<PAGE>
SEI DAILY INCOME TRUST
MAY 31, 1997
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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, 1997, has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing the Distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of Additional
Information is incorporated into this Prospectus by reference.
SEI 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, 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.
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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
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<TABLE>
<S> <C>
Management/Advisory Fees (after fee waiver) (1) .15%
12b-1 Fees none
Total Other Expenses .55%
Shareholder Servicing Fees .25%
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Total Operating Expenses (after fee waiver) (2) .70%
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</TABLE>
(1) THE MANAGER AND ADVISER HAVE WAIVED A PORTION OF THEIR FEE, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THESE WAIVERS. ABSENT SUCH WAIVERS,
MANAGEMENT/ADVISORY FEES WOULD BE .30% FOR THE PORTFOLIO.
(2) ABSENT THIS FEE WAIVER, TOTAL OPERATING EXPENSES FOR THE CLASS C SHARES OF
THE PORTFOLIO WOULD BE .85%.
EXAMPLE CLASS C
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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:
Government 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 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, CLASS G AND SWEEP CLASS 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."
2
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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 7, 1997, 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, 1997, and notes thereto, which are
incorporated by reference to the Trust's Statement of Additional Information
under the heading "Financial Information." Additional performance information is
set forth in the Trust's 1997 Annual Report to shareholders, which is available
upon request and without charge by calling 1-800-342-5734. As of January 31,
1997, there were no Class C shares outstanding of the Government Portfolio.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD*
<TABLE>
<CAPTION>
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)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------
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>
RATIO OF NET
EXPENSES INCOME TO NET ASSETS NET ASSETS
TO AVERAGE AVERAGE NET (EXCLUDING (EXCLUDING
NET ASSETS ASSETS WAIVERS) WAIVERS)
- ------------------
<S> <C> <C> <C> <C>
- ------------------
GOVERNMENT
PORTFOLIO
- ------------------
CLASS C
1996 0.70% 5.23% 0.84% 5.09%
1995(1) 0.70 4.32 0.89 4.13
</TABLE>
(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 FOR THE FISCAL YEARS ENDED 1995 AND 1996 REFLECTS THE
PERFORMANCE AND RATIOS OF CLASS C SHARES OF THE PORTFOLIO. ON MARCH 18,
1996, THE TRUST'S BOARD OF TRUSTEES APPROVED THE CONVERSION OF THE FORMER
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.
3
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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 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 Investments
Distribution Co., Oaks, Pennsylvania 19456, 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. 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.
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.
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. In addition, the Portfolio may
invest in U.S. Treasury STRIPS (as defined in the
"Description of Permitted Investments and Risk Factors").
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The Portfolio may purchase securities on a
when-issued basis.
For temporary defensive purposes, the Portfolio may
maintain 100% of its assets in cash.
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. 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
THE PORTFOLIO MAKES ADDITIONAL INVESTMENTS AND ANY
INTEREST PAID ON SUCH BORROWINGS WILL REDUCE THE INCOME
OF THE PORTFOLIO.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional fundamental 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"), 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 .75% of daily net assets of the Class C shares of the
Portfolio on an annualized basis. In addition, the Manager
has voluntarily agreed to waive a portion its fee in order
to limit the
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total operating expenses to not more than .70% of the daily
net assets of Class C shares of the Portfolio on an
annualized basis. The Manager reserves the right, in its
sole discretion, to terminate this voluntary waiver at any
time. For the fiscal year ended January 31, 1997, the
Portfolio paid management fees, after waivers, of .14%.
THE ADVISER
_______________________________________________________________________
Wellington Management Company, LLP (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 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, 1997, the Adviser had discretionary management
authority with respect to approximately $136.3 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 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, 1997, 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 Investments Distribution Co. (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 plans for each of its
classes, under which firms, including the Distributor, that
provide shareholder and administrative services may receive
6
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compensation therefor. The Class A, B, C, G and Sweep Class
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. 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 C
shareholder service plan, the Distributor is entitled to a
shareholder service fee at an annual rate of up to .25% of
the Portfolio's average daily net assets attributable to
Class C 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. In addition, Class C shares may pay
administrative services fees at a specified percentage 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 differing
services to the classes of the Portfolio, and thus receive
compensation with respect to different classes. These
financial institutions may also charge separate fees to
their customers.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation, to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolios'
shares.
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
7
<PAGE>
fund shares can not be purchased by Federal Reserve wire on
Federal holidays restricting wire transfers.
Shareholders who desire to purchase shares with cash
must place their orders with the Transfer Agent (or its
authorized agent) prior to the determination of net asset
value and in accordance with the procedures described below
for the order to be accepted on that Business Day. Cash
investments must be transmitted or delivered in federal
funds to the wire agent by the close of business on the
same day the order is placed. The Trust reserves the right
to reject a purchase order when the Distributor determines
that it is not in the best interest of the Trust or
shareholders to accept such purchase order.
The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust, which
is expected to remain constant at $1.00. The net asset
value per share of the Portfolio is determined by dividing
the total value of its investments and other assets, less
any liabilities, by the total number of outstanding shares
of the Portfolio. The Portfolio's investments will be
valued by the amortized cost method described in the
Statement of Additional Information. Net asset value per
share is determined daily as of 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 (or its authorized agent) prior to the
determination of net asset value and in accordance with the
procedures described below on any Business Day. The
redemption price is the net asset value per share of the
Portfolio next determined after receipt by the Transfer
Agent of the redemption order. Payment on redemptions will
be made as promptly as possible and, in any event, within
seven days after the redemption order is received.
8
<PAGE>
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 administrative services expenses charged to
Class B shares. Likewise, the performance of Class B shares
will normally be higher than that of Class C, Class G and
Sweep Class 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 and Sweep Class 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.
9
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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. In addition, state and local
tax consequences of an investment in the Portfolio may
differ from the federal income tax consequences described
below. Accordingly, shareholders are urged to consult their
tax advisers regarding specific questions as to federal,
state and local income taxes. Additional information
concerning taxes is set forth in the Statement of
Additional Information.
TAX STATUS
OF THE PORTFOLIO
The Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies ("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 prior to the end
of each calendar year 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 a Fund's 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,
regardless of how long shareholders have held their shares
and regardless of whether the distributions are received in
cash or in additional shares. 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 by a Portfolio and may be exempt, depending on the
state, when received by a shareholder from a Portfolio
provided certain state-specific 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
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<PAGE>
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.
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,
Intermediate-Duration Government Portfolio, GNMA Portfolio,
Corporate Daily Income Portfolio and Treasury Securities
Daily Income Portfolio (formerly, 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
11
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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 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 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 dividends that are declared on each Business Day as
a dividend for shareholders of record and are distributed
monthly in federal funds or in additional shares at the
discretion of the shareholder on the first Business Day of
each month. Dividends will be paid on the next Business Day
to shareholders who redeem all of their shares of a
Portfolio at any other time during the month. The dividends
on Class A shares are normally higher than those on Class B
shares of each Portfolio because of the additional
administrative services expenses charged to Class B shares.
The dividends on Class B shares are normally higher than
those on Class C, Class G and Sweep Class shares of each
Portfolio because of the additional distribution and/or
shareholder servicing expenses charged to Class C, Class G
and Sweep Class shares.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
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.
12
<PAGE>
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 active secondary market for such
security, and repurchase agreements with maturities or
durations 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 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., 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,
13
<PAGE>
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
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these securities
is fixed as of the purchase date and no interest accrues to
the Portfolio before settlement.
14
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 3
The Trust................................................................. 4
Investment Objective and Policies......................................... 4
General Investment Policies............................................... 4
Investment Limitations.................................................... 5
The Manager............................................................... 5
The Adviser............................................................... 6
Distribution and Shareholder Servicing.................................... 6
Purchase and Redemption of Shares......................................... 7
Performance............................................................... 9
Taxes..................................................................... 10
General Information....................................................... 11
Description of Permitted Investments and Risk Factors..................... 13
</TABLE>
15
<PAGE>
SEI DAILY INCOME TRUST
MAY 31, 1997
- --------------------------------------------------------------------------------
CORPORATE DAILY INCOME PORTFOLIO
TREASURY SECURITIES DAILY INCOME 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, 1997, has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing the Distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of Additional
Information is incorporated into this Prospectus by reference.
SEI 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 Intermediate-Duration
Government Portfolio and GNMA Portfolio; and Class A, Class B and Class C shares
of the Corporate Daily Income, Treasury Securities Daily Income (formerly,
Government Securities Daily Income Portfolio) and Short-Duration Government
Portfolios, fixed income portfolios of the Trust (each a "Portfolio" and,
together, the "Portfolios").
- --------------------------------------------------------------------------------
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 A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY
CORPORATE SECURITIES SHORT- INTERMEDIATE-
DAILY DAILY DURATION DURATION
INCOME INCOME GOVERNMENT GOVERNMENT GNMA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Management/Advisory Fees(AFTER FEE WAIVER) (1) .27% .31% .39% .42% .41%
12b-1 Fees none none none none none
Total Other Expenses .08% .04% .06% .08% .19%
Shareholder Servicing Fees (AFTER FEE WAIVER) (2) .00% .00% .00% .03% .13%
- ------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVERS) (3)(4) .35% .35% .45% .50% .60%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER AND ADVISER HAVE WAIVED A PORTION OF THEIR FEES, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THESE WAIVERS. ABSENT SUCH WAIVERS,
MANAGEMENT/ADVISORY FEES WOULD BE .45% FOR THE CORPORATE DAILY INCOME,
TREASURY SECURITIES DAILY INCOME, SHORT-DURATION GOVERNMENT AND
INTERMEDIATE-DURATION GOVERNMENT PORTFOLIOS AND .42% FOR THE GNMA PORTFOLIO.
(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 TREASURY SECURITIES DAILY INCOME PORTFOLIO
ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
(4) ABSENT THESE FEE WAIVERS, TOTAL OPERATING EXPENSES FOR CLASS A SHARES OF THE
PORTFOLIOS WOULD BE .78% FOR THE CORPORATE DAILY INCOME PORTFOLIO, .74% FOR
THE TREASURY SECURITIES DAILY INCOME PORTFOLIO, .76% FOR THE SHORT-DURATION
GOVERNMENT PORTFOLIO, .75% FOR THE INTERMEDIATE-DURATION GOVERNMENT
PORTFOLIO AND .73% FOR THE GNMA PORTFOLIO. FOR THE INTERMEDIATE-DURATION
GOVERNMENT AND GNMA PORTFOLIOS, TOTAL OPERATING EXPENSES HAVE BEEN RESTATED
TO REFLECT CURRENT EXPENSES.
EXAMPLE CLASS A
- --------------------------------------------------------------------------------
<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
Treasury Securities Daily Income Portfolio $ 4 $ 11 $ 20 $ 44
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
CORPORATE DAILY INCOME, TREASURY SECURITIES DAILY INCOME AND SHORT-DURATION
GOVERNMENT PORTFOLIOS ALSO OFFER CLASS B AND C SHARES, WHICH ARE SUBJECT TO THE
SAME EXPENSES, EXCEPT THAT EACH HAS DIFFERENT SHAREHOLDER AND/OR ADMINISTRATIVE
SERVICING COSTS. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE MANAGER," "THE
ADVISER" AND "DISTRIBUTION AND SHAREHOLDER SERVICING."
2
<PAGE>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) CLASS B
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY SHORT-
CORPORATE SECURITIES DURATION
DAILY INCOME DAILY INCOME GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ -----------
<S> <C> <C> <C>
Management/Advisory Fees (AFTER FEE WAIVER) (1) .27% .31% .39%
12b-1 Fees none none none
Total Other Expenses .38% .34% .36%
Shareholder Servicing Fees .25% .25% .25%
- ------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVER) (2)(3) .65% .65% .75%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER AND ADVISER HAVE WAIVED A PORTION OF THEIR FEES, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THESE WAIVERS. ABSENT SUCH WAIVERS,
MANAGEMENT/ADVISORY FEES WOULD BE .45% FOR THE CORPORATE DAILY INCOME,
TREASURY SECURITIES DAILY INCOME, AND SHORT-DURATION GOVERNMENT PORTFOLIOS.
(2) TOTAL OPERATING EXPENSES FOR THE TREASURY SECURITIES DAILY INCOME PORTFOLIO
ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
(3) ABSENT THE FEE WAIVER, TOTAL OPERATING EXPENSES FOR CLASS B SHARES OF THE
PORTFOLIOS WOULD BE .83% FOR THE CORPORATE DAILY INCOME PORTFOLIO, .79% FOR
THE TREASURY SECURITIES DAILY INCOME PORTFOLIO AND .81% FOR THE
SHORT-DURATION GOVERNMENT PORTFOLIO.
EXAMPLE CLASS B
- --------------------------------------------------------------------------------
<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
Treasury Securities Daily Income Portfolio $ 7 $ 21 $ 36 $ 81
Short-Duration Government 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 B SHARES OF THE PORTFOLIOS. A PERSON WHO PURCHASES SHARES THROUGH A
FINANCIAL INSTITUTION MAY BE CHARGED SEPARATE FEES BY THAT INSTITUTION. THE
CORPORATE DAILY INCOME, TREASURY SECURITIES DAILY INCOME, AND SHORT-DURATION
GOVERNMENT PORTFOLIOS ALSO OFFER CLASS A SHARES, AND THE CORPORATE DAILY INCOME,
TREASURY SECURITIES DAILY INCOME AND SHORT-DURATION GOVERNMENT PORTFOLIOS ALSO
OFFER CLASS C SHARES, WHICH ARE SUBJECT TO THE SAME EXPENSES, EXCEPT THAT EACH
HAS DIFFERENT SHAREHOLDER AND/OR ADMINISTRATIVE SERVICING COSTS. ADDITIONAL
INFORMATION MAY BE FOUND UNDER "THE MANAGER," "THE ADVISER" AND "DISTRIBUTION
AND SHAREHOLDER SERVICING."
3
<PAGE>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) CLASS C
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY
CORPORATE SECURITIES SHORT-DURATION
DAILY INCOME DAILY INCOME GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ --------------
<S> <C> <C> <C>
Management/Advisory Fees (AFTER FEE WAIVER) (1) .27% .31% .39%
12b-1 Fees none none none
Total Other Expenses .58% .54% .56%
Shareholder Servicing Fees .25% .25% .25%
- ------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVER) (2)(3) .85% .85% .95%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER AND ADVISER HAVE WAIVED A PORTION OF THEIR FEES, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THESE WAIVERS. ABSENT SUCH WAIVERS,
MANAGEMENT/ADVISORY FEES WOULD BE .45% FOR THE CORPORATE DAILY INCOME,
TREASURY SECURITIES DAILY INCOME, AND SHORT-DURATION GOVERNMENT PORTFOLIOS.
(2) TOTAL OPERATING EXPENSES FOR THE TREASURY 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 1.03% FOR THE CORPORATE DAILY INCOME PORTFOLIO, .99% FOR
THE TREASURY SECURITIES DAILY INCOME PORTFOLIO AND 1.01% FOR THE
SHORT-DURATION GOVERNMENT PORTFOLIO.
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 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
Treasury 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
CORPORATE DAILY INCOME, TREASURY 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 AND/OR
ADMINISTRATIVE SERVICING COSTS. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE
MANAGER," "THE ADVISER" AND "DISTRIBUTION AND SHAREHOLDER SERVICING."
4
<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 7, 1997, 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, 1997, and notes thereto, which are
incorporated by reference to the Trust's Statement of Additional Information
under the heading "Financial Information." Additional performance information is
set forth in the Trust's 1997 Annual Report to shareholders, which is available
upon request and without charge by calling 1-800-342-5734. As of January 31,
1997, there were no shares outstanding of the Treasury Securities Daily Income
Portfolio, no Class B or C shares outstanding of the Corporate Daily Income,
Intermediate-Duration Government and GNMA Portfolios and no Class C shares
outstanding of the Short-Duration Government Portfolio.
