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SEI DAILY INCOME TRUST
APRIL 1, 1996
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GOVERNMENT PORTFOLIO
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Please read this Prospectus carefully before investing, and keep it on file for
future reference.
A Statement of Additional Information dated May 31, 1995, as amended has been
filed with the Securities and Exchange Commission and is available without
charge through the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087 or by calling 1-800-342-5734. The Statement of
Additional Information is incorporated into this Prospectus by reference.
SEI Daily Income Trust (the "Trust") is a mutual fund that offers 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 portfolios of securities. Some portfolios offer separate classes of
units of beneficial interest ("shares") that differ from each other primarily in
the allocation of certain distribution expenses. This Prospectus offers Class G
shares (formerly Class C shares) of the Government 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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE 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.
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ANNUAL OPERATING EXPENSES (as a percentage of average net assets) CLASS G
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<TABLE>
<S> <C> <C>
Management/Advisory Fees (after fee waiver) (1) .12%
12b-1 Fees (after fee waiver)(2) .44%
Total Other Expenses .29%
Shareholder Service Fees .25%
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Total Operating Expenses (after fee waiver) (3) .85%
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</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 would be .27%
for the Portfolio.
(2) The maximum 12b-1 fees payable by Class G shares of the Portfolios are
.50%.
(3) Absent the voluntary fee waivers described above, total operating expenses
for the Class G shares of the Portfolio would be 1.06%.
EXAMPLE
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<TABLE>
<CAPTION>
1 yr. 3 yrs. 5 yrs. 10 yrs.
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<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period:
Government Portfolio $9 $27 $47 $105
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</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 this table is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in
Class G shares of the Portfolio. A person who purchases shares through a
financial institution may be charged separate fees by that institution. The
information set forth in the foregoing table and example relates only to Class G
shares. Additional information may be found under "The Manager and Shareholder
Servicing Agent," "The Adviser" and "Distribution." Long-term shareholders may
eventually pay more than the economic equivalent of the maximum front-end sales
charges otherwise permitted by the NASD Rules.
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FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, the Trust's
independent accountants, as indicated in their report dated March 8, 1995 on the
Trust's financial statements as of January 31, 1995 included in the Trust's
Statement of Additional Information under "Financial Information." Additional
performance information is set forth in the 1995 Annual Report to shareholders
and is available upon request and without charge by calling 1-800-342-5734.
FOR A CLASS G SHARE OUTSTANDING THROUGHOUT THE PERIOD**
<TABLE>
<CAPTION>
Government Portfolio
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For fiscal year
ended
January 31,
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1995(1)
<S> <C>
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Net Asset Value, Beginning of Period $ 1.00
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Income from Investment Operations:
Net Investment Income 0.03
Net Realized and Unrealized Gains (Losses) on Securities --
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Total from Investment Operations $ 0.03
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Less Distributions:
Dividends from Net Investment Income (0.03)
Distributions from Realized Capital Gains --
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Total Distributions $ (0.03)
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Net Asset Value, End of Period $ 1.00
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Total Return 3.41%(2)
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Ratios/Supplemental Data:
Net Assets End of Period (000) $ 310,835
Ratio of Expenses to Average Net Assets 0.70%
Ratio of Expenses to Average Net Assets (Excluding Waivers) 0.89%
Ratio of Net Investment Income to Average Net Assets 4.32%
Ratio of Net Investment Income to Average Net Assets (Excluding Waivers) 4.13
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</TABLE>
(1) The Class C shares of the Portfolio were first offered April 7, 1994. All
ratios have been annualized.
(2) Returns are for the period indicated and have not been annualized.
** Financial information presented here reflects the performance and ratios of
Class C shares of the Portfolio. The Trust's board of trustees has approved
the conversion of Class C shares of the Portfolio into Class G shares. Class
G shares are subject to different fees and expenses than Class C shares.
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THE TRUST
SEI DAILY INCOME TRUST (the "Trust") is a diversified open-end management
investment company that offers units of beneficial interest ("shares") in
separate investment portfolios. This Prospectus offers Class G shares of the
Trust's Government Portfolio (the "Portfolio.") The Portfolio has separate
classes of shares which provide for variations in distribution, shareholder
service and transfer agent costs, voting rights and dividends. Additional
information pertaining to the Trust may be obtained from SEI Financial Services
Company, 680 East Swedesford Road, Wayne, PA 19087 or by calling 1-800-342-5734.
INVESTMENT
OBJECTIVE AND
POLICIES
The Government Portfolio seeks to preserve principal value
and maintain a high degree of liquidity while providing
current income. Under normal conditions the Portfolio
invests exclusively in U.S. Treasury obligations,
obligations issued or guaranteed as to principal and
interest by the agencies or instrumentalities of the U.S.
Government, and repurchase agreements involving such
obligations.
GENERAL
INVESTMENT
POLICIES
The Portfolio complies with regulations of the Securities
and Exchange Commission applicable to money market funds,
as amended effective June 1, 1991. These regulations
impose certain quality, maturity and diversification
restraints on investments by the Portfolio. These
regulations generally require money market funds to
acquire only U.S. dollar denominated obligations maturing
in 397 days or less. Under these regulations, the
Portfolio will maintain an average maturity on a
dollar-weighted basis of 90 days or less. For a
description of certain of these restraints, see
"Description of Permitted Investments and Risk Factors."
The Portfolio may invest up to 10% of its net assets
in illiquid securities, including illiquid restricted
securities. However, restricted securities, including Rule
144A securities and Section 4(2) commercial paper, that
meet the criteria established by the Board of Trustees of
the Trust will be considered liquid. In addition, the
Portfolio may invest in STRIPS (as defined in the
"Description of Permitted Investments and Risk Factors").
The Portfolio may purchase securities on a
when-issued basis.
For a description of the permitted investments and
the above ratings see "Description of Permitted
Investments and Risk Factors" and the Statement of
Additional Information.
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INVESTMENT
LIMITATIONS
The investment objective and certain investment
limitations are fundamental policies of the Portfolio. 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. There can be no assurance that the investment
objective of the Portfolio will be met or that the
Portfolio will be able to maintain a net asset value of
$1.00 per share on a continuing basis.
Fundamental policies cannot be changed with respect
to the Portfolio without the consent of the holders of a
majority of the Portfolio's outstanding shares.
The Portfolio may not:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the U.S. Government, its
agencies or instrumentalities), if as a result, more
than 5% of total assets of the Portfolio 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 as
permitted by Rule 2a-7 under the Investment Company Act
of 1940, as amended (the "1940 Act").
2. Purchase any securities which would cause more than 25%
of the total assets of the Portfolio to be invested in
the securities of one or more issuers conducting their
principal business activities in the same industry,
provided that this limitation does not apply to
investments in (a) domestic banks and (b) obligations
issued or guaranteed by the U.S. Government or its
agencies and instrumentalities; provided.
3. Borrow money except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the
value of the total assets of the Portfolio. This
borrowing provision is included solely to facilitate
the orderly sale of portfolio securities to accommodate
substantial redemption requests if they should occur
and is not for investment purposes. All borrowings will
be repaid before making additional investments for the
Portfolio and any interest paid on such borrowings will
reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the
time of the purchase of a security. Additional fundamental
and nonfundamental investment limitations are set forth in
the Statement of Additional Information.
THE MANAGER
SEI Financial Management Corporation (the "Manager" and
the "Transfer Agent"), a wholly owned subsidiary of SEI
Corporation ("SEI"), and the Trust are parties to a
management agreement (the "Management Agreement"). Under
the terms of the Management Agreement, the Manager is
responsible for providing the Trust with overall
management services, regulatory reporting, all necessary
office space, equipment, personnel and facilities and for
acting as transfer agent, dividend disbursing agent, and
shareholder servicing agent.
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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 Portfolio's average daily net assets.
The Manager has voluntarily agreed to waive all or a
portion of its fee in order to limit the total operating
expenses to not more than .85% of the daily net assets of
Class G shares of the Portfolio, on an annualized basis.
