MONEY MARKET SECURITIES
Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks; (ii) U.S. Treasury obligations and obligations
issued by the agencies and instrumentalities of the U.S.
Government; and (iii) repurchase agreements involving any
of the foregoing obligations entered into with highly-rated
banks and broker-dealers.
MUNICIPAL SECURITIES
Municipal Securities consist of (i) debt obligations issued
by or on behalf of public authorities to obtain funds to be
used for various public facilities, for refunding
outstanding obligations, for general operating expenses and
for lending such funds to other public institutions and
facilities, and (ii) certain private activity and
industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately
operated facilities.
General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed
by the revenues of a project or facility, tolls from a toll
bridge, for example. Certificates of participation
represent an interest in an underlying obligation or
commitment such as an obligation issued in connection with
a leasing arrangement. The payment of principal and
interest on private activity and industrial development
bonds generally is dependent solely on the ability of the
facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed
as security for such payment.
Municipal notes include general obligation notes, tax
anticipation notes, revenue anticipation notes, bond
anticipation notes, certificates of indebtedness, demand
notes and construction loan notes and participation
interests in municipal notes. Municipal bonds include
general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds
and participation interests in municipal bonds.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements by which a Portfolio
obtains a security and simultaneously commits to return the
security to the seller at an agreed upon price (including
principal and interest) on an agreed upon date within a
number of days from the date of purchase. Repurchase
agreements are considered loans under the 1940 act.
STANDBY COMMITMENTS AND
PUTS
Securities subject to standby commitments or puts permit
the holder thereof to sell the securities at a fixed price
prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current
market price. However, unless the standby
17
<PAGE>
commitment or put was an integral part of the security as
originally issued, it may not be marketable or assignable;
therefore, the standby commitment or put would only have
value to the Portfolio owning the security to which it
relates. In certain cases, a premium may be paid for a
standby commitment or put, which premium will have the
effect of reducing the yield otherwise payable on the
underlying security. The Portfolio will limit standby
commitment or put transactions to institutions believed to
present minimal credit risks.
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 a Portfolio may
carry variable or floating rates of interest and may
involve a conditional or unconditional demand feature. Such
obligations may include variable amount master demand
notes. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities
may be reset daily, weekly, quarterly or at some other
interval, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing market
interest rates. A demand instrument with a demand notice
period exceeding seven days may be considered illiquid if
there is no secondary market for such security.
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. Each Portfolio 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 a Portfolio
before settlement.
18
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 3
The Trust................................................................. 4
Investment Objectives and Policies........................................ 4
General Investment Policies............................................... 5
Risk Factors.............................................................. 6
Investment Limitations.................................................... 7
The Manager............................................................... 8
The Advisers.............................................................. 8
Distribution and Shareholder Servicing.................................... 9
Purchase and Redemption of Shares......................................... 10
Performance............................................................... 12
Taxes..................................................................... 13
General Information....................................................... 15
Description of Permitted Investments and Risk Factors..................... 17
</TABLE>
19
<PAGE>
SEI TAX EXEMPT TRUST
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely information about the above-referenced
Portfolio that an investor needs to know before investing. Please read this
Prospectus carefully, and keep it on file for future reference.
A Statement of Additional Information dated December 31, 1997, has been filed
with the Securities and Exchange Commission, and is available upon request and
without charge by writing the Distributor, SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Tax Exempt Trust (the "Trust") is an open-end investment management company,
certain classes of which offer financial institutions a convenient means of
investing their own funds, or funds for which they act in a fiduciary, agency or
custodial capacity, in one or more professionally managed diversified and
non-diversified portfolios of securities. A portfolio may offer separate classes
of shares that differ from each other primarily in the allocation of certain
expenses and minimum investment amounts. This Prospectus offers CNI Class shares
of the Trust's California Tax Exempt Portfolio (the "Portfolio"), a money market
portfolio.
AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. IN ADDITION, THE PORTFOLIO
MAY INVEST A SIGNIFICANT PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER, AND
INVESTING IN THE PORTFOLIO MAY BE RISKIER THAN INVESTING IN OTHER TYPES OF MONEY
MARKET FUNDS.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) CNI CLASS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Management/Advisory Fees (AFTER FEE WAIVER) (1) .23%
12b-1 Fees (AFTER FEE WAIVER) (2) .25%
Total Other Expenses .30%
Shareholder Servicing Fees .25%
- ------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVERS) (3) .78%
- ------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER HAS WAIVED, ON A VOLUNTARY BASIS, A PORTION OF ITS FEES FOR THE
PORTFOLIO. THE MANAGEMENT/ADVISORY FEES SHOWN REFLECT THIS VOLUNTARY WAIVER.
THE MANAGER RESERVES THE RIGHT TO TERMINATE ITS WAIVER AT ANY TIME IN ITS
SOLE DISCRETION. ABSENT SUCH FEE WAIVER, MANAGEMENT/ADVISORY FEES FOR THE
CNI CLASS SHARES OF THE PORTFOLIO WOULD BE .27%.
(2) THE DISTRIBUTOR HAS WAIVED, ON A VOLUNTARY BASIS, A PORTION OF ITS 12B-1
FEE, AND THE 12B-1 FEES SHOWN REFLECT THIS WAIVER. THE DISTRIBUTOR RESERVES
THE RIGHT TO TERMINATE ITS WAIVER AT ANY TIME IN ITS SOLE DISCRETION. ABSENT
SUCH WAIVER, 12B-1 FEES WOULD BE .50% FOR THE PORTFOLIO.
(3) ABSENT THESE FEE WAIVERS, TOTAL OPERATING EXPENSES FOR THE PORTFOLIO WOULD
BE 1.07%. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE ADVISER" AND "THE
MANAGER."
EXAMPLE CNI CLASS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
------- ------- ------- -------
<S> <C> <C> <C> <C>
An investor in the Portfolio would pay the following expenses on a $1,000
investment assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
CNI Class $ 8 $ 25 $ 43 $ 97
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN CNI CLASS SHARES OF THE PORTFOLIO. THE PORTFOLIO ALSO
OFFERS CLASS A, CLASS B AND CLASS C SHARES, WHICH ARE SUBJECT TO THE SAME
EXPENSES, EXCEPT THERE ARE DIFFERENT DISTRIBUTION, SHAREHOLDER SERVICING AND/OR
TRANSFER AGENT COSTS. A PERSON WHO PURCHASES SHARES THROUGH A FINANCIAL
INSTITUTION MAY BE CHARGED SEPARATE FEES BY THAT INSTITUTION. ADDITIONAL
INFORMATION MAY BE FOUND UNDER "THE MANAGER," "DISTRIBUTION AND SHAREHOLDER
SERVICING" AND "THE ADVISER."
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGES OTHERWISE PERMITTED BY THE CONDUCT RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
2
<PAGE>
FINANCIAL HIGHLIGHTS
______________________________________________________________
The following financial highlights for a share outstanding throughout each
period have been derived from the Trust's financial statements which were
audited by Arthur Andersen LLP, independent accountants, whose report thereon,
dated October 17, 1997, was unqualified. This information should be read in
conjunction with the Trust's financial statements for the fiscal year ended
August 31, 1997, and notes thereto which are incorporated by reference to the
Trust's Statement of Additional Information. Additional performance information
is set forth in the Trust's 1997 Annual Report to Shareholders, which is
available upon request and without charge by calling 1-800-342-5734.
FOR A CNI CLASS SHARE OUTSTANDING THROUGHOUT THE PERIOD+
<TABLE>
<CAPTION>
NET REALIZED
AND
INVESTMENT UNREALIZED
ACTIVITIES DISTRIBUTIONS GAIN (LOSS)
NET ASSET ---------- --------------------------------------- ON NET ASSET
VALUE NET NET NET INVESTMENTS VALUE
BEGINNING INVESTMENT INVESTMENT REALIZED TOTAL AND CAPITAL END OF
OF PERIOD INCOME INCOME INCOME DISTRIBUTIONS TRANSACTIONS PERIOD
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------
CALIFORNIA TAX EXEMPT PORTFOLIO
- -------------------------------
CNI Class
FOR THE YEARS ENDED AUGUST 31,
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(1) 1.00 0.006 (0.006) -- (0.006) -- 1.00
<CAPTION>
RATIO OF RATIO OF NET
EXPENSES INVESTMENT
TO AVERAGE RATIO OF NET INCOME TO
RATIO OF NET ASSETS INVESTMENT AVERAGE
NET ASSETS EXPENSES (EXCLUDING INCOME TO NET ASSETS
TOTAL END OF TO AVERAGE FEE AVERAGE (EXCLUDING
RETURN PERIOD (000) NET ASSETS WAIVERS) NET ASSETS FEE WAIVERS)
- --------------------------------- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------
CALIFORNIA TAX EXEMPT PORTFOLIO
- -------------------------------
CNI Class
FOR THE YEARS ENDED AUGUST 31,
1997 2.79% $ 412,142 0.78% 1.06%(2) 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(1) 2.14%* 318,122 0.67%* 0.87%* 2.06%* 1.86%*
</TABLE>
+ CLASS G SHARES WERE RENAMED CNI CLASS SHARES ON DECEMBER 31, 1997.
* ANNUALIZED
(1) THE CALIFORNIA TAX EXEMPT PORTFOLIO--CNI CLASS (FORMERLY, CLASS G)
COMMENCED OPERATIONS ON MAY 11, 1994. PRIOR TO MAY 1, 1996, CLASS G SHARES
OF THE PORTFOLIO WERE KNOWN AS CLASS C SHARES.
(2) THE 1997 RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING FEE WAIVERS
INCLUDES GROSS FEES RELATED TO THE SHAREHOLDER SERVICING PLAN ADOPTED MAY 1,
1996. PRIOR TO THIS DATE FEES WERE LEVIED UNDER A DISTRIBUTION REIMBURSEMENT
PLAN. SEE FOOTNOTE 3 IN THE NOTES TO THE FIANCIAL STATEMENTS IN THE ANNUAL
REPORT FOR A MORE COMPLETE DESCRIPTION OF THE PLAN.
3
<PAGE>
THE TRUST
__________________________________________________________________________
SEI TAX EXEMPT TRUST (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in separate diversified and
non-diversified investment portfolios. This Prospectus offers CNI Class shares
of the Trust's California Tax Exempt Portfolio (the "Portfolio"). Investors may
also purchase Class A, Class B and Class C shares of the Portfolio. Each class
provides for variation in distribution, shareholder servicing, or transfer agent
costs, voting rights and dividends. Additional information pertaining to the
Trust may be obtained by writing to SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-342-5734.
INVESTMENT OBJECTIVE
AND POLICIES
___________________________________________________________________________
The Portfolio'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 Portfolio will
achieve its investment objective.
It is a fundamental policy of the Portfolio 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 for the issuers, is exempt
from federal income tax (collectively, "Municipal
Securities"), and the Portfolio 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 Portfolio'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 or municipal authorities, as
well as municipal obligations issued by territories or
possessions of the United States.
Under normal conditions, the Portfolio may invest, in
the aggregate; 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 Portfolio 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 Portfolio's investment adviser (the "Adviser"),
determines that market conditions warrant, the Portfolio
may invest up to 100% of its assets in municipal
obligations of states other than California or in taxable
money market securities.
The Adviser will not invest more than 25% of the
Portfolio'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.
4
<PAGE>
GENERAL INVESTMENT
POLICIES
___________________________________________________________________________
In purchasing obligations, the Portfolio complies with the
requirements of Rule 2a-7 under the Investment Company Act
of 1940 (the "1940 Act"), as that Rule may be amended from
time to time. These requirements currently provide that the
Portfolio must limit its investments to securities with
remaining maturities of 397 days or less, and must maintain
a dollar-weighted average maturity of 90 days or less. In
addition, the Portfolio may only invest in eligible quality
securities. In general, this means securities rated in one
of the two highest categories for short-term securities by
at least two nationally recognized statistical rating
organizations ("NRSROs") (or by one NRSRO if only one NRSRO
has rated the security), or, if unrated, determined by the
Adviser to be of equivalent quality. Since the Portfolio
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 Portfolio and affect its share price.
Securities rated in the highest rating category
(E.G., A-1 by Standard & Poor's Corporation ("S&P")) by at
least two NRSROs (or, if unrated, determined by the Adviser
to be of comparable quality) are "first tier" securities.
Non-first tier securities rated in the second highest
rating category (E.G., A-2 by S&P) by at least one NRSRO
(or, if unrated, determined by the Adviser to be of
comparable quality) are considered to be "second tier"
securities. The Portfolio's investments in non-first tier
conduit securities will be limited to 5% of the Portfolio's
assets. Conduit securities are securities issued to finance
non-governmental private projects, such as housing
developments and retirement homes, and for which the
ultimate obligor is not a governmental issuer.
The Portfolio may purchase municipal bonds, municipal
notes and tax-exempt commercial paper, but only if such
securities, at the time of purchase, either meet the rating
requirements imposed by Rule 2a-7 or, if not rated, are of
comparable quality as determined by the Adviser. See
"General Investment Policies."
The Portfolio may invest in variable and floating
rate obligations, may purchase securities on a
"when-issued" basis, and reserves the right to engage in
transactions involving standby commitments. The Portfolio
will not invest more than 10% of its net assets in
securities which are considered illiquid.
For a description of the Portfolio's permitted
investments and ratings, see the "Description of Permitted
Investments and Risk Factors" and the Statement of
Additional Information.
RISK FACTORS
______________________________________________________________________
CALIFORNIA RISK FACTORS
THE PORTFOLIO'S CONCENTRATION IN INVESTMENTS IN MUNICIPAL
SECURITIES OF A SINGLE STATE INVOLVES GREATER RISKS THAN
MONEY MARKET FUNDS THAT ARE DIVERSIFIED ACROSS ISSUERS
LOCATED IN A NUMBER OF STATES. These risks result primarily
from (1) amendments to the California
5
<PAGE>
Constitution and other statutes that limit the taxing and
spending authority of California government entities, and
(2) a variety of California laws and regulations that may
affect, directly or indirectly, the issuer of California
municipal securities.
There could be economic, business, or political
developments which might affect all Municipal Securities of
a similar type. To the extent that a significant portion of
the Portfolio's assets are invested in Municipal Securities
payable from revenues on similar projects, the Portfolio
will be subject to the risks presented by such projects to
a greater extent than it would be if the Portfolio's assets
were not so invested. Moreover, in seeking to attain its
investment objective, the Portfolio may invest all or any
part of its assets in Municipal Securities that are
industrial development bonds.
INVESTMENT
LIMITATIONS
________________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolio. Fundamental policies
cannot be changed with respect to the Trust or the
Portfolio without the consent of the holders of a majority
of the Trust's or the Portfolio's outstanding shares. It is
a fundamental policy of the Portfolio to use its best
efforts to maintain a constant net asset value of $1.00 per
share.
THE PORTFOLIO MAY NOT:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the United States Government,
its agencies or instrumentalities) if, as a result, more
than 5% of the total assets of the Portfolio (based on
current value at the time of investment) would be
invested in the securities of such issuer. This
restriction applies to 75% of the Portfolio's assets.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio, based on fair
market value at the time of such purchase, to be
invested in the securities of one or more issuers
conducting their principal business activities in the
same industry, provided that this limitation does not
apply to investments in obligations issued or guaranteed
by the United States Government or its agencies and
instrumentalities or to investments in tax-exempt
securities issued by governments or political
subdivisions of governments.
3. Borrow money except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the
value of the total assets of the Portfolio. All
borrowings will be repaid before making additional
investments and any interest paid on such borrowings
will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional fundamental
investment limitations are set forth in the Statement of
Additional Information.
6
<PAGE>
THE MANAGER
______________________________________________________________________
SEI Fund Management (the "Manager" and the "Transfer
Agent") provides the Trust with overall management
services, regulatory reporting, all necessary office space,
equipment, personnel and facilities, and serves as
institutional transfer agent and dividend disbursing agent.
For these services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .23% of the average daily net assets of the
Portfolio. The Manager has voluntarily agreed to waive a
portion of its fees in order to limit the total operating
expenses of CNI Class shares of the Portfolio (as a
percentage of the Portfolio's average daily net assets
attributable to CNI Class shares) to not more than .78%, on
an annualized basis. The Manager reserves the right, in its
sole discretion, to terminate its voluntary fee waiver at
any time. For the fiscal year ended August 31, 1997, the
Portfolio paid management fees, after waivers, of .19% of
its average daily net assets.
THE ADVISER
_______________________________________________________________________
Weiss, Peck & Greer, L.L.C., serves as the Portfolio's
investment adviser under an advisory agreement (the
"Advisory Agreement") with the Trust. Under the Advisory
Agreement, the Adviser invests the assets of the Portfolio,
and continuously reviews, supervises and administers the
investment program of the Portfolio. The Adviser is
independent of the Manager and discharges its
responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust.
The Adviser is a limited liability company founded as
a limited partnership in 1970, and engages in investment
management, venture capital management and management
buyouts. The Adviser has been active since its founding in
managing portfolios of tax exempt securities. As of
September 30, 1997, total assets under management were
approximately $14.6 billion. The principal business address
of the Adviser is One New York Plaza, New York, New York
10004.
Janet Fiorenza acts as portfolio manager for the
Portfolio. Ms. Fiorenza, a Principal of the Adviser, has
been associated with the Adviser's Tax Exempt Fixed Income
Group since 1988, and its predecessor since 1980.
For its services to the Portfolio, the Adviser is
entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .05% of the combined average
daily net assets of the money market portfolios of the
Trust advised by the Adviser up to $500 million, .04% of
such assets from $500 million to 1 billion, and .03% of
such assets in excess of $1 billion. Such fees are
allocated daily among these portfolios on the basis of
their relative net assets. For the fiscal year ended August
31, 1997, the Portfolio paid advisory fees, after waivers,
of .04% of its relative net assets.
7
<PAGE>
DISTRIBUTION AND
SHAREHOLDER
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), a
wholly owned subsidiary of SEI Investments Company ("SEI
Investments"), serves as the Portfolio's distributor
pursuant to a distribution agreement (the "Distribution
Agreement") with the Trust.
The Rule 12b-1 Plan applicable to CNI Class shares of
the Portfolio (the "CNI Class Plan") provides for payments
to the Distributor at an annual rate of .50% of the
Portfolio's average daily net assets attributable to CNI
Class shares. This payment is characterized as
"compensation," and is not directly tied to expenses
incurred by the Distributor; the payment the Distributor
receives during any year may therefore be higher or lower
than its actual expenses. This payment compensates the
Distributor for its services in connection with
distribution assistance, and some or all of it may be used
to pay financial institutions and intermediaries such as
banks, savings and loan associations, insurance companies,
and investment counselors, broker-dealers (including the
Distributor's affiliates and subsidiaries) for services or
reimbursement of expenses incurred in connection with
distribution assistance. If the Distributor's expenses are
less than its fees under the CNI Class Plan, the Trust will
still pay the full fee and the Distributor will realize a
profit, but the Trust will not be obligated to pay in
excess of the full fee, even if the Distributor's actual
expenses are higher.
The Portfolio has adopted a shareholder servicing
plan (the "CNI Class Service Plan") under which firms,
including the Distributor, that provide shareholder
services may receive compensation therefor. Under the CNI
Class Service Plan, the Distributor is entitled to receive
shareholder service fees at an annual rate of up to .25% of
average daily net assets in return for the Distributor's
(or its agent's) efforts in maintaining client accounts;
arranging for bank wires; responding to client inquiries
concerning services provided or investment; and assisting
clients in changing dividend options, account designations
and addresses. The Distributor may provide those services
itself or may enter into arrangements under which third
parties provide such services and are compensated by the
Distributor. In addition, the Portfolio has adopted
shareholder servicing plans for its Class A, Class B and
Class C shares that are similar to the plan described
above. The Distributor may retain as a profit any
difference between the fee it receives and the amount it
pays to third parties.
It is possible that an institution may offer
different classes of shares to its customers and provide
differing services to the classes of the Portfolio, and
thus receive different compensation with respect to
different classes. These financial institutions may also
charge separate fees to their customers.
The Trust may execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive compensation.
8
<PAGE>
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolio's
shares.
PURCHASE AND
REDEMPTION OF SHARES
____________________________________________________________________________
Financial institutions may acquire shares of the Portfolio
for their own account, or as a record owner on behalf of
fiduciary, agency or custody accounts, by placing orders
with the Transfer Agent (or its authorized agent).
Institutions that use certain SEI proprietary systems may
place orders electronically through those systems.
Financial institutions that purchase shares for the
accounts of their customers may impose separate charges on
these customers for account services. Financial
institutions may impose an earlier cut-off time for receipt
of purchase orders directed through them to allow for
processing and transmittal of these orders to the Transfer
Agent for effectiveness on the same day.
Shares of the Portfolio may be purchased or redeemed
on days on which the New York Stock Exchange is open for
business ("Business Days"). However, money market fund
shares cannot be purchased by Federal Reserve wire on
federal holidays restricting wire transfers. Shareholders
who desire to purchase shares for cash must place their
orders with the Transfer Agent (or its authorized agent)
prior to the calculation of net asset value on any Business
Day for the order to be accepted on that Business Day. Cash
investments must be transmitted or delivered in federal
funds to the wire agent by the close of business on the
same day the order is placed for the Portfolio. The Trust
reserves the right to reject a purchase order when the
Distributor determines that it is not in the best interest
of the Trust or shareholders to accept such purchase order.
The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust. The
purchase price of shares of the Portfolio is expected to
remain constant at $1.00. The net asset value per share of
the Portfolio is determined by dividing the total value of
its investments and other assets, less any liabilities, by
the total number of outstanding shares of the Portfolio.
The Portfolio's investments will be valued by the amortized
cost method described in the Statement of Additional
Information. Net asset value per share is determined on
each Business Day as of 2:00 p.m., Eastern time.
Shareholders who desire to redeem shares of the
Portfolio must place their redemption orders with the
Transfer Agent (or its authorized agent) prior to the
determination of net asset value and in accordance with the
procedures described below for the order to be accepted on
that Business Day. Otherwise, redemption orders will be
effective on the next Business Day. Payment for redemption
orders from the Portfolio
9
<PAGE>
received before the calculation of net asset value will be
made the same day by transfer of federal funds. The
redemption price is the net asset value per share of the
Portfolio next determined after receipt by the Transfer
Agent (or its authorized agent) of an effective redemption
order.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor its transfer agent will be
responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The
Trust and its transfer agent will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by other
means.
PERFORMANCE
______________________________________________________________________
From time to time the Portfolio advertises its "current
yield," "tax equivalent yield" and "effective yield." These
figures are based on historical earnings and are not
intended to indicate future performance. The "current
yield" of the Portfolio refers to the income generated by
an investment over a seven-day period which is then
"annualized." That is, the amount of income generated by
the investment during the week is assumed to be generated
each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" (also
called "effective compound yield") is calculated similarly
but, when annualized, the income earned by an investment is
assumed to be reinvested. The "effective yield" will be
slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment. The "tax
equivalent yield" is calculated by determining the rate of
return that would have been achieved on a fully taxable
investment to produce the after-tax equivalent of the
Portfolio's yield, assuming certain tax brackets for a
shareholder.
The Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives.
The performance of Class A shares of the Portfolio
will normally be higher than that of Class B, Class C or
CNI Class shares because of the additional distribution
and/or administrative services expenses charged to Class B,
Class C and CNI Class shares.
10
<PAGE>
TAXES
______________________________________________________________________________
The following summary of federal and state income tax
consequences is based on current tax laws and regulations,
which may be changed by legislative, judicial or
administrative action. No attempt has been made to present
a detailed explanation of the federal, state or local
income tax treatment of the Portfolio or its shareholders.
Accordingly, shareholders are urged to consult their tax
advisers regarding specific questions as to federal, state
and local income taxes. Additional information concerning
taxes is set forth in the Statement of Additional
Information.
TAX STATUS OF THE
PORTFOLIO
The Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), so as to be
relieved of federal income tax on net investment company
taxable income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss)
distributed to shareholders.
TAX STATUS OF
DISTRIBUTIONS
The Portfolio intends to distribute substantially all of
its net investment income (including net short-term capital
gain) to shareholders. If, at the close of each quarter of
its taxable year, at least 50% of the value of the
Portfolio's total assets consists of obligations the
interest on which is excludable from gross income, the
Portfolio may pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends are excludable from
a shareholder's gross income for federal income tax
purposes, but may have certain collateral federal tax
consequences including alternative minimum tax
consequences. In addition, the receipt of exempt-interest
dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxable on a portion of
such benefits. See the Statement of Additional Information.
Any dividends paid out of income realized by the
Portfolio on taxable securities will be taxable to
shareholders as ordinary income (whether received in cash
or in additional shares) to the extent of the Portfolio's
earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders.
Distributions to shareholders of net capital gains of the
Portfolio also will not qualify for the dividends received
deduction and will be taxable to shareholders as long-term
capital gain, whether received in cash or additional
shares, and regardless of how long a shareholder has held
the shares.
Dividends declared by the Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in any such month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if paid by the
Portfolio at any time during the following January. The
Portfolio intends to make sufficient distributions prior to
the end of each calendar year to avoid liability for
federal excise tax applicable to regulated investment
companies.
11
<PAGE>
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of the
Portfolio is not deductible for federal income tax purposes
to the extent that it relates to exempt-interest dividends
distributed to the shareholders during the taxable year.
Furthermore, the Portfolio may not be an appropriate
investment for persons (including corporations and other
business entities) who are "substantial users" (or persons
related to "substantial users") of facilities financed by
industrial development bonds or private activity bonds.
Such persons should consult their tax advisers before
purchasing shares. The Portfolio will report annually to
its shareholders the portion of dividends that is taxable
and the portion that is tax-exempt based on income received
by the Portfolio during the year to which the dividends
relate.
Each sale, exchange or redemption of the Portfolio's
shares is a taxable transaction to the shareholder.
CALIFORNIA TAXES
The following 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.
The Portfolio intends to qualify to pay dividends to
shareholders that are exempt from California personal
income tax ("California exempt-interest dividends"). The
Portfolio will qualify to pay California exempt-interest
dividends if (1) at the close of each quarter of the
Portfolio's taxable year, at least 50 percent of the value
of the Portfolio'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 Portfolio
continues to qualify as a regulated investment company. The
Portfolio will notify its shareholders of the amount of
exempt-interest dividends each year.
If the Portfolio qualifies to pay California
exempt-interest dividends, dividends distributed to
shareholders will be considered California exempt-interest
dividends if they meet certain requirements. See the
Statement of Additional Information.
Corporations subject to California franchise tax that
invest in the Portfolio may not be entitled to exclude
California exempt-interest dividends from income.
Distributions that do not qualify for treatment as
California exempt-interest dividends (including those
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
Portfolio's earnings and profits.
Interest on indebtedness incurred or continued by a
shareholder in connection with the purchase of shares of
the Portfolio will not be deductible for California
personal income tax purposes if the Portfolio distributes
California exempt-interest dividends.
