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THE GLENMEDE FUND, INC.
1 South Street, Baltimore, Maryland 21202
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(800) 442-8299
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Prospectus - February 27, 1997
INVESTMENT OBJECTIVES
The Glenmede Fund, Inc., a Maryland corporation ("Glenmede Fund"), is a no-load,
open-end management investment company. Glenmede Fund consists of nine series of
shares, each of which has different investment objectives and policies. The
securities offered hereby are one of these series of shares, the Institutional
International Portfolio.
Institutional International Portfolio. The objective of the Institutional
International Portfolio is to provide maximum long-term total return consistent
with reasonable risk to principal. The Institutional International Portfolio
seeks to achieve its objective by investing primarily in common stocks and other
equity securities of companies located outside the United States. The net asset
value of this Portfolio will fluctuate.
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 Portfolio are subject to investment risks, including the
possible loss of principal, are not bank deposits and are not endorsed by,
insured by, guaranteed by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, The Glenmede Corporation or any of its affiliates or any other
governmental agency or bank.
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ABOUT THIS PROSPECTUS
This Prospectus, which should be retained for future reference, sets
forth certain information that you should know before you invest. A Statement of
Additional Information ("SAI") containing additional information about the
Portfolio has been filed with the Securities and Exchange Commission. The SAI
dated February 27, 1997, as amended or supplemented from time to time, is
incorporated by reference into this Prospectus. The 1996 Annual Report to
Shareholders contains additional investment and performance information about
the Portfolios. A copy of the SAI and the 1996 Annual Report may be obtained,
without charge, by writing to Glenmede Fund at the address shown above or by
calling Glenmede Fund at the telephone number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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EXPENSES OF THE PORTFOLIOS
The following table illustrates the expenses and fees incurred by the
Institutional International Portfolio for the fiscal year ended October 31,
1996.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases......................................NONE
Sales Load Imposed on Reinvested Dividends...........................NONE
Deferred Sales Load..................................................NONE
Redemption Fees......................................................NONE
Exchange Fees........................................................NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
Institutional
International
Portfolio
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Investment Advisory Fees..................................... .75%(1)
Administration Fees.......................................... .04%
Other Expenses............................................... .16%
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Total Operating Expenses..................................... .95%
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(1) The Glenmede Trust Company (the "Advisor") has agreed to waive its fees
to the extent necessary to ensure that the Institutional International
Portfolio's annual total operating expenses do not exceed 1.00% of such
Portfolio's average net assets.
The purpose of the above table is to assist an investor in
understanding the various estimated costs and expenses that an investor in the
Portfolio will bear directly or indirectly. Actual expenses may be greater or
lesser than such estimates. For further information concerning the Portfolio's
expenses see "Investment Advisor," "Administrative, Transfer Agency and Dividend
Paying Services" and "Board Members and Officers."
The following example illustrates the estimated expenses that an
investor in the Portfolio would pay on a $1,000 investment over various time
periods assuming (i) a 5% annual rate of return and (ii) redemption at the end
of each time period. As noted in the above table, Glenmede Fund charges no
redemption fees of any kind.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------- ------- ------- --------
<S> <C> <C> <C> <C>
Institutional International Portfolio................... $10 $30 $ 53 $117
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. THE ABOVE FIGURES ARE ESTIMATES ONLY. ACTUAL EXPENSES
MAY BE GREATER OR LESSER THAN THOSE SHOWN.
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FINANCIAL HIGHLIGHTS
The table below sets forth financial highlights of the Institutional
International Portfolio for the respective periods presented. The data presented
for the Portfolio is derived from the Portfolio's Financial Statements included
in Glenmede Fund's 1996 Annual Report to Shareholders, which Financial
Statements and the report thereon of Coopers & Lybrand L.L.P., Glenmede Fund's
independent accountants, are incorporated by reference into the SAI. The
following information should be read in conjunction with those Financial
Statements.
Institutional International Portfolio
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Period Ended
October 31, October 31, October 31, October 31, October 31,
1996 1995 1994 1993 1992+
---------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.............................. $12.34 $12.63 $12.00 $9.42 $10.00
------ ------ ------ ----- ------
Income from investment operations:
Net investment income#........................................ 0.28 0.19 0.16 0.15 0.03
Net realized and unrealized gain/(loss)
on investments............................................... 1.50 (0.13) 1.49 2.88 (0.60)
------ ----- ------ ------ ------
Total from investment operations............................ 1.78 0.06 1.65 3.03 (0.57)
------ ----- ------ ------ ------
Less Distributions:
Distributions from net investment
income....................................................... (0.25) (0.18) (0.13) (0.14) (0.01)
Distributions from net realized
capital gains................................................ (0.14) (0.17) (0.87) (0.31) --
Distributions in excess of net
realized gains............................................... (0.06) -- (0.02) -- --
------ ----- ------ ------ ----
Total Distributions......................................... (0.45) (0.35) (1.02) (0.45) (0.01)
------ ----- ------ ------ ------
Net asset value, end of year.................................... $13.67 $12.34 $12.63 $12.00 $9.42
====== ====== ====== ====== =====
Total return++.................................................. 14.46% 0.38% 13.85% 32.34% (5.60)%
====== ====== ====== ====== =====
Ratios to average net assets/ Supplemental data:
Net assets, end of year (in 000's).............................. $58,390 $44,206 $17,076 $12,979 $9,416
Ratio of operating expenses to average
net assets**................................................... 0.95% 0.93% 1.00% 1.00% 1.00%*
Ratio of net investment income to average
net assets..................................................... 2.06% 1.78% 1.29% 1.41% 1.28%*
Portfolio turnover rate......................................... 10% 25% 39% 34% 10%
Average commissions per share##................................. $0.02 N/A N/A N/A N/A
</TABLE>
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+ The Portfolio commenced operations on August 1, 1992.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
** Annualized expense ratio before waiver of fees and/or expenses reimbursed
by the investment advisor for the years ended October 31, 1996, 1995, 1994
and 1993 and the period ended October 31, 1992 were .95%, .93%, 1.01%,
1.08% and 1.08%, respectively.
# Net investment income before waiver of fees and/or expenses reimbursed by
the investment advisor for the years ended October 31, 1996, 1995, 1994 and
1993 and the period ended October 31, 1992 were $.28, $0.19, $0.16, $0.14
and $0.03, respectively.
## Represents Average Commission rate per share charged to the Portfolio on
purchases and sales of investment during the period. Such information is
only required for fiscal years beginning on or after September 1, 1995.
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PERFORMANCE CALCULATIONS
The Institutional International Portfolio may advertise or quote total
return data from time to time. Total return will be calculated on an average
annual total return basis, and may also be calculated on an aggregate total
return basis, for various periods. Average annual total return reflects the
average annual percentage change in value of an investment in the 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 during the period are reinvested in Portfolio shares.
The Portfolio may compare its total return to that of other investment
companies with similar investment objectives and to stock and other relevant
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For example,
the total return of the Portfolio may be compared to data prepared by Lipper
Analytical Services, Inc. ("Lipper") and 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 performances of the
Portfolio.
Performance quotations will represent the Portfolio's past performance, and
should not be considered as representative of future results. Since performance
will fluctuate, performance data for the 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 the Portfolio, portfolio maturity, operating expenses and
market conditions. Any management fees charged by the Advisor or institutions to
their clients will not be included in the Portfolio's calculations of total
return.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Institutional International Portfolio is
not fundamental and may be changed by the Board members without shareholder
approval.
The objective of the 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 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.
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 Investment Company Act of 1940 (the "1940 Act")); U.S.
or foreign securities convertible into foreign common stock; and American
Depositary Receipts ("ADRs") which are U.S. domestic securities representing
ownership rights in foreign companies.
The Portfolio also may enter into forward currency exchange contracts only
in order to hedge against uncertainty in the level of future foreign exchange
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rates in the purchase and sale of investment securities; it may not enter into
such contracts for speculative purposes. See "Investment Techniques--Forward
Foreign Currency Exchange Contracts."
The 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 20% under normal
circumstances) in the following fixed income and money market securities:
obligations of the U.S. Government and its guaranteed or sponsored agencies,
including shares of open-end or closed-end 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
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.
INVESTMENT TECHNIQUES
Repurchase Agreements. The Portfolio may enter into repurchase agreements
with qualified brokers, dealers, banks and other financial institutions deemed
creditworthy by the Advisor. Under normal circumstances, however, the Portfolio
will not enter into repurchase agreements if entering into such agreements would
cause, at the time of entering into such agreements, more than 20% of the value
of its total assets to be subject to repurchase agreements. The Portfolio would
generally enter into repurchase transactions to invest cash reserves and for
temporary defensive purposes.
In a repurchase agreement, the 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 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 the Portfolio should enter into a repurchase agreement, and
the Portfolio 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, the Portfolio is
lending its funds to the seller at the agreed upon interest rate and receiving
securities as collateral for the loan. Such agreements can be entered into for
periods of one day (overnight repo) or for a fixed term (term repo). Repurchase
agreements are a common way to earn interest income on short-term funds.
The use of repurchase agreements involves certain risks. For example, if
the seller of a repurchase agreement defaults on its obligation to repurchase
the
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underlying securities at a time when the value of these securities has declined,
the Portfolio may incur a loss upon disposition of them. Default by the seller
would also expose the 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 the Portfolio and
therefore subject to sale by the trustee in bankruptcy. Further, it is possible
that the Portfolio may not be able to substantiate its interest in the
underlying securities.
Lending of Securities. The 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
Portfolio may purchase and sell securities on a "when issued," "delayed
settlement" or "forward delivery" basis. "When issued" or "forward delivery"
refer to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery. When issued
or forward delivery transactions may be expected to occur one month or more
before delivery is due. Delayed settlement is a term used to describe settlement
of a securities transaction in the secondary market which will occur sometime in
the future. No payment or delivery is made by the 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. The 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 the Portfolio receives no
income from the above described securities prior to delivery, the market value
of such securities is still subject to change.
The 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 the Portfolio engages in when issued, delayed settlement or forward
delivery transactions, it will do so for the purpose of acquiring securities
consistent with its investment objective and policies and not for the purposes
of speculation. The 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 the Portfolio will only sell securities on
such a basis to offset securities purchased on such a basis.
Borrowing. The Portfolio may purchase securities on a "when issued,"
"delayed settlement" or "forward delivery" basis. As a temporary measure for
extraordinary or emergency purposes, the Portfolio may borrow money from banks.
However, the Portfolio will not borrow money for speculative purposes.
Forward Foreign Currency Exchange Contracts. The Portfolio may enter into
forward foreign currency exchange contracts in connection with the purchase and
sale of investment securities; such contracts may not be used for speculative
purposes. A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts may be bought or sold to
protect the Portfolio, to some degree, against a possible loss resulting from an
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adverse change in the relationship between foreign currencies and the U.S.
dollar. It should be realized that this method of protecting the value of the
Portfolio's investment securities against a decline in the value of a currency
does not eliminate fluctuations in the underlying prices of the securities. It
simply establishes a rate of exchange at some future point in time.
Additionally, although such contracts tend to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they tend to limit
any potential gain which might result should the value of such currency
increase.
Depositary Receipts. The Portfolio may purchase sponsored or unsponsored
ADRs. ADRs are depositary receipts typically issued by a U.S. bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. Generally, depositary receipts in registered form are designed for
use in the U.S. securities market and depositary receipts in bearer form are
designed for use in securities markets outside the United States. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Depositary receipts may
be issued pursuant to sponsored or unsponsored programs. In sponsored programs,
an issuer has made arrangements to have its securities traded in the form of
depositary receipts. In unsponsored programs, the issuer may not be directly
involved in the creation of the program. Although regulatory requirements with
respect to sponsored and unsponsored programs are generally similar, in some
cases it may be easier to obtain financial information from an issuer that has
participated in the creation of a sponsored program. Accordingly, there may be
less information available regarding issuers of securities underlying
unsponsored programs and there may not be a correlation between such information
and the market value of the depositary receipts. Depositary receipts also
involve the risks of other investments in foreign securities, as discussed
below. For purposes of the Portfolio's investment policies, the Portfolio's
investments in Depositary receipts will be deemed to be investments in the
underlying securities.
Illiquid Securities. The Portfolio will not invest more than 10% of net
assets in securities that are illiquid. Illiquid securities are difficult to
sell promptly at an acceptable price.
Unless specified above and except as described under "Investment
Limitations," the foregoing investment policies are not fundamental and the
Board may change such policies without shareholder approval.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Portfolio,
nor can there be any assurance that the Portfolio's investment objective will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Portfolio can decrease as well as increase, depending on a
variety of factors which may affect the values and income generated by the
Portfolio's securities, including general economic conditions, market factors
and currency exchange rates. An investment in the Portfolio is not intended as a
complete investment program.
Foreign Securities. The Portfolio has the right to purchase securities in
any foreign country, developed or underdeveloped. Investors should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations, which are in addition to the usual
risks inherent in domestic investments. Investors should recognize that
investing in the securities of foreign companies involve special risks and
considerations not typically associated with investing in U.S. companies. These
risks and considerations include differences in accounting, auditing and
financial reporting standards, generally higher commission rates on foreign
portfolio transactions, the possibility of expropriation or confiscatory
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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 the 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, the 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
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.
PURCHASE OF SHARES
Shares of the Portfolio are sold without a sales commission on a continuous
basis to the Advisor acting on behalf of its clients ("Clients") and to other
institutions (the "Institutions"), at the net asset value per share next
determined after receipt of the purchase order by Glenmede Fund's transfer
agent. See "Valuation of Shares." The minimum initial investment for the
Portfolio is $25,000; the minimum for subsequent investments for the Portfolio
is $1,000. Glenmede Fund reserves the right to reduce or waive the minimum
initial and subsequent investment requirements from time to time. Beneficial
ownership of shares will be reflected on books maintained by the Advisor or the
Institutions. A prospective investor wishing to purchase shares in Glenmede Fund
should contact the Advisor or his or her Institution.
It is the Advisor's responsibility to transmit orders for share purchases
to Investment Company Capital Corp. ("ICC"), Glenmede Fund's transfer agent, and
deliver required funds to Glenmede Fund's custodian, on a timely basis.
Glenmede Fund reserves the right, in its sole discretion, to suspend the
offering of shares of the Portfolio or reject purchase orders when, in the
judgment of management, such suspension or rejection is in the best interests of
Glenmede Fund.
Purchases of the Portfolio's shares will be made in full and fractional
shares of the Portfolio calculated to three decimal places. In the interest of
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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 the Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the redemption
request by the transfer agent. Generally, a properly signed written request is
all that is required. Any redemption may be more or less than the purchase price
of the shares depending on the market value of the investment securities held by
the Portfolio. An investor wishing to redeem shares should contact the Advisor
or his or her Institution. It is the responsibility of the Advisor to transmit
promptly redemption orders to the transfer agent.
Payment of the redemption proceeds will ordinarily be made within one
business day, but in no event more than seven days, after receipt of the order
in proper form by the transfer agent. Redemption orders are effected at net
asset value per share next determined after receipt of the order in proper form
by the transfer agent. Glenmede Fund may suspend the right of redemption or
postpone the date of payment at times when the New York Stock Exchange (the
"Exchange") is closed, or under any emergency circumstances as determined by the
Securities and Exchange Commission (the "Commission"). See "Valuation of Shares"
for the days on which the Exchange is closed.
If Glenmede Fund's Board determines that it would be detrimental to the
best interests of the remaining shareholders of the Portfolio to make payment
wholly or partly in cash, Glenmede Fund may pay the redemption proceeds in whole
or in part by a distribution in-kind of securities held by the Portfolio in lieu
of cash in conformity with applicable rules of the Commission. Investors may
incur brokerage charges on the sale of portfolio securities received as a
redemption in kind.
Glenmede Fund reserves the right, upon 30 days' written notice, to redeem
an account in the Portfolio if the net asset value of the account's shares falls
below $100 and is not increased to at least such amount within such 30-day
period.
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION
OF SHARES
Glenmede Fund may, from time to time, in its sole discretion appoint one or
more entities, including the Advisor, as its agent to receive purchase and
redemption orders of shares of the Portfolio and cause these orders to be
transmitted, on a net basis, to Glenmede Fund's transfer agent. As of date of
this Prospectus, only the Advisor serves as the Glenmede Fund's agent to receive
and transmit purchase and redemption orders. The Advisor is not entitled to
receive any fee from shareholders and/or the Glenmede Fund for acting as the
Glenmede Fund's agent to receive and transmit purchase and redemption orders. 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 of the Portfolio is determined by dividing the total
market value of its investments and other assets, less any of its liabilities,
by the total outstanding shares of the Portfolio. The Portfolio's net asset
value per share is determined as of the close of regular trading hours of the
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Exchange on each day that the Exchange is open for business and the Portfolio
receives an order to purchase or redeem its shares. Currently the Exchange is
closed on weekends and the customary national business holidays of New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day (or the days on which they are observed). One
or more pricing services may be used to provide securities valuations in
connection with the determination of the net asset value of the 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 Portfolio normally distributes substantially all of its net investment
income to shareholders in the form of a quarterly dividend. If any net capital
gains are realized, the Portfolio normally distributes 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 the Portfolio's net
assets for the purpose of calculating net asset value per share. Therefore, on
the Portfolio's "ex-dividend" date, the net asset value per share excludes the
dividend (i.e., is reduced by the per share amount of the dividend).
FEDERAL TAXES
The Portfolio intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"). Such qualification
generally relieves the 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 the 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, the 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. The 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 the 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 the Portfolio are from
domestic corporations for the taxable year. It is anticipated that only a small
-10-
<PAGE>
part, if any, of the dividends paid by the Portfolio will be eligible for the
dividends received deduction.
Substantially all of the Portfolio's net realized long-term capital gains,
if any, will be distributed at least annually to its shareholders. The Portfolio
generally will have no tax liability with respect to such gains and the
distributions will be taxable as 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 the Portfolio on or just before
the record date of a dividend should be aware that the amount of the forthcoming
dividend payment, although in effect a return of capital, will be taxable.
A taxable gain or loss may be realized by a shareholder upon his redemption
or transfer of shares of the Portfolio, depending upon the tax basis of such
shares and their price at the time of redemption or transfer.
It is expected that dividends and certain interest income earned by the
Portfolio from foreign securities will be subject to foreign withholding taxes
or other taxes. So long as more than 50% of the value of the Portfolio's total
assets at the close of any taxable year consists of stock or securities of
foreign corporations, the Portfolio may elect, for U.S. Federal income tax
purposes, to treat certain foreign taxes paid by it, including generally any
withholding taxes and other foreign income taxes, as paid by its shareholders.
If the Portfolio makes this election, the amount of such foreign taxes paid by
the Portfolio will be included in its shareholders' income pro rata (in addition
to taxable distributions actually received by them), and each shareholder will
be entitled (a) to credit his proportionate amount of such taxes against his
U.S. Federal income tax liabilities, or (b) if he itemizes his deductions, to
deduct such proportionate amount from his U.S. income, should he so choose.
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 the 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). The 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 Portfolio and its shareholders and is not intended as a substitute
for careful tax planning. Accordingly, potential investors in the Portfolio
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.
The 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
-11-
<PAGE>
identification number in the manner required, who are subject to withholding by
the IRS for failure properly to include on their return payments of taxable
interest or dividends, or who have failed to certify to the Portfolio that they
are not subject to backup withholding when required to do so or that they are
"exempt recipients."
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on distributions
from the Portfolio. A shareholder should consult with his tax adviser with
respect to the tax status of distributions from the Portfolio in a particular
state and locality.
The Portfolio has obtained a Certificate of Authority to do business as a
foreign corporation in Pennsylvania, and currently does business in that state.
Accordingly, the shares of the Portfolio will be exempt from Pennsylvania
Personal Property Taxes.
INVESTMENT ADVISOR
The Advisor, a limited purpose trust company chartered in 1956, provides
fiduciary and investment services to endowment funds, foundations, employee
benefit plans and other institutions and individuals. The Advisor is a
wholly-owned subsidiary of The Glenmede Corporation and is located at One
Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania 19103.
At January 31, 1997, the Advisor had over $10.3 billion in assets in the
accounts for which it serves in various capacities including as executor,
trustee or investment advisor.
Under its Investment Advisory Agreement with Glenmede Fund with respect to
the Portfolio, the Advisor, subject to the control and supervision of Glenmede
Fund's Board and in conformance with the stated investment objective and
policies of the Portfolio, manages the investment and reinvestment of the
Portfolio's assets. It is the responsibility of the Advisor to make investment
decisions for the Portfolio and to place the Portfolio's purchase and sales
orders.
The Advisor is entitled to receive a fee from the Portfolio for its
investment services computed daily and payable monthly, at the annual rate of
.75% of the Portfolio's average daily net assets. Although the advisory fee rate
payable by the Portfolio is higher than the rates paid by most mutual funds,
Glenmede Fund's Board of Directors believes it is comparable to the rates paid
by other similar funds. The Advisor has agreed to waive its fees to the extent
necessary to ensure that the Portfolio's annual total operating expenses do not
exceed 1.00% of its average net assets. For the fiscal year ended October 31,
1996, the Advisor received a fee of .75% (annualized) of the Portfolio's average
net assets.
Andrew Williams, Senior Vice President of the Advisor, is the portfolio
manager for the Portfolio, has been primarily responsible for its management
since that Portfolio commenced operations. Mr. Williams has been employed by the
Advisor since May 1985.
ADMINISTRATIVE, TRANSFER AGENCY AND DIVIDEND PAYING SERVICES
ICC serves as Glenmede Fund's administrator, transfer agent and dividend
paying agent pursuant to a Master Services Agreement and in those capacities
supervises all aspects of Glenmede Fund's day-to-day operations, other than the
management of Glenmede Fund's investments. ICC is a wholly-owned subsidiary of
Alex. Brown & Sons Incorporated ("Alex. Brown"). For its services as
administrator, transfer agent and dividend paying agent, ICC is entitled to
receive fees from Glenmede Fund equal to .12% of the first $100 million of the
-12-
<PAGE>
combined net assets of Glenmede Fund and The Glenmede Portfolios, an investment
company with the same officers, Board and service providers as Glenmede Fund
(collectively, the "Funds"); .08% of the next $150 million of the combined net
assets of the Funds; .04% of the next $500 million of the combined net assets of
the Funds; and .03% of the combined net assets of the Funds over $750 million.
For fiscal year ended October 31, 1996, ICC received fees at the rate of .04% of
the Portfolio's average net assets.
INVESTMENT LIMITATIONS
The 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 its
total assets would be invested in securities of companies within
such industry; provided, however, that there shall be no
limitation on the purchase of obligations issued or guaranteed by
the U.S. Government, its agencies, enterprises or
instrumentalities;
(d) Pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of the Portfolio's total assets, at fair market
value, except as described in this Prospectus and the SAI and in
connection with entering into futures contracts, but the deposit
of assets in a segregated account in connection with the writing
of covered put and call options and the purchase of securities on
a when issued, delayed settlement or forward delivery basis and
collateral arrangements with respect to initial or variation
margin for futures contracts will not be deemed to be pledges of
the Portfolio's assets or the purchase of any securities on margin
for purposes of this investment limitation;
(e) Issue senior securities, except that the Portfolio may borrow
money in accordance with investment limitation (f), purchase
securities on a when issued, delayed settlement or forward
delivery basis and enter into reverse repurchase agreements; and
(f) Borrow money, except that the Portfolio may borrow money as a
temporary measure for extraordinary or emergency purposes, and
then not in excess of 10% of its total assets at the time of
borrowing (entering into reverse repurchase agreements and
purchasing securities on a when issued, delayed settlement or
forward delivery basis are not subject to this investment
limitation).
With respect to investment limitation (c), (a) there is no limitation with
respect to (i) instruments issued or guaranteed by the United States, any state,
territory or possession of the United States, the District of Columbia or any of
their authorities, agencies, instrumentalities or political subdivisions, and
(ii) repurchase agreements secured by the instruments described in clause (i);
(b) wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents; and (c) utilities will be divided according to their
services; for example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry.
-13-
<PAGE>
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value of assets
will not constitute a violation of such restriction. If the 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. The Portfolio's borrowings including reverse
repurchase agreements and securities purchased on a when-issued, delayed
settlement or forward delivery basis may not exceed 33 1/3% of its total net
assets.
The investment limitations described here and in the SAI are fundamental
policies and may be changed only with the approval of the holders of a majority
of the outstanding shares (as defined in the 1940 Act) of the Portfolio.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
Glenmede Fund was organized as a Maryland corporation on June 30, 1988.
Glenmede Fund's Articles of Incorporation authorize the Board members to issue
2,500,000,000 shares of common stock, with a $.001 par value. The Board has the
power to designate one or more classes ("Portfolios") of shares of common stock
and to classify or reclassify any unissued shares with respect to such
Portfolios. Currently, Glenmede Fund is offering shares of nine Portfolios.
The shares of the 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 the
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.
At January 31, 1997, the Advisor was the record owner of substantially all
of the outstanding shares of the Portfolio.
DISTRIBUTOR
Armata Financial Corp. ("Armata"), located at 1 South Street, Baltimore,
Maryland 21202, serves as Glenmede Fund's distributor. Armata is a subsidiary of
Alex. Brown.
CUSTODIAN
The Chase Manhattan Bank, N.A., Brooklyn, New York, serves as the custodian
of Glenmede Fund's assets.
TRANSFER AGENT
ICC, located at 1 South Street, Baltimore, Maryland 21202, serves as
Glenmede Fund's transfer agent.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., Philadelphia, Pennsylvania serves as independent
accountants for Glenmede Fund and will audit its financial statements annually.
-14-
<PAGE>
REPORTS
Shareholders receive unaudited semi-annual financial statements and audited
annual financial statements.
COUNSEL
Drinker Biddle & Reath, Philadelphia, Pennsylvania, serves as counsel to
Glenmede Fund.
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<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. 40 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 of 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 Director 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 71 Director of Glenmede Fund; Trustee of The Glenmede
P.O. Box 44024 Portfolios; Trustee of Gintel Fund;
Phoenix, AZ 85064-4024 Director of XTRA Corporation; Former Executive Vice
President--Finance of ARAMARK, Inc.
G. Thompson Pew, Jr.* 54 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 44 Executive Vice President of Glenmede Fund; Vice President
One Liberty Place and Manager of The Fixed Income Division of The
1650 Market Street, Suite 1200 Glenmede Trust Company. She has been employed by
Philadelphia, PA 19103 The Glenmede Trust Company since 1982.
Kimberly C. Osborne 31 Vice President of Glenmede Fund; Vice President of The
One Liberty Plaza Glenmede Trust Company. She has been employed by The
1650 Market Street, Suite 1200 Glenmede Trust Company since 1993. From 1992-1993, she
Philadelphia, PA 19103 was a Client Service Manager with Mutual Funds Service
Company and from 1987-1992, she was a Client Administrator with
The Vanguard Group, Inc.
Michael P. Malloy 37 Secretary of Glenmede Fund; Partner in the law firm of
Philadelphia National Bank Building Drinker Biddle & Reath.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Edward J. Veilleux 53 Assistant Secretary of Glenmede Fund; Principal, Alex.
1 South Street Brown; President, ICC and Armata.
Baltimore, MD 21202
Joseph A. Finelli 40 Treasurer of Glenmede Fund. He has been a Vice President
1 South Street of Alex. Brown since 1995. Prior thereto, he was Vice
Baltimore, MD 21202 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.
For additional information concerning remuneration of Board members see
"Management of Glenmede Fund" in the SAI.
---------------
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<PAGE>
Shareholder inquiries should be addressed to Glenmede Fund at the address
or telephone number stated on the cover page.
-17-
<PAGE>
THE GLENMEDE FUND, INC.
1 South Street, Baltimore, Maryland 21202
Prospectus
Dated February 27, 1997
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
Armata Financial Corp.
1 South Street
Baltimore, Maryland 21202
- ------------------------------------------------------------------------------
Table of Contents
Page
----
EXPENSES OF THE PORTFOLIOS............................................ 2
FINANCIAL HIGHLIGHTS.................................................. 3
PERFORMANCE CALCULATIONS.............................................. 4
INVESTMENT OBJECTIVES AND POLICIES.................................... 4
INVESTMENT TECHNIQUES................................................. 5
RISK FACTORS.......................................................... 7
PURCHASE OF SHARES.................................................... 8
REDEMPTION OF SHARES.................................................. 9
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF SHARES....... 9
VALUATION OF SHARES................................................... 9
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES...................... 10
INVESTMENT ADVISOR.................................................... 12
ADMINISTRATIVE, TRANSFER AGENCY AND DIVIDEND PAYING SERVICES.......... 12
INVESTMENT LIMITATIONS................................................ 13
GENERAL INFORMATION................................................... 14
BOARD MEMBERS AND OFFICERS............................................ 16
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>
THE GLENMEDE FUND, INC.
1 South Street, Baltimore, Maryland 21202
- -------------------------------------------------------------------------------
(800) 442-8299
- -------------------------------------------------------------------------------
Prospectus - February 27, 1997
INVESTMENT OBJECTIVES
The Glenmede Fund, Inc., a Maryland corporation ("Glenmede Fund"), is a no-load,
open-end management investment company. Glenmede Fund consists of nine series of
shares, each of which has different investment objectives and policies. The
securities offered hereby are one of these series of shares, the Emerging
Markets Portfolio.
Emerging Markets Portfolio. The objective of the Emerging Markets Portfolio is
to provide long-term growth of capital. The Emerging Markets Portfolio seeks to
achieve its objective by investing primarily in equity securities of issuers in
countries having emerging markets. The net asset value of this Portfolio will
fluctuate.
Total return consists of income (dividend and/or interest income from
portfolio securities) and capital gains and losses, both realized and
unrealized, from portfolio securities.
Shares of the Portfolio 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.
- -------------------------------------------------------------------------------
ABOUT THIS PROSPECTUS
This Prospectus, which should be retained for future reference, sets
forth certain information that you should know before you invest. A Statement of
Additional Information ("SAI") containing additional information about the
Portfolio has been filed with the Securities and Exchange Commission. The SAI
dated February 27, 1997, as amended or supplemented from time to time, is
incorporated by reference into this Prospectus. The 1996 Annual Report to
Shareholders contains additional investment and performance information about
the Portfolios. A copy of the SAI and the 1996 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.
<PAGE>
EXPENSES OF THE PORTFOLIOS
The following table illustrates the expenses and fees incurred by the
Emerging Markets Portfolio for the fiscal year ended October 31, 1996.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases...............................NONE
Sales Load Imposed on Reinvested Dividends....................NONE
Deferred Sales Load...........................................NONE
Redemption Fees...............................................NONE
Exchange Fees.................................................NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
Emerging
Markets
Portfolio
---------
Investment Advisory Fees................................ 1.25%
Administration Fees..................................... .04%
Other Expenses.......................................... .46%
-----
Total Operating Expenses................................ 1.75%
=====
- ----------------------
The purpose of the above table is to assist an investor in
understanding the various estimated costs and expenses that an investor in the
Portfolio will bear directly or indirectly. Actual expenses may be greater or
lesser than such estimates. For further information concerning the Portfolios'
expenses see "Investment Advisor," "Administrative, Transfer Agency and Dividend
Paying Services" and "Board Members and Officers."
The following example illustrates the estimated expenses that an
investor in the Portfolio would pay on a $1,000 investment over various time
periods assuming (i) a 5% annual rate of return and (ii) redemption at the end
of each time period. As noted in the above table, Glenmede Fund charges no
redemption fees of any kind.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------- ------- ------- --------
<S> <C> <C> <C> <C>
Emerging Markets Portfolio.............................. $18 $55 $95 $206
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. THE ABOVE FIGURES ARE ESTIMATES ONLY. ACTUAL EXPENSES
MAY BE GREATER OR LESSER THAN THOSE SHOWN.
-2-
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth financial highlights of the Emerging Markets
Portfolio for the respective periods presented. The data presented for the
Portfolio is derived from the Portfolios' Financial Statements included in
Glenmede Fund's 1996 Annual Report to Shareholders, which Financial Statements
and the report thereon of Coopers & Lybrand, L.L.P., Glenmede Fund's independent
accountants, are incorporated by reference into the SAI. The following
information should be read in conjunction with those Financial Statements.
Emerging Markets Portfolio
Year Ended Period Ended
October 31, 1996 October 31, 1995+
---------------- -----------------
Net asset value, beginning of period............. $9.73 $10.00
----- ------
Income from investment operations:
Net investment income.......................... 0.06 0.16
Net realized and unrealized gain/(loss)........
on investments................................ (0.16) (0.31)
------ ------
Total from investment operations............. (0.10) (0.15)
------ ------
Less Distributions:
Distributions from net investment income....... (0.08) (0.12)
Distributions from net realized capital gains.. (0.03) --
------ ------
Total Distributions.......................... (0.11) (0.12)
------ ------
Net asset value, end of period................... $9.52 $9.73
===== =====
Total return..................................... (0.96)% (1.96)%*
======= ========
Ratios to average net assets/Supplemental data:
Net assets, end of year (in 000's)...............$86,385 $27,297
Ratio of operating expenses to average
net assets...................................... 1.76% 1.81%*
Ratio of net investment income to average
net assets...................................... 0.80% 1.87%*
Portfolio turnover rate.......................... 44% 50%
Average Commission per Share#.................... $0.001 N/A
- -----------------------------
+ The Portfolio commenced operations on December 14, 1994.
* 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 year beginning on or after
September 1, 1995.
-3-
<PAGE>
PERFORMANCE CALCULATIONS
The Emerging Markets Portfolio may advertise or quote total return data
from time to time. Total return will be calculated on an average annual total
return basis, and may also be calculated on an aggregate total return basis, for
various periods. Average annual total return reflects the average annual
percentage change in value of an investment in the 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 during the
period are reinvested in Portfolio shares.
The Portfolio may compare its total return to that of other investment
companies with similar investment objectives and to stock and other relevant
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For example,
the total return of the Emerging Markets Portfolio may be compared to data
prepared by Lipper, the Morgan Stanley Capital International Emerging Markets
Free Index (also known as the Emerging Markets Index) and the International
Financial Corporation Composite Index. Total return and other performance data
as reported in national financial publications such as Money Magazine, Forbes,
Barron's, The Wall Street Journal and The New York Times, or in publications of
a local or regional nature, may also be used in comparing the performances of
the Portfolios.
Performance quotations will represent the Portfolio's past performance,
and should not be considered as representative of future results. Since
performance will fluctuate, performance data for the 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 the Portfolio, portfolio maturity,
operating expenses and market conditions. Any management fees charged by the
Advisor or institutions to their clients will not be included in the Portfolio's
calculations of total return.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Portfolio is not fundamental and may be
changed by the Board members without shareholder approval.
The objective of the Portfolio is to provide long-term growth of
capital. The Portfolio seeks to achieve this objective by investing primarily in
equity securities of issuers in countries having emerging markets. It is
currently expected that under normal conditions at least 65% of the Portfolio's
total assets will be invested in emerging market equity securities.
The Portfolio considers countries having emerging markets to be all
countries that are generally considered to be developing or emerging countries
by the International Bank for Reconstruction and Development (more commonly
referred to as the World Bank) and the International Finance Corporation, as
well as countries that are classified by the United Nations or otherwise
regarded by their authorities as developing. The countries may include, but are
not limited to, the following: Turkey, India, Indonesia, Brazil, Greece,
Malaysia, China, Taiwan, South Korea, Portugal and Hungary. In addition, as used
in this Prospectus, "emerging market equity securities" means (i) equity
securities of companies the principal securities trading market for which is an
emerging market country, as defined above, (ii) equity securities, traded in any
market, of companies that derive 50% or more of their total revenue from either
goods or services produced in such emerging market countries or sales made in
such emerging market countries or (iii) equity securities of companies organized
under the laws of, and with a principal office in, an emerging market country.
"Equity
-4-
<PAGE>
securities," as used in this Prospectus, refers to common stock, preferred
stock, warrants or rights to subscribe to or purchase such securities and
sponsored or unsponsored American Depository Receipts ("ADRs"), European
Depositary Receipts ("EDRs"), and Global Depositary Receipts ("GDRs").
Determinations as to eligibility will be made by the Emerging Markets
Portfolio's sub-advisor, Pictet International Management Limited (the
"Sub-Advisor"), based on publicly available information and inquiries made to
the companies. See "Risk Factors" for a discussion of the nature of information
publicly available for non-U.S. companies. The Portfolio will at all times,
except during defensive periods, maintain investments in at least three
countries having developing markets. The Sub-Advisor will limit holdings in any
one country to 15% at the time of investment.
The Portfolio and its Sub-Advisor may, from time to time, use various
methods of selecting securities for the Portfolio, and may also employ and rely
on independent or affiliated sources of information and ideas in connection with
management of the Portfolio. The Sub-Advisor's philosophy for investing in
emerging markets focuses on stock selection and significantly diversifying the
Portfolio's investments on a company and country level. The Sub-Advisor uses a
proprietary data base which screens for emerging markets that meet the Sub-
Advisor's strict quantitative criteria. Generally, in order for a country to be
included by the Sub-Advisor as a permissible emerging market investment it must
satisfy three conditions and meet certain additional criteria. First, the
country must meet certain custodial criteria, such as security of assets and
international experience. Second, the country typically satisfies certain
socioeconomic conditions, including political stability, freedom to invest and
repatriate capital and deregulation of the economy. Third, the country typically
satisfies specific cyclical criteria, including liquidity conditions, industrial
production capacity constraints, direction of real interest rates and the
valuation of the market.
For long-term growth of capital, the Portfolio may invest up to 35% of
its total assets in debt securities (defined as bonds, notes, debentures,
commercial paper, certificates of deposit, time deposits and bankers'
acceptances) which are rated at least Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Rating Group, Division of McGraw Hill
("S&P") or are unrated debt securities deemed to be of comparable quality by the
Sub-Advisor. Securities with the lowest rating in the investment grade category
(i.e., Baa by Moody's or BBB by S&P) are considered to have some speculative
characteristics and are more sensitive to economic change than higher rated
securities. Certain debt securities can provide the potential for long-term
growth of capital based on various factors such as changes in interest rates,
economic and market conditions, improvement in an issuer's ability to repay
principal and pay interest, and ratings upgrades. Additionally, convertible
bonds can provide the potential for long-term growth of capital through the
conversion feature, which enables the holder of the bond to benefit from
increases in the market price of the securities into which they are convertible.
However, there can be no assurances that debt securities or convertible bonds
will provide long-term growth of capital.
The Portfolio may lend its portfolio securities. In addition, the
Portfolio may enter into forward foreign currency contracts and reverse
repurchase agreements. When deemed appropriate by the Sub-Advisor, the Portfolio
may invest cash balances in repurchase agreements and other money market
investments to maintain liquidity in an amount to meet expenses or for
day-to-day operating purposes. These investment techniques are described below
and under the heading "Investment Objective and Policies" in the SAI.
When the Sub-Advisor believes that market conditions warrant, the
Portfolio may adopt a temporary defensive position and may invest without limit
in high-quality money market securities denominated in U.S. dollars or in the
currency of any foreign country. See "Investment Techniques -- Temporary
Investments."
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INVESTMENT TECHNIQUES
Temporary Investments. As determined by the Sub-Advisor, when market
conditions warrant, the Portfolio may invest up to 100% of its total assets in
the following high-quality (that is, rated Prime-1 by Moody's or A or better by
S&P or, if unrated, of comparable quality as determined by the Sub-Advisor)
money market securities, denominated in U.S. dollars or in the currency of any
foreign country, issued by entities organized in the United States or any
foreign country: short-term (less than twelve months to maturity) and
medium-term (not greater than five years to maturity) obligations issued or
guaranteed by the U.S. Government or the governments of foreign countries, their
agencies or instrumentalities; finance company and corporate commercial paper,
and other short-term corporate obligations; obligations (including certificates
of deposit, time deposits and bankers' acceptances) of banks; and repurchase
agreements with banks and broker-dealers with respect to such securities. The
Emerging Markets Portfolio also may purchase shares of closed-end investment
companies which invest chiefly in the shares of companies located outside the
U.S. (such shares will be purchased by the Portfolio within the limits
prescribed by the Investment Company Act of 1940 ( the "1940 Act")).
Repurchase Agreements. Portfolio may enter into repurchase agreements
with qualified brokers, dealers, banks and other financial institutions deemed
creditworthy by the Sub-Advisor. Under normal circumstances, however, the
Portfolio will not enter into repurchase agreements if entering into such
agreements would cause, at the time of entering into such agreements, more than
20% of the value of its total assets to be subject to repurchase agreements. The
Portfolio would generally enter into repurchase transactions to invest cash
reserves and for temporary defensive purposes.
In a repurchase agreement, the 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 Sub-Advisor
currently expects that repurchase agreements will mature in less than 13 months.
The seller under a repurchase agreement will be required to maintain the value
of the securities subject to the agreement at not less than 101% of the
repurchase price including accrued interest. Glenmede Fund's administrator and
the Sub-Advisor will mark to market daily the value of the securities purchased,
and the Sub-Advisor will, if necessary, require the seller to deposit additional
securities to ensure that the value is in compliance with the 101% requirement
stated above. The Sub-Advisor will consider the creditworthiness of a seller in
determining whether the Portfolio should enter into a repurchase agreement, and
the Portfolio will only enter into repurchase agreements with banks and dealers
which are determined to present minimal credit risk by the Sub-Advisor under
procedures adopted by the Board of Directors.
In effect, by entering into a repurchase agreement, the Portfolio is
lending its funds to the seller at the agreed upon interest rate and receiving
securities as collateral for the loan. Such agreements can be entered into for
periods of one day (overnight repo) or for a fixed term (term repo). Repurchase
agreements are a common way to earn interest income on short-term funds.
The use of repurchase agreements involves certain risks. For example,
if the seller of a repurchase agreement defaults on its obligation to repurchase
the underlying securities at a time when the value of these securities has
declined, the Portfolio may incur a loss upon disposition of them. Default by
the seller would also expose the 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
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underlying securities are collateral not within the control of the Portfolio and
therefore subject to sale by the trustee in bankruptcy. Further, it is possible
that the Portfolio may not be able to substantiate its interest in the
underlying securities.
Reverse Repurchase Agreements. The Portfolio may enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and simultaneously commits to repurchase that security at a future date
from the buyer. In effect, the Portfolio is temporarily borrowing funds at an
agreed upon interest rate from the purchaser of the security, and the sale of
the security represents collateral for the loan. The Portfolio retains record
ownership of the security and the right to receive interest and principal
payments on the security. At an agreed upon future date, the Portfolio
repurchases the security by remitting the proceeds previously received, plus
interest. In certain types of agreements, there is no agreed upon repurchase
date and interest payments are calculated daily, often based on the prevailing
overnight repurchase rate. These agreements, which are treated as if
reestablished each day, are expected to provide the Emerging Markets Portfolio
with a flexible borrowing tool. Reverse repurchase agreements are considered to
be borrowings by the Portfolio under the 1940 Act.
The Portfolio's investment of the proceeds of a reverse repurchase
agreement is the speculative factor known as leverage. The Portfolio may enter
into a reverse repurchase agreement only if the interest income from investment
of the proceeds is greater than the interest expense of the transaction and the
proceeds are invested for a period no longer than the term of the agreement. The
Portfolio will maintain with the custodian a separate account with a segregated
portfolio of liquid securities at least equal to its purchase obligations under
these agreements. The Sub-Advisor will consider the creditworthiness of the
other party in determining whether the Portfolio will enter into a reverse
repurchase agreement.
Under normal circumstances, the Portfolio will not enter into reverse
repurchase agreements if entering into such agreements would cause, at the time
of entering into such agreements, more than 10% of the value of its total assets
to be subject to such agreements.
The use of reverse repurchase agreements involves certain risks. For
example, the other party to the agreement may default on its obligation or
become insolvent and unable to deliver the securities to the Portfolio at a time
when the value of the securities has increased. Reverse repurchase agreements
also involve the risk that the Portfolio may not be able to substantiate its
interest in the underlying securities.
Lending of Securities. The 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 Sub-Advisor to be of good standing.
"When Issued," "Delayed Settlement," and "Forward Delivery" Securities.
The Portfolio may purchase and sell securities on a "when issued," "delayed
settlement" or "forward delivery" basis. "When issued" or "forward delivery"
refer to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery. When issued
or forward delivery transactions may be expected to occur one month or more
before delivery is due. Delayed settlement is a term used to describe settlement
of a securities transaction in the secondary market which will occur sometime in
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the future. No payment or delivery is made by the 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. The 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 the Portfolio receives no
income from the above described securities prior to delivery, the market value
of such securities is still subject to change.
The 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 the Portfolio engages in when issued, delayed settlement or forward
delivery transactions, it will do so for the purpose of acquiring securities
consistent with its investment objective and policies and not for the purposes
of speculation. The 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 the Portfolio will only sell securities on
such a basis to offset securities purchased on such a basis.
Borrowing. The Portfolio may purchase securities on a "when issued,"
"delayed settlement" or "forward delivery" basis and may enter into reverse
repurchase agreements. As a temporary measure for extraordinary or emergency
purposes, the Portfolio may borrow money from banks. However, the Portfolio will
not borrow money for speculative purposes.
Forward Foreign Currency Exchange Contracts. The Portfolio may enter
into forward foreign currency exchange contracts in connection with the purchase
and sale of investment securities; such contracts may not be used for
speculative purposes. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts may be
bought or sold to protect the Portfolio, to some degree, against a possible loss
resulting from an adverse change in the relationship between foreign currencies
and the U.S. dollar. It should be realized that this method of protecting the
value of the Portfolio's investment securities against a decline in the value of
a currency does not eliminate fluctuations in the underlying prices of the
securities. It simply establishes a rate of exchange at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they tend
to limit any potential gain which might result should the value of such currency
increase.
Depositary Receipts. The Emerging Markets Portfolio may purchase
sponsored or unsponsored ADRs, EDRs and GDRs (collectively, "Depositary
Receipts"). ADRs are depositary receipts typically issued by a U.S. bank or
trust company which evidence ownership of underlying securities issued by a
foreign corporation. EDRs and GDRs are depository receipts typically issued by
foreign banks or trust companies, although they also may be issued by U.S. banks
or trust companies, and evidence ownership of underlying securities issued by
either a foreign or a United States corporation. Generally, Depositary Receipts
in registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements to
have its securities traded in the form of Depositary Receipts. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program.
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Accordingly, there may be less information available regarding issuers of
securities underlying unsponsored programs and there may not be a correlation
between such information and the market value of the Depositary Receipts.
Depositary Receipts also involve the risks of other investments in foreign
securities, as discussed below. For purposes of the Portfolio's investment
policies, the Portfolio's investments in Depositary Receipts will be deemed to
be investments in the underlying securities.
Illiquid Securities. The Portfolio will not invest more than 15% of net
assets in securities that are illiquid. Illiquid securities are difficult to
sell promptly at an acceptable price.
Unless specified above and except as described under "Investment
Limitations," the foregoing investment policies are not fundamental and the
Board may change such policies without shareholder approval.
RISK FACTORS
Shareholders should understand that all investments involve risk and
there can be no guarantee against loss resulting from an investment in the
Portfolio, nor can there be any assurance that the Portfolio's investment
objective will be attained. As with any investment in securities, the value of,
and income from, an investment in the Portfolio can decrease as well as
increase, depending on the variety of factors which may affect the values and
income generated by the Portfolio's securities, including general economic
conditions, market factors and currency exchange rates. An investment in the
Portfolio is not intended as a complete investment program.
Foreign Securities. The Portfolio has the right to purchase securities
in any foreign country, developed or underdeveloped. Investors should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations, which are in addition to the usual
risks inherent in domestic investments. Investors should recognize that
investing in the securities of foreign companies involve special risks and
considerations not typically associated with investing in U.S. companies. These
risks and considerations include differences in accounting, auditing and
financial reporting standards, generally higher commission rates on foreign
portfolio transactions, the possibility of expropriation or confiscatory
taxation, adverse changes in investment or exchange control regulations,
political instability which could affect U.S. investment in foreign countries,
and potential restrictions on the flow of international capital. Moreover, the
dividends payable on 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 the 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, the Portfolio may encounter difficulties or be unable to pursue legal
remedies and obtain judgments in foreign courts.
These risks are often heightened for investments in developing or
emerging markets, including certain Eastern European countries where the risks
include the possibility that such countries may revert to a centrally planned
economy. Developing countries may also impose restrictions on the Portfolio's
ability to repatriate investment income or capital. Even where there is no
outright restriction on repatriation of investment income or capital, the
mechanics of
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repatriation may affect certain aspects of the operations of the Portfolio. For
example, funds may be withdrawn from the People's Republic of China only in U.S.
or Hong Kong dollars and only at an exchange rate established by the government
once each week.
Some of the currencies in emerging markets have experienced
devaluations relative to the U.S. dollar, and major adjustments have been made
periodically in certain of such currencies. Certain developing countries face
serious exchange constraints.
Lastly, governments of some developing countries exercise substantial
influence over many aspects of the private sector. In some countries, the
government owns or controls many companies, including the largest in the
country. As such, government actions in the future could have a significant
effect on economic conditions in developing countries in these regions, which
could affect private sector companies, the Portfolio and the value of its
securities. Furthermore, certain developing countries are among the largest
debtors to commercial banks and foreign governments. Trading in debt obligations
issued or guaranteed by such governments or their agencies and instrumentalities
involves a high degree of risk.
Brokerage commissions, custodial services, and other costs relating to
investment in foreign securities markets are generally more expensive than in
the United States. Foreign securities markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of 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
Portfolio to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result either in losses to
the Portfolio due to subsequent declines in value of the portfolio security or,
if the Portfolio has entered into a contract to sell the security, could result
in possible liability to the purchaser.
In many emerging markets, there is less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the United States. The foreign securities markets of
many of the countries in which the Portfolio may invest may also be smaller,
less liquid, and subject to greater price volatility than those in the United
States.
There are further risk factors, including possible losses through the
holding of securities in domestic and foreign custodian banks and depositories.
PURCHASE OF SHARES
Shares of the Portfolio are sold without a sales commission on a
continuous basis to the Advisor acting on behalf of its clients ("Clients") and
to other institutions (the "Institutions"), at the net asset value per share
next determined after receipt of the purchase order by Glenmede Fund's transfer
agent. See "Valuation of Shares." The minimum initial investment for the
Portfolio is $25,000; the minimum for subsequent investments for the Portfolio
is $1,000. Glenmede Fund reserves the right to reduce or waive the minimum
initial and subsequent investment requirements from time to time. Beneficial
ownership of shares will be reflected on books maintained by the Advisor or the
Institutions. A prospective investor wishing to purchase shares in Glenmede Fund
should contact the Advisor or his or her Institution.
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It is the Advisor's responsibility to transmit orders for share
purchases to Investment Company Capital Corp. ("ICC"), Glenmede Fund's transfer
agent, and deliver required funds to Glenmede Fund's custodian, on a timely
basis.
Glenmede Fund reserves the right, in its sole discretion, to suspend
the offering of shares of the Portfolio or reject purchase orders when, in the
judgment of management, such suspension or rejection is in the best interests of
Glenmede Fund.
Purchases of the 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 the Portfolio may be redeemed at any time, without cost, at
the net asset value of the Portfolio next determined after receipt of the
redemption request by the transfer agent. Generally, a properly signed written
request is all that is required. Any redemption may be more or less than the
purchase price of the shares depending on the market value of the investment
securities held by the Portfolio. An investor wishing to redeem shares should
contact the Advisor or his or her Institution. It is the responsibility of the
Advisor to transmit promptly redemption orders to the transfer agent.
Payment of the redemption proceeds will ordinarily be made within one
business day, but in no event more than seven days, after receipt of the order
in proper form by the transfer agent. Redemption orders are effected at net
asset value per share next determined after receipt of the order in proper form
by the transfer agent. Glenmede Fund may suspend the right of redemption or
postpone the date of payment at times when the New York Stock Exchange (the
"Exchange") is closed, or under any emergency circumstances as determined by the
Securities and Exchange Commission (the "Commission"). See "Valuation of Shares"
for the days on which the Exchange is closed.
If Glenmede Fund's Board determines that it would be detrimental to the
best interests of the remaining shareholders of the Portfolio to make payment
wholly or partly in cash, Glenmede Fund may pay the redemption proceeds in whole
or in part by a distribution in-kind of securities held by the Portfolio in lieu
of cash in conformity with applicable rules of the Commission. Investors may
incur brokerage charges on the sale of portfolio securities received as a
redemption in kind.
Glenmede Fund reserves the right, upon 30 days' written notice, to
redeem an account in the Portfolio if the net asset value of the account's
shares falls below $100 and is not increased to at least such amount within such
30-day period.
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION
OF SHARES
Glenmede Fund may, from time to time, in its sole discretion appoint
one or more entities, including the Advisor, as its agent to receive purchase
and redemption orders of shares of the Portfolio and cause these orders to be
transmitted, on a net basis, to Glenmede Fund's transfer agent. As of date of
this Prospectus, only the Advisor serves as the Glenmede Fund's agent to receive
and transmit purchase and redemption orders. The Advisor is not entitled to
receive any fee from shareholders and/or the Glenmede Fund for acting as the
Glenmede Fund's agent to receive and transmit purchase and redemption orders. In
these instances, orders are effected at the net asset value per share next
determined after receipt of
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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 of the Portfolio is determined by dividing the
total market value of its investments and other assets, less any of its
liabilities, by the total outstanding shares of the Portfolio. The Portfolio's
net asset value per share is determined as of the close of regular trading hours
of the Exchange on each day that the Exchange is open for business and the
Portfolio receives an order to purchase or redeem its shares. Currently the
Exchange is closed on weekends and the customary national business holidays of
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day (or the days on which they are
observed). One or more pricing services may be used to provide securities
valuations in connection with the determination of the net asset value of the
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 Portfolio normally distributes substantially all of its net
investment income to shareholders in the form of a quarterly dividend. If any
net capital gains are realized, the Portfolio 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 the Portfolio's net
assets for the purpose of calculating net asset value per share. Therefore, on
the Portfolio's "ex-dividend" date, the net asset value per share excludes the
dividend (i.e., is reduced by the per share amount of the dividend). Dividends
paid shortly after the purchase of shares of the Portfolio by an investor,
although in effect a return of capital, are taxable to the investor.
FEDERAL TAXES
The Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification generally relieves the 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 the 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, the Portfolio's investment company taxable income will be its net
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investment income, including interest and dividends, subject to certain
adjustments, and net short-term capital gain excluding the excess of any net
long-term capital gain for the taxable year over the net short-term capital
loss, if any, for such year. The 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 the 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 the 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 Portfolio will be eligible for the
dividends received deduction.
Substantially all of the Portfolio's net realized long-term capital
gains, if any, will be distributed at least annually to its shareholders. The
Portfolio generally will have no tax liability with respect to such gains and
the distributions will be taxable to the shareholders who are not currently
exempt from Federal income taxes as long-term capital gains, regardless of how
long the shareholders have held the shares and whether such gains are received
in cash or reinvested in additional shares.
A shareholder considering buying shares of the Portfolio on or just
before the record date of a dividend should be aware that the amount of the
forthcoming dividend payment, although in effect a return of capital, will be
taxable.
A taxable gain or loss may be realized by a shareholder upon his
redemption or transfer of shares of the Portfolio, depending upon the tax basis
of such shares and their price at the time of redemption or transfer.
It is expected that dividends and certain interest income earned by the
Portfolio from foreign securities will be subject to foreign withholding taxes
or other taxes. So long as more than 50% of the value of the Portfolio's total
assets at the close of any taxable year consists of stock or securities of
foreign corporations, the Portfolio may elect, for U.S. Federal income tax
purposes, to treat certain foreign taxes paid by it, including generally any
withholding taxes and other foreign income taxes, as paid by its shareholders.
If the Portfolio makes this election, the amount of such foreign taxes paid by
the Portfolio will be included in its shareholders' income pro rata (in addition
to taxable distributions actually received by them), and each shareholder will
be entitled (a) to credit his proportionate amount of such taxes against his
U.S. Federal income tax liabilities, or (b) if he itemizes his deductions, to
deduct such proportionate amount from his U.S. income, should he so choose.
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 the
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). The 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 Portfolio and its shareholders and is not intended as a
substitute for careful tax planning. Accordingly, potential investors in the
Portfolio should consult their tax advisers with specific reference to their own
tax situation.
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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.
The Portfolio will be required in certain cases to withhold and remit
to the United States Treasury 31% of taxable dividends or gross proceeds
realized upon sale paid to shareholders who have failed to provide a correct tax
identification number in the manner required, who are subject to withholding by
the IRS for failure properly to include on their return payments of taxable
interest or dividends, or who have failed to certify to the Portfolio that they
are not subject to backup withholding when required to do so or that they are
"exempt recipients."
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on
distributions from Glenmede Fund. A shareholder should consult with his tax
adviser with respect to the tax status of distributions from Glenmede Fund in a
particular state and locality.
Glenmede Fund has obtained a Certificate of Authority to do business as
a foreign corporation in Pennsylvania, and currently does business in that
state. Accordingly, the shares of the Portfolio will be exempt from Pennsylvania
Personal Property Taxes.
INVESTMENT ADVISOR
The Advisor, a limited purpose trust company chartered in 1956,
provides fiduciary and investment services to endowment funds, foundations,
employee benefit plans and other institutions and individuals. The Advisor is a
wholly-owned subsidiary of The Glenmede Corporation and is located at One
Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania 19103.
At January 31, 1997, the Advisor had over $10.3 billion in assets in the
accounts for which it serves in various capacities including as executor,
trustee or investment advisor.
Under its Investment Advisory Agreement with Glenmede Fund with respect
to the Portfolio, the Advisor, subject to the control and supervision of
Glenmede Fund's Board and in conformance with the stated investment objective
and policies of the Portfolio, has agreed to manage the investment and
reinvestment of the Portfolio assets, make investment decisions for the
Portfolio and place the Portfolio's purchase and sales orders.
Pursuant to that Agreement, the Advisor also may select a person to act
as sub-advisor. The Advisor and Glenmede Fund, on behalf of the Emerging Markets
Portfolio, have entered into a sub-investment advisory agreement with Pictet
International Management Limited, located at Cutlers Gardens, 5 Devonshire
Square, London, United Kingdom EC2M 4LD. The Sub-Advisor, subject to the control
and supervision of Glenmede Fund's Board and in conformance with the stated
investment objective and policies of the Portfolio, performs sub-advisory and
portfolio transaction services for the Portfolio, including managing the
Portfolio's holdings in accordance with the Portfolio's investment objective and
policies, making investment decisions concerning foreign assets for the
Portfolio, placing purchase and sale orders for portfolio transactions and
employing professional portfolio managers and security analysts who provide
research services to the Portfolio.
Effective November 1, 1996, the Advisor and Sub-Advisor are entitled to
receive fees from the Portfolio for their investment services computed daily and
-14-
<PAGE>
payable monthly at the annual rate of .75% and .50%, respectively, of the
Portfolio's average daily net assets. Prior to November 1, 1996, the Advisor and
Sub-Advisor were entitled to receive fees from the Portfolio for their
investment services computed daily and payable monthly at the annual rate of
.50% and .75%, respectively, of the Portfolio's average daily net assets. The
aggregate fees paid to the Portfolio's Advisor and Sub-Advisor are higher than
advisory fees paid by most other U.S. investment companies. Glenmede Fund's
Board believes such fees are comparable to the rates paid by other similar
funds. For the fiscal year ended October 31, 1996, the Advisor received a fee of
.50% of the Portfolio's average net assets and the Sub-Advisor received a fee at
the rate of .75% of the Portfolio's average net assets.
The Sub-Advisor is an affiliate of Pictet & Cie (the "Bank"), a Swiss
private bank, which was founded in 1805. As of January 31, 1997, the Bank
managed in excess of $10.3 billion for institutional and private clients. The
Bank is owned by seven partners. The Sub-Advisor was established in 1980 to
manage the investment needs of clients seeking to invest in the international
fixed revenue and equity markets. As of December 31, 1996, the Sub-Advisor and
its affiliates managed $4.9 billion for 118 clients.
Douglas Polunin, Senior Investment Manager at the Sub-Advisor, is a co-
portfolio manager for the Emerging Markets Portfolio. Mr. Polunin has been
employed by the Sub-Advisor since January 1989. Prior to his employment with the
Sub-Advisor, Mr. Polunin had been with Union Bank of Switzerland since 1982.
Morid Kamshad, Senior Investment Manager at the Sub-Advisor, is a co-
portfolio manager for the Emerging Markets Portfolio. Mr. Kamshad has been
employed by the Sub-Advisor since July 1995. Prior to his employment with the
Sub- Advisor, from March 1994 to July 1995, Mr. Kamshad worked at HSBC Asset
Management as an analyst specializing in the emerging markets of Europe and the
Middle East. From August 1989 to December 1993, he worked at Air Products and
Chemicals as a business development manager.
ADMINISTRATIVE, TRANSFER AGENCY AND DIVIDEND PAYING SERVICES
ICC serves as Glenmede Fund's administrator, transfer agent and
dividend paying agent pursuant to a Master Services Agreement and in those
capacities supervises all aspects of Glenmede Fund's day-to-day operations,
other than the management of Glenmede Fund's investments. ICC is a wholly-owned
subsidiary of Alex. Brown & Sons Incorporated ("Alex. Brown"). For its services
as administrator, transfer agent and dividend paying agent, ICC is entitled to
receive fees from Glenmede Fund equal to .12% of the first $100 million of the
combined net assets of Glenmede Fund and The Glenmede Portfolios, an investment
company with the same officers, Board and service providers as Glenmede Fund
(collectively, the "Funds"); .08% of the next $150 million of the combined net
assets of the Funds; .04% of the next $500 million of the combined net assets of
the Funds and .03% of the combined net assets of the Funds over $750 million.
For the fiscal year ended October 31, 1996, ICC received fees at the rate of
.04% of the Portfolio's average net assets.
INVESTMENT LIMITATIONS
The 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;
-15-
<PAGE>
(c) Acquire any securities of companies within one industry if, as
a result of such acquisition, more than 25% of the value of
its total assets would be invested in securities of companies
within such industry; provided, however, that there shall be
no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies, enterprises
or instrumentalities;
(d) Pledge, mortgage, or hypothecate any of its assets to an
extent greater than 15% of the Emerging Markets Portfolio's
total assets, each at fair market value, except as described
in this Prospectus and the SAI and in connection with entering
into futures contracts, but the deposit of assets in a
segregated account in connection with the writing of covered
put and call options and the purchase of securities on a when
issued, delayed settlement or forward delivery basis and
collateral arrangements with respect to initial or variation
margin for futures contracts will not be deemed to be pledges
of the Portfolio's assets or the purchase of any securities on
margin for purposes of this investment limitation;
(e) Issue senior securities, except that the Portfolio may borrow
money in accordance with investment limitation (f), purchase
securities on a when issued, delayed settlement or forward
delivery basis and enter into reverse repurchase agreements;
and
(f) Borrow money, except that the Portfolio may borrow money as a
temporary measure for extraordinary or emergency purposes, and
then not in excess of 10% of its total assets at the time of
borrowing (entering into reverse repurchase agreements and
purchasing securities on a when issued, delayed settlement or
forward delivery basis are not subject to this investment
limitation).
With respect to investment limitation (c), (a) there is no limitation
with respect to (i) instruments issued or guaranteed by the United States, any
state, territory or possession of the United States, the District of Columbia or
any of their authorities, agencies, instrumentalities or political subdivisions,
and (ii) repurchase agreements secured by the instruments described in clause
(i); (b) wholly-owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related to
financing the activities of the parents; and (c) utilities will be divided
according to their services; for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry.
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value of assets
will not constitute a violation of such restriction. If the 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. The Portfolio's borrowings including reverse
repurchase agreements and securities purchased on a when-issued, delayed
settlement or forward delivery basis may not exceed 33 1/3% of its total net
assets.
The investment limitations described here and in the SAI are
fundamental policies and may be changed only with the approval of the holders of
a majority of the outstanding shares (as defined in the 1940 Act) of the
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. Currently, Glenmede Fund is offering shares of nine Portfolios.
The shares of the 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 the 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.
At January 31, 1997, the Advisor was the record owner of 100% of the
outstanding shares of the Portfolio.
DISTRIBUTOR
Armata Financial Corp. ("Armata"), located at 1 South Street,
Baltimore, Maryland 21202, serves as Glenmede Fund's distributor. Armata is a
subsidiary of Alex. Brown.
CUSTODIAN
The Chase Manhattan Bank, N.A., Brooklyn, New York, serves as the
custodian of Glenmede Fund's assets.
TRANSFER AGENT
ICC, located at 1 South Street, Baltimore, Maryland 21202, serves as
Glenmede Fund's transfer agent.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P., Philadelphia, Pennsylvania serves as
independent accountants for Glenmede Fund and will audit its financial
statements annually.
REPORTS
Shareholders receive unaudited semi-annual financial statements and
audited annual financial statements.
COUNSEL
Drinker Biddle & Reath, Philadelphia, Pennsylvania, serves as counsel
to Glenmede Fund.
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<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. 40 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 of 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 Director 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 71 Director of Glenmede Fund; Trustee of The Glenmede
P.O. Box 44024 Portfolios; Trustee of Gintel Fund;
Phoenix, AZ 85064-4024 Director of XTRA Corporation; Former Executive Vice
President--Finance of ARAMARK, Inc.
G. Thompson Pew, Jr.* 54 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 44 Executive Vice President of Glenmede Fund; Vice President
One Liberty Place and Manager of The Fixed Income Division of The
1650 Market Street, Suite 1200 Glenmede Trust Company. She has been employed by
Philadelphia, PA 19103 The Glenmede Trust Company since 1982.
Kimberly C. Osborne 31 Vice President of Glenmede Fund; Vice President of The
One Liberty Plaza Glenmede Trust Company. She has been employed by The
1650 Market Street, Suite 1200 Glenmede Trust Company since 1993. From 1992-1993, she
Philadelphia, PA 19103 was a Client Service Manager with Mutual Funds Service
Company and from 1987-1992, she was a Client Administrator
with The Vanguard Group, Inc.
Michael P. Malloy 37 Secretary of Glenmede Fund; Partner in the law firm of
Philadelphia National Bank Building Drinker Biddle & Reath.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Edward J. Veilleux 53 Assistant Secretary of Glenmede Fund; Principal, Alex.
1 South Street Brown; President, ICC and Armata.
Baltimore, MD 21202
Joseph A. Finelli 40 Treasurer of Glenmede Fund. He has been a Vice President
1 South Street of Alex. Brown since 1995. Prior thereto, he was Vice
Baltimore, MD 21202 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.
-18-
<PAGE>
For additional information concerning remuneration of Board members see
"Management of Glenmede Fund" in the SAI.
-------------------
Shareholder inquiries should be addressed to Glenmede Fund at the
address or telephone number stated on the cover page.
-19-
<PAGE>
THE GLENMEDE FUND, INC.
1 South Street, Baltimore, Maryland 21202
Prospectus
Dated February 27, 1997
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
Investment Sub-Advisor Distributor
(for Emerging Markets Portfolio)
Pictet International Management Limited Armata Financial Corp.
Cutlers Gardens 1 South Street
5 Devonshire Square Baltimore, Maryland 21202
London, United Kingdom
EC2M 4LD
- -------------------------------------------------------------------------------
Table of Contents
Page
----
EXPENSES OF THE PORTFOLIOS............................................ 2
FINANCIAL HIGHLIGHTS.................................................. 3
PERFORMANCE CALCULATIONS.............................................. 4
INVESTMENT OBJECTIVES AND POLICIES.................................... 4
INVESTMENT TECHNIQUES................................................. 6
RISK FACTORS.......................................................... 9
PURCHASE OF SHARES.................................................... 10
REDEMPTION OF SHARES.................................................. 11
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF SHARES....... 11
VALUATION OF SHARES................................................... 12
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES...................... 12
INVESTMENT ADVISOR.................................................... 14
ADMINISTRATIVE, TRANSFER AGENCY AND DIVIDEND PAYING SERVICES.......... 15
INVESTMENT LIMITATIONS................................................ 15
GENERAL INFORMATION................................................... 17
BOARD MEMBERS AND OFFICERS............................................ 18
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>
THE GLENMEDE FUND, INC.
(800) 442-8299
STATEMENT OF ADDITIONAL INFORMATION
INSTITUTIONAL INTERNATIONAL PORTFOLIO
EMERGING MARKETS PORTFOLIO
February 27, 1997
This Statement of Additional Information is not a prospectus but should
be read in conjunction with The Glenmede Fund, Inc.'s ("Glenmede Fund")
Prospectus for the Institutional International Portfolio and the Emerging
Markets Portfolio (the "Prospectus") dated February 27, 1997. To obtain the
Prospectus, please call Glenmede Fund at the above telephone number.
Capitalized terms used in this Statement of Additional Information and
not otherwise defined have the same meanings given to them in Glenmede Fund's
Prospectus.
Table of Contents Page
INVESTMENT OBJECTIVES AND POLICIES....................................... 2
PURCHASE OF SHARES....................................................... 2
REDEMPTION OF SHARES..................................................... 3
SHAREHOLDER SERVICES..................................................... 3
PORTFOLIO TURNOVER....................................................... 3
INVESTMENT LIMITATIONS................................................... 3
MANAGEMENT OF GLENMEDE FUND.............................................. 7
INVESTMENT ADVISORY AND OTHER SERVICES................................... 8
DISTRIBUTOR.............................................................. 9
PORTFOLIO TRANSACTIONS................................................... 9
ADDITIONAL INFORMATION CONCERNING TAXES.................................. 11
PERFORMANCE CALCULATIONS................................................. 17
GENERAL INFORMATION...................................................... 18
EXPENSES................................................................. 19
FINANCIAL STATEMENTS..................................................... 20
OTHER INFORMATION ....................................................... 20
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS........................ A-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and
policies set forth in Glenmede Fund's Prospectus:
Repurchase Agreements
Repurchase agreements that do not provide for payment to a Portfolio
within seven days after notice without taking a reduced price are considered
illiquid securities.
Securities Lending
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, a Portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolio. A Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940 (the "1940 Act") or the
rules and regulations or interpretations of the Securities and Exchange
Commission (the "Commission") thereunder. All relevant facts and circumstances,
including the creditworthiness of the broker, dealer or institution, will be
considered by the Advisor in making decisions with respect to the lending of
securities, subject to review by Glenmede Fund's Board.
PURCHASE OF SHARES
The purchase price of shares of each Portfolio is the net asset value
next determined after receipt of the purchase order by the particular Portfolio.
Each Portfolio reserves the right in its sole discretion (i) to suspend
the offering of its shares, (ii) to reject purchase orders when in the judgment
of management such rejection is in the best interest of the Portfolio, and (iii)
to reduce or waive the minimum for initial and subsequent investments from time
to time.
At the discretion of Glenmede Fund, investors may be permitted to
purchase Portfolio shares by transferring securities to the Portfolio that meet
the Portfolio's investment objectives and policies.
-2-
<PAGE>
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date
of payment (i) during any period that the New York Stock Exchange (the
"Exchange") is closed, or trading on the Exchange is restricted as determined by
the Commission, (ii) during any period when an emergency exists as defined by
the rules of the Commission as a result of which it is not reasonably
practicable for a Portfolio to dispose of securities owned by it, or fairly to
determine the value of its assets, and (iii) for such other periods as the
Commission may permit.
No charge is made by a Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
SHAREHOLDER SERVICES
Transfer of Shares. Shareholders may transfer shares of the
Portfolios to another person. An investor wishing to transfer
shares should contact the Advisor.
PORTFOLIO TURNOVER
A high portfolio turnover rate can result in corresponding increases in
brokerage commissions; however, the Advisor, and Sub-Advisor with respect to the
Emerging Markets Portfolio, will not consider portfolio turnover rate a limiting
factor in making investment decisions consistent with that Portfolio's
investment objectives and policies. The portfolio turnover rates of the
Institutional International Portfolio for the fiscal years ended October 31,
1996 and 1995 were 10% and 25%, respectively. The portfolio turnover rate of the
Emerging Markets Portfolio for the fiscal year ended October 31, 1996 and for
the period December 14, 1994 (commencement of operations) to October 31, 1995
were 44% and 50% (annualized), respectively.
INVESTMENT LIMITATIONS
Each Portfolio is subject to the following restrictions which are
fundamental policies and may not be changed without the approval of the lesser
of: (1) 67% of the voting securities of the Portfolio present at a meeting if
the holders of more than 50% of the outstanding voting securities of the
Portfolio are present or represented by proxy, or (2) more than 50% of the
outstanding voting securities of the Portfolio. Each Portfolio will not:
(1) invest in commodities or commodity contracts, except
that each Portfolio may invest in futures contracts and
options;
-3-
<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 (10)
below, and money market instruments, including bankers
acceptances and commercial paper, and selling securities on a
when issued, delayed settlement or forward delivery basis)
which are publicly or privately distributed, and (ii) by
lending its portfolio securities to banks, brokers, dealers
and other financial institutions so long as such loans are not
inconsistent with the 1940 Act or the rules and regulations or
interpretations of the Commission thereunder;
(4) purchase on margin or sell short, except as specified
above in investment limitation (1);
(5) purchase more than 10% of any class of the outstanding
voting securities of any issuer;
(6) with respect as to 75% of its total assets, invest more than
5% of its total assets at the time of purchase in the
securities of any single issuer (other than obligations issued
or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities);
(7) issue senior securities, except that each Portfolio may borrow
money in accordance with investment limitation (8) below,
purchase securities on a when issued, delayed settlement or
forward delivery basis and enter into reverse repurchase
agreements;
(8) borrow money, except that each Portfolio may borrow money as a
temporary measure for extraordinary or emergency purposes, and
then not in excess of 10% of its total assets at the time of
the borrowing (entering into reverse repurchase agreements and
purchasing securities on a when issued, delayed settlement or
forward delivery basis are not subject to this investment
limitation);
(9) pledge, mortgage, or hypothecate any of its assets to an
extent greater than 10% of its total assets at fair market
value in the case of the Institutional International Portfolio
and 15% in the case of the Emerging Markets Portfolio, except
as described in the
-4-
<PAGE>
Prospectus and this SAI and in connection with entering into
futures contracts, but the deposit of assets in a segregated
account in connection with the writing of covered put and call
options and the purchase of securities on a when issued,
delayed settlement or forward delivery basis and collateral
arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be pledges of a
Portfolio's assets or the purchase of any securities on margin
for purposes of this investment limitation;
(10) underwrite the securities of other issuers or invest more than
an aggregate of 10% of the total assets of the Institutional
International Portfolio or 15% of the total assets of the
Emerging Markets Portfolio, at the time of purchase, in
securities for which there are no readily available markets,
including repurchase agreements which have maturities of more
than seven days or, in the case of Institutional International
Portfolio, securities subject to legal or contractual
restrictions on resale;
(11) invest for the purpose of exercising control over management
of any company;
(12) invest its assets in securities of any investment company,
except in connection with mergers, acquisitions of assets or
consolidations and except as may otherwise be permitted by the
1940 Act;
(13) acquire any securities of companies within one industry if, as
a result of such acquisition, more than 25% of the value of
the Portfolio's total assets would be invested in securities
of companies within such industry; provided, however, that
there shall be no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities, or instruments issued by
U.S. banks; and
(14) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value or assets
will not constitute a violation of such restriction.
With regard to limitations (8) and (9), each Portfolio may borrow money
as a temporary measure for extraordinary or emergency purposes, enter into
reverse repurchase agreements and purchase securities on a when-issued, delayed
settlement or
-5-
<PAGE>
forward delivery basis, which activities may involve a borrowing, provided that
the aggregate of such borrowings shall not exceed 33 1/3% of the value of each
Portfolio's total assets (including the amount borrowed) less liabilities (other
than borrowings) and may pledge up to 33 1/3% of the value of its total assets
to secure borrowings.
With regard to limitation (12), the 1940 Act currently prohibits an
investment company from acquiring securities of another investment company if,
as a result of the transaction, the acquiring company and any company or
companies controlled by it would own in the aggregate: (i) more than 3% of the
total outstanding voting stock of the acquired company, (ii) securities issued
by the acquired company having an aggregate value in excess of 5% of the value
of the total assets of the acquiring company, or (iii) securities issued by the
acquired company and all other investment companies (other than treasury stock
of the acquired company) having an aggregate value in excess of 10% of the value
of the total assets of the acquiring company. The 1940 Act also currently
prohibits an investment company from acquiring securities of a registered
closed-end investment company, if as a result of the transaction, the acquiring
company, other investment companies having the same investment adviser, and
companies controlled by such investment companies, own more than 10% of the
total outstanding voting stock of such closed-end company. In addition to the
advisory fees and other expenses that a Portfolio bears directly in connection
with its own operations, as a shareholder of another investment company, such
Portfolio would bear its "pro rata" portion of the other investment company's
advisory fees and other expenses. Therefore, to the extent that a Portfolio is
invested in shares of other investment companies, the Portfolio's shareholders
will be subject to expenses of such other investment companies, in addition to
expenses of the Portfolio.
With respect to investment limitation (13), (a) there is no limitation
with respect to (i) instruments issued or guaranteed by the United States, any
state, territory or possession of the United States, the District of Columbia or
any of their authorities, agencies, instrumentalities or political subdivisions,
and (ii) repurchase agreements secured by the instruments described in clause
(i); (b) wholly-owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related to
financing the activities of the parents; and (c) utilities will be divided
according to their services; for example, gas, gas transaction, electric and
gas, electric and telephone will each be considered a separate industry.
With regard to limitation (14), the purchase of securities
of a corporation, a subsidiary of which has an interest in oil,
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<PAGE>
gas or other mineral exploration or development programs, shall not be deemed to
be prohibited by the limitation.
MANAGEMENT OF GLENMEDE FUND
Glenmede Fund's officers, under the supervision of the Board, manage
the day-to-day operations of Glenmede Fund. The Board members set broad policies
for Glenmede Fund and choose its officers. A list of the Board members and
officers and a brief statement of their current positions and principal
occupations during the past five years is set forth in the Prospectus.
Remuneration of Board Members
Effective June 12, 1996, Glenmede Fund pays each Board member, other
than Mr. Church, an annual fee of $8,000 plus $1,250 for each Board meeting
attended and each Board Valuation Committee meeting attended (unless such
meeting was held in conjunction with a Board meeting) and out-of-pocket expenses
incurred in attending Board meetings. Prior to June 12, 1996, Glenmede Fund paid
each Board member, other than Mr. Church, an annual fee of $6,000 plus $1,250
for each Board meeting attended and out-of-pocket expenses incurred in attending
Board meetings. Officers of Glenmede Fund receive no compensation as officers
from Glenmede Fund.
Set forth in the table below is the compensation received by each Board
member for the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
Pension or Total
Retirement compensation
Benefits Estimated from Glenmede
Aggregate accrued as Annual Fund and Fund
Compensation part of Benefits Complex (1)
Name of from Glenmede Fund's Upon paid to
Person, Position Glenmede Fund expenses Retirement Directors
---------------- ------------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Dr. H. Franklin Allen, Ph.D., $14,441 None None $15,500
Director
Willard S. Boothby, Jr., $11,941 None None $13,000
Director
John W. Church, Jr. None None None None
Director
Francis J. Palamara, $11,941 None None $13,000
Director
G. Thompson Pew, Jr., $14,441 None None $15,500
Director
</TABLE>
- --------------------------------
(1) Includes total compensation from Glenmede Fund and The Glenmede Portfolios,
both of which are advised by the Advisor.
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<PAGE>
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
73 shareholders. The Corporation has a nine person Board of Directors which, at
January 31, 1997, collectively, owned 98.67% of the Corporation's voting shares
and 35.70% of the Corporation's total outstanding shares. The members of the
Board and their respective interests in the Corporation at January 31, 1997 are
as follows:
<TABLE>
<CAPTION>
The Glenmede Corporation Percent of Percent of
Board of Directors Voting Shares Total Shares
- ------------------------ ------------- ------------
<S> <C> <C>
Susan W. Catherwood.................................. 10.83% 1.17%
Richard F. Pew....................................... 10.83% 1.03%
Thomas W. Langfitt, M.D.............................. 11.07% 7.59%
Arthur E. Pew III.................................... 10.83% 1.03%
J. Howard Pew, II.................................... 10.83% 1.37%
J. N. Pew, III....................................... 11.07% 5.25%
J. N. Pew, IV........................................ 11.07% 1.37%
R. Anderson Pew...................................... 11.07% 5.82%
Ethel Benson Wister.................................. 11.07% 11.07%
------ ------
98.67% 35.70%
</TABLE>
The Advisor is entitled to receive a fee from the Institutional
International Portfolio for its services, calculated daily and payable monthly,
at the annual rate of .75% of the Institutional International Portfolio's
average daily net assets. The Advisor has agreed to waive its fees to the extent
necessary to ensure that the Institutional International Portfolio's annual
total operating expenses do not exceed 1.00% of average net assets. During the
fiscal years ended October 31, 1996, 1995 and 1994, the Institutional
International Portfolio paid the Advisor advisory fees of $382,491, $155,065 and
$114,956, respectively, and the Advisor waived fees in the amounts of $0, $0 and
$1,110, respectively.
Effective November 1, 1996, the Advisor is entitled to receive a fee
from the Emerging Markets Portfolio for its services, calculated daily and
payable monthly, at the annual rate of .75% of the Emerging Markets Portfolio's
average daily net assets, and the Sub-Advisor is entitled to receive a fee from
the Emerging Markets Portfolio for its services, calculated daily and payable
monthly, at the annual rate of .50% of the Emerging Markets Portfolio's average
daily net assets. Prior to November 1, 1996, the Advisor and Sub-Advisor were
entitled to receive fees from the Emerging Markets Portfolio for their services,
calculated daily and payable monthly at the annual rate of .50% and .75%,
respectively, of the Emerging Market Portfolio's average daily net assets. For
the fiscal year ended October 31,
-8-
<PAGE>
1996 and for the period December 14, 1994 (commencement of operations) to
October 31, 1995, the Emerging Markets Portfolio paid the Advisor advisory fees
of $331,946 and $109,919, respectively, and paid the Sub-Advisor sub-advisory
fees of $498,632 and $130,000, respectively.
Since July 1, 1995, administrative transfer agency and dividend paying
services have been provided to Glenmede Fund by ICC pursuant to a Master
Services Agreement. See "Administrative, Transfer Agency and Dividend Paying
Services" in the Prospectus for information concerning the substantive
provisions of the Master Services Agreement. For the fiscal year ended October
31, 1996 and for the period July 1, 1995 to October 31, 1995, Glenmede Fund paid
ICC fees of $20,500 and $3,798, respectively, for the Institutional
International Portfolio and $25,712 and $4,524, respectively, for the Emerging
Markets Portfolio.
For the period May 7, 1994 to June 30, 1995, administrative services
were provided to Glenmede Fund by The Shareholder Services Group, Inc. ("TSSG"),
pursuant to an Administration Agreement. For the periods November 1, 1994 to
June 30, 1995 and May 7, 1994 to October 31, 1994, Glenmede Fund paid TSSG
administrative fees of $10,092 and $7,519, respectively, for the Institutional
International Portfolio. For the period December 14, 1994 (commencement of
operations) to June 30, 1995, Glenmede Fund paid TSSG administrative fees of
$7,397 for the Emerging Markets Portfolio.
Prior to May 6, 1994, The Boston Company Advisors, Inc. ("Boston
Advisors"), an indirect wholly owned subsidiary of Mellon Bank Corporation,
served as Glenmede Fund's administrator. For the period November 1, 1993 to May
5, 1994, Glenmede Fund paid Boston Advisors administrative fees of $6,453 for
the Institutional International Portfolio.
Custody services are provided to the Institutional International and
Emerging Markets Portfolios by The Chase Manhattan Bank, N.A., Brooklyn, New
York.
DISTRIBUTOR
Shares of Glenmede Fund are distributed continuously and are offered
without a sales load by Armata, pursuant to a Distribution Agreement between
Glenmede Fund and Armata. Armata receives no fee from Glenmede Fund for its
distribution services.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements and the Sub-Advisory Agreement
authorize the Advisor, and the Sub-Advisor for the Emerging Markets Portfolio,
to select the brokers or dealers that
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<PAGE>
will execute the purchases and sales of investment securities for each of the
Portfolios and direct the Advisor or the Sub-Advisor to use their best efforts
to obtain the best available price and most favorable execution with respect to
all transactions for the Portfolios. The Advisor or the Sub-Advisor, if any,
may, however, consistent with the interests of a Portfolio, select brokers on
the basis of the research, statistical and pricing services they provide to a
Portfolio. Information and research received from such brokers will be in
addition to, and not in lieu of, the services required to be performed by the
Advisor or Sub-Advisor under the Investment Advisory Agreements and the Sub-
Advisory Agreement. A commission paid to such brokers may be higher than that
which another qualified broker would have charged for effecting the same
transaction, provided that such commissions are paid in compliance with the
Securities Exchange Act of 1934, as amended, and that the Advisor or Sub-Advisor
determines in good faith that such commission is reasonable in terms either of
the transaction or the overall responsibility of the Advisor or Sub-Advisor to a
Portfolio and the Advisor's or Sub-Advisor's other clients.
During the fiscal years ended October 31, 1996, 1995 and 1994, the
Institutional International Portfolio paid $40,839, $122,396 and $33,893,
respectively, in brokerage commissions. For the fiscal year ended October 31,
1996 and for the period December 14, 1994 (commencement of operations) to
October 31, 1995, the Emerging Markets Portfolio paid $535,111 and $258,281,
respectively, in brokerage commissions.
Because shares of the Portfolios are not marketed through intermediary
brokers or dealers, it is not Glenmede Fund's practice to allocate brokerage or
effect principal transactions with dealers on the basis of sales of shares which
may be made through such firms. However, the Advisor may place portfolio orders
with qualified broker-dealers who refer clients to the Advisor and the other
Institutions.
Some securities considered for investment by a Portfolio may also be
appropriate for other clients served by the Advisor or Sub-Advisor. If purchase
or sale of securities is consistent with the investment policies of a Portfolio
and one or more of these other clients served by the Advisor or Sub-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 or Sub-Advisor. While in some cases this practice could have a
detrimental effect on the price, value or quantity of the security as far as a
Portfolio is concerned, in other cases it is believed to be beneficial to the
Portfolios.
-10-
<PAGE>
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 during a
taxable year. At least 90% of the gross income of each Portfolio must be derived
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies, and
other income (including, but not limited to, gains from options, futures, or
forward contracts) derived with respect to the Portfolio's business of investing
in such stock, securities or currencies. The Treasury Department may by
regulation exclude from qualifying income foreign currency gains which are not
directly related to a Portfolio's principal business of investing in stock or
securities, or options and futures with respect to stock or securities. Any
income derived by a Portfolio from a partnership or trust is treated for this
purpose as derived with respect to the Portfolio's business of investing in
stock, securities or currencies only to the extent that such income is
attributable to items of income which would have been qualifying income if
realized by the Portfolio in the same manner as by the partnership or trust.
A Portfolio will not be treated as a regulated investment company under
the Code if 30% or more of its gross income for a taxable year is derived from
gains realized on the sale or other disposition of the following investments
held for less than three months: (1) stock and securities (as defined in section
2(a)(36) of the 1940 Act); (2) options, futures and forward contracts other than
those on foreign currencies; and (3) foreign currencies (and options, futures
and forward contracts on foreign currencies) that are not directly related to
the Portfolio's principal business of investing in stock and securities (and
options and futures with respect to stocks and securities).
-11-
<PAGE>
Interest (including original issue discount and accrued market discount)
received by a Portfolio upon maturity or disposition of a security held for less
than three months will not be treated as gross income derived from the sale or
other disposition of such security within the meaning of this requirement.
However, income which is attributable to realized market appreciation will be
treated as gross income from the sale or other disposition of securities for
this purpose. With respect to covered call options, if the call is exercised by
the holder, the premium and the price received on exercise constitute the
proceeds of sale, and the difference between the proceeds and the cost of the
securities subject to the call is capital gain or loss. Premiums from expired
call options written by a Portfolio and net gains from closing purchase
transactions are treated as short-term capital gains for Federal income tax
purposes, and losses on closing purchase transactions are short-term capital
losses.
Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to shareholders as long-term capital gain,
regardless of how long the shareholder has held a Portfolio's shares and whether
such distribution is received in cash or additional Portfolio shares. Each
Portfolio will designate such distributions as capital gain dividends in a
written notice mailed to shareholders within 60 days after the close of Glenmede
Fund's taxable year. Shareholders should note that, upon the sale of Portfolio
shares, if the shareholder has not held such shares for more than six months,
any loss on the sale of those shares will be treated as long-term capital loss
to the extent of the capital gain dividends received with respect to the shares.
An individual's net capital gains are taxable at a maximum 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 the Emerging Markets Portfolio retains net capital gains for
reinvestment, the Portfolio may elect to treat such amounts as having been
distributed to shareholders. As a result, the shareholders would be subject to
tax on undistributed net capital gains, would be able to claim their
proportionate share of the Federal income taxes paid by the Portfolio on such
gains as a credit against their own Federal income tax liabilities, and would be
entitled to an increase in their basis in their Portfolio shares.
-12-
<PAGE>
If for any taxable year a Portfolio does not qualify for the special
Federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to Federal income tax at regular corporate rates
(without any deduction for distributions to its shareholders). In such event,
dividend distributions would be taxable as ordinary income to shareholders to
the extent of the Portfolio's current and accumulated earnings and profits and
would be eligible for the dividends received deduction for corporations.
Foreign Taxes. Income received from sources within foreign countries may
be subject to withholding and other income or similar taxes imposed by such
countries. If more than 50% of the value of a Portfolio's total assets at the
close of its taxable year consists of stock or securities of foreign
corporations, each Portfolio will be eligible and intends to elect to
"pass-through" to its shareholders the amount of foreign taxes paid by it.
Pursuant to this election, each shareholder will be required to include in gross
income (in addition to taxable dividends actually received) his pro rata share
of the foreign taxes paid by the Portfolio, and will be entitled either to
deduct (as an itemized deduction) his pro rata share of foreign taxes in
computing his taxable income or to use it as a foreign tax credit against his
U.S. Federal income tax liability, subject to limitations. No deduction for
foreign taxes may be claimed by a shareholder who does not itemize deductions,
but such a shareholder may be eligible to claim the foreign tax credit (see
below). Each shareholder will be notified within 60 days after the close of a
Portfolio's taxable year whether the foreign taxes paid by the Portfolio will
"pass-through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his or her foreign
source taxable income. For this purpose, if the pass-through election is made,
the source of the Portfolio's income flows through to its shareholders with
respect to a Portfolio, gains from the sale of securities will be treated as
derived from U.S. sources and certain currency fluctuation gains, including
fluctuation gains from foreign currency denominated debt securities, receivables
and payables, will be treated as ordinary income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income (as defined for purposes of the foreign tax credit), including
the foreign source passive income passed through by a Portfolio. Shareholders
may be unable to claim a credit for the full amount of their proportionate share
of the foreign taxes paid by a Portfolio. Foreign taxes may not be deducted in
computing alternative minimum taxable income and the foreign tax credit can be
used to offset only 90% of the alternative minimum tax (as computed under the
Code for purposes of this limitation) imposed on corporations and individuals.
If a Portfolio is not eligible to make the election to "pass
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<PAGE>
through" to its shareholders its foreign taxes, the foreign taxes it pays will
reduce investment company taxable income and the distributions by the Portfolio
will be treated as United States source income.
Federal Taxation of Certain Financial Instruments. Generally, futures
contracts held by a Portfolio at the close of its taxable year will be treated
for Federal income tax purposes as sold for their fair market value on the last
business day of such year, a process known as "mark-to-market." Forty percent of
any gain or loss resulting from such constructive sale will be treated as
short-term capital gain or loss and 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 futures contract ("the 40-60 rule"). The amount of any
capital gain or loss actually realized by a Portfolio in a subsequent sale or
other disposition of those futures contracts will be adjusted to reflect any
capital gain or loss taken into account by the Portfolio in a prior year as a
result of the constructive sale of the contracts. With respect to futures
contracts to sell, which will be regarded as parts of a "mixed straddle" because
their values fluctuate inversely to the values of specific securities held by
the Portfolio, losses as to such contracts to sell will be subject to certain
loss deferral rules which limit the amount of loss currently deductible on
either part of the straddle to the amount thereof which exceeds the unrecognized
gain, if any, with respect to the other part of the straddle, and to certain
wash sales regulations. Under short sales rules, which also will be applicable,
the holding period of the securities forming part of the straddle will (if they
have not been held for the long term holding period) be deemed not to begin
prior to termination of the straddle. With respect to certain futures contracts,
deductions for interest and carrying charges will not be allowed.
Notwithstanding the rules described above, with respect to futures contracts to
sell which are properly identified as such, a Portfolio may make an election
which will exempt (in whole or in part) those identified futures contracts from
being treated for Federal income tax purposes as sold on the last business day
of its taxable year, but gains and losses will be subject to such short sales,
wash sales and loss deferral rules and the requirement to capitalize interest
and carrying charges. Under Temporary Regulations, a Portfolio would be allowed
(in lieu of the foregoing) to elect either (1) to offset gains or losses from
portions which are part of a mixed straddle by separately identifying each mixed
straddle to which such treatment applies, or (2) to establish a mixed straddle
account for which gains and losses would be recognized and offset on a periodic
basis during the taxable year. Under either election, the 40-60 rule will apply
to the net gain or loss attributable to the futures contracts, but in the case
of a mixed straddle account election, no more than 50% of any net gain may be
treated as long term and no more than 40% of any net loss may be treated as
short term.
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<PAGE>
Options on futures contracts generally receive Federal tax treatment similar to
that described above.
Certain foreign currency contracts entered into by the Portfolios may be
subject to the "mark-to-market" process and the 40-60 rule in a manner similar
to that described in the preceding paragraph for futures contracts. To receive
such Federal income tax treatment, a foreign currency contract must meet the
following conditions: (1) the contract must require delivery of a foreign
currency of a type in which regulated futures contracts are traded or upon which
the settlement value of the contract depends; (2) the contract must be entered
into at arm's length at a price determined by reference to the price in the
interbank market; and (3) the contract must be traded in the interbank market.
The Treasury has broad authority to issue regulations under the provisions
respecting foreign currency contracts. As of the date of this Statement of
Additional Information, the Treasury has not issued any such regulations. Other
foreign currency contracts entered into by the Portfolios may result in the
creation of one or more straddles for Federal income tax purposes, in which case
certain loss deferral, short sales, and wash sales rules and the requirement to
capitalize interest and carrying charges may apply.
As described more fully above, in order to qualify as a regulated
investment company under the Code, a Portfolio must derive less than 30% of its
gross income from the sale or other disposition of securities and certain other
investments held for less than three months. With respect to futures contracts
and other financial instruments subject to the mark-to-market rules, the
Internal Revenue Service has ruled in private letter rulings that a gain
realized from such a futures contract or financial instrument will be treated as
being derived from a security held for three months or more (regardless of the
actual period for which the contract or instrument is held) if the gain arises
as a result of a constructive sale under the mark-to-market rules, and will be
treated as being derived from a security held for less than three months only if
the contract or instrument is terminated (or transferred) during the taxable
year (other than by reason of mark-to-market) and less than three months have
elapsed between the date the contract or instrument is acquired and the
termination date. In determining whether the 30% test is met for a taxable year,
increases and decreases in the value of a Portfolio's futures contracts and
other investments that qualify as part of a "designated hedge," as defined in
the Code, may be netted.
Other Tax Matters. Special rules govern the Federal income tax treatment
of certain transactions denominated in terms of a currency other than the U.S.
dollar or determined by reference to the value of one or more currencies other
than the U.S. dollar. The types of transactions covered by the special rules
include
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<PAGE>
the following: (i) the acquisition of, or becoming the obligor under, a bond or
other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option and similar financial instrument if such
instrument is not marked to market. The disposition of a currency other than the
U.S. dollar by a U.S. taxpayer also is treated as a transaction subject to the
special currency rules. However, foreign currency-related regulated futures
contracts and nonequity options generally are not subject to the special
currency rules if they are or would be treated as sold for their fair market
value at year-end under the mark-to-market rules, unless an election is made to
have such currency rules apply. With respect to transactions covered by the
special rules, foreign currency gain or loss is calculated separately from any
gain or loss on the underlying transaction and is normally taxable as ordinary
gain or loss. A taxpayer may elect to treat as capital gain or loss foreign
currency gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not part of a straddle. In accordance with Treasury regulations under
which certain transactions that are part of a "section 988 hedging transaction"
(as defined in the Code and the Treasury regulations) will be integrated and
treated as a single transaction or otherwise treated consistently for purposes
of the Code. Any gain or loss attributable to the foreign currency component of
a transaction engaged in by a Portfolio which is not subject to the special
currency rules (such as foreign equity investments other than certain preferred
stocks) will be treated as capital gain or loss and will not be segregated from
the gain or loss on the underlying transaction. It is anticipated that some of
the non-U.S. dollar denominated investments and foreign currency contracts a
Portfolio may make or enter into will be subject to the special currency rules
described above.
The Portfolio may recognize income currently for Federal income tax
purposes in the amount of the unpaid, accrued interest with respect to bonds
structured as zero coupon bonds or pay-in-kind securities, even though it
receives no cash interest until the security's maturity or payment date. As
discussed above, in order to qualify for beneficial tax treatment, a Portfolio
must distribute substantially all of its income to shareholders. Thus, a
Portfolio may have to dispose of its portfolio securities under disadvantageous
circumstances to generate cash or leverage itself by borrowing cash, in order to
satisfy the distribution requirement.
Some of the debt securities may be purchased by a Portfolio at a
discount which exceeds the original issue discount on such debt securities, if
any. This additional discount represents market discount for Federal income tax
purposes. The gain
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<PAGE>
realized on the disposition of any taxable debt security having market discount
will be treated as ordinary income to the extent it does not exceed the accrued
market discount on such debt security. Generally, market discount accrues on a
daily basis for each day the debt security is held by a Portfolio at a constant
rate over the time remaining to the debt security's maturity or, at the election
of the Portfolio, at a constant yield to maturity which takes into account the
semi-annual compounding of interest.
Exchange control regulations that may restrict repatriation of
investment income, capital, or the proceeds of securities sales by foreign
investors may limit a Portfolio's ability to make sufficient distributions to
satisfy the 90% and calendar year distribution requirements.
PERFORMANCE CALCULATIONS
Each Portfolio computes its average annual total return by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
1/n
T = [( ERV ) - 1]
--------
P
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical
$1,000 payment made at the beginning of the
period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in
terms of years.
Each Portfolio computes its aggregate total return by determining the
aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
T = [( ERV ) - 1]
--------
P
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<PAGE>
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 Institutions to their clients.
Set forth below are the average annual total return figures for the
Institutional International Portfolio since inception (August 1, 1992) and for
the one year period ended October 31, 1996 (with fee waivers).
1 Year Ended 10/31/96: 14.46%
Inception to 10/31/96: 12.31%
Set forth below are the average annual total return figures for the
Institutional International Portfolio since inception (August 1, 1992) and for
the one year period ended October 31, 1996 (without fee waivers).
1 Year Ended 10/31/96: 14.46%
Inception to 10/31/96: 12.28%
The aggregate total return figure for the Institutional International
Portfolio from inception (August 1, 1992) to October 31, 1996 with fee waivers
was 63.61% and without fee waivers was 63.61%.
Set forth below are the average annual total return figures for the
Emerging Markets Portfolio since inception (December 14, 1994) and for the one
year period ended October 31, 1996.
1 Year Ended 10/31/96: (0.96)%
Inception to 10/31/96: (1.42)%
The aggregate total return figure for the Emerging Markets Portfolio from
inception (December 14, 1994) to October 31, 1996 was (2.65)%.
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
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imposition of the Federal excise tax on undistributed income and gains (see
discussion under "Dividends, Capital Gains Distributions and Taxes" in the
Prospectus). As set forth in the Prospectus, each Portfolio normally distributes
substantially all of its net investment income to shareholders in the form of a
quarterly dividend. If any net capital gains are realized by a Portfolio, that
Portfolio normally distributes such gains at least once a year. The amounts of
any income dividends or capital gains distributions for a Portfolio cannot be
predicted.
Any dividend or distribution paid shortly after the purchase of shares of
a Portfolio by an investor may have the effect of reducing the per share net
asset value of that Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect a
return of capital, are subject to income taxes as set forth in the Prospectus.
Certain Record Holders
As of January 31, 1997, the Advisor held of record substantially all of
the outstanding shares of the Institutional International and all of the
outstanding shares of the Emerging Markets Portfolios. For more information
about the Advisor, see "Investment Advisor" in the Prospectus. As of January 31,
1997, the directors and officers of Glenmede Fund collectively owned less than
1% of the outstanding shares of the Institutional International and Emerging
Markets Portfolio.
EXPENSES
Glenmede Fund bears its own expenses incurred in its operations
including: taxes; interest; miscellaneous fees (including fees paid to Board
members); Securities and Exchange Commission fees; costs of preparing and
printing prospectuses for regulatory purposes and for distribution to existing
shareholders; administration fees; charges of the custodian, dividend agent
fees; certain insurance premiums; outside auditing and legal expenses; costs of
shareholders' reports and meetings; and any extraordinary expenses. Each
Portfolio also pays for brokerage fees and commissions, if any, in connection
with the purchase and sale of its portfolio securities. See "Financial
Highlights" in the Prospectus.
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<PAGE>
FINANCIAL STATEMENTS
Those portions of Glenmede Fund's Financial Statements relating to the
Institutional International and Emerging Markets Portfolios appearing in the
1996 Annual Report to Shareholders, and the report thereon of Coopers & Lybrand,
L.L.P., independent accountants, also appearing therein, are incorporated by
reference in this Statement of Additional Information. No other part of the
Annual Report is incorporated by reference. Copies of the Annual Report may be
obtained by writing to Glenmede Fund at 1 South Street, Baltimore, Maryland
21202 or by calling Glenmede Fund at 1-800-442-8299.
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.
-20-
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. Description of Commercial Paper Ratings
Description of Moody's highest commercial paper rating:
Prime-1 ("P-1") --judged to be of the best quality. Issuers rated P-1 (or
related supporting institutions) are considered to have a superior
capacity for repayment of short-term promissory obligations.
Description of S&P highest commercial paper ratings:
A-1+ -- this designation indicates the degree of safety regarding timely
payment is overwhelming. A-1 -- this designation indicates the degree of
safety regarding timely payment is either overwhelming or very strong.
Description of Bond Ratings
The following summarizes the ratings used by S&P for corporate and
municipal debt:
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Plus (+) or Minus (-): The ratings from AA to BBB may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
A-1
<PAGE>
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes
and are to be considered upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa - Bonds that are rated Baa are considered medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to
corporate bonds rated Aa, A and Baa. The modifier 1 indicates that the bond
being rated ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates that the bond
ranks in the lower end of its generic rating category. Those bonds in the Aa, A
and Baa categories which Moody's believes possess the strongest investment
attributes, within those categories are designated by the symbols Aa1, A1 and
Baa1, respectively.
II. Description of U.S. Government Securities and Certain
Other Securities
The term "U.S. Government securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.
A-2
<PAGE>
U.S. Treasury securities are backed by the "full faith and credit" of the
United States Government. Securities issued or guaranteed by Federal agencies
and U.S. Government sponsored enterprises or instrumentalities may or may not be
backed by the full faith and credit of the United States. In the case of
securities not backed by the full faith and credit of the United States, an
investor must look principally to the agency, enterprise or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency,
enterprise or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export
Import Bank, Farmers Home Administration, Federal Financing Bank and others.
Certain agencies, enterprises and instrumentalities, such as the Government
National Mortgage Association are, in effect, backed by the full faith and
credit of the United States through provisions in their charters that they may
make "indefinite and unlimited" drawings on the Treasury, if needed, to service
its debt. Debt from certain other agencies, enterprises and instrumentalities,
including the Federal Home Loan Bank and Federal National Mortgage Association,
are not guaranteed by the United States, but those institutions are protected by
the discretionary authority for the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies, enterprises and instrumentalities, such as the Farm
Credit System and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under Government supervision, but their debt securities
are backed only by the creditworthiness of those institutions, not the U.S.
Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency
organized under Federal charter with Government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Overseas Private
Investment Corporation, Federal Home Loan Banks, the Federal Land Banks, Central
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal
National Mortgage Association.
III. Foreign Investments
Investors should recognize that investing in foreign companies involves
certain special considerations which are not typically associated with investing
in U.S. companies. Because
A-3
<PAGE>
the stocks of foreign companies are frequently denominated in foreign
currencies, and because the Institutional International and Emerging Markets
Portfolios may temporarily hold uninvested reserves in bank deposits in foreign
currencies, the Institutional International and Emerging Markets Portfolios may
be affected favorably or unfavorably by changes in currency rates and in
exchange control regulations, and may incur costs in connection with conversions
between various currencies. The investment policies of the Institutional
International and Emerging Markets Portfolios permit the Portfolios to enter
into forward foreign currency exchange contracts in order to hedge the
Portfolios' holdings and commitments against changes in the level of future
currency rates. Such contracts involve an obligation to purchase or sell a
specific currency at a future date at a price set at the time of the contract.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in foreign
countries.
Although the Institutional International and Emerging Markets Portfolios
will endeavor to achieve most favorable execution costs in its portfolio
transactions, fixed commissions on many foreign stock exchanges are generally
higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from the foreign companies comprising the Institutional
International and Emerging Markets Portfolios.
A-4
<PAGE>
THE GLENMEDE FUND, INC.
1 South Street, Baltimore, Maryland 21202
- ------------------------------------------------------------------------------
(800) 442-8299
- ------------------------------------------------------------------------------
Prospectus--February 27, 1997
INVESTMENT OBJECTIVES
The Glenmede Fund, Inc., a Maryland corporation ("Glenmede Fund") is a no-load,
open-end management investment company. The Glenmede Fund consists of nine
series of shares, each of which has different investment objectives and
policies. The securities offered hereby are four of these series of shares (each
referenced herein as a "Portfolio") of the Glenmede Fund listed below.
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 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 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.
- -------------------------------------------------------------------------------
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
February 27, 1997, as amended or supplemented from time to
<PAGE>
time, is incorporated by reference into this Prospectus. The 1996 Annual Report
to Shareholders contains additional investment and performance information about
the Portfolios. A copy of the SAI and the 1996 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 incurred by each
Portfolio for the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
Small
Capitalization Large Cap
Equity International Equity Value
Portfolio Portfolio Portfolio 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% .00% .00%
Administration Fees............................... .04% .04% .04% .04%
Other Expenses.................................... .11% .14% .13% .11%
---- ---- ---- ----
Total Operating Expenses.......................... .15% .18% .17% .15%
==== ==== ==== ====
</TABLE>
- -------------------
(1) The Portfolios described in this prospectus 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 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 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.
-2-
<PAGE>
<TABLE>
<CAPTION>
1 Year* 3 Years* 5 Years* 10 Years*
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Equity Portfolio........................................ $2 $5 $8 $19
International Portfolio................................. $2 $6 $10 $23
Small Capitalization Equity Portfolio................... $2 $5 $10 $22
Large Cap Value Portfolio............................... $2 $5 $8 $19
</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 1996 Annual Report to
Shareholders, which Financial Statements and report thereon of Coopers & Lybrand
L.L.P., 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, Price Waterhouse L.L.P.
<TABLE>
<CAPTION>
Equity Portfolio
------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1996 1995 1994 1993
---------- ---------- ---------- ----------
<S> <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.................................. 0.15% 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
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1996 1995 1994 1993
---------- ---------- ---------- ----------
<S> <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
----------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended Period ended
October 31, October 31, October 31, October 31, October 31, October 31,
1996 1995 1994 1993 1992 1991+
---------- ---------- --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 14.98 $ 13.95 $ 13.97 $ 11.12 $ 11.02 $ 10.00
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income......................... 0.33 0.28 0.16 0.14 0.16 0.16
Net realized and unrealized gain
on investments............................... 2.38 2.69 0.23 3.60 0.09 1.02
------ -------- ------- ------- ------- -------
Total from investment operations 2.71 2.97 0.39 3.74 0.25 1.18
------ -------- ------- ------- ------- -------
Less Distributions:
Distributions from net investment
income....................................... (0.33) (0.26) (0.15) (0.15) (0.15) (0.16)
Distributions from net realized
capital gains................................ (1.24) (1.68) (0.26) (0.74) -- --
------- --------- ------- ------- -------- --------
Total Distributions........................ (1.57) (1.94) (0.41) (0.89) (0.15) (0.16)
------- --------- ------- ------- ------- --------
Net asset value, end of year.................... $ 16.12 $ 14.98 $ 13.95 $ 13.97 $ 11.12 $ 11.02
======= ======== ======== ======== ======== ========
Total return++.................................. 18.22% 21.15% 2.85% 33.86% 2.32% 11.84%
======= ======== ======== ======== ======== ========
Ratios to average net assets/Supplemental data:
Net assets, end of year (in 000's) $308,415 $170,969 $109,872 $68,418 $39,728 $39,631
Ratio of operating expenses to
average net assets........................... 0.17% 0.14% 0.14% 0.14% 0.19% 0.20%*
Ratio of net investment income to
average net assets........................... 2.15% 1.92% 1.18% 1.08% 1.44% 2.24%*
Portfolio turnover rate....................... 37% 57% 31% 63% 56% 29%
Average Commission per share**................ $ 0.07 N/A N/A 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.
-6-
<PAGE>
<TABLE>
<CAPTION>
Large Cap Value Portfolio+
-----------------------------------------------------------
Year Ended Year Ended Year Ended Period Ended
October 31, October 31, October 31, October 31,
1996 1995 1994 1993++
----------- ----------- ---------- ---------
<S> <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. Total return will be calculated on an average annual total return basis,
and may also be calculated on an aggregate total return basis, for various
periods. Average annual total return reflects the average annual percentage
change in value of an investment in the particular Portfolio. Aggregate total
return reflects the total percentage change in value over the measuring period.
Both methods of calculating total return assume that dividend and capital gains
distributions made by the Portfolio during the period are reinvested in
additional Portfolio shares.
Each of the Equity, International, Small Capitalization Equity and
Large Cap Value Portfolios may compare their total returns 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 Russel 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 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 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.
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.
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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"));
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 is
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 countries other
than the United States.
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); 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 currency
exchange contracts in order to hedge against uncertainty in the level of
future foreign exchange rates in the purchase and sale of investment
securities, but may not enter into such contracts for speculative purposes. A
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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. It
should be realized that this method of protecting the value of the Portfolio's
investment securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange at some future point in time. Additionally,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, at the same time they tend to limit any
potential gain which might result should the value of such currency increase.
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.
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); 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, banker's 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."
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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
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, 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, banker's 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."
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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.
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
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repurchase agreements. The International Portfolio would generally enter into
repurchase transactions to invest cash reserves.
In a repurchase agreement, a Portfolio purchases a security and
simultaneously commits to resell that security at a future date to the seller (a
qualified bank or securities dealer) at an agreed upon price plus an agreed upon
market rate of interest (itself unrelated to the coupon rate or date of maturity
of the purchased security). The securities held subject to a repurchase
agreement may have stated maturities exceeding 13 months. 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
a security as collateral for the loan. Such agreements can be entered into for
periods of one day (overnight repo) or for a fixed term (term repo). Repurchase
agreements are a common way to earn interest income on short-term funds.
The use of repurchase agreements involves certain risks. For example,
if the seller of a repurchase agreement defaults on its obligation to repurchase
the underlying securities at a time when the value of these securities has
declined, a Portfolio may incur a loss upon disposition of them. Default by the
seller would also expose a Portfolio 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
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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" refers to securities whose terms and indenture are available and for
which a market exists, but which are not available for immediate delivery. When
issued or forward delivery transactions may be expected to occur one month or
more before delivery is due. Delayed settlement is a term used to describe
settlement of a securities transaction in the secondary market which will occur
sometime in the future. No payment or delivery is made by a Portfolio in a when
issued, delayed settlement or forward delivery transaction until the Portfolio
receives payment or delivery from the other party to the transaction. A
Portfolio will maintain a separate account of cash, U.S. Government securities
or other high grade debt obligations at least equal to the value of purchase
commitments until payment is made. Such segregated securities will either mature
or, if necessary, be sold on or before the settlement date. Although a Portfolio
receives no income from the above described securities prior to delivery, the
market value of such securities is still subject to change. A Portfolio receives
no income from "when issued," "delayed settlement" or "forward delivery"
securities prior to delivery of such securities.
A Portfolio will engage in when issued transactions to obtain what is
considered to be an advantageous price and yield at the time of the transaction.
When a Portfolio engages in when issued, delayed settlement or forward delivery
transactions, it will do so for the purpose of acquiring securities consistent
with its investment objective and policies and not for the purposes 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 members may change such policies without shareholder approval.
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PURCHASE OF SHARES
Shares of each Portfolio are sold without a sales commission on a
continuous basis to the Advisor acting on behalf of its 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." The minimum initial
investment for each Portfolio is $25,000; the minimum for subsequent investments
for each Portfolio is $1,000. Glenmede Fund reserves the right to reduce or
waive the minimum initial and subsequent investment requirements from time to
time. Beneficial ownership of shares will be reflected on books maintained by
the Advisor or the Institutions. A prospective investor wishing to purchase
shares in the Glenmede Fund should contact the Advisor or his or her
Institution.
It is the responsibility of the Advisor to transmit orders for share
purchases to Investment Company Capital Corp. ("ICC"), 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.
Purchases of a Portfolio's shares will be made in full and fractional
shares of the Portfolio calculated to three decimal places. In the interest of
economy and convenience, certificates for shares will not be issued except upon
the written request of the shareholder. Certificates for fractional shares,
however, will not be issued.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed at any time, without cost, at
the net asset value of the Portfolio next determined after receipt of the
redemption request by the transfer agent. Generally, a properly signed written
request is all that is required. Any redemption may be more or less than the
purchase price of the shares depending on the market value of the investment
securities held by the Portfolio. An investor wishing to redeem shares should
contact the Advisor or his or her Institution. It is the responsibility of the
Advisor to transmit promptly redemption orders to the transfer agent.
Payment of the redemption proceeds will ordinarily be made within one
business day, but in no event more than seven days, after receipt of the order
in proper form by the transfer agent. Redemption orders are effected at net
asset value per share next determined after receipt of the order in proper form
by the transfer agent. 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.
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Glenmede Fund reserves the right, upon 30 days' written notice, to
redeem an account in any of the Portfolios if the net asset value of the
account's shares falls below $100 and is not increased to at least such amount
within such 30-day period.
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. As of date of this
Prospectus, only the Advisor serves as the Glenmede Fund's agent to receive and
transmit purchase and redemption orders. The Advisor is not entitled to receive
any fee from shareholders and/or the Glenmede Fund for acting as the Glenmede
Fund's agent to receive and transmit purchase and redemption orders. 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. The
Advisor does receive shareholder servicing fees for shareholder support
services. See "Shareholder Servicing Plan."
VALUATION OF SHARES
The net asset value of the Portfolios is determined by dividing the
total market value of each Portfolio's investments and other assets, less any
liabilities of that Portfolio, by the total outstanding shares of that
Portfolio. Currently the Exchange is closed on weekends and the customary
national business holidays of New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
(or the days on which they are observed). For the 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. 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
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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 an investor, although in
effect a return of capital, are taxable to the investor.
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Portfolio of liability for Federal income taxes to the
extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that a taxable Portfolio distribute
to its shareholders an amount at least equal to 90% of its investment company
taxable income and 90% of its net exempt interest income if any for such taxable
year. In general, a Portfolio's investment company taxable income will be its
net investment income, including interest and dividends, subject to certain
adjustments, and net short-term capital gain, excluding the excess of any net
long-term capital gain for the taxable year over the net short-term capital
loss, if any, for such year. Each Portfolio intends to distribute as dividends
substantially all of its investment company taxable income each year. Such
dividends will be taxable as ordinary income to each Portfolio's shareholders
who are not currently exempt from Federal income taxes, whether such income or
gain is received in cash or reinvested in additional shares. The dividends
received deduction for corporations will apply to such ordinary income
distributions to the extent the total qualifying dividends received by a
Portfolio are from domestic corporations for the taxable year. It is anticipated
that only a small part, if any, of the dividends paid by the 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
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<PAGE>
Portfolio generally will have no tax liability with respect to such gains and
the distributions will be taxable to the shareholders who are not currently
exempt from Federal income taxes as long-term capital gains, regardless of how
long the shareholders have held the shares and whether such gains are received
in cash or reinvested in additional shares.
A shareholder considering buying shares of a Portfolio on or just
before the record date of a dividend should be aware that the amount of the
forthcoming dividend payment, although in effect a return of capital, will be
taxable.
A taxable gain or loss may be realized by a shareholder upon 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.
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.
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<PAGE>
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 January 31, 1997, the Advisor had over $10.3 billion in assets in the
accounts for which it serves in various capacities including as executor,
trustee or investment advisor.
Under Investment Advisory Agreements (the "Investment Advisory
Agreements") with 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 Portfolios described in this prospectus.
However, 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).
John W. Church, Jr., Senior Vice President and Chief Investment Officer
of the Advisor, is the portfolio manager primarily responsible for the
management of the Equity Portfolio. Mr. Church has been responsible for the
management of the Equity Portfolio since April 1, 1993 and has been employed by
the Advisor since 1979.
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
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<PAGE>
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.
Ronald K. Stribley is the portfolio manager primarily responsible for
the management of the Large Cap Value Portfolio. Mr. Stribley has been
responsible for the management of the Large Cap Value Portfolio since February
27, 1996. Mr. Stribley has been employed by the Advisor since April 1990.
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 a wholly-owned subsidiary
of Alex. Brown & Sons Incorporated ("Alex. Brown"). For its services as
administrator, transfer agent and dividend paying agent, ICC is entitled to
receive fees from Glenmede Fund equal to .12% of the first $100 million of the
combined net assets of Glenmede Fund and The Glenmede Portfolios, an investment
company with the same officers, Board and service providers as Glenmede Fund
(the "Funds"); .08% of the next $150 million of the combined net assets of the
Funds; .04% of the next $500 million of the combined net assets of the Funds;
and .03% of the combined net assets of the Funds over $750 million. For the
fiscal year ended October 31, 1996, ICC received fees at the rate of .04% of the
Equity Portfolio's average net assets; .04% of the International Portfolio's
average net assets; .04% of the Small Capitalization Equity Portfolio's average
net assets; and .04% of the Large Cap Value Portfolio's average net assets.
SHAREHOLDER SERVICING PLAN
Glenmede Fund has adopted a Shareholder Servicing Plan (the "Plan")
effective January 1, 1995 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 their clients ("Customers") who beneficially own shares of the
Portfolios. The fee, which is at an annual rate of .05%, is computed monthly and
is based on the average daily net assets of the shares beneficially owned by
Customers of such Servicing Agents. All expenses incurred by the Portfolios in
connection with the Agreements and the implementation of the Plan shall be borne
entirely by the holders of the shares of the particular Portfolio involved and
will result in an equivalent increase to each Portfolio's Total 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
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<PAGE>
dividend, distribution and tax notices) to Customers; and providing such other
similar services as may be reasonably requested.
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) purchase more than 10% of any class of the outstanding voting
securities of any issuer;
(b) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the
Portfolio's total assets would be invested in securities of
companies within such industry; provided, however, that there shall
be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies, enterprises or
instrumentalities;
(c) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value, except
as described in this Prospectus and the Statement of Additional
Information and in connection with entering into futures contracts,
but the deposit of assets in a segregated account in connection
with the writing of covered put and call options and the purchase
of securities on a when issued, delayed settlement or forward
delivery basis and collateral arrangements with respect to initial
or variation margin for futures contracts will not be deemed to be
pledges of a Portfolio's assets or the purchase of any securities
on margin for purposes of this investment limitation;
(d) issue senior securities except that a Portfolio may borrow money in
accordance with investment limitation (e), purchase securities on a
when issued, delayed settlement or forward delivery basis and enter
into reverse repurchase agreements; and
(e) borrow money except as a temporary measure for extraordinary or
emergency purposes, and then not in excess of 10% of its total
assets at the time of borrowing (entering into purchasing
securities on a when issued, delayed settlement or forward delivery
basis are not subject to this investment limitation).
With respect to investment limitation (b), (a) there is no limitation
with respect to (i) instruments issued or guaranteed by the United States, any
state, territory or possession of the United States, the District of Columbia or
any of their authorities, agencies, instrumentalities or political subdivisions,
and (ii) repurchase agreements secured by the instruments described in clause
(i); (b) wholly-owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related to
financing the activities of the parents; and (c) utilities will be divided
according to their services; for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry.
Each Portfolio also will not:
(a) with respect to 75% of its total assets, invest more than 5% of its
total assets at the time of purchase in the securities of any
single issuer (other than obligations issued or guaranteed
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<PAGE>
by the U.S. Government, its agencies, enterprises or
instrumentalities).
If a percentage restriction for a Portfolio is adhered to at the time
an investment is made, a later increase in percentage resulting from a change in
value or assets will not constitute a violation of such restriction. If a
Portfolio's borrowings are in excess of 5% (excluding overdrafts) of its total
net assets, additional portfolio purchases will not be made until the amount of
such borrowing is reduced to 5% or less.
The investment limitations described here and in the SAI are
fundamental policies of the Portfolios and may be changed only with the approval
of the holders of a majority of the outstanding shares (as defined in the 1940
Act) of the affected Portfolio.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
Glenmede Fund was organized as a Maryland corporation on June 30, 1988.
Glenmede Fund's Articles of Incorporation authorize the Board members to issue
2,500,000,000 shares of common stock, with a $.001 par value. The Board has the
power to designate one or more classes ("Portfolios") of shares of common stock
and to classify or reclassify any unissued shares with respect to such
Portfolios. Currently, Glenmede Fund is offering shares of nine Portfolios.
The shares of each Portfolio have no preference as to conversion,
exchange, dividends, retirement or other rights, and, when issued and paid for
as provided in this Prospectus, will be fully paid and non-assessable. The
shares of each Portfolio have no pre-emptive rights and do not have cumulative
voting rights, which means that the holders of more than 50% of the shares of
Glenmede Fund voting for the election of its Board members can elect 100% of the
Board of Glenmede Fund if they choose to do so. A shareholder is entitled to one
vote for each full share held (and a 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.
At January 31, 1997, the Advisor was the record owner of 100% of the
outstanding shares of each Portfolio.
DISTRIBUTOR
Armata Financial Corp. ("Armata"), located at 1 South Street,
Baltimore, Maryland 21202, serves as Glenmede Fund's distributor. Armata is a
subsidiary of Alex. Brown.
CUSTODIAN
The Chase Manhattan Bank, N.A., Brooklyn, New York, serves as the
custodian of Glenmede Fund's assets.
TRANSFER AGENT
ICC, located at 1 South Street, Baltimore, Maryland 21202, acts as
Glenmede Fund's transfer agent.
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<PAGE>
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., Philadelphia, Pennsylvania, serves as
independent accountants for Glenmede Fund and will audit its financial
statements annually.
REPORTS
Shareholders receive unaudited semi-annual financial statements and
audited annual financial statements.
COUNSEL
Drinker Biddle & Reath, Philadelphia, Pennsylvania, serves as counsel
to Glenmede Fund.
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<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. 40 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 71 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.* 54 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 44 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 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 37 Secretary of Glenmede Fund; Partner in the law firm of
Philadelphia National Bank Building Drinker Biddle & Reath.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Edward J. Veilleux 53 Assistant Secretary of Glenmede Fund; Principal, Alex.
1 South Street Brown; President, ICC and Armata.
Baltimore, MD 21202
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<PAGE>
Joseph A. Finelli 40 Treasurer of Glenmede Fund. He has been a Vice President
1 South Street of Alex. Brown since 1995. Prior thereto, he was Vice
Baltimore, MD 21202 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.
For additional information concerning remuneration of Board members see
"Management of the Funds" in the SAI.
Shareholder inquiries should be addressed to Glenmede Fund at the
address or telephone number stated on the cover page.
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<PAGE>
THE GLENMEDE FUND, INC.
1 South Street, Baltimore, Maryland 21202
Prospectus
Dated February 27, 1997
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
Armata Financial Corp.
1 South Street
Baltimore, Maryland 21202
Table of Contents
Page
Expenses of the Portfolios............................................... 2
Financial Highlights..................................................... 3
Performance Calculations................................................. 8
Investment Policies and Risk
Factors................................................................ 8
Common Investment Policies and
Risk Factors........................................................... 12
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............................................... 24
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>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
1 South Street, Baltimore, Maryland 21202
(800) 442-8299
Prospectus - February 27, 1997
INVESTMENT OBJECTIVES
The Glenmede Fund, Inc., a Maryland corporation ("Glenmede Fund"), and The
Glenmede Portfolios, a Massachusetts business trust ("Glenmede Portfolios" and
collectively with Glenmede Fund, the "Funds"), are no-load, open-end management
investment companies. The Funds currently offer eleven series of shares, each of
which has different investment objectives and policies. The securities offered
hereby are five of these series of shares (known as "Portfolios") of the Funds
listed below.
Government Cash Portfolio. The objective of the Government Cash Portfolio is to
provide maximum current interest income consistent with the preservation of
capital and liquidity. The Government Cash Portfolio seeks to achieve its
objective by investing primarily in short-term money market instruments issued
by the U.S. Treasury, U.S. Government agencies, or other agencies, enterprises
or instrumentalities sponsored by the U.S. Government and by entering into
repurchase agreements secured thereby. It is anticipated that the Portfolio will
maintain a constant net asset value or price of $1.00 per share, and an average
weighted maturity of 90 days or less.
Tax-Exempt Cash Portfolio. The objective of the Tax-Exempt Cash Portfolio is to
provide maximum current interest income exempt from Federal income taxes
consistent with the preservation of capital and liquidity. The Tax-Exempt Cash
Portfolio seeks to achieve its objective by investing primarily in short-term,
high quality municipal securities ("Municipal Obligations"). It is anticipated
that the Portfolio will maintain a constant net asset value or price of $1.00
per share, and an average weighted maturity of 90 days or less.
Intermediate Government Portfolio. The objective of the Intermediate Government
Portfolio is to provide maximum, long-term total return consistent with
reasonable risk to principal. The Intermediate Government Portfolio seeks to
achieve its objective by investing primarily in mortgage-backed securities and
medium-term fixed income securities issued by the U.S. Treasury, U.S. Government
agencies, or other agencies, enterprises or instrumentalities sponsored by the
U.S. Government. The net asset value of this Portfolio will fluctuate.
Muni Intermediate Portfolio. The objective of the Muni Intermediate Portfolio is
to seek as high a level of current income exempt from Federal income tax as is
consistent with preservation of capital. The Muni Intermediate Portfolio seeks
to achieve its objective by investing primarily in Municipal Obligations. The
net asset value of this Portfolio will fluctuate.
New Jersey Muni Portfolio. The objective of the New Jersey Muni Portfolio is to
seek as high a level of current income exempt from Federal income tax as is
consistent with preservation of capital. The New Jersey Muni Portfolio seeks to
achieve its objective by investing primarily in Municipal Obligations. The net
asset value of this Portfolio will fluctuate.
Total return consists of income (dividend and/or interest income from
portfolio securities) and capital gains and losses, both realized and
unrealized, from portfolio securities.
Shares of the Portfolios are subject to investment risks, including
possible loss of principal, are not bank deposits and are not endorsed by,
insured by, guaranteed by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, The Glenmede Corporation or any of its affiliates or any other
governmental agency or bank. There can be no assurance that the Government Cash
or Tax-Exempt Cash Portfolios will be able to maintain a stable net asset value
of $1.00 per share.
- --------------------------------------------------------------------------------
<PAGE>
ABOUT THIS PROSPECTUS
This Prospectus, which should be retained for future reference, sets
forth certain information that you should know before you invest. A Statement of
Additional Information ("SAI") containing additional information about the Funds
has been filed with the Securities and Exchange Commission. Such SAI dated
February 27, 1997 as amended or supplemented from time to time, is incorporated
by reference into this Prospectus. The 1996 Annual Report to Shareholders
contains additional investment and performance information about the Portfolios.
A copy of the SAI and the 1996 Annual Report may be obtained, without charge, by
writing to the Funds at the address shown above or by calling the Funds at the
telephone number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSES OF THE PORTFOLIOS
Client Fees and Annual Portfolio Operating Expenses
The following table illustrates the expenses and fees incurred by each
Portfolio for the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
Tax- New
Government Exempt Intermediate Muni Jersey
Cash Cash Government Intermediate Muni
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses.......... None None None None None
Maximum Annual Client Fee................. 1.00%+ 1.00%+ 1.00%+ 1.00%+ 1.00%+
Annual Portfolio Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fees.............. 0% .0% .0%+ .0%+ .0%+
Administration Fees................... .04% .04% .04% .04% .04%
Other Expenses........................ .12% .11% .12% .28% .20%
Total Annual Portfolio Operating
Expenses................................ .16% .15% .16% .32% .24%
==== ==== === ==== ====
</TABLE>
- -----------------------------
+ The Portfolios described in this prospectus do not pay any advisory fees to
The Glenmede Trust Company, the investment advisor of the Funds (the
"Advisor"), or its affiliates ("Affiliates"). However, