<PAGE>
SEI DAILY INCOME TRUST
DECEMBER 1, 1998
- --------------------------------------------------------------------------------
GOVERNMENT FUND
- --------------------------------------------------------------------------------
This Prospectus concisely sets forth information about the above-referenced Fund
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, 1998, 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
B and Class C shares of the Government Fund, a money market portfolio (the
"Fund").
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND 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 B
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Management/Advisory Fees (after fee waiver) (1) .15%
12b-1 Fees none
Total Other Expenses .35%
Shareholder Servicing Fees .25%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waiver) (2) .50%
- ---------------------------------------------------------------------------------------------------------------------
</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 .26% FOR THE GOVERNMENT FUND.
(2) ABSENT THIS FEE WAIVER, TOTAL OPERATING EXPENSES FOR THE CLASS B SHARES OF
THE FUND WOULD BE .61%.
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:
Government Fund $ 5 $ 16 $ 28 $ 63
- -------------------------------------------------------------------------------------
</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 FUND. A PERSON WHO PURCHASES SHARES THROUGH A FINANCIAL
INSTITUTION MAY BE CHARGED SEPARATE FEES BY THAT INSTITUTION. THE FUND ALSO
OFFERS CLASS A, CLASS C, CNI CLASS AND SWEEP CLASS SHARES, WHICH ARE SUBJECT TO
THE SAME EXPENSES, EXCEPT THAT CLASS A, CLASS C, CNI CLASS 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 C
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Management/Advisory Fees (after fee waiver) (1) .15%
12b-1 Fees none
Total Other Expenses .55%
Shareholder Servicing Fees .25%
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waiver) (2) .70%
- ---------------------------------------------------------------------------------------------------------------------
</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 .26% FOR THE FUND.
(2) ABSENT THIS FEE WAIVER, TOTAL OPERATING EXPENSES FOR THE CLASS C SHARES OF
THE FUND WOULD BE .81%.
EXAMPLE CLASS C
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
------- ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end
of each time period:
Government Fund $ 7 $ 22 $ 39 $ 87
- -------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE PURPOSE OF THIS TABLE IS TO ASSIST THE INVESTOR IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY BORNE BY INVESTORS IN
CLASS C SHARES OF THE FUND. A PERSON WHO PURCHASES SHARES THROUGH A FINANCIAL
INSTITUTION MAY BE CHARGED SEPARATE FEES BY THAT INSTITUTION. THE FUND ALSO
OFFERS CLASS A, CLASS B, CNI CLASS 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."
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 6, 1998, 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, 1998, 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 1998 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 FUND
- ------------------
CLASS B
1998 $ 1.00 $0.05 $ -- $ (0.05) $ -- $ 1.00
1997 1.00 0.05 -- (0.05) -- 1.00
1996(1) 1.00 0.02 -- (0.02) -- 1.00
CLASS C
1998(2) $ 1.00 $0.03 $ -- $ (0.03) $ -- $ 1.00
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME
RATIO OF INVESTMENT TO AVERAGE TO AVERAGE
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 FUND
- ------------------
CLASS B
1998 5.21% $ 29,102 0.50% 5.06% 0.61% 4.95%
1997 5.02 53,144 0.50 4.91 0.62 4.79
1996(1) 2.39+ 14,997 0.50 5.27 0.63 5.14
CLASS C
1998(2) 5.01% $ 25,341 0.70% 4.93% 0.81% 4.83%
</TABLE>
+ RETURNS FOR THE PERIOD HAVE NOT BEEN ANNUALIZED.
(1) CLASS B SHARES WERE OFFERED BEGINNING AUGUST 22, 1995. ALL RATIOS AND TOTAL
RETURNS FOR THAT PERIOD HAVE BEEN ANNUALIZED.
(2) CLASS C SHARES WERE OFFERED BEGINNING JULY 1, 1997. ALL RATIOS AND TOTAL
RETURN FOR THE PERIOD 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 Class B and Class C
shares of the Trust's Government Fund (the "Fund.") The Fund has separate
classes of shares which provide for variations in distribution, shareholder
servicing and transfer agency costs, voting rights and dividends. The Fund
offers Class A, Class B, Class C, Sweep Class and CNI Class 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 OBJECTIVE
AND POLICIES
___________________________________________________________________________
The Government Fund seeks to preserve principal value and
maintain a high degree of liquidity while providing current
income. The Fund 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 Fund will achieve
its investment objective.
GENERAL INVESTMENT
POLICIES
___________________________________________________________________________
In purchasing obligations, the Fund 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
Fund 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 Fund 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 Fund 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 Fund is governed by Rule 2a-7, its
investment policies are, in certain respects, more
restrictive than those imposed by that Rule.
5
<PAGE>
The Fund may invest up to 10% of its net assets in
illiquid securities. In addition, the Fund may invest in
U.S. Treasury STRIPS (as defined in the "Description of
Permitted Investments and Risk Factors").
The Fund may purchase securities on a when-issued
basis.
For temporary defensive purposes, the Fund 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 Fund. It is a
fundamental policy of the Fund to use its best efforts to
maintain a constant net asset value of $1.00 per share.
There can be no assurance that the Fund will achieve its
investment objective or that the Fund 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 Fund without the consent of the holders of a
majority of the Fund's outstanding shares.
THE FUND 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 FUND. 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 FUND MAKES ADDITIONAL INVESTMENTS AND ANY
INTEREST PAID ON SUCH BORROWINGS WILL REDUCE THE INCOME
OF THE FUND.
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 Investments Fund Management (the "Manager" or the
"Transfer Agent"), provides the Trust with overall
management services, regulatory reporting, all necessary
office space, equipment, personnel and facilities and acts
as transfer agent, dividend disbursing agent, and
shareholder servicing agent for the shares of the Fund.
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 Fund's average daily net assets. The
Manager is contractually obligated 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 Fund.
The
6
<PAGE>
Manager has also voluntarily agreed to waive a portion its
fee in order to limit the total operating expenses of the
Fund. The Manager reserves the right, in its sole
discretion, to terminate this voluntary waiver at any time.
For the fiscal year ended January 31, 1998, the Fund paid
management fees, after waivers, of .14%.
THE ADVISER
_______________________________________________________________________
Wellington Management Company, LLP (the "Adviser" or "WMC")
serves as the investment adviser for the Fund 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 Fund and
continuously reviews, supervises and administers the Fund'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 and its predecessor organizations have
provided investment advisory services to investment
companies since 1928 and to investment counseling clients
since 1960. As of March 31, 1998, the Adviser had
discretionary management authority with respect to
approximately $193.9 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, 1998, the
Fund 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 Investments Company, serves
as the Fund's distributor pursuant to a distribution
agreement (the "Distribution Agreement") with the Trust.
The Fund has adopted plans for each of its classes,
under which firms, including the Distributor, that provide
shareholder and administrative services may receive
7
<PAGE>
compensation therefor. The Class B and Class C 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 Fund may enter into such arrangements
directly.
Under the Class B shareholder service plan, a Fund
will pay shareholder servicing 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%). 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 Fund'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 Fund, 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 Fund shares.
PURCHASE AND
REDEMPTION OF SHARES
____________________________________________________________________________
Financial institutions may acquire shares of the Fund 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
8
<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 the Fund 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 Fund 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 Fund. The Fund'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 redeem shares of the Fund
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 Fund next determined after
receipt by the Transfer Agent of the redemption order.
Payment on redemptions will be made as promptly as possible
and, in any event, within seven days after the redemption
order is received.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor the Trust's Transfer Agent
will be responsible for any loss, liability, cost or
expense for acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The
Trust and the Trust's Transfer Agent will each employ
reasonable procedures to confirm that instructions
communicated by telephone are genuine, including requiring
a form of personal identification prior to acting upon
instructions received by telephone and recording telephone
instructions.
9
<PAGE>
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 Fund, the performance of Class B shares will
normally be higher than that of Class C shares because of
the additional administrative services expenses charged to
Class C shares.
From time to time, the Fund 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
Fund refers to the income generated by a hypothetical
investment in the Fund 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 Fund 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 Fund 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 Fund
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
Fund or its shareholders. In addition, state and local tax
consequences of an investment in the Fund 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 FUND
The Fund is treated as a separate entity for federal income
tax purposes and is not combined with the Trust's other
portfolios. The Fund intends to continue to qualify for the
special tax treatment afforded regulated investment
companies ("RICs") under
10
<PAGE>
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 Fund 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 Fund 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 Fund provides annual
reports to shareholders of the federal income tax status of
all distributions.
Dividends declared by the Fund 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 Fund and received by the shareholders on
December 31 of the year declared if paid by the Fund 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 Fund and may be exempt, depending on the
state, when received by a shareholder from a Fund 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 Fund 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 Fund 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 Fund will be
required to include as part of its current income the
accreted interest on any such obligations even though the
Fund has not received any interest payments on such
obligations during that period. Because the Fund
distributes all of its net investment income to its
shareholders, the Fund 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 Fund shares is
a taxable transaction to the shareholder.
11
<PAGE>
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 Government Fund, the Trust
consists of the following funds: Money Market Fund, Prime
Obligation Fund, Government II Fund, Treasury Fund,
Treasury II Fund, Federal Securities Fund, Short-Duration
Government Fund, Intermediate-Duration Government Fund,
GNMA Fund, Corporate Daily Income Fund and Treasury
Securities Daily Income Fund (formerly, Government
Securities Daily Income Fund). 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 Fund or class will vote
separately on matters relating solely to that Fund 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 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 Investments Fund Management, Oaks, Pennsylvania 19456.
DIVIDENDS
Substantially all of the net investment income (exclusive
of capital gains) of the Fund 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.
12
<PAGE>
Dividends will be paid on the next Business Day to
shareholders who redeem all of their shares of a Fund at
any other time during the month. The dividends on Class B
shares are normally higher than those on Class C shares of
the Fund because of the additional distribution and/or
shareholder servicing expenses charged to Class C shares.
COUNSEL AND INDEPENDENT
PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Arthur Andersen LLP serves as the independent public
accountants of the Trust.
CUSTODIAN AND WIRE AGENT
First Union National Bank, Broad and Chestnut Streets, P.O.
Box 7618, Philadelphia, Pennsylvania 19101 (the
"Custodian"), acts as custodian and wire agent of the
assets of the Fund. 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 Fund 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 Fund'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 Fund
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 Fund will have actual or constructive
possession of the security as collateral for the repurchase
agreement. The Fund bears a risk of loss in the event the
other party defaults on its obligations and the Fund is
delayed or prevented from exercising its rights to dispose
of the collateral or if the Fund realizes a loss on the
sale of the collateral. The Fund 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
13
<PAGE>
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 Fund'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.
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 Fund 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 Fund
before settlement.
14
<PAGE>
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 4
The Trust................................................................. 5
Investment Objective and Policies......................................... 5
General Investment Policies............................................... 5
Investment Limitations.................................................... 6
The Manager............................................................... 6
The Adviser............................................................... 7
Distribution and Shareholder Servicing.................................... 7
Purchase and Redemption of Shares......................................... 8
Performance............................................................... 10
Taxes..................................................................... 10
General Information....................................................... 12
Description of Permitted Investments and Risk Factors..................... 13
</TABLE>
15