12
<PAGE>
GENERAL INFORMATION
_______________________________________________________________________
THE TRUST
The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated March 15, 1982. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. In addition to the Portfolio, the Trust consists
of the following portfolios: Tax Free Portfolio,
Institutional Tax Free Portfolio, Intermediate-Term
Municipal Portfolio, Pennsylvania Municipal Portfolio, New
York Intermediate-Term Municipal Portfolio, and
Pennsylvania Tax Free Portfolio. All consideration received
by the Trust for shares of any portfolio and all assets of
such portfolio belong to that portfolio and would be
subject to liabilities related thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will vote
separately on matters relating solely to that portfolio or
class, such as any distribution plan. As a Massachusetts
business trust, the Trust is not required to hold annual
meetings of shareholders, but approval will be sought for
certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining
Trustees or by shareholders at a special meeting called
upon written request of shareholders owning at least 10% of
the outstanding shares of the Trust. In the event that such
a meeting is requested the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
REPORTING
The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Manager,
SEI Fund Management, Oaks, Pennsylvania, 19456.
DIVIDENDS
The net investment income (exclusive of capital gains) of
the Portfolio is determined and declared on each Business
Day as a dividend for shareholders of record as of the
close of business on that day. Dividends are paid by the
Portfolio in federal funds or in additional shares at the
discretion of the shareholder on the first Business Day of
each month. Dividends will be paid on the next Business Day
to shareholders who redeem all of their
13
<PAGE>
shares of the Portfolio at any time during the month.
Currently, capital gains, if any, are distributed at the
end of the calendar year.
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares, unless the shareholder has elected to take such
payment in cash. Shareholders may change their election by
providing written notice to the Manager at least 15 days
prior to the distribution.
The dividends on Class A shares of the Portfolio are
normally higher than those on Class B, Class C or CNI Class
shares because of the additional distribution and/or
administrative services expenses charged to Class B, Class
C and CNI Class shares.
COUNSEL AND INDEPENDENT
PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
CUSTODIAN AND WIRE AGENT
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, serves as Custodian
of the Trust's assets and acts as wire agent of the Trust.
The Custodian holds cash, securities and other assets of
the Trust as required by the 1940 Act.
DESCRIPTION OF
PERMITTED
INVESTMENTS AND RISK
FACTORS ______________________________________________________________________
The following is a description of certain of the permitted
investments for the Portfolios, and the associated risk
factors:
MONEY MARKET SECURITIES
Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks; (ii) U.S. Treasury obligations and obligations
issued by the agencies and instrumentalities of the U.S.
Government; and (iii) repurchase agreements involving any
of the foregoing obligations entered into with highly-rated
banks and broker-dealers.
MUNICIPAL SECURITIES
Municipal Securities consist of (i) debt obligations issued
by or on behalf of public authorities to obtain funds to be
used for various public facilities, for refunding
outstanding obligations, for general operating expenses and
for lending such funds to other public institutions and
facilities, and (ii) certain private activity and
industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately
operated facilities.
General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed
by the revenues of a project or facility, tolls from a toll
bridge, for example. Certificates of participation
represent an interest in an underlying obligation or
commitment such as an obligation issued in connection with
a leasing arrangement. The payment of principal and
interest on private activity and industrial
14
<PAGE>
development bonds generally is dependent solely on the
ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal
property so financed as security for such payment.
Municipal notes include general obligation notes, tax
anticipation notes, revenue anticipation notes, bond
anticipation notes, certificates of indebtedness, demand
notes and construction loan notes and participation
interests in municipal notes. Municipal bonds include
general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds
and participation interests in municipal bonds.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements by which a Portfolio
obtains a security and simultaneously commits to return the
security to the seller at an agreed upon price (including
principal and interest) on an agreed upon date within a
number of days from the date of purchase. Repurchase
agreements are considered loans under the 1940 Act.
STANDBY COMMITMENTS AND
PUTS
Securities subject to standby commitments or puts permit
the holder thereof to sell the securities at a fixed price
prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current
market price. However, unless the standby commitment or put
was an integral part of the security as originally issued,
it may not be marketable or assignable; therefore, the
standby commitment or put would only have value to the
Portfolio owning the security to which it relates. In
certain cases, a premium may be paid for a standby
commitment or put, which premium will have the effect of
reducing the yield otherwise payable on the underlying
security. The Portfolio will limit standby commitment or
put transactions to institutions believed to present
minimal credit risks.
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 Portfolio may
carry variable or floating rates of interest and may
involve a conditional or unconditional demand feature. Such
obligations may include variable amount master demand
notes. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities
may be reset daily, weekly, quarterly or at some other
interval, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing market
interest rates. A demand instrument with a demand notice
period exceeding seven days may be considered illiquid if
there is no secondary market for such security.
15
<PAGE>
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. The Portfolio will maintain with the
custodian a separate account with liquid securities or cash
in an amount at least equal to these commitments. The
interest rate realized on these securities is fixed as of
the purchase date, and no interest accrues to the Portfolio
before settlement.
16
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 3
The Trust................................................................. 4
Investment Objective and Policies......................................... 4
General Investment Policies............................................... 5
Risk Factors.............................................................. 5
Investment Limitations.................................................... 6
The Manager............................................................... 7
The Adviser............................................................... 7
Distribution and Shareholder Servicing.................................... 8
Purchase and Redemption of Shares......................................... 9
Performance............................................................... 10
Taxes..................................................................... 11
General Information....................................................... 13
Description of Permitted Investments and Risk Factors..................... 14
</TABLE>
17
<PAGE>
PROSPECTUS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
TAX FREE PORTFOLIO
- --------------------------------------------------------------------------------
Please read this Prospectus carefully before investing, and keep it on file for
future reference. It concisely sets forth information that can help you decide
if the Portfolio's investment goals match your own.
A Statement of Additional Information dated December 31, 1997 has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing the Distributor, SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling 1-800-437-6016. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Tax Exempt Trust (the "Trust") is an open-end investment management company,
certain classes of which offer shareholders a convenient means of investing
their funds in one or more professionally managed diversified and non-
diversified portfolios of securities. The Tax Free Portfolio offers two classes
of shares, Class A and Class D shares. Class D shares differ from Class A shares
primarily in the allocation of certain expenses and minimum investment amounts.
Class D shares are available through SEI Investments Distribution Co. (the
Trust's distributor), and through participating broker-dealers, financial
institutions and other organizations. This Prospectus offers Class D shares of
the Trust's Tax Free Portfolio (the "Portfolio"), a money market portfolio.
AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
HOW TO READ THIS PROSPECTUS
- --------------------------------------------------------------------------------
This Prospectus gives you information that you should know about the Portfolio
before investing. Brief descriptions are also provided throughout the Prospectus
to better explain certain key points. To find these helpful guides, look for
this symbol.[>]
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
The following summary provides basic information about the Class D shares of the
Portfolio. This summary is qualified in its entirety by reference to the more
detailed information provided elsewhere in this Prospectus and in the Statement
of Additional Information.
INVESTMENT OBJECTIVE
AND POLICIES
The Tax Free Portfolio seeks to preserve principal value
and maintain a high degree of liquidity while providing
current income exempt from federal income taxes. See
"Investment Objective and Policies" and "Description of
Permitted Investments and Risk
Factors."
UNDERSTANDING RISK
The Portfolio invests in U.S.
dollar denominated municipal
securities, the interest on
which is exempt from federal
income taxes. The investment
policies of the Portfolio entail
certain risks and considerations
of which an investor should be
aware. There can be no assurance
that the Portfolio will achieve
its investment objective. See
"Investment Objective and
Policies" and "Description of
Permitted Investments and Risk
Factors."
MANAGEMENT PROFILE
WEISS, PECK & GREER, L.L.C. (the
"Adviser"), serves as the
investment adviser of the
Portfolio. SEI Fund Management
serves as the manager and
shareholder servicing agent of
the Trust (the "Manager"). DST
Systems, Inc. ("DST"), serves as
transfer agent (the "Transfer
Agent") and dividend disbursing
agent for the Class D shares of
the Trust. SEI Investments
Distribution Co. acts as
distributor ("Distributor") of
the Trust's shares. See "The
Manager and Shareholder
Servicing Agent," "The Adviser"
and "Distribution."
...........................................................................
TABLE OF CONTENTS
<TABLE>
<S> <C>
FUND HIGHLIGHTS................................... 2
PORTFOLIO EXPENSES................................ 4
FINANCIAL HIGHLIGHTS.............................. 5
YOUR ACCOUNT AND DOING BUSINESS WITH US........... 6
INVESTMENT OBJECTIVE AND POLICIES................. 9
GENERAL INVESTMENT POLICIES....................... 10
INVESTMENT LIMITATIONS............................ 11
THE MANAGER AND SHAREHOLDER SERVICING AGENT....... 11
THE ADVISER....................................... 12
DISTRIBUTION...................................... 13
PERFORMANCE....................................... 13
TAXES............................................. 14
ADDITIONAL INFORMATION ABOUT DOING BUSINESS WITH
US........................................... 16
GENERAL INFORMATION............................... 18
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK
FACTORS...................................... 20
</TABLE>
...........................................................................
2
<PAGE>
YOUR ACCOUNT AND
DOING BUSINESS WITH
US
You may open an account with just $1,000, and make
additional investments with as little as $100. Redemptions
of the Portfolio's shares are made at net asset value per
share. See "Your Account and Doing Business With Us."
DIVIDENDS
Substantially all of the net
investment income (exclusive of
capital gains) of the Portfolio
is distributed in the form of
dividends that will be declared
daily and paid monthly on the
first Business Day of each
month. Any realized net capital
gain is distributed at least
annually. Distributions are paid
in additional shares unless the
shareholder elects to take the
payment in cash. See "General
Information--Dividends."
INFORMATION/SERVICE
CONTACTS
For more information about Class
D Shares, call 1-800-437-6016.
...........................................................................
[>] INVESTMENT PHILOSOPHY
BELIEVING THAT NO SINGLE INVESTMENT ADVISER CAN DELIVER OUTSTANDING PERFORMANCE
IN EVERY INVESTMENT CATEGORY, ONLY THOSE ADVISERS WHO HAVE DISTINGUISHED
THEMSELVES WITHIN THEIR AREAS OF SPECIALIZATION ARE SELECTED TO ADVISE OUR
MUTUAL FUNDS.
...........................................................................
3
<PAGE>
PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
The purpose of the following table is to help you understand the various cost
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in Class D shares.
SHAREHOLDER TRANSACTION EXPENSES (AS A PERCENTAGE OF OFFERING PRICE)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS D
-------
<S> <C>
Maximum Sales Load Imposed on Purchases (AS A PERCENTAGE OF
OFFERING PRICE) None
Maximum Sales Load Imposed on Reinvested Dividends (AS A
PERCENTAGE OF OFFERING PRICE) None
Redemption Fees (1) None
</TABLE>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS D
-------
<S> <C>
Management/Advisory Fees .40%
12b-1 Fees (AFTER FEE WAIVER) (2) .20%
Other Expenses .20%
- ---------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVER) (3) .80%
- ---------------------------------------------------------------------
</TABLE>
(1) A CHARGE, CURRENTLY $10.00, IS IMPOSED ON WIRES OF REDEMPTION PROCEEDS.
(2) THE DISTRIBUTOR HAS WAIVED, ON A VOLUNTARY BASIS, ALL OR A PORTION OF ITS
12b-1 FEE, AND THE 12b-1 FEES SHOWN REFLECT THIS WAIVER. THE DISTRIBUTOR
RESERVES THE RIGHT TO TERMINATE ITS WAIVER AT ANY TIME IN ITS SOLE
DISCRETION. ABSENT SUCH WAIVER, 12b-1 FEES WOULD BE .25% FOR THE PORTFOLIO.
(3) ABSENT THIS FEE WAIVER, TOTAL OPERATING EXPENSES FOR CLASS D SHARES OF THE
PORTFOLIO WOULD BE .85%. TOTAL OPERATING EXPENSES HAVE BEEN RESTATED TO
REFLECT CURRENT EXPENSES. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE
ADVISER" AND "THE MANAGER AND SHAREHOLDER SERVICING AGENT."
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
3 5 10
1 YR. YRS. YRS. YRS.
----- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
in the Class D shares assuming (1) a 5% annual return and
(2) redemption at the end of each time period: $ 8 $ 26 $ 44 $ 99
- ----------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSE.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE PORTFOLIO'S CLASS D SHARES. THE PORTFOLIO ALSO OFFERS
CLASS A SHARES, WHICH ARE SUBJECT TO THE SAME EXPENSES AS THE PORTFOLIO'S CLASS
D SHARES, EXCEPT THAT CLASS A SHARES BEAR DIFFERENT SHAREHOLDER SERVICING AND
TRANSFER AGENT COSTS. A PERSON THAT PURCHASES SHARES THROUGH AN ACCOUNT WITH A
FINANCIAL INSTITUTION MAY BE CHARGED SEPARATE FEES BY THE FINANCIAL INSTITUTION.
ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE MANAGER AND SHAREHOLDER SERVICING
AGENT," "DISTRIBUTION," AND "THE ADVISER."
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT END SALES CHARGES PERMITTED BY THE CONDUCT RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
4
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following financial highlights for a share outstanding throughout each
period have been derived from the Trust's financial statements which were
audited by Arthur Andersen LLP, independent accountants, whose report thereon,
dated October 17, 1997, was unqualified. This information should be read in
conjunction with the Trust's financial statements for the fiscal year ended
August 31, 1997, and notes thereto which are incorporated by reference to the
Trust's Statement of Additional Information. Additional performance information
is set forth in the Trust's 1997 Annual Report to Shareholders, which is
available upon request and without charge by calling 1-800-437-6016.
FOR A CLASS D SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
INVESTMENT NET REALIZED
ACTIVITIES: DISTRIBUTIONS: AND UNREALIZED
NET ASSET ----------- --------------------------------------------- GAIN (LOSS) ON
VALUE, NET NET INVESTMENTS
BEGINNING INVESTMENT NET INVESTMENT REALIZED TOTAL AND CAPITAL
OF PERIOD INCOME INCOME GAIN DISTRIBUTIONS TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------
TAX FREE PORTFOLIO
- ------------------
Class D
FOR THE YEAR ENDED
AUGUST 31,
1997 $ 1.00 $0.028 $ (0.028) $ -- $(0.028) $ --
1996 1.00 0.030 (0.030) -- (0.030) --
1995 (1) 1.00 0.026 (0.026) -- (0.026) --
<CAPTION>
RATIO OF
NET
RATIO OF INVESTMENT
EXPENSES RATIO OF INCOME
TO AVERAGE NET TO AVERAGE
NET ASSETS, RATIO OF NET ASSETS INVESTMENT NET ASSETS
NET ASSET END OF EXPENSES (EXCLUDING INCOME (EXCLUDING
VALUE, END OF PERIOD TO AVERAGE FEE TO AVERAGE FEE
PERIOD TOTAL RETURN (000) NET ASSETS WAIVERS) NET ASSETS WAIVERS)
- ------------------------ -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------
TAX FREE PORTFOLIO
- ------------------
Class D
FOR THE YEAR ENDED
AUGUST 31,
1997 $1.00 2.86% $ 1 0.74% 0.74% 3.04% 3.04%
1996 1.00 2.99% 6 0.80% 0.88% 3.18% 3.10%
1995 (1) 1.00 2.68%+ 272 0.80%* 0.86%* 3.13%* 3.07%*
</TABLE>
* ANNUALIZED.
+ RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) THE TAX FREE PORTFOLIO--CLASS D COMMENCED OPERATIONS ON NOVEMBER 1, 1994.
5
<PAGE>
YOUR ACCOUNT AND DOING BUSINESS WITH US
- --------------------------------------------------------------------------------
Class D shares of the Portfolio are sold on a continuous basis and may be
purchased directly from the Trust's Transfer Agent, DST Systems, Inc. Shares may
also be purchased through financial institutions, broker-dealers, or other
organizations which have established a dealer agreement or other arrangement
with SEI Investments Distribution Co. ("Intermediaries"). For more information
about the following topics, see "Additional Information About Doing Business
with Us."
- --------------------------------------------------------------------------------
HOW TO BUY, SELL AND
EXCHANGE SHARES
THROUGH
INTERMEDIARIES
Class D shares of the Portfolio may be purchased through
Intermediaries. Contact your Intermediary for information
on how to buy, sell and exchange shares. To allow for
processing and transmittal of orders to the Transfer Agent
(or its authorized agent) on the
same day, Intermediaries may
impose earlier cut-off times for
receipt of purchase orders.
Certain Intermediaries may
charge customer account fees.
Information concerning any
charges will be provided to the
customer by the Intermediary.
The shares you purchase
through an Intermediary may be
held "of record" by that
Intermediary. If you want to
transfer the registration of
shares beneficially owned by
you, but held "of record" by an Intermediary, you should
call the Intermediary to request this change.
...........................................................................
[>] WHAT IS AN INTERMEDIARY?
ANY ENTITY, SUCH AS A BANK, BROKER-DEALER, OTHER FINANCIAL INSTITUTION,
ASSOCIATION OR ORGANIZATION WHICH HAS ENTERED INTO AN ARRANGEMENT WITH THE
DISTRIBUTOR TO SELL CLASS D SHARES TO ITS CUSTOMERS.
...........................................................................
HOW TO BUY SHARES
FROM THE TRANSFER
AGENT
Account application forms may be obtained by calling
1-800-437-6016.
OPENING AN ACCOUNT BY
CHECK
You may buy Class D shares by mailing a completed
application and a check (or other negotiable bank
instrument or money order) to the Transfer Agent (or its
authorized agent). All purchases made by check should be in
U.S. dollars and made payable to "Class D Shares (Tax Free
Portfolio)." If you send a check that does not clear, the
purchase will be canceled and you could be liable for any
losses or fees incurred. Third-party checks, credit cards,
credit card checks and cash will not be accepted. When
purchases are made by check (including certified or
cashier's checks), redemption proceeds will not be
forwarded until the check providing for the investment
being redeemed has cleared (which may take up to 15 days).
BY FED WIRE
You may buy shares by Fed Wire by calling 1-800-437-6016.
AUTOMATIC INVESTMENT
PLAN ("AIP")
You may systematically buy Class D shares through
deductions from your checking or savings accounts, provided
these accounts are maintained through banks which are part
of the Automated Clearing House ("ACH") system. You may
purchase shares on a fixed schedule (semi-monthly or
monthly) with amounts as low as $25, or as high as
$100,000. Upon notice, the amount you commit to the AIP may
be changed or canceled at any time. The AIP is subject to
account minimum initial purchase amounts and minimum
balance maintenance requirements.
6
<PAGE>
EXCHANGING SHARES
WHEN CAN YOU
EXCHANGE SHARES?
Once good payment for your shares has been received and
accepted (I.E., an account has been established), you may
exchange some or all of your shares for Class D shares of
the Trust or of SEI Liquid Asset Trust, SEI Daily Income
Trust, SEI International Trust and SEI Institutional
Managed Trust ("SEI Funds"). Exchanges are made at net
asset value plus any applicable sales charge.
WHEN DO SALES CHARGES
APPLY TO AN EXCHANGE?
SEI Funds' portfolios that are
not money market portfolios
currently impose a sales charge
on Class D shares. If you
exchange into one of these "non-
money market" portfolios, you
will have to pay a sales charge
on any portion of your exchanged
Class D shares for which you
have not previously paid a sales
charge.
If you previously paid a
sales charge on your Class D
shares, no additional sales
charge will be assessed when you
exchange those Class D shares
for other Class D shares.
If you buy Class D shares
of a "non-money market" fund and
you receive a sales charge
waiver, you will be deemed to have paid the sales charge
for purposes of this exchange privilege. In calculating any
sales charge payable on your exchange, the Trust will
assume that the first shares you exchange are those on
which you have already paid a sales charge. Sales charge
waivers may also be available under certain circumstances
described in the SEI Funds' prospectuses.
...........................................................................
[>] HOW DOES AN EXCHANGE TAKE PLACE?
WHEN MAKING AN EXCHANGE, YOU AUTHORIZE THE SALE OF YOUR SHARES OF ONE OR MORE
PORTFOLIOS IN ORDER TO PURCHASE THE SHARES OF ANOTHER PORTFOLIO. IN OTHER WORDS,
YOU ARE EXECUTING A SELL ORDER AND THEN A BUY ORDER. THIS SALE OF YOUR SHARES IS
A TAXABLE EVENT WHICH COULD RESULT IN A TAXABLE GAIN OR LOSS.
...........................................................................
The Trust reserves the right to change the terms and
conditions of the exchange privilege discussed herein, or
to terminate the exchange privilege, upon 60 days' notice.
The Trust also reserves the right to deny an exchange
request made within 60 days of the purchase of a "non-money
market" portfolio.
REQUESTING AN EXCHANGE
OF SHARES
To request an exchange, you must provide proper
instructions in writing to the Transfer Agent (or its
authorized agent). Telephone exchanges will also be
accepted if you previously elected this option on your
account application.
In the case of shares held "of record" by an
Intermediary but beneficially owned by you, you should
contact the Intermediary who will contact the Transfer
Agent and effect the exchange on your behalf.
HOW TO SELL SHARES
THROUGH THE
TRANSFER AGENT
To sell your shares, a written request for redemption in
good order must be received by the Transfer Agent (or its
authorized agent). Valid written redemption requests will
be effective on receipt. All shareholders of record must
sign the redemption request. The Transfer Agent may require
that the signatures on written requests be guaranteed.
7
<PAGE>
BY MAIL
For information about the proper form of redemption
requests, call 1-800-437-6016. You may also have the
proceeds mailed to an address of record or mailed (or sent
by ACH) to a commercial bank account previously designated
on the Account Application or specified by written
instruction to the Transfer Agent. There is no charge for
having redemption requests mailed to a designated bank
account.
BY TELEPHONE
You may sell your shares by telephone if you previously
elected that option on the Account Application. You may
have the proceeds mailed to the address of record, wired or
sent by ACH to a commercial bank account previously
designated on the Account Application.
Under most circumstances,
payments will be transmitted on
the next Business Day following
receipt of a valid telephone
request for redemption. Wire
redemption requests may be made
by calling 1-800-437-6016, who
will subtract a wire redemption
charge (presently $10.00) from
the amount of the redemption.
SYSTEMATIC WITHDRAWAL
PLAN ("SWP")
You may establish a systematic
withdrawal plan for an account
with a $10,000 minimum balance.
Under the plan, redemptions can
be automatically processed from
accounts (monthly, quarterly,
semi-annually or annually) by
check or by ACH with a minimum
redemption amount of $50.
...........................................................................
[>] WHAT IS A SIGNATURE GUARANTEE?
A SIGNATURE GUARANTEE VERIFIES THE AUTHENTICITY OF YOUR SIGNATURE AND MAY BE
OBTAINED FROM ANY OF THE FOLLOWING: BANKS, BROKERS, DEALERS, CERTAIN CREDIT
UNIONS, SECURITIES EXCHANGE OR ASSOCIATION, CLEARING AGENCY OR SAVINGS
ASSOCIATION. A NOTARY PUBLIC CANNOT PROVIDE A SIGNATURE GUARANTEE.
...........................................................................
CHECK-WRITING
Check-Writing Service is offered free of charge to Class D
shareholders in the Portfolio. You may redeem shares by
writing checks on your account for $500 or more. Once you
have signed and returned a signature card, you will receive
a supply of checks. A check may be made payable to any
person, and your account will continue to earn dividends
until the check clears.
Because of the difficulty of determining in advance
the exact value of your account, you may not use a check to
close your account. The checks are free, but your account
will be charged a fee for stopping payment of a check upon
your request or if the check cannot be honored because of
insufficient funds or other valid reasons.
8
<PAGE>
INVESTMENT OBJECTIVE
AND POLICIES
___________________________________________________________________________
The Portfolio'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 Portfolio will
meet its investment objective.
The Portfolio 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
(collectively, "Municipal
Securities"). At least 80% of
the Portfolio's net assets will
be invested in securities the
interest on 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 Portfolio. Under normal
conditions, the Portfolio will
invest at least 80% of its net
assets in securities the
interest on which is not a
preference item for purposes of
the federal alternative minimum
tax.
The Portfolio 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. See
"General Investment Policies."
...........................................................................
[>] WHAT ARE INVESTMENT OBJECTIVES AND POLICIES?
THE PORTFOLIO'S INVESTMENT OBJECTIVE IS A STATEMENT OF WHAT IT SEEKS TO ACHIEVE.
IT IS IMPORTANT TO MAKE SURE THAT THE INVESTMENT OBJECTIVE MATCHES YOUR OWN
FINANCIAL NEEDS AND CIRCUMSTANCES. THE INVESTMENT POLICIES SECTION SPELLS OUT
THE TYPES OF SECURITIES IN WHICH THE PORTFOLIO INVESTS.
...........................................................................
The Adviser will not invest more than 25% of
Portfolio 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 Portfolio's assets are invested in Municipal Securities
payable from revenues on similar projects, the Portfolio
will be subject to the peculiar risks presented by such
projects to a greater extent than it would be if the
Portfolio's assets were not so invested. Moreover, in
seeking to attain its investment objective, the Portfolio
may invest all or any part of its assets in Municipal
Securities that are industrial development bonds.
9
<PAGE>
GENERAL INVESTMENT
POLICIES
___________________________________________________________________________
In purchasing obligations, the Portfolio complies with the
requirements of Rule 2a-7 under the Investment Company Act
of 1940 (the "1940 Act"), as that Rule may be amended from
time to time. These requirements currently provide that the
Portfolio must limit its investments to securities with
remaining maturities of 397 days or less, and must maintain
a dollar-weighted average maturity of 90 days or less. In
addition, the Portfolio may only invest in eligible
securities. In general, this means securities rated in one
of the two highest categories for short-term securities by
at least two nationally recognized statistical rating
organizations ("NRSROs") (or by one NRSRO if only one NRSRO
has rated the security), or, if unrated, determined by
Weiss, Peck & Greer, L.L.C. (the "Adviser") to be of
equivalent quality. Since the Portfolio 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 Portfolio
and affect its share price.
Securities rated in the highest rating category
(E.G., A-1 by Standard & Poor's Corporation ("S&P")) by at
least two NRSROs (or, if unrated, determined by the Adviser
to be of comparable quality) are "first tier" securities.
Non-first tier securities rated in the second highest
rating category (E.G., A-2 by S&P) by at least one NRSRO
(or, if unrated, determined by the Adviser to be of
comparable quality) are considered to be "second tier"
securities. The Portfolio's investments in non-first tier
conduit securities will be limited to 5% of the Portfolio's
assets. Conduit securities are securities issued to finance
non-governmental private projects, such as housing
developments and retirement homes, and for which the
ultimate obligor is not a governmental issuer.
The Portfolio may invest in variable and floating
rate obligations, may purchase securities on a
"when-issued" basis, and reserves the right to engage in
transactions involving standby commitments. The Portfolio
will not invest more than 10% of its net assets in illiquid
securities.
The Adviser has discretion to invest up to 20% of the
Portfolio's assets in taxable money market instruments
(including repurchase agreements) and securities the
interest on which is a preference item for purposes of the
federal alternative minimum tax. However, the Portfolio
generally intends to be fully invested in federally
tax-exempt securities.
For a description of the Portfolio's permitted
investments and ratings, see the "Description of Permitted
Investments and Risk Factors" and the Statement of
Additional Information.
10
<PAGE>
INVESTMENT
LIMITATIONS
________________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolio. Fundamental policies
cannot be changed with respect to the Trust or the
Portfolio without the consent of the holders of a majority
of the Trust's or the Portfolio's outstanding shares. It is
a fundamental policy of the Portfolio to use its best
efforts to maintain a constant net asset value of $1.00 per
share.
