<PAGE>
SEI DAILY INCOME TRUST
NOVEMBER 15, 1998
- --------------------------------------------------------------------------------
GOVERNMENT II FUND
TREASURY II FUND
- --------------------------------------------------------------------------------
This Prospectus concisely sets forth information about the above-referenced
Funds 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 C shares of the Government II and Treasury II Funds (each a "Fund" and,
together, the "Funds").
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT ANY 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>
<CAPTION>
GOVERNMENT II TREASURY
FUND II FUND
------------- ----------
<S> <C> <C>
Management/Advisory Fees (AFTER FEE WAIVER) (1) .15% .21%
12b-1 Fees none none
Total Other Expenses .35% .34%
Shareholder Servicing Fees .25% .25%
- --------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVER) (2) .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 .21% FOR THE GOVERNMENT II FUND AND .26%
FOR THE TREASURY II FUND .
(2) ABSENT THIS FEE WAIVER, TOTAL OPERATING EXPENSES FOR THE CLASS B SHARES OF
THE FUNDS WOULD BE .56% FOR THE GOVERNMENT II FUND AND .60% FOR THE TREASURY
II FUND.
EXAMPLE CLASS B
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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 II Fund $ 5 $ 16 $ 28 $ 63
Treasury II Fund $ 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 FUNDS. A PERSON WHO PURCHASES SHARES THROUGH A FINANCIAL
INSTITUTION MAY BE CHARGED SEPARATE FEES BY THAT INSTITUTION. EACH OF THE FUNDS
ALSO OFFERS CLASS A SHARES, CLASS C SHARES AND SWEEP CLASS SHARES, WHICH ARE
SUBJECT TO THE SAME EXPENSES, EXCEPT THAT CLASS A, CLASS C, 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>
<CAPTION>
GOVERNMENT II TREASURY
FUND II FUND
------------- ----------
<S> <C> <C>
Management/Advisory Fees (AFTER FEE WAIVER) (1) .15% .21%
12b-1 Fees none none
Total Other Expenses .55% .54%
Shareholder Servicing Fees .25% .25%
- --------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVERS) (2) .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 .21% FOR THE GOVERNMENT II FUND AND .26%
FOR THE TREASURY II FUND.
(2) ABSENT THIS FEE WAIVER, TOTAL OPERATING EXPENSES FOR THE CLASS C SHARES OF
THE FUNDS WOULD BE .76% FOR THE GOVERNMENT II FUND AND .80% FOR THE TREASURY
II FUND.
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 II Fund $ 7 $ 22 $ 39 $ 87
Treasury II Fund $ 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 FUNDS. A PERSON WHO PURCHASES SHARES THROUGH A FINANCIAL
INSTITUTION MAY BE CHARGED SEPARATE FEES BY THAT INSTITUTION. EACH OF THE FUNDS
ALSO OFFERS CLASS A, CLASS B AND SWEEP CLASS SHARES, WHICH ARE SUBJECT TO THE
SAME EXPENSES, EXCEPT THAT CLASS A, CLASS B, 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 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.
