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THE GLENMEDE FUND, INC.
135 EAST BALTIMORE STREET, BALTIMORE MARYLAND 21202
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(800) 442-8299
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PROSPECTUS -- FEBRUARY 27, 1996
(AS REVISED NOVEMBER 1, 1996)
INVESTMENT OBJECTIVES
The Glenmede Fund, Inc., a Maryland corporation ("Glenmede Fund"), is a
no-load, open-end management investment company. Glenmede Fund consists of
ten series of shares, each of which has different investment objectives and
policies. The securities offered hereby are two of these series of shares
(each referenced herein as a "Portfolio") of Glenmede Fund.
Institutional International Portfolio. The objective of the Institutional
International Portfolio is to provide maximum long-term total return
consistent with reasonable risk to principal. The Institutional International
Portfolio seeks to achieve its objective by investing primarily in common
stocks and other equity securities of companies located outside the United
States. The net asset value of this Portfolio will fluctuate.
Emerging Markets Portfolio. The objective of the Emerging Markets Portfolio
is to provide long-term growth of capital. The Emerging Markets Portfolio
seeks to achieve its objective by investing primarily in equity securities of
issuers in countries having emerging markets. The net asset value of this
Portfolio will fluctuate.
Total return consists of income (dividend and/or interest income from
portfolio securities) and capital gains and losses, both realized and
unrealized, from portfolio securities.
Shares of the Portfolios are subject to investment risks, including the
possible loss of principal, are not bank deposits and are not endorsed by,
insured by, guaranteed by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, The Glenmede Corporation or any of its affiliates or any other
governmental agency or bank.
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ABOUT THIS PROSPECTUS
This Prospectus, which should be retained for future reference, sets forth
certain information that you should know before you invest. A Statement of
Additional Information ("SAI") containing additional information about the
Portfolios has been filed with the Securities and Exchange Commission. The
SAI dated February 27, 1996 (as revised November 1, 1996), as amended or
supplemented from time to time, is incorporated by reference into this
Prospectus. The 1995 Annual Report to Shareholders contains additional
investment and performance information about the Portfolios. A copy of the
SAI and the 1995 Annual Report may be obtained, without charge, by writing to
Glenmede Fund at the address shown above or by calling Glenmede Fund at the
telephone number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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EXPENSES OF THE PORTFOLIOS
The following table illustrates the expenses and fees incurred by the
Institutional International and Emerging Markets Portfolios for the fiscal
year ended October 31, 1995, restated to reflect new contractual
arrangements.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases .............. NONE
Sales Load Imposed on Reinvested Dividends ... NONE
Deferred Sales Load .......................... NONE
Redemption Fees .............................. NONE
Exchange Fees ................................ NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Institutional Emerging
International Markets
Portfolio Portfolio
----------------- -------------
Investment Advisory Fees ... .75%(1) 1.25%
--- ----
Administration Fees ........ .06% .06%
--- ----
Other Expenses ............. .12% .50%
--- ----
Total Operating Expenses ... .93% 1.81%
=== ====
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(1) The Glenmede Trust Company (the "Advisor") has agreed to waive its fees
to the extent necessary to ensure that the Institutional International
Portfolio's annual total operating expenses do not exceed 1.00% of such
Portfolio's average net assets.
The purpose of the above table is to assist an investor in understanding
the various estimated costs and expenses that an investor in a Portfolio will
bear directly or indirectly. Actual expenses may be greater or lesser than
such estimates. For further information concerning the Portfolios' expenses
see "Investment Advisor," "Administrative, Transfer Agency and Dividend
Paying Services" and "Board Members and Officers."
The following example illustrates the estimated expenses that an investor
in each Portfolio would pay on a $1,000 investment over various time periods
assuming (i) a 5% annual rate of return and (ii) redemption at the end of
each time period. As noted in the above table, Glenmede Fund charges no
redemption fees of any kind.
<TABLE>
<CAPTION>
1 Year* 3 Years* 5 Years* 10 Years*
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Institutional International Portfolio $10 $30 $ 53 $120
--- --- ---- ----
Emerging Markets Portfolio .......... $19 $58 $103 $233
--- --- ---- ----
</TABLE>
*You would pay the same expenses set forth above on the same investment,
assuming no redemptions at the end of the period.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. THE ABOVE FIGURES ARE ESTIMATES ONLY. ACTUAL
EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
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FINANCIAL HIGHLIGHTS
The table below sets forth financial highlights of the Institutional
International and Emerging Markets Portfolios for the respective periods
presented. The data presented for the Portfolios is derived from the
Portfolios' Financial Statements included in Glenmede Fund's 1995 Annual
Report to Shareholders, which Financial Statements and the report thereon of
Coopers & Lybrand L.L.P., Glenmede Fund's independent accountants, are
incorporated by reference into the SAI. The following information should be
read in conjunction with those Financial Statements.
<TABLE>
<CAPTION>
Institutional International Portfolio
---------------------------------------------
Year Ended Year Ended Year Ended Period Ended
October 31 October 31, October 31, October 31,
1995 1994 1993 1992+
------------ ------------- ------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year ....... $ 12.63 $ 12.00 $ 9.42 $10.00
------- ------- ------- ------
Income from investment operations:
Net investment income# ................. 0.19 0.16 0.15 0.03
Net realized and unrealized gain/(loss)
on investments ...................... (0.13) 1.49 2.88 (0.60)
------- ------- ------- ------
Total from investment operations ...... 0.06 1.65 3.03 (0.57)
------- ------- ------- ------
Less Distributions:
Distributions from net investment income (0.18) (0.13) (0.14) (0.01)
Distributions from net realized capital
gains ............................... (0.17) (0.87) (0.31) --
Distributions in excess of net realized
gains ............................... -- (0.02) -- --
------- ------- ------- ------
Total Distributions ................... (0.35) (1.02) (0.45) (0.01)
------- ------- ------- ------
Net asset value, end of year ............. $ 12.34 $ 12.63 $ 12.00 $ 9.42
======= ======= ======= ======
Total return++ ........................... 0.38% 13.85% 32.34% (5.60)%
======= ======= ======= ======
Ratios to average net assets/Supplemental
data:
Net assets, end of year (in 000's) ....... $44,206 $17,076 $12,979 $9,416
Ratio of operating expenses to average net
assets** ............................... 0.93% 1.00% 1.00% 1.00%*
Ratio of net investment income to average
net assets ............................. 1.78% 1.29% 1.41% 1.28%*
Portfolio turnover rate .................. 25% 39% 34% 10%
</TABLE>
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+ The Portfolio commenced operations on August 1, 1992.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
** Annualized expense ratio before waiver of fees and/or expenses reimbursed
by the investment advisor for the years ended October 31, 1995, 1994 and
1993 and the period ended October 31, 1992 were .93%, 1.01%, 1.08% and
1.08%, respectively.
# Net investment income before waiver of fees and/or expenses reimbursed by
the investment advisor for the years ended October 31, 1995, 1994 and 1993
and the period ended October 31, 1992 were $0.19, $0.16, $0.14 and $0.03,
respectively.
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<TABLE>
<CAPTION>
Emerging Markets Portfolio
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Period Ended
October 31, 1995+
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<S> <C>
Net asset value, beginning of period ................. $ 10.00
-------
Income from investment operations:
Net investment income ........................... 0.16
Net realized and unrealized gain/(loss) on
investments ................................... (0.31)
-------
Total from investment operations .............. (0.15)
-------
Less Distributions:
Distributions from net investment income ........ (0.12)
-------
Distributions from net realized capital gains ... --
Total Distributions ........................... (0.12)
-------
Net asset value, end of period ....................... $ 9.73
=======
Total return ......................................... (1.96)%*
=======
Ratios to average net assets/Supplemental data:
Net assets, end of year (in 000's) ................... $27,297
Ratio of operating expenses to average net assets .... 1.81%*
Ratio of net investment income to average net assets . 1.87%*
Portfolio turnover rate .............................. 50%
</TABLE>
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+ The Portfolio commenced operations on December 14, 1994.
* Annualized.
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PERFORMANCE CALCULATIONS
Each Portfolio may advertise or quote total return data from time to time.
Total return will be calculated on an average annual total return basis, and
may also be calculated on an aggregate total return basis, for various
periods. Average annual total return reflects the average annual percentage
change in value of an investment in the particular Portfolio over the
measuring period. Aggregate total return reflects the total percentage change
in value over the measuring period. Both methods of calculating total return
assume that dividends and capital gains distributions made by a Portfolio
during the period are reinvested in Portfolio shares.
Each Portfolio may compare its total returns to that of other investment
companies with similar investment objectives and to stock and other relevant
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For
example, the total return of the Institutional International Portfolio may be
compared to data prepared by Lipper Analytical Services, Inc. ("Lipper") and
the Morgan Stanley Capital International EAFE Index. Total return of the
Emerging Markets Portfolio may be compared to data prepared by Lipper, the
Morgan Stanley Capital International Emerging Markets Free Index (also known
as the Emerging Markets Index) and the International Financial Corporation
Composite Index. Total return and other performance data as reported in
national financial publications such as MONEY MAGAZINE, FORBES, BARRON'S, THE
WALL STREET JOURNAL and THE NEW YORK TIMES, or in publications of a local or
regional nature, may also be used in comparing the performances of the
Portfolios.
Performance quotations will represent a Portfolio's past performance, and
should not be considered as representative of future results. Since
performance will fluctuate, performance data for a Portfolio should not be
used to compare an investment in a Portfolio's shares with bank deposits,
savings accounts and similar investment alternatives which often provide an
agreed or guaranteed fixed yield/return for a stated period of time.
Shareholders should remember that performance is generally a function of the
kind and quality of the instruments held in a Portfolio, portfolio maturity,
operating expenses and market conditions. Any management fees charged by the
Advisor or institutions to their clients will not be included in a
Portfolio's calculations of total return.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Portfolio is not fundamental and may be
changed by the Board members without shareholder approval.
INSTITUTIONAL INTERNATIONAL PORTFOLIO
The objective of the Institutional International Portfolio is to provide
maximum, long-term total return consistent with reasonable risk to principal.
The Institutional International Portfolio seeks to achieve its objective by
investing primarily in common stocks and other equity securities of companies
located outside the United States. The Institutional International Portfolio
is expected to diversify its investments across companies located in a number
of foreign countries, which may include, but are not limited to, Japan, the
United Kingdom, Germany, France, Switzerland, the Netherlands, Sweden,
Australia, Hong Kong and Singapore. The Institutional International Portfolio
will invest an aggregate of at least 65% of its total assets in the
securities of companies (other than investment companies) in at least three
different countries, other than the United States.
The securities which the Institutional International Portfolio may
purchase include the following: common stocks of companies located outside
the U.S.; shares of closed-end investment companies which invest chiefly in
the shares of companies located outside the U.S. (such shares will be
purchased by the Institutional International Portfolio within the limits
prescribed by the Investment Company Act of 1940 (the "1940 Act"); U.S. or
foreign securities convertible into foreign common stock; and American
Depository Receipts ("ADRs") which are U.S. domestic securities representing
ownership rights in foreign companies.
The Institutional International Portfolio also may enter into forward
currency exchange contracts only in order to hedge against uncertainty in the
level of future foreign exchange rates in the purchase and sale of investment
securities; it may not enter into such contracts for speculative purposes.
See "Investment Techniques--Forward Foreign Currency Exchange Contracts."
The Institutional International Portfolio intends to remain, for the most
part, fully invested in equity securities of companies located outside of the
United States. However, the Institutional International Portfolio may invest
a portion of its assets (up to 20% under normal circumstances) in the
following fixed income and money market securities: obligations of the U.S.
Government and its guaranteed or sponsored agencies, including shares of
open-end or closed-end
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investment companies which invest in such obligations (such shares will be
purchased within the limits prescribed by the 1940 Act and would subject a
shareholder of the Institutional International Portfolio to expenses of the
other investment company in addition to the expenses of the Portfolio);
short-term money market instruments issued in the U.S. or abroad, denominated
in dollars or any foreign currency, including short-term certificates of
deposit (including variable rate certificates of deposit), time deposits with
a maturity no greater than 180 days, bankers acceptances, commercial paper
rated A-1 by Standard & Poor's Ratings Group, Division of McGraw Hill ("S&P")
or Prime-1 by Moody's Investors Service, Inc. ("Moody's"), or in equivalent
money market securities; and high quality fixed income securities denominated
in U.S. dollars, any foreign currency, or a multi-national currency unit such
as the European Currency Unit.
EMERGING MARKETS PORTFOLIO
The objective of the Emerging Markets Portfolio is to provide long-term
growth of capital. The Emerging Markets Portfolio seeks to achieve this
objective by investing primarily in equity securities of issuers in countries
having emerging markets. It is currently expected that under normal
conditions at least 65% of the Emerging Markets Portfolio's total assets will
be invested in emerging market equity securities.
The Portfolio considers countries having emerging markets to be all
countries that are generally considered to be developing or emerging
countries by the International Bank for Reconstruction and Development (more
commonly referred to as the World Bank) and the International Finance
Corporation, as well as countries that are classified by the United Nations
or otherwise regarded by their authorities as developing. The countries may
include, but are not limited to, the following: Turkey, India, Indonesia,
Brazil, Greece, Malaysia, China, Taiwan, South Korea, Portugal and Hungary.
In addition, as used in this Prospectus, "emerging market equity securities"
means (i) equity securities of companies the principal securities trading
market for which is an emerging market country, as defined above, (ii) equity
securities, traded in any market, of companies that derive 50% or more of
their total revenue from either goods or services produced in such emerging
market countries or sales made in such emerging market countries or (iii)
equity securities of companies organized under the laws of, and with a
principal office in, an emerging market country. "Equity securities," as used
in this Prospectus, refers to common stock, preferred stock, warrants or
rights to subscribe to or purchase such securities and sponsored or
unsponsored ADRs, European Depositary Receipts ("EDRs"), and Global
Depositary Receipts ("GDRs"). Determinations as to eligibility will be made
by the Emerging Markets Portfolio's sub-advisor, Pictet International
Management Limited (the "Sub-Advisor"), based on publicly available
information and inquiries made to the companies. See "Risk Factors" for a
discussion of the nature of information publicly available for non-U.S.
companies. The Portfolio will at all times, except during defensive periods,
maintain investments in at least three countries having developing markets.
The Sub-Advisor will limit holdings in any one country to 15% at the time of
investment.
The Emerging Markets Portfolio and its Sub-Advisor may, from time to time,
use various methods of selecting securities for the Emerging Markets
Portfolio, and may also employ and rely on independent or affiliated sources
of information and ideas in connection with management of the Portfolio. The
Sub-Advisor's philosophy for investing in emerging markets focuses on stock
selection and significantly diversifying the Portfolio's investments on a
company and country level. The Sub-Advisor uses a proprietary data base which
screens for emerging markets that meet the Sub-Advisor's strict quantitative
criteria. Generally, in order for a country to be included by the Sub-Advisor
as a permissible emerging market investment it must satisfy three conditions
and meet certain additional criteria. First, the country must meet certain
custodial criteria, such as security of assets and international experience.
Second, the country typically satisfies certain socioeconomic conditions,
including political stability, freedom to invest and repatriate capital and
deregulation of the economy. Third, the country typically satisfies specific
cyclical criteria, including liquidity conditions, industrial production
capacity constraints, direction of real interest rates and the valuation of
the market.
For long-term growth of capital, the Emerging Markets Portfolio may invest
up to 35% of its total assets in debt securities (defined as bonds, notes,
debentures, commercial paper, certificates of deposit, time deposits and
bankers' acceptances) which are rated at least Baa by Moody's or BBB by S&P
or are unrated debt securities deemed to be of comparable quality by the
Sub-Advisor. Securities with the lowest rating in the investment grade
category (i.e., Baa by Moody's or BBB by S&P) are considered to have some
speculative characteristics and are more sensitive to economic change than
higher rated securities. Certain debt securities can provide the potential
for long-term growth of capital based on various factors such as changes in
interest rates, economic and market conditions, improvement in an issuer's
ability to repay principal and pay interest, and ratings upgrades.
Additionally, convertible bonds can provide the potential for long-term
growth of capital through the conversion feature, which enables the holder of
the bond to benefit from increases in the market price of the securities into
which they are convertible. However, there can be no assurances that debt
securities or convertible bonds will provide long-term growth of capital.
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The Emerging Markets Portfolio may lend its portfolio securities. In
addition, the Emerging Markets Portfolio may enter into forward foreign
currency contracts and reverse repurchase agreements. When deemed appropriate
by the Sub-Advisor, the Emerging Markets Portfolio may invest cash balances
in repurchase agreements and other money market investments to maintain
liquidity in an amount to meet expenses or for day-to-day operating purposes.
These investment techniques are described below and under the heading
"Investment Objective and Policies" in the SAI.
When the Sub-Advisor believes that market conditions warrant, the Emerging
Markets Portfolio may adopt a temporary defensive position and may invest
without limit in high-quality money market securities denominated in U.S.
dollars or in the currency of any foreign country. See "Investment Techniques
- -- Temporary Investments."
INVESTMENT TECHNIQUES
Temporary Investments. As determined by the Sub-Advisor, when market
conditions warrant, the Emerging Markets Portfolio may invest up to 100% of
its total assets in the following high-quality (that is, rated Prime-1 by
Moody's or A or better by S&P or, if unrated, of comparable quality as
determined by the Sub-Advisor) money market securities, denominated in U.S.
dollars or in the currency of any foreign country, issued by entities
organized in the United States or any foreign country: short-term (less than
twelve months to maturity) and medium-term (not greater than five years to
maturity) obligations issued or guaranteed by the U.S. Government or the
governments of foreign countries, their agencies or instrumentalities;
finance company and corporate commercial paper, and other short-term
corporate obligations; obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks; and repurchase agreements with
banks and broker-dealers with respect to such securities. The Emerging
Markets Portfolio also may purchase shares of closed-end investment companies
which invest chiefly in the shares of companies located outside the U.S.
(such shares will be purchased by the Emerging Markets Portfolio within the
limits prescribed by the 1940 Act).
Repurchase Agreements. Each Portfolio may enter into repurchase agreements
with qualified brokers, dealers, banks and other financial institutions
deemed creditworthy by its Advisor or Sub-Advisor. Under normal
circumstances, however, a Portfolio will not enter into repurchase agreements
if entering into such agreements would cause, at the time of entering into
such agreements, more than 20% of the value of its total assets to be subject
to repurchase agreements. A Portfolio would generally enter into repurchase
transactions to invest cash reserves and for temporary defensive purposes.
In a repurchase agreement, a Portfolio purchases a security and
simultaneously commits to resell that security at a future date to the seller
(a qualified bank or securities dealer) at an agreed upon price plus an
agreed upon market rate of interest (itself unrelated to the coupon rate or
date of maturity of the purchased security). The securities held subject to a
repurchase agreement may have stated maturities exceeding 13 months, but the
Advisor or Sub-Advisor currently expects that repurchase agreements will
mature in less than 13 months. The seller under a repurchase agreement will
be required to maintain the value of the securities subject to the agreement
at not less than 101% of the repurchase price including accrued interest.
Glenmede Fund's administrator and the Advisor or Sub-Advisor will mark to
market daily the value of the securities purchased, and the Advisor or
Sub-Advisor will, if necessary, require the seller to deposit additional
securities to ensure that the value is in compliance with the 101%
requirement stated above. The Advisor or Sub-Advisor will consider the
creditworthiness of a seller in determining whether a Portfolio should enter
into a repurchase agreement, and a Portfolio will only enter into repurchase
agreements with banks and dealers which are determined to present minimal
credit risk by the Advisor or Sub-Advisor under procedures adopted by the
Board of Directors.
In effect, by entering into a repurchase agreement, a Portfolio is lending
its funds to the seller at the agreed upon interest rate and receiving
securities as collateral for the loan. Such agreements can be entered into
for periods of one day (overnight repo) or for a fixed term (term repo).
Repurchase agreements are a common way to earn interest income on short-term
funds.
The use of repurchase agreements involves certain risks. For example, if
the seller of a repurchase agreement defaults on its obligation to repurchase
the underlying securities at a time when the value of these securities has
declined, a Portfolio may incur a loss upon disposition of them. Default by
the seller would also expose a Portfolio to possible loss because of delays
in connection with the disposition of the underlying obligations. If the
seller of an agreement becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a bankruptcy court
may determine that the underlying securities are collateral not within the
control of a Portfolio and therefore subject to sale by the trustee in
bankruptcy. Further, it is possible that a Portfolio may not be able to
substantiate its interest in the underlying securities.
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Reverse Repurchase Agreements. The Emerging Markets Portfolio may enter
into reverse repurchase agreements. In a reverse repurchase agreement, the
Portfolio sells a security and simultaneously commits to repurchase that
security at a future date from the buyer. In effect, the Portfolio is
temporarily borrowing funds at an agreed upon interest rate from the
purchaser of the security, and the sale of the security represents collateral
for the loan. The Portfolio retains record ownership of the security and the
right to receive interest and principal payments on the security. At an
agreed upon future date, the Portfolio repurchases the security by remitting
the proceeds previously received, plus interest. In certain types of
agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based on the prevailing overnight repurchase rate.
These agreements, which are treated as if reestablished each day, are
expected to provide the Emerging Markets Portfolio with a flexible borrowing
tool. Reverse repurchase agreements are considered to be borrowings by a
Portfolio under the 1940 Act.
The Portfolio's investment of the proceeds of a reverse repurchase
agreement is the speculative factor known as leverage. The Portfolio may
enter into a reverse repurchase agreement only if the interest income from
investment of the proceeds is greater than the interest expense of the
transaction and the proceeds are invested for a period no longer than the
term of the agreement. The Portfolio will maintain with the custodian a
separate account with a segregated portfolio of liquid securities at least
equal to its purchase obligations under these agreements. The Sub-Advisor
will consider the creditworthiness of the other party in determining whether
a Portfolio will enter into a reverse repurchase agreement.
Under normal circumstances the Portfolio will not enter into reverse
repurchase agreements if entering into such agreements would cause, at the
time of entering into such agreements, more than 10% of the value of its
total assets to be subject to such agreements.
The use of reverse repurchase agreements involves certain risks. For
example, the other party to the agreement may default on its obligation or
become insolvent and unable to deliver the securities to the Portfolio at a
time when the value of the securities has increased. Reverse repurchase
agreements also involve the risk that the Portfolio may not be able to
substantiate its interest in the underlying securities.
Lending of Securities. Each Portfolio may lend its portfolio securities
with a value up to one-third of its total assets to qualified brokers,
dealers, banks and other financial institutions for the purpose of realizing
additional net investment income through the receipt of interest on the loan.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even
loss of rights in the collateral should the borrower of the securities fail
financially. Loans will be made only to borrowers deemed by the Advisor or
Sub-Advisor to be of good standing.
"When Issued," "Delayed Settlement," and "Forward Delivery" Securities.
Each Portfolio may purchase and sell securities on a "when issued," "delayed
settlement" or "forward delivery" basis. "When issued" or "forward delivery"
refer to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery. When
issued or forward delivery transactions may be expected to occur one month or
more before delivery is due. Delayed settlement is a term used to describe
settlement of a securities transaction in the secondary market which will
occur sometime in the future. No payment or delivery is made by a Portfolio
in a when issued, delayed settlement or forward delivery transaction until
the Portfolio receives payment or delivery from the other party to the
transaction. A Portfolio will maintain a separate account of cash, U.S.
Government securities or other high grade debt obligations at least equal to
the value of purchase commitments until payment is made. Such segregated
securities will either mature or, if necessary, be sold on or before the
settlement date. Although a Portfolio receives no income from the above
described securities prior to delivery, the market value of such securities
is still subject to change.
A Portfolio will engage in when issued transactions to obtain what is
considered to be an advantageous price and yield at the time of the
transaction. When a Portfolio engages in when issued, delayed settlement or
forward delivery transactions, it will do so for the purpose of acquiring
securities consistent with its investment objective and policies and not for
the purposes of speculation. A Portfolio's when issued, delayed settlement
and forward delivery commitments are not expected to exceed 25% of its total
assets absent unusual market circumstances, and a Portfolio will only sell
securities on such a basis to offset securities purchased on such a basis.
Borrowing. Each Portfolio may purchase securities on a "when issued,"
"delayed settlement" or "forward delivery" basis and the Emerging Markets
Portfolio may enter into reverse repurchase agreements. As a temporary
measure for extraordinary or emergency purposes, each Portfolio may borrow
money from banks. However, neither Portfolio will borrow money for
speculative purposes.
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Forward Foreign Currency Exchange Contracts. Each Portfolio may enter into
forward foreign currency exchange contracts in connection with the purchase
and sale of investment securities; such contracts may not be used for
speculative purposes. A forward foreign currency exchange contract involves
an obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon by
the parties, at a price set at the time of the contract. These contracts may
be bought or sold to protect a Portfolio, to some degree, against a possible
loss resulting from an adverse change in the relationship between foreign
currencies and the U.S. dollar. It should be realized that this method of
protecting the value of a Portfolio's investment securities against a decline
in the value of a currency does not eliminate fluctuations in the underlying
prices of the securities. It simply establishes a rate of exchange at some
future point in time. Additionally, although such contracts tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain which might result should the
value of such currency increase.
Depository Receipts. The Emerging Markets Portfolio may purchase sponsored
or unsponsored ADRs, EDRs and GDRs (collectively, "Depository Receipts") and
the Institutional International Portfolio may purchase sponsored or
unsponsored ADRs. ADRs are Depository Receipts typically issued by a U.S.
bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs and GDRs are typically issued by
foreign banks or trust companies, although they also may be issued by U.S.
banks or trust companies, and evidence ownership of underlying securities
issued by either a foreign or a United States corporation. Generally,
Depository Receipts in registered form are designed for use in the U.S.
securities market and Depository Receipts in bearer form are designed for use
in securities markets outside the United States. Depository Receipts may not
necessarily be denominated in the same currency as the underlying securities
into which they may be converted. Depository Receipts may be issued pursuant
to sponsored or unsponsored programs. In sponsored programs, an issuer has
made arrangements to have its securities traded in the form of Depository
Receipts. In unsponsored programs, the issuer may not be directly involved in
the creation of the program. Although regulatory requirements with respect to
sponsored and unsponsored programs are generally similar, in some cases it
may be easier to obtain financial information from an issuer that has
participated in the creation of a sponsored program. Accordingly, there may
be less information available regarding issuers of securities underlying
unsponsored programs and there may not be a correlation between such
information and the market value of the Depository Receipts. Depository
Receipts also involve the risks of other investments in foreign securities,
as discussed below. For purposes of a Portfolio's investment policies, a
Portfolio's investments in Depository Receipts will be deemed to be
investments in the underlying securities.
Illiquid Securities. The Institutional International Portfolio will not
invest more than 10% of net assets and the Emerging Markets Portfolio will
not invest more than 15% of net assets in securities that are illiquid.
Illiquid securities are difficult to sell promptly at an acceptable price.
Unless specified above and except as described under "Investment
Limitations," the foregoing investment policies are not fundamental and the
Board may change such policies without shareholder approval.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in a Portfolio,
nor can there be any assurance that a Portfolio's investment objective will
be attained. As with any investment in securities, the value of, and income
from, an investment in a Portfolio can decrease as well as increase,
depending on a variety of factors which may affect the values and income
generated by the Portfolio's securities, including general economic
conditions, market factors and currency exchange rates. An investment in the
Emerging Markets Portfolio or the Institutional International Portfolio is
not intended as a complete investment program.
Foreign Securities. Each Portfolio has the right to purchase securities in
any foreign country, developed or underdeveloped. Investors should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations, which are in addition to the
usual risks inherent in domestic investments. Investors should recognize that
investing in the securities of foreign companies involve special risks and
considerations not typically associated with investing in U.S. companies.
These risks and considerations include differences in accounting, auditing
and financial reporting standards, generally higher commission rates on
foreign portfolio transactions, the possibility of expropriation or
confiscatory taxation, adverse changes in investment or exchange control
regulations, political instability which could affect U.S. investment in
foreign countries and potential restrictions on the flow of international
capital. Moreover, the dividends payable on a Portfolio's foreign portfolio
securities may be subject to foreign withholding taxes, thus reducing the net
amount of income available for distribution to the Portfolio's shareholders.
Further, foreign securities often trade with less frequency and volume than
domestic securities
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and, therefore, may exhibit greater price volatility. Also, changes in
foreign exchange rates will affect, favorably or unfavorably, the value of
those securities in a Portfolio which are denominated or quoted in currencies
other than the U.S. dollar. In addition, in many countries there is less
publicly available information about issuers than is available in reports
about companies in the United States. Foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards,
and auditing practices and requirements may not be comparable to those
applicable to U.S. companies. Further, a Portfolio may encounter difficulties
or be unable to pursue legal remedies and obtain judgments in foreign courts.
These risks are often heightened for investments in developing or emerging
markets, including certain Eastern European countries where the risks include
the possibility that such countries may revert to a centrally planned
economy. Developing countries may also impose restrictions on a Portfolio's
ability to repatriate investment income or capital. Even where there is no
outright restriction on repatriation of investment income or capital, the
mechanics of repatriation may affect certain aspects of the operations of a
Portfolio. For example, funds may be withdrawn from the People's Republic of
China only in U.S. or Hong Kong dollars and only at an exchange rate
established by the government once each week.
Some of the currencies in emerging markets have experienced devaluations
relative to the U.S. dollar, and major adjustments have been made
periodically in certain of such currencies. Certain developing countries face
serious exchange constraints.
Lastly, governments of some developing countries exercise substantial
influence over many aspects of the private sector. In some countries, the
government owns or controls many companies, including the largest in the
country. As such, government actions in the future could have a significant
effect on economic conditions in developing countries in these regions, which
could affect private sector companies, the Portfolio and the value of its
securities. Furthermore, certain developing countries are among the largest
debtors to commercial banks and foreign governments. Trading in debt
obligations issued or guaranteed by such governments or their agencies and
instrumentalities involves a high degree of risk.
Brokerage commissions, custodial services, and other costs relating to
investment in foreign securities markets are generally more expensive than in
the United States. Foreign securities markets also have different clearance
and settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of a Portfolio are
uninvested and no return is earned thereon. The inability of a Portfolio to
make intended security purchases due to settlement problems could cause the
Portfolio to miss attractive investment opportunities. Inability to dispose
of portfolio securities due to settlement problems could result either in
losses to the Portfolio due to subsequent declines in value of the portfolio
security or, if the Portfolio has entered into a contract to sell the
security, could result in possible liability to the purchaser.
In many emerging markets, there is less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the United States. The foreign securities markets of
many of the countries in which the Emerging Markets Portfolio may invest may
also be smaller, less liquid, and subject to greater price volatility than
those in the United States.
There are further risk factors, including possible losses through the
holding of securities in domestic and foreign custodian banks and
depositories.
PURCHASE OF SHARES
Shares of each Portfolio are sold without a sales commission on a
continuous basis to the Advisor acting on behalf of its clients ("Clients")
and to other institutions (the "Institutions"), at the net asset value per
share next determined after receipt of the purchase order by Glenmede Fund's
transfer agent. See "Valuation of Shares." The minimum initial investment for
each Portfolio is $25,000; the minimum for subsequent investments for each
Portfolio is $1,000. Glenmede Fund reserves the right to reduce or waive the
minimum initial and subsequent investment requirements from time to time.
Beneficial ownership of shares will be reflected on books maintained by the
Advisor or the Institutions. A prospective investor wishing to purchase
shares in Glenmede Fund should contact the Advisor or his or her Institution.
It is the Advisor's responsibility to transmit orders for share purchases
to Investment Company Capital Corp. ("ICC"), Glenmede Fund's transfer agent,
and deliver required funds to Glenmede Fund's custodian, on a timely basis.
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Glenmede Fund reserves the right, in its sole discretion, to suspend the
offering of shares of the Portfolios or reject purchase orders when, in the
judgment of management, such suspension or rejection is in the best interests
of Glenmede Fund.
Purchases of a Portfolio's shares will be made in full and fractional
shares of a Portfolio calculated to three decimal places. In the interest of
economy and convenience, certificates for shares will not be issued except
upon the written request of the shareholder. Certificates for fractional
shares, however, will not be issued.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the
redemption request by the transfer agent. Generally, a properly signed
written request is all that is required. Any redemption may be more or less
than the purchase price of the shares depending on the market value of the
investment securities held by a Portfolio. An investor wishing to redeem
shares should contact the Advisor or his or her Institution. It is the
responsibility of the Advisor to transmit promptly redemption orders to the
transfer agent.
Payment of the redemption proceeds will ordinarily be made within one
business day, but in no event more than seven days, after receipt of the
order in proper form by the transfer agent. Redemption orders are effected at
net asset value per share next determined after receipt of the order in
proper form by the transfer agent. Glenmede Fund may suspend the right of
redemption or postpone the date of payment at times when the New York Stock
Exchange (the "Exchange") is closed, or under any emergency circumstances as
determined by the Securities and Exchange Commission (the "Commission"). See
"Valuation of Shares" for the days on which the Exchange is closed.
If Glenmede Fund's Board determines that it would be detrimental to the
best interests of the remaining shareholders of a Portfolio to make payment
wholly or partly in cash, Glenmede Fund may pay the redemption proceeds in
whole or in part by a distribution in-kind of securities held by a Portfolio
in lieu of cash in conformity with applicable rules of the Commission.
Investors may incur brokerage charges on the sale of portfolio securities
received as a redemption in kind.
Glenmede Fund reserves the right, upon 30 days' written notice, to redeem
an account in a Portfolio if the net asset value of the account's shares
falls below $100 and is not increased to at least such amount within such
30-day period.
VALUATION OF SHARES
The net asset value of each Portfolio is determined by dividing the total
market value of its investments and other assets, less any of its
liabilities, by the total outstanding shares of the Portfolio. Each
Portfolio's net asset value per share is determined as of the close of
regular trading hours of the Exchange on each day that the Exchange is open
for business and the Portfolio receives an order to purchase or redeem its
shares. Currently the Exchange is closed on weekends and the customary
national business holidays of New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
(or the days on which they are observed). One or more pricing services may be
used to provide securities valuations in connection with the determination of
the net asset value of each Portfolio.
Equity securities listed on a U.S. securities exchange for which market
quotations are available are valued at the last quoted sale price as of the
close of the exchange's regular trading hours on the day the valuation is
made. Securities listed on a foreign exchange and unlisted foreign securities
are valued at the latest quoted sales price available before the time when
assets are valued. Price information on listed securities is taken from the
exchange where the security is primarily traded. Unlisted U.S. equity
securities and listed securities not traded on the valuation date for which
market quotations are readily available are valued not in excess of the asked
prices or less than the bid prices. The value of securities for which no
quotations are readily available (including restricted securities) is
determined in good faith at fair value using methods determined by the Board.
Foreign currency amounts are translated into U.S. dollars at the bid prices
of such currencies against U.S. dollars last quoted by a major bank.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Portfolios normally distribute substantially all of their net
investment income to shareholders in the form of a quarterly dividend. If any
net capital gains are realized, the Portfolios normally distribute such gains
at least once a year. However, see "Dividends, Capital Gains Distributions
and Taxes-Federal Taxes-Miscellaneous," for a discussion of the Federal
excise tax applicable to certain regulated investment companies.
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Undistributed net investment income is included in each Portfolio's net
assets for the purpose of calculating net asset value per share. Therefore,
on a Portfolio's "ex-dividend" date, the net asset value per share excludes
the dividend (i.e., is reduced by the per share amount of the dividend).
Dividends paid shortly after the purchase of shares of a Portfolio by an
investor, although in effect a return of capital, are taxable to the
investor.
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification generally relieves a Portfolio of liability for Federal income
taxes to the extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that a Portfolio distribute to its
shareholders an amount at least equal to 90% of its investment company
taxable income and 90% of its net exempt interest income (if any) for such
taxable year. In general, a Portfolio's investment company taxable income
will be its net investment income, including interest and dividends, subject
to certain adjustments, and net short-term capital gains excluding the excess
of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. Each Portfolio intends to
distribute as dividends substantially all of its investment company taxable
income each year. Such dividends will be taxable as ordinary income to each
Portfolio's shareholders who are not currently exempt from Federal income
taxes, whether such income or gain is received in cash or reinvested in
additional shares. The dividends received deduction for corporations will
apply to such ordinary income distributions to the extent the total
qualifying dividends received by a Portfolio are from domestic corporations
for the taxable year. It is anticipated that only a small part (if any) of
the dividends paid by the Portfolios will be eligible for the dividends
received deduction.
Substantially all of each Portfolio's net realized long-term capital
gains, if any, will be distributed at least annually to its shareholders. A
Portfolio generally will have no tax liability with respect to such gains and
the distributions will be taxable to the shareholders who are not currently
exempt from Federal income taxes as long-term capital gains, regardless of
how long the shareholders have held the shares and whether such gains are
received in cash or reinvested in additional shares.
A shareholder considering buying shares of a Portfolio on or just before
the record date of a dividend should be aware that the amount of the
forthcoming dividend payment, although in effect a return of capital, will be
taxable.
A taxable gain or loss may be realized by a shareholder upon his
redemption or transfer of shares of a Portfolio, depending upon the tax basis
of such shares and their price at the time of redemption or transfer.
It is expected that dividends and certain interest income earned by the
Portfolios from foreign securities will be subject to foreign withholding
taxes or other taxes. So long as more than 50% of the value of a Portfolio's
total assets at the close of any taxable year consists of stock or securities
of foreign corporations, the Portfolio may elect, for U.S. Federal income tax
purposes, to treat certain foreign taxes paid by it, including generally any
withholding taxes and other foreign income taxes, as paid by its
shareholders. If a Portfolio makes this election, the amount of such foreign
taxes paid by the Portfolio will be included in its shareholders' income pro
rata (in addition to taxable distributions actually received by them), and
each shareholder will be entitled (a) to credit his proportionate amount of
such taxes against his U.S. Federal income tax liabilities, or (b) if he
itemizes his deductions, to deduct such proportionate amount from his U.S.
income.
Miscellaneous. Dividends declared in October, November or December of any
year payable to shareholders of record on a specified date in such months
will be deemed to have been received by the shareholders and paid by a
Portfolio on December 31, in the event such dividends are paid during January
of the following year.
A 4% nondeductible excise tax is imposed on regulated investment companies
that fail to currently distribute specified percentages of their ordinary
taxable income and net capital gain (excess of capital gains over capital
losses). Each Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and any net capital gain prior
to the end of each calendar year to avoid liability for this excise tax.
The foregoing summarizes some of the important tax considerations
generally affecting the Portfolios and their shareholders and is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Portfolios should consult their tax advisers with specific reference to
their own tax situation.
The foregoing discussion of tax consequences is based on tax laws and
regulations in effect on the date of this Prospectus, which are subject to
change by legislative or administrative action.
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Shareholders will be advised at least annually as to the federal income
tax consequences of distributions made each year.
Each Portfolio will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or gross proceeds
realized upon sale paid to shareholders who have failed to provide a correct
tax identification number in the manner required, who are subject to
withholding by the IRS for failure properly to include on their return
payments of taxable interest or dividends, or who have failed to certify to
the Portfolio that they are not subject to backup withholding when required
to do so or that they are "exempt recipients."
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on distributions
from Glenmede Fund. A shareholder should consult with his tax adviser with
respect to the tax status of distributions from Glenmede Fund in a particular
state and locality.
Glenmede Fund has obtained a Certificate of Authority to do business as a
foreign corporation in Pennsylvania, and currently does business in that
state. Accordingly, the shares of the Portfolio will be exempt from
Pennsylvania Personal Property Taxes.
INVESTMENT ADVISOR
The Advisor, a limited purpose trust company chartered in 1956, provides
fiduciary and investment services to endowment funds, foundations, employee
benefit plans and other institutions and individuals. The Advisor is a
wholly-owned subsidiary of The Glenmede Corporation and is located at One
Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania
19103. At January 30, 1996, the Advisor had over $8 billion in assets in the
accounts for which it serves in various capacities including as executor,
trustee or investment advisor.
Under separate Investment Advisory Agreements (each, an "Investment
Advisory Agreement") with Glenmede Fund with respect to the Institutional
International Portfolio and the Emerging Markets Portfolio, the Advisor or
SubAdvisor, respectively, subject to the control and supervision of Glenmede
Fund's Board and in conformance with the stated investment objective and
policies of each Portfolio, manages the investment and reinvestment of the
assets of the respective Portfolio. It is the responsibility of the Advisor
or Sub-Advisor to make investment decisions for the Institutional
International Portfolio and Emerging Markets Portfolio, respectively, and to
place each Portfolio's purchase and sales orders.
INSTITUTIONAL INTERNATIONAL PORTFOLIO
The Advisor is entitled to receive a fee from the Institutional
International Portfolio for its investment services computed daily and
payable monthly, at the annual rate of .75% of the Institutional
International Portfolio's average daily net assets. Although the advisory fee
rate payable by the Institutional International Portfolio is higher than the
rates paid by most mutual funds, Glenmede Fund's Board of Directors believes
it is comparable to the rates paid by other similar funds. The Advisor has
agreed to waive its fees to the extent necessary to ensure that the
Institutional International Portfolio's annual total operating expenses do
not exceed 1.00% of the Institutional International Portfolio's average net
assets. For the fiscal year ended October 31, 1995, the Advisor received a
fee at a rate of .75% (annualized) of the Institutional International
Portfolio's average net assets.
Andrew Williams, portfolio manager for the Institutional International
Portfolio, has been primarily responsible for its management since that
Portfolio commenced operations. Mr. Williams has been employed by the Advisor
since May 1985. Before joining the Advisor, he was a vice president in
investment research at Shearson Lehman Brothers.
EMERGING MARKETS PORTFOLIO
Pursuant to the Investment Advisory Agreement relating to the Emerging
Markets Portfolio, the Advisor may select a person to act as sub-advisor to the
Portfolio. The Advisor and Glenmede Fund, on behalf of the Emerging Markets
Portfolio, have entered into a sub-investment advisory agreement with Pictet
International Management Limited, located at Cutlers Gardens, 5 Devonshire
Square, London, United Kingdom EC2M 4LD. The Sub-Advisor performs sub-advisory
and portfolio transaction services for the Portfolio, including managing the
Portfolio's holdings in accordance with the Portfolio's investment objective and
policies, making investment decisions concerning foreign
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assets for the Portfolio, placing purchase and sale orders for portfolio
transactions and employing professional portfolio managers and security
analysts who provide research services to the Emerging Markets Portfolio.
Effective November 1, 1996, the Advisor and Sub-Advisor are entitled to
receive fees from the Emerging Markets Portfolio for their investment services
computed daily and payable monthly at the annual rate of .75% and 50%,
respectively, of the Emerging Market Portfolio's average daily net assets.
Prior to November 1, 1996, the Advisor and Sub-Advisor were entitled to
receive fees from the Emerging Markets Portfolio for their investment
services computed daily and payable monthly at the annual rate of .50% and
.75%, respectively of the Emerging Market Portfolio's average daily net
assets. The aggregate fees paid to the Emerging Markets Portfolio's Advisor
and Sub-Advisor are higher than advisory fees paid by most other U.S.
investment companies. Glenmede Fund's Board believes such fees are comparable
to the rates paid by other similar funds. For the period December 14, 1994
(commencement of operations) to October 31, 1995, the Advisor received a fee
of .50% (annualized) of the Emerging Markets Portfolio's average net assets
and the Sub-Advisor received a fee at the rate of .75% (annualized) of the
Emerging Markets Portfolio's average net assets.
The Sub-Advisor is an affiliate of Pictet & Cie (the "Bank"), a Swiss
private bank, which was founded in 1805. As of January 30, 1996, the Bank
managed in excess of $40 billion for institutional and private clients. The
Bank is owned by seven partners. The Sub-Advisor was established in 1980 to
manage the investment needs of clients seeking to invest in the international
fixed revenue and equity markets. The Sub-Advisor and its affiliates
presently manage over $3.5 billion for 70 accounts.
Douglas Polunin, Senior Investment Manager at the Sub-Advisor, has been
the portfolio manager primarily responsible for the management of the
Emerging Markets Portfolio since its inception. Mr. Polunin has been employed
by the Sub-Advisor since January 1989. Prior to his employment with the
Sub-Advisor, Mr. Polunin had been with Union Bank of Switzerland since 1982.
ADMINISTRATIVE, TRANSFER AGENCY AND DIVIDEND PAYING SERVICES
ICC serves as Glenmede Fund's administrator, transfer agent and dividend
paying agent pursuant to a Master Services Agreement and in those capacities
supervises all aspects of Glenmede Fund's day-to-day operations, other than
the management of Glenmede Fund's investments. ICC is a wholly-owned
subsidiary of Alex. Brown & Sons Incorporated ("Alex. Brown"). For its
services as administrator, transfer agent and dividend paying agent, ICC is
entitled to receive fees from Glenmede Fund equal to .12% of the first $100
million of the combined net assets of Glenmede Fund and The Glenmede
Portfolios, an investment company with the same officers, Board and service
providers as Glenmede Fund (collectively, the "Funds"); .08% of the next $150
million of the combined net assets of the Funds; .04% of the next $500
million of the combined net assets of the Funds and .03% of the combined net
assets of the Funds over $750 million. For the period July 1, 1995 to October
31, 1995, ICC received fees at the rate of .04% (annualized) of the
Institutional International Portfolio's average net assets and .05%
(annualized) of the Emerging Markets Portfolio's average net assets. For the
period November 1, 1994 to June 30, 1995, Glenmede Fund's previous
administrator received fees at the rate of .09% (annualized) of the
Institutional International Portfolio's average net assets. For the period
December 14, 1994 (commencement of operations) to June 30, 1995, Glenmede
Fund's previous administrator received fees at the rate of .09% (annualized)
of the Emerging Markets Portfolio's average net assets.
EXPENSES
Glenmede Fund bears its own expenses incurred in its operations including:
taxes; interest; miscellaneous fees (including fees paid to Board members);
Securities and Exchange Commission fees; costs of preparing and printing
prospectuses for regulatory purposes and for distribution to existing
shareholders; administration fees; charges of the custodian, dividend agent
fees; certain insurance premiums; outside auditing and legal expenses; costs
of shareholders' reports and meetings; and any extraordinary expenses. Each
Portfolio also pays for brokerage fees and commissions, if any, in connection
with the purchase and sale of its portfolio securities. See "Financial
Highlights."
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) With respect to 75% of its total assets, invest more than 5% of its
total assets at the time of purchase in the securities of any single
issuer (other than obligations issued or guaranteed by the U.S.
Government, its agencies, enterprises or instrumentalities);
(b) Purchase more than 10% of any class of the outstanding voting
securities of any issuer;
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(c) Acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of its total
assets would be invested in securities of companies within such
industry; provided, however, that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government,
its agencies, enterprises or instrumentalities;
(d) Pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of the Institutional International Portfolio's total
assets or 15% of the Emerging Markets Portfolio's total assets, each
at fair market value, except as described in this Prospectus and the
SAI and in connection with entering into futures contracts, but the
deposit of assets in a segregated account in connection with the
writing of covered put and call options and the purchase of securities
on a when issued, delayed settlement or forward delivery basis and
collateral arrangements with respect to initial or variation margin
for futures contracts will not be deemed to be pledges of a
Portfolio's assets or the purchase of any securities on margin for
purposes of this investment limitation;
(e) Issue senior securities, except that a Portfolio may borrow money in
accordance with investment limitation (f), purchase securities on a
when issued, delayed settlement or forward delivery basis and enter
into reverse repurchase agreements; and
(f) Borrow money, except that each Portfolio may borrow money as a
temporary measure for extraordinary or emergency purposes, and then
not in excess of 10% of its total assets at the time of borrowing
(entering into reverse repurchase agreements and purchasing securities
on a when issued, delayed settlement or forward delivery basis are not
subject to this investment limitation).
With respect to investment limitation (c), (a) there is no limitation with
respect to (i) instruments issued or guaranteed by the United States, any
state, territory or possession of the United States, the District of Columbia
or any of their authorities, agencies, instrumentalities or political
subdivisions, and (ii) repurchase agreements secured by the instruments
described in clause (i); (b) wholly-owned finance companies will be
considered to be in the industries of their parents if their activities are
primarily related to financing the activities of the parents; and (c)
utilities will be divided according to their services; for example, gas, gas
transmission, electric and gas, electric and telephone will each be
considered a separate industry.
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value of
assets will not constitute a violation of such restriction. If a Portfolio's
borrowings are in excess of 5% (excluding overdrafts) of its total net
assets, additional portfolio purchases will not be made until the amount of
such borrowing is reduced to 5% or less. A Portfolio's borrowings including
reverse repurchase agreements and securities purchased on a when-issued,
delayed settlement or forward delivery basis may not exceed 33 1/3% of its
total net assets.
The investment limitations described here and in the SAI are fundamental
policies and may be changed only with the approval of the holders of a
majority of the outstanding shares (as defined in the 1940 Act) of the
affected Portfolio. In order to permit the sale of shares in certain states,
Glenmede Fund may make commitments more restrictive than the investment
policies and limitations described in this Prospectus and the SAI. Should
Glenmede Fund determine that any such commitment is no longer in the best
interest of Glenmede Fund, it will revoke the commitment by terminating sales
of its shares in the state involved.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
Glenmede Fund was organized as a Maryland corporation on June 30, 1988.
Glenmede Fund's Articles of Incorporation authorize the Board members to
issue 2,500,000,000 shares of common stock, with a $.001 par value. The Board
has the power to designate one or more classes ("Portfolios") of shares of
common stock and to classify or reclassify any unissued shares with respect
to such Portfolios. Currently, Glenmede Fund is offering shares of ten
Portfolios.
The shares of each Portfolio have no preference as to conversion,
exchange, dividends, retirement or other rights, and, when issued and paid
for as provided in this Prospectus, will be fully paid and non-assessable.
The shares of each Portfolio have no pre-emptive rights and do not have
cumulative voting rights, which means that the holders of more than 50% of
the shares of Glenmede Fund voting for the election of its Board members can
elect 100% of the Board of Glenmede Fund if they choose to do so. A
shareholder is entitled to one vote for each full share held (and a frac-
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tional vote for each fractional share held), then standing in his or her name
on the books of Glenmede Fund. Glenmede Fund will not hold annual meetings of
shareholders except as required by the 1940 Act, the next sentence and other
applicable law. Glenmede Fund has undertaken that its Board will call a
meeting of shareholders for the purpose of voting upon the question of
removal of a Board member or members if such a meeting is requested in
writing by the holders of not less than 10% of the outstanding shares of
Glenmede Fund. To the extent required by the undertaking, Glenmede Fund will
assist shareholder communication in such matters.
At January 30, 1996, the Advisor was the record owner of substantially all
of Glenmede Fund's outstanding shares.
DISTRIBUTOR
Armata Financial Corp. ("Armata"), located at 135 East Baltimore Street,
Baltimore, Maryland 21202, serves as Glenmede Fund's distributor. Armata is a
subsidiary of Alex. Brown.
CUSTODIAN
The Chase Manhattan Bank, N.A., Brooklyn, New York, serves as the
custodian of Glenmede Fund's assets.
TRANSFER AGENT
ICC, located at 135 East Baltimore Street, Baltimore, Maryland 21202,
serves as Glenmede Fund's transfer agent.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., Philadelphia, Pennsylvania serves as independent
accountants for Glenmede Fund and will audit its financial statements
annually.
REPORTS
Shareholders receive unaudited semi-annual financial statements and
audited annual financial statements.
COUNSEL
Drinker Biddle & Reath, Philadelphia, Pennsylvania, serves as counsel to
Glenmede Fund.
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BOARD MEMBERS AND OFFICERS
The business and affairs of Glenmede Fund are managed under the direction
of its Board. The following is a list of the Board members and officers of
Glenmede Fund and a brief statement of their principal occupations during the
past five years:
<TABLE>
<CAPTION>
Name and Address Age Principal Occupation During Past Five Years
----------------------------------- ----- -------------------------------------------------------------------
<S> <C> <C>
H. Franklin Allen, Ph.D. 40 Director of Glenmede Fund; Trustee of The Glenmede Portfolios;
Finance Department Nippon Life Professor of Finance and Economics; Professor of
The Wharton School Finance and Economics from 1990-1996; Vice Dean and Director of
University of Pennsylvania Wharton Doctoral Programs from 1990-1993. He has been employed by
Philadelphia, PA 19104-6367 The University of Pennsylvania since 1980.
Willard S. Boothby, Jr. 74 Director of Glenmede Fund; Trustee of The Glenmede Portfolios;
600 East Gravers Lane Director of Penn Engineering & Manufacturing Corp.; Former Director
Wyndmoor, PA 19118 of Georgia-Pacific Corp.; formerly Managing Director of Paine
Webber, Inc.
John W. Church, Jr.* 63 Chairman, President and Director of Glenmede Fund; Chairman,
One Liberty Place President and Trustee of The Glenmede Portfolios; Executive Vice
1650 Market Street, Suite 1200 President and Chief Investment Officer of The Glenmede Trust
Philadelphia, PA 19103 Company. He has been employed by The Glenmede Trust Company since
1979.
Francis J. Palamara 70 Director of Glenmede Fund; Trustee of The Glenmede Portfolios;
P.O. Box 44024 Trustee of Gintel Fund; Director of XTRA Corporation and Central
Phoenix, AZ 85064-4024 Tractor Farm and Country, Inc.; Former Executive Vice President--Finance
of ARAMARK, Inc.
G. Thompson Pew, Jr.* 54 Director of Glenmede Fund; Trustee of The Glenmede Portfolios;
310 Caversham Road Director of The Glenmede Trust Company; Former Director of Brown &
Bryn Mawr, PA 19010 Glenmede Holdings, Inc.; Former Co-Director, Principal and Officer
of Philadelphia Investment Banking Co.; Former Director and Officer
of Valley Forge Administrative Services Company.
Mary Ann B. Wirts 44 Executive Vice President of Glenmede Fund; Vice President and
One Liberty Place Manager of The Fixed Income Division of The Glenmede Trust Company.
1650 Market Street, Suite 1200 She has been employed by The Glenmede Trust Company since 1982.
Philadelphia, PA 19103
Kimberly C. Osborne 30 Vice President of Glenmede Fund; Vice President of The
One Liberty Place Glenmede Trust Company. She has been employed by The Glenmede Trust
1650 Market Street, Suite 1200 Company since 1993. From 1992-1993, she was a Client Service
Philadelphia, PA 19103 Manager with Mutual Funds Service Company and from 1987-1992, she
was a Client Administrator with The Vanguard Group, Inc.
Michael P. Malloy 37 Secretary of Glenmede Fund; Partner in the law firm of Drinker
Philadelphia National Bank Building Biddle & Reath.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Edward J. Veilleux 53 Assistant Secretary of Glenmede Fund; Principal, Alex. Brown;
135 East Baltimore Street President, ICC and Armata.
Baltimore, MD 21202
Joseph A. Finelli 39 Treasurer of Glenmede Fund. He has been a Vice President of Alex.
135 East Baltimore Street Brown since 1995. Prior thereto, he was Vice President and
Baltimore, MD 21202 Treasurer of Delaware Group.
</TABLE>
- ------
* Board members Church and Pew are "interested persons" of Glenmede Fund as
that term is defined in the 1940 Act.
For additional information concerning remuneration of Board members see
"Management of Glenmede Fund" in the SAI.
Shareholder inquiries should be addressed to Glenmede Fund at the address
or telephone number stated on the cover page.
17
<PAGE>
THE GLENMEDE FUND, INC.
135 EAST BALTIMORE STREET, BALTIMORE, MARYLAND 21202
- -----------------------------------------------------------------------------
PROSPECTUS
DATED FEBRUARY 27, 1996
(AS REVISED NOVEMBER 1, 1996)
Investment Advisor Administrator and
The Glenmede Trust Company Transfer Agent
One Liberty Place Investment Company
1650 Market Street, Suite 1200 Capital Corp.
Philadelphia, PA 19103 135 East Baltimore
Investment Sub-Advisor Street
(for Emerging Markets Portfolio) Baltimore, Maryland
Pictet International Management Limited 21202
Cutlers Garden Distributor
5 Devonshire Square Armata Financial Corp.
London, United Kingdom 135 East Baltimore
EC2M 4LD Street
Baltimore, Maryland
21202
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Expenses of the Portfolios 2 Dividends, Capital Gains Distributions
Financial Highlights 3 and Taxes 11
Performance Calculations 5 Investment Advisor 13
Investment Objectives and Policies 5 Administrative, Transfer Agency and
Investment Techniques 7 Dividend Paying Services 14
Risk Factors 9 Expenses 14
Purchase of Shares 10 Investment Limitations 14
Redemption of Shares 11 General Information 15
Valuation of Shares 11 Board Members and Officers 17
</TABLE>
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in Glenmede Fund's
Statement of Additional Information, in connection with the offering made by
this Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by Glenmede Fund or its
Distributor. This Prospectus does not constitute an offering by Glenmede Fund
or the Distributor in any jurisdiction in which such offering may not
lawfully be made.
<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
135 EAST BALTIMORE STREET, BALTIMORE MARYLAND 21202
- -----------------------------------------------------------------------------
1-800-442-8299
- -----------------------------------------------------------------------------
PROSPECTUS -- FEBRUARY 27, 1996
(as revised November 1, 1996)
INVESTMENT OBJECTIVES
The Glenmede Fund, Inc., a Maryland corporation ("Glenmede Fund"), and The
Glenmede Portfolios, a Massachusetts business trust ("Glenmede Portfolios"
and collectively with Glenmede Fund, the "Funds"), are no-load, open-end
management investment companies. The Funds currently offer 12 series of
shares, each of which has different investment objectives and policies. The
securities offered hereby are six of these series of shares (known as
"Portfolios") of the Funds listed below.
Government Cash Portfolio. The objective of the Government Cash Portfolio is
to provide maximum current interest income consistent with the preservation
of capital and liquidity. The Government Cash Portfolio seeks to achieve its
objective by investing primarily in short-term money market instruments
issued by the U.S. Treasury, U.S. Government agencies, or other agencies,
enterprises or instrumentalities sponsored by the U.S. Government and by
entering into repurchase agreements secured thereby. It is anticipated that
the Portfolio will maintain a constant net asset value or price of $1.00 per
share, and an average weighted maturity of 90 days or less.
Tax-Exempt Cash Portfolio. The objective of the Tax-Exempt Cash Portfolio is
to provide maximum current interest income exempt from Federal income taxes
consistent with the preservation of capital and liquidity. The Tax-Exempt
Cash Portfolio seeks to achieve its objective by investing primarily in
short-term, high quality municipal securities ("Municipal Obligations"). It
is anticipated that the Portfolio will maintain a constant net asset value or
price of $1.00 per share, and an average weighted maturity of 90 days or
less.
Intermediate Government Portfolio. The objective of the Intermediate
Government Portfolio is to provide maximum, long-term total return
consistent with reasonable risk to principal. The Intermediate Government
Portfolio seeks to achieve its objective by investing primarily in
mortgage-backed securities and medium-term fixed income securities issued by
the U.S. Treasury, U.S. Government agencies, or other agencies, enterprises
or instrumentalities sponsored by the U.S. Government. The net asset value of
this Portfolio will fluctuate.
Muni Intermediate Portfolio. The objective of the Muni Intermediate Portfolio
is to seek as high a level of current income exempt from Federal income tax
as is consistent with preservation of capital. The Muni Intermediate
Portfolio seeks to achieve its objective by investing primarily in Municipal
Obligations. The net asset value of this Portfolio will fluctuate.
New Jersey Muni Portfolio. The objective of the New Jersey Muni Portfolio is
to seek as high a level of current income exempt from Federal income tax as
is consistent with preservation of capital. The New Jersey Muni Portfolio
seeks to achieve its objective by investing primarily in Municipal
Obligations. The net asset value of this Portfolio will fluctuate.
International Fixed Income Portfolio. The objective of the International
Fixed Income Portfolio is to provide maximum long-term total return
consistent with reasonable risk to principal. The International Fixed Income
Portfolio seeks to achieve its objective by investing primarily in non-dollar
denominated fixed income securities, such as those issued by foreign
governments and governmental agencies and other agencies, enterprises or
instrumentalities sponsored by foreign governments. The net asset value of
this Portfolio will fluctuate.
Total return consists of income (dividend and/or interest income from
portfolio securities) and capital gains and losses, both realized and
unrealized, from portfolio securities.
Shares of the Portfolios are subject to investment risks, including
possible loss of principal, are not bank deposits and are not endorsed by,
insured by, guaranteed by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, The Glenmede Corporation or any of its affiliates or any governmental
agency or bank. There can be no assurance that the Government Cash or
Tax-Exempt Cash Portfolios will be able to maintain a stable net asset value
of $1.00 per share.
<PAGE>
- -----------------------------------------------------------------------------
ABOUT THIS PROSPECTUS
This Prospectus, which should be retained for future reference, sets forth
certain information that you should know before you invest. A Statement of
Additional Information ("SAI") containing additional information about the
Funds has been filed with the Securities and Exchange Commission. Such SAI
dated February 27, 1996 (as revised November 1, 1996), as amended or
supplemented from time to time, is incorporated by reference into this
Prospectus. The 1995 Annual Report to Shareholders contains additional
investment and performance information about the Portfolios. A copy of the SAI
and the 1995 Annual Report may be obtained, without charge, by writing to the
Funds at the address shown above or by calling the Funds at the telephone
number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSES OF THE PORTFOLIOS
CLIENT FEES AND ANNUAL PORTFOLIO OPERATING EXPENSES
The following table illustrates the expenses and fees incurred by each
Portfolio for the fiscal year ended October 31, 1995, restated to reflect new
contractual arrangements.
<TABLE>
<CAPTION>
New International
Government Tax-Exempt Intermediate Muni Jersey Fixed
Cash Cash Government Intermediate Muni Income
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses ....... None None None None None None
Maximum Annual Client Fee .............. 1.00%+ 1.00%+ 1.00%+ 1.00%+ 1.00%+ 1.00%+
Annual Portfolio Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fees .......... .00% .00% .00% .00% .00% .00%
Administration Fees ............... .07% .07% .07% .07% .07% .07%
Other Expenses .................... .08% .08% .04% .21% .46% .16%
------------ ------------ ------------ ------------ ------------ ------------
Total Annual Portfolio Operating
Expenses ............................. .15% .15% .11% .28% .53% .23%
============ ============ ============ ============ ============ ============
</TABLE>
- ------
+ The Portfolios described in this prospectus do not pay any advisory fees to
The Glenmede Trust Company, the investment advisor of the Funds (the
"Advisor"), or its affiliates ("Affiliates"). However, investors in these
Portfolios must be clients of the Advisor or Affiliates. The "Maximum
Annual Client Fee" in the above table is the current maximum fee that the
Advisor or an Affiliate would charge its clients directly for fiduciary,
trust and/or advisory services (e.g., personal trust, estate, advisory, tax
and custodian services). The actual annual fees charged by the Advisor and
its Affiliates directly to their clients for such services vary depending
on a number of factors, including the particular services provided to the
client, but are generally under 1% of the client's assets under management.
Investors may also have to pay various fees to others to become clients of
the Advisor or an Affiliate. See "Investment Advisor."
The purpose of the above table is to assist an investor in understanding
the various estimated costs and expenses that an investor in a Portfolio will
bear directly or indirectly. Actual expenses may be greater or lesser than
such estimates. For further information concerning the Funds' expenses see
"Investment Advisor," "Administrative, Transfer Agency and Dividend Paying
Services" and "Board Members and Officers."
The following example illustrates the estimated Annual Portfolio Operating
Expenses that an investor would pay on a $1,000 investment over various time
periods assuming (i) a 5% annual rate of return and (ii) redemption at the
end of each time period. The example does not include fees for fiduciary and
investment services which investors pay the Advisor or Affiliates as clients.
See "Investment Advisor." As noted in the above table the Funds charge no
shareholder transaction expenses of any kind.
<TABLE>
<CAPTION>
1 Year* 3 Years* 5 Years* 10 Years*
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Government Cash Portfolio ................ $2 $ 5 $ 9 $19
Tax-Exempt Cash Portfolio ................ $2 $ 5 $ 9 $19
Intermediate Government Portfolio ........ $1 $ 4 $ 6 $14
Muni Intermediate Portfolio .............. $3 $ 9 $16 $36
New Jersey Muni Portfolio ................ $5 $17 $30 $68
International Fixed Income Portfolio ..... $2 $ 7 $13 $30
</TABLE>
- ------
* You would pay the same expenses set forth above on the same investment,
assuming no redemptions at the end of the period.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables provide financial highlights of each Portfolio for
the respective periods presented and includes data derived from the Funds'
Financial Statements included in the Funds' 1995 Annual Report to
Shareholders, which Financial Statements and reports thereon of Coopers &
Lybrand L.L.P., the Funds' independent accountants, are incorporated by
reference in the SAI. The following information should be read in conjunction
with such Financial Statements. Glenmede Fund's Financial Statements for the
periods ended October 31, 1991, 1990 and 1989 were examined by the Funds'
previous independent accountants, Price Waterhouse L.L.P.
<TABLE>
<CAPTION>
Government Cash Portfolio
------------------------------------------------------------------------------------------
Year Year Year Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1995 1994 1993 1992 1991 1990 1989+
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment income ....... 0.059 0.038 0.031 0.041 0.064 0.081 0.089
Distributions from net
investment income .......... $ (0.059) $ (0.038) $ (0.031) $ (0.041) $ (0.064) $ (0.081) $ (0.089)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ========== ==========
Total return++ .............. 5.87% 3.78% 3.18% 4.19% 6.59% 8.41% 9.27%
========== ========== ========== ========== ========== ========== ==========
Ratios to average net assets/
Supplemental data:
Net assets, end of year
(in 000's) ........... $408,605 $353,405 $247,816 $203,882 $253,260 $217,398 $229,555
Ratio of operating
expenses to average
net assets ........... 0.15% 0.11% 0.11% 0.13% 0.13% 0.15% 0.14%*
Ratio of net investment
income to average net
assets ............... 5.71% 3.82% 3.14% 4.18% 6.45% 8.08% 9.00%*
</TABLE>
- ------
+ The Portfolio commenced operations on November 7, 1988.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
<TABLE>
<CAPTION>
Tax-Exempt Cash Portfolio
------------------------------------------------------------------------------------------
Year Year Year Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1995 1994 1993 1992 1991 1990 1989+
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment income ....... 0.038 0.025 0.023 0.033 0.047 0.057 0.061
Distributions from net
investment income .......... $ (0.038) $ (0.025) $ (0.023) $ (0.033) $(0.047) $ (0.057) $(0.061)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ========== ==========
Total return++ .............. 3.76% 2.48% 2.34% 3.30% 4.83% 5.85% 6.27%
========== ========== ========== ========== ========== ========== ==========
Ratios to average net assets/
Supplemental data:
Net assets, end of year
(in 000's) ........... $225,808 $222,985 $106,590 $125,826 $81,394 $107,283 $69,047
Ratio of operating
expenses to average
net assets ........... 0.15% 0.13% 0.13% 0.15% 0.16% 0.15% 0.15%*
Ratio of net investment
income to average net
assets ............... 3.69% 2.52% 2.33% 3.21% 4.78% 5.78% 6.31%*
</TABLE>
- ------
+ The Portfolio commenced operations on November 10, 1988.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
3
<PAGE>
<TABLE>
<CAPTION>
Intermediate Government Portfolio
------------------------------------------------------------------------------------------
Year Year Year Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1995 1994 1993 1992 1991 1990 1989+
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year ....................... $ 9.89 $ 10.84 $ 10.76 $ 10.61 $ 10.11 $ 10.28 $ 10.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from investment
operations:
Net investment income ..... 0.69 0.64 0.66 0.74 0.87 0.88 0.86
Net realized and unrealized
gain/(loss) on
investments ............ 0.46 (0.96) 0.41 0.22 0.56 (0.07) 0.22
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations ............. 1.15 (0.32) 1.07 0.96 1.43 0.81 1.08
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Distribution from net
investment income ...... (0.68) (0.63) (0.67) (0.70) (0.93) (0.89) (0.80)
Distributions from net
realized capital gains . -- -- (0.32) (0.11) -- (0.09) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Distributions ....... (0.68) (0.63) (0.99) (0.81) (0.93) (0.98) (0.80)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of
year ................... $ 10.36 $ 9.89 $ 10.84 $ 10.76 $ 10.61 $ 10.11 $ 10.28
========== ========== ========== ========== ========== ========== ==========
Total return++ .............. 12.06% (3.03)% 10.38% 9.34% 14.75% 8.32% 11.20%
========== ========== ========== ========== ========== ========== ==========
Ratios to average net assets/
Supplemental data:
Net assets, end of year
(in 000's) ........... $342,874 $333,797 $581,823 $445,816 $265,963 $207,182 $187,012
Ratio of operating
expenses to average
net assets ........... 0.11% 0.12%** 0.14%** 0.16% 0.16% 0.14% 0.14%*
Ratio of net investment
income to average net
assets ............... 6.67% 6.06% 6.03% 7.03% 8.22% 8.75% 9.07%*
Portfolio turnover rate 228% 165% 83% 39% 91% 94% 29%
</TABLE>
- ------
+ The Portfolio commenced operations on November 17, 1988.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
** The annualized operating expense ratios exclude interest expense. The
ratios including interest expense for the years ended October 31, 1994 and
October 31, 1993 were 0.14% and 0.16%, respectively.