THE PORTFOLIO MAY NOT:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the United States Government,
its agencies or instrumentalities) if, as a result, more
than 5% of the total assets of the Portfolio (based on
current value at the time of investment) would be
invested in the securities of such issuer, provided,
however, that the Portfolio may invest up to 25% of its
total assets without regard to this restriction of, and
as permitted by, Rule 2a-7.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio, based on 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 the total assets of the Portfolio. All
borrowings will be repaid before making additional
investments and any interest paid on such borrowings
will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at
the time of the purchase of a security. Additional
fundamental investment limitations are set forth in the
Statement of Additional Information.
THE MANAGER,
SHAREHOLDER
SERVICING AGENT AND
TRANSFER AGENT
______________________________________________________________________________
SEI Fund Management (the "Manager") provides the Trust with
overall management services, regulatory reporting, all
necessary office space, equipment, personnel and
facilities, and serves as the Trust's institutional
transfer agent, dividend disbursing agent, and shareholder
servicing agent.
For these services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .36% of the average daily net assets of the
Portfolio. The Manager has voluntarily waived a portion of
its fees in order to limit the total
11
<PAGE>
operating expenses of the Class D shares of the Portfolio
to not more than .80% of the Portfolio's average daily net
assets attributable to Class D shares, on an annualized
basis. The Manager reserves the right, in its sole
discretion, to terminate this voluntary fee waiver at any
time.
For the fiscal year ended August 31, 1997, the
Portfolio paid management fees, after waivers, of .36% of
its average daily net assets.
The Trust and DST Systems, Inc., 1004 Baltimore
Avenue, Kansas City, Missouri, 64105 ("DST"), have entered
into a separate transfer agent agreement, with respect to
the Class D shares of the Portfolio. Under this agreement,
DST acts as the transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Class D shares of the
Trust.
THE ADVISER
_______________________________________________________________________
Weiss, Peck & Greer, L.L.C., acts as the Portfolio's
investment adviser under an advisory agreement with the
Trust (the "Advisory Agreement"). Under the Advisory
Agreement, the Adviser invests
the assets of the Portfolio, and
continuously reviews, supervises
and administers the Portfolio's
investment program. The Adviser
is independent of the Manager
and SEI, and discharges its
responsibilities subject to the
supervision of, and policies set
by, the Trustees of the Trust.
The Adviser is a limited
liability company founded as a
limited partnership in 1970, and
engages in investment
management, venture capital
management and management
buyouts. WPG has been active
since its founding in managing
portfolios of tax exempt
securities. As of September 30,
1997, total assets under management were approximately
$14.6 billion. The principal business address of the
Adviser is One New York Plaza, New York, New York 10004.
...........................................................................
[>] INVESTMENT
ADVISER
THE PORTFOLIO'S INVESTMENT ADVISER MANAGES THE INVESTMENT ACTIVITIES AND IS
RESPONSIBLE FOR THE PERFORMANCE OF THE PORTFOLIO. THE ADVISER CONDUCTS
INVESTMENT RESEARCH, EXECUTES INVESTMENT STRATEGIES BASED ON AN ASSESSMENT OF
ECONOMIC AND MARKET CONDITIONS, AND DETERMINES WHICH SECURITIES TO BUY, HOLD OR
SELL.
...........................................................................
Janet Fiorenza acts as the portfolio manager for the
Portfolio. Ms. Fiorenza, a Principal of the Adviser, has
been associated with the Adviser's Tax Exempt Fixed Income
group since 1988, and with its predecessor since 1980.
For its services, the Adviser is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .05% of the combined average daily net assets of
the money market portfolios of the Trust that are advised
by the Adviser up to $500 million, .04% of such assets from
$500 million to $1 billion, and .03% of such assets in
excess of $1 billion. Such fees are allocated daily among
these portfolios based on their relative net assets. For
the fiscal year ended August 31, 1997, the Portfolio paid
advisory fees, after waivers, of .04% of its relative net
assets.
12
<PAGE>
DISTRIBUTION
_______________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), a
wholly-owned subsidiary of SEI Investments Company ("SEI
Investments"), serves as each Portfolio's distributor
pursuant to a distribution agreement (the "Distribution
Agreement") with the Trust. The Trust has adopted a
distribution plan for its Class D shares (the "Class D
Plan,"), pursuant to Rule 12b-1 under the 1940 Act.
The Class D Plan provides for payments to the
Distributor at an annual rate of .25% of the Portfolio's
average daily net assets attributable to Class D shares.
This payment may be used to compensate financial
institutions that provide distribution-related services to
their customers. These payments are characterized as
"compensation," and are not directly tied to expenses
incurred by the Distributor; the payments the Distributor
receives during any year may therefore be higher or lower
than its actual expenses. These payments compensate the
Distributor for its services in connection with
distribution assistance or provision of shareholder
services, and some or all of it may be used to pay
financial institutions and intermediaries such as banks,
savings and loan associations, insurance companies, and
investment counselors, broker-dealers (including the
Distributor's affiliates and subsidiaries) for services or
reimbursement of expenses incurred in connection with
distribution assistance or provision of shareholder
services. If the Distributor's expenses are less than its
fees under the Class D Plan, the Trust will still pay the
full fee and the Distributor will realize a profit, but the
Trust will not be obligated to pay in excess of the full
fee, even if the Distributor's actual expenses are higher.
It is possible that an institution may offer
different classes of shares to its customers and thus
receive different compensation with respect to different
classes. These financial institutions may also charge
separate fees to their customers.
The Trust may execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive compensation.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolio's
shares.
PERFORMANCE
______________________________________________________________________
From time to time the Portfolio advertises its "current
yield," "tax equivalent yield" and "effective yield." These
figures are based on historical earnings and are not
intended to indicate future performance. The "current
yield" of the Portfolio refers to the income generated by
an investment over a seven-day period which is then
"annualized." That is, the amount of income generated by
the investment during the week is assumed to be generated
each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" (also
called "effective compound yield") is calculated similarly
but, when annualized, the income earned by an investment is
assumed to be
13
<PAGE>
reinvested. The "effective yield" will be slightly higher
than the "current yield" because of the compounding effect
of this assumed reinvestment. The "tax equivalent yield" is
calculated by determining the rate of return that would
have been achieved on a fully taxable investment to produce
the after-tax equivalent of the Portfolio's yield, assuming
certain tax brackets for a shareholder.
The Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives.
The Portfolio may also quote financial and business
publications and periodicals as they relate to fund
management, investment philosophy and investment
techniques.
The performance of Class D shares will normally be
lower than that of Class A shares of the Portfolio because
of the additional distribution and transfer agent expenses
charged to Class D shares.
TAXES
______________________________________________________________________________
The following summary of federal income tax consequences is
based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No attempt has been made to present a detailed explanation
of the federal income tax treatment of the
Portfolio or its shareholders,
and state and local tax
consequences of an investment in
the Portfolio may differ from
the federal income tax
consequences described below.
Accordingly, shareholders are
urged to consult their tax
advisers regarding specific
questions as to federal, state
and local income taxes.
Additional information
concerning taxes is set forth in
the Statement of Additional
Information.
TAX STATUS OF THE
PORTFOLIO:
The Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended, (the "Code"), so as to be
relieved of federal income tax on net investment company
taxable income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss)
distributed to shareholders.
...........................................................................
[>] TAXES
YOU MUST PAY TAXES ON YOUR PORTFOLIO'S EARNINGS WHETHER YOU TAKE YOUR PAYMENTS
IN CASH OR ADDITIONAL SHARES.
...........................................................................
14
<PAGE>
TAX STATUS OF
DISTRIBUTIONS:
The Portfolio intends to
distribute substantially all of
its net investment income
(including net short-term
capital gain) to shareholders.
If, at the close of each quarter
of its taxable year, at least
50% of the value of the
Portfolio's total assets
consists of obligations the
interest on which is excludable
from gross income, the Portfolio
may pay "exempt-interest
dividends" to its shareholders.
Exempt-interest dividends are
excludable from a shareholder's
gross income for federal income
tax purposes but may have
certain collateral federal tax
consequences, including alternative minimum tax
consequences. In addition, the receipt of exempt-interest
dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxable on a portion of
such benefits. See the Statement of Additional Information.
...........................................................................
[>] DISTRIBUTIONS
THE PORTFOLIO DISTRIBUTES INCOME DIVIDENDS AND CAPITAL GAINS. INCOME DIVIDENDS
REPRESENT THE EARNINGS FROM THE PORTFOLIO'S INVESTMENTS; CAPITAL GAINS
DISTRIBUTIONS OCCUR WHEN INVESTMENTS IN THE PORTFOLIO ARE SOLD FOR MORE THAN THE
ORIGINAL PURCHASE PRICE.
...........................................................................
Any dividends paid out of income realized by the
Portfolio on taxable securities will be taxable to
shareholders as ordinary income (whether received in cash
or in additional shares) to the extent of the Portfolio's
earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders.
Distributions of net capital gains of the Portfolio also
will not qualify for the dividends received deduction and
will be taxable to shareholders as long-term capital gains
whether received in cash or additional shares, and
regardless of how long a shareholder has held the shares.
Dividends declared by the Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in any such month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if paid by the
Portfolio at any time during the following January. The
Portfolio intends to make sufficient distributions prior to
the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment
companies.
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of the
Portfolio is not deductible for federal income tax purposes
to the extent that it relates to exempt-interest dividends
distributed to the shareholder during the taxable year.
Furthermore, the Portfolio may not be an appropriate
investment for persons (including corporations and other
business entities) who are "substantial users" (or persons
related to "substantial users") of facilities financed by
industrial development bonds or private activity bonds.
Such persons should consult their tax advisers before
purchasing shares.
The Portfolio will report annually to its
shareholders the portion of dividends that is taxable and
the portion that is tax-exempt based on income received by
the Portfolio during the year to which the dividends
relate.
Each sale, exchange, or redemption of the Portfolio's
shares is a taxable transaction to the shareholder.
15
<PAGE>
ADDITIONAL
INFORMATION ABOUT
DOING BUSINESS
WITH US
____________________________________________________________________________
BUSINESS DAYS
You may buy, sell or exchange shares on days on which the
New York Stock Exchange is open for business (a "Business
Day"). All purchase, exchange and redemption requests
received in "good order" will be effective as of the
Business Day received by the Transfer Agent (or its
authorized agent) as long as the Transfer Agent (or its
authorized agent) receives the order and, in the case of a
purchase request, payment before 12:30 p.m., Eastern time,
for redemption and exchange requests, and prior to the
determination of net asset value per share of the Portfolio
for purchase requests. Otherwise the purchase will be
effective when payment is received. Broker-dealers may have
separate arrangements with the Trust regarding the sale of
Class D shares of the Portfolio.
If an exchange request is
for shares of a portfolio whose
net asset value is calculated as
of a time earlier than 2:00
p.m., Eastern time, the exchange
request will not be effective
until the next Business Day.
Anyone who wishes to make an
exchange must have received a
current prospectus of the
portfolio into which the
exchange is being made before
the exchange will be effected.
MINIMUM INVESTMENTS
The minimum initial investment
in the Portfolio's Class D
shares is $1,000; however, the
minimum investment may be waived
at the Distributor's discretion.
All subsequent purchases must be
at least $100 ($25 for payroll
deductions authorized pursuant
to pre-approved payroll
deduction plans). The Trust reserves the right to reject a
purchase order when the Distributor determines that it is
not in the best interest of the Trust or its shareholders
to accept such order.
...........................................................................
[>] BUY, EXCHANGE AND SELL REQUESTS ARE IN "GOOD ORDER" WHEN:
- - THE ACCOUNT NUMBER AND PORTFOLIO NAME ARE SHOWN
- THE AMOUNT OF THE TRANSACTION IS SPECIFIED IN DOLLARS OR SHARES
- SIGNATURES OF ALL OWNERS APPEAR EXACTLY AS THEY ARE REGISTERED ON THE
ACCOUNT
- ANY REQUIRED SIGNATURE GUARANTEES (IF APPLICABLE) ARE INCLUDED
- OTHER SUPPORTING LEGAL DOCUMENTS (AS NECESSARY) ARE PRESENT
...........................................................................
MAINTAINING A MINIMUM
ACCOUNT BALANCE
Due to the relatively high cost of handling small
investments, the Portfolio reserves the right to redeem, at
net asset value, the shares of any shareholder if, because
of redemptions of shares by or on behalf of the
shareholder, the account of such shareholder in the
Portfolio has a value of less than $1,000, the minimum
initial purchase amount. Accordingly, an investor
purchasing shares of the Portfolio in only the minimum
investment amount may be subject to such involuntary
redemption if he or she thereafter redeems any of these
shares. Before the Portfolio exercises its right to redeem
such shares and to send the proceeds to the shareholder,
the shareholder will be given notice that the value of the
shares in his or her account is less than the minimum
amount and will be allowed 60 days to make an additional
investment in the Portfolio in an amount that will increase
16
<PAGE>
the value of the account to at least $1,000. See "Purchase
and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption
may be suspended.
At various times, the Portfolio may receive a request
to redeem shares for which it has not yet received good
payment. In such circumstances, redemption proceeds will be
forwarded upon collection of payment for the shares;
collection of payment may take up to 15 days. The Portfolio
intends to pay cash for all shares redeemed, but under
abnormal conditions that make payment in cash unwise,
payment may be made wholly or partly in portfolio
securities with a market value equal to the redemption
price. In such cases, an investor may incur brokerage costs
in converting such securities to cash.
NET ASSET VALUE
An order to buy shares will be executed at a per share
price equal to the net asset value next determined after
the receipt of the purchase order by the Transfer Agent
(the "offering price"). The purchase price of shares is
expected to remain constant at $1.00. No certificates
representing shares will be issued. An order to sell shares
will be executed at the net asset value per share next
determined after receipt and effectiveness of a request for
redemption in good order. Net asset value per share is
determined daily as of 2:00 p.m., Eastern time, on any
Business Day. Payment to shareholders for shares redeemed
will be made within 7 days after receipt by the Transfer
Agent (or its authorized agent) of the redemption order.
HOW THE NET ASSET VALUE
IS
DETERMINED
The net asset value per share of the Portfolio is
determined by dividing the total market value of its
investments and other assets, less any liabilities, by the
total number of outstanding shares of the Portfolio. The
Portfolio's investments will be valued by the amortized
cost method described in the Statement of Additional
Information. Although the methodology and procedures for
determining net asset value per share are identical for
each class of the Portfolio, the net asset value per share
of one class may differ from that of another class because
of the different distribution fees and incremental transfer
agent fees charged to Class D shares.
SIGNATURE GUARANTEES
The Transfer Agent may require that the signatures on the
written request be guaranteed. You should be able to obtain
a signature guarantee from a bank, broker, dealer, certain
credit unions, securities exchange or association, clearing
agency or savings association. Notaries public cannot
guarantee signatures. The signature guarantee requirement
will be waived if all of the following conditions apply:
(1) the redemption is for not more than $5,000 worth of
shares, (2) the redemption check is payable to the
shareholder(s) of record, and (3) the redemption check is
mailed to the shareholder(s) at his or her address of
record. The Trust and the Transfer Agent reserve the right
to amend these requirements without notice.
TELEPHONE/WIRE
INSTRUCTIONS
Redemption orders may be placed by telephone. Neither the
Trust nor the Transfer Agent will be responsible for any
loss, liability, cost or expense for acting upon wire
instructions
17
<PAGE>
or upon telephone instructions that it reasonably believes
to be genuine. The Trust and the Transfer Agent will each
employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including requiring
a form of personal identification prior to acting upon
instructions received by telephone and recording telephone
instructions. If market conditions are extraordinarily
active, or other extraordinary circumstances exist, and you
experience difficulties placing redemption orders by
telephone, you may wish to consider placing your order by
other means.
SYSTEMATIC WITHDRAWAL
PLAN ("SWP")
Please note that if withdrawals exceed income dividends,
your invested principal in the account will be depleted.
Thus, depending upon the frequency and amounts of the
withdrawal payments and/or any fluctuations in the net
asset value per share, your original investment could be
exhausted entirely. To participate in the SWP, you must
have your dividends automatically reinvested. You may
change or cancel the SWP at any time, upon written notice
to the Transfer Agent.
HOW TO CLOSE YOUR
ACCOUNT
An account may be closed by providing written notice to the
Transfer Agent. You may also close your account by
telephone if you have previously elected telephone options
on your account application.
GENERAL INFORMATION
_______________________________________________________________________
THE TRUST
SEI Tax Exempt Trust (the"Trust") was organized as a
Massachusetts business trust under a Declaration of Trust
dated March 15, 1982. The Declaration of Trust permits the
Trust to offer separate portfolios of shares and different
classes of each portfolio. Shareholders may purchase shares
in the Portfolio through two separate classes: Class A and
Class D, which provide for variation in distribution and
transfer agent costs, voting rights, and dividends. This
Prospectus offers Class D shares of the Trust's Tax Free
Portfolio. In addition to the Portfolio, the Trust consists
of the following portfolios: Institutional Tax Free
Portfolio, California Tax Exempt Portfolio,
Intermediate-Term Municipal Portfolio, Pennsylvania
Municipal Portfolio, New York Intermediate-Term Municipal
Portfolio and Pennsylvania Tax Free Portfolio. Additional
information pertaining to the Trust may be obtained by
writing to SEI Fund Management, Oaks, Pennsylvania 19456,
or by calling 1-800-437-6016. All consideration received by
the Trust for shares of any portfolio and all assets of
such portfolio belong to that portfolio and would be
subject to liabilities related thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation material and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
18
<PAGE>
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class of the
Trust will vote separately on matters relating solely to
that portfolio or class, such as any distribution plan. As
a Massachusetts business trust, the Trust is not required
to hold annual meetings of shareholders, but shareholder
approval will be sought for certain changes in the
operation of the Trust and for the election of Trustees
under certain circumstances. In addition, a Trustee may be
removed by the remaining Trustees or by shareholders at a
special meeting called upon written request of shareholders
owning at least 10% of the outstanding shares of the Trust.
In the event that such a meeting is requested, the Trust
will provide appropriate assistance and information to the
shareholders requesting the meeting.
REPORTING
The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Transfer
Agent, DST Systems, Inc., 1004 Baltimore Avenue, Kansas
City, Missouri, 64141-6240.
DIVIDENDS
The net investment income (exclusive of capital gains) of
the Portfolio is determined and declared on each Business
Day as a dividend for shareholders of record as of the
close of business on that day. Dividends are paid by the
Portfolio in cash or in additional shares at the discretion
of the shareholder on the first Business Day of each month.
Currently, capital gains, if any, are distributed at the
end of the calendar year.
The dividends on Class D shares of the Portfolio will
normally be lower than those on Class A shares because of
the additional distribution and transfer agent expenses
charged to Class D shares.
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares, unless the shareholder has elected to take such
payment in cash. Shareholders may change their election by
providing written notice to the Manager at least 15 days
prior to the distribution.
COUNSEL AND INDEPENDENT
PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
CUSTODIAN AND WIRE AGENT
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, serves as custodian
of the Trust's assets and acts as wire agent of the Trust.
The Custodian holds cash, securities and other assets of
the Trust as required by the 1940 Act.
19
<PAGE>
DESCRIPTION OF
PERMITTED
INVESTMENTS AND RISK
FACTORS ______________________________________________________________________
The following is a description of certain of the permitted
investments for the Portfolio, and the associated risk
factors:
MONEY MARKET SECURITIES
Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks; (ii) U.S. Treasury obligations and obligations
issued by the agencies and instrumentalities of the U.S.
Government; and (iii) repurchase agreements involving any
of the foregoing obligations entered into with highly-rated
banks and broker-dealers.
MUNICIPAL SECURITIES
Municipal Securities consist of (i) debt obligations issued
by or on behalf of public authorities to obtain funds to be
used for various public facilities, for refunding
outstanding obligations, for general operating expenses and
for lending such funds to other public institutions and
facilities, and (ii) certain private activity and
industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately
operated facilities.
General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed
by the revenues of a project or facility, tolls from a toll
bridge, for example. Certificates of participation
represent an interest in an underlying obligation or
commitment such as an obligation issued in connection with
a leasing arrangement. The payment of principal and
interest on private activity and industrial development
bonds generally is dependent solely on the ability of the
facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed
as security for such payment.
Municipal notes include general obligation notes, tax
anticipation notes, revenue anticipation notes, bond
anticipation notes, certificates of indebtedness, demand
notes and construction loan notes and participation
interests in municipal notes. Municipal bonds include
general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds
and participation interests in municipal bonds.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements by which a Portfolio
obtains a security and simultaneously commits to return the
security to the seller at an agreed upon price (including
principal and interest) on an agreed upon date within a
number of days from the date of purchase. Repurchase
agreements are considered loans under the 1940 Act.
STANDBY COMMITMENTS AND
PUTS
Securities subject to standby commitments or puts permit
the holder thereof to sell the securities at a fixed price
prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current
market price. However, unless the standby
20
<PAGE>
commitment or put was an integral part of the security as
originally issued, it may not be marketable or assignable;
therefore, the standby commitment or put would only have
value to the Portfolio owning the security to which it
relates. In certain cases, a premium may be paid for a
standby commitment or put, which premium will have the
effect of reducing the yield otherwise payable on the
underlying security. The Portfolio will limit standby
commitment or put transactions to institutions believed to
present minimal credit risks.
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 Portfolio may
carry variable or floating rates of interest and may
involve a conditional or unconditional demand feature. Such
obligations may include variable amount master demand
notes. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities
may be reset daily, weekly, quarterly or at some other
interval and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing market
interest rates. A demand instrument with a demand notice
period exceeding seven days may be considered illiquid if
there is no secondary market for such security.
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. The Portfolio will maintain with the
custodian a separate account with liquid securities or cash
in an amount at least equal to these commitments. The
interest rate realized on these securities is fixed as of
the purchase date, and no interest accrues to the Portfolio
before settlement.
21
<PAGE>
SEI TAX EXEMPT TRUST
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NEW YORK INTERMEDIATE-TERM MUNICIPAL PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely information about the above-referenced
Portfolio that an investor needs to know before investing. Please read this
Prospectus carefully before investing, and keep it on file for future reference.
A Statement of Additional Information dated December 31, 1997, has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing the Distributor, SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Tax Exempt Trust (the "Trust") is an open-end investment management company,
certain classes of which offer financial institutions a convenient means of
investing their own funds, or funds for which they act in a fiduciary, agency or
custodial capacity, in professionally managed diversified and non-diversified
portfolios of securities. A portfolio may offer separate classes of shares that
differ from each other primarily in the allocation of certain expenses and
minimum investment amounts. This Prospectus offers Class A shares of the Trust's
New York Intermediate-Term Municipal Portfolio (the "Portfolio"), a fixed income
portfolio.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Management/Advisory Fees (AFTER FEE WAIVERS) (1) .50%
12b-1 Fees None
Total Other Expenses (2) .05%
Shareholder Servicing Fees (AFTER FEE WAIVER) (3) .00%
- ------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVERS) (4) .55%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER AND ADVISER HAVE WAIVED, ON A VOLUNTARY BASIS, A PORTION OF
THEIR FEES, AND THE MANAGEMENT/ADVISORY FEES SHOWN REFLECT THESE VOLUNTARY
WAIVERS. THE MANAGER AND ADVISER RESERVE THE RIGHT TO TERMINATE THEIR
WAIVERS AT ANY TIME IN THEIR SOLE DISCRETION. ABSENT SUCH WAIVER, THE
MANAGEMENT/ADVISORY FEES FOR THE PORTFOLIO WOULD BE .57%.
(2) "TOTAL OTHER EXPENSES" IS BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL
YEAR.
(3) THE DISTRIBUTOR HAS WAIVED, ON A VOLUNTARY BASIS, ALL OR A PORTION OF ITS
SHAREHOLDER SERVICING FEE, AND THE SHAREHOLDER SERVICING FEES SHOWN REFLECT
THIS WAIVER. THE DISTRIBUTOR RESERVES THE RIGHT TO TERMINATE ITS WAIVER AT
ANY TIME IN ITS SOLE DISCRETION. ABSENT SUCH WAIVER, SHAREHOLDER SERVICING
FEES FOR THE PORTFOLIO WOULD BE .25%.
(4) ABSENT THESE FEE WAIVERS. TOTAL OPERATING EXPENSES FOR CLASS A SHARES OF THE
PORTFOLIO WOULD BE .87%.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
An investor in Class A shares of the Portfolio would pay the following expenses
on a $1,000 investment assuming (1) a 5% annual return and (2) redemption at
the end of each time period: $ 6 $ 18 $ 31 $ 69
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE PURPOSE OF THE TABLE AND THIS EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE PORTFOLIO'S CLASS A SHARES. A PERSON WHO PURCHASES
SHARES THROUGH A FINANCIAL INSTITUTION MAY BE CHARGED SEPARATE FEES BY THAT
INSTITUTION. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE MANAGER,"
"DISTRIBUTION AND SHAREHOLDER SERVICING" AND "THE ADVISER."
2
<PAGE>
THE TRUST
__________________________________________________________________________
SEI TAX EXEMPT TRUST (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in separate diversified and
non-diversified investment portfolios. This prospectus offers Class A shares of
the Trust's New York Intermediate-Term Municipal Portfolio (the "Portfolio").
Additional information pertaining to the Trust may be obtained by writing to SEI
Investments Distribution Co., Oaks, Pennsylvania 19456, or by calling
1-800-342-5734.
INVESTMENT OBJECTIVE
AND POLICIES
___________________________________________________________________________
The investment objective of the Portfolio is a high level
of current income, exempt from both federal and New York
state personal income taxes, consistent with the
preservation of principal. There can be no assurance that
the Portfolio will achieve its investment objective.
It is a fundamental policy of the Portfolio 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 to the issuers, is exempt
from federal income tax (collectively, "Municipal
Securities") and is not a preference item for purposes of
the federal alternative minimum tax. Under normal
conditions, at least 65% of the Portfolio's assets will be
invested in municipal obligations the interest on which is
exempt from New York State personal income tax. These
include municipal obligations issued by the State of New
York and its political subdivisions or any agency or
instrumentality of either of the foregoing, as well as
municipal obligations issued by territories or possessions
of the United States.
Under normal conditions, the Portfolio may invest, in
the aggregate, 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 Portfolio has no present intention of investing in such
securities) and (2) taxable investments. In addition, for
temporary defensive purposes when its investment adviser
determines that market conditions warrant, the Portfolio
may invest up to 100% of its assets in municipal
obligations of states other than New York or taxable money
market instruments (including repurchase agreements, U.S.
Treasury securities and instruments of certain U.S.
commercial banks or savings and loan institutions).
The Portfolio may purchase the following types of
municipal obligations, but only if such securities, at the
time of purchase, either have the requisite rating or, if
not rated, are determined by Weiss, Peck & Greer, L.L.C.