<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 II FUND
- --------------------
CLASS B
1998 $ 1.00 $0.05 $-- $(0.05) $--
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(1) 1.00 0.00 -- (0.00) --
CLASS C
1998 $ 1.00 $0.05 $-- $(0.05) $--
1997(2) 1.00 0.01 -- (0.01) --
- -----------------
TREASURY II FUND
- -----------------
CLASS B
1998 $ 1.00 $0.05 $-- $(0.05) $--
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(3) 1.00 0.07 -- (0.07) --
CLASS C
1998 $ 1.00 $0.05 $-- $(0.05) $--
1997 1.00 0.04 -- (0.04) --
1996(4) 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>
- --------------------
GOVERNMENT II FUND
- --------------------
CLASS B
1998 $ 1.00 5.14% $ 31,851 0.50% 5.02% 0.56% 4.96%
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(1) 1.00 0.00 607 0.50 6.44 3.76 3.18
CLASS C
1998 $ 1.00 4.93% $ 35,272 0.70% 4.82% 0.76% 4.76%
1997(2) 1.00 4.71 6,359 0.70 4.69 0.75 4.64
- -----------------
TREASURY II FUND
- -----------------
CLASS B
1998 $ 1.00 4.88% $ 69,572 0.55% 4.78% 0.61% 4.72%
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(3) 1.00 7.16 85,439 0.55 7.18 0.67 7.06
CLASS C
1998 $ 1.00 4.67% $ 11,843 0.75% 4.58% 0.81% 4.52%
1997 1.00 4.55 4,528 0.75 4.45 0.82 4.38
1996(4) 1.00 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) GOVERNMENT II CLASS B SHARES WERE OFFERED BEGINNING JANUARY 28, 1991. ALL
RATIOS AND TOTAL RETURN FOR THAT PERIOD HAVE BEEN ANNUALIZED.
(2) GOVERNMENT II CLASS C SHARES WERE OFFERED BEGINNING NOVEMBER 27, 1996. ALL
RATIOS AND TOTAL RETURN FOR THAT PERIOD HAVE BEEN ANNUALIZED.
(3) TREASURY II CLASS B SHARES WERE OFFERED BEGINNING FEBRUARY 15, 1990. ALL
RATIOS AND TOTAL RETURN FOR THAT PERIOD HAVE BEEN ANNUALIZED.
(4) TREASURY II CLASS C SHARES WERE OFFERED BEGINNING MAY 8, 1995. ALL RATIOS
FOR THAT 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 II and Treasury II Funds (each a "Fund" and,
together, the "Funds"). Each Fund has separate classes of shares which provide
for variations in distribution, shareholder servicing and transfer agency costs,
voting rights and dividends. Each of the Funds offers Class A, Class B, Class C
and Sweep 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
OBJECTIVES AND
POLICIES
___________________________________________________________________________
GOVERNMENT II FUND
The Government II Fund seeks to preserve principal value
and maintain a high degree of liquidity while providing
current income. Under normal market conditions, the Fund
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. Since the Government II Fund invests
exclusively in U.S. Treasury Obligations, its income is not
subject to state or local taxation.
TREASURY II FUND
The Treasury II Fund seeks to preserve principal value and
maintain a high degree of liquidity while providing current
income. Under normal market conditions, the Fund invests
exclusively in U.S. Treasury obligations.
There can be no assurance that the Funds will achieve
their respective investment objectives.
GENERAL INVESTMENT
POLICIES
___________________________________________________________________________
In purchasing obligations, the Funds 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
Funds 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 Funds 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.
5
<PAGE>
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 Funds are governed by Rule 2a-7, their
investment policies are, in certain respects, more
restrictive than those imposed by that Rule.
Each Fund 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 Fund may invest in U.S. Treasury STRIPS (as
defined in the "Description of Permitted Investments and
Risk Factors").
Each Fund may purchase securities on a when-issued
basis.
For temporary defensive purposes, the Funds 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 Funds. It is a
fundamental policy of each Fund to use its best efforts to
maintain a constant net asset value of $1.00 per share.
There can be no assurance that any Fund will achieve its
investment objective, or that any 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 Trust or a Fund without the consent of the holders
of a majority of the Trust or that Fund's outstanding
shares.
EACH FUND 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 Fund would be
invested in the securities of such issuer; provided,
however, that any Fund 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 Fund 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.
6
<PAGE>
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 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 that Fund.
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 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 each Fund.
For these services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, at an annual
rate of each Fund's average daily net assets as follows:
Government II Fund--.19%; and Treasury II Fund--.24%. 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 Funds.
The Manager has also voluntarily agreed to waive up to all
of its fee in order to limit total operating expenses of
the Funds. The Manager reserves the right, in its sole
discretion, to terminate these voluntary waivers at any
time. For the fiscal year ended January 31, 1998, the
Government II and Treasury II Funds paid management fees,
after waivers, of .14% and .20%, respectively, of their
average daily net assets.
