<PAGE> 1
SEI DAILY INCOME TRUST
MAY 31, 1996
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
PRIME OBLIGATION PORTFOLIO
GOVERNMENT PORTFOLIO
GOVERNMENT II PORTFOLIO
TREASURY PORTFOLIO
TREASURY II PORTFOLIO
FEDERAL SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus concisely sets forth 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 May 31, 1996, has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, Pennsylvania 19087-1658, or by calling 1-800-342-5734.
The Statement of Additional Information is incorporated into this Prospectus by
reference.
SEI Daily Income 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 professionally managed diversified portfolios
of securities. Some portfolios offer separate classes of units of beneficial
interest that differ from each other primarily in the allocation of certain
distribution and/or shareholder servicing expenses. This Prospectus offers Class
A shares of each of the seven money market fund portfolios (each a "Portfolio"
and, together, the "Portfolios") listed above, and Class B and Class C shares of
the Money Market, Prime Obligation, Government, Government II, Treasury and
Treasury II Portfolios. The Federal Securities Portfolio offers only Class A
shares.
AN INVESTMENT IN A PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT ANY PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE 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> 2
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) CLASS A*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY PRIME FEDERAL
MARKET OBLIGATION GOVERNMENT GOVERNMENT II TREASURY TREASURY II SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- ---------- ------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Management/Advisory Fees
(after fee waiver) (1) .15% .16% .16% .16% .14% .21% .58%
12b-1 Fees none none none none none none none
Total Other Expenses .05% .04% .04% .04% .06% .04% .02%
Shareholder
Servicing
Fees (after fee
waiver) (2) .00% .00% .00% .00% .00% .00% .00%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers) (3)
(4) .20% .20% .20% .20% .20% .25% .60%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Federal Securities Portfolio offers only Class A shares.
(1) For the Money Market and Government Portfolios, 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 .40% for the Money Market
Portfolio and .30% for the Government Portfolio. For the Prime Obligation,
Government II, Treasury and Treasury II Portfolios, the Manager has agreed
to waive its fee, and, if necessary, pay other operating expenses of the
Portfolios in an amount that operates to limit the total operating expenses
of the Class A shares. Absent these waivers and/or reimbursements,
management/advisory fees would be .25% for the Prime Obligation and
Government II Portfolios, and .30% for the Treasury and Treasury II
Portfolios. Management/advisory fees have been restated to reflect current
expenses.
(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
any time in its sole discretion. Absent such a fee waiver, shareholder
servicing fees would be .25% for each of the Portfolios.
(3) Absent these fee waivers, total operating expenses for the Class A shares
of the Portfolios would be .70% for the Money Market Portfolio, .54% for the
Prime Obligation Portfolio, .59% for the Government Portfolio, .54% for the
Government II Portfolio, .61% for the Treasury Portfolio, .59% for the
Treasury II Portfolio and .85% for the Federal Securities Portfolio.
(4) Total operating expenses for the Federal Securities Portfolio are based on
estimated amounts for the current fiscal year.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end of each time period:
Money Market Portfolio $ 2 $ 6 $ 11 $26
Prime Obligation Portfolio $ 2 $ 6 $ 11 $26
Government Portfolio $ 2 $ 6 $ 11 $26
Government II Portfolio $ 2 $ 6 $ 11 $26
Treasury Portfolio $ 2 $ 6 $ 11 $26
Treasury II Portfolio $ 3 $ 8 $ 14 $32
Federal Securities Portfolio $ 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 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 A shares of the Portfolios. A person who purchases shares through a
financial institution may be charged separate fees by that institution. Each of
the Portfolios, except the Federal Securities Portfolio, also offers Class B and
Class C shares, and the Government Portfolio also offers Class G shares, which
classes are subject to the same expenses, except that Class B, Class C and Class
G shares each have different distribution and/or shareholder servicing costs.
Additional information may be found under "The Manager," "The Adviser" and
"Distribution and Shareholder Servicing."
2
<PAGE> 3
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) CLASS B
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY PRIME
MARKET OBLIGATION GOVERNMENT GOVERNMENT II TREASURY TREASURY II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- ---------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Management/Advisory Fees
(after fee waiver) (1) .15% .16% .16% .16% .14% .21%
12b-1 Fees none none none none none none
Total Other Expenses .35% .34% .34% .34% .36% .34%
Shareholder Servicing
Fees .25% .25% .25% .25% .25% .25%
- -------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waiver) (2) .50% .50% .50% .50% .50% .55%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the Money Market and Government Portfolios 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 .40% for the Money Market
Portfolio and .30% for the Government Portfolio. For the Prime Obligation,
Government II, Treasury and Treasury II Portfolios, the Manager has agreed
to waive its fee, and, if necessary, pay other operating expenses of the
Portfolios in an amount that operates to limit the total operating expenses
of the Class B shares. Absent these waivers and/or reimbursements,
management/advisory fees would be .25% for the Prime Obligation and
Government II Portfolios, and .30% for the Treasury and Treasury II
Portfolios. Management/advisory fees have been restated to reflect current
expenses.
(2) Absent the fee waiver, total operating expenses for the Class B shares of
the Portfolios would be .75 % for the Money Market Portfolio, .59% for the
Prime Obligation Portfolio, .64% for the Government Portfolio, .59% for the
Government II Portfolio, .66% for the Treasury Portfolio and .64% for the
Treasury II Portfolio.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end of each time period:
Money Market Portfolio $ 5 $ 16 $ 28 $63
Prime Obligation Portfolio $ 5 $ 16 $ 28 $63
Government Portfolio $ 5 $ 16 $ 28 $63
Government II Portfolio $ 5 $ 16 $ 28 $63
Treasury Portfolio $ 5 $ 16 $ 28 $63
Treasury II Portfolio $ 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 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 B shares of the Portfolios. A person who purchases shares through a
financial institution may be charged separate fees by that institution. Each of
the Portfolios also offers Class A shares and Class C shares, and the Government
Portfolio also offers Class G shares, which classes are subject to the same
expenses, except that Class A, Class C and Class G shares each have different
distribution and/or shareholder servicing costs. Additional information may be
found under "The Manager," "The Adviser" and "Distribution and Shareholder
Servicing."
3
<PAGE> 4
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) CLASS C
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY PRIME
MARKET OBLIGATION GOVERNMENT GOVERNMENT II TREASURY TREASURY II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- ---------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Management/Advisory Fees
(after fee waiver) (1) .15% .16% .16% .16% .14% .21%
12b-1 Fees none none none none none none
Total Other Expenses .55% .54% .54% .54% .56% .54%
Shareholder Servicing
Fees .25% .25% .25% .25% .25% .25%
- ------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waiver) (2) .70% .70% .70% .70% .70% .75%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the Money Market and Government Portfolios, 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 .40% for the Money Market
Portfolio and .30% for the Government Portfolio. For the Prime Obligation,
Government II, Treasury and Treasury II Portfolios, the manager has agreed
to waive its fee, and, if necessary, pay other operating expenses of the
Portfolios in an amount that operates to limit the total operating expenses
of the Class C shares. Absent these waivers and/or reimbursements,
management/advisory fees would be .25% for the Prime Obligation and
Government II Portfolios, and .30% for the Treasury and Treasury II
Portfolios. Management/advisory fees have been restated to reflect current
expenses.
(2) Absent the fee waiver, total operating expenses for the Class C shares of
the Portfolios would be .95% for the Money Market Portfolio, .79% for the
Prime Obligation Portfolio, .84% for the Government Portfolio, .79% for the
Government II Portfolio, .86% for the Treasury Portfolio and .84% for the
Treasury II Portfolio.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end of each time period:
Money Market Portfolio $ 7 $ 22 $ 39 $87
Prime Obligation Portfolio $ 7 $ 22 $ 39 $87
Government Portfolio $ 7 $ 22 $ 39 $87
Government II Portfolio $ 7 $ 22 $ 39 $87
Treasury Portfolio $ 7 $ 22 $ 39 $87
Treasury II Portfolio $ 8 $ 24 $ 42 $93
- ---------------------------------------------------------------------------------------------------------------------
</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 C shares of the Portfolios. A person who purchases shares through a
financial institution may be charged separate fees by that institution. Each of
the Portfolios also offers Class A shares and Class B shares and the Government
Portfolio also offers Class G shares, which classes are subject to the same
expenses, except that Class A, Class B and Class G shares each have different
distribution and/or shareholder servicing costs. Additional information may be
found under "The Manager," "The Adviser" and "Distribution and Shareholder
Servicing."
4
<PAGE> 5
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout each
period have been audited by Arthur Andersen LLP, independent public
accountants, whose report thereon, dated March 14, 1996, was unqualified. This
information should be read in conjunction with the Trust's financial statements
as of and for the fiscal year ended January 31, 1996, and notes thereto, which
are included in the Trust's Statement of Additional Information under the
heading "Financial Information." Additional performance information is set
forth in the Trust's 1996 Annual Report to shareholders, which is available
upon request and without charge by calling 1-800-342-5734. As of January 31,
1996, there were no Class B shares outstanding of the Treasury Portfolio, no
Class C shares outstanding of the Government II Portfolio and no shares
outstanding of the Federal Securities Portfolio.
For a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Net Asset Net Realized and Distributions Distributions
Value Net Unrealized from Net from Net Asset
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total
Of Period Income on Securities Income Gains of Period Return
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
CLASS A
1996 $1.00 $ 0.06 $ -- $ (0.06) $ -- $1.00 5.98%
1995 1.00 0.04 -- (0.04) -- 1.00 4.55
1994 1.00 0.03 -- (0.03) -- 1.00 2.98
1993 1.00 0.04 -- (0.04) -- 1.00 3.60
1992 1.00 0.06 -- (0.06) -- 1.00 5.76
1991 1.00 0.08 -- (0.08) -- 1.00 8.18
1990 1.00 0.09 -- (0.09) -- 1.00 9.24
1989 1.00 0.08 -- (0.08) -- 1.00 7.82
1988 1.00 0.07 -- (0.07) -- 1.00 6.90
1987 1.00 0.06 -- (0.06) -- 1.00 6.67
CLASS B
1996 1.00 0.06 -- (0.06) -- 1.00 5.67
1995 1.00 0.04 -- (0.04) -- 1.00 4.24
1994 1.00 0.03 -- (0.03) -- 1.00 2.68
1993 1.00 0.04 -- (0.04) -- 1.00 3.29
1992 1.00 0.05 -- (0.05) -- 1.00 5.45
1991 (1) 1.00 0.02 -- (0.02) -- 1.00 7.37
CLASS C
1996 (2) 1.00 0.04 -- (0.04) -- 1.00 3.79+
<CAPTION>
Ratio of
Net
Ratio of Ratio of Investment
Net Expenses Income
Ratio of Investment to Average to Average
Net Assets Expenses Income Net Assets Net Assets
End of to Average to Average (Excluding (Excluding
Period (000) Net Assets Net Assets Waivers) Waivers)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
CLASS A
1996 $ 95,891 0.20% 5.88% 0.45% 5.63%
1995 213,988 0.21 4.49 0.45 4.25
1994 203,803 0.35 2.95 0.44 2.86
1993 264,450 0.35 3.56 0.39 3.52
1992 312,151 0.35 5.84 0.39 5.80
1991 815,847 0.33 7.88 0.38 7.83
1990 589,683 0.35 8.90 0.40 8.85
1989 507,821 0.35 7.52 0.39 7.48
1988 606,117 0.35 6.76 0.42 6.69
1987 295,121 0.35 6.39 0.41 6.33
CLASS B
1996 6,616 0.50 5.53 0.75 5.28
1995 6,314 0.51 4.49 0.75 4.25
1994 2,334 0.65 2.65 0.74 2.56
1993 309 0.65 3.47 0.69 3.43
1992 2,305 0.53 5.18 0.61 5.10
1991 (1) 830 0.65 7.17 0.72 7.10
CLASS C
1996 (2) 2,460 0.70 5.17 0.96 4.91
</TABLE>
5
<PAGE> 6
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
Net Asset Net Realized and Distributions Distributions
Value Net Unrealized from Net from Net Asset
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total
Of Period Income on Securities Income Gains of Period Return
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
- --------------------------
PRIME OBLIGATION PORTFOLIO
- --------------------------
CLASS A
1996 $1.00 $ 0.06 $ -- $ (0.06) $ -- $1.00 5.96%
1995 1.00 0.04 -- (0.04) -- 1.00 4.46
1994 1.00 0.03 -- (0.03) -- 1.00 3.10
1993 1.00 0.04 -- (0.04) -- 1.00 3.72
1992 1.00 0.06 -- (0.06) -- 1.00 5.97
1991 1.00 0.08 -- (0.08) -- 1.00 8.34
1990 1.00 0.09 -- (0.09) -- 1.00 9.36
1989 1.00 0.08 -- (0.08) -- 1.00 8.58
1988 (3) 1.00 0.01 -- (0.01) -- 1.00 7.48
CLASS B
1996 1.00 0.06 -- (0.06) -- 1.00 5.65
1995 1.00 0.04 -- (0.04) -- 1.00 4.15
1994 1.00 0.03 -- (0.03) -- 1.00 2.79
1993 1.00 0.04 -- (0.04) -- 1.00 3.41
1992 (4) 1.00 0.04 -- (0.04) -- 1.00 5.58
CLASS C
1995 (5) 1.00 0.03 -- (0.03) -- 1.00 2.55+
1994 1.00 0.03 -- (0.03) -- 1.00 2.59
1993 (6) 1.00 0.03 -- (0.03) -- 1.00 3.13
- --------------------
GOVERNMENT PORTFOLIO
- --------------------
CLASS A
1996 (7) $1.00 $ 0.01 $ -- $ (0.01) $ -- $1.00 1.48%+
1994 (8) 1.00 0.01 -- (0.01) -- 1.00 3.22
1993 (9) 1.00 0.03 -- (0.03) -- 1.00 3.19
CLASS B
1996 (10) 1.00 0.02 -- (0.02) -- 1.00 2.39+
CLASS C
1996 1.00 0.05 -- (0.05) -- 1.00 5.39
1995 (11) 1.00 0.03 -- (0.03) -- 1.00 3.41+
<CAPTION>
Ratio of
Net
Ratio of Ratio of Investment
Net Expenses Income
Ratio of Investment to Average to Average
Net Assets Expenses Income Net Assets Net Assets
End of to Average to Average (Excluding (Excluding
Period (000) Net Assets Net Assets Waivers) Waivers)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
- --------------------------
PRIME OBLIGATION PORTFOLIO
- --------------------------
CLASS A
1996 $ 2,441,662 0.20% 5.82% 0.29% 5.73%
1995 2,778,326 0.20 4.41 0.30 4.31
1994 2,541,126 0.20 3.07 0.28 2.98
1993 2,564,340 0.20 3.62 0.30 3.52
1992 1,661,619 0.20 5.73 0.29 5.64
1991 825,081 0.20 8.03 0.30 7.93
1990 532,137 0.20 8.86 0.33 8.73
1989 237,273 0.20 7.68 0.34 7.54
1988 (3) 139,944 0.13 7.22 0.58 6.77
CLASS B
1996 174,779 0.50 5.38 0.58 5.30
1995 21,852 0.50 4.55 0.60 4.45
1994 6,312 0.50 2.77 0.58 2.68
1993 4,699 0.47 3.63 0.53 3.57
1992 (4) 67,016 0.50 4.98 0.59 4.89
CLASS C
1995 (5) 0 0.70 2.79 0.77 2.72
1994 20,602 0.70 2.57 0.78 2.48
1993 (6) 85,325 0.70 3.05 0.83 2.92
- --------------------
GOVERNMENT PORTFOLIO
- --------------------
CLASS A
1996 (7) $ 48,762 0.20% 5.55% 0.33% 5.42%
1994 (8) 0 0.20 3.04 0.37 2.87
1993 (9) 20,022 0.20 3.41 0.38 3.23
CLASS B
1996 (10) 14,997 0.50 5.27 0.63 5.14
CLASS C
1996 542,936 0.70 5.23 0.84 5.09
1995 (11) 310,835 0.70 4.32 0.89 4.13
</TABLE>
6
<PAGE> 7
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
Net Asset Net Realized and Distributions Distributions
Value Net Unrealized from Net from Net Asset
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total
Of Period Income on Securities Income Gains of Period Return
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
- -----------------------
GOVERNMENT II PORTFOLIO
- -----------------------
CLASS A
1996 $1.00 $ 0.06 $ -- $ (0.06) $ -- $1.00 5.83%
1995 1.00 0.04 -- (0.04) -- 1.00 4.39
1994 1.00 0.03 -- (0.03) -- 1.00 3.02
1993 1.00 0.04 -- (0.04) -- 1.00 3.57
1992 1.00 0.06 -- (0.06) -- 1.00 5.73
1991 1.00 0.08 -- (0.08) -- 1.00 8.01
1990 1.00 0.09 -- (0.09) -- 1.00 8.90
1989 1.00 0.07 -- (0.07) -- 1.00 7.53
1988 1.00 0.06 -- (0.06) -- 1.00 6.55
1987 1.00 0.06 -- (0.06) -- 1.00 6.55
CLASS B
1996 1.00 0.05 -- (0.05) -- 1.00 5.52
1995 1.00 0.04 -- (0.04) -- 1.00 4.08
1994 1.00 0.03 -- (0.03) -- 1.00 2.71
1993 1.00 0.03 -- (0.03) -- 1.00 3.26
1992 1.00 0.05 -- (0.05) -- 1.00 5.02
1991 (12) 1.00 0.00 -- (0.00) -- 1.00 0.00
- ------------------
TREASURY PORTFOLIO
- ------------------
CLASS A
1996 $1.00 $ 0.06 $ -- $ (0.06) $ -- $1.00 5.89%
1995 1.00 0.04 -- (0.04) -- 1.00 4.29
1994 1.00 0.03 -- (0.03) -- 1.00 3.00
1993 (13) 1.00 0.01 -- (0.01) -- 1.00 2.91
CLASS C
1996 (14) 1.00 0.03 -- (0.03) -- 1.00 2.68+
<CAPTION>
Ratio of
Net
Ratio of Ratio of Investment
Net Expenses Income
Ratio of Investment to Average to Average
Net Assets Expenses Income Net Assets Net Assets
End of to Average to Average (Excluding (Excluding
Period (000) Net Assets Net Assets Waivers) Waivers)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
- -----------------------
GOVERNMENT II PORTFOLIO
- -----------------------
CLASS A
1996 $ 810,365 0.20% 5.69% 0.29% 5.60%
1995 786,405 0.20 4.33 0.30 4.23
1994 738,040 0.20 2.98 0.29 2.89
1993 664,540 0.20 3.48 0.29 3.39
1992 534,303 0.20 5.56 0.28 5.48
1991 500,526 0.20 7.66 0.31 7.55
1990 257,523 0.20 8.49 0.32 8.37
1989 155,987 0.20 7.22 0.36 7.06
1988 158,361 0.20 6.35 0.34 6.21
1987 143,736 0.20 6.26 0.35 6.11
CLASS B
1996 19,678 0.50 5.41 0.59 5.32
1995 15,201 0.50 4.33 0.60 4.23
1994 21,462 0.50 2.68 0.60 2.58
1993 338 0.50 3.35 0.59 3.26
1992 1,906 0.48 4.75 0.59 4.64
1991 (12) 607 0.50 6.44 3.76 3.18
- ------------------
TREASURY PORTFOLIO
- ------------------
CLASS A
1996 $ 54,820 0.20% 5.72% 0.36% 5.56%
1995 39,129 0.20 4.17 0.34 4.03
1994 46,296 0.20 2.96 0.33 2.82
1993 (13) 44,624 0.20 2.89 0.42 2.67
CLASS C
1996 (14) 14,691 0.70 5.12 0.87 4.95
</TABLE>
7
<PAGE> 8
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
Net Asset Net Realized and Distributions Distributions
Value Net Unrealized from Net from Net Asset
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total
Of Period Income on Securities Income Gains of Period Return
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------
TREASURY II PORTFOLIO
- ----------------------
CLASS A
1996 $1.00 $ 0.05 $ -- $ (0.05) $ -- $1.00 5.58%
1995 1.00 0.04 -- (0.04) -- 1.00 4.17
1994 1.00 0.03 -- (0.03) -- 1.00 2.88
1993 1.00 0.03 -- (0.03) -- 1.00 3.46
1992 1.00 0.06 -- (0.06) -- 1.00 5.48
1991 1.00 0.07 -- (0.07) -- 1.00 7.76
1990 (15) 1.00 0.08 -- (0.08) -- 1.00 7.90
CLASS B
1996 1.00 0.05 -- (0.05) -- 1.00 5.27
1995 1.00 0.04 -- (0.04) -- 1.00 3.86
1994 1.00 0.03 -- (0.03) -- 1.00 2.57
1993 1.00 0.03 -- (0.03) -- 1.00 3.15
1992 1.00 0.05 -- (0.05) -- 1.00 5.16
1991 (16) 1.00 0.07 -- (0.07) -- 1.00 7.16
CLASS C
1996 (17) 1.00 0.04 -- (0.04) -- 1.00 3.64+
<CAPTION>
Ratio of
Net
Ratio of Ratio of Investment
Net Expenses Income
Ratio of Investment to Average to Average
Net Assets Expenses Income Net Assets Net Assets
End of to Average to Average (Excluding (Excluding
Period (000) Net Assets Net Assets Waivers) Waivers)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
- ---------------------
TREASURY II PORTFOLIO
- ---------------------
CLASS A
1996 $ 418,250 0.25% 5.44% 0.34% 5.35%
1995 397,682 0.25 4.11 0.35 4.01
1994 364,334 0.25 2.84 0.34 2.76
1993 352,435 0.25 3.40 0.34 3.31
1992 282,535 0.25 5.43 0.31 5.37
1991 490,705 0.25 7.11 0.41 6.95
1990 (15) 72,777 0.25 7.66 0.69 7.22
CLASS B
1996 26,447 0.55 5.18 0.64 5.09
1995 44,680 0.55 3.71 0.65 3.61
1994 22,448 0.55 2.54 0.64 2.46
1993 6,038 0.55 3.42 0.64 3.33
1992 102,182 0.55 4.97 0.61 4.91
1991 (16) 85,439 0.55 7.18 0.67 7.06
CLASS C
1996 (17) 3,935 0.75 4.85 0.84 4.76
+ Returns are for the period indicated and have not been annualized.
1 Money Market Class B shares were offered beginning October 12, 1990. All ratios including total return for the
period indicated have been annualized.
2 Money Market Class C shares were offered beginning May 17, 1995. All ratios except total return for the period
indicated have been annualized.
3 Prime Obligation Class A shares were offered beginning December 22, 1987. All ratios including total return for
the period indicated have been annualized.
4 Prime Obligation Class B shares were offered beginning March 26, 1991. All ratios including total return for the
period indicated have been annualized.
5 Prime Obligation Class C shares were fully liquidated October 27, 1994. All ratios except total return for the
period indicated have been annualized.
6 Prime Obligation Class C shares were offered beginning March 25, 1992. All ratios including total return for the
period indicated have been annualized.
7 Government Class A shares were offered beginning October 27, 1995. All ratios except total return for the period
indicated have been annualized.
8 Government Class A shares were fully liquidated June 2, 1993. All ratios including total return for the period
indicated have been annualized.
9 Government Class A shares were offered beginning March 8, 1992. All ratios including total return for the period
indicated have been annualized.
10 Government Class B shares were offered beginning August 22, 1995. All ratios except total return for the period
indicated have been annualized.
11 Government Class C shares were offered beginning April 7, 1994. All ratios except total return for the period
indicated have been annualized.
12 Government II Class B shares were offered beginning January 28, 1991. All ratios including total return for the
period indicated have been annualized.
13 Treasury Class A shares were offered beginning September 30, 1992. All ratios including total return for the
period indicated have been annualized.
14 Treasury Class C shares were offered beginning July 27, 1995. All ratios except total return for the period
indicated have been annualized.
15 Treasury II Class A shares were offered beginning July 28, 1989. All ratios including total return for the period
indicated have been annualized.
16 Treasury II Class B shares were offered beginning February 15, 1990. All ratios including total return for the
period indicated have been annualized.
17 Treasury II Class C shares were offered beginning May 8, 1995. All ratios except total return for the period
indicated have been annualized.
</TABLE>
8
<PAGE> 9
THE TRUST
SEI DAILY INCOME TRUST (the "Trust") is an open-end management investment
company that offers units of beneficial interest ("shares") in separate
diversified investment portfolios. This Prospectus offers shares of the Trust's
Money Market, Prime Obligation, Government, Government II, Treasury, Treasury II
and Federal Securities Portfolios (each a "Portfolio," and, together, the
"Portfolios"). Each Portfolio may have separate classes of shares which provide
for variations in distribution, shareholder servicing and transfer agency costs,
voting rights and dividends. Each of the Portfolios offers Class A, Class B and
Class C shares, except the Federal Securities Portfolio, which offers only Class
A shares. The Government Portfolio also offers Class G shares. Additional
information pertaining to the Trust may be obtained by writing SEI Financial
Services Company, 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658, or
by calling 1-800-342-5734.
INVESTMENT
OBJECTIVES AND
POLICIES
MONEY MARKET
PORTFOLIO The Money Market Portfolio seeks to preserve principal
value and maintain a high degree of liquidity while
providing current income. Under normal market conditions,
the Portfolio invests in obligations denominated in U.S.
dollars consisting of: (i) commercial paper issued by U.S.
and foreign issuers rated, at the time of investment, in
the highest short-term rating category by two or more
nationally recognized statistical rating organizations
(each, an "NRSRO"), or one NRSRO if only one NRSRO has
rated the security or, if not rated, determined by the
Adviser to be of comparable quality; (ii) obligations
(including certificates of deposit, time deposits,
bankers' acceptances and bank notes) of U.S. savings and
loan and thrift institutions, U.S. commercial banks
(including foreign branches of such banks), and U.S. and
London branches of foreign banks, provided that such
institutions (or, in the case of a branch, the parent
institution) have total assets of $1 billion or more as
shown on their last published financial statements at the
time of investment; (iii) short-term corporate obligations
issued by U.S. and foreign issuers with a remaining term
of not more than 397 days that issue commercial paper of
comparable priority and security meeting the above
ratings; (iv) short-term obligations issued by state and
local governmental issuers which are rated, at the time of
investment, by a least two NRSROs in one of the two
highest municipal bond rating categories, or, if not
rated, determined by the Adviser to be of comparable
quality, and which carry yields that are competitive with
those of other types of money market instruments of
comparable quality; (v) U.S. dollar denominated
obligations of foreign governments including Canadian and
Provincial Government and Crown Agency Obligations; (vi)
investments permitted for the Government II Portfolio (see
below); and (vii) repurchase agreements involving any of
the foregoing obligations.
9
<PAGE> 10
PRIME OBLIGATION
PORTFOLIO The Prime Obligation Portfolio seeks to preserve principal
value and maintain a high degree of liquidity while
providing current income. Under normal market conditions,
the Portfolio invests exclusively in obligations of U.S.
issuers (excluding foreign branches of U.S. banks or U.S.
branches of foreign banks) consisting of: (i) commercial
paper rated, at the time of investment, in the highest
short-term rating category by two or more NRSROs, or one
NRSRO if only one NRSRO has rated the security or, if not
rated, determined by the Adviser to be of comparable
quality; (ii) obligations (including certificates of
deposit, time deposits, bankers' acceptances and bank
notes) of U.S. commercial banks or savings and loan
institutions having total assets of $500 million or more
as shown on their last published financial statements at
the time of investment and that are insured by the Federal
Deposit Insurance Corporation; (iii) corporate obligations
with a remaining term of not more than 397 days of issuers
that issue commercial paper of comparable priority and
security meeting the above ratings or, if not rated,
determined by the Adviser to be of comparable quality;
(iv) short-term obligations issued by state and local
governmental issuers which are rated, at the time of
investment, in the highest municipal bond rating
categories by at least two NRSROs, or, if not rated,
determined by the Adviser to be of comparable quality, and
which carry yields that are competitive with those of
other types of money market instruments of comparable
quality; (v) investments permitted for the Government II
Portfolio (see below); and (vi) repurchase agreements
involving any of the foregoing obligations.
GOVERNMENT
PORTFOLIO The Government Portfolio seeks to preserve principal value
and maintain a high degree of liquidity while providing
current income. Under normal market conditions, the
Portfolio invests exclusively in (i) U.S. Treasury
obligations; (ii) obligations issued or guaranteed as to
principal and interest by the agencies or
instrumentalities of the U.S. Government; and (iii)
repurchase agreements involving such obligations.
GOVERNMENT II
PORTFOLIO The Government II Portfolio seeks to preserve principal
value and maintain a high degree of liquidity while
providing current income. Under normal market conditions,
the Portfolio invests exclusively in U.S. Treasury
obligations and obligations issued or guaranteed as to
principal and interest by the agencies or
instrumentalities of the U.S. Government.
TREASURY PORTFOLIO The Treasury Portfolio seeks to preserve principal value
and maintain a high degree of liquidity while providing
current income. Under normal market conditions, the
Portfolio invests exclusively in U.S. Treasury obligations
and repurchase agreements involving such obligations.
TREASURY II PORTFOLIO The Treasury II Portfolio seeks to preserve principal
value and maintain a high degree of liquidity while
providing current income. Under normal market conditions,
the Portfolio invests exclusively in U.S. Treasury
obligations.
10
<PAGE> 11
FEDERAL SECURITIES
PORTFOLIO The Federal Securities Portfolio seeks to preserve
principal value and maintain a high degree of liquidity
while providing current income. Under normal market
conditions, the Portfolio invests exclusively in general
obligations issued by the U.S. Treasury and repurchase
agreements involving such obligations.
There can be no assurance that the Portfolios will
achieve their respective investment objectives.
GENERAL
INVESTMENT
POLICIES
In purchasing obligations, the Portfolios comply 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 Portfolios must limit their 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, under Rule 2a-7, the Portfolios may
only invest in securities (other than U.S. Government
Securities) rated in one of the two highest categories for
short-term securities by at least two 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 (in accordance
with procedures adopted by the Trust's Board of Trustees)
to be of equivalent quality to rated securities in which
the Portfolio may invest. Purchases by the Portfolios of
unrated securities and securities rated by only one NRSRO
must be ratified by the Trust's Board of Trustees.
Securities rated in the highest rating category 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 by at least one NRSRO (or, if
unrated, determined by the Adviser to be of comparable
quality) are considered to be "second tier" securities.
Each Portfolio, except the Money Market and Prime
Obligation Portfolios, may invest, in the aggregate, no
more than 5% of its assets in second tier securities, and
an investment in any one second tier security 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.
Although the Portfolios are governed by Rule 2a-7,
their investment policies are, in certain respects, more
restrictive than those imposed by that Rule.
Each Portfolio may invest up to 10% of its net
assets in illiquid securities. However, restricted
securities, including Rule 144A securities and Section
4(2) commercial paper, that meet the criteria established
by the Board of Trustees of the Trust will be considered
liquid. In addition, each Portfolio may invest in U.S.
11
<PAGE> 12
Treasury STRIPS (as defined in the "Description of
Permitted Investments and Risk Factors").
Each 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.
INVESTMENT
LIMITATIONS
The investment objectives and certain of the investment
limitations are fundamental policies of the Portfolios. It
is a fundamental policy of each Portfolio to use its best
efforts to maintain a constant net asset value of $1.00
per share. There can be no assurance that any Portfolio
will achieve its investment objective, or that any
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 Trust or a Portfolio without the consent of the
holders of a majority of the Trust or that Portfolio's
outstanding shares.
Each 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 the total assets of the Portfolio would be
invested in the securities of such issuer; provided,
however, that any Portfolio except the Money Market
and Prime Obligation Portfolios may invest up to 25%
of its total assets without regard to this restriction
as permitted by Rule 2a-7 under 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.
3. Borrow money except for temporary or emergency
purposes and then only in an amount not exceeding 10%
of the value of the total assets of that Portfolio.
This borrowing provision is included solely to
facilitate the orderly sale of portfolio securities to
accommodate substantial redemption requests if they
should occur and is not for investment purposes. All
borrowings will be repaid before making additional
investments for that Portfolio and any interest paid
on such borrowings will reduce the income of that
Portfolio.
The foregoing percentage limitations (except the
limitation on borrowing) will apply at the time of the
purchase of a security. Additional fundamental and non-
12
<PAGE> 13
fundamental investment limitations are set forth in the
Statement of Additional Information.
THE MANAGER
SEI Financial Management Corporation (the "Manager" or 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 (i) providing the Trust with overall
management services, regulatory reporting, all necessary
office space, equipment, personnel and facilities and (ii)
acting as transfer agent, dividend disbursing agent, and
shareholder servicing agent for Class A, Class B and Class
C shares of each Portfolio, and for Class G shares of the
Government Portfolio.
For these services, the Manager is entitled to a
fee, which is calculated daily and paid monthly, at an
annual rate of each Portfolio's average daily net assets
as follows: Money Market Portfolio--.33%; Prime Obligation
Portfolio--.19%; Government Portfolio--.24%; Government II
Portfolio--.19%; Treasury Portfolio--.24%; Treasury II
Portfolio--.24%; and Federal Securities Portfolio--.55%.
The Manager has contractually agreed to waive up to all of
its fee and, if necessary, pay other operating expenses in
order to limit the total operating expenses to not more
than (i) .20% of the Class A shares of the Prime
Obligation, Government II and Treasury Portfolios; (ii)
.25% of the Class A shares of the Treasury II and
Government Portfolios; (iii) 1.00% of the Class A shares
of the Federal Securities and Money Market Portfolios;
(iv) .50% of the Class B shares of the Prime Obligation,
Government II and Treasury Portfolios; (v) .55% of the
Class B shares of the Treasury II and Government
Portfolios; (vi) 1.30% of the Class B shares of the Money
Market Portfolio; (vii) .70% of the Class C shares of the
Prime Obligation, Government II and Treasury Portfolios;
(viii) .75% of the Class C shares of the Treasury II and
Government Portfolios; and (ix) 1.50% of the Class C
shares of the Money Market Portfolio, each on an
annualized basis. The Manager has voluntarily agreed to
waive up to all of its fee in order to limit total
operating expenses to not more than (i) .20% of the
average daily net assets of Class A shares, (ii) .50% of
the average daily net assets of Class B shares and (iii)
.70% of the daily net assets of Class C shares of the
Money Market and Government Portfolios, each on an
annualized basis. The Manager reserves the right, in its
sole discretion, to terminate these voluntary waivers at
any time. For the fiscal year ended January 31, 1996, the
Money Market, Prime Obligation, Government, Government II,
Treasury and Treasury II Portfolios paid management fees,
after waivers, of .10%, .12%, .12%, .12%, .10% and .17%,
respectively, of their average daily net assets.
13
<PAGE> 14
THE ADVISER
Wellington Management Company (the "Adviser" or "WMC")
serves as the investment adviser for each Portfolio under
advisory agreements with the Trust. The Adviser is a
professional investment counseling firm which provides
investment services to investment companies, employee
benefit plans, endowments, foundations, and other
institutions and individuals. Under the advisory
agreements, the Adviser invests the assets of the
Portfolios and continuously reviews, supervises and
administers each 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 March 31, 1996, the Adviser had
discretionary management authority with respect to
approximately $114.1 billion of assets, including the
assets of the Trust and SEI Liquid Asset Trust, each an
open-end management investment company administered by the
Manager. The principal address of the Adviser is 75 State
Street, Boston, Massachusetts 02109. WMC is a
Massachusetts general partnership, of which the following
persons are managing partners: Robert W. Doran, Duncan M.
McFarland and John R. Ryan.
The Adviser is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of
.075% of the combined average daily net assets of the
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, 1996, the Money Market,
Prime Obligation, Government, Government II, Treasury and
Treasury II Portfolios paid the Adviser advisory fees,
after fee waivers, of .01%, .01%, .01%, .01%, .01% and
.01%, respectively, of their relative net assets.
DISTRIBUTION AND
SHAREHOLDER
SERVICES
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as each Portfolio's
distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust.
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
14
<PAGE> 15
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 Portfolios may enter into such arrangements
directly.
Under the Class A plan, a Portfolio will pay the
Distributor 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 and administrative services. Under the Class B
and Class C shareholder service plans, a Portfolio will
pay shareholder service fees at an annual rate of up to
.25% of its 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
investments; and assisting clients in changing dividend
options, account designations and addresses. In addition,
the Class B and Class C shares may pay 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
providing sub-accounting; providing information on share
positions to clients; forwarding shareholder
communications to clients; processing purchase, exchange
and redemption orders; and processing dividend payments.
Pursuant to state law, the Distributor has voluntarily
agreed to limit the shareholder servicing expenses of the
Class A shares of each Portfolio to .25%.
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 its
own resources. Under any such program, the Distributor
will provide promotional incentives, in the form of cash
or other compensation, including merchandise, airline
vouchers, trips and vacation packages, to all dealers
selling shares of the Portfolios. Such promotional
incentives will be offered uniformly to all dealers and
predicated upon the amount of shares of the Portfolios
sold by the dealer.
PURCHASE AND
REDEMPTION OF
SHARES
Financial institutions may acquire shares of the
Portfolios 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
15
<PAGE> 16
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 on 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 each Portfolio are offered only to residents of
states in which the shares are eligible for purchase.
Shares of each Portfolio may be purchased or
redeemed on days on which the New York Stock Exchange is
open for business ("Business Days"). However, money market
fund shares cannot be purchased by Federal Reserve wire on
Federal holidays 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 a 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. 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 2:00 p.m.
Eastern time on each Business Day, except that the net
asset value per share of the Money Market, Prime
Obligation, Government and Treasury Portfolios is
determined as of 4:30 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 a
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. Payment on redemptions will be made as promptly as
possible and, in any event, within seven days after the
redemption order is received.
16
<PAGE> 17
Shareholders who desire to purchase or redeem
shares of the Money Market, Prime Obligation, Government
or Treasury Portfolios after 2:00 p.m. Eastern time must
contact the Transfer Agent one week in advance to
establish the requisite operational requirements for late
day trading. Even after these procedures are in place,
investors are encouraged to execute as many trades as
possible prior to 2:00 p.m. Eastern time.
Shareholders who wish to receive same-day
acceptance of investment in the Money Market, Prime
Obligation, Government and Treasury Portfolios after 2:00
p.m. Eastern time must contact the Transfer Agent before
4:30 p.m. Eastern time to place the trade and must obtain
a security code number for each trade. It is necessary to
obtain a new security code number for each purchase placed
in the Portfolios after 2:00 p.m. Eastern time. Security
code numbers are assigned exclusively by means of
telephone communications and are effective for one
transaction only and may not be used more than once.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Trust's Transfer
Agent will be responsible for any loss, liability, cost or
expense for acting upon wire instructions or upon
telephone instructions that it reasonably believes to be
genuine. The Trust and the Trust's Transfer Agent will
each employ reasonable procedures to confirm that
instructions communicated by telephone are genuine,
including requiring a form of personal identification
prior to acting upon instructions received by telephone
and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by
other means.
PERFORMANCE
For any Portfolio, the performance on Class A shares will
normally be higher than that on Class B shares because of
the additional shareholder servicing expenses charged
Class B shares. Likewise, the performance on Class B
shares will normally be higher than that on Class C or
Class G shares because of the additional shareholder
servicing expenses charged to Class C shares and the
additional distribution and shareholder servicing expenses
charged to Class G shares.
From time to time, each 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 a 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
17
<PAGE> 18
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 a 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.
Each Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical) or
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) to other investment
alternatives. Each 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
Portfolios or their 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 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 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, as amended (the
"Code"), 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.
Tax Status
of Distributions Each 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 Portfolios
provide annual reports to shareholders of the federal
income tax status of all distributions.
18
<PAGE> 19
Dividends declared by a Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in such a month, will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of the year declared if
paid by the Portfolio at any time during the following
January.
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. Each Portfolio will inform shareholders annually
of the percentage of income and distributions derived from
direct U.S. Government obligations. Shareholders should
consult their tax advisers to determine whether any
portion of the income dividends received from a Portfolio
is considered tax exempt in their particular states.
With respect to investments in U.S. Treasury
STRIPS, which are sold at original issue discount and thus
do not make periodic cash interest payments, each
Portfolio will be required to include as part of its
current income the 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 Portfolio intends to make sufficient
distributions to avoid liability for the federal excise
tax applicable to RICs.
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 Portfolios, the Trust
consists of the following portfolios: Short-Duration
Government Portfolio (formerly, Short-Term Government
Portfolio), Intermediate-Duration Government Portfolio
(formerly, Intermediate-Term Government Portfolio), GNMA
Portfolio, Short-Duration Mortgage Portfolio (formerly,
Short-Term Mortgage Portfolio), Corporate Daily Income
Portfolio and Government Securities Daily Income
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.
19
<PAGE> 20
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 an unaudited report 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, Pennsylvania 19087-1658.
Dividends Substantially all of the net investment income (exclusive
of capital gains) of each 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 Portfolios 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 shareholder servicing
expenses charged to Class B shares. Likewise, the
dividends on Class B shares are normally higher than those
on Class C or Class G shares of each Portfolio because of
the additional shareholder servicing expenses charged to
Class C shares and the additional distribution and
shareholder servicing expenses charged to Class G 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.
20
<PAGE> 21
Custodians
and Wire Agent The Bank of New York, 48 Wall Street, New York, New York
10286, (a "Custodian"), serves as custodian and wire agent
of the assets of the Money Market and Treasury Portfolios.
First Interstate Bank of Oregon, 1300 S.W. Fifth Street,
Portland, Oregon 97208 (a "Custodian"), serves as
custodian and wire agent of the assets of the Federal
Securities Portfolio. CoreStates Bank, N.A., Broad and
Chestnut Streets, P.O. Box 7618, Philadelphia,
Pennsylvania 19101 (a "Custodian," and together, the
"Custodians"), serves as custodian and wire agent of the
assets of the Prime Obligation, Government. Government II
and Treasury II Portfolios. The Custodians hold 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
investment practices for the Portfolios and the associated
risk factors:
Bankers' Acceptances Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers'
acceptances are used by corporations to finance the
shipment and storage of goods. Maturities are generally
six months or less.
Certificates of Deposit
Certificates of deposit are interest-bearing instruments
with a specific maturity. They are issued by banks and
savings and loan institutions in exchange for the deposit
of funds, and normally can be traded in the secondary
market, prior to maturity. Certificates of deposit 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 a few to 270 days.
Demand Instruments Certain instruments may entail a demand feature which
permits the holder to demand payment of the principal
amount of the instrument. Demand instruments may include
variable rate master demand notes.
Foreign Securities The Money Market Portfolio may invest in U.S. dollar
denominated obligations of issuers domiciled outside of
the United States ("Yankees"), securities issued by
foreign branches of U.S. commercial banks and of U.S. and
London branches of foreign banks, and obligations and
securities of foreign governments, including Canadian and
Provincial Government and Crown Agency Obligations. The
Adviser will attempt to minimize the risks associated with
investing in foreign obligations by
21
<PAGE> 22
investing only in those instruments which satisfy the
quality and maturity restrictions applicable to the
Portfolio.
Illiquid Securities Illiquid securities are securities which cannot be
disposed of within seven business days at approximately
the price at which they are being carried on a Portfolio's
books. Illiquid securities include demand instruments with
a demand notice periods exceeding seven days, securities
for which there is no secondary market, and repurchase
agreements with maturities of more than seven days in
length.
Municipal Securities Municipal Securities consist of: (i) debt obligations
issued by or on behalf of public authorities to obtain
funds to be used for various public facilities, for
refunding outstanding obligations, for general operating
expenses, and for lending such funds to other public
institutions and facilities, and (ii) certain private
activity and industrial development bonds issued by or on
behalf of public authorities to obtain funds to provide
for the construction, equipment, repair or improvement of
privately operated facilities.
Municipal Securities include both municipal notes
and municipal bonds. Municipal notes include general
obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates
of indebtedness, demand notes and construction loan notes
and participation interests in municipal notes. Municipal
bonds include general obligation bonds, revenue or special
obligation bonds, private activity and industrial
development bonds and participation interests in municipal
bonds.
General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are
backed by the revenues of a project or facility (tolls
from a bridge, for example). Certificates of participation
represent an interest in an underlying obligation or
commitment, such as an obligation issued in connection
with a leasing arrangement. The payment of principal and
interest on private activity and industrial development
bonds generally is dependent solely on the ability of a
facility's user to meet its financial obligations and the
pledge, if any, of real and personal property as security
for such payment.
Taxable Municipal Securities: Taxable Municipal
Securities are Municipal Securities the interest on which
is not exempt from federal income tax. Taxable Municipal
Securities include "private activity bonds" that are
issued by or on behalf of states or political subdivisions
thereof to finance privately-owned or operated facilities
for business and manufacturing, housing, sports, and
pollution control and to finance activities of and
facilities for charitable institutions. Private activity
bonds are also used to finance public facilities such as
airports, mass transit systems, ports, parking lots, and
low income housing. The payment of the principal and
interest on private activity bonds is not backed by a
pledge of tax revenues, and is dependent solely on the
ability of the facility's user to meet its financial
obligations,
22
<PAGE> 23
and may be secured by a pledge of real and personal
property so financed. Interest on these bonds may not be
exempt from federal income tax.
Repurchase Agreements Repurchase agreements are agreements by which a Portfolio
obtains a security and simultaneously commits to return
the security to the seller at an agreed upon price on an
agreed upon date. A Portfolio will have actual or
constructive possession of 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 right 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.
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 are considered to be
illiquid securities.