The Manager reserves the right, in its sole discretion, to
terminate this voluntary waiver at any time.
THE ADVISER
Wellington Management Company ("WMC" or the "Adviser")
acts as the investment adviser for the Portfolio under an
advisory agreement (the "Advisory Agreement") with the
Trust. WMC is a professional investment counseling firm
which provides investment services to investment
companies, employee benefit plans, endowments,
foundations, and other institutions and individuals. Under
the Advisory Agreement, the Adviser is responsible for the
investment decisions for 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's predecessor organizations have
provided investment advisory services to investment
companies since 1933 and to investment counseling clients
since 1960. As of September 30, 1995, the Adviser had
discretionary management authority with respect to
approximately $102.4 billion of assets, including the
assets of the Trust, SEI Liquid Asset Trust and the
Insurance Investment Products Trust, each an open-end
investment company. Wellington Trust Company, National
Association, a wholly-owned subsidiary of the Adviser,
utilizes SEI's trust accounting services. The principal
address of Wellington Management Company is 75 State
Street, Boston, MA 02109. WMC is a Massachusetts general
partnership, of which the following persons are managing
partners: Robert W. Doran, Duncan M. McFarland and John B.
Neff.
The Adviser is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of
.075% of the combined average daily net assets of the
Portfolios of the Trust up to $500 million and .02% of
such combined average daily net assets in excess of $500
million. Such fees are allocated daily among the
Portfolios on the basis of their relative net assets. For
the fiscal year ended January 31, 1995, the Portfolio paid
the Adviser advisory fees (shown here as a percentage of
average daily net assets after voluntary fee waivers) of
.01%.
DISTRIBUTION AND
SHAREHOLDER
SERVICES
SEI Financial Services Company (the "Distributor"), a
wholly owned subsidiary of SEI, serves as the Portfolio's
distributor pursuant to a distribution agreement (the
"Distribution Agreement"). Each Class of each Portfolio
has a separate distribution plan ("Class A Plan,"
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"Class B Plan," "Class C Plan" and "Class G Plan";
collectively, the "Plans") pursuant to Rule 12b-1 under
the 1940 Act. The Trust may also execute brokerage or
other agency transactions through the Distributor for
which the Distributor may receive usual and customary
compensation.
The Class G Plan provides for payments to the
Distributor at an annual rate of up to .50% of the
Portfolio's average daily net assets attributable to Class
G shares. These payments are characterized as
"compensation" and are not directly tied to expenses
incurred by the Distributor; the payments the Distributor
receives during any year may therefore be higher or lower
than its actual expenses. These additional payments may be
used to compensate Class G shareholders that provide
distribution related services to their customers. Class G
shares are also subject to a shareholder servicing fee of
up to .25% of the average daily net assets of the Class G
shares of the Portfolio. This shareholder servicing fee
may be used for personal service and maintenance of
shareholder accounts.
It is possible that an institution may offer
different classes of shares to its customers and thus
receive compensation with respect to different classes.
These financial institutions may also charge separate fees
to their customers. Certain financial institutions
offering shares to their customers may be required to
register as dealers pursuant to state laws.
The Distributor may, from time to time in its sole
discretion, institute one or more promotional incentive
programs, which will be paid by the Distributor from the
sales charge it receives or from any other source
available to it. Under any such program, the Distributor
will provide promotional incentives, in the form of cash
or other compensation, including merchandise, airline
vouchers, trips and vacation packages, to all dealers
selling shares of the Portfolios. Such promotional
incentives will be offered uniformly to all dealers and
predicated upon the amount of shares of the Portfolios
sold by the dealer.
PURCHASE AND
REDEMPTION OF
SHARES
Financial institutions may acquire shares of the Portfolio
for their own accounts or as a record owner on behalf of
fiduciary, agency or custody accounts by placing orders
with the Transfer Agent. Institutions that use certain SEI
proprietary systems may place orders electronically
through those systems. State securities laws may require
banks and financial institutions purchasing shares for
their customers to register as dealers pursuant to state
laws. Financial institutions may impose an earlier cut-off
time for receipt of purchase orders directed through them
to allow for processing and transmittal of these orders to
the Transfer Agent for effectiveness the same day.