4
<PAGE>
<TABLE>
<CAPTION>
Muni Intermediate Portfolio
--------------------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1995 1994 1993 1992+
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year ........... $ 9.74 $ 10.59 $ 10.00 $ 10.00
------------- ------------- ------------- -------------
Income from investment operations:
Net investment income ...................... 0.53 0.53 0.44 0.11
Net realized and unrealized gain/(loss) on
investments ............................. 0.58 (0.85) 0.59 (0.03)
------------- ------------- ------------- -------------
Total from investment operations ........ 1.11 (0.32) 1.03 0.08
Distributions from net investment income ..... (0.53) (0.53) (0.44) (0.08)
------------- ------------- ------------- -------------
Net asset value, end of period ............... $ 10.32 $ 9.74 $ 10.59 $ 10.00
============= ============= ============= =============
Total return++ ............................... 11.76% (3.13)% 10.54% 0.74%
============= ============= ============= =============
Ratios to average net assets/Supplemental
data:
Net assets, end of period (in 000's) ....... $18,096 $22,097 $94,803 $42,533
Ratio of operating expenses to average net
assets .................................. 0.28% 0.25% 0.25% 0.25%*
Ratio of net investment income to average
net assets .............................. 5.23% 4.78% 4.41% 4.22%*
Portfolio turnover rate .................... 28% 11% 10% 3%
</TABLE>
- ------
+ The Portfolio commenced operations on June 5, 1992.
++ Total return represents aggregate return for the period indicated.
* Annualized.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
New Jersey
Muni Portfolio
------------------------------
Year Year
Ended Ended
October 31, October 31,
1995 1994+
------------- -------------
<S> <C> <C>
Net asset value, beginning of period ........................... $ 9.22 $ 10.00
Income from investment operations:
Net investment income ..................................... 0.41 0.32
Net realized and unrealized loss on investments ........... 0.78 (0.82)
------------- -------------
Total from investment operations ..................... 1.19 (0.50)
Distributions from net investment income ....................... (0.41) (0.28)
------------- -------------
Net asset value, end of period ................................. $10.00 $ 9.22
============= =============
Total return++ ................................................. 13.25% (5.13)%
============= =============
Ratios to average net assets/Supplemental data:
Net assets, end of period (in 000's) ...................... $5,932 $ 4,564
Ratio of operating expenses to average net assets ......... 0.53% 0.60%
Ratio of net investment income to average net assets ...... 4.30% 3.60%
Portfolio turnover rate ................................... 12% 65%
</TABLE>
- ------
+ The Portfolio commenced operations on November 1, 1993.
++ Total return represents aggregate total return for the period indicated.
5
<PAGE>
<TABLE>
<CAPTION>
International Fixed Income Portfolio
----------------------------------------------
Year Year Period
Ended Ended Ended
October 31, October 31, October 31,
1995 1994 1993+
------------- ------------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period ....................... $ 10.25 $ 10.45 $ 10.00
------------- ------------- -------------
Income from investment operations:
Net investment income ................................. 0.66 0.65 0.40
Net realized and unrealized gain on investments ....... 0.78 0.34 0.59
------------- ------------- -------------
Total from investment operations .................... 1.44 0.99 0.99
------------- ------------- -------------
Less Distributions:
Distributions from net investment income .............. (0.61) (0.66) (0.45)
Distributions in excess of net investment income ...... -- (0.46) --
Distributions from net realized capital gains ......... (0.01) (0.07) (0.09)
------------- ------------- -------------
Total Distributions ................................. (0.62) (1.19) (0.54)
------------- ------------- -------------
Net asset value, end of period ............................. $ 11.07 $ 10.25 $ 10.45
============= ============= =============
Total return++ ............................................. 14.41% 9.79% 10.13%
============= ============= =============
Ratios to average net assets/Supplemental data:
Net assets, end of period (in 000's) .................. $26,959 $16,584 $15,801
Ratio of operating expenses to average net assets ..... 0.23% 0.24% 0.24%*
Ratio of net investment income to average net assets .. 6.50% 5.99% 6.04%*
Portfolio turnover rate ............................... 30% 39% 27%
</TABLE>
- ------
+ The Portfolio commenced operations on November 2, 1992.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
6
<PAGE>
PERFORMANCE CALCULATIONS
From time to time, the Government Cash Portfolio and the Tax-Exempt Cash
Portfolio (each a "Cash Portfolio," collectively, the "Cash Portfolios") may
advertise or quote its "yield" and "effective yield." The "yield" of either
of the Cash Portfolios refers to the income generated by an investment in
each such Portfolio over a seven-day period (which period will be stated in
the advertisement or quote). This income is then "annualized." That is, the
amount of income generated by the investment 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" is calculated similarly but, when
annualized, the income earned by an investment in such a Portfolio is assumed
to be reinvested. The "effective yield" will be slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment.
The Intermediate Government, Muni Intermediate, New Jersey Muni and
International Fixed Income Portfolios may also advertise or quote yield data
from time to time. The yield of such Portfolios is computed based on the net
income of the Portfolio during a 30-day (or one-month) period, which period
will be identified in connection with the particular yield quotation. More
specifically, each such Portfolio's yield is computed by dividing the
Portfolio's net income per share during a 30-day (or one-month) period by the
maximum offering price per share on the last day of the period and
annualizing the result on a semi-annual basis.
The Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios'
"tax-equivalent yields" may be advertised or quoted from time to time. The
tax equivalent yield shows the level of taxable yield needed to produce an
after-tax equivalent to each such Portfolio's tax-free yield. This is done by
increasing each such Portfolio's yield (calculated as above) by the amount
necessary to reflect the payment of Federal and/or State income tax at a
stated tax rate.
Each of the Intermediate Government, Muni Intermediate, New Jersey Muni
and International Fixed Income Portfolios may advertise or quote total return
data from time to time. Total return will be calculated on an average annual
total return basis, and may also be calculated on an aggregate total return
basis, for various periods. Average annual total return reflects the average
annual percentage change in value of an investment in the particular
Portfolio. Aggregate total return reflects the total percentage change in
value over the measuring period. Both methods of calculating total return
assume that dividend and capital gains distributions made by the Portfolio
during the period are reinvested in additional Portfolio shares.
Each of the Intermediate Government, Muni Intermediate, New Jersey Muni
and International Fixed Income Portfolios may compare their total returns,
and their yields, to that of other investment companies with similar
investment objectives and to bond and other relevant indices such as those
compiled by Merrill Lynch, Salomon Brothers, Lehman Brothers or others or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
total return or the yield of the Intermediate Government, Muni Intermediate,
New Jersey Muni or International Fixed Income Portfolios may be compared to
data prepared by Lipper Analytical Services, Inc. Total return and yield data
as reported in national financial publications such as Money Magazine,
Forbes, Barron's, The Wall Street Journal and The New York Times, or in
publications of a local or regional nature, may also be used in comparing the
performance of the Intermediate Government, Muni Intermediate, New Jersey
Muni or International Fixed Income Portfolios.
Performance quotations represent a Portfolio's past performance, and
should not be considered as indicative of future results. Since performance
will fluctuate, performance data for a Portfolio should not be used to
compare an investment in the Portfolio's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed or
guaranteed fixed yield/return for a stated period of time. Shareholders
should remember that performance is generally a function of the kind and
quality of the instruments held in a Portfolio, portfolio maturity, operating
expenses and market conditions. Any management fees charged by the Advisor or
an Affiliate to its respective clients will not be included in the
Portfolio's calculations of yield, effective yield, tax-equivalent yield or
total return. See "Investment Advisor."
INVESTMENT POLICIES AND RISK FACTORS
The investment objective of each Portfolio is not fundamental and may be
changed by the particular Funds' Board members without shareholder approval.
GOVERNMENT CASH PORTFOLIO
The objective of the Government Cash Portfolio is to provide maximum
current interest income consistent with the preservation of capital and
liquidity. The Government Cash Portfolio seeks to achieve its objective by
investing in
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short-term U.S. dollar-denominated money market instruments issued by the
U.S. Treasury, U.S. Government agencies, or other agencies, enterprises or
instrumentalities sponsored by the U.S. Government and by entering into
repurchase agreements secured thereby. During normal market conditions, the
Portfolio will invest at least 65% of its total assets in such instruments.
The Portfolio may invest in the following securities provided they are
"eligible securities," as defined below ("Eligible Securities"), which the
Advisor believes presents minimal credit risk at the time of purchase: (i)
straight-debt and mortgage-backed obligations issued by the U.S. Government
or its sponsored agencies, enterprises or instrumentalities; (ii) securities
of international institutions (Asian Development Bank, Export-Import Bank,
Inter American Development Bank, International Bank for Reconstruction and
Development, Government Trust Certificates, Private Export Funding Corp. and
Agency for International Development) which are not direct obligations of the
U.S. Government but which involve governmental agencies, instrumentalities or
enterprises (such investments will represent no more than 25% of the
Portfolio's total assets); and (iii) any publicly or privately placed,
unrated securities issued by the U.S. Government, its agencies, enterprises
or instrumentalities, including floating and variable rate securities, which,
in the Advisor's opinion, are equivalent in credit quality to securities
rated AAA by Standard & Poor's Ratings Group, Division of McGraw Hill ("S&P")
or Aaa by Moody's Investors Service, Inc. ("Moody's"). The Portfolio will
invest in securities maturing within 13 months from the date of purchase,
except that securities collateralizing repurchase agreements may bear
maturities exceeding 13 months, and the Portfolio may also purchase bonds
with longer final maturities if such bonds pursuant to a demand feature
provide for an earlier redemption date within 13 months from the date of
purchase.
Obligations of certain agencies and instrumentalities of the U.S.
Government, such as the Government National Mortgage Association and the
Export-Import Bank of the United States, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the right of the issuer to borrow from
the Treasury; others, such as those of the Student Loan Marketing
Association, are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others, such as those
of the Federal Farm Credit Banks or the Federal Home Loan Mortgage
Corporation, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial
support to U.S. Government-sponsored agencies or instrumentalities if it is
not obligated to do so by law.
Securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities have historically involved little risk of loss of principal
if held to maturity. However, due to fluctuations in interest rates, the
market value of such securities may vary during the period a shareholder owns
shares of the Portfolio. See "Investment Policies -- Intermediate Government
Portfolio" for a description of obligations of certain agencies, enterprises
and instrumentalities of the U.S. Government. Securities in which the
Government Cash Portfolio may invest may not earn as much income as longer
term and/or lower quality securities.
The Government Cash Portfolio will limit its purchases of any one issuer's
securities (other than U.S. Government securities) to 5% of the Portfolio's
total assets at the time of purchase, except that it may invest more than 5%
(but no more than 25%) of its total assets in First Tier Securities (as
defined below) of one issuer for a period of up to three business days. The
Portfolio will also limit its purchases of Second Tier Securities (Eligible
Securities which are not First Tier Securities) of one issuer to the greater
of 1% of its total assets or $1 million. Eligible Securities are: (i)
securities (or their issuers) rated in one of the two highest rating
categories of a nationally recognized statistical rating organization (an
"NRSRO"), provided that if they are rated by more than one NRSRO, at least
one other NRSRO rates them in one of its two highest categories; and (ii)
unrated securities determined to be of comparable quality at the time of
purchase. First Tier Securities are: (i) securities (or issuers) rated in the
highest rating category by the only NRSRO rating them; (ii) securities (or
their issuers) in the highest rating category of at least two NRSROs, if more
than one NRSRO has rated them; (iii) securities that have no short-term
rating, but have been issued by an issuer that has other outstanding
short-term obligations that have been rated in accordance with (i) or (ii)
above and are comparable in priority and security to such securities; and
(iv) certain unrated securities that have been determined to be of comparable
quality to such securities.
For a description of other securities in which the Portfolio may invest,
see "Common Investment Policies and Risk Factors."
TAX-EXEMPT CASH PORTFOLIO
The objective of the Tax-Exempt Cash Portfolio is to provide maximum
current interest income exempt from Federal income taxes consistent with the
preservation of capital and liquidity. The Tax-Exempt Cash Portfolio seeks
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to achieve its objective by investing primarily in short-term, high quality
Municipal Obligations (defined below). Under normal circumstances, at least
80% of the net assets of the Portfolio will be invested in Municipal
Obligations, the interest on which, in the opinion of bond counsel or the
issuer's counsel, is exempt from regular Federal income tax and does not
constitute an item of tax preference for purposes of the Federal alternative
minimum tax ("Tax-Exempt Interest"). Glenmede Fund will use its best efforts
to not invest any of the Tax-Exempt Cash Portfolio's assets in Municipal
Obligations the interest on which constitutes an item of tax preference for
purposes of the Federal alternative minimum tax.
Municipal Obligations in which the Portfolio may invest include the
following, provided at the time of purchase they are Eligible Securities
which the Advisor believes presents minimal credit risk: project notes,
demand notes, short-term municipal obligations (including tax anticipation
notes, revenue anticipation notes, bond anticipation notes, tax and revenue
anticipation notes, construction loan notes, and short-term discount notes)
rated SP-1+ or SP-1 by S&P or MIG-1 by Moody's; tax-exempt commercial paper
rated A-1+ or A-1 by S&P or Prime-1 by Moody's; municipal bonds with a
remaining effective maturity of 13 months or less, rated AA or better by S&P
or Aa or better by Moody's; variable rate demand notes rated "VMIG-1" by
Moody's; and any non-rated tax-exempt, privately placed securities which, in
the Advisor's opinion, are equivalent in credit quality to an AA or Aa-rated
security as determined by S&P or Moody's, respectively.
The Portfolio will invest in securities maturing within 13 months from the
date of purchase, except that securities collateralizing repurchase
agreements may bear maturities exceeding 13 months; and the Portfolio may
purchase bonds with final maturities exceeding 13 months if such bonds
pursuant to a demand feature provide for an earlier redemption date within 13
months from the date of purchase.
Municipal Obligations. The two principal classifications of Municipal
Obligations are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the
proceeds of a special or specific excise tax or other specific revenue source
such as the user of the facility being financed. Revenue securities include
private activity bonds which are not payable from the unrestricted revenues
of the issuer. Consequently, the credit quality of private activity bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which
created the issuer.
Municipal Obligations may include variable rate demand notes, provided
they are Eligible Securities. Such notes are frequently not rated by credit
rating agencies, but unrated notes will be purchased by the Portfolio if they
are comparable in quality at the time of the purchase to rated Eligible
Securities as determined by the Advisor. Where necessary to ensure that a
note is an Eligible Security, the Portfolio will require that the issuer's
obligation to pay the principal of the note be backed by an unconditional
bank letter or line of credit, guarantee or commitment to lend. While there
may be no active secondary market with respect to a particular variable rate
demand note purchased by the Portfolio, the Portfolio may, upon the notice
specified in the note, demand payment of the principal of the note at any
time or during specified periods not exceeding 13 months, depending upon the
instrument involved. The absence of such an active secondary market, however,
could make it difficult for the Portfolio to dispose of a variable rate
demand note if the issuer defaulted on its payment obligation or during the
periods that the Portfolio is not entitled to exercise its demand rights. The
Portfolio could, for this or other reasons, suffer a loss to the extent of
the default. The Portfolio invests in variable rate demand notes only when
the Advisor deems the investment to involve minimal credit risk. The Advisor
also monitors the continuing creditworthiness of issuers of such notes and
parties providing credit enhancement to determine whether the Portfolio
should continue to hold the notes.
For a further discussion of Municipal Obligations, see the Appendix to the
Statement of Additional Information.
For a description of other securities in which the Portfolio may invest,
see "Common Investment Policies and Risk Factors."
INTERMEDIATE GOVERNMENT PORTFOLIO
The objective of the Intermediate Government Portfolio is to provide
maximum, long-term total return consistent with reasonable risk to principal.
The Intermediate Government Portfolio seeks to achieve its objective by
investing
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primarily in mortgage-backed securities and medium-term fixed income
securities issued by the U.S. Treasury, U.S. Government agencies, or other
agencies, enterprises or instrumentalities sponsored by the U.S. Government.
The Portfolio seeks to achieve consistent results over the long-term. While
portfolio securities will be traded, the Portfolio is not expected to engage
in active trading under normal circumstances. The net asset value of the
Portfolio will fluctuate, and it is anticipated that the Portfolio will
maintain an average weighted maturity of 3 to 10 years.
The Portfolio may invest in the following securities: (i) straight-debt and
mortgage-backed obligations issued by the U.S. Government or its sponsored
agencies, enterprises or instrumentalities; (ii) securities of international
institutions which are not direct obligations of the U.S. Government but which
involve governmental agencies, enterprises or instrumentalities; (iii) any other
publicly or privately placed, unrated securities issued by the U.S. Government,
its agencies, enterprises or instrumentalities, which, in the Advisor's opinion,
are equivalent in credit quality to securities rated AAA by S&P or Aaa by
Moody's; (iv) mortgage-backed obligations which are privately issued with a
rating of at least AA by S&P or Aa by Moody's or which if unrated, are in the
Advisor's opinion equivalent in credit quality to either such rating; and (v)
corporate debt obligations of domestic and foreign corporations rated A or
better by S&P or Moody's. Any of the above securities may be variable or
floating rate. Under normal circumstances, at least 65% of the Intermediate
Government Portfolio's total assets will be invested in U.S. government
securities and repurchase agreements relating thereto and no more than 35% of
the value of its total assets will be invested in the securities described in
(ii) and (v) of the first sentence of this paragraph.
Mortgage-Backed Obligations. Mortgage-backed obligations represent an
ownership interest in a pool of residential mortgage loans, the interests in
which are issued and guaranteed by an agency or instrumentality of the U.S.
Government, though not necessarily by the U.S. Government itself.
One such type of mortgage-backed obligation in which the Portfolio may
invest is a Government National Mortgage Association ("GNMA") Certificate.
GNMA Certificates are backed as to the timely payment of principal and
interest by the full faith and credit of the U.S. Government. Another type is
a Federal National Mortgage Association ("FNMA") Certificate; the principal
and interest of which are guaranteed only by FNMA itself, not by the full
faith and credit of the U.S. Government. Another type is a Federal Home Loan
Mortgage Association ("FHLMC") Participation Certificate. This type of
obligation is guaranteed by FHLMC as to timely payment of principal and
interest. However, like a FNMA security, it is not guaranteed by the full
faith and credit of the U.S. Government. Another type is a privately issued
obligation with a rating of at least AA by S&P or Aa by Moody's or which if
unrated, is in the Advisor's opinion equivalent in credit quality to either
such rating. Mortgage-backed obligations issued by private issuers, whether
or not such obligations are subject to guarantees by the private issuer, may
entail greater risk than obligations directly or indirectly guaranteed by the
U.S. Government.
Mortgage-backed obligations are characterized by monthly payments to the
security holder, reflecting the monthly payments, net of certain fees, made
by the mortgagors of the underlying mortgage loans. The payments to the
security holders (such as the Portfolio), similar to the payments on the
underlying loans, represent both principal and interest. Although the
underlying mortgage loans are for specified periods of time (such as thirty
years) the borrowers can, and typically do, repay them sooner. Thus, the
security holders frequently receive prepayments of principal, in addition to
the principal which is part of the regular monthly payments. A borrower is
more likely to prepay a mortgage which bears a relatively high rate of
interest. Therefore, in times of declining interest rates, some of the
Portfolio's higher yielding securities might be repaid and thereby converted
to cash and the Portfolio will be forced to accept lower interest rates when
that cash is used to purchase additional securities. The Portfolio normally
will not distribute principal payments (whether regular or prepaid) to its
shareholders. Interest received by the Portfolio will, however, be
distributed to shareholders in the form of dividends. For a further
discussion of mortgage-backed obligations, see the Appendix to the Statement
of Additional Information.
Corporate Debt Obligations. Corporate debt obligations of domestic and
foreign corporations may include a broad range of fixed and variable rate
bonds, debentures and notes.
Although government-guaranteed or sponsored securities reduce credit risk
(the possibility that issuers of bonds will default on payments of interest
and principal), the Portfolio's shares are still subject to the risk of
market value fluctuations inherent in owning fixed income securities,
including securities of international institutions and corporate debt
obligations. The market value of securities held by the Intermediate
Government Portfolio is expected to vary according to, among other factors,
changes in prevailing interest rates and the average weighted maturity of the
Portfolio maintained by the Advisor. In general, if interest rates increase
from the time a fixed income investment is made, the market value of that
investment is likely to decline. Similarly, if interest rates fall from the
time a fixed income investment is made, the market value of that investment
is likely to increase. Also, in general, for a given change in
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interest rates, a fixed income investment with a longer maturity is likely to
fluctuate more in market value than a comparable investment with a shorter
maturity. An investment in the Intermediate Government Portfolio is expected
to be subject to such market risks.
For a description of other securities in which the Intermediate Government
Portfolio may invest, see "Common Investment Policies and Risk Factors."
MUNI INTERMEDIATE PORTFOLIO AND NEW JERSEY MUNI PORTFOLIO
The objective of each of the Muni Intermediate and New Jersey Muni
Portfolios is to seek as high a level of current income exempt from Federal
income tax as is consistent with preservation of capital. To the extent
possible, the Muni Intermediate Portfolio seeks to achieve its objective by
investing primarily in intermediate and long-term Municipal Obligations
issued by the Commonwealth of Pennsylvania and its political subdivisions,
agencies, instrumentalities and authorities ("Pennsylvania Municipal
Obligations") and the New Jersey Muni Portfolio seeks to achieve its
objective by investing primarily in intermediate and long-term Municipal
Obligations issued by the State of New Jersey and its political subdivisions,
agencies, instrumentalities and authorities ("New Jersey Municipal
Obligations"). Municipal Obligations acquired by these Portfolios will be
rated at the time of purchase within the three highest ratings assigned by
Moody's (i.e., Aaa, Aa, A) or by S&P (AAA, AA, A) in the case of bonds, rated
SP-1 or higher by S&P or MIG-2 or higher by Moody's in the case of notes,
rated A-1 or higher by S&P or Prime-1 or higher by Moody's in the case of
tax-exempt commercial paper or in unrated securities determined by the
Advisor at the time of purchase to be of comparable quality. If a portfolio
security is reduced below A by Moody's or S&P, the Advisor will dispose of
the security in an orderly fashion as soon as practicable. The Muni
Intermediate and New Jersey Muni Portfolios may not be able to achieve as
high a level of current income under all market conditions as would be
possible if they were permitted to invest in lower quality and longer term
securities which, however, generally are less liquid, have greater market
risk and are generally subject to more fluctuation of market value. See
"Investment Policies--Tax-Exempt Cash Portfolio" for a description of
Municipal Obligations and the Appendix to the SAI for a description of
Moody's and S&P's ratings.
To the extent possible, during normal market conditions at least 65% of
the net assets of the New Jersey Muni Portfolio will be invested in New
Jersey Municipal Obligations. It is anticipated that the New Jersey Portfolio
and the Muni Intermediate Portfolio will each maintain an average weighted
maturity of three to ten years.
During normal market conditions: up to 20% of each Portfolio's net assets
may be invested in securities which are not Municipal Obligations; and at
least 80% of the Portfolio's net assets will be invested in intermediate and
long-term Municipal Obligations, the interest on which is Tax-Exempt
Interest. Each of the Portfolios may invest up to 20% of its net assets in
Municipal Obligations, the interest on which is exempt from regular Federal
income tax but is an item of tax preference for purposes of the Federal
alternative minimum tax. During temporary defensive periods, each Portfolio
may invest without limitation in obligations which are not Municipal
Obligations and may hold without limitation uninvested cash reserves. Such
securities may include, without limitation, bonds, notes, variable rate
demand notes and commercial paper, provided such securities are rated within
the relevant categories applicable to Municipal Obligations set forth above,
or if unrated, are of comparable quality as determined by the Advisor and may
also include, without limitation, other debt obligations, such as bank
obligations which are also of comparable quality as determined by the
Advisor. Each Portfolio may acquire "stand-by commitments" with respect to
Municipal Obligations held by it. Under a stand-by commitment, a dealer
agrees to purchase, at the Portfolio's option, specified Municipal
Obligations at a specified price. The acquisition of a stand-by commitment
may increase the cost, and thereby reduce the yield, of the Municipal
Obligation to which such commitment relates. Each Portfolio will acquire
stand-by commitments solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes.
Each Portfolio is classified as non-diversified under the Investment
Company Act of 1940, as amended (the "1940 Act"). Investment returns on a
non-diversified portfolio typically are dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio. Consequently, the change in value of any one security may affect
the overall value of a non-diversified portfolio more than it would a
diversified portfolio. Additionally, a non-diversified portfolio may be more
susceptible to economic, political and regulatory developments than a
diversified portfolio with a similar objective.
Since each of the Muni Intermediate and New Jersey Muni Portfolios will
invest primarily in securities issued by issuers located in one state, each
of these Portfolios is susceptible to adverse changes in value due to changes
in the economic condition and governmental policies of that state and its
political subdivisions, agencies, instrumentalities
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and authorities. A comparable municipal bond fund which is not concentrated
in obligations issued by issuers located in one state would be less
susceptible to these risks. If any issuer of securities held by one of these
Portfolios is unable to meet its financial obligations, that Portfolio's
income, capital, and liquidity may be adversely affected.
With respect to the Commonwealth of Pennsylvania, although the balance in
the General Fund of the Commonwealth (the principal operating fund of the
Commonwealth) experienced deficits in fiscal 1990 and 1991, tax increases and
spending decreases have resulted in surpluses the last three years; as of
June 30, 1994, the General Fund had a surplus of $892.9 million. The deficit
in the Commonwealth's unreserved/undesignated funds also has been eliminated,
and there was a surplus of $79.2 million as of June 30, 1994.
The concentration of investments by the New Jersey Muni Portfolio in New
Jersey Municipal Obligations also raises special investment considerations.
The State of New Jersey generally has a diversified economic base consisting
of, among others, commerce and service industries, selective commercial
agriculture, insurance, tourism, petroleum refining and manufacturing,
although New Jersey's manufacturing industry has shown a downward trend in
the last few years. New Jersey is a major recipient of Federal assistance
and, of all the states, is among the highest in the amount of Federal aid
received. Therefore, a decrease in Federal financial assistance may adversely
affect New Jersey's financial condition. While New Jersey's economic base has
become more diversified over time and thus its economy appears to be less
vulnerable during recessionary periods, a recurrence of high levels of
unemployment could adversely affect New Jersey's overall economy and its
ability to meet its financial obligations. In addition, because New Jersey
maintains a balanced budget which restricts total appropriation increases to
only 5% annually to any municipality or county, the balanced budget plan may
actually adversely affect a particular municipality's or county's ability to
repay its obligations.
See "Common Investment Policies and Risk Factors" for a description of
other investment policies.
INTERNATIONAL FIXED INCOME PORTFOLIO
The objective of the International Fixed Income Portfolio is to provide
maximum long-term total return consistent with reasonable risk to principal.
The International Fixed Income Portfolio seeks to achieve its objective by
investing primarily in non-dollar denominated fixed income securities. The
Portfolio will primarily invest in fixed income securities denominated in
foreign currencies, including the European Currency Unit ("ECU"), which are
issued by foreign governments and governmental agencies, and other agencies,
enterprises or instrumentalities sponsored by foreign governments. The
Advisor will seek opportunities for investment return in securities
denominated in currencies it believes to be undervalued. The Portfolio is
expected to invest in securities in a number of foreign countries, which may
include but are not limited to, Japan, the United Kingdom, Germany, France,
Switzerland, the Netherlands, Sweden, Australia, Hong Kong and Singapore. The
Portfolio will invest an aggregate of at least 65% of its total assets in the
fixed income securities of at least three countries other than the United
States. The net asset value of the Portfolio will fluctuate.
The Portfolio may invest in the following securities: (i) debt obligations
issued or guaranteed by foreign national governments, their agencies,
instrumentalities, or political subdivisions (including any security of an
entity which is majority owned by such government, agency, instrumentality or
political subdivision) and (ii) debt securities issued or guaranteed by
supranational organizations established or supported by more than one
national government, including but not limited to, the World Bank, the
European Investment Bank, European Union and the Asian Development Bank. The
Portfolio may also invest in obligations of the U.S. Government and its
guaranteed or sponsored agencies, including shares of open-end or closed-end
investment companies which invest in such obligations exclusively (such
shares will be purchased within the limits prescribed by the 1940 Act);
short-term money market instruments issued in the U.S. or abroad, denominated
in dollars or any foreign currency, including short-term certificates of
deposit (including variable rate certificates of deposit), time deposits with
a maturity no greater than 180 days, bankers acceptances, commercial paper
rated A-1 by S&P or Prime-1 by Moody's, or in equivalent money market
securities; and other high quality fixed income securities denominated in
U.S. dollars, any foreign currency, or a multi-national currency unit such as
the ECU. The Portfolio invests in high grade debt securities. The Portfolio's
investments will consist of securities rated at least AA by S&P or Aa by
Moody's, or if unrated, securities which, in the Advisor's opinion, are
equivalent in credit quality to securities so rated. The Portfolio may also
invest in interest rate swaps, caps and floors. See "Investment Objectives
and Policies -- Interest Rate Transactions" in the SAI.
The International Fixed Income Portfolio may also enter into forward
foreign currency exchange contracts only in order to hedge against
uncertainty in the level of future foreign exchange rates in the purchase and
sale of investment securities; it may not enter into such contracts for
speculative purposes. A forward foreign currency exchange
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contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the
contract. These contracts may be bought or sold to protect the Portfolio, to
some degree, against a possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S. dollar. It should be
realized that this method of protecting the value of the Portfolio's
investment securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange at some future point in time. Additionally,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, at the same time they tend to limit any
potential gain which might result should the value of such currency increase.
The International Fixed Income Portfolio may utilize futures contracts,
options and options on futures contracts as a hedge against changes resulting
from market conditions and exchange rates in the values of the securities
held in that Portfolio of which it intends to purchase or if the Portfolio's
aggregate initial margins and premiums required in connection with new
hedging positions do not exceed 5% of its net asset value. The Portfolio
would not utilize futures contracts, options or options on futures contracts
unless the transactions are economically appropriate for the reduction of
risks inherent in the ongoing management of the Portfolio. The International
Fixed Income Portfolio may write covered calls (options on securities owned
by the Portfolio) and enter into closing purchase transactions with respect
to such options. Also, the Portfolio may enter into futures contracts and
options on futures contracts only to the extent that not more than 20% of the
Portfolio's assets are invested in such instruments. The International Fixed
Income Portfolio may engage in futures and options transactions only if it is
consistent with its investment objectives and policies.
Entering into futures contracts and trading options are highly specialized
activities which entail greater than ordinary investment risks. To enter into
a futures contract, the Portfolio must make a deposit of initial margin with
its custodian in a segregated account in the name of its futures broker.
Subsequent payments to or from the broker, called variation margin, will be
made on a daily basis as the price of the underlying security or index
fluctuates, making the long and short positions in the futures contracts more
or less valuable.
A call option for a particular security gives the purchaser of the option
the right to buy, and a writer the obligation to sell, the underlying
security at the stated exercise price at any time prior to the expiration of
the option, regardless of the market price of the security. The premium paid
to the writer is in consideration for undertaking the obligations under the
option contract. A put option for a particular security gives the purchaser
the right to sell the underlying security at the stated exercise price at any
time prior to the expiration date of the option, regardless of the market
price of the security. In contrast to an option on a particular security, an
option on an index provides the holder with the right to make or receive a
cash settlement upon exercise of the option. The amount of this settlement
will be equal to the difference between the closing price of the index at the
time of exercise and the exercise price of the option expressed in dollars,
times a specified multiple.
The Portfolio may use over-the-counter bond options through any dealer or
dealer bank which the Advisor determines is creditworthy for outright
purchases and sales of securities. To the extent that over-the-counter bond
options are determined to be illiquid, the Portfolio will not purchase such
options if such purchase will cause the Portfolio's investments in all
illiquid securities to exceed 10% of its total assets.
The risks associated with the use of futures and options include: (i)
imperfect correlation between changes in the price of the securities being
hedged and the prices of futures and options relating to such securities;
(ii) possible lack of a liquid secondary market for a futures contract or
option, and the resulting inability to close a futures position which could
have an adverse impact on the Portfolio's ability to hedge, and (iii) losses
due to unanticipated market movements. The risk of loss in trading futures
contracts in some strategies can be substantial, due both to the low margin
deposits required, and the extremely high degree of leverage involved in
futures pricing. As a result, a relatively small price movement in a futures
contract may result in immediate and substantial loss or gain to the
investor. Thus, a purchase or sale of a futures contract may result in losses
or gains in excess of the amount invested in the contract. In contrast,
purchasing options entails a risk of a complete loss of the amounts paid as
premiums to the writer of the options. In addition, by writing a covered call
option, the Portfolio forgoes the opportunity to profit from an increase in
the market price of the underlying security above the exercise price except
insofar as the premium represents such a profit. The Portfolio will not be
able to sell the underlying security until the covered call option expires or
is exercised or the Portfolio effects a closing purchase transaction by
purchasing an option of the same series. For a further discussion of futures
contracts and options, see "Investment Objectives and Policies -- Futures
Contracts" in the SAI.
The Portfolio is classified as non-diversified under the 1940 Act.
Investment returns on a non-diversified portfolio typically are dependent
upon the performance of a smaller number of securities relative to the number
held in a
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diversified portfolio. Consequently, the change in value of any one security
may affect the overall value of a non- diversified portfolio more than it
would a diversified portfolio. Additionally, a non-diversified portfolio may
be more susceptible to economic, political and regulatory developments than a
diversified portfolio with a similar objective.
Because the Portfolio invests significantly in securities denominated in
foreign currencies, movements in foreign currency exchange rates versus the
U.S. dollar are likely to impact the Portfolio's share price stability
relative to domestic income funds. Fluctuation in foreign currencies can have
a positive or negative impact on returns. Normally, to the extent that the
Portfolio invested in foreign securities, a weakening in the U.S. dollar
relative to the foreign currencies underlying the Portfolio's investments
should help increase the net asset value of the Portfolio. Conversely, a
strengthening in the U.S. dollar versus the foreign currencies in which the
Portfolio's securities are denominated will generally lower the net asset
value of the Portfolio. The Advisor attempts to minimize exchange rate risk
through active portfolio management and efforts to identify risk from the
Portfolio's holdings. Investors should recognize that investing in the
securities of foreign companies and the utilization of forward foreign
currency contracts involve special risks and considerations not typically
associated with investing in U.S. companies. These risks and considerations
include differences in accounting, auditing and financial reporting
standards, generally higher commission rates on foreign portfolio
transactions, the possibility of expropriation or confiscatory taxation,
adverse changes in investment or exchange control regulations, political
instability which could affect U.S. investment in foreign countries and
potential restrictions on the flow of international capital. Moreover, the
dividends payable on the Portfolio's foreign portfolio securities may be
subject to foreign withholding taxes, thus reducing the net amount of income
available for distribution to the Portfolio's shareholders. Further, foreign
securities often trade with less frequency and volume than domestic
securities and, therefore, may exhibit greater price volatility.
COMMON INVESTMENT POLICIES AND RISK FACTORS
There can be no assurance that any of the Portfolios will achieve its
stated investment objective. There are a number of investment policies common
to each of the Portfolios.
REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements with qualified
brokers, dealers, banks and other financial institutions deemed creditworthy
by the Advisor. Under normal circumstances, however, each of the Intermediate
Government, Muni Intermediate, New Jersey Muni and International Fixed Income
Portfolios will not enter into repurchase agreements if entering into such
agreements would cause, at the time of entering into such agreements, more
than 20% of the value of the total assets of the particular Portfolio to be
subject to repurchase agreements. The International Fixed Income Portfolio
would generally enter into repurchase transactions to invest cash reserves.
In a repurchase agreement, a Portfolio purchases a security and
simultaneously commits to resell that security at a future date to the seller
(a qualified bank or securities dealer) at an agreed upon price plus an
agreed upon market rate of interest (itself unrelated to the coupon rate or
date of maturity of the purchased security). The securities held subject to a
repurchase agreement may have stated maturities exceeding 13 months, provided
that with respect to the Cash Portfolios, the repurchase agreement itself
matures in less than 13 months. The Advisor currently expects that repurchase
agreements with respect to the Intermediate Government, Muni Intermediate,
New Jersey Muni and International Fixed Income Portfolios also will mature in
less than 13 months. The seller under a repurchase agreement will be required
to maintain the value of the securities subject to the agreement at not less
than 101% of the repurchase price including accrued interest. The Funds'
administrator will mark to market daily the value of the securities
purchased, and the Advisor will, if necessary, require the seller to deposit
additional securities to ensure that the value is in compliance with the 101%
requirement stated above. The Advisor will consider the creditworthiness of a
seller in determining whether a Portfolio should enter into a repurchase
agreement, and the Portfolios will only enter into repurchase agreements with
banks and dealers which are determined to present minimal credit risk by the
Advisor under procedures adopted by the Board members.
In effect, by entering into a repurchase agreement, a Portfolio is lending
its funds to the seller at the agreed upon interest rate, and receiving a
security as collateral for the loan. Such agreements can be entered into for
periods of one day (overnight repo) or for a fixed term (term repo).
Repurchase agreements are a common way to earn interest income on short-term
funds.
The use of repurchase agreements involves certain risks. For example, if
the seller of a repurchase agreement defaults on its obligation to repurchase
the underlying securities at a time when the value of these securities has
declined, a Portfolio may incur a loss upon disposition of them. Default by
the seller would also expose a Portfolio
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to possible loss because of delays in connection with the disposition of the
underlying obligations. If the seller of an agreement becomes insolvent and
subject to liquidation or reorganization under the Bankruptcy Code or other
laws, a bankruptcy court may determine that the underlying securities are
collateral not within the control of a Portfolio and therefore subject to
sale by the trustee in bankruptcy. Further, it is possible that a Portfolio
may not be able to substantiate its interest in the underlying securities.
REVERSE REPURCHASE AGREEMENTS
The Government Cash and Intermediate Government Portfolios may enter into
reverse repurchase agreements. In a reverse repurchase agreement a Portfolio
sells a security and simultaneously commits to repurchase that security at a
future date from the buyer. In effect, the Portfolio is temporarily borrowing
funds at an agreed upon interest rate from the purchaser of the security, and
the sale of the security represents collateral for the loan. The Portfolio
retains record ownership of the security and the right to receive interest
and principal payments on the security. At an agreed upon future date, the
Portfolio repurchases the security by remitting the proceeds previously
received, plus interest. In certain types of agreements, there is no agreed
upon repurchase date and interest payments are calculated daily, often based
on the prevailing overnight repurchase rate. These agreements, which are
treated as if reestablished each day, are expected to provide the Government
Cash Portfolio and the Intermediate Government Portfolio with a flexible
borrowing tool. Reverse repurchase agreements are considered to be borrowings
by a Portfolio under the 1940 Act.
A Portfolio's investment of the proceeds of a reverse repurchase agreement
is the speculative factor known as leverage. The Portfolio may enter into a
reverse repurchase agreement only if the interest income from investment of
the proceeds is greater than the interest expense of the transaction and the
proceeds are invested for a period no longer than the term of the agreement.
A Portfolio will maintain with the custodian a separate account with a
segregated portfolio of liquid securities at least equal to its purchase
obligations under these agreements. The Advisor will consider the
creditworthiness of the other party in determining whether a Portfolio will
enter into a reverse repurchase agreement.
Under normal circumstances each of the Government Cash and Intermediate
Government Portfolios will not enter into reverse repurchase agreements if
entering into such agreements would cause, at the time of entering into such
agreements, more than 10% of the value of its total assets to be subject to
such agreements.
The use of reverse repurchase agreements involves certain risks. For
example, the other party to the agreement may default on its obligation or
become insolvent and unable to deliver the securities to the Portfolio at a
time when the value of the securities has increased. Reverse repurchase
agreements also involve the risk that a Portfolio may not be able to
substantiate its interest in the underlying securities.
BORROWING
Each Portfolio may purchase securities on a "when issued," "delayed
settlement" or "forward delivery" basis, and the Government Cash and
Intermediate Government Portfolios may enter into reverse repurchase
agreements. As a temporary measure for extraordinary or emergency purposes, a
Portfolio may borrow money from banks. However, none of the Portfolios will
borrow money for speculative purposes. See "Common Investment Policies--'When
Issued,' 'Delayed Settlement,' 'Forward Delivery Securities' and 'Reverse
Repurchase Agreements.' "
LENDING OF SECURITIES
Each Portfolio may lend its portfolio securities with a value of up to
one-third of its total assets to qualified brokers, dealers, banks and other
financial institutions for the purpose of realizing additional net investment
income through the receipt of interest on the loan. Such loans would involve
risks of delay in receiving additional collateral in the event the value of
the collateral decreased below the value of the securities loaned or of delay
in recovering the securities loaned or even loss of rights in the collateral
should the borrower of the securities fail financially. Loans will be made
only to borrowers deemed by the Advisor to be of good standing.
MUNICIPAL OBLIGATIONS
The Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios may
each invest 25% or more of its net assets in Municipal Obligations, the
interest on which is paid solely from revenues of similar projects, and may
invest up to 20% of its total assets in private activity bonds when added
together with any taxable investments held by the Portfolio when, in the
opinion of the Advisor, the investment is warranted. To the extent a
Portfolio's assets are
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invested in Municipal Obligations payable from the revenues of similar
projects or are invested in private activity bonds, the particular Portfolio
will be subject to the peculiar risks presented by the laws and economic
conditions relating to such projects and bonds to a greater extent than it
would be if its assets were not so invested.
"WHEN ISSUED," "DELAYED SETTLEMENT" AND "FORWARD DELIVERY" SECURITIES
The Portfolios may purchase and sell securities on a "when issued,"
"delayed settlement" or "forward delivery" basis. "When issued" or "forward
delivery" refers to securities whose terms and indenture are available and
for which a market exists, but which are not available for immediate
delivery. When issued or forward delivery transactions may be expected to
occur one month or more before delivery is due. Delayed settlement is a term
used to describe settlement of a securities transaction in the secondary
market which will occur sometime in the future. No payment or delivery is
made by a Portfolio in a when issued, delayed settlement or forward delivery
transaction until the Portfolio receives payment or delivery from the other
party to the transaction. A Portfolio will maintain a separate account of
cash, U.S. Government securities or other high grade debt obligations at
least equal to the value of purchase commitments until payment is made. Such
segregated securities will either mature or, if necessary, be sold on or
before the settlement date. Although a Portfolio receives no income from the
above described securities prior to delivery, the market value of such
securities is still subject to change. A Portfolio receives no income from
"when issued," "delayed settlement" or "forward delivery" securities prior to
delivery of such securities.
A Portfolio will engage in when issued transactions to obtain what is
considered to be an advantageous price and yield at the time of the
transaction. When a Portfolio engages in when issued, delayed settlement or
forward delivery transactions, it will do so for the purpose of acquiring
securities consistent with its investment objective and policies and not for
the purpose of speculation. Each Portfolio's when issued, delayed settlement
and forward delivery commitments are not expected to exceed 25% of its total
assets absent unusual market circumstances, and each Portfolio will only sell
securities on such a basis to offset securities purchased on such a basis.
INVESTMENT COMPANY SECURITIES
In connection with the management of their daily cash positions, the
Portfolios may each invest in securities issued by other open-end investment
companies with investment objectives and policies that are consistent with
those of the investing portfolio. Each Portfolio limits its investments so
that, as determined immediately after a securities purchase is made: (a) not
more than 5% of the value of its total assets will be invested in the
securities of any one investment company; (b) not more than 10% of the value
of its total assets will be invested in the aggregate in the securities of
investment companies as a group; and (c) not more than 3% of the outstanding
voting stock of any one investment company will be owned by the Portfolio. As
a shareholder of another investment company, the Portfolio would bear its pro
rata portion of the other investment company's advisory fees and other
expenses, in addition to the expenses the Portfolio bears directly in
connection with its own operations.
ILLIQUID SECURITIES
No Portfolio will invest more than 10% of its net assets in securities
that are illiquid.
ELIGIBLE INSTRUMENTS--GOVERNMENT CASH AND INTERMEDIATE GOVERNMENT
PORTFOLIOS
During periods when federally chartered credit unions beneficially own
shares of the Government Cash and Intermediate Government Portfolios, those
Portfolios intend to observe limitations imposed under the National Credit
Union Administration Rules and Regulations ("NCUA Regulations") governing
eligible investments for federally chartered credit unions. Accordingly,
during those periods, unless the laws, rules or regulations governing
eligible investments for federally chartered credit unions are changed to
permit such investments, those Portfolios intend not to invest in, among
other investments: Government Trust Certificates; World Bank Obligations;
securities of the Asian Development Bank, the Inter-American Development
Bank; the International Bank for Reconstruction and Development; obligations
of certain U.S. government enterprises and instrumentalities investment in
which is not provided for by the Federal Credit Union Act; futures contracts;
or options; and intend to observe limitations imposed under NCUA Regulations
on investment in certain types of mortgage-related securities. With respect
to collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conduits ("REMICs"), the Portfolios, in accordance with NCUA
Regulations, will not invest in any CMO or REMIC that does not pass the
average life, average life sensitivity and price sensitivity tests of the
NCUA's "high-risk security" test, unless the purchase is made solely to
reduce interest rate risk or the instrument is subject to the next sentence.
The average life and average life sensitivity tests do
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not apply to a floating or adjustable rate CMO or REMIC, irrespective of
whether it has been purchased to reduce interest rate risk, if (a) the
interest rate is reset at least annually, (b) the interest rate is below the
contractual cap of the instrument at the time of purchase or a subsequent
testing date, (c) the index upon which the interest rate is based is a
widely-used market interest rate index such as the London Interbank Offered
Rate and (d) the interest rate of the instrument varies directly (not
inversely) with the index upon which it is based and is not reset as a
multiple of the change in the index.
Additionally, during periods when Massachusetts state-chartered credit
unions beneficially own shares of the Government Cash or Intermediate
Government Portfolios, those Portfolios intend to observe limitations imposed
under Massachusetts General Laws regarding eligible investments for
Massachusetts state-chartered credit unions. Accordingly, during those
periods, unless the laws governing eligible investments for Massachusetts
state-chartered credit unions are changed to permit such investments, those
Portfolios intend not to invest in obligations of certain U.S. Government
agencies, enterprises and instrumentalities such as the Student Loan
Marketing Association, the investment in which is not permitted under
Massachusetts law.
Unless specified above and except as described under "Investment
Limitations," the foregoing investment policies are not fundamental, and the
particular Funds' Board members may change such policies without shareholder
approval.
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PURCHASE OF SHARES
Shares of each Portfolio are sold without a sales commission on a
continuous basis to the Advisor acting on behalf of its or an Affiliate's
clients ("Clients") and to other institutions (the "Institutions"), at the
net asset value per share next determined after receipt of the purchase order
by the transfer agent. See "Valuation of Shares." The minimum initial
investment for each Portfolio is $25,000; the minimum for subsequent
investments for each Portfolio is $1,000. Each Fund reserves the right to
reduce or waive the minimum initial and subsequent investment requirements
from time to time. Beneficial ownership of shares will be reflected on books
maintained by the Advisor or the Institutions. A prospective investor wishing
to purchase shares in any of the Funds should contact the Advisor or his or
her Institution.
It is the responsibility of the Advisor to transmit orders for share
purchases to Investment Company Capital Corp. ("ICC"), the Funds' transfer
agent, and deliver required funds to The Chase Manhattan Bank, N.A.,
Brooklyn, New York, the Funds' custodian, on a timely basis. Shares purchased
in the Cash Portfolios before 12:00 noon (Eastern time) begin earning
dividends on the same business day provided Federal funds are available to
the particular Portfolio before 12:00 noon (Eastern time) that day.
Each of the Funds reserves the right, in its sole discretion, to suspend
the offering of shares of its Portfolios or reject purchase orders when, in
the judgment of management, such suspension or rejection is in the best
interests of the Fund.
Purchases of a Portfolio's shares will be made in full and fractional
shares of the Portfolio calculated to three decimal places. In the interest
of economy and convenience, certificates for shares will not be issued except
upon the written request of the shareholder. Certificates for fractional
shares, however, will not be issued.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the
redemption request by the transfer agent. Generally, a properly signed
written request is all that is required. Any redemption may be more or less
than the purchase price of the shares depending on the market value of the
investment securities held by the Portfolio. An investor wishing to redeem
shares should contact the Advisor or his or her Institution. It is the
responsibility of the Advisor to transmit promptly redemption orders to the
transfer agent.
Payment of the redemption proceeds will ordinarily be made within one
business day, but in no event more than seven days, after receipt of the
order in proper form by the transfer agent. Redemption orders are effected at
net asset value per share next determined after receipt of the order in
proper form by the transfer agent. Each of the Funds may suspend the right of
redemption or postpone the date of payment at times when the New York Stock
Exchange (the "Exchange") is closed, or under any emergency circumstances as
determined by the Securities and Exchange Commission (the "Commission"). See
"Valuation of Shares" for the days on which the Exchange is closed.
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If the particular Board determines that it would be detrimental to the
best interests of the remaining shareholders of the particular Fund to make
payment wholly or partly in cash, the Fund may pay the redemption proceeds in
whole or in part by a distribution in-kind of securities held by a Portfolio
in lieu of cash in conformity with applicable rules of the Commission.
Investors may incur brokerage charges on the sale of portfolio securities
received as a redemption in kind.
Each of the Funds reserves the right, upon 30 days' written notice, to
redeem an account in any of the Portfolios if the net asset value of the
account's shares falls below $100 and is not increased to at least such
amount within such 30-day period.
VALUATION OF SHARES
The net asset value of the Portfolios is determined by dividing the total
market value of each Portfolio's investments and other assets, less any
liabilities of that Portfolio, by the total outstanding shares of that
Portfolio. For the Cash Portfolios, net asset value per share is determined
as of 12:00 noon (Eastern time) on each day that the Exchange is open for
business (an "Exchange Business Day"). Currently the Exchange is closed on
weekends and the customary national business holidays of New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day (or the days on which they are observed).
For the Intermediate Government, Muni Intermediate, New Jersey Muni and
International Fixed Income Portfolios, net asset value per share is
determined as of the close of regular trading hours of the Exchange on each
Exchange Business Day on which the Portfolio receives an order to purchase or
redeem its shares. One or more pricing services may be used to provide
securities valuations in connection with the determination of the net asset
value of each Portfolio.
GOVERNMENT CASH AND TAX-EXEMPT CASH PORTFOLIOS
For the purpose of calculating each Cash Portfolio's net asset value per
share, securities are valued by the "amortized cost" method of valuation,
which does not take into account unrealized gains or losses. The amortized
cost method involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if it sold the
instrument.
The use of amortized cost and the maintenance of each Portfolio's per
share net asset value at $1.00 is based on its election to operate under the
provisions of Rule 2a-7 under the 1940 Act. As a condition of operating under
that rule, each Cash Portfolio must maintain an average weighted maturity of
90 days or less, purchase only instruments deemed to have remaining
maturities of 13 months or less, and invest only in securities which are
determined by the Advisor, pursuant to procedures established by the Board,
to present minimal credit risks and which are Eligible Securities, pursuant
to procedures established by the Board.
The Board has established procedures reasonably designed to stabilize the
net asset value per share for the purposes of sales and redemptions at $1.00.
These procedures include daily review of the relationship between the
amortized cost value per share and a net asset value per share based upon
available indications of market value.
In the event of a deviation of over 1/2 of 1% between a Cash Portfolio's
net asset value based upon available market quotations or market equivalents
and $1.00 per share based on amortized cost, the Board members will promptly
consider what action, if any, should be taken. The Board members will also
take such action as they deem appropriate to eliminate or to reduce to the
extent reasonably practicable any material dilution or other unfair results
which might arise from differences between the two. Such action may include
redemption in kind, selling instruments prior to maturity to realize capital
gains or losses or to shorten the average weighted maturity, exercising puts,
withholding dividends, paying distributions from capital or capital gains or
utilizing a net asset value per share as determined by using available market
quotations.
The net asset value per share of each Cash Portfolio will ordinarily
remain at $1.00, but each Cash Portfolio's daily dividends will vary in
amount. There can be no assurance, however, that the Cash Portfolios will
maintain a constant net asset value per share of $1.00.
INTERMEDIATE GOVERNMENT PORTFOLIO
Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the
over-the-counter market, at the most recent quoted bid price, or when stock
exchange
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valuations are used, at the latest quoted sale price on the day of
valuation. If there is not such a reported sale, the latest quoted bid price
will be used. Net asset value includes interest on fixed income securities
which is accrued daily. In addition, bond and other fixed income securities
may be valued on the basis of prices provided by a pricing service when the
Advisor believes such prices reflect the fair market value of such
securities. The prices provided by a pricing service are determined without
regard to bid or last sale prices but take into account institutional size
trading in similar groups of securities and any developments related to
specific securities. Debt securities with remaining maturities of 60 days or
less are valued at amortized cost, pursuant to which (i) such securities
shall be valued initially at cost on the date of purchase or, in the case of
securities purchased with more than 60 days maturity, at their market or fair
value on the 61st day prior to maturity, and (ii) thereafter (absent unusual
circumstances), a constant proportionate amortization of any discount or
premium shall be assumed until maturity of the security.
The value of other assets and securities for which no quotations are
readily available (including restricted securities) is determined in good
faith at fair value using methods determined by the Board.
MUNI INTERMEDIATE AND NEW JERSEY MUNI PORTFOLIOS
Municipal Obligations for which quotations are readily available are
valued at the most recent quoted bid price provided by investment dealers,
provided that Municipal Obligations may be valued on the basis of prices
provided by a pricing service when such prices are determined by the
administrator to reflect the fair market value of such Municipal Obligations.
Municipal Obligations for which market quotations are not readily available
are valued at fair market value as determined in good faith by or under the
direction of the particular Board. Debt obligations with remaining maturities
of 60 days or less are valued on the basis of amortized cost, pursuant to
which (i) such securities are valued initially at cost on the date of
purchase or, in the case of securities purchased with more than 60 days
maturity, at their market or fair value on the 61st day prior to maturity,
and (ii) thereafter (absent unusual circumstances), a constant proportionate
amortization of any discount or premium shall be assumed until maturity of
the security.
INTERNATIONAL FIXED INCOME PORTFOLIO
Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the
over-the-counter market, at the most recent quoted bid price. Securities that
are primarily traded on U.S. or foreign exchanges (including securities
traded through the National Market System) are valued at the last quoted sale
price on the day of valuation. If there is no such reported sale, the latest
quoted bid price will be used. Net asset value includes interest on fixed
income securities which is accrued daily.
In addition, bond and other fixed income securities may be valued on the
basis of prices provided by a pricing service when the Advisor believes such
prices reflect the fair market value of such securities. The prices provided
by a pricing service are determined without regard to bid or last sale prices
but take into account institutional size trading in similar groups of
securities and any developments related to specific securities. Debt
securities with remaining maturities of 60 days or less are valued at
amortized cost, pursuant to which (i) such securities shall be valued
initially at cost on the date of purchase or, in the case of securities
purchased with more than 60 days maturity, at their market or fair value on
the 61st day prior to maturity, and (ii) thereafter (absent unusual
circumstances), a constant proportionate amortization of any discount or
premium shall be assumed until maturity of the security.
The value of other assets and securities for which no quotations are
readily available (including restricted securities) is determined in good
faith at fair value using methods determined by the Board. Foreign currency
amounts are translated into U.S. dollars at the bid prices of such currencies
against U.S. dollars last quoted by a major bank.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Portfolios have the following dividend and capital gains policies:
(a) The Cash Portfolios declare dividends daily and normally distribute
substantially all of their net investment income to shareholders
monthly.
(b) The International Fixed Income Portfolio normally distributes
substantially all of its net investment income to shareholders in the
form of a quarterly dividend.
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(c) The Intermediate Government, Muni Intermediate and New Jersey Muni
Portfolios normally will distribute substantially all of their net
investment income to shareholders in the form of monthly dividends.
If any net capital gains are realized, the Portfolios normally distribute
such gains at least once a year. However, see "Dividends, Capital Gains
Distributions and Taxes--Federal Taxes--Miscellaneous," for a discussion of
the Federal excise tax applicable to certain regulated investment companies.
Undistributed net investment income is included in a Portfolio's net
assets for the purpose of calculating net asset value per share. Therefore,
on the Intermediate Government, Muni Intermediate, New Jersey Muni and
International Fixed Income Portfolios' "ex-dividend" date, the net asset
value per share excludes the dividend (i.e., is reduced by the per share
amount of the dividend). Dividends paid shortly after the purchase of shares
of the Intermediate Government, Muni Intermediate, New Jersey Muni and
International Fixed Income Portfolios by an investor, although in effect a
return of capital, are taxable to the investor.
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Portfolio of liability for Federal income taxes to
the extent its earnings are distributed in accordance with the Code.
Taxable Portfolios. Qualification as a regulated investment company under
the Code for a taxable year requires, among other things, that a taxable
Portfolio distribute to its shareholders an amount at least equal to 90% of
its investment company taxable income and 90% of its net exempt interest
income (if any) for such taxable year. In general, a Portfolio's investment
company taxable income will be its net investment income, including interest
and dividends, subject to certain adjustments, and net short-term capital
gains and excluding the excess of any net long-term capital gain for the
taxable year over the net short-term capital loss, if any, for such year.
Each Portfolio intends to distribute as dividends substantially all of its
investment company taxable income each year. Such dividends will be taxable
as ordinary income to each Portfolio's shareholders who are not currently
exempt from Federal income taxes, whether such income or gain is received in
cash or reinvested in additional shares. The dividends received deduction for
corporations will apply to such ordinary income distributions to the extent
the total qualifying dividends received by a Portfolio are from domestic
corporations for the taxable year. It is anticipated that none of the
dividends paid by the Government Cash and Intermediate Government Portfolios,
and only a small part (if any) of the dividends paid by the International
Fixed Income Portfolio will be eligible for the dividends received deduction.
Substantially all of each Portfolio's net realized long-term capital
gains, if any, will be distributed at least annually to its shareholders. A
Portfolio generally will have no tax liability with respect to such gains and
the distributions will be taxable to the shareholders who are not currently
exempt from Federal income taxes as long-term capital gains, regardless of
how long the shareholders have held the shares and whether such gains are
received in cash or reinvested in additional shares.
With respect to shares of the Intermediate Government, Muni Intermediate,
New Jersey Muni and International Fixed Income Portfolios, a shareholder
considering buying shares of a fund on or just before the record date of a
dividend should be aware that the amount of the forthcoming dividend payment,
although in effect a return of capital, will be taxable.
A taxable gain or loss may be realized by a shareholder upon redemption or
transfer of shares of the Intermediate Government, Muni Intermediate, New
Jersey Muni and International Fixed Income Portfolios, depending upon the tax
basis of such shares and their price at the time of redemption or transfer.
International Fixed Income Portfolio. It is expected that dividends and
certain interest income earned by the International Fixed Income Portfolio
from foreign securities will be subject to foreign withholding taxes or other
taxes. So long as more than 50% of the value of the Portfolio's total assets
at the close of any taxable year consists of stock or securities of foreign
corporations, the Portfolio may elect, for U.S. Federal income tax purposes,
to treat certain foreign taxes paid by it, including generally any
withholding taxes and other foreign income taxes, as paid by its
shareholders. If the Portfolio makes this election, the amount of such
foreign taxes paid by the Portfolio will be included in its shareholders'
income pro rata (in addition to taxable distributions actually received by
them), and each shareholder will be entitled (a) to credit his proportionate
amount of such taxes against his U.S. Federal income tax liabilities, or (b)
if he itemizes his deductions, to deduct such proportionate amount from his
U.S. income.
20
<PAGE>
Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios.
Exempt-interest dividends may be treated by shareholders as items of interest
excludable from their gross income under Section 103(a) of the Code, unless
under the circumstances applicable to the particular shareholder the
exclusion would be disallowed. (See "Additional Information Concerning Taxes"
in the SAI.) Distributions of net income may be taxable to investors under
state or local law as dividend income even though a substantial portion of
such distributions may be derived from interest on tax-exempt obligations
which, if realized directly, would be exempt from such income taxes.
If the Portfolio should hold certain private activity bonds issued after
August 7, 1986, shareholders must include, as an item of tax preference, the
portion of dividends paid by a Portfolio that is attributable to interest on
such bonds in their Federal alternative minimum taxable income for purposes
of determining liability (if any) for the alternative minimum tax and the
environmental tax applicable to corporations. Corporate shareholders must
also take all exempt-interest dividends into account in determining certain
adjustments for Federal alternative minimum and environmental tax purposes.
For individuals, the alternative minimum tax rate is 26% for alternative
minimum taxable income in excess of an exemption amount and 28% for any
amount of alternative minimum taxable income in excess of the exemption
amount plus $175,000. For corporations, the alternative minimum tax rate is
20%. The environmental tax applicable to corporations is imposed at the rate of
.12% on the excess of the corporation's modified Federal alternative minimum
taxable income over $2,000,000. Shareholders receiving Social Security benefits
should note that all exempt-interest dividends will be taken into account in
determining the taxability of such benefits.
To the extent that dividends paid to shareholders are derived from taxable
interest or from long-term or short-term capital gains, such dividends will
be subject to Federal income tax (whether such dividends are paid in cash or
additional shares) and may also be subject to state and local taxes.
Miscellaneous. Dividends declared in October, November or December of any
year payable to shareholders of record on a specified date in such months
will be deemed to have been received by the shareholders and paid by a
Portfolio on December 31, in the event such dividends are paid during January
of the following year.
A 4% nondeductible excise tax is imposed on regulated investment companies
that fail to currently distribute specified percentages of their ordinary
taxable income and net capital gain (excess of capital gains over capital
losses). Each Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and any net capital gain prior
to the end of each calendar year to avoid liability for this excise tax.
The foregoing summarizes some of the important tax considerations
generally affecting the Portfolios and their shareholders and is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Portfolios should consult their tax advisers with specific reference to
their own tax situation.
The foregoing discussion of tax consequences is based on tax laws and
regulations in effect on the date of this Prospectus, which are subject to
change by legislative or administrative action.
Shareholders will be advised at least annually as to the federal income
tax consequences of distributions made each year.
Each Portfolio will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or gross proceeds
realized upon sale paid to shareholders who have failed to provide a correct
tax identification number in the manner required, who are subject to
withholding by the IRS for failure properly to include on their return
payments of taxable interest or dividends, or who have failed to certify to
the Portfolio that they are not subject to backup withholding when required
to do so or that they are "exempt recipients."
PENNSYLVANIA TAX CONSIDERATIONS
Shareholders of the Muni Intermediate Portfolio will not be subject to
Pennsylvania Personal Income Tax on distributions from the Portfolio
attributable to interest income from Pennsylvania Municipal Obligations held
by the Portfolio, either when received by the Portfolio or when credited or
distributed to the shareholders. The exemption from Pennsylvania Personal
Income Tax will also extend to interest on obligations of the United States,
its territories and certain of its agencies and instrumentalities ("Federal
Securities"). Shareholders of the Portfolio will not be subject to the
Philadelphia School District Net Income Tax imposed on Philadelphia residents
on distributions from the Portfolio attributable to interest income from
Pennsylvania Municipal Obligations or Federal Securities held by the
Portfolio, either when received by the Portfolio or when credited or
distributed to the shareholders.
For purposes of the Pennsylvania Personal Income Tax and the School
District Tax, distributions derived from investments in other than
Pennsylvania Municipal Obligations and Federal Securities and distributions
from net real-
21
<PAGE>
ized capital gains in respect of such investments will be taxable. Distributions
qualifying as capital gain dividends for Federal income tax purposes are not
taxable for purposes of the School District Tax. Gain on the disposition of a
share of the Muni Intermediate Portfolio will be subject to the Pennsylvania
Personal Income Tax and the School District Tax, except that gain realized with
respect to a share held for more than six months is not subject to the School
District Tax.
Shareholders of the Muni Intermediate Portfolio are not subject to the
Pennsylvania personal property tax imposed by many counties in Pennsylvania
to the extent that the Portfolio is comprised of Pennsylvania Municipal
Obligations and Federal Securities. In addition, Glenmede Fund has obtained a
Certificate of Authority to do business as a foreign corporation in
Pennsylvania, and currently does business in that state. Accordingly, the
shares of the Glenmede Fund will be exempt from Pennsylvania Personal
Property Taxes.
NEW JERSEY TAX CONSIDERATIONS
It is anticipated that substantially all dividends paid by the New Jersey
Muni Portfolio will not be subject to New Jersey personal income tax. In
accordance with the provisions of New Jersey law as currently in effect,
distributions paid by a "qualified investment fund" will not be subject to the
New Jersey personal income tax to the extent that the distributions are
attributable to income received as interest or gain from New Jersey Municipal
Obligations, or as interest or gain from direct U.S. Government obligations.
Distributions by a qualified investment fund that are attributable to most other
sources will be subject to the New Jersey personal income tax. If the New Jersey
Muni Portfolio qualifies as a qualified investment fund under New Jersey law,
any gain on the redemption or sale of the Portfolio's shares will not be subject
to the New Jersey personal income tax. To be classified as a qualified
investment fund, at least 80% of the Portfolio's investment must consist of New
Jersey Municipal Obligations or direct U.S. Government obligations; it must have
no investments other than interest-bearing obligations, obligations issued at a
discount, and cash and cash items (including receivables) and financial options,
futures and forward contracts related to interest bearing obligations issued at
a discount; and it must satisfy certain reporting obligations and provide
certain information to its shareholders. Shares of the Portfolio are not subject
to property taxation by New Jersey or its political subdivisions. To the extent
that a shareholder is subject to state or local taxes outside New Jersey,
dividends earned by an investment in the Fund may represent taxable income.
The New Jersey personal income tax is not applicable to corporations. For
all corporations subject to the New Jersey Corporation Business Tax, dividend
and distributions from a "qualified investment fund" are included in the net
income tax base for purposes of computing the Corporation Business Tax.
Furthermore, any gain upon the redemption or sale of Fund shares by a
corporate shareholder is also included in the net income tax base for
purposes of computing the Corporation Business Tax.
The foregoing is only a summary of certain New Jersey tax considerations
generally affecting the Portfolio and its shareholders, and is not intended
as a substitute for careful tax planning. Shareholders are urged to consult
their tax advisors with specific reference to their own tax situations.
OTHER STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on distributions
from the Funds. A shareholder should consult with his or her tax adviser with
respect to the tax status of distributions from the Funds in a particular
state and locality.
INVESTMENT ADVISOR
The Advisor, a limited purpose trust company chartered in 1956, provides
fiduciary and investment services to endowment funds, foundations, employee
benefit plans and other institutions and individuals. The Advisor is a
wholly-owned subsidiary of The Glenmede Corporation and is located at One
Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania
19103. At January 30, 1996 the Advisor had over $8 billion in assets in the
accounts for which it serves in various capacities including as executor,
trustee or investment advisor.
Under Investment Advisory Agreements (the "Investment Advisory
Agreements") with the Funds, the Advisor, subject to the control and
supervision of the particular Fund's Board and in conformance with the stated
investment objective and policies of each Portfolio, manages the investment
and reinvestment of the assets of each Portfolio. It is the responsibility of
the Advisor to make investment decisions for the Portfolios and to place each
Portfolio's purchase and sales orders.
22
<PAGE>
The Advisor does not receive any fee from the Funds for its investment
services provided to the Portfolios described in this Prospectus. However,
shareholders in the Funds who are clients of the Advisor or an Affiliate pay
fees which vary depending on the capacity in which the Advisor or the
Affiliate provides fiduciary and investment services to the particular client
(e.g., personal trust, estate settlement, advisory and custodian services).
Mary Ann B. Wirts, Vice President and Manager of the Fixed Income Division
of the Advisor, has been the portfolio manager primarily responsible for the
management of the Tax-Exempt Cash Portfolio since that Portfolio commenced
operations. Effective September 12, 1996, Mrs. Wirts is also the portfolio
manager primarily responsible for the management of the Government Cash,
Intermediate Government and International Fixed Income Portfolios. Mrs. Wirts
has been employed by the Advisor since 1982.
Laura LaRosa is the portfolio manager primarily responsible for the
management of the Muni Intermediate and New Jersey Muni Portfolios. Ms.
LaRosa has been primarily responsible for the management of those Portfolios
since November 1994. Prior to her employment with the Advisor, Ms. LaRosa was
Vice President of Institutional Sales at Hopper Soliday, Philadelphia from
1986 through October 1994. Ms. LaRosa has been employed by the Advisor since
November 1994.
ADMINISTRATIVE, TRANSFER AGENCY AND DIVIDEND PAYING SERVICES
ICC serves as the Funds' administrator, transfer agent and dividend paying
agent pursuant to a Master Services Agreement, and in those capacities
supervises all aspects of the Funds' day-to-day operations, other than
management of the Funds' investments. ICC is a wholly-owned subsidiary of
Alex. Brown & Sons Incorporated ("Alex. Brown"). For its services as
administrator, transfer agent and dividend paying agent, ICC is entitled to
receive fees from the Funds equal to .12% of the first $100 million of the
combined net assets of the Funds; .08% of the next $150 million of the
combined net assets of the Funds; .04% of the next $500 million of the
combined net assets of the Funds and .03% of the combined net assets of the
Funds over $750 million. For the period July 1, 1995 to October 31, 1995, ICC
received fees at the rate of .04% (annualized) of the Government Cash
Portfolio's average net assets, .04% (annualized) of the Tax-Exempt Cash
Portfolio's average net assets, .04% (annualized) of the Intermediate
Government Portfolio's average net assets, .04% (annualized) of the Muni
Intermediate Portfolio's average net assets, .04% (annualized) of the New
Jersey Muni Portfolio's average net assets, .04% (annualized) of the
International Fixed Income Portfolio's average net assets. For the period
November 1, 1994 to June 30, 1995, the Fund's previous administrator received
fees at a rate of .08% (annualized) of the Government Cash Portfolio's
average net assets, .09% (annualized) of the Tax-Exempt Cash Portfolio's
average net assets, .09% (annualized) of the Intermediate Government
Portfolio's average net assets, .09% (annualized) of the Muni Intermediate
Portfolio's average net assets, .09% (annualized) of the New Jersey Muni
Portfolio's average net assets and .09% (annualized) of the International
Fixed Income Portfolio's average net assets.
SHAREHOLDER SERVICING PLAN
The Funds have each adopted a Shareholder Servicing Plan (the "Plan")
effective January 1, 1995 under which the Funds may pay a fee to
broker/dealers, banks and other financial institutions (including the Advisor
and its affiliates) that are dealers of record or holders of record or which
have a servicing relationship ("Servicing Agents") with the beneficial owners
of shares in any of the Portfolios. Under the Plan, Servicing Agents enter
into Shareholder Servicing Agreements (the "Agreements") with the Funds.
Pursuant to such Agreements, Servicing Agents provide shareholder support
services to their clients ("Customers") who beneficially own shares of the
Portfolios. The fee, which will be at an annual rate of .05%, is computed
monthly and is based on the average daily net assets of the shares
beneficially owned by Customers of such Servicing Agents. All expenses
incurred by the Portfolios in connection with the Agreements and the
implementation of the Plans shall be borne entirely by the holders of the
shares of the particular Portfolio involved and will result in an equivalent
increase to each Portfolio's Total Annual Portfolio Operating Expenses. The
Advisor has entered into an Agreement with each Fund for each Portfolio.
The services provided by the Servicing Agents under the Agreements may
include aggregating and processing purchase and redemption requests from
Customers and transmitting purchase and redemption orders to the transfer
agent; providing Customers with a service that invests the assets of their
accounts in shares pursuant to specific or pre-authorized instructions;
processing dividend and distribution payments from the Funds on behalf of
Customers; providing information periodically to Customers showing their
positions; arranging for bank wires; responding to Customers' inquiries
concerning their investments; providing sub-accounting with respect to shares
beneficially owned
23
<PAGE>
by Customers or the information necessary for sub-accounting; if required by
law, forwarding shareholder communications (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to Customers; and providing such other similar services as may
be reasonably requested.
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) purchase more than 10% of any class of the outstanding voting
securities of any issuer;
(b) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the
Portfolio's total assets would be invested in securities of companies
within such industry; provided, however, that there shall be no
limitation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies, enterprises or instrumentalities;
(c) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value, except as
described in this Prospectus and the Statement of Additional
Information and in connection with entering into futures contracts,
but the deposit of assets in a segregated account in connection with
the writing of covered put and call options and the purchase of
securities on a when issued, delayed settlement or forward delivery
basis and collateral arrangements with respect to initial or variation
margin for futures contracts will not be deemed to be pledges of a
Portfolio's assets or the purchase of any securities on margin for
purposes of this investment limitation;
(d) issue senior securities except that a Portfolio may borrow money in
accordance with investment limitation (e), purchase securities on a
when issued, delayed settlement or forward delivery basis and enter
into reverse repurchase agreements; and
(e) borrow money except as a temporary measure for extraordinary or
emergency purposes, and then not in excess of 10% of its total assets
at the time of borrowing (entering into reverse repurchase agreements
and purchasing securities on a when issued, delayed settlement or
forward delivery basis are not subject to this investment limitation).
With respect to investment limitation (b), (a) there is no limitation with
respect to (i) instruments issued or guaranteed by the United States, any
State, territory or possession of the United States, the District of Columbia
or any of their authorities, agencies, instrumentalities or political
subdivisions, and (ii) repurchase agreements secured by the instruments
described in clause (i); (b) wholly-owned finance companies will be
considered to be in the industries of their parents if their activities are
primarily related to financing the activities of the parents; and (c)
utilities will be divided according to their services; for example, gas, gas
transmission, electric and gas, electric and telephone will each be
considered a separate industry.
Each Portfolio, with the exceptions of the Muni Intermediate, New Jersey
Muni and International Fixed Income Portfolios, also will not:
(a) with respect to 75% of its total assets, invest more than 5% of its
total assets at the time of purchase in the securities of any single
issuer (other than obligations issued or guaranteed by the U.S.
Government, its agencies, enterprises or instrumentalities).
Each of the Muni Intermediate, New Jersey Muni and International Fixed
Income Portfolios is classified as a "non-diversified" investment company
under the 1940 Act, which means that each Portfolio is not limited by the
1940 Act in the proportion of its assets that it may invest in the securities
of a single issuer. However, each Portfolio intends to conduct its operations
so as to qualify as a "regulated investment company" for purposes of the
Internal Revenue Code of 1986, as amended, which generally will relieve the
Portfolio of any liability for federal income tax to the extent its earnings
are distributed to shareholders. In order to qualify as a regulated
investment company for federal income tax purposes, each Portfolio will limit
its investments and at the close of each quarter of the taxable year will
not, with respect to 50% of its total assets, invest more than 5% of its
total assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed by the U.S. Government, its
agencies, enterprises or instrumentalities).
If a percentage restriction for a Portfolio is adhered to at the time an
investment is made, a later increase in percentage resulting from a change in
value or assets will not constitute a violation of such restriction. If a
Portfolio's borrowings are in excess of 5% (excluding overdrafts) of its
total net assets, additional portfolio purchases will not be made until the
amount of such borrowing is reduced to 5% or less.
24
<PAGE>
The investment limitations described here and in the SAI are fundamental
policies of the Portfolios and may be changed only with the approval of the
holders of a majority of the outstanding shares (as defined in the 1940 Act)
of the affected Portfolio. In order to permit the sale of shares in certain
states, each of the Funds may make commitments more restrictive than the
investment policies and limitations described in this Prospectus and the SAI.
Should a Fund determine that any such commitment is no longer in the best
interest of the Fund, it will revoke the commitment by terminating sales of
its shares in the state involved.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
Glenmede Fund was organized as a Maryland corporation on June 30, 1988.
Glenmede Fund's Articles of Incorporation authorize the Board members to
issue 2,500,000,000 shares of common stock, with a $.001 par value. The Board
has the power to designate one or more classes ("Portfolios") of shares of
common stock and to classify or reclassify any unissued shares with respect
to such Portfolios. Currently, Glenmede Fund is offering shares of ten
Portfolios.
Glenmede Portfolios was organized as a Massachusetts business trust on
March 3, 1992. Glenmede Portfolio's Master Trust Agreement authorizes the
Glenmede Portfolios' Board to issue an unlimited number of shares of
beneficial interest with a $.001 par value. The Glenmede Portfolios' Board
has the power to designate one or more series (Sub-Trusts) of shares of
beneficial interest and to classify or reclassify any unissued shares with
respect to such Sub-Trusts. Currently, the Glenmede Portfolios is offering
shares of two Sub-Trusts, the Muni Intermediate and New Jersey Muni
Portfolios.
The shares of each Portfolio have no preference as to conversion,
exchange, dividends, retirement or other rights, and, when issued and paid
for as provided in this Prospectus, will be fully paid and non-assessable.
The shares of each Portfolio have no pre-emptive rights and do not have
cumulative voting rights, which means that the holders of more than 50% of
the shares of a Fund voting for the election of its Board members can elect
100% of the Board of that Fund if they choose to do so. A shareholder is
entitled to one vote for each full share held (and a fractional vote for each
fractional share held), then standing in his or her name on the books of the
particular Fund. The Funds will not hold annual meetings of Shareholders
except as required by the 1940 Act, the next sentence and other applicable
law. Each Fund has undertaken that its Board will call a meeting of
shareholders for the purpose of voting upon the question of removal of a
Board member or members if such a meeting is requested in writing by the
holders of not less than 10% of the outstanding shares of the particular
Fund. To the extent required by the undertaking, the particular Fund will
assist shareholder communication in such matters. The Securities and Exchange
Commission staff has expressed the view that the use of this combined
Prospectus for the Funds may subject a Fund to liability for misstatements,
inaccuracies or incomplete disclosure about the other Fund.
At January 30, 1996, the Advisor was the record owner of 100% of the
outstanding shares of each Portfolio.
DISTRIBUTOR
Armata Financial Corp. ("Armata"), located at 135 East Baltimore Street,
Baltimore, Maryland 21202, serves as the Funds' distributor. Armata is a
subsidiary of Alex. Brown.
CUSTODIAN
The Chase Manhattan Bank, N.A., Brooklyn, New York, serves as the
custodian of the Funds' respective assets.
TRANSFER AGENT
ICC, located at 135 East Baltimore Street, Baltimore, Maryland 21202, acts
as the Funds' transfer agent.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., Philadelphia, Pennsylvania, serves as
independent accountants for the Funds and will audit their respective financial
statements annually.
25
<PAGE>
REPORTS
Shareholders receive unaudited semi-annual financial statements and
audited annual financial statements.
COUNSEL
Drinker Biddle & Reath, Philadelphia, Pennsylvania, serves as counsel to
the Funds.
26
<PAGE>
BOARD MEMBERS AND OFFICERS
The business and affairs of the Funds are managed under the direction of
its Board. The following is a list of the Board members and officers of the
Funds and a brief statement of their principal occupations during the past
five years:
<TABLE>
<CAPTION>
Name and Address Age Principal Occupation During Past Five Years
---------------------------------- ----- ------------------------------------------------------------------
<S> <C> <C>
H. Franklin Allen, Ph.D. 40 Director/Trustee of the Funds; Nippon Life Professor of Finance
Finance Department and Economics; Professor of Finance and Economics from 1990-1996;
The Wharton School Vice Dean and Director of Wharton Doctoral Programs from
University of Pennsylvania 1990-1993. He has been employed by The University of Pennsylvania
Philadelphia, PA 19104-6367 since 1980.
Willard S. Boothby, Jr. 74 Director/Trustee of the Funds; Director, Penn Engineering &
600 East Gravers Lane Manufacturing Corp.; Former Director of Georgia-Pacific Corp.;
Wyndmoor, PA 19118 formerly Managing Director of PaineWebber, Inc.
John W. Church, Jr.* 63 Chairman, President and Director/Trustee of the Funds; Executive
One Liberty Place Vice President and Chief Investment Officer of The Glenmede Trust
1650 Market Street, Suite 1200 Company. He has been employed by The Glenmede Trust Company since
Philadelphia, PA 19103 1979.
Francis J. Palamara 70 Director/Trustee of the Funds; Trustee of Gintel Fund and Gintel
P.O. Box 44024 ERISA Fund; Director, XTRA Corporation and Central Tractor, Farm
Phoenix, AZ 85064-4024 and Country, Inc.; Former Executive Vice President--Finance of
ARAMARK, Inc.
G. Thompson Pew, Jr.* 54 Director/Trustee of the Funds; Former Director of Brown & Glenmede
310 Caversham Road Holdings, Inc.; Former Co-Founder, Director, Principal and Officer
Bryn Mawr, PA 19010 of Philadelphia Investment Banking Co.; Former Director and
Officer of Valley Forge Administrative Services Company.
Mary Ann B. Wirts 44 Executive Vice President of the Funds; Vice President and Manager
One Liberty Place of the Fixed Income Division of The Glenmede Trust Company. She
1650 Market Street, Suite 1200 has been employed by The Glenmede Trust Company since 1982.
Philadelphia, PA 19103
Kimberly C. Osborne 30 Vice President of the Funds; Assistant Vice President of The
One Liberty Place Glenmede Trust Company. She has been employed by The Glenmede
1650 Market Street, Suite 1200 Trust Company since 1993. From 1992-1993 she was a Client Service
Philadelphia, PA 19103 Manager with Mutual Funds Service Company and from 1987-1992, she
was a Client Administrator with The Vanguard Group, Inc.
Michael P. Malloy 37 Secretary of the Funds; Partner in the law firm of Drinker Biddle
Philadelphia National Bank Building & Reath.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Edward J. Veilleux 53 Assistant Secretary of the Funds; Principal, Alex. Brown;
135 East Baltimore Street President, ICC and Armata.
Baltimore, MD 21202
Joseph A. Finelli 39 Treasurer of the Funds. He has been a Vice President of Alex.
135 East Baltimore Street Brown since September 1995. Prior thereto, he was Vice President
Baltimore, MD 21202 and Treasurer of Delaware Group.
</TABLE>
- ------
* Board members Church and Pew are "interested persons" of the Funds as that
term is defined in the 1940 Act.
For additional information concerning remuneration of Board members see
"Management of the Funds" in the SAI.
Shareholder inquiries should be addressed to the Funds at the address or
telephone number stated on the cover page.
27
<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
135 EAST BALTIMORE STREET, BALTIMORE, MARYLAND 21202
=============================================================================
- -----------------------------------------------------------------------------
PROSPECTUS
DATED FEBRUARY 27, 1996
(as revised November 1, 1996)
Investment Advisor Administrator and Transfer Agent
The Glenmede Trust Company Investment Company Capital Corp.
One Liberty Place 135 East Baltimore Street
1650 Market Street, Suite 1200 Baltimore, Maryland 21202
Philadelphia, PA 19103
Distributor
Armata Financial Corp.
135 East Baltimore Street
Baltimore, Maryland 21202
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Page
---- ----
<S> <C> <C> <C>
Expenses of the Portfolios ......... 2 Dividends, Capital Gains Distributions
Financial Highlights ............... 3 and Taxes ............................. 19
Performance Calculations ........... 7 Investment Advisor ..................... 22
Investment Policies and Administrative, Transfer Agency and
Risk Factors ...................... 7 Dividend Paying Services .............. 23
Common Investment Policies and Shareholder Servicing Plan ............. 23
Risk Factors ...................... 14 Investment Limitations ................. 24
Purchase of Shares ................. 17 General Information. ................... 25
Redemption of Shares ............... 17 Board Members and Officers ............. 27
Valuation of Shares ................ 18
</TABLE>
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Funds' Statement
of Additional Information, in connection with the offering made by this
Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the Funds or their
Distributor. This Prospectus does not constitute an offering by the Funds or
the Distributor in any jurisdiction in which such offering may not lawfully
be made.
<PAGE>
THE GLENMEDE FUND, INC.
(800) 442-8299
STATEMENT OF ADDITIONAL INFORMATION
INSTITUTIONAL INTERNATIONAL PORTFOLIO
EMERGING MARKETS PORTFOLIO
February 27, 1996
(as revised November 1, 1996)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with The Glenmede Fund, Inc.'s ("Glenmede Fund")
Prospectus for the Institutional International Portfolio and the Emerging
Markets Portfolio (the "Prospectus") dated February 27, 1996 (as revised
November 1, 1996). To obtain the Prospectus, please call Glenmede Fund at the
above telephone number.
Capitalized terms used in this Statement of Additional Information and
not otherwise defined have the same meanings given to them in Glenmede Fund's
Prospectus.
Table of Contents Page
INVESTMENT OBJECTIVES AND POLICIES................................... 2
PURCHASE OF SHARES................................................... 2
REDEMPTION OF SHARES................................................. 2
SHAREHOLDER SERVICES................................................. 3
PORTFOLIO TURNOVER................................................... 3
INVESTMENT LIMITATIONS............................................... 3
MANAGEMENT OF GLENMEDE FUND.......................................... 7
INVESTMENT ADVISORY AND OTHER SERVICES............................... 8
DISTRIBUTOR.......................................................... 9
PORTFOLIO TRANSACTIONS............................................... 9
ADDITIONAL INFORMATION CONCERNING TAXES.............................. 11
PERFORMANCE CALCULATIONS............................................. 17
GENERAL INFORMATION.................................................. 18
FINANCIAL STATEMENTS................................................. 19
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS.................... A-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and
policies set forth in Glenmede Fund's Prospectus:
Repurchase Agreements
Repurchase agreements that do not provide for payment to a Portfolio
within seven days after notice without taking a reduced price are considered
illiquid securities.
Securities Lending
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, a Portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolio. A Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940 (the "1940 Act") or the
rules and regulations or interpretations of the Securities and Exchange
Commission (the "Commission") thereunder. All relevant facts and circumstances,
including the creditworthiness of the broker, dealer or institution, will be
considered by the Advisor in making decisions with respect to the lending of
securities, subject to review by Glenmede Fund's Board.
PURCHASE OF SHARES
The purchase price of shares of each Portfolio is the net asset value
next determined after receipt of the purchase order by the particular Portfolio.
Each Portfolio reserves the right in its sole discretion (i) to suspend
the offering of its shares, (ii) to reject purchase orders when in the judgment
of management such rejection is in the best interest of the Portfolio, and (iii)
to reduce or waive the minimum for initial and subsequent investments from time
to time.
At the discretion of Glenmede Fund, investors may be permitted to
purchase Portfolio shares by transferring securities to the Portfolio that meet
the Portfolio's investment objectives and policies.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date
of payment (i) during any period that the New York Stock Exchange (the
"Exchange") is closed, or trading on the Exchange is restricted as determined by
the Commission, (ii) during any period when an emergency exists as defined by
the rules of the Commission as a result of which it is not reasonably
practicable for a Portfolio to dispose of securities owned by it, or fairly to
determine the value of its assets, and (iii) for such other periods as the
Commission may permit.
No charge is made by a Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
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SHAREHOLDER SERVICES
Transfer of Shares. Shareholders may transfer shares of the
Portfolios to another person. An investor wishing to transfer shares should
contact the Advisor.
PORTFOLIO TURNOVER
A high portfolio turnover rate can result in corresponding increases
in brokerage commissions; however, the Advisor, and Sub-Advisor with respect to
the Emerging Markets Portfolio, will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with that Portfolio's
investment objectives and policies. The portfolio turnover rates of the
Institutional International Portfolio for the fiscal years ended October 31,
1995 and 1994 were 25% and 39%, respectively. The portfolio turnover rate of
the Emerging Markets Portfolio for the period December 14, 1994 (commencement of
operations) to October 31, 1995 was 50% (annualized).
INVESTMENT LIMITATIONS
Each Portfolio is subject to the following restrictions which are
fundamental policies and may not be changed without the approval of the lesser
of: (1) 67% of the voting securities of the Portfolio present at a meeting if
the holders of more than 50% of the outstanding voting securities of the
Portfolio are present or represented by proxy, or (2) more than 50% of the
outstanding voting securities of the Portfolio. Each Portfolio will not:
(1) invest in commodities or commodity contracts, except
that each Portfolio may invest in futures contracts and
options;
(2) purchase or sell real estate, although it may purchase and
sell securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;
(3) make loans, except (i) by purchasing bonds, debentures
or similar obligations (including repurchase
agreements, subject to the limitation described in
investment limitation (10) below, and money market
instruments, including bankers acceptances and
commercial paper, and selling securities on a when
issued, delayed settlement or forward delivery basis)
which are publicly or privately distributed, and (ii)
by lending its portfolio securities to banks, brokers,
dealers and other financial institutions so long as
such loans are not inconsistent with the 1940 Act or
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the rules and regulations or interpretations of the
Commission thereunder;
(4) purchase on margin or sell short, except as specified
above in investment limitation (1);
(5) purchase more than 10% of any class of the outstanding
voting securities of any issuer;
(6) with respect as to 75% of its total assets, invest more than
5% of its total assets at the time of purchase in the
securities of any single issuer (other than obligations issued
or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities);
(7) issue senior securities, except that each Portfolio may borrow
money in accordance with investment limitation (8) below,
purchase securities on a when issued, delayed settlement or
forward delivery basis and enter into reverse repurchase
agreements;
(8) borrow money, except that each Portfolio may borrow
money as a temporary measure for extraordinary or
emergency purposes, and then not in excess of 10% of
its total assets at the time of the borrowing (entering
into reverse repurchase agreements and purchasing
securities on a when issued, delayed settlement or
forward delivery basis are not subject to this
investment limitation);
(9) pledge, mortgage, or hypothecate any of its assets to
an extent greater than 10% of its total assets at fair
market value in the case of the Institutional
International Portfolio and 15% in the case of the
Emerging Markets Portfolio, except as described in the
Prospectus and this SAI and in connection with entering
into futures contracts, but the deposit of assets in a
segregated account in connection with the writing of
covered put and call options and the purchase of
securities on a when issued, delayed settlement or
forward delivery basis and collateral arrangements with
respect to initial or variation margin for futures
contracts will not be deemed to be pledges of a
Portfolio's assets or the purchase of any securities on
margin for purposes of this investment limitation;
(10) underwrite the securities of other issuers or invest more than
an aggregate of 10% of the total assets of the Institutional
International Portfolio or 15% of the total assets of the
Emerging Markets Portfolio, at the time of purchase, in
securities for which there are no readily available markets,
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including repurchase agreements which have maturities of more
than seven days or, in the case of Institutional International
Portfolio, securities subject to legal or contractual
restrictions on resale;
(11) invest for the purpose of exercising control over
management of any company;
(12) invest its assets in securities of any investment company,
except in connection with mergers, acquisitions of assets or
consolidations and except as may otherwise be permitted by the
1940 Act;
(13) acquire any securities of companies within one industry
if, as a result of such acquisition, more than 25% of
the value of the Portfolio's total assets would be
invested in securities of companies within such
industry; provided, however, that there shall be no
limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities, or instruments issued
by U.S. banks; and
(14) write or acquire options or interests in oil, gas or
other mineral exploration or development programs.
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value or assets
will not constitute a violation of such restriction.
With regard to limitations (8) and (9), each Portfolio may borrow money
as a temporary measure for extraordinary or emergency purposes, enter into
reverse repurchase agreements and purchase securities on a when-issued, delayed
settlement or forward delivery basis, which activities may involve a borrowing,
provided that the aggregate of such borrowings shall not exceed 33 1/3% of the
value of each Portfolio's total assets (including the amount borrowed) less
liabilities (other than borrowings) and may pledge up to 33 1/3% of the value of
its total assets to secure borrowings.
With regard to limitation (12), the 1940 Act currently prohibits an
investment company from acquiring securities of another investment company if,
as a result of the transaction, the acquiring company and any company or
companies controlled by it would own in the aggregate: (i) more than 3% of the
total outstanding voting stock of the acquired company, (ii) securities issued
by the acquired company having an aggregate value in excess of 5% of the value
of the total assets of the acquiring company, or (iii) securities issued by the
acquired company and all other investment companies (other than treasury stock
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of the acquired company) having an aggregate value in excess of 10% of the value
of the total assets of the acquiring company. The 1940 Act also currently
prohibits an investment company from acquiring securities of a registered
closed-end investment company, if as a result of the transaction, the acquiring
company, other investment companies having the same investment adviser, and
companies controlled by such investment companies, own more than 10% of the
total outstanding voting stock of such closed-end company. In addition to the
advisory fees and other expenses that a Portfolio bears directly in connection
with its own operations, as a shareholder of another investment company, such
Portfolio would bear its "pro rata" portion of the other investment company's
advisory fees and other expenses. Therefore, to the extent that a Portfolio is
invested in shares of other investment companies, the Portfolio's shareholders
will be subject to expenses of such other investment companies, in addition to
expenses of the Portfolio.
With respect to investment limitation 13, (a) there is no
limitation with respect to (i) instruments issued or guaranteed by the United
States, any state, territory or possession of the United States, the District of
Columbia or any of their authorities, agencies, instrumentalities or political
subdivisions, and (ii) repurchase agreements secured by the instruments
described in clause (i); (b) wholly-owned finance companies will be considered
to be in the industries of their parents if their activities are primarily
related to financing the activities of the parents; and (c) utilities will be
divided according to their services; for example, gas, gas transmission,
electric and gas, electric and telephone will each be considered a separate
industry.
With regard to limitation (14), the purchase of securities of a
corporation, a subsidiary of which has an interest in oil, gas or other mineral
exploration or development programs, shall not be deemed to be prohibited by the
limitation.
MANAGEMENT OF GLENMEDE FUND
Glenmede Fund's officers, under the supervision of the Board, manage
the day-to-day operations of Glenmede Fund. The Board members set broad
policies for Glenmede Fund and choose its officers. A list of the Board
members and officers and a brief statement of their current positions and
principal occupations during the past five years is set forth in the Prospectus.
Remuneration of Board Members
Effective June 12, 1996, Glenmede Fund pays each Board member, other
than Mr. Church, an annual fee of $8,000 plus $1,250 for each Board meeting
attended and each Board Valuation Committee meeting attended (unless such
meeting was held in conjunction with a Board meeting) and out-of-pocket
expenses incurred in attending Board meetings. Prior to June 12, 1996, Glenmede
Fund paid each Board member, other than Mr. Church, an annual fee of $6,000 plus
$1,250 for each Board meeting attended and out-of-pocket expenses incurred in
attending Board meetings. Officers of Glenmede Fund receive no compensation as
officers from Glenmede Fund.
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Set forth in the table below is the compensation received by each
Board member for the fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>
Pension or Total
Retirement compensation
Benefits from Glenmede
Aggregate accrued as Estimated Fund and Fund
Compensation part of Annual Complex (1)
Name of from Glenmede Fund's Benefits Upon paid to
Person, Position Glenmede Fund expenses Retirement Directors
---------------- ------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C>
Dr. H. Franklin Allen, Ph.D., $12,250 None None $13,250
Director
Willard S. Boothby, Jr., $12,250 None None $13,250
Director
John W. Church, Jr. None None None None
Director
Francis J. Palamara, $12,250 None None $13,250
Director
G. Thompson Pew, Jr., $12,250 None None $13,250
Director
</TABLE>
- --------------------------------
(1) Includes total compensation from Glenmede Fund and The Glenmede Portfolios,
both of which are advised by the Advisor.
INVESTMENT ADVISORY AND OTHER SERVICES
The Advisor is the wholly-owned subsidiary of The Glenmede Corporation
(the "Corporation") whose shares are closely held by 63 shareholders. The
Corporation has a nine person Board of Directors which, at January 30, 1996,
collectively, owned 98.67% of the Corporation's voting shares and 41.96% of
the Corporation's total outstanding shares. The members of the Board and their
respective interests in the Corporation at January 30, 1996 are as follows:
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The Glenmede Corporation Percent of Percent of
Board of Directors Voting Shares Total Shares
- ------------------------- ------------- ------------
Susan W. Catherwood 10.83% 1.23%
Robert G. Dunlop 10.83% 5.16%
Thomas W. Langfitt, M.D 11.07% 7.86%
Robert E. McDonald 10.83% 1.16%
J. Howard Pew, II 10.83% 1.45%
J. N. Pew, III 11.07% 5.66%
J. N. Pew, IV 11.07% 1.44%
R. Anderson Pew 11.07% 6.20%
Ethel Benson Wister 11.07% 11.80%
----- -----
98.67% 41.96%
===== =====
The Advisor is entitled to receive a fee from the Institutional
International Portfolio for its services, calculated daily and payable monthly,
at the annual rate of .75% of the Institutional International Portfolio's
average daily net assets. The Advisor has agreed to waive its fees to the extent
necessary to ensure that the Institutional International Portfolio's annual
total operating expenses do not exceed 1.00% of average net assets. During the
fiscal years ended October 31, 1995, 1994 and 1993, the Institutional
International Portfolio paid the Advisor advisory fees of $155,065, $114,956 and
$81,255, respectively, and the Advisor waived fees in the amounts of $0, $1,110
and $9,038 respectively.
Effective November 1, 1996, the Advisor is entitled to receive a fee
from the Emerging Markets Portfolio for its services, calculated daily and
payable monthly, at the annual rate of .75% of the Emerging Markets Portfolio's
average daily net assets, and the Sub-Advisor is entitled to receive a fee from
the Emerging Markets Portfolio for its services, calculated daily and payable
monthly, at the annual rate of .50% of the Emerging Markets Portfolio's average
daily net assets. Prior to November 1, 1996, the Advisor and Sub-Advisor were
entitled to receive fees from the Emerging Markets Portfolio for their
services, calculated daily and payable monthly, at the annual rate of .50% and
.75%, respectively, of the Emerging Market Portfolio's average daily net assets.
For the period December 14, 1994 (commencement of operations) to October 31,
1995, the Emerging Markets Portfolio paid the Advisor advisory fees of $109,919
and paid the Sub-Advisor sub-advisory fees of $130,000.
Since July 1, 1995, administrative transfer agency and dividend
paying services have been provided to Glenmede Fund by ICC pursuant to a
Master Services Agreement. See "Administrative, Transfer Agency and Dividend
Paying Services" in the Prospectus for information concerning the substantive
provisions of the Master Services Agreement. For the period July 1, 1995 to
October 31, 1995, Glenmede Fund paid ICC fees of $3,798 for the Institutional
International Portfolio and $4,524 for the Emerging Markets Portfolio.
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<PAGE>
From the close of business on May 6, 1994 to the close of business on
June 30, 1995, administrative services were provided to Glenmede Fund by The
Shareholder Services Group, Inc. ("TSSG"), pursuant to an Administration
Agreement. For the period November 1, 1994 to June 30, 1995, Glenmede Fund paid
TSSG administrative fees of $10,092 for the Institutional International
Portfolio. For the period December 14, 1994 (commencement of operations) to June
30, 1995, Glenmede Fund paid TSSG administrative fees of $7,397 for the Emerging
Markets Portfolio. For the period May 6, 1994 through October 31, 1994, Glenmede
Fund paid TSSG administrative fees of $7,519 for the Institutional International
Portfolio.
Prior to May 6, 1994, The Boston Company Advisors, Inc. ("Boston
Advisors"), an indirect wholly owned subsidiary of Mellon Bank Corporation,
served as Glenmede Fund's administrator. For the period November 1, 1993 to
May 5, 1994, and the fiscal year ended October 31, 1993, Glenmede Fund paid
Boston Advisors administrative fees of $6,453 and $10,064, respectively, for
the Institutional International Portfolio.
Custody services are provided to the Institutional International and
Emerging Markets Portfolios by The Chase Manhattan Bank, N.A., Brooklyn,
New York.
DISTRIBUTOR
Shares of Glenmede Fund are distributed continuously and are offered
without a sales load by Armata, pursuant to a Distribution Agreement between
Glenmede Fund and Armata. Armata receives no fee from Glenmede Fund for its
distribution services.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements and the Sub-Advisory Agreement
authorize the Advisor, and the Sub-Advisor for the Emerging Markets Portfolio,
to select the brokers or dealers that will execute the purchases and sales of
investment securities for each of the Portfolios and direct the Advisor or the
Sub-Advisor to use their best efforts to obtain the best available price and
most favorable execution with respect to all transactions for the Portfolios.
The Advisor or the Sub-Advisor, if any, may, however, consistent with the
interests of a Portfolio, select brokers on the basis of the research,
statistical and pricing services they provide to a Portfolio. Information and
research received from such brokers will be in addition to, and not in lieu of,
the services required to be performed by the Advisor or Sub-Advisor under the
Investment Advisory Agreements and the Sub-Advisory Agreement. A commission
paid to such brokers may be higher than that which another qualified broker
would have charged for effecting the same transaction, provided that such
commissions are paid in compliance with the Securities Exchange Act of 1934, as
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amended, and that the Advisor or Sub-Advisor determines in good faith that such
commission is reasonable in terms either of the transaction or the overall
responsibility of the Advisor or Sub-Advisor to a Portfolio and the Advisor's or
Sub-Advisor's other clients. For the fiscal year ended October 31, 1995, brokers
were selected by the Advisor and Sub-Advisor on the basis of research,
statistical and pricing services with respect to the Institutional International
and Emerging Markets Portfolios.
During the fiscal years ended October 31, 1995, 1994 and 1993, the
Institutional International Portfolio paid $122,396, $33,893 and $22,099 in
brokerage commissions, respectively. For the period December 14, 1994
(commencement of operations) to October 31, 1995, the Emerging Markets Portfolio
paid $258,281 in brokerage commissions.
Because shares of the Portfolios are not marketed through
intermediary brokers or dealers, it is not Glenmede Fund's practice to
allocate brokerage or effect principal transactions with dealers on the basis of
sales of shares which may be made through such firms. However, the Advisor may
place portfolio orders with qualified broker-dealers who refer clients to the
Advisor and the other Institutions.
Some securities considered for investment by a Portfolio may also be
appropriate for other clients served by the Advisor or Sub-Advisor. If purchase
or sale of securities is consistent with the investment policies of a Portfolio
and one or more of these other clients served by the Advisor or Sub-Advisors and
is considered at or about the same time, transactions in such securities will be
allocated among the Portfolio and clients in a manner deemed fair and reasonable
by the Advisor or Sub-Advisor. While in some cases this practice could have a
detrimental effect on the price, value or quantity of the security as far as a
Portfolio is concerned, in other cases it is believed to be beneficial to the
Portfolios.
ADDITIONAL INFORMATION CONCERNING TAXES
General. The following summarizes certain additional tax considerations
generally affecting the Portfolios and their shareholders that are not described
in the Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Portfolios or their shareholders, and the discussion here
and in the Prospectus is not intended as a substitute for careful tax planning.
Potential investors should consult their tax advisers with specific reference to
their own tax situation.
Each Portfolio is treated as a separate corporate entity under the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to qualify
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as a regulated investment company. Qualification as a regulated investment
company under the Code requires, among other things, that each Portfolio
distribute to its shareholders an amount equal to at least the sum of 90% of its
investment company taxable income and 90% of its tax-exempt income (if any) net
of certain deductions for a taxable year. In addition, each Portfolio must
satisfy certain requirements with respect to the source of its income during a
taxable year. At least 90% of the gross income of each Portfolio must be derived
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies, and
other income (including, but not limited to, gains from options, futures, or
forward contracts) derived with respect to the Portfolio's business of investing
in such stock, securities or currencies. The Treasury Department may by
regulation exclude from qualifying income foreign currency gains which are not
directly related to a Portfolio's principal business of investing in stock or
securities, or options and futures with respect to stock or securities. Any
income derived by a Portfolio from a partnership or trust is treated for this
purpose as derived with respect to the Portfolio's business of investing in
stock, securities or currencies only to the extent that such income is
attributable to items of income which would have been qualifying income if
realized by the Portfolio in the same manner as by the partnership or trust.
A Portfolio will not be treated as a regulated investment company under
the Code if 30% or more of its gross income for a taxable year is derived from
gains realized on the sale or other disposition of the following investments
held for less than three months: (1) stock and securities (as defined in section
2(a)(36) of the 1940 Act); (2) options, futures and forward contracts other than
those on foreign currencies; and (3) foreign currencies (and options, futures
and forward contracts on foreign currencies) that are not directly related to
the Portfolio's principal business of investing in stock and securities (and
options and futures with respect to stocks and securities). Interest (including
original issue discount and accrued market discount) received by a Portfolio
upon maturity or disposition of a security held for less than three months will
not be treated as gross income derived from the sale or other disposition of
such security within the meaning of this requirement. However, income which is
attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose. With respect
to covered call options, if the call is exercised by the holder, the premium and
the price received on exercise constitute the proceeds of sale, and the
difference between the proceeds and the cost of the securities subject to the
call is capital gain or loss. Premiums from expired call options written by a
Portfolio and net gains from closing purchase transactions are treated as
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short-term capital gains for Federal income tax purposes, and losses on closing
purchase transactions are short-term capital losses.
Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to shareholders as long-term capital gain,
regardless of how long the shareholder has held a Portfolio's shares and whether
such distribution is received in cash or additional Portfolio shares. Each
Portfolio will designate such distributions as capital gain dividends in a
written notice mailed to shareholders within 60 days after the close of
Glenmede Fund's taxable year. Shareholders should note that, upon the sale of
Portfolio shares, if the shareholder has not held such shares for more than six
months, any loss on the sale of those shares will be treated as long-term
capital loss to the extent of the capital gain dividends received with respect
to the shares.
An individual's net capital gains are taxable at a maximum effective
rate of 28%. Ordinary income of individuals is taxable at a maximum nominal rate
of 39.6%, but because of limitations on itemized deductions otherwise allowable
and the phase-out of personal exemptions, the maximum effective marginal rate of
tax for some taxpayers may be higher. For corporations, long-term capital gains
and ordinary income are both taxable at a maximum nominal rate of 35% (although
surtax provisions apply at certain income levels to result in effective marginal
rates as high as 39%).
If the Emerging Markets Portfolio retains net capital gains for
reinvestment, the Portfolio may elect to treat such amounts as having been
distributed to shareholders. As a result, the shareholders would be subject to
tax on undistributed net capital gains, would be able to claim their
proportionate share of the Federal income taxes paid by the Portfolio on such
gains as a credit against their own Federal income tax liabilities, and would be
entitled to an increase in their basis in their Portfolio shares.
If for any taxable year a Portfolio does not qualify for the special
Federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to Federal income tax at regular corporate rates
(without any deduction for distributions to its shareholders). In such event,
dividend distributions would be taxable as ordinary income to shareholders to
the extent of the Portfolio's current and accumulated earnings and profits and
would be eligible for the dividends received deduction for corporations.
Foreign Taxes. Income received from sources within foreign
countries may be subject to withholding and other income or
similar taxes imposed by such countries. If more than 50% of the
value of a Portfolio's total assets at the close of its taxable
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year consists of stock or securities of foreign corporations, each Portfolio
will be eligible and intends to elect to "pass-through" to its shareholders the
amount of foreign taxes paid by it. Pursuant to this election, each shareholder
will be required to include in gross income (in addition to taxable dividends
actually received) his pro rata share of the foreign taxes paid by the
Portfolio, and will be entitled either to deduct (as an itemized deduction) his
pro rata share of foreign taxes in computing his taxable income or to use it as
a foreign tax credit against his U.S. Federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions, but such a shareholder may be eligible to claim the
foreign tax credit (see below). Each shareholder will be notified within 60 days
after the close of a Portfolio's taxable year whether the foreign taxes paid by
the Portfolio will "pass-through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his or her foreign
source taxable income. For this purpose, if the pass-through election is made,
the source of the Portfolio's income flows through to its shareholders with
respect to a Portfolio, gains from the sale of securities will be treated as
derived from U.S. sources and certain currency fluctuation gains, including
fluctuation gains from foreign currency denominated debt securities, receivables
and payables, will be treated as ordinary income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income (as defined for purposes of the foreign tax credit), including
the foreign source passive income passed through by a Portfolio. Shareholders
may be unable to claim a credit for the full amount of their proportionate share
of the foreign taxes paid by a Portfolio. Foreign taxes may not be deducted in
computing alternative minimum taxable income and the foreign tax credit can be
used to offset only 90% of the alternative minimum tax (as computed under the
Code for purposes of this limitation) imposed on corporations and individuals.
If a Portfolio is not eligible to make the election to "pass through" to its
shareholders its foreign taxes, the foreign taxes it pays will reduce investment
company taxable income and the distributions by the Portfolio will be treated as
United States source income.
Federal Taxation of Certain Financial Instruments. Generally, futures
contracts held by a Portfolio at the close of its taxable year will be treated
for Federal income tax purposes as sold for their fair market value on the last
business day of such year, a process known as "mark-to-market." Forty percent of
any gain or loss resulting from such constructive sale will be treated as
short-term capital gain or loss and 60% of such gain or loss will be treated as
long-term capital gain or loss without regard to the length of time the
Portfolio holds the futures contract ("the 40% - 60% rule"). The amount of any
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capital gain or loss actually realized by a Portfolio in a subsequent sale or
other disposition of those futures contracts will be adjusted to reflect any
capital gain or loss taken into account by the Portfolio in a prior year as a
result of the constructive sale of the contracts. With respect to futures
contracts to sell, which will be regarded as parts of a "mixed straddle" because
their values fluctuate inversely to the values of specific securities held by
the Portfolio, losses as to such contracts to sell will be subject to certain
loss deferral rules which limit the amount of loss currently deductible on
either part of the straddle to the amount thereof which exceeds the unrecognized
gain (if any) with respect to the other part of the straddle, and to certain
wash sales regulations. Under short sales rules, which also will be applicable,
the holding period of the securities forming part of the straddle will (if they
have not been held for the long term holding period) be deemed not to begin
prior to termination of the straddle. With respect to certain futures contracts,
deductions for interest and carrying charges will not be allowed.
Notwithstanding the rules described above, with respect to futures contracts to
sell which are properly identified as such, a Portfolio may make an election
which will exempt (in whole or in part) those identified futures contracts from
being treated for Federal income tax purposes as sold on the last business day
of its taxable year, but gains and losses will be subject to such short sales,
wash sales and loss deferral rules and the requirement to capitalize interest
and carrying charges. Under Temporary Regulations, a Portfolio would be allowed
(in lieu of the foregoing) to elect either (1) to offset gains or losses from
portions which are part of a mixed straddle by separately identifying each mixed
straddle to which such treatment applies, or (2) to establish a mixed straddle
account for which gains and losses would be recognized and offset on a periodic
basis during the taxable year. Under either election, the 40%-60% rule will
apply to the net gain or loss attributable to the futures contracts, but in the
case of a mixed straddle account election, no more than 50% of any net gain may
be treated as long term and no more than 40% of any net loss may be treated as
short term. Options on futures contracts generally receive Federal tax treatment
similar to that described above.
Certain foreign currency contracts entered into by the Portfolios may
be subject to the "mark-to-market" process and the 40%-60% rule in a manner
similar to that described in the preceding paragraph for futures contracts. To
receive such Federal income tax treatment, a foreign currency contract must meet
the following conditions: (1) the contract must require delivery of a foreign
currency of a type in which regulated futures contracts are traded or upon which
the settlement value of the contract depends; (2) the contract must be entered
into at arm's length at a price determined by reference to the price in the
interbank market; and (3) the contract must be traded in the interbank market.
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The Treasury has broad authority to issue regulations under the provisions
respecting foreign currency contracts. As of the date of this Statement of
Additional Information, the Treasury has not issued any such regulations. Other
foreign currency contracts entered into by the Portfolios may result in the
creation of one or more straddles for Federal income tax purposes, in which case
certain loss deferral, short sales, and wash sales rules and the requirement to
capitalize interest and carrying charges may apply.
As described more fully above, in order to qualify as a regulated
investment company under the Code, a Portfolio must derive less than 30% of its
gross income from the sale or other disposition of securities and certain other
investments held for less than three months. With respect to futures contracts
and other financial instruments subject to the mark-to-market rules, the
Internal Revenue Service has ruled in private letter rulings that a gain
realized from such a futures contract or financial instrument will be treated as
being derived from a security held for three months or more (regardless of the
actual period for which the contract or instrument is held) if the gain arises
as a result of a constructive sale under the mark-to-market rules, and will be
treated as being derived from a security held for less than three months only if
the contract or instrument is terminated (or transferred) during the taxable
year (other than by reason of mark-to-market) and less than three months have
elapsed between the date the contract or instrument is acquired and the
termination date. In determining whether the 30% test is met for a taxable year,
increases and decreases in the value of a Portfolio's futures contracts and
other investments that qualify as part of a "designated hedge," as defined in
the Code, may be netted.
Other Tax Matters. Special rules govern the Federal income tax
treatment of certain transactions denominated in terms of a currency other than
the U.S. dollar or determined by reference to the value of one or more
currencies other than the U.S. dollar. The types of transactions covered by the
special rules include the following: (i) the acquisition of, or becoming the
obligor under, a bond or other debt instrument (including, to the extent
provided in Treasury regulations, preferred stock); (ii) the accruing of certain
trade receivables and payables; and (iii) the entering into or acquisition of
any forward contract, futures contract, option and similar financial instrument
if such instrument is not marked to market. The disposition of a currency other
than the U.S. dollar by a U.S. taxpayer also is treated as a transaction subject
to the special currency rules. However, foreign currency-related regulated
futures contracts and nonequity options generally are not subject to the special
currency rules if they are or would be treated as sold for their fair market
value at year-end under the mark-to-market rules, unless an election is made to
have such currency rules apply. With respect to transactions covered by the
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special rules, foreign currency gain or loss is calculated separately from any
gain or loss on the underlying transaction and is normally taxable as ordinary
gain or loss. A taxpayer may elect to treat as capital gain or loss foreign
currency gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not part of a straddle. In accordance with Treasury regulations under
which certain transactions that are part of a "section 988 hedging transaction"
(as defined in the Code and the Treasury regulations) will be integrated and
treated as a single transaction or otherwise treated consistently for purposes
of the Code. Any gain or loss attributable to the foreign currency component of
a transaction engaged in by a Portfolio which is not subject to the special
currency rules (such as foreign equity investments other than certain preferred
stocks) will be treated as capital gain or loss and will not be segregated from
the gain or loss on the underlying transaction. It is anticipated that some of
the non-U.S. dollar denominated investments and foreign currency contracts a
Portfolio may make or enter into will be subject to the special currency rules
described above.
The Portfolio may recognize income currently for Federal income tax
purposes in the amount of the unpaid, accrued interest with respect to bonds
structured as zero coupon bonds or pay-in-kind securities, even though it
receives no cash interest until the security's maturity or payment date. As
discussed above, in order to qualify for beneficial tax treatment, a Portfolio
must distribute substantially all of its income to shareholders. Thus, a
Portfolio may have to dispose of its portfolio securities under disadvantageous
circumstances to generate cash or leverage itself by borrowing cash, in order
to satisfy the distribution requirement.
Some of the debt securities may be purchased by a Portfolio at a
discount which exceeds the original issue discount on such debt securities, if
any. This additional discount represents market discount for Federal income tax
purposes. The gain realized on the disposition of any taxable debt security
having market discount will be treated as ordinary income to the extent it does
not exceed the accrued market discount on such debt security. Generally, market
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discount accrues on a daily basis for each day the debt security is held by a
Portfolio at a constant rate over the time remaining to the debt security's
maturity or, at the election of the Portfolio, at a constant yield to maturity
which takes into account the semi-annual compounding of interest.
Exchange control regulations that may restrict repatriation of
investment income, capital, or the proceeds of securities sales by foreign
investors may limit a Portfolio's ability to make sufficient distributions to
satisfy the 90% and calendar year distribution requirements.
PERFORMANCE CALCULATIONS
Each Portfolio computes its average annual total return by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
T = [( ERV )1/n - 1]
---
P
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in
terms of years.
Each Portfolio computes its aggregate total return by determining the
aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
T = [( ERV ) - 1]
---
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions.
The ending redeemable value (variable "ERV" in each formula) is determined by
assuming complete redemption of the hypothetical investment and the deduction of
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all nonrecurring charges at the end of the period covered by the computations.
Each Portfolio's average annual total return and aggregate total return do not
reflect any fees charged by Institutions to their clients.
Set forth below are the average annual total return figures for the
Institutional International Portfolio since inception (August 1, 1992) and for
the one year period ended October 31, 1995 (with fee waivers).
1 Year Ended 10/31/95: 0.4%
Inception to 10/31/95: 11.62%
Set forth below are the average annual total return figures for the
Institutional International Portfolio since inception (August 1, 1992) and for
the one year period ended October 31, 1995 (without fee waivers).
1 Year Ended 10/31/95: 0.4%
Inception to 10/31/95: 11.53%
The aggregate total return figure for the Institutional International
Portfolio from inception (August 1, 1992) to October 31, 1995 with fee waivers
was 42.94% and without fee waivers was 42.58%.
The aggregate total return figure for the Emerging Markets Portfolio
from inception (December 14, 1994) to October 31, 1995 was -1.7%.
GENERAL INFORMATION
Dividends and Capital Gains Distributions
Each Portfolio's policy is to distribute substantially all of its net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed income
and gains (see discussion under "Dividends, Capital Gains Distributions and
Taxes" in the Prospectus). As set forth in the Prospectus, each Portfolio
normally distributes substantially all of its net investment income to
shareholders in the form of a quarterly dividend. If any net capital gains are
realized by a Portfolio, that Portfolio normally distributes such gains at
least once a year. The amounts of any income dividends or capital gains
distributions for a Portfolio cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares
of a Portfolio by an investor may have the effect of reducing the per share net
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<PAGE>
asset value of that Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect a
return of capital, are subject to income taxes as set forth in the Prospectus.
Certain Record Holders
As of January 30, 1996, the Advisor held of record 100% of the
outstanding shares of the Emerging Markets Portfolio. For more information about
the Advisor, see "Investment Advisor" in the Prospectus. Under the 1940 Act, the
Advisor may be deemed to be a controlling person of Glenmede Fund. To Glenmede
Fund's knowledge, as of January 30, 1996, no person owned, beneficially or of
record, 5% or more of the outstanding shares of the Institutional International
Portfolio. As of January 30, 1996, the directors and officers of Glenmede Fund
collectively owned less than 1% of the outstanding shares of the Institutional
International and Emerging Markets Portfolio.
FINANCIAL STATEMENTS
Those portions of Glenmede Fund's Financial Statements relating to
the Institutional International Portfolio for the fiscal year ended October 31,
1995 and to the Emerging Markets Portfolio for the period December 14, 1994
(commencement of operations) to October 31, 1995, appearing in the 1995 Annual
Report to Shareholders, and the report thereon of Coopers & Lybrand L.L.P.,
independent accountants, also appearing therein, are incorporated by reference
in this Statement of Additional Information.
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<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. Description of Commercial Paper Ratings
Description of Moody's highest commercial paper rating:
Prime-1 ("P-1") --judged to be of the best quality. Issuers rated P-1
(or related supporting institutions) are considered to have a superior
capacity for repayment of short-term promissory obligations.
Description of S&P highest commercial paper ratings:
A-1+ -- this designation indicates the degree of safety regarding
timely payment is overwhelming. A-1 -- this designation indicates the
degree of safety regarding timely payment is either overwhelming or
very strong.
Description of Bond Ratings
The following summarizes the ratings used by S&P for corporate and
municipal debt:
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Plus (+) or Minus (-): The ratings from AA to BBB may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
A-1
<PAGE>
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to
corporate bonds rated Aa, A and Baa. The modifier 1 indicates that the bond
being rated ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates that the bond
ranks in the lower end of its generic rating category. Those bonds in the Aa, A
and Baa categories which Moody's believes possess the strongest investment
attributes, within those categories are designated by the symbols Aa1, A1 and
Baa1, respectively.
II. Description of U.S. Government Securities and Certain Other
Securities
The term "U.S. Government securities" refers to a variety of
securities which are issued or guaranteed by the United States
A-2
<PAGE>
Government, and by various instrumentalities which have been established or
sponsored by the United States Government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States Government. Securities issued or guaranteed by Federal
agencies and U.S. Government sponsored enterprises or instrumentalities may or
may not be backed by the full faith and credit of the United States. In the case
of securities not backed by the full faith and credit of the United States, an
investor must look principally to the agency, enterprise or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency,
enterprise or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export
Import Bank, Farmers Home Administration, Federal Financing Bank and others.
Certain agencies, enterprises and instrumentalities, such as the Government
National Mortgage Association are, in effect, backed by the full faith and
credit of the United States through provisions in their charters that they may
make "indefinite and unlimited" drawings on the Treasury, if needed to service
its debt. Debt from certain other agencies, enterprises and instrumentalities,
including the Federal Home Loan Bank and Federal National Mortgage Association,
are not guaranteed by the United States, but those institutions are protected by
the discretionary authority for the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies, enterprises and instrumentalities, such as the Farm
Credit System and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under Government supervision, but their debt securities
are backed only by the creditworthiness of those institutions, not the U.S.
Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency
organized under Federal charter with Government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Overseas Private
Investment Corporation, Federal Home Loan Banks, the Federal Land Banks, Central
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal
National Mortgage Association.
A-3
<PAGE>
III. Foreign Investments
Investors should recognize that investing in foreign companies involves
certain special considerations which are not typically associated with investing
in U.S. companies. Because the stocks of foreign companies are frequently
denominated in foreign currencies, and because the Institutional International
and Emerging Markets Portfolios may temporarily hold uninvested reserves in bank
deposits in foreign currencies, the Institutional International and Emerging
Markets Portfolios may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations, and may incur costs in
connection with conversions between various currencies. The investment policies
of the Institutional International and Emerging Markets Portfolios permit the
Portfolios to enter into forward foreign currency exchange contracts in order to
hedge the Portfolios' holdings and commitments against changes in the level of
future currency rates. Such contracts involve an obligation to purchase or sell
a specific currency at a future date at a price set at the time of the contract.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in foreign
countries.
Although the Institutional International and Emerging Markets
Portfolios will endeavor to achieve most favorable execution costs in its
portfolio transactions, fixed commissions on many foreign stock exchanges are
generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from the foreign companies comprising the Institutional
International and Emerging Markets Portfolios.
A-4
<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
(800) 442-8299
STATEMENT OF ADDITIONAL INFORMATION
February 27, 1996
(as revised November 1, 1996)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with The Glenmede Fund, Inc.'s ("Glenmede Fund") and The
Glenmede Portfolios' ("Glenmede Portfolios" and collectively with Glenmede Fund,
the "Funds") Prospectuses dated February 27, 1996 (as revised November 1, 1996)
(the "Prospectuses"). To obtain any of the Prospectuses, please call the Funds
at the above telephone number.
Capitalized terms used in this Statement of Additional Information and
not otherwise defined have the same meanings given to them in the Funds'
Prospectuses.
Table of Contents
Page
INVESTMENT OBJECTIVES AND POLICIES........................................ 2
PURCHASE OF SHARES........................................................ 12
REDEMPTION OF SHARES...................................................... 12
SHAREHOLDER SERVICES...................................................... 12
PORTFOLIO TURNOVER........................................................ 13
INVESTMENT LIMITATIONS.................................................... 13
MANAGEMENT OF THE FUNDS................................................... 17
INVESTMENT ADVISORY AND OTHER SERVICES.................................... 18
DISTRIBUTOR............................................................... 20
PORTFOLIO TRANSACTIONS.................................................... 21
ADDITIONAL INFORMATION CONCERNING TAXES................................... 22
PERFORMANCE CALCULATIONS.................................................. 34
GENERAL INFORMATION....................................................... 38
FINANCIAL STATEMENTS...................................................... 39
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS......................... A-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and
policies set forth in the Funds' Prospectuses:
Repurchase Agreements
Repurchase agreements that do not provide for payment to a Portfolio
within seven days after notice without taking a reduced price are considered
illiquid securities.
Futures Contracts
Even though the following hedging instruments are not currently used by
the International Fixed Income Portfolio, this Portfolio may, where appropriate,
enter into futures contracts, options, and options on futures contracts for the
purpose of hedging. 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. Futures contracts which are
standardized as to maturity date and underlying financial instrument are traded
on national futures exchanges. Futures exchanges and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC").
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date. Minimal
initial margin requirements are established by the futures exchange and may be
changed. Brokers may establish deposit requirements which are higher than the
exchange minimums. Futures contracts are customarily purchased and sold on
margin that may range upward from less than 5% of the value of the contract
being traded.
After a futures contract position is opened, the value of the contract
is marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The
International Fixed Income Portfolio expects to earn interest income on its
margin deposits.
<PAGE>
Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from fluctuations in
interest rates. The International Fixed Income Portfolio intends to use futures
contracts only for hedging purposes.
Regulations of the CFTC applicable to the International Fixed Income
Portfolio require that all of its futures transactions either constitute bona
fide hedging transactions or that the Portfolio's aggregate initial margins
and premiums required in connection with new hedging positions do not exceed 5%
of its net asset value. The International Fixed Income Portfolio will only sell
futures contracts to protect securities it owns against price declines or
purchase contracts to protect against an increase in the price of securities it
intends to purchase.
Although techniques other than the sale and purchase of futures
contracts could be used to control the International Fixed Income Portfolio's
exposure to market fluctuations, the use of futures contracts may be a more
effective means of hedging this exposure. The International Fixed Income
Portfolio would incur commission expenses in both opening and closing out
futures positions.
Restrictions on the Use of Futures Contracts. The International Fixed
Income Portfolio will not enter into futures contract transactions to the extent
that, immediately thereafter, the sum of the Portfolio's initial margin deposits
on open contracts exceeds 5% of the market value of its total assets. In
addition, the International Fixed Income Portfolio will not enter into futures
contracts to the extent that the Portfolio's outstanding obligations to purchase
securities under these contracts would exceed 20% of its total assets.
<PAGE>
Risk Factors in Futures Transactions. Positions in futures contracts
may be closed out only on an exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, the International Fixed Income Portfolio would continue to be
required to make daily cash payments to maintain its required margin. In such
situations, if the Portfolio has insufficient cash, it may have to sell
portfolio securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, the International Fixed Income Portfolio
may be required to make delivery of the instruments underlying futures contracts
it holds. The inability to close options and futures positions also could have
an adverse impact on the International Fixed Income Portfolio's ability to
effectively hedge.
The International Fixed Income Portfolio will attempt to minimize the
risk that it will be unable to close out a futures contract by only entering
into futures which are traded on national futures exchanges and for which there
appears to be a liquid secondary market. There can be no assurance, however,
that a liquid secondary market will exist for a particular futures contract at
any given time.
Successful use of futures by the International Fixed Income Portfolio
also is subject to the Advisor's ability to predict correctly movements in the
direction of the market. For example, if the Portfolio has hedged against the
possibility of a decline in the market adversely affecting securities held by it
and securities prices increase instead, the Portfolio will lose part or all of
the benefit to the increased value of its securities which it has hedged because
it will have approximately equal offsetting losses in its futures positions. In
addition, in some situations, if the International Fixed Income Portfolio has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The International Fixed Income
Portfolio may have to sell securities at a time when it may be disadvantageous
to do so.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit, before any deduction for the
transaction costs, if the contract were closed out. Thus, a purchase or sale of
a futures contract may result in losses in excess of the amount invested in the
contract.
<PAGE>
Utilization of futures transactions by the International Fixed Income
Portfolio involves the risk of imperfect or no correlation where the securities
underlying futures contracts have different maturities than the portfolio
securities being hedged. It is also possible that the International Fixed Income
Portfolio could both lose money on futures contracts and also experience a
decline in value of its portfolio securities. There is also the risk of loss by
the International Fixed Income Portfolio of margin deposits in the event of
bankruptcy of a broker with whom the Portfolio has an open position in a futures
contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
The trading of futures contracts is also subject to the risk of trading
halts, suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions or to recover excess variation
margin payments.
Forward Foreign Exchange Contracts
A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract as agreed by the parties, at a
price set at the time of the contract. In the case of a cancelable forward
contract, the holder has the unilateral right to cancel the contract at maturity
by paying a specified fee. The contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. A foreign currency futures
contract is a standardized contract for the future delivery of a specified
amount of a foreign currency at a future date at a price set at the time of the
contract. Foreign currency futures contracts traded in the United States are
designed by and traded on exchanges regulated by the CFTC such as the New York
Mercantile Exchange. A Portfolio would enter into foreign currency futures
contracts solely for hedging or other appropriate investment purposes as defined
in CFTC regulations.
<PAGE>
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in any
given month. Forward contracts may be in any amounts agreed upon by the parties
rather than predetermined amounts. Also, forward foreign exchange contracts are
traded directly between currency traders so that no intermediary is required. A
forward contract generally requires no margin or other deposit.
At the maturity of a forward contract, a Portfolio may either accept or
make delivery of the currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract.
Options
Investments in options involve some of the same considerations that are
involved in connection with investments in futures contracts (e.g., the
existence of a liquid secondary market). In addition, the purchase of an option
also entails the risk that changes in the value of the underlying security or
contract will not be fully reflected in the value of the option purchased.
Depending on the pricing of the option compared to either the futures contract
upon which it is based, or upon the price of the securities being hedged, an
option may or may not be less risky than ownership of the futures contract or
such securities. In general, the market prices of options can be expected to be
more volatile than the market prices on the underlying futures contract or
securities. Over-the-counter options are considered illiquid. The International
Fixed Income Portfolio may enter into options only if not more than 5% of the
Portfolio's assets are required as premiums.
<PAGE>
Fixed Income Options
Call and Put Options. The International Fixed Income Portfolio will
write call options and put options on a covered or secured basis only, and will
not engage in option writing strategies for speculative purposes. The Portfolio
may write covered call options and secured put options from time to time on such
portion of its portfolio, without limit, as the Advisor determines is
appropriate in seeking to obtain the Portfolio's investment objective. The
Portfolio may also purchase call options and invest up to 20% of its total
assets in the purchase of put options if, at the time of such purchase, the
Portfolio owns the security covered by such put option.
Covered Call Writing. A call option gives the purchaser of the option
the right to buy, and the writer has the obligation to sell, the underlying
security at the stated exercise price during the option period. During the
option period, the covered call writer has, in return for the premium on the
option, given up the opportunity for capital appreciation above the exercise
price should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security decline.
The International Fixed Income Portfolio will write call options only
on a covered basis, which means that the Portfolio owns or has the right to
acquire the underlying security subject to a call option at all times during the
option period. Options written by the Portfolio will normally have expiration
dates between three and nine months from the date written. The exercise price of
a call option may be below, equal to or above the market value of the underlying
security at the time the option is written.
During the option period, a covered call option writer may be required
at any time to deliver the underlying security against payment of the exercise
price. This obligation is terminated upon the expiration of the option period or
at such earlier time in which the writer effects a closing purchase transaction.
A closing purchase transaction cannot be effected with respect to an option once
the option writer has received an exercise notice.
Closing purchase transactions are ordinarily effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
International Fixed Income Portfolio to write another call option on the
underlying security with either a different exercise price or expiration date or
both. The Portfolio may realize a net gain or loss from a closing purchase
transaction depending upon whether the amount of the premium received on the
call option is more or less than the cost of effecting the closing purchase
transaction. Any loss incurred in a closing purchase transaction may be wholly
or partially offset by unrealized appreciation in the market value of the
underlying security. Conversely, a gain resulting from a closing purchase
transaction, or upon expiration of an unexercised option, could be offset in
whole or in part or exceeded by a decline in the market value of the underlying
security. If a call option is exercised, the Portfolio realizes a gain or loss
from the sale of the underlying security equal to the difference between the
cost of the underlying security and the proceeds of the sale of the security
plus the premium received for the option less the commission paid.
<PAGE>
The value of a call option generally reflects the market price of the
underlying security. Other principal factors affecting the value include supply
and demand, interest rates, the price volatility of the underlying security and
the time remaining until the expiration date.
Secured Put Writing. A put option gives the purchaser of the option the
right to sell, and the writer has the obligation to buy, the underlying security
at the stated exercise price during the option period. The put writer assumes
the risk of loss should the market value of the underlying security decline
below the exercise price of the option. During the option period the writer of a
put option may be required at any time to make payment of the exercise price
against delivery of the underlying security. The operation of put options in
other respects is substantially identical to that of call options.
The International Fixed Income Portfolio will write put options only on
a secured basis, which means that the Portfolio will maintain in a segregated
account with the custodian cash or securities in an amount not less than the
exercise price of the option at all times during the option period. The
Portfolio will generally write secured put options when it wishes to purchase
the underlying security at a price lower than the current market price of the
security. In such event the Portfolio would write a secured put option at an
exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay. The potential gain on a secured put option
is limited to the premium received on the option (less the commissions paid on
the transaction) while the potential loss equals the difference between the
exercise price of the option and the market price of the underlying securities
when the put is exercised, offset by the premium received (less the commissions
paid on the transaction).
Purchasing Call Options. The International Fixed Income Portfolio may
purchase call options only (i) in a closing purchase transaction as described
under "Options -- Fixed Income Options -- Covered Call Writing," (ii) to offset
its obligation under an over-the-counter option which it has written, or (iii)
to offset the convexity risk of futures contracts. The option purchased in an
offsetting transaction could be either a listed or over-the-counter option on
the same securities and having the same terms as the outstanding option. An
offsetting over-the-counter option generally would be acquired from a dealer or
financial institution other than the holder of the over-the-counter option
written by the Portfolio. The purchased option would be exercised or closed out
prior to or at the same time as the option written.
<PAGE>
Purchasing Put Options. The International Fixed Income Portfolio may
invest up to 20% of its total assets in the purchase of put options on
securities. At all times during which it holds a put option, the Portfolio is
required to own or have the right to acquire the security covered by such
option.
The Portfolio may purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The authority to
purchase put options allows the Portfolio to protect unrealized gain in an
appreciated security in its portfolio without actually selling the security. The
Portfolio may sell a put option which it has previously purchased prior to the
sale of the securities underlying such option. Such a sale would result in a net
gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put option which
is sold. Any such gain or loss could be offset in whole or part by a change in
the market value of the underlying security. If a put option purchased by the
Portfolio expired without being sold or exercised, the premium would be lost.
Options on Interest Rate Futures Contracts. The International Fixed
Income Portfolio may purchase and write call and put options on futures
contracts which are traded on an exchange and enter into closing transactions
with respect to such options to terminate an existing position. The writer of an
option on a futures contract is required to deposit initial and variation margin
pursuant to requirements similar to those applicable to futures contracts.
Premiums received from the writing of an option are included in initial margin
deposits. An option on a futures contract gives the purchaser the right, and the
writer the obligation, in return for the premium paid, to assume a position in a
futures contract (a long position if the option is a call and a short position
if the option is a put) at a specified exercise price at any time during the
term of the option. Upon exercise of the option, the delivery of the futures
position by the writer of the option to the holder of the option is accompanied
by delivery of the accumulated balance in the writer's futures margin account
which represents the amount by which the market price of the futures contract at
the time of exercise exceeds, in the case of a call, or is less than, in the
case of a put, the exercise price of the option on the futures contract.
The Portfolio may use options on futures contracts in connection with
hedging strategies. Generally, these strategies are employed in a similar manner
and under the same market conditions in which the Portfolio may use put and call
options on securities.
<PAGE>
While hedging can provide protection against an adverse movement in
interest rates, it can also preclude a hedger's opportunity to benefit from a
favorable interest rate movement. In addition, investing in futures contracts
and options on futures contracts causes the Portfolio to incur additional
brokerage commissions, and may cause an increase in the Portfolio's portfolio
turnover rate.
Miscellaneous. The International Fixed Income Portfolio may write or
purchase options which are listed on an exchange as well as options which are
traded over-the-counter.
The Portfolio may close out its position as writer of an option only if
a liquid secondary market exists for options of that series, but there is no
assurance that such a market will exist, particularly in the case of
over-the-counter options, which can be closed out only with the other party to
the transaction. The Portfolio may be able to purchase an offsetting option
which does not close out its position as a writer but constitutes an asset of
equal value to the obligation under the option written. If the Portfolio is not
able to enter into a closing purchase transaction or to purchase an offsetting
position, it will be required to maintain the securities subject to the call, or
the collateral underlying the put, even though it might not be advantageous to
do so, until a closing transaction can be entered into (or the option is
exercised or expires).
Securities Lending.
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, a Portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolio. Each Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940 (the "1940 Act") or the
rules and regulations or interpretations of the Securities and Exchange
Commission (the "Commission") thereunder. The Company may, from time to time,
pay negotiated fees in connection with the lending of securities.
<PAGE>
Interest Rate Transactions
The International Fixed Income Portfolio may enter into interest rate
swaps and the purchase or sale of related caps and floors transactions. The
Portfolio expects to enter into these transactions primarily to preserve a
return or spread on a particular investment or a portion of its portfolio, to
protect against currency fluctuations, as a duration management technique or to
protect against any increase in the price of securities the Portfolio
anticipates purchasing at a later date. The Portfolio intends to use these
transactions as hedges and not as speculative investments and will not sell
interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Portfolio may be obligated to pay.
Interest rate swaps involve the exchange by the Portfolio with another party of
their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional amount
of principal. A currency swap is an agreement to exchange cash flows on a
notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount.
The Portfolio will usually enter into swaps on a net basis, i.e., the
two payment streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with the Portfolio receiving or paying, as
the case may be, only the net amount of the two payments. Inasmuch as these
swaps, caps or floors are entered into in good faith for hedging purposes, the
Advisor and the Portfolio believe such obligations do not constitute senior
securities under the 1940 Act and, accordingly, will not treat them as being
subject to its borrowing restrictions. The Portfolio will not enter into any
swap, cap or floor transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the counterparty, combined with any
credit enhancements, is rated at least "A" by S&P or Moody's or has an
equivalent rating from an NRSRO or is determined to be of equivalent credit
quality by the Advisor. If there is a default by the counterparty, the Portfolio
may have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps and floors are more recent innovations
for which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
With respect to swaps, the Portfolio will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps and floors require
segregation of assets with a value equal to the Portfolio's net obligation, if
any.
<PAGE>
PURCHASE OF SHARES
The purchase price of shares of each Portfolio is the net asset value
next determined after receipt of the purchase order by the particular Fund.
Each Portfolio reserves the right in its sole discretion (i) to suspend
the offering of its shares, (ii) to reject purchase orders when in the judgment
of management such rejection is in the best interest of the particular Fund, and
(iii) to reduce or waive the minimum for initial and subsequent investments from
time to time.
At the discretion of the Funds, investors may be permitted to
purchase Portfolio shares by transferring securities to the Portfolio that meet
the Portfolios investment objectives and policies.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date
of payment (i) during any period that the Exchange is closed, or trading on the
Exchange is restricted as determined by the Commission, (ii) during any period
when an emergency exists as defined by the rules of the Commission as a result
of which it is not reasonably practicable for a Portfolio to dispose of
securities owned by it, or fairly to determine the value of its assets, and
(iii) for such other periods as the Commission may permit.