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL
OF PERIOD INCOME ON SECURITIES INCOME CAPITAL GAINS OF PERIOD RETURN
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------
CORPORATE DAILY INCOME PORTFOLIO
- ---------------------------------
CLASS A
1997 $ 2.00 $0.11 $(0.01) $(0.11) $-- $ 1.99 5.21%
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
- ----------------------------------
SHORT-DURATION GOVERNMENT
PORTFOLIO
- ----------------------------------
CLASS A
1997 $ 10.09 $0.57 $(0.12) $(0.59) $-- $ 9.95 4.62%
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(2) 10.00 0.76 (0.19) (0.76) -- 9.81 6.09
CLASS B
1997 10.07 0.55 (0.12) (0.56) -- 9.94 4.40
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(3) 9.75 0.17 0.07 (0.17) -- 9.82 (0.25)
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME TO
RATIO OF INVESTMENT TO AVERAGE AVERAGE NET
NET ASSETS EXPENSES INCOME NET ASSETS 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
1997 $ 55,783 0.36% 5.49% 0.73% 5.12% 141%
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
- ----------------------------------
SHORT-DURATION GOVERNMENT
PORTFOLIO
- ----------------------------------
CLASS A
1997 $ 73,545 0.45% 5.72% 0.70% 5.47% 145%
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(2) 27,279 0.32 8.17 0.78 7.71 85
CLASS B
1997 13 0.75 5.49 0.82 5.42 145
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(3) 150 0.75 7.25 0.93 7.07 17
</TABLE>
5
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL
OF PERIOD INCOME ON SECURITIES INCOME CAPITAL GAINS OF PERIOD RETURN
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------
INTERMEDIATE-DURATION GOVERNMENT
PORTFOLIO
- ----------------------------------
CLASS A
1997 $ 10.06 $0.55 $(0.28) $(0.55) $-- $ 9.78 2.81%
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(4) 10.00 0.77 (0.29) (0.77) -- 9.71 5.37
- ----------------
GNMA PORTFOLIO
- ----------------
CLASS A
1997 $ 9.84 $0.65 $(0.21) $(0.65) $-- $ 9.63 4.70%
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(5) 10.00 0.77 (0.53) (0.77) -- 9.47 3.25
CLASS B
1997(6) 9.84 0.28 (0.46) (0.28) -- 9.38 (1.88)+
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>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME TO
RATIO OF INVESTMENT TO AVERAGE AVERAGE NET
NET ASSETS EXPENSES INCOME NET ASSETS 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
1997 $ 133,675 0.49% 5.59% 0.69% 5.39% 94%
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(4) 77,542 0.28 8.40 1.67 7.01 56
- ----------------
GNMA PORTFOLIO
- ----------------
CLASS A
1997 $ 101,887 0.57% 6.76% 0.68% 6.65% 12%
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(5) 4,968 0.03 9.49 0.74 8.78 48
CLASS B
1997(6) -- 0.78 6.54 0.80 6.52 7
1996 15 0.79 6.71 0.81 6.69 20
1995(7) 14 0.79 6.80 0.82 6.77 85
</TABLE>
+ 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 GOVERNMENT CLASS A SHARES WERE OFFERED BEGINNING FEBRUARY
17, 1987. ALL RATIOS INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE
BEEN ANNUALIZED.
(3) SHORT-DURATION GOVERNMENT CLASS B SHARES WERE OFFERED BEGINNING NOVEMBER 5,
1990. ALL RATIOS INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN
ANNUALIZED.
(4) INTERMEDIATE-DURATION GOVERNMENT CLASS A SHARES WERE OFFERED BEGINNING
FEBRUARY 17, 1987. ALL RATIOS INCLUDING TOTAL RETURN FOR THE PERIOD
INDICATED HAVE BEEN ANNUALIZED.
(5) GNMA CLASS A SHARES WERE OFFERED BEGINNING MARCH 20, 1987. ALL RATIOS
INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(6) GNMA CLASS B SHARES WERE FULLY LIQUIDATED JULY 10, 1996. ALL RATIOS FOR
THAT PERIOD 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.
6
<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 Class A shares of the
Intermediate-Duration Government Portfolio and the GNMA Portfolio, and Class A,
Class B and Class C shares of the Corporate Daily Income. Treasury Securities
Daily Income and Short-Duration Government Portfolios, (each a "Portfolio" and,
together, the "Portfolios"). Each Portfolio has separate classes of shares which
provide for variations in distribution, shareholder servicing and transfer
agency costs, sales charges, voting rights and dividends. Additional information
pertaining to the Trust may be obtained by writing to SEI Investments
Distribution Co., Oaks, Pennsylvania 19456, or by calling 1-800-342-5734.
INVESTMENT 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. 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 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 or variable rate
securities that reset at least annually.
7
<PAGE>
TREASURY SECURITIES DAILY INCOME PORTFOLIO
The Treasury Securities Daily Income Portfolio (formerly,
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; and
(ii) 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.
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 of governmental issuers;
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 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.
8
<PAGE>
GENERAL INVESTMENT
POLICIES
___________________________________________________________________________
Each Portfolio invests in 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.
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 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
in 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 may hold a
portion of its assets in cash or cash equivalents.
The Portfolio turnover rates for the Corporate Daily
Income, Short-Duration Government, Intermediate-Duration
Government and GNMA Portfolios for the fiscal year ended
January 31, 1997 were 141%, 145%, 94% and 12%,
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.
9
<PAGE>
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
the Portfolio makes additional investments 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 Fund Management (the "Manager" or the "Transfer
Agent"), a wholly-owned subsidiary of SEI Investments
Company ("SEI"), 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.
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
10
<PAGE>
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, 1997, the
Corporate Daily Income, Short-Duration Government,
Intermediate-Duration Government, and GNMA Portfolios paid
management fees, after waivers, of .22%, .31%, .33% and
.31%, respectively, of their average daily net assets. The
Treasury Securities Daily Income Portfolio had not
commenced operations as of January 31, 1997.
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 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 Treasury
Securities Daily Income Portfolio upon the commencement of
its operations.
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, 1997, the Adviser had discretionary
management authority with respect to approximately $136.3
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 limited
liability partnership, of which the following
11
<PAGE>
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 Treasury Securities Daily
Income Portfolios and (ii) Short-Duration Government,
Intermediate-Duration Government and GNMA Portfolios. 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, 1997, the
Corporate Daily Income, Short-Duration Government,
Intermediate-Duration Government and GNMA Portfolios paid
WMC advisory fees, after fee waivers, of .05%, .08%, .09%
and .10%, respectively. The Treasury Securities Daily
Income Portfolio had not commenced operations as of January
31, 1997.
DISTRIBUTION AND
SHAREHOLDER SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (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 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, the Distributor is entitled
to receive a fee at an annual rate of up to .25% of the
average daily net assets of such Portfolio attributable to
Class A shares, in return for provision of a broad range of
shareholder and administrative services. Under the Class B
and Class C shareholder service plans, the Distributor is
entitled to receive a shareholder service fee 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
12
<PAGE>
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.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation, to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolios'
shares.
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. 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 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 (or its
authorized 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.
13
<PAGE>
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 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. Information about the market value of
each portfolio security may be obtained by SEI Fund
Management from an independent pricing service. The pricing
service may use a matrix system to determine valuations of
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 (or its authorized 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
administrative services expenses charged Class B shares.
The performance of Class C
14
<PAGE>
shares of a Portfolio may be lower than the performance of
that Portfolio's Class B shares, if any, because of the
additional administrative services 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. In addition, state and
local tax consequences of an investment in a Portfolio may
differ from the federal income tax consequences described
below. Accordingly, shareholders are urged to consult their
tax
15
<PAGE>
advisers regarding specific questions as to federal, state
and local income taxes. Additional information concerning
taxes is set forth in the Statement of Additional
information.
TAX STATUS
OF THE 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, regardless of how long shareholders have held their
shares and regardless of whether the distributions are
received in cash or in additional shares. The Portfolios
provide annual reports to shareholders of the federal
income tax status of all distributions.
Each Portfolio intends to make sufficient
distributions prior to the end of each calendar year to
avoid liability for the federal excise tax applicable to
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
state-specific 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 when the Adviser would not have chosen to
sell such securities and which may result in a taxable gain
or loss.
16
<PAGE>
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.
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 each Portfolio is distributed in the
form of dividends that are declared on each Business Day as
a dividend for shareholders of record and are distributed
monthly 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 administrative services expenses
charged to
17
<PAGE>
Class B shares. Likewise, the dividends on Class B shares
are normally higher than those on Class C shares, if any,
of a Portfolio because of the additional administrative
services 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
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 municipalities,
corporations and other entities. Maturities on these issues
vary from one to 270 days.
DOLLAR ROLL TRANSACTIONS
Dollar rolls are transactions in which the Portfolios sell
securities 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
(plus any interest earned on the cash proceeds of the sale)
is netted against the interest
18
<PAGE>
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.
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.
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 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.
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.
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
19
<PAGE>
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.
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 active secondary market, and repurchase
agreements with maturities or durations 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, Fannie Mae and the
Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie
Mae and FHLMC obligations are not backed by the full faith
and credit of the U.S. Government as GNMA certificates are,
but Fannie Mae and FHLMC securities are supported by the
instrumentalities' right to borrow from the U.S. Treasury.
GNMA, Fannie Mae and FHLMC each guarantees timely
distributions of interest to certificate holders. GNMA and
Fannie Mae 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
20
<PAGE>
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.
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. 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 Fannie Mae or
FHLMC represent beneficial ownership interests in a REMIC
trust consisting principally of mortgage loans or Fannie
Mae, FHLMC or GNMA-guaranteed mortgage pass-through
certificates.
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. 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.
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 within a number of days from the date of
purchase. The Portfolio will
21
<PAGE>
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 maturities of more
than seven days are considered to be illiquid.
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.,
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
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."
22
<PAGE>
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 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.
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.
23
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 5
The Trust................................................................. 7
Investment Objectives and Policies........................................ 7
General Investment Policies............................................... 9
Investment Limitations.................................................... 10
The Manager............................................................... 10
The Adviser............................................................... 11
Distribution and Shareholder Servicing.................................... 12
Purchase and Redemption of Shares......................................... 13
Performance............................................................... 14
Taxes..................................................................... 15
General Information....................................................... 17
Description of Permitted Investments and Risk Factors..................... 18
</TABLE>
24
<PAGE>
SEI DAILY INCOME TRUST
MAY 31, 1997
- --------------------------------------------------------------------------------
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, 1997, has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing the Distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of Additional
Information is incorporated into this Prospectus by reference.
SEI 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 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 G
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Management/Advisory Fees (after fee waiver) (1) .15%
12b-1 Fees (after fee waiver) (2) .40%
Total Other Expenses .30%
Shareholder Servicing Fees .25%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (3) .85%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER AND ADVISER HAVE WAIVED A PORTION OF THEIR FEES, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THESE WAIVERS. ABSENT SUCH WAIVERS,
MANAGEMENT/ADVISORY FEES WOULD BE .30% 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 FEE PAYABLE BY CLASS G SHARES OF THE
PORTFOLIOS IS .50%.
(3) ABSENT THESE FEE WAIVERS, TOTAL OPERATING EXPENSES FOR THE CLASS G SHARES OF
THE PORTFOLIO WOULD BE 1.10%. TOTAL OPERATING EXPENSES HAVE BEEN RESTATED TO
REFLECT CURRENT EXPENSES.
EXAMPLE CLASS G
- --------------------------------------------------------------------------------
<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, CLASS C SHARES, AND SWEEP CLASS 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 CHARGE OTHERWISE PERMITTED BY THE NASD
RULES.
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 7, 1997, 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, 1997, and notes thereto, which are
incorporated by reference to the Trust's Statement of Additional Information
under the heading "Financial Information." Additional performance information is
set forth in the Trust's 1997 Annual Report to shareholders, which is available
upon request and without charge by calling 1-800-342-5734.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD*
<TABLE>
<CAPTION>
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END
OF PERIOD INCOME SECURITIES INCOME CAPITAL GAINS OF PERIOD
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------
GOVERNMENT PORTFOLIO
- ----------------------
CLASS G
1997 $ 1.00 $0.05 $ -- $(0.05) $ -- $ 1.00
1996 1.00 0.05 -- (0.05) -- 1.00
1995(1) 1.00 0.03 -- (0.03) -- 1.00
<CAPTION>
RATIO OF NET
NET ASSETS EXPENSES INCOME TO NET ASSETS NET ASSETS
TOTAL END OF TO AVERAGE AVERAGE NET (EXCLUDING (EXCLUDING
RETURN PERIOD (000) NET ASSETS ASSETS WAIVERS) WAIVERS)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------
GOVERNMENT PORTFOLIO
- ----------------------
CLASS G
1997 4.69% $ 617,186 0.82% 4.59% 1.03% 4.38%
1996 5.39 542,936 0.70 5.23 0.84 5.09
1995(1) 3.41+ 310,835 0.70 4.32 0.89 4.13
</TABLE>
(1) THE CLASS G SHARES (FORMERLY 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 FOR THE FISCAL YEARS ENDED 1995 AND 1996 REFLECTS THE
PERFORMANCE AND RATIOS OF CLASS C SHARES OF THE PORTFOLIO. ON MARCH 18,
1996, THE TRUST'S BOARD OF TRUSTEES 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.
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 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 Investments
Distribution Co., Oaks, Pennsylvania 19456, 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. 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.
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.
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. In addition, the Portfolio may
invest in U.S. Treasury STRIPS (as defined in the
"Description of Permitted Investments and Risk Factors").
4
<PAGE>
The Portfolio may purchase securities on a
when-issued basis.
For temporary defensive purposes, the Portfolio may
maintain 100% of its assets in cash.
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. 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
THE PORTFOLIO MAKES ADDITIONAL INVESTMENTS AND ANY
INTEREST PAID ON SUCH BORROWINGS WILL REDUCE THE INCOME
OF THE PORTFOLIO.
The foregoing percentage limitations will apply at the time
of the purchase of a security. Additional fundamental 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"), 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 a portion of its fee in
order to limit
5
<PAGE>
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, 1997, the
Portfolio paid management fees, after waivers, of .14%.
THE ADVISER
_______________________________________________________________________
Wellington Management Company, LLP (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 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, 1997, the Adviser had discretionary management
authority with respect to approximately $136.3 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 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, 1997, 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 Investments Distribution Co. (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
6
<PAGE>
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, G and Sweep Class
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. 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 Distributor is entitled to a
shareholder service fee 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.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation, to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolios'
shares.
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.
7
<PAGE>
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.
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 and in accordance with the procedures described below
for the order to be accepted on that Business Day. Cash
investments must be transmitted or delivered in federal
funds to the wire agent by the close of business on the
same day the order is placed. The Trust reserves the right
to reject a purchase order when the Distributor determines
that it is not in the best interest of the Trust or
shareholders to accept such purchase order.
The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust, which
is expected to remain constant at $1.00. The net asset
value per share of the Portfolio is determined by dividing
the total value of its investments and other assets, less
any liabilities, by the total number of outstanding shares
of the Portfolio. The Portfolio's investments will be
valued by the amortized cost method described in the
Statement of Additional Information. Net asset value per
share is determined daily as of 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 (or its authorized agent) prior to the
determination of net asset value and in accordance with the
procedures described below on any Business Day. The
redemption price is the net asset value per share of the
Portfolio next determined after receipt by the Transfer
Agent of the redemption order. Payment on
8
<PAGE>
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 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 administrative services expenses charged to
Class B shares. Likewise, the performance of Class B shares
will normally be higher than that of Class C, Class G and
Sweep Class 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 and Sweep Class 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.