Financial institutions that purchase shares for the
accounts of their customers may impose separate charges on
these customers for account services. Shares of the
Portfolio are offered only to residents of states in which
the shares are eligible for purchase.
Shares of the Portfolio may be purchased or redeemed
on days on which the New York Stock Exchange is open for
business ("Business Days"). However, money market
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fund shares can not be purchased by Federal Reserve wire
on Federal holidays restricting wire transfers.
Shareholders who desire to purchase shares with cash
must place their orders with the Transfer Agent prior to
the determination of net asset value 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 outstanding
shares of the Portfolio. A 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 3:00 p.m. Eastern time on
each Business Day. Financial institutions which purchase
and redeem shares for the accounts of their customers may
impose their own cut-off times for receipt of purchase and
redemption requests directed through them.
Shareholders who desire to redeem shares of the
Portfolio must place their redemption orders with the
Transfer Agent prior to the determination of net asset
value 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. For redemption orders received before the cut-off
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 Trust's Transfer
Agent will be responsible for any loss, liability, cost or
expense for acting upon wire instructions or upon
telephone instructions that it reasonably believes to be
genuine. The Trust and the Trust's Transfer Agent will
each employ reasonable procedures to confirm that
instructions communicated by telephone are genuine,
including requiring a form of personal identification
prior to acting upon instructions received by telephone
and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, and you
experience difficulties placing redemption orders by
telephone, you may wish to consider placing your order by
other means.
PERFORMANCE
For any Portfolio, the performance of Class A shares will
normally be higher than that of Class B shares because of
the additional distribution expenses charged to Class B
shares. Likewise, the performance on Class B shares will
normally be higher than that of Class C or
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Class G shares because of the additional distribution
expenses charged to Class C shares and the additional
distribution and shareholder servicing expenses charged to
Class G shares.
From time to time, the Portfolio may advertise the
"current yield" and "effective yield" (also called
"effective compound yield"). These figures are based on
historical earnings and are not intended to indicate
future performance. No representation can be made
concerning actual future yields or returns. The "current
yield" of the Portfolio refers to the income generated by
a hypothetical investment in such Portfolio over a
seven-day period (which period will be stated in the
advertisement). This income is then "annualized," i.e.,
the income generated 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"
(also called "effective compound yield") is calculated
similarly but, when annualized, the income earned by an
investment in the Portfolio 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 Portfolio may periodically compare its
performance to that of other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical) or
financial and business publications and periodicals, broad
groups of comparable mutual funds, unmanaged indices which
may assume investment of dividends but generally do not
reflect deductions for administrative and management costs
or to 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.
TAXES
The following summary of federal income tax consequences
is based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No attempt has been made to present a detailed explanation
of the federal, state or local income tax treatment of the
Portfolio or its shareholders. Accordingly, shareholders
are urged to consult their tax advisers regarding specific
questions as to federal, state and local income taxes.
State and local tax consequences of an investment in the
Portfolio may differ from the federal income tax
consequences described below. Additional information
concerning taxes is set forth in the Statement of
Additional Information.
Tax Status
of the Portfolios 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 qualify or to
continue to qualify for the special tax treatment afforded
regulated investment companies ("RICs") under Subchapter M
of the Internal Revenue Code of 1986 (the "Code"), as
amended, so as to be relieved of federal income tax on net
investment company taxable income and net capital gains
(the excess of net long-term capital gains over net
short-term capital losses) distributed to shareholders.
The Portfolio also intends to distribute sufficient
amounts each calendar year to avoid liability for federal
excise tax.
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Tax Status
of Distributions The Portfolio distributes substantially all of its net
investment income (including net short-term capital gains)
to shareholders. Dividends from net investment company
taxable income are taxable to its shareholders as ordinary
income (whether received in cash or in additional shares)
and will not qualify for the corporate dividends received
deduction. Distributions of net capital gains are taxable
to shareholders as long-term capital gains. The Portfolio
provides annual reports to shareholders of the federal
income tax status of all distributions.