No charge is made by any Portfolio for redemptions. Any redemption may
be more or less than the shareholder's initial cost depending on the market
value of the securities held by the Portfolio.
SHAREHOLDER SERVICES
Shareholders may transfer shares of the Portfolios to another person.
An investor wishing to transfer shares should contact the Advisor.
<PAGE>
PORTFOLIO TURNOVER
The Portfolios will not normally engage in short-term trading, but
reserve the right to do so. A high portfolio turnover rate can result in
corresponding increases in brokerage commissions; however, the Advisor will not
consider turnover rate a limiting factor in making investment decisions
consistent with that Portfolio's investment objectives and policies. The
Portfolios' portfolio turnover rates for each of the past fiscal years are set
forth under "Financial Highlights" in the Funds' Prospectuses. Changes in the
Portfolios' turnover rates were due to market fluctuations and investment
opportunities. The Glenmede Fund anticipates a variation in the portfolio
turnover rate for the Model Equity Portfolio from that reported for the
Portfolio's most recent fiscal year due to the change in how that Portfolio
seeks to achieve its investment objective.
INVESTMENT LIMITATIONS
Each Portfolio is subject to the following restrictions which are
fundamental policies and may not be changed without the approval of the lesser
of: (1) 67% of the voting securities of the affected Portfolio present at a
meeting if the holders of more than 50% of the outstanding voting securities of
the affected Portfolio are present or represented by proxy, or (2) more than 50%
of the outstanding voting securities of the affected Portfolio. Each Portfolio
will not:
(1) invest in commodities or commodity contracts, except that each
Portfolio may invest in futures contracts and options;
(2) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate and may purchase
and sell securities which are secured by interests in real estate;
(3) make loans, except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the
limitation described in investment limitation (9) below, and money
market instruments, including bankers acceptances and commercial
paper, and selling securities on a when issued, delayed settlement
or forward delivery basis) which are publicly or privately
distributed, and (ii) by lending its portfolio securities to
banks, brokers, dealers and other financial institutions so long
as such loans are not inconsistent with the 1940 Act or the rules
and regulations or interpretations of the Commission thereunder;
<PAGE>
(4) purchase on margin or sell short, except as specified above in
investment limitation (1);
(5) purchase more than 10% of any class of the outstanding voting
securities of any issuer;
(6) issue senior securities, except that a Portfolio may borrow money
in accordance with investment limitation (7) below, purchase
securities on a when issued, delayed settlement or forward
delivery basis and enter into reverse repurchase agreements;
(7) borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then not in excess of 10% of its total
assets at the time of the borrowing (entering into reverse
repurchase agreements and purchasing securities on a when issued,
delayed settlement or forward delivery basis are not subject to
this investment limitation);
(8) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value, except
as described in the Prospectus and this Statement of Additional
Information and in connection with entering into futures
contracts, but the deposit of assets in a segregated account in
connection with the writing of covered put and call options and
the purchase of securities on a when issued, delayed settlement or
forward delivery basis and collateral arrangements with respect to
initial or variation margin for futures contracts will not be
deemed to be pledges of a Portfolio's assets or the purchase of
any securities on margin for purposes of this investment
limitation;
(9) underwrite the securities of other issuers or invest more than an
aggregate of 10% of the total assets of the Portfolio, at the time
of purchase, in securities subject to legal or contractual
restrictions on resale or securities for which there are no
readily available markets, including repurchase agreements which
have maturities of more than seven days;
(10) invest for the purpose of exercising control over management of
any company;
(11) invest its assets in securities of any investment company, except
in connection with mergers, acquisitions of assets or
consolidations and except as may otherwise be permitted by the
1940 Act;
<PAGE>
(12) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the
Portfolio's total assets would be invested in securities of
companies within such industry; provided, however, that there
shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies, enterprises or
instrumentalities, or instruments issued by U.S. banks; and
(13) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
Each Portfolio, with the exception of the Muni Intermediate, New
Jersey Muni and International Fixed Income Portfolios, also will not:
(1) with respect as to 75% of its total assets, invest more than 5% of
its total assets at the time of purchase in the securities of any
single issuer (other than obligations issued or guaranteed by the
U.S. Government, its agencies, enterprises or instrumentalities).
Although not a matter of fundamental policy, pursuant to Rule 2a-7
under the 1940 Act, the Government Cash Portfolio will limit its purchases of
any one issuer's securities (other than U.S. Government Securities) to 5% of the
Portfolio's total assets at the time of purchase, except that it may invest more
than 5% (but no more than 25%) of its total assets in First Tier Securities of
one issuer for a period of up to three business days.
Each of the Muni Intermediate, New Jersey Muni and International Fixed
Income Portfolios is classified as a "non-diversified" investment company under
the 1940 Act, which means the Portfolio is not limited by the 1940 Act in the
proportion of its assets that it may invest in the securities of a single
issuer. However, each Portfolio intends to conduct its operations so as to
qualify as a "regulated investment company" for purposes of the Internal Revenue
Code of 1986, as amended, which generally will relieve the Portfolio of any
liability for federal income tax to the extent its earnings are distributed to
shareholders. In order to qualify as a regulated investment company for federal
income tax purposes, the Portfolio generally will limit its investments such
that at the close of each quarter of the taxable year it will not, with respect
to 50% of its total assets, invest more than 5% of its total assets at the time
of purchase in the securities of any single issuer (other than obligations
issued or guaranteed by the U.S. Government, its agencies, enterprises or
instrumentalities).
<PAGE>
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value or assets
will not constitute a violation of such restriction.
With regard to limitation (11), the 1940 Act currently prohibits an
investment company from acquiring securities of another investment company if,
as a result of the transaction, the acquiring company and any company or
companies controlled by it would own in the aggregate: (i) more than 3% of the
total outstanding voting stock of the acquired company, (ii) securities issued
by the acquired company having an aggregate value in excess of 5% of the value
of the total assets of the acquiring company, or (iii) securities issued by the
acquired company and all other investment companies (other than treasury stock
of the acquired company) having an aggregate value in excess of 10% of the value
of the total assets of the acquiring company. In addition to the advisory fees
and other expenses that a Portfolio bears directly in connection with its own
operations, as a shareholder of another investment company, such Portfolio would
bear its "pro rata" portion of the other investment company's advisory fees and
other expenses. Therefore, to the extent that a Portfolio is invested in shares
of other investment companies, such Portfolio's shareholders will be subject to
expenses of such other investment companies, in addition to expenses of the
Portfolio.
As a matter of policy which may be changed by the particular Fund's
Board without shareholder approval, with respect to limitation (12), Portfolios
other than the Government Cash Portfolio and the Tax-Exempt Cash Portfolio will
not invest more than 25% of the value of their respective total assets in
instruments issued by U.S. banks.
In addition, with respect to investment limitation (12), (a) there is
no limitation with respect to (i) instruments issued or guaranteed by the United
States, any State, territory or possession of the United States, the District of
Columbia or any of their authorities, agencies, instrumentalities or political
subdivisions, and (ii) repurchase agreements secured by the instruments
described in clause (i); (b) wholly-owned finance companies will be considered
to be in the industries of their parents if their activities are primarily
related to financing the activities of the parents; and (c) utilities will be
divided according to their services; for example, gas, gas transmission,
electric and gas, electric and telephone will each be considered a separate
industry.
With regard to limitation (13), the purchase of securities of a
corporation, a subsidiary of which has an interest in oil, gas or other mineral
exploration or development programs shall not be deemed to be prohibited by the
limitation.
As stated in the Prospectuses, each of the Funds may make commitments
with respect to a Portfolio that are more restrictive than the investment
policies and limitations described above and in the Prospectuses in order to
permit the sale of a Portfolio's shares in certain states. All these commitments
may not appear in the Prospectuses or this SAI. To permit the sale of shares of
the Equity, Small Capitalization Equity and International Portfolios in Texas,
Glenmede Fund has made commitments that those Portfolios will not invest in oil,
gas or mineral leases, or in real estate limited partnership interests that are
not readily marketable, and will not lend portfolio securities unless collateral
values are continuously maintained at no less than 100% by "marking to market"
daily and the practice is fair, just and equitable as determined by a finding
that adequate provision has been made for margin calls, termination of the loan,
reasonable servicing fees (including finders' fees), voting rights, dividend
rights, shareholder approval and disclosure, and the loan is within the
limitations approved by the SEC. Should Glenmede Fund determine that any of
these commitments is no longer in the best interests of the particular
Portfolio, it will revoke that commitment by terminating sales of the
Portfolio's shares in Texas and giving notice of such action to investors in
Texas.
<PAGE>
MANAGEMENT OF THE FUNDS
Each Fund's officers, under the supervision of the particular Board,
manage the day-to-day operations of the Fund. The Board members set broad
policies for each Fund and choose its officers. A list of the Board members and
officers and a brief statement of their current positions and principal
occupations during the past five years is set forth in the Funds'
Prospectuses.
Remuneration of Board Members
Effective June 12, 1996, Glenmede Fund pays each Board member, other
than Mr. Church, an annual fee of $8,000 plus $1,250 for each Board meeting
attended and each Board Valuation Committee meeting attended (unless such
meeting was held in conjunction with a Board meeting) and out-of-pocket expenses
incurred in attending Board meetings. Prior to June 12, 1996, Glemmede Fund paid
each Director, other than Mr. Church, an annual fee of $6,000 plus $1,250 for
each Board meeting attended and out-of-pocket expenses incurred in attending
Board meetings. Glenmede Portfolios pays each Board member, other than Mr.
Church, an annual fee of $1,000 per year and out-of-pocket expenses incurred in
attending Board meetings. Officers of the Funds receive no compensation as
officers from the Funds.
<PAGE>
Set forth in the table below is the compensation received by Board
members for the fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Aggregate Benefits
Compensation Compensation Compensation Estimated Total Annual
from from Part of Benefits Compensation
Name of Glenmede Glenmede the Funds' Upon from the
Person, Position Fund Portfolios Expense Retirement Funds
<S> <C> <C> <C> <C> <C>
Dr. H. Franklin Allen, Ph.D., $12,250 $1,000 None None $13,250
Director/Trustee
Willard S. Boothby, Jr., $12,250 $ 750 None None $13,000
Director/Trustee
John W. Church, Jr. None None None None None
Director/Trustee
Francis J. Palamara, $12,250 $1,000 None None $13,250
Director/Trustee
G. Thompson Pew, Jr., $12,250 $1,000 None None $13,250
Director/Trustee
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
The Advisor, The Glenmede Trust Company, is the wholly-owned subsidiary
of The Glenmede Corporation (the "Corporation") whose shares are closely held by
63 shareholders. The Corporation has a nine person Board of Directors which, at
January 30, 1996, collectively, owned 98.67% of the Corporation's voting shares
and 41.96% of the Corporation's total outstanding shares. The members of the
Board and their respective interests in the Corporation at January 30, 1996 are
as follows:
The Glenmede Corporation Percent of Percent of
Board of Directors Voting Shares Total Shares
- ------------------------ ------------- ------------
Susan W. Catherwood............ 10.83% 1.23%
Robert G. Dunlop............... 10.83% 5.16%
Thomas W. Langfitt, M.D........ 11.07% 7.86%
Robert E. McDonald............. 10.83% 1.16%
J. Howard Pew, II.............. 10.83% 1.45%
J. N. Pew, III................. 11.07% 5.66%
J. N. Pew, IV.................. 11.07% 1.44%
R. Anderson Pew................ 11.07% 6.20%
Ethel Benson Wister............ 11.07% 11.80%
------ ------
98.67% 41.96%
<PAGE>
As noted in the Prospectus, the Advisor does not receive any fee from
the Portfolios for its investment services. However, all shareholders in the
Portfolios are clients of the Advisor or an Affiliate and, as clients, pay fees
which vary depending on the capacity in which the Advisor or Affiliate provides
fiduciary and investment services to the particular client. Such services may
include personal trust, estate settlement, advisory and custodian services. For
example, for advisory services, the Advisor charges its clients up to 1% on the
first $1 million of principal, .60% on the next $1 million of principal, .50% on
the next $3 million of principal and .40% on the next $5 million of principal,
with a minimum annual fee of $10,000. For accounts in excess of $10 million of
principal, the fee would be determined by special analysis.
Since July 1, 1995, administrative, transfer agency and dividend paying
services have been provided to each of the Funds by ICC, pursuant to a Master
Services Agreement between each of the Funds and ICC. See "Administrative,
Transfer Agency and Dividend Paying Services" in the Prospectuses for
information concerning the substantive provisions of each Master Services
Agreement. For the period July 1, 1995 to October 31, 1995, the Funds paid ICC
fees of $59,300 for the Government Cash Portfolio, $30,104 for the Tax-Exempt
Cash Portfolio, $48,906 for the Intermediate Government Portfolio, $55,781 for
the International Portfolio, $11,445 for the Equity Portfolio, $24,932 for the
Small Capitalization Equity Portfolio, $4,050 for the International Fixed Income
Portfolio, $2,615 for the Model Equity Portfolio, $2,663 for the Muni
Intermediate Portfolio and $808 for the New Jersey Muni Portfolio.
From May 6, 1994 to June 30, 1995, administrative services were
provided to each Fund by The Shareholder Services Group, Inc. ("TSSG"), pursuant
to Administration Agreements. For the period November 1, 1994 to June 30, 1995,
the Funds paid TSSG administrative fees of $238,455 for the Government Cash
Portfolio, $126,195 for the Tax-Exempt Cash Portfolio, $193,903 for the
Intermediate Government Portfolio, $172,504 for the International Portfolio,
$38,056 for the Equity Portfolio, $76,001 for the Small Capitalization Equity
Portfolio, $14,249 for the International Fixed Income Portfolio, $11,371 for the
Model Equity Portfolio, $11,012 for the Muni Intermediate Portfolio and $2,829
for the New Jersey Muni Portfolio. For the period May 6, 1994 through October
31, 1994, the Funds paid TSSG administrative fees of $138,505 for the Government
Cash Portfolio, $96,424 for the Tax-Exempt Cash Portfolio, $166,354 for the
Intermediate Government Portfolio, $126,733 for the International Portfolio,
$28,783 for the Equity Portfolio, $44,272 for the Small Capitalization Equity
Portfolio, $7,491 for the International Fixed Income Portfolio, $9,019 for the
Model Equity Portfolio, $13,154 for the Muni Intermediate Portfolio and $1,858
for the New Jersey Muni Portfolio.
<PAGE>
Prior to May 6, 1994, The Boston Company Advisors, Inc. ("Boston
Advisors"), an indirect wholly owned subsidiary of Mellon Bank Corporation,
served as the Funds' administrator. For the period November 1, 1993 to May 5,
1994, the Funds paid fees to Boston Advisors of $106,343 for the Government Cash
Portfolio, $63,862 for the Tax-Exempt Cash Portfolio, $236,483 for the
Intermediate Government Portfolio, $108,217 for the International Portfolio,
$23,504 for the Equity Portfolio, $35,777 for the Small Capitalization Equity
Portfolio, $7,150 for the International Fixed Income Portfolio, $7,061 for the
Model Equity Portfolio, $37,283 for the Muni Intermediate Portfolio and $1,378
for the New Jersey Muni Portfolio.
For the fiscal year ended October 31, 1993, the Funds paid fees to
Boston Advisors of $193,797 for the Government Cash Portfolio, $115,854 for the
Tax-Exempt Cash Portfolio, $447,870 for the Intermediate Government Portfolio,
$176,538 for the International Portfolio, $29,773 for the Equity Portfolio and
$48,198 for the Small Capitalization Equity Portfolio and $65,070 for the Muni
Intermediate Portfolio, and for the period November 2, 1992 (commencement of
operations) to October 31, 1993, $13,347 for the International Fixed Income
Portfolio and for the period December 31, 1992 (commencement of operations) to
October 31, 1993, $8,588 for the Model Equity Portfolio.
As described more fully in the Prospectuses, the Advisor provides
shareholder support services to their clients who beneficially own shares of the
Portfolios pursuant to a Shareholder Servicing Agreement ("Agreement") with each
of the Funds. Shareholder servicing fees incurred for the period January 1, 1995
to October 31, 1995 and outstanding payable shareholder servicing fees as of
October 31, 1995 for the Government Cash, Tax-Exempt Cash, Intermediate
Government, Muni Intermediate, New Jersey Muni, International Fixed Income,
Equity, International, Small Capitalization Equity and Model Equity Portfolios
were $179,403 and $17,198, $88,295 and $9,547, $137,633 and $14,501, $7,721 and
$794, $2,177 and $255, $11,150 and $1,154, $29,441 and $3,416, $130,533 and
$14,718, $61,932 and $7,416, and $7,699 and $712, respectively.
Custody services are provided to each Portfolio by The Chase Manhattan
Bank, N.A., Brooklyn, New York.
DISTRIBUTOR
Shares of each Fund are distributed continuously and are offered
without a sales load by Armata, pursuant to a Distribution Agreement between
each Fund and Armata. Armata receives no fee from the Funds for its distribution
services.
The Funds bear their own expenses incurred in their operations
including: taxes; interest; miscellaneous fees (including fees paid to their
Board members); Securities and Exchange Commission fees; costs of preparing and
printing prospectuses for regulatory purposes and for distribution to existing
shareholders; administration fees; charges of the custodian, dividend agent
fees; certain insurance premiums; outside auditing and legal expenses; costs of
shareholders' reports and shareholder meetings; and any extraordinary expenses.
Each Portfolio also pays for brokerage fees and commissions, if any, in
connection with the purchase and sale of its portfolio securities.
<PAGE>
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Advisor to select the
brokers or dealers that will execute the purchases and sales of investment
securities for each of the Portfolios and direct the Advisor to use its best
efforts to obtain the best available price and most favorable execution with
respect to all transactions for the Portfolios. The Advisor may, however,
consistent with the interests of a Portfolio, select brokers on the basis of the
research, statistical and pricing services they provide to a Portfolio.
Information and research received from such brokers will be in addition to, and
not in lieu of, the services required to be performed by the Advisor under the
Investment Advisory Agreements. A commission paid to such brokers may be higher
than that which another qualified broker would have charged for effecting the
same transaction, provided that such commissions are paid in compliance with the
Securities Exchange Act of 1934, as amended, and that the Advisor determines in
good faith that such commission is reasonable in terms either of the transaction
or the overall responsibility of the Advisor to a Portfolio and the Advisor's
other clients. For the Funds' fiscal year ended October 31, 1995, however, no
brokers were selected by the Advisor on the basis of research, statistical and
pricing services provided to a Portfolio.
During the fiscal year ended October 31, 1995, the Equity,
International and Small Capitalization Equity and Model Equity Portfolios paid
$157,547, $453,721, $343,683 and $165,103 in brokerage commissions,
respectively. During the fiscal year ended October 31, 1994, the Equity,
International, Small Capitalization Equity and Model Equity Portfolios paid
$212,177, $617,512, $180,822 and $212,005 in brokerage commissions,
respectively. During the fiscal year ended October 31, 1993, the Equity,
International, Small Capitalization Equity and Model Equity Portfolios paid
$88,965, $401,382, $102,071 and $115,654 in brokerage commissions, respectively.
The Government Cash, Intermediate Government, Muni Intermediate, New
Jersey Muni and International Fixed Income Portfolios do not currently expect to
incur any brokerage commission expense on transactions in their portfolio
securities because debt instruments are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission.
The price of the security, however, usually includes a profit to the dealer.
<PAGE>
Because shares of the Portfolios are not marketed through intermediary
brokers or dealers, it is not the Funds' practice to allocate brokerage or
effect principal transactions with dealers on the basis of sales of shares which
may be made through such firms. However, the Advisor may place portfolio orders
with qualified broker-dealers who refer clients to the Advisor.
Some securities considered for investment by each Portfolio may also be
appropriate for other clients served by the Advisor. If purchase or sale of
securities is consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Advisor and is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Advisor.
While in some cases this practice could have a detrimental effect on the price,
value or quantity of the security as far as a Portfolio is concerned, in other
cases it is believed to be beneficial to the Portfolios.
ADDITIONAL INFORMATION CONCERNING TAXES
General. The following summarizes certain additional tax considerations
generally affecting the Portfolios and their shareholders that are not described
in the Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Portfolios or their shareholders, and the discussion here
and in the Prospectus is not intended as a substitute for careful tax planning.
Potential investors should consult their tax advisers with specific reference to
their own tax situation.
Each Portfolio is treated as a separate corporate entity under the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to qualify
as a regulated investment company. Qualification as a regulated investment
company under the Code requires, among other things, that each Portfolio
distribute to its shareholders an amount equal to at least the sum of 90% of its
investment company taxable income and 90% of its tax-exempt income (if any) net
of certain deductions for a taxable year. In addition, each Portfolio must
satisfy certain requirements with respect to the source of its income for a
taxable year. At least 90% of the gross income of each Portfolio must be derived
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies, and
other income (including, but not limited to, gains from options, futures, or
forward contracts) derived with respect to the Portfolio's business of investing
in such stock, securities or currencies. The Treasury Department may by
regulation exclude from qualifying income foreign currency gains which are not
directly related to a Portfolio's principal business of investing in stock or
securities, or options and futures with respect to stock or securities. Any
income derived by a Portfolio from a partnership or trust is treated for this
purpose as derived with respect to the Portfolio's business of investing in
stock, securities or currencies only to the extent that such income is
attributable to items of income which would have been qualifying income if
realized by the Portfolio in the same manner as by the partnership or trust.
<PAGE>
A Portfolio will not be treated as a regulated investment Company under
the Code if 30% or more of the Portfolio's gross income for a taxable year is
derived from gains realized on the sale or other disposition of the following
investments held for less than three months: (1) stock and securities (as
defined in section 2(a)(36) of the 1940 Act); (2) options, futures and forward
contracts other than those on foreign currencies; and (3) foreign currencies
(and options, futures and forward contracts on foreign currencies) that are not
directly related to a Portfolio's principal business of investing in stock and
securities (and options and futures with respect to stocks and securities).
Interest (including original issue discount and accrued market discount)
received by a Portfolio upon maturity or disposition of a security held for less
than three months will not be treated as gross income derived from the sale or
other disposition of such security within the meaning of this requirement.
However, income which is attributable to realized market appreciation will be
treated as gross income from the sale or other disposition of securities for
this purpose. With respect to covered call options, if the call is exercised by
the holder, the premium and the price received on exercise constitute the
proceeds of sale, and the difference between the proceeds and the cost of the
securities subject to the call is capital gain or loss. Premiums from expired
call options written by a Portfolio and net gains from closing purchase
transactions are treated as short-term capital gains for Federal income tax
purposes, and losses on closing purchase transactions are short-term capital
losses.
Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to a shareholder as long-term capital gain,
regardless of how long the shareholder has held the distributing Portfolio's
shares and whether such distribution is received in cash or additional Portfolio
shares. Each Portfolio will designate such distributions as capital gain
dividends in a written notice mailed to shareholders within 60 days after the
close of the Portfolio's taxable year. Shareholders should note that, upon the
sale or exchange of Portfolio shares, if the shareholder has not held such
shares for more than six months, any loss on the sale or exchange of those
shares will be treated as long-term capital loss to the extent of the capital
gain dividends received with respect to the shares.
<PAGE>
An individual's net capital gains are taxable at a maximum effective
rate of 28%. Ordinary income of individuals is taxable at a maximum nominal rate
of 39.6%, but because of limitations on itemized deductions otherwise allowable
and the phase-out of personal exemptions, the maximum effective marginal rate of
tax for some taxpayers may be higher. For corporations, long-term capital gains
and ordinary income are both taxable at a maximum nominal rate of 35% (although
surtax provisions apply at certain income levels to result in effective marginal
rates as high as 39%).
If for any taxable year a Portfolio does not qualify for the special
Federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to Federal income tax at regular corporate rates
(without any deduction for distributions to its shareholders). In such event,
dividend distributions (including amounts derived from interest on tax-exempt
obligations in the case of the Tax-Exempt Cash, Muni Intermediate and New Jersey
Muni Portfolios) would be taxable as ordinary income to shareholders to the
extent of the Portfolio's current and accumulated earnings and profits, and
would be eligible for the dividends received deduction for corporations.
Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios. As
described in the Prospectus, these Portfolios are designed to provide investors
with current tax-exempt interest income. Shares of the Portfolios would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans and individual
retirement accounts since such plans and accounts are generally tax-exempt and,
therefore, would not only fail to gain any additional benefit from each such
Portfolio's dividends being tax-exempt, but such dividends would be ultimately
taxable to the beneficiaries when distributed to them. In addition, the
Portfolios may not be an appropriate investment for entities which are
"substantial users" of facilities financed by private activity bonds or "related
persons" thereof. "Substantial user" is defined under U.S. Treasury Regulations
to include a non-exempt person who regularly uses a part of such facilities in
his trade or business and whose gross revenues derived with respect to the
facilities financed by the issuance of bonds are more than 5% of the total
revenues derived by all users of such facilities, who occupies more than 5% of
the usable area of such facilities or for whom such facilities or a part thereof
were specifically constructed, reconstructed or acquired. "Related persons"
include certain related natural persons, affiliated corporations, a partnership
and its partners and an S corporation and its shareholders.
The percentage of total dividends paid by each Portfolio with respect
to any taxable year which qualify as Federal exempt-interest dividends will be
the same for all shareholders receiving dividends for such year. In order for
each Portfolio to pay exempt-interest dividends with respect to any taxable
year, at the close of each quarter of its taxable year at least 50% of the
aggregate value of each Portfolio's assets must consist of exempt-interest
obligations. After the close of its taxable year, each Portfolio will notify its
shareholders of the portion of the dividends paid by it which constitutes an
exempt-interest dividend with respect to such year. However, the aggregate
amount of dividends so designated by each Portfolio cannot exceed the excess of
the amount of interest exempt from tax under Section 103 of the Code received by
the particular Portfolio for the taxable year over any amounts disallowed as
deductions under Sections 265 and 171(a)(2) of the Code.
<PAGE>
Interest on indebtedness incurred by a shareholder to purchase or carry
such a Portfolio's shares generally is not deductible for Federal income tax
purposes if the Portfolio distributes exempt-interest dividends during the
shareholder's taxable year.
While each Portfolio will seek to invest substantially all of its
assets in tax-exempt obligations (except on a temporary basis or for temporary
defensive periods), any investment company taxable income earned by a Portfolio
will be distributed. In general, each Portfolio's investment company taxable
income will be its taxable income (including taxable interest received from
temporary investments and any net short-term capital gains realized by a
Portfolio) subject to certain adjustments and excluding the excess of any net
long-term capital gains for the taxable year over the net short-term capital
loss, if any, for such year.
Federal Taxation of Certain Financial Instruments. Generally, futures
contracts held by the International Fixed Income Portfolio at the close of the
Fund's taxable year will be treated for Federal income tax purposes as sold for
their fair market value on the last business day of such year, a process known
as "mark-to-market." Forty percent of any gain or loss resulting from such
constructive sale will be treated as short-term capital gain or loss and 60% of
such gain or loss will be treated as long-term capital gain or loss without
regard to the length of time the Portfolio holds the futures contract ("the
40%-60% rule"). The amount of any capital gain or loss actually realized by the
Portfolio in a subsequent sale or other disposition of those futures contracts
will be adjusted to reflect any capital gain or loss taken into account by the
Portfolio in a prior year as a result of the constructive sale of the contracts.
With respect to futures contracts to sell, which will be regarded as parts of a
"mixed straddle" because their values fluctuate inversely to the values of
specific securities held by the Portfolio, losses as to such contracts to sell
will be subject to certain loss deferral rules which limit the amount of loss
currently deductible on either part of the straddle to the amount thereof which
exceeds the unrecognized gain (if any) with respect to the other part of the
straddle, and to certain wash sales regulations. Under short sales rules, which
will also be applicable, the holding period of the securities forming part of
the straddle will (if they have not been held for the long term holding period)
be deemed not to begin prior to termination of the straddle. With respect to
certain futures contracts, deductions for interest and carrying charges will not
be allowed. Notwithstanding the rules described above, with respect to futures
contracts to sell which are properly identified as such, the International Fixed
Income Portfolio may make an election which will exempt (in whole or in part)
those identified futures contracts from being treated for Federal income tax
purposes as sold on the last business day of the Fund's taxable year, but gains
and losses will be subject to such short sales, wash sales and loss deferral
rules and the requirement to capitalize interest and carrying charges. Under
Temporary Regulations, the International Fixed Income Portfolio would be allowed
(in lieu of the foregoing) to elect either (1) to offset gains or losses from
positions which are part of a mixed straddle by separately identifying each
mixed straddle to which such treatment applies, or (2) to establish a mixed
straddle account for which gains and losses would be recognized and offset on a
periodic basis during the taxable year. Under either election, the 40%-60% rule
will apply to the net gain or loss attributable to the futures contracts, but in
the case of a mixed straddle account election, no more than 50% of any net gain
may be treated as long term and no more than 40% of any net loss may be treated
as short term. Options on futures contracts generally receive Federal tax
treatment similar to that described above.
<PAGE>
Certain foreign currency contracts entered into by the International or
International Fixed Income Portfolios may be subject to the "mark-to-market"
process and the 40%-60% rule in a manner similar to that described in the
preceding paragraph for futures contracts. To receive such Federal income tax
treatment, a foreign currency contract must meet the following conditions: (1)
the contract must require delivery of a foreign currency of a type in which
regulated futures contracts are traded or upon which the settlement value of the
contract depends; (2) the contract must be entered into at arm's length at a
price determined by reference to the price in the interbank market; and (3) the
contract must be traded in the interbank market. The Treasury Department has
broad authority to issue regulations under the provisions respecting foreign
currency contracts. As of the date of this Statement of Additional Information,
the Treasury has not issued any such regulations. Other foreign currency
contracts entered into by the International or International Fixed Income
Portfolio may result in the creation of one or more straddles for Federal income
tax purposes, in which case certain loss deferral, short sales, and wash sales
rules and the requirement to capitalize interest and carrying charges may apply.
As described more fully above, in order to qualify as a regulated
investment company under the Code a Portfolio must derive less than 30% of its
gross income from the sale or other disposition of securities and certain other
investments held for less than three months. With respect to futures contracts
and other financial instruments subject to the mark-to-market rules, the
Internal Revenue Service has ruled in private letter rulings that a gain
realized from such a futures contract or financial instrument will be treated as
being derived from a security held for three months or more (regardless of the
actual period for which the contract or instrument is held) if the gain arises
as a result of a constructive sale under the mark-to-market rules, and will be
treated as being derived from a security held for less than three months only if
the contract or instrument is terminated (or transferred) during the taxable
year (other than by reason of mark-to-market) and less than three months have
elapsed between the date the contract or instrument is acquired and the
termination date. In determining whether the 30% test is met for a taxable year,
increases and decreases in the value of a Portfolio's futures contracts and
other investments that qualify as part of a "designated hedge," as defined in
the Code, may be netted.
Special rules govern the Federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules include the
following: (i) the acquisition of, or becoming the obligor under, a bond or
other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option and similar financial instrument if such
instrument is not marked to market. The disposition of a currency other than the
U.S. dollar by a U.S. taxpayer is also treated as a transaction subject to the
special currency rules. However, foreign currency-related regulated futures
contracts and non-equity options are generally not subject to the special
currency rules if they are or would be treated as sold for their fair market
value at year-end under the mark-to-market rules, unless an election is made to
have such currency rules apply. With respect to transactions covered by the
special rules, foreign currency gain or loss is calculated separately from any
gain or loss on the underlying transaction and is normally taxable as ordinary
gain or loss. A taxpayer may elect to treat as capital gain or loss foreign
currency gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not part of a straddle. In accordance with Treasury regulations under
which certain transactions that are part of a "section 988 hedging transaction"
(as defined in the Code and the Treasury regulations) will be integrated and
treated as a single transaction or otherwise treated consistently for purposes
of the Code. Any gain or loss attributable to the foreign currency component of
a transaction engaged in by a Portfolio which is not subject to the special
currency rules (such as foreign equity investments other than certain preferred
stocks) will be treated as capital gain or loss and will not be segregated from
the gain or loss on the underlying transaction. It is anticipated that some of
the non-U.S. dollar denominated investments and foreign currency contracts the
International and International Fixed Income Portfolios may make or enter into
will be subject to the special currency rules described above.
<PAGE>
Special Considerations Regarding Investment In Pennsylvania
Municipal Obligations.
The concentration of investments in Pennsylvania Municipal Obligations
by the Muni Intermediate Portfolio raises special investment considerations. In
particular, changes in the economic condition and governmental policies of the
Commonwealth of Pennsylvania and its municipalities could adversely affect the
value of the Portfolio and its portfolio securities. This section briefly
describes current economic trends in Pennsylvania.
Pennsylvania has historically been dependent on heavy industry although
recent declines in the coal, steel and railroad industries have led to
diversification of the Commonwealth's economy. Recent sources of economic growth
in Pennsylvania are in the service sector, including trade, medical and health
services, education and financial institutions. Agriculture continues to be an
important component of the Commonwealth's economic structure, with nearly
one-third of the Commonwealth's total land area devoted to cropland, pasture and
farm woodlands.
The population of Pennsylvania experienced a slight increase in the
period 1980 through 1990 and has a high proportion of persons 65 or older. The
Commonwealth is highly urbanized, with almost 85% of the 1980 census population
residing in metropolitan statistical areas. The two largest metropolitan
statistical areas, those containing the Cities of Philadelphia and Pittsburgh,
together comprise approximately 50% of the Commonwealth's total population.
<PAGE>
The Commonwealth utilizes the fund method of accounting and over 120
funds have been established for purposes of recording receipts and disbursements
of the Commonwealth, of which the General Fund is the largest. Most of the
Commonwealth's operating and administrative expenses are payable from the
General Fund. The major tax sources for the General Fund are the sales tax, the
personal income tax and the corporate net income tax. Major expenditures of the
Commonwealth include funding for education, public health and welfare,
transportation, and economic development.
The constitution of the Commonwealth provides that operating budget
appropriations of the Commonwealth may not exceed the estimated revenues and
available surplus in the fiscal year for which funds are appropriated. Annual
budgets are enacted for the General Fund and for certain special revenue funds
which together represent the majority of expenditures of the Commonwealth.
Although the balance in the General Fund of the Commonwealth (the principal
operating fund of the Commonwealth) experienced deficits in fiscal 1990 and
1991, tax increases and spending decreases have resulted in surpluses the last
four years; as of June 30, 1995, the General Fund had a surplus of $688.3
million.
Current constitutional provisions permit the Commonwealth to issue the
following types of debt: (i) electorate approved debt, (ii) debt for capital
projects subject to an aggregate debt limit of 1.75 times the annual average tax
revenues of the preceding five fiscal years, (iii) tax anticipation notes
payable in the fiscal year of issuance and (iv) debt to suppress insurrection or
rehabilitate areas affected by disaster. General obligation debt totaled
$5,045.4 million at June 30, 1995. Certain state-created agencies issue debt
supported by assets of, or revenues derived from, the various projects financed
and the debt of such agencies is not an obligation of the Commonwealth although
some of the agencies are indirectly dependent on Commonwealth appropriations.