9
<PAGE>
TAXES
______________________________________________________________________________
The following summary of federal income tax consequences is
based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action.
No attempt has been made to present a detailed explanation
of the federal, state or local income tax treatment of the
Portfolio or its shareholders. In addition, state and local
tax consequences of an investment in the Portfolio may
differ from the federal income tax consequences described
below. Accordingly, shareholders are urged to consult their
tax advisers regarding specific questions as to federal,
state and local income taxes. Additional information
concerning taxes is set forth in the Statement of
Additional Information.
TAX STATUS
OF THE PORTFOLIO
The Portfolio is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. The Portfolio intends to continue to
qualify for the special tax treatment afforded regulated
investment companies ("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 prior to the end
of each calendar year 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 a Fund's 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,
regardless of how long shareholders have held their shares
and regardless of whether the distributions are received in
cash or in additional shares. 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 by a Portfolio and may be exempt, depending on the
state, when received by a shareholder from a Portfolio
provided certain state-specific 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.
10
<PAGE>
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.
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,
Intermediate-Duration Government Portfolio, GNMA Portfolio,
Corporate Daily Income Portfolio and Treasury Securities
Daily Income Portfolio (formerly, 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.
11
<PAGE>
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 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 dividends that are declared on each Business Day as
a dividend for shareholders of record and are distributed
monthly in federal funds or in additional shares at the
discretion of the shareholder on the first Business Day of
each month. Dividends will be paid on the next Business Day
to shareholders who redeem all of their shares of a
Portfolio at any other time during the month. The dividends
on Class A shares are normally higher than those on Class B
shares of the Portfolio because of the additional
administrative services expenses charged to Class B shares.
The dividends on Class B shares are normally higher than
those on Class C, Class G and Sweep Class shares of the
Portfolio because of the additional administrative services
expenses charged to Class C shares and the additional
distribution and/or shareholder servicing expenses charged
to Class C, Class G and Sweep Class shares.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
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 active secondary market for such
security, and repurchase agreements with maturities or
durations 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
12
<PAGE>
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 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., 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."
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
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.
13
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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............................................................... 5
The Adviser............................................................... 6
Distribution and Shareholder Servicing.................................... 6
Purchase and Redemption of Shares......................................... 7
Performance............................................................... 9
Taxes..................................................................... 10
General Information....................................................... 11
Description of Permitted Investments and Risk Factors..................... 12
</TABLE>
14
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SEI DAILY INCOME TRUST
MAY 31, 1997
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
PRIME OBLIGATION PORTFOLIO
GOVERNMENT PORTFOLIO
GOVERNMENT II PORTFOLIO
TREASURY PORTFOLIO
TREASURY II 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, 1997, has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing the Distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of Additional
Information is incorporated into this Prospectus by reference.
SEI 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 Sweep
Class shares of each of the six 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.
- --------------------------------------------------------------------------------
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) SWEEP CLASS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY PRIME TREASURY
MARKET OBLIGATION GOVERNMENT GOVERNMENT II TREASURY II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- ----------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Management/Advisory Fees (AFTER FEE WAIVER) (1) .09% .16% .15% .16% .08% .20%
12b-1 Fees .50% .50% .50% .50% .50% .50%
Total Other Expenses .36% .29% .30% .29% .37% .30%
Shareholder Servicing Fees .25% .25% .25% .25% .25% .25%
- --------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVER) (2) .95% .95% .95% .95% .95% 1.00%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER AND ADVISER HAVE WAIVED A PORTION OF THEIR FEES, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THESE WAIVERS. ABSENT SUCH WAIVERS,
MANAGEMENT/ADVISORY FEES WOULD BE .40% FOR THE MONEY MARKET PORTFOLIO, .30%
FOR THE GOVERNMENT, TREASURY AND TREASURY II PORTFOLIOS, .25% FOR THE PRIME
OBLIGATION AND GOVERNMENT II PORTFOLIOS.
(2) ABSENT THE FEE WAIVER, TOTAL OPERATING EXPENSES FOR THE SWEEP CLASS SHARES
OF THE PORTFOLIOS WOULD BE 1.26% FOR THE MONEY MARKET PORTFOLIO, 1.04% FOR
THE PRIME OBLIGATION PORTFOLIO, 1.10% FOR THE GOVERNMENT PORTFOLIO, 1.04%
FOR THE GOVERNMENT II PORTFOLIO, 1.17% FOR THE TREASURY PORTFOLIO AND 1.10%
FOR THE TREASURY II PORTFOLIO.
EXAMPLE SWEEP CLASS
- --------------------------------------------------------------------------------
<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 $ 10 $ 30 $ 53 $ 117
Prime Obligation Portfolio $ 10 $ 30 $ 53 $ 117
Government Portfolio $ 10 $ 30 $ 53 $ 117
Government II Portfolio $ 10 $ 30 $ 53 $ 117
Treasury Portfolio $ 10 $ 30 $ 53 $ 117
Treasury II Portfolio $ 10 $ 32 $ 55 $ 122
- -----------------------------------------------------------------------------------------------------------------------------------
</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
SWEEP CLASS 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, CLASS B SHARES AND CLASS C SHARES,
AND THE GOVERNMENT PORTFOLIO ALSO OFFERS CLASS G SHARES, WHICH ARE SUBJECT TO
THE SAME EXPENSES, EXCEPT THAT CLASS A, 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." LONG-TERM SHAREHOLDERS MAY EVENTUALLY PAY MORE THAN
THE ECONOMIC EQUIVALENT OF THE MAXIMUM FRONT-END SALES CHARGE OTHERWISE
PERMITTED BY THE NASD RULES.
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 7, 1997, 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, 1997, and notes thereto, which are
incorporated by reference to the Trust's Statement of Additional Information
under the heading "Financial Information." Additional performance information is
set forth in the Trust's 1997 Annual Report to shareholders, which is available
upon request and without charge by calling 1-800-342-5734. As of January 31,
1997, there were no Sweep Class shares of the Portfolios outstanding. The
information set forth below relates to Class A shares of the Portfolios. Sweep
Class shares of the Portfolios are subject to higher expenses, and, as a result,
will have different performance than that of the Class A shares of the
Portfolios.
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED
OF PERIOD INCOME SECURITIES INCOME CAPITAL GAINS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------
MONEY MARKET PORTFOLIO
- ------------------------
CLASS A
1997 $ 1.00 $0.05 $ -- $(0.05) $ --
1996 1.00 0.06 -- (0.06) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993 1.00 0.04 -- (0.04) --
1992 1.00 0.06 -- (0.06) --
1991 1.00 0.08 -- (0.08) --
1990 1.00 0.09 -- (0.09) --
1989 1.00 0.08 -- (0.08) --
1988 1.00 0.07 -- (0.07) --
1987 1.00 0.06 -- (0.06) --
- --------------------------
PRIME OBLIGATION PORTFOLIO
- --------------------------
CLASS A
1997 $ 1.00 $0.05 $ -- $(0.05) $ --
1996 1.00 0.06 -- (0.06) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993 1.00 0.04 -- (0.04) --
1992 1.00 0.06 -- (0.06) --
1991 1.00 0.08 -- (0.08) --
1990 1.00 0.09 -- (0.09) --
1989 1.00 0.08 -- (0.08) --
1988(1) 1.00 0.01 -- (0.01) --
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
RATIO OF
NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES INCOME TO
RATIO OF INVESTMENT TO AVERAGE AVERAGE
NET ASSET NET ASSETS EXPENSES INCOME TO NET ASSETS NET ASSETS
VALUE END TOTAL END OF TO AVERAGE AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD RETURN PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------
MONEY MARKET PORTFOLIO
- ------------------------
CLASS A
1997 $ 1.00 5.44% $ 369,052 0.16% 5.33% 0.63% 4.86%
1996 1.00 5.98 95,891 0.20 5.88 0.45 5.63
1995 1.00 4.55 213,988 0.21 4.49 0.45 4.25
1994 1.00 2.98 203,803 0.35 2.95 0.44 2.86
1993 1.00 3.60 264,450 0.35 3.56 0.39 3.52
1992 1.00 5.76 312,151 0.35 5.84 0.39 5.80
1991 1.00 8.18 815,847 0.33 7.88 0.38 7.83
1990 1.00 9.24 589,683 0.35 8.90 0.40 8.85
1989 1.00 7.82 507,821 0.35 7.52 0.39 7.48
1988 1.00 6.90 606,117 0.35 6.76 0.42 6.69
1987 1.00 6.67 295,121 0.35 6.39 0.41 6.33
- --------------------------
PRIME OBLIGATION PORTFOLIO
- --------------------------
CLASS A
1997 $ 1.00 5.38% $2,626,360 0.20% 5.26% 0.45% 5.01%
1996 1.00 5.96 2,441,662 0.20 5.82 0.29 5.73
1995 1.00 4.46 2,778,326 0.20 4.41 0.30 4.31
1994 1.00 3.10 2,541,126 0.20 3.07 0.28 2.98
1993 1.00 3.72 2,564,340 0.20 3.62 0.30 3.52
1992 1.00 5.97 1,661,619 0.20 5.73 0.29 5.64
1991 1.00 8.34 825,081 0.20 8.03 0.30 7.93
1990 1.00 9.36 532,137 0.20 8.86 0.33 8.73
1989 1.00 8.58 237,273 0.20 7.68 0.34 7.54
1988(1) 1.00 7.48 139,944 0.13 7.22 0.58 6.77
</TABLE>
3
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED
OF PERIOD INCOME SECURITIES INCOME CAPITAL GAINS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------
GOVERNMENT PORTFOLIO
- ----------------------
CLASS A
1997 $ 1.00 $0.05 $ -- $(0.05) $ --
1996(2) 1.00 0.01 -- (0.01) --
1994(3) 1.00 0.01 -- (0.01) --
1993(4) 1.00 0.03 -- (0.03) --
- ------------------------
GOVERNMENT II PORTFOLIO
- ------------------------
CLASS A
1997 $ 1.00 $0.05 $ -- $(0.05) $ --
1996 1.00 0.06 -- (0.06) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993 1.00 0.04 -- (0.04) --
1992 1.00 0.06 -- (0.06) --
1991 1.00 0.08 -- (0.08) --
1990 1.00 0.09 -- (0.09) --
1989 1.00 0.07 -- (0.07) --
1988 1.00 0.06 -- (0.06) --
1987 1.00 0.06 -- (0.06) --
- ------------------
TREASURY PORTFOLIO
- ------------------
CLASS A
1997 $ 1.00 $0.05 $ -- $(0.05) $ --
1996 1.00 0.06 -- (0.06) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993(5) 1.00 0.01 -- (0.01) --
- --------------------
TREASURY II PORTFOLIO
- --------------------
CLASS A
1997 $ 1.00 $0.05 $ -- $(0.05) $ --
1996 1.00 0.05 -- (0.05) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993 1.00 0.03 -- (0.03) --
1992 1.00 0.06 -- (0.06) --
1991 1.00 0.07 -- (0.07) --
1990(6) 1.00 0.08 -- (0.08) --
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
RATIO OF
NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES INCOME TO
RATIO OF INVESTMENT TO AVERAGE AVERAGE
NET ASSET NET ASSETS EXPENSES INCOME TO NET ASSETS NET ASSETS
VALUE END TOTAL END OF TO AVERAGE AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD RETURN PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------
GOVERNMENT PORTFOLIO
- ----------------------
CLASS A
1997 $ 1.00 5.33% $ 116,373 0.20% 5.22% 0.55% 4.87%
1996(2) 1.00 1.48+ 48,762 0.20 5.55 0.33 5.42
1994(3) 1.00 3.22 0 0.20 3.04 0.37 2.87
1993(4) 1.00 3.19 20,022 0.20 3.41 0.38 3.23
- ------------------------
GOVERNMENT II PORTFOLIO
- ------------------------
CLASS A
1997 $ 1.00 5.29% $ 762,015 0.20% 5.17% 0.45% 4.92%
1996 1.00 5.83 810,365 0.20 5.69 0.29 5.60
1995 1.00 4.39 786,405 0.20 4.33 0.30 4.23
1994 1.00 3.02 738,040 0.20 2.98 0.29 2.89
1993 1.00 3.57 664,540 0.20 3.48 0.29 3.39
1992 1.00 5.73 534,303 0.20 5.56 0.28 5.48
1991 1.00 8.01 500,526 0.20 7.66 0.31 7.55
1990 1.00 8.90 257,523 0.20 8.49 0.32 8.37
1989 1.00 7.53 155,987 0.20 7.22 0.36 7.06
1988 1.00 6.55 158,361 0.20 6.35 0.34 6.21
1987 1.00 6.55 143,736 0.20 6.26 0.35 6.11
- ------------------
TREASURY PORTFOLIO
- ------------------
CLASS A
1997 $ 1.00 5.32% $ 67,924 0.20% 5.19% 0.60% 4.79%
1996 1.00 5.89 54,820 0.20 5.72 0.36 5.56
1995 1.00 4.29 39,129 0.20 4.17 0.34 4.03
1994 1.00 3.00 46,296 0.20 2.96 0.33 2.82
1993(5) 1.00 2.91 44,624 0.20 2.89 0.42 2.67
- --------------------
TREASURY II PORTFOLIO
- --------------------
CLASS A
1997 $ 1.00 5.07% $ 780,718 0.25% 4.96% 0.52% 4.69%
1996 1.00 5.58 418,250 0.25 5.44 0.34 5.35
1995 1.00 4.17 397,682 0.25 4.11 0.35 4.01
1994 1.00 2.88 364,334 0.25 2.84 0.34 2.76
1993 1.00 3.46 352,435 0.25 3.40 0.34 3.31
1992 1.00 5.48 282,535 0.25 5.43 0.31 5.37
1991 1.00 7.76 490,705 0.25 7.11 0.41 6.95
1990(6) 1.00 7.90 72,777 0.25 7.66 0.69 7.22
</TABLE>
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(1) PRIME OBLIGATION CLASS A SHARES WERE OFFERED BEGINNING DECEMBER 22, 1987.
ALL RATIOS INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN
ANNUALIZED.
(2) GOVERNMENT CLASS A SHARES WERE REOFFERED BEGINNING OCTOBER 27, 1995. ALL
RATIOS EXCEPT TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(3) GOVERNMENT CLASS A SHARES WERE FULLY LIQUIDATED JUNE 2, 1993. ALL RATIOS
INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(4) GOVERNMENT CLASS A SHARES WERE OFFERED BEGINNING MARCH 8, 1992. ALL RATIOS
INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(5) TREASURY CLASS A SHARES WERE OFFERED BEGINNING SEPTEMBER 30, 1992. ALL
RATIOS INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(6) TREASURY II CLASS A SHARES WERE OFFERED BEGINNING JULY 28, 1989. ALL RATIOS
INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
4
<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
Money Market, Prime Obligation, Government, Government II, Treasury and Treasury
II Portfolios (each a "Portfolio," and, together, the "Portfolios"). Each
Portfolio has 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, Class C and Sweep
Class shares. The Government Portfolio also offers Class G shares. Additional
information pertaining to the Trust may be obtained by writing SEI Investments
Distribution Co., Oaks, Pennsylvania 19456, 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 at 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.
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
5
<PAGE>
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.
There can be no assurance that the Portfolios will
achieve their respective investment objectives.
6
<PAGE>
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.
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.
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.
For temporary defensive purposes, the Portfolios may
maintain 100% of their assets in cash.
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.
