<PAGE> 1
SEI DAILY INCOME TRUST
DECEMBER 1, 1996
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PRIME OBLIGATION PORTFOLIO
TREASURY PORTFOLIO
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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
C shares of each of the two money market fund portfolios (each a "Portfolio"
and, together, the "Portfolios") listed above.
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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
<PAGE> 2
ANNUAL OPERATING EXPENSES (as a percentage of average net assets) CLASS C
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<TABLE>
<CAPTION>
PRIME
OBLIGATION TREASURY
PORTFOLIO PORTFOLIO
---------- ---------
<S> <C> <C>
Management/Advisory Fees (after fee waiver) (1) .16% .14%
12b-1 Fees none none
Total Other Expenses .54% .56%
Shareholder Servicing Fees .25% .25%
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Total Operating Expenses
(after fee waiver) (2) .70% .70%
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</TABLE>
(1) For the Prime Obligation and Treasury 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 Portfolio
and .30% for the Treasury Portfolio. 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 .79% for the Prime Obligation Portfolio and .86% for
the Treasury Portfolio.
EXAMPLE
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<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:
Prime Obligation Portfolio $ 7 $ 22 $ 39 $87
Treasury Portfolio $ 7 $ 22 $ 39 $87
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</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in
Class 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, as well as the Money Market, Government, Government II and
Treasury II Portfolios, also offer 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 "The Manager," "The Adviser" and
"Distribution and Shareholder Servicing."
2
<PAGE> 3
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.
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
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- -----------------------------
PRIME OBLIGATION PORTFOLIO
- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS C
1995 (1) $1.00 $ 0.03 $ -- $ (0.03) $ -- $1.00 2.55%+
1994 1.00 0.03 -- (0.03) -- 1.00 2.59
1993 (2) 1.00 0.03 -- (0.03) -- 1.00 3.13
<CAPTION>
- -------------------
TREASURY PORTFOLIO
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS C
1996 (3) $1.00 $ 0.03 $ -- $ (0.03) $ -- $1.00 2.68%+
<CAPTION>
Ratio of
Ratio of Ratio of Expenses Net Investment
Ratio of Net Investment to Average Income 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)
- ------------------------------------------------------------------------------------------------
- -----------------------------
PRIME OBLIGATION PORTFOLIO
- -----------------------------
CLASS C
<S> <C> <C> <C> <C> <C>
1995 (1) $ 0 0.70% 2.79% 0.77% 2.72%
1994 20,602 0.70 2.57 0.78 2.48
1993 (2) 85,325 0.70 3.05 0.83 2.92
<CAPTION>
- -------------------
TREASURY PORTFOLIO
- -------------------
CLASS C
<S> <C> <C> <C> <C> <C>
1996 (3) $ 14,691 0.70% 5.12% 0.87% 4.95%
</TABLE>
+ Returns are for the period indicated and have not been annualized.
1 Prime Obligation Class C shares were fully liquidated October 27, 1994.
All ratios except total return for the period indicated have been
annualized.
2 Prime Obligation Class C shares were offered beginning March 25, 1992.
All ratios including total return for the period indicated have been
annualized.
3 Treasury Class C shares were offered beginning July 27, 1995. All ratios
except total return for the period indicated have been annualized.
3
<PAGE> 4
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 C shares of the
Trust's Prime Obligation and Treasury Portfolios (each a "Portfolio," and,
together, the "Portfolios"). As of September 30, 1996, the aggregate net assets
of all classes of the Prime Obligation and Treasury Portfolios were
$2,976,088,915 and $90,455,377, respectively. Each Portfolio may have separate
classes of shares which provide for variations in distribution, shareholder
servicing and transfer agency costs, voting rights and dividends. The
Portfolios, as well as the Money Market, Government, Government II, and Treasury
II Portfolios, also offer Class A and Class B 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
PRIME OBLIGATION The Prime Obligation Portfolio seeks to preserve principal
PORTFOLIO 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) U.S. Treasury obligations and obligations
issued or guaranteed as to principal and interest by the
agencies or instrumentalities of the U.S. Government; and
(vi) repurchase agreements involving any of the foregoing
obligations.
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
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<PAGE> 5
Portfolio invests exclusively in U.S. Treasury obligations
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 Prime Obligation Portfolio, 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.
Treasury STRIPS (as defined in the "Description of
Permitted Investments and Risk Factors").
Each Portfolio may purchase securities on a
when-issued basis.
5
<PAGE> 6
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 the Treasury 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 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-
fundamental investment limitations are set forth in the
Statement of Additional Information.
6
<PAGE> 7
THE MANAGER
SEI Fund Management ("SEI Management") provides the Trust
with overall management services, regulatory reporting,
all necessary office space, equipment, personnel and
facilities, and acts as dividend disbursing agent and
shareholder servicing agent. SEI Management also serves as
transfer agent (the "Transfer Agent") to Class C shares of
each Portfolio.
For its management services, SEI Management 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: Prime Obligation
Portfolio--.19% and Treasury Portfolio--.24%. SEI
Management 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 .70% of the Class C shares of the Prime Obligation
and Treasury Portfolios, each on an annualized basis. For
the fiscal year ended January 31, 1996, the Prime
Obligation and Treasury Portfolios paid management fees,
after waivers, of .12% and .10%, respectively, of their
average daily net assets.
THE ADVISER
Wellington Management Company LLP (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 limited liability 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
7
<PAGE> 8
Portfolios on the basis of their relative net assets. For
the fiscal year ended January 31, 1996, the Prime
Obligation and Treasury Portfolios paid the Adviser
advisory fees, after fee waivers, of .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 the
Class C 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. 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 C shareholder service plan, 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 C shares may pay administrative
services fees at specified percentages of the average
daily net assets of the shares of the Class (up to .25%).
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.
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.
8
<PAGE> 9
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 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 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.
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<PAGE> 10
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.
Shareholders who desire to purchase or redeem
shares of the Prime Obligation 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 investments in the Prime Obligation 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 and Class B
shares will normally be higher than that on Class C and
Class G shares because of the additional shareholder
servicing and/or administrative services expenses charged
Class C and Class G 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
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<PAGE> 11
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 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
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<PAGE> 12
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.
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: Money Market,
Government, Government II, Treasury II, Federal
Securities, Short-Duration Government Portfolio (formerly,
Short-Term Government Portfolio), Intermediate-Duration
Government Portfolio (formerly, Intermediate-Term
Government
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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.
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 and Class B
shares are normally higher than those on Class C and Class
G shares of each Portfolio because of the additional
shareholder servicing and/or administrative expenses
charged to Class C shares and
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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.
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 Treasury 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 Portfolio. 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.
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.
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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, 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
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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 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
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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.
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Annual Operating Expenses......................... 2
Financial Highlights.............................. 3
The Trust......................................... 4
Investment Objectives and Policies................ 4
General Investment Policies....................... 5
Investment Limitations............................ 6
The Manager....................................... 6
The Adviser....................................... 7
Distribution and Shareholder Servicing............ 8
Purchase and Redemption of Shares................. 9
Performance....................................... 10
Taxes............................................. 11
General Information............................... 12
Description of Permitted Investments and Risk
Factors......................................... 14
</TABLE>
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