(the "Adviser"), to be of comparable quality: (i) municipal
bonds rated BBB or better by Standard and Poor's
Corporation ("S&P") or Baa or better by Moody's Investors
Service, Inc. ("Moody's"); (ii) municipal notes and
certificates of participation which are rated at least SP-2
by S&P or MIG-2 or VMIG-2 by Moody's; and (iii) tax-exempt
commercial paper rated at least A-2 by S&P or Prime-2 by
Moody's. Since the Portfolio often purchases securities
supported by credit
3
<PAGE>
enhancements from banks and other financial institutions,
changes in the credit quality of these institutions could
cause losses to the Portfolio and affect its share price.
The Portfolio currently contemplates that it will not
invest more than 25% of its total assets (at market value
at the time of purchase) in Municipal Securities, the
interest on which is paid from revenues of projects with
similar characteristics. 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.
In seeking to attain its investment objective, the
Portfolio may invest all or any part of its assets in
Municipal Securities that are industrial development bonds.
Normally, the Portfolio will maintain a
dollar-weighted average portfolio maturity of five to ten
years; however, under certain circumstances this average
weighted maturity may fall below five years. There are no
restrictions on the maturity of any single instrument in
which the Portfolio may invest. The Portfolio's annual
portfolio turnover rate is expected to be less than 100%
under normal circumstances. See also "Risk Factors."
GENERAL INVESTMENT
POLICIES
___________________________________________________________________________
The Portfolio may invest in variable and floating rate
obligations, may purchase securities on a "when-issued"
basis, and reserves the right to engage in transactions
involving standby commitments. The Portfolio may also
purchase other types of tax-exempt instruments as long as
they are of a quality equivalent to the long-term bond or
commercial paper ratings stated above. The Portfolio will
not invest more than 15% of its net assets in illiquid
securities.
The taxable money market instruments in which the
Portfolio may invest consist of U.S. Treasury obligations;
obligations issued or guaranteed by the U.S. Government or
by its agencies or instrumentalities, whether or not backed
by the full faith and credit of the U.S. Government;
obligations of U.S. commercial banks or savings and loan
institutions (not including foreign branches of U.S. banks
or U.S. branches of foreign banks) which are members of the
Federal Reserve System or Federal Deposit Insurance
Corporation and which have total assets of $1 billion or
more as shown on their last published financial statements
at the time of investment; and repurchase agreements
involving any of the foregoing obligations.
For a description of the permitted investments and
ratings, see the "Description of Permitted Investments and
Risk Factors" and the Statement of Additional Information.
RISK FACTORS
______________________________________________________________________
The Portfolio's concentration in investments in New York
Municipal Securities involves greater risks than if their
investments were more diversified. These risks result from
4
<PAGE>
(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 Portfolio'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 recent years, both
the State and the City experienced financial difficulties
related to poor economic performance and recurring
deficits. The State's credit standing has been, and could
be further, reduced, and its ability to provide assistance
to its public authorities and political subdivisions has
been, and could be, further impaired.
NON-DIVERSIFICATION
In addition to the risks described above arising from
concentration, investment in the Portfolio, a
non-diversified mutual fund, may entail greater risk than
would investment in a diversified investment company
because the concentration in Municipal Securities of
relatively few issuers could result in greater fluctuation
in the total market value of the Portfolio's holdings. Any
economic, political, or regulatory developments affecting
the value of the securities the Portfolio holds could have
a greater impact on the total value of the Portfolio's
holdings than would be the case if the portfolio securities
were diversified among more issuers. The Portfolio intends
to comply with the diversification requirements of
Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). In accordance with these
requirements, the Portfolio will not invest more than 5% of
its total assets in any one issuer; this limitation applies
to 50% of the Portfolio's total assets.
INVESTMENT
LIMITATIONS
________________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolio. Fundamental policies
cannot be changed with respect to the Trust or the
Portfolio without the consent of the holders of a majority
of the Trust's or the Portfolio's outstanding shares.
THE PORTFOLIO MAY NOT:
1. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio, based on current
value at the time of such purchase, to be invested in
the securities of one or more issuers conducting their
principal business activities in the same industry,
provided that this limitation does not apply to
investments in obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities or
to investments in tax-exempt securities issued by
governments or political subdivisions of governments.
5
<PAGE>
2. Borrow money except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the
value of the total assets of the Portfolio. All
borrowings in excess of 5% of the Portfolio's total
assets, will be repaid before making additional
investments and any interest paid on such borrowings
will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional fundamental
investment limitations are set forth in the Statement of
Additional Information.
THE MANAGER
______________________________________________________________________
SEI Fund Management (the "Manager" and the "Transfer
Agent") provides the Trust with overall management
services, regulatory reporting, all necessary office space,
equipment, personnel and facilities, and serves as
institutional transfer agent and dividend disbursing agent.
For these services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .39% of the average daily net assets of the
Portfolio. In addition, the Manager and Adviser have
voluntarily agreed to waive a portion of their fees
proportionately in order to limit total operating expenses
of the Class A shares of the Portfolio to not more than
.55% of the Portfolio's average daily net assets
attributable to Class A shares, on an annualized basis.
Each of the Manager and the Adviser reserves the right, in
its sole discretion, to terminate its waiver at any time.
THE ADVISER
_______________________________________________________________________
Weiss, Peck & Greer, L.L.C. ("WPG"), serves as the
Portfolio's investment adviser under an advisory agreement
with the Trust (the "Advisory Agreement"). Under the
Advisory Agreement, the Adviser invests the assets of the
Portfolio, and continuously reviews, supervises and
administers the Portfolio's investment program. The Adviser
is independent of the Manager and discharges its
responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust.
The Adviser is a limited liability company founded as
a limited partnership in 1970, and engages in investment
management, venture capital management and management
buyouts. WPG has been active since its founding in managing
portfolios of tax exempt securities. At September 30, 1997,
total assets under management were approximately $14.6
billion. The principal business address of the Adviser is
One New York Plaza, New York, NY 10004.
S. Blake Miller, CFA, and Nancy J. Neiman act as the
portfolio managers for the Portfolio. Mr. Miller, an
Associate Principal of WPG, has been associated with WPG's
Tax Exempt Fixed Income group since 1988, and its
predecessor since 1986. Ms. Neiman, an Associate Principal
of WPG, has been associated with WPG's Tax Exempt Fixed
Income group since 1988 and its predecessor since 1985.
6
<PAGE>
For its services to the New York Intermediate-Term
Municipal Portfolio, the Adviser is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .18% of the combined average daily net assets of
the non-money market portfolios of the Trust advised by the
Adviser up to $150 million, and .16% of such assets in
excess of $150 million. Such fees are allocated daily among
these portfolios on the basis of their relative net assets.
The Adviser has voluntarily agreed to waive a portion of
its fee, as described under "The Manager." As of August 31,
1997, the Portfolio had not commenced operations.
DISTRIBUTION AND
SHAREHOLDER
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), a
wholly-owned subsidiary of SEI Investments Company ("SEI
Investments"), serves as the Portfolio's distributor
pursuant to a distribution agreement with the Trust.
The Portfolio has adopted a shareholder servicing
plan for Class A shares (the "Service Plan") under which
the Distributor is entitled to receive a shareholder
servicing fee of up to .25% of average daily net assets
attributable to Class A shares. Under the Service Plan, the
Distributor may perform, or may compensate other service
providers for performing the following shareholder and
administrative services; maintaining client accounts;
arranging for bank wires; responding to client inquiries
concerning services provided on investments; assisting
clients in changing dividend options; account designations
and addresses; sub-accounting; providing information on
share positions to clients; forwarding shareholder
communications to clients; processing purchase, exchange
and redemption orders; and processing dividend payments.
Under the Service Plan, the Distributor may retain as a
profit any difference between the fee it receives and the
amount it pays to third parties.
It is possible that an institution may offer
different classes of shares to its customers and thus
receive different compensation with respect to different
classes. These financial institutions may also charge
separate fees to their customers.
The Trust may also execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive usual and customary compensation.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolio's
shares.
7
<PAGE>
PURCHASE AND
REDEMPTION OF SHARES
____________________________________________________________________________
Financial institutions may acquire shares of the Portfolio
for their own account, or as a record owner on behalf of
fiduciary, agency or custody accounts, by placing orders
with the Transfer Agent (or its authorized agent).
Institutions that use certain SEI proprietary systems may
place orders electronically through those systems.
Financial institutions which purchase shares for the
accounts of their customers may impose separate charges on
these customers for account services. Financial
institutions may impose an earlier cut-off time for receipt
of purchase orders directed through them to allow for
processing and transmittal of these orders to the Transfer
Agent for effectiveness on the same day.
Shares of the Portfolio may be purchased or redeemed
on days on which the New York Stock Exchange is open for
business ("Business Days").
Shareholders who desire to purchase shares for cash
must place their orders with the Transfer Agent (or its
authorized agent) prior to the determination of net asset
value and in accordance with the procedures described below
for the order to be accepted on that Business Day. Cash
investments must be transmitted or delivered in federal
funds to the wire agent by the close of business on the
same day the order is placed. The Trust reserves the right
to reject a purchase order when the Distributor determines
that it is not in the best interest of the Trust and/or
shareholders to accept such purchase order.
Purchases will be made in full and fractional shares
of the Portfolio calculated to three decimal places. The
Trust will send shareholders a statement of shares owned
after each transaction. The purchase price of shares is the
net asset value next determined after a purchase order is
received and accepted by the Trust. The net asset value per
share of the Portfolio is determined by dividing the total
value of its investments and other assets, less any
liabilities, by the total number of outstanding shares of
the Portfolio. Net asset value per share is determined
daily as of the close of trading on the New York Stock
Exchange (presently 4:00 p.m., Eastern time) on each
Business Day.
Information about the market value of each portfolio
security may be obtained by the Manager from an independent
pricing service. Securities having maturities of 60 days or
less at the time of purchase will be valued using the
amortized cost method (described in the Statement of
Additional Information), which approximates the securities'
market value. The pricing service may use a matrix system
to determine valuations of fixed income securities. This
system considers such factors as security prices, yields,
maturities, call features, ratings and developments
relating to specific securities in arriving at valuations.
The pricing service may also provide market quotations. The
procedures used by the pricing service and its valuations
are reviewed by the officers of the Trust under the general
supervision of the Trustees. Portfolio securities for which
market quotations are available are valued at the last
quoted sale price on each Business Day or, if there is no
such reported sale, at the most recently quoted bid price.
8
<PAGE>
Shareholders who desire to redeem shares of the
Portfolio must place their redemption orders with the
Transfer Agent (or its authorized agent) prior to the
determination of net asset value and in accordance with the
procedures described below on any Business Day. The
redemption price is the net asset value per share of the
Portfolio next determined after receipt by the Transfer
Agent of the redemption order. Payment on redemption will
be made as promptly as possible and, in any event, within
seven days after the redemption order is received.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The
Trust and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by other
means.
PERFORMANCE
______________________________________________________________________
From time to time, the Portfolio may advertise yield, total
return and tax equivalent yield. These figures will be
based on historical earnings and are not intended to
indicate future performance.
The yield of the Portfolio refers to the annualized
income generated by a hypothetical investment in the
Portfolio over a specified 30-day period. The yield is
calculated by assuming that the same amount of income
generated by the investment during that period is generated
in each 30-day period over one year and is shown as a
percentage of the investment.
The total return of the Portfolio refers to the
average compounded rate of return to a hypothetical
investment for designated time periods (including, but not
limited to, the period from which the Portfolio commenced
operations through the specified date), assuming that the
entire investment is redeemed at the end of each period and
assuming the reinvestment of all dividend and capital gain
distributions. The total return of the Portfolio may also
be quoted as a dollar amount or on an aggregate basis, an
actual basis.
The tax equivalent yield is calculated by determining
the rate of return that would have been achieved on a fully
taxable investment to produce the after-tax equivalent of
the Portfolio's yield, assuming certain tax brackets for a
shareholder.
The Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) other investment
9
<PAGE>
alternatives. The Portfolio may quote Morningstar, Inc., a
service that ranks mutual funds on the basis of
risk-adjusted performance, and Ibbotson Associates of
Chicago, Illinois, which provides historical returns of the
capital markets in the U.S. The Portfolio may use long-term
performance of these capital markets to demonstrate general
long-term risk versus reward scenarios and could include
the value of a hypothetical investment in any of the
capital markets. The Portfolio may also quote financial and
business publications and periodicals as they relate to
fund management, investment philosophy, and investment
techniques.
The Portfolio may quote various measures of
volatility and benchmark correlation in advertising and may
compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while measures
of benchmark correlation indicate how valid a comparative
benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot
be calculated precisely.
TAXES
______________________________________________________________________________
The following summary of federal, state and local income
tax consequences is based on current tax laws and
regulations, which may be changed by legislative, judicial
or administrative action. No attempt has been made to
present a detailed explanation of the federal, state or
local income tax treatment of the Portfolio or its
shareholders. Accordingly, shareholders are urged to
consult their tax advisers regarding specific questions as
to federal, state and local income taxes. Additional
information concerning taxes is set forth in the Statement
of Additional Information.
TAX STATUS OF THE
PORTFOLIO
The Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), so as to be
relieved of federal income tax on net investment company
taxable income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss)
distributed to shareholders.
TAX STATUS OF
DISTRIBUTIONS
The Portfolio intends to distribute substantially all of
its net investment income (including net short-term capital
gain) to shareholders. If, at the close of each quarter of
its taxable year, at least 50% of the value of the
Portfolio's total assets consists of obligations the
interest on which is excludable from gross income, the
Portfolio may pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends are excludable from
a shareholder's gross income for federal income tax
purposes but may have certain collateral federal tax
consequences including alternative minimum tax
consequences. In addition, the receipt of exempt-interest
dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxable on a portion of
such benefits. See the Statement of Additional Information.
10
<PAGE>
Any dividends paid out of income realized by the
Portfolio on taxable securities will be taxable to
shareholders as ordinary income (whether received in cash
or in additional shares) to the extent of the Portfolio's
earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders.
Distributions to shareholders of net capital gains of the
Portfolio also will not qualify for the dividends received
deduction and will be taxable to shareholders as long-term
capital gain, whether received in cash or additional
shares, and regardless of how long a shareholder has held
the shares.
Dividends declared by the Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in any such month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if paid by the
Portfolio at any time during the following January. The
Portfolio intends to make sufficient distributions prior to
the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment
companies.
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of the
Portfolio is not deductible for federal income tax purposes
to the extent that it relates to exempt-interest dividends
distributed to the shareholders during the taxable year.
Furthermore, the Portfolio may not be an appropriate
investment for persons (including corporations and other
business entities) who are "substantial users" (or persons
related to "substantial users") of facilities financed by
industrial development bonds or private activity bonds.
Such persons should consult their tax advisers before
purchasing shares.
The Portfolio will report annually to its
shareholders the portion of dividends that is taxable and
the portion that is tax-exempt based on income received by
the Portfolio during the year to which the dividends
relate.
Each sale, exchange, or redemption of the Portfolio's
shares is a taxable transaction to the shareholder.
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 Portfolio that are derived from
interest on Municipal Securities issued by New York State
and the 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 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 Portfolio 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.
11
<PAGE>
GENERAL INFORMATION
_______________________________________________________________________
THE TRUST
The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated March 15, 1982. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. In addition to the Portfolio, the Trust consists
of the following portfolios: Tax Free Portfolio,
Institutional Tax Free Portfolio, California Tax Exempt
Portfolio, Pennsylvania Municipal Portfolio,
Intermediate-Term Municipal Portfolio, and Pennsylvania Tax
Free Portfolio. All consideration received by the Trust for
shares of any portfolio and all assets of such portfolio
belong to that portfolio and would be subject to
liabilities related thereto.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation material and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential management services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will vote
separately on matters relating solely to that portfolio or
class, such as any distribution plan. As a Massachusetts
business trust, the Trust is not required to hold annual
meetings of shareholders, but approval will be sought for
certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining
Trustees or by shareholders at a special meeting called
upon written request of shareholders owning at least 10% of
the outstanding shares of the Trust. In the event that such
a meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
REPORTING
The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Manager,
SEI Fund Management, Oaks, Pennsylvania, 19456.
DIVIDENDS
Substantially all of the net investment income (exclusive
of capital gains) of the Portfolio is periodically declared
and paid as a dividend. Shareholders of record on the last
record date of each period will be entitled to receive the
periodic dividend distribution, which is generally paid on
the 10th Business day of the following month. If any net
capital gains are realized, they will be distributed by the
Portfolio annually.
12
<PAGE>
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares, unless the shareholder has elected to take such
payment in cash. Shareholders may change their election by
providing written notice to the Manager at least 15 days
prior to the distribution.
COUNSEL AND INDEPENDENT
PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
CUSTODIAN AND WIRE AGENT
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, serves as Custodian
of the Trust's assets and acts as wire agent of the Trust.
The Custodian holds cash, securities and other assets of
the Trust as required by the 1940 Act.
DESCRIPTION OF
PERMITTED
INVESTMENTS AND
RISK FACTORS
______________________________________________________________________
The following is a description of certain of the permitted
investments for the Portfolio, and the associated risk
factors:
MONEY MARKET SECURITIES
Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks; (ii) U.S. Treasury obligations and obligations
issued by the agencies and instrumentalities of the U.S.
Government and (iii) repurchase agreements involving any of
the foregoing obligations entered into with highly-rated
banks and broker-dealers.
MUNICIPAL SECURITIES
Municipal Securities consist of (i) debt obligations issued
by or on behalf of public authorities to obtain funds to be
used for various public facilities, for refunding
outstanding obligations, for general operating expenses and
for lending such funds to other public institutions and
facilities, and (ii) certain private activity and
industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately
operated facilities.
General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed
by the revenues of a project or facility, tolls from a toll
bridge, for example. Certificates of participation
represent an interest in an underlying obligation or
commitment such as an obligation issued in connection with
a leasing arrangement. The payment of principal and
interest on private activity and industrial development
bonds generally is dependent solely on the ability of the
facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed
as security for such payment.
Municipal notes include general obligation notes, tax
anticipation notes, revenue anticipation notes, bond
anticipation notes, certificates of indebtedness, demand
notes and construction loan notes and participation
interests in municipal notes. Municipal bonds
13
<PAGE>
include general obligation bonds, revenue or special
obligation bonds, private activity and industrial
development bonds and participation interests in municipal
bonds.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements by which a Portfolio
obtains a security and simultaneously commits to return the
security to the seller at an agreed upon price (including
principal and interest) on an agreed upon date within a
number of days from the date of purchase. Repurchase
agreements are considered loans under the 1940 Act.
STANDBY COMMITMENTS
AND PUTS
Securities subject to standby commitments or puts permit
the holder thereof to sell the securities at a fixed price
prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current
market price. However, unless the standby commitment or put
was an integral part of the security as originally issued,
it may not be marketable or assignable; therefore, the
standby commitment or put would only have value to the
Portfolio owning the security to which it relates. In
certain cases, a premium may be paid for a standby
commitment or put, which premium will have the effect of
reducing the yield otherwise payable on the underlying
security. The Portfolio will limit standby commitment or
put transactions to institutions believed to present
minimal credit risks.
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 Portfolio may
carry variable or floating rates of interest and may
involve a conditional or unconditional demand feature. Such
obligations may include variable amount master demand
notes. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities
may be reset daily, weekly, quarterly or at some other
interval, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing market
interest rates. A demand instrument with a demand notice
period exceeding seven days may be considered illiquid if
there is no secondary market for such security.
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. The Portfolio will maintain with the
custodian a separate account with liquid securities or cash
in an amount at least equal to these commitments. The
interest rate realized on these securities is fixed as of
the purchase date, and no interest accrues to the Portfolio
before settlement.
14
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
The Trust................................................................. 3
Investment Objective and Policies......................................... 3
General Investment Policies............................................... 4
Risk Factors.............................................................. 4
Investment Limitations.................................................... 5
The Manager............................................................... 6
The Adviser............................................................... 6
Distribution and Shareholder Servicing.................................... 7
Purchase and Redemption of Shares......................................... 8
Performance............................................................... 9
Taxes..................................................................... 10
General Information....................................................... 12
Description of Permitted Investments and Risk Factors..................... 13
</TABLE>
15
<PAGE>
SEI TAX EXEMPT TRUST
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
INSTITUTIONAL TAX FREE PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely information about the above-referenced
Portfolio that an investor needs to know before investing. Please read this
Prospectus carefully, and keep it on file for future reference.
A Statement of Additional Information dated December 31, 1997, has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing the Distributor, SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Tax Exempt Trust (the "Trust") is an open-end management investment company,
certain classes of which offer financial institutions a convenient means of
investing their own funds, or funds for which they act in a fiduciary, agency or
custodial capacity, in one or more professionally managed diversified and
non-diversified portfolios of securities. A portfolio may offer separate classes
of shares that differ from each other primarily in the allocation of certain
expenses and minimum investment amounts. This Prospectus offers Class A and
Class B shares of the Institutional Tax Free Portfolio (the "Portfolio"), a
money market portfolio.
AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
---------- ----------
<S> <C> <C>
Management/Advisory Fees (AFTER FEE WAIVER) (1) .29% .29%
12b-1 Fees None None
Total Other Expenses .04% .34%
Shareholder Servicing Fees (AFTER FEE WAIVER) .00%(2) .25%
- ------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVERS) (3) .33% .63%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER HAS WAIVED, ON A VOLUNTARY BASIS, A PORTION OF ITS FEE, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THIS VOLUNTARY WAIVER. THE MANAGER
RESERVES THE RIGHT TO TERMINATE ITS WAIVER AT ANY TIME IN ITS SOLE
DISCRETION. ABSENT SUCH FEE WAIVER, MANAGEMENT/ADVISORY FEES FOR CLASS A AND
CLASS B SHARES OF THE PORTFOLIO WOULD BE .40%.
(2) THE DISTRIBUTOR HAS WAIVED, ON A VOLUNTARY BASIS, ALL OR A PORTION OF ITS
SHAREHOLDER SERVICING FEE FOR THE CLASS A SHARES, AND THE SHAREHOLDER
SERVICING FEES SHOWN REFLECT THIS WAIVER. THE DISTRIBUTOR RESERVES THE RIGHT
TO TERMINATE ITS WAIVER AT ANY TIME IN ITS SOLE DISCRETION. ABSENT SUCH
WAIVER, SHAREHOLDER SERVICING FEES FOR CLASS A SHARES OF THE PORTFOLIO WOULD
BE .25%.
(3) ABSENT THESE FEE WAIVERS, TOTAL OPERATING EXPENSES OF THE PORTFOLIO WOULD BE
.69% FOR CLASS A SHARES AND .74% FOR THE CLASS B SHARES. ADDITIONAL
INFORMATION MAY BE FOUND UNDER "THE ADVISER" AND "THE MANAGER."
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
An investor in Class A shares of the Portfolio would pay the following expenses
on a $1,000 investment assuming (1) a 5% annual return and (2) redemption at
the end of each time period:
Class A $ 3 $ 11 $ 19 $ 42
Class B $ 6 $ 20 $ 35 $ 79
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE PORTFOLIO'S CLASS A AND CLASS B SHARES. THE PORTFOLIO
ALSO OFFERS CLASS C SHARES, WHICH ARE SUBJECT TO THE SAME EXPENSES, EXCEPT THAT
CLASS C SHARES BEAR DIFFERENT SHAREHOLDER SERVICING COSTS. A PERSON WHO
PURCHASES SHARES THROUGH AN ACCOUNT WITH A FINANCIAL INSTITUTION MAY BE CHARGED
SEPARATE FEES BY THAT INSTITUTION. ADDITIONAL INFORMATION MAY BE FOUND UNDER
"THE MANAGER," "DISTRIBUTION AND SHAREHOLDER SERVICING" AND "THE ADVISER."
2
<PAGE>
FINANCIAL HIGHLIGHTS
______________________________________________________________
The following financial highlights for a share outstanding throughout each
period have been derived from the Trust's financial statements which were
audited by Arthur Andersen LLP, independent accountants, whose report thereon,
dated October 17, 1997, was unqualified. This information should be read in
conjunction with the Trust's financial statements for the fiscal year ended
August 31, 1997, and notes thereto which are incorporated by reference to the
Trust's Statement of Additional Information. Additional performance information
is set forth in the Trust's 1997 Annual Report to Shareholders, which is
available upon request and without charge by calling 1-800-342-5734.
FOR CLASS A SHARES OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
INVESTMENT NET REALIZED
ACTIVITIES DISTRIBUTIONS AND UNREALIZED
NET ASSET ---------- ------------------------------------- GAIN (LOSS) ON
VALUE, NET NET NET INVESTMENTS AND NET ASSET
BEGINNING INVESTMENT INVESTMENT REALIZED TOTAL CAPITAL VALUE END
OF PERIOD INCOME INCOME GAIN DISTRIBUTIONS TRANSACTIONS OF PERIOD
- ------------------------------------------------------------------------------------------------------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------
INSTITUTIONAL TAX FREE PORTFOLIO
- ------------------------------
Class A
FOR THE YEARS ENDED AUGUST 31:
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
1993 1.00 0.026 (0.026) -- (0.026) -- 1.00
1992 1.00 0.036 (0.036) -- (0.036) -- 1.00
1991 1.00 0.049 (0.049) -- (0.049) -- 1.00
1990(1) 1.00 0.033 (0.033) -- (0.033) -- 1.00
FOR THE YEARS ENDED JANUARY 31:
1990 $1.00 $0.059 $ (0.059) -- $(0.059) -- $1.00
1989 1.00 0.048 (0.048) -- (0.048) -- 1.00
1988 1.00 0.042 (0.042) -- (0.042) -- 1.00
Class B
FOR THE YEARS ENDED AUGUST 31:
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
1993 1.00 0.023 (0.023) -- (0.023) -- 1.00
1992 1.00 0.033 (0.033) -- (0.033) -- 1.00
1991(2) 1.00 0.038 (0.038) -- (0.038) -- 1.00
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES RATIO OF NET INCOME TO
RATIO OF TO AVERAGE INVESTMENT AVERAGE NET
NET ASSETS, EXPENSES NET ASSETS INCOME TO ASSETS
TOTAL END OF TO AVERAGE (EXCLUDING AVERAGE NET (EXCLUDING
RETURN PERIOD (000) NET ASSETS FEE WAIVERS) ASSETS FEE WAIVERS)
- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------
INSTITUTIONAL TAX FREE PORTFOLIO
- ------------------------------
Class A
FOR THE YEARS ENDED AUGUST 31:
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%
1993 2.59% 763,040 0.33% 0.49% 2.55% 2.39%
1992 3.66% 623,689 0.33% 0.51% 3.54% 3.36%
1991 5.20% 448,390 0.33% 0.53% 4.91% 4.71%
1990(1) 3.32%+ 226,658 0.33%* 0.56%* 5.64%* 5.41%*
FOR THE YEARS ENDED JANUARY 31:
1990 6.11% $ 177,342 0.52% 0.60% 5.90% 5.82%
1989 5.05% 99,774 0.55% 0.57% 4.80% 4.78%
1988 4.28% 223,653 0.55% 0.56% 4.20% 4.19%
Class B
FOR THE YEARS ENDED AUGUST 31:
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%
1993 2.29% 3,040 0.63% 0.79% 2.22% 2.06%
1992 3.35% 686 0.63% 0.81% 3.22% 3.04%
1991(2) 3.89%+ 1,515 0.63%* 0.84%* 4.34%* 4.13%*
</TABLE>
* ANNUALIZED
+ RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) IN AUGUST 1990, THE TRUSTEES CHANGED THE FISCAL YEAR END OF THE TRUST FROM
JANUARY 31 TO AUGUST 31.
(2) THE INSTITUTIONAL TAX-FREE PORTFOLIO--CLASS B COMMENCED OPERATIONS ON
OCTOBER 15, 1990.
3
<PAGE>
THE TRUST
__________________________________________________________________________
SEI TAX EXEMPT TRUST (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in separate diversified and
non-diversified investment portfolios. This Prospectus offers Class A and Class
B shares of the Trust's Institutional Tax Free Portfolio (the "Portfolio"). As
of September 30, 1997, the aggregate net assets of all classes of the
Institutional Tax Free Portfolio was $992,670,088. Investors may also purchase
Class C shares of the Portfolio. Each class provides for variation in
shareholder servicing expenses, voting rights and dividends. Additional
information pertaining to the Trust may be obtained by writing to SEI
Investments Distribution Co., Oaks, Pennsylvania 19456, or by calling
1-800-342-5734.
INVESTMENT OBJECTIVE
AND POLICIES
___________________________________________________________________________
The Portfolio'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 Portfolio will
meet its investment objective.
The Portfolio 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 (collectively, "Municipal
Securities"). It is a fundamental policy of the Portfolio
to invest at least 80% of its net assets in securities the
interest on which is exempt from federal income taxes,
based on opinions from bond counsel for the issuers, and
the Portfolio 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.
The Portfolio may purchase municipal bonds, municipal
notes and tax-exempt commercial paper, but only if such
securities, at the time of purchase, meet quality, maturity
and diversification requirements imposed by Rule 2a-7. See
"General Investment Policies."
The Adviser will not invest more than 25% of
Portfolio 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 Portfolio's assets are invested in Municipal Securities
payable from revenues on similar projects, the Portfolio
will be subject to the peculiar risks presented by such
projects to a
4
<PAGE>
greater extent than it would be if the Portfolio's assets
were not so invested. Moreover, in seeking to attain its
investment objective, the Portfolio may invest all or any
part of its assets in Municipal Securities that are
industrial development bonds.
GENERAL INVESTMENT
POLICIES
___________________________________________________________________________
In purchasing obligations, the Portfolio complies with the
requirements of Rule 2a-7 under the Investment Company Act
of 1940 (the "1940 Act"), as that Rule may be amended from
time to time. These requirements currently provide that the
Portfolio must limit its investments to securities with
remaining maturities of 397 days or less, and must maintain
a dollar-weighted average maturity of 90 days or less. In
addition, the Portfolio may only invest in eligible
securities. In general, this means securities rated in one
of the two highest categories for short-term securities by
at least two nationally recognized statistical rating
organizations ("NRSROs") (or by one NRSRO if only one NRSRO
has rated the security), or, if unrated, determined by
Weiss, Peck & Greer, L.L.C. (the "Adviser") to be of
equivalent quality. Since the Portfolio 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 Portfolio
and affect its share price.
Securities rated in the highest rating category
(e.g., A-1 by Standard & Poor's Corporation ("S&P")) by at
least two NRSROs (or, if unrated, determined by the Adviser
to be of comparable quality) are "first tier" securities.
Non-first tier securities rated in the second highest
rating category (e.g., A-2 by S&P) by at least one NRSRO
(or, if unrated, determined by the Adviser to be of
comparable quality) are considered to be "second tier"
securities. The Portfolio's investments in non-first tier
conduit securities will be limited to 5% of the Portfolio's
assets. Conduit securities are securities issued to finance
non-governmental private projects, such as housing
developments and retirement homes, and for which the
ultimate obligor is not a governmental issuer.
The Portfolio may purchase securities on a
"when-issued" basis, variable and floating rate obligations
and reserves the right to engage in transactions involving
standby commitments. While the Portfolio generally intends
to be fully invested in federally tax-exempt securities,
the Portfolio may invest up to 20% of its net assets in
taxable money market instruments (including repurchase
agreements) and securities the interest on which is a
preference item for purposes of the federal alternative
minimum tax. The Portfolio will not invest more than 10% of
its total assets in securities which are considered to be
illiquid.
For a description of the permitted investments and
ratings, see the "Description of Permitted Investments and
Risk Factors" and the Statement of Additional Information.
5
<PAGE>
INVESTMENT
LIMITATIONS
________________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolio. Fundamental policies
cannot be changed with respect to the Trust or the
Portfolio without the consent of the holders of a majority
of the Trust's or the Portfolio's outstanding shares. It is
a fundamental policy of the Portfolio to use its best
efforts to maintain a constant net asset value of $1.00 per
share.
THE PORTFOLIO MAY NOT:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the United States Government,
its agencies or instrumentalities) if, as a result, more
than 5% of the total assets of the Portfolio (based on
current market value at the time of investment) would be
invested in the securities of such issuer; provided,
however, that the Portfolio may invest up to 25% of its
total assets without regard to this restriction of, and
as permitted by, Rule 2a-7.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio, based on 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 the total assets of the Portfolio. All
borrowings will be repaid before making additional
investments and any interest paid on such borrowings
will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional fundamental
investment limitations are set forth in the Statement of
Additional Information.
THE MANAGER
______________________________________________________________________
SEI Fund Management (the "Manager" and the "Transfer
Agent") provides the Trust with overall management
services, regulatory reporting, all necessary office space,
equipment, personnel and facilities, and serves as
institutional transfer agent and dividend disbursing agent.
For these services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .36% of the average daily net assets of the
Portfolio. The Manager has voluntarily agreed to waive a
portion of its fee in order to limit the total operating
expenses to not more than .33% of the average daily net
assets of the Class A
6
<PAGE>
shares of the Portfolio and not more than .63% of the
average daily net assets of the Class B shares of the
Portfolio, on an annualized basis. The Manager reserves the
right, in its sole discretion, to terminate this voluntary
fee waiver at any time. For the fiscal year ended August
31, 1997, the Portfolio paid management fees, after
waivers, of .25% of its average daily net assets.
THE ADVISER
_______________________________________________________________________
Weiss, Peck & Greer, L.L.C., serves as the Portfolio's
investment adviser under an investment advisory agreement
with the Trust (the "Advisory Agreement"). Under the
Advisory Agreement, the Adviser invests the assets of the
Portfolio, and continuously reviews, supervises and
administers the Portfolio's investment program. The Adviser
is independent of the Manager and discharges its
responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust.
The Adviser is a limited liability company founded as
a limited partnership in 1970, and engages in investment
management, venture capital management and management
buyouts. The Adviser has been active since its founding in
managing portfolios of tax exempt securities. As of
September 30, 1997, total assets under management were
approximately $14.6 billion. The principal business address
of the Adviser is One New York Plaza, New York, New York
10004.
Janet Fiorenza acts as the portfolio manager for the
Portfolio. Ms. Fiorenza, a Principal of the Adviser, has
been associated with the Adviser's Tax Exempt Fixed Income
group since 1988, and with its predecessor since 1980.
For its services, the Adviser is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .05% of the combined average daily net assets of
the money market portfolios of the Trust that are advised
by the Adviser up to $500 million, .04% of such assets from
$500 million to $1 billion and .03% of such assets in
excess of $1 billion. Such fees are allocated daily among
these portfolios based on their relative net assets. For
the fiscal year ended August 31, 1997 the Portfolio paid
advisory fees, after waivers, of .04% of its relative net
assets.
7
<PAGE>
DISTRIBUTION AND
SHAREHOLDER
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), a
wholly owned subsidiary of SEI Investments Company ("SEI
Investments"), serves as the Portfolio's distributor
pursuant to a distribution agreement (the "Distribution
Agreement") with the Trust.
The Portfolio has adopted plans under which firms,
including the Distributor, that provide shareholder and
administrative services may receive compensation therefor.
The Class A, B and C plans differ in a number of ways,
including the amounts that may be paid. Under each plan,
the Distributor may provide those services itself or may
enter into arrangements under which third parties provide
such services and are compensated by the Distributor. Under
such arrangements the Distributor may retain as a profit
any difference between the fee it receives and the amount
it pays such third party. In addition, the Portfolio may
enter into such arrangements directly.
Under the Class A plan, the Distributor is entitled
to receive a fee at an annual rate of up to .25% of the
average daily net assets of the Portfolio attributable to
Class A shares, in return for provision of a broad range of
shareholder and administrative services. Under the Class B
shareholder service plan, the Distributor is entitled to
receive shareholder service fees at an annual rate of up to
.25% of average daily net assets in return for the
Distributor's (or its agent's) efforts in maintaining
client accounts; arranging for bank wires; responding to
client inquiries concerning services provided or
investment; and assisting clients in changing dividend
options, account designations and addresses. In addition,
under its administrative services plan, Class B shares will
pay administrative services fees to the Distributor at
specified percentages of the average daily net assets of
the shares of the Class (up to .05%). Administrative
services include sub-accounting; providing information on
share positions to clients; forwarding shareholder
communications to clients; processing purchase, exchange
and redemption orders and processing dividend payments.
It is possible that an institution may offer
different classes of shares to its customers and differing
services to the Classes of the Portfolio and thus receive
compensation with respect to different classes. These
financial institutions may also charge separate fees to
their customers.
The Trust may execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive compensation.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation, to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolio's
shares.
8
<PAGE>
PURCHASE AND
REDEMPTION OF SHARES
____________________________________________________________________________
Financial institutions may acquire shares of the Portfolio
for their own account, or as a record owner on behalf of
fiduciary, agency or custody accounts, by placing orders
with the Transfer Agent (or its authorized agent).
Institutions that use certain SEI proprietary systems may
place orders electronically through those systems.
Financial institutions which purchase shares for the
accounts of their customers may impose separate charges on
these customers for account services. Financial
institutions may impose an earlier cut-off time for receipt
of purchase orders directed through them to allow for
processing and transmittal of these orders to the Transfer
Agent for effectiveness on the same day.
Shares of the Portfolio may be purchased or redeemed
on days on which the New York Stock Exchange is open for
business ("Business Days"). However, money market fund
shares cannot be purchased by Federal Reserve wire on
federal holidays restricting wire transfers.
Shareholders who desire to purchase shares for cash
must place their orders with the Transfer Agent (or its
authorized agent) prior to the determination of net asset
value and in accordance with the procedures described below
for the order to be accepted on that Business Day. Cash
investments must be transmitted or delivered in federal
funds to the wire agent by the close of business on the
same day the order is placed. The Trust reserves the right
to reject a purchase order when the Transfer Agent
determines that it is not in the best interest of the Trust
or shareholders to accept such purchase order.
The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust, which
is expected to remain constant at $1.00. The net asset
value per share of the Portfolio is determined by dividing
the total value of its investments and other assets, less
any liabilities, by the total number of outstanding shares
of the Portfolio. The Portfolio's investments will be
valued by the amortized cost method described in the
Statement of Additional Information. Net asset value per
share is determined daily as of 2:00 p.m., Eastern time, on
each Business Day.
Shareholders who desire to redeem shares of the
Portfolio must place their redemption orders with the
Transfer Agent (or its authorized agent) prior to 12:30
p.m., Eastern time, on any Business Day. Otherwise, the
redemption order will be effective on the next Business
Day. The redemption price is the net asset value per share
of the Portfolio next determined after receipt by the
Transfer Agent, and effectiveness, of the redemption order.
For redemption orders received before 12:30 p.m., Eastern
time, on any Business Day, payment will be made the same
day by transfer of federal funds. Otherwise, the redemption
will be effective on the next Business Day.
9
<PAGE>
If a shareholder's aggregate balance is less than $45
million as a result of redemption or transfer, for a period
of seven consecutive days, the Trust reserves the right to
redeem that shareholder's shares in the Portfolio for their
current net asset value. Before the Trust redeems such
shares, the shareholder will be given notice that the value
of its shares is less than the minimum amount and will be
allowed sixty days to make an additional investment in an
amount that will increase the value of the account to at
least $50 million.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The
Trust and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by other
means.
PERFORMANCE
______________________________________________________________________
From time to time the Portfolio advertises its "current
yield," "tax equivalent yield" and "effective yield." These
figures are based on historical earnings and are not
intended to indicate future performance. The "current
yield" of the Portfolio refers to the income generated by
an investment over a seven-day period which is then
"annualized." That is, the amount of income generated by
the investment during the week is assumed to be generated
each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" (also
called "effective compound yield") is calculated similarly
but, when annualized, the income earned by an investment is
assumed to be reinvested. The "effective yield" will be
slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment. The "tax
equivalent yield" is calculated by determining the rate of
return that would have been achieved on a fully taxable
investment to produce the after-tax equivalent of the
Portfolio's yield, assuming certain tax brackets for a
shareholder.
The Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives.
The Portfolio may also quote financial and business
publications and
10
<PAGE>
periodicals as they relate to fund management, investment
philosophy and investment techniques.
The performance of Class A shares will normally be
higher than that of Class B and Class C shares because of
the additional administrative services expenses charged to
Class B and Class C shares.
TAXES
______________________________________________________________________________
The following summary of federal income tax consequences is
based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No attempt has been made to present a detailed explanation
of the federal income tax treatment of the Portfolio or its
shareholders, and state and local tax consequences of an
investment in the Portfolio may differ from the federal
income tax consequences described below. Accordingly,
shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state and local
income taxes. Additional information concerning taxes is
set forth in the Statement of Additional Information.
TAX STATUS OF THE
PORTFOLIO
The Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), so as to be
relieved of federal income tax on net investment company
taxable income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss)
distributed to shareholders.
TAX STATUS OF
DISTRIBUTIONS
The Portfolio intends to distribute substantially all of
its net investment income (including net short-term capital
gain) to shareholders. If, at the close of each quarter of
its taxable year, at least 50% of the value of the
Portfolio's total assets consists of obligations the
interest on which is excludable from gross income, the
Portfolio may pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends are excludable from
a shareholder's gross income for federal income tax
purposes but may have certain collateral federal tax
consequences including alternative minimum tax
consequences. In addition, the receipt of exempt-interest
dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxable on a portion of
such benefits. See the Statement of Additional Information.
Any dividends paid out of income realized by the
Portfolio on taxable securities will be taxable to
shareholders as ordinary income (whether received in cash
or in additional shares) to the extent of the Portfolio's
earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders.
Distributions to shareholders of net capital gains of the
Portfolio also will not qualify for the dividends received
deduction and will be taxable to shareholders as long-term
capital gain, whether received in cash or additional
shares, and regardless of how long a shareholder has held
the shares.
11
<PAGE>
Dividends declared by the Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in any such month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if paid by the
Portfolio at any time during the following January. The
Portfolio intends to make sufficient distributions prior to
the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment
companies.
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of the
Portfolio is not deductible for federal income tax purposes
to the extent that it relates to exempt-interest dividends
distributed to the shareholder during the taxable year.
Furthermore, the Portfolio may not be an appropriate
investment for persons (including corporations and other
business entities) who are "substantial users" (or persons
related to "substantial users") of facilities financed by
industrial development bonds or private activity bonds.
Such persons should consult their tax advisers before
purchasing shares.
The Portfolio will report annually to its
shareholders the portion of dividends that is taxable and
the portion that is tax-exempt based on income received by
the Portfolio during the year to which the dividends
relate.
Each sale, exchange, or redemption of the Portfolio's
shares is a taxable transaction to the shareholder.
GENERAL INFORMATION
_______________________________________________________________________
THE TRUST
The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated March 15, 1982. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. In addition to the Portfolio, the Trust consists
of the following portfolios: Tax Free Portfolio, California
Tax Exempt Portfolio, Intermediate-Term Municipal
Portfolio, Pennsylvania Municipal Portfolio, New York
Intermediate-Term Municipal Portfolio, and Pennsylvania Tax
Free Portfolio. All consideration received by the Trust for
shares of any portfolio and all assets of such portfolio
belong to that portfolio and would be subject to
liabilities related thereto.
The Trust pay its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts under
which, as described above, certain companies provide
essential services to the Trust.
12
<PAGE>
VOTING RIGHTS
Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will vote
separately on matters relating solely to that Portfolio or
class, such as any distribution plan. As a Massachusetts
business trust, the Trust is not required to hold annual
meetings of shareholders, but approval will be sought for
certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining
Trustees or by shareholders at a special meeting called
upon written request of shareholders owning at least 10% of
the outstanding shares of the Trust. In the event that such
a meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting
the meeting.
REPORTING
The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Manager.
SEI Fund Management, Oaks, Pennsylvania, 19456.
DIVIDENDS
The net investment income (exclusive of capital gains) of
the Portfolio is determined and declared on each Business
Day as a dividend for shareholders of record as of the
close of business on that day. Dividends are paid by the
Portfolio in federal funds or in additional shares at the
discretion of the shareholder on the first Business Day of
each month. Dividends will be paid on the next Business Day
to shareholders who redeem all of their shares of the
Portfolio at any time during the month. Currently, capital
gains, if any, are distributed at the end of the calendar
year.
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares, unless the shareholder has elected to take such
payment in cash. Shareholders may change their election by
providing written notice to the Manager at least 15 days
prior to the distribution.
The dividends on Class A shares of the Portfolio are
normally higher than those on Class B and Class C shares
because of the additional administrative services expenses
charged to Class B and Class C shares.
COUNSEL AND INDEPENDENT
PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
CUSTODIAN AND WIRE AGENT
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, serves as Custodian
of the Trust's assets and acts as wire agent of the Trust.
The Custodian holds cash, securities and other assets of
the Trust as required by the 1940 Act.
13
<PAGE>
DESCRIPTION OF
PERMITTED
INVESTMENTS AND RISK
FACTORS ______________________________________________________________________
The following is a description of certain of the permitted
investments for the Portfolio, and the associated risk
factors:
MONEY MARKET SECURITIES
Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks; (ii) U.S. Treasury obligations and obligations
issued by the agencies and instrumentalities of the U.S.
Government; and (iii) repurchase agreements involving any
of the foregoing obligations entered into with highly-rated
banks and broker-dealers.
MUNICIPAL SECURITIES
Municipal Securities consist of (i) debt obligations issued
by or on behalf of public authorities to obtain funds to be
used for various public facilities, for refunding
outstanding obligations, for general operating expenses and
for lending such funds to other public institutions and
facilities, and (ii) certain private activity and
industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately
operated facilities.
General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed
by the revenues of a project or facility, tolls from a toll
bridge, for example. Certificates of participation
represent an interest in an underlying obligation or
commitment such as an obligation issued in connection with
a leasing arrangement. The payment of principal and
interest on private activity and industrial development
bonds generally is dependent solely on the ability of the
facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed
as security for such payment.
Municipal notes include general obligation notes, tax
anticipation notes, revenue anticipation notes, bond
anticipation notes, certificates of indebtedness, demand
notes and construction loan notes and participation
interests in municipal notes. Municipal bonds include
general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds
and participation interests in municipal bonds.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements by which a Portfolio
obtains a security and simultaneously commits to return the
security to the seller at an agreed upon price (including
principal and interest) on an agreed upon date within a
number of days from the date of purchase. Repurchase
agreements are considered loans under the 1940 Act.
14
<PAGE>
STANDBY COMMITMENTS AND
PUTS
Securities subject to standby commitments or puts permit
the holder thereof to sell the securities at a fixed price
prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current
market price. However, unless the standby commitment or put
was an integral part of the security as originally issued,
it may not be marketable or assignable; therefore, the
standby commitment or put would only have value to the
Portfolio owning the security to which it relates. In
certain cases, a premium may be paid for a standby
commitment or put, which premium will have the effect of
reducing the yield otherwise payable on the underlying
security. The Portfolio will limit standby commitment or
put transactions to institutions believed to present
minimal credit risks.
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 Portfolio may
carry variable or floating rates of interest and may
involve a conditional or unconditional demand feature. Such
obligations may include variable amount master demand
notes. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities
may be reset daily, weekly, quarterly or at some other
interval, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing market
interest rates. A demand instrument with a demand notice
period exceeding seven days may be considered illiquid if
there is no secondary market for such security.
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. The Portfolio will maintain with the
custodian a separate account with liquid securities or cash
in an amount at least equal to these commitments. The
interest rate realized on these securities is fixed as of
the purchase date, and no interest accrues to the Portfolio
before settlement.
15
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 3
The Trust................................................................. 4
Investment Objective and Policies......................................... 4
General Investment Policies............................................... 5
Investment Limitations.................................................... 6
The Manager............................................................... 6
The Adviser............................................................... 7
Distribution and Shareholder Servicing.................................... 8
Purchase and Redemption of Shares......................................... 9
Performance............................................................... 10
Taxes..................................................................... 11
General Information....................................................... 12
Description of Permitted Investments and Risk Factors..................... 14
</TABLE>
16
<PAGE>
SEI TAX EXEMPT TRUST
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
INSTITUTIONAL TAX FREE PORTFOLIO
- ---------------------------------------------------------------------
This Prospectus sets forth concisely information about the above-referenced
Portfolio that an investor needs to know before investing. Please read this
Prospectus carefully, and keep it on file for future reference.
A Statement of Additional Information dated December 31, 1997, has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing the Distributor, SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Tax Exempt Trust (the "Trust") is an open-end management investment company,
certain classes of which offer financial institutions a convenient means of
investing their own funds, or funds for which they act in a fiduciary, agency or
custodial capacity, in one or more professionally managed diversified and non-
diversified portfolios of securities. A portfolio may offer separate classes of
shares that differ from each other primarily in the allocation of certain
expenses and minimum investment amounts. This Prospectus offers Class B shares
of the Institutional Tax Free Portfolio (the "Portfolio"), a money market
portfolio.
AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS) CLASS B
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
Management/Advisory Fees (AFTER FEE WAIVER) (1) .29%
12b-1 Fees None
Total Other Expenses .34%
Shareholder Servicing Fees .25%
- ------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVER) (2) .63%
- ------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER HAS WAIVED, ON A VOLUNTARY BASIS, A PORTION OF ITS FEE, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THIS VOLUNTARY WAIVER. THE MANAGER
RESERVES THE RIGHT TO TERMINATE ITS WAIVER AT ANY TIME IN ITS SOLE
DISCRETION. ABSENT SUCH FEE WAIVER, MANAGEMENT/ADVISORY FEES FOR CLASS B
SHARES OF THE PORTFOLIO WOULD BE .40%.
(2) ABSENT THIS FEE WAIVER TOTAL OPERATING EXPENSES OF THE PORTFOLIO WOULD BE
.74% FOR THE CLASS B SHARES. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE
ADVISER" AND "THE MANAGER."
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor in Class B shares of the
Portfolio would pay the following expenses
on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end
of each time period:
Class B $6 $20 $35 $79
- --------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE PORTFOLIO'S CLASS B SHARES. THE PORTFOLIO ALSO OFFERS
CLASS A AND CLASS C SHARES, WHICH ARE SUBJECT TO THE SAME EXPENSES, EXCEPT THAT
CLASS A AND CLASS C SHARES BEAR DIFFERENT SHAREHOLDER SERVICING COSTS. A PERSON
WHO PURCHASES SHARES THROUGH AN ACCOUNT WITH A FINANCIAL INSTITUTION MAY BE
CHARGED SEPARATE FEES BY THAT INSTITUTION. ADDITIONAL INFORMATION MAY BE FOUND
UNDER "THE MANAGER," "DISTRIBUTION AND SHAREHOLDER SERVICING" AND "THE ADVISER."
2
<PAGE>
FINANCIAL HIGHLIGHTS
______________________________________________________________
The following financial highlights for a share outstanding throughout each
period have been derived from the Trust's financial statements which were
audited by Arthur Andersen LLP, independent accountants, whose report thereon,
dated October 17, 1997, was unqualified. This information should be read in
conjunction with the Trust's financial statements for the fiscal year ended
August 31, 1997, and notes thereto which are incorporated by reference to the
Trust's Statement of Additional Information. Additional performance information
is set forth in the Trust's 1997 Annual Report to Shareholders, which is
available upon request and without charge by calling 1-800-342-5734.
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET REALIZED
AND
INVESTMENT UNREALIZED
NET ACTIVITIES DISTRIBUTIONS GAIN (LOSS)
ASSET ---------- -------------------------------------- ON
VALUE, NET NET NET INVESTMENTS
BEGINNING INVESTMENT INVESTMENT REALIZED TOTAL AND CAPITAL
OF PERIOD INCOME INCOME GAIN DISTRIBUTIONS TRANSACTIONS
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- ------------------------------
INSTITUTIONAL TAX FREE
PORTFOLIO
- -----------------------------
Class B
FOR THE YEARS ENDED AUGUST 31:
1997 $ 1.00 $ 0.031 $ (0.031) $ -- $ (0.031) $ --
1996 1.00 0.032 (0.032) -- (0.032) --
1995 1.00 0.033 (0.033) -- (0.033) --
1994 1.00 0.022 (0.022) -- (0.022) --
1993 1.00 0.023 (0.023) -- (0.023) --
1992 1.00 0.033 (0.033) -- (0.033) --
1991 (2) 1.00 0.038 (0.038) -- (0.038) --
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF RATIO OF INVESTMENT
EXPENSES EXPENSES TO NET INCOME TO
NET NET ASSETS, TO AVERAGE NET INVESTMENT AVERAGE NET
ASSET END AVERAGE ASSETS INCOME TO ASSETS
VALUE END TOTAL OF PERIOD NET (EXCLUDING AVERAGE (EXCLUDING
OF PERIOD RETURN (000) ASSETS FEE WAIVERS) NET ASSETS FEE WAIVERS)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------
- ------------------------------
INSTITUTIONAL TAX FREE
PORTFOLIO
- -----------------------------
Class B
FOR THE YEARS ENDED AUGUST 31:
1997 $ 1.00 3.13% $ 34,783 0.63% 0.73% 3.10% 3.00%
1996 1.00 3.21% 14,156 0.63% 0.80% 3.16% 2.99%
1995 1.00 3.39% 15,084 0.63% 0.82% 3.32% 3.13%
1994 1.00 2.21% 21,725 0.63% 0.81% 2.31% 2.13%
1993 1.00 2.29% 3,040 0.63% 0.79% 2.22% 2.06%
1992 1.00 3.35% 686 0.63% 0.81% 3.22% 3.04%
1991 (2) 1.00 3.89% 1,515 0.63%* 0.84%* 4.34%* 4.13%*
- ------------------------------
- ------------------------------
</TABLE>
* ANNUALIZED
+ RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) THE INSTITUTIONAL TAX-FREE PORTFOLIO--CLASS B COMMENCED OPERATIONS ON
OCTOBER 15, 1990.
3
<PAGE>
THE TRUST
_________________________________________________________________________
SEI TAX EXEMPT TRUST (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in separate diversified and
non-diversified investment portfolios. This Prospectus offers Class B shares of
the Trust's Institutional Tax Free Portfolio (the "Portfolio"). As of September
30, 1997, the aggregate net assets of all classes of the Institutional Tax Free
Portfolio was $992,670,088. Investors may also purchase Class A and Class C
shares of the Portfolio. Each class provides for variation in shareholder
servicing expenses, voting rights and dividends. Additional information
pertaining to the Trust may be obtained by writing to SEI Investments
Distribution Co., Oaks, Pennsylvania 19456, or by calling 1-800-342-5734.