7
<PAGE>
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
the Portfolio makes additional investments 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 Fund Management (the "Manager" or the "Transfer
Agent"), a wholly-owned subsidiary of SEI Investments
Company ("SEI"), 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, Class C, Class G and Sweep Class shares 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 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% and Treasury II
Portfolio--.24%. The Manager has agreed to waive up to all
of its fee and, if necessary, pay other operating expenses
in order to limit the total operating expenses of the Sweep
Class shares of the Portfolio. The Manager reserves the
right, in its sole discretion, to
8
<PAGE>
terminate these voluntary waivers at any time. For the
fiscal year ended January 31, 1997, the Money Market, Prime
Obligation, Government, Government II, Treasury and
Treasury II Portfolios paid management fees, after waivers,
of .08%, .15%, .14%, .15%, .07% and .19%, 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, 1997, the Adviser had discretionary management
authority with respect to approximately $136.3 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 Portfolios on the basis of their
relative net assets. For the fiscal year ended January 31,
1997, 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
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (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 its Sweep Class shares
(the "Sweep Class Plan") pursuant to Rule 12b-1 under the
9
<PAGE>
1940 Act. The Sweep Class Plan provides for payments to the
Distributor at an annual rate of .50% of the Portfolio's
average daily net assets attributable to Sweep Class
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 Sweep
Class shareholders that provide distribution related
services to their customers.
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, C, G and Sweep Class 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 Sweep Class service plan, the Distributor
is entitled to receive a fee at an annual rate of up to
.25% of the average daily net assets of such Portfolio
attributable to Sweep Class shares in return for provision
of a broad range of shareholder and administrative
services, including 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 thus
receive compensation with respect to different classes.
These financial institutions may also charge separate fees
to their customers.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolios'
shares.
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. 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.
10
<PAGE>
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 (or its
authorized agent) prior to the determination of net asset
value and in accordance with the procedures described below
for the order to be accepted on that Business Day. Cash
investments must be transmitted or delivered in federal
funds to the wire agent by the close of business on the
same day the order is placed. The Trust reserves the right
to reject a purchase order when the Distributor determines
that it is not in the best interest of the Trust or
shareholders to accept such purchase order.
The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust, which
is expected to remain constant at $1.00. The net asset
value per share of 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 (or its authorized agent) prior to the
determination of net asset value and in accordance with the
procedures described below on any Business Day. The
redemption price is the net asset value per share of the
Portfolio next determined after receipt by the Transfer
Agent of the redemption order. Payment on 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 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 (or its authorized
agent) before 4:30 p.m. Eastern time to place the trade and
must obtain a security code number for each trade. It is
11
<PAGE>
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 of Class A shares will
normally be higher than that of Class B shares because of
the additional administrative services expenses charged
Class B shares. Likewise, the performance of Class B shares
will normally be higher than that of Class C, Class G and
Sweep Class 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 and Sweep Class 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 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
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<PAGE>
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. In addition, state and
local tax consequences of an investment in the Portfolio
may differ from the federal income tax consequences
described below. Accordingly, shareholders are urged to
consult their tax advisers regarding specific questions as
to federal, state and local income taxes. Additional
information concerning taxes is set forth in the Statement
of Additional Information.
TAX STATUS
OF THE 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 Fund's 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,
regardless of how long shareholders have held their shares
and regardless of whether the distributions are received in
cash or in additional shares. 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 by a Portfolio and may be exempt, depending on the
state, when received by a shareholder from a Portfolio
provided certain state-specific 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.
13
<PAGE>
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, a 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 prior to the end of each calendar year 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: Federal Securities
Portfolio, Short-Duration Government Portfolio,
Intermediate-Duration Government Portfolio, GNMA Portfolio,
Corporate Daily Income Portfolio and Treasury Securities
Daily Income Portfolio (formerly, 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.
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<PAGE>
As of May 5, 1997, BMS & Company, c/o Central Trust
Bank (Jefferson City, MO) owned a controlling interest, as
defined by the 1940 Act, of the Treasury Portfolio.
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 each Portfolio is distributed in the
form of dividends that are declared on each Business Day as
a dividend for shareholders of record and are distributed
monthly in federal funds or in additional shares at the
discretion of the shareholder on the first Business Day of
each month. Dividends will be paid on the next Business Day
to Shareholders who redeem all of their shares of a
Portfolio at any other time during the month. The dividends
on Class A shares are normally higher than those on Class B
shares of each Portfolio because of the additional
administrative services expenses charged to Class B shares.
Likewise, the dividends on Class B shares are normally
higher than those on Class C, Class G and Sweep Class
shares of each 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 and Sweep Class shares.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
CUSTODIANS AND WIRE AGENT
The Bank of New York, 48 Wall Street, New York, New York
10286, (a "Custodian"), serves as custodian of the assets
of the Money Market and Treasury Portfolios. 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 and wire agent
for the Money Market and Treasury 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.
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<PAGE>
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 municipalities,
corporations and other entities. Maturities on these issues
vary from one 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, including (i) commercial paper of
issuers domiciled outside of the United States ("Yankees").
(ii) securities issued by foreign branches of U.S.
commercial banks and of U.S. and London branches of foreign
banks, and (iii) 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 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 active secondary market, and repurchase
agreements with maturities or durations 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
16
<PAGE>
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 within a number of days from the date of
purchase. 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 with maturities of more
than seven days are considered to be illiquid.
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., Fannie Mae securities). Guarantees
of principal
17
<PAGE>
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.
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 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.
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TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 3
The Trust................................................................. 5
Investment Objectives and Policies........................................ 5
General Investment Policies............................................... 7
Investment Limitations.................................................... 7
The Manager............................................................... 8
The Adviser............................................................... 9
Distribution and Shareholder Servicing.................................... 9
Purchase and Redemption of Shares......................................... 10
Performance............................................................... 12
Taxes..................................................................... 13
General Information....................................................... 14
Description of Permitted Investments and Risk Factors..................... 15
</TABLE>
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<PAGE>
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<PAGE>
SEI DAILY INCOME TRUST
MAY 31, 1997
- --------------------------------------------------------------------------------
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, 1997, has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing the Distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of Additional
Information is incorporated into this Prospectus by reference.
SEI 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 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, 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 A*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY PRIME TREASURY FEDERAL
MARKET OBLIGATION GOVERNMENT GOVERNMENT II 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) .09% .16% .15% .16% .08% .20% .58%
12b-1 Fees none none none none none none none
Total Other Expenses .11% .04% .05% .04% .12% .05% .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) THE MANAGER AND ADVISER HAVE WAIVED A PORTION OF THEIR FEES, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THESE WAIVERS. ABSENT SUCH WAIVERS,
MANAGEMENT/ADVISORY FEES WOULD BE .40% FOR THE MONEY MARKET PORTFOLIO, .30%
FOR THE GOVERNMENT, TREASURY AND TREASURY II PORTFOLIOS, .62% FOR THE
FEDERAL SECURITIES PORTFOLIO, .25% FOR THE PRIME OBLIGATION AND GOVERNMENT
II PORTFOLIOS. MANAGEMENT/ADVISORY FEES HAVE BEEN RESTATED TO REFLECT
CURRENT EXPENSES.
(2) THE DISTRIBUTOR HAS WAIVED, ON A VOLUNTARY BASIS, ALL 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 .76% FOR THE MONEY MARKET PORTFOLIO, .54% FOR THE
PRIME OBLIGATION PORTFOLIO, .60% FOR THE GOVERNMENT PORTFOLIO, .54% FOR THE
GOVERNMENT II PORTFOLIO, .67% FOR THE TREASURY PORTFOLIO, .60% FOR THE
TREASURY II PORTFOLIO AND .89% FOR THE FEDERAL SECURITIES PORTFOLIO. TOTAL
OPERATING EXPENSES FOR THE MONEY MARKET PORTFOLIO HAVE BEEN RESTATED TO
REFLECT CURRENT EXPENSES.
(4) TOTAL OPERATING EXPENSES FOR THE FEDERAL SECURITIES PORTFOLIO ARE BASED ON
ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
EXAMPLE CLASS A
- --------------------------------------------------------------------------------
<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,
CLASS C AND SWEEP CLASS SHARES, AND THE GOVERNMENT PORTFOLIO ALSO OFFERS CLASS G
SHARES, WHICH ARE SUBJECT TO THE SAME EXPENSES, EXCEPT THAT CLASS B, CLASS C,
CLASS G, AND SWEEP CLASS 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>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) CLASS B
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY PRIME TREASURY
MARKET OBLIGATION GOVERNMENT GOVERNMENT II TREASURY II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- ----------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Management/Advisory Fees (AFTER FEE WAIVER) (1) .09% .16% .15% .16% .08% .20%
12b-1 Fees none none none none none none
Total Other Expenses .41% .34% .35% .34% .42% .35%
Shareholder Servicing Fees .25% .25% .25% .25% .25% .25%
- --------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVER) (2) .50% .50% .50% .50% .50% .55%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER AND ADVISER HAVE WAIVED A PORTION OF THEIR FEES, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THESE WAIVERS. ABSENT SUCH WAIVERS,
MANAGEMENT/ADVISORY FEES WOULD BE .40% FOR THE MONEY MARKET PORTFOLIO, .30%
FOR THE GOVERNMENT, TREASURY AND TREASURY II PORTFOLIOS AND .25% FOR THE
PRIME OBLIGATION AND GOVERNMENT II PORTFOLIOS.
(2) ABSENT THE FEE WAIVER, TOTAL OPERATING EXPENSES FOR THE CLASS B SHARES OF
THE PORTFOLIOS WOULD BE .81 % FOR THE MONEY MARKET PORTFOLIO, .59% FOR THE
PRIME OBLIGATION PORTFOLIO, .65% FOR THE GOVERNMENT PORTFOLIO, .59% FOR THE
GOVERNMENT II PORTFOLIO, .72% FOR THE TREASURY PORTFOLIO AND .65% FOR THE
TREASURY II PORTFOLIO.
EXAMPLE CLASS B
- --------------------------------------------------------------------------------
<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, CLASS C SHARES AND SWEEP CLASS
SHARES, AND THE GOVERNMENT PORTFOLIO ALSO OFFERS CLASS G SHARES, WHICH ARE
SUBJECT TO THE SAME EXPENSES, EXCEPT THAT CLASS A, CLASS C, CLASS G, AND SWEEP
CLASS 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>
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 7, 1997, 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, 1997, and notes thereto, which are
incorporated by reference to the Trust's Statement of Additional Information
under the heading "Financial Information." Additional performance information is
set forth in the Trust's 1997 Annual Report to shareholders, which is available
upon request and without charge by calling 1-800-342-5734. As of January 31,
1997, there were no Class B shares outstanding of the Treasury Portfolio, and no
shares outstanding of the Federal Securities Portfolio.
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED
OF PERIOD INCOME SECURITIES INCOME CAPITAL GAINS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------
MONEY MARKET PORTFOLIO
- ------------------------
CLASS A
1997 $ 1.00 $0.05 $ -- $(0.05) $ --
1996 1.00 0.06 -- (0.06) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993 1.00 0.04 -- (0.04) --
1992 1.00 0.06 -- (0.06) --
1991 1.00 0.08 -- (0.08) --
1990 1.00 0.09 -- (0.09) --
1989 1.00 0.08 -- (0.08) --
1988 1.00 0.07 -- (0.07) --
1987 1.00 0.06 -- (0.06) --
CLASS B
1997 1.00 0.05 -- (0.05) --
1996 1.00 0.06 -- (0.06) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993 1.00 0.04 -- (0.04) --
1992 1.00 0.05 -- (0.05) --
1991(1) 1.00 0.02 -- (0.02) --
- --------------------------
PRIME OBLIGATION PORTFOLIO
- --------------------------
CLASS A
1997 $ 1.00 $0.05 $ -- $(0.05) $ --
1996 1.00 0.06 -- (0.06) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993 1.00 0.04 -- (0.04) --
1992 1.00 0.06 -- (0.06) --
1991 1.00 0.08 -- (0.08) --
1990 1.00 0.09 -- (0.09) --
1989 1.00 0.08 -- (0.08) --
1988(2) 1.00 0.01 -- (0.01) --
CLASS B
1997 1.00 0.05 -- (0.05) --
1996 1.00 0.06 -- (0.06) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993 1.00 0.04 -- (0.04) --
1992(3) 1.00 0.04 -- (0.04) --
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
RATIO OF
NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES INCOME TO
RATIO OF INVESTMENT TO AVERAGE AVERAGE
NET ASSET NET ASSETS EXPENSES INCOME TO NET ASSETS NET ASSETS
VALUE END TOTAL END OF TO AVERAGE AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD RETURN PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------
MONEY MARKET PORTFOLIO
- ------------------------
CLASS A
1997 $ 1.00 5.44% $ 369,052 0.16% 5.33% 0.63% 4.86%
1996 1.00 5.98 95,891 0.20 5.88 0.45 5.63
1995 1.00 4.55 213,988 0.21 4.49 0.45 4.25
1994 1.00 2.98 203,803 0.35 2.95 0.44 2.86
1993 1.00 3.60 264,450 0.35 3.56 0.39 3.52
1992 1.00 5.76 312,151 0.35 5.84 0.39 5.80
1991 1.00 8.18 815,847 0.33 7.88 0.38 7.83
1990 1.00 9.24 589,683 0.35 8.90 0.40 8.85
1989 1.00 7.82 507,821 0.35 7.52 0.39 7.48
1988 1.00 6.90 606,117 0.35 6.76 0.42 6.69
1987 1.00 6.67 295,121 0.35 6.39 0.41 6.33
CLASS B
1997 1.00 5.13 770 0.50 4.96 0.76 4.70
1996 1.00 5.67 6,616 0.50 5.53 0.75 5.28
1995 1.00 4.24 6,314 0.51 4.49 0.75 4.25
1994 1.00 2.68 2,334 0.65 2.65 0.74 2.56
1993 1.00 3.29 309 0.65 3.47 0.69 3.43
1992 1.00 5.45 2,305 0.53 5.18 0.61 5.10
1991(1) 1.00 7.37 830 0.65 7.17 0.72 7.10
- --------------------------
PRIME OBLIGATION PORTFOLIO
- --------------------------
CLASS A
1997 $ 1.00 5.38% $2,626,360 0.20% 5.26% 0.45% 5.01%
1996 1.00 5.96 2,441,662 0.20 5.82 0.29 5.73
1995 1.00 4.46 2,778,326 0.20 4.41 0.30 4.31
1994 1.00 3.10 2,541,126 0.20 3.07 0.28 2.98
1993 1.00 3.72 2,564,340 0.20 3.62 0.30 3.52
1992 1.00 5.97 1,661,619 0.20 5.73 0.29 5.64
1991 1.00 8.34 825,081 0.20 8.03 0.30 7.93
1990 1.00 9.36 532,137 0.20 8.86 0.33 8.73
1989 1.00 8.58 237,273 0.20 7.68 0.34 7.54
1988(2) 1.00 7.48 139,944 0.13 7.22 0.58 6.77
CLASS B
1997 1.00 5.07 146,267 0.50 4.95 0.56 4.89
1996 1.00 5.65 174,779 0.50 5.38 0.58 5.30
1995 1.00 4.15 21,852 0.50 4.55 0.60 4.45
1994 1.00 2.79 6,312 0.50 2.77 0.58 2.68
1993 1.00 3.41 4,699 0.47 3.63 0.53 3.57
1992(3) 1.00 5.58 67,016 0.50 4.98 0.59 4.89
</TABLE>
4
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED
OF PERIOD INCOME SECURITIES INCOME CAPITAL GAINS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------
GOVERNMENT PORTFOLIO
- ----------------------
CLASS A
1997 $ 1.00 $0.05 $ -- $(0.05) $ --
1996(4) 1.00 0.01 -- (0.01) --
1994(5) 1.00 0.01 -- (0.01) --
1993(6) 1.00 0.03 -- (0.03) --
CLASS B
1997 1.00 0.05 -- (0.05) --
1996(7) 1.00 0.02 -- (0.02) --
- ------------------------
GOVERNMENT II PORTFOLIO
- ------------------------
CLASS A
1997 $ 1.00 $0.05 $ -- $(0.05) $ --