U.S. Government Agency
Securities 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
Corporation, 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 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., Federal National
Mortgage Association securities). Guarantees of principal
by agencies or instrumentalities of the U.S. Government
may be a guarantee of payment at the maturity of the
obligation so that in the event of a default prior to
maturity there might not be a market and thus no means of
realizing 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, as well as separately
traded interest and principal component parts of such
obligations known as Separately Traded Registered Interest
and Principal Securities ("STRIPS") that are transferable
through the federal book-entry system.
U.S. Treasury 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
23
<PAGE> 24
of the security, and such accretion will constitute
the income earned on the security for both accounting
and tax purposes. Because of these features, such
securities may be subject to greater interest rate
volatility than interest-paying investments. See
also "Taxes."
Variable and Floating
Rate Instruments Certain obligations may carry variable or floating rates
of interest, and may involve a conditional or
unconditional demand feature. 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 some other reset period, 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 exceeding seven
days may be considered illiquid if there is no secondary
market for such security.
When-Issued and Delayed
Delivery Securities When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. A Portfolio will maintain with the
Custodian a separate account with liquid, high grade debt
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these
securities is fixed as of the purchase date, and no
interest accrues to a Portfolio before settlement. These
securities are subject to market fluctuation due to
changes in market interest rates, and it is possible that
the market value at the time of settlement could be higher
or lower than the purchase price if the general level of
interest rates has changed. Although a Portfolio generally
purchases securities on a when-issued or forward
commitment basis with the intention of actually acquiring
securities, the Portfolio may dispose of a when-issued
security or forward commitment prior to settlement if the
Adviser deems it appropriate to do so.
24
<PAGE> 25
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Annual Operating Expenses......................... 2
Financial Highlights.............................. 5
The Trust......................................... 9
Investment Objectives and Policies................ 9
General Investment Policies....................... 11
Investment Limitations............................ 12
The Manager....................................... 13
The Adviser....................................... 14
Distribution and Shareholder Servicing............ 14
Purchase and Redemption of Shares................. 15
Performance....................................... 17
Taxes............................................. 18
General Information............................... 19
Description of Permitted Investments and Risk
Factors......................................... 21
</TABLE>
25
<PAGE> 26
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 27
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 28
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 29
PROSPECTUS
MAY 31, 1996
- --------------------------------------------------------------------------------
SHORT-DURATION GOVERNMENT PORTFOLIO
INTERMEDIATE-DURATION GOVERNMENT PORTFOLIO
GNMA 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 a Portfolio's investment goals match your own.
A Statement of Additional Information dated May 31, 1996, has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, Pennsylvania 19087-0451, or by calling 1-800-437-6016.
The Statement of Additional Information is incorporated into this Prospectus by
reference.
SEI Daily Income Trust (the "Trust") is an open-end management investment
company that offers shareholders a convenient means of investing their funds in
one or more professionally managed diversified portfolios of securities. Class D
shares differ from other classes of the Trust primarily in the imposition of
sales charges and the allocation of certain distribution expenses and transfer
agency fees. Class D shares are available through SEI Financial Services Company
(the Trust's distributor) and through participating broker-dealers, financial
institutions and other organizations. This Prospectus relates to Class D shares
of the three fixed income portfolios (each a "Portfolio" and, together, the
"Portfolios") listed above.
- --------------------------------------------------------------------------------
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.
<PAGE> 30
HOW TO READ THIS PROSPECTUS
This Prospectus gives you information that you should know about the Portfolios
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.
PORTFOLIO HIGHLIGHTS
The following summary provides basic information about the Class D shares of the
Trust's Short-Duration Government Portfolio (formerly, Short-Term Government
Portfolio), Intermediate-Duration Government Portfolio (formerly,
Intermediate-Term Government Portfolio) and GNMA 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
OBJECTIVES AND
POLICIES The Short-Duration Government, Intermediate-Duration
Government and GNMA Portfolios seek to preserve principal
value and maintain a high degree of liquidity while
providing current income. Each of the Portfolios may
invest in U.S. Treasury
obligations, U.S. Government
agency obligations and
repurchase agreements
involving any of these
obligations. See "Investment
Objectives and Policies" and
"Description of Permitted
Investments and Risk
Factors."
UNDERSTANDING RISK Shares of each Portfolio,
like shares of any mutual
fund, will fluctuate in
value, and when you sell your
shares, they may be worth
more or less than what you
paid for them. The value of
fixed income funds and the
fixed income securities in
which they invest tend to
vary inversely with interest
rates and may be affected by
other market and economic
factors. In addition, there
can be no assurance that any
Portfolio will achieve its
investment objective. See
"Investment Objectives and
Policies" and "Description of
Permitted Investments and
Risk Factors."
TABLE OF
CONTENTS
Portfolio Highlights...2
Portfolio Expenses.....4
Financial Highlights...5
Your Account and Doing
Business with Us.....6
Investment Objectives
and
Policies.............9
General Investment
Policies..............11
Investment
Limitations...........11
The Manager...........12
The Adviser...........13
Distribution..........14
Performance...........15
Taxes.................16
Additional Information
About
Doing Business With
Us....................17
General Information...22
Description of Permitted
Investments and Risk
Factors.............24
<PAGE> 31
MANAGEMENT PROFILE Wellington Management Company (the "Adviser") serves as
the investment adviser to the Portfolios. The Adviser is a
professional investment counseling firm which has been
providing investment advisory services to mutual funds
since 1933. SEI Financial Management Corporation serves as
the manager and shareholder servicing agent of the Trust
(the "Manager"). DST Systems, Inc. ("DST") serves as
transfer agent (the "Transfer Agent") and dividend
disbursing agent for the Class D shares of the Trust. SEI
Financial Services Company serves as distributor (the
"Distributor") of the Trust's shares. See "The Manager,"
"The Adviser" and "Distribution."
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. Class D
shares of a Portfolio are offered at net asset value per
share plus a maximum sales charge at the time of purchase
of 3.50% for the Short-Duration Government and
Intermediate-Duration Government Portfolios and 4.50% for
the GNMA Portfolio. Shareholders who purchase larger
amounts may qualify for a reduced sales charge.
Redemptions of a Portfolio's shares are made at net asset
value per share. See "Purchase of Shares" and "Redemption
of Shares."
DIVIDENDS Substantially all of the net
investment income
(exclusive of capital gains)
of each Portfolio is
distributed in the form of
dividends that will be
declared daily and paid
monthly on the first Business
Day of each month. Any
realized net capital gain is
distributed at least
annually. Distributions are
paid in additional shares
unless you elect to take the
payment in cash. See
"Dividends."
INFORMATION/
SERVICE CONTACTS For more information about Class D shares of the
Portfolios, 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> 32
PORTFOLIO EXPENSES
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the Class D shares of a Portfolio.
SHAREHOLDER TRANSACTION EXPENSES (as a percentage of offering price)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE-
SHORT-DURATION DURATION
GOVERNMENT GOVERNMENT GNMA
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------- ---------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases 3.50% 3.50% 4.50%
Maximum Sales Charge Imposed on Reinvested Dividends none none none
Redemption Fees (1) none none none
</TABLE>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Management/Advisory Fees (after fee waiver) (2) .41% .43% .42%
12b-1 Fees (after fee waiver) (3) .25% .25% .25%
Other Expenses .19% .19% .20%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (4) (5) .85% .87% .87%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A charge, currently $10.00, is imposed on wires of redemption proceeds of a
Portfolio's Class D shares.
(2) The Manager has waived, on a voluntary basis, a portion of its fee (except
with respect to the GNMA Portfolio), 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, the
management/advisory fees would be .45% for the Short-Duration Government and
Intermediate-Duration Government Portfolios. Management/advisory fees have
been restated to reflect current expenses.
(3) The Distributor has waived, on a voluntary basis, all or a portion of its
12b-1 fee and the 12b-1 fees shown reflect this waiver. The Distributor
reserves the right to terminate its waiver at any time in its sole
discretion. The maximum 12b-1 fees payable by the Class D shares for each
Portfolio are .30%.
(4) Absent these fee waivers, total operating expenses for Class D shares would
be .94% for the Short-Duration Government and Intermediate-Duration
Government Portfolios and .92% for the GNMA Portfolio.
(5) Total operating expenses for the Intermediate-Duration Government and GNMA
Portfolios have been restated to reflect reductions in fee waivers.
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) imposition of the maximum sales charge, (2) a 5% annual return and
(3) redemption at the end of each time period:
Short-Duration Government Portfolio $43 $61 $80 $136
Intermediate-Duration Government Portfolio $44 $62 $82 $139
GNMA Portfolio $53 $72 $91 $147
- ---------------------------------------------------------------------------------------------------------------------
</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 Class D shares of each Portfolio. A person who purchases
shares through a financial institution may be charged separate fees by that
institution. The Intermediate-Duration Government Portfolio also offers Class A
shares, the GNMA Portfolio also offers Class A and Class B shares; and the
Short-Duration Government Portfolio also offers Class A, Class B and Class C
shares, which are subject to the same expenses, except that there are no sales
charges, and they have different distribution, shareholder servicing and
transfer agency costs. Additional information may be found under "The Manager,"
"The Adviser" and "Distribution."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "Purchase of Shares." Long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charges otherwise permitted by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD").
4
<PAGE> 33
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout each
period have been audited by Arthur Andersen LLP, independent public accountants,
whose report thereon, dated March 14, 1996, was unqualified. This information
should be read in conjunction with the Trust's financial statements as of and
for the fiscal year ended January 31, 1996, and notes thereto, which are
included in the Trust's Statement of Additional Information under the heading
"Financial Information." Additional performance information is set forth in the
Trust's 1996 Annual Report to shareholders, which is available upon request and
without charge by calling 1-800-437-6016.
For a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Net Asset Net Realized and Distributions Distributions
Value Net Unrealized from Net from Net Asset
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total
Of Period Income on Securities Income Gains of Period Return
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------
SHORT-DURATION GOVERNMENT PORTFOLIO
- -----------------------------------------
CLASS D*
1996 (1) $ 9.83 $ 0.54 $ 0.26 $ (0.54) $ -- $ 10.09 8.31%+
- -------------------------------------------------
INTERMEDIATE-DURATION GOVERNMENT PORTFOLIO
- -------------------------------------------------
CLASS D*
1996 $ 9.32 $ 0.56 $ 0.73 $ (0.56) $ -- $ 10.05 14.15%
1995 10.13 0.47 (0.74) (0.47) (0.07) 9.32 (2.61)
1994 (2) 10.44 0.17 (0.10) (0.17) (0.21) 10.13 1.52
- -----------------
GNMA PORTFOLIO
- -----------------
CLASS D*
1996 $ 9.16 $ 0.63 $ 0.67 $ (0.63) $ -- $ 9.83 14.61%
1995 10.09 0.61 (0.93) (0.61) -- 9.16 (3.04)
1994 (3) 10.22 0.19 (0.04) (0.19) (0.09) 10.09 4.24
<CAPTION>
Ratio of
Net
Ratio of Ratio of Investment
Net Expenses Income
Ratio of Investment to Average to Average
Net Assets Expenses Income Net Assets Net Assets Portfolio
End of to Average to Average (Excluding (Excluding Turnover
Period (000) Net Assets Net Assets Waivers) Waivers) Rate
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------
SHORT-DURATION GOVERNMENT PORTFOLIO
- -----------------------------------
CLASS D*
1996 (1) $ 11 0.85% 5.86% 0.93% 5.78% 184%
- ------------------------------------------
INTERMEDIATE-DURATION GOVERNMENT PORTFOLIO
- ------------------------------------------
CLASS D*
1996 $ 60 0.85% 5.73% 0.93% 5.65% 115%
1995 99 0.84 4.80 0.92 4.72 61
1994 (2) 107 0.75 4.94 0.83 4.86 56
- --------------
GNMA PORTFOLIO
- --------------
CLASS D*
1996 $158 0.89% 6.62% 0.91% 6.60% 20%
1995 169 0.86 6.54 0.89 6.51 85
1994 (3) 133 0.75 6.06 0.80 6.01 70
+ Returns are for the period indicated and have not been annualized.
* Total return does not reflect the sales charge on the Class D (formerly Pro Vantage) shares.
(1) Short-Duration Government Class D shares were offered beginning February 28, 1995. All ratios, except total return, for the
period indicated have been annualized.
(2) Intermediate-Duration Government Class D shares were offered beginning September 26, 1993. All ratios, including total
return, for the period indicated have been annualized.
(3) GNMA Class D shares were offered beginning September 30, 1993. All ratios, including total return, for the period indicated
have been annualized.
</TABLE>
5
<PAGE> 34
YOUR ACCOUNT AND DOING BUSINESS
WITH US
Class D shares of the Portfolios 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 that have established a dealer agreement or other arrangement with
the Trust's Distributor, SEI Financial Services Company ("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 Portfolios may be purchased through
Intermediaries that provide various levels of shareholder
services to their customers. Contact your Intermediary for
information about the services available to you and for
specific instructions on how to buy, sell and exchange
shares. To allow for
processing and
transmittal of orders to the
Transfer Agent on the same
day, Intermediaries may
impose earlier cut-off times
for receipt of purchase
orders. Certain
Intermediaries may charge
customer account fees.
Information concerning
shareholder services and any
charges will be provided to
the customer by the
Intermediary. Certain of
these Intermediaries may be
required to register as
broker/dealers under state law.
The shares you purchase through an Intermediary may
be held "of record" by that Intermediary. If you want to
transfer the registration of shares beneficially owned by
you, but held "of record" by an Intermediary, you should
call the Intermediary to request this change.
HOW TO BUY SHARES
FROM THE TRANSFER
AGENT Account Application forms can be obtained by calling
1-800-437-6016. Class D shares of the Portfolio are
offered only to residents of states in which the shares
are eligible for purchase.
Opening an Account
By Check You may buy Class D shares by mailing to the Transfer
Agent a completed application and a check (or other
negotiable bank instrument or money order) payable to
"Class D (Portfolio Name)." If you send a check that does
not clear, the purchase will be canceled, and you could be
liable for any losses or fees incurred.
By Fed Wire To buy shares by Fed Wire call toll-free at
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
WHAT IS AN
(>) INTERMEDIARY?
Any entity, such as a
bank, broker-dealer,
other financial
institution, association
or organization that has
entered into an
agreement with the
Distributor to sell
Class D shares of the
Portfolios to their
customers.
6
<PAGE> 35
$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.
OTHER INFORMATION
ABOUT BUYING SHARES
Sales Charges Your purchase is subject to a sales charge which varies
depending on the size of your purchase and the Portfolio
shares that you are purchasing. The following table shows
the regular sales charges on Class D shares of each
Portfolio to a "single purchaser," together with the
reallowance paid to dealers and the agency commission paid
to brokers (collectively the "commission"):
SHORT-DURATION GOVERNMENT PORTFOLIO
INTERMEDIATE-DURATION GOVERNMENT PORTFOLIO
----------------------------------------------------------
<TABLE>
<CAPTION>
REALLOWANCE AND
SALES CHARGE BROKER COMMISSION
SALES CHARGE AS AS APPROPRIATE AS A PERCENTAGE
A PERCENTAGE OF PERCENTAGE OF OF
AMOUNT OF PURCHASE OFFERING PRICE NET AMOUNT INVESTED OFFERING PRICE
<S> <C> <C> <C>
---------------------------------------------------------------------------------------
< $50,000 3.50% 3.63% 3.00%
$50,000 < $100,000 3.00% 3.09% 2.50%
$100,000 < $250,000 2.50% 2.56% 2.00%
$250,000 < $500,000 2.00% 2.04% 1.50%
$500,000 < $1,000,000 1.50% 1.52% 1.25%
$1,000,000 < $2,000,000 1.00% 1.01% 1.00%
$2,000,000 < $4,000,000 .50% .50% .50%
Over $4,000,000 none none none
---------------------------------------------------------------------------------------
GNMA PORTFOLIO
---------------------------------------------------------------------------------------
< $50,000 4.50% 4.71% 4.00%
$50,000 < $100,000 4.00% 4.17% 3.50%
$100,000 < $250,000 3.50% 3.63% 3.00%
$250,000 < $500,000 2.50% 2.56% 2.00%
$500,000 < $1,000,000 2.00% 2.04% 1.75%
$1,000,000 < $2,000,000 1.00% 1.01% 1.00%
$2,000,000 < $4,000,000 .50% .50% .50%
Over $4,000,000 none none none
---------------------------------------------------------------------------------------
</TABLE>
The commissions shown in the table above apply to
sales through Intermediaries. Under certain circumstances,
commissions up to the amount of the entire sales charge
may be re-allowed to certain Intermediaries, who might
then be deemed to be "underwriters" under the Securities
Act of 1933, as amended. Commission rates may vary among
the Portfolios.
Rights of Rights of Accumulation allow you, under certain
Accumulation circumstances, to combine your current purchase with the
current market value of previously purchased shares of
that Portfolio and Class D shares of other portfolios in
order to obtain a reduced sales charge.
Letter of Intent A Letter of Intent allows you, under certain
circumstances, to aggregate anticipated purchases over a
13-month period to obtain a reduced sales charge.
7
<PAGE> 36
Sales Charge Waiver Certain shareholders may qualify for a sales charge
waiver. To determine whether or not you qualify for a
sales charge waiver see "Additional Information About
Doing Business With Us." Shareholders who qualify for a
sales charge waiver must notify the Transfer Agent before
purchasing shares.
EXCHANGING SHARES
When Can You
Exchange Shares? Once payment for your shares has been received and
accepted (i.e., an account has been established), you may
exchange some or all of your shares for Class D shares
of SEI Tax Exempt Trust, SEI
Liquid Asset
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? 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"
portfolio and you receive a sales charge waiver, you will
be deemed to have paid the sales charge for purposes of
this exchange privilege. In calculating any sales charge
payable on your exchange, the Trust will assume that the
first shares you exchange are those on which you have
already paid a sales charge. Sales charge waivers may also
be available under certain circumstances described in the
SEI Funds' prospectuses.
The Trust reserves the right to change the terms
and conditions of the exchange privilege discussed herein,
or to terminate the exchange privilege, upon sixty days'
notice. The Trust also reserves the right to deny an
exchange request made within 60 days of the purchase of a
non-money market portfolio.
Requesting an Exchange
of Shares To request an exchange, you must provide proper
instructions in writing to the Transfer Agent. Telephone
exchanges will also be accepted if you previously elected
this option on your Account Application.
In the case of shares held "of record" by an
Intermediary but beneficially owned by you, you should
contact the Intermediary who will contact the Transfer
Agent and effect the exchange on your behalf.
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.
8
<PAGE> 37
HOW TO SELL SHARES
THROUGH THE
TRANSFER AGENT
By Mail To sell your shares, a written request for redemption in
good order must be received by the Transfer Agent. Valid
written redemption requests will be effective on receipt.
All shareholders of record must sign the redemption
request. The Transfer Agent may require that the
signatures on written requests be guaranteed.
For information about the proper form of redemption
requests, call 1-800-437-6016. You may also have the
proceeds mailed to an address of record or mailed (or sent
by ACH) to a commercial bank account previously designated
on the Account Application or specified by written
instruction to the Transfer Agent. There is no charge for
having redemption requests mailed to a designated bank
account.
By Telephone You may sell your shares by
telephone if you previously
elected that option on the
Account Application. You may
have the proceeds mailed to
the address of record, wired
or sent by ACH to a
commercial bank account
previously designated on the
Account Application. Under
most circumstances, payments
will be transmitted on the
next Business Day following
receipt of a valid telephone
request for redemption. Wire
redemption requests may be
made by calling
1-800-437-6016, who will
subtract a wire
redemption charge (presently $10.00) from the amount of
the redemption.
Systematic
Withdrawal Plan
("SWP") You may establish a SWP 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.
INVESTMENT
OBJECTIVES AND
POLICIES
SHORT-DURATION
GOVERNMENT
PORTFOLIO The investment objective of the Short-Duration Government
Portfolio is to preserve principal value and maintain a
high degree of liquidity while providing current income.
Under normal market conditions, the Short-Duration
Government Portfolio invests exclusively in: (i) U.S.
Treasury obligations; (ii) obligations issued or
guaranteed as to principal and interest by the agencies
and instrumentalities of the U.S. Government, including
Government National Mortgage Association ("GNMA")
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.
9
<PAGE> 38
and other mortgage-backed securities; and (iii)
repurchase agreements involving such obligations. The
Portfolio will have a duration of up to three years.
INTERMEDIATE-
DURATION
GOVERNMENT
PORTFOLIO The investment objective of the Intermediate-Duration
Government Portfolio is to preserve principal value and
maintain a high degree of liquidity while providing
current income.
Under normal market conditions, the
Intermediate-Duration Government Portfolio invests in: (i)
U.S. Treasury obligations; (ii) obligations issued or
guaranteed as to principal and interest by the agencies
and instrumentalities of the U.S. Government, including
GNMA and other mortgage-backed securities; and (iii)
repurchase agreements involving such obligations. The
Portfolio may also invest in futures contracts (including
futures on U.S. Treasury obligations and Eurodollar
instruments) and related options, swaps, caps and floors,
as described in this Prospectus and the Statement of
Additional Information, as a hedging strategy. The
Portfolio will have a duration of two and one-half to five
years.
GNMA
PORTFOLIO The investment objective of the GNMA Portfolio is to
preserve principal value and maintain a high degree of
liquidity while providing current income.
Under normal market
conditions, the
GNMA Portfolio invests in: (i)
U.S. Treasury obligations; (ii)
obligations issued or
guaranteed as to principal and
interest by the agencies and
instrumentalities of the U.S.
Government, including GNMA and
other mortgage-backed
securities; and (iii)
repurchase agreements involving
such obligations. In addition,
the GNMA Portfolio may invest
in futures contracts (including
futures on U.S. Treasury
obligations) and related
options, swaps, caps and
floors, as described in this
Prospectus and the Statement of
Additional Information, as a
hedging strategy, and enter
into dollar roll transactions
with selected banks and
broker-dealers. The Portfolio
has no restrictions on its duration. At least 65% of the
total assets of the Portfolio will, under normal
circumstances, be invested in instruments issued by GNMA.
There can be no assurance that the Portfolios will
achieve their respective investment objectives.
WHAT ARE
(>) INVESTMENT
OBJECTIVES AND
POLICIES?
A Portfolio's investment
objective is a statement
of what it seeks to
achieve. It is important
to make sure that the
investment objective
matches your own
financial needs and
circumstances. The
investment policies
section spells out the
types of securities in
which each Portfolio
invests.
10
<PAGE> 39
GENERAL
INVESTMENT
POLICIES
Each Portfolio may invest up to 10% of its net assets in
illiquid securities. However, restricted securities,
including Rule 144A securities and Section 4(2) commercial
paper, that meet the criteria established by the Board of
Trustees of the Trust will be considered liquid. In
addition, each Portfolio may invest in U.S. Treasury
STRIPS (as defined in the "Description of Permitted
Investments and Risk Factors").
Each Portfolio may purchase securities on a
when-issued basis.
For temporary defensive purposes during periods
when the Adviser believes that market conditions warrant,
each Portfolio may invest up to 100% of its assets in
investments such as money market instruments (consisting
of securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, repurchase agreements,
certificates of deposit and bankers' acceptances issued by
banks or savings and loan associations having net assets
of at least $500 million as of the end of their most
recent fiscal year), other long- and short-term debt
instruments which are rated A or higher by Standard &
Poor's Corporation ("S&P") or Moody's Investors Service,
Inc. ("Moody's"), and also may hold a portion of its
assets in cash or cash equivalents.
The Portfolio turnover rates for the Short-Duration
Government, Intermediate-Duration Government and GNMA
Portfolios for the fiscal year ended January 31, 1996 were
184%, 115% and 20%, respectively. A high turnover rate
will result in higher transaction costs and may result in
additional taxes for shareholders. See "Taxes."
For additional information regarding the permitted
investments of the Portfolios, see the "Description of
Permitted Investments and Risk Factors" in this Prospectus
and the Statement of Additional Information.
INVESTMENT
LIMITATIONS
The investment objectives and certain of the 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.
Each 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. This
limitation applies to 75% of each Portfolio's total
assets.
11
<PAGE> 40
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 U.S. Government or its agencies and
instrumentalities.
3. Borrow money except for temporary or emergency
purposes and then only an amount not exceeding 10% of
the value of the total assets of that Portfolio. This
borrowing provision is included solely to facilitate
the orderly sale of portfolio securities to
accommodate substantial redemption requests if they
should occur and is not for investment purposes. All
borrowings will be repaid before making additional
investments for that Portfolio and any interest paid
on such borrowings will reduce the income of that
Portfolio.
The foregoing percentage limitations (except the
limitation on borrowing) will apply at the time of the
purchase of a security. Additional fundamental and
non-fundamental investment limitations are set forth in
the Statement of Additional Information.
THE MANAGER
SEI Financial Management Corporation (the "Manager"), 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 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 .35% of the average daily net assets of the
Short-Duration Government and Intermediate-Duration
Government Portfolios and .32% of the average daily net
assets of the GNMA 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 .85% of the
average daily net assets of the Class D shares of the
Short-Duration Government Portfolio and to not more than
.87% of the average daily net assets of the Class D shares
of the Intermediate-Duration Government and GNMA
Portfolios on an annualized basis. The Manager reserves
the right, in its sole discretion, to terminate these
waivers at any time. For the fiscal year ended January 31,
1996, the Short-Duration Government, Intermediate-Duration
Government and GNMA Portfolios paid management fees, after
waivers, of .29%, .29% and .31%, respectively, of their
average daily net assets.
The Trust and DST Systems, Inc., 210 W. 10th
Street, Kansas City, Missouri 64105 ("DST"), have entered
into a separate transfer agent agreement with respect
12
<PAGE> 41
to the Class D shares of each Portfolio. Under this
agreement, DST acts as the transfer agent (the "Transfer
Agent") and dividend disbursing agent for the Class D
shares of the Trust.
THE ADVISER
Wellington Management Company (the "Adviser" or "WMC")
serves as the investment adviser for each Portfolio under
advisory agreements with the Trust. The Adviser is a
professional investment counseling firm which provides
investment services to investment companies, employee
benefit plans, endowments, foundations, and other
institutions and individuals. Under the advisory
agreements with the Trust, the Adviser invests the assets
of the Portfolios and continuously reviews, supervises and
administers each 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.
John C. Keogh, Senior
Vice President of the
Adviser, serves as the
portfolio manager for the
Short-Duration Government
Portfolio. He has been an
investment professional with
the Adviser since 1983. Mr.
Keogh has served as portfolio
manager for the
Short-Duration Government
Portfolio since 1995. Paul D.
Kaplan, Senior Vice President
of the Adviser, serves as the
portfolio manager for the
GNMA Portfolio. He has been
an investment professional
with the Adviser since 1978.
Mr. Kaplan has served as portfolio manager for the GNMA
Portfolio since it commenced operations. Thomas L. Pappas,
Senior Vice President of the Adviser, serves as the
portfolio manager for the Intermediate-Duration Government
Portfolio. He has been an investment professional with the
Adviser since 1987. Mr. Pappas has served as portfolio
manager for the Intermediate-Duration Government Portfolio
since 1995.
As of March 31, 1996, the Adviser had discretionary
management authority with respect to approximately $114.1
billion of assets, including the assets of the Trust and
SEI Liquid Asset Trust, each an open-end management
investment company administered by the Manager. The
Adviser's predecessor organizations have provided
investment advisory services to investment companies since
1933, and to investment counseling clients since 1960. The
principal address of the Adviser is 75 State Street,
Boston, Massachusetts 02109. WMC is a Massachusetts
general partnership, of which the following persons are
managing partners: Robert W. Doran, Duncan M. McFarland
and John R. Ryan.
INVESTMENT
(>) ADVISER
A Portfolio's investment
adviser manages the
investment activities
and is responsible for
the performance of the
Portfolio. The adviser
conducts investment
research, executes
investment strategies
based on an assessment
of economic and market
conditions, and
determines which
securities to buy, hold
or sell.
13
<PAGE> 42
The Adviser is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of
.10% of the average daily net assets of the Portfolios up
to $500 million, .075% of such average daily net assets
from $500 million to $1 billion and .05% of such average
daily net assets in excess of $1 billion. Fees are
allocated daily among the Portfolios on the basis of their
relative net assets. For the fiscal year ended January 31,
1996, the Short-Duration Government, Intermediate-Duration
Government and GNMA Portfolios paid WMC advisory fees,
after fee waivers, of .08%, .08% and .10%, respectively.
DISTRIBUTION
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as each Portfolio's
distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust. The Class D
shares of each Portfolio have a distribution plan (the
"Class D Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act").
The Class D Plan provides for payments to the
Distributor at an annual rate of .30% of each Portfolio's
average daily net assets attributable to Class D 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 payments may be used to 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 and 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 a financial 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. 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 for by the Distributor from
its own resources. Under any such program, the Distributor
will provide promotional incentives, in the form of cash
or other compensation, including merchandise, airline
vouchers, trips and vacation packages, to all dealers
selling
14
<PAGE> 43
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.
PERFORMANCE
For a Portfolio, the performance of the Class D shares
will normally be lower than that of Class A or Class B
shares, if any, of the Portfolio because of the sales
charge (when applicable) and additional distribution and
transfer agency expenses charged to Class D shares. The
performance of the Class D shares will normally be higher
than of Class C shares, if any, of a Portfolio because of
the additional shareholder servicing expenses charged to
Class C shares.
From time to time, each Portfolio may advertise its
yield and total return. 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 yield of a
Portfolio refers to the income generated by a hypothetical
investment, net of any sales charge (if applicable)
imposed in the case of the Class D shares in that
Portfolio over a 30-day period. This income is then
"annualized," (i.e. the income generated by the investment
over 30 days is assumed to be generated over one year and
is shown as a percentage of the investment.)
The total return of a Portfolio refers to the
average compounded rate of return on 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.
A Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical) or
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) to other investment
alternatives. The Portfolios 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 Portfolios may use the
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 Portfolios may also
quote financial and business publications and periodicals
as they relate to fund management, investment philosophy
and investment techniques.
A Portfolio may quote various measures of
volatility and benchmark correlation in advertising, and
may compare these measures to those of other
15
<PAGE> 44
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, state or local income tax treatment of the
Portfolios or their 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 any 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 Portfolio A Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolios intend to continue to
qualify for the special tax treatment afforded regulated
investment companies ("RICs") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), so
as to be relieved of federal income tax on net investment
company taxable income and net capital gains (the excess
of net long-term capital gain over net short-term capital
losses) distributed to shareholders.
Tax Status
of Distributions Each Portfolio will
distribute substantially all
of its net investment income
(including net short-term
capital gains) and net
capital gain to shareholders.
Dividends from each
Portfolio's net investment
income will be taxable to its
shareholders as ordinary
income, whether received in
cash or in additional shares
and do not qualify for the
corporate dividends-received deduction. Distributions of
net capital gains are taxable to shareholders as long-term
capital gains. The Portfolios will make 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 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.
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,
(>) TAXES
You must pay taxes on
your Portfolio's
earnings whether you
take your payments in
cash or additional
shares.
16
<PAGE> 45
when received by a shareholder from any Portfolio
provided certain conditions are satisfied. Interest
received on repurchase agreements collateralized by U.S.
Government obligations normally is not exempt from state
taxation. Each Portfolio will inform shareholders
annually of the percentage of income and distributions
derived from direct U.S. Government obligations.
Shareholders should consult their tax advisers to
determine whether any portion of the income dividends
received from a Portfolio is considered tax exempt in
their particular states.
With respect to
investments such as
U.S. Treasury STRIPS, which
are sold at original issue
discount and thus do not make
periodic cash interest
payments, a Portfolio will be
required to include as part
of its current income the
accreted interest on such
obligations even though the
Portfolio has not received
any interest payments on such
obligations during that
period. Because each
Portfolio distributes all of
its net investment income to
its shareholders, 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 Portfolio intends to make sufficient
distributions to avoid liability for the federal excise
tax applicable to RICs.
Each sale, exchange or redemption of a Portfolio's
shares is a taxable transaction to the shareholder.
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 that
are received in "good order" will be effective as of the
Business Day received by the Transfer Agent as long as the
Transfer Agent receives the order and, in the case of a
purchase request, payment before 4:00 p.m. Eastern time.
Otherwise the purchase will be effective when payment is
received. Broker-dealers may have separate arrangements
with the Trust regarding the sale of its Class D shares.
If an exchange request is for shares of a portfolio
whose net asset value is calculated as of a time earlier
than 4:00 p.m. Eastern time, the exchange request will not
be effective until the next Business Day. Anyone who
wishes to make an
(>) DISTRIBUTIONS
A 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 they were
originally bought.
17
<PAGE> 46
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 each Portfolio 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 preapproved payroll deduction
plans). The Trust reserves the right to reject a purchase
order when the Distributor determines that it is not in
the best interest of the Trust or its shareholders to
accept such order.
Maintaining a
Minimum Account Balance
Due to the relatively high
cost of handling
small investments, the
Portfolios reserve 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 a Portfolio
has a value of less than
$1,000, the minimum initial
purchase amount. Accordingly,
an investor purchasing shares
of a 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 a
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 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, a Portfolio may be requested to
redeem shares for which it has not yet received good
payment. In such circumstances, redemption proceeds will
be forwarded upon collection of payment for the shares;
collection of payment may take 10 or more days. The
Portfolios intend 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
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
18
<PAGE> 47
plus any applicable sales charge (the "offering price").
No certificates representing shares will be issued. An
order to sell shares will be executed at the net asset
value per share next determined after receipt and
effectiveness of a request for redemption in good order.
Payment to shareholders for shares redeemed will be made
within seven days after receipt by the Transfer Agent of
the redemption order.
How the
Net Asset Value
is Determined The net asset value per share of each Portfolio is
determined by dividing the total market value of its
assets, less any liabilities, by the total number of
outstanding shares of that Portfolio. 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. A Portfolio may
use a pricing service to obtain the last sale price of
each equity or fixed income security held by that
Portfolio. In addition, portfolio securities for which
market quotations are available are valued at the last
quoted sales price on each Business Day, or, if there is
not such reported sale, at the most recently quoted bid
price. Unlisted securities for which market quotations are
readily available are valued at the most recently quoted
bid price. Net asset value per share is determined daily
as of 4:00 p.m. Eastern time on each Business Day.
Purchases will be made in full and fractional shares of
the Portfolios calculated to three decimal places.
Although the methodology and procedures for determining
net asset value per share are identical for all classes of
each Portfolio, the net asset value per share of one class
may differ from that of another class because of the
different distribution and/or shareholder servicing fees
charged to each class and the incremental transfer agent
fees charged to Class D shares.
Rights of In calculating the sale charge rates applicable to current
Accumulation purchases of a Portfolio's shares, a "single purchaser"
(defined below) is entitled to combine current purchases
with the current market value of previously purchased
shares of the Portfolios and Class D shares of other
portfolios which are sold subject to a comparable sales
charge.
The term "single purchaser" refers to (i) an
individual, (ii) an individual spouse purchasing shares of
the Portfolio for their own account or for trust or
custodian accounts of their minor children, or (iii) a
fiduciary purchasing for any one trust, estate or
fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Code, including
related plans of the same employer. Furthermore, under
this provision, purchases by a single purchaser shall
include purchases by an individual for his/her own account
in combination with (i) purchases of that individual and
spouse for their joint accounts or for trust and custodial
accounts for their minor children and (ii) purchases of
that individual's spouse for his/her own account. To be
entitled to a reduced sales charge based upon shares
already owned, the investor must ask the Transfer Agent
for such reduction at the
19
<PAGE> 48
time of purchase and provide the account number(s) of
the investor, the investor and spouse, and their
children (under age 21). The Portfolios may amend or
terminate this right of accumulation at any time as to
subsequent purchases.
Letter of Intent By submitting a Letter of Intent (the "Letter") to the
Transfer Agent, a single purchaser may purchase shares of
any Portfolio and the other Eligible Portfolios during a
13-month period at the reduced sales charge rates applying
to the aggregate amount of the intended purchases stated
in the Letter. The Letter may apply to purchases made up
to 90 days before the date of the Letter. It is the
shareholder's responsibility to notify the Transfer Agent
at the time the Letter is submitted that there are prior
purchases that may apply.
Five percent (5%) of the total amount intended to
be purchased will be held in escrow by the Transfer Agent
until such purchase is completed within the 13-month
period. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not
completed, the Manager will surrender an appropriate
number of the escrowed shares for redemption in order to
realize the difference between the sales charge on the
shares purchased at the reduced rate and the sales charge
otherwise applicable to the total shares purchased. Such
purchasers may include the value of all their shares of
the Portfolios and of any of the other Eligible Portfolios
in the Trust towards the completion of such Letter.
Sales Charge Waivers No sales charge is imposed on shares of the Portfolios:
(i) issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Trust
is a party; (ii) sold to dealers or brokers that have a
sales agreement with the Distributor ("participating
broker-dealers"), for their own account or for retirement
plans for employees or sold to present employees of
dealers or brokers that certify to the Distributor at the
time of purchase that such purchase is for their own
account; (iii) sold to present employees of SEI or one of
its affiliates, or of any entity which is a current
service provider to the Trust; (iv) sold to tax-exempt
organizations enumerated in Section 501(c) of the Code or
qualified employee benefit plans created under Sections
401, 403(b)(7) or 457 of the Code (but not IRAs or SEPs);
(v) sold to fee-based clients of banks, financial planners
and investment advisers; (vi) sold to clients of trust
companies and bank trust departments; (vii) sold to
trustees and officers of the Trust; (viii) purchased with
proceeds from the recent redemption of Class D shares of
another Portfolio of the Trust or another class of shares,
except Class D shares, of a portfolio of SEI Funds or the
Trust; (ix) purchased with the proceeds from the recent
redemption of shares of a mutual fund with similar
investment objectives and policies (other than Class D
shares of the trusts listed in (viii) above) for which a
front-end sales charge was paid (this offer will be
extended, to cover shares on which a deferred sales charge
was paid, if permitted under regulatory authorities'
interpretation of applicable law); or (x) sold to
participants or members of certain affinity groups,
20
<PAGE> 49
such as trade associations or membership organizations,
which have entered into arrangements with the
Distributor. If you rely upon any of the categories of
waivers of the sales charge, you must qualify such
waiver in advance of your purchase with the Transfer
Agent or the financial institution or Intermediary
through which you purchased the shares.
The waiver of the sales charge under circumstances
(viii) and (ix) above applies only if the following
conditions are met: the purchase must be made within 60
days of the redemption; the Transfer Agent must be
notified in writing by the investor, or his or her agent,
at the time a purchase is made; and a copy of the
investor's account statement showing such redemption must
accompany such notice. The waiver policy with respect to
the purchase of shares through the use of proceeds from a
recent redemption as described in clauses (viii) and (ix)
above will not be continued indefinitely and may be
discontinued at any time without notice. Investors should
call the Transfer Agent at 1-800-437-6016 to confirm
availability prior to initiating the procedures described
in clauses (viii) and (ix) above.
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 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.
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
21
<PAGE> 50
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 Daily Income 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 Portfolios through four separate classes: Class
A, Class B, Class C and Class D, which provide for
variation in distribution, shareholder servicing, and
transfer agent costs, voting rights, dividends, and the
imposition of a sales charge on Class D shares. This
Prospectus offers the Class D shares of the Trust's
Short-Duration Government Portfolio, Intermediate-Duration
Government Portfolio and GNMA Portfolio (the
"Portfolios"). In addition to the Portfolios, the Trust
consists of the following portfolios: Money Market
Portfolio, Prime Obligation Portfolio, Government
Portfolio, Government II Portfolio, Treasury Portfolio,
Treasury II Portfolio, Federal Securities Portfolio,
Short-Duration Mortgage Portfolio (formerly, Short-Term
Mortgage Portfolio) and Government Securities Daily
Income Portfolio. Additional information pertaining to
the Trust may be obtained by writing to SEI Financial
Management Corporation, 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658, or by calling 1-800-437-6016.
All consideration received by the Trust for shares of
any Portfolio 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, including 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
22
<PAGE> 51
Portfolio or class. As a Massachusetts business trust, the Trust is not required
to hold annual meetings of shareholders, but approval will be sought for certain
changes in the operation of the Trust and for the election of Trustees under
certain circumstances. In addition, a Trustee may be removed by the remaining
Trustees or by shareholders at a special meeting called upon written request of
shareholders owning at least 10% of the outstanding shares of the Trust. In the
event that such a meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting the meeting.
Reporting The Trust issues unaudited financial statements
semiannually 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., P.O. Box 419240, Kansas City,
Missouri 64141-6240.
Dividends The dividends of Class D shares will normally be lower
than on Class A and Class B shares, if any, of a Portfolio
because of the additional distribution and transfer agency
expenses charged to Class D shares and the dividends on
Class D shares are normally higher than on Class C shares,
if any, of a Portfolio because of the additional
shareholder servicing expenses charged to Class C shares.
Substantially all of the net investment income
(exclusive of capital gains) of each Portfolio is
distributed in the form of dividends that will be declared
daily and paid monthly on the first Business Day of each
month. Currently, capital gains, if any, are distributed
at least annually.
Shareholders in the Portfolios 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 Transfer Agent at least 15 days
prior to the distribution.
Dividends and distributions of the Portfolios are
paid by the Portfolios on a per-share basis. The value of
each share will be reduced by the amount of any such
payment. If shares are purchased shortly before the record
date for a dividend or the distribution of capital gains,
a shareholder will pay the full price for the shares and
receive some portion of the price back as a taxable
dividend or distribution.
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 (the
"Custodian"), serves as custodian of the Trust's assets
and wire agent of the Trust. The Custodian holds cash,
securities and other assets of the Trust as required by
the 1940 Act.
23
<PAGE> 52
DESCRIPTION OF
PERMITTED
INVESTMENTS AND
RISK FACTORS
The following is a description of certain of the permitted
investments practices for the Portfolios and the
associated risk factors:
Asset-Backed Securities
Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and
auto loans, leases and credit card receivables. Such
securities are generally issued as pass-through
certificates, which represent undivided fractional
ownership interests in the underlying pools of assets.
Such securities also may be debt instruments, which are
also known as collateralized obligations and are generally
issued as the debt of a special purpose entity, such as a
trust, organized solely for the purpose of owning such
assets and issuing such debt.
Bankers' Acceptances A banker's acceptance is a bill of exchange or time draft
drawn on and accepted by a commercial bank. Bankers'
acceptances are used by corporations to finance the
shipment and storage of goods and to furnish dollar
exchange. Maturities are generally six months or less.
Certificates of Deposit
A certificate of deposit is a negotiable, interest-bearing
instrument with a specific maturity. Certificates of
deposit 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.
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 a few to 270 days.
Dollar Roll Transactions
Dollar rolls are transactions in which securities are sold
for delivery in the current month and the seller
simultaneously contracts to repurchase substantially
similar securities on a specified future date. Any
difference between the sale price and the purchase price
is netted against the interest income foregone on the
securities sold to arrive at an implied borrowing rate.
Alternatively, the sale and purchase transactions can be
executed at the same price, with a Portfolio being paid a
fee as consideration for entering into the commitment to
purchase. Dollar rolls may be renewed prior to cash
settlement and initially may involve only a firm
commitment agreement by a Portfolio to buy a security. If
the broker-dealer to whom a Portfolio sells the security
becomes insolvent, a Portfolio's right to purchase the
security may be restricted. Other risks involved in
entering into dollar rolls include the risk that the value
of the security may change adversely over the term of the
24
<PAGE> 53
dollar roll and that the security a Portfolio is required
to repurchase may be worth less than the security the
Portfolio originally held.
Fixed Income Securities
Fixed income securities are debt obligations issued by
corporations, municipalities and other borrowers. The
market value of fixed income investments will generally
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. Moreover,
while securities with longer maturities tend to produce
higher yields, the prices of longer maturity securities
are also subject to greater market fluctuations as a
result of change in interest rates. Changes by recognized
agencies in the rating of any fixed income security and in
the ability of an issuer to make payments of interest and
principal will also affect the value of these investments.
Changes in the value of portfolio securities will not
affect cash income derived from these securities, but will
affect a Portfolio's net asset value.
Futures and Options on
Futures
Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a
specific security at a specified future time and at a
specified price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume
a position in a futures contract at a specified exercise
price during the term of the option. A Portfolio will
minimize the risk that it will be unable to close out a
futures contract by only entering into futures contracts
that are traded on national futures exchanges.
No price is paid upon entering into futures
contracts. Instead, a Portfolio would be required to
deposit an amount of cash or U.S. Treasury securities
known as "initial margin." Subsequent payments, called
"variation margin," to and from the broker, would be made
on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The
margin is in the nature of a performance bond or
good-faith deposit on a futures contract.
Eurodollar instruments are U.S. dollar-denominated
futures contracts or options thereon which are linked to
the London Interbank Offered Rate (LIBOR), although
foreign currency denominated instruments are available
from time to time. Eurodollar futures contracts enable
purchasers to obtain a fixed rate for the lending of funds
and sellers to obtain a fixed rate for borrowings.
In order to avoid leveraging and related risks,
when a Portfolio purchases futures contracts, it will
collateralize its position by depositing an amount of cash
or liquid, high grade debt securities, equal to the market
value of the futures positions held, less margin deposits,
in a segregated account with the Trust's Custodian.
Collateral equal to the current market value of the
futures position will be marked to market on a daily
basis.
There are risks associated with these activities,
including the following: (1) the success of a hedging
strategy may depend on an ability to predict
25
<PAGE> 54
movements in the prices of individual securities,
fluctuations in markets and movements in interest rates,
(2) there may be an imperfect or no correlation between
the changes in market value of the securities held by a
Portfolio and the prices of futures and options on
futures, (3) there may not be a liquid secondary market
for a futures contract or option, (4) trading
restrictions or limitations may be imposed by an
exchange, and (5) government regulations may restrict
trading in futures contracts and options on futures.