Dividends declared by the Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in such a month, will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of the year declared if
paid by the Portfolio at any time during the following
January.
Income received on direct U.S. Government
obligations is exempt from tax at the state level when
received directly and may be exempt, depending on the
state, when received by a shareholder from a Portfolio
provided certain conditions are satisfied. Interest
received on repurchase agreements collateralized by U.S.
Government obligations normally is not exempt from state
taxation. The Portfolio will inform shareholders annually
of the percentage of income and distributions derived from
direct U.S. Government obligations. Shareholders should
consult their tax advisers to determine whether any
portion of the income dividends received from the
Portfolio is considered tax exempt in their particular
states.
With respect to investments in STRIPS, which are
sold at original issue discount and thus do not make
periodic cash interest payments, the Portfolio will be
required to include as part of its current income the
accreted interest on any such obligations even though the
Portfolio has not received any interest payments on such
obligations during that period. Because the Portfolio
distributes all of its net investment income to its
shareholders, the Portfolio may have to sell portfolio
securities to distribute such imputed income, which may
occur at a time when the Adviser would not have chosen to
sell such securities, and which may result in a taxable
gain or loss.
Each sale, exchange, or redemption of Portfolio
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: Money Market
Portfolio, Prime Obligation Portfolio, Government II
Portfolio, Treasury Portfolio, Treasury II Portfolio,
Federal Securities Portfolio, Short-Term Government
Portfolio, Intermediate-Term Government Portfolio, GNMA
Portfolio, Short-Term Mortgage Portfolio (formerly
Adjustable Rate Mortgage Portfolio) Short Duration
Mortgage Portfolio, Corporate Daily Income Portfolio and
Government Securities Daily Income Portfolio. All
consideration received by the Trust for
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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 state and federal 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. 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 information
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 Financial Management Corporation, 680 E. Swedesford
Road, Wayne, PA 19087.
Dividends Substantially all of the net investment income (exclusive
of capital gains) of the Portfolio is distributed in the
form of monthly dividends. The dividends are determined
and declared as a dividend for shareholders of record on
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. The dividends on Class A shares are
normally higher than those on Class B shares of each
Portfolio because of the additional distribution expenses
charged to Class B shares. The dividends on Class B shares
are normally higher than those on Class C and Class G
shares of each Portfolio because of the additional
distribution and/or shareholder servicing expenses charged
to Class C and Class G shares.
Counsel and Independent
Accountants Morgan, Lewis & Bockius LLP serves as counsel to the
Trust. Arthur Andersen LLP serves as the independent
public accountants of the Trust.
Custodians
and Wire Agent CoreStates Bank, N.A., Broad and Chestnut Streets, P.O.
Box 7618, Philadelphia, PA 19101 (the "Custodian"), acts
as custodian of the assets of the Portfolio, and as wire
agent of the Trust. The Custodian holds cash, securities
and other assets of the Trust as required by the 1940 Act.
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DESCRIPTION
OF PERMITTED
INVESTMENTS
AND RISK FACTORS
The following is a description of certain of the permitted
investment practices for the Portfolios and the associated
risk factors:
Illiquid Securities Illiquid securities are securities which cannot be
disposed of within seven business days at approximately
the price at which they are being carried on a Portfolio's
books. An illiquid security includes a demand instrument
with a demand notice period exceeding seven days, where
there is no secondary market for such security, and
repurchase agreements with maturities over seven days in
length.
Repurchase Agreements Repurchase agreements are agreements by which a Portfolio
obtains a security and simultaneously commits to return
the security to the seller at an agreed upon price on an
agreed upon date within a number of days from the date of
purchase. The Custodian will hold the security as
collateral for the repurchase agreement. A Portfolio bears
a risk of loss in the event the other party defaults on
its obligations and the Portfolio is delayed or prevented
from exercising its rights to dispose of the collateral or
if the Portfolio realizes a loss on the sale of the
collateral. A Portfolio will enter into repurchase
agreements only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the
agreement based on established guidelines. Repurchase
agreements are considered loans under the 1940 Act.