1996 1.00 0.06 -- (0.06) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993 1.00 0.04 -- (0.04) --
1992 1.00 0.06 -- (0.06) --
1991 1.00 0.08 -- (0.08) --
1990 1.00 0.09 -- (0.09) --
1989 1.00 0.07 -- (0.07) --
1988 1.00 0.06 -- (0.06) --
1987 1.00 0.06 -- (0.06) --
CLASS B
1997 1.00 0.05 -- (0.05) --
1996 1.00 0.05 -- (0.05) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993 1.00 0.03 -- (0.03) --
1992 1.00 0.05 -- (0.05) --
1991(8) 1.00 0.00 -- (0.00) --
- ------------------
TREASURY PORTFOLIO
- ------------------
CLASS A
1997 $ 1.00 $0.05 $ -- $(0.05) $ --
1996 1.00 0.06 -- (0.06) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993(9) 1.00 0.01 -- (0.01) --
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
RATIO OF
NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES INCOME TO
RATIO OF INVESTMENT TO AVERAGE AVERAGE
NET ASSET NET ASSETS EXPENSES INCOME TO NET ASSETS NET ASSETS
VALUE END TOTAL END OF TO AVERAGE AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD RETURN PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------
GOVERNMENT PORTFOLIO
- ----------------------
CLASS A
1997 $ 1.00 5.33% $ 116,373 0.20% 5.22% 0.55% 4.87%
1996(4) 1.00 1.48+ 48,762 0.20 5.55 0.33 5.42
1994(5) 1.00 3.22 0 0.20 3.04 0.37 2.87
1993(6) 1.00 3.19 20,022 0.20 3.41 0.38 3.23
CLASS B
1997 1.00 5.02 53,144 0.50 4.91 0.62 4.79
1996(7) 1.00 2.39+ 14,997 0.50 5.27 0.63 5.14
- ------------------------
GOVERNMENT II PORTFOLIO
- ------------------------
CLASS A
1997 $ 1.00 5.29% $ 762,015 0.20% 5.17% 0.45% 4.92%
1996 1.00 5.83 810,365 0.20 5.69 0.29 5.60
1995 1.00 4.39 786,405 0.20 4.33 0.30 4.23
1994 1.00 3.02 738,040 0.20 2.98 0.29 2.89
1993 1.00 3.57 664,540 0.20 3.48 0.29 3.39
1992 1.00 5.73 534,303 0.20 5.56 0.28 5.48
1991 1.00 8.01 500,526 0.20 7.66 0.31 7.55
1990 1.00 8.90 257,523 0.20 8.49 0.32 8.37
1989 1.00 7.53 155,987 0.20 7.22 0.36 7.06
1988 1.00 6.55 158,361 0.20 6.35 0.34 6.21
1987 1.00 6.55 143,736 0.20 6.26 0.35 6.11
CLASS B
1997 1.00 4.98 16,323 0.50 4.87 0.56 4.81
1996 1.00 5.52 19,678 0.50 5.41 0.59 5.32
1995 1.00 4.08 15,201 0.50 4.33 0.60 4.23
1994 1.00 2.71 21,462 0.50 2.68 0.60 2.58
1993 1.00 3.26 338 0.50 3.35 0.59 3.26
1992 1.00 5.02 1,906 0.48 4.75 0.59 4.64
1991(8) 1.00 0.00 607 0.50 6.44 3.76 3.18
- ------------------
TREASURY PORTFOLIO
- ------------------
CLASS A
1997 $ 1.00 5.32% $ 67,924 0.20% 5.19% 0.60% 4.79%
1996 1.00 5.89 54,820 0.20 5.72 0.36 5.56
1995 1.00 4.29 39,129 0.20 4.17 0.34 4.03
1994 1.00 3.00 46,296 0.20 2.96 0.33 2.82
1993(9) 1.00 2.91 44,624 0.20 2.89 0.42 2.67
</TABLE>
5
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED
OF PERIOD INCOME SECURITIES INCOME CAPITAL GAINS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------
TREASURY II PORTFOLIO
- --------------------
CLASS A
1997 $ 1.00 $0.05 $ -- $(0.05) $ --
1996 1.00 0.05 -- (0.05) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993 1.00 0.03 -- (0.03) --
1992 1.00 0.06 -- (0.06) --
1991 1.00 0.07 -- (0.07) --
1990(10) 1.00 0.08 -- (0.08) --
CLASS B
1997 1.00 0.05 -- (0.05) --
1996 1.00 0.05 -- (0.05) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993 1.00 0.03 -- (0.03) --
1992 1.00 0.05 -- (0.05) --
1991(11) 1.00 0.07 -- (0.07) --
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
RATIO OF
NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES INCOME TO
RATIO OF INVESTMENT TO AVERAGE AVERAGE
NET ASSET NET ASSETS EXPENSES INCOME TO NET ASSETS NET ASSETS
VALUE END TOTAL END OF TO AVERAGE AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD RETURN PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------
TREASURY II PORTFOLIO
- --------------------
CLASS A
1997 $ 1.00 5.07% $ 780,718 0.25% 4.96% 0.52% 4.69%
1996 1.00 5.58 418,250 0.25 5.44 0.34 5.35
1995 1.00 4.17 397,682 0.25 4.11 0.35 4.01
1994 1.00 2.88 364,334 0.25 2.84 0.34 2.76
1993 1.00 3.46 352,435 0.25 3.40 0.34 3.31
1992 1.00 5.48 282,535 0.25 5.43 0.31 5.37
1991 1.00 7.76 490,705 0.25 7.11 0.41 6.95
1990(10) 1.00 7.90 72,777 0.25 7.66 0.69 7.22
CLASS B
1997 1.00 4.76 54,148 0.55 4.65 0.63 4.57
1996 1.00 5.27 26,447 0.55 5.18 0.64 5.09
1995 1.00 3.86 44,680 0.55 3.71 0.65 3.61
1994 1.00 2.57 22,448 0.55 2.54 0.64 2.46
1993 1.00 3.15 6,038 0.55 3.42 0.64 3.33
1992 1.00 5.16 102,182 0.55 4.97 0.61 4.91
1991(11) 1.00 7.16 85,439 0.55 7.18 0.67 7.06
</TABLE>
+ 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) PRIME OBLIGATION CLASS A SHARES WERE OFFERED BEGINNING DECEMBER 22, 1987.
ALL RATIOS INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN
ANNUALIZED.
(3) PRIME OBLIGATION CLASS B SHARES WERE OFFERED BEGINNING MARCH 26, 1991. ALL
RATIOS INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(4) GOVERNMENT CLASS A SHARES WERE REOFFERED BEGINNING OCTOBER 27, 1995. ALL
RATIOS EXCEPT TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(5) GOVERNMENT CLASS A SHARES WERE FULLY LIQUIDATED JUNE 2, 1993. ALL RATIOS
INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(6) GOVERNMENT CLASS A SHARES WERE OFFERED BEGINNING MARCH 8, 1992. ALL RATIOS
INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(7) GOVERNMENT CLASS B SHARES WERE OFFERED BEGINNING AUGUST 22, 1995. ALL
RATIOS EXCEPT TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(8) GOVERNMENT II CLASS B SHARES WERE OFFERED BEGINNING JANUARY 28, 1991. ALL
RATIOS INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(9) TREASURY CLASS A SHARES WERE OFFERED BEGINNING SEPTEMBER 30, 1992. ALL
RATIOS INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(10) TREASURY II CLASS A SHARES WERE OFFERED BEGINNING JULY 28, 1989. ALL RATIOS
INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(11) TREASURY II CLASS B SHARES WERE OFFERED BEGINNING FEBRUARY 15, 1990. ALL
RATIOS INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
6
<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
Money Market, Prime Obligation, Government, Government II, Treasury, Treasury II
and Federal Securities Portfolios (each a "Portfolio," and, together, the
"Portfolios"). Each Portfolio has 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,
Class C and Sweep Class 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
Investments Distribution Co., Oaks, Pennsylvania 19456, 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 at 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.
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
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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.
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.
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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.
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.
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.
For temporary defensive purposes, the Portfolios may
maintain 100% of their assets in cash.
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
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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
the Portfolio makes additional investments 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 Fund Management (the "Manager" or the "Transfer
Agent"), a wholly-owned subsidiary of SEI Investments
Company ("SEI"), 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, Class C, Class G and Sweep Class shares 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 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
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<PAGE>
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; and (vi) 1.30% of the Class B 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 the Money
Market, Prime Obligation, Government, Government II, and
Treasury Class A shares, .25% of the average daily net
assets of the Treasury II Class A Shares, and .60% of the
average daily net assets of the Federal Securities Class A
shares; and (ii) .50% of the average daily net assets of
the Money Market, Prime Obligation, Government, Government
II and Treasury Class B shares, and .55% of the average
daily net assets of the Treasury II Class B shares, 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, 1997, the
Money Market, Prime Obligation, Government, Government II,
Treasury and Treasury II Portfolios paid management fees,
after waivers, of .08%, .15%, .14%, .15%, .07% and .19%,
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, 1997, the Adviser had discretionary management
authority with respect to approximately $136.3 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.
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<PAGE>
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,
1997, 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
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (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 and B 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, the Distributor is entitled
to receive a fee at an annual rate of up to .25% of the
average daily net assets of such Portfolio attributable to
Class A shares in return for provision of a broad range of
shareholder and administrative services. Under the Class B
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 B shares may pay
administrative services fees at a specified percentage of
the average daily net assets of the shares of the Class (up
to .05%). 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.
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The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolios'
shares.
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. 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 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 and in accordance with the procedures described below
for the order to be accepted on that Business Day. Cash
investments must be transmitted or delivered in federal
funds to the wire agent by the close of business on the
same day the order is placed. The Trust reserves the right
to reject a purchase order when the Distributor determines
that it is not in the best interest of the Trust or
shareholders to accept such purchase order.
The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust, which
is expected to remain constant at $1.00. The net asset
value per share of 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.
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Shareholders who desire to redeem shares of a
Portfolio must place their redemption orders with the
Transfer Agent (or its authorized agent) prior to the
determination of net asset value and in accordance with the
procedures described below on any Business Day. 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 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 (or its authorized
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 of Class A shares will
normally be higher than that of Class B shares because of
the additional administrative services expenses charged
Class B shares. Likewise, the performance of Class B shares
will normally be higher than that of Class C, Class G or
Sweep Class 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 and Sweep Class 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
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<PAGE>
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 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. In addition, state and
local tax consequences of an investment in the Portfolio
may differ from the federal income tax consequences
described below. Accordingly, shareholders are urged to
consult their tax advisers regarding specific questions as
to federal, state and local income taxes. Additional
information concerning taxes is set forth in the Statement
of Additional Information.
TAX STATUS
OF THE 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 Fund's 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
15
<PAGE>
capital gains, regardless of how long shareholders have
held their shares and regardless of whether the
distributions are received in cash or in additional shares.
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 by a Portfolio and may be exempt, depending on the
state, when received by a shareholder from a Portfolio
provided certain state-specific 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, a 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 prior to the end of each calendar year 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, Intermediate-Duration Government
Portfolio, GNMA Portfolio, Corporate Daily Income Portfolio
and Treasury Securities Daily Income Portfolio (formerly,
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.
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<PAGE>
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.
As of May 5, 1997, BMS & Company, c/o Central Trust
Bank (Jefferson City, MO) owned a controlling interest, as
defined by the 1940 Act, of the Treasury Portfolio.
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 each Portfolio is distributed in the
form of dividends that are declared on each Business Day,
as a dividend for shareholders of record and are
distributed monthly in federal funds or in additional
shares at the discretion of the shareholder on the first
Business Day of each month. Dividends will be paid on the
next Business Day to Shareholders who redeem all of their
shares of a Portfolio at any other time during the month.
The dividends on Class A shares are normally higher than
those on Class B shares of each Portfolio because of the
additional administrative services expenses charged to
Class B shares. Likewise, the dividends on Class B shares
are normally higher than those on Class C, Class G and
Sweep Class shares of each 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 and Sweep
Class shares.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
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CUSTODIANS AND WIRE AGENT
The Bank of New York, 48 Wall Street, New York, New York
10286, (a "Custodian"), serves as custodian 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, and wire agent for the Money Market and
Treasury 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 municipalities,
corporations and other entities. Maturities on these issues
vary from one 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 including (i) commercial paper of
issuers domiciled outside of the United States ("Yankees"),
(ii) securities issued by foreign branches of U.S.
commercial banks and of U.S. and London branches of foreign
banks, and (iii) 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 investing only in those instruments which
satisfy the quality and maturity restrictions applicable to
the Portfolio.
18
<PAGE>
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 active secondary market, and repurchase
agreements with maturities or durations 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, 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 within a number of days from the date of
purchase. A Portfolio will
19
<PAGE>
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 with maturities of more
than seven days are considered to be illiquid.
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., 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
20
<PAGE>
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.
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 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.
21
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 4
The Trust................................................................. 7
Investment Objectives and Policies........................................ 7
General Investment Policies............................................... 9
Investment Limitations.................................................... 9
The Manager............................................................... 10
The Adviser............................................................... 11
Distribution and Shareholder Servicing.................................... 12
Purchase and Redemption of Shares......................................... 13
Performance............................................................... 14
Taxes..................................................................... 15
General Information....................................................... 16
Description of Permitted Investments and Risk Factors..................... 18
</TABLE>
22
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
SEI DAILY INCOME TRUST
MAY 31, 1997
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
PRIME OBLIGATION PORTFOLIO
GOVERNMENT PORTFOLIO
GOVERNMENT II PORTFOLIO
TREASURY PORTFOLIO
TREASURY II 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, 1997, has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing the Distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-342-5734. The Statement of Additional
Information is incorporated into this Prospectus by reference.
SEI 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 six 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.
- --------------------------------------------------------------------------------
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>
MONEY PRIME TREASURY
MARKET OBLIGATION GOVERNMENT GOVERNMENT II TREASURY II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- ----------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Management/Advisory Fees (AFTER FEE WAIVER) (1) .09% .16% .15% .16% .08% .20%
12b-1 Fees none none none none none none
Total Other Expenses .61% .54% .55% .54% .62% .55%
Shareholder Servicing Fees .25% .25% .25% .25% .25% .25%
- --------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVER) (2) .70% .70% .70% .70% .70% .75%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE MANAGER AND ADVISER HAVE WAIVED A PORTION OF THEIR FEES, AND THE
MANAGEMENT/ADVISORY FEES SHOWN REFLECT THESE WAIVERS. ABSENT SUCH WAIVERS,
MANAGEMENT/ADVISORY FEES WOULD BE .40% FOR THE MONEY MARKET PORTFOLIO, .30%
FOR THE GOVERNMENT, TREASURY AND TREASURY II PORTFOLIOS, .25% FOR THE PRIME
OBLIGATION AND GOVERNMENT II PORTFOLIOS.
(2) ABSENT THE FEE WAIVER, TOTAL OPERATING EXPENSES FOR THE CLASS C SHARES OF
THE PORTFOLIOS WOULD BE 1.01% FOR THE MONEY MARKET PORTFOLIO, .79% FOR THE
PRIME OBLIGATION PORTFOLIO, .85% FOR THE GOVERNMENT PORTFOLIO, .79% FOR THE
GOVERNMENT II PORTFOLIO, .92% FOR THE TREASURY PORTFOLIO AND .85% FOR THE
TREASURY II PORTFOLIO. TOTAL OPERATING EXPENSES FOR THE MONEY MARKET
PORTFOLIO HAVE BEEN RESTATED TO REFLECT CURRENT EXPENSES.