THE ADVISER
_______________________________________________________________________
Wellington Management Company, LLP (the "Adviser" or "WMC")
serves as the investment adviser for each Fund under an
advisory agreement with the Trust. The Adviser is a
professional investment counseling firm which provides
investment services to investment companies, employee
benefit plans, endowments, foundations, and other
institutions and individuals. Under the advisory agreement,
the Adviser invests the assets of the Funds and
continuously reviews, supervises and administers each
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
7
<PAGE>
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
whose managing partners are 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 Funds 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 Funds on the basis of their
relative net assets. For the fiscal year ended January 31,
1998, each of the Funds paid the Adviser advisory fees,
after fee waivers, of .01% of their relative net assets.
DISTRIBUTION AND
SHAREHOLDER
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), a
wholly-owned subsidiary of SEI Investments Company, serves
as each Fund's distributor pursuant to a distribution
agreement (the "Distribution Agreement") with the Trust.
The Funds have adopted plans under which firms,
including the Distributor, that provide shareholder and
administrative services may receive compensation therefor.
The Class 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 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
receive 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 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
8
<PAGE>
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 Funds for
their own accounts, or as a record owner on behalf of
fiduciary, agency or custody accounts, by placing orders
with the Transfer Agent (or its authorized 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 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 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 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. A 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 on each Business Day as of 2:00 p.m. Eastern
time on each Business Day for
9
<PAGE>
the Government II Fund and 2:30 p.m. Eastern time on each
Business Day for the Treasury II Fund. 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 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.
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, each 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 a
Fund refers to the income generated by a hypothetical
investment in such 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 a 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.
Each 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
10
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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 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
Funds or their 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 FUNDS
Each Fund is treated as a separate entity for federal
income tax purposes and is not combined with the Trust's
other portfolios. Each Fund 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 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 Funds provide annual
reports to shareholders of the federal income tax status of
all distributions.
Dividends declared by a 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. Each Fund will inform shareholders annually of
the percentage of income and distributions derived from
direct U.S.
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Government obligations. Shareholders should consult their
tax advisers to determine whether any portion of the income
dividends received from a 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, each 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, a 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 Fund 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 Fund 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 Funds, the Trust consists of
the following portfolios: Money Market Fund, Prime
Obligation Fund, Government Fund, Treasury Fund, Federal
Securities Fund, Short-Duration Government Fund,
Intermediate-Duration Government Fund, GNMA Fund, Corporate
Daily Income Fund and Treasury 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
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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.
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 Investments Fund Management, Oaks, Pennsylvania 19456.
DIVIDENDS
Substantially all of the net investment income (exclusive
of capital gains) of each 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. 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
each Fund 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
First Union National Bank, Broad and Chestnut Streets, P.O.
Box 7618, Philadelphia, Pennsylvania 19101 (the
"Custodian") serves as custodian and wire agent of the
assets of the Government II and Treasury II Funds. The
Custodian holds 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:
DEMAND INSTRUMENTS
Certain instruments may entail a demand feature which
permits the holder to demand payment of the principal
amount of the instrument. Demand instruments may include
variable rate master demand notes.
ILLIQUID SECURITIES
Illiquid securities are securities which cannot be disposed
of within seven business days at approximately the price at
which they are being carried on a Fund'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 of more than seven days in length.
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 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.
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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 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 a Fund before
settlement.
TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses................................................. 2
Financial Highlights...................................................... 4
The Trust................................................................. 5
Investment Objectives and Policies........................................ 5
General Investment Policies............................................... 5
Investment Limitations.................................................... 6
The Manager............................................................... 7
The Adviser............................................................... 7
Distribution and Shareholder Servicing.................................... 8
Purchase and Redemption of Shares......................................... 9
Performance............................................................... 10
Taxes..................................................................... 11
General Information....................................................... 12
Description of Permitted Investments and Risk Factors..................... 14
</TABLE>
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