<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 24, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THE GLENMEDE FUND, INC.
One South Street, Baltimore, Maryland 21202
- ------------------------------------------------------------------------------
(800) 442-8299
- ------------------------------------------------------------------------------
Prospectus-- January __, 1998
INVESTMENT OBJECTIVES
The Glenmede Fund, Inc., a Maryland corporation ("Glenmede Fund") is an
open-end management investment company. The Glenmede Fund consists of ten
series of shares, each of which has different investment objectives and
policies. The securities offered hereby are shares of the Equity Portfolio,
International Portfolio and Large Cap Value Portfolio and Advisor Shares
(collectively with the other securities offered hereby, "shares") of the Small
Capitalization Equity Portfolio (each Portfolio referenced herein as a
"Portfolio") of the Glenmede Fund.
Equity Portfolio. The objective of the Equity Portfolio is to provide maximum
long-term total return consistent with reasonable risk to principal. The
Equity Portfolio seeks to achieve its objective by investing, under normal
market conditions, primarily in common stocks. The net asset value of this
Portfolio will fluctuate.
International Portfolio. The objective of the International Portfolio is to
provide maximum long-term total return consistent with reasonable risk to
principal. The International Portfolio seeks to achieve its objective by
investing, under normal market conditions, primarily in common stocks and
other equity securities of companies located outside the United States. The
net asset value of this Portfolio will fluctuate.
Small Capitalization Equity Portfolio. The objective of the Small
Capitalization Equity Portfolio is to provide long-term appreciation
consistent with reasonable risk to principal. The Small Capitalization Equity
Portfolio seeks to achieve its investment objective by investing, under normal
market conditions, at least 65% of the value of its total assets in equity
securities of companies with market capitalizations, at the time of purchase,
that are below the maximum capitalization permitted for a stock in the Russell
2000 Index.
Large Cap Value Portfolio. The objective of the Large Cap Value Portfolio is
to provide maximum long-term total return consistent with reasonable risk to
principal. The Large Cap Value Portfolio seeks to achieve its objective by
investing primarily in common stocks using The Glenmede Trust Company's (the
"Advisor") proprietary equity computer model as an investment guide. The net
asset value of this Portfolio will fluctuate. The Large Cap Value Portfolio
seeks to achieve its objective by investing, under normal market conditions,
at least 65% of the value of its total assets in equity securities of
companies with market capitalizations, at the time of purchase, of greater
than $5 billion.
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.
- -------------------------------------------------------------------------------
<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
Glenmede Fund has been filed with the Securities and Exchange Commission. Such
SAI, dated January __, 1998, as amended or supplemented from time to time,
is incorporated by reference into this Prospectus. The ____ Annual Report to
Shareholders contains additional investment and performance information about
the Portfolios. A copy of the SAI and the ____ 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.
EXPENSES OF THE PORTFOLIOS
The following table illustrates the expenses and fees: 1) incurred by
the Equity, International and Large Cap Value Portfolios for the fiscal year
ended October 31, 1997; and 2) incurred by Advisor Shares of the Small
Capitalization Equity Portfolio for the fiscal year ended October 31, 1997 as
restated to reflect current fees.
<TABLE>
<CAPTION>
Small
Capitalization
Equity Large Cap
Equity International Portfolio Value
Portfolio Portfolio (Advisor Shares) Portfolio
--------- ------------- ---------------- ---------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses*.................... None None None None
Maximum Annual Client Fee............................ 1.00% 1.00% 1.00%** 1.00%
Annual Portfolio Operating Expenses
(as a percentage of net assets)
Investment Advisory Fees(1)....................... .00% .00% .55% .00%
Administration Fees............................... .__% .__% .04% .__%
Other Expenses.................................... .__% .__% .30% .__%
Total Operating Expenses.......................... .__% .__% .89% .__%
==== ==== ==== ====
</TABLE>
- ---------------------
* A transaction charge may be imposed by broker-dealers or others that
make shares of the Portfolio available. There is no transaction charge for
shares purchased directly from the Portfolio.
** The Advisor and its affiliates ("Affiliates") currently intends to
exclude the portion of its clients' assets invested in the Small Capitalization
Equity Portfolio when calculating Client Fees. The annual fees charged by the
Advisor and its Affiliates directly to their clients varies as described in
Note 1 below.
(1) The Equity, International and Large Cap Value Portfolios do not pay any
advisory fees to 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 ("Client 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 also may have to pay various fees to
-2-
<PAGE>
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 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 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, Glenmede Fund charges no
redemption fees of any kind.
<TABLE>
<CAPTION>
1 Year* 3 Years* 5 Years* 10 Years*
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Equity Portfolio........................................ $__ $__ $__ $___
International Portfolio................................. $__ $__ $__ $___
Small Capitalization Equity Portfolio...................
Advisor Shares...................................... $ 9 $28 $49 $110
Large Cap Value Portfolio............................... $__ $__ $__ $___
</TABLE>
* You would pay the same expenses on the same investment, assuming no
redemption 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.
-3-
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables provide financial highlights of each Portfolio
for the respective periods presented and includes data derived from Glenmede
Fund's Financial Statements included in Glenmede Fund's ____ Annual Report to
Shareholders, which Financial Statements and report thereon of ___________,
Glenmede Fund's independent accountants, are incorporated by reference in the
SAI. The following information should be read in conjunction with those
Financial Statements. Glenmede Fund's Financial Statements for the periods
ended October 31, 1991, 1990 and 1989 were audited by Glenmede Fund's previous
independent accountants, _______________.
<TABLE>
<CAPTION>
Equity Portfolio
------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year....................... $ $14.67 $12.56 $13.23 $11.84
------ ------ ------ ------- ------
Income from investment operations:
Net investment income.................................. ______ 0.41 0.32 0.31 0.32
Net realized and unrealized gain/(loss)
on investments....................................... ______ 3.73 2.64 (0.17) 1.63
------ ------ ------ ------ ------
Total from investment operations..................... ______ 4.14 2.96 0.14 1.95
------ ------ ------ ------ ------
Less Distributions:
Distributions from net investment
income............................................... ______ (0.40) (0.33) (0.29) (0.32)
Distributions from net realized capital
gains................................................ ______ (1.62) (0.52) (0.52) (0.24)
Distributions from capital............................. ______ -- -- -- --
------ ------ ------ ------ ------
Total Distributions.................................. ______ (2.02) (0.85) (0.81) (0.56)
------ ------ ------ ------ ------
Net asset value, end of year............................. $ $16.79 $14.67 $12.56 $13.23
====== ====== ====== ====== ======
Total return++........................................... % 28.65% 23.78% 1.21% 16.60%
====== ===== ===== ===== =====
Ratios to average net assets/ Supplemental data:
Net assets, end of year (in 000's)................... $ $94,185 $80,157 $64,046 $43,611
------
Ratio of operating expenses to average
net assets.......................................... % 0.17% 0.14% 0.16% 0.20%
------
Ratio of net investment income to average
net assets.......................................... % 2.26% 2.32% 2.40% 2.61%
------
Portfolio turnover rate.............................. % 36% 70% 109% 61%
------
Average Commission per share**....................... $ $0.07 N/A N/A N/A
------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Equity Portfolio
----------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1992 1991 1990 1989+
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year....................... $11.21 $ 8.57 $10.04 $10.00
------ ------ ------ ------
Income from investment operations:
Net investment income.................................. 0.31 0.29 0.34 0.14
Net realized and unrealized gain/(loss)
on investments....................................... 0.65 2.66 (1.44) (0.01)
------ ------ ------ ------
Total from investment operations..................... 0.96 2.95 (1.10) 0.13
------ ------ ------ ------
Less Distributions:
Distributions from net investment
income............................................... (0.33) (0.31) (0.34) (0.09)
Distributions from net realized capital
gains................................................ -- -- -- --
Distributions from capital............................. -- -- -- (0.03)
------ ------ ------ ------
Total Distributions.................................. (0.33) (0.31) (0.37) (0.09)
------ ------ ------ ------
Net asset value, end of year............................. $11.84 $11.21 $ 8.57 $10.04
====== ====== ====== ======
Total return++........................................... 8.62% 34.81% (11.34)% 1.27%
===== ===== ====== =====
Ratios to average net assets/ Supplemental data:
Net assets, end of year (in 000's)................... $18,049 $9,135 $5,903 $6,523
Ratio of operating expenses to average
net assets.......................................... 0.24% 0.22% 0.24% 0.42%*
Ratio of net investment income to average
net assets.......................................... 2.91% 2.89% 3.59% 5.39%*
Portfolio turnover rate.............................. 30% 86% 91% --
Average Commission per share**....................... N/A N/A N/A N/A
</TABLE>
- -------------------------
+ The Portfolio commenced operations on July 20, 1989.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
** Represents average commission rate per share charged to the Portfolio
on purchases and sales of investments during the period. Such information is
only required for fiscal years beginning on or after September 1, 1995.
-4-
<PAGE>
<TABLE>
<CAPTION>
International Portfolio
-------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year....................... $ $12.70 $13.04 $12.69 $ 9.84
------ ------ ------ ------ ------
Income from investment operations:
Net investment income.................................. ______ 0.40 0.32 0.27 0.27
Net realized and unrealized gain/(loss)
on investments........................................ ______ 1.29 0.23 1.50 2.98
------ ------ ------ ------ ------
Total from investment operations..................... ______ 1.69 0.55 1.77 3.25
------ ------ ------ ------ ------
Less Distributions:
Distributions from net investment
income................................................ ______ (0.43) (0.32) (0.25) (0.26)
Distributions from net realized gains.................. ______ (0.04) (0.57) (1.16) (0.14)
Distributions in excess of net realized
gains .......................................... -- (0.05) -- (0.01) --
Distributions from capital............................. ______ -- -- -- --
------ ------ ------ ------ ------
Total Distributions.................................. ______ (0.52) (0.89) (1.42) (0.40)
------ ------ ------ ------ ------
Net asset value, end of year............................. $ $13.87 $12.70 $13.04 $12.69
====== ====== ====== ====== ======
Total return++........................................... % 13.47% 4.23% 14.26% 33.47%
======= ===== ====== ====== ======
Ratios to average net assets/ Supplemental data:
Net assets, end of year (in 000's)................... $ $643,459 $343,209 $292,513 $221,515
-------
Ratio of operating expenses to average
net assets.......................................... % 0.18% 0.18% 0.16% 0.17%
-------
Ratio of net investment income to
average net assets.................................. % 3.05% 2.61% 2.11% 2.31%
-------
Portfolio turnover rate.............................. % 6% 24% 39% 34%
-------
Average Commissions per share**...................... $ $0.02 N/A N/A N/A
-------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
International Portfolio
----------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1992 1991 1990 1989+
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year....................... $10.89 $10.48 $11.20 $10.00
------ ------ ------ ------
Income from investment operations:
Net investment income.................................. 0.26 0.21 0.30 0.40
Net realized and unrealized gain/(loss)
on investments........................................ (0.51) 1.00 0.22 0.81
------ ------ ------ ------
Total from investment operations..................... (0.25) 1.21 0.52 1.21
------ ------ ------ ------
Less Distributions:
Distributions from net investment
income................................................ (0.26) (0.28) (0.42) (0.01)
Distributions from net realized gains.................. (0.54) (0.52) -- --
Distributions in excess of net realized
gains .......................................... -- -- -- --
Distributions from capital............................. -- -- (0.82) --
------ ------ ------ ------
Total Distributions.................................. (0.80) (0.80) (1.24) (0.01)
------ ------ ------ ------
Net asset value, end of year............................. $ 9.84 $10.89 $10.48 $11.20
====== ====== ====== ======
Total return++........................................... (2.73)% 12.12% 4.27% 12.07%
====== ====== ====== ======
Ratios to average net assets/ Supplemental data:
Net assets, end of year (in 000's)................... $167,191 $176,397 $107,690 $91,181
Ratio of operating expenses to average
net assets.......................................... 0.23% 0.23% 0.22% 0.20%*
Ratio of net investment income to
average net assets.................................. 2.47% 2.99% 3.84% 3.84%*
Portfolio turnover rate.............................. 40% 46% 44% 47%
Average Commissions per share**...................... N/A N/A N/A N/A
</TABLE>
- -------------------------------
+ The Portfolio commenced operations on November 17, 1988.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
** Represents average commission rate per share charged to the Portfolio on
purchases and sales of investments during the period. Such information is
only required for fiscal years beginning on or after September 1, 1995.
-5-
<PAGE>
<TABLE>
<CAPTION>
Small Capitalization Equity Portfolio (Advisor Shares)
------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended
October 31, October 31, October 31, October 31, October 31,
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year....................... $ $14.98 $13.95 $13.97 $11.12
------- ------ ------ ------ ------
Income from investment operations:
Net investment income.................................. 0.33 0.28 0.16 0.14
-------
Net realized and unrealized gain
on investments........................................ 2.38 2.69 0.23 3.60
------- ------ ------ ------ ------
Total from investment operations..................... 2.71 2.97 0.39 3.74
------- ------ ------ ------ ------
Less Distributions:
Distributions from net investment
income................................................ (0.33) (0.26) (0.15) (0.15)
-------
Distributions from net realized
capital gains......................................... (1.24) (1.68) (0.26) (0.74)
------- ------ ------- ------ ------
Total Distributions................................. (1.57) (1.94) (0.41) (0.89)
------- ------ ------- ------ ------
Net asset value, end of year............................. $ $16.12 $14.98 $13.95 $13.97
------- ====== ====== ====== ======
Total return++........................................... % 18.22% 21.15% 2.85% 33.86%
======== ====== ====== ====== ======
Ratios to average net assets/ Supplemental data:
Net assets, end of year (in 000's)..................... $ $308,415 $170,969 $109,872 $68,418
--------
Ratio of operating expenses to
average net assets.................................... % 0.17% 0.14% 0.14% 0.14%
--------
Ratio of net investment income to
average net assets.................................... % 2.15% 1.92% 1.18% 1.08%
--------
Portfolio turnover rate................................ % 37% 57% 31% 63%
--------
Average Commission per share**......................... $ $0.07 N/A N/A N/A
--------
</TABLE>
- -------------------------
+ The Portfolio commenced operations on March 1, 1991.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
** Represents average commission rate per share charged to the Portfolio on
purchases and sales of investments during the period. Such information is
only required for fiscal years beginning on or after September 1, 1995.
<PAGE>
<TABLE>
<CAPTION>
Small Capitalization Equity Portfolio (Advisor Shares)
------------------------------------------------------
Year ended Period ended
October 31, October 31,
1992 1991+
--------- --------
<S> <C> <C>
Net asset value, beginning of year....................... $11.02 $10.00
------ ------
Income from investment operations:
Net investment income.................................. 0.16 0.16
Net realized and unrealized gain
on investments........................................ 0.09 1.02
------ ------
Total from investment operations..................... 0.25 1.18
------ ------
Less Distributions:
Distributions from net investment
income................................................ (0.15) (0.16)
Distributions from net realized
capital gains......................................... -- --
------ ------
Total Distributions................................. (0.15) (0.16)
------ ------
Net asset value, end of year............................. $11.12 $11.02
====== ======
Total return++........................................... 2.32% 11.84%
====== ======
Ratios to average net assets/ Supplemental data:
Net assets, end of year (in 000's)..................... $39,728 $39,631
Ratio of operating expenses to
average net assets.................................... 0.19% 0.20%*
Ratio of net investment income to
average net assets.................................... 1.44% 2.24%*
Portfolio turnover rate................................ 56% 29%
Average Commission per share**......................... N/A N/A
</TABLE>
- -------------------------
+ The Portfolio commenced operations on March 1, 1991.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
** Represents average commission rate per share charged to the Portfolio on
purchases and sales of investments during the period. Such information is
only required for fiscal years beginning on or after September 1, 1995.
-6-
<PAGE>
<TABLE>
<CAPTION>
Large Cap Value Portfolio+
----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Period Ended
October 31, October 31, October 31, October 31, October 31,
1997 1996 1995 1994 1993++
---------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ $10.34 $10.62 $10.92 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income.............................. 0.26 0.32 0.21 0.21
------
Net realized and unrealized gain on
investments....................................... 1.49 1.38 (0.31) 2.06
------ ------ ------ ------ ------
Total from investment operations................. 1.75 1.70 (0.10) 2.27
------ ------ ------ ------ ------
Less Distributions:
Distributions from net investment
income........................................... (0.27) (0.31) (0.20) (0.20)
------
Distributions from net realized
capital gains.................................... (0.14) (1.67) -- (1.15)
------ ------ ------ ------ ------
Total Distributions.............................. (0.41) (1.98) (0.20) (1.35)
------ ------ ------ ------ ------
Net asset value, end of year..................... $ $11.68 $10.34 $10.62 $10.92
====== ====== ====== ====== ======
Total return+++.................................. % 17.13% 16.01% (0.91)% 23.05%
====== ===== ===== ====== ======
Ratios to average net assets/Supplemental
data:
Net assets, end of year (in 000's)................. $ $50,131 $15,981 $20,654 $13,969
------
Ratio of operating expenses to
average net assets............................... % 0.15% 0.20% 0.24% 0.24%*
------
Ratio of net investment income to
average net assets............................... % 2.62% 2.80% 2.04% 2.47%*
------
Portfolio turnover rate............................ 104% 227% 287% 230%
Average Commissions per share**.................... $ $0.07 N/A N/A N/A
</TABLE>
- ------------------------------
+ The Portfolio's name was changed from Model Equity Portfolio to Large
Cap Value Portfolio on February 27, 1997.
++ The Portfolio commenced operations on December 31, 1992.
+++ Total return represents aggregate total return for the period indicated.
* Annualized.
** Represents average commission rate per share charged to the Portfolio
on purchases and sales of investments during the period. Such
information is only required for fiscal years beginning on or after
September 1, 1995.
-7-
<PAGE>
PERFORMANCE CALCULATIONS
Each of the Equity, International, Small Capitalization Equity and
Large Cap Value Portfolios may advertise or quote total return data from time
to time for the shares. Total return for the shares 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 the Portfolio with respect to the shares during the
period are reinvested in additional Portfolio shares.
Each of the Equity, International, Small Capitalization Equity and
Large Cap Value Portfolios may compare their total returns for the shares to
that of other investment companies with similar investment objectives and to
stock and other relevant indices such as the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"), the Dow Jones Industrial Average, the Russell
2000 Index or the National Association of Securities Dealers, Inc.'s National
Market and Automated Quotations Systems ("NASDAQ") Composite Index 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 shares of the Equity, International, Small Capitalization
Equity or Large Cap Value Portfolios may also be compared to data prepared by
Lipper Analytical Services, Inc. In addition, the International Portfolio's
total return may be compared to the Morgan Stanley Capital International EAFE
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 performance of the shares
of the Equity, International, Small Capitalization Equity or Large Cap Value
Portfolios.
Performance quotations 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 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 institutions to their respective clients will not be included in
the Portfolio's calculations of 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 Board members without shareholder approval.
-8-
<PAGE>
EQUITY PORTFOLIO
The objective of the Equity Portfolio is to provide maximum long-term
total return consistent with reasonable risk to principal. The Portfolio seeks
to achieve its objective by investing primarily in common stocks selected on
the basis of fundamental investment value. Crucial to the valuation process is
a systematic examination of the earning and dividend paying ability of
companies and denominating these characteristics by the market value of the
underlying stock. Stocks purchased by the Portfolio will be primarily those
traded on the various stock exchanges and the NASDAQ.
Under normal circumstances, at least 65% of the Equity Portfolio's
total assets will be invested in equity securities such as common and
preferred stock and securities convertible into such stock. Factors considered
in the selection of securities include, without limitation, price to earnings
ratios, price-to-cash flow ratios, reinvestment rates, dividend yields, payout
ratios and earnings growth rates.
The Portfolio's holdings will tend to be characterized by relatively
low price-to-earnings ratios. There is no mandated income requirement for
securities held by the Portfolio.
The Equity Portfolio intends to remain, for the most part, fully
invested in equity securities, which may include securities of companies
located outside the United States, and will not engage in "market timing"
transactions. See "Investment Policies and Risk Factors--International
Portfolio" for a discussion of special risks and considerations involved in
investing in securities of foreign companies. However, the Portfolio may
invest a portion of its assets (up to 20% under normal circumstances) in
preferred stocks, convertible debentures, and 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 investment
companies which invest in such obligations (such shares will be purchased
within the limits prescribed by the Investment Company Act of 1940, as amended
(the "1940 Act") and would subject a shareholder of the 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.
For a description of other securities in which the Equity Portfolio
may invest, see "Common Investment Policies and Risk Factors."
INTERNATIONAL PORTFOLIO
The objective of the International Portfolio is to provide maximum,
long-term total return consistent with reasonable risk to principal. The
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 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 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.
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The securities which the 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
Portfolio within the limits prescribed by the 1940 Act and would subject a
shareholder of the Portfolio to the expenses of the other investment company
in addition to the expenses of the Portfolio); U.S. or foreign securities
convertible into foreign common stock; and American Depository Receipts, which
are U.S. domestic securities representing ownership rights in foreign
companies.
The International Portfolio also 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 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. 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.
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. 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.
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 the Portfolio are
uninvested and no return is earned thereon. The inability of the Portfolio to
make intended security purchases due to settlement problems could cause the
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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.
There are further risk factors, including possible losses through the
holding of securities in domestic and foreign custodian banks and
depositories.
The International Portfolio intends to remain, for the most part,
fully invested in equity securities of companies located outside of the United
States. However, the Portfolio may invest a portion of its assets (up to 35%
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 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
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 S&P or Prime-1 by 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.
For a description of other securities in which the International
Portfolio may invest, see "Common Investment Policies and Risk Factors."
SMALL CAPITALIZATION EQUITY PORTFOLIO
The objective of the Small Capitalization Equity Portfolio is to
provide long-term appreciation consistent with reasonable risk to principal.
The Small Capitalization Equity Portfolio seeks to achieve its objective by
investing primarily in equity securities with market capitalizations, at the
time of purchase, that are below the maximum capitalization permitted for a
stock in the Russell 2000 Index. Crucial to this valuation process is a
systematic examination of the earning and dividend paying ability of companies
and denominating these characteristics by the market value of the underlying
equity securities. Equity securities purchased by the Portfolio will be
primarily those traded on the various stock exchanges and NASDAQ, however, the
Portfolio may purchase unlisted securities and penny stocks. Many different
company types and industries may be represented by the securities purchased by
the Portfolio.
Factors considered by the Advisor in the selection of securities
include, but are not limited to, price-to-earnings ratios, price-to-cash flow
ratios, reinvestment rates, dividend yields, expected growth rates, and
balance sheet quality. The Small Capitalization Equity Portfolio may invest in
securities located outside the United States. Investors in the Portfolio
should recognize that securities denominated in foreign currencies or a
multi-national currency unit involve special risks. The Portfolio 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. See "Investment Policies and Risk
Factors--International Portfolio" for a discussion of special risks and
considerations involved in investing in securities of foreign companies.
The Portfolio's holdings will tend to be characterized by relatively
low price-to-earnings ratios. There is no mandated income requirement for
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securities held by the Portfolio. The Portfolio generally will be more
volatile and have a higher expected growth rate than the overall market. In
certain periods, the Portfolio may fluctuate independently of broad, larger
capitalization indices such as the S&P 500.
Under normal market conditions, at least 65% of the Portfolio's total
assets will be invested in equity securities of companies with market
capitalizations, at the time of purchase, that are below the maximum
capitalization permitted for a stock in the Russell 2000 Index. However, if
warranted in the judgement of the Advisor, the Portfolio may invest a portion
of its assets (up to 20% under normal circumstances) in preferred stocks and
convertible debentures with a minimum rating of BBB by S&P or Baa by Moody's,
and 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 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 Portfolio to expenses of the other
investment company in addition to the expenses of the Portfolio, as more fully
described under "Investment Limitations" in the SAI); 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 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.
For a description of other securities in which the Small
Capitalization Equity Portfolio may invest, see "Common Investment Policies
and Risk Factors."
LARGE CAP VALUE PORTFOLIO
The objective of the Large Cap Value Portfolio is to provide maximum
long-term total return consistent with reasonable risk to principal. The Large
Cap Value Portfolio seeks to achieve its objective by investing, under normal
market conditions, at least 65% of the value of its total assets in equity
securities of companies with market capitalizations, at the time of purchase,
of greater than $5 billion.
As stated above, the Portfolio seeks to achieve its objective by
investing primarily in equity securities. Although the Advisor will actively
manage this Portfolio based upon ongoing analysis of economic, financial and
market developments, the Advisor will use its proprietary equity computer
model, which ranks stocks, as an investment guide. The Advisor currently
anticipates that its proprietary equity computer model will be run at least
weekly.
Other factors considered by the Advisor in the selection of
securities include, but are not limited to, price-to-book value ratios,
earnings-to-yields ratios, price-to-cash flow ratios, return on equity ratios,
debt-to-equity ratios, dividend yields, earnings growth rates and historic
price patterns.
From time to time, the Advisor may revise its proprietary equity
computer model programs to maintain or enhance performance. Although the
Advisor's proprietary equity computer model is a disciplined model, the
Advisor is permitted to use its investment judgment in seeking to achieve the
Portfolio's objective.
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The Large Cap Value Portfolio intends to remain, for the most part,
fully invested in equity securities which may include American Depository
Receipts which are listed on the New York Stock Exchange, and will not engage
in "market timing" transactions. See "Investment Policies and Risk
Factors--International Portfolio" for a discussion of special risks and
considerations involved in investing in securities of foreign companies.
However, for temporary purposes this Portfolio may invest a portion of its
assets (up to 20%) in short-term money market instruments issued by U.S. or
foreign issuers, 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
similar money market securities.
For a description of other securities in which the Large Cap Value
Portfolio may invest, see "Common Investment Policies and Risk Factors."
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 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 Equity,
International, Small Capitalization Equity and Large Cap Value 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 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 currently expects that repurchase agreements with respect to the
Equity, International, Small Capitalization Equity and Large Cap Value
Portfolios 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 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 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
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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.
BORROWING
The Portfolios may purchase securities on a "when-issued," "delayed
settlement" or "forward delivery" basis. 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' and
`Forward Delivery' 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 to be of good standing.
"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" 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
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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.
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.
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 or the clients
of its Affiliates ("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." There are no minimum
initial or minimum subsequent investment requirements for the Equity,
International or Large Cap Value Portfolios or for Advisor Shares of the Small
Capitalization Equity Portfolio. Beneficial ownership of shares will be
reflected on books maintained by the Advisor or the Institutions. The Advisor
has informed Glenmede Fund that neither it nor its Affiliates currently have
any minimum or subsequent investment requirements for their Clients'
investments in the Portfolios. Other Institutions may have such requirements.
A prospective investor wishing to purchase shares in the Glenmede Fund should
contact the Advisor or his or her Institution.
It is the responsibility of the Advisor or Institutions to transmit
orders for share purchases to Investment Company Capital Corp. ("ICC"), Glenmede
Fund's transfer agent, and deliver required funds to The Chase Manhattan Bank,
N.A., Brooklyn, New York, Glenmede Fund's custodian, on a timely basis.
Glenmede Fund 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 Glenmede Fund.
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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 particular shares 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 or Institution 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 the Board determines that it would be detrimental to the best
interests of the remaining shareholders of Glenmede Fund 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.
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION
OF SHARES OF THE PORTFOLIOS
Glenmede Fund may, from time to time, in its sole discretion appoint
one or more entities as its agent to receive purchase and redemption orders of
shares of the Portfolios and cause these orders to be transmitted, on a net
basis, to Glenmede Fund's transfer agent. In these instances, orders are
effected at the net asset value per share next determined after receipt of
that order by the entity, if the order is actually received by Glenmede Fund's
transfer agent not later than the next business morning.
VALUATION OF SHARES
The net asset value per share of the Portfolios is determined by
dividing the total market value of each Portfolio's investments and other
assets attributable to the shares, less any liabilities of that Portfolio
attributable to the shares, by the total outstanding shares of that Portfolio.
For the Equity, International, Small Capitalization Equity and Large Cap Value
Portfolios, 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. Currently the Exchange is closed on weekends and the customary
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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, SMALL CAPITALIZATION EQUITY AND LARGE CAP VALUE PORTFOLIOS
Equity securities listed on a U.S. securities exchange for which
market quotations are readily 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. Price information on listed securities is taken from the
exchange where the security is primarily traded. Unlisted equity securities
and listed securities not traded on the valuation date for which market
quotations are readily available are valued not exceeding the asked prices nor
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. For the Equity,
Small Capitalization Equity and Large Cap Value Portfolios, securities listed
on a foreign exchange and unlisted foreign securities are valued as described
below under "International Portfolio."
INTERNATIONAL 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 that 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 International, Equity, Small Capitalization Equity and Large Cap
Value 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.
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 Equity, International, Small Capitalization Equity and Large Cap Value
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 Equity, International, Small
Capitalization Equity and Large Cap Value Portfolios by
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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 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 the sum of its net investment income, including interest and dividends,
subject to certain adjustments, and net short-term capital gain over net
long-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 International 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 as mid-term or other long-term capital gains
to the shareholders who are not currently exempt from Federal income taxes,
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
redemption or transfer of shares of each Portfolio, depending upon the tax
basis of such shares and their price at the time of redemption or transfer.
International Portfolio. It is expected that dividends and certain
interest income earned by the International 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 stocks 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, should he so choose.
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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 also may 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, or 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 or her
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 Glenmede Fund 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 September 30, 1997, the Advisor had over $12.6 billion in assets
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<PAGE>
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 Glenmede Fund, the Advisor, 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 each Portfolio. It is the responsibility of
the Advisor to make investment decisions for each Portfolio and to place each
Portfolio's purchase and sell orders.
The Advisor does not receive any fee from Glenmede Fund for its
investment services provided to the Equity, International and Large Cap Value
Portfolios. Prior to January 1, 1998, the Advisor did not receive any fee from
Glenmede Fund for its investment services. Effective January 1, 1998, the
Advisor is entitled to receive a fee from the Small Capitalization Equity
Portfolio for its investment services computed daily and payable monthly, at an
annual rate of .55% of that Portfolio's average daily net assets. Additionally,
Shareholders in Glenmede Fund who are clients of the Advisor, or an affiliate of
the Advisor, pay fees which vary, depending on the capacity in which the Advisor
or its affiliate provides fiduciary and investment services to the particular
client (e.g., personal trust, estate settlement, advisory and custodian
services).
Bruce D. Simon, Chief Investment Officer of the High Net Worth Division
of the Advisor, is the portfolio manager primarily responsible for the
management of the Equity Portfolio. Mr. Simon has been responsible for the
management of the Equity Portfolio since January 1, 1998 and has been employed
by the Advisor since May 2, 1994.
Andrew B. Williams, Senior Vice President of the Advisor, is the
portfolio manager primarily responsible for the management of the
International Portfolio. Mr. Williams has been responsible for the management
of the International Portfolio since November 17, 1988. Mr. Williams has been
employed by the Advisor since May 1985.
Robert J. Mancuso is the portfolio manager primarily responsible for
the management of the Small Capitalization Equity Portfolio. Mr. Mancuso has
been primarily responsible for the management of that Portfolio since February
27, 1996. Mr. Mancuso has been employed by the Advisor since November 1992.
Prior to joining the Advisor, he was responsible for leading the equity research
function at Penn Mutual Life Insurance Company.
All investment decisions with respect to the Large Cap Value
Portfolio are made by a team and no one person is responsible for making
recommendations to that team.
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 the Funds' day-to-day operations, other
than management of Glenmede Funds' investments. ICC is an indirect
subsidiary of Bankers Trust New York Corporation. 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 (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. ICC is entitled to an additional .10% of the net assets of Class A
Shares of the
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Institutional International Portfolio, which shares are offered through a
separate prospectus. For the fiscal year ended October 31, 1997, ICC
received fees at the rate of .__% of the Equity Portfolio's average net
assets; .__% of the International Portfolio's average net assets; .__% of
the Small Capitalization Equity Portfolio's average net assets; and .__% of
the Large Cap Value Portfolio's average net assets.
SHAREHOLDER SERVICING PLAN
Glenmede Fund has adopted an Amended and Restated Shareholder Servicing
Plan (the "Plan") effective January __, 1998 under which each Portfolio 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 Glenmede
Fund. Pursuant to such Agreements, Servicing Agents provide shareholder support
services to investors ("Customers") who beneficially own shares of the
Portfolios. The fee, which is at an annual rate of .05% for the Equity,
International and Large Cap Value Portfolios, and .25% (.05% prior to January 1,
1998) for Advisor Shares of the Small Capitalization Equity Portfolio, 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 Plan shall be borne entirely by the holders of the shares of the particular
Portfolio involved and will result in an equivalent increase to such shares'
Total Portfolio Operating Expenses. The Advisor has entered into an Agreement
with Glenmede Fund.
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 Glenmede Fund 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 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) 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;
(c) 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
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<PAGE>
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 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;
(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 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 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. 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 (other than the second sentence of the
preceding paragraph) 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.
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<PAGE>
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. The Board also has the power to designate separate classes of
shares within the same Portfolio. Currently, Glenmede Fund is offering shares
of ten Portfolios. Glenmede Fund has classified Institutional Shares,
described in a separate prospectus, and Advisor Shares of the Small
Capitalization Equity Portfolio.
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 fractional 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.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as Glenmede Fund shall not be deemed to have been effectively
acted upon unless approved by a majority of the outstanding shares of each
Portfolio or class affected by the matter. A Portfolio or class is affected by
a matter unless it is clear that the interests of each Portfolio or class in
the matter are substantially identical or that the matter does not affect any
interest of the Portfolio or class. Under Rule 18f-2, the approval of an
investment advisory agreement or any change in a fundamental investment policy
would be effectively acted upon with respect to a Portfolio only if approved
by a majority of the outstanding shares of such Portfolio. However, the rule
also provides that the ratification of independent public accountants and the
election of directors may be effectively acted upon by shareholders of
Glenmede Fund voting without regard to particular Portfolios.
Notwithstanding any provision of Maryland law requiring a greater
vote of the Fund's common stock (or of the shares of a Portfolio or class
voting separately as a class) in connection with any corporate action, unless
otherwise provided by law (for example by Rule 18f-2 discussed above) or by
Glenmede Fund's Articles of Amendment and Restatement, Glenmede Fund may take
or authorize such action upon the favorable vote of the holders of more than
50% of the outstanding common stock of Glenmede Fund entitled to vote thereon.
At September 30, 1997, the Advisor was the record owner of 100% of the
outstanding shares of each Portfolio.
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<PAGE>
DISTRIBUTOR
ICC Distributors, Inc., located at P.O. Box 7558, Portland, Maine,
04101, serves as Glenmede Fund's distributor.
CUSTODIAN
The Chase Manhattan Bank, N.A., Brooklyn, New York, serves as the
custodian of Glenmede Fund's assets.
TRANSFER AGENT
ICC, located at One South Street, Baltimore, Maryland 21202, acts
as Glenmede Fund's transfer agent.
INDEPENDENT ACCOUNTANTS
________________________________, 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 LLP, Philadelphia, Pennsylvania, serves as
counsel to Glenmede Fund.
-------------------------
Shareholder inquiries regarding the Portfolios should be addressed to
Glenmede Fund at the address or telephone number stated on the cover page.
Shareholder inquiries regarding Institutional Shares of the Small
Capitalization Equity Portfolio should be addressed to Glenmede Fund at the
address or telephone number stated on the cover page.
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<PAGE>
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. 41 Director of Glenmede Fund; Trustee of The Glenmede
Finance Department Portfolios; Nippon Life Professor of Finance and
The Wharton School Economics; Professor of Finance and Economics from 1990-
University of Pennsylvania 1996; Vice Dean and Director of Wharton Doctoral Programs
Philadelphia, PA 19104-6367 from 1990-1993. He has been employed by The University of
Pennsylvania since 1980.
Willard S. Boothby, Jr. 75 Director of Glenmede Fund; Trustee of The Glenmede
600 East Gravers Lane Portfolios; Director, Penn Engineering & Manufacturing
Wyndmoor, PA 19118 Corp.; Former Director of Georgia-Pacific Corp.; Former
Managing Director of Paine Webber, Inc.
John W. Church, Jr.* 64 Chairman, President and Director of Glenmede Fund;
One Liberty Place Chairman, President and Trustee of The Glenmede
1650 Market Street, Suite 1200 Portfolios; Executive Vice President and Chief Investment
Philadelphia, PA 19103 Officer of The Glenmede Trust Company. He has been
employed by The Glenmede Trust Company since 1979.
Francis J. Palamara 72 Director of Glenmede Fund; Trustee of The Glenmede
P.O. Box 44024 Portfolios; Trustee of Gintel Fund; Director of XTRA
Phoenix, AZ 85064-4024 Corporation; Former Executive Vice President--Finance of
ARAMARK, Inc.
G. Thompson Pew, Jr.* 55 Director of Glenmede Fund; Trustee of The Glenmede
310 Caversham Road Portfolios; Director of The Glenmede Trust Company;
Bryn Mawr, PA 19010 Former Director of Brown & 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 46 Executive Vice President of Glenmede Fund; Vice President
One Liberty Place and Manager of The Fixed Income Division of The Glenmede
1650 Market Street, Suite 1200 Trust Company. She has been employed by The Glenmede
Philadelphia, PA 19103 Trust Company since 1982.