A Portfolio may enter into futures contracts and
options on futures contracts traded on an exchange
regulated by the Commodities Futures Trading Commission
("CFTC"), so long as, to the extent that such transactions
are not for "bona fide hedging purposes," the aggregate
initial margin and premiums on such positions (excluding
the amount by which such options are in the money) do not
exceed 5% of the liquidating value of the Portfolio's
assets. A Portfolio may buy and sell futures contracts and
related options to manage its exposure to changing
interest rates and securities prices. Some strategies
reduce a Portfolio's exposure to price fluctuations, while
others tend to increase its market exposure. Futures and
options on futures can be volatile instruments and involve
certain risks that could negatively impact a Portfolio's
return.
Illiquid Securities Illiquid securities are securities which cannot be
disposed of within seven business days at approximately
the value at which they are being carried on a Portfolio's
books. Illiquid securities include demand instruments with
demand notice periods exceeding seven days, securities for
which there is no secondary market, and repurchase
agreements with maturities of more than seven days in
length.
Mortgage-Backed
Securities Mortgage-backed securities are instruments that entitle
the holder to a share of all interest and principal
payments from mortgages underlying the security. The
mortgages backing these securities include conventional
15- and 30-year fixed-rate mortgages, graduated payment
mortgages, adjustable rate mortgages and balloon
mortgages. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed
securities can be expected to accelerate. Prepayment of
mortgages which underlie securities purchased at a premium
often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital
gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict
accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities: These are
securities that are issued or guaranteed by a U.S.
Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these
mortgage-backed securities are the Government National
Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Association ("FHLMC"). FNMA and FHLMC obligations
are not backed by the full
26
<PAGE> 55
faith and credit of the U.S. Government as GNMA
certificates are, but FNMA and FHLMC securities are
supported by the instrumentalities' right to borrow from
the U.S. Treasury. GNMA, FNMA and FHLMC each guarantees
timely distributions of interest to certificate holders.
GNMA and FNMA also each guarantees timely distributions
of scheduled principal. FHLMC has in the past guaranteed
only the ultimate collection of principal of the
underlying mortgage loan; however, FHLMC now issues
mortgage-backed securities (FHLMC Gold PCs) which also
guarantee timely payment of monthly principal
reductions. Government and private guarantees do not
extend to the securities' value, which is likely to vary
inversely with fluctuations in interest rates.
Private Pass-Through Securities: These are
mortgage-backed securities issued by a non-governmental
entity, such as a trust. These securities include
collateralized mortgage obligations ("CMOs") and real
estate mortgage investments conduits ("REMICs") that are
rated in one of the top two rating categories. While they
are generally structured with one or more types of credit
enhancement, private pass-through securities typically
lack a guarantee by an entity having the credit status of
a governmental agency or instrumentality.
Collateralized Mortgage Obligations: CMOs are debt
obligations or multiclass pass-through certificates issued
by agencies or instrumentalities of the U.S. Government or
by private originators or investors in mortgage loans. In
a CMO, series of bonds or certificates are usually issued
in multiple classes. Principal and interest paid on the
underlying mortgage assets may be allocated among the
several classes of a series of a CMO in a variety of ways.
Each class of a CMO, often referred to as a "tranche," is
issued with a specific fixed or floating coupon rate and
has a stated maturity or final distribution date.
Principal payments on the underlying mortgage assets may
cause CMOs to be retired substantially earlier than their
stated maturities or final distribution dates, resulting
in a loss of all or part of any premium paid.
REMICs: A REMIC is a CMO that qualifies for special
tax treatment under the Internal Revenue Code and invests
in certain mortgages principally secured by interests in
real property. Investors may purchase beneficial interests
in REMICs, which are known as "regular" interests, or
"residual" interests. Guaranteed REMIC pass-through
certificates ("REMIC Certificates") issued by FNMA or
FHLMC represent beneficial ownership interests in a REMIC
trust consisting principally of mortgage loans or FNMA,
FHLMC or GNMA-guaranteed mortgage pass-through
certificates. For FHLMC REMIC Certificates, FHLMC
guarantees the timely payment of interest, and also
guarantees the payment of principal as payments are
required to be made on the underlying mortgage
participation certificates. FNMA REMIC Certificates are
issued and guaranteed as to timely distribution of
principal and interest by FNMA.
27
<PAGE> 56
Parallel Pay Securities: PAC Bonds: Parallel pay
CMOs and REMICs are structured to provide payments of
principal on each payment date to more than one class.
These simultaneous payments are taken into account in
calculating the stated maturity date or final distribution
date of each class, which must be retired by its stated
maturity date or final distribution date, but may be
retired earlier. Planned Amortization Class CMOs ("PAC
Bonds") generally require payments of a specified amount
of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on
such securities having the highest priority after interest
has been paid to all classes.
Stripped Mortgage-Backed Securities ("SMBs"): SMBs
are usually structured with two classes that receive
specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One
class may receive all of the interest payments, and is
thus termed an interest-only class ("IO"), while the other
class may receive all of the principal payments, and is
thus termed the principal-only class ("PO"). The value of
IOs tends to increase as rates rise and decrease as rates
fall; the opposite is true of POs. SMBs are extremely
sensitive to changes in interest rates, because of the
impact thereon of prepayment of principal on the
underlying mortgage securities and can experience wide
swings in value in response to changes in interest rates
and associated mortgage prepayment rates. During times
when interest rates are experiencing fluctuations, such
securities can be difficult to price on a consistent
basis. The market for SMBs is not as fully developed as
other markets; SMBs, therefore, may be illiquid.
Risk Factors: Due to the possibility of prepayments
of the underlying mortgage instruments, mortgage-backed
securities generally do not have a known maturity. In the
absence of a known maturity, market participants generally
refer to an estimated average life. An average life
estimate is a function of an assumption regarding
anticipated prepayment patterns, based upon current
interest rates, current conditions in the relevant housing
markets and other factors. The assumption is necessarily
subjective, and thus different market participants can
produce different average life estimates with regard to
the same security. There can be no assurance that
estimated average life will be a security's actual average
life.
REITs Real Estate Investment Trusts ("REITs") are trusts that
invest primarily in commercial real estate or real
estate-related loans. The value of interests in REITs may
be affected by the value of the property owned or the
quality of the mortgages held by the trust.
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. A Portfolio will have actual or
constructive possession of 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
28
<PAGE> 57
delayed or prevented from exercising its right to
dispose of the collateral or if the Portfolio realizes a
loss on the sale of the collateral. 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.
Time Deposits A time deposit is a non-negotiable receipt 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; no Portfolio will invest more than 10% of its
nets assets in such time deposits and other illiquid
securities.
U.S. Government Agency
Securities 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, FHLMC, 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., GNMA 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., FNMA securities). Guarantees of principal by
agencies or instrumentalities of the U.S. Government may
be a guarantee of payment at the maturity of the
obligation so that in the event of a default prior to
maturity there might not be a market and thus no means of
realizing 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 as well as separately
traded interest and principal component parts of such
obligations, known as Separately Traded Registered
Interest and Principal Securities ("STRIPS"), that are
transferable through the federal book-entry system.
U.S. Treasury STRIPS U.S. Treasury 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 accredited over the life of the security, and
such accretion will constitute the income earned on the
security for both accounting and tax purposes. Because of
these features, such securities may be subject to greater
interest rate volatility than interest-paying investments.
See also "Taxes."
29
<PAGE> 58
When-Issued and Delayed
Delivery Securities
(including TBA
Mortgage-Backed
Securities) When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. A Portfolio will maintain with the
Custodian a separate account with liquid, high grade debt
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these
securities is fixed as of the purchase date, and no
interest accrues to a Portfolio before settlement. These
securities are subject to market fluctuation due to
changes in market interest rates, and it is possible that
the market value at the time of settlement could be higher
or lower than the purchase price if the general level of
interest rates has changed. Although a Portfolio generally
purchases securities on a when-issued or forward
commitment basis with the intention of actually acquiring
securities, the Portfolio may dispose of a when-issued
security or forward commitment prior to settlement if the
Adviser deems it appropriate to do so.
One form of when-issued or delayed-delivery security that
a Portfolio may purchase is a "to be announced" ("TBA")
mortgage-backed security. A TBA mortgage-backed security
transaction arises when a mortgage-backed security, such
as a GNMA pass-through security, is purchased or sold with
the specific pools that will constitute that GNMA
pass-through security to be announced on a future
settlement date.
30
<PAGE> 59
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 60
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 61
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 62
SEI DAILY INCOME TRUST
MAY 31, 1996
- --------------------------------------------------------------------------------
CORPORATE DAILY INCOME PORTFOLIO
GOVERNMENT SECURITIES DAILY INCOME PORTFOLIO
SHORT-DURATION MORTGAGE PORTFOLIO
SHORT-DURATION GOVERNMENT PORTFOLIO
INTERMEDIATE-DURATION GOVERNMENT PORTFOLIO
GNMA PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus concisely sets forth 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 May 31, 1996, has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, Pennsylvania 19087-1658, or by calling 1-800-342-5734.
The Statement of Additional Information is incorporated into this Prospectus by
reference.
SEI Daily Income 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 professionally managed diversified portfolios
of securities. Some portfolios offer separate classes of units of beneficial
interest that differ from each other primarily in the allocation of certain
distribution and/or shareholder servicing expenses and minimum investment
amounts. This Prospectus offers Class A shares of the Short-Duration Mortgage
(formerly, Short-Term Mortgage) and Intermediate-Duration Government (formerly,
Intermediate-Term Government) Portfolios; Class A and Class B shares of the GNMA
Portfolio; and Class A, Class B and Class C shares of the Corporate Daily
Income, Government Securities Daily Income and Short-Duration Government
(formerly, Short-Term Government) Portfolios, all fixed income portfolios of the
Trust (each a "Portfolio" and, together, the "Portfolios"). The Short-Duration
Mortgage Portfolio is currently in the process of liquidating and is not open
for additional investment.
- --------------------------------------------------------------------------------
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.
<PAGE> 63
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) CLASS A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT
CORPORATE SECURITIES SHORT- SHORT- INTERMEDIATE-
DAILY DAILY DURATION DURATION DURATION
INCOME INCOME MORTGAGE GOVERNMENT GOVERNMENT GNMA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- -------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Management/Advisory Fees (after fee waiver) (1) .29% .31% .14% .41% .43% .42%
12b-1 Fees none none none none none none
Total Other Expenses .06% .04% .31% .04% .07% .18%
Shareholder Servicing Fees (after fee waiver)
(2) .00% .00% .00% .00% .03% .13%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers) (3) (4) (5) .35% .35% .45% .45% .50% .60%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Manager has waived, on a voluntary basis, a portion of its fee (except
with respect to the GNMA Portfolio), 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 .45% for the Corporate Daily Income,
Government Securities Daily Income, Short-Duration Mortgage, Short-Duration
Government and Intermediate-Duration Government Portfolios.
Management/advisory fees have been restated to reflect current expenses.
(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
any time in its sole discretion. Absent such a fee waiver, shareholder
servicing fees would be .25% for each of the Portfolios.
(3) Total operating expenses for the Government Securities Daily Income
Portfolio are based on estimated amounts for the current fiscal year.
(4) Total operating expenses for the Intermediate-Duration Government and GNMA
Portfolios have been restated to reflect a reduction in fee waivers.
(5) Absent these fee waivers, total operating expenses for Class A shares of
the Portfolios would be .76% for the Corporate Daily Income Portfolio, .74%
for the Government Securities Daily Income Portfolio, 1.01% for the
Short-Duration Mortgage Portfolio, .74% for the Short-Duration Government
Portfolio, .74% for the Intermediate-Duration Government Portfolio and .72%
for the GNMA Portfolio.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment of each
portfolio assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
Corporate Daily Income Portfolio $ 4 $ 11 $ 20 $44
Government Securities Daily Income Portfolio $ 4 $ 11 $ 20 $44
Short-Duration Mortgage Portfolio $ 5 $ 14 $ 25 $57
Short-Duration Government Portfolio $ 5 $ 14 $ 25 $57
Intermediate-Duration Government Portfolio $ 5 $ 16 $ 28 $63
GNMA Portfolio $ 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 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 A shares of the Portfolios. A person who purchases shares through a
financial institution may be charged separate fees by that institution. The
Short-Duration Government, Intermediate-Duration Government and GNMA Portfolios
also offer Class D shares, which are subject to the same expenses, except that
Class D shares bear sales charges and have different distribution and transfer
agency costs. The Corporate Daily Income, Government Securities Daily Income,
Short-Duration Government and GNMA Portfolios also offer Class B shares, and the
Corporate Daily Income, Government Securities Daily Income and Short-Duration
Government Portfolios also offer Class C shares, which classes are subject to
the same expenses, except that each has different shareholder servicing costs.
Additional information may be found under "The Manager," "The Adviser" and
"Distribution and Shareholder Servicing."
2
<PAGE> 64
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) CLASS B
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT
CORPORATE SECURITIES SHORT-
DAILY DAILY DURATION
INCOME INCOME GOVERNMENT GNMA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Management/Advisory Fees (after fee waiver) (1) .29% .31% .41% .42%
12b-1 Fees none none none none
Total Other Expenses .36% .34% .34% .35%
Shareholder Servicing Fees .25% .25% .25% .25%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waiver) (2) (3) (4) .65% .65% .75% .77%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Manager has waived, on a voluntary basis, a portion of its fee (except
with respect to the GNMA Portfolio), 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 .45% for the Corporate Daily Income,
Government Securities Daily Income, and Short-Duration Government
Portfolios. Management/advisory fees have been restated to reflect current
expenses.
(2) Total operating expenses for the Government Securities Portfolio are based
on estimated amounts for the current fiscal year.
(3) Total operating expenses for the GNMA Portfolio have been restated to
reflect a reduction in fee waivers.
(4) Absent the fee waiver, total operating expenses for Class B shares of the
Portfolios would be .81% for the Corporate Daily Income Portfolio, .79% for
the Government Securities Daily Income Portfolio, .79% for the
Short-Duration Government Portfolio and .77% for the GNMA Portfolio.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment of each
portfolio assuming
(1) a 5% annual return and (2) redemption at the end of each time period:
Corporate Daily Income Portfolio $ 7 $ 21 $ 36 $81
Government Securities Daily Income Portfolio $ 7 $ 21 $ 36 $81
Short-Duration Government Portfolio $ 8 $ 24 $ 42 $93
GNMA Portfolio $ 8 $ 25 $ 43 $95
- ---------------------------------------------------------------------------------------------------------------------
</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 B shares of the Portfolios. A person who purchases shares through a
financial institution may be charged separate fees by that institution. The
Short-Duration Government, Intermediate-Duration Government and GNMA Portfolios
also offer Class D shares, which are subject to the same expenses, except that
Class D shares bear sales charges and have different distribution and transfer
agency costs. The Corporate Daily Income, Government Securities Daily Income,
Short-Duration Government and GNMA Portfolios also offer Class A shares, and the
Corporate Daily Income, Government Securities Daily Income and Short-Duration
Government Portfolios also offer Class C shares, which classes are subject to
the same expenses, except that each has different shareholder servicing costs.
Additional information may be found under "The Manager," "The Adviser" and
"Distribution and Shareholder Servicing."
3
<PAGE> 65
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) CLASS C
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT
CORPORATE SECURITIES SHORT-
DAILY DAILY DURATION
INCOME INCOME GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- ----------
<S> <C> <C> <C>
Management/Advisory Fees (after fee waiver) (1) .29% .31% .41%
12b-1 Fees none none none
Total Other Expenses .56% .54% .54%
Shareholder Servicing Fees .25% .25% .25%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waiver) (2) (3) .85% .85% .95%
- ---------------------------------------------------------------------------------------------------------------------
</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 .45%
for each Portfolio. Management/advisory fees have been restated to reflect
current expenses.
(2) Total operating expenses for the Government Securities Daily Income
Portfolio are based on estimated amounts for the current fiscal year.
(3) Absent the fee waiver, total operating expenses for Class C shares of the
Portfolios would be 1.01% for the Corporate Daily Income Portfolio, .99%
for the Government Securities Daily Income Portfolio and .99% for the
Short-Duration Government Portfolio.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment of each
portfolio assuming
(1) a 5% annual return and (2) redemption at the end of each time period:
Corporate Daily Income Portfolio $ 9 $ 27 $ 47 $ 105
Government Securities Daily Income Portfolio $ 9 $ 27 $ 47 $ 105
Short-Duration Government Portfolio $10 $ 30 $ 53 $ 117
- ---------------------------------------------------------------------------------------------------------------------
</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 C shares of the Portfolios. A person who purchases shares
through a financial institution may be charged separate fees by that
institution. The Short-Duration Government Portfolio also offers Class D
shares, which are subject to the same expenses, except that Class D shares bear
sales charges and have different distribution and transfer agency costs. The
Corporate Daily Income, Government Securities Daily Income and Short-Duration
Government Portfolios also offer Class A and Class B shares, which are subject
to the same expenses, except that each has different shareholder servicing
costs. Additional information may be found under "The Manager," "The Adviser"
and "Distribution and Shareholder Servicing."
4
<PAGE> 66
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout each
period have been audited by Arthur Andersen LLP, independent public accountants,
whose report thereon, dated March 14, 1996, was unqualified. This information
should be read in conjunction with the Trust's financial statements as of and
for the fiscal year ended January 31, 1996, and notes thereto, which are
included in the Trust's Statement of Additional Information under the heading
"Financial Information." Additional performance information is set forth in the
Trust's 1996 Annual Report to shareholders, which is available upon request and
without charge by calling 1-800-342-5734. As of January 31, 1996, there were no
shares outstanding of the Government Securities Daily Income Portfolio and no
Class B or C shares outstanding of the Corporate Daily Income Portfolio, and no
Class C shares outstanding of the Short-Duration Government Portfolio.
For a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Net Asset Net Realized and Distributions Distributions
Value Net Unrealized from Net from Net Asset
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total
Of Period Income on Securities Income Gains of Period Return
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------
CORPORATE DAILY INCOME PORTFOLIO
- ------------------------------------
CLASS A
1996 $ 1.96 $ 0.12 $ 0.05 $ (0.12) $(0.01) $ 2.00 8.65%
1995 2.00 0.09 (0.04) (0.09) -- 1.96 2.59
1994 (1) 2.00 0.02 -- (0.02) -- 2.00 3.45
<CAPTION>
Ratio of
Ratio of Ratio of Net Investment
Net Expenses Income
Ratio of Investment to Average to Average
Net Assets Expenses Income Net Assets Net Assets Portfolio
End of to Average to Average (Excluding (Excluding Turnover
Period (000) Net Assets Net Assets Waivers) Waivers) Rate
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------
CORPORATE DAILY INCOME PORTFOLIO
- ---------------------------------
CLASS A
1996 $ 48,539 0.35% 5.97% 0.55% 5.77% 295%
1995 50,495 0.35 4.60 0.55 4.40 147
1994 (1) 43,655 0.35 3.45 0.63 3.18 34
<CAPTION>
Net Asset Net Realized and Distributions Distributions
Value Net Unrealized from Net from Net Asset
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total
Of Period Income on Securities Income Gains of Period Return
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------
SHORT-DURATION MORTGAGE PORTFOLIO
- --------------------------------------
CLASS A
1996 $ 9.64 $ 0.63 $ 0.25 $ (0.64) $ -- $ 9.88 9.43%
1995 9.90 0.48 (0.24) (0.48) (0.02) 9.64 2.29
1994 (2) 10.00 0.22 (0.10) (0.22) -- 9.90 1.84
<CAPTION>
Ratio of
Net
Ratio of Ratio of Investment
Net Expenses Income
Ratio of Investment to Average to Average
Net Assets Expenses Income Net Assets Net Assets Portfolio
End of to Average to Average (Excluding (Excluding Turnover
Period (000) Net Assets Net Assets Waivers) Waivers) Rate
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------
SHORT-DURATION MORTGAGE PORTFOLIO
- ----------------------------------
CLASS A
1996 $ 1,815 0.45% 6.50% 0.80% 6.15% 356%
1995 3,607 0.45 4.90 0.64 4.71 741
1994 (2) 3,921 0.45 3.16 0.93 2.68 166
</TABLE>
5
<PAGE> 67
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
Net Asset Net Realized and Distributions Distributions
Value Net Unrealized from Net from Net Asset
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total
Of Period Income on Securities Income Gains of Period Return
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------
SHORT-DURATION GOVERNMENT PORTFOLIO
- -----------------------------------------
CLASS A
1996 $ 9.73 $ 0.61 $ 0.36 $ (0.61) $ -- $ 10.09 10.27%
1995 10.06 0.40 (0.32) (0.40) (0.01) 9.73 0.93
1994 10.13 0.40 0.04 (0.40) (0.11) 10.06 4.41
1993 10.09 0.52 0.14 (0.52) (0.10) 10.13 6.66
1992 9.82 0.68 0.27 (0.68) -- 10.09 10.00
1991 9.65 0.76 0.17 (0.76) -- 9.82 9.98
1990 9.54 0.75 0.11 (0.75) -- 9.65 9.01
1989 9.81 0.76 (0.27) (0.76) -- 9.54 5.21
1988 (3) 10.00 0.76 (0.19) (0.76) -- 9.81 6.09
CLASS B
1996 9.71 0.58 0.36 (0.58) -- 10.07 9.94
1995 10.04 0.38 (0.32) (0.38) (0.01) 9.71 0.70
1994 10.13 0.37 0.02 (0.37) (0.11) 10.04 3.93
1993 10.09 0.48 0.14 (0.48) (0.10) 10.13 6.34
1992 9.82 0.65 0.27 (0.65) -- 10.09 9.68
1991 (4) 9.75 0.17 0.07 (0.17) -- 9.82 (0.25)
<CAPTION>
Ratio of
Net
Ratio of Ratio of Investment
Net Expenses Income
Ratio of Investment to Average to Average
Net Assets Expenses Income Net Assets Net Assets Portfolio
End of to Average to Average (Excluding (Excluding Turnover
Period (000) Net Assets Net Assets Waivers) Waivers) Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------
SHORT-DURATION GOVERNMENT PORTFOLIO
- -----------------------------------
CLASS A
1996 $ 73,431 0.45% 6.13% 0.53% 6.05% 184%
1995 99,458 0.45 4.12 0.52 4.05 45
1994 128,063 0.45 3.98 0.52 3.91 105
1993 100,153 0.45 5.04 0.55 4.94 80
1992 63,194 0.45 6.82 0.56 6.71 36
1991 51,457 0.45 7.73 0.54 7.64 17
1990 48,683 0.45 7.72 0.58 7.59 6
1989 54,887 0.41 7.95 0.58 7.78 55
1988 (3) 27,279 0.32 8.17 0.78 7.71 85
CLASS B
1996 39 0.75 5.85 0.83 5.77 184
1995 131 0.75 3.92 0.82 3.85 45
1994 37 0.75 3.67 0.82 3.60 105
1993 135 0.75 4.74 0.85 4.64 80
1992 135 0.75 6.52 0.85 6.42 36
1991 (4) 150 0.75 7.25 0.93 7.07 17
</TABLE>
6
<PAGE> 68
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
Net Asset Net Realized and Distributions Distributions
Value Net Unrealized from Net from Net Asset
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total
Of Period Income on Securities Income Gains of Period Return
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------
INTERMEDIATE-DURATION GOVERNMENT PORTFOLIO
- -------------------------------------------------
CLASS A
1996 $ 9.33 $ 0.60 $ 0.73 $ (0.60) $ -- $ 10.06 14.60%
1995 10.13 0.50 (0.73) (0.50) (0.07) 9.33 (2.19)
1994 10.23 0.54 0.11 (0.54) (0.21) 10.13 6.44
1993 10.06 0.62 0.28 (0.62) (0.11) 10.23 9.51
1992 9.75 0.70 0.40 (0.70) (0.09) 10.06 11.44
1991 9.48 0.73 0.28 (0.74) -- 9.75 11.06
1990 9.32 0.76 0.16 (0.76) -- 9.48 9.94
1989 9.71 0.78 (0.39) (0.78) -- 9.32 4.23
1988 (5) 10.00 0.77 (0.29) (0.77) -- 9.71 5.37
- -----------------
GNMA PORTFOLIO
- -----------------
CLASS A
1996 $ 9.17 $ 0.67 $ 0.67 $ (0.67) $ -- $ 9.84 15.06%
1995 10.07 0.64 (0.90) (0.64) -- 9.17 (2.46)
1994 10.22 0.66 (0.06) (0.66) (0.09) 10.07 6.09
1993 9.99 0.75 0.27 (0.75) (0.04) 10.22 10.92
1992 9.61 0.79 0.38 (0.79) -- 9.99 12.49
1991 9.31 0.83 0.30 (0.83) -- 9.61 12.74
1990 9.15 0.88 0.16 (0.88) -- 9.31 11.53
1989 9.47 0.87 (0.32) (0.87) -- 9.15 6.19
1988 (6) 10.00 0.77 (0.53) (0.77) -- 9.47 3.25
CLASS B
1996 9.17 0.64 0.67 (0.64) -- 9.84 14.72
1995 (7) 9.16 0.35 0.01 (0.35) -- 9.17 4.00+
<CAPTION>
Ratio of
Net
Ratio of Ratio of Investment
Net Expenses Income
Ratio of Investment to Average to Average
Net Assets Expenses Income Net Assets Net Assets Portfolio
End of to Average to Average (Excluding (Excluding Turnover
Period (000) Net Assets Net Assets Waivers) Waivers) Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------
INTERMEDIATE-DURATION GOVERNMENT PORTFOLIO
- ------------------------------------------
CLASS A
1996 $ 164,978 0.45% 6.12% 0.53% 6.04% 115%
1995 243,671 0.45 5.20 0.52 5.13 61
1994 336,814 0.45 5.24 0.53 5.16 56
1993 259,488 0.45 6.16 0.53 6.08 52
1992 199,901 0.45 7.08 0.54 6.99 62
1991 184,193 0.45 7.78 0.54 7.69 39
1990 127,966 0.45 8.01 0.74 7.72 34
1989 102,166 0.41 8.32 0.72 8.01 36
1988 (5) 77,542 0.28 8.40 1.67 7.01 56
- --------------
GNMA PORTFOLIO
- --------------
CLASS A
1996 $ 136,394 0.49% 7.04% 0.51% 7.02% 20%
1995 182,225 0.47 6.89 0.50 6.86 85
1994 262,162 0.45 6.38 0.50 6.32 70
1993 193,204 0.45 7.49 0.52 7.42 23
1992 120,712 0.45 8.09 0.52 8.02 9
1991 56,912 0.45 8.66 0.61 8.50 16
1990 7,899 0.44 9.50 0.49 9.45 29
1989 8,367 0.37 9.49 0.44 9.42 19
1988 (6) 4,968 0.03 9.49 0.74 8.78 48
CLASS B
1996 15 0.79 6.71 0.81 6.69 20
1995 (7) 14 0.79 6.80 0.82 6.77 85
+ Returns are for the period indicated and have not been annualized.
1 Corporate Daily Income Class A shares were offered beginning September 28, 1993. All ratios including total
return for the period indicated have been annualized.
2 Short-Duration Mortgage Class A shares were offered beginning May 20, 1993. All ratios including total return for
the period indicated have been annualized. Prior to June 30, 1994, Bear Stearns Asset Management served as the
Investment Adviser.
3 Short-Duration Government Class A shares were offered beginning February 17, 1987. All ratios including total
return for the period indicated have been annualized.
4 Short-Duration Government Class B shares were offered beginning November 5, 1990. All ratios including total
return for the period indicated have been annualized.
5 Intermediate-Duration Government Class A shares were offered beginning February 17, 1987. All ratios including
total return for the period indicated have been annualized.
6 GNMA Class A shares were offered beginning March 20, 1987. All ratios including total return for the period
indicated have been annualized.
7 GNMA Class B shares were offered beginning July 12, 1994. All ratios, except total return, for the period
indicated have been annualized.
</TABLE>
7
<PAGE> 69
THE TRUST
SEI DAILY INCOME TRUST (the "Trust") is an open-end management investment
company that offers units of beneficial interest ("shares") in separate
diversified investment portfolios. This Prospectus offers Class A shares of the
Short-Duration Mortgage and Intermediate-Duration Government Portfolios; Class A
and Class B shares of the GNMA Portfolio, and Class A, Class B and Class C
shares of the Corporate Daily Income, Government Securities Daily Income and
Short-Duration Government Portfolios, (each a "Portfolio" and, together, the
"Portfolios"). Each Portfolio may have separate classes of shares which provide
for variations in distribution, shareholder servicing and transfer agency costs,
sales charges, voting rights and dividends. The Short-Duration Government,
Intermediate-Duration Government and GNMA Portfolios also offer Class D shares.
Additional information pertaining to the Trust may be obtained by writing to SEI
Financial Services Company, 680 East Swedesford Road, Wayne, Pennsylvania
19087-1658, or by calling 1-800-342-5734.
INVESTMENT
OBJECTIVES AND
POLICIES
CORPORATE DAILY
INCOME PORTFOLIO The Corporate Daily Income Portfolio seeks to provide
higher current income than that typically offered by a
money market fund while maintaining a high degree of
liquidity and a correspondingly higher risk of principal
volatility. Under normal market conditions, the Portfolio
invests exclusively in obligations of U.S. domiciled
issuers (not including foreign branches of U.S. banks or
U.S. branches of foreign banks) consisting of: (i)
commercial paper rated in one of the two highest rating
categories by a nationally recognized statistical rating
organization (each an "NRSRO") or, if unrated, determined
by the Adviser to be of comparable quality at the time of
investment; (ii) obligations (certificates of deposit,
time deposits, bankers' acceptances and bank notes) of
U.S. commercial banks or savings and loan institutions,
provided that such institutions have net assets of at
least $500 million as of the end of their most recent
fiscal year; (iii) U.S. Treasury obligations and
obligations issued or guaranteed as to principal and
interest by agencies or instrumentalities of the U.S.
Government; (iv) corporate obligations (notes, bonds and
debentures) rated in one of the four highest rating
categories by an NRSRO or, if unrated, determined by the
Adviser to be of comparable quality at the time of
investment; (v) mortgage-backed securities; (vi)
asset-backed securities rated in one of the four highest
rating categories by an NRSRO or, if unrated, determined
by the Adviser to be of comparable quality at the time of
investment; and (vii) repurchase agreements involving the
foregoing securities. However, the Adviser intends to
limit the Portfolio's purchases of non-mortgage
asset-backed securities to securities that are readily
marketable at the time of purchase. Securities rated in
the lowest category of investment grade may have
speculative characteristics. In the event a security owned
by the Portfolio is downgraded below these rating
categories, the Adviser will take appropriate action with
regard to such security. Under normal
8
<PAGE> 70
conditions, the Portfolio's duration will range from half
a year to one and a half years. Maximum remaining
maturity on any single issue will be five years, with
the exception of floating rate securities that reset at
least annually.
GOVERNMENT
SECURITIES DAILY
INCOME PORTFOLIO The Government Securities Daily Income Portfolio seeks to
provide higher current income than that typically offered
by a money market fund while maintaining a high degree of
liquidity and a correspondingly higher risk of principal
volatility. Under normal market conditions, the Portfolio
invests exclusively in (i) U.S. Treasury obligations; (ii)
obligations issued or guaranteed as to principal and
interest by the agencies and instrumentalities of the U.S.
Government; and (iii) repurchase agreements involving such
obligations. Under normal conditions, the Portfolio's
duration will range from half a year to one and a half
years. Maximum remaining maturity on any single issue will
be five years, with the exception of floating rate
securities that reset at least annually.
SHORT-DURATION
MORTGAGE PORTFOLIO Under normal conditions, the Short-Duration Mortgage
Portfolio seeks to provide a high level of current income
consistent with low principal volatility. Under normal
market conditions, the Portfolio will invest at least 65%
of its total assets in fixed rate and adjustable rate
mortgage-backed securities ("ARMs") that are either
privately issued or guaranteed by the U.S Government, its
agencies or instrumentalities. The Portfolio may also
invest in (i) asset-backed securities rated in one of the
two highest rating categories for such securities; (ii)
direct obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; (iii)
repurchase agreements involving such obligations; and (iv)
futures contracts and related options, swaps, caps, and
floors, as described in this Prospectus and the Statement
of Additional Information, as a hedging strategy.
Under normal conditions, the Portfolio is expected
to maintain a duration of less than three years.
In addition, the Portfolio will acquire only
adjustable rate securities that have an interest rate
reset period not exceeding one year.
SHORT-DURATION
GOVERNMENT
PORTFOLIO The Short-Duration Government Portfolio seeks to preserve
principal value and maintain a high degree of liquidity
while providing current income. Under normal market
conditions, the Portfolio invests exclusively in (i) U.S.
Treasury obligations; (ii) obligations issued or
guaranteed as to principal and interest by the agencies
and instrumentalities of the U.S. Government, including
Government National Mortgage Association ("GNMA") and
other mortgage-backed securities; and (iii) repurchase
agreements involving such obligations. Under normal market
conditions, the Portfolio will have a duration of up to
three years.
INTERMEDIATE-
DURATION
GOVERNMENT
PORTFOLIO The Intermediate-Duration Government Portfolio seeks to
preserve principal value and maintain a high degree of
liquidity while providing current income. Under normal
market conditions, the Portfolio invests in the
investments permitted for the
9
<PAGE> 71
Short-Duration Government Portfolio and may also invest
in futures contracts (including futures on U.S. Treasury
obligations and Eurodollar instruments) and related
options, swaps, caps and floors, as described in this
Prospectus and the Statement of Additional Information,
as a hedging strategy. Under normal market conditions,
this Portfolio will have a duration of two and one-half
to five years.
GNMA PORTFOLIO The GNMA Portfolio seeks to preserve principal value and
maintain a high degree of liquidity while providing
current income. Under normal market conditions, the
Portfolio invests in the investments permitted for the
Short-Duration Government Portfolio, but without
restrictions on portfolio duration. At least 65% of the
total assets of the Portfolio will, under normal
circumstances, be invested in instruments issued by GNMA.
In addition, the GNMA Portfolio may invest in futures
contracts (including futures on U.S. Treasury obligations)
and related options, swaps, caps and floors, as described
in this Prospectus and the Statement of Additional
Information, as a hedging strategy, and enter into dollar
roll transactions with selected banks and broker-dealers.
There can be no assurance that the Portfolios will
achieve their respective investment objectives.
GENERAL
INVESTMENT
POLICIES
Each Portfolio may invest up to 10% of its net assets in
illiquid securities. However, restricted securities,
including Rule 144A securities and section 4(2) commercial
paper, that meet the criteria established by the Board of
Trustees of the Trust will be considered liquid. In
addition, each Portfolio's investments may include U.S.
Treasury STRIPS ( as defined in the "Description of
Permitted Investments and Risk Factors").
Each Portfolio may purchase securities on a
when-issued basis.
For temporary defensive purposes during periods
when the Adviser believes that market conditions warrant,
any Portfolio may invest up to 100% of its assets in
investments such as money market instruments (including
securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, repurchase agreements,
certificates of deposit and bankers' acceptances issued by
banks or savings and loan associations having net assets
of at least $500 million as of the end of their most
recent fiscal year) or other long- and short-term debt
instruments which are rated A or higher by Standard &
Poor's Corporation ("S&P") or Moody's Investors Service,
Inc. ("Moody's"), and it also may hold a portion of its
assets in cash or cash equivalents.
The Portfolio turnover rates for the Corporate
Daily Income, Short-Duration Mortgage, Short-Duration
Government, Intermediate-Duration Government and
10
<PAGE> 72
GNMA Portfolios for the fiscal year ended January 31,
1996 were 295%, 356%, 184%, 115% and 20%, respectively.
A high turnover rate will result in higher transaction
costs and may result in additional taxes for shareholders.
See "Taxes."
For a description of the permitted investments, see
the "Description of Permitted Investments and Risk
Factors" and the Statement of Additional Information.
INVESTMENT
LIMITATIONS
The investment objectives and certain of the 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.
Each 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. This
limitation applies to 75% of each Portfolio's total
assets.
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 obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities
(but does apply to mortgage-backed securities of
non-government issuers). For purposes of this
limitation, asset-backed securities secured by truck
and auto loan leases, credit card receivables and home
equity loans each will be considered a separate
industry.
3. Borrow money except for temporary or emergency purposes
and then only an amount not exceeding 10% of the value
of the total assets of that Portfolio. This borrowing
provision is included solely to facilitate the orderly
sale of portfolio securities to accommodate substantial
redemption requests if they should occur and is not for
investment purposes. All borrowings will be repaid
before making additional investments for that Portfolio
and any interest paid on such borrowings will reduce
the income of that Portfolio.
The foregoing percentage limitations (except the
limitation on borrowing) will apply at the time of the
purchase of a security. Additional fundamental and non-
fundamental investment limitations are set forth in the
Statement of Additional Information.
11
<PAGE> 73
THE MANAGER
SEI Financial Management Corporation (the "Manager" or 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 (i) providing the Trust with overall
management services, regulatory reporting, all necessary
office space, equipment, personnel and facilities and (ii)
acting as transfer agent, dividend disbursing agent, and
shareholder servicing agent for Class A, Class B and Class
C shares, as applicable, of each Portfolio.
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
each Portfolio except the GNMA Portfolio, for which the
Manager is entitled to a fee of .32%. The Manager has
voluntarily agreed to waive a portion of its fee in order
to limit the total operating expenses of each Portfolio.
The Manager reserves the right, in its sole discretion, to
terminate these voluntary waivers at any time. For the
fiscal year ended January 31, 1996, the Corporate Daily
Income, Short-Duration Mortgage, Short-Duration
Government, Intermediate-Duration Government, and GNMA
Portfolios paid management fees, after waivers, of .20%,
.00%, .29%, .29%, and .31%, respectively, of their average
daily net assets. The Government Securities Daily Income
Portfolio had not commenced operations as of January 31,
1996.
THE ADVISER
Wellington Management Company (the "Adviser" or "WMC")
serves as the investment adviser for each Portfolio under
advisory agreements with the Trust. The Adviser is a
professional investment counseling firm which provides
investment services to investment companies, employee
benefit plans, endowments, foundations, and other
institutions and individuals. Under these advisory
agreements, the Adviser invests the assets of the
Portfolios and continuously reviews, supervises and
administers each 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.
John C. Keogh, Senior Vice President of the
Adviser, serves as the portfolio manager for the Corporate
Daily Income and Short-Duration Government Portfolios. He
has been an investment professional with the Adviser since
1983. Mr. Keogh has served as portfolio manager for the
Corporate Daily Income Portfolio since it commenced
operations and has served as portfolio manager for the
Short-Duration Government Portfolio since 1995. Mr. Keogh
will also serve as portfolio manager for the Government
Securities Daily Income Portfolio upon the commencement of
its operations.
12
<PAGE> 74
Paul D. Kaplan, Senior Vice President of the
Adviser, serves as the portfolio manager for the GNMA
Portfolio. He has been an investment professional with the
Adviser since 1978. Mr. Kaplan has served as portfolio
manager for the GNMA Portfolio since it commenced
operations.
Thomas L. Pappas, Senior Vice President of the
Adviser, serves as the portfolio manager for the
Intermediate-Duration Government and Short-Duration
Mortgage Portfolios. He has been an investment
professional with the Adviser since 1987. Mr. Pappas has
served as portfolio manager for the Intermediate-Duration
Government and Short-Duration Mortgage Portfolios since
1995.
As of March 31, 1996, the Adviser had discretionary
management authority with respect to approximately $114.1
billion of assets, including the assets of the Trust and
SEI Liquid Asset Trust, each an open-end management
investment company administered by the Manager. The
Adviser's predecessor organizations have provided
investment advisory services to investment companies since
1933, and to investment counseling clients since 1960. The
principal address of the Adviser is 75 State Street,
Boston, Massachusetts 02109. WMC is a Massachusetts
general partnership, of which the following persons are
managing partners: Robert W. Doran, Duncan M. McFarland
and John R. Ryan.
The Adviser is entitled to a fee with respect to
each Portfolio, which fee is calculated daily and paid
monthly, at an annual rate of .10% of the average daily
net assets of each group of Portfolios up to $500 million,
.075% of such average daily net assets from $500 million
to $1 billion and .05% of such average daily net assets in
excess of $1 billion. For the purpose of calculating such
fees, the Portfolios are aggregated into the following
groups: (i) Corporate Daily Income and Government
Securities Daily Income Portfolios, (ii) Short-Duration
Government, Intermediate-Duration Government and GNMA
Portfolios and (iii) Short-Duration Mortgage Portfolio.
The fees are based upon each group's aggregate average
daily net assets, and are allocated daily among each
Portfolio within a group on the basis of each Portfolio's
relative net assets. For the fiscal year ended January 31,
1996, the Corporate Daily Income, Short-Duration Mortgage,
Short-Duration Government, Intermediate-Duration
Government and GNMA Portfolios paid WMC advisory fees,
after fee waivers, of .06%, .10%, .08%, .08%, and .10%,
respectively. The Government Securities Daily Income
Portfolio had not commenced operations as of January 31,
1996.
13
<PAGE> 75
DISTRIBUTION
AND SHAREHOLDER
SERVICING
SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI, serves as each Portfolio's
distributor pursuant to a distribution agreement (the
"Distribution Agreement") with the Trust. The Portfolios
have adopted a distribution plan for their Class D shares
(the "Class D Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940
Act").
The 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 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, a Portfolio will pay the
Distributor 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 and administrative services. Under the
Class B and Class C shareholder service plans, a Portfolio
will pay a shareholder service fee to the Distributor at
an annual rate of up to .25% of its 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 investments; 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 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. Certain financial institutions
offering shares to their customers may be required to
register as dealers pursuant to state laws.
14
<PAGE> 76
The Distributor may, from time to time in its sole
discretion, institute one or more promotional incentive
programs, which will be paid by the Distributor from its
own resources. Under any such program, the Distributor
will provide promotional incentives, in the form of cash
or other compensation, including merchandise, airline
vouchers, trips and vacation packages, to all dealers
selling shares of the Portfolios. Such promotional
incentives will be offered uniformly to all dealers and
predicated upon the amount of shares of the Portfolios
sold by the dealer.
PURCHASE AND
REDEMPTION OF
SHARES
Financial institutions may acquire shares of the
Portfolios for their own account, or as a record owner on
behalf of fiduciary, agency or custody accounts, by
placing orders with the Transfer Agent. Institutions that
use certain SEI proprietary systems may place orders
electronically through those systems. State securities
laws may require banks and financial institutions
purchasing shares for their customers to register as
dealers pursuant to state laws. Financial institutions may
impose an earlier cut-off time for receipt of purchase
orders directed through them to allow 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 each Portfolio are offered only to
residents of states in which the shares are eligible for
purchase.
Shares of each Portfolio may be purchased or
redeemed on days on which the New York Stock Exchange is
open for business ("Business Days").
Shareholders who desire to purchase shares with
cash must place their orders with the Transfer Agent prior
to 4:00 p.m. Eastern time on any Business Day for the
order to be accepted on that Business Day. Generally, cash
investments must be transmitted or delivered in federal
funds to the wire agent on the next Business Day following
the 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.
Shares of the GNMA Portfolio may be purchased in
exchange for securities that are permissible investments
of that Portfolio, subject to the Adviser's and Manager's
determination that the securities are acceptable.
Securities accepted in exchange will be valued at the mean
between their bid and asked quotations.
Purchases will be made in full and fractional
shares of a 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
15
<PAGE> 77
net asset value per share of each Portfolio is determined
by dividing the total market value of a Portfolio's
investments and other assets, less any liabilities, by the
total number of outstanding shares of that Portfolio.
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. Net asset value per share is determined daily as of
the close of business of the New York Stock Exchange
(currently 4:00 p.m. Eastern time) on each Business Day.
The market value of each security is obtained by the
Manager from an independent pricing service. The pricing
service may use a matrix system to determine valuations of
equity and fixed income securities. The pricing service
may also provide market quotations. 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. Although the methodology and procedures
are identical, the net asset value of classes within a
Portfolio may differ because of the different
distribution, transfer agency and/or shareholder servicing
fees charged to each class.
Shareholders who desire to redeem shares of a
Portfolio must place their redemption orders with the
Transfer Agent prior to 4:00 p.m. Eastern time on any
Business Day. The redemption price is the net asset value
per share of the Portfolio next determined after receipt
by the Transfer Agent of the redemption order. Payment on
redemption will be made as promptly as possible and, in
any event, within seven days after the redemption order is
received.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Trust's Transfer
Agent will be responsible for any loss, liability, cost or
expense for acting upon wire instructions or upon
telephone instructions that it reasonably believes to be
genuine. The Trust and the Trust's Transfer Agent will
each employ reasonable procedures to confirm that
instructions communicated by telephone are genuine,
including requiring a form of personal identification
prior to acting upon instructions received by telephone
and recording telephone instructions.
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, shareholders may
experience difficulties placing redemption orders by
telephone, and may wish to consider placing orders by
other means.
PERFORMANCE
For a Portfolio with multiple classes, the performance of
Class A shares will normally be higher than that of Class
B shares, if any, of such Portfolio because of the
additional shareholder servicing expenses charged Class B
shares. Likewise, the performance of Class B shares will
normally be higher than of Class D shares, if any, of a
Portfolio because of the sales charge and additional
distribution expenses and transfer agency fees charged to
Class D shares. The performance of Class C
16
<PAGE> 78
shares of a Portfolio may be lower than the performance of
that Portfolio's Class D shares, if any, because of the
additional shareholder servicing expenses charged to Class
C shares.
From time to time, each Portfolio may advertise
yield and total return. 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 yield of a
Portfolio refers to the income generated by a hypothetical
investment in such Portfolio over a 30-day period. This
income is then "annualized," i.e., the income over 30 days
is assumed to be generated over one year and is shown as a
percentage of the investment.
The total return of a Portfolio refers to the
average compounded rate of return on a hypothetical
investment for designated time periods, assuming that the
entire investment is redeemed at the end of each period
and assuming the reinvestment of all dividend and capital
gain distributions.
A Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical) or
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs; or (iv) to other investment
alternatives. A 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. A 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. A Portfolio may also quote
financial and business publications and periodicals as
they relate to fund management, investment philosophy and
investment techniques.
A 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, state or local income tax treatment of the
Portfolios or their shareholders. Accordingly,
shareholders are urged to consult their tax advisers
regarding specific
17
<PAGE> 79
questions as to federal, state and local income taxes.
State and local tax consequences of an investment in a
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 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 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, as amended, (the
"Code") 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.
Tax Status
of Distributions Each Portfolio distributes substantially all of its net
investment income (including net short-term capital gains)
to shareholders. Dividends from a Portfolio's net
investment income are taxable to its shareholders as
ordinary income (whether received in cash or in additional
shares) 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 Portfolios provide annual reports to
shareholders of the federal income tax status of all
distributions.
Each Portfolio intends to make sufficient
distributions to avoid liability for the federal excise
tax applicable to RICs.
Dividends declared by a Portfolio in October,
November or December of any year and payable to
shareholders of record on a date in such a month will be
deemed to have been paid by the Portfolio and received by
the shareholders on December 31 of the year declared if
paid by the Portfolio at any time during the following
January.
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. Each Portfolio
will inform shareholders annually of the percentage of
income and distributions derived from direct U.S.
Government obligations. Shareholders should consult their
tax advisers to determine whether any portion of the
income dividends received from a Portfolio is considered
tax exempt in their particular states.
With respect to investments such as U.S. Treasury
STRIPS, which are sold at original issue discount and thus
do not make periodic cash interest payments, each
Portfolio will be required to include as part of its
current income the accreted interest on such obligations
even though such Portfolio has not received any interest
payments on such obligations during that period. Because
each Portfolio distributes all of its net investment
income to its shareholders, a Portfolio may have to sell
portfolio securities to distribute such imputed income,
which may occur at a time
18
<PAGE> 80
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 Portfolios, the Trust
consists of the following portfolios: Money Market
Portfolio, Prime Obligation Portfolio, Government
Portfolio, Government II Portfolio, Treasury Portfolio,
Treasury II Portfolio and Federal Securities 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 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 an unaudited report semi-annually and
audited financial statements annually. The Trust furnishes
proxy statements and other reports to shareholders of
record.
19
<PAGE> 81
Shareholder Inquiries Shareholder inquiries should be directed to the Manager,
SEI Financial Management Corporation, 680 E. Swedesford
Road, Wayne, Pennsylvania 19087-1658.
Dividends Substantially all of the net investment income (exclusive
of capital gains) of each Portfolio is distributed in the
form of monthly dividends. Dividends are 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 Portfolios 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, if any, of a Portfolio because of the
additional shareholder servicing expenses charged to Class
B shares. Likewise, the dividends on Class B shares are
normally higher than those on Class D shares, if any, of a
Portfolio because of the additional distribution expenses
and transfer agency fees charged to Class D shares, and
the dividends on Class D shares are normally higher than
those on Class C shares, if any, of a Portfolio because of
the additional shareholder servicing expenses charged to
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 (the
"Custodian"), serves as custodian of the Trust's assets
and as wire agent of the Trust. The Custodian holds cash,
securities and other assets of the Trust as required by
the 1940 Act.
DESCRIPTION
OF PERMITTED
INVESTMENTS
AND RISK FACTORS
The following is a description of certain of the permitted
investment practices for the Portfolios, and the
associated risk factors:
Asset-Backed Securities
Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and
auto loans, leases and credit card receivables. Such
securities are generally issued as pass-through
certificates, which represent undivided fractional
ownership interests in the underlying pools of assets.
Such securities also may be debt instruments, which are
also known as collateralized obligations and are generally
issued as the debt of a special purpose entity, such as a
trust, organized solely for the purpose of owning such
assets and issuing such debt.
Bankers' Acceptances A banker's acceptance is a bill of exchange or time draft
drawn on and accepted by a commercial bank. Bankers'
acceptances are used by corporations to finance the
20
<PAGE> 82
shipment and storage of goods and to furnish dollar
exchange. Maturities are generally six months or less.
Certificates of Deposit
A certificate of deposit is a negotiable, interest-bearing
instrument with a specific maturity. Certificates of
deposit 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.
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 a few to 270 days.
Dollar Roll Transactions
Dollar rolls are transactions in which securities are sold
for delivery in the current month and the seller
simultaneously contracts to repurchase substantially
similar securities on a specified future date. Any
difference between the sale price and the purchase price
is netted against the interest income foregone on the
securities sold to arrive at an implied borrowing rate.
Alternatively, the sale and purchase transactions can be
executed at the same price, with a Portfolio being paid a
fee as consideration for entering into the commitment to
purchase. Dollar rolls may be renewed prior to cash
settlement and initially may involve only a firm
commitment agreement by a Portfolio to buy a security. If
the broker-dealer to whom a Portfolio sells the security
becomes insolvent, a Portfolio's right to repurchase the
security may be restricted. Other risks involved in
entering into dollar rolls include the risk that the value
of the security may change adversely over the term of the
dollar roll and that the security a Portfolio is required
to repurchase may be worth less than the security the
Portfolio originally held.
Fixed Income Securities
Fixed income securities are debt obligations issued by
corporations, municipalities and other borrowers. The
market value of fixed income investments will generally
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. Moreover,
while securities with longer maturities tend to produce
higher yields, the prices of longer maturity securities
are also subject to greater market fluctuations as a
result of changes in interest rates. Changes by recognized
agencies in the rating of any fixed income security and in
the ability of an issuer to make payments of interest and
principal will also affect the value of these investments.
Changes in the value of portfolio securities will not
affect cash income derived from these securities, but will
affect a Portfolio's net asset value.
Futures and Options on
Futures
Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a
specific security at a specified future time and at a
specified price. An option on a futures contract gives the
purchaser the right, in
21
<PAGE> 83
exchange for a premium, to assume a position in a futures
contract at a specified exercise price during the term of
the option. A Portfolio will minimize the risk that it
will be unable to close out a futures contract by only
entering into futures contracts that are traded on
national futures exchanges.
No price is paid upon entering into futures
contracts. Instead, a Portfolio would be required to
deposit an amount of cash or U.S. Treasury securities
known as "initial margin." Subsequent payments, called
"variation margin," to and from the broker, would be made
on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The
margin is in the nature of a performance bond or
good-faith deposit on a futures contract.
Eurodollar instruments are U.S. dollar-denominated
futures contracts or options thereon which are linked to
the London Interbank Offered Rate (LIBOR), although
foreign currency denominated instruments are available
from time to time. Eurodollar futures contracts enable
purchasers to obtain a fixed rate for the lending of funds
and sellers to obtain a fixed rate for borrowings.
In order to avoid leveraging and related risks,
when a Portfolio purchases futures contracts, it will
collateralize its position by depositing an amount of cash
or liquid, high grade debt securities equal to the market
value of the futures positions held, less margin deposits,
in a segregated account with the Trust's Custodian.
Collateral equal to the current market value of the
futures position will be marked to market on a daily
basis.
There are risks associated with these activities,
including the following: (1) the success of a hedging
strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in
markets and movements in interest rates, (2) there may be
an imperfect or no correlation between the changes in
market value of the securities held by a Portfolio and the
prices of futures and options on futures, (3) there may
not be a liquid secondary market for a futures contract or
option, (4) trading restrictions or limitations may be
imposed by an exchange, and (5) government regulations may
restrict trading in futures contracts and options on
futures.
A Portfolio may enter into futures contracts and
options on futures contracts traded on an exchange
regulated by the Commodities Futures Trading Commission
("CFTC"), so long as, to the extent that such transactions
are not for "bona fide hedging purposes," the aggregate
initial margin and premiums on such positions (excluding
the amount by which such options are in the money) do not
exceed 5% of the liquidating value of the Portfolio's
assets. A Portfolio may buy and sell futures contracts and
related options to manage its exposure to changing
interest rates and securities prices. Some strategies
reduce a Portfolio's exposure to price fluctuations, while
others tend to increase its market exposure. Futures and
options on futures can be volatile instruments and involve
certain risks that could negatively impact a Portfolio's
return.
22
<PAGE> 84
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. Illiquid securities include demand instruments with
demand notice periods exceeding seven days, securities for
which there is no secondary market, and repurchase
agreements with maturities of more than seven days in
length.
Mortgage-Backed
Securities Mortgage-backed securities are instruments that entitle
the holder to a share of all interest and principal
payments from mortgages underlying the security. The
mortgages backing these securities include conventional
15- and 30-year fixed-rate mortgages, graduated payment
mortgages, adjustable rate mortgages and balloon
mortgages. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed
securities can be expected to accelerate. Prepayment of
mortgages which underlie securities purchased at a premium
often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital
gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict
accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities: These are
securities that are issued or guaranteed by a U.S.
Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these
mortgage-backed securities are GNMA, the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). FNMA and FHLMC obligations
are not backed by the full faith and credit of the U.S.
Government as GNMA certificates are, but FNMA and FHLMC
securities are supported by the instrumentalities' right
to borrow from the U.S. Treasury. GNMA, FNMA and FHLMC
each guarantees timely distributions of interest to
certificate holders. GNMA and FNMA also each guarantees
timely distributions of scheduled principal. FHLMC has in
the past guaranteed only the ultimate collection of
principal of the underlying mortgage loan; however, FHLMC
now issues mortgage-backed securities (FHLMC Gold PCs)
which also guarantee timely payment of monthly principal
reductions. Government and private guarantees do not
extend to the securities' value, which is likely to vary
inversely with fluctuations in interest rates.
Private Pass-Through Securities: These are
mortgage-backed securities issued by a non-governmental
entity, such as a trust. These securities include
collateralized mortgage obligations ("CMOs") and real
estate mortgage investments conduits ("REMICs") that are
rated in one of the top two rating categories. While they
are generally structured with one or more types of credit
enhancement, private pass-through securities typically
lack a guarantee by an entity having the credit status of
a governmental agency or instrumentality.
23
<PAGE> 85
Collateralized Mortgage Obligations: CMOs are debt
obligations or multiclass pass-through certificates issued
by agencies or instrumentalities of the U.S. Government or
by private originators or investors in mortgage loans. In
a CMO, series of bonds or certificates are usually issued
in multiple classes. Principal and interest paid on the
underlying mortgage assets may be allocated among the
several classes of a series of a CMO in a variety of ways.
Each class of a CMO, often referred to as a "tranche," is
issued with a specific fixed or floating coupon rate and
has a stated maturity or final distribution date.
Principal payments on the underlying mortgage assets may
cause CMOs to be retired substantially earlier than their
stated maturities or final distribution dates, resulting
in a loss of all or part of any premium paid.
REMICs: A REMIC is a CMO that qualifies for
special tax treatment under the Internal Revenue Code and
invests in certain mortgages principally secured by
interests in real property. Investors may purchase
beneficial interests in REMICs, which are known as
"regular" interests, or "residual" interests. Guaranteed
REMIC pass-through certificates ("REMIC Certificates")
issued by FNMA or FHLMC represent beneficial ownership
interests in a REMIC trust consisting principally of
mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage
pass-through certificates. For FHLMC REMIC Certificates,
FHLMC guarantees the timely payment of interest, and also
guarantees the payment of principal as payments are
required to be made on the underlying mortgage
participation certificates. FNMA REMIC Certificates are
issued and guaranteed as to timely distribution of
principal and interest by FNMA.
Parallel Pay Securities, PAC Bonds: Parallel pay
CMOs and REMICs are structured to provide payments of
principal on each payment date to more than one class.
These simultaneous payments are taken into account in
calculating the stated maturity date or final distribution
date of each class, which must be retired by its stated
maturity date or final distribution date, but may be
retired earlier. Planned Amortization Class CMOs ("PAC
Bonds") generally require payments of a specified amount
of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on
such securities having the highest priority after interest
has been paid to all classes.
Stripped Mortgage-Backed Securities ("SMBs"): SMBs
are usually structured with two classes that receive
specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One
class may receive all of the interest payments, and is
thus termed an interest-only class ("IO"), while the other
class may receive all of the principal payments, and is
thus termed the principal-only class ("PO"). The value of
IOs tends to increase as rates rise and decrease as rates
fall; the opposite is true of POs. SMBs are extremely
sensitive to changes in interest rates because of the
impact thereon of prepayment of principal
24
<PAGE> 86
on the underlying mortgage securities can experience wide
swings in value in response to changes in interest rates
and associated mortgage prepayment rates. During times
when interest rates are experiencing fluctuations, such
securities can be difficult to price on a consistent
basis. The market for SMBs is not as fully developed as
other markets; SMBs, therefore, may be illiquid.
Risk Factors: Due to the possibility of
prepayments of the underlying mortgage instruments,
mortgage-backed securities generally do not have a known
maturity. In the absence of a known maturity, market
participants generally refer to an estimated average life.
An average life estimate is a function of an assumption
regarding anticipated prepayment patterns, based upon
current interest rates, current conditions in the relevant
housing markets and other factors. The assumption is
necessarily subjective, and thus different market
participants can produce different average life estimates
with regard to the same security. There can be no
assurance that estimated average life will be a security's
actual average life.
REITs Real Estate Investment Trusts ("REITs") are trusts that
invest primarily in commercial real estate or real
estate-related loans. The value of interests in REITs may
be affected by the value of the property owned or the
quality of the mortgages held by the trust.
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. The Portfolio will have actual or
constructive possession of 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 right 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.
Time Deposits A time deposit is a non-negotiable receipt 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; no Portfolio will invest more than 10% of its
nets assets in such time deposits and other illiquid
securities.
U.S. Government Agency
Securities 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, FHLMC, the Federal Land Banks and
the U.S. Postal Service. Some of these securities are
25
<PAGE> 87
supported by the full faith and credit of the U.S.
Treasury (e.g., GNMA 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., FNMA securities). Guarantees of principal by
agencies or instrumentalities of the U.S. Government may
be a guarantee of payment at the maturity of the
obligation so that in the event of a default prior to
maturity there might not be a market and thus no means of
realizing 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 as well as separately
traded interest and principal component parts of such
obligations, known as Separately Traded Registered
Interest and Principal Securities ("STRIPS"), that are
transferable through the federal book-entry system.
U.S. Treasury STRIPS U.S. Treasury 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 investments.
See also "Taxes."
When-Issued and Delayed
Delivery Securities
(including TBA
Mortgage-Backed
Securities) When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. A Portfolio will maintain with the
Custodian a separate account with liquid, high grade debt
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these
securities is fixed as of the purchase date, and no
interest accrues to a Portfolio before settlement. These
securities are subject to market fluctuation due to
changes in market interest rates, and it is possible that
the market value at the time of settlement could be higher
or lower than the purchase price if the general level of
interest rates has changed. Although a Portfolio generally
purchases securities on a when-issued or forward
commitment basis with the intention of actually acquiring
securities, the Portfolio may dispose of a when-issued
security or forward commitment prior to settlement if the
Adviser deems it appropriate to do so.
One form of when-issued or delayed-delivery
security that a Portfolio may purchase is a "to be
announced" ("TBA") mortgage-backed security. A TBA
mortgage-backed security transaction arises when a
mortgage-backed security, such as a GNMA pass-through
security, is purchased or sold with the specific pools
that will constitute that GNMA pass-through security to be
announced on a future settlement date.
26
<PAGE> 88
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Annual Operating Expenses................... 2
Financial Highlights........................ 5
The Trust................................... 8
Investment Objectives and Policies.......... 8
General Investment Policies................. 10
Investment Limitations...................... 11
The Manager................................. 12
The Adviser................................. 12
Distribution and Shareholder Servicing...... 14
Purchase and Redemption of Shares........... 15
Performance................................. 16
Taxes....................................... 17
General Information......................... 19
Description of Permitted Investments
and Risk Factors.......................... 20
</TABLE>
27
<PAGE> 89
SEI DAILY INCOME TRUST
MAY 31, 1996
- --------------------------------------------------------------------------------
GOVERNMENT PORTFOLIO
- --------------------------------------------------------------------------------
This Prospectus concisely sets forth 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 May 31, 1996, has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, Pennsylvania 19087-1658, or by calling 1-800-342-5734.
The Statement of Additional Information is incorporated into this Prospectus by
reference.
SEI Daily Income 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 professionally managed diversified portfolios
of securities. Some portfolios offer separate classes of units of beneficial
interest that differ from each other primarily in the allocation of certain
distribution and/or shareholder servicing expenses. This Prospectus offers Class
G shares of the Government 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.
- --------------------------------------------------------------------------------
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.
<PAGE> 90
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) CLASS G
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Management/Advisory Fees (after fee waiver) (1) .16%
12b-1 Fees (after fee waiver) (2) .40%
Total Other Expenses .29%
Shareholder Servicing Fees .25%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (3) .85%
- ---------------------------------------------------------------------------------------------------------------------
</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 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. The maximum 12b-1 fees payable by Class G shares of the
Portfolios are .50%.
(3) Absent these fee waivers, total operating expenses for the Class G shares
of the Portfolio would be 1.06%.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 yr. 3 yrs. 5 yrs. 10 yrs.
----- ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment assuming (1) a
5% annual return and (2) redemption at the end of each time period:
Government Portfolio $9 $27 $47 $105
- ---------------------------------------------------------------------------------------------------------------------
</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 Portfolio also offers Class A, Class B and Class C shares,
which are subject to the same expenses, except that each has different
distribution and/or shareholder servicing costs. Additional information may be
found under "The Manager," "The Adviser" and "Distribution and Shareholder
Servicing." Long-term shareholders may eventually pay more than the economic
equivalent of the maximum front-end sales charges otherwise permitted by the
NASD Rules.
2
<PAGE> 91
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout each
period have been audited by Arthur Andersen LLP, independent public
accountants, whose report thereon, dated March 14, 1996, was unqualified. This
information should be read in conjunction with the Trust's financial statements
as of and for the fiscal year ended January 31, 1996, and notes thereto, which
are included in the Trust's Statement of Additional Information under the
heading "Financial Information." Additional performance information is set
forth in the Trust's 1996 Annual Report to shareholders, which is available
upon request and without charge by calling 1-800-342-5734. As of January 31,
1996, there were no Class G shares outstanding of the Government Portfolio.
For a Share Outstanding Throughout each Period*
<TABLE>
<CAPTION>
Net Asset Net Realized and Distributions Distributions
Value Net Unrealized from Net from Net Asset
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total
of Period Income on Securities Income Gains of Period Return
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- -------------------
GOVERNMENT PORTFOLIO
- -------------------
CLASS C
1996 $1.00 $ 0.05 $ -- $ (0.05) $ -- $1.00 5.39%
1995 (1) 1.00 0.03 -- (0.03) -- 1.00 3.41+
<CAPTION>
Ratio of
Ratio of Ratio of Net Investment
Net Expenses Income
Ratio of Investment to Average to Average
Net Assets Expenses Income Net Assets Net Assets
End of to Average to Average (Excluding (Excluding
Period (000) Net Assets Net Assets Waivers) Waivers)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
- --------------------
GOVERNMENT PORTFOLIO
- --------------------
CLASS C
1996 $ 542,936 0.70% 5.23% 0.84% 5.09%
1995 (1) 310,835 0.70 4.32 0.89 4.13
(1) The Class C shares of the Portfolio were first offered April 7, 1994. All ratios, except total return, for the period
indicated have been annualized.
+ 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 the former Class C shares.
</TABLE>
3
<PAGE> 92
THE TRUST
SEI DAILY INCOME TRUST (the "Trust") is an open-end management investment
company that offers units of beneficial interest ("shares") in separate
diversified investment portfolios. This Prospectus offers Class G shares of the
Trust's Government Portfolio (the "Portfolio.") The Portfolio has separate
classes of shares which provide for variations in distribution, shareholder
servicing and transfer agency costs, voting rights and dividends. Additional
information pertaining to the Trust may be obtained by writing SEI Financial
Services Company, 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658, 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 market conditions, the
Portfolio invests exclusively in (i) U.S. Treasury
obligations; (ii) obligations issued or guaranteed as to
principal and interest by the agencies or
instrumentalities of the U.S. Government; and (iii)
repurchase agreements involving such obligations.
There can be no assurance that the Portfolio will
achieve its investment objective.
GENERAL
INVESTMENT
POLICIES
In purchasing obligations, the Portfolio complies with the
requirements of Rule 2a-7 under the 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, under Rule 2a-7, the Portfolio may only
invest in securities (other than U.S. Government
Securities) rated in one of the two highest categories for
short-term securities by at least two 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 (in accordance
with procedures adopted by the Trust's Board of Trustees)
to be of equivalent quality to rated securities in which
the Portfolio may invest. Purchases by the Portfolio of
unrated securities and securities rated by only one NRSRO
must be ratified by the Trust's Board of Trustees.
Securities rated in the highest rating category 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 by at least one NRSRO (or, if
unrated, determined by the Adviser to be of comparable
4
<PAGE> 93
quality) are considered to be "second tier" securities.
The Portfolio will invest, in the aggregate, no more than
5% of its assets in second tier securities, and an
investment in any one second tier security is limited to
the greater of 1% of the Portfolio's total assets or $1
million. The Portfolio may also hold more than 5% of its
total assets in the first tier securities of a single
issuer for three business days.
Although the Portfolio is governed by Rule 2a-7,
its investment policies are, in certain respects, more
restrictive than those imposed by that Rule.
The Portfolio may invest up to 10% of its net
assets in illiquid securities. However, restricted
securities, including Rule 144A securities and Section
4(2) commercial paper, that meet the criteria established
by the Board of Trustees of the Trust will be considered
liquid. In addition, the Portfolio may invest in U.S.
Treasury 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.
INVESTMENT
LIMITATIONS
The investment objective and certain of the 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 Portfolio
will achieve its investment objective 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 the 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 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
5
<PAGE> 94
issued or guaranteed by the U.S. Government or its
agencies and instrumentalities.
3. Borrow money except for temporary or emergency purposes
and then only in an amount not exceeding 10% of the
value of the total assets of the Portfolio. This
borrowing provision is included solely to facilitate
the orderly sale of portfolio securities to accommodate
substantial redemption requests if they should occur
and is not for investment purposes. All borrowings will
be repaid before making additional investments for the
Portfolio and any interest paid on such borrowings will
reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the
time of the purchase of a security. Additional fundamental
and nonfundamental investment limitations are set forth in
the Statement of Additional Information.
THE MANAGER
SEI Financial Management Corporation (the "Manager" or 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 (i) providing the Trust with overall
management services, regulatory reporting, all necessary
office space, equipment, personnel and facilities and (ii)
acting as 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 .24% of the Portfolio's average daily net
assets. The Manager has contractually agreed to waive up
to all of its fee and, if necessary, pay other operating
expenses in order to limit the total operating expenses to
not more than 1.00% of daily net assets of the Class G
shares of the Portfolio, on an annualized basis. In
addition, the Manager has voluntarily agreed to waive up
to all 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. For the
fiscal year ended January 31, 1996, the Portfolio paid
management fees, after waivers, of .12%.
THE ADVISER
Wellington Management Company (the "Adviser" or "WMC")
serves as the investment adviser for the Portfolio under
an advisory agreement (the "Advisory Agreement") with the
Trust. The Adviser is a professional investment counseling
firm which provides investment services to investment
companies, employee benefit plans, endowments,
foundations, and other institutions and individuals. Under
the Advisory Agreement, the Adviser invests the assets of
the Portfolio and continuously
6
<PAGE> 95
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 March 31, 1996, the Adviser had
discretionary management authority with respect to
approximately $114.1 billion of assets, including the
assets of the Trust and SEI Liquid Asset Trust, each an
open-end management investment company administered by the
Manager. The principal address of the Adviser is 75 State
Street, Boston, Massachusetts 02109. WMC is a
Massachusetts general partnership, of which the following
persons are managing partners: Robert W. Doran, Duncan M.
McFarland and John R. Ryan.
The Adviser is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of
.075% of the combined average daily net assets of the
Trust's seven money market portfolios 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 money market portfolios on the basis of their
relative net assets. For the fiscal year ended January 31,
1996, the Portfolio paid WMC advisory fees (shown here as
a percentage of average daily net assets after voluntary
fee waivers) of .01%.
DISTRIBUTION AND
SHAREHOLDER
SERVICING
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") with the Trust. The Portfolio
has adopted a distribution plan for its Class G shares
(the "Class G Plan") pursuant to Rule 12b-1 under the 1940
Act. The Class G Plan provides for payments to the
Distributor at an annual rate of .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 payments may be used to compensate Class G
shareholders that provide distribution related services to
their customers.
The Portfolio has also adopted plans for each of
its classes, under which firms, including the Distributor,
that provide shareholder and administrative services may
receive compensation therefor. The Class A, B, C and G
plans differ in a number of ways, including the amounts
that may be paid. Under the plans, 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.
7
<PAGE> 96
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 G shareholder service plan, the Portfolio will
pay a shareholder service fee to the Distributor at an
annual rate of up to .25% of the Portfolio's average daily
net assets attributable to Class G shares 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
investments; and assisting clients in changing dividend
options, account designations and addresses.
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. 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 its
own resources. Under any such program, the Distributor
will provide promotional incentives, in the form of cash
or other compensation, including merchandise, airline
vouchers, trips and vacation packages, to all dealers
selling shares of the Portfolios. Such promotional
incentives will be offered uniformly to all dealers and
predicated upon the amount of shares of the Portfolios
sold by the dealer.
PURCHASE AND
REDEMPTION OF
SHARES
Financial institutions may acquire 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 on 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
fund shares can not be purchased by Federal Reserve wire
on Federal holidays restricting wire transfers.
8
<PAGE> 97
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 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 4:30 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 purchase or redeem
shares of the Portfolio after 2:00 p.m. Eastern time must
contact the Transfer Agent one week in advance to
establish the requisite operational requirements for late
day trading. Even after these procedures are in place,
investors are encouraged to execute as many trades as
possible prior to 2:00 p.m. Eastern time.
Shareholders who wish to receive same-day
acceptance of investment in the Portfolio after 2:00 p.m.
Eastern time must contact the Transfer Agent before 4:30
p.m. Eastern time to place the trade and must obtain a
security code number for each trade. It is necessary to
obtain a new security code number for each purchase placed
in the Portfolios after 2:00 p.m. Eastern time. Security
code numbers are assigned exclusively by means of
telephone communications and are effective for one
transaction only and may not be used more than once.
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. Payment on redemptions will be made as promptly as
possible and, in any event, within seven days after the
redemption order is received.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Trust's Transfer
Agent will be responsible for any loss, liability, cost or
expense for acting upon wire instructions or upon
telephone instructions that it reasonably believes to be
genuine. The Trust and the Trust's Transfer Agent will
each employ reasonable procedures to confirm that
instructions communicated by
9
<PAGE> 98
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
For the Portfolio, the performance of Class A shares will
normally be higher than that of Class B shares because of
the additional shareholder servicing expenses charged to
Class B shares. Likewise, the performance of Class B
shares will normally be higher than that of Class C or
Class G shares because of the additional shareholder
servicing 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 the 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: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical) or
financial and business publications and periodicals; (ii)
broad groups of comparable mutual funds; (iii) unmanaged
indices which may assume investment of dividends but
generally do not reflect deductions for administrative and
management costs, or; (iv) to other investment
alternatives. The Portfolio may 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
10
<PAGE> 99
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 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 ("RICs") under Subchapter M of the
Internal Revenue Code of 1986, as amended, (the "Code") so
as to be relieved of federal income tax on net investment
company taxable income and net capital gains (the excess
of net long-term capital gains over net short-term capital
losses) distributed to shareholders. The Portfolio also
intends to make sufficient distributions to avoid
liability for the federal excise tax applicable to RICs.
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 U.S. Treasury
STRIPS, which are sold at original issue discount and thus
do not make periodic cash interest payments, the Portfolio
will be required to include as part of its current income
the 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
11
<PAGE> 100
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-Duration Government
Portfolio (formerly, Short-Term Government Portfolio),
Intermediate-Duration Government Portfolio (formerly,
Intermediate-Term Government Portfolio), GNMA Portfolio,
Short-Duration Mortgage Portfolio (formerly, Short-Term
Mortgage Portfolio), Corporate Daily Income Portfolio and
Government Securities Daily Income 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 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.
12
<PAGE> 101
Reporting The Trust issues an unaudited financial report
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, Pennsylvania 19087-1658.
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 shareholder servicing
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
Public 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, Pennsylvania 19101 (the
"Custodian"), acts as custodian and wire agent of the
assets of the Portfolio. 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
investment practices for the Portfolio 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 the
Portfolio's books. An illiquid security includes a demand
instrument with a demand notice period exceeding seven
days, securities for which 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 the
Portfolio obtains a security and simultaneously commits to
return the security to the seller at an agreed upon price
on an agreed upon date within a number of days from the
date of purchase. The Portfolio will have actual or
constructive possession of the security as collateral
13
<PAGE> 102
for the repurchase agreement. The Portfolio bears a risk
of loss in the event the other party defaults on its
obligations and the Portfolio is delayed or prevented from
exercising its rights to dispose of the collateral or if
the Portfolio realizes a loss on the sale of the
collateral. The Portfolio will enter into repurchase
agreements only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the
agreement based on established guidelines. Repurchase
agreements are considered loans under the 1940 Act.
U.S. Government Agency
Securities 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
Corporation, 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 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., Federal National
Mortgage Association securities). Guarantees of principal
by agencies or instrumentalities of the U.S. Government
may be a guarantee of payment at the maturity of the
obligation so that in the event of a default prior to
maturity there might not be a market and thus no means of
realizing 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 as well as separately
traded interest and principal component parts of such
obligations, known as Separately Traded Registered
Interest and Principal Securities ("STRIPS"), that are
transferable through the federal book-entry system.
U.S. Treasury 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 investments. 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. The Portfolio will maintain
with the Custodian a separate account with liquid high
grade debt securities or cash in an amount at least equal
to
14
<PAGE> 103
these commitments. The interest rate realized on these
securities is fixed as of the purchase date and no
interest accrues to the Portfolio before settlement. These
securities are subject to market fluctuation due to
changes in market interest rates and it is possible that
the market value at the time of settlement could be higher
or lower than the purchase price if the general level of
interest rates has changed. Although the Portfolio
generally purchases securities on a when-issued or forward
commitment basis with the intention of actually acquiring
securities, the Portfolio may dispose of a when-issued
security or forward commitment prior to settlement if the
Adviser deems it appropriate to do so.
15
<PAGE> 104
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Annual Operating Expenses................... 2
Financial Highlights........................ 3
The Trust................................... 4
Investment Objective and Policies........... 4
General Investment Policies................. 4
Investment Limitations...................... 5
The Manager................................. 6
The Adviser................................. 6
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> 105
SEI DAILY INCOME TRUST
MANAGER AND SHAREHOLDER SERVICING AGENT:
SEI FINANCIAL MANAGEMENT CORPORATION
DISTRIBUTOR:
SEI FINANCIAL SERVICES COMPANY
INVESTMENT ADVISER:
WELLINGTON MANAGEMENT COMPANY
This STATEMENT OF ADDITIONAL INFORMATION is not a Prospectus. It is intended to
provide additional information regarding the activities and operations of SEI
Daily Income Trust (the "Trust") and should be read in conjunction with the
Trust's Prospectuses dated May 31, 1996. Prospectuses may be obtained without
charge by writing the Trust's distributor, SEI Financial Services Company, 680
East Swedesford Road, Wayne, PA 19087-1658 or by calling 1-800-342-5734.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE TRUST.............................................................................................. 2
DESCRIPTION OF PERMITTED INVESTMENTS................................................................... 2
THE MANAGER............................................................................................ 12
THE ADVISER............................................................................................ 14
DISTRIBUTION........................................................................................... 15
TRUSTEES AND OFFICERS OF THE TRUST..................................................................... 18
INVESTMENT LIMITATIONS................................................................................. 19
PERFORMANCE............................................................................................ 21
DETERMINATION OF NET ASSET VALUE....................................................................... 25
PURCHASE AND REDEMPTION OF SHARES...................................................................... 26
SHAREHOLDER SERVICES................................................................................... 26
TAXES.................................................................................................. 28
PORTFOLIO TRANSACTIONS................................................................................. 29
DESCRIPTION OF SHARES.................................................................................. 30
LIMITATION OF TRUSTEES' LIABILITY...................................................................... 30
VOTING................................................................................................. 30
SHAREHOLDER LIABILITY.................................................................................. 31
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.................................................... 31
EXPERTS................................................................................................ 33
FINANCIAL STATEMENTS................................................................................... 33
</TABLE>
May 31, 1996
[SEI-F-045-08]
<PAGE> 106
THE TRUST
The Trust is a diversified, 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. Except for differences between the Class A, Class B, Class C,
Class D and/or Class G shares pertaining to distribution and shareholder service
plans, voting rights, dividends and transfer agency expenses, each share of each
portfolio represents an equal proportionate interest in that portfolio with each
other share of that portfolio. The Trust changed its name from SEI Cash+Plus
Trust to its current name in April, 1994.
This Statement of Additional Information relates to the following portfolios:
Money Market, Prime Obligation, Government, Government II, Treasury, Treasury
II, Federal Securities, Corporate Daily Income, Government Securities Daily
Income, Short-Duration Mortgage (formerly Short-Term Mortgage), Short-Duration
Government (formerly Short-Term Government), Intermediate-Duration Government
(formerly Intermediate-Term Government) and GNMA Portfolios (each a
"Portfolio," and, together, the "Portfolios") and any different classes of the
Portfolios. Currently, the Government Securities Daily Income Portfolio is not
selling shares.
Shareholders may purchase shares in some of the Portfolios through five separate
classes: Class A, Class B, Class C, Class D and Class G shares.
DESCRIPTION OF PERMITTED INVESTMENTS
ASSET-BACKED SECURITIES--The Corporate Daily Income and Short-Duration Mortgage
Portfolios may invest in asset-backed securities. Asset-backed
securities are not issued or guaranteed by the United States
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain period by a letter of credit issued by a financial
institution (such as a bank or insurance company) unaffiliated with the issuers
of such securities. The purchase of asset-backed securities raises risk
considerations peculiar to the financing of the instruments underlying such
securities. For example, there is a risk that another party could acquire an
interest in the obligations superior to that of the holders of the asset-backed
securities. There also is the possibility that recoveries on repossessed
collateral may not, in some cases, be available to support payments on those
securities. Asset-backed securities entail prepayment risk, which may vary
depending on the type of asset, but is generally less than the prepayment risk
associated with mortgage-backed securities. In addition, credit card receivables
are unsecured obligations of the card holder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
securities.
<PAGE> 107
COMMERCIAL PAPER--The Corporate Daily Income, Money Market and Prime Obligation
Portfolios may invest in commercial paper. Commercial paper is the term used to
designate unsecured short-term promissory notes issued by corporations and
other entities. Maturities on these issues vary from a few days to nine months.
COMMERCIAL PAPER RATINGS: The following descriptions of commercial paper ratings
have been published by Standard & Poor's Corporation ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff &
Phelps, Inc. ("Duff"), Thomson BankWatch ("Thomson") and IBCA Limited and IBCA,
Inc. (together, "IBCA").
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1 and 2 to indicate the relative degree of safety. Issues rated A-1+
are those with an "overwhelming degree" of credit protection. Those rated A-1
reflect a "very
-2-
<PAGE> 108
strong" degree of safety regarding timely payment. Those rated
A-2 reflect a safety regarding timely payment, but not as high as A-1.
Moody's employs two designations, judged to be high grade commercial paper, to
indicate the relative repayment capacity of rated issuers as follows:
Prime-1 Superior Quality
Prime-2 Strong Quality
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second-highest commercial paper rating assigned by Fitch and reflects an
assurance of timely payment only slightly lower in degree than the strongest
issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors that are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The rating TBW-1 is the highest commercial paper rating assigned by Thomson.
Paper rated TBW-1 indicates a very high likelihood that principal and interest
will be paid on a timely basis. The rating TBW-2 is the second-highest rating
category assigned by Thomson. The relative degree of safety regarding timely
repayment of principal and interest is strong. However, the relative degree of
safety is not as high as for issues rated TBW-1.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
DOLLAR ROLLS--The GNMA Portfolio may enter into dollar rolls. Dollar rolls and
"covered rolls" are transactions in which the Portfolio sells securities
(usually mortgage-backed securities) and simultaneously contracts to repurchase,
typically in 30 or 60 days, substantially similar, but not identical, securities
on a specified future date. During the roll commitment period, a Portfolio
forgoes principal and interest paid on such securities. A Portfolio is
compensated by the difference between the current sales price and the forward
price for the future purchase (often referred to as the "drop") as well as by
the interest earned on the cash proceeds of the initial sale. A "covered roll"
is a specific type of dollar roll for which there is an offsetting cash position
or cash equivalent securities position that matures on or before the forward
settlement date of the dollar roll transaction. As used herein the term "dollar
roll" refers to dollar rolls that are not "covered rolls." At the end of the
roll commitment period, a Portfolio may or may not take delivery of the
securities the Portfolio has contracted to purchase.
FOREIGN SECURITIES--The Money Market Portfolio may invest in foreign securities.
These instruments may subject the holder to investment risks that differ in some
respects from those related to investments in obligations of U.S. issuers. Such
risks include future adverse political and economic developments, the possible
imposition of withholding taxes on interest or other income, possible seizure,
nationalization, or expropriation of foreign deposits, the possible
establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions, which might adversely affect the payment of
principal and interest on such obligations. Foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements than those
applicable to domestic branches of U.S. banks.
-3-
<PAGE> 109
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS--Transactions in the
foregoing instruments may be entered into by certain Portfolios on
U.S. exchanges regulated by the Securities and Exchange Commission ("SEC") or
the Commodities Futures Trading Commission ("CFTC"). Over-the-counter
transactions involve certain risks which may not be present in an exchange
environment.
FUTURES CONTRACTS: The Intermediate-Duration Government, GNMA and
Short-Duration Mortgage Portfolios may enter into futures contracts for
hedging purposes only. A futures contract is a bilateral agreement providing
for the purchase and sale for future delivery of a fixed income security, or a
futures contract may be based on municipal bond or other financial indices,
including any index of fixed income securities. A "sale" of a futures contract
means a contractual obligation to deliver the securities called for by the
contract at a specified price on a specified date. A "purchase" of a futures
contract means a contractual obligation to acquire the securities called for
by the contract at a specified price on a specified date. Although futures
contracts call for the actual delivery or acquisition of securities or, in the
case of futures contracts based on an index, the making or acceptance of a
cash settlement at a specified future time, the contractual obligation is
usually fulfilled before such date without the making or taking of delivery by
"closing out" the contract, that is, by buying or selling, as the case may be,
on a commodities exchange, an identical futures contract calling for
settlement in the same month, subject to the availability of a liquid
secondary market; there can be no assurance that a liquid secondary market
will exist for any particular futures contract. Brokerage commissions are
incurred when a futures contract is bought or sold.
Futures contracts have been designed by exchanges, which have been designated as
"contract markets" by the CFTC, and must be executed through a futures
commission merchant or brokerage firm that is a member of the relevant contract
market. Presently, futures contracts are based on such debt securities as
long-term U.S. Treasury Bonds, Treasury Notes, three-month U.S. Treasury Bills
and bank certificates of deposit. Existing contract markets include the Chicago
Board of Trade and the International Monetary Market of the Chicago Mercantile
Exchange. Futures contracts are traded on these markets, and, through their
clearing corporations, the exchanges guarantee performance of the contracts as
between the clearing members of the exchange.
Futures traders are required to make a good faith margin deposit in cash or
government securities with or for the account of a broker or custodian to
initiate and maintain open positions in futures contracts. A margin deposit is
intended to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish deposit requirements which
are higher than the exchange minimums. Deposit requirements on futures contracts
customarily range upward from less than 5% of the value of the contract being
traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy the required margin, payment of an additional
"variation" margin will be required. Conversely, change in the contract value
may reduce the required margin, resulting in a repayment of the excess margin to
the contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Portfolios expect to earn
interest income on their margin deposits.
At the time of delivery of securities pursuant to a futures contract based on
fixed income securities, adjustments are made to recognize differences in value
arising from the delivery of securities with a different interest rate from that
specified in the contract. In some (but not many) cases, securities called for
by a futures contract may not have been issued when the contract was written.
Traders in futures contracts and related options may be broadly classified as
either "hedgers" or "speculators." Hedgers use the futures markets primarily to
offset unfavorable changes in the value of securities otherwise held or expected
to be acquired for investment purposes. Speculators are less inclined to own the
securities
-4-
<PAGE> 110
underlying the futures contracts which they trade, and use futures contracts
with the expectation of realizing profits from fluctuations in the prices of
underlying securities. The purpose of the purchase or sale of a futures
contract, in the case of a Portfolio that holds or intends to acquire long-term
fixed income securities, is to hedge, that is, to attempt to protect the
Portfolio from fluctuations in interest rates without actually buying or selling
long-term fixed income securities. For example, if a Portfolio owns long-term
bonds and interest rates were expected to increase, the Portfolio might enter
into futures contracts for the sale of debt securities. Such a sale would have
much the same effect as selling an equivalent value of the long-term bonds owned
by the Portfolio. If interest rates did increase, the value of the debt
securities in the portfolio would decline, but the value of the futures
contracts would increase at approximately the same rate, thereby keeping the net
asset value of the Portfolio from declining as much as it otherwise would have.
The Portfolio could accomplish similar results by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase. However, the use of futures contracts as an investment
technique allows a Portfolio to maintain a hedging position without having to
sell its portfolio securities.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated purchases of
long-term bonds at higher prices. Since the fluctuations in the value of futures
contracts should be similar to that of long-term bonds, a Portfolio could take
advantage of the anticipated rise in the value of long-term bonds without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Portfolio could then buy long-term bonds.
To the extent a Portfolio purchases futures contracts for this purpose, the
assets in the segregated asset account maintained to cover the Portfolio's
obligations with respect to such futures contracts will consist of cash,
government securities or high quality fixed income securities in an amount equal
to the difference between the fluctuating market value of such futures contracts
and the aggregate value of the initial and variation margin payments made by the
Portfolio with respect to such futures contracts.
In order to insure that no Portfolio will be deemed to be a "commodity pool" as
defined in CFTC Regulations, all futures transactions must constitute either
bona fide hedging transactions or transactions for other purposes so long as the
aggregate initial margin and premiums required for such transaction will not
exceed five percent of the liquidation value of the qualifying entity's
portfolio, after taking into account unrealized profits and unrealized losses on
any such contracts it has entered into. The Portfolio will only sell futures
contracts to protect securities owned against declines in price or purchase
contracts to protect against an increase in the price of securities intended for
purchase. As evidence of this hedging interest, the Portfolio expects that
approximately 75% of its futures contracts will be "completed"; that is,
equivalent amounts of related securities will have been purchased or are being
purchased by the Portfolio upon sale of open futures contracts.
OPTIONS ON FUTURES CONTRACTS: The Short-Duration Mortgage,
Intermediate-Duration Government and GNMA Portfolios, subject to any
applicable laws, may purchase and write options on futures contracts ("options
on futures contracts") for hedging purposes only. An option on a futures
contract provides the holder with the right to enter into a "long" position in
the underlying futures contract (i.e., a purchase of the futures contract), in
the case of a call option, or a "short" position in the underlying futures
contract (i.e., a sale of the futures contract), in the case of a put option,
at a fixed exercise price up to a stated expiration date or, in the case of
certain options, on such date. Such options on futures contracts will be
traded on contract markets regulated by the CFTC. Depending on the pricing of
the option compared to either the price of the futures contract upon which it
is based or the price of the underlying debt securities, it may or may not be
less risky than ownership of the futures contract or underlying debt
securities. As with the purchase of futures contracts, when a Portfolio is not
fully invested, Wellington Management Company (the "Adviser") may purchase a
call option on a futures contract on behalf of the Portfolio to hedge against
a market advance due to declining interest rates.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the securities which are deliverable upon exercise
of the futures contract. If the futures price at expiration of the option is
below the exercise price, a Portfolio will retain the full amount of the option
premium which provides
-5-
<PAGE> 111
a partial hedge against any decline that may have occurred in the Portfolio's
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the securities which are deliverable
upon exercise of the futures contract. If the futures price at expiration of the
options is higher than the exercise price, a Portfolio will retain the full
amount of the option premium, less related transaction costs, which provides a
partial hedge against any increase in the price of securities which the
Portfolio intends to purchase. If a put or call option a Portfolio has written
is exercised, the Portfolio may incur a loss which will be reduced by the amount
of the premium it receives, less related transaction costs. A straddle involves
the simultaneous writing of put and call options with respect to a futures
contract. The Portfolios will cover these straddles in accordance with
applicable law. Depending on the degree of correlation between changes in the
value of the portfolio securities of a Portfolio and changes in the value of its
futures positions, a Portfolio's losses from existing options on futures
contracts may to some extent be reduced or increased by changes in the value of
the Portfolio's securities. The writer of an option on futures contract is
subject to the requirement of initial and variation margin payments.