INVESTMENT
OBJECTIVE AND
POLICIES
___________________________________________________________________________
The Portfolio'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 Portfolio will
meet its investment objective.
The Portfolio 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 (collectively, "Municipal
Securities"). It is a fundamental policy of the Portfolio
to invest at least 80% of its net assets in securities the
interest on which is exempt from federal income taxes,
based on opinions from bond counsel for the issuers, and
the Portfolio 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.
The Portfolio may purchase municipal bonds, municipal
notes and tax-exempt commercial paper, but only if such
securities, at the time of purchase, meet quality,
maturity and diversification requirements imposed by Rule
2a-7. See "General Investment Policies."
The Adviser will not invest more than 25% of
Portfolio 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 Portfolio's assets are invested in
Municipal Securities payable from revenues on similar
projects, the Portfolio will be subject to the peculiar
risks presented by such projects to a greater extent than
it would be if the Portfolio's
4
<PAGE>
assets were not so invested. Moreover, in seeking to
attain its investment objective, the Portfolio may invest
all or any part of its assets in Municipal Securities that
are industrial development bonds.
GENERAL
INVESTMENT
POLICIES
___________________________________________________________________________
In purchasing obligations, the Portfolio complies with the
requirements of Rule 2a-7 under the Investment Company Act
of 1940 (the "1940 Act"), as that Rule may be amended from
time to time. These requirements currently provide that
the Portfolio must limit its investments to securities
with remaining maturities of 397 days or less, and must
maintain a dollar-weighted average maturity of 90 days or
less. In addition, the Portfolio may only invest in
eligible securities. In general, this means securities
rated in one of the two highest categories for short-term
securities by at least two nationally recognized
statistical rating organizations ("NRSROs") (or by one
NRSRO if only one NRSRO has rated the security), or, if
unrated, determined by Weiss, Peck & Greer, L.L.C. (the
"Adviser") to be of equivalent quality. Since the
Portfolio 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 Portfolio and affect its share price.
Securities rated in the highest rating category
(E.G., A-1 by Standard & Poor's Corporation ("S&P")) by at
least two NRSROs (or, if unrated, determined by the
Adviser to be of comparable quality) are "first tier"
securities. Non-first tier securities rated in the second
highest rating category (E.G., A-2 by S&P) by at least one
NRSRO (or, if unrated, determined by the Adviser to be of
comparable quality) are considered to be "second tier"
securities. The Portfolio's investments in non-first tier
conduit securities will be limited to 5% of the
Portfolio's assets. Conduit securities are securities
issued to finance non-governmental private projects, such
as housing developments and retirement homes, and for
which the ultimate obligor is not a governmental issuer.
The Portfolio may purchase securities on a
"when-issued" basis, variable and floating rate
obligations and reserves the right to engage in
transactions involving standby commitments. While the
Portfolio generally intends to be fully invested in
federally tax-exempt securities, the Portfolio may invest
up to 20% of its net assets in taxable money market
instruments (including repurchase agreements) and
securities the interest on which is a preference item for
purposes of the federal alternative minimum tax. The
Portfolio will not invest more than 10% of its total
assets in securities which are considered to be illiquid.
5
<PAGE>
For a description of the permitted investments and
ratings, see the "Description of Permitted Investments and
Risk Factors" and the Statement of Additional Information.
INVESTMENT
LIMITATIONS
_______________________________________________________________________
The investment objective and investment limitations are
fundamental policies of the Portfolio. Fundamental
policies cannot be changed with respect to the Trust or
the Portfolio without the consent of the holders of a
majority of the Trust's or the Portfolio's outstanding
shares. It is a fundamental policy of the Portfolio to use
its best efforts to maintain a constant net asset value of
$1.00 per share.
THE PORTFOLIO MAY NOT:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the United States Government,
its agencies or instrumentalities) if, as a result,
more than 5% of the total assets of the Portfolio
(based on current market value at the time of
investment) would be invested in the securities of such
issuer; provided, however, that the Portfolio may
invest up to 25% of its total assets without regard to
this restriction of, and as permitted by, Rule 2a-7.
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio, based on 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 the total assets of the Portfolio. All
borrowings will be repaid before making additional
investments and any interest paid on such borrowings
will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the
time of the purchase of a security. Additional fundamental
investment limitations are set forth in the Statement of
Additional Information.
THE MANAGER_____________________________________________________________________
SEI Fund Management (the "Manager" and the "Transfer
Agent") provides the Trust with overall management
services, regulatory reporting, all necessary office
space, equipment, personnel and facilities, and serves as
institutional transfer agent and dividend disbursing
agent.
For these services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .36% of the average daily net assets of the
6
<PAGE>
Portfolio. The Manager has voluntarily agreed to waive a
portion of its fee in order to limit the total operating
expenses to not more than .63% of the average daily net
assets of the Class B shares of the Portfolio, on an
annualized basis. The Manager reserves the right, in its
sole discretion, to terminate this voluntary fee waiver at
any time. For the fiscal year ended August 31, 1997, the
Portfolio paid management fees, after waivers, of .25% of
its average daily net assets.
THE ADVISER
_______________________________________________________________________
Weiss, Peck & Greer, L.L.C., serves as the Portfolio's
investment adviser under an investment advisory agreement
with the Trust (the "Advisory Agreement"). Under the
Advisory Agreement, the Adviser invests the assets of the
Portfolio, and continuously reviews, supervises and
administers the Portfolio's investment program. The
Adviser is independent of the Manager and discharges its
responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust.
The Adviser is a limited liability company founded as
a limited partnership in 1970, and engages in investment
management, venture capital management and management
buyouts. The Adviser has been active since its founding in
managing portfolios of tax exempt securities. As of
September 30, 1997, total assets under management were
approximately $14.6 billion. The principal business
address of the Adviser is One New York Plaza, New York,
New York 10004.
Janet Fiorenza acts as the portfolio manager for the
Portfolio. Ms. Fiorenza, a Principal of the Adviser, has
been associated with the Adviser's Tax Exempt Fixed Income
group since 1988, and with its predecessor since 1980.
For its services, the Adviser is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of .05% of the combined average daily net assets of
the money market portfolios of the Trust that are advised
by the Adviser up to $500 million, .04% of such assets
from $500 million to $1 billion and .03% of such assets in
excess of $1 billion. Such fees are allocated daily among
these portfolios based on their relative net assets. For
the fiscal year ended August 31, 1997 the Portfolio paid
advisory fees, after waivers, of .04% of its relative net
assets.
DISTRIBUTION AND
SHAREHOLDER
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), a
wholly owned subsidiary of SEI Investments Company ("SEI
Investments"), serves as the Portfolio's distributor
pursuant to a distribution agreement (the "Distribution
Agreement") with the Trust.
The Portfolio has adopted plans under which firms,
including the Distributor, that provide shareholder and
administrative services may receive compensation
7
<PAGE>
therefor. The Class A, B and C plans differ in a number of
ways, including the amounts that may be paid. Under each
plan, the Distributor may provide those services itself or
may enter into arrangements under which third parties
provide such services and are compensated by the
Distributor. Under such arrangements the Distributor may
retain as a profit any difference between the fee it
receives and the amount it pays such third parties. In
addition, the Portfolio may enter into such arrangements
directly.
Under the Class B shareholder service plan, the
Distributor is entitled to receive shareholder service
fees at an annual rate of up to .25% of average daily net
assets in return for the Distributor's (or its agent's)
efforts in maintaining client accounts; arranging for bank
wires; responding to client inquiries concerning services
provided or investment; and assisting clients in changing
dividend options, account designations and addresses. In
addition, under its administrative services plan, Class B
shares will pay administrative services fees to the
Distributor at specified percentages of the average daily
net assets of the shares of the Class (up to .05%).
Administrative services include sub-accounting; providing
information on share positions to clients; forwarding
shareholder communications to clients; processing
purchase, exchange and redemption orders and processing
dividend payments.
It is possible that an institution may offer
different classes of shares to its customers and differing
services to the Classes of the Portfolio and thus receive
compensation with respect to different classes. These
financial institutions may also charge separate fees to
their customers.
The Trust may execute brokerage or other agency
transactions through the Distributor for which the
Distributor may receive compensation.
The Distributor may, from time to time and at its own
expense provide promotional incentives, in the form of
cash or other compensation, to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolio's
shares.
PURCHASE AND
REDEMPTION OF
SHARES
____________________________________________________________________________
Financial institutions may acquire shares of the Portfolio
for their own account, or as a record owner on behalf of
fiduciary, agency or custody accounts, by placing orders
with the Transfer Agent (or its authorized agent).
Institutions that use certain SEI proprietary systems may
place orders electronically through those systems.
Financial institutions which purchase shares for the
accounts of their customers may impose separate charges on
these customers for account services. Financial
institutions may impose an earlier cut-off time for
receipt of purchase
8
<PAGE>
orders directed through them to allow for processing and
transmittal of these orders to the Transfer Agent for
effectiveness on the same day.
Shares of the Portfolio may be purchased or redeemed
on days on which the New York Stock Exchange is open for
business ("Business Days"). However, money market fund
shares cannot be purchased by Federal Reserve wire on
federal holidays restricting wire transfers.
Shareholders who desire to purchase shares for cash
must place their orders with the Transfer Agent (or its
authorized agent) prior to the determination of net asset
value and in accordance with the procedures described
below for the order to be accepted on that Business Day.
Cash investments must be transmitted or delivered in
federal funds to the wire agent by the close of business
on the same day the order is placed.
The Trust reserves the right to reject a purchase
order when the Transfer Agent determines that it is not in
the best interest of the Trust or shareholders to accept
such purchase order.
The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust,
which is expected to remain constant at $1.00. The net
asset value per share of the Portfolio is determined by
dividing the total value of its investments and other
assets, less any liabilities, by the total number of
outstanding shares of the Portfolio. The Portfolio's
investments will be valued by the amortized cost method
described in the Statement of Additional Information. Net
asset value per share is determined daily as of 2:00 p.m.,
Eastern time, on each Business Day.
Shareholders who desire to redeem shares of the
Portfolio must place their redemption orders with the
Transfer Agent (or its authorized agent) prior to 12:30
p.m., Eastern time, on any Business Day. Otherwise, the
redemption order will be effective on the next Business
Day. The redemption price is the net asset value per share
of the Portfolio next determined after receipt by the
Transfer Agent, and effectiveness, of the redemption
order. For redemption orders received before 12:30 p.m.,
Eastern time, on any Business Day, payment will be made
the same day by transfer of federal funds. Otherwise, the
redemption will be effective on the next Business Day.
If a shareholder's aggregate balance is less than $45
million as a result of redemption or transfer, for a
period of seven consecutive days, the Trust reserves the
right to redeem that shareholder's shares in the Portfolio
for their current net asset value. Before the Trust
redeems such shares, the shareholder will be given notice
that the value of its shares is less than the minimum
amount and will be allowed sixty days to make an
additional investment in an amount that will increase the
value of the account to at least $50 million.
9
<PAGE>
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Transfer Agent will
be responsible for any loss, liability, cost or expense
for acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine.
The Trust and the Transfer Agent will each employ
reasonable procedures to confirm that instructions
communicated by telephone are genuine, including requiring
a form of personal identification prior to acting upon
instructions received by telephone and recording telephone
instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by
other means.
PERFORMANCE_____________________________________________________________________
From time to time the Portfolio advertises its "current
yield," "tax equivalent yield" and "effective yield."
These figures are based on historical earnings and are not
intended to indicate future performance. The "current
yield" of the Portfolio refers to the income generated by
an investment over a seven-day period which is then
"annualized." That is, the amount of income generated by
the investment during the week is assumed to be generated
each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" (also
called "effective compound yield") is calculated similarly
but, when annualized, the income earned by an investment
is assumed to be reinvested. The "effective yield" will be
slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment. The "tax
equivalent yield" is calculated by determining the rate of
return that would have been achieved on a fully taxable
investment to produce the after-tax equivalent of the
Portfolio's yield, assuming certain tax brackets for a
shareholder.
The Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives.
The Portfolio may also quote financial and business
publications and periodicals as they relate to fund
management, investment philosophy and investment
techniques.
The performance of Class A shares will normally be
higher than that of Class B and Class C shares because of
the additional administrative services expenses charged to
Class B and Class C shares.
10
<PAGE>
TAXES
______________________________________________________________________________
The following summary of federal income tax consequences
is based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No attempt has been made to present a detailed explanation
of the federal income tax treatment of the Portfolio or
its shareholders, and state and local tax consequences of
an investment in the Portfolio may differ from the federal
income tax consequences described below. Accordingly,
shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state and
local income taxes. Additional information concerning
taxes is set forth in the Statement of Additional
Information.
TAX STATUS OF THE PORTFOLIO
The Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), so as to be
relieved of federal income tax on net investment company
taxable income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss)
distributed to shareholders.
TAX STATUS OF DISTRIBUTIONS
The Portfolio intends to distribute substantially all of
its net investment income (including net short-term
capital gain) to shareholders. If, at the close of each
quarter of its taxable year, at least 50% of the value of
the Portfolio's total assets consists of obligations the
interest on which is excludable from gross income, the
Portfolio may pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends are excludable
from a shareholder's gross income for federal income tax
purposes but may have certain collateral federal tax
consequences including alternative minimum tax
consequences. In addition, the receipt of exempt-interest
dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxable on a portion of
such benefits. See the Statement of Additional
Information.
Any dividends paid out of income realized by the
Portfolio on taxable securities will be taxable to
shareholders as ordinary income (whether received in cash
or in additional shares) to the extent of the Portfolio's
earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders.
Distributions to shareholders of net capital gains of the
Portfolio also will not qualify for the dividends received
deduction and will be taxable to shareholders as long-term
capital gain, whether received in cash or additional
shares, and regardless of how long a shareholder has held
the shares.
Dividends declared by the Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in any such month will be
11
<PAGE>
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of that year if paid by
the Portfolio at any time during the following January.
The Portfolio intends to make sufficient distributions
prior to the end of each calendar year to avoid liability
for the federal excise tax applicable to regulated
investment companies.
Interest on indebtedness incurred or continued by a
shareholder in order to purchase or carry shares of the
Portfolio is not deductible for federal income tax
purposes to the extent that it relates to exempt-interest
dividends distributed to the shareholder during the
taxable year. Furthermore, the Portfolio may not be an
appropriate investment for persons (including corporations
and other business entities) who are "substantial users"
(or persons related to "substantial users") of facilities
financed by industrial development bonds or private
activity bonds. Such persons should consult their tax
advisers before purchasing shares.
The Portfolio will report annually to its
shareholders the portion of dividends that is taxable and
the portion that is tax-exempt based on income received by
the Portfolio during the year to which the dividends
relate.
Each sale, exchange, or redemption of the Portfolio's
shares is a taxable transaction to the shareholder.
GENERAL
INFORMATION
_______________________________________________________________________
THE TRUST
The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated March 15, 1982. The
Declaration of Trust permits the Trust to offer separate
portfolios of shares and different classes of each
portfolio. In addition to the Portfolio, the Trust
consists of the following portfolios: Tax Free Portfolio,
California Tax Exempt Portfolio, Intermediate-Term
Municipal Portfolio, Pennsylvania Municipal Portfolio, New
York Intermediate-Term Municipal Portfolio, and
Pennsylvania Tax Free Portfolio. All consideration
received by the Trust for shares of any portfolio and all
assets of such portfolio belong to that portfolio and
would be subject to liabilities related thereto.
The Trust pay its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation materials and
reports to shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by
the Trustees under the laws of the Commonwealth of
Massachusetts. The Trustees have approved contracts
12
<PAGE>
under which, as described above, certain companies provide
essential services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one
vote. The shareholders of each portfolio or class will
vote separately on matters relating solely to that
Portfolio or class, such as any distribution plan. As a
Massachusetts business trust, the Trust is not required to
hold annual meetings of shareholders, but approval will be
sought for certain changes in the operation of the Trust
and for the election of Trustees under certain
circumstances. In addition, a Trustee may be removed by
the remaining Trustees or by shareholders at a special
meeting called upon written request of shareholders owning
at least 10% of the outstanding shares of the Trust. In
the event that such a meeting is requested, the Trust will
provide appropriate assistance and information to the
shareholders requesting the meeting.
REPORTING
The Trust issues unaudited financial statements
semi-annually and audited financial statements annually.
The Trust furnishes proxy statements and other reports to
shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Manager.
SEI Fund Management, Oaks, Pennsylvania, 19456.
DIVIDENDS
The net investment income (exclusive of capital gains) of
the Portfolio is determined and declared on each Business
Day as a dividend for shareholders of record as of the
close of business on that day. Dividends are paid by the
Portfolio in federal funds or in additional shares at the
discretion of the shareholder on the first Business Day of
each month. Dividends will be paid on the next Business
Day to shareholders who redeem all of their shares of the
Portfolio at any time during the month. Currently, capital
gains, if any, are distributed at the end of the calendar
year.
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares, unless the shareholder has elected to take such
payment in cash. Shareholders may change their election by
providing written notice to the Manager at least 15 days
prior to the distribution.
The dividends on Class A shares of the Portfolio are
normally higher than those on Class B and Class C shares
because of the additional administrative services expenses
charged to Class B and Class C shares.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the
Trust. Arthur Andersen LLP serves as the independent
public accountants of the Trust.
CUSTODIAN AND WIRE AGENT
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O.
Box 7618, Philadelphia, Pennsylvania 19101, serves as
Custodian of the Trust's assets and acts as wire agent of
the Trust. The Custodian holds cash, securities and other
assets of the Trust as required by the 1940 Act.
13
<PAGE>
DESCRIPTION
OF PERMITTED
INVESTMENTS
AND RISK FACTORS
_________________________________________________________________
The following is a description of certain of the permitted
investments for the Portfolio, and the associated risk
factors:
MONEY MARKET SECURITIES
Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks; (ii) U.S. Treasury obligations and obligations
issued by the agencies and instrumentalities of the U.S.
Government; and (iii) repurchase agreements involving any
of the foregoing obligations entered into with
highly-rated banks and broker-dealers.
MUNICIPAL SECURITIES
Municipal Securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain
funds to be used for various public facilities, for
refunding outstanding obligations, for general operating
expenses and for lending such funds to other public
institutions and facilities, and (ii) certain private
activity and industrial development bonds issued by or on
behalf of public authorities to obtain funds to provide
for the construction, equipment, repair or improvement of
privately operated facilities.
General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are
backed by the revenues of a project or facility, tolls
from a toll bridge, for example. Certificates of
participation represent an interest in an underlying
obligation or commitment such as an obligation issued in
connection with a leasing arrangement. The payment of
principal and interest on private activity and industrial
development bonds generally is dependent solely on the
ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal
property so financed as security for such payment.
Municipal notes include general obligation notes, tax
anticipation notes, revenue anticipation notes, bond
anticipation notes, certificates of indebtedness, demand
notes and construction loan notes and participation
interests in municipal notes. Municipal bonds include
general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds
and participation interests in municipal bonds.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements by which a
Portfolio obtains a security and simultaneously commits to
return the security to the seller at an agreed upon price
(including principal and interest) on an agreed upon date
within a number of days from the date of purchase.
Repurchase agreements are considered loans under the 1940
Act.
14
<PAGE>
STANDBY COMMITMENTS AND PUTS
Securities subject to standby commitments or puts permit
the holder thereof to sell the securities at a fixed price
prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current
market price. However, unless the standby commitment or
put was an integral part of the security as originally
issued, it may not be marketable or assignable; therefore,
the standby commitment or put would only have value to the
Portfolio owning the security to which it relates. In
certain cases, a premium may be paid for a standby
commitment or put, which premium will have the effect of
reducing the yield otherwise payable on the underlying
security. The Portfolio will limit standby commitment or
put transactions to institutions believed to present
minimal credit risk.
U.S. GOVERNMENT OBLIGATIONS
Obligations issued by the U.S. Treasury or issued or
guaranteed by agencies of the U.S. Government 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 Portfolio may
carry variable or floating rates of interest and may
involve a conditional or unconditional demand feature.
Such obligations may include variable amount master demand
notes. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities
may be reset daily, weekly, quarterly or at some other
interval, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on
such obligations may not accurately reflect existing
market interest rates. A demand instrument with a demand
notice period exceeding seven days may be considered
illiquid if there is no secondary market for such
security.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. The Portfolio will maintain with the
custodian a separate account with liquid securities or
cash in an amount at least equal to these commitments. The
interest rate realized on these securities is fixed as of
the purchase date, and no interest accrues to the
Portfolio before settlement.
15
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Annual Operating Expenses........................ 2
Financial Highlights............................. 3
The Trust........................................ 4
Investment Objective and Policies................ 4
General Investment Policies...................... 5
Investment Limitations........................... 6
The Manager...................................... 6
The Adviser...................................... 7
Distribution and Shareholder Servicing........... 7
Purchase and Redemption of Shares................ 8
Performance...................................... 10
Taxes............................................ 11
General Information.............................. 12
Description of Permitted Investments and Risk
Factors........................................ 14
</TABLE>
16
<PAGE>
SEI TAX EXEMPT TRUST
Manager:
SEI Fund Management
Distributor:
SEI Investments Distribution Co.
Investment Advisers and Sub-Advisers:
Morgan Grenfell Capital Management Incorporated
SEI Investments Management Corporation
Standish, Ayer & Wood, Inc.
Weiss, Peck & Greer L.L.C.
This STATEMENT OF ADDITIONAL INFORMATION is not a Prospectus. It is intended
to provide additional information regarding the activities and operations of SEI
Tax Exempt Trust (the "Trust") and should be read in conjunction with the
Trust's Prospectuses dated December 31, 1997. 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
Description of Permitted Investments.................................................. S-2
Description of Ratings................................................................ S-5
Investment Limitations................................................................ S-6
State Specific Disclosure............................................................. S-8
The Manager........................................................................... S-9
The Advisers and Sub-Adviser.......................................................... S-10
Distribution and Shareholder Servicing................................................ S-10
Trustees and Officers of the Trust.................................................... S-12
Performance........................................................................... S-14
Determination of Net Asset Value...................................................... S-16
Purchase and Redemption of Shares..................................................... S-17
Shareholder Services.................................................................. S-18
Taxes................................................................................. S-18
Portfolio Transactions................................................................ S-21
Description of Shares................................................................. S-22
Limitation of Trustees' Liability..................................................... S-23
Shareholder Liability................................................................. S-23
5% Shareholders....................................................................... S-23
Experts............................................................................... S-26
Financial Statements.................................................................. S-26
</TABLE>
December 31, 1997
SEI-F-043-11
<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 ("portfolios") of units of beneficial interest ("shares")
and separate classes of portfolios. This Statement of Additional Information
relates to the following portfolios: Tax Free, Institutional Tax Free,
California Tax Exempt, Intermediate-Term Municipal, Pennsylvania Municipal,
Pennsylvania Tax Free, and New York Intermediate-Term Municipal Portfolios (each
a "Portfolio," and collectively, the "Portfolios"), and any different classes of
the Portfolios. Except for differences between the Class A, Class B, Class C,
Class D and CNI Class shares of any Portfolio pertaining to sales loads,
shareholder servicing and administrative services plans, distribution plans,
transfer agency costs, voting rights and/or dividends, each share of each
Portfolio represents an equal proportionate interest in that Portfolio with each
other share of that Portfolio.
DESCRIPTION OF PERMITTED INVESTMENTS
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
Portfolio's fixed income investments will change in response to interest rate
changes and other factors. During periods of falling interest rates, the values
of outstanding fixed income securities generally rise. Conversely, during
periods of rising interest rates, the values of such securities generally
decline. Changes by recognized rating agencies in the rating of any fixed income
security and in the ability of an issuer to make payments of interest and
principal also affect the value of these investments. Changes in the value of
portfolio securities will not necessarily affect cash income derived from these
securities, but will affect a Portfolio's net asset value.
INVESTMENT COMPANY SHARES--Each Portfolio may invest in shares of other
investment companies, to the extent permitted by applicable law and subject to
certain restrictions set forth in this Statement of Additional Information.
These investment companies typically incur fees that are separate from those
fees incurred directly by a Portfolio. A Portfolio's purchase of such investment
company securities results in the layering of expenses, such that shareholders
would indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees, in addition to paying Portfolio
expenses. Under applicable regulations, a Portfolio is prohibited from acquiring
the securities of another investment company if, as a result of such
acquisition: (1) the Portfolio owns more than 3% of the total voting stock of
the other company; (2) securities issued by any one investment company represent
more than 5% of the Portfolio's total assets; or (3) securities (other than
treasury stock) issued by all investment companies represent more than 10% of
the total assets of the Portfolio.
MUNICIPAL LEASES--Each Portfolio may invest in instruments, or
participations in instruments, issued in connection with lease obligations or
installment purchase contract obligations of municipalities ("municipal lease
obligations"). 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
S-2
<PAGE>
for, appropriate funds for, and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses, which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose in the relevant years. Municipal lease obligations are a relatively
new form of financing, and the market for such obligations is still developing.
Municipal leases will be treated as liquid only if they satisfy criteria set
forth in guidelines established by the Board of Trustees, and there can be no
assurance that a market will exist or continue to exist for any municipal lease
obligation.
MUNICIPAL NOTES--Municipal notes consist of general obligation notes, tax
anticipation notes (notes sold to finance working capital needs of the issuer in
anticipation of receiving taxes on a future date), revenue anticipation notes
(notes sold to provide needed cash prior receipt of expected non-tax revenues
from a specific source), bond anticipation notes, tax and revenue anticipation
notes, certificates of indebtedness, demand notes, and construction loan notes.
The maturities of the instruments at the time of issue will generally range from
three months to one year.
MUNICIPAL BONDS--Municipal bonds are debt obligations issued to obtain funds
for various public purposes. A Portfolio may purchase private activity or
industrial development bonds if the interest paid is exempt from federal income
tax. These bonds are issued by or on behalf of public authorities to raise money
to finance various privately-owned or -operated facilities for business and
manufacturing, housing, sports, and pollution control. These bonds are also used
to finance public facilities such as airports, mass transit systems, ports,
parking or sewage or solid waste disposal facilities, as well as certain other
categories. The payment of the principal and interest on such bonds is dependent
solely on the ability of the facility's user to meet its financial obligations
and the pledge, if any, of real and personal property so financed as security
for such payment.
REPURCHASE AGREEMENTS--Repurchase agreements are agreements under which
securities are acquired from a securities dealer or bank subject to resale on an
agreed upon date and at an agreed upon price which includes principal and
interest. Each Portfolio or its agent will have actual or constructive
possession of the securities held as collateral for the repurchase agreement.
Each Portfolio bears a risk of loss in the event the other party defaults on its
obligations and the Portfolio is delayed or prevented from exercising its right
to dispose of the collateral securities, or if the Portfolio realizes a loss on
the sale of the collateral securities. The Advisers or Sub-Adviser will enter
into repurchase agreements on behalf of a Portfolio only with financial
institutions deemed to present minimal risk of bankruptcy during the term of the
agreement based on guidelines established and periodically reviewed by the Board
of Trustees. These guidelines currently permit the Portfolios to enter into
repurchase agreements only with approved banks and primary securities dealers,
as recognized by the Federal Reserve Bank of New York, which have minimum net
capital of $100 million, or with a member bank of the Federal Reserve System.