Kimberly C. Osborne 31 Executive Vice President of Glenmede Fund; Assistant Vice President
One Liberty Place of The Glenmede Trust Company. She has been employed by
1650 Market Street, Suite 1200 The Glenmede Trust Company since 1993. From 1992-1993,
Philadelphia, PA 19103 she was a Client Service Manager with Mutual Funds Service
Company and from 1987-1992, a Client Administrator with The
Vanguard Group, Inc.
Michael P. Malloy 38 Secretary of Glenmede Fund; Partner in the law firm of
Philadelphia National Bank Building Drinker Biddle & Reath LLP.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Edward J. Veilleux 54 Assistant Secretary of Glenmede Fund; Principal, BT Alex.
One South Street Brown; President, ICC and Armata Financial Corp.
Baltimore, MD 21202
Joseph A. Finelli 40 Treasurer of Glenmede Fund. He has been a Vice President
One South Street of B.T. Alex. Brown since 1995. Prior thereto, he was
Baltimore, MD 21202 Vice President and Treasurer of The Delaware Group.
</TABLE>
- --------------
*Board members Church and Pew are "interested persons" of Glenmede Fund as
that term is defined in the 1940 Act.
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<PAGE>
For additional information concerning remuneration of Board members
see "Management of the Funds" in the SAI.
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<PAGE>
THE GLENMEDE FUND, INC.
1 South Street, Baltimore, Maryland 21202
Prospectus
Dated January __, 1998
Investment Advisor Administrator and Transfer Agent
The Glenmede Trust Company Investment Company Capital Corp.
One Liberty Place 1 South Street
1650 Market Street, Suite 1200 Baltimore, Maryland 21202
Philadelphia, PA 19103
Distributor
ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
- --------------------------------------------------------------------------------
Table of Contents
Page
----
Expenses of the Portfolios............................................. 2
Financial Highlights................................................... 4
Performance Calculations............................................... 8
Investment Policies and Risk 8
Factors.............................................................. 8
Common Investment Policies and
Risk Factors......................................................... 13
Purchase of Shares..................................................... 15
Redemption of Shares................................................... 15
Additional Information on the Purchase and Redemption of
Shares of the Portfolios............................................. 16
Valuation of Shares.................................................... 16
Dividends, Capital Gains Distributions and Taxes....................... 17
Investment Advisor .................................................... 19
Administrative, Transfer Agency and Dividend Paying Services........... 20
Shareholder Servicing Plan............................................. 20
Investment Limitations................................................. 21
General Information.................................................... 22
Board Members and Officers............................................. 25
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.
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<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED NOVEMBER 24, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
(800) 442-8299
STATEMENT OF ADDITIONAL INFORMATION
January __, 1998
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 January __, 1998 and February
27, 1997, respectively, as amended or supplemented from time to time (the
"Prospectuses"). This Statement of Additional Information is for the
Government Cash, Tax-Exempt Cash, Core Fixed Income, International, Equity,
Small Capitalization Equity, Large Cap Value, Muni Intermediate and New Jersey
Muni Portfolios. 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
THE FUNDS.............................................................. 2
INVESTMENT OBJECTIVES AND POLICIES..................................... 2
PURCHASE OF SHARES..................................................... 3
REDEMPTION OF SHARES................................................... 4
SHAREHOLDER SERVICES................................................... 4
PORTFOLIO TURNOVER..................................................... 4
INVESTMENT LIMITATIONS................................................. 4
MANAGEMENT OF THE FUNDS................................................ 8
INVESTMENT ADVISORY AND OTHER SERVICES................................. 9
DISTRIBUTOR............................................................ 12
PORTFOLIO TRANSACTIONS................................................. 12
ADDITIONAL INFORMATION CONCERNING TAXES................................ 13
PERFORMANCE CALCULATIONS............................................... 24
GENERAL INFORMATION.................................................... 29
FINANCIAL STATEMENTS................................................... 29
OTHER INFORMATION...................................................... 30
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS...................... A-1
<PAGE>
THE FUNDS
On February 27, 1997, the Model Equity Portfolio changed its name to
the Large Cap Value Portfolio. On September 25, 1997, the Intermediate
Government Portfolio changed its name to the Core Fixed Income Portfolio.
References in this Statement of Additional Information are to a Portfolio's
current name.
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.
Forward Foreign Exchange Contracts
The International Portfolio may enter into 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. The International
Portfolio would enter into foreign currency futures contracts solely for
hedging or other appropriate investment purposes as defined in CFTC
regulations.
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
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<PAGE>
so that no intermediary is required. A forward contract generally requires no
margin or other deposit.
At the maturity of a forward contract, the International 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.
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
Portfolios may, from time to time, pay negotiated fees in connection with the
lending of securities.
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.
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<PAGE>
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.
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.
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;
-4-
<PAGE>
(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;
(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
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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;
(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 and New
Jersey Muni 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.
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Each of the Muni Intermediate and New Jersey Muni 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).
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.
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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
transaction, 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.
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,
Glenmede 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.
Set forth in the table below is the compensation received by Board
members for the fiscal year ended October 31, 1997.
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<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Aggregate Benefits Estimated
Compensation Compensation 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., _______ _______ None None _______
Director/Trustee
Willard S. Boothby, Jr., _______ _______ None None _______
Director/Trustee
John W. Church, Jr. None None None None None
Director/Trustee
Francis J. Palamara, _______ _______ None None _______
Director/Trustee
G. Thompson Pew, Jr., _______ _______ None None _______
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 76 shareholders. The Corporation has a nine person Board of
Directors which, at September 30, 1997, collectively, owned 98.67% of the
Corporation's voting shares and 37.80% of the Corporation's total outstanding
shares. The members of the Board and their respective interests in the
Corporation at September 30, 1997 are as follows:
The Glenmede Corporation Percent of Percent of
Board of Directors Voting Shares Total Shares
- ------------------------ ------------- ------------
Susan W. Catherwood.................... 10.83% 1.23%
Richard F. Pew......................... 10.83% 1.07%
Thomas W. Langfitt, M.D................ 11.07% 8.69%
Arthur E. Pew III...................... 10.83% 1.07%
J. Howard Pew, II...................... 10.83% 1.43%
J. N. Pew, III......................... 11.07% 5.45%
J. N. Pew, IV.......................... 11.07% 1.43%
R. Anderson Pew........................ 11.07% 6.03%
Ethel Benson Wister.................... 11.07% 11.4%
----- -----
98.67% 37.80%
===== =====
As noted in the Prospectuses, the Advisor does not receive any fee
from the Government Cash, Tax-Exempt Cash, Core Fixed Income, International,
Equity, Large Cap Value, Muni Intermediate and New Jersey Muni Portfolios for
its investment services. Prior to January 1, 1998 the Advisor did not receive
any fee
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from The Small Capitalization Equity Portfolio for its investment services.
Effective January 1, 1998, the Advisor is entitled to receive a fee from the
Small Capitalization Equity Portfolio for its investment services computed
daily and payable monthly, at an annual rate of .55% of that Portfolio's
average daily net assets. Additionally, 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 fiscal year ended October 31, 1997, the
Funds paid ICC fees of $_______ for the Government Cash Portfolio,
$________ for the Tax-Exempt Cash Portfolio, $_________ for the Core Fixed
Income Portfolio, $________ for the International Portfolio, $______ for
the Equity Portfolio, $_________ for the Small Capitalization Equity
Portfolio, $_______ for the Large Cap Value Portfolio, $_______ for the
Muni Intermediate Portfolio and $_________ for the New Jersey Muni
Portfolio.
For the fiscal year ended October 31, 1996, the Funds paid ICC
fees of $183,151 for the Government Cash Portfolio, $95,073 for the
Tax-Exempt Cash Portfolio, $110,811 for the Core Fixed Income Portfolio,
$216,069 for the International Portfolio, $33,415 for the Equity Portfolio,
$101,413 for the Small Capitalization Equity Portfolio, $12,716 for the
Large Cap Value Portfolio, $7,474 for the Muni Intermediate Portfolio and
$2,571 for the New Jersey Muni Portfolio.
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 Core Fixed Income Portfolio, $55,781 for the
International Portfolio, $11,445 for the Equity Portfolio, $24,932 for the
Small Capitalization Equity Portfolio, $2,615 for the Large Cap Value
Portfolio, $2,663 for the Muni Intermediate Portfolio and $808 for the New
Jersey Muni Portfolio.
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From the close of business on May 6, 1994 to the close of business on
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 Core Fixed Income
Portfolio, $172,504 for the International Portfolio, $38,056 for the Equity
Portfolio, $76,001 for the Small Capitalization Equity Portfolio, $11,371 for
the Large Cap Value 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 Core Fixed Income Portfolio, $126,733 for the International Portfolio,
$28,783 for the Equity Portfolio, $44,272 for the Small Capitalization Equity
Portfolio, $9,019 for the Large Cap Value Portfolio, $13,154 for the Muni
Intermediate Portfolio and $1,858 for the New Jersey Muni 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 payable for the fiscal year
ended October 31, 1997 for the Government Cash, Tax-Exempt Cash, Core Fixed
Income, Muni Intermediate, New Jersey Muni, Equity, International, Small
Capitalization Equity and Large Cap Value Portfolios were $_______,
$_______, $_______, $________, $______, $_______, $________, $________ and
$________, respectively.
Shareholder servicing fees payable for the fiscal year ended October
31, 1996 for the Government Cash, Tax-Exempt Cash, Core Fixed Income, Muni
Intermediate, New Jersey Muni, Equity, International, Small Capitalization
Equity and Large Cap Value Portfolios were $226,624, $117,082, $136,249,
$9,135, $3,168, $42,934, $265,082, $125,390 and $15,789, respectively.
Shareholder servicing fees payable for the period January 1, 1995 to
October 31, 1995 for the Government Cash, Tax-Exempt Cash, Core Fixed Income,
Muni Intermediate, New Jersey Muni, Equity, International, Small
Capitalization Equity and Large Cap Value Portfolios were $179,403, $88,295,
$137,633, $7,721, $2,177, $29,441, $130,533, $ 61,932, and $7,699,
respectively.
Custody services are provided to each Portfolio by The Chase
Manhattan Bank, N.A., Brooklyn, New York.
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<PAGE>
DISTRIBUTOR
Shares of the Funds are distributed continuously and are offered
without a sales load by ICC Distributors, Inc. ("ICC Distributors"), pursuant
to a Distribution Agreement between the Funds and ICC Distributors. ICC
Distributors receives no fee from the Funds for its distribution services.
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.
During the fiscal year ended October 31, 1997, the Equity,
International, Small Capitalization Equity and Large Cap Value Portfolios paid
$______, $_______, $_______ and $_________ in brokerage commissions,
respectively. During the fiscal year ended October 31, 1996, the Equity,
International, Small Capitalization Equity and Large Cap Value Portfolios paid
$99,329, $726,803, $487,995 and $165,881 in brokerage commissions,
respectively. During the fiscal year ended October 31, 1995, the Equity,
International, Small Capitalization Equity and Large Cap Value Portfolios paid
$157,547, $453,721, $343,683 and $165,103 in brokerage commissions,
respectively.
The Government Cash, Core Fixed Income, Muni Intermediate and New
Jersey Muni Portfolios do not currently expect to incur any brokerage
commission expense on transactions in their portfolio securities because debt
instruments are generally
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<PAGE>
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.
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
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<PAGE>
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.
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
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shares will be treated as long-term capital loss to the extent of the capital
gain dividends received with respect to the shares.
Under the Taxpayer Relief Act of 1997, for capital gains on securities
recognized after July 28, 1997, the maximum tax rate for individuals is 20% if
the property was held more than 18 months; for property held for more than 12
months, but no longer than 18 months, the maximum tax rate on capital gains
continues to be 28%. For sales or exchanges on or before July 28, 1997, an
individual's net capital gains are still taxable at a maximum rate of 28%.
Ordinary income of individuals is taxable at a maximum marginal 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 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.
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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.
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, certain
foreign currency contracts entered into and held by the International
Portfolio at the close of the Fund's taxable year may 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 sixty percent 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 foreign currency contract ("the 40-60 rule"). 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
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the interbank market; and (3) the contract must be traded in the interbank
market. The amount of any capital gain or loss actually realized by the
Portfolio in a subsequent sale or other disposition of those foreign currency
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. 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 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.
With respect to foreign currency 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 foreign
currency 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 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
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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 Portfolio may
make or enter into will be subject to the special currency rules described
above.
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 (the "Commonwealth") 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's economy historically has 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.
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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, 1996, the General Fund had a surplus of $635.2
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. 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.
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,
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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. The court issued a writ in
mandamus and appointed a special master in 1996 to submit a plan for
implementation, which it intended to acquire by January 1, 1998. In January
1997, the Court established a committee, consisting of the special master and
representatives of the Executive and Legislature, to develop an implementation
plan; (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; in the state case, the trial, briefing and
argument has been completed as of September 1997, and the presiding judge has
taken the case under advisement (no available estimate of potential liability);
(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 to resolve Envirotest's claims that will pay
Envirotest a conditional sum of $195 million over four years (e) in litigation
brought by the Pennsylvania Human Relations Commission to remedy unintentional
conditions of segregation in the Philadelphia public schools, the School
District of Philadelphia filed a third-party complaint against the Commonwealth
asking the Commonwealth Court to require the Commonwealth to supply funding
necessary for the District to comply with orders of the court; the Commonwealth
Court found that the School District was entitled to receive an additional $45.1
million for the 1996-97 school year, but the Pennsylvania Supreme Court vacated
this decision in September 1996; in January 1997, the Supreme Court ordered the
parties to brief certain issues, but no further decision by the Supreme Court
has been issued (no available estimate of potential liability); and (f) in
February 1997, five residents of the City of Philadelphia, joined by the City,
the School District and others, filed a civil action in the Commonwealth Court
for declaratory judgment against the Commonwealth and certain Commonwealth
officers and officials that the defendants had failed to provide an adequate
quality of education in Philadelphia, as required by the Pennsylvania
Constitution (no available estimate of potential liability).
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
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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 creditworthiness 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") experienced a series of General
Fund deficits for Fiscal Years 1988 through 1992 and, while its general
financial situation has improved, the City is still seeking a long-term solution
for its economic difficulties. 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, and in recent
years, the Authority has issued approximately $1.76 billion of Special Revenue
Bonds on behalf of the City. The City currently is operating under a five year
plan approved by the Authority in 1996, with technical amendments officially
incorporated on July 18, 1995. The audited balance of the City's General Fund as
of June 30, 1996 showed a surplus of approximately $118.5 million, up from
approximately $80.5 million as of June 30, 1995.
The Authority's power to issue further bonds to finance capital
projects or deficit expired on December 31, 1994. The Authority's power to issue
debt to finance a cash flow deficit expired on December 31, 1996, but its
ability to refund outstanding bonds is unrestricted. The Authority had
approximately $1.1 billion in Special Revenue Bonds outstanding as of June 30,
1996.
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.
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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.
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.
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<PAGE>
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.
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
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recovery from the Department of costs they have incurred for the maintenance of
such residents; (iii) 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; (iv) 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; (v) 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; (vi) 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; (vii) representatives of the trucking
industry have filed a constitutional challenge to annual hazardous and solid
waste licensure renewal fees; (viii) the New Jersey Hospital Association has
filed a constitutional challenge to the State's failure to provide funding for
charity care costs, while requiring hospitals to treat all patients without
ability to pay; (ix) the Education Law Center filed a motion compelling the
State to close the spending gap between poor urban school districts and wealthy
rural school districts; (x) a group of insurance companies have filed a
constitutional challenge to the challenge to the State's assessment of monies
pursuant to the Fair Automobile Insurance Reform Act of 1990; (xi) a class
action consisting of prisoners with serious mental disorders has been filed
against officers of the Department of Corrections, alleging sex discrimination,
violation of the Americans with Disabilities Act of 1990, and constitutional
violations; (xii) a class action has been brought in federal court challenging
the State's method of determining the monthly needs of a spouse of an
institutionalized person under the Medicare Catastrophic Act; (xiii) several
suits have been filed against the State in federal court alleging that the State
committed securities fraud and environmental violations in the financing of a
new Atlantic City highway and tunnel; (xiv) a class action has been filed
against the State alleging the State's breach of contract for not paying certain
Medicare co-insurance and deductibles; and (xv) an action has been filed
challenging the State's issuance of bonds to fund the accrued liability in its
pension funds under the Pension Bond Financing Act of 1997.
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.
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
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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, 1997.
Government Cash Tax-Exempt
Portfolio Cash Portfolio
10/31/97 10/31/97
--------------- --------------
7-Day Yield (Net Change
X 365/7 average net
asset value) ____% ____%
7-Day Effective Yield ____% ____%
7-Day Tax-Equivalent Yield ____% ____%*
- -------------
* Assumes an effective Federal income tax rate of 31%
The Commission yield of the Core Fixed Income Portfolio, Muni
Intermediate Portfolio and the New Jersey Muni Portfolio for the 30-day period
ended October 31, 1997 was ____%, ____% and ____%, 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:
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<PAGE>
Yield = 2 [( a-b + 1)(6) - 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 Core Fixed Income, Muni Intermediate or New Jersey
Muni 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 Core Fixed Income, Muni
Intermediate and New Jersey Muni Portfolios' yields do not reflect any fees
charged by the Advisor or an Affiliate to its clients. See "Investment
Advisor."
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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, 1997 was ____% and
____%, respectively (assuming a marginal Federal income tax rate of 31% and
marginal Pennsylvania and New Jersey income tax rates of ____ and ____%,
respectively).
The Core Fixed Income, Equity, International, Small Capitalization
Equity, Muni Intermediate, New Jersey Muni and Large Cap Value Portfolios each
compute their respective average annual total returns separately for each
class 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.
The Core Fixed Income, Equity, International, Small Capitalization
Equity, Muni Intermediate, New Jersey Muni and Large Cap Value Portfolios
compute their aggregate total returns separately for each class 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:
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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."
As of January 1, 1998, the Small Capitalization Equity Portfolio
began to offer Institutional Shares. Institutional Shares are subject to an
annual fee of .05% payable pursuant to the Amended and Restated Shareholder
Servicing Plan ("Shareholder Servicing Fee"). Prior to January 1, 1998,
Advisor Shares were subject to a .05% Shareholder Servicing Fee. Performance
of the Institutional Shares prior to January 1, 1998 is represented by
performance of the Advisor Shares.
Set forth below are the average annual total return figures for the
Core Fixed Income, Equity, International, Small Capitalization Equity, Muni
Intermediate, Large Cap Value and New Jersey Muni Portfolios since inception and
for the one year and five year periods ended October 31, 1997.
<TABLE>
<CAPTION>
Small
Core Fixed Capitalization Muni
Income Equity International Equity Intermediate
Portfolio Portfolio Portfolio Portfolio Portfolio
---------- --------- ------------- --------------- ------------
Advisor Institutional
Shares Shares
------- -------------
<S> <C> <C> <C> <C> <C> <C>
1 Year Ended 10/31/97 _____ _____ _____ _____ ______ _____
5 Years Ended 10/31/97 _____ _____ _____ _____ ______ _____
Inception to 10/31/97 _____ _____ _____ _____ ______ _____
</TABLE>
Large Cap New
Value Jersey Muni
Portfolio Portfolio
--------- -----------
1 Year Ended 10/31/97 _____ _____
Inception to 10/31/97 _____ _____
Inception Dates:
Core Fixed Income 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
Large Cap Value Portfolio.................................... 12/31/92
New Jersey Muni Portfolio.................................... 11/01/93
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Set forth below are the aggregate total return figures for the Core
Fixed Income, Equity, International, Small Capitalization Equity, Muni
Intermediate, Large Cap Value and New Jersey Muni Portfolios from inception
to October 31, 1997.
Portfolio Inception Date Aggregate Total Return
- --------- -------------- ----------------------
Core Fixed Income 11/17/88 ________
Equity 07/20/89 ________
International 11/17/88 ________
Small Capitalization Equity 03/01/91 ________
Muni Intermediate 06/05/92 ________
Large Cap Value 12/31/92 ________
New Jersey Muni 11/01/93 ________
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 distribute substantially all of their net investment income to
shareholders monthly; the International, Equity, Small Capitalization Equity
and Large Cap Value Portfolios normally distribute substantially all of their
net investment income to shareholders in the form of a quarterly dividend and
the Core Fixed Income, 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 September 30, 1997, the Advisor held of record all of the
outstanding shares of each Portfolio. For more information about the Advisor,
see "Investment Advisor" in the Prospectus. As of September 30, 1997 the
directors/trustees and officers of the Funds collectively owned less than 1%
of the outstanding shares of each of the Funds' Portfolios.
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FINANCIAL STATEMENTS
The Funds' Financial Statements for the year ended October 31, ____
and the financial highlights for each of the respective periods presented,
appearing in the ____ Annual Report to Shareholders, and the reports thereon
of _________________, the Funds' independent accountants, also appearing
therein, are incorporated by reference in this Statement of Additional
Information.
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OTHER INFORMATION
The Prospectus and this Statement of Additional Information do not
contain all the information included in the Registration Statement filed with
the Commission under the 1933 Act with respect to the securities offered by
the Prospectus. Certain portions of the Registration Statement have been
omitted from the Prospectus and this Statement of Additional Information
pursuant to the rules and regulations of the SEC. The Registration Statement,
including the exhibits filed therewith, may be examined at the office of the
SEC in Washington, D.C.
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other documents
referred to are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of
Additional Information form a part, each such statement being qualified in all
respects by such reference.
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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.
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
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mortgagor's monthly payments to his/her lending institution are
"passed-through" to an investor such as the Government Cash Portfolio and the
Core Fixed Income 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.
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
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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 Core
Fixed Income 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 Core Fixed Income 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.
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.
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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 rates, 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.
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
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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.
International institutions that issue securities which the Core Fixed
Income 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),
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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.
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.
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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.
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 and Large Cap Value Portfolios may
temporarily hold uninvested reserves in bank deposits in foreign currencies,
the Equity, International, Small Capitalization Equity and Large Cap Value
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 Portfolio permit the Portfolio to enter into forward foreign
currency exchange contracts in order to hedge the Portfolio's 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
Large Cap Value Portfolios will endeavor to achieve most favorable execution
costs in its portfolio transactions, fixed commissions on many
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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 and Large Cap Value
Portfolios.
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