<PAGE>
SEI DAILY INCOME TRUST
MAY 31, 1996
- --------------------------------------------------------------------------------
GOVERNMENT 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, Oaks,
Pennsylvania 19456, 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 the Government Portfolio, (the "Portfolio").
AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) CLASS C
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT
PORTFOLIO
-----------
<S> <C>
Management/Advisory Fees (AFTER FEE WAIVER) (1) .16%
12b-1 Fees none
Total Other Expenses .54%
Shareholder Servicing Fees .25%
- ----------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVER) (2) .70%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR THE GOVERNMENT PORTFOLIO, 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 .30% FOR THE GOVERNMENT 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 PORTFOLIO WOULD BE .84%.
EXAMPLE CLASS C
- --------------------------------------------------------------------------------
<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 $ 7 $ 22 $ 39 $ 87
- ------------------------------------------------------------------------------------------------------------------------------------
</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
PORTFOLIO ALSO OFFERS CLASS A SHARES, CLASS B SHARES AND 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>
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.
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END TOTAL END OF
OF PERIOD INCOME SECURITIES INCOME CAPITAL GAINS OF PERIOD RETURN PERIOD (000)
- --------------------------------------------------------------------------------------------------------------------------------
- ------------------
GOVERNMENT
PORTFOLIO
- ------------------
CLASS C
1996 1.00 0.05 -- (0.05) -- 1.00 5.39 542,936
1995(1) 1.00 0.03 -- (0.03) -- 1.00 3.41+ 310,835
<CAPTION>
FOR A SHARE OUTSTA
<S> <C> <C> <C> <C>
RATIO OF
NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES INCOME TO
RATIO OF INVESTMENT TO AVERAGE AVERAGE
EXPENSES INCOME TO NET ASSETS NET ASSETS
TO AVERAGE AVERAGE (EXCLUDING (EXCLUDING
NET ASSETS NET ASSETS WAIVERS) WAIVERS)
- ------------------
- ------------------
GOVERNMENT
PORTFOLIO
- ------------------
CLASS C
1996 0.70 5.23 0.84 5.09
1995(1) 0.70 4.32 0.89 4.13
</TABLE>
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(1) GOVERNMENT CLASS C SHARES WERE OFFERED BEGINNING APRIL 7, 1994. ALL RATIOS
EXCEPT TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
3
<PAGE>
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
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. The Portfolio offers Class
A, Class B and Class G shares. Additional information pertaining to the Trust
may be obtained by writing SEI Financial Services Company, Oaks, Pennsylvania
19456, or by calling 1-800-342-5734.
INVESTMENT OBJECTIVE
AND POLICIES
_______________________________________________________________________
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.
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 quality) are
considered to be "second tier" securities. The 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
4
<PAGE>
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 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 objectives 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 Trust or the Portfolio without the consent of the
holders of a majority of the Trust or 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
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
5
<PAGE>
for the Portfolio and any interest paid on such
borrowings will reduce the income of the 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 Fund Management (the "Manager" or the "Transfer
Agent"), a wholly-owned subsidiary of SEI Investments
Company ("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 the Portfolio's average daily net assets as
follows: Government Portfolio--.24%. 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 .75% of the
Class C shares of the Government Portfolio 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 .70% of the daily net assets of Class C
shares of the Government Portfolio 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, Government Portfolio
paid management fees, after waivers, of .12% of its average
daily net assets.
THE ADVISER
_______________________________________________________________________
Wellington Management Company, LLP (the "Adviser" or "WMC")
serves as the investment adviser for the Portfolio under an
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 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
6
<PAGE>
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 Portfolios on the basis of their
relative net assets. For the fiscal year ended January 31,
1996, the Government Portfolio paid the Adviser advisory
fees, after fee waivers, of .01% of its relative net
assets.
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 Portfolio has adopted plans under which firms,
including the Distributor, that provide shareholder and
administrative services may receive compensation therefor.
The Class A, B and C plans differ in a number of ways,
including the amounts that may be paid. Under each plan,
the Distributor may provide those services itself or may
enter into arrangements under which third parties provide
such services and are compensated by the Distributor. Under
such arrangements the Distributor may retain as a profit
any difference between the fee it receives and the amount
it pays such third party. In addition, the Portfolios may
enter into such arrangements directly.
Under the Class C shareholder service plan, the
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
7
<PAGE>
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 Portfolio. 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. 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 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 (or its
authorized 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.
8
<PAGE>
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 (or its authorized 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 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
Portfolio 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 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 Class
B shares. Likewise, the performance on Class B shares will
normally be higher than that of Class C or Class G shares
because of the additional administrative services expenses
charged to Class C shares and the additional distribution
and shareholder servicing expenses charged to Class G
shares.
9
<PAGE>
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 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 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
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
10
<PAGE>
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 the 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 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.
The 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 Portfolio, 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,
Government Securities Daily Income Portfolio, Federal
Securities Portfolio, Money Market Portfolio, Prime
Obligation Portfolio, Government II Portfolio, Treasury
Portfolio and
11
<PAGE>
Treasury II 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 Fund Management, Oaks, Pennsylvania 19456.
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 the 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 the Portfolio because of the additional
administrative services 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.
CUSTODIAN 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
12
<PAGE>
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 (the "Custodian"), serves as custodian
and wire agent of the assets of the Government 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:
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 the Portfolio's books.
Illiquid securities include demand instruments with a
demand notice periods exceeding seven days, securities for
which there is no active secondary market, and repurchase
agreements with maturities or durations of more than 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. The Portfolio will have actual or constructive
possession of the security as collateral 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 right
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
13
<PAGE>
by the credit of the instrumentality (e.g., Fannie Mae
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 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. 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 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.
14
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses........................ 2
Financial Highlights............................. 3
The Trust........................................ 4
Investment Objective and Policies................ 4
General Investment Policies...................... 4
Investment Limitations........................... 5
The Manager...................................... 6
The Adviser...................................... 6
Distribution and Shareholder Servicing........... 7
Purchase and Redemption of Shares................ 8
Performance...................................... 9
Taxes............................................ 10
General Information.............................. 11
Description of Permitted Investments and Risk
Factors......................................... 13
</TABLE>
15