Repurchase agreements are considered to be loans collateralized by the
underlying security. Repurchase agreements entered into by the Portfolios will
provide that the underlying security at all times shall have a value at least
equal to 102% of the price stated in the agreement. This underlying security
will be marked to market daily. The Advisers or Sub-Adviser will monitor
compliance with this requirement. Under all repurchase agreements entered into
by the Portfolios, the Custodian or its agent must take possession of the
underlying collateral. However, if the seller defaults, the Portfolios could
realize a loss on the sale of the underlying security to the extent the proceeds
of the sale are less than the resale price. In addition, even though the
Bankruptcy Code provides protection for most repurchase agreements, if the
seller should be involved in bankruptcy or insolvency proceedings, the
Portfolios may incur delays and costs in selling the security and may suffer a
loss of principal and interest if the Portfolios are treated as unsecured
creditors.
STANDBY COMMITMENTS AND PUT TRANSACTIONS--The Portfolios reserve the right
to engage in put transactions. The Advisers and Sub-Adviser have the authority
to purchase securities at a price which would result in a yield to maturity
lower than that generally offered by the seller at the time of purchase when the
Portfolios can simultaneously acquire the right to sell the securities back to
the seller,
S-3
<PAGE>
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 Portfolios
to meet redemptions and remain as fully invested as possible in municipal
securities. The right to put the securities depends on the writer's ability to
pay for the securities at the time the put is exercised. The Portfolios would
limit their put transactions to institutions which the Adviser or Sub-Adviser
believes present minimum credit risks, and the Adviser or Sub-Adviser would use
its best efforts to initially determine and continue to monitor the financial
strength of the sellers of the options by evaluating their financial statements
and such other information as is available in the marketplace. It may, however,
be difficult to monitor the financial strength of the writers because adequate
current financial information may not be available. In the event that any writer
is unable to honor a put for financial reasons, a Portfolio would be a general
creditor (I.E., on a parity with all other unsecured creditors) of the writer.
Furthermore, particular provisions of the contract between a Portfolio and the
writer may excuse the writer from repurchasing the securities; for example, a
change in the published rating of the underlying securities or any similar event
that has an adverse effect on the issuer's credit or a provision in the contract
that the put will not be exercised except in certain special cases, for example,
to maintain portfolio liquidity. A Portfolio could, however, at any time sell
the underlying portfolio security in the open market or wait until the portfolio
security matures, at which time it should realize the full par value of the
security.
The securities purchased subject to a put, may be sold to third persons at
any time, even though the put is outstanding, but the put itself, unless it is
an integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Portfolio.
Sale of the securities to third parties or lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, a Portfolio could seek to negotiate terms for the
extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to the Portfolio, the Portfolio could, of course, sell the
security. The maturity of the underlying security will generally be different
from that of the put. The Intermediate-Term Municipal and Pennsylvania Municipal
Portfolios will consider the "maturity" of a security subject to a put to be the
first date on which it has the right to demand payment from the writer of the
put although the final maturity of the security is later than such date.
The Trust has received a private letter ruling from the Internal Revenue
Service that, to the extent it purchases securities subject to the right to put
them back to the seller in order to maintain liquidity to meet redemption
requirements, it will be treated as the owner of those securities for federal
income tax purposes. No assurance can be given that legislative, judicial or
administrative changes may not be forthcoming which could modify the Trust's
private letter ruling.
TIME DEPOSITS--Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time deposits with a withdrawal penalty are
considered to be illiquid securities.
WHEN-ISSUED SECURITIES--These securities involve the purchase of debt
obligations on a when-issued basis, in which case delivery and payment normally
take place within 45 days after the date of commitment to purchase. These
securities are subject to market fluctuation due to changes in market interest
rates, and it is possible that the market value at the time of settlement could
be higher or lower than the purchase price if the general level of interest
rates has changed. Although a Portfolio generally purchases securities on a
when-issued or forward commitment basis with the intention of actually acquiring
securities for its portfolio, a Portfolio may dispose of a when-issued security
or forward commitment prior to settlement if the Adviser deems it appropriate to
do so.
The Portfolios will only make commitments to purchase obligations on a
when-issued basis with the intention of actually acquiring the securities, but
may sell them before the settlement date. The when-
S-4
<PAGE>
issued securities are subject to market fluctuation, and no interest accrues to
the purchaser during this period. The payment obligation and the interest rate
that will be received on the securities are each fixed at the time the purchaser
enters into the commitment. Purchasing obligations on a when-issued basis is a
form of leveraging and can involve a risk that the yields available in the
market when the delivery takes place may actually be higher than those obtained
in the transaction itself. In that case there could be an unrealized loss at the
time of delivery.
The Portfolios will establish segregated accounts with the Custodian and
will maintain liquid assets in an amount at least equal in value to the
Portfolios' 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.
S-5
<PAGE>
They are rated lower than the best bonds because margins or protection may not
be as large as in Aaa-rated securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa-rated securities.
Bonds which are rated A by Moody's possess many favorable investment
attributes and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Bonds which are rated Baa by Moody's are considered as medium-grade
obligations (I.E., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
COMMERCIAL PAPER RATINGS. Commercial paper rated A by S&P is regarded by
S&P as having the greatest capacity for timely payment. Issues rated A are
further refined by use of the numbers 1+, 1, 2 and 3 to indicate the relative
degree of safety, issues rated A-1+ are those with an "overwhelming degree" of
credit protection. Those rated A-1 reflect a "very strong" degree of safety
regarding timely payment. Those rated A-2 reflect a "satisfactory" degree of
safety regarding timely payment.
Commercial paper issuers rated Prime-1 or Prime-2 by Moody's are judged by
Moody's to be of "superior" quality and "strong" quality, respectively, on the
basis of relative repayment capacity.
INVESTMENT LIMITATIONS
No Portfolio may:
1. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 10% of the value of total assets. The California Tax
Exempt Portfolio has a fundamental policy that to the extent such borrowing
exceeds 5% of the value of the Portfolio's total assets, borrowing will be
done from a bank and in accordance with the requirements of the 1940 Act.
This borrowing provision is included solely to facilitate the orderly sale
of portfolio securities to accommodate heavy redemption requests if they
should occur and is not for investment purposes. All borrowings of the
Portfolios, in excess of 5% of its total assets, will be repaid before
making additional investments and any interest paid on such borrowings will
reduce income.
2. Purchase securities of other investment companies, except that the
Intermediate-Term Municipal, Pennsylvania Municipal and Pennsylvania Tax
Free Portfolios may only purchase securities of money market funds and the
New York Intermediate-Term Municipal Portfolio may purchase securities of
other investment companies, in either case, as permitted by the 1940 Act and
the rules and regulations thereunder.
3. Make loans, except that each Portfolio may purchase or hold debt instruments
in accordance with its investment objective and policies and may enter into
repurchase agreements, provided that repurchase agreements maturing in more
than seven days, restricted securities and other illiquid securities are not
to exceed, in the aggregate, 10% of the Portfolio's net assets, except for
the Intermediate-Term Municipal and New York Intermediate-Term Municipal
Portfolios, for which it cannot exceed 15% of the Portfolio's net assets.
4. Pledge, mortgage or hypothecate assets except to secure temporary borrowings
permitted by (1) above in aggregate amounts not to exceed 10% of the net
assets of such Portfolio taken at current value at the time of the
incurrence of such loan.
5. Invest in companies for the purpose of exercising control.
S-6
<PAGE>
6. Acquire more than 10% of the voting securities of any one issuer.
7. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts including futures contracts. However,
subject to its permitted investments, any Portfolio may invest in municipal
securities or other obligations secured by real estate or other interests
therein.
8. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Portfolio may obtain short-term
credits as necessary for the clearance of security transactions.
9. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
10. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described in the Prospectuses and this
Statement of Additional Information or as permitted by rule, regulation or
order of the SEC.
11. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, partner or director of the Trust or any
investment adviser of the Trust owns beneficially more than 1/2 of 1% of the
shares or securities of such issuer and all such officers, trustees,
partners and directors owning more than 1/2 of 1% of such shares or
securities together own more than 5% of such shares or securities.
12. Purchase securities of any company which has (with predecessors) a record of
less than three years continuing operations (except (i) obligations issued
or guaranteed by the United States Government, its agencies or
instrumentalities, or (ii) municipal securities which are rated by at least
two nationally recognized municipal bond rating services or determined by
the Adviser or Sub-Adviser to be of "high quality") if, as a result, more
than 5% of the total assets (taken at current value) would be invested in
such securities.
13. Purchase warrants, calls, straddles, spreads or combinations thereof, except
as permitted by its Prospectus and this Statement of Additional Information.
14. Invest in interests in oil, gas or other mineral exploration or development
programs. The Institutional Tax Free Portfolio and the California Tax Exempt
Portfolio may not invest in oil, gas or mineral leases.
15. Invest more than 25% of total assets in issues within the same state or
similar type projects (except in specified categories). This investment
limitation applies to the Intermediate-Term Municipal Portfolio, Tax Free
Portfolio, Institutional Tax Free Portfolio, and Pennsylvania Municipal
Portfolio. For the Pennsylvania Municipal Portfolio, this limitation does
not apply to the extent stated in its investment objective and policies.
The foregoing percentages (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, except that for the New
York Intermediate-Term Municipal Portfolio investment limitations 2, 4, 8, 11,
12, 13 and 14 are not fundamental and do not require shareholder approval to be
amended. It is a fundamental policy of the Intermediate-Term Municipal and
Pennsylvania Municipal Portfolios to abide by the maturity restrictions and to
invest solely in the permitted investments described in this Statement of
Additional Information and in their respective Prospectuses.
S-7
<PAGE>
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.
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 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.
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.
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.
S-8
<PAGE>
THE MANAGER
The Trust and SEI 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.
The continuance of the Management Agreement must be specifically approved at
least annually (i) by the vote of a majority of the Trustees or by the vote of a
majority of the outstanding voting securities of the Portfolio, and (ii) by the
vote of a majority of the Trustees of the Trust who are not parties to the
Management Agreement or an "interested person" (as that term is defined in the
1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval. The Management Agreement is terminable at
any time as to any Portfolio without penalty by the Trustees of the Trust, by a
vote of a majority of the outstanding shares of the Portfolio or by the Manager
on not less than 30 days' nor more than 60 days' written notice.
SEI Management, a Delaware business trust, has its principal business
offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation
("SIMC"), a wholly-owned subsidiary of SEI Investments Company ("SEI
Investments"), is the owner of all beneficial interest in SEI Management. SEI
Investments and its subsidiaries and affiliates, including SEI Management, are
leading providers of funds evaluation services, trust accounting systems, and
brokerage and information services to financial institutions, institutional
investors, and money managers. SEI Management and its affiliates also serve as
administrator or sub-administrator to the following other mutual funds: The
Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK
Funds, Bishop Street Funds, Boston 1784 Funds-Registered Trademark-, CoreFunds,
Inc., CrestFunds, Inc., CUFUND, The Expedition Funds, FMB Funds, Inc., First
American Funds, Inc., First American Investment Funds, Inc., First American
Strategy Funds, Inc., HighMark Funds, Marquis Funds-Registered Trademark-,
Monitor Funds, Morgan Grenfell Investment Trust, The PBHG Funds, Inc., PBHG
Insurance Series Fund, Inc., The Pillar Funds, Profit Funds Investment Trust,
Santa Barbara Group of Mutual Funds, Inc., SEI Asset Allocation Trust, SEI Daily
Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
International Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust,
STI Classic Funds, STI Classic Variable Trust, and TIP Funds.
For the fiscal years ended August 31, 1995, 1996, and 1997, the Portfolios
paid management fees, after waivers and/or reimbursements as follows:
<TABLE>
<CAPTION>
FEES WAIVED OR
FEES PAID (000) REIMBURSED (000)
---------------------- ----------------------
PORTFOLIO 1995 1996 1997 1995 1996 1997
- -------------------------------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Tax Free Portfolio................................ $ 991 $1,099 $1,420 $ 207 $ 158 $ 0
Institutional Tax Free Portfolio.................. $1,548 $1,697 $2,472 $1,567 $1,283 $1,080
California Tax Exempt Portfolio................... $ 486 $ 581 $ 848 $ 330 $ 305 $ 158
Intermediate-Term Municipal Portfolio............. $ 288 $ 279 $ 412 $ 125 $ 74 $ 40
Pennsylvania Municipal Portfolio.................. $ 132 $ 183 $ 200 $ 253 $ 174 $ 140
Pennsylvania Tax Free Portfolio................... $ 42 $ 66 $ 93 $ 33 $ 43 $ 43
New York Intermediate-Term Municipal
Portfolio....................................... * * * * * *
</TABLE>
- ------------------------
* Not in operation during the period.
S-9
<PAGE>
THE ADVISERS AND SUB-ADVISER
Each Advisory Agreement or Sub-Advisory Agreement provides that each Adviser
or Sub-Adviser shall not be protected against any liability to the Trust or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
The continuance of each Advisory or Sub-Advisory Agreement after the first
two (2) years must be specifically approved at least annually (i) by the vote of
a majority of the outstanding shares of that Portfolio or by the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to such
Advisory or Sub-Advisory Agreement or "interested persons" of any party thereto,
cast in person at a meeting called for the purpose of voting on such approval.
Each Advisory or Sub-Advisory Agreement will terminate automatically in the
event of its assignment, and is terminable at any time without penalty by the
Trustees of the Trust or, with respect to a Portfolio, by a majority of the
outstanding shares of that Portfolio, on not less than 30 days' nor more than 60
days' written notice to the Adviser or Sub-Adviser, or by the Adviser or
Sub-Adviser on 90 days' written notice to the Trust.
For the fiscal years ended August 31, 1995, 1996 and 1997, the Portfolios
paid advisory fees, after waivers and/or reimbursements as follows:
<TABLE>
<CAPTION>
FEES WAIVED OR
FEES PAID (000) REIMBURSED (000)
---------------- ----------------
PORTFOLIO 1995 1996 1997 1995 1996 1997
- -------------------------------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Tax Free Portfolio................................ $129 $137 $153 $ 0 $ 0 $ 0
Institutional Tax Free Portfolio.................. $334 $325 $384 $ 0 $ 0 $ 0
California Tax Exempt Portfolio................... $137 $151 $170 $ 0 $ 0 $ 0
Intermediate-Term Municipal Portfolio+............ $131 $254 $622 $60 $ 0 $ 0
Pennsylvania Municipal Portfolio.................. $262 $202 $195 $ 4 $ 0 $ 0
Pennsylvania Tax Free Portfolio................... $ 8 $ 12 $ 15 $ 0 $ 0 $ 0
New York Intermediate-Term Municipal
Portfolio....................................... * * * * * *
</TABLE>
- ------------------------
* Not in operation during the period.
+ Amounts paid for the Portfolio since April 16, 1996, were paid to 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 Portfolios (the "Plans") in accordance with the provisions of Rule 12b-1
under the 1940 Act, which regulates circumstances under which an investment
company may directly or indirectly bear expenses relating to the distribution of
its shares. In this regard, the Board of Trustees has determined that the Plans
and the Distribution Agreement are in the best interests of the shareholders.
Continuance of the Plans must be approved annually by a majority of the Trustees
of the Trust and by a majority of the trustees who are not "interested persons"
of the Trust as that term is defined in the 1940 Act and who have no direct or
indirect financial interest in the operation of a Distribution Plan or in any
agreements related thereto ("Qualified Trustees"). The Plans require that
quarterly written reports of amounts spent under the Plans and the purposes of
such expenditures be furnished to and reviewed by the Trustees. The Plans may
not be amended to increase materially the amount which may be spent thereunder
without approval by a majority of the outstanding shares of the Portfolio or
class affected. All material amendments of the Plans will require approval by a
majority of the Trustees of the Trust and of the Qualified Trustees.
S-10
<PAGE>
The Plans provide that the Trust will pay the Distributor a fee on the Class
D and CNI Class shares of the Portfolio. The Distributor may use this fee for:
(i) compensation for its services in connection with distribution assistance or
provision of shareholder services or (ii) payments to financial institutions and
intermediaries such as banks, savings and loan associations, insurance companies
and investment counselors, broker-dealers and the Distributor's affiliates and
subsidiaries as compensation for services or reimbursement of expenses incurred
in connection with distribution assistance or provision of shareholder services.
The Portfolios have also adopted shareholder servicing plans for its Class
A, Class B, Class C and CNI Class shares (the "Service Plans"), and
Administrative Services Plans for its Class B and Class C shares. Under these
Service and Administrative Services Plans, the Distributor may perform, or may
compensate other service providers for performing, the following shareholder and
administrative services: maintaining client accounts; arranging for bank wires;
responding to client inquiries concerning services provided on investments;
assisting clients in changing dividend options, account designations and
addresses; sub-accounting; providing information on share positions to clients;
forwarding shareholder communications to clients; processing purchase, exchange
and redemption orders; and processing dividend payments. Under the Service and
Administrative Services Plans, the Distributor may retain as a profit any
difference between the fee it receives and the amount it pays to third parties.
For the fiscal year ended August 31, 1997, the Portfolios 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
PORTFOLIO/CLASS AMOUNT POINTS SERVICES EXPENSES COSTS REGISTRATION
- ------------------------------------ ---------- ------ -------------- -------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
California Tax Exempt Portfolio --
CNI Class+........................ $ 972,801 .25% $ 972,801 $ 0 $ 0 $ 0
Tax Free Portfolio -- Class D....... $ 4 .25% $ 4 $ 0 $ 0 $ 0
</TABLE>
- ------------------------
+ Formerly the Class C shares; converted to Class G shares on March 18, 1996,
and 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, 1995, 1996 and 1997, the aggregate
sales charges payable to the Distributor with respect to the Class D shares for
the Tax Free Portfolio were as follows:
<TABLE>
<CAPTION>
AGGREGATE SALES CHARGE AMOUNT RETAINED
YEAR PAYABLE TO DISTRIBUTOR BY DISTRIBUTOR
---- ---------------------- ---------------
<S> <C> <C>
1995 $38,648 $3,468
1996 $17,368 $1,614
1997 $ 0 $ 0
</TABLE>
S-11
<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
executive officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as officers of some of the following: The
Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK
Funds, Bishop Street Funds, CoreFunds, Inc., CrestFunds, Inc., CUFUND, The
Expedition Funds, FMB Funds, Inc., First American Funds, Inc., First American
Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds,
Marquis Funds-Registered Trademark-, Monitor Funds, Morgan Grenfell Investment
Trust, The PBHG Funds, Inc., The Pillar Funds, Profit Funds Investment Trust,
Santa Barbara Group of Mutual Funds, Inc., Boston 1784 Funds, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI International Trust, SEI
Liquid Asset Trust, STI Classic Funds, STI Classic Variable Trust and TIP Funds,
open-end management investment companies which are managed by SEI Fund
Management or its affiliates and, except for and with the exception of Profit
Funds Investment Trust, and Santa Barbara Group of Mutual Funds, Inc., are
distributed by SEI Investments Distribution Co. (the "Distributor").
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 the Manager and the
Distributor, 1981-1994. Trustee of the Arbor Fund, Marquis
Funds-Registered Trademark-, The Advisors' Inner Circle Fund, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Liquid Asset Trust, SEI Index
Funds, SEI Institutional Managed Trust, SEI Institutional Investments Trust, SEI
International Trust, Insurance Investment Products Trust, Boston 1784
Funds-Registered Trademark-, Pillar Funds, and Rembrandt
Funds-Registered Trademark-.
WILLIAM M. DORAN (DOB 05/26/40)--Trustee*--2000 One Logan Square,
Philadelphia, PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel
to the Trust, Manager and Distributor, Director and Secretary of SEI Investments
and Secretary of the Manager and Distributor. Trustee of the Arbor Fund, Marquis
Funds-Registered Trademark-, The Advisors' Inner Circle Fund, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Liquid Asset Trust, SEI Index
Funds, SEI Institutional Managed Trust, SEI Institutional Investments Trust, and
SEI International Trust.
F. WENDELL GOOCH (DOB 12/03/32)--Trustee**--P.O. Box 190, Paoli, IN 47454.
President, Orange County Publishing Co., Inc. from October 1981 to January 1,
1997. Publisher of the Paoli News and the Paoli Republican and Editor of the
Paoli Republican since January 1981. President, H & W Distribution, Inc. since
July 1984. Executive Vice President, Trust Department, Harris Trust and Savings
Bank and Chairman of the Board of Directors of The Harris Trust Company of
Arizona before January 1981. Trustee of STI Classic Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Liquid Asset Trust, SEI Index Funds, SEI
Institutional Managed Trust, SEI Institutional Investments Trust and SEI
International Trust.
FRANK E. MORRIS (DOB 12/30/23)--Trustee**--105 Walpole Street, Dover, MA
02030. Retired since 1990. Peter Drucker Professor of Management, Boston
College, 1989-1990. President, Federal Reserve Bank of Boston, 1968-1988.
Trustee of The Arbor Fund, Marquis Funds-Registered Trademark-, The Advisors'
Inner Circle Fund, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Liquid Asset Trust, SEI Index Funds, SEI Institutional Managed Trust, SEI
Institutional Investments Trust, and SEI International Trust.
JAMES M. STOREY (DOB 04/12/31)--Trustee**--89A Mt. Vernon Street, Boston, MA
02108.-- Partner, Dechert Price & Rhoads, from September 1987 - December 1993.
Trustee of the Arbor Fund, Marquis Funds-Registered Trademark-, The Advisors'
Inner Circle Fund, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Liquid Asset Trust, SEI Index Funds, SEI Institutional Managed Trust, SEI
Institutional Investments Trust, and SEI International Trust.
S-12
<PAGE>
GEORGE J. SULLIVAN, JR. (DOB 11/13/42)--Trustee**--48 Catherine Drive,
Peabody, MA 01960. General Partner, Teton Partners, L.P., since 1991; Chief
Financial Officer, Noble Partners, L.P., since 1991; Treasurer and Clerk, Peak
Asset Management, Inc., since 1991; Trustee, Navigator Securities Lending Trust,
since 1995. Trustee of SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Liquid Asset Trust, SEI Index Funds, SEI Institutional Managed Trust, SEI
Institutional Investments Trust, and SEI International Trust.
DAVID G. LEE (DOB 04/16/52)--President and Chief Executive Officer--Senior
Vice President of the Manager and Distributor since 1993. Vice President of the
Manager and Distributor, 1991-1993. President, GW Sierra Trust Funds before
1991.
SANDRA K. ORLOW (DOB 10/18/53)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of the Manager and Distributor since 1988.
KEVIN P. ROBINS (DOB 04/15/61)--Vice President and Assistant
Secretary--Senior Vice President, General Counsel of SEI, the Manager and
Distributor since 1994. Vice President and Assistant Secretary of SEI
Investments, the Manager and Distributor, 1992-1994. Associate, Morgan, Lewis &
Bockius LLP (law firm), 1988-1992.
RICHARD W. GRANT (DOB 10/25/45)--Secretary--2000 One Logan Square,
Philadelphia, PA 19103, Partner, Morgan, Lewis & Bockius LLP (law firm), counsel
to the Trust, Manager and Distributor.
KATHRYN L. STANTON (DOB 11/19/58)--Vice President and Assistant
Secretary--Deputy General Counsel, Vice President and Assistant Secretary of SEI
Investments, the Manager and Distributor since 1994, General Counsel, Investment
Systems & Services since 1997. Associate, Morgan, Lewis & Bockius LLP (law
firm), 1989-1994.
MARK E. NAGLE (DOB 10/20/59)--Controller and Chief Financial Officer--Vice
President of Fund Accounting and Administration for SEI Fund Resources and the
Manager since 1996. Vice President of Fund Accounting, BISYS Fund Services
(1995-1996). Fidelity Investments (1981-1995).
TODD CIPPERMAN (DOB 02/14/66)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of SEI Investments, the Manager and the
Distributor since 1995. Associate, Dewey Ballantine (law firm) (1994-1995).
Associate, Winston & Strawn (law firm) (1991-1994).
BARBARA A. NUGENT (DOB 06/18/56)--Vice President and Assistant
Secretary--Vice President and Assistant Secretary of SEI Investments, the
Manager and Distributor since 1996. Associate, Drinker, Biddle & Reath (law
firm). Assistant Vice President/Administration, Delaware Service Company, Inc.
(1992-1993), Assistant Vice President - Operations, Delaware Service Company,
Inc. (1988-1992).
MARC H. CAHN (DOB 06/19/57)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of SEI Investments, the Manager and
Distributor since 1996. Associate General Counsel, Barclays Bank PLC
(1995-1996). ERISA counsel, First Fidelity Bancorporation (1994-1995),
Associate, Morgan, Lewis & Bockius LLP (1989-1994).
- ------------------------
*Messrs. Nesher and Doran are Trustees who may be deemed to be "interested
persons" of the Trust as the term is defined in the 1940 Act.
**Messrs. Gooch, Storey, Sullivan and Morris serve as members of the Audit
Committee of the Trust.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for unaffiliated Trustees.
Compensation of officers and affiliated Trustees of the Trust is paid by the
Manager.
S-13
<PAGE>
The following table sets forth information about the compensation paid to
the Trustees for the fiscal year ended August 31, 1997:
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT ESTIMATED FROM REGISTRANT
COMPENSATION BENEFITS ACCRUED ANNUAL AND FUND COMPLEX
FROM REGISTRANT AS PART OF BENEFITS UPON PAID TO DIRECTORS
NAME OF PERSON AND POSITION FOR FYE 8/31/97 FUND EXPENSES RETIREMENT FOR FYE 8/31/97
- ---------------------------------------- --------------- ------------------- --------------- ----------------------
<S> <C> <C> <C> <C>
Robert A. Nesher, Trustee............... $ -- N/A N/A $ --
William M. Doran, Trustee............... $ -- N/A N/A $ --
F. Wendell Gooch, Trustee............... $ 12,162 N/A N/A $96,750 on services on
8 boards
Frank E. Morris, Trustee................ $ 12,162 N/A N/A $96,750 on service on
8 boards
James M. Storey, Trustee................ $ 12,162 N/A N/A $96,750 on service on
8 boards
George J. Sullivan, Trustee............. $ 12,162 N/A N/A $96,750 on 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 Portfolios may advertise yield and/or total return.
These figures will be based on historical earnings and are not intended to
indicate future performance.
The current yield of the Portfolios that are money market funds is
calculated daily based upon the 7 days ending on the date of calculation ("base
period"). The yield is computed by determining the net change (exclusive of
capital changes) in the value of a hypothetical pre-existing shareholder account
having a balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts and dividing
such net change by the value of the account at the beginning of the same period
to obtain the base period return and multiplying the result by (365/7). Realized
and unrealized gains and losses are not included in the calculation of the
yield.
The Portfolios compute their effective compound yield by determining the net
changes, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula: Effective Yield = {(Base Period Return + 1)(365/7)} - 1. The
current and the effective yields reflect the reinvestment of net income earned
daily on portfolio assets.
From time to time, the Intermediate-Term Municipal, Pennsylvania Municipal,
and New York Intermediate-Term Portfolios may advertise yield. These figures
will be based on historical earnings and are not intended to indicate future
performance. The yield of these Portfolios refers to the annualized income
generated by an investment in the Portfolios over a specified 30-day period. The
yield is calculated by assuming that the income generated by the investment
during that period generated each period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula:
Yield = 2([(a-b)/(cd) + 1)](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.
S-14
<PAGE>
Actual yields will depend on such variables as asset quality, average asset
maturity, the type of instruments a Portfolio invests in, changes in interest
rates on money market instruments, changes in the expenses of the Portfolios and
other factors.
Yields are one basis upon which investors may compare the Portfolios with
other money market funds; however, yields of other money market mutual funds and
other investment vehicles may not be comparable because of the factors set forth
above and differences in the methods used in valuing portfolio instruments.
For the 7-day period ended August 31, 1997, the end of the Trust's most
recent fiscal year, the money market Portfolios' current effective and
tax-equivalent yields were as follows:
<TABLE>
<CAPTION>
7-DAY 7-DAY
7-DAY TAX-EQUIVALENT TAX-EQUIVALENT
PORTFOLIO CLASS 7-DAY YIELD EFFECTIVE YIELD YIELD EFFECTIVE YIELD
- ---------------------------------------- ----------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Tax Free Portfolio...................... Class A 3.18% 3.23% 5.26% 5.35%
Class D 2.84% 2.88% 4.93% 5.00%
Institutional Tax Free Portfolio........ Class A 3.34% 3.40% 5.53% 5.63%
Class B 3.04% 3.09% 5.03% 5.12%
Class C 2.84% 2.88% 4.70% 4.77%
California Tax Exempt Portfolio......... Class A 3.07% 3.12% 6.01% 6.11%
Class B * * * *
Class C * * * *
CNI Class+ 2.57% 2.60% 5.03% 5.09%
Pennsylvania Tax Free Portfolio......... Class A 3.15% 3.20% 5.47% 5.56%
</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.
For the 30-day period ended August 31, 1997, yields on the Portfolios other
than the money market Portfolios were as follows:
<TABLE>
<CAPTION>
YIELD
--------------------------
30-DAY
PORTFOLIO CLASS 30-DAY TAX EQUIVALENT
- ------------------------------------------------------------------- --------- --------- ---------------
<S> <C> <C> <C>
New York Intermediate-Term Municipal Portfolio..................... Class A * *
Pennsylvania Municipal Portfolio................................... Class A 4.83% 8.39%
Intermediate-Term Municipal Portfolio.............................. Class A 4.22% 6.99%
</TABLE>
- ------------------------
* Not in operation during the period.
From time to time, the Intermediate-Term Municipal, Pennsylvania Municipal
and New York Intermediate-Term Municipal Portfolios may advertise total return.
The total return of a Portfolio refers to the average compounded rate of return
to a hypothetical investment for designated time periods (including, but not
limited to, the period from which the Portfolio commenced operations through the
specified date), assuming that the entire investment is redeemed at the end of
each period. In particular, total return will be calculated according to the
following formula: P(1 + T)n = ERV, where P = a hypothetical initial payment of
$1,000; T = average annual total return; n = number of years; and ERV = ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
designated time period as of the end of such period.
S-15
<PAGE>
Based on the foregoing, the average annual total returns for the Portfolios
from inception through August 31, 1997, and for the one-, five- and ten-year
periods ended August 31, 1997 were as follows:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
--------------------------------------
TEN SINCE
PORTFOLIO CLASS ONE YEAR FIVE YEAR YEAR INCEPTION
- ----------------------------------- ----------------------------- -------- --------- --- ---------
<S> <C> <C> <C> <C> <C>
Tax Free Portfolio................. Class A(1) 3.31% 2.92% 3.88% 4.19%
Class D -- Offering Price(9) 2.86% * * 3.02%
Institutional Tax Free Portfolio... Class A(3) 3.44% 3.15% 4.10 4.30%
Class B(4) 3.13% 2.84% * 3.15%
Class C(5) 2.93% * * 2.96%
California Tax Exempt Portfolio.... Class A 3.30% 2.99% * 3.44%
CNI Class+ 2.79% * * 2.81%
Pennsylvania Municipal Portfolio... Class A(6) 8.08% 5.74% * 6.54%
Pennsylvania Tax Free Portfolio.... Class A(7) 3.39% * * 3.28%
Intermediate-Term Municipal
Portfolio........................ Class A(8) 7.93% 5.65% * 6.36%
</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.
(1) Commenced operations 2/1/84
(2) Commenced operations 10/15/90
(3) Commenced operations 5/14/90
(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
Each Portfolio may, from time to time, compare its performance to other
mutual funds tracked by mutual fund rating services, to broad groups of
comparable mutual funds or to unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for sales charges,
administrative and management costs.
DETERMINATION OF NET ASSET VALUE
Securities of the Tax Free, Institutional Tax Free, California Tax Exempt
and the Pennsylvania Tax Free Portfolios will be valued by the amortized cost
method which involves valuing a security at its cost on the date of purchase and
thereafter (absent unusual circumstances) assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuations in
general market rates of interest on the value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by this method is higher or lower than the price the Trust
would receive if it sold the instrument. During periods of declining interest
rates, the daily yield of a Portfolio may tend to be higher than a like
computation made by a company with identical investments utilizing a method of
valuation based upon market prices and estimates of market prices for all of its
portfolio securities. Thus, if the use of amortized cost by a Portfolio resulted
in a lower aggregate portfolio value on a particular day, a prospective investor
in a Portfolio would be able to obtain a somewhat higher yield than would result
from investment in a company utilizing solely market values, and existing
shareholders in the Portfolio would experience a lower yield. The converse would
apply in a period of rising interest rates.
A Portfolio's use of amortized cost valuation and the maintenance of the
Portfolio's net asset value at $1.00 are permitted by Rule 2a-7 under the 1940
Act, provided that certain conditions are met. Under Rule 2a-7 a money market
portfolio must maintain a dollar-weighted average maturity of 90 days or less,
and not purchase any instrument having a remaining maturity of more than 397
days. In addition, money market funds may acquire only U.S. dollar denominated
obligations that present minimal credit risks and
S-16
<PAGE>
that are "eligible securities," which means they are: (i) rated, at the time of
investment, by at least two nationally recognized statistical rating
organizations (one if it is the only organization rating such obligation) in the
highest short-term rating category or, if unrated, determined to be of
comparable quality (a "first tier security"), or (ii) rated according to the
foregoing criteria in the second highest short-term rating category or, if
unrated, determined to be of comparable quality ("second tier security"). The
Advisers will determine that an obligation presents minimal credit risk or that
unrated instruments are of comparable quality in accordance with guidelines
established by the Trustees. In the event a first tier security of the Tax Free
Portfolio, Institutional Tax Free Portfolio, California Tax Exempt Portfolio or
the Pennsylvania Tax Free Portfolio is downgraded below first tier security
status after purchase, or the Adviser of the of any such Portfolio becomes aware
that an unrated or second tier security has received any rating below the second
highest rating category after purchase, the Portfolio's Adviser will either
dispose of the security within five business days or the Board of Trustees will
reassess whether the security continues to present minimal credit risks. The
Board may also delegate this responsibility to the Portfolio's Adviser with
respect to the downgrade of a first tier security. The regulations also require
the Trustees to establish procedures which are reasonably designed to stabilize
the net asset value per unit at $1.00 for each Portfolio. However, there is no
assurance that the Trust will be able to meet this objective. The Trust's
procedures include the determination of the extent of deviation, if any, of each
Portfolio's current net asset value per unit calculated using available market
quotations from each Portfolio's amortized cost price per unit at such intervals
as the Trustees deem appropriate and reasonable in light of market conditions
and periodic reviews of the amount of the deviation and the methods used to
calculate such deviation. In the event that such deviation exceeds 1/2 of 1%,
the Trustees are required to consider promptly what action, if any, should be
initiated; and, if the Trustees believe that the extent of any deviation may
result in material dilution or other unfair results to shareholders, the
Trustees are required to take such corrective action as they deem appropriate to
eliminate or reduce such dilution or unfair results to the extent reasonably
practicable. In addition, if any Portfolio incurs a significant loss or
liability, the Trustees have the authority to reduce pro rata the number of
shares of that Portfolio in each shareholder's account and to offset each
shareholder's pro rata portion of such loss or liability from the shareholder's
accrued but unpaid dividends or from future dividends.
Securities of the Intermediate-Term Municipal, Pennsylvania Municipal and
New York Intermediate-Term Municipal Portfolios 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 Portfolio for any period
during which the New York Stock Exchange, the Manager, a Portfolio's Adviser,
the Distributor and/or the Custodian are not open for business.
In calculating the sales charge rates applicable to current purchases of
Class D shares, members of the following affinity groups and clients of the
following broker-dealers, each of which has entered into an
S-17
<PAGE>
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
50% September 23, 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 PORTFOLIOS ONLY): Investors may request
a stop payment on checks by providing the Trust with a written authorization to
do so. Oral requests will be accepted provided that the Trust promptly receives
a written authorization. Such requests will remain in effect for six months
unless renewed or canceled. The Trust will use its best efforts to effect
stop-payment instructions, but does not promise or guarantee that such
instructions will be effective. Shareholders requesting stop payment will be
charged a $20 service fee per check which will be deducted from their accounts.
EXCHANGE PRIVILEGE: A shareholder may exchange the shares of the Tax Free
Portfolio for which good payment has been received, in his account at any time,
regardless of how long he has held his shares.
Each Exchange Request must be in proper form (I.E., if in writing, signed by
the record owner(s) exactly as the shares are registered; if by telephone,
proper account identification is given by the dealer or shareholder of record),
and each exchange must involve either shares having an aggregate value of at
least $1,000 or all the shares in the account. Each exchange involves the
redemption of the shares of a Portfolio (the "Old Portfolio") to be exchanged
and the purchase at net asset value of the shares of the other portfolios (the
"New Portfolios") plus in certain cases, as disclosed in each Prospectus, any
applicable sales charge. Any gain or loss on the redemption of the shares
exchanged is reportable on the shareholder's federal income tax return, unless
such shares were held in a tax-deferred retirement plan or other tax-exempt
account. If the Exchange Request is received by the Distributor in writing or by
telephone on any business day prior to the redemption cut-off time specified in
each Prospectus, the exchange usually will occur on that day if all the
restrictions set forth above have been complied with at that time. However,
payment of the redemption proceeds by the Old Portfolio, and thus the purchase
of shares of the New Portfolios, may be delayed for up to seven days if the
Portfolios determine that such delay would be in the best interest of all of its
shareholders. Investment dealers which have satisfied criteria established by
the Portfolios may also communicate a shareholder's Exchange Request to the
Portfolios subject to the restrictions set forth above. No more than five
exchange requests may be made in any one telephone Exchange Request.
TAXES
FEDERAL INCOME TAX
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.
S-18
<PAGE>
Each Portfolio will decide whether to distribute or retain all or part of
any net capital gains (the excess of net long-term capital gains over net
short-term capital losses) in any year for reinvestment. If any such gains are
retained, the Portfolio will pay federal income tax thereon, and, if the
Portfolio makes an election, the shareholders will include such undistributed
gains in their income and shareholders subject to tax will be able to claim
their share of the tax paid by the Portfolio as a credit against their federal
income tax liability.
A gain or loss realized by a shareholder on the sale or exchange of shares
of a Portfolio held as a capital asset will be capital gain or loss, and such
gain or loss will be long-term if the holding period for the shares exceeds one
year, and otherwise will be short-term. Any loss realized on a sale or exchange
will be disallowed to the extent the shares disposed of are replaced within the
61-day period beginning 30 days before and ending 30 days after the shares are
disposed of. Any loss realized by a shareholder on the disposition of shares
held 6 months or less is treated as a long-term capital loss to the extent of
any distributions of net long-term capital gains received by the shareholder
with respect to such shares or any inclusion of undistributed capital gain with
respect to such shares.
Each Portfolio will generally be subject to a nondeductible 4% federal
excise tax to the extent it fails to distribute by the end of any calendar year
at least 98% of its ordinary income and 98% of its capital gain net income (the
excess of short- and long-term capital gains over short- and long-term capital
losses) for the one-year period ending on October 31 of that year, plus certain
other amounts.
Each Portfolio is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions, and
redemptions) paid individual or non-corporate to shareholders who have not
certified on the Account Registration Form or on a separate form supplied by the
Portfolio, that the Social Security or Taxpayer Identification Number provided
is correct and that the shareholder is exempt from backup withholding or is not
currently subject to backup withholding.
Each Portfolio within the Trust is generally treated as a separate
corporation for federal income tax purposes, and thus the provisions of the Code
generally will be applied to each Portfolio separately, rather than to the Trust
as a whole. Net long-term and short-term capital gains, net income, and
operating expenses therefore will be determined separately for each Portfolio.
If a Portfolio fails to qualify as a regulated investment company ("RIC")
for any year, all of its income will be subject to tax at corporate rates, and
its distributions (including capital gains distributions) will be taxable as
ordinary income dividends to its shareholders, subject to the corporate
dividends received deduction for corporate shareholders. No dividends of any
Portfolio are expected to qualify for that deduction.
As noted in the Prospectuses for the Portfolios, exempt-interest dividends
are excludable from a shareholder's gross income for regular federal income tax
purposes. Exempt-interest dividends may nevertheless be subject to the
alternative minimum tax (the "Alternative Minimum Tax") imposed by Section 55 of
the Code or the environmental tax (the "Environmental Tax") imposed by Section
59A of the Code. The Alternative Minimum Tax is imposed at the rate of 26% to
28% in the case of non-corporate taxpayers and at the rate of 20% in the case of
corporate taxpayers, to the extent it exceeds the taxpayer's regular tax
liability. The Environmental Tax is imposed at the rate of 0.12% and applies
only to corporate taxpayers. The Alternative Minimum Tax and the Environmental
Tax may be imposed in two circumstances. First, exempt-interest dividends
derived from certain "private activity bonds" issued after August 7, 1986, will
generally be an item of tax preference and therefore potentially subject to the
Alternative Minimum Tax for both corporate and non-corporate taxpayers and the
Environmental Tax for corporate taxpayers only. The Portfolios intend, when
possible, to avoid investing in private activity bonds. Second, in the case of
exempt-interest dividends received by corporate shareholders, all
exempt-interest dividends, regardless of when the bonds from which they are
derived were issued or whether they are derived from private activity bonds,
will be included in the corporation's "adjusted current earnings," as
S-19
<PAGE>
defined in Section 56(g) of the Code, in calculating the corporation's
alternative minimum taxable income for purposes of determining the Alternative
Minimum Tax and the Environmental Tax.
The percentage of income that constitutes "exempt-interest dividends" will
be determined for each year for the Portfolios and will be applied uniformly to
all dividends declared with respect to the Portfolios during that year. This
percentage may differ from the actual percentage for any particular day.
Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Portfolios will not be deductible for federal income tax purposes
to the extent that the Portfolios distribute exempt-interest dividends during
the taxable year. The deduction otherwise allowable to property and casualty
insurance companies for "losses incurred" will be reduced by an amount equal to
a portion of exempt-interest dividends received or accrued during any taxable
year. Certain foreign corporations engaged in a trade or business in the United
States will be subject to a "branch profits tax" on their "dividend equivalent
amount" for the taxable year, which will include exempt-interest dividends.
Certain Subchapter S corporations may also be subject to taxes on their "passive
investment income," which could include exempt-interest dividends. Up to 85% of
the Social Security benefits or railroad retirement benefits received by an
individual during any taxable year will be included in the gross income of such
individual if the individual's "modified adjusted gross income" (which includes
exempt-interest dividends) plus one-half of the Social Security benefits or
railroad retirement benefits received by such individual during that taxable
year exceeds the base amount described in Section 86 of the Code.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development bonds or
private activity bonds should consult their tax advisors before purchasing
shares of the Portfolios. "Substantial user" is defined generally as including a
"non-exempt person" who regularly uses in a trade or business a part of a
facility financed from the proceeds of industrial development bonds or private
activity bonds.
Issuers of bonds purchased by the Portfolios (or the beneficiary of such
bonds) may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Investors should be aware
that exempt-interest dividends derived from such bonds may become subject to
federal income taxation retroactively to the date of issuance of the bonds to
which such dividends are attributable if such representations are determined to
have been inaccurate or if the issuer of such bonds (or the beneficiary of such
bonds) fails to comply with such covenants.
STATE TAXES
A Portfolio is not liable for any income or franchise tax in Massachusetts
if it qualifies as a RIC for federal income tax purposes. Depending upon
applicable state and local law, shareholders of a Portfolio may be exempt from
state and local taxes on distributions of tax-exempt interest income derived
from obligations of the state and/or municipalities in which they reside, but
shareholders may be subject to tax on income derived from obligations of other
jurisdictions. Each Portfolio will make periodic reports to shareholders of the
source of distributions on a state-by-state basis.
If a Portfolio 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 Portfolio in a written notice to shareholders mailed within 60
days of the close of the Portfolio's taxable year and (2) to the extent the
interest received by the Portfolio during the year on California Tax Exempt
Obligations exceeds expenses of the Portfolio that would be disallowed under
California personal income tax law as allocable to tax exempt interest if the
Portfolio 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.
S-20
<PAGE>
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 Portfolio, or treat dividends paid by the Portfolio to its
shareholders as California exempt-interest dividends, if the Portfolio fails to
meet the 30-percent test. It is the intention of the management of the Portfolio
to continue to meet the 30-percent test for all years for which California does
not conform to the federal legislation.
Shareholders should consult their tax advisors concerning the state and
local tax consequences of investments in the Trust, which may differ from the
federal income tax consequences described above.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Advisers and Sub-Adviser are responsible for
placing orders to execute Portfolio transactions. In placing orders, it is the
Trust's policy to seek to obtain the best net results taking into account such
factors as price (including the applicable dealer spread), size, type and
difficulty of the transaction involved, the firm's general execution and
operational facilities, and the firm's risk in positioning the securities
involved. While the Advisers and Sub-Adviser generally seek reasonably
competitive spreads or commissions, the Trust will not necessarily be paying the
lowest spread or commission available. The Trust's policy of investing in
securities with short maturities will result in high portfolio turnover. The
Trust will not purchase portfolio securities from any affiliated person acting
as principal except in conformity with the regulations of the SEC.
The Trust does not expect to use one particular dealer, but, subject to the
Trust's policy of seeking the best net results, dealers who provide supplemental
investment research to the Advisers and Sub-Adviser may receive orders for
transactions by the Trust. Information so received will be in addition to and
not in lieu of the services required to be performed by the Advisers or
Sub-Adviser under the Advisory or Sub-Advisory Agreements, and the expenses of
the Advisers and Sub-Adviser will not necessarily be reduced as a result of the
receipt of such supplemental information.
The money market securities in which certain of the Portfolios invest are
traded primarily in the over-the-counter market. Bonds and debentures are
usually traded over-the-counter, but may be traded on an exchange. Where
possible, a Portfolio's Adviser or Sub-Adviser will deal directly with the
dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere. Such
dealers usually are acting as principal for their own account. On occasion,
securities may be purchased directly from the issuer. Money market securities
are generally traded on a net basis, and do not normally involve either
brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Portfolio will primarily consist of dealer
spreads and underwriting commissions.
It is expected that certain of the Portfolios may execute brokerage or other
agency transactions through the Distributor, a registered broker-dealer, for a
commission, in conformity with the 1940 Act, the Securities Exchange Act of
1934, as amended, and rules of the SEC. Under these provisions, the Distributor
is permitted to receive and retain compensation for effecting portfolio
transactions for a Portfolio on an exchange if a written contract is in effect
between the Distributor and the Trust expressly permitting the Distributor to
receive and retain such compensation. These provisions further require that
commissions paid to the Distributor by the Trust for exchange transactions not
exceed "usual and customary" brokerage commissions. The rules define "usual and
customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities
S-21
<PAGE>
being purchased or sold on a securities exchange during a comparable period of
time." In addition, the Portfolios may direct commission business to one or more
designated broker-dealers, including the Distributor, in connection with payment
of certain of the Portfolios' expenses by such broker-dealers. The Trustees,
including those who are not "interested persons" of the Trust, have adopted
procedures for evaluating the reasonableness of commissions paid to the
Distributor and will review these procedures periodically.
Since the Trust does not market its shares through intermediary brokers or
dealers, it is not the Trust's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, the Advisers and Sub-Adviser may place portfolio orders with
qualified broker-dealers who recommend the Trust to clients, and may, when a
number of brokers and dealers can provide best price and execution on a
particular transaction, consider such recommendations by a broker or dealer in
selecting among broker-dealers.
The Advisers and Sub-Adviser may, consistent with the interests of the
Portfolios, select brokers on the basis of the research services they provide to
the Adviser or Sub-Adviser. Such services may include analysis of the business
or prospects of a company, industry or economic sector or statistical and
pricing services. Information so received by the Advisers or Sub-Adviser will be
in addition to and not in lieu of the services required to be performed by an
Adviser or Sub-Adviser under the Advisory or Sub-Advisory Agreements. If in the
judgement of an Adviser or Sub-Adviser the Portfolios, or other accounts managed
by the Adviser or Sub-Adviser, will be benefitted by supplemental research
services, the Adviser or Sub-Adviser is authorized to pay brokerage commissions
to a broker furnishing such services which are in excess of commissions which
another broker may have charged for effecting the same transaction. The expenses
of an Adviser or Sub-Adviser will not necessarily be reduced as a result of the
receipt of such supplemental information.
For the fiscal years ended August 31, 1995, 1996, and 1997, the Portfolios
paid no brokerage commissions.
It is expected that the portfolio turnover rate will normally not exceed
100% for any Portfolio. A portfolio turnover rate would exceed 100% if all of
its securities, exclusive of U.S. Government securities and other securities
whose maturities at the time of acquisition are one year or less, are replaced
in the period of one year. Turnover rates may vary from year to year and may be
affected by cash requirements for redemptions and by requirements which enable a
Portfolio to receive favorable tax treatment.
For each of the fiscal years ending August 31, 1996 and 1997, the portfolio
turnover rate for each of the following Portfolios was:
<TABLE>
<CAPTION>
TURNOVER RATE
------------------------
PORTFOLIO 1997 1996
- ----------------------------------------------------------------------------------------- ----- -----
<S> <C> <C>
Pennsylvania Municipal Portfolio......................................................... 34% 66%
Intermediate-Term Municipal Portfolio.................................................... 16% 41%
New York Intermediate-Term Municipal Portfolio........................................... * *
</TABLE>
- ------------------------
* Not in operation during the period.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of each Portfolio, each of which represents an equal proportionate
interest in that Portfolio. Each share upon liquidation entitles a shareholder
to a pro rata share in the net assets of that Portfolio, after taking into
account the Class D and 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.
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<PAGE>
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.
5% SHAREHOLDERS
As of December 1, 1997, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Portfolios. The Trust believes that most of the shares
referred to below were held by the persons indicated in accounts for their
fiduciary, agency, or custodial customers.
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES FUNDS
- ------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
TAX FREE PORTFOLIO:
Naidot & Co. .................................................... 121,840,100.000 23.23%
c/o Bessemer Trust Company
Attn: Peter Scully
630 Fifth Avenue 38th Floor
New York, NY 10111-0100
SEI Trust Company ............................................... 71,514,729.720 13.64%
c/o SEI Corporation
Attn: Sandra Crawford
P.O. Box 1100
Oaks, PA 19456-1100
EAMCO ........................................................... 36,711,457.660 7.01%
c/o Riggs Bank NA
Attn: Pat Murrell
5700 Rivertech Court R5300
Riverdale, MD 20737-1250
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES FUNDS
- ------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Smith & Co. ..................................................... 71,075,552.600 13.55%
c/o First Security Bank of Utah
Attn: Rick Parr
P.O. Box 30007
Salt Lake City, UT 84130-0007
INSTITUTIONAL TAX FREE PORTFOLIO:
Bank of America NT & SA ......................................... 91,351,968.860 10.12%
Attn: Common Trust Funds
P.O. Box 3577 Terminal Annex
Los Angeles, CA 90051-1577
First American National Bank .................................... 75,697,335.860 8.39%
Attn: Jeff Eubanks
800 First American Center
Nashville, TN 37237
Whitcust & Co. .................................................. 69,909,192.880 7.75%
c/o Whitney National Bank
Attn: Darryl Fricke
228 St. Charles Ave.
New Orleans, LA 70130-2601
Calhoun & Co. ................................................... 70,227,692.130 7.78%
c/o Comerica Bank
Attn: Dennis Miriani
P.O. Box 1319, 7th Floor
Detroit, MI 48231
CENCO ........................................................... 60,189,418.550 6.67%
Compass Bank Trust Division
Attn: Bobby Morris
P.O. Box 10566
Birmingham, AL 35296-0001
Unit & Co. ...................................................... 57,935,823.000 6.42%
c/o US National Bank of Oregon
Attn: Jeanene Wine
P.O. Box 3168
Portland, OR 97208-3168
CALIFORNIA TAX EXEMPT PORTFOLIO:
Union Investors ................................................. 3,407,956.730 6.11%
c/o SEI Financial Management
One Freedom Valley Road
Oaks, PA 19456
</TABLE>
S-24
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES FUNDS
- ------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Bank of America NT & SA ......................................... 8,454,939.520 15.17%
Attn: Common Trust Funds
P.O. Box 3577 Terminal Annex
Los Angeles, CA 90051-1577
Union Bank of California ........................................ 36,995,438.600 66.38%
Attn: Jeanne Chizek or Julie Parra
P.O. Box 109
San Diego, CA 92112-4103
INTERMEDIATE-TERM MUNICIPAL PORTFOLIO:
TRANSCO & Company ............................................... 1,788,386.524 6.44%
c/o Intrust Bank, NA
Attn: Pat Wills
P.O. Box 48698
Wichita, KS 67201-8698
SEI Trust Company ............................................... 17,286,729.814 62.23%
Attn: Jacqueline Esposito
One Freedom Valley Road
Oaks, PA 19456
PENNSYLVANIA MUNICIPAL PORTFOLIO:
Sheldon & Co. (Integra) ......................................... 6,495,591.389 69.74%
c/o National City
Attn: Trust Mutual Funds
P.O. Box 94777, LOC 5312
Cleveland, OH 44101-4777
SEI Trust Company ............................................... 701,741.429 7.53%
ATTN: Jacqueline Esposito
One Freedom Valley Road
Oaks, PA 19456
Meg & Co. ....................................................... 787,636.673 8.46%
c/o United States National Bank
Attn: Debbie Moraca
P.O. Box 520
Johnstown, PA 15907-0520
PENNSYLVANIA TAX FREE PORTFOLIO:
The Farmers Company ............................................. 2,434,000.000 5.95%
c/o Darmer First Bank
Attn: Wendy Basehoar
P.O. Box 1000
Lititz, PA 17543-7000
</TABLE>
S-25
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES FUNDS
- ------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
The Fulton Company .............................................. 36,407,607.810 89.04%
c/o Fulton Bank Trust Dept.
Attn: Dennis Patrice
One Penn Square
Lancaster, PA 17602-2853
</TABLE>
EXPERTS
The financial statements incorporated by reference in this Statement of
Additional Information have been audited by Arthur Andersen LLP, independent
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing in giving said report.
FINANCIAL STATEMENTS
The Trust's financial statements for the fiscal year ended August 31, 1997,
including notes thereto and the report of Arthur Andersen LLP thereon, are
herein incorporated by reference. A copy of the 1997 Annual Report must
accompany the delivery of this Statement of Additional Information.
S-26