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:
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, CLASS B SHARES AND SWEEP CLASS
SHARES, AND THE GOVERNMENT PORTFOLIO ALSO OFFERS CLASS G SHARES, WHICH ARE
SUBJECT TO THE SAME EXPENSES, EXCEPT THAT CLASS A, CLASS B, CLASS G AND SWEEP
CLASS 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>
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 7, 1997, 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, 1997, and notes thereto, which are
incorporated by reference to the Trust's Statement of Additional Information
under the heading "Financial Information." Additional performance information is
set forth in the Trust's 1997 Annual Report to shareholders, which is available
upon request and without charge by calling 1-800-342-5734. As of January 31,
1997, there were no Class C shares outstanding of the Government Portfolio.
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END
OF PERIOD INCOME SECURITIES INCOME CAPITAL GAINS OF PERIOD
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------
MONEY MARKET PORTFOLIO
- ------------------------
CLASS C
1997 $ 1.00 $0.05 $ -- $(0.05) $ -- $ 1.00
1996(1) 1.00 0.04 -- (0.04) -- 1.00
- --------------------------
PRIME OBLIGATION PORTFOLIO
- --------------------------
CLASS C
1997(2) $ 1.00 $0.04 $ -- $(0.04) $ -- $ 1.00
1995(3) 1.00 0.03 -- (0.03) -- 1.00
1994 1.00 0.03 -- (0.03) -- 1.00
1993(4) 1.00 0.03 -- (0.03) -- 1.00
- ----------------------
GOVERNMENT PORTFOLIO
- ----------------------
CLASS C
1996(5) $ 1.00 $0.03 $ -- $(0.05) $ -- $ 1.00
1995(6) 1.00 0.03 -- (0.03) -- 1.00
- ------------------------
GOVERNMENT II PORTFOLIO
- ------------------------
CLASS C
1997(7) $ 1.00 $0.01 $ -- $(0.01) $ -- $ 1.00
- ------------------
TREASURY PORTFOLIO
- ------------------
CLASS C
1997 $ 1.00 $0.05 $ -- $(0.05) $ -- $ 1.00
1996(8) 1.00 0.03 -- (0.03) -- 1.00
- --------------------
TREASURY II PORTFOLIO
- --------------------
CLASS C
1997 $ 1.00 $0.04 $ -- $(0.04) $ -- $ 1.00
1996(9) 1.00 0.04 -- (0.04) -- 1.00
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
RATIO OF
NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES INCOME TO
RATIO OF INVESTMENT TO AVERAGE AVERAGE
NET ASSETS EXPENSES INCOME TO NET ASSETS NET ASSETS
TOTAL END OF TO AVERAGE AVERAGE (EXCLUDING (EXCLUDING
RETURN PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------
MONEY MARKET PORTFOLIO
- ------------------------
CLASS C
1997 4.92% $ 30,528 0.66% 4.84% 0.92% 4.58%
1996(1) 3.79+ 2,460 0.70 5.17 0.96 4.91
- --------------------------
PRIME OBLIGATION PORTFOLIO
- --------------------------
CLASS C
1997(2) 4.85% $ 4,332 0.70% 4.79% 0.74% 4.75%
1995(3) 2.55+ 0 0.70 2.79 0.77 2.72
1994 2.59 20,602 0.70 2.57 0.78 2.48
1993(4) 3.13 33,325 0.70 3.05 0.83 2.92
- ----------------------
GOVERNMENT PORTFOLIO
- ----------------------
CLASS C
1996(5) 5.39% $ 542,936 0.70% 5.23% 0.64% 5.09%
1995(6) 3.41+ 310,835 0.70 4.32 0.89 4.13
- ------------------------
GOVERNMENT II PORTFOLIO
- ------------------------
CLASS C
1997(7) 4.71% $ 6,359 0.70% 4.69% 0.75% 4.64%
- ------------------
TREASURY PORTFOLIO
- ------------------
CLASS C
1997 4.80% $ 24,904 0.70% 4.70% 0.90% 4.50%
1996(8) 2.68+ 14,691 0.70 5.12 0.87 4.95
- --------------------
TREASURY II PORTFOLIO
- --------------------
CLASS C
1997 4.55% $ 4,528 0.75% 4.45% 0.82% 4.38%
1996(9) 3.64+ 3,935 0.75 4.85 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
INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(2) PRIME OBLIGATION CLASS C SHARES WERE RE-OFFERED BEGINNING APRIL 30, 1996.
ALL RATIOS INCLUDING TOTAL RETURN FOR THE PERIOD HAVE BEEN ANNUALIZED.
(3) PRIME OBLIGATION CLASS C SHARES WERE FULLY LIQUIDATED OCTOBER 27, 1994. ALL
RATIOS FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(4) PRIME OBLIGATION CLASS C SHARES WERE OFFERED BEGINNING MARCH 25, 1992. ALL
RATIOS INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(5) GOVERNMENT CLASS C SHARES WERE CONVERTED TO CLASS G SHARES ON APRIL 1,
1996.
(6) GOVERNMENT CLASS C SHARES WERE OFFERED BEGINNING APRIL 7, 1994. ALL RATIOS
EXCEPT TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(7) GOVERNMENT II CLASS C SHARES WERE OFFERED BEGINNING NOVEMBER 27, 1996. ALL
RATIOS INCLUDING TOTAL RETURN FOR THAT PERIOD HAVE BEEN ANNUALIZED.
(8) TREASURY CLASS C SHARES WERE OFFERED BEGINNING JULY 27, 1995. ALL RATIOS
INCLUDING TOTAL RETURN FOR THE PERIOD INDICATED HAVE BEEN ANNUALIZED.
(9) TREASURY II CLASS C SHARES WERE OFFERED BEGINNING MAY 8, 1995. ALL RATIOS
INCLUDING 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
Money Market, Prime Obligation, Government, Government II, Treasury and Treasury
II Portfolios (each a "Portfolio," and, together, the "Portfolios"). Each
Portfolio has 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, Class C and Sweep
Class shares. The Government Portfolio also offers Class G shares. Additional
information pertaining to the Trust may be obtained by writing SEI Investments
Distribution Co., Oaks, Pennsylvania 19456, 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 at 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.
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
4
<PAGE>
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.
There can be no assurance that the Portfolios will
achieve their respective investment objectives.
5
<PAGE>
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.
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.
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.
For temporary defensive purposes, the Portfolios may
maintain 100% of their assets in cash.
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.
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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
the Portfolio makes additional investments 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 Fund Management (the "Manager" or the "Transfer
Agent"), a wholly-owned subsidiary of SEI Investments
Company ("SEI"), 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, Class C, Class G and Sweep Class shares 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 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%; and Treasury II
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: (i) .70% of the Class C shares
of the Prime Obligation, Government II and
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Treasury Portfolios; (ii) .75% of the Class C shares of the
Treasury II and Government Portfolios; and (iii) 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 .70% of the average
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, 1997, the Money Market, Prime
Obligation, Government, Government II, Treasury and
Treasury II Portfolios paid management fees, after waivers,
of .08%, .15%, .14%, .15%, .07% and .19%, 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, 1997, the Adviser had discretionary management
authority with respect to approximately $136.3 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 Portfolios on the basis of their
relative net assets. For the fiscal year ended January 31,
1997, 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.
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DISTRIBUTION AND
SHAREHOLDER
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (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, C, G and Sweep Class 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
Distributor is entitled to receive 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 a specified percentage 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.
The Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of
cash or other compensation to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Portfolios'
shares.
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. Financial institutions may impose an earlier
cut-off time for receipt of purchase orders directed
through them to allow for processing and
9
<PAGE>
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 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 and in accordance with the procedures described below
for the order to be accepted on that Business Day. Cash
investments must be transmitted or delivered in federal
funds to the wire agent by the close of business on the
same day the order is placed. The Trust reserves the right
to reject a purchase order when the Distributor determines
that it is not in the best interest of the Trust or
shareholders to accept such purchase order.
The Trust will send shareholders a statement of
shares owned after each transaction. The purchase price of
shares is the net asset value next determined after a
purchase order is received and accepted by the Trust, which
is expected to remain constant at $1.00. The net asset
value per share of 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 (or its authorized agent) prior to the
determination of net asset value and in accordance with the
procedures described below on any Business Day. The
redemption price is the net asset value per share of the
Portfolio next determined after receipt by the Transfer
Agent of the redemption order. Payment on 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 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.
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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 (or its authorized
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 of Class A shares will
normally be higher than that of Class B shares because of
the additional administrative services expenses charged
Class B shares. Likewise, the performance of Class B shares
will normally be higher than that of Class C, Class G and
Sweep Class 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 and Sweep Class 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 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
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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. In addition, state and
local tax consequences of an investment in the Portfolio
may differ from the federal income tax consequences
described below. Accordingly, shareholders are urged to
consult their tax advisers regarding specific questions as
to federal, state and local income taxes. Additional
information concerning taxes is set forth in the Statement
of Additional Information.
TAX STATUS
OF THE 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 Fund's 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,
regardless of how long shareholders have held their shares
and regardless of whether the distributions are received in
cash or in additional shares. 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 by a Portfolio and may be exempt, depending on the
state, when received by a shareholder from a Portfolio
provided certain state-specific conditions are satisfied.
Interest received on repurchase agreements collateralized
by U.S. Government obligations normally is not exempt from
state taxation. Each Portfolio will
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<PAGE>
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, a 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 prior to the end of each calendar year 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: Federal Securities
Portfolio, Short-Duration Government Portfolio,
Intermediate-Duration Government Portfolio, GNMA Portfolio,
Corporate Daily Income Portfolio and Treasury Securities
Daily Income Portfolio (formerly, 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
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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.
As of May 5, 1997, BMS & Company, c/o Central Trust
Bank (Jefferson City, MO) owned a controlling interest, as
defined by the 1940 Act, of the Treasury Portfolio.
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 each Portfolio is distributed in the
form of dividends that are declared on each Business Day as
a dividend for shareholders of record and are distributed
monthly in federal funds or in additional shares at the
discretion of the shareholder on the first Business Day of
each month. Dividends will be paid on the next Business Day
to shareholders who redeem all of their shares of a
Portfolio at any other time during the month. The dividends
on Class A shares are normally higher than those on Class B
shares of each Portfolio because of the additional
administrative services expenses charged to Class B shares.
Likewise, the dividends on Class B shares are normally
higher than those on Class C, Class G and Sweep Class
shares of each 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 and Sweep Class shares.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
CUSTODIANS AND WIRE AGENT
The Bank of New York, 48 Wall Street, New York, New York
10286, (a "Custodian"), serves as custodian of the assets
of the Money Market and Treasury Portfolios. 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 and wire agent for
the Money Market and Treasury Portfolios. The Custodians
hold cash, securities and other assets of the Trust as
required by the 1940 Act.
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DESCRIPTION OF
PERMITTED INVESTMENTS
AND RISK FACTORS
____________________________________________________________________________
The following is a description of certain of the permitted
investment practices for the Portfolios and the associated
risk factors:
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 municipalities,
corporations and other entities. Maturities on these issues
vary from one 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, including (i) commercial paper of
issuers domiciled outside of the United States ("Yankees"),
(ii) securities issued by foreign branches of U.S.
commercial banks and of U.S. and London branches of foreign
banks, and (iii) 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 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 active secondary market, and repurchase
agreements with maturities or durations 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
15
<PAGE>
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 within a number of days from the date of
purchase. 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
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period of time; however, it cannot be traded in the
secondary market. Time deposits with maturities of more
than seven days are considered to be illiquid.
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., 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.
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 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.
17
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TABLE OF CONTENTS
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<TABLE>
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Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 3
The Trust................................................................. 4
Investment Objectives and Policies........................................ 4
General Investment Policies............................................... 6
Investment Limitations.................................................... 6
The Manager............................................................... 7
The Adviser............................................................... 8
Distribution and Shareholder Servicing.................................... 9
Purchase and Redemption of Shares......................................... 9
Performance............................................................... 11
Taxes..................................................................... 12
General Information....................................................... 13
Description of Permitted Investments and Risk Factors..................... 15
</TABLE>
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SEI DAILY INCOME TRUST
Manager:
SEI Fund Management
Distributor:
SEI Investments Distribution Co.
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, 1997. Prospectuses may be obtained without
charge by writing the Trust's distributor, SEI Investments Distribution Co.,
Oaks, PA 19456, or by calling 1-800-342-5734.
TABLE OF CONTENTS
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PAGE
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The Trust................................................................. S-2
Description of Permitted Investments...................................... S-2
The Manager............................................................... S-13
The Adviser............................................................... S-14
Distribution.............................................................. S-15
Trustees and Officers of the Trust........................................ S-16
Investment Limitations.................................................... S-19
Performance............................................................... S-20
Determination of Net Asset Value.......................................... S-23
Purchase and Redemption of Shares......................................... S-24
Taxes..................................................................... S-25
Portfolio Transactions.................................................... S-26
Description of Shares..................................................... S-27
Limitation of Trustees' Liability......................................... S-27
Voting.................................................................... S-28
Shareholder Liability..................................................... S-28
Control Persons and Principal Holders of Securities....................... S-28
Experts................................................................... S-29
Financial Statements...................................................... S-29
May 31, 1997
</TABLE>
SEI-F-045-09
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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 G and/or Sweep Class 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, Treasury Securities
Daily Income (formerly, Government Securities Daily Income), Short-Duration
Government, Intermediate-Duration Government and GNMA Portfolios (each a
"Portfolio," and, together, the "Portfolios") and any different classes of the
Portfolios. Currently, the Treasury 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 G and Sweep Class shares.
DESCRIPTION OF PERMITTED INVESTMENTS
ASSET-BACKED SECURITIES--The Corporate Daily Income Portfolio 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.
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 strong" degree of safety regarding timely payment. Those rated
A-2 reflect a safety regarding timely payment, but not as high as A-1.
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Moody's employs two designations, judged to be high grade commercial paper,
to indicate the relative repayment capacity of rated issuers as follows:
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Prime-1 Superior Quality
Prime-2 Strong Quality
</TABLE>
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. Dollars 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.
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.
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FUTURES CONTRACTS: The Intermediate-Duration Government and GNMA 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 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
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<PAGE>
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 or
liquid 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 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, LLP (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 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
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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 futures 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 or liquid
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.
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
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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.
Moreover, 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.
MORTGAGE-BACKED SECURITIES--The Corporate Daily Income, Short-Duration
Government, Intermediate-Duration Government and GNMA Portfolios may invest in
mortgage-backed securities.
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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
Fannie Mae, 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 Fannie Mae include Fannie Mae Guaranteed
Mortgage Pass-Through Certificates (also known as "Fannie Maes") that are solely
the obligations of Fannie Mae and are not backed by or entitled to the full
faith and credit of the United States. The Fannie Mae is a government-sponsored
organization owned entirely by private stockholders. Fannie Maes are guaranteed
as to timely payment of the principal and interest by Fannie Mae.
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 180-day Treasury Bill rate, the Eleventh District Federal Home Loan
S-8
<PAGE>
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.
S-9
<PAGE>
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 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 underlying
collateral. However, if the seller
S-10
<PAGE>
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 cash or liquid securities
in a segregated account. A Portfolio will enter into swaps only with
counterparties believed to be creditworthy.
The Portfolios 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, Federal Securities and Treasury Securities Daily Income 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
others, Federal Home Loan
S-11
<PAGE>
Banks, FHLMC, Federal Intermediate Credit Banks, Federal Land Banks, Fannie Mae
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 Corporate Daily Income Portfolio may invest) are supported only
by the credit of the instrumentality (E.G., Fannie Mae). 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--Certain of the Portfolios 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 cash or liquid securities 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.
S-12
<PAGE>
THE MANAGER
The Trust and SEI Fund Management ("SEI Management" or the "Manager") have
entered into a Management Agreement (the "Management Agreement"). Formerly, SEI
Financial Management Corporation ("SFM") served as the manager to the Trust. The
Management Agreement provides that the Manager shall not be liable for any error
of judgement or mistake of law or for any loss suffered by the Trust in
connection with the matters to which the Management Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Manager in the performance of its duties or from reckless disregard
of its duties and obligations thereunder.
The continuance of the Management Agreement 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 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. This Agreement shall not be assignable by either party without
the written consent of the other party.
SEI Management, a Delaware business trust, has its principal business
offices at Oaks, Pennsylvania 19456. SFM, a wholly-owned subsidiary of SEI
Investments Company ("SEI"), is the owner of all beneficial interest in SEI
Management. SEI and its subsidiaries and affiliates, including SEI Management,
are leading providers of funds evaluation services, trust accounting systems,
and brokerage and information services to financial institutions, institutional
investors, and money managers. SEI Management and its affiliates also serve as
administrator 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, FMB Funds, Inc., First American
Funds, Inc., First American Investment Funds, Inc., First American Strategy
Funds, Inc., High Mark Funds, Marquis Funds-Registered Trademark-, Monitor
Funds, Morgan Grenfell Investment Trust, The PBHG Funds, Inc., The Pillar Funds,
Profit Funds Investment Trust, Rembrandt Funds-Registered Trademark-, Santa
Barbara Group of Mutual Funds, Inc., 1784 Funds-Registered Trademark-, SEI Asset
Allocation Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
International Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust,
SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust, and TIP
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, 1997; these
voluntary fee waivers and reimbursement arrangements are described in the
Prospectuses.
S-13
<PAGE>
For the fiscal years ended January 31, 1995, 1996 and 1997, the Portfolios
paid fees to the Manager as follows:
<TABLE>
<CAPTION>
FEES PAID (000) FEE WAIVERS (000)
--------------------------- ---------------------------
1995 1996 1997 1995 1996 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Money Market Portfolio.................... $ 220 $ 159 $ 131 $ 491 $ 365 $ 385
Prime Obligation Portfolio................ $ 2,551 $ 2,918 $ 4,245 $ 1,697 $ 1,646 $ 1,097
Government Portfolio...................... $ 121 $ 605 $ 1,082 $ 285 $ 580 $ 812
Government II Portfolio................... $ 861 $ 988 $ 1,155 $ 574 $ 572 $ 338
Treasury Portfolio........................ $ 56 $ 53 $ 56 $ 59 $ 75 $ 148
Treasury II Portfolio..................... $ 616 $ 814 $ 1,013 $ 313 $ 356 $ 297
Federal Securities Portfolio.............. $ 50 * * $ 2 * *
Corporate Daily Income Portfolio.......... $ 70 $ 105 $ 109 $ 82 $ 80 $ 66
Treasury Securities Daily Income
Portfolio............................... * * * * * *
Short-Duration Government Portfolio....... $ 333 $ 231 $ 222 $ 61 $ 48 $ 27
Intermediate-Duration Government
Portfolio............................... $ 866 $ 555 $ 492 $ 188 $ 113 $ 27
GNMA Portfolio............................ $ 744 $ 464 $ 387 $ 34 $ 19 $ 8
</TABLE>
- ------------------------
* Not in operation during such period.
THE ADVISER
The Trust and Wellington Management Company, LLP (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; and .10% of the combined daily net assets of the
Corporate Daily Income and Treasury 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. 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.
S-14
<PAGE>
For the fiscal years ended January 31, 1995, 1996 and 1997, the Portfolios
paid advisory fees as follows:
<TABLE>
<CAPTION>
FEES PAID (000) FEE WAIVERS (000)
--------------------------- ---------------------------
1995 1996 1997 1995 1996 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Money Market Portfolio.................... $ 46 $ 12 $ 6 $ 13 $ 29 $ 33
Prime Obligation Portfolio................ $ 165 $ 197 $ 227 $ 443 $ 443 $ 485
Government Portfolio...................... $ 12 $ 32 $ 44 $ 34 $ 97 $ 155
Government II Portfolio................... $ 56 $ 67 $ 62 $ 150 $ 149 $ 138
Treasury Portfolio........................ $ 3 $ 3 $ 2 $ 10 $ 11 $ 20
Treasury II Portfolio..................... $ 28 $ 44 $ 45 $ 77 $ 84 $ 93
Federal Securities Portfolio.............. $ 2 * * $ 0 * *
Corporate Daily Income Portfolio.......... $ 36 $ 30 $ 27 $ 6 $ 23 $ 23
Treasury Securities Daily Income
Portfolio............................... * * * * * *
Short-Duration Government Portfolio....... $ 88 $ 65 $ 57 $ 16 $ 14 $ 14
Intermediate-Duration Government
Portfolio............................... $ 235 $ 157 $ 137 $ 43 $ 34 $ 11
GNMA Portfolio............................ $ 190 $ 144 $ 120 $ 35 $ 7 $ 3
</TABLE>
- ------------------------
* Not in operation during such period.
+ Not an adviser during such period.
DISTRIBUTION
The Trust has adopted a Distribution Plan (the "Plan") for the Sweep Class
and Class G shares of each Portfolio that offers Sweep Class or Class G shares
(only the Money Market, Prime Obligation, Government, Government II, Treasury
and Treasury II Portfolios offer Sweep Class 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 Sweep Class shareholders provides that the Trust
will pay the Distributor a fee of up to .50% of the average daily net assets of
a Portfolio's Sweep Class shares that the Distributor can use to compensate
broker-dealers and service providers, including affiliates of the Distributor,
that provide distribution-related services to Sweep Class shareholders or to
their customers who beneficially own Sweep Class shares.
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 Sweep Class and Class G Plans 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.
S-15
<PAGE>
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, 1997, the Portfolios incurred the
following distribution expenses:
<TABLE>
<CAPTION>
AMOUNT PAID
TO
3RD PARTIES
BY
TOTAL DIST. SFS FOR
EXPENSES AS DISTRIBUTOR
TOTAL DIST. A % OF NET RELATED SALES PRINTING OTHER
PORTFOLIO CLASS EXPENSES ASSETS SERVICES EXPENSES COSTS COSTS*
- ------------------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Government Portfolio G $ 3,050,565 .43 $2,864,380 $ 0 $ 21,665 $ 164,520
Short-Duration Government Portfolio D*** $ 1 .03 $ 1 $ N/A N/A
Intermediate-Duration Government D*** $ 9 .03 $ 4 $ $ 2 $ 3
Portfolio
GNMA D*** $ 22 .03 $ 13 $ 0 $ 6 $ 3
</TABLE>
- ------------------------
* Costs of complying with securities laws pertaining to the distribution of
shares.
** Not in operation during such period.
*** Class is no longer offered.
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 each
Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as 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, FMB
Funds, Inc., First American Funds, Inc, First American Investment Funds, Inc.,
First American Strategy Funds, Inc., HighMark Funds, Marquis
Funds-Registered Trademark-, Monitor Funds, Morgan Grenfell Investment Trust,
The PBHG Funds, Inc., The Pillar Funds, Profit Funds Investment Trust, Rembrandt
Funds-Registered Trademark-, Santa Barbara Group of Mutual Funds, Inc., 1784
Funds-Registered Trademark-, SEI Asset Allocation Trust, SEI Index Funds, SEI
Institutional Investments Trust, SEI International Trust, SEI Institutional
Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Funds,
STI Classic Variable Trust, and TIP Funds, each of which is an open-end
management investment company managed by SEI Fund Management or its affiliates
and, except for Profit Funds Investment Trust, Rembrandt
Funds-Registered Trademark-, and Santa Barbara Group of Mutual Funds, Inc., are
distributed by SEI Investments Distribution Co.
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 Adviser, Manager and the
Distributor, 1981-1994. Trustee of the Arbor Fund, Marquis
Funds-Registered Trademark-, The Advisors' Inner Circle Fund, SEI Liquid Asset
Trust, SEI Tax Exempt Trust, SEI Index Funds,
S-16
<PAGE>
SEI Asset Allocation Trust, SEI International Trust, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, 1784
Funds-Registered Trademark-, Pillar Funds, and Rembrandt
Funds-Registered Trademark-.
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 Adviser,
Manager and Distributor. Trustee of The Arbor Fund, Marquis
Funds-Registered Trademark-, The Advisors' Inner Circle Fund, SEI Liquid Asset
Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI Asset Allocation Trust, SEI
Institutional Investments Trust, SEI International Trust, and SEI Institutional
Managed Trust.
F. WENDELL GOOCH (12/3/32)--Trustee**--P.O. Box 190, Paoli, IN 47454.
Retired; President, Orange County Publishing Co., Inc., from October 1981 to
January 1, 1997. Publisher of the Paoli News and the Paoli Republican and Editor
of the Paoli Republican from January 1981 to January 1, 1997. President, H & W
Distribution, Inc. since July 1984. Executive Vice President, Trust Department,
Harris Trust and Savings Bank and Chairman of the Board of Directors of The
Harris Trust Company of Arizona before January 1981. Trustee of STI Classic
Funds, SEI Liquid Asset Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI Asset
Allocation Trust, SEI International Trust, SEI Institutional Managed Trust, and
SEI Institutional Investments Trust.
FRANK E. MORRIS (12/30/23)--Trustee**--105 Walpole Street, Dover, MA 02030.
Retired since 1990. Peter Drucker Professor of Management, Boston College,
1989-1990. President, Federal Reserve Bank of Boston, 1968-1988. Trustee of The
Arbor Fund, Marquis Funds-Registered Trademark-, The Advisors' Inner Circle
Fund, SEI Liquid Asset Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI
International Trust, SEI Asset Allocation Trust, SEI Institutional Managed
Trust, and SEI Institutional Investments Trust.
JAMES M. STOREY (4/12/31)--Trustee**--89A Mt. Vernon Street, Boston, MA
02108. Retired since 1994. Partner, Dechert Price & Rhoads, from September
1987-December 1993; Trustee of The Arbor Fund, Marquis
Funds-Registered Trademark-, The Advisors' Inner Circle Fund, SEI Liquid Asset
Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI Asset Allocation Trust, SEI
Institutional Investments Trust, SEI International Trust, and SEI Institutional
Managed Trust.
GEORGE J. SULLIVAN, JR. (11/13/42)--Trustee**--48 Catherine Drive, Peabody,
MA 01960. General Partner, Teton Partners, L.P., since 1991; Chief Financial
Officer, Noble Partners, L.P., since 1991; Treasurer and Clerk, Peak Asset
Management, Inc., since 1991; Trustee, Navigator Securities Lending Trust, since
1995. Trustee of SEI Liquid Asset Trust, SEI Tax Exempt Trust, SEI Index Funds,
SEI Asset Allocation Trust, SEI Institutional Investments Trust, SEI
International Trust, and SEI Institutional Managed Trust.
DAVID G. LEE (4/16/52)--President, Chief Executive Officer--Senior Vice
President of the Manager and the Distributor since 1993. Vice President of the
Adviser, Manager and the Distributor, 1991-1993. President, GW Sierra Trust
Funds prior to 1991.
KATHRYN L. STANTON (11/19/58)--Vice President, Assistant Secretary--Vice
President, Deputy General Counsel, Vice President and Assistant Secretary of
SEI, the Adviser, Manager and Distributor since 1994. General Counsel,
Investment Systems and Services, since 1997. 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 Adviser, Manager and Distributor since
1988.
KEVIN P. ROBINS (4/15/61)--Vice President, Assistant Secretary--Senior Vice
President, General Counsel and Assistant Secretary of SEI, Senior Vice
President, General Counsel and Secretary of the Adviser, Manager and the
Distributor since 1994. Vice President and Assistant Secretary of SEI, the
Adviser, Manager and Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius
LLP (law firm), 1988-1992.
S-17
<PAGE>
TODD B. CIPPERMAN (2/14/66)--Vice President, Assistant Secretary--Vice
President and Assistant Secretary of SEI, the Adviser, Manager and the
Distributor since 1995. Associate, Dewey Ballantine (law firm), 1994-1995.
Associate, Winston & Strawn (law firm), 1991-1994.
MARK E. NAGLE (10/20/59)--Controller and Chief Financial Officer--Vice
President of Fund Accounting and Administration for SEI Fund Resources and the
Manager since 1996. Vice President of Fund Accounting, BISYS Fund Services
(1995-1996). Senior Vice President and Site Manager, Fidelity Investments
(1981-1995).
BARBARA A. NUGENT (6/18/56)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of SEI, the Adviser, Manager and Distributor
since 1996. Associate, Drinker, Biddle & Reath (law firm). Assistant Vice
President/Administration, Delaware Service Company, Inc. (1992-1993), Assistant
Vice President--Operations, Delaware Service Company, Inc. (1988-1992).
MARC H. CAHN (6/19/57)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of SEI, the Adviser, Manager and Distributor
since 1996. Associate General Counsel, Barclays Bank PLC (1995-1996). ERISA
counsel, First Fidelity Bancorporation (1994-1995). Associate, Morgan, Lewis &
Bockius LLP (1989-1994).
RICHARD W. GRANT (10/25/45)--Secretary--2000 One Logan Square, Philadelphia,
PA 19103, Partner, Morgan, Lewis & Bockius LLP, counsel to the Trust, SEI, the
Adviser, 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>
PENSION OR TOTAL COMPENSATION FROM
AGGREGATE RETIREMENT BENEFITS ESTIMATED REGISTRANT AND FUND
COMPENSATION ACCRUED AS ANNUAL COMPLEX PAID TO DIRECTORS
NAME OF FROM REGISTRANT PART OF BENEFITS UPON FOR
PERSON AND POSITION FOR FYE 1/31/97 FUND EXPENSES RETIREMENT FYE 1/31/97
- ---------------------------------- ----------------- ----------------------- -------------- ---------------------------
<S> <C> <C> <C> <C>
Robert A. Nesher, Trustee*........ $ 0 $ 0 $ 0 $0 for services on 8 boards
Richard F. Blanchard,
Trustee(1)...................... $ 4,554 $ 0 $ 0 $22,500 for services on 8
boards
William M. Doran, Trustee*........ $ 0 $ 0 $ 0 $0 for services on 8 boards
F. Wendell Gooch, Trustee**....... $ 18,479 $ 0 $ 0 $90,000 for services on 8
boards
Frank E. Morris, Trustee**........ $ 18,479 $ 0 $ 0 $90,000 for services on 8
boards
James M. Storey, Trustee**........ $ 18,479 $ 0 $ 0 $90,000 for services on 8
boards
George J. Sullivan, Trustee**..... $ 8,818 $ 0 $ 0 $45,000 for services on 8
boards
</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, Storey, Sullivan and Morris serve as members of the Audit
Committee of the Trust.
(1) Deceased May 7, 1996
S-18
<PAGE>
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. 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. Make loans, except that each Portfolio may purchase or hold debt instruments
in accordance with its investment objective and policies and may enter into
repurchase agreements, provided that repurchase agreements maturing in more
than seven days, restricted securities and other illiquid securities are not
to exceed, in the aggregate, 10% of the Portfolio's net assets.
4. Pledge, mortgage or hypothecate assets except to secure temporary borrowings
permitted by (1) above in aggregate amounts not to exceed 10% of the net
assets of such Portfolio taken at fair market value at the time of the
incurrence of such loan.
5. Invest in companies for the purpose of exercising control.
6. Acquire more than 10% of the voting securities of any one issuer.
7. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts including (with the exception of the
Short-Duration Government, Intermediate-Duration Government, and GNMA
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.
8. 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.
9. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
10. 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 may not
purchase securities of other open-end investment companies.
11. 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.
12. 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
S-19
<PAGE>
more than 1/2 of 1% of such shares or securities together own more than 5%
of such shares or securities.
13. 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.
14. Purchase warrants, puts, calls, straddles, spreads or combinations thereof,
except that the Intermediate-Duration Government and GNMA Portfolios may
invest in options on futures contracts.
15. Invest in interests in oil, gas or other mineral exploration or development
programs.
16. 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.
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, Corporate Daily Income
and/or Treasury 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
S-20
<PAGE>
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 instrument 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, 1997, 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, 5.41% and 5.55%; Prime Obligation,
5.30% and 5.44%; Government, 5.24% and 5.37%; Government II, 5.21% and 5.34%;
Treasury, 5.24% and 5.38%; Treasury II, 4.89% and 5.01%, 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, 1997, 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, 5.12% and 5.25%; Prime Obligation,
5.00% and 5.12%; Government, 4.94% and 5.06%; Government II, 4.91% and 5.03%;
and Treasury II, 4.59% and 4.70%, respectively.
For the seven-day period ended January 31, 1997, 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, 4.91% and 5.03%; Treasury, 4.74% and
4.85%; Prime Obligation, 4.80% and 4.91%; and Treasury II, 4.39% and 4.49%,
respectively.
For the 30-day period ended January 31, 1997, the yield for Class A shares
of each non-money market Portfolio was: Corporate Daily Income, 5.42%;
Short-Duration Government, 6.00%; Intermediate-Duration Government, 6.06%; and
GNMA, 6.63%, respectively.
For the 30-day period ended January 31, 1997, the yield for Class B shares
of each non-money market Portfolio was: Short-Duration Government Portfolio,
5.68.
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, Corporate Daily Income and Treasury 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, 1997 and for the one, five and ten year
periods ended January 31, 1997 were as follows:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
--------------------------------------------
SINCE
PORTFOLIO CLASS ONE YEAR FIVE YEAR TEN YEAR INCEPTION
- --------------------------- ----------------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Corporate Daily Income Class A(1)............. 5.21% * * 5.24%
Portfolio Class B................ * * * *
Class C................ * * * *
Treasury Securities Daily Class A................ * * * *
Income Portfolio Class B................ * * * *
Class C................ * * * *
</TABLE>
S-21
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
--------------------------------------------
SINCE
PORTFOLIO CLASS ONE YEAR FIVE YEAR TEN YEAR INCEPTION
- --------------------------- ----------------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Short-Duration Government Class A(2)............. 4.62% 5.34% * 6.68%
Portfolio Class B(3)............. 4.40% 5.02% * 5.98%
Class C................ * * * *
Intermediate-Duration Class A(4)............. 2.81% 6.08% * 7.23%
Government Portfolio
GNMA Portfolio Class A(5)............. 4.70% 6.70% * 7.99%
Class B(6)............. 14.72% * * 12.01%
Money Market Portfolio Class A(7)............. 5.44% 4.51% 6.03% 6.64%
Class B(8)............. 5.13% 4.20% * 4.49%
Class C(9)............. 4.92% * * 5.11%
Sweep Class
Prime Obligation Portfolio Class A(10)............ 5.38% 4.52% * 6.02%
Class B(11)............ 5.07% 4.21% * 4.39%
Class C(12)............ 4.85% * * 4.88%
Sweep Class
Government Portfolio Class A(13)............ 5.33% * * 5.42%
Class B(14)............ 5.02% * * 5.15%
Class C(15)............ * * * *
Class G(15)............ 4.69% * * 4.79%
Sweep Class
Government II Portfolio Class A(16)............ 5.29% 4.42% 5.87% 5.97%
Class B(17)............ 4.98% 4.10% * 4.32%
Class C................ 4.71% * * 4.85%
Sweep Class
Treasury Portfolio Class A(18)............ 5.32% * * 4.49%
Class B................ * * * *
Class C(19)............ 4.80% * * 4.96%
Sweep Class
Treasury II Portfolio Class A(20)............ 5.07% 4.23% * 5.10%
Class B(21)............ 4.76% 3.92% * 4.54%
Class C(22)............ 4.55% * * 4.74%
Sweep Class
Federal Securities Class A(23)............ * * * *
Portfolio
</TABLE>
- ------------------------
* Not in operation during period.
(1) Corporate Daily Income Class A shares were offered beginning September 28,
1993.
(2) Short-Duration Government Class A shares were offered beginning February
17, 1987.
(3) Short-Duration Government Class B shares were offered beginning November 5,
1990.
(4) Intermediate-Duration Government Class A shares were offered beginning
February 17, 1987.
(5) GNMA Class A shares were offered beginning March 20, 1987.
(6) GNMA Class B shares were offered beginning July 12, 1994. GNMA Class B
shares were fully liquidated on July 10, 1996.
(7) Money Market Class A shares were offered beginning November 15, 1983.
(8) Money Market Class B shares were offered beginning October 12, 1990
(9) Money Market Class C shares were offered beginning May 17, 1995.
S-22
<PAGE>
(10) Prime Obligation Class A shares were offered beginning December 22, 1987.
(11) Prime Obligation Class B shares were offered beginning March 26, 1991.
(12) Prime Obligation Class C shares were offered beginning March 25, 1992 and
were fully liquidated October 27, 1994.
(13) Government Class A shares were offered beginning March 8, 1992, were fully
liquidated June 2, 1993 and were reoffered beginning October 27, 1995.
(14) Government Class B shares were offered beginning August 22, 1995.
(15) Government Class C shares were converted to Class G shares on April 1,
1996.
(16) Government II Class A shares were offered beginning September 6, 1985.
(17) Government II Class B shares were offered beginning January 28, 1991.
(18) Treasury Class A shares were offered beginning September 30, 1992.
(19) Treasury Class C shares were offered beginning July 27, 1995.
(20) Treasury II Class A shares were offered beginning July 28, 1989.
(21) Treasury II Class B shares were offered beginning February 15, 1990.
(22) Treasury II Class C shares were offered beginning May 8, 1995.
(23) Federal Securities Class A shares were offered beginning November 12, 1982,
and were fully liquidated July 15, 1994.
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.
S-23
<PAGE>
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 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, Corporate Daily Income and Treasury Securities Daily Income
Portfolios may be valued by the Manager pursuant to valuations provided by an
independent pricing service. The pricing service relies primarily on prices of
actual market transactions as well as trader quotations. However, the service
may also use a matrix system to determine valuations, which system considers
such factors as security prices, yields, maturities, call features, ratings and
developments relating to specific securities in arriving at valuations. The
procedures of the pricing service and its valuations are reviewed by the
officers of the Trust under the general supervision of the Trustees.
PURCHASE AND REDEMPTION OF SHARES
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(s),
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).
S-24
<PAGE>
TAXES
The following is only a summary of certain additional federal tax
considerations generally affecting the Portfolios and their shareholders that
are not described in the Portfolios' prospectuses. No attempt is made to present
a detailed explanation of the federal, state or local tax treatment of the
Portfolios or their shareholders and the discussion here and in the Portfolios'
prospectuses is not intended as a substitute for careful tax planning.
This discussion of federal income tax consequences is based on the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations issued
thereunder, in effect on the date of this Statement of Additional Information.
New legislation, as well as administrative changes or court decisions, may
significantly change the conclusions expressed herein, and may have a
retroactive effect with respect to the transactions contemplated herein.
QUALIFICATION AS A RIC
In order to qualify for treatment as a regulated investment company ("RIC")
under Subchapter M of the Code, a Portfolio must distribute annually to its
shareholders at least 90% of its investment company taxable income (generally,
net investment income plus the excess, if any, of net short-term capital gain
over net long-term capital loss) (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 are engaged in the same, similar or
related trades or businesses, if the Fund owns at least 20% of the voting power
of such issuers.
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 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.
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Rules of state and local taxation of dividend and capital gains
distributions from RICs 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.
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, 1995, 1996 and 1997, no Portfolio paid any brokerage
commissions.
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
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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, 1997: the Money Market
Portfolio held a tri-party repurchase agreement issued by Lehman Brothers in the
amount of $12,500,000; the Corporate Daily Income Portfolio held a repurchase
agreement issued by Paine Webber in the amount of $4,944,000; the Government
Portfolio held a tri-party repurchase agreement issued by UBS Securities in the
amount of $150,000,000; the Short-Duration Government Portfolio held a
repurchase agreement issued by PaineWebber in the amount of $2,682,000; the
Treasury Portfolio held a tri-party repurchase agreement issued by Lehman
Brothers in the amount of $20,000,000; and the GNMA Portfolio held a repurchase
agreement issued by Paine Webber in the amount of $5,850,000.
The portfolio turnover rate for each fixed income Portfolio for the fiscal
years ending January 31, 1995, 1996 and 1997 was as follows: Short-Duration
Government, 45%, 184% and 145%, respectively; Intermediate-Duration Government,
61%, 115% and 94%, respectively; GNMA, 85%, 20% and 12%, respectively; Corporate
Daily Income Portfolio, 147%, 295% and 141%, 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.
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.
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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 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 May 5, 1997, the following persons were the only persons who were
record owners (or, to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Portfolios. The Trust believes that most of the shares
referred to below were held by the following persons in accounts for their
fiduciary, agency, or custodial customers.
Money Market Portfolio: Northwest Airlines, Attn: Cheryl Johnson, 5101
Northwest Drive, Dept. A4500, St. Paul, MN 55111-3075, 17.20%; Morton
International, Inc., Attn: Oscar Castro, 100 North Riverside Plaza, Chicago, IL
60606-1501, 16.13%; Royal MacCabees Life Insurance Co., Attn: Ed Vodopyanov,
25800 Northwestern Highway, Springfield, MI 48075-8403, 6.34%; Calhoun & Co.,
c/o Comerica Bank, Attn: Dennis Miriani, P.O. Box 1319, 7th Floor, Detroit, MI
48231, 5.97%.
Government Portfolio: Southwest Securities, Special Custodian Account for
Exclusive Benefit of Our Customers, Attn: Cathy Reames, P.O. Box 509002, Dallas,
TX 75250-9002, 62.81%; City National Bank AS, Agent for Various Accounts, Attn:
Richard Bolokowicz, Beverly Hills, CA 90210, 20.26%.
Government II Portfolio: United States Trust Company, Attn: Rich Lynch,
P.O. Box 131, Boston, MA 02101-0131, 20.88%; Fleet Investment Operations, 159 E.
Main Street, NY/RO/T03C, Rochester, NY 14604-1605, 16.76%; Enele Co., c/o Copper
Mountain Financial Group, Attn: Michael Huckins, 1211 SW Fifth Ave, Suite 1900,
Portland, OR 97204-3713, 11.89%; Meg and Co., c/o United States National Bank,
Attn: Debbie Moraca, P.O. Box 520, Johnstown, PA, 15907-0520, 5.76%; Pabl & Co.,
c/o Peabody & Arnold; Attn: Peggy Ohrenberger, 50 Rowes Wharf, Boston, MA
02110-3339, 5.14%.
Prime Obligation Portfolio: The New Hillman Company, c/o Amalgamated Bank
of New York, Attn: David Guitane, 11-15 Union Square, New York, NY 10003-3316,
18.76%; Wellington Trust Company, NA, Attn: Diane Bissell, 200 State Street,
Floor 6, Boston, MA 02109-2610, 9.79%; Calhoun & Co., c/o Comerica Bank, Attn:
Dennis Mirian, P.O. Box 1319, 7th Floor, Detroit, MI 48231, 7.43%; Union Bank of
California, Attn: Jeanne Chizek of Jolie Parra, P.O. Box 109, San Diego, CA
92112-4103, 6.30%; Corestates Bank NA, Attn: Jim Quinlan, Penn Mutual Insurance
Building, Philadelphia, PA 19106, 5.30%.
Treasury Portfolio: BMS and Company, c/o Central Trust Bank, Attn: Wanda
McGlade, P.O. Box 779, Jefferson City, MO 65102-0779, 31.01%; Wabanc & Co., c/o
Washington Trust Bank, Attn: Lyla Morgenstern, P.O. Box 2127, Spokane, WA
99210-2127, 22.30%; Citizens Trust Company, Attn: Carole Strynar, Checking
Account Department, 1 Citizens Drive, Riverside, RI 02915-3032, 7.07%; KPMG Peat
Marwick LLP, Attn: Jarrey Skolnick, 3 Chestnutridge Rd., Montvale, NJ
07645-1898, 7.07%; Citizens
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Massachusetts, Attn: Carol Strynar, Checking Account Department, 1 Citizens
Drive, Riverside, RI 02915-3019, 5.55%.
Treasury II Portfolio: LaSalle National Trust, NA, P.O. Box 1443, Chicago,
IL 60690-1443, 38.61%; The New Hillman Company, c/o Amalgamated Bank of New
York, Attn: David Guitano, 11-15 Union Square, New York, NY 10003-3316, 21.09%.
Short Duration Government Portfolio: SEI Trust Company, Attn: Jacqueline
Esposito, One Freedom Valley Road, Oaks, PA 19456, 27.81%; Trico & Co., c/o
National Bank of Commerce Mississippi, P.O. Box 631, Columbus, MS 39703-0631,
11.84%; Meg and Co., c/o United States National Bank, Attn: Debbie Moraca, P.O.
Box 520, Johnstown, PA 15907-0520, 8.30%.
Intermediate Duration Government Portfolio: Sheldon & Co. (INTEGRA), c/o
National City, Attn: Trust Mutual Funds, P.O. Box 94777, LOC 5312, Cleveland, OH
44101-4777, 21.78%, SEI Trust Company, Attn: Jacqueline Esposito, One Freedom
Valley Road, Oaks, PA 19456, 10.79%; Meg and Co., c/o United States National
Bank, Attn: Debbie Moraca, P.O. Box 520, Johnstown, PA 15907-0520, 6.42%; The
Fulton Company, c/o Fulton Bank Trust Department; Attn: Dennis Patrick, One Penn
Square, Lancaster, PA 17602-2853, 5.60%; North Carolina Trust Company, Attn:
Charlene Martin, P.O. Box 1108, Greensboro, N.C. 27402-1108, 5.54%.
GNMA Portfolio: SEI Trust Company, Attn. Jacqueline Esposito, One Freedom
Valley Road, Oaks, PA 19456, 11.80%; BMS and Company, c/o Central Trust Bank,
Attn: Trust & Financial Services, P.O. Box 779, Jefferson City, MO 65102-0779,
11.23%; Transco & Company, c/o Intrust Bank, N.A., Attn: Pat Wills, P.O. Box
48698, Wichita, KS 67201-8698, 6.60%; ISTCO, c/o Magna Trust Company, P.O. Box
523, Belleville, IL 62222-0523, 5.14%.
Corporate Daily Income Portfolio: SEI Trust Company, Attn: Jacqueline
Esposito, One Freedom Valley Road, Oaks, PA 19456, 36.05%; Wellington Trust
Company, NA, Attn: Diane Bissell, 200 State Street, Floor 6, Boston MA
02109-2610, 12.72%; Port & Co., c/o Today's Bank, Attn: Trust Operations, P.O.
Box 30, Freeport, IL 61032-0030, 8.14%; The Fulton Company, c/o Fulton Bank
Trust Department, Attn: Dennis Patrick, One Penn Square, Lancaster, PA
17602-2853, 5.51%.
EXPERTS
The financial statements incorporated by reference into 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
The Trust's financial statements for the fiscal year ended January 31, 1997,
including notes thereto and the report of Arthur Andersen LLP thereon, are
herein incorporated by reference. A copy of the 1997 Annual Report must
accompany the delivery of this Statement of Additional Information.
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