A Portfolio may cover the writing of call options on futures contracts (a)
through purchases of the underlying futures contract, or (b) through the holding
of a call on the same futures contract and in the same principal amount as the
call written where the exercise price of the call held (i) is equal to or less
than the exercise price of the call written or (ii) is greater than the exercise
price of the call written if the difference is maintained by the Trust on behalf
of a Portfolio in cash, cash equivalents or U.S. Treasury securities in a
segregated account with its custodian. The Trust may cover the writing of put
options on future contracts on behalf of a Portfolio (a) through sales of the
underlying futures contract, (b) through segregation of cash, cash equivalents
or U.S. Treasury securities in an amount equal to the value of the security or
index underlying the futures contract, or (c) through the holding of a put on
the same futures contract and in the same principal amount as the put written
where the exercise price of the put held is equal to or greater than the
exercise price of the put written or less than the exercise price of the put
written if the difference is maintained by the Portfolio in cash, cash
equivalents or U.S. Treasury securities in a segregated account with its
custodian. Put and call options on futures contracts written by the Trust on
behalf of a Portfolio may also be covered in such other manner as may be in
accordance with the requirements of the exchange on which they are traded and
applicable laws and regulations.
The amount of risk a Portfolio assumes when it purchases an option on a futures
contract is the premium paid for the option plus related transaction costs,
although in order to realize a profit, it may be necessary to exercise the
option and close out the underlying futures contract, subject to the risks of
futures trading described herein. In addition to the correlation risks discussed
above, the purchase of an option also entails the risk that changes in the value
of the underlying futures contract will not be fully reflected in the value of
the option purchased. The writing of an option on a futures contract, however,
involves all of the risks of futures trading, including the requirement to make
initial and variation margin payments.
Although techniques other than the sale and purchase of futures contracts and
options on futures contracts could be used to control a Portfolio's exposure to
market fluctuations, the use of futures contracts may be a more effective means
of hedging this exposure. While a Portfolio will incur commission expenses in
both opening and closing out futures positions, these costs are lower than
transaction costs incurred in the purchase and sale of the underlying
securities.
RISKS OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS: Various additional
risks exist with respect to the trading of futures contracts and options on
futures contracts. For example, the Trust's ability to effectively hedge all or
a portion of the holdings of a Portfolio through transactions in such
instruments will depend on the degree to which price movements in the underlying
index or instrument correlate with price movements in the relevant portion of
the Portfolio's holdings. The trading of futures contracts and options entails
the additional risk of imperfect correlation between movements in the futures or
option price and the price of the underlying index or obligation, while the
writing of options also entails the risk of imperfect correlation between
securities used to cover options written and the securities underlying such
options.
-6-
<PAGE> 112
Positions in futures contracts may be closed out only on an exchange that
provides a secondary market for such futures. However, there can be no assurance
that a liquid secondary market will exist for any particular futures contract at
any specific time. Thus, it may not be possible to close a futures position. In
the event of adverse price movements, a Portfolio unable to close out a futures
position would continue to be required to make daily cash payments to maintain
its required margin. In such situations, if a Portfolio has insufficient cash,
it may have to sell portfolio securities to meet daily margin requirements at a
time when it may be disadvantageous to do so. In addition, a Portfolio may be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the ability of the Portfolio to hedge effectively. A Portfolio
will minimize the risk that it will be unable to close out a futures contract by
only entering into futures which are traded on national futures exchanges and
for which there appears to be a liquid secondary market.
Futures contracts entail risks. If the Adviser's investment judgment about the
general direction of interest rates is incorrect, the overall performance of a
Portfolio that has entered into a futures contract would be poorer than if it
had not entered into any such contract. If, for example, a Portfolio has hedged
against the possibility of an increase in interest rates, which increase would
adversely affect the price of bonds held in its portfolio, and interest rates
decrease instead, the Portfolio will lose part or all of the benefit of the
increased value of its hedged bonds because it will have offsetting losses in
its futures positions. In addition, in such situations, if a Portfolio has
insufficient cash, it may have to sell bonds from its portfolio to meet daily
variation margin requirements. Such sales of bonds may be, but will not
necessarily be, at increased prices that reflect the rising market. A Portfolio
may, therefore, have to sell securities at a time when it may be disadvantageous
to do so.
The risk of loss in trading futures contracts in some strategies can be
substantial, due to both the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss (as well as gain) to a Portfolio. For example, if at the time of purchase
10% of the value of the futures contract is deposited as margin, a subsequent
10% decrease in the value of the futures contract would result in a total (100%)
loss of the margin deposit, before any deduction for the transaction costs, if
the account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of the
amount invested in the contract. However, because a Portfolio will engage in
futures strategies only for hedging purposes, the Adviser does not believe that
the Portfolio is subject to the risks of loss frequently associated with futures
transactions. A Portfolio would presumably have sustained comparable losses if,
instead of transacting in the futures contract, it had invested in the
underlying financial instrument and sold it after the decline. The risk of loss
from the purchase of options is less than the risk from the purchase or sale of
futures contracts because the maximum amount at risk is the premium paid for the
option.
Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is also
possible that a Portfolio could both lose money on futures contracts and
experience a decline in the value of its portfolio securities. There is also the
risk of loss by a Portfolio of margin deposits in the event of the bankruptcy of
a broker with whom the Portfolio has an open position in a futures contract or
related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some futures
traders to substantial losses.
-7-
<PAGE> 113
MORTGAGE-BACKED SECURITIES--The Corporate Daily Income, Short-Duration Mortgage,
Short-Duration Government, Intermediate-Duration Government and GNMA
Portfolios may invest in mortgage-backed securities. Mortgage-backed
securities represent pools of mortgage loans assembled for sale to investors
by various governmental agencies such as the Government National Mortgage
Association ("GNMA") and government-related organizations such as the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC"), as well as by non-governmental issuers such as
commercial banks, savings and loan institutions, mortgage bankers, and private
mortgage insurance companies. Although certain mortgage-backed securities are
guaranteed by a third party or otherwise similarly secured, the market value
of such securities, which may fluctuate, is not so secured. If a Portfolio
purchases a mortgage-backed security at a premium, that portion may be lost if
there is a decline in the market value of the security, whether resulting from
changes in interest rates or prepayments in the underlying mortgage collateral.
As with other interest-bearing securities, the prices of such securities are
inversely affected by changes in interest rates. However, though the value of
a mortgage-backed security may decline when interest rates rise, the converse
is not necessarily true since in periods of declining interest rates the
mortgages underlying the securities are prone to prepayment. For this and
other reasons, a mortgage-backed security's stated maturity may be shortened
by unscheduled prepayments on the underlying mortgages and, therefore, it is
not possible to accurately predict the security's return to a Portfolio. In
addition, regular payments received in respect of mortgage-backed securities
include both interest and principal. No assurance can be given as to the
return a Portfolio will receive when these amounts are reinvested.
A Portfolio may also invest in mortgage-backed securities that are
collateralized mortgage obligations structured on pools of mortgage pass-through
certificates or mortgage loans. For purposes of determining the average maturity
of a mortgage-backed security in its investment portfolio, a Portfolio will
utilize the expected average life of the security, as estimated in good faith by
the Adviser.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-backed securities
and among the securities that they issue. Mortgage-backed securities issued by
GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") that are guaranteed as to the timely payment of principal and interest by
GNMA and are backed by the full faith and credit of the United States. GNMA is a
wholly-owned U.S. Government corporation within the Department of Housing and
Urban Development. GNMA certificates also are supported by the authority of GNMA
to borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-backed securities issued by FNMA include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") that are solely the
obligations of FNMA and are not backed by or entitled to the full faith and
credit of the United States. FNMA is a government-sponsored organization
owned entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of the principal and interest by FNMA. Mortgage-backed securities issued
by FHLMC include FHLMC Mortgage Participation Certificates (also known as
"Freddie Macs" or "PC's"). FHLMC is a corporate instrumentality of the
United States, created pursuant to an Act of Congress, which is owned entirely
by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States
or by any Federal Home Loan Banks and do not constitute a debt or obligation of
the United States or of any Federal Home Loan Bank. Freddie Macs entitle the
holder to timely payment of interest, which is guaranteed by FHLMC.
FHLMC guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When FHLMC does not guarantee
timely payment of principal, FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.
RESETS: Interest rates on the mortgages underlying the adjustable rate
securities and other floating rate securities are reset at intervals of one year
or less in response to changes in a predetermined interest rate index. There are
two main categories of indices: those based on U.S. Treasury securities and
those derived from a calculated measure such as a cost-of-funds index or a
moving average of mortgage rates. Commonly used indices include the one-year and
three-year constant maturity Treasury rates (CMT), the three-month Treasury Bill
rate, the
-8-
<PAGE> 114
180-day Treasury Bill rate, the Eleventh District Federal Home Loan
Bank Cost-of-Funds Index, and the one-month, three-month, six-month or one-year
London Interbank Offered Rate.
CAPS AND FLOORS: Underlying mortgages or other obligations that collateralize
the adjustable rate securities and other floating rate securities will
frequently have caps and floors, which limits the maximum amount by which the
loan rate may change up or down, either at each reset or adjustment interval or
over the life of the loan. This provides the mortgage borrower and lender some
degree of protection against large changes in monthly payments. Some residential
mortgage loans restrict periodic adjustments by limiting changes in the
borrower's monthly principal and interest payments rather than limiting interest
rate changes. These payment caps may result in negative amortization, i.e., an
increase in the balance of the mortgage loan. The adjustable rate feature of the
mortgages underlying the adjustable rate mortgage securities ("ARMs"),
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") in which a Portfolio may invest should reduce, but will not
eliminate, price fluctuations in such securities, particularly during periods of
extreme fluctuations in market interest rates. Since the interest rates on many
mortgages underlying ARMs, CMOs and REMICs are reset on an annual basis and
generally are subject to caps, it can be expected that the prices of such ARMs,
CMOs and REMICs will fluctuate to the extent prevailing market interest rates
are not reflected in the interest rates payable on the underlying ARMs, CMOs or
REMICs. In this regard, the net asset value of the Trust's shares could
fluctuate to the extent interest rates on underlying mortgages differ from
prevailing market interest rates during interim periods between interest rate
reset dates. Accordingly, investors could experience some principal loss, or
less gain than might otherwise be achieved, if they redeem their shares of the
Trust before the interest rates on the mortgages underlying the Trust's
portfolio securities are adjusted to reflect prevailing market interest rates.
Municipal Securities--The Money Market and Prime Obligation Portfolios may
invest in Municipal Securities. The two principal classifications of Municipal
Securities are "general obligation" and "revenue" issues. General obligation
issues are issues involving the credit of an issuer possessing taxing power and
are payable from the issuer's general unrestricted revenues, although the
characteristics and method of enforcement of general obligation issues may vary
according to the law applicable to the particular issuer. Revenue issues are
payable only from the revenues derived from a particular facility or class of
facilities or other specific revenue source. A Portfolio may also invest in
"moral obligation" issues, which are normally issued by special purpose
authorities. Moral obligation issues are not backed by the full faith and credit
of the state but are generally backed by the agreement of the issuing authority
to request appropriations from the state legislative body. Municipal Securities
include debt obligations issued by governmental entities to obtain funds for
various public purposes, such as the construction of a wide range of public
facilities, the refunding of outstanding obligations, the payment of general
operating expenses, and the extension of loans to other public institutions and
facilities. Certain private activity bonds that are issued by or on behalf of
public authorities to finance various privately-owned or operated facilities are
included within the term "Municipal Securities." Private activity bonds and
industrial development bonds are generally revenue bonds, the credit and quality
of which are directly related to the credit of the private user of the
facilities.
Municipal Securities may also include general obligation notes, tax anticipation
notes, bond anticipation notes, revenue anticipation notes, project notes,
certificates of indebtedness, demand notes, tax-exempt commercial paper,
construction loan notes and other forms of short-term, tax-exempt loans. Such
instruments are issued with a short-term maturity in anticipation of the receipt
of tax funds, the proceeds of bond placements or other revenues. Project notes
are issued by a state or local housing agency and are sold by the Department of
Housing and Urban Development. While the issuing agency has the primary
obligation with respect to its project notes, they are also secured by the full
faith and credit of the United States through agreements with the issuing
authority which provide that, if required, the federal government will lend the
issuer an amount equal to the principal of and interest on the project notes.
-9-
<PAGE> 115
The quality of Municipal Securities, both within a particular classification and
between classifications, will vary, and the yields on Municipal Securities
depend upon a variety of factors, including general money market conditions, the
financial condition of the issuer (or other entity whose financial resources are
supporting the securities), general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation and the rating(s)
of the issue. In this regard, it should be emphasized that the ratings of any
nationally recognized statistical rating organization ("NRSRO") are general and
are not absolute standards of quality. Municipal Securities with the same
maturity, interest rate and rating(s) may have different yields, while Municipal
Securities of the same maturity and interest rate with different rating(s) may
have the same yield.
An issuer's obligations under its Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Securities may be
materially adversely affected by litigation or other conditions.
MUNICIPAL NOTE RATINGS: Moody's highest rating for state and municipal and other
short-term notes is MIG-1 and VMIG-1. Short-term Municipal Securities rated
MIG-1 or VMIG-1 are of the best quality, and such securities have strong
protection afforded by established cash flows, superior liquidity support and/or
demonstrated, broad-based access to the market for refinancing. Short-term
Municipal Securities rated MIG-2 and VMIG-2 are of high quality, and their
margins of protection are ample, although not so large as in the preceding
group.
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment.
- 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 rate symbols are as follows:
SP-1. Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2. Satisfactory capacity to pay principal and interest.
REPURCHASE AGREEMENTS--Each Portfolio, except the Government II and Treasury II
Portfolios, may invest in 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. A Portfolio involved bears a risk of loss in
the event that the other party to a repurchase agreement defaults on its
obligations and the Portfolio is delayed or prevented from exercising its rights
to dispose of the collateral securities. The Adviser will only enter into
repurchase agreements with financial institutions that it deems to present
minimal risk of bankruptcy during the term of the agreement based on guidelines
which are periodically reviewed by the Board of Trustees. Repurchase agreements
are considered to be loans collateralized by the underlying security. Repurchase
agreements entered into by a Portfolio will provide that the underlying security
shall be fully collateralized at all times. This underlying security will be
marked to market daily and the Adviser will monitor compliance with this
requirement. Under all repurchase agreements entered into by a Portfolio, the
Portfolio must take actual or constructive possession of the
10
<PAGE> 116
underlying collateral. However, if the seller defaults, the Portfolio 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 Portfolio
may incur delay and costs in selling the security and may suffer a loss of
principal and interest if that Portfolio is treated as an unsecured creditor.
SWAPS, CAPS, FLOORS AND COLLARS -- The Intermediate-Duration Government, GNMA
and Short-Duration Government Portfolios may invest in swaps, caps and floors
as a hedging strategy. Interest rate swaps, mortgage swaps, currency swaps and
other types of swap agreements such as caps, floors and collars are designed
to permit the purchaser to preserve a return or spread on a particular
investment or portion of its portfolio, and to protect against any increase in
the price of securities a Portfolio anticipates purchasing at a later date. In
a typical interest rate swap, one party agrees to make regular payments equal
to a floating interest rate multiplied by a "notional principal amount," in
return for payments equal to a fixed rate multiplied by the same amount, for a
specific period of time. If a swap agreement provides for payment in different
currencies, the parties might agree to exchange the notional principal amount
as well. Swaps may also depend on other prices or rates, such as the value of
an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specific interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a result,
swaps can be highly volatile and have a considerable impact on a Portfolio's
performance. Swap agreements are subject to risks related to the counterparty's
ability to perform, and may decline in value if the counterparty's
creditworthiness deteriorates. A Portfolio may also suffer losses if it is
unable to terminate outstanding swap agreements or reduce its exposure through
offsetting transactions. Any obligation a Portfolio may have under these
types of arrangements will be covered by setting aside liquid high grade
securities in a segregated account. A Portfolio will enter into swaps only
with counterparties believed to be creditworthy.
The Short-Duration Mortgage Portfolio will enter into interest rate and mortgage
swaps only on a net basis, i.e., the two payment streams are netted out, with
the Portfolio receiving or paying, as the case may be, only the net amount of
the two payments. Since these transactions are entered into for good faith
hedging purposes, the Trust and the Adviser do not believe that such obligations
constitute senior securities as defined in the Investment Company Act of 1940
(the "1940 Act") and, accordingly, will not treat them as being subject to the
Trust's or the Portfolio's borrowing restrictions. The net amount of the excess,
if any, of the Portfolio's obligations over its entitlements with respect to
each interest rate or mortgage swap will be accrued on a daily basis and an
amount of cash or liquid securities rated in one of the top three ratings
categories by Moody's or S&P, or, if unrated by either Moody's or S&P, deemed by
the Adviser to be of comparable quality having an aggregate net asset value at
least equal to such accrued excess will be maintained in a segregated account by
the Portfolio's custodian.
U.S. GOVERNMENT AGENCY OBLIGATIONS -- Each Portfolio, except the Treasury,
Treasury II and Federal Securities Portfolios, may invest in U.S. agency
obligations. Various agencies of the U.S. Government issue obligations,
including the Export Import Bank of the United States, Farmers Home
Administration, Federal Farm Credit Bank, Federal Housing Administration, GNMA,
Maritime Administration, Small Business Administration, and The Tennessee Valley
Authority. The Portfolios may purchase securities guaranteed by GNMA which
represent participation in Veterans Administration and Federal Housing
Administration backed mortgage pools. Obligations of instrumentalities of the
U.S. Government include securities issued by, among
11
<PAGE> 117
others, Federal Home Loan Banks, FHLMC, Federal Intermediate Credit Banks,
Federal Land Banks, FNMA 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., GNMA),
others (in which all Portfolios permitted to invest in agencies' securities may
invest) are supported by the right of the issuer to borrow from the Treasury and
still others (in which only the Short-Duration Mortgage, Corporate Daily
Income and Government Securities Daily Income Portfolios may invest) are
supported only by the credit of the instrumentality (e.g., FNMA). Guarantees
of principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation so that in the event of
a default prior to maturity there might not be a market and thus no means of
realizing the value of the obligation prior to maturity.
VARIABLE OR FLOATING RATE INSTRUMENTS--The Government Securities Daily Income
Portfolio may invest in variable or floating rate instruments. These securities
may involve a demand feature and may include variable amount master demand notes
that may be backed by bank letters of credit. The holder of an instrument with a
demand feature may tender the instrument back to the issuer at par prior to
maturity. A variable amount master demand note is issued pursuant to a written
agreement between the issuer and the holder, its amount may be increased by the
holder or decreased by the holder or issuer, it is payable on demand and the
rate of interest varies based upon an agreed formula. The quality of the
underlying credit must, in the opinion of the Adviser, be equivalent to the
long-term bond or commercial paper ratings applicable to the Portfolio's
permitted investments. The Adviser will monitor on an ongoing basis the earning
power, cash flow, and liquidity ratios of the issuers of such instruments and
will similarly monitor the ability of an issuer of a demand instrument to pay
principal and interest on demand.
WHEN-ISSUED SECURITIES--Each Portfolio may invest in 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. The Portfolios will make
commitments to purchase obligations on a when-issued basis only with the
intention of actually acquiring the securities, but may sell them before the
settlement date. When-issued securities are subject to market fluctuation,
and no interest accrues to the purchaser during the period prior to settlement.
The payment obligation and the interest rate that a Portfolio will receive on
the securities are each fixed at the time the Portfolio 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
delivery takes place may actually be higher than those obtained in the
transaction itself, in which case the Portfolio could experience an unrealized
loss at the time of delivery.
Segregated accounts comprised of liquid assets will be established with the
custodian for a Portfolio in an amount at least equal in value to each such
Portfolio's commitments to purchase when-issued securities. If the value of
these assets declines, the appropriate Portfolio will place additional liquid
assets in the account on a daily basis so that the value of the assets in the
account is equal to the amount of such commitments.
THE MANAGER
The Management Agreement provides that the Manager shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which the Management Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Manager in the performance of its duties or from reckless disregard
of its duties and obligations thereunder.
The continuance of the Management Agreement with respect to each Portfolio 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
that 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, without penalty, at any time as to any Portfolio by the
Trustees of the Trust, by a vote
12
<PAGE> 118
of a majority of the outstanding shares of that Portfolio or by the Manager on
not less than 30 days' nor more than 60 days' written notice.
The Manager, a wholly-owned subsidiary of SEI Corporation ("SEI"), was organized
as a Delaware corporation in 1969 and has its principal business offices at 680
East Swedesford Road, Wayne, PA 19087-1658. Alfred P. West, Jr., Henry H. Greer
and Carmen V. Romeo constitute the Board of Directors of the Manager and SEI
Financial Services Company (the "Distributor"). Mr. West is the Chairman of the
Board and Chief Executive Officer of the Manager, the Distributor and SEI. Mr.
Greer is the President and Chief Operating Officer of the Manager, the
Distributor and SEI. SEI and its subsidiaries are leading providers of funds
evaluation services, trust accounting systems, and brokerage and information
services to financial institutions, institutional investors and money managers.
The Manager also serves as administrator to the following other mutual funds:
The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund,
ARK Funds, Bishop Street Funds, CoreFunds, Inc., CrestFunds, Inc., CUFUND,
First American Funds, Inc., First American Investment Funds, Inc., FMB Funds,
Inc., Insurance Investment Products Trust, Inventor Funds, Inc., Marquis
Funds(R), Monitor Funds, Morgan Grenfell Investment Trust, The PBHG Funds,
Inc., The Pillar Funds, Rembrandt Funds(R), 1784 Funds, SEI Asset Allocation
Trust, SEI Index Funds, SEI Institutional Managed Trust, SEI International
Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, Stepstone Funds, STI
Classic Funds, STI Classic Variable Trust and Turner Funds.
The Manager is obligated under the Management Agreement to pay the excess of a
Portfolio's operating expenses as disclosed in the applicable Prospectuses. If
operating expenses of any Portfolio exceed limitations established by certain
states, the Manager will pay such excess. The Manager will not be required to
bear expenses of any Portfolio to an extent which would result in the
Portfolio's inability to qualify as a regulated investment company under
provisions of the Internal Revenue Code. The term "expenses" is defined in such
laws or regulations, and generally excludes brokerage commissions, distribution
expenses, taxes, interest and extraordinary expenses. In addition, certain
voluntary and contractual fee waivers and reimbursement arrangements by the
Manager were in effect during the fiscal year ended January 31, 1996; these
voluntary fee waivers and reimbursement arrangements are described in the
Prospectuses.
For the fiscal years ended January 31, 1994, 1995 and 1996, the Portfolios paid
fees to the Manager as follows:
<TABLE>
<CAPTION>
====================================================================================================================================
Fees Paid (000) Fee Waivers and Reimbursements (000)
---------------------------------------------------------------------------------------
1994 1995 1996 1994 1995 1996
- ----------------------------------------------------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market Portfolio $ 542 $ 220 $ 159 $ 181 $ 491 $ 365
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Obligation Portfolio $2,669 $2,551 $2,918 $1,337 $1,697 $1,646
- ------------------------------------------------------------------------------------------------------------------------------------
Government Portfolio $ 6 $ 121 $ 605 $ 7 $ 285 $ 580
- ------------------------------------------------------------------------------------------------------------------------------------
Government II Portfolio $ 826 $ 861 $ 988 $ 473 $ 574 $ 572
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury Portfolio $ 55 $ 56 $ 53 $ 51 $ 59 $ 75
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury II Portfolio $ 639 $ 616 $ 814 $ 263 $ 313 $ 356
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Securities Portfolio $ 166 $ 50 * $ 0 $ 2 *
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate Daily Income Portfolio $ 14 $ 70 $ 105 $ 29 $ 82 $ 80
- ------------------------------------------------------------------------------------------------------------------------------------
Government Securities Daily Income Portfolio * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Duration Mortgage Portfolio $ (1) $ 8 <$ 1 $ 5 $ 9 $ 9
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Duration Government Portfolio $ 323 $ 333 $ 231 $ 65 $ 61 $ 48
- ------------------------------------------------------------------------------------------------------------------------------------
Intermediate-Duration Government Portfolio $ 885 $ 866 $ 555 $ 188 $ 188 $ 113
- ------------------------------------------------------------------------------------------------------------------------------------
GNMA Portfolio $ 671 $ 744 $ 464 $ 86 $ 34 $ 19
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not in operation during such period.
13
<PAGE> 119
THE ADVISER
The Trust and Wellington Management Company (the "Adviser" or "WMC") have
entered into four advisory agreements (the "Advisory Agreements," and each an
"Advisory Agreement") dated September 30, 1983, December 15, 1986, August 4,
1993 and June 30, 1994, respectively. The Advisory Agreements provide that the
Adviser shall not be protected against any liability to the Trust or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from the reckless disregard of its
obligations or duties thereunder.
The continuance of an Advisory Agreement with respect to a Portfolio after
the first two (2) years of such Agreement must be specifically approved at least
annually (i) by the vote of a majority of the outstanding shares of that
Portfolio or by the Trustees, and (ii) by the vote of a majority of the Trustees
who are not parties to such Advisory Agreement or "interested persons" of any
party thereto, cast in person at a meeting called for the purpose of voting on
such approval. An Advisory Agreement will terminate automatically in the event
of its assignment, and is terminable at any time without penalty by the Trustees
of the Trust or, with respect to a Portfolio, by a majority of the outstanding
shares of that Portfolio, on not less than 30 days' nor more than 60 days'
written notice to the Adviser, or by the Adviser on 90 days' written notice to
the Trust.
The Adviser is entitled to a fee for its investment advisory services, which is
accrued daily and paid monthly at the following annual rates: .075% of the
combined daily net assets of the Money Market, Prime Obligation, Government,
Government II, Treasury, Treasury II and Federal Securities Portfolios up to
$500 million and .02% of such net assets in excess of $500 million; .10% of the
combined daily net assets of the Short-Duration Government, Intermediate-
Duration Government and GNMA Portfolios up to $500 million, .075% of such net
assets between $500 million and $1 billion, and .05% of such net assets in
excess of $1 billion; .10% of the combined daily net assets of the Corporate
Daily Income and Government Securities Daily Income Portfolios up to $500
million, .075% of such net assets between $500 million and $1 billion, and
.05% of such assets in excess of $1 billion; and .10% of the average daily net
assets of the Short-Duration Mortgage Portfolio for the first $500 million,
.075% of such assets between $500 million and $1 billion and .05% of such
assets in excess of $1 billion. WMC may voluntarily waive portions of its
fees, although such waiver is not expected to affect any Portfolio's total
operating expenses, due to the nature of the Manager's fee waivers. WMC may
terminate its waiver at any time. The Trust's investment advisory agreement
with respect to the Short-Duration Mortgage Portfolio with Bear Stearns Asset
Management was terminated by the Board of Trustees on June 8, 1994 and by
written consent of the sole shareholder on September 30, 1994, respectively.
As of June 30, 1994, WMC has served as investment adviser to the Short-Duration
Mortgage Portfolio.
For the fiscal years ended January 31, 1994, 1995 and 1996, the
Portfolios paid advisory fees as follows:
14
<PAGE> 120
<TABLE>
<CAPTION>
====================================================================================================================================
Fees Paid (000) Fee Waivers (000)
------------------------------------------------ ------------------------------
1994 1995 1996 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market Portfolio $ 52 $ 46 $ 12 $ 9 $ 13 $ 29
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Obligation Portfolio $207 $165 $197 $381 $443 $433
- ------------------------------------------------------------------------------------------------------------------------------------
Government Portfolio $ 1 $ 12 $ 32 $ 1 $ 34 $ 97
- ------------------------------------------------------------------------------------------------------------------------------------
Government II Portfolio $ 68 $ 56 $ 67 $123 $150 $149
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury Portfolio $ 4 $ 3 $ 3 $ 8 $ 10 $ 11
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury II Portfolio $ 37 $ 28 $ 44 $ 68 $ 77 $ 84
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Securities Portfolio $ 8 $ 2 * $ 0 $ 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate Daily Income Portfolio $ 4 $ 36 $ 30 $ 8 $ 6 $ 23
- ------------------------------------------------------------------------------------------------------------------------------------
Government Securities Daily Income Portfolio * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Duration Mortgage Portfolio $ 1 $ 5 $ 3 $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Bear Stearns Asset Management $ 1 $ 2 + $ 0 $ 0 +
- ------------------------------------------------------------------------------------------------------------------------------------
Wellington Management Company + $ 3 $ 3 + $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Duration Government Portfolio $ 89 $ 88 $ 65 $ 16 $ 16 $ 14
- ------------------------------------------------------------------------------------------------------------------------------------
Intermediate-Duration Government Portfolio $248 $235 $157 $ 44 $ 43 $ 34
- ------------------------------------------------------------------------------------------------------------------------------------
GNMA Portfolio $191 $190 $144 $ 34 $ 35 $ 7
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not in operation during such period.
+ Not an adviser during such period.
DISTRIBUTION
The Trust has adopted Distribution Plans (each a "Plan" and, together, the
"Plans") for the Class D and Class G shares of each Portfolio that offers Class
D or Class G shares (only the Short-Duration Government, Intermediate-Duration
Government and GNMA Portfolios offer Class D shares, and only the Government
Portfolio offers Class G shares) 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
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 Plan or in any agreements related thereto ("Qualified
Trustees"). The Plans may not be amended to increase materially the amount that
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.
The Plan adopted by the Class D shareholders provides that the Trust will pay
the Distributor a fee of up to .30% of the average daily net assets of a
Portfolio's Class D shares that the Distributor can use to compensate
broker-dealers and service providers, including affiliates of the Distributor,
that provide distribution-related services to Class D shareholders or to their
customers who beneficially own Class D shares.
-15-
<PAGE> 121
The Class G Distribution Plan provides that the Trust will pay the Distributor a
fee of up to .50% of the average daily net assets of the Government Portfolio's
Class G shares that the Distributor can use to compensate Class G shareholders
that provide distribution-related services to their customers.
Payments may be made under the Class D Plan as compensation for services
provided in connection with distribution assistance or the provision of
shareholder services, or may be made to financial institutions and
intermediaries such as banks, savings and loan associations, insurance companies
and investment counsellors, broker-dealers and affiliates and subsidiaries of
the Distributor as compensation for services or reimbursement of expenses
incurred in connection with distribution assistance or provision of shareholder
services to Class D shareholders.
Payments may be made under the Class G Plan for distribution services, including
reviewing of purchase and redemption orders, assisting in processing purchase,
exchange and redemption requests from customers, providing certain shareholder
communications requested by the Distributor, forwarding sales literature and
advertisements provided by the Distributor, and arranging for bank wires.
Certain state securities laws may require those financial institutions providing
such distribution services to register as dealers pursuant to state law.
During the fiscal year ended January 31, 1996, the Trust also had separate
distribution plans (the "Class A Plan," "Class B Plan" and Class C Plan") for
the Class A, Class B and Class C shares of each Portfolio (except for the
Federal Securities Portfolio, which offered only Class A shares) in accordance
with the provisions of Rule 12b-1 under the 1940 Act. On March 18, 1996 a
majority of the Board of Trustees, including a majority of the Qualified
Trustees, voted to discontinue the Class A, Class B and Class C Plans.
Moreover, on the same date, a majority of the Trustees, including the Qualified
Trustees, voted to convert, with respect to the Government Portfolio, the
existing Class C shares into Class G shares and to adopt a Class G Plan,
which is substantially similar to the former Class C Plan.
Except to the extent that the Manager and/or Adviser 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 has or had
a direct or indirect financial interest in the operation of any of the
distribution plans or related agreements.
Although banking laws and regulations prohibit banks from distributing shares of
open-end investment companies such as the Trust, according to an opinion issued
to the staff of the SEC by the Office of the Comptroller of the Currency,
financial institutions are not prohibited from acting in other capacities for
investment companies, such as providing shareholder services. Should future
legislative, judicial or administrative action prohibit or restrict the
activities of financial institutions in connection with providing shareholder
services, the Trust may be required to alter materially or discontinue its
arrangements with such financial institutions.
For the fiscal year ended January 31, 1996, the Portfolios incurred the
following distribution expenses:
-16-
<PAGE> 122
<TABLE>
<CAPTION>
====================================================================================================================================
Total Dist. Amount Paid
Expenses to 3rd Parties
Total Dist. as by SFS for Sales Printing Other
Portfolio Class Expenses a % of net Distributor Expenses Costs Costs*
assets Related
Services
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A $82,488 .06 N/A $55,897 $2,630 $23,961
----------------------------------------------------------------------------------------------------
Money Market Portfolio B $21,455 .35 $18,154 $2,237 $105 $959
----------------------------------------------------------------------------------------------------
C $7,565 .55 $6,821 $504 $24 $216
- ------------------------------------------------------------------------------------------------------------------------------------
A $1,150,490 .05 N/A $808,325 $56,285 $285,880
Prime Obligation Portfolio
----------------------------------------------------------------------------------------------------
B $180,235 .35 $154,941 $17,771 $1,238 $6,285
- ------------------------------------------------------------------------------------------------------------------------------------
A $2,125 .05 N/A $1,538 $131 $456
----------------------------------------------------------------------------------------------------
Government Portfolio B $19,656 .35 $17,075 $1,868 $159 $554
----------------------------------------------------------------------------------------------------
C $2,633,904 .55 $2,414,972 $158,443 $13,499 $46,990
- ------------------------------------------------------------------------------------------------------------------------------------
A $392,052 .05 N/A $272,559 $19,787 $99,706
Government II Portfolio
----------------------------------------------------------------------------------------------------
B $62,859 .35 $54,057 $6,119 $444 $2,239
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury Portfolio A $20,471 .04 N/A $15,060 $1,018 $4,393
----------------------------------------------------------------------------------------------------
C $38,769 .55 $35,613 $2,322 $157 $677
- ------------------------------------------------------------------------------------------------------------------------------------
A $219,740 .04 N/A $151,365 $11,946 $56,429
Treasury II Portfolio
----------------------------------------------------------------------------------------------------
B $118,907 .35 $102,311 $11,432 $902 $4,262
----------------------------------------------------------------------------------------------------
C $8,261 .55 $7,528 $505 $40 $188
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Securities Portfolio** A ** N/A ** ** ** **
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate Daily Income A $25,969 .05 N/A $18,197 $1,304 $6,468
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Government Securities Daily A ** N/A ** ** ** **
Income Portfolio**
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Duration Mortgage Portfolio A $1,489 .06 N/A $976 $46 $467
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Duration Government A $40,716 .05 N/A $27,929 $1,728 $11,059
Portfolio ----------------------------------------------------------------------------------------------------
B $410 .35 $350 $41 $3 $16
----------------------------------------------------------------------------------------------------
D $29 .30 $25 $4 N/A N/A
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Intermediate-Duration Government A $98,764 .05 N/A $67,654 $3,921 $27,189
Portfolio ----------------------------------------------------------------------------------------------
B*** $303 .35 $258 $31 $2 $12
----------------------------------------------------------------------------------------------
D $286 .30 $236 $33 $4 $13
- ------------------------------------------------------------------------------------------------------------------------------
A $75,251 .05 N/A $51,784 ($924) $24,391
GNMA
----------------------------------------------------------------------------------------------
B $53 .35 $45 $5 N/A $3
----------------------------------------------------------------------------------------------
D $535 .30 $444 $61 $1 $29
==============================================================================================================================
</TABLE>
* Costs of complying with securities laws pertaining to the distribution of
shares.
** Not in operation during such period.
*** Class is no longer offered.
-17-
<PAGE> 123
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 Financial Management Corporation, 680 East Swedesford
Road, Wayne, PA 19087-1658. Certain Trustees and officers of the Trust also
serve as trustees and officers of some or all 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; First American Funds,
Inc.; First American Investment Funds, Inc.; FMB Funds, Inc.; Insurance
Investment Products Trust; Inventor Funds, Inc.; Marquis Funds(R); Monitor
Funds; Morgan Grenfell Investment Trust; The Pillar Funds; The PBHG Funds,
Inc.; Rembrandt Funds(R); SEI Asset Allocation Trust; SEI Index Funds; SEI
Institutional Managed Trust; SEI International Trust; SEI Liquid Asset Trust;
SEI Tax Exempt Trust; 1784 Funds; Stepstone Funds; STI Classic Funds; STI
Classic Variable Trust; and Turner Funds, each of which is an open-end
management investment company administered by the Manager and, except for
Rembrandt Funds(R), distributed by the Distributor.
ROBERT A. NESHER (8/17/46) - Chairman of the Board of Trustees* - Retired since
1994. Executive Officer - Executive Vice President of SEI, 1986-1994. Director
and Executive Vice President of the Manager and Executive Vice President of the
Distributor, September, 1981-1994. Trustee of The Arbor Fund, Marquis Funds(R),
Advisors' Inner Circle Fund, and Inventor Funds, Inc.
WILLIAM M. DORAN (5/26/40) - Trustee* - 2000 One Logan Square, Philadelphia, PA
19103. Partner of Morgan, Lewis & Bockius LLP, counsel to the Trust, Manager and
Distributor, Director and Secretary of SEI and Secretary of the Manager and
Distributor. Trustee of The Arbor Fund, Marquis Funds(R), Advisors' Inner
Circle Fund, and Inventor Funds, Inc.
F. WENDELL GOOCH (12/3/32) - Trustee** - P.O. Box 190, Paoli, IN 47454.
President, Orange County Publishing Co., Inc., since October 1981. Publisher of
the Paoli News and the Paoli Republican and Editor of the Paoli Republican since
January 1981; President, H & W Distribution, Inc. since July 1984. Executive
Vice President, Trust Department, Harris Trust and Savings Bank and Chairman of
the Board of Directors of The Harris Trust Company of Arizona before January
1981. Trustee of STI Classic Funds.
FRANK E. MORRIS (12/30/23) - Trustee** - 105 Walpole Street, Dover, MA 02030.
Retired since 1990. Peter Drucker Professor of Management, Boston College since
1989. President, Federal Reserve Bank of Boston, 1968-1988.
DAVID G. LEE (4/16/52) - President, Chief Executive Officer - Senior Vice
President of the Distributor since 1993. Vice President of the Distributor
since 1991. President, GW Sierra Trust Funds prior to 1991.
KATHRYN L. STANTON (11/18/58) - Vice President, Assistant Secretary - Vice
President, Assistant Secretary of SEI, the Manager and Distributor since 1994.
Associate, Morgan, Lewis & Bockius LLP (law firm), 1989-1994.
SANDRA K. ORLOW (10/18/53) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of the Manager and Distributor since 1988.
Corporate Legal Assistant, Omni Exploration (oil and gas investment) prior to
1983.
KEVIN P. ROBINS (4/15/61) - Vice President, Assistant Secretary - Senior Vice
President and General Counsel of SEI, the Manager and the Distributor, and
Assistant Secretary of SEI since 1994. Secretary of the Manager and the
Distributor since 1994. Vice President and Assistant Secretary of SEI, the
Manager and Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius LLP (law
firm) prior to 1992.
-18-
<PAGE> 124
JOSEPH M. LYDON (9/27/59) - Vice President, Assistant Secretary - Director of
Business Administration of Fund Resources, SEI Corporation since 1995. Vice
President of Fund Group and Vice President of Dreman Value Management
(investment adviser), President of Dreman Financial Services, Inc. prior to
1995.
TODD CIPPERMAN (2/14/66) - Vice President, Assistant Secretary - Vice President
and Assistant Secretary of SEI, the Manager and the Distributor since 1995.
Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston & Strawn
(law firm), 1991-1994.
JEFFREY A. COHEN (4/22/61) - Controller, Chief Financial Officer - CPA, Vice
President, International and Domestic Funds Accounting, SEI Corporation since
1991. Audit Manager, Price Waterhouse prior to 1991.
RICHARD W. GRANT (10/25/45) - Secretary - 2000 One Logan Square, Philadelphia,
PA 19103, Partner, Morgan, Lewis & Bockius LLP, counsel to the Trust, Manager
and Distributor.
The Trustees and officers of the Trust own, as a group, 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.
COMPENSATION TABLE
<TABLE>
<CAPTION>
====================================================================================================================================
Aggregate Compensation Total Compensation From
Name of Person, from Registrant for the Pension or Retirement Estimated Annual Registrant and Trust
Position Fiscal Year Ended Benefits Accrued as Benefits Upon Complex Paid to Trustees
January 31, 1996 Part of Fund Expenses Retirement for the Fiscal Year Ended
January 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William M. Doran* 0 N/A N/A $0
- ------------------------------------------------------------------------------------------------------------------------------------
F. Wendell Gooch $16,070.36 N/A N/A $90,000 for services on 7
board
- ------------------------------------------------------------------------------------------------------------------------------------
Frank E. Morris $16,070.36 N/A N/A $90,000 for services on 7
boards
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Nesher* 0 N/A N/A $0
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
* Messrs. Nesher and Doran are Trustees who may be deemed to be
"interested persons" of the Trust as the term is defined in the
Investment Company Act of 1940.
** Messrs. Gooch and Morris serve as members of the Audit Committee of
the Trust.
INVESTMENT LIMITATIONS
FUNDAMENTAL POLICIES
The following investment limitations are fundamental policies of each Portfolio
which cannot be changed with respect to a Portfolio without the consent of the
holders of a majority of that Portfolio's outstanding shares. The term "majority
of outstanding shares" means the vote of (i) 67% or more of a Portfolio's shares
present at a meeting, if not more than 50% of the outstanding shares of a
Portfolio are present or represented by proxy, or (ii) more than 50% of a
Portfolio's outstanding shares, whichever is less.
A Portfolio may not:
1. 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
-19-
<PAGE> 125
agreements maturing in more than seven days, restricted securities and
other illiquid securities are not to exceed, in the aggregate, 10% of
the Portfolio's total assets.
2. 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 fair market value at
the time of the incurrence of such loan.
3. Invest in companies for the purpose of exercising control.
4. Acquire more than 10% of the voting securities of any one issuer.
5. Purchase or sell real estate, real estate limited partnership
interests, commodities or commodities contracts including (with the
exception of the Short-Duration Government, Intermediate-Duration
Government, GNMA and Short-Duration Mortgage Portfolios) futures
contracts. However, subject to its permitted investments, the
Portfolios may purchase obligations issued by companies which invest
in real estate, commodities or commodities contracts.
6. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Portfolios may obtain short-term
credits as necessary for the clearance of security transactions.
7. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a portfolio security.
8. Purchase securities of other investment companies; provided that all
Portfolios may purchase such securities as permitted by the 1940 Act
and the rules and regulations thereunder but, in any event, such
Portfolios (except the Short-Duration Mortgage Portfolio) may not
purchase securities of other open-end investment companies.
9. 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.
10. 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.
11. Purchase securities of any company which has (with predecessors) a
record of less than three years continuing operations, except (i)
obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, or (ii) municipal securities which are rated by
at least two nationally recognized municipal bond rating services if,
as a result, more than 5% of the total assets (taken at fair market
value) would be invested in such securities.
12. Purchase warrants, puts, calls, straddles, spreads or combinations
thereof, except that the Short-Duration Mortgage,
Intermediate-Duration Government and GNMA Portfolios may invest in
options on futures contracts.
13. Invest in interests in oil, gas or other mineral exploration or
development programs.
14. Purchase restricted securities (securities which must be registered
under the Securities Act of 1933 before they may be offered or sold to
the public) or other illiquid securities except as described in the
Prospectuses and this Statement of Additional Information.
-20-
<PAGE> 126
Except with regard to the limitation on investing in illiquid securities, the
foregoing percentages will apply at the time of the purchase of a security
and shall not be considered violated unless an excess or deficiency occurs or
exists immediately after and as a result of a purchase of such security. These
investment limitations and the investment limitations in each Prospectus are
fundamental policies of the Trust and may not be changed without shareholders'
approval.
In addition, it is a non-fundamental policy of the Portfolios not to invest in
oil, gas or mineral leases.
PERFORMANCE
From time to time, each Portfolio 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.
These money market 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 Trust may advertise the yield of the Short-Duration
Government, Intermediate-Duration Government, GNMA, Short-Duration Mortgage,
Corporate Daily Income and/or Government Securities Daily Income Portfolios.
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 a Portfolio over a
specified 30-day period. The yield is calculated by assuming that the income
generated by the investment during that period is 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.
Actual yields will depend on such variables as asset quality, average asset
maturity, the type of instruments in which a Portfolio invests, 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
mutual funds; however, yields of other mutual funds and other investment
vehicles may not be comparable because of the factors set forth above and
differences in the methods used in valuing portfolio instruments.
For the seven-day period ended January 31, 1996, the end of the Trust's most
recent fiscal year, the current and effective yields for Class A shares of each
money market Portfolio were: Money Market, 5.44% and 5.59%; Prime Obligation,
5.46% and 5.61%; Government, 5.37% and 5.51%; Government II, 5.27% and 5.41%;
Treasury, 5.32% and
-21-
<PAGE> 127
5.46%; Treasury II, 5.04% and 5.16%, respectively. As of the
end of the fiscal year, the Federal Securities Portfolio had no outstanding
shares.
For the seven-day period ended January 31, 1996, the end of the Trust's most
recent fiscal year, the current and effective yields for Class B shares of each
money market Portfolio were: Money Market, 5.15% and 5.29%; Prime Obligation,
5.16% and 5.30%; Government, 5.07% and 5.20%; Government II, 4.97% and 5.09%;
and Treasury II, 4.74% and 4.85%, respectively.
For the seven-day period ended January 31, 1996, the end of the Trust's most
recent fiscal year, the current and effective yields for Class C shares of each
money market Portfolio were: Money Market, 4.92% and 5.04%; Government
Portfolio, 4.87% and 4.99%; Treasury, 4.83% and 4.95%; and Treasury II, 4.54%
and 4.64%, respectively.
For the 30-day period ended January 31, 1996, the yield for Class A shares of
each non-money market Portfolio was: Corporate Daily Income, 5.46%;
Short-Duration Mortgage, 6.93%; Short-Duration Government, 5.25%;
Intermediate-Duration Government, 5.40%; and GNMA, 6.54%, respectively.
For the 30-day period ended January 31, 1996, the yield for Class B shares of
each non-money market Portfolio was: Short-Duration Government Portfolio,
4.93%; and GNMA, 6.23%, respectively.
For the 30-day period ended January 31, 1996, the yield (without loads) for
Class D shares of each Portfolio which had offered Class D shares as of the end
of the 1996 fiscal year was: Short-Duration Government, 4.67%;
Intermediate-Duration Government, 4.83%; and GNMA, 5.86%, respectively.
From time to time, the Trust may advertise total return for one or more of the
following Portfolios: Short-Duration Government, Intermediate-Duration
Government, GNMA, Short-Duration Mortgage, Corporate Daily Income and
Government Securities Daily Income. The total return of a Portfolio refers to
the average compounded rate of return for 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.
Based on the foregoing, the average annual total returns for the Portfolios from
inception through January 31, 1996 and for the one, five and ten year periods
ended January 31, 1996 were as follows:
-22-
<PAGE> 128
<TABLE>
<CAPTION>
=========================================================================================================================
PORTFOLIO CLASS AVERAGE ANNUAL TOTAL RETURN
-----------------------------------------------------------
ONE FIVE TEN SINCE
YEAR YEAR YEAR INCEPTION
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corporate Daily Income Class A(1) 8.65% * * 5.26%
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
Class B * * * *
- ---------------------------------------------------------------------------------------------------------------------------
Class C * * * *
- ---------------------------------------------------------------------------------------------------------------------------
Government Securities Class A * * * *
Daily Income Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
Class B * * * *
- ---------------------------------------------------------------------------------------------------------------------------
Class C * * * *
- ---------------------------------------------------------------------------------------------------------------------------
Short-Duration Mortgage Class A(2) 9.43% * * 4.76%
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
Short-Duration Government Class A(3) 10.27% 6.40% * 6.91%
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
Class B(4) 9.94% 6.06% * 6.28%
- ---------------------------------------------------------------------------------------------------------------------------
Class C * * * *
- ---------------------------------------------------------------------------------------------------------------------------
Class D(5) Offering Price * * * 4.85%
- ---------------------------------------------------------------------------------------------------------------------------
Class D(5) Net Asset * * * 9.01%
Value
- ---------------------------------------------------------------------------------------------------------------------------
Intermediate-Duration Class A(6) 14.60% 7.80% * 7.73%
Government Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
Class D(7) Offering Price 10.13% * * 3.47%
- ---------------------------------------------------------------------------------------------------------------------------
Class D(7) Net Asset 14.15% * * 5.06%
Value
- ---------------------------------------------------------------------------------------------------------------------------
GNMA Portfolio Class A(8) 15.06% 8.23% * 8.36%
- ---------------------------------------------------------------------------------------------------------------------------
Class B(9) 14.72% * * 12.01%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Class D(10) Offering Price 9.47% * * 3.21%
- ---------------------------------------------------------------------------------------------------------------------------
Class D(10) Net Asset 14.61% * * 5.25%
Value
- ---------------------------------------------------------------------------------------------------------------------------
Money Market Portfolio Class A(11) 5.98% 4.57% 6.15% 6.74%
- ---------------------------------------------------------------------------------------------------------------------------
Class B(12) 5.67% 4.25% * 4.45%
- ---------------------------------------------------------------------------------------------------------------------------
Class C(13) * * * 5.38%
</TABLE>
-23-
<PAGE> 129
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Prime Obligation Class A(14) 5.96% 4.63% * 6.10%
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
Class B(15) 5.65% * * 4.25%
- ---------------------------------------------------------------------------------------------------------------------------
Class C(16) * * * *
- ---------------------------------------------------------------------------------------------------------------------------
Government Portfolio Class A(17) * * * 5.75%
- ---------------------------------------------------------------------------------------------------------------------------
Class B(18) * * * 5.46%
- ---------------------------------------------------------------------------------------------------------------------------
Class C(19) 5.39% * * 4.84%
- ---------------------------------------------------------------------------------------------------------------------------
Government II Portfolio Class A(20) 5.83% 4.50% 5.99% 6.04%
- ---------------------------------------------------------------------------------------------------------------------------
Class B(21) 5.52% 4.19% * 4.20%
- ---------------------------------------------------------------------------------------------------------------------------
Class C * * * *
- ---------------------------------------------------------------------------------------------------------------------------
Treasury Portfolio Class A(22) 5.89% * * 4.24%
- ---------------------------------------------------------------------------------------------------------------------------
Class B * * * *
- ---------------------------------------------------------------------------------------------------------------------------
Class C(23) * * * 5.27%
- ---------------------------------------------------------------------------------------------------------------------------
Treasury II Portfolio Class A(24) 5.58% 4.31% * 5.11%
- ---------------------------------------------------------------------------------------------------------------------------
Class B(25) 5.27% 3.99% * 4.50%
- ---------------------------------------------------------------------------------------------------------------------------
Class C(26) * * * 5.00%
- ---------------------------------------------------------------------------------------------------------------------------
Federal Securities Class A(27) * * * *
Portfolio
===========================================================================================================================
</TABLE>
1 Corporate Daily Income Class A shares were offered beginning September 28,
1993.
2 Short-Duration Mortgage Class A shares were offered beginning May 20, 1993.
3 Short-Duration Government Class A shares were offered beginning February
17, 1987.
4 Short-Duration Government Class B shares were offered beginning November 5,
1990.
5 Short-Duration Government Class D shares were offered beginning February
28, 1995.
6 Intermediate-Duration Government Class A shares were offered beginning
February 17, 1987.
7 Intermediate-Duration Government Class D shares were offered beginning
September 26, 1993.
8 GNMA Class A shares were offered beginning March 20, 1987.
9 GNMA Class B shares were offered beginning July 12, 1994.
10 GNMA Class D shares were offered beginning September 30, 1993.
11 Money Market Class A shares were offered beginning November 15, 1983.
12 Money Market Class B shares were offered beginning October 12, 1990
13 Money Market Class C shares were offered beginning May 17, 1995.
14 Prime Obligation Class A shares were offered beginning December 22, 1987.
15 Prime Obligation Class B shares were offered beginning March 26, 1991.
-24-
<PAGE> 130
16 Prime Obligation Class C shares were offered beginning March 25, 1992 and
were fully liquidated October 27, 1994.
17 Government Class A shares were offered beginning March 8, 1992, were fully
liquidated June 2, 1993 and were offered beginning October 27, 1995.
18 Government Class B shares were offered beginning August 22, 1995.
19 Government Class C shares were offered beginning April 7, 1994.
20 Government II Class A shares were offered beginning September 6, 1985.
21 Government II Class B shares were offered beginning January 28, 1991.
22 Treasury Class A shares were offered beginning September 30, 1992.
23 Treasury Class C shares were offered beginning July 27, 1995.
24 Treasury II Class A shares were offered beginning July 28, 1989.
25 Treasury II Class B shares were offered beginning February 15, 1990.
26 Treasury II Class C shares were offered beginning May 8, 1995.
27 Federal Securities Class A shares were offered beginning November 12, 1982,
and were fully liquidated July 15, 1994.
* Not in operation during period.
The Portfolios may, from time to time, compare their performance to the
performance of other mutual funds tracked by mutual fund rating services, to
broad groups of comparable mutual funds or unmanaged indices which may assume
investment of dividends but generally do not reflect deductions for
administrative and management costs.
DETERMINATION OF NET ASSET VALUE
Securities of the Money Market, Prime Obligation, Government, Government II,
Treasury, Treasury II and Federal Securities 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, there may be periods during
which the value of an instrument, 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 the Trust resulted in a lower aggregate portfolio value on a particular day,
a prospective investor in a Portfolio would be able to obtain a somewhat higher
yield than would result from investment in a company utilizing solely market
values, and existing shareholders in the Portfolio would experience a lower
yield. The converse would apply in a period of rising interest rates.
The Trust's use of amortized cost valuation (with respect to the Money Market,
Prime Obligation, Government, Government II, Treasury, Treasury II and Federal
Securities Portfolios) and the maintenance of the Trust's net asset value at
$1.00 are permitted, provided certain conditions are met, by Rule 2a-7,
promulgated by the SEC under the 1940 Act. Under Rule 2a-7, as amended, a money
market portfolio must maintain a dollar-weighted average maturity of 90 days or
less and not purchase any instrument having a remaining maturity of more than
397 days. In addition, money market funds may acquire only U.S. dollar
denominated obligations that present minimal credit risks and that are "eligible
securities." An "eligible security" is one that is (i) rated, at the time of
investment, by at least two NRSROs (one if it is the only organization rating
such obligation) in the highest short-term rating category or, if unrated,
determined to be of comparable quality (a "first tier security"), or (ii) rated
according to the foregoing criteria in the second highest short-term rating
category or, if unrated, determined to be of comparable quality ("second tier
security"). The Adviser will determine that an obligation presents minimal
credit risks or that unrated instruments are of comparable quality in accordance
with guidelines established by the Trustees. The Trustees must approve or ratify
the purchase of any unrated securities or securities rated by only one NRSRO. In
addition, investments in second tier securities are subject to the further
constraints that (i) no more than 5% of a money market portfolio's assets may be
invested in such securities in the aggregate, and (ii) any investment in such
securities of one issuer is limited to the greater of 1% of the Portfolio's
total assets or $1 million. The regulations also require the Trustees to
establish procedures which are reasonably designed to stabilize the net asset
value per share at $1.00 for each Portfolio. However, there is no assurance that
the Trust will be able to meet this objective for any Portfolio. The Trust's
procedures include the determination of the extent of deviation, if any, of each
Portfolio's
-25-
<PAGE> 131
current net asset value per share calculated using available market
quotations from each Portfolio's amortized cost price per share 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 Short-Duration Government, Intermediate-Duration Government,
GNMA, Short-Duration Mortgage, Corporate Daily Income and Government Securities
Daily Income Portfolios are 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
It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in kind of readily marketable securities held
by a Portfolio in lieu of cash. Shareholders may incur brokerage charges on the
sale of any such securities so received in payment of redemptions. However, a
shareholder will at all times be entitled to aggregate cash redemptions from all
Portfolios of the Trust during any 90-day period of up to the lesser of $250,000
or 1% of the Trust's net assets.
A gain or loss for federal income tax purposes may be realized by a taxable
shareholder upon an in-kind redemption depending upon the shareholder's basis in
the shares of the Trust redeemed.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period during which trading
on the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or evaluation of the portfolio securities is not reasonably
practicable, or for such other periods as the SEC may by order permit. The Trust
also reserves the right to suspend sales of shares of the Portfolios for any
period during which the New York Stock Exchange, the Manager, the Adviser,
the Distributor and/or the Custodian(s) are not open for business.
The Manager or Distributor will not accept securities as payment for shares of
the GNMA Portfolio unless (a) such securities meet the investment objective and
policies of the Portfolio; (b) the securities are acquired for investment and
not for resale; (c) such securities are liquid securities which are not
restricted as to transfer either by law or liquidity of market; and (d) such
securities have a value which is readily ascertainable (and not established
only by evaluation).
SHAREHOLDER SERVICES
The following is a description of plans and privileges by which the sale charges
imposed on the Class D shares of the Short-Duration Government,
Intermediate-Duration Government and GNMA Portfolios may be reduced.
STOP-PAYMENT REQUESTS: Investors may request a stop payment on checks by
providing the Trust with a written authorization to do so. Oral requests will be
accepted provided that the Trust promptly receives a written authorization. Such
requests will remain in effect for six months unless renewed or canceled. The
Trust will use its best efforts to effect stop-payment instructions, but does
not promise or guarantee that such instructions will be effective. Shareholders
requesting stop payment will be charged a $20 service fee per check which will
be deducted from their accounts.
-26-
<PAGE> 132
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity discounts
when the shareholder's new investment, together with the current market value of
all holdings of that shareholder in certain eligible portfolios, reaches a
discount level. See "Purchase and Redemption of Shares" in the Prospectuses for
the sales charge on quantity purchases.
LETTER OF INTENT: The reduced sales charges are also applicable to the aggregate
amount of purchases made by any such purchaser previously enumerated within a
13-month period pursuant to a written Letter of Intent provided by the
Distributor, and not legally binding on the signer or a Portfolio which provides
for the holder in escrow by the Manager of 5% of the total amount intended to be
purchased until such purchase is completed within the 13-month period. A Letter
of Intent may be dated to include shares purchased up to 90 days prior to the
date the Letter of Intent is signed. The 13-month period begins on the date of
the earliest purchase. If the intended investment is not completed, the Manager
will surrender an appropriate number of the escrowed shares for redemption in
order to realize the difference between the sales charge imposed under the
Letter of Intent and the sales charge that would have otherwise been imposed.
DISTRIBUTION INVESTMENT OPTION: Distributions of dividends and capital gains
made by the Portfolios may be automatically invested in shares of one of the
Portfolios if shares of the Portfolio are available for sale. Such investments
will be subject to initial investment minimums, as well as additional purchase
minimums. A shareholder considering the distribution investment option should
obtain and read the prospectus(es) of the other Portfolios and consider the
differences in objectives and policies before making any investment.
REINSTATEMENT PRIVILEGE: A shareholder who has redeemed shares of any of the
Portfolios has a one-time right to reinvest the redemption proceeds in shares of
the Portfolio at their net asset value as of the time of reinvestment. Such a
reinvestment must be made within 30 days of the redemption and is limited to the
amount of the redemption proceeds. Although redemptions and repurchases of
shares are taxable events, a reinvestment within such 30-day period in the same
fund is considered a "wash sale" and results in the inability to recognize
currently all or a portion of a loss realized on the original redemption for
federal income tax purposes. The investor must notify the Transfer Agent at the
time the trade is placed that the transaction is a reinvestment.
EXCHANGE PRIVILEGE: Some or all of the shares of a Portfolio's Class D for which
payment has been received (i.e., an established account), may be exchanged for
Class D shares of other portfolios of the Trust or of SEI Liquid Asset Trust,
SEI Tax Exempt Trust, SEI International Trust and SEI Institutional Managed
Trust ("SEI Funds"). Exchanges are made at net asset value plus any applicable
sales charge. SEI Funds' portfolios that are not money market portfolios
currently impose a sales charge on Class D shares. A shareholder who exchanges
into one of these "non-money market" portfolios will have to pay a sales charge
on any portion of the exchanged Class D shares for which he or she has not
previously paid a sales charge. If a shareholder has paid a sales charge on
Class D shares, no additional sales charge will be assessed when he or she
exchanges those Class D shares for other Class D shares. If a shareholder buys
Class D shares of a "non-money market" fund and receives a sales charge waiver,
he or she will be deemed to have paid the sales charge for purposes of this
exchange privilege. In calculating any sales charge payable on an exchange
transaction, the SEI Funds will assume that the first shares a shareholder
exchanges are those on which he or she has already paid a sales charge. Sales
charge waivers may also be available under certain circumstances, as described
in the portfolios' prospectuses. The Trust reserves the right to change the
terms and conditions of the exchange privilege discussed herein, or to terminate
the exchange privilege, upon 60 days' notice. Exchanges will be made only after
proper instructions in writing or by telephone (an "Exchange Request") are
received for an established account by the Distributor.
A shareholder may exchange the shares of each Portfolio's Class D shares, for
which good payment has been received, in his or her account at any time,
regardless of how long he or she has held his or her 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 must be 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 (plus any applicable sales charge) of the
shares of the other portfolios ("New Portfolios"). 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
Transfer Agent in writing or by telephone on any
-27-
<PAGE> 133
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 Portfolios, and thus the purchase of shares of the New
Portfolios, may be delayed for up to seven days if the Portfolio determines 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
QUALIFICATION AS A RIC
In order to qualify for treatment as a regulated investment company ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), a Portfolio must distribute annually to its shareholders at least 90%
of its investment company taxable income (generally, net investment income plus
net short-term capital gain) (the "Distribution Requirement") and also must meet
several additional requirements. Among these requirements are the following (i)
at least 90% of a Portfolio's gross income each taxable year must be derived
from dividends, interest, payments with respect to securities loans, and gains
from the sale or other disposition of stock or securities, or other income
derived with respect to its business of investing in such stock or securities;
(ii) less than 30% of a Portfolio's gross income each taxable year may be
derived from the sale or other disposition of stock of securities held for less
than three months; (iii) at the close of each quarter of a Portfolio's taxable
year, at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. Government securities, securities of other RICs and other
securities, with such other securities limited, in respect of any one issuer, to
an amount that does not exceed 5% of the value of a Portfolio's assets and that
does not represent more than 10% of the outstanding voting securities of such
issuer; and (iv) at the close of each quarter of a Portfolio's taxable year, not
more than 25% of the value of its assets may be invested in securities (other
than U.S. Government securities or the securities of other RICs) of any one
issuer or of two or more issuers which the Portfolio controls and which are
engaged in the same, similar or related trades or businesses.
Notwithstanding the Distribution Requirement described above, which only
requires a Portfolio to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital
gain, a Portfolio will be subject to a nondeductible 4% excise tax to the extent
it fails to distribute, by the end of any calendar year, at least 98% of its
ordinary income for that year and 98% of its capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
If capital gain distributions have been made with respect to shares that are
sold at a loss after being held for six months or less, then the loss is treated
as a long-term capital loss to the extent of the capital gain distributions.
If a Portfolio fails to qualify as a 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 dividends received deduction for corporate
shareholders who have held shares for more than 45 days.
Generally, gain or loss on the sale, exchange or redemption of shares will be
capital gain or loss which will be long-term if the share has been held for more
than one year and otherwise will be short-term. However, if a shareholder
realizes a loss on the sale, exchange or redemption of a share held for six
months or less and has previously received a capital gains distribution with
respect to the share (or if any undistributed net capital gains of the Portfolio
with respect to such share are included in determining the shareholder's
long-term capital gain), the shareholder must treat the loss as long-term
capital loss to the extent of the amount of the prior capital gains distribution
(or if any undistributed net capital gains of the Portfolio which have been
included in determining such shareholder's long-term capital gains).
Rules of state and local taxation of dividend and capital gains distributions
from regulated investment companies often differ from the rules for federal
income taxation described above. Shareholders are urged to consult their tax
advisers as to the consequences of these and other state and local tax rules
affecting an investment in the Trust.
-28-
<PAGE> 134
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. Distributions by the
Portfolio to shareholders and the ownership of shares may be subject to state
and local taxes.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Adviser is responsible for placing orders to
execute Portfolio transactions. In placing orders, it is the Trust's policy to
seek to obtain the best net results taking into account such factors as price
(including the applicable dealer spread), size, type and difficulty of the
transaction involved, the firm's general execution and operational facilities,
and the firm's risk in positioning the securities involved. While the Adviser
generally seeks reasonably competitive spreads or commissions, the Trust will
not necessarily be paying the lowest spread or commission available. The Trust's
policy of investing in securities with short maturities will result in high
portfolio turnover. The Trust will not purchase portfolio securities from any
affiliated person acting as principal except in conformity with the regulations
of the SEC.
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, the
Adviser will deal directly with the dealers who make a market in the securities
involved except in those circumstances where better prices and execution are
available elsewhere. Such dealers usually are acting as principal for their own
account. On occasion, securities may be purchased directly from the issuer.
Money market securities 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 Portfolios 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
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
being purchased or sold on a securities exchange during a comparable period of
time." In addition, the Portfolio may direct commission business to one or more
designated broker-dealers, including the Distributor, in connection with such
broker-dealer's payment of certain of the Portfolio's expenses. 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. For the fiscal years
ended January 31, 1994, 1995 and 1996, no Portfolio paid any brokerage
commissions.
The portfolio turnover rate for each fixed income Portfolio for the fiscal years
ending January 31, 1994, 1995 and 1996 was as follows: Short-Duration
Government, 105%, 45% and 184%, respectively; Intermediate-Duration Government,
56%, 61% and 115%, respectively; GNMA, 70%, 85% and 20%, respectively;
Corporate Daily Income Portfolio, 34%, 147% and 295%, respectively; and
Short-Duration Mortgage Portfolio, 166%, 741% and 356%, respectively; and in
each case is expected to be comparable in the coming year.
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.
-29-
<PAGE> 135
Since the Trust does not market its shares through intermediary brokers or
dealers, it is not the Trust's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, the Adviser may place Portfolio orders with qualified
broker-dealers who recommend the Trust to clients, and may, when a number of
brokers and dealers can provide best price and execution on a particular
transaction, consider such recommendations by a broker or dealer in selecting
among broker-dealers.
The Trust does not expect to use one particular dealer, but, subject to the
Trust's policy of seeking the best net results, dealers who provide supplemental
investment research to the Adviser may receive orders for transactions by the
Trust. Information so received will be in addition to and not in lieu of the
services required to be performed by the Adviser under the Advisory Agreement,
and the expenses of the Adviser will not necessarily be reduced as a result of
the receipt of such supplemental information.
The Trust is required to identify any securities of its "regular brokers or
dealers" (as such term is defined in the 1940 Act) which the Trust has acquired
during its most recent fiscal year. As of January 31, 1996: the Money Market
Portfolio held commercial paper issued by Goldman Sachs in the amount of
$3,000,000; the Prime Obligation Portfolio held commercial paper issued by Bear
Stearns in the amount of $75,000,000, commercial paper issued by Goldman Sachs
in the amount of $55,000,000, and an overnight repurchase agreement issued by
Lehman Brothers in the amount of $4,000,000; the Corporate Daily Income
Portfolio held an overnight repurchase agreement issued by Paine Webber in the
amount of $3,579,000; the Government Portfolio held a term repurchase agreement
issued by Goldman Sachs in the amount of $60,000,000, and an overnight
repurchase agreement issued by Lehman Brothers in the amount of $144,000; the
Short-Duration Government Portfolio held an overnight repurchase agreement
issued by Paine Webber in the amount of $1,985,000; the Intermediate-Duration
Government Portfolio held an overnight repurchase agreement issued by Paine
Webber in the amount of $2,857,000; the Treasury Portfolio held overnight
repurchase agreements issued by J.P. Morgan and Lehman Brothers in the amounts
of $6,000,000 and $6,000,000, respectively; the GNMA Portfolio held an overnight
repurchase agreement issued by Paine Webber in the amount of $5,431,000; and the
Short-Duration Mortgage Portfolio held an overnight repurchase agreement
issued by Paine Webber in the amount of $16,000.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of each Portfolio, each of which represents an equal proportionate
interest in that Portfolio. Each share of a Portfolio upon liquidation of that
Portfolio entitles a shareholder to a pro rata share in the net assets of that
Portfolio after taking into account certain distribution expenses. Shareholders
have no preemptive rights. The Declaration of Trust provides that the Trustees
of the Trust may create additional portfolios of shares or classes of
portfolios. Any consideration received by the Trust for shares of any additional
portfolio and all assets in which such consideration is invested would belong to
that portfolio and would be subject to the liabilities related thereto. Share
certificates representing the shares will not be issued.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his or
her 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 or her
duties.
VOTING
Where the prospectuses for the Portfolios or Statement of Additional Information
state that an investment limitation or a fundamental policy may not be changed
without shareholder approval, such approval means the vote of (i) 67% or more of
the
-30-
<PAGE> 136
Portfolio's shares present at a meeting if the holders of more than 50% of the
outstanding shares of the Portfolio are present or represented by Proxy, or
(ii) more than 50% of the Portfolio's outstanding shares, whichever is less.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of the Trust could, under
certain circumstances, be held personally liable 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.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 13, 1996, the following persons were the only persons who were
record owners (or, to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Portfolios. The Trust believes that most of the shares
referred to below were held by the following persons in accounts for their
fiduciary, agency, or custodial customers.
MONEY MARKET PORTFOLIO-CLASS A: First Fidelity Bank, NA, Attention: Joanne
Monteiro, Broad & Walnut Streets, Funds Services, W21/2,Philadelphia, PA 19109,
7.03%; Maril & Co., c/o Marshall & Ilsley Trust Co., Attention: Andrew
Tillman/Fund Accounting, 1000 North Water St. 14th Floor, Milwaukee, WI 53202,
12.61%; SEI Trust Company, Attention: Jackie Esposito, 680 E. Swedesford Rd,
Wayne, PA 19087, 6.09%; Calhoun & Co., c/o Comerica Bank, Attention: Dennis
Miriani, P.O. Box 1319, 19th Fl., Detroit, MI 48231, 29.15%; Walker and Company,
c/o Orange County Trust, Attention: Kenneth Flood, 212 Dolson Avenue, 2nd Floor,
Middletown, NY 10940, 10.86%; Nazareth National Bank and Trust Co., Attention:
Sally Jablonski, 76 S. Main St., Nazareth, PA 18064, 11.31%; Smith & Co., c/o
First Security Bank of Utah, NA, Attention: Money Market/Mutual Fund Desk, P.O.
Box 25297, Salt Lake City, UT 84125, 8.54%.
MONEY MARKET PORTFOLIO-CLASS B: First National Bank of Rochester, Attention:
Trust Operations Manager, 35 State Street, Powers Building, Suite 300,
Rochester, NY 14614, 9.32%; Palm Beach National Bank & Trust Company, Attention:
Diana Z. Helmann, 11760 US Highway One #100, North Palm Beach, FL 33408, 90.68%.
MONEY MARKET PORTFOLIO-CLASS C: First National Bank of Rochester, Attention:
Trust Operations Manager, 35 State Street, Powers Building, Suite 300,
Rochester, NY 14614, 100.00%.
PRIME OBLIGATION PORTFOLIO-CLASS A: The Bank of California, NA, Cash Management
Services, 475 Samsome Street, 11th Floor, Attention: Elena Aguba, San Francisco,
CA 94111, 5.63%; Calhoun & Co., c/o Comerica Bank, Attention: Dennis Miriani,
P.O. Box 1319, 7th Floor, Detroit, MI 48231, 20.49%; The New Hillman Company,
c/o Amalgamated Bank of New York, Attention: David Guitano, 11-15 Union Square,
New York, NY 10003, 19.48%.
PRIME OBLIGATION PORTFOLIO-CLASS B: Brotherhood Bank and Trust Company,
Attention: Julie Zamora, 756 Minnesota Avenue, Kansas City, KS 66101, 40.79%;
Muir & Co., c/o Frost National Bank, P.O. Box 2479, San Antonio, TX 78298-2479,
38.26%; Oltrust & Co., c/o Old National Bank in Evansville, Attention: David
Crow, P.O. Box 207, Evansville, IN 47702, 19.70%.
GOVERNMENT PORTFOLIO-CLASS A: City of Chicago Fund 750, Attention: Miriam
Santos, 121 N. LaSalle Street, Room 204, Chicago, IL 60602, 12.27%; People's
Bank, Attention: Trust Dept. Lillian Tompkins, 850 Main St., RC 13-505,
Bridgeport, CT 06604, 86.05%.
GOVERNMENT PORTFOLIO-CLASS B: Guaranty Federal Bank, F.S.B., Attention: Roy
Ochoa, 8333 Douglas Avenue, Dallas, TX 75225, 39.62%; Brotherhood Bank and Trust
Company, Attention: Julie Zamora, 756 Minnesota Avenue, Kansas City, KS 66101,
60.38%.
-31-
<PAGE> 137
GOVERNMENT PORTFOLIO-CLASS C: City National Bank, Attention: Michael Nunnelee,
400 N. Roxbury Drive, Suite 700, Beverly Hills, CA 90210, 20.41%; Southwest
Securities, Special Custodial Account for Exclusive Benefit of our Customers,
Attention: Cathy Reames, P.O. Box 509002, Dallas, TX 75250, 79.59%.
GOVERNMENT II PORTFOLIO-CLASS A: Fleet National Bank of Massachusetts,
Attention: Kevin Adamson, ACI Unit OF-0504, One Federal Street, Boston, MA
02211, 16.68%; Enele Co., c/o Copper Mountain Financial Group, Attention:
Michael Huckins, 1211 SW Fifth Ave., Suite 1900, Portland, OR 97204, 12.48%;
United States Trust Company, Attention: Rich Lynch, P.O. Box 131, Boston, MA
02101, 19.12%; Dixie Company, c/o Jefferson National Bank, Attention: Katherine
Randolph, P.O. Box 12312, Richmond, VA 23241, 8.13%; MEG and Co., c/o United
States National Bank, Attention: Debbie Moraco, P.O. Box 520, Johnstown, PA
15907, 5.12%.
GOVERNMENT II PORTFOLIO-CLASS B: Muir & Co., c/o Frost National Bank, P.O. Box
2479, San Antonio, TX 78298-2479, 54.68%; Oltrust & Co., c/o Old National Bank
in Evansville, Attention: David Crow, P.O. Box 207, Evansville, IN 47702,
8.20%; GABCO, German American Bank, Attn: Norm Kempf, 711 Main Street, Jasper,
IN 47547, 27.93%.
TREASURY PORTFOLIO-CLASS A: WABANC & Co., c/o Washington Trust Bank, Attention:
Lyla Morgenstern, P.O. Box 2127, Spokane, WA 99210-2127, 43.11%; BMS and
Company, c/o Central Trust Bank, Attention: Wanda McGlade, P.O. Box 779,
Jefferson City, MO 65102, 49.47%; Southwest Guaranty Trust Company, Attention:
Susan Wolverton, 2121 Sage Road, Suite 150, Houston, TX 77056, 7.42%.
TREASURY PORTFOLIO-CLASS C: Relico, c/o Reliance Trust Company, Attention: Ms.
Jennifer D. Pearson, 3295 Northcrest Road NE, Atlanta, GA 30340-4009, 72.37%;
Community Bank, N.A., Attention: Nancy M. Lewis, 201 North Union Street, Olean,
NY 14760, 27.63%.
TREASURY II PORTFOLIO-CLASS A: LaSalle National Trust, NA, P.O. Box 1443,
Chicago, IL 60690-1443, 18.93%; Kinco & Co., c/o Republic National Bank of New
York, Attention: Madee Padilla, One Hanson Place, Lower Level, Brooklyn, NY
11243, 7.73%; The New Hillman Company, c/o Amalgamated Bank of New York,
Attention: David Guitano, 11-15 Union Square, New York, NY 10003, 27.53%; Trulin
& Co., c/o Chase Lincoln First Bank, Attention: Pat Whalen, P.O. Box 1412,
Rochester, NY 14603, 5.52%.
TREASURY II PORTFOLIO-CLASS B: Second National Bank of Saginaw, Attention:
Bonnie Wenzel, 101 N. Washington Avenue, Saginaw, MI 48607, 6.81%; Marshall
National Bank & Trust Co., Attention: Janie Harlow, P.O.Box 38, Marshall, VA
22115, 7.59%; Muir & Co., c/o Frost National Bank, P.O. Box 2479, San Antonio,
TX 78298-2479, 52.13%; Oltrust & Co., c/o Old National Bank in Evansville,
Attention: David Crow, P.O. Box 207, Evansville, IN 47702, 7.51%; Palm Beach
National Bank & Trust Company, Attention: Diana Z. Helmann, 11760 US Highway One
#100, North Palm Beach, FL 33408, 25.68%.
TREASURY II PORTFOLIO-CLASS C: First National Bank of Rochester, Attention:
Trust Operations Manager, 35 State Street, Powers Building, Suite 300,
Rochester, NY 14614, 100.00%.
CORPORATE DAILY INCOME PORTFOLIO-CLASS A: Wellington Trust Company, NA,
Attention: Diane Bissell, 200 State Street, Floor 6, Boston, MA 02109, 10.54%;
SEI Trust Company, Attention: Jacqueline Esposito, 680 E. Swedesford Road,
Wayne, PA 19087, 34.91%; One Valley Bank, N.A., Attention: Rhonda Surbaugh, P.O.
Box 1793, One Valley Bank, Charleston, WV 25326, 5.36%; Port & Co., c/o Today's
Bank, Attention: Trust Operations, 50 W. Douglas Street, Freeport, IL 61032,
10.53%; Professional Investment Management Inc., Attention: Douglas Cowgill,
3455 Mill Run Dr., Suite 311, Hilliard, OH 43026, 7.75%.
SHORT-DURATION GOVERNMENT PORTFOLIO-CLASS A: Garico, c/o American National
Bank of Chicago, Attention: Wendy Kosek, Dept. 77-3272, Division 219, Chicago,
IL 60678-3272, 8.82%; SEI Trust Company, Attention: Jacqueline Esposito, 680 E.
Swedesford Road, Wayne, PA 19087, 13.26%; One Valley Bank, N.A., Attention:
Rhonda Surbaugh, P.O. Box 1793, One Valley Bank, Charleston, WV 25326, 8.71%;
West One Bank Idaho, NA, Attention: Tom Coleman, Trust Dept. Securities
Clearance, P.O. Box 7928, Boise, ID 83707, 10.50%; Meg and Co., c/o United
States National Bank, Attention: Debbie Moraca, P.O. Box 520, Johnstown, PA
15907, 13.07%.
-32-
<PAGE> 138
SHORT-DURATION GOVERNMENT PORTFOLIO-CLASS B: Relico, c/o Reliance Trust Company,
Attention: Ms. Jennifer D. Pearson, 3295 Northcrest Road NE, Atlanta, GA
30340-4009, 62.50%; Union Planters Bank Capital Control, Attention: Joyce
Harris, P.O. Box 387, Brokerage Services, Memphis, TN 38147, 37.50%.
SHORT-DURATION GOVERNMENT PORTFOLIO-CLASS D: Reliance Trust Company, P.O. Box
48449, Atlanta, GA 30362-1449, 99.11%.
SHORT-DURATION MORTGAGE PORTFOLIO-CLASS A: Batrus & Co., c/o Bankers Trust
Company, P.O. Box 9005, Church Street Station, New York, NY 10008, 8.66%;
Palsan Company, c/o Sumitomo Bank of California, 320 California Street, 3rd
Floor, Trust Department, Attention: Stephen N. Emigh, San Francisco, CA 94104,
5.09%; SEI Trust Company, Attention: Jacqueline Esposito, 680 E. Swedesford
Road, Wayne, PA 19087, 35.38%; New England Trust Company, c/o First of America
Trust Operations, P.O. Box 4042, Kalamazoo, MI 49003-4042, 25.33%; Cherrytrust
& Co., c/o The Bank of Cherry Creek, Attention: Daniel Rich, 3033 E. 1st
Avenue, Denver, CO 80010, 14.49%.
INTERMEDIATE-DURATION GOVERNMENT-CLASS A: Transco & Company, c/o Intrust Bank,
N.A., Attention: Pat Wills, P.O. Box 48698, Wichita, KS 67201, 15.90%; ACO, c/o
Integra Trust Services, Attention: Karen White, Trust Securities Section 2-032,
300 Fourth Avenue, Pittsburgh, PA 15278-2232, 25.31%; SEI Trust Company,
Attention: Jacqueline Esposito, 680 E. Swedesford Road, Wayne, PA 19087, 6.30%;
The Fulton Company, c/o Fulton Bank Trust Department, Attention: Dennis Patrick,
One Penn Square, Lancaster, PA 17602, 6.13%; Meg and Co., c/o United States
National Bank, Attention: Debbie Moraca, P.O. Box 520, Johnstown, PA 15907,
5.32%.
INTERMEDIATE-DURATION GOVERNMENT-CLASS D: Sumitomo Bank Trustee, FBO, Garland
Chandler & Alma Chandler JTTEN, 336 S. Acacia Street, San Dimas, CA 91773,
10.62%; Sumitomo Bank Trustee, FBO, Shukyoku Kamiyama & Ethel S. Kamiyama JTTEN,
14711 S. Raymond Avenue, Gardena, CA 90247, 8.22%; Sumitomo Bank Trustee, FBO,
Hillis O. & Margaret Folkins, TTEES, Hillis O. & Margaret Folkins 89 TR, U/A/D
4/20/89, 1048 Harding Court, Claremont, CA 91711, 19.32%; Reliance Trust
Company, P.O. Box 48449, Atlanta, GA 30362-1449, 48.37%.
GNMA PORTFOLIO-CLASS A: Transco & Company, c/o Intrust Bank, N.A., Attention:
Pat Wills, P.O. Box 48698, Wichita, KS 67201, 20.33%; SEI Trust Company,
Attention: Jacqueline Esposito, 680 E. Swedesford Road, Wayne, PA 19087, 9.63%;
BMS and Company, c/o Central Trust Bank, Attention: Trust & Financial Services,
P.O. Box 779, Jefferson City, MO 65102, 9.70%.
GNMA PORTFOLIO-CLASS B: Relico, c/o Reliance Trust Company, Attention: Ms.
Jennifer D. Pearson, 3295 Northcrest Road NE, Atlanta, GA 30340-4009,100.00%.
GNMA PORTFOLIO-CLASS D: Isamu Sam Ishikata & Chiyoko Ishikata JTTEN, 1814 Butte
Street, Richmond, CA 94804, 10.43%; Sumitomo Bank Trustee, FBO, Mary Ota, 538
39th Avenue, San Francisco, CA 94121, 17.42%; Sumitomo Bank Trustee, FBO, Etsuko
M. Horio & Mike Horio JTTEN, 264 Belblossom Drive, Los Gatos, CA 95032, 21.09%;
Sumitomo Bank Trustee, FBO, Joseph Cefalu Cust FBO, Giuliana S. Cefalu UGMA CA,
7061 Valentine Drive, Huntington Beach, CA 92647, 26.00%; SEI Trust Company,
Cust for the IRA of Philip G. Marino, 412 White Road, Mineola, NY 11501-1022,
6.25%.
EXPERTS
The financial statements in this Statement of Additional Information and the
Financial Highlights included in the prospectuses have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report, with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said report.
FINANCIAL STATEMENTS
Following are the audited financial statements of the Trust for the fiscal
year ended January 31, 1996, and the Report of Independent Accountants of
Arthur Andersen LLP dated March 14, 1996, relating to the financial statements
and Financial Highlights of the Trust.
-33-
<PAGE> 139
STATEMENT OF NET ASSETS
================================================================================
SEI Daily Income Trust -- January 31, 1996
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
Face
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER -- 52.3%
American Home Products
5.450%, 03/15/96 $ 3,000 $ 2,980
ANZ Delaware
5.680%, 02/13/96 1,000 998
Banque National De Paris
5.510%, 05/21/96 3,000 2,949
BHF Finance Delaware
5.640%, 03/04/96 3,000 2,985
Burlington Northern Railroad
Santa Fe
5.900%, 02/28/96 1,000 996
Ciesco LP
5.750%, 02/06/96 300 300
5.750%, 02/08/96 400 399
5.400%, 02/16/96 1,000 998
CoreStates Capital
5.680%, 02/20/96 3,000 2,991
Corporate Receivables
5.270%, 04/26/96 3,000 2,963
ESC Securitization
5.680%, 02/22/96 4,000 3,987
Falcon Asset Securitization
5.450%, 02/26/96 3,000 2,989
General Motors Acceptance
5.750%, 02/16/96 3,000 2,993
Goldman Sachs Group LP
5.440%, 03/11/96 3,000 2,982
GTE Northwest
5.380%, 02/20/96 500 499
Household International
5.730%, 02/08/96 2,400 2,397
Kreditbank North America Finance
5.740%, 02/05/96 2,000 1,999
Metropolitan Life Funding
5.380%, 02/23/96 635 633
Norwest Corporation
5.370%, 04/22/96 3,000 2,964
Norwest Financial
5.690%, 02/28/96 2,000 1,991
Preferred Receivables Funding
5.500%, 02/20/96 1,100 1,097
Puerto Rico Development Bank
5.650%, 02/28/96 3,000 2,987
Quebec Province
5.080%, 07/22/96 3,000 2,927
Sears Roebuck Acceptance
5.720%, 02/13/96 3,000 2,994
Westpac Banking
5.530%, 04/30/96 3,000 2,959
---------
TOTAL COMMERCIAL PAPER
(Cost $54,957) 54,957
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 20.3%
FFCB
5.181%, 07/18/96 1,310 1,280
FHLMC
5.523%, 02/26/96 5,000 4,981
SLMA
5.350%, 03/28/96 (A) 15,000 15,000
---------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $21,261) 21,261
---------
CERTIFICATES OF DEPOSIT/BANK NOTES -- 17.1%
BankAmerica
5.740%, 02/16/96 3,000 3,000
Bank of Nova Scotia
5.240%, 06/28/96 3,000 3,000
Bank of Tokyo
5.590%, 03/12/96 3,000 3,000
Chase Manhattan
5.770%, 04/15/96 3,000 3,000
First of America Bank
5.375%, 05/17/96 3,000 3,000
National Westminister Bank
5.760%, 02/22/96 3,000 3,000
---------
TOTAL CERTIFICATES OF DEPOSIT/BANK NOTES
(Cost $18,000) 18,000
---------
FLOATING RATE INSTRUMENTS -- 12.4%
General Electric Capital
5.867%, 02/22/96 (A) 3,000 3,001
People's Security Funding
Agreement
6.090%, 05/01/96 (A) 5,000 5,000
PNC Bank NA
5.550%, 02/06/96 (A) 3,000 2,998
SMM Trust 1995-1
5.583%, 02/29/96 (A) 2,000 2,000
---------
TOTAL FLOATING RATE INSTRUMENTS
(Cost $12,999) 12,999
---------
CORPORATE BOND -- 2.7%
NationsBank
4.750%, 08/15/96 2,825 2,810
---------
TOTAL CORPORATE BOND
(Cost $2,810) 2,810
---------
TOTAL INVESTMENTS -- 104.8%
(Cost $110,027) 110,027
---------
OTHER ASSETS AND LIABILITIES, NET -- (4.8)% (5,060)
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE> 140
STATEMENT OF NET ASSETS
================================================================================
SEI Daily Income Trust -- January 31, 1996
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
Face
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization -- no
par value) based on 95,900,558
outstanding shares of beneficial
interest $ 95,900
Portfolio shares of Class B
(unlimited authorization -- no
par value) based on 6,615,694
outstanding shares of beneficial
interest 6,616
Portfolio shares of Class C
(unlimited authorization -- no
par value) based on 2,460,108
outstanding shares of beneficial
interest 2,460
Accumulated net realized loss
on investments (9)
---------
TOTAL NET ASSETS -- 100.0% $104,967
===== ========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 1.00
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS B $ 1.00
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS C $ 1.00
========
</TABLE>
(A) Floating Rate Instrument. Rate reflected on the Statement of Net Assets
is the rate in effect on January 31, 1996. The date shown is the longer
of the reset date or the demand date.
FFCB Federal Farm Credit Bank
FHLMC Federal Home Loan Mortgage Corporation
LP Limited Partnership
SLMA Student Loan Marketing Association
<TABLE>
<CAPTION>
GOVERNMENT PORTFOLIO
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 91.9%
FFCB
5.821%, 02/13/96 $ 9,000 $ 8,983
5.822%, 02/14/96 20,000 19,960
5.798%, 10/17/96 6,570 6,314
FHLB
5.503%, 02/03/96 (A) 100,000 99,909
5.710%, 02/21/96 40,000 39,877
5.695%, 02/28/96 32,000 31,867
5.722%, 03/26/96 5,075 5,033
5.310%, 05/13/96 10,220 10,071
5.250%, 06/14/96 30,000 29,434
5.201%, 06/27/96 5,000 4,897
5.764%, 10/18/96 400 384
FHLMC
5.700%, 02/22/96 1,985 1,979
4.400%, 03/11/96 2,730 2,727
4.550%, 04/01/96 5,000 4,992
5.362%, 04/24/96 2,535 2,504
FNMA
5.340%, 02/07/96 (A) 22,000 22,000
5.572%, 02/21/96 3,800 3,788
5.824%, 02/22/96 20,000 19,935
5.827%, 02/22/96 30,000 29,902
5.720%, 03/13/96 6,000 5,962
5.708%, 03/15/96 20,000 19,869
5.614%, 03/20/96 50,000 49,636
5.683%, 04/30/96 7,000 6,906
5.686%, 04/30/96 7,000 6,906
5.193%, 06/20/96 10,000 9,805
5.200%, 06/26/96 25,000 24,491
5.101%, 06/27/96 10,900 10,681
5.180%, 07/30/96 40,000 39,004
FNMA MTN
5.475%, 02/16/96 (A) 25,000 24,992
TVA
5.296%, 05/28/96 14,770 14,524
---------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $557,332) 557,332
---------
REPURCHASE AGREEMENTS -- 9.9%
Goldman Sachs (B)
5.47%, dated 01/26/96, matures
02/28/96, repurchase price
$60,009,117 (collateralized by
various FHLMC obligations ranging
in par value $6,525,730 --
$34,577,833, 6.00% --
7.500%, 04/01/09 -- 08/01/25;
FNMA obligation par value
$30,000,000, 7.000%, 01/01/09;
with total market value of
$61,200,000) 60,000 60,000
Lehman Brothers
5.93%, dated 01/31/96, matures
02/01/96, repurchase price
$144,024 (collateralized by
U.S. Treasury STRIPS, par value
$650,000, 0.000%, matures
08/15/19: market value $146,848) 144 144
---------
TOTAL REPURCHASE AGREEMENTS
(Cost $60,144) 60,144
---------
TOTAL INVESTMENTS -- 101.8%
(Cost $617,476) 617,476
---------
OTHER ASSETS AND LIABILITIES, NET -- (1.8)% (10,781)
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE> 141
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization -- no
par value) based on 48,760,917
outstanding shares of beneficial
interest $ 48,761
Portfolio shares of Class B
(unlimited authorization -- no
par value) based on 14,995,987
outstanding shares of beneficial
interest 14,996
Portfolio shares of Class C
(unlimited authorization -- no
par value) based on 542,927,756
outstanding shares of beneficial
interest 542,928
Accumulated net realized gain
on investments 5
Undistributed net investment
income 5
--------
TOTAL NET ASSETS -- 100.0% $606,695
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 1.00
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS B $ 1.00
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS C $ 1.00
========
</TABLE>
(A) Floating Rate Instrument. The rate reflected on the Statement of Net
Assets is the rate in effect on January 31, 1996. The date shown is the
longer of the reset date or the demand date.
(B) Illiquid Security.
FFCB Federal Farm Credit Bank
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
MTN Medium Term Note
STRIPS Separately Trading of Registered Interest and Principal of Securities
TVA Tennessee Valley Authority
<TABLE>
<CAPTION>
GOVERNMENT II PORTFOLIO
<S> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 99.5%
FFCB
5.514%, 02/14/96 $10,750 $10,729
5.525%, 02/14/96 3,000 2,994
5.529%, 02/14/96 3,000 2,994
5.546%, 02/14/96 1,015 1,013
5.683%, 02/15/96 2,055 2,051
5.729%, 02/15/96 1,600 1,597
5.536%, 02/21/96 $15,000 $14,955
5.448%, 02/23/96 4,075 4,062
5.688%, 02/26/96 6,000 5,977
5.705%, 02/29/96 2,000 1,991
5.625%, 03/08/96 20,000 19,891
5.394%, 03/15/96 12,565 12,486
5.375%, 03/18/96 1,460 1,450
5.325%, 03/25/96 1,405 1,394
5.552%, 04/15/96 3,000 2,967
5.091%, 06/28/96 1,000 980
5.112%, 06/28/96 5,000 4,898
5.187%, 07/10/96 11,285 11,034
5.191%, 07/15/96 2,175 2,125
5.169%, 07/30/96 12,000 11,702
FHLB
5.446%, 02/01/96 11,435 11,435
5.881%, 02/01/96 40,900 40,900
5.713%, 02/14/96 4,000 3,992
5.671%, 02/15/96 35,000 34,925
5.686%, 02/15/96 4,885 4,875
5.822%, 02/15/96 45,000 44,902
5.445%, 02/20/96 20,000 19,944
5.688%, 02/21/96 4,500 4,486
5.573%, 02/22/96 1,195 1,191
5.711%, 02/22/96 58,915 58,725
5.728%, 02/26/96 2,035 2,027
5.664%, 02/29/96 2,000 1,991
5.702%, 02/29/96 10,000 9,957
5.598%, 03/13/96 9,660 9,600
5.593%, 03/20/96 50,200 49,836
5.624%, 03/25/96 1,800 1,786
5.626%, 03/26/96 13,690 13,578
5.318%, 05/09/96 30,000 29,579
5.310%, 05/13/96 15,000 14,781
5.251%, 05/21/96 10,000 9,843
5.201%, 06/13/96 3,000 2,944
5.282%, 06/13/96 4,055 3,979
5.250%, 06/14/96 35,000 34,339
5.203%, 06/19/96 4,875 4,779
5.229%, 06/19/96 14,410 14,126
5.229%, 06/20/96 6,330 6,204
5.197%, 06/26/96 37,400 36,639
5.201%, 06/27/96 6,160 6,034
5.216%, 06/27/96 25,000 24,486
5.843%, 09/25/96 5,000 4,821
5.788%, 09/27/96 175 169
FHLB
5.385%, 02/05/96 (A) 30,000 29,976
SLMA
5.330%, 02/07/96 (A) 35,000 35,000
5.350%, 02/07/96 (A) 20,000 20,000
5.360%, 02/07/96 (A) 30,000 30,000
5.370%, 02/07/96 (A) 44,450 44,453
5.510%, 02/07/96 (A) 30,000 30,076
TVA
5.466%, 02/01/96 12,450 12,450
------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 142
STATEMENT OF NET ASSETS
================================================================================
SEI Daily Income Trust -- January 31, 1996
<TABLE>
<CAPTION>
GOVERNMENT II PORTFOLIO
- --------------------------------------------------------------------------------
Face
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $826,118) $826,118
--------
U.S. TREASURY OBLIGATIONS -- 4.3%
U.S. Treasury Bill
5.093%, 05/02/96 $25,000 24,686
U.S. Treasury Note
4.375%, 08/15/96 11,000 10,921
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $35,607) 35,607
--------
TOTAL INVESTMENTS -- 103.8%
(Cost $861,725) 861,725
--------
OTHER ASSETS AND LIABILITIES, NET -- (3.8)% (31,682)
--------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization -- no
par value) based on 810,513,477
outstanding shares of beneficial
interest 810,513
Portfolio shares of Class B
(unlimited authorization -- no
par value) based on 19,676,306
outstanding shares of beneficial
interest 19,676
Accumulated net realized loss
on investments (146)
--------
TOTAL NET ASSETS -- 100.0% $830,043
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 1.00
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS B $ 1.00
========
</TABLE>
(A) Floating Rate Instrument. The rate reflected on the Statement of Net
Assets is the rate in effect on January 31, 1996. The date shown is the
longer of the reset date or the demand date.
FFCB Federal Farm Credit Bank
FHLB Federal Home Loan Bank
SLMA Student Loan Marketing Association
TVA Tennessee Valley Authority
<TABLE>
<CAPTION>
PRIME OBLIGATION PORTFOLIO
<S> <C> <C>
COMMERCIAL PAPER -- 60.1%
American Express Credit
5.650%, 03/08/96 $20,000 $19,887
5.520%, 04/19/96 50,000 49,402
5.160%, 06/21/96 30,000 29,394
American Home Products
5.710%, 02/02/96 10,000 9,998
5.700%, 02/06/96 19,400 19,385
5.720%, 02/09/96 15,000 14,981
5.700%, 02/12/96 11,000 10,981
5.660%, 03/07/96 15,000 14,917
5.450%, 03/15/96 12,000 11,922
5.300%, 04/24/96 23,000 22,719
Associates of North America
5.680%, 02/08/96 20,000 19,978
5.680%, 02/12/96 20,000 19,965
Bear Stearns
5.470%, 03/04/96 40,000 39,806
5.420%, 03/18/96 35,000 34,758
Beneficial
5.220%, 05/21/96 75,000 73,804
Centric Funding
5.850%, 02/01/96 17,000 17,000
Chase Manhattan
5.650%, 02/29/96 45,000 44,802
Chevron Transportation
5.700%, 02/06/96 10,000 9,992
5.150%, 06/21/96 15,000 14,697
5.100%, 06/27/96 8,000 7,833
Ciesco LP
5.650%, 02/13/96 40,000 39,925
5.650%, 02/23/96 10,000 9,966
5.630%, 02/29/96 7,000 6,969
CIT Group Holdings
5.650%, 02/12/96 20,000 19,965
Coca Cola Enterprises
5.700%, 02/12/96 13,000 12,977
CoreStates Capital
5.680%, 02/16/96 7,000 6,983
5.680%, 02/20/96 15,000 14,955
Corporate Receivables
5.520%, 02/28/96 25,000 24,897
5.600%, 03/08/96 20,000 19,888
Ford Motor Credit
5.680%, 02/09/96 30,000 29,962
5.580%, 03/27/96 30,000 29,744
General Electric Capital
5.690%, 02/13/96 20,000 19,962
5.590%, 03/01/96 25,000 24,887
5.580%, 04/11/96 15,000 14,837
5.150%, 06/21/96 30,000 29,395
General Motors Acceptance
5.680%, 02/15/96 25,000 24,945
5.750%, 02/16/96 9,000 8,978
5.700%, 02/22/96 20,000 19,934
5.310%, 05/16/96 25,000 24,613
Goldman Sachs Group LP
5.440%, 03/11/96 55,000 54,676
Harvard University
5.250%, 05/15/96 20,000 19,697
Hewlett-Packard
5.650%, 02/15/96 4,200 4,191
</TABLE>
12
<PAGE> 143
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
IBM Credit
5.510%, 04/24/96 $55,000 $ 54,301
International Lease Finance
5.650%, 02/26/96 8,000 7,969
5.620%, 03/08/96 23,000 22,871
John Deere Capital
5.640%, 03/29/96 35,000 34,687
5.510%, 04/25/96 30,000 29,614
5.200%, 05/22/96 25,000 24,599
McKenna Triangle National
5.660%, 02/15/96 25,000 24,945
National Fuel Gas
5.330%, 04/25/96 25,000 24,689
NationsBank
5.635%, 04/03/96 25,000 24,757
5.190%, 06/28/96 28,000 27,403
New Center Asset Trust
5.710%, 02/02/96 30,000 29,995
Norwest Financial
5.690%, 02/28/96 15,000 14,936
Norwest Corporation
5.370%, 04/22/96 27,000 26,674
PNC Funding
5.770%, 02/05/96 20,000 19,987
Preferred Receivables Funding
5.520%, 04/16/96 30,200 29,853
Prudential Funding
5.530%, 04/18/96 20,000 19,763
Puerto Rico Development Bank
5.650%, 02/28/96 15,000 14,936
Riverwood Funding
5.680%, 02/15/96 29,000 28,936
Sears Roebuck Acceptance
5.700%, 02/13/96 25,000 24,953
5.720%, 02/13/96 30,000 29,943
5.700%, 02/22/96 25,000 24,917
Suntrust Banks
5.605%, 02/08/96 15,000 14,984
5.600%, 02/28/96 15,000 14,937
Whirlpool
5.760%, 02/14/96 14,000 13,971
5.680%, 02/15/96 20,000 19,956
5.710%, 02/16/96 16,000 15,962
----------
TOTAL COMMERCIAL PAPER
(Cost $1,569,105) 1,569,105
----------
CERTIFICATES OF DEPOSIT/BANK NOTES -- 22.6%
Bank of Hawaii
5.570%, 11/06/96 38,000 38,034
BankAmerica
5.740%, 02/16/96 55,000 55,000
5.270%, 06/25/96 30,000 30,000
Bank of New York
5.520%, 05/22/96 50,000 49,988
Chase Manhattan
5.770%, 04/15/96 35,000 35,000
First Alabama Bank
5.250%, 05/31/96 20,000 20,000
5.230%, 07/22/96 20,000 19,998
First American Bank
5.560%, 03/20/96 8,000 8,000
First Chicago
5.480%, 03/15/96 25,000 25,000
First of America Bank
5.375%, 05/17/96 60,000 60,000
5.340%, 05/23/96 20,000 20,000
First National Bank of Maryland
5.740%, 02/05/96 30,000 30,000
First Union National Bank
5.220%, 05/03/96 45,000 45,000
Fleet Financial Group
5.750%, 02/29/96 16,000 16,000
National Bank of Detroit
5.300%, 04/01/96 50,000 50,002
NationsBank
5.500%, 06/10/96 40,000 40,000
Wilmington Trust Bank
5.680%, 03/27/96 50,000 50,000
----------
TOTAL CERTIFICATES OF DEPOSIT/BANK NOTES
(Cost $592,022) 592,022
----------
FLOATING RATE INSTRUMENTS -- 12.4%
Allstate
6.000%, 02/01/96 (A) 15,000 15,000
CoreStates Capital
5.650%, 02/05/96 (A) 15,000 15,000
5.590%, 02/12/96 (A) 15,000 15,000
First Bank of South Dakota
5.605%, 02/21/96 (A) 50,000 49,997
People's Security Funding
Agreement
6.090%, 05/01/96 (A) 62,000 62,000
PNC Bank
5.603%, 02/05/96 (A) 25,000 24,982
5.550%, 02/06/96 (A) 50,000 49,964
South Trust
5.603%, 02/20/96 (A) 13,000 13,000
SMM Trust 1995-B
5.738%, 02/02/96 (A) 30,000 30,000
SMM Trust 1995-1
5.583%, 02/29/96 (A) 50,000 49,995
----------
TOTAL FLOATING RATE INSTRUMENTS
(Cost $324,938) 324,938
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE> 144
STATEMENT OF NET ASSETS
================================================================================
SEI Daily Income Trust -- January 31, 1996
PRIME OBLIGATION PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 8.0%
FNMA
5.340%, 02/07/96 (A) $100,000 $ 100,000
SLMA
5.350%, 02/07/96 (A) 47,600 47,600
5.370%, 02/07/96 (A) 47,000 47,006
5.360%, 02/07/96 (A) 16,000 16,002
-----------
TOTAL U.S. GOVERNMENT AGENCY
Obligations
(Cost $210,608) 210,608
-----------
BANKER'S ACCEPTANCE -- 0.6%
Republic National Bank
5.420%, 03/14/96 15,000 14,905
-----------
TOTAL BANKER'S ACCEPTANCE
(Cost $14,905) 14,905
-----------
REPURCHASE AGREEMENTS -- 0.8%
Aubrey Lanston
5.90%, dated 01/31/96,
matures 02/01/96,
repurchase price $17,505,869
(collateralized by U.S.
Treasury Bill, par value
$18,295,000, 4.830%, matures
07/25/96: market value
$17,862,994) 17,503 17,503
Lehman Brothers
5.93%, dated 01/31/96,
matures 02/01/96,
repurchase price $4,000,659
(collateralized by U.S.
Treasury STRIPS, par value
$9,460,000, 0.000%, matures
11/15/09: market value
$4,142,156) 4,000 4,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $21,503) 21,503
-----------
TOTAL INVESTMENTS -- 104.5%
(Cost $2,733,081) 2,733,081
-----------
OTHER ASSETS AND LIABILITIES, NET -- (4.5)% (116,640)
-----------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization -- no
par value) based on 2,441,684,292
outstanding shares of beneficial
interest $ 2,441,684
Portfolio shares of Class B
(unlimited authorization -- no
par value) based on 174,778,951
outstanding shares of beneficial
interest 174,779
Accumulated net realized loss on
investments (22)
-----------
TOTAL NET ASSETS -- 100.0% $ 2,616,441
===========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 1.00
===========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS B $ 1.00
===========
</TABLE>
(A) Floating Rate Instrument. Rate reflected on the Statement of Net Assets
is the rate in effect on January 31, 1996. The date shown is the longer
of the reset date or the demand date.
FNMA Federal National Mortgage Association
LP Limited Partnership
SLMA Student Loan Marketing Association
STRIPS Separately Trading of Registered Interest and Principal of Securities
The accompanying notes are an integral part of the financial statements.
14
<PAGE> 145
TREASURY PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 36.8%
U.S. Treasury Bills
5.102%, 04/25/96 $ 4,000 $ 3,954
5.107%, 05/30/96 5,000 4,918
5.876%, 05/30/96 3,000 2,945
5.877%, 05/30/96 4,000 3,927
5.122%, 06/20/96 3,000 2,942
5.126%, 07/11/96 3,000 2,934
U.S. Treasury Note
4.375%, 08/15/96 4,000 3,971
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $25,591) 25,591
-------
REPURCHASE AGREEMENTS -- 62.1%
Aubrey Lanston
5.90%, dated 01/31/96,
matures 02/01/96, repurchase
price $1,172,192 (collateralized
by U.S. Treasury Note, par
value $1,115,000, 7.250%,
matures 02/15/98: market
value $1,199,438) 1,172 1,172
J. P. Morgan
5.90%, dated 01/31/96,
matures 02/01/96, repurchase
price $6,000,983 (collateralized
by U.S. Treasury Note, par
value $4,318,000, 11.875%,
matures 11/15/03: market
value $6,127,737) 6,000 6,000
Lehman Brothers
5.93%, dated 01/31/96,
matures 02/01/96, repurchase
price $6,000,988 (collateralized
by U.S. Treasury STRIPS, par
value $13,330,000, 0.000%,
matures 11/15/08: market
value $6,243,372) 6,000 6,000
Nomura Securities
5.94%, dated 01/31/96,
matures 02/01/96, repurchase
price $15,002,475 (collateralized
by U.S. Treasury Note, par
value $15,098,000, 7.875%,
matures 07/31/96: market
value $15,300,177) 15,000 15,000
SWISS BANK
5.93%, dated 01/31/96,
matures 02/01/96, repurchase
price $15,002,471 (collateralized
by various U.S. Treasury Bonds
ranging in par value $2,680,000
-- $9,500,000, 8.125% -- 9.125%,
05/15/09 -- 05/15/21; with total
market value of $15,389,302) $15,000 $15,000
-------
TOTAL REPURCHASE AGREEMENTS
(Cost $43,172) 43,172
-------
TOTAL INVESTMENTS -- 98.9%
(Cost $68,763) 68,763
-------
OTHER ASSETS AND LIABILITIES, NET -- 1.1% 748
-------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization -- no
par value) based on 54,813,953
outstanding shares of beneficial
interest 54,814
Portfolio shares of Class C
(unlimited authorization -- no
par value) based on 14,690,387
outstanding shares of beneficial
interest 14,690
Accumulated net realized gain
on investments 7
-------
TOTAL NET ASSETS -- 100.0% $69,511
=======
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 1.00
=======
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS C $ 1.00
=======
</TABLE>
STRIPS Separately Trading of Registered Interest and Principal of Securities
The accompanying notes are an integral part of the financial statements.
15
<PAGE> 146
STATEMENT OF NET ASSETS
================================================================================
SEI Daily Income Trust -- January 31, 1996
TREASURY II PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 98.8%
U.S. Treasury Bills
5.135%, 02/29/96 $ 12,980 $ 12,928
5.200%, 03/07/96 5,570 5,542
5.295%, 03/07/96 42,685 42,465
5.521%, 03/07/96 3,695 3,676
5.540%, 03/07/96 1,435 1,428
5.109%, 04/04/96 11,625 11,523
5.115%, 04/04/96 4,555 4,515
5.131%, 04/04/96 6,590 6,532
5.146%, 04/04/96 6,230 6,175
5.155%, 04/04/96 7,590 7,523
5.171%, 04/04/96 10,530 10,437
5.175%, 04/04/96 7,165 7,102
6.057%, 04/04/96 3,370 3,337
6.199%, 04/04/96 2,775 2,747
6.208%, 04/04/96 4,440 4,395
6.299%, 04/04/96 7,000 6,928
6.301%, 04/04/96 1,995 1,975
6.362%, 04/04/96 7,000 6,927
5.131%, 04/11/96 6,615 6,551
U.S. Treasury Notes
4.625%, 02/15/96 200,000 199,947
7.875%, 02/15/96 35,000 35,029
9.375%, 04/15/96 55,000 55,444
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $443,126) 443,126
--------
TOTAL INVESTMENTS -- 98.8%
(Cost $443,126) 443,126
--------
OTHER ASSETS AND LIABILITIES, NET -- 1.2% 5,506
--------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization -- no
par value) based on 418,083,768
outstanding shares of beneficial
interest 418,084
Portfolio shares of Class B
(unlimited authorization -- no
par value) based on 26,433,415
outstanding shares of beneficial
interest 26,433
Portfolio shares of Class C
(unlimited authorization -- no
par value) based on 3,934,437
outstanding shares of beneficial
interest 3,935
Accumulated net realized gain
on investments 180
--------
TOTAL NET ASSETS -- 100.0% $448,632
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 1.00
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS B $ 1.00
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS C $ 1.00
========
</TABLE>
SHORT-TERM GOVERNMENT PORTFOLIO
<TABLE>
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 56.5%
FFCB
6.970%, 03/28/97 $ 5,000 $ 5,012
FHLB
6.940%, 03/14/97 10,000 10,201
FNMA
5.390%, 08/05/98 4,000 3,992
6.850%, 05/26/00 6,000 6,162
FNMA MTN
7.440%, 03/06/98 5,000 5,000
5.850%, 06/22/98 8,000 8,113
5.410%, 06/25/98 3,000 3,002
-------
TOTAL U.S. GOVERNMENT AGENCY
Obligations
(Cost $40,912) 41,482
-------
U.S. TREASURY OBLIGATION -- 24.3%
U.S. Treasury Note
6.750%, 06/30/99 17,000 17,851
-------
TOTAL U.S. TREASURY OBLIGATION
(Cost $17,469) 17,851
-------
U.S. GOVERNMENT MORTGAGE-BACKED
BONDS -- 18.6%
FHLMC
6.500%, 10/01/07 4,038 4,022
FNMA
6.750%, 03/25/15 3,932 3,923
GNMA
7.500%, 01/01/10 TBA 2,000 2,052
9.000%, 11/15/20 29 31
9.000%, 10/15/21 28 29
9.000%, 06/15/24 20 21
9.000%, 11/15/24 584 617
9.000%, 12/15/24 951 1,006
9.000%, 01/15/25 802 848
9.000%, 02/15/25 451 477
9.000%, 05/15/25 652 689
-------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED BONDS
(Cost $13,529) 13,715
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 147
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 2.7%
Paine Webber
5.90%, dated 01/31/96,
matures 02/01/96, repurchase
price $1,985,325 (collateralized
by U.S. Treasury Note, par
value $1,935,000, 6.250%,
matures 05/31/00: market
value $2,016,532) $1,985 $ 1,985
-------
TOTAL REPURCHASE AGREEMENT
(Cost $1,985) 1,985
-------
TOTAL INVESTMENTS -- 102.1%
(Cost $73,895) 75,033
-------
OTHER ASSETS AND LIABILITIES, NET -- (2.1)% (1,552)
-------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization -- no
par value) based on 7,278,572
outstanding shares of beneficial
interest 73,751
Portfolio shares of Class B
(unlimited authorization -- no
par value) based on 3,868 outstanding
shares of beneficial interest 38
Portfolio shares of Class D
(unlimited authorization -- no
value) based on 1,130 outstanding
shares of beneficial interest 11
Accumulated net realized loss
on investments (1,584)
Net unrealized appreciation on
investments 1,138
Undistributed net investment income 127
-------
TOTAL NET ASSETS -- 100.0% $73,481
=======
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 10.09
=======
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS B $ 10.07
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS D $ 10.09
=======
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS D ($10.09 divided by 96.5%)+ $ 10.46
=======
</TABLE>
+ The maximum offering price per share is calculated by dividing the net asset
value by 1 minus the maximum sales charge of 3.50%.
FFCB Federal Farm Credit Bank
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MTN Medium Term Note
TBA "To Be Announced" Mortgage Backed Security (See Note 2)
INTERMEDIATE-TERM GOVERNMENT PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 55.0%
U.S. Treasury Bond
12.000%, 08/15/13 $13,550 $20,856
U.S. Treasury Notes
5.625%, 01/31/98 6,250 6,331
7.875%, 04/15/98 10,350 10,967
7.500%, 10/31/99 16,500 17,788
8.500%, 02/15/00 9,000 10,070
10.750%, 02/15/03 19,000 24,796
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $88,183) 90,808
-------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 24.2%
FHLMC
7.974%, 04/20/05 655 681
7.350%, 05/16/05 750 786
FNMA Callable 05/13/96 @ 100
5.250%, 05/13/98 20,000 19,964
FNMA MTN
7.920%, 03/30/05 3,100 3,316
Private Export Funding
7.900%, 03/31/00 3,000 3,255
8.400%, 07/31/01 1,000 1,132
7.300%, 01/31/02 1,445 1,568
6.240%, 05/15/02 1,100 1,136
8.750%, 06/30/03 4,790 5,628
6.860%, 04/30/04 2,295 2,438
-------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $38,583) 39,904
-------
U.S. GOVERNMENT
MORTGAGE-BACKED BONDS -- 19.6%
FHLMC
6.250%, 07/01/03 535 537
6.500%, 10/01/07 6,085 6,060
6.500%, 09/01/10 7,315 7,379
7.000%, 02/25/19 500 515
6.500%, 06/25/19 2,100 2,122
6.500%, 09/15/21 570 565
7.000%, 05/01/24 1,444 1,459
7.000%, 10/01/25 1,978 1,999
FNMA
7.500%, 03/01/07 458 470
7.500%, 06/01/09 203 208
9.500%, 05/01/18 601 643
GNMA
7.000%, 02/01/95 (A) 5,823 5,976
8.000%, 06/15/24 522 543
8.000%, 07/15/24 394 410
8.000%, 08/15/24 1,281 1,333
8.000%, 11/15/24 476 495
8.000%, 05/15/25 526 547
8.000%, 07/15/25 527 548
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE> 148
STATEMENT OF NET ASSETS
================================================================================
SEI Daily Income Trust -- January 31, 1996
INTERMEDIATE-TERM GOVERNMENT PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
GNMA (continued)
8.000%, 08/15/25 $473 $ 492
8.000%, 09/15/25 50 52
--------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED BONDS
(Cost $31,731) 32,353
--------
REPURCHASE AGREEMENT -- 1.7%
Paine Webber
5.90%, dated 01/31/96, matures
02/01/96, repurchase price
$2,857,468 (collateralized by
U.S. Treasury Note, par value
$2,850,000, 5.125%, matures
02/28/98: market value
$2,917,905) 2,857 2,857
--------
TOTAL REPURCHASE AGREEMENT
(Cost $2,857) 2,857
--------
TOTAL INVESTMENTS -- 100.5%
(Cost $161,354) 165,922
--------
OTHER ASSETS AND LIABILITIES, NET -- (0.5%) (884)
--------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization -- no
par value) based on 16,404,114
outstanding shares of beneficial
interest 167,329
Portfolio shares of Class D
(unlimited authorization -- no
par value) based on 5,965
outstanding shares of beneficial
interest 66
Accumulated net realized loss on
investments (6,925)
Net unrealized appreciation on
investments 4,568
--------
TOTAL NET ASSETS -- 100.0% $165,038
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 10.06
========
NET ASSET VALUE, AND REDEMPTION
PRICE PER SHARE -- CLASS D $ 10.05
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS D ($10.05 divided by 96.5%)+ $ 10.41
========
</TABLE>
+ The maximum offering price per share is calculated by dividing the net asset
value by 1 minus the maximum sales charge of 3.50%.
(A) Adjustable Rate Mortgage. The rate reflected on the Statement of Net
Assets is the rate in effect on January 31, 1996.
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MTN Medium Term Note
GNMA PORTFOLIO
<TABLE>
<S> <C> <C>
GNMA -- 98.0%
6.00%, 10/15/23 - 04/15/24 $ 3,947 $ 3,841
6.50%, 06/15/23 - 11/01/24 17,828 17,700
6.50%, 11/01/24 TBA 6,000 5,957
7.00%, 12/15/22 - 04/15/24 36,274 36,739
7.50%, 02/15/17 - 09/15/23 19,277 19,843
8.00%, 12/15/21 - 07/15/22 9,543 9,930
8.50%, 08/15/08 - 12/15/21 11,899 12,466
9.00%, 05/15/16 - 05/15/22 8,609 9,104
9.50%, 06/15/09 - 12/15/20 11,195 11,976
10.00%, 02/15/13 - 07/15/20 3,865 4,254
10.50%, 03/15/18 180 200
11.00%, 12/15/09 - 11/15/14 1,507 1,700
11.50%, 04/15/10 - 02/15/13 87 98
12.00%, 01/15/13 - 04/15/14 22 25
12.50%, 12/15/06 - 07/15/15 66 76
--------
TOTAL GNMA
(Cost $131,427) 133,909
--------
REPURCHASE AGREEMENT -- 4.0%
Paine Webber
5.90%, dated 01/31/96,
matures 02/01/96, repurchase
price $5,431,890 (collateralized
by U.S. Treasury Note, par
value $5,345,000, 6.375%,
matures 01/15/99: market
value $5,544,602) 5,431 5,431
--------
TOTAL REPURCHASE AGREEMENT
(Cost $5,431) 5,431
--------
TOTAL INVESTMENTS -- 102.0%
(Cost $136,858) 139,340
--------
OTHER ASSETS AND LIABILITIES, NET -- (2.0%) (2,773)
--------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization -- no
par value) based on 13,859,553
outstanding shares of beneficial
interest 145,516
Portfolio shares of Class B
(unlimited authorization -- no
par value) based on 1,567
outstanding shares of beneficial
interest 14
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 149
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Portfolio shares of Class D
(unlimited authorization -- no
par value) based on 16,126
outstanding shares of beneficial
interest $ 161
Accumulated net realized loss on
investments (11,700)
Net unrealized appreciation on
investments 2,482
Undistributed net investment income 94
---------
TOTAL NET ASSETS -- 100.0% $ 136,567
=========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 9.84
=========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS B $ 9.84
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS D $ 9.83
=========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS D ($9.83 divided by 95.5%) + $ 10.29
=========
</TABLE>
+ The maximum offering price per share is calculated by dividing the net asset
value by 1 minus the maximum sales charge of 4.50%
GNMA Government National Mortgage Association
TBA "To Be Announced" Mortgage Backed Security (See Note 2)
CORPORATE DAILY INCOME PORTFOLIO
<TABLE>
<S> <C> <C>
CORPORATE OBLIGATIONS -- 35.9%
BankAmerica Corporate
6.013%, 03/20/96 (A) $ 2,000 $2,000
Bankers Trust of New York
9.200%, 07/15/99 1,000 1,105
Caterpillar MTN
5.200%, 04/01/96 (A) 1,000 980
Citicorp MTN
6.000%, 02/12/96 (A) 2,000 1,999
Continental Bank
6.250%, 02/20/96 (A) 825 829
Fleet Mortgage Group
6.500%, 06/15/00 2,000 2,050
Ford Motor Credit
5.310%, 02/15/96 (A) 1,500 1,491
General Electric Capital
5.600%, 02/01/96 (A) 1,000 1,000
General Motors Acceptance
5.230%, 03/25/96 (A) 1,000 985
NationsBank MTN
5.983%, 03/20/96 (A) 2,000 2,000
Sears Roebuck MTN
5.223%, 03/10/96 (A) 1,000 995
Wells Fargo
5.813%, 03/20/96 (A) $ 2,000 $ 1,999
-------
TOTAL CORPORATE OBLIGATIONS
(Cost $17,355) 17,433
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 26.6%
FHLMC
6.000%, 05/25/97 780 786
6.000%, 07/22/97 88 89
6.000%, 09/26/97 495 499
6.000%, 11/01/97 122 123
6.000%, 02/28/98 433 437
6.000%, 03/06/98 745 751
6.000%, 03/24/98 68 69
6.000%, 04/11/98 241 243
6.000%, 06/30/98 3,375 3,403
6.000%, 07/19/98 322 325
6.000%, 07/22/98 664 670
6.000%, 08/13/98 471 475
6.000%, 08/09/99 105 105
6.000%, 10/03/99 127 128
6.000%, 10/29/99 759 765
FNMA
5.994%, 02/25/96 (A) 1,058 1,060
FNMA MTN
5.410%, 06/25/98 3,000 3,002
-------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(Cost $12,827) 12,930
-------
ASSET BACKED SECURITIES -- 23.2%
Banc One Auto 95-A A3
6.850%, 10/29/96 1,500 1,514
Daimler-Benz Auto Grantor
Trust 93-A
3.900%, 10/22/96 191 189
Daimler-Benz Auto Grantor
Trust 95-A A
5.850%, 04/22/97 924 928
Ford Credit Grantor Trust 93-B
4.300%, 11/16/96 255 253
Ford Credit Grantor Trust 95-B A
5.900%, 09/04/97 946 955
General Motors Acceptance 93-A
4.150%, 08/13/96 64 64
General Motors Acceptance 93-B A
4.000%, 10/25/96 207 205
General Motors Grantor Trust 95 A1
7.150%, 06/09/97 966 985
IBM Credit Receivables Lease
Asset Master Trust 93-1 A
4.550%, 12/30/96 967 957
Main Place Funding 95-2
5.670%, 04/25/96 (A) 1,000 1,000
</TABLE>
19
<PAGE> 150
STATEMENT OF NET ASSETS
================================================================================
SEI Daily Income Trust -- January 31, 1996
CORPORATE DAILY INCOME PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
MBNA Master Credit 94-DA
5.700%, 02/01/96 (A) $ 1,500 $ 1,501
Premier Auto Trust 92-5
4.550%, 09/30/96 113 112
Premier Auto Trust 93-4 A2
4.650%, 01/14/97 254 252
Premier Auto Trust 93-6 A2
4.650%, 03/06/97 645 641
Premier Auto Trust 95-2 A4
7.050%, 02/08/97 1,500 1,527
Toyota Auto Receivables 93-A A
3.900%, 09/04/96 178 176
-------
TOTAL ASSET BACKED SECURITIES
(Cost $11,185) 11,259
-------
U.S. TREASURY OBLIGATION -- 6.4%
U.S. Treasury Note
6.125%, 09/30/00 3,000 3,106
-------
TOTAL U.S. TREASURY OBLIGATION
(Cost $3,080) 3,106
-------
REPURCHASE AGREEMENT -- 7.4%
Paine Webber
5.90%, dated 01/31/96,
matures 02/01/96, repurchase
price $3,579,587 (collateralized
by U.S. Treasury Note, par
value $3,638,000, 5.250%,
matures 07/31/98: market
value $3,653,916) 3,579 3,579
-------
TOTAL REPURCHASE AGREEMENT
(Cost $3,579) 3,579
-------
TOTAL INVESTMENTS -- 99.5%
(Cost $48,026) 48,307
-------
OTHER ASSETS AND LIABILITIES, NET -- 0.5% 232
-------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization -- no
par value) based on 24,243,059
outstanding shares of beneficial
interest 48,262
Accumulated net realized loss on
investments (4)
Net unrealized appreciation on
investments 281
-------
TOTAL NET ASSETS -- 100.0% $48,539
=======
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 2.00
=======
</TABLE>
(A) Floating Rate Instrument. The rate reflected on the Statement of Net
Assets is the rate in effect on January 31, 1996. The date shown is the
longer of the reset date or the demand date.
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
MTN Medium Term Note
SHORT-TERM MORTGAGE PORTFOLIO
<TABLE>
<S> <C> <C>
U.S. MORTGAGE-BACKED OBLIGATIONS -- 84.1%
FHLMC
7.000%, 02/01/99 $ 50 $ 50
FHLMC IO
7.000%, 05/15/21 401 60
FNMA
7.690%, 02/01/96 (A) 280 289
8.250%, 02/01/96 (A) 504 524
7.000%, 01/25/99 150 153
GNMA
12.000%, 09/15/98 45 49
12.000%, 10/15/98 19 20
10.000%, 04/20/01 141 152
10.750%, 03/15/03 38 41
8.000%, 02/15/08 117 121
9.250%, 11/20/16 65 68
------
TOTAL U.S. MORTGAGE-BACKED OBLIGATIONS
(Cost $1,489) 1,527
------
U.S. TREASURY OBLIGATIONS -- 13.6%
U.S. Treasury Notes
7.500%, 10/31/99 35 38
10.750%, 02/15/03 160 209
------
U.S. TREASURY OBLIGATIONS
(Cost $244) 247
------
REPURCHASE AGREEMENT -- 0.9%
Paine Webber
5.90%, dated 01/31/96,
matures 02/01/96, repurchase
price $16,003 (collateralized by
U.S. Treasury Note, par value
$17,000, 5.250%, matures 07/31/98:
market value $17,074) 16 16
------
TOTAL REPURCHASE AGREEMENT
(Cost $16) 16
------
</TABLE>
20
<PAGE> 151
SHORT-TERM MORTGAGE PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Description Value (000)
- --------------------------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS -- 98.6%
(Cost $1,749) $ 1,790
-------
OTHER ASSETS AND LIABILITIES, NET -- 1.4% 25
-------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization -- no par
value) based on 183,682 outstanding
shares of beneficial interest 1,886
Accumulated net realized loss
on investments (110)
Net unrealized appreciation on investments 41
Distributions in excess of net
investment income (2)
-------
TOTAL NET ASSETS -- 100.0% $ 1,815
=======
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 9.88
=======
</TABLE>
(A) Adjustable Rate Mortgage. The rate reflected on the Statement of Net
Assets is the rate in effect on January 31, 1996.
FNMA Federal National Mortgage Association
FHLMC Federal Home Loan Mortgage Corporation
GNMA Government National Mortgage Association
IO Interest Only
21
<PAGE> 152
STATEMENTS OF OPERATIONS (000)
================================================================================
SEI Daily Income Trust -- for the year ended January 31, 1996
<TABLE>
<CAPTION>
MONEY PRIME
MARKET GOVERNMENT GOVERNMENT II OBLIGATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Interest Income $ 9,645 $ 29,232 $ 48,353 $ 144,492
------- -------- -------- ---------
EXPENSES:
Management fee 524 1,185 1,559 4,565
Less management fees waived (365) (580) (572) (1,646)
Investment advisory fee 42 130 215 630
Less investment advisory fees waived (29) (97) (148) (433)
Custodian/wire agent fees 39 39 65 164
Trustee fees 3 8 14 41
Distribution fees(1) 84 2,594 333 981
Other 45 141 229 657
Amortization of deferred
organizational costs -- -- -- --
------- -------- -------- ---------
Total expenses 343 3,420 1,695 4,959
------- -------- -------- ---------
NET INVESTMENT INCOME 9,302 25,812 46,658 139,533
------- -------- -------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) from security
transactions 27 79 56 94
------- -------- -------- ---------
Net change in unrealized appreciation
of investments -- -- -- --
------- -------- -------- ---------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,329 $ 25,891 $ 46,714 $ 139,627
======= ======== ======== =========
</TABLE>
(1) Includes class specific expenses of approximately $25, $2,432, $54, $155,
$36, $110, $1, and $1 for the Money Market, Government, Government II, Prime
Obligation, Treasury, Treasury II, Intermediate-Term Government, and GNMA
Portfolios, respectively.
Amounts designated as " -- " are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 153
<TABLE>
<CAPTION>
INTERMEDIATE- CORPORATE
SHORT-TERM TERM DAILY SHORT-TERM
TREASURY TREASURY II GOVERNMENT GOVERNMENT GNMA INCOME MORTGAGE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ----------- ---------- ------------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income $ 3,151 $ 27,770 $ 5,249 $ 12,553 $ 11,362 $ 3,350 $ 186
------- -------- ------- -------- -------- ------- -----
EXPENSES:
Management fee 128 1,170 279 669 483 185 9
Less management fees waived (75) (356) (48) (113) (19) (80) (9)
Investment advisory fee 14 128 79 191 150 53 3
Less investment advisory fees waived (11) (84) (14) (34) (7) (23) --
Custodian/wire agent fees 18 37 8 16 35 8 2
Trustee fees 1 8 1 3 3 1 --
Distribution fees(1) 53 273 28 68 52 18 1
Other 14 153 26 60 43 16 --
Amortization of deferred
organizational costs -- -- -- -- -- 8 6
------- -------- ------- -------- -------- ------- -----
Total expenses 142 1,329 359 860 740 186 12
------- -------- ------- -------- -------- ------- -----
NET INVESTMENT INCOME 3,009 26,441 4,890 11,693 10,622 3,164 174
------- -------- ------- -------- -------- ------- -----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) from security
transactions 11 103 (210) 1,392 (1,931) 530 44
------- -------- ------- -------- -------- ------- -----
Net change in unrealized appreciation
of investments -- -- 3,207 13,934 13,217 737 31
------- -------- ------- -------- -------- ------- -----
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 3,020 $ 26,544 $ 7,887 $ 27,019 $ 21,908 $ 4,431 $ 249
======= ======== ======= ======== ======== ======= =====
</TABLE>
23
<PAGE> 154
STATEMENTS OF CHANGES IN NET ASSETS (000)
================================================================================
SEI Daily Income Trust -- for the periods ended January 31
<TABLE>
<CAPTION>
MONEY
MARKET
---------------------------
1996 1995
---------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 9,302 $ 9,667
Net realized gain (loss) from security transactions 27 (12)
----------- -----------
Net increase in net assets resulting from operations 9,329 9,655
----------- -----------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class A (8,897) (9,468)
Class B (335) (199)
Class C (70) --
Net realized gains: -- --
----------- -----------
Total dividends distributed (9,302) (9,667)
----------- -----------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Class A:
Proceeds from shares issued 1,636,983 2,811,452
Reinvestment of cash distributions 249 38
Cost of shares repurchased (1,755,356) (2,801,293)
----------- -----------
Increase (decrease) in net assets from Class A transactions (118,124) 10,197
----------- -----------
Class B:
Proceeds from shares issued 9,372 13,161
Reinvestment of cash distributions 9 --
Cost of shares repurchased (9,079) (9,181)
----------- -----------
Increase (decrease) in net assets from Class B transactions 302 3,980
----------- -----------
Class C:
Proceeds from shares issued 8,473 --
Reinvestment of cash distributions 70 --
Cost of shares repurchased (6,083) --
----------- -----------
Increase (decrease) in net assets from Class C transactions 2,460 --
----------- -----------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (115,362) 14,177
----------- -----------
Net increase (decrease) in net assets (115,335) 14,165
----------- -----------
NET ASSETS:
Beginning of Period 220,302 206,137
----------- -----------
End of Period $ 104,967 $ 220,302
=========== ===========
</TABLE>
(1) Government Portfolio reopened on April 7, 1994.
Amounts designated as " -- " are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
24
<PAGE> 155
<TABLE>
<CAPTION>
GOVERNMENT GOVERNMENT II
------------------------- ---------------------------
1996 1995 (1) 1996 1995
------------------------- ---------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 25,812 $ 7,304 $ 46,658 $ 32,719
Net realized gain (loss) from security transactions 79 (74) 56 (87)
----------- --------- ----------- -----------
Net increase in net assets resulting from operations 25,891 7,230 46,714 32,632
----------- --------- ----------- -----------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class A (260) -- (45,683) (32,116)
Class B (300) -- (975) (603)
Class C (25,247) (7,304) -- --
Net realized gains: -- -- -- --
----------- --------- ----------- -----------
Total dividends distributed (25,807) (7,304) (46,658) (32,719)
----------- --------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Class A:
Proceeds from shares issued 151,613 -- 4,331,859 3,658,726
Reinvestment of cash distributions 51 -- 691 623
Cost of shares repurchased (102,903) -- (4,308,644) (3,610,898)
----------- --------- ----------- -----------
Increase (decrease) in net assets from Class A transactions 48,761 -- 23,906 48,451
----------- --------- ----------- -----------
Class B:
Proceeds from shares issued 82,626 -- 130,798 70,987
Reinvestment of cash distributions 4 -- 244 57
Cost of shares repurchased (67,634) -- (126,567) (77,304)
----------- --------- ----------- -----------
Increase (decrease) in net assets from Class B transactions 14,996 -- 4,475 (6,260)
----------- --------- ----------- -----------
Class C:
Proceeds from shares issued 1,365,830 824,507 -- --
Reinvestment of cash distributions 20,121 6,347 -- --
Cost of shares repurchased (1,153,932) (519,945) -- --
----------- --------- ----------- -----------
Increase (decrease) in net assets from Class C transactions 232,019 310,909 -- --
----------- --------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS 295,776 310,909 28,381 42,191
----------- --------- ----------- -----------
Net increase (decrease) in net assets 295,860 310,835 28,437 42,104
----------- --------- ----------- -----------
NET ASSETS:
Beginning of Period 310,835 -- 801,606 759,502
----------- --------- ----------- -----------
End of Period $ 606,695 $ 310,835 $ 830,043 $ 801,606
=========== ========= =========== ===========
<CAPTION> PRIME
OBLIGATION TREASURY
---------------------------- ----------------------
1996 1995 1996 1995
---------------------------- ----------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 139,533 $ 98,561 $ 3,009 $ 1,999
Net realized gain (loss) from security transactions 94 (138) 11 (3)
------------ ------------ --------- ---------
Net increase in net assets resulting from operations 139,627 98,423 3,020 1,996
------------ ------------ --------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class A (136,749) (97,805) (2,644) (1,999)
Class B (2,784) (647) -- --
Class C -- (109) (365) --
Net realized gains: -- -- -- --
------------ ------------ --------- ---------
Total dividends distributed (139,533) (98,561) (3,009) (1,999)
------------ ------------ --------- ---------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Class A:
Proceeds from shares issued 15,851,570 16,480,679 221,471 225,159
Reinvestment of cash distributions 35,850 18,646 1 --
Cost of shares repurchased (16,224,177) (16,261,984) (205,791) (232,323)
------------ ------------ --------- ---------
Increase (decrease) in net assets from Class A transactions (336,757) 237,341 15,681 (7,164)
------------ ------------ --------- ---------
Class B:
Proceeds from shares issued 544,082 56,734 -- --
Reinvestment of cash distributions 127 5 -- --
Cost of shares repurchased (391,283) (41,198) -- --
------------ ------------ --------- ---------
Increase (decrease) in net assets from Class B transactions 152,926 15,541 -- --
------------ ------------ --------- ---------
Class C:
Proceeds from shares issued -- 3,479 40,529 --
Reinvestment of cash distributions -- -- -- --
Cost of shares repurchased -- (24,085) (25,839) --
------------ ------------ --------- ---------
Increase (decrease) in net assets from Class C transactions -- (20,606) 14,690 --
------------ ------------ --------- ---------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (183,831) 232,276 30,371 (7,164)
------------ ------------ --------- ---------
Net increase (decrease) in net assets (183,737) 232,138 30,382 (7,167)
------------ ------------ --------- ---------
NET ASSETS:
Beginning of Period 2,800,178 2,568,040 39,129 46,296
------------ ------------ --------- ---------
End of Period $ 2,616,441 $ 2,800,178 $ 69,511 $ 39,129
============ ============ ========= =========
<CAPTION>
TREASURY II
---------------------------
1996 1995
---------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 26,441 $ 15,796
Net realized gain (loss) from security transactions 103 95
----------- -----------
Net increase in net assets resulting from operations 26,544 15,891
----------- -----------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class A (24,600) (14,850)
Class B (1,768) (946)
Class C (73) --
Net realized gains: -- --
----------- -----------
Total dividends distributed (26,441) (15,796)
----------- -----------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Class A:
Proceeds from shares issued 3,724,146 2,198,439
Reinvestment of cash distributions 6,454 5,301
Cost of shares repurchased (3,710,125) (2,170,484)
----------- -----------
Increase (decrease) in net assets from Class A transactions 20,475 33,256
----------- -----------
Class B:
Proceeds from shares issued 173,790 157,948
Reinvestment of cash distributions 2 4
Cost of shares repurchased (192,035) (135,723)
----------- -----------
Increase (decrease) in net assets from Class B transactions (18,243) 22,229
----------- -----------
Class C:
Proceeds from shares issued 8,448 --
Reinvestment of cash distributions 73 --
Cost of shares repurchased (4,586) --
----------- -----------
Increase (decrease) in net assets from Class C transactions 3,935 --
----------- -----------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS 6,167 55,485
----------- -----------
Net increase (decrease) in net assets 6,270 55,580
----------- -----------
NET ASSETS:
Beginning of Period 442,362 386,782
----------- -----------
End of Period $ 448,632 $ 442,362
=========== ===========
</TABLE>
25
<PAGE> 156
STATEMENTS OF CHANGES IN NET ASSETS (000)
================================================================================
SEI Daily Income Trust -- for the years ended January 31
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT
--------------------
1996 1995
--------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,890 $ 4,639
Net realized gain (loss) from security transactions (210) (1,375)
Net change in unrealized appreciation (depreciation) of investments 3,207 (2,532)
-------- --------
Net increase (decrease) in net assets resulting from operations 7,887 732
-------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class A (4,882) (4,636)
Class B (7) (3)
Class D (1) --
Net Realized Gains:
Class A -- (143)
Class B -- --
Class D -- --
-------- --------
Total dividends distributed (4,890) (4,782)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Class A:
Proceeds from shares issued 54,202 61,290
Reinvestment of cash distributions 1,484 1,556
Cost of shares repurchased (84,705) (87,404)
-------- --------
Increase (decrease) in net assets from Class A transactions (29,019) (24,558)
-------- --------
Class B:
Proceeds from shares issued 1 112
Reinvestment of cash distributions -- --
Cost of shares repurchased (98) (15)
-------- --------
Increase (decrease) in net assets from Class B transactions (97) 97
-------- --------
Class D:
Proceeds from shares issued 11 --
Reinvestment of cash distributions -- --
Cost of shares repurchased -- --
-------- --------
Increase (decrease) in net assets from Class D transactions 11 --
-------- --------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (29,105) (24,461)
-------- --------
Net increase (decrease) in net assets (26,108) (28,511)
-------- --------
NET ASSETS:
Beginning of Period 99,589 128,100
-------- --------
End of Period $ 73,481 $ 99,589
======== ========
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 5,451 6,239
Shares issued in lieu of cash distributions 149 159
Shares repurchased (8,542) (8,911)
-------- --------
Total Class A transactions (2,942) (2,513)
-------- --------
Class B:
Shares issued -- 11
Shares issued in lieu of cash distributions -- --
Shares repurchased (10) (1)
-------- --------
Total Class B transactions (10) 10
-------- --------
Class D:
Shares issued 1 --
Shares issued in lieu of cash distributions -- --
Shares repurchased -- --
-------- --------
Total Class D transactions 1 --
-------- --------
Increase (decrease) in capital shares (2,951) (2,503)
======== ========
Distributions in excess of net investment income $ -- $ --
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE> 157
<TABLE>
<CAPTION>
INTERMEDIATE-
TERM
GOVERNMENT GNMA
---------------------------------------------
1996 1995 1996 1995
--------------------- ---------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 11,693 $ 15,663 $ 10,622 $ 16,746
Net realized gain (loss) from security transactions 1,392 (8,331) (1,931) (9,770)
Net change in unrealized appreciation (depreciation) of investments 13,934 (16,030) 13,217 (14,407)
--------- --------- -------- ---------
Net increase (decrease) in net assets resulting from operations 27,019 (8,698) 21,908 (7,431)
--------- --------- -------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class A (11,683) (15,655) (10,609) (16,618)
Class B (5) (3) (1) (1)
Class D (5) (7) (12) (10)
Net Realized Gains:
Class A -- (2,132) -- (66)
Class B -- (1) -- --
Class D -- (1) -- --
--------- --------- -------- ---------
Total dividends distributed (11,693) (17,799) (10,622) (16,695)
--------- --------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Class A:
Proceeds from shares issued 35,080 109,590 35,784 96,860
Reinvestment of cash distributions 1,840 2,663 2,093 3,898
Cost of shares repurchased (130,929) (178,914) (94,982) (156,581)
--------- --------- -------- ---------
Increase (decrease) in net assets from Class A transactions (94,009) (66,661) (57,105) (55,823)
--------- --------- -------- ---------
Class B:
Proceeds from shares issued -- 96 -- 28
Reinvestment of cash distributions -- -- -- --
Cost of shares repurchased (96) -- -- (14)
--------- --------- -------- ---------
Increase (decrease) in net assets from Class B transactions (96) 96 -- 14
--------- --------- -------- ---------
Class D:
Proceeds from shares issued 26 142 17 47
Reinvestment of cash distributions 4 7 10 8
Cost of shares repurchased (76) (145) (49) (7)
--------- --------- -------- ---------
Increase (decrease) in net assets from Class D transactions (46) 4 (22) 48
--------- --------- -------- ---------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (94,151) (66,561) (57,127) (55,761)
--------- --------- -------- ---------
Net increase (decrease) in net assets (78,825) (93,058) (45,841) (79,887)
--------- --------- -------- ---------
NET ASSETS:
Beginning of Period 243,863 336,921 182,408 262,295
--------- --------- -------- ---------
End of Period $ 165,038 $ 243,863 $136,567 $ 182,408
========= ========= ======== =========
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 3,585 11,387 3,727 10,398
Shares issued in lieu of cash distributions 188 280 218 421
Shares repurchased (13,494) (18,803) (9,957) (16,985)
--------- --------- -------- ---------
Total Class A transactions (9,721) (7,136) (6,012) (6,166)
--------- --------- -------- ---------
Class B:
Shares issued -- 10 -- 3
Shares issued in lieu of cash distributions -- -- -- --
Shares repurchased (10) -- -- (1)
--------- --------- -------- ---------
Total Class B transactions (10) 10 -- 2
--------- --------- -------- ---------
Class D:
Shares issued 3 14 2 5
Shares issued in lieu of cash distributions -- 1 1 1
Shares repurchased (8) (15) (5) (1)
--------- --------- -------- ---------
Total Class D transactions (5) -- (2) 5
--------- --------- -------- ---------
Increase (decrease) in capital shares (9,736) (7,126) (6,014) (6,159)
========= ========= ======== =========
Distributions in excess of net investment income $ -- $ -- $ -- $ --
========= ========= ======== =========
<CAPTION>
CORPORATE
DAILY SHORT-TERM
INCOME MORTGAGE
--------------------- ------------------
1996 1995 1996 1995
--------------------- ------------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 3,164 $ 1,997 $ 174 $ 241
Net realized gain (loss) from security transactions 530 (367) 44 (148)
Net change in unrealized appreciation (depreciation) of investments 737 (442) 31 12
-------- -------- ------- -------
Net increase (decrease) in net assets resulting from operations 4,431 1,188 249 105
-------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class A (3,164) (1,997) (176) (241)
Class B -- -- -- --
Class D -- -- -- --
Net Realized Gains:
Class A (168) -- -- --
Class B -- -- -- --
Class D -- -- -- --
-------- -------- ------- -------
Total dividends distributed (3,332) (1,997) (176) (241)
-------- -------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Class A:
Proceeds from shares issued 33,220 51,564 1,707 5,704
Reinvestment of cash distributions 1,876 1,071 53 95
Cost of shares repurchased (38,151) (44,986) (3,625) (5,977)
-------- -------- ------- -------
Increase (decrease) in net assets from Class A transactions (3,055) 7,649 (1,865) (178)
-------- -------- ------- -------
Class B:
Proceeds from shares issued -- -- -- --
Reinvestment of cash distributions -- -- -- --
Cost of shares repurchased -- -- -- --
-------- -------- ------- -------
Increase (decrease) in net assets from Class B transactions -- -- -- --
-------- -------- ------- -------
Class D:
Proceeds from shares issued -- -- -- --
Reinvestment of cash distributions -- -- -- --
Cost of shares repurchased -- -- -- --
-------- -------- ------- -------
Increase (decrease) in net assets from Class D transactions -- -- -- --
-------- -------- ------- -------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (3,055) 7,649 (1,865) (178)
-------- -------- ------- -------
Net increase (decrease) in net assets (1,956) 6,840 (1,792) (314)
-------- -------- ------- -------
NET ASSETS:
Beginning of Period 50,495 43,655 3,607 3,921
-------- -------- ------- -------
End of Period $ 48,539 $ 50,495 $ 1,815 $ 3,607
======== ======== ======= =======
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 16,731 26,175 174 584
Shares issued in lieu of cash distributions 942 544 6 10
Shares repurchased (19,144) (22,845) (370) (616)
-------- -------- ------- -------
Total Class A transactions (1,471) 3,874 (190) (22)
-------- -------- ------- -------
Class B:
Shares issued -- -- -- --
Shares issued in lieu of cash distributions -- -- -- --
Shares repurchased -- -- -- --
-------- -------- ------- -------
Total Class B transactions -- -- -- --
-------- -------- ------- -------
Class D:
Shares issued -- -- -- --
Shares issued in lieu of cash distributions -- -- -- --
Shares repurchased -- -- -- --
-------- -------- ------- -------
Total Class D transactions -- -- -- --
-------- -------- ------- -------
Increase (decrease) in capital shares (1,471) 3,874 (190) (22)
======== ======== ======= =======
Distributions in excess of net investment income $ -- $ -- $ (2) $ --
======== ======== ======= =======
</TABLE>
27
<PAGE> 158
FINANCIAL HIGHLIGHTS
================================================================================
SEI Daily Income Trust -- for the period ended January 31, 1996
For a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Ratio of
Net
Net Asset Net Realized and Distributions Distributions Ratio of Investment
Value Net Unrealized from Net from Net Asset Net Assets Expenses Income
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total End of to Average to Average
Of Period Income on Securities Income Gains of Period Return Period (000) Net Assets Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
CLASS A
1996 $1.00 $0.06 $ -- $(0.06) $ -- $1.00 5.98% $ 95,891 0.20% 5.88%
1995 1.00 0.04 -- (0.04) -- 1.00 4.55 213,988 0.21 4.49
1994 1.00 0.03 -- (0.03) -- 1.00 2.98 203,803 0.35 2.95
1993 1.00 0.04 -- (0.04) -- 1.00 3.60 264,450 0.35 3.56
1992 1.00 0.06 -- (0.06) -- 1.00 5.76 312,151 0.35 5.84
CLASS B
1996 1.00 0.06 -- (0.06) -- 1.00 5.67 6,616 0.50 5.53
1995 1.00 0.04 -- (0.04) -- 1.00 4.24 6,314 0.51 4.49
1994 1.00 0.03 -- (0.03) -- 1.00 2.68 2,334 0.65 2.65
1993 1.00 0.04 -- (0.04) -- 1.00 3.29 309 0.65 3.47
1992 1.00 0.05 -- (0.05) -- 1.00 5.45 2,305 0.53 5.18
CLASS C
1996(1) 1.00 0.04 -- (0.04) -- 1.00 3.79+ 2,460 0.70 5.17
- --------------------
GOVERNMENT PORTFOLIO
- --------------------
CLASS A
1996(2) $1.00 $0.01 $ -- $(0.01) $ -- $1.00 1.48%+ $ 48,762 0.20% 5.55%
1994(3) 1.00 0.01 -- (0.01) -- 1.00 3.22 -- 0.20 3.04
1993(4) 1.00 0.03 -- (0.03) -- 1.00 3.19 20,022 0.20 3.41
CLASS B
1996(5) 1.00 0.02 -- (0.02) -- 1.00 2.39+ 14,997 0.50 5.27
CLASS C
1996 1.00 0.05 -- (0.05) -- 1.00 5.39+ 542,936 0.70 5.23
1995(6) 1.00 0.03 -- (0.03) -- 1.00 3.41+ 310,835 0.70 4.32
- -----------------------
GOVERNMENT II PORTFOLIO
- -----------------------
CLASS A
1996 $1.00 $0.06 $ -- $(0.06) $ -- $1.00 5.83% $ 810,365 0.20% 5.69%
1995 1.00 0.04 -- (0.04) -- 1.00 4.39 786,405 0.20 4.33
1994 1.00 0.03 -- (0.03) -- 1.00 3.02 738,040 0.20 2.98
1993 1.00 0.04 -- (0.04) -- 1.00 3.57 664,540 0.20 3.48
1992 1.00 0.06 -- (0.06) -- 1.00 5.73 534,303 0.20 5.56
CLASS B
1996 1.00 0.05 -- (0.05) -- 1.00 5.52 19,678 0.50 5.41
1995 1.00 0.04 -- (0.04) -- 1.00 4.08 15,201 0.50 4.33
1994 1.00 0.03 -- (0.03) -- 1.00 2.71 21,462 0.50 2.68
1993 1.00 0.03 -- (0.03) -- 1.00 3.26 338 0.50 3.35
1992 1.00 0.05 -- (0.05) -- 1.00 5.02 1,906 0.48 4.75
- --------------------------
PRIME OBLIGATION PORTFOLIO
- --------------------------
CLASS A
1996 $1.00 $0.06 $ -- $(0.06) $ -- $1.00 5.96% $2,441,662 0.20% 5.82%
1995 1.00 0.04 -- (0.04) -- 1.00 4.46 2,778,326 0.20 4.41
1994 1.00 0.03 -- (0.03) -- 1.00 3.10 2,541,126 0.20 3.07
1993 1.00 0.04 -- (0.04) -- 1.00 3.72 2,564,340 0.20 3.62
1992 1.00 0.06 -- (0.06) -- 1.00 5.97 1,661,619 0.20 5.73
CLASS B
1996 1.00 0.06 -- (0.06) -- 1.00 5.65 174,779 0.50 5.38
1995 1.00 0.04 -- (0.04) -- 1.00 4.15 21,852 0.50 4.55
1994 1.00 0.03 -- (0.03) -- 1.00 2.79 6,312 0.50 2.77
1993 1.00 0.04 -- (0.04) -- 1.00 3.41 4,699 0.47 3.63
1992(7) 1.00 0.04 -- (0.04) -- 1.00 5.58 67,016 0.50 4.98
CLASS C
1995(8) 1.00 0.03 -- (0.03) -- 1.00 2.55+ -- 0.70 2.79
1994 1.00 0.03 -- (0.03) -- 1.00 2.59 20,602 0.70 2.57
1993(9) 1.00 0.03 -- (0.03) -- 1.00 3.13 85,325 0.70 3.05
<CAPTION>
Ratio of
Net
Ratio of Investment
Expenses Income
to Average to Average
Net Assets Net Assets
(Excluding (Excluding
Waivers) Waivers)
- ---------------------------------------------------
<S> <C> <C>
- ----------------------
MONEY MARKET PORTFOLIO
- ----------------------
CLASS A
1996 0.45% 5.63%
1995 0.45 4.25
1994 0.44 2.86
1993 0.39 3.52
1992 0.39 5.80
CLASS B
1996 0.75 5.28
1995 0.75 4.25
1994 0.74 2.56
1993 0.69 3.43
1992 0.61 5.10
CLASS C
1996(1) 0.96 4.91
- --------------------
GOVERNMENT PORTFOLIO
- --------------------
CLASS A
1996(2) 0.33% 5.42%
1994(3) 0.37 2.87
1993(4) 0.38 3.23
CLASS B
1996(5) 0.63 5.14
CLASS C
1996 0.84 5.09
1995(6) 0.89 4.13
- -----------------------
GOVERNMENT II PORTFOLIO
- -----------------------
CLASS A
1996 0.29% 5.60%
1995 0.30 4.23
1994 0.29 2.89
1993 0.29 3.39
1992 0.28 5.48
CLASS B
1996 0.59 5.32
1995 0.60 4.23
1994 0.60 2.58
1993 0.59 3.26
1992 0.59 4.64
- --------------------------
PRIME OBLIGATION PORTFOLIO
- --------------------------
CLASS A
1996 0.29% 5.73%
1995 0.30 4.31
1994 0.28 2.98
1993 0.30 3.52
1992 0.29 5.64
CLASS B
1996 0.58 5.30
1995 0.60 4.45
1994 0.58 2.68
1993 0.53 3.57
1992(7) 0.59 4.89
CLASS C
1995(8) 0.77 2.72
1994 0.78 2.48
1993(9) 0.83 2.92
</TABLE>
28
<PAGE> 159
<TABLE>
<CAPTION>
Ratio of
Net
Net Asset Net Realized and Distributions Distributions Ratio of Investment
Value Net Unrealized from Net from Net Asset Net Assets Expenses Income
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total End of to Average to Average
Of Period Income on Securities Income Gains of Period Return Period (000) Net Assets Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TREASURY PORTFOLIO
CLASS A
1996 $1.00 $0.06 $ -- $(0.06) $ -- $1.00 5.89% $ 54,820 0.20% 5.72%
1995 1.00 0.04 -- (0.04) -- 1.00 4.29 39,129 0.20 4.17
1994 1.00 0.03 -- (0.03) -- 1.00 3.00 46,296 0.20 2.96
1993(10) 1.00 0.01 -- (0.01) -- 1.00 2.91 44,624 0.20 2.89
CLASS C
1996(11) 1.00 0.03 -- (0.03) -- 1.00 2.68+ 14,691 0.70 5.12
TREASURY II PORTFOLIO
CLASS A
1996 $1.00 $0.05 $ -- $(0.05) $ -- $1.00 5.58% $418,250 0.25% 5.44%
1995 1.00 0.04 -- (0.04) -- 1.00 4.17 397,682 0.25 4.11
1994 1.00 0.03 -- (0.03) -- 1.00 2.88 364,334 0.25 2.84
1993 1.00 0.03 -- (0.03) -- 1.00 3.46 352,435 0.25 3.40
1992 1.00 0.06 -- (0.06) -- 1.00 5.48 282,535 0.25 5.43
CLASS B
1996 1.00 0.05 -- (0.05) -- 1.00 5.27 26,447 0.55 5.18
1995 1.00 0.04 -- (0.04) -- 1.00 3.86 44,680 0.55 3.71
1994 1.00 0.03 -- (0.03) -- 1.00 2.57 22,448 0.55 2.54
1993 1.00 0.03 -- (0.03) -- 1.00 3.15 6,038 0.55 3.42
1992 1.00 0.05 -- (0.05) -- 1.00 5.16 102,182 0.55 4.97
CLASS C
1996(12) 1.00 0.04 -- (0.04) -- 1.00 3.64+ 3,935 0.75 4.85
<CAPTION>
Ratio of
Net
Ratio of Investment
Expenses Income
to Average to Average
Net Assets Net Assets
(Excluding (Excluding
Waivers) Waivers)
- ---------------------------------------------------
<S> <C> <C>
- ------------------
TREASURY PORTFOLIO
- ------------------
CLASS A
1996 0.36% 5.56%
1995 0.34 4.03
1994 0.33 2.82
1993(10) 0.42 2.67
CLASS C
1996(11) 0.87 4.95
- ---------------------
TREASURY II PORTFOLIO
- ---------------------
CLASS A
1996 0.34% 5.35%
1995 0.35 4.01
1994 0.34 2.76
1993 0.34 3.31
1992 0.31 5.37
CLASS B
1996 0.64 5.09
1995 0.65 3.61
1994 0.64 2.46
1993 0.64 3.33
1992 0.61 4.91
CLASS C
1996(12) 0.84 4.76
</TABLE>
+ Returns are for the period indicated and have not been annualized.
1 Money Market Class C shares were offered beginning May 17, 1995. All ratios
for that period have been annualized.
2 Government Class A shares were offered beginning October 27, 1995. All ratios
for that period have been annualized.
3 Government Class A shares were fully liquidated June 2, 1993. All ratios
including total return for that period have been annualized.
4 Government Class A shares were offered beginning March 8, 1992. All ratios
including total return for that period have been annualized.
5 Government Class B shares were offered beginning August 22, 1995. All ratios
for that period have been annualized.
6 Government Class C shares were offered beginning April 7, 1994. All ratios
for that period have been annualized.
7 Prime Obligation Class B shares were offered beginning March 26, 1991. All
ratios including total return for that period have been annualized.
8 Prime Obligation Class C shares were fully liquidated October 27, 1994. All
ratios for that period have been annualized.
9 Prime Obligation Class C shares were offered beginning March 25, 1992. All
ratios including total return for that period have been annualized.
10 Treasury Class A shares were offered beginning September 30, 1992. All ratios
including total return for that period have been annualized.
11 Treasury Class C shares were offered beginning July 27, 1995. All ratios for
that period have been annualized.
12 Treasury II Class C shares were offered beginning May 8, 1995. All ratios for
that period have been annualized.
The accompanying notes are an integral part of the financial statements.
29
<PAGE> 160
FINANCIAL HIGHLIGHTS (CONTINUED)
================================================================================
SEI Daily Income Trust -- for the period ended January 31, 1996
For a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Ratio of
Net
Net Asset Net Realized and Distributions Distributions Ratio of Investment
Value Net Unrealized from Net from Net Asset Net Assets Expenses Income
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total End of to Average to Average
Of Period Income on Securities Income Gains of Period Return Period (000) Net Assets Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------
SHORT-TERM GOVERNMENT PORTFOLIO
- -------------------------------
CLASS A
1996 $ 9.73 $0.61 $ 0.36 $(0.61) $ -- $10.09 10.27% $ 73,431 0.45% 6.13%
1995 10.06 0.40 (0.32) (0.40) (0.01) 9.73 0.93 99,458 0.45 4.12
1994 10.13 0.40 0.04 (0.40) (0.11) 10.06 4.41 128,063 0.45 3.98
1993 10.09 0.52 0.14 (0.52) (0.10) 10.13 6.66 100,153 0.45 5.04
1992 9.82 0.68 0.27 (0.68) -- 10.09 10.00 63,194 0.45 6.82
CLASS B
1996 9.71 0.58 0.36 (0.58) -- 10.07 9.94 39 0.75 5.85
1995 10.04 0.38 (0.32) (0.38) (0.01) 9.71 0.70 131 0.75 3.92
1994 10.13 0.37 0.02 (0.37) (0.11) 10.04 3.93 37 0.75 3.67
1993 10.09 0.48 0.14 (0.48) (0.10) 10.13 6.34 135 0.75 4.74
1992 9.82 0.65 0.27 (0.65) -- 10.09 9.68 135 0.75 6.52
CLASS D**
1996(1) 9.83 0.54 0.26 (0.54) -- 10.09 8.31+ 11 0.85 5.86
- --------------------------------------
INTERMEDIATE-TERM GOVERNMENT PORTFOLIO
- --------------------------------------
CLASS A
1996 $ 9.33 $0.60 $ 0.73 $(0.60) $ -- $10.06 14.60% $164,978 0.45% 6.12%
1995 10.13 0.50 (0.73) (0.50) (0.07) 9.33 (2.19) 243,671 0.45 5.20
1994 10.23 0.54 0.11 (0.54) (0.21) 10.13 6.44 336,814 0.45 5.24
1993 10.06 0.62 0.28 (0.62) (0.11) 10.23 9.51 259,488 0.45 6.16
1992 9.75 0.70 0.40 (0.70) (0.09) 10.06 11.44 199,901 0.45 7.08
Class B
1996(2) 9.33 0.50 0.65 (0.50) -- 9.98 12.26+ -- 0.75 5.82
1995(3) 9.64 0.31 (0.24) (0.31) (0.07) 9.33 0.61+ 93 0.75 5.07
Class D**
1996 9.32 0.56 0.73 (0.56) -- 10.05 14.15 60 0.85 5.73
1995 10.13 0.47 (0.74) (0.47) (0.07) 9.32 (2.61) 99 0.84 4.80
1994(4) 10.44 0.17 (0.10) (0.17) (0.21) 10.13 1.52 107 0.75 4.94
- --------------
GNMA PORTFOLIO
- --------------
CLASS A
1996 $ 9.17 $0.67 $ 0.67 $(0.67) $ -- $ 9.84 15.06% $136,394 0.49% 7.04%
1995 10.07 0.64 (0.90) (0.64) -- 9.17 (2.46) 182,225 0.47 6.89
1994 10.22 0.66 (0.06) (0.66) (0.09) 10.07 6.09 262,162 0.45 6.38
1993 9.99 0.75 0.27 (0.75) (0.04) 10.22 10.92 193,204 0.45 7.49
1992 9.61 0.79 0.38 (0.79) -- 9.99 12.49 120,712 0.45 8.09
CLASS B
1996 9.17 0.64 0.67 (0.64) -- 9.84 14.72 15 0.79 6.71
1995(5) 9.16 0.35 0.01 (0.35) -- 9.17 4.00+ 14 0.79 6.80
CLASS D**
1996 9.16 0.63 0.67 (0.63) -- 9.83 14.61 158 0.89 6.62
1995 10.09 0.61 (0.93) (0.61) -- 9.16 (3.04) 169 0.86 6.54
1994(6) 10.22 0.19 (0.04) (0.19) (0.09) 10.09 4.24 133 0.75 6.06
- --------------------------------
Corporate Daily Income Portfolio
- --------------------------------
CLASS A
1996 $ 1.96 $0.12 $ 0.05 $(0.12) $(0.01) $ 2.00 8.65% $ 48,539 0.35% 5.97%
1995 2.00 0.09 (0.04) (0.09) -- 1.96 2.59 50,495 0.35 4.60
1994(7) 2.00 0.02 -- (0.02) -- 2.00 3.45 43,655 0.35 3.45
<CAPTION>
Ratio of
Net
Ratio of Investment
Expenses Income
to Average to Average
Net Assets Net Assets Portfolio
(Excluding (Excluding Turnover
Waivers) Waivers) Rate
- -----------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------
SHORT-TERM GOVERNMENT PORTFOLIO
- -------------------------------
CLASS A
1996 0.53% 6.05% 184%
1995 0.52 4.05 45
1994 0.52 3.91 105
1993 0.55 4.94 80
1992 0.56 6.71 36
CLASS B
1996 0.83 5.77 184
1995 0.82 3.85 45
1994 0.82 3.60 105
1993 0.85 4.64 80
1992 0.85 6.42 36
CLASS D**
1996(1) 0.93 5.78 184
- --------------------------------------
INTERMEDIATE-TERM GOVERNMENT PORTFOLIO
- --------------------------------------
CLASS A
1996 0.53% 6.04% 115%
1995 0.52 5.13 61
1994 0.53 5.16 56
1993 0.53 6.08 52
1992 0.54 6.99 62
Class B
1996(2) 0.83 5.74 115
1995(3) 0.83 4.99 61
Class D**
1996 0.93 5.65 115
1995 0.92 4.72 61
1994(4) 0.83 4.86 56
- --------------
GNMA PORTFOLIO
- --------------
CLASS A
1996 0.51% 7.02% 20%
1995 0.50 6.86 85
1994 0.50 6.32 70
1993 0.52 7.42 23
1992 0.52 8.02 9
CLASS B
1996 0.81 6.69 20
1995(5) 0.82 6.77 85
CLASS D**
1996 0.91 6.60 20
1995 0.89 6.51 85
1994(6) 0.80 6.01 70
- --------------------------------
Corporate Daily Income Portfolio
- --------------------------------
CLASS A
1996 0.55% 5.77% 295%
1995 0.55 4.40 147
1994(7) 0.63 3.18 34
</TABLE>
30
<PAGE> 161
<TABLE>
<CAPTION>
Ratio of
Net
Net Asset Net Realized and Distributions Distributions Ratio of Investment
Value Net Unrealized from Net from Net Asset Net Assets Expenses Income
Beginning Investment Gains (Losses) Investment Realized Capital Value End Total End of to Average to Average
Of Period Income on Securities Income Gains of Period Return Period (000) Net Assets Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------
SHORT-TERM MORTGAGE PORTFOLIO
- -----------------------------
CLASS A
1996 $ 9.64 $0.63 $0.25 $(0.64) $ -- $9.88 9.43% $1,815 0.45% 6.50%
1995 9.90 0.48 (0.24) (0.48) (0.02) 9.64 2.29 3,607 0.45 4.90
1994(8) 10.00 0.22 (0.10) (0.22) -- 9.90 1.84 3,921 0.45 3.16
<CAPTION>
Ratio of
Net
Ratio of Investment
Expenses Income
to Average to Average
Net Assets Net Assets Portfolio
(Excluding (Excluding Turnover
Waivers) Waivers) Rate
- -----------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------
SHORT-TERM MORTGAGE PORTFOLIO
- -----------------------------
CLASS A
1996 0.80% 6.15% 356%
1995 0.64 4.71 741
1994(8) 0.93 2.68 166
</TABLE>
+ Returns are for the period indicated and have not been annualized.
** Total return does not reflect the sales charge on the Class D (formerly Pro
Vantage) shares.
1 Short-Term Government Class D shares were offered beginning February 28,
1995. All ratios for that period have been annualized.
2 Intermediate-Term Government Class B shares were fully liquidated December
22, 1995. All ratios for that period have been annualized.
3 Intermediate-Term Government Class B shares were offered beginning June 8,
1994. All ratios for that period have been annualized.
4 Intermediate-Term Government Class D shares were offered beginning September
26, 1993. All ratios including total return for that period have been
annualized.
5 GNMA Class B shares were offered beginning July 12, 1994. All ratios for
that period have been annualized.
6 GNMA Class D shares were offered beginning September 30, 1993. All ratios
including total return for that period have been annualized.
7 Corporate Daily Income Class A shares were offered beginning September 28,
1993. All ratios including total return for that period have been
annualized.
8 Short-Term Mortgage Class A shares were offered beginning May 20, 1993. All
ratios including total return for that period have been annualized. Prior to
June 30, 1994, Bear Stearns Asset Management served as the Investment
Adviser.
The accompanying notes are an integral part of the financial statements.
31
<PAGE> 162
NOTES TO FINANCIAL STATEMENTS
SEI Daily Income Trust -- January 31, 1996
1. ORGANIZATION
SEI Daily Income Trust (the "Trust") was organized as a Massachusetts business
trust under a Declaration of Trust dated March 15, 1982.
The Trust is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end investment company with eleven operational
Portfolios: the Money Market Portfolio, the Government Portfolio, the Government
II Portfolio, the Prime Obligation Portfolio, the Treasury Portfolio, the
Treasury II Portfolio (the "Money Market Portfolios"), the Short-Term Government
Portfolio, the Intermediate-Term Government Portfolio, the GNMA Portfolio, the
Corporate Daily Income Portfolio and the Short-Term Mortgage Portfolio (the
"Fixed Income Portfolios"). The Portfolios' prospectus provides a description of
each Portfolio's investment objectives, policies and strategies. The assets of
each portfolio are segregated, and a shareholder's interest is limited to the
Portfolio in which shares are held.
On July 15, 1994, the Federal Securities Portfolio closed and all of the
outstanding shares of the Portfolio were redeemed. SEI Financial Management
Corporation, the Manager of the Portfolio, voluntarily agreed to bear the costs
associated with the liquidation of the Portfolio which approximated $9,000.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Portfolios.
Security Valuation -- Investment securities of the "Money Market
Portfolios" are stated at amortized cost which approximates market value. Under
this valuation method, purchase discounts and premiums are accreted and
amortized ratably to maturity and are included in interest income.
Investment securities of the "Fixed Income Portfolios" which are listed on
a securities exchange for which market quotations are available are valued by an
independent pricing service at the last quoted sales price for such securities
on each business day. If there is no such reported sale, those securities for
which market quotations are readily available are valued at the most recent
quoted bid price. Unlisted securities for which market quotations are readily
available are valued at the most recently quoted price with estimates of such
values determined under certain market conditions using procedures determined in
good faith by the Board of Trustees. Debt obligations with sixty days or less
remaining until maturity may be valued at their amortized cost.
Federal Income Taxes -- It is each Portfolio's intention to continue to
qualify as a regulated investment company and distribute all of its taxable
income. Accordingly, no provision for Federal income taxes is required.
In accordance with Statement of Position 93-2, "Determination, Disclosure,
and Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distribution by Investment Companies," $126,900 and $94,600 relating to
permanent differences attributable to classifying short-term capital gains as
ordinary income for tax purposes of the Short-Term Government and GNMA Funds,
respectively, as of January 31, 1996 have been reclassified between the Fund's
paid-in capital, accumulated net realized gains/losses and undistributed net
investment income accounts.
Net Asset Value Per Share -- The net asset value per share is calculated on
each business day separately for each Portfolio. In general, it is computed by
dividing the assets of each Portfolio, less its liabilities, by the number of
outstanding shares of the Portfolio.
Security Transactions and Investment Income -- Security transactions are
accounted for on the trade date of the security purchase or sale. Costs used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts and premiums during the respective holding
period. Interest income is recorded on the accrual basis.
Purchase discounts and premiums on securities held in the "Fixed Income
Portfolios" are accreted and amortized over the life of each security and
recorded as interest income, using the effective interest method.
Repurchase Agreements -- Securities pledged as collateral for repurchase
agreements are held by each Portfolio's custodian bank until maturity of the
repurchase agreements. Provisions of the agreements and procedures adopted by
the Adviser
32
<PAGE> 163
ensure that the market value of the collateral, including accrued interest
thereon, is sufficient in the event of default by the counterparty. The
Portfolios also invest in tri-party repurchase agreements. Securities held as
collateral for tri-party repurchase agreements are maintained by the broker's
custodian bank in a segregated account until maturity of the repurchase
agreement. Provisions of the agreements ensure that the market value of the
collateral, including accrued interest thereon, is sufficient in the event of
default. If the counterparty defaults and the value of the collateral declines
or if the counterparty enters into an insolvency proceeding, realization of the
collateral by the Portfolio may be delayed or limited.
TBA Purchase Commitments -- The Fixed Income Portfolios may enter into
"TBA" (To Be Announced) purchase commitments to purchase securities for a fixed
price at a future date beyond customary settlement time. TBA purchase
commitments may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior to settlement
date, which risk is in addition to the risk of decline in the value of the
funds' other assets. Unsettled TBA purchase commitments are valued at the
current market value of the underlying securities, generally according to the
procedures described under "Security Valuation."
Expenses -- Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses of the Trust are
prorated to the Portfolios on the basis of relative net assets. Class specific
expenses, such as the 12b-1 fees, are borne by that class. Income, other
expenses and realized and unrealized gains and losses of a Portfolio are
allocated to the respective class on the basis of the relative net asset value
each day.
Distributions to Shareholders -- Distributions from net investment income
are declared on a daily basis and are payable on the first business day of the
following month. Any net realized capital gains on sales of securities for a
Portfolio are distributed to its shareholders at least annually.
3. ORGANIZATION COSTS AND TRANSACTIONS WITH AFFILIATES
Organizational costs have been capitalized by the Trust and are being amortized
on a straight line basis over a period of sixty months commencing with
operations. In the event any of the initial shares of the Trust are redeemed by
any holder thereof during the period that the Trust is amortizing its
organizational costs, the redemption proceeds payable to the holder thereof by
the Trust will be reduced by the unamortized organizational costs in the same
ratio as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
The Trust and SEI Financial Management Corporation (the "Manager") are
parties to a Management Agreement dated May 23, 1986 under which the Manager
provides management, administrative and shareholder services to the Portfolios
for an annual fee of .33% of the average daily net assets of the Money Market
Portfolio, .19% each of the average daily net assets of the Government II and
Prime Obligation Portfolios, .24% each of the average daily net assets of the
Government, Treasury and Treasury II Portfolios, .35% each of the average daily
net assets of the Short-Term Government, Intermediate-Term Government, Corporate
Daily Income and Short-Term Mortgage Portfolios; and .32% of the average daily
net assets of the GNMA Portfolio. However, the Manager has agreed to waive its
annual fee in an amount which limits total annual expenses of the following
Portfolios (including the annual management fee) to the following amounts set
forth in the Management Agreement (expressed as a percentage of each Portfolio's
daily net assets):
<TABLE>
<CAPTION>
Money Prime
Market Gov't Gov't II Obligation Treasury Treasury II
------ ----- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class A 1.00% .25% .20% .20% .20% .25%
Class B 1.30% .55% .50% .50% .50% .55%
Class C 1.50% .75% .70% .70% .70% .75%
</TABLE>
In the event that the total annual expenses of a Portfolio, after
reflecting a waiver of all fees by the Manager and Adviser, exceed the specified
limitation, the Manager has agreed to bear such excess.
SEI Financial Services Company ("the Distributor"), a wholly-owned
subsidiary of SEI Corporation and a registered broker-dealer, acts as the
distributor of the shares of the Trust under distribution plans which provide
for the Trust to reimburse the Distributor for certain distribution-related
expenses incurred by the Distributor. Such expenses
33
<PAGE> 164
may not exceed .30% of the average daily net assets of a Portfolio, provided
those expenses are permissible as to both type and amount under a budget
approved and monitored by the Board of Trustees.
In addition to providing for the reimbursement payments described above,
the Class B, Class C and Class D distribution plans provide for additional
payments to the Distributor. This additional payment may be used to compensate
financial institutions that provide distribution-related expenses for the Class
B, Class C and Class D shares of the Portfolios and may not exceed .60%, .80%
and .60%, respectively.
Certain officers and/or Trustees of the Trust are also officers and/or
Directors of the Manager. The Trust pays each unaffiliated Trustee an annual fee
for attendance at quarterly, interim, and committee meetings. Compensation of
officers and affiliated Trustees is paid by the Manager.
4. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENT
Under an Investment Advisory Agreement dated September 30, 1983, Wellington
Management Company serves as the Investment Adviser of the Trust on behalf of
the "Money Market Portfolios." For its services, the Investment Adviser receives
a monthly fee equal to .075% of the combined average daily net assets up to $500
million and .02% of such assets in excess of $500 million of the "Money Market
Portfolios." Such fees are allocated daily on the basis of the relative net
assets of each money market portfolio in the Trust. The Adviser has agreed to
waive 50% of the fee otherwise due for the Government, Government II, Prime
Obligation, Treasury and Treasury II Portfolios. In addition, the Adviser has
voluntarily agreed to waive its remaining fee in an amount proportionate to the
Manager's waiver of its fee.
Under an Investment Advisory Agreement dated December 15, 1986, Wellington
Management Company serves as the Investment Adviser of the Trust on behalf of
the Short-Term Government, Intermediate-Term Government and GNMA Portfolios.
Monthly fees are equal to .10% of the Portfolios' combined average daily net
assets up to $500 million, .075% of the next $500 million of such assets and
.05% of such net assets in excess of $1 billion. The Adviser has voluntarily
agreed to waive its remaining fee in an amount proportionate to the Manager's
waiver of its fee. Pursuant to an Investment Advisory Agreement dated August 4,
1993, Wellington Management Company serves as Investment Adviser for the
Corporate Daily Income Portfolio. Monthly fees are equal to .10% of the
Portfolios' average daily net assets up to $500 million, .075% of the next $500
million and .05% of such net assets in excess of $1 billion. The Adviser has
voluntarily agreed to waive its remaining fee in an amount proportionate to the
Manager's waiver of its fee. Pursuant to an Investment Advisory Agreement dated
June 30, 1994, Wellington Management Company serves as the Investment Adviser of
the Trust on behalf of the Short-Term Mortgage Portfolio for a monthly fee equal
to .10% of the Portfolio's average daily net assets.
For the period of November 15, 1983 to July 31, 1995, Comerica Bank
(formerly Manufacturers National Bank of Detroit) acted as custodian of the
Money Market Portfolio's securities under an agreement dated September 22, 1983.
For the period of September 30, 1992 to July 31, 1995, CoreStates Bank, N.A.
acted as custodian of the Treasury Portfolio's securities under an agreement
dated August 30, 1985. Effective August 1, 1995, Bank of New York began serving
as custodian of the Money Market and Treasury Portfolio's securities under an
agreement dated August 1, 1995. CoreStates Bank, N.A. acts as the custodian of
the Government, Government II, Prime Obligation, Treasury II and the "Fixed
Income Portfolios" under an agreement dated August 30, 1985. The custodians play
no role in determining the investment policies of the Portfolios or which
securities are to be purchased or sold in the Portfolios.
34
<PAGE> 165
5. INVESTMENT TRANSACTIONS
The cost of security purchases and the proceeds from the sale of securities,
other than temporary investments in short-term securities for the period ended
January 31, 1996, were as follows for the "Fixed Income Portfolios":
<TABLE>
<CAPTION>
INTER-
SHORT- MEDIATE-
TERM TERM CORPORATE SHORT-
GOVERN- GOVERN- DAILY TERM
MENT MENT GNMA INCOME MORTGAGE
(000) (000) (000) (000) (000)
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
PURCHASES
U.S.
Government $103,978 $207,106 $ 28,476 $ 66,378 $ 5,309
Other -- -- -- 10,637 --
SALES
U.S.
Government $141,677 $304,840 $ 80,064 $ 65,655 $ 7,059
Other -- -- -- 10,377 --
</TABLE>
At January 31, 1996 the total cost of securities and the net realized gains
or losses on securities sold for federal income tax purposes was not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized gain on securities in which there was an excess of market value
over cost, the aggregate gross unrealized loss on securities in which there was
an excess of cost over market value and the net unrealized gain/(loss) at
January 31, 1996 for each "Fixed Income Portfolio" is as follows (in thousands):
<TABLE>
<CAPTION>
INTERMEDIATE- CORPORATE
SHORT-TERM TERM DAILY SHORT-TERM
GOVERNMENT GOVERNMENT GNMA INCOME MORTGAGE
---------- ---------- ------- --------- ----------
<S> <C> <C> <C> <C> <C>
Aggregate
gross
unrealized
gain $1,164 $4,598 $3,025 $ 335 $ 41
Aggregate
gross
unrealized
loss (26) (30) (543) (54) --
------ ------ ------ ------- -------
Net
unrealized
gain $1,138 $4,568 $2,482 $ 281 $ 41
====== ====== ====== ======= =======
</TABLE>
6. CAPITAL LOSS CARRYFORWARDS
At January 31, 1996 the following funds have capital loss carryforwards:
<TABLE>
<CAPTION>
Expiration
Amount Date
---------- ----------
<S> <C> <C>
Money Market $ 731 2003
Government II 32,234 2001
58,412 2002
84,628 2003
Prime Obligation 45,241 2003
Short-Term Government 407,299 2003
1,176,473 2004
Intermediate-Term Government 3,551,432 2003
3,199,945 2004
GNMA 5,227,577 2003
6,472,568 2004
Short-Term Mortgage 93,041 2003
16,758 2004
</TABLE>
Subsequent to October 31, 1995, the Portfolios recognized net capital
losses for tax purposes that have been deferred to 1996 and can be used to
offset future capital gains at January 31, 1996.
<TABLE>
<CAPTION>
Post October 31, 1995 Losses
----------------------------
<S> <C>
Treasury II $26,900
Corporate Daily Income 6,239
</TABLE>
7. SHAREHOLDER VOTING RESULTS
There was a special meeting scheduled for July 28, 1995 at which the
shareholders of the Money Market and Prime Obligation Portfolios (the
"Portfolios") voted on a series of proposals (the "Proposals"). With respect to
the Prime Obligation Portfolio, the meeting was adjourned until August 3, 1995.
Proposal III related solely to the Money Market Portfolio. Each Proposal and the
results of the shareholder meeting are set forth below (unaudited):
I. Proposal to approve the elimination of the fundamental policy requiring
each portfolio to invest its assets solely in the securities listed as
appropriate investments.
<TABLE>
<CAPTION>
Prime
Money Obligation
Market Portfolio Portfolio
---------------- ----------------
<S> <C> <C>
For 145,629,802.00 1,583,847,565.17
Against 1,648,601.00 69,605,552.00
Abstain 232,253.00 3,157,819.00
</TABLE>
35
<PAGE> 166
NOTES TO FINANCIAL STATEMENTS (Concluded)
===============================================================================
SEI Daily Income Trust -- January 31, 1996
II. Proposal to approve the elimination of the fundamental policy
requiring each portfolio to invest in securities maturing in one year
or less and to maintain an average weighted maturity of 120 days.
<TABLE>
<CAPTION>
Prime
Money Obligation
Market Portfolio Portfolio
---------------- ----------------
<S> <C> <C>
For 146,934,842.00 1,635,230,466.17
Against 343,561.00 18,505,201.00
Abstain 232,253.00 3,156,616.00
</TABLE>
III. Proposal to approve the elimination of the fundamental policy
requiring the Money Market portfolio to concentrate its investments in
obligations issued by the banking industry, consisting of U.S. dollar
denominated obligations of domestic banks and U.S. branches of foreign
banks.
<TABLE>
<CAPTION>
Money
Market Portfolio
----------------
<S> <C>
For 146,934,841.00
Against 343,562.00
Abstain 232,253.00
</TABLE>
There were no broker non-votes submitted and no other proposals voted on at such
meeting.
36
<PAGE> 167
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES OF THE SEI DAILY INCOME TRUST
We have audited the accompanying statements of net assets of the Money Market,
Government, Government II, Prime Obligation, Treasury, Treasury II, Short-Term
Government, Intermediate-Term Government, GNMA, Corporate Daily Income and
Short-Term Mortgage Portfolios as of January 31, 1996, and the related
statements of operations, changes in net assets and financial highlights for the
periods presented. These financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1996, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Money Market, Government, Government II, Prime Obligation, Treasury, Treasury
II, Short-Term Government, Intermediate-Term Government, GNMA, Corporate Daily
Income and Short-Term Mortgage Portfolios of the SEI Daily Income Trust as of
January 31, 1996, the results of their operations, changes in their net assets
and financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.
March 14, 1996
37