<PAGE>
Certain litigation is pending against the Commonwealth that could
adversely affect the ability of the Commonwealth to pay debt service on its
obligations including suits relating to the following matters: (a) the ACLU has
filed suit in federal court demanding additional funding for child welfare
services; the Commonwealth settled a similar suit in the Commonwealth Court of
Pennsylvania and is seeking the dismissal of the federal suit, inter alia,
because of that settlement. After its earlier denial was reversed by the Third
Circuit Court of Appeals, the district court granted class certification to the
ACLU, and the parties are proceeding with discovery (no available estimates of
potential liability); (b) in 1987, the Supreme Court of Pennsylvania held that
the statutory scheme for county funding of the judicial system to be in conflict
with the constitution of the Commonwealth, but stayed judgment pending enactment
by the legislature of funding consistent with the opinion and the legislature
has yet to consider legislation implementing the judgment; in 1992, a new action
in mandamus was filed seeking to compel the Commonwealth to comply with the
original decision; (c) litigation has been filed in both state and federal court
by an association of rural and small schools and several individual school
districts and parents challenging the constitutionality of the Commonwealth's
system for funding local school districts -- the federal case has been stayed
pending resolution of the state case and the state case is in the pre-trial
stage (no available estimate of potential liability) and (d) Envirotest/Synterra
Partners ("Envirotest") filed suit against the Commonwealth asserting that
it sustained damages in excess of $350 million as a result of investments it
made in reliance on a contract to conduct emissions testing before the emissions
testing program was suspended. Envirotest has entered into a Settlement
Agreement with the Commonwealth pursuant to which Envirotest will receive $145
million over four years in full satisfaction of its claims against the
Commonwealth; and (e) the Pennsylvania Human Relations Commission joined
additional respondents, including the Commonwealth of Pennsylvania, in its
enforcement action against the School District of Philadelphia pursuant to the
Pennsylvania Human Relations Act. The Commonwealth and the city have appealed
an adverse action of the Commonwealth Court to the Supreme Court of
Pennsylvania (no available estimate of potential liability).
<PAGE>
Local government units in the Commonwealth of Pennsylvania (which
include, among other things, counties, cities, boroughs, towns, townships,
school districts and other municipally created units such as industrial
development authorities and municipality authorities, including water and sewer
authorities) are permitted to issue debt for capital projects: (i) in any amount
so long as the debt has been approved by the voters of the local government
unit; or (ii) without electoral approval if the aggregate outstanding principal
amount of debt of the local government unit is not in excess of 100% of its
borrowing base (in the case of a school district of the first class), 300% of
its borrowing base (in the case of a county) or 250% of its borrowing base (in
the case of all other local government units); or (iii) without electoral
approval and without regard to the limit described in (ii) in any amount in the
case of certain subsidized debt and self-liquidating debt (defined to be debt
with no claim on taxing power, secured solely by revenues from a specific source
which have been projected to be sufficient to pay debt service on the related
debt). Lease rental debt may also be issued, in which case the total debt limits
described in section (ii) (taking into account all existing lease rental debt in
addition to all other debt) are increased. The borrowing base for a local
government unit is the average of total revenues for the three fiscal years
preceding the borrowing. The risk of investing in debt issued by any particular
local government unit depends, in the case of general obligation bonds secured
by tax revenues, on the credit-worthiness of that issuer or, in the case of
revenue bonds, on the revenue producing ability of the project being financed,
and not directly on the credit-worthiness of the Commonwealth of Pennsylvania as
a whole.
The City of Philadelphia (the "City") has been experiencing severe
financial difficulties which have impaired its access to public credit markets
and a long-term solution to the City's financial crisis is still being sought.
The City experienced a series of General Fund deficits for Fiscal Years 1988
through 1992. The City has no legal authority to issue deficit reduction bonds
on its own behalf, but state legislation has been enacted to create an
Intergovernmental Cooperation Authority (the "Authority") to provide fiscal
oversight for Pennsylvania cities (primarily Philadelphia) suffering recurring
financial difficulties. The Authority is broadly empowered to assist cities in
avoiding defaults and eliminating deficits by encouraging the adoption of sound
budgetary practices and issuing bonds. In order for the Authority to issue bonds
on behalf of the City, the City and the Authority entered into an
intergovernmental cooperative agreement providing the Authority with certain
oversight powers with respect to the fiscal affairs of the City. The City
currently is operating under a five year plan approved by the Authority on
April 17, 1995, with technical amendments officially incorporated on July 18,
1995. The audited balance of the City's General Fund as of June 30, 1995 showed
a surplus of approximately $80.5 million.
<PAGE>
The Authority's power to issue further bonds to finance capital
projects or deficit expired on December 31, 1994. The Authority may continue to
issue debt to finance a cash flow deficit until December 31, 1996, and its
ability to refund outstanding bonds is unrestricted.
The foregoing information as to certain Pennsylvania risk factors
constitutes only a brief summary, does not purport to be a complete description
of Pennsylvania risk factors and is principally drawn from official statements
relating to securities offerings of the Commonwealth of Pennsylvania that have
come to the Funds' attention and were available as of the date of this Statement
of Additional Information.
Special Considerations Regarding Investment in New Jersey
Municipal Obligations
The State of New Jersey and its political subdivisions, agencies and
public authorities are authorized to issue two general classes of indebtedness;
general obligation bonds and revenue bonds. Both classes of bonds may be
included in the New Jersey Muni Portfolio. The repayment of principal and
interest on general obligation bonds is secured by the full faith and credit of
the issuer, backed by the issuer's taxing authority, without recourse to any
special project or source of revenue. Special obligation or revenue bonds may be
repaid only from revenues received in connection with the project for which the
bonds are issued, special excise taxes, or other special revenue sources and
generally are issued by entities without taxing power. Neither the State of New
Jersey nor any of its subdivisions is liable for the repayment of principal or
interest on revenue bonds except to the extent stated in the preceding
sentences.
General obligation bonds of the state are repaid from revenues obtained
through the state's general taxing authority. An inability to increase taxes may
adversely affect the state's ability to authorize or repay debt.
Public authorities, private non-profit corporations, agencies and
similar entities of New Jersey ("Authorities") are established for a variety of
beneficial purposes, including economic development, housing and mortgage
financing, health care facilities and public transportation. The Authorities are
not operating entities of the State of New Jersey, but are separate legal
entities that are managed independently. The state oversees the Authorities by
appointing the governing boards, designating management, and by significantly
influencing operations. The Authorities are not subject to New Jersey
constitutional restrictions on the incurrence of debt, applicable to the State
of New Jersey itself, and may issue special obligation or private activity bonds
in legislatively authorized amounts.
<PAGE>
An absence or reduction of revenue will affect a bond-issuing
Authority's ability to repay debt on special obligation bonds and no assurance
can be given that sufficient revenues will be obtained to make such payments,
although in some instances repayment may be guaranteed or otherwise secured.
Various Authorities have issued bonds for the construction of health
care facilities, transportation facilities, office buildings and related
facilities, housing facilities, pollution control facilities, water and sewerage
facilities and power and electric facilities. Each of these facilities may incur
different difficulties in meeting its debt repayment obligations. Hospital
facilities, for example, are subject to changes in Medicare and Medicaid
reimbursement regulations, attempts by Federal and state legislatures to limit
the costs of health care and management's ability to complete construction
projects on a timely basis as well as to maintain projected rates of occupancy
and utilization. At any given time, there are several proposals pending on a
Federal and state level concerning health care which may further affect a
hospital's debt service obligation.
Housing facilities may be subject to increases in operating costs,
management's ability to maintain occupancy levels, rent restrictions and
availability of Federal or state subsidies, while power and electric facilities
may be subject to increased costs resulting from environmental restrictions,
fluctuations in fuel costs, delays in licensing procedures and the general
regulatory framework in which these facilities operate. All of these entities
are constructed and operated under rigid regulatory guidelines.
Some entities which financed facilities with proceeds of private
activity bonds issued by the New Jersey Economic Development Authority, a major
issuer of special obligation bonds, have defaulted on their debt service
obligations. Because these special obligation bonds were repayable only from
revenue received from the specific projects which they funded, the New Jersey
Economic Development Authority was unable to repay the debt service to
bondholders for such facilities. Each issue of special obligation bonds,
however, depends on its own revenue for repayment, and thus these defaults
should not affect the ability of the New Jersey Economic Development Authority
to repay obligations on other bonds that it issues in the future.
<PAGE>
The state has experienced a gradual economic recovery since hitting a
recessionary peak during 1992. Recently, the state's unemployment rate has
fallen, and job growth has been experienced in several sectors of the state's
economy. To the extent that any adverse conditions exist in the future which
affect the obligor's ability to repay debt, the value of the Portfolio may be
immediately and substantially affected.
The following are cases presently pending or threatened in which the
State has a potential for either a significant loss of revenue or a significant
unanticipated expenditure: (i) several labor unions have challenged 1994
legislation mandating a revaluation of several public employee pension funds
which resulted in a refund of millions of dollars in public employer
contributions to the State and significant ongoing annual savings to the State
(ii) several cases filed in the State courts challenged the basis on which
recoveries of certain costs for residents in State psychiatric hospitals and
other facilities are shared between the State Department of Human Services and
the State's county governments, and certain counties are seeking the recovery
from the Department of costs they have incurred for the maintenance of such
residents; (iii) a lawsuit filed in the United States District Court in 1990
alleges that the State Department of Human Services has established unreasonably
low medicaid payment rates for long-term care facilities; (iv) various hospitals
challenged the Commissioner's calculation of the hospital asessment required by
the Health Care Cost Reduction Act of 1991; (v) the 1990 Fair Automobile
Insurance Reform Act has been challenged in several State court suits; (vi) the
County of Passaic and other parties have filed suit alleging the State violated
a 1984 consent order concerning the construction of a resource recovery facility
in that county; (vii) several Medicaid eligible children and the Association for
Children of New Jersey have filed suit claiming the Medicaid reimbursement rates
for services rendered to such children are inadequate under federal law; (viii)
a coalition of churches and church leaders in Hudson County have filed suit
asserting the State-owned Liberty State Park in Jersey City violates
environmental standards; (ix) Waste Management of Pennsylvania, Inc. and an
affiliate have filed suit alleging their constitutional rights were violated by
the State's issuance of two emergency redirection orders and a draft permit; and
(x) representatives of the trucking industry have filed a constitutional
challenge to annual hazardous and solid waste licensure renewal fees.
Although the Portfolio generally intends to invest its assets primarily
in New Jersey Municipal Obligations rated no lower than A, MIG2 or Prime-1 by
Moody's or A SP-1 or A-1 by S&P, there can be no assurance that such ratings
will remain in effect until the bond matures or is redeemed or will not be
revised downward or withdrawn. Such a revision or withdrawal may have an adverse
affect on the market price of such securities.
<PAGE>
PERFORMANCE CALCULATIONS
The "yield" and "effective yield" of the Government Cash and Tax-Exempt
Cash Portfolios (the "Cash Portfolios"), and the "tax-equivalent yield" of the
Tax-Exempt Cash Portfolio, are calculated according to formulas prescribed by
the Commission. The standardized seven-day yield of each of these Portfolios is
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account in the particular Portfolio having
a balance of one share at the beginning of the period, dividing the net change
in account value by the value of the account at the beginning of the base period
to obtain the base period return, and multiplying the base period return by
(365/7). The net change in the value of an account in the Cash Portfolios
includes the value of additional shares purchased with dividends from the
original share, and dividends declared on both the original share and any such
additional shares, net of all fees, other than nonrecurring account or sales
charges, that are charged by the Fund to all shareholder accounts in proportion
to the length of the base period and the Portfolio's average account size. The
capital changes to be excluded from the calculation of the net change in account
value are realized gains and losses from the sale of securities and unrealized
appreciation and depreciation. An effective annualized yield for the Cash
Portfolios may be computed by compounding the unannualized base period return
(calculated as above) by adding 1 to the base period return, raising the sum to
a power equal to 365 divided by 7, and subtracting 1 from the result.
The Tax-Exempt Cash Portfolio's "7-day tax-equivalent yield" may be
computed by dividing the tax-exempt portion of the Portfolio's yield (calculated
as above) by one minus a stated Federal income tax rate and adding the product
to that portion, if any, of the Portfolio's yield that is not tax-exempt. The
Tax-Exempt Cash Portfolio's tax-equivalent yield, and the Cash Portfolios' yield
and effective yield, do not reflect any fees charged by the Advisor to its
clients. See "Investment Advisor."
Set forth below is an example, for purposes of illustration only, of
the current yield calculations for each of the Cash Portfolios for the seven day
period ended October 31, 1995.
Government Cash Tax-Exempt
Portfolio Cash Portfolio
10/31/95 10/31/95
---------------- ---------------
7-Day Yield (Net Change
X 365/7 average net
asset value) 5.80% 3.87%
7-Day Effective Yield 5.97% 3.94%
7-Day Tax-Equivalent Yield 5.97% 5.71%*
- --------------
* Assumes an effective Federal income tax rate of 31%
<PAGE>
The SEC yield of the Intermediate Government Portfolio, Muni
Intermediate Portfolio, New Jersey Muni Portfolio and the International Fixed
Income Portfolio for the 30-day period ended October 31, 1995 was 6.47%, 5.07%,
4.29% and 8.96%, respectively. These yields were calculated by dividing the net
investment income per share (as described below) earned by the Portfolio during
a 30-day (or one month) period by the maximum offering price per share on the
last day of the period and annualizing the result on a semi-annual basis by
adding one to the quotient, raising the sum to the power of six, subtracting one
from the result and then doubling the difference. The Portfolio's net investment
income per share earned during the period is based on the average daily number
of shares outstanding during the period entitled to receive dividends and
includes dividends and interest earned during the period minus expenses accrued
for the period, net of reimbursements. This calculation can be expressed as
follows:
6
Yield = 2 [( a-b + 1) - 1]
---
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period net of reimbursements.
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = maximum offering price per share on the last day of the
period.
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), interest earned on any debt obligations
held by the Intermediate Government, Muni Intermediate, New Jersey Muni or
International Fixed Income Portfolios is calculated by computing the yield to
maturity of each obligation held by the Portfolio based on the market value of
the obligation (including actual accrued interest) at the close of business on
the last business day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and dividing
the result by 360 and multiplying the quotient by the market value of the
obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is held by the particular Portfolio. For purposes of this
calculation, it is assumed that each month contains 30 days. The maturity of an
obligation with a call provision is the next call date on which the obligation
reasonably may be expected to be called or, if none, the maturity date. With
respect to debt obligations purchased at a discount or premium, the formula
generally calls for amortization of the discount or premium. The amortization
schedule will be adjusted monthly to reflect changes in the market values of
such debt obligations.
Undeclared earned income will be subtracted from the maximum offering
price per share (variable "d" in the formula). Undeclared earned income is the
net investment income which, at the end of the base period, has not been
declared as a dividend, but is reasonably expected to be and is declared and
paid as a dividend shortly thereafter. The Intermediate Government, Muni
Intermediate, New Jersey Muni and International Fixed Income Portfolios' yields
do not reflect any fees charged by the Advisor or an Affiliate to its clients.
See "Investment Advisor."
The Muni Intermediate and New Jersey Muni Portfolios' "tax-equivalent"
yield is computed by dividing the portion of the yield that is exempt from
Federal and/or State income taxes by one minus a stated Federal income tax rate
and/or the State income tax rate and by adding that figure to that portion, if
any, of the yield that is not tax-exempt. The 30 day tax-equivalent yield for
the Muni Intermediate Portfolio and New Jersey Portfolio for the 30-day period
ended October 31, 1995 was 7.26% and 6.14%, respectively (assuming a marginal
Federal income tax rate of 31% and marginal Pennsylvania and New Jersey income
tax rates of 2.80 and 5.28%, respectively).
<PAGE>
The Intermediate Government, Equity, International, Small
Capitalization Equity, Muni Intermediate, New Jersey Muni, International Fixed
Income and Model Equity Portfolios each compute their respective average annual
total returns by determining the average annual compounded rates of return
during specified periods that equate the initial amount invested to the ending
redeemable value of such investment. This is done by dividing the ending
redeemable value of a hypothetical $1,000 initial payment by $1,000 and raising
the quotient to a power equal to one divided by the number of years (or
fractional portion thereof) covered by the computation and subtracting one from
the result. This calculation can be expressed as follows:
l/n
T = [( ERV ) - 1]
---
P
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of
years.
The Intermediate Government, Equity, International, Small
Capitalization Equity, Muni Intermediate, New Jersey Muni, International Fixed
Income and Model Equity Portfolios compute their aggregate total returns by
determining the aggregate rates of return during specified periods that likewise
equate the initial amount invested to the ending redeemable value of such
investment. The formula for calculating aggregate total return is as follows:
T = [( ERV ) - 1]
---
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions.
The ending redeemable value (variable "ERV" in each formula) is determined by
assuming complete redemption of the hypothetical investment and the deduction of
all nonrecurring charges at the end of the period covered by the computations.
Each Portfolio's average annual total return and aggregate total return do not
reflect any fees charged by the Advisor to its clients. See "Investment
Advisor."
Set forth below are the average annual total return figures for the
Intermediate Government, Equity, International, Small Capitalization Equity,
Muni Intermediate, International Fixed Income , Model Equity and New Jersey Muni
Portfolios since inception and for the one year and five year periods ended
October 31, 1995.
<PAGE>
<TABLE>
<CAPTION>
Small International
Intermediate Capitalization Muni Fixed
Government Equity International Equity Intermediate Income
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------ --------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 Year Ended 10/31/95 12.1% 23.8% 4.2% 21.2% 11.8% 14.4%
5 Years Ended 10/31/95 8.5% 16.4% 11.6% -- N/A N/A
Inception to 10/31/95 8.9% 10.9% 10.7% 14.9% 5.7% 11.5%
</TABLE>
<TABLE>
<CAPTION>
Model New
Equity Jersey Muni
Portfolio Portfolio
--------- -----------
<S> <C> <C>
1 Year Ended 10/31/95 16.0% 13.3%
Inception to 10/31/95 13.1% 3.7%
</TABLE>
Inception Dates:
Intermediate Government Portfolio............................ 11/17/88
Equity Portfolio............................................. 07/20/89
International Portfolio...................................... 11/17/88
Small Capitalization Equity Portfolio........................ 03/01/91
Muni Intermediate Portfolio.................................. 06/05/92
International Fixed Income Portfolio......................... 11/02/92
Model Equity Portfolio....................................... 12/31/92
New Jersey Muni Portfolio.................................... 11/01/93
Set forth below are the aggregate total return figures for the
Intermediate Government, Equity, International, Small Capitalization Equity,
Muni Intermediate, International Fixed Income, Model Equity and New Jersey Muni
Portfolios from inception to October 31, 1995.
Portfolio Inception Date Aggregate Total Return
- --------- -------------- ----------------------
Intermediate Government 11/17/88 81.28%
Equity 07/20/89 92.03%
International 11/17/88 102.54%
Small Capitalization Equity 03/01/91 90.87%
Muni Intermediate 06/05/92 20.57%
International Fixed Income 11/02/92 38.34%
Model Equity 12/31/92 41.45%
New Jersey Muni 11/01/93 7.44%
GENERAL INFORMATION
Dividends and Capital Gains Distributions
Each Portfolio's policy is to distribute substantially all of its net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed income
and gains (see discussion under "Dividends, Capital Gains Distributions and
Taxes" in the Prospectus). As set forth in the Prospectuses, the Government Cash
and the Tax-Exempt Cash Portfolios declare dividends daily and normally
<PAGE>
distribute substantially all of their net investment income to shareholders
monthly; the International Fixed Income, International, Equity, Small
Capitalization Equity and Model Equity Portfolios normally distribute
substantially all of their net investment income to shareholders in the form of
a quarterly dividend and the Intermediate Government, Muni Intermediate and New
Jersey Muni Portfolios normally distribute substantially all of their net
investment income to shareholders in the form of a monthly dividend. If any net
capital gains are realized by a Portfolio, that Portfolio normally distributes
such gains at least once a year. The amounts of any income dividends or
capital gains distributions for a Portfolio cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares
of a Portfolio by an investor may have the effect of reducing the per share net
asset value of that Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect a
return of capital, are subject to income taxes as set forth in the Prospectus.
Certain Record Holders
As of January 30, 1996, the Advisor held of record 100% of the
outstanding shares of each Portfolio other than the International Portfolio. For
more information about the Advisor, see "Investment Advisor" in the Prospectus.
To the Funds' knowledge, as of January 30, 1996, no person owned, beneficially
or of record, 5% or more of the outstanding shares of the International
Portfolio. As of January 30, 1996, the directors/trustees and officers of the
Funds collectively owned less than 1% of the outstanding shares of each of the
Funds' Portfolios.
FINANCIAL STATEMENTS
The Funds' Financial Statements for the year ended October 31, 1995 and
the financial highlights for each of the respective periods presented, appearing
in the 1995 Annual Report to Shareholders, and the reports thereon of Coopers &
Lybrand L.L.P., the Funds' independent accountants, also appearing therein, are
incorporated by reference in this Statement of Additional Information.
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. Description of Bond Ratings
Excerpts from Moody's description of its highest bond ratings: Aaa --
judged to be the best quality; carry the smallest degree of investment risk; Aa
- -- judged to be of high quality by all standards; A -- judged to be of upper
medium quality; factors giving security to principal and interest considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future; Baa -- judged to be of medium quality;
lacking outstanding investment characteristics and in fact having speculative
characteristics.
Excerpts from S&P description of its highest bond ratings: AAA --
highest grade obligations; indicates an extremely strong capacity to pay
interest and repay principal; AA -- also qualify as high grade obligations;
indicates a very strong capacity to pay interest and repay principal and differs
from AAA issues only in small degree; A -- qualifies as upper medium grade
obligations; have strong capacity to pay interest and repay principal, although
somewhat more susceptible to adverse effects of change in circumstances and
economic conditions than higher rated bonds; BBB -- indicates adequate capacity
to pay interest and repay principal, although adverse economic conditions are
likely to weaken such capacity.
Description of Moody's ratings of state and municipal notes: Moody's
ratings for state and municipal notes, other short-term obligations and variable
rate demand obligations are as follows: MIG-1/VMIG-1 -- Best quality, enjoying
strong protection by established cash flows, superior liquidity support or
demonstrated broadbased access to the market for refinancing; MIG-2/VMIG-2 --
High quality with margins of protection ample although not so large as in the
preceding group.
Description of Moody's highest commercial paper rating: Prime-1 ("P-1")
- -- judged to be of the best quality. Issuers rated P-1 (or related supporting
institutions) are considered to have a superior capacity for repayment of
short-term promissory obligations.
Excerpt from S&P rating of municipal note issues: SP-1+ --overwhelming
capacity to pay principal and interest; SP-1 -- very strong or strong capacity
to pay principal and interest.
Description of S&P highest commercial papers ratings: A-1+ -- this
designation indicates the degree of safety regarding timely payment is
overwhelming. A-1 -- this designation indicates the degree of safety regarding
timely payment is either overwhelming or very strong.
<PAGE>
II. Description of Mortgage-Backed Securities
Mortgage-backed securities represent an ownership interest in a pool of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. The mortgagor's monthly
payments to his/her lending institution are "passed-through" to an investor such
as the Government Cash Portfolio and the Intermediate Government Portfolio. Most
issuers or poolers provide guarantees of payments, regardless of whether or not
the mortgagor actually makes the payment. The guarantees made by issuers or
poolers are supported by various forms of credit, collateral, guarantees or
insurance, including individual loan, title, pool and hazard insurance purchased
by the issuer. There can be no assurance that the private issuers or poolers can
meet their obligations under the policies. Mortgage-backed securities issued by
private issuers or poolers, whether or not such securities are subject to
guarantees, may entail greater risk than securities directly or indirectly
guaranteed by the U.S. Government.
About Mortgage-Backed Securities. Interests in pools of mortgage-backed
securities differ from other forms of debt securities, which normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities provide a monthly
payment which consists of both interest and principal payments. In effect, these
payments are a "pass-through" of the monthly payments made by the individual
borrowers on their residential mortgage loans, net of any fees paid. Additional
payments are caused by repayments resulting from the sale of the underlying
residential property, refinancing or foreclosure net of fees or costs which may
be incurred. Some mortgage-backed securities are described as "modified
pass-through." These securities entitle the holders to receive all interest and
principal payments owed on the mortgages in the pool, net of certain fees,
regardless of whether or not the mortgagors actually make the payments.
Residential mortgage loans are pooled by the Federal Home Loan Mortgage
Corporation (FHLMC). FHLMC is a corporate instrumentality of the U.S. Government
and was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. Its stock is owned by
the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PC's") which represent interests in mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal.
The Federal National Mortgage Association (FNMA) is a Government
sponsored corporation owned entirely by private stockholders. It is subject to
general regulation by the Secretary of Housing and Urban Development. FNMA
purchases residential mortgages from a list of approved seller/servicers which
include state and federally-chartered savings and loan associations, mutual
savings banks, commercial banks and credit unions and mortgage bankers.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA.
<PAGE>
The principal Government guarantor of mortgage-backed securities is the
Government National Mortgage Association (GNMA). GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
FNMA is authorized to guarantee, with the full faith and credit of the U.S.
Government, the timely payment of principal and interest on securities issued by
approved institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Pools
created by such non-governmental issuers generally offer a higher rate of
interest than Government and Government-related pools because there are no
direct or indirect Government guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance purchased by the issuer. The insurance and guarantees are
issued by Governmental entities, private insurers and the mortgage poolers.
There can be no assurance that the private insurers or mortgage poolers can meet
their obligations under the policies.
The Funds expect that Governmental or private entities may create
mortgage loan pools offering pass-through investments in addition to those
described above. The mortgages underlying these securities may be alternative
mortgage instruments, that is, mortgage instruments whose principal or interest
payment may vary or whose terms to maturity may be shorter than previously
customary. As new types of mortgage-backed securities are developed and offered
to investors, each of the Government Cash Portfolio and the Intermediate
Government Portfolio will, consistent with its investment objective and
policies, consider making investments in such new types of securities.
Underlying Mortgages. Pools consist of whole mortgage loans or
participations in loans. The majority of these loans are made to purchasers of
1-4 family homes. The terms and characteristics of the mortgage instruments are
generally uniform within a pool but may vary among pools. For example, in
addition to fixed-rate, fixed-term mortgages, the Intermediate Government
Portfolio may purchase pools of variable rate mortgages (VRM), growing equity
mortgages (GEM), graduated payment mortgages (GPM) and other types where the
principal and interest payment procedures vary. VRMs are mortgages which reset
the mortgage's interest rate periodically with changes in open market interest
rates. To the extent that the Portfolio is actually invested in VRMs, the
Portfolio's interest income will vary with changes in the applicable interest
rate on pools of VRMs. GPM and GEM pools maintain constant interest rates, with
varying levels of principal repayment over the life of the mortgage. These
different interest and principal payment procedures should not impact the
Portfolio's net asset value since the prices at which these securities are
valued will reflect the payment procedures.
<PAGE>
All poolers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Poolers also establish
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, some mortgages included in pools are insured through
private mortgage insurance companies.
Average Life. The average life of pass-through pools varies with the
maturities of the underlying mortgage instruments. In addition, a pool's term
may be shortened by unscheduled or early payments of principal and interest on
the underlying mortgages. The occurrence of mortgage prepayments is affected by
factors including the level of interest rate, general economic conditions, the
location and age of the mortgage and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not possible
to accurately predict the average life of a particular pool. For pools of fixed
rate 30 year mortgages, common industry practice is to assume that prepayments
will result in a 12-year average life. Pools of mortgages with other maturities
or different characteristics will have varying assumptions for average life.
Returns on Mortgage-Backed Securities. Yields on mortgage-backed
pass-through securities are typically quoted based on the maturity of the
underlying instruments and the associated average life assumption. Actual
prepayment experience may cause the yield to differ from the assumed average
life yield.
Reinvestment of prepayments may occur at higher or lower interest rates
than the original investment, thus affecting the yields of the Portfolios which
invest in them. The compounding effect from reinvestments of monthly payments
received by a Portfolio will increase its yield to shareholders, compared to
bonds that pay interest semi-annually.
<PAGE>
III. Description of U.S. Government Securities and Certain Other Securities
The term "U.S. Government securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored enterprises or instrumentalities may or may not be backed
by the full faith and credit of the United States. In the case of securities not
backed by the full faith and credit of the United States, an investor must look
principally to the agency, enterprise or instrumentality issuing or guaranteeing
the obligation for ultimate repayment, and may not be able to assert a claim
against the United States itself in the event the agency, enterprise or
instrumentality does not meet its commitment. Agencies which are backed by the
full faith and credit of the United States include the Export Import Bank,
Farmers Home Administration, Federal Financing Bank and others. Certain
agencies, enterprises and instrumentalities, such as the Government National
Mortgage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service its
debt. Debt from certain other agencies, enterprises and instrumentalities,
including the Federal Home Loan Bank and Federal National Mortgage Association,
are not guaranteed by the United States, but those institutions are protected by
the discretionary authority for the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies, enterprises and instrumentalities, such as the Farm
Credit System and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under Government supervision, but their debt securities
are backed only by the creditworthiness of those institutions, not the U.S.
Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency
organized under Federal charter with Government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Overseas Private
Investment Corporation, Federal Home Loan Banks, the Federal Land Banks, Central
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal
National Mortgage Association.
<PAGE>
International institutions that issue securities which the Intermediate
Government Portfolio may purchase include the Asian Development Bank,
Inter-American Development Bank and the International Bank for Reconstruction
and Development (the "World Bank").
IV. Description of Municipal Obligations
Municipal Obligations generally include debt obligations issued by
states and their political subdivisions, and duly constituted authorities and
corporations, to obtain funds to construct, repair or improve various public
facilities such as airports, bridges, highways, hospitals, housing, schools,
streets and water and sewer works. Municipal Obligations may also be issued to
refinance outstanding obligations as well as to obtain funds for general
operating expenses and for loan to other public institutions and facilities.
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" or "special tax" bonds. General obligation bonds are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue or special tax bonds are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise or other tax, but not
from general tax revenues. The Tax-Exempt Cash Portfolio may also invest in
tax-exempt industrial development bonds, short-term municipal obligations (rated
SP-1+ or SP-1 by S&P or MIG-1/VMIG-1 by Moody's), project notes, demand notes
and tax-exempt commercial paper (rated A-1+ or A-1 by S&P or P-1 by Moody's),
and municipal bonds with a remaining effective maturity of 13 months or less
(rated AA or better by S&P or Aa or better by Moody's).
Industrial revenue bonds in most cases are revenue bonds and generally
do not have the pledge of the credit of the issuer. The payment of the principal
and interest on such industrial revenue bonds is dependent solely on the ability
of the user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment. Short-term municipal obligations issued by states,
cities, municipalities or municipal agencies, include Tax Anticipation Notes,
Revenue Anticipation Notes, Bond Anticipation Notes, Construction Loan Notes and
Short-Term Discount Notes. Project Notes are instruments guaranteed by the
Department of Housing and Urban Development but issued by a state or local
housing agency. While the issuing agency has the primary obligation on Project
Notes, they are also secured by the full faith and credit of the United States.
<PAGE>
Municipal Obligations may also include "moral obligation" bonds, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Note obligations with demand or put options may have a stated maturity
in excess of 13 months, but permit any holder to demand payment of principal
plus accrued interest upon a specified number of days' notice. Frequently, such
obligations are secured by letters of credit or other credit support
arrangements provided by banks. The issuer of such notes normally has a
corresponding right, after a given period, to repay in its discretion the
outstanding principal of the note plus accrued interest upon a specific number
of days' notice to the bondholders. The interest rate on a demand note may be
based upon a known lending rate, such as a bank's prime rate, and be adjusted
when such rate changes, or the interest rate on a demand note may be a market
rate that is adjusted at specified intervals. The demand notes in which the
Tax-Exempt Cash Portfolio will invest are payable on not more than thirteen
months notice.
The yields of Municipal Obligations depend on, among other things,
general money market conditions, conditions in the Municipal Obligation market,
the size of a particular offering, the maturity of the obligation, and the
rating of the issue. The ratings of Moody's and S&P represent their opinions of
the quality of the Municipal Obligations rated by them. It should be emphasized
that such ratings are general and are not absolute standards of quality.
Consequently, Municipal Obligations with the same maturity, coupon and rating
may have different yields, while Municipal Obligations of the same maturity and
coupon, but with different ratings may have the same yield. It will be the
responsibility of the Advisor to appraise independently the fundamental quality
of the bonds held by the Tax-Exempt Cash Portfolio.
Municipal Obligations are sometimes purchased on a "when issued" basis,
which means the buyer has committed to purchase certain specified securities at
an agreed upon price when they are issued. The period between commitment date
and issuance date can be a month or more. It is possible that the securities
will never be issued and the commitment cancelled.
From time to time proposals have been introduced before Congress to
restrict or eliminate the Federal income tax exemption for interest on Municipal
Obligations. Similar proposals may be introduced in the future. If any such
proposal were enacted, it might restrict or eliminate the ability of the
Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios to achieve
their investment objectives. In that event the Funds' Board members and officers
would reevaluate the Tax-Exempt Cash, Muni Intermediate and New Jersey Muni
Portfolios' investment objectives and policies and consider recommending to
their shareholders changes in such objectives and policies.
<PAGE>
V. Foreign Investments
Investors should recognize that investing in foreign companies involves
certain special considerations which are not typically associated with investing
in U.S. companies. Because the stocks of foreign companies are frequently
denominated in foreign currencies, and because the Equity, International, Small
Capitalization Equity, International Fixed Income and Model Equity Portfolios
may temporarily hold uninvested reserves in bank deposits in foreign currencies,
the Equity, International, Small Capitalization Equity, International Fixed
Income and Model Equity Portfolios may be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations, and may incur
costs in connection with conversions between various currencies. The investment
policies of the International and International Fixed Income Portfolios permit
the Portfolios to enter into forward foreign currency exchange contracts in
order to hedge the Portfolios' holdings and commitments against changes in the
level of future currency rates. Such contracts involve an obligation to purchase
or sell a specific currency at a future date at a price set at the time of the
contract.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in foreign
countries.
Although the Equity, International, Small Capitalization Equity, and
Model Equity Portfolios will endeavor to achieve most favorable execution costs
in its portfolio transactions, fixed commissions on many foreign stock exchanges
are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from the foreign companies comprising the Equity,
International, Small Capitalization Equity, International Fixed Income and Model
Equity Portfolios.