Restraints on
Investments by
Money Market Funds Investments by a money market fund are subject to
limitations imposed under regulations adopted by the
Securities and Exchange Commission. These regulations
generally require money market funds to acquire only U.S.
dollar denominated obligations maturing in 397 days or
less and to maintain a dollar-weighted average portfolio
maturity of 90 days or less. In addition, money market
funds may acquire only obligations that present minimal
credit risk and that are "eligible securities," which
means they are (i) rated, at the time of investment, by at
least two nationally recognized statistical rating
organizations (one if it is the only organization rating
such obligation) in the highest short-term rating category
or, if unrated, determined to be of comparable quality (a
"first tier security"), or (ii) rated according to the
foregoing criteria in the second highest rating category
or, if unrated, determined to be of comparable quality
("second tier security"). A security is not considered to
be unrated if its issuer has outstanding obligations of
comparable priority and security that have a short-term
rating. In the case of taxable money market funds,
investments in second tier securities are subject to the
further constraints that (i) no more than 5% of a
Portfolio's assets may be invested in second tier
securities, and (ii) any investment in securities of any
one issuer is limited to the greater of 1% of the
Portfolio's total assets or $1 million. A taxable money
market fund may also hold more than 5% of its total assets
in the first tier securities of a single issuer for three
business days.
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U.S. Government Agencies
Obligations issued or guaranteed by agencies of the U.S.
Government, including, among others, the Federal Farm
Credit Bank, the Federal Housing Administration and the
Small Business Administration, and obligations issued or
guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage
Corporations, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the
full faith and credit of the U.S. Treasury (e.g.,
Government National Mortgage Association), others are
supported by the right of the issuer to borrow from the
Treasury (e.g., Federal Farm Credit Bank), while still
others are supported only by the credit of the
instrumentality (e.g., Federal National Mortgage
Association). Guarantees of principal by agencies or
instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation so
that in the event of a default prior to maturity there
might not be a market and thus no means of realizing on
the obligation prior to maturity. Guarantees as to the
timely payment of principal and interest do not extend to
the value or yield of these securities nor to the value of
the Portfolio's shares.
U.S. Treasury
Obligations U.S. treasury obligations consist of bills, notes and
bonds issued by the U.S. Treasury and separately traded
interest and principal component parts of such obligations
that are transferable through the Federal book-entry
system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS").
STRIPS STRIPS are sold as zero coupon securities which means that
they are sold at a substantial discount and redeemed at
face value at their maturity date without interim cash
payments of interest or principal. This discount is
accreted over the life of the security, and such accretion
will constitute the income earned on the security for both
accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate
volatility than interest paying securities. See also
"Taxes."
When-Issued and Delayed
Delivery Securities When-issued or delayed delivery basis transactions involve
the purchase of an instrument with payment and delivery
taking place in the future. Delivery of and payment for
these securities may occur a month or more after the date
of the purchase commitment. A Portfolio will maintain with
the Custodian a separate account with liquid high grade
debt securities or cash in an amount at least equal to
these commitments. The interest rate realized on these
securities is fixed as of the purchase date and no
interest accrues to a Portfolio before settlement. These
securities are subject to market fluctuation due to
changes in market interest rates and it is possible that
the market value at the time of settlement could be higher
or lower than the purchase price if the general level of
interest rates has changed. Although a Portfolio generally
purchases securities on a when-issued or forward
commitment basis with the intention of actually acquiring
securities, a Portfolio may dispose of a when-issued
security or forward commitment prior to settlement if it
deems appropriate.
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Expense Summary............................. 2
Financial Highlights........................ 3
The Trust................................... 4
Investment Objectives and Policies.......... 4
General Investment Policies................. 4
Investment Limitations...................... 5
The Manager................................. 5
The Adviser................................. 6
Distribution and Shareholder Services....... 6
Purchase and Redemption of Shares........... 7
Performance................................. 8
Taxes....................................... 9
General Information......................... 10
Description of Permitted Investments and
Risk Factors.............................. 12
</TABLE>
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