<PAGE>
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO, AMONG OTHER THINGS, THIS PROSPECTUS HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SECURITIES OF THE FUNDS
REFERENCED IN THIS PROSPECTUS MAY NOT BE SOLD NOR MAY OFFERS TO BUY SUCH
SECURITIES BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES
REFERENCED HEREIN IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO SUCH REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
<PAGE>
SEI INSTITUTIONAL MANAGED TRUST
FEBRUARY 28, 1998
- --------------------------------------------------------------------------------
TAX-MANAGED LARGE CAP FUND
- --------------------------------------------------------------------------------
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 February 28, 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 by reference into this Prospectus.
SEI Institutional Managed 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. A portfolio may offer separate classes of shares that
differ from each other primarily in the allocation of certain distribution
expenses, sales charges and minimum investment amounts. This Prospectus offers
the Class A shares of the Tax-Managed Large Cap Fund (the "Portfolio").
- --------------------------------------------------------------------------------
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>
TAX-MANAGED
LARGE CAP
FUND
------------
<S> <C>
Management/Advisory Fees (AFTER FEE WAIVER) .70 (1)
12b-1 Fees None
Total Other Expenses (AFTER REIMBURSEMENTS) .15
Shareholder Servicing Fees (AFTER FEE WAIVER) (2) .03
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (AFTER FEE WAIVERS) (3) .85
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) SEI INVESTMENTS MANAGEMENT CORPORATION ("SIMC") AND CERTAIN OF THE
SUB-ADVISERS (COLLECTIVELY, "ADVISERS") HAVE AGREED TO WAIVE ON A VOLUNTARY
BASIS, A PORTION OF THEIR FEES, AND THE MANAGEMENT/ADVISORY FEES SHOWN
REFLECT THESE VOLUNTARY WAIVERS. SUCH FEE WAIVERS ARE VOLUNTARY AND MAY BE
TERMINATED AT ANY TIME IN THE SOLE DISCRETION OF EACH ENTITY THAT HAS AGREED
TO WAIVE A PORTION OF ITS FEE. ABSENT SUCH FEE WAIVERS, MANAGEMENT/ADVISORY
FEES WOULD BE .85%.
(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 WAIVER, SHAREHOLDER SERVICING
FEES WOULD BE .25% FOR THE PORTFOLIO.
(3) ABSENT THESE FEE WAIVERS, TOTAL OPERATING EXPENSES FOR THE CLASS A SHARES OF
THE PORTFOLIO WOULD BE 1.22%. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE
ADVISER," "THE SUB-ADVISERS" AND "THE MANAGER."
EXAMPLE CLASS A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS.
----------- -----------
<S> <C> <C>
An investor in the Portfolio 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:
Tax-Managed Large Cap Fund $ 9 $ 27
- ------------------------------------------------------------------------------------------------------------------------------
</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 THE EXPENSE TABLE AND EXAMPLE 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 PORTFOLIO. A PERSON WHO PURCHASES
SHARES THROUGH A FINANCIAL INSTITUTION MAY BE CHARGED SEPARATE FEES BY THAT
INSTITUTION. ADDITIONAL INFORMATION MAY BE FOUND UNDER "THE MANAGER," "THE
ADVISER," "THE SUB-ADVISERS" AND "DISTRIBUTION AND SHAREHOLDER SERVICING."
2
<PAGE>
THE TRUST
__________________________________________________________________________
SEI INSTITUTIONAL MANAGED TRUST (the "Trust") is an open-end investment
management company that offers units of beneficial interest ("shares") in
separate diversified and non-diversified portfolios. This prospectus offers
Class A shares of the Trust's Tax-Managed Large Cap Fund (the "Portfolio"). The
investment adviser and investment sub-advisers to the Portfolio are referred to
collectively as the "advisers." 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
___________________________________________________________________________
TAX-MANAGED LARGE
CAP FUND
The Tax-Managed Large Cap Fund's investment objective is to
achieve high long-term, after-tax returns for its
shareholders. The investment objective of the Portfolio is
fundamental, and may not be changed unless authorized by a
vote of the Portfolio's shareholders.
Under normal market conditions, the Portfolio will
invest at least 80% of its total assets in equity
securities of large companies (I.E., companies with market
capitalizations of more than $1 billion at the time of
purchase). Any remaining assets may be invested in
investment grade fixed income securities, including
tax-exempt securities, including variable and floating rate
securities, or in equity securities of smaller companies
that the Portfolio's advisers believe are appropriate in
light of the Portfolio's objective. The Portfolio may
acquire shares of other investment companies, when-issued
and delayed-delivery securities and zero coupon
obligations, and may invest in securities that are
illiquid. The Portfolio may also borrow money and lend its
securities to qualified borrowers.
THE TAX-MANAGED LARGE
CAP FUND'S INVESTMENT
APPROACH
The Portfolio is designed for long-term taxable investors,
including high net worth individuals. While the Portfolio
seeks to minimize taxes associated with the Portfolio's
investment income and realized capital gains, the Portfolio
is very likely to have taxable investment income and will
likely realize taxable gains from time to time.
The Portfolio seeks to achieve favorable after-tax
returns for its shareholders in part by minimizing the
taxes they incur in connection with the Portfolio's
realization of investment income and capital gains. Taxable
Investment income will be minimized by investing primarily
in lower yielding securities. If this strategy is carried
out the Portfolio can be expected to distribute relatively
low levels of taxable investment income.
Realized capital gains will be minimized in part by
investing primarily in established companies with the
expectation of holding these securities for a period of
years. The Portfolio's advisers will generally seek to
avoid realizing short-term capital gains, thereby
minimizing portfolio turnover. When a decision is made to
sell a particular appreciated security, the Portfolio will
attempt to select for sale those share lots with holding
periods sufficient to qualify for long-term capital gains
treatment and among those, the share lots
3
<PAGE>
with the highest cost basis. The Portfolio may, when
prudent, sell securities to realize capital losses that can
be used to offset realized capital gains.
To protect against price declines affecting
securities with large unrealized gains, the Portfolio may
use hedging techniques such as the purchase of put options,
short sales "against the box," the sale of stock index
futures contracts, and equity swaps. By using these
techniques rather than selling such securities, the
Portfolio will attempt to reduce its exposure to price
declines without realizing substantial capital gains under
the current tax law. Although the Portfolio may utilize
certain hedging strategies in lieu of selling appreciated
securities, the Portfolio's exposure to losses during stock
market declines may nonetheless be higher than that of
other funds that do not follow a general policy of avoiding
sales of highly-appreciated securities.
There can be no assurance that the Portfolio will
achieve its investment objective.
GENERAL INVESTMENT
POLICIES AND RISK
FACTORS
____________________________________________________________________________
EQUITY SECURITIES
Equity securities represent ownership interests in a
company or corporation and include common stock, preferred
stock and warrants and other rights to acquire such
instruments and convertible securities. Equity securities
also include structured securities whose risk and return
characteristics are similar to those of traditional equity
securities. Changes in the value of portfolio securities
will not necessarily affect cash income derived from these
securities, but will affect the Portfolio's net asset
value.
FIXED INCOME SECURITIES
Fixed income securities consist primarily of debt
obligations issued by governments, corporations,
municipalities and other borrowers, but may also include
structured securities that provide for participation
interests in debt obligations. 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.
Fixed income securities are considered investment
grade if they are rated in one of the four highest rating
categories by a nationally recognized statistical rating
organization ("NRSRO"), or, if not rated, are determined to
be of comparable quality by the Portfolio's advisers. Fixed
income securities rated BBB or Baa lack outstanding
investment characteristics, and have speculative
characteristics as well.
MONEY MARKET
SECURITIES
The Portfolio may hold cash reserves and invest 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,
shares of tax-exempt money market mutual funds, high-grade
4
<PAGE>
commercial paper and other short-term debt securities)
rated at the time of purchase in the top two categories by
a nationally recognized statistical rating organization
("NRSRO"), or, if not rated, determined by the advisers to
be of comparable quality at the time of purchase.
OPTIONS AND FUTURES
The Portfolio may purchase or write options, futures and
options on futures. Risks associated with investing in
options and futures may include lack of a liquid secondary
market, trading restrictions which may be imposed by an
exchange, government regulations which may restrict
trading, and an imperfect correlation between the pricing
of securities held by the Portfolio and the price of an
option or future.
TAX-EXEMPT SECURITIES
The Portfolio may purchase tax-exempt securities issued by
state and local government issuers to obtain funds to
finance a variety of activities and public facilities,
including municipal bonds and notes. Tax-exempt securities
are obligations of the municipality that issued the
securities and may be subject to the issuers' financial
condition or ability to collect taxes.
TEMPORARY DEFENSIVE
INVESTMENTS
In order to meet liquidity needs, or for temporary
defensive purposes, the Portfolio may invest up to 100% of
its assets in cash and money market securities. To the
extent the Portfolio is engaged in temporary defensive
investing, it will not be pursuing its investment
objective.
For additional information regarding the Portfolio's
permitted investments, see "Description of Permitted
Investments and Risk Factors" in this Prospectus and
"Description of Permitted Investments" in the Statement of
Additional Information. For a description of the above
ratings, see "Description of Ratings" in the Statement of
Additional Information.
INVESTMENT
LIMITATIONS
________________________________________________________________________
The investment objective and certain of the investment
limitations are fundamental policies of the Portfolio.
Fundamental policies cannot be changed with respect to the
Trust or the Portfolio without the consent of the holders
of a majority of the Trust's or the Portfolio's outstanding
shares.
THE PORTFOLIO MAY NOT:
1. With respect to 75% of its assets, (i) purchase the
securities of any issuer (except securities issued or
guaranteed by the United States Government, its agencies
or instrumentalities) if, as a result, more than 5% of
its total assets would be invested in the securities of
such issuer; or (ii) acquire more than 10% of the
outstanding voting securities of any one issuer.
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
5
<PAGE>
apply to investments in obligations issued or guaranteed
by the United States Government, its agencies or
instrumentalities.
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
Trust's Statement of Additional Information.
THE MANAGER
______________________________________________________________________
SEI Fund Management ("SEI Management") provides the Trust
with overall management services, regulatory reporting, all
necessary office space, equipment, personnel and
facilities, and acts as dividend disbursing agent and
shareholder servicing agent. In addition, SEI Management
also serves as transfer agent (the "Transfer Agent") to the
Class A shares of the Trust.
For its management services, SEI Management 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 the Portfolio. SEI Management may waive all or a
portion of its fee in order to limit the operating expenses
of the Portfolio. Any such waivers are voluntary and may be
terminated at any time in SEI Management's sole discretion.
THE ADVISER
_______________________________________________________________________
SEI INVESTMENTS
MANAGEMENT
CORPORATION
SEI Investments Management Corporation ("SIMC") serves as
investment adviser to the Portfolio. SIMC is a wholly-owned
subsidiary of SEI Investments Company ("SEI Investments"),
a financial services company located in Oaks, Pennsylvania.
The principal business address of SEI Investments and SIMC
is Oaks, Pennsylvania 19456. SEI Investments was founded in
1968 and is a leading provider of investment solutions to
banks, institutional investors, investment advisers, and
insurance companies. Affiliates of SIMC have provided
consulting advice to institutional investors for more than
20 years, including advice regarding selection and
evaluation of investment advisers. SIMC currently serves as
manager or administrator to more than __ investment
companies, including more than ___ portfolios, which
investment companies have more than $__ billion in assets
as of September 30, 1997.
SIMC acts as the investment adviser to the Portfolio
and operates as a "manager of managers." As Adviser, SIMC
oversees the investment advisory services provided to the
Portfolio and manages the cash portion of the Portfolio's
assets. Pursuant to separate sub-advisory agreements with
SIMC, and under the supervision of SIMC and the Board of
Trustees, the sub-advisers are responsible for the
day-to-day investment management of all or a discrete
portion of the assets of the Portfolio. The sub-advisers
are selected based primarily upon the research and
recommendations of SIMC, which evaluates quantitatively and
qualitatively each sub-adviser's skills and investment
results in managing assets for specific asset classes,
investment styles and strategies. Subject to Board review,
SIMC allocates and, when appropriate, reallocates the
Portfolio's assets among sub-advisers, monitors and
evaluates sub-adviser performance, and oversees sub-adviser
compliance with the Portfolio's investment objectives,
policies and restrictions. SIMC HAS THE ULTIMATE
6
<PAGE>
RESPONSIBILITY FOR THE INVESTMENT PERFORMANCE OF THE
PORTFOLIO DUE TO ITS RESPONSIBILITY TO OVERSEE SUB-ADVISERS
AND RECOMMEND THEIR HIRING, TERMINATION AND REPLACEMENT.
For these advisory services, SIMC is entitled to a
fee, which is calculated daily and paid monthly, at an
annual rate of .50% of the Tax-Managed Large Cap
Portfolio's average daily net assets. SIMC pays the
sub-advisers a fee out of its investment advisory fees,
which fee is based on a percentage of the average monthly
market value of the assets managed by each sub-adviser.
SIMC and the Trust have obtained an exemptive order
from the Securities and Exchange Commission (the "SEC")
that permits SIMC, with the approval of the Trust's Board
of Trustees, to retain sub-advisers unaffiliated with SIMC
for the Portfolio without submitting the sub-advisory
agreements to a vote of the Portfolio's shareholders. The
exemptive relief permits the disclosure of only the
aggregate amount payable by SIMC under all such
sub-advisory agreements. The Portfolio will notify
shareholders in the event of any addition or change in the
identity of its sub-advisers.
THE SUB-ADVISERS
_________________________________________________________________
ALLIANCE CAPITAL
MANAGEMENT L.P.
Alliance Capital Management L.P. ("Alliance"), serves as a
Sub-Adviser for a portion of the assets of the Portfolio.
Alliance is a registered investment adviser organized as a
Delaware limited partnership, which originated as Alliance
Capital Management Corporation in 1971. Alliance Capital
Management Corporation, an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United
States, is the general partner of Alliance. As of September
30, 1997, Alliance managed over $___ billion in assets. The
principal business address of Alliance is 1345 Avenue of
the Americas, New York, New York 10105.
A committee of investment professionals at Alliance
manages the portion of the Portfolio's assets allocated to
Alliance.
MELLON EQUITY
ASSOCIATES
Mellon Equity Associates ("Mellon Equity") serves as a
Sub-Adviser for a portion of the assets of the Portfolio.
Mellon Equity is a Pennsylvania business trust founded in
1987, whose beneficial owners are Mellon Bank, N.A. and
MMIP, Inc. Mellon Equity is a professional investment
counseling firm that provides investment management
services to the equity and balanced pension, public fund
and profit-sharing investment management markets, and is an
investment adviser registered under the Investment Advisers
Act of 1940. As of September 30, 1997, Mellon Equity had
discretionary management authority with respect to
approximately $___ billion of assets. Mellon Equity's
predecessor organization had managed domestic equity
tax-exempt institutional accounts since 1947. The business
address for Mellon Equity is 500 Grant Street, Suite 3700,
Pittsburgh, Pennsylvania 15258.
William P. Rydell and Robert A. Wilk manage the
portion of the Portfolio's assets allocated to Mellon
Equity. Mr. Rydell is the President and Chief Executive
Officer of Mellon Equity, and has been managing individual
and collective portfolios at Mellon Equity since 1982. Mr.
Wilk is a Senior Vice President and Portfolio Manager of
Mellon Equity, and has been involved with securities
analysis, quantitative research, asset allocation, trading
and client services at Mellon since April, 1990.
7
<PAGE>
SANFORD C. BERNSTEIN
& CO., INC.
Sanford C. Bernstein & Co., Inc. ("Bernstein"), acts as a
sub-adviser for a portion of the assets of the Portfolio.
Bernstein, a New York corporation formed in 1969, is a
registered investment adviser that managed approximately
$69 billion in assets as of September 30, 1997. Bernstein
is controlled by the members of its Board of Directors.
Bernstein's principal business address is 767 Fifth Avenue,
New York, New York 10153.
Lewis A. Sanders, and Marilyn Goldstein Fedak are
primarily responsible for the day-to-day management and
investment decisions with respect to the assets of the
Portfolio. Mr. Sanders has been employed by Bernstein since
1969, and is currently Chairman of the Board, Chief
Executive Officer, and Director of Bernstein. Ms. Fedak,
Chief Investment Officer-Large Capitalization Domestic
Equities and a Director of Bernstein, has been employed by
Bernstein since 1984.
DISTRIBUTION AND
SHAREHOLDER
SERVICING
__________________________________________________________________________
SEI Investments Distribution Co. (the "Distributor"), a
wholly-owned subsidiary of SEI Investments, serves as the
Portfolio's distributor pursuant to a distribution
agreement with the Trust.
The Portfolio has adopted a shareholder servicing
plan for its Class A shares (the "Service Plan") under
which the Distributor is entitled to receive a shareholder
servicing fee of up to .25% of average daily net assets
attributable to Class A shares. Under the Service Plan, the
Distributor may perform, or may compensate other service
providers for performing, the following shareholder and
administrative services: maintaining client accounts;
arranging for bank wires; responding to client inquiries
concerning services provided on investments; assisting
clients in changing dividend options, account designations
and addresses; sub-accounting; providing information on
share positions to clients; forwarding shareholder
communications to clients; processing purchase, exchange
and redemption orders; and processing dividend payments.
Under the Service Plan, the Distributor may retain as a
profit any difference between the fee it receives and the
amount it pays to third parties.
It is possible that an institution may offer
different classes of shares to its customers and thus
receive different compensation with respect to different
classes. These financial institutions may also charge
separate fees to their customers.
The Trust may execute brokerage or other agency
transactions through the Distributor, for which the
Distributor may receive compensation.
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 Portfolio's
shares.
8
<PAGE>
PURCHASE AND
REDEMPTION OF SHARES
____________________________________________________________________________
Financial institutions may acquire Class A shares of the
Portfolio for their own accounts or as record owner on
behalf of fiduciary, agency or custody accounts by placing
orders with SEI Management. 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 SEI Management for
effectiveness 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"). The minimum initial investment
in the Portfolio is $100,000; however, the minimum
investment may be waived at the Distributor's discretion.
All subsequent purchases must be at least $1,000.
Shareholders who desire to purchase shares for cash
must place their orders with SEI Management (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.
Generally, payment for portfolio shares must be transmitted
on the next Business Day following the day the order is
placed. Payment for such shares may only be transmitted or
delivered in federal funds to the wire agent. 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 its shareholders to accept such purchase
order. In addition, because excessive trading (including
short-term "market timing" trading) can hurt the
Portfolio's performance, the Portfolio may refuse purchase
orders from any shareholder account if the accountholder
has been advised that previous purchase and redemption
transactions were considered excessive in number or amount.
Accounts under common control or ownership, including those
with the same taxpayer identification number and those
administered so as to redeem or purchase shares based upon
certain predetermined market indicators, will be considered
one account for this purpose.
Purchases will be made in full and fractional shares
of the 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 the Portfolio is determined by dividing the total
market value of the Portfolio's investments and other
assets, less any liabilities, by the total number of
outstanding shares of the Portfolio. Net asset value per
share is determined daily at 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 Management from an
independent pricing service. Securities having maturities
of 60
9
<PAGE>
days or less at the time of purchase will be valued using
the amortized cost method (described in the Statement of
Additional Information). The pricing service relies
primarily on prices of actual market transactions as well
as trader quotations. However, the pricing service may use
a matrix system to determine valuations of equity and fixed
income securities. This system considers such factors as
security prices, yields, maturities, call features, ratings
and developments relating to specific securities in
arriving at valuations. The procedures used by the pricing
service and its valuations are reviewed by the officers of
the Trust under the general supervision of the Trustees.
Shareholders who desire to redeem shares of the
Portfolio must place their redemption orders with SEI
Management (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. The redemption price is the net asset
value per share of the Portfolio next determined after
receipt by SEI Management 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.
Shares of the Portfolio may be purchased in exchange
for securities included in the Portfolio subject to SEI
Management's determination that the securities are
acceptable. Securities accepted in an exchange will be
valued at the market value. All accrued interest and
subscription of other rights which are reflected in the
market price of accepted securities at the time of
valuation become the property of the Trust and must be
delivered by the Shareholder to the Trust upon receipt from
the issuer.
SEI Management will not accept securities for the
Portfolio unless (1) such securities are appropriate for
the Portfolio at the time of the exchange; (2) such
securities are acquired for investment and not for resale;
(3) the Shareholder represents and agrees that all
securities offered to the Trust for the Portfolio are not
subject to any restrictions upon their sale by the
Portfolio under the Securities Act of 1933, or otherwise;
(4) such securities are traded on the American Stock
Exchange, the New York Stock Exchange or on NASDAQ in an
unrelated transaction with a quoted sales price on the same
day the exchange valuation is made or, if not listed on
such exchanges or on NASDAQ, have prices available from an
independent pricing service approved by the Trust's Board
of Trustees; and (5) the securities may be acquired under
the investment restrictions applicable to the Portfolio.
Purchase and redemption orders may be placed by
telephone. Neither the Trust nor SEI Management 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 SEI Management 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.
10
<PAGE>
If market conditions are extraordinarily active, or
other extraordinary circumstances exist, and shareholders
experience difficulties placing redemption orders by
telephone, shareholders may wish to consider placing their
order by other means.
IN-KIND REDEMPTIONS
The Portfolio may follow the practice of distributing
selected appreciated securities to meet redemptions of
certain shareholders and may, within certain limits, use
the selection of securities distributed to meet such
redemptions as a management tool. By distributing
appreciated securities the Portfolio can reduce its
position in such securities without realizing capital
gains. During periods of net withdrawals by shareholders of
the Portfolio, using distributions of securities also
enables the Portfolio to avoid the forced sales of
securities to raise cash for meeting redemptions. The
Portfolio currently intends to meet redemptions solely in
cash, but may adopt in the future a policy of meeting
shareholder redemptions in whole or in part through the
distribution of readily marketable securities. Such a
policy would only be adopted after giving notice to the
shareholders and only in conjunction with putting in place
a program whereby redeeming shareholders who receive
securities could elect to sell the securities received to a
designated broker-dealer at no cost and at a price equal to
the price used in determining the redemption value of the
distributed securities. A redeeming shareholder of the
Portfolio who received securities would incur no more or
less taxable gain than if the redemption had been paid in
cash.
The Portfolio will only distribute readily marketable
securities, which would be valued pursuant to the
Portfolio's valuation procedures. The practice of
distributing appreciated securities to meet redemptions can
be a useful tool for the tax-efficient management of the
Portfolio. This election would need to be made in a letter
of instruction which would be provided to shareholders
before the policy was implemented. Shareholders not making
an affirmative election to sell distributed securities to a
designated broker-dealer, would be required to take
delivery of any securities distributed upon a redemption of
shares. Such shareholders could incur brokerage charges and
other costs and may be exposed to market risk in selling
the distributed securities.
PERFORMANCE
______________________________________________________________________
From time to time, the Portfolio may advertise yield and
total return. These figures will be based on historical
earnings, and are not intended to indicate future
performance. The yield of the Portfolio refers to the
annualized income generated by an investment in the
Portfolio over a specified 30-day period. The yield is
calculated by assuming that the same amount of income
generated by the investment during that period is generated
in each 30-day period over one year and is shown as a
percentage of the investment.
The total return of the Portfolio refers to the
average compounded rate of return to a hypothetical
investment redeemed at the end of the specified period
covered by the total return figure, 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 and assuming the
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reinvestment of all dividend and capital gain
distributions. The total return of the Portfolio may also
be quoted as a dollar amount or on an aggregate basis, an
actual basis, without inclusion of any front-end or
contingent sales charges, or with a reduced sales charge in
advertisements distributed to investors entitled to a
reduced sales charge.
The Portfolio may periodically compare its
performance to that of: (i) other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical),
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) other investment alternatives.
The Portfolio may quote Morningstar, Inc., a service that
ranks mutual funds on the basis of risk-adjusted or
after-tax performance, and Ibbotson Associates of Chicago,
Illinois, which provides historical returns of the capital
markets in the U.S. The 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. The Portfolio may also quote financial and
business publications and periodicals as they relate to
fund management, investment philosophy, and investment
techniques.
The 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. The Portfolio may also use total
return figures showing after-tax returns, including
comparisons to tax-deferred vehicles such as Individual
Retirement Accounts ("IRAs") and variable annuities.
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
taxes. Additional information concerning taxes is set forth
in the Statement of Additional Information.
TAX STRATEGY OF THE
PORTFOLIO
Taxes are a major influence on the net returns that
investors receive on their taxable investments. Today,
dividends and short-term capital gains distributed by
mutual funds are taxed at federal income tax rates as high
as 39.6%, and distributions of mid-term capital gains are
taxed at a rate of 28% and long-term capital gains are
taxed at a federal tax rate of 20%. Including state taxes
and the federal itemized deduction phaseout, the top
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tax rates in high-tax states such as California, New York,
Massachusetts are in a range of 45-48% on dividend income
and short-term gains and 33-36% on long-term capital gains.
Most equity mutual funds are managed to maximize
PRE-TAX returns, largely ignoring the considerable impact
on returns of taxes incurred by investors in connection
with distributions of income and capital gains. In
contrast, the Portfolio seeks to achieve high long-term
AFTER-TAX returns for its shareholders by managing its
investments so as to minimize and defer the taxes incurred
by shareholders as a consequence of their investment in the
Portfolio. The Portfolio seeks to achieve returns primarily
in the form of unrealized capital appreciation, which
currently does not give rise to tax obligations for
shareholders.
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, so as to be
relieved of federal income tax on net investment company
taxable income (including the excess, if any, of net
short-term capital gains over net long-term capital losses)
and net capital gains (the excess of net long-term capital
gains over net short-term capital losses) distributed to
shareholders.
TAX STATUS
OF DISTRIBUTIONS
The Portfolio distributes substantially all of its net
investment company taxable income to shareholders.
Dividends from the Portfolio's net investment company
taxable income are taxable to its shareholders as ordinary
income (whether received in cash or in additional shares),
and generally will qualify for the dividends-received
deduction for corporate shareholders to the extent that
such dividends are derived from dividends received by the
portfolio from domestic corporations. Distributions of net
capital gains are also not eligible for the corporate
dividends-received deduction and are taxable to
shareholders as long-term capital gains, regardless of how
long a shareholder has held shares. The Portfolio will
provide 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.
The Portfolio intends to make sufficient
distributions to avoid liability for the federal excise tax
applicable to RICs.
The sale, exchange or redemption of the Portfolio's
shares generally 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 October 20, 1986. The
Declaration of Trust permits the Trust to offer separate
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series ("portfolios") of shares and different classes of
each portfolio. All consideration received by the Trust for
shares of any class of any portfolio and all assets of such
portfolio or class belong to that portfolio or class,
respectively, and would be subject to the 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 federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
Certain shareholders in one or more of the portfolios
may obtain asset allocation services from the Adviser and
other financial intermediaries with respect to their
investments in such portfolios. If a sufficient amount of a
portfolio's assets are subject to such asset allocation
services, the Portfolio may incur higher transaction costs
and a higher portfolio turnover rate than would otherwise
be anticipated as a result of redemptions and purchases of
Portfolio shares pursuant to such services. Further, to the
extent that the Adviser is providing asset allocation
services and providing investment advice to the Portfolio,
it may face conflicts of interest in fulfilling its
responsibilities because of the possible differences
between the interests of its asset allocation clients and
the interest of the Portfolio.
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 the Portfolio or class will vote
separately on matters pertaining solely to the Portfolio or
class, such as any distribution plan. 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 unaudited financial statements
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.
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<PAGE>
DIVIDENDS AND
DISTRIBUTIONS
The Portfolio will be managed toward an objective of
achieving long-term, after-tax returns in part by
minimizing shareholders taxes. Because distributions of net
investment income and realized capital gains give rise to
shareholder taxes, the Portfolio will generally seek to
select and manage its investments so as to minimize net
investment income and net realized gains and associated
distributions. The Portfolio can be expected to generally
distribute a lesser percentage of returns each year than
other equity mutual funds. There can be no assurance,
however, that the Portfolio can be managed to avoid taxable
distributions. The Portfolio's ability to utilize or the
desirability of various tax management techniques and
securities lending may be reduced or eliminated by future
tax and other legislation, regulations, administrative
interpretations, or court decisions.
Substantially all of the net investment income
(exclusive of capital gains) of the Portfolio is
periodically declared and paid as a dividend. Dividends
currently are paid on a quarterly basis for the Portfolio.
To the extent that the Portfolio has net investment
income and net realized capital gains in any year, the
Portfolio's present policy is to make (A) at least one
distribution annually (normally in December) of or
substantially all of the investment income (if any), less
the Portfolio's direct expenses and (B) at least one
distribution annually of all or substantially all of the
net realized capital gains (if any), reduced by any
available capital loss carryforwards from prior years.
Shareholders may reinvest all distributions in shares of
the Portfolio without a sales charge at the net asset value
per share as of the close of business on the record date.
The Portfolio's net investment income consists of all
income accrued on the Portfolio's assets, less all actual
and accrued expenses of the Portfolio determined in
accordance with generally accepted accounting principles.
The Portfolio's net realized capital gains, if any, consist
of the net realized capital gains (if any) of the Portfolio
for tax purposes, after taking into account any available
capital loss carryovers.
Shareholders automatically receive all income
dividends and capital gain distributions in additional
shares at the net asset value next determined following the
record date, unless the shareholder has elected to take
such payment in cash. Shareholders may change their
election by providing written notice to SEI Management at
least 15 days prior to the distribution.
Dividends and capital gains of the Portfolio are paid
on a per-share basis. The value of each share will be
reduced by the amount of any such payment. If shares are
purchased shortly before the record date for a dividend or
capital gains distribution, a shareholder will pay the full
price for the share and receive some portion of the price
back as a taxable dividend or distribution.
COUNSEL AND INDEPENDENT
ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Price Waterhouse LLP serves as the independent accountants
of the Trust.
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<PAGE>
CUSTODIAN 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 Trust's assets. 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 the permitted investment
practices for the Portfolio, and the associated risk
factors:
AMERICAN DEPOSITARY
RECEIPTS ("ADRS")
ADRs are securities, typically issued by a U.S. financial
institution (a "depositary"), that evidence ownership
interests in a security or a pool of securities issued by a
foreign issuer and deposited with the depositary. ADRs may
be available through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by
the issuer of the security underlying the receipt and a
depositary, whereas an unsponsored facility may be
established by a depositary without participation by the
issuer of the underlying security.
CONVERTIBLE SECURITIES
Convertible securities are corporate securities that are
exchangeable for a set number of another security at a
prestated price. Convertible securities typically have
characteristics similar to both fixed-income and equity
securities. Because of the conversion feature, the market
value of a convertible security tends to move with the
market value of the underlying stock. The value of a
convertible security is also affected by prevailing
interest rates, the credit quality of the issuer, and any
call provisions.
DERIVATIVES
Derivatives are securities that derive their value from
other securities assets, or indices. The following are
considered derivative securities: options on futures,
futures, options (E.G., puts and calls), swap agreements,
mortgage-backed securities (E.G., CMOs, REMICs, IOs and
POs), when-issued securities and forward commitments,
floating and variable rate securities, convertible
securities, "stripped" U.S. Treasury securities (E.G.,
Receipts and STRIPs), privately issued stripped securities
(E.G., TGRs, TRs and CATS). See elsewhere in this
"Description of Permitted Investments and Risk Factors" for
discussions of certain of these instruments.
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. The Portfolio may use
futures contracts and related options for BONA FIDE hedging
purposes, to offset changes in the value of securities held
or expected to be acquired or be disposed of, to minimize
fluctuations in foreign currencies, or to gain exposure to
a particular market or instrument. The Portfolio will
minimize the risk that it
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<PAGE>
will be unable to close out a futures contract by only
entering into futures contracts that are traded on national
futures exchanges.
A stock index futures contract is a bilateral
agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to a specified
dollar amount times the difference between the stock index
value at the close of trading of the contract and the price
at which the futures contract is originally struck. No
physical delivery of the stocks comprising the index is
made; generally contracts are closed out prior to the
expiration date of the contract.
In order to avoid leveraging and related risks, when
the Portfolio invests in futures contracts, it will cover
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 and that amount will be marked to market on a daily
basis.
The 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 "bone 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 Portfolio's net assets.
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 may be
an imperfect or no correlation between the changes in
market value of the securities held by the 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 futures options.
ILLIQUID SECURITIES
Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price at
which they are being carried on the Portfolio's books.
Illiquid securities include demand instruments with demand
notice periods exceeding seven days, securities for which
there is no active secondary market, and repurchase
agreements with durations (or maturities) over seven days
in length.
MONEY MARKET SECURITIES
Money market securities are high-quality, dollar- and
nondollar-denominated, short-term debt instruments. They
consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S.
banks and U.S. branches of foreign banks; (ii) U.S.
Treasury obligations and obligations issued by the agencies
and instrumentalities of the U.S. Government; (iii)
high-quality commercial paper issued by U.S. and foreign
corporations; (iv) debt obligations with a maturity of one
year or less issued by corporations and governments that
issue high-quality commercial paper or similar
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<PAGE>
securities; and (v) repurchase agreements involving any of
the foregoing obligations entered into with highly-rated
banks and broker-dealers.
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 fifteen- and
thirty-year fixed-rate mortgages, graduated payment
mortgages, and 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.
OPTIONS
The Portfolio may purchase and write put and call options
on indices and enter in related closing transactions. A put
option on a security gives the purchaser of the option the
right to sell, and the writer of the option the obligation
to buy, the underlying security at any time during the
option period. A call option on a security gives the
purchaser of the option the right to buy, and the writer of
the option the obligation to sell, the underlying security
at any time during the option period. The premium paid to
the writer is the consideration for undertaking the
obligations under the option contract.
Put and call options on indices are similar to
options on securities except that options on an index give
the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the
underlying index is greater than (or less than, in the case
of puts) the exercise price of the option. This amount of
cash is equal to the difference between the closing price
of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number.
Thus, unlike options on individual securities, all
settlements are in cash, and gain or loss depends on price
movements in the particular market represented by the index
generally, rather than the price movements in individual
securities.
All options written on indices or securities must be
covered. When the Portfolio writes an option on an index,
it will establish a segregated account containing cash or
liquid securities with its Custodian in an amount at least
equal to the market value of the option and will maintain
the account while the option is open or will otherwise
cover the transaction.
RISK FACTORS: Risks associated with options
transactions include: (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 may be an imperfect
correlation between the movement in prices of options and
the securities underlying them; (3) there may not be a
liquid secondary market for options; and (4) while the
Portfolio will receive a premium when it writes covered
call options, it may not participate fully in a rise in the
market value of the underlying security.
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RECEIPTS
Receipts 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 Permitted Investments. See
also "Taxes."
REPURCHASE AGREEMENTS
Arrangements by which the Portfolio obtains a security and
simultaneously commits to return the security to the seller
at an agreed upon price (including principal and interest)
on an agreed upon date within a number of days from the
date of purchase. Repurchase agreements are considered
loans under the 1940 Act.
SECURITIES LENDING
In order to generate additional income, the Portfolio may
lend its securities pursuant to agreements that require
that the loan be continuously secured by collateral
consisting of cash or securities of the U.S. Government or
its agencies equal to at least 100% of the market value of
the loaned securities. The Portfolio continues to receive
interest on the loaned securities while simultaneously
earning interest on the investment of cash collateral.
Collateral is marked to market daily. There may be risks of
delay in recovery of the securities or even loss of rights
in the collateral should the borrower of the securities
fail financially or become insolvent.
TAX-EXEMPT SECURITIES
Tax-Exempt 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.
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 toll
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 the
facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed
as security for such payment. 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.
U.S. GOVERNMENT AGENCY
OBLIGATIONS
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.
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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, and others
are supported by the right of the issuer to borrow from the
Treasury, while still others are supported only by the
credit of the instrumentality.
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 RECEIPTS
U.S. Treasury receipts are interests in separately traded
interest and principal component parts of U.S. Treasury
obligations that are issued by banks or brokerage firms and
are created by depositing U.S. Treasury notes and
obligations into a special account at a custodian bank. The
custodian holds the interest and principal payments for the
benefit of the registered owners of the certificates of
receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains
the register.
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.
WARRANTS
Warrants are instruments giving holders the right, but not
the obligation, to buy equity or fixed income securities of
a company at a given price during a specified period.
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
When-issued or delayed delivery transactions involve the
purchase of an instrument with payment and delivery taking
place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the
purchase commitment. The Portfolio will maintain with the
custodian a separate account with liquid, high grade debt
securities or cash in an amount at least equal to these
commitments. The interest rate realized on these securities
is fixed as of the purchase date, and no interest accrues
to the Portfolio before settlement.
Additional information on permitted investments and risk
factors can be found in the Statement of Additional
Information.
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TABLE OF CONTENTS
_________________________________________________________________
<TABLE>
<S> <C>
Annual Operating Expenses........................ 2
The Trust........................................ 3
Investment Objective and Policies................ 3
General Investment Policies and Risk Factors..... 4
Investment Limitations........................... 5
The Manager...................................... 6
The Adviser...................................... 6
The Sub-Advisers................................. 7
Distribution and Shareholder Servicing........... 8
Purchase and Redemption of Shares................ 9
Performance...................................... 11
Taxes............................................ 12
General Information.............................. 13
Description of Permitted Investments and Risk
Factors......................................... 16
</TABLE>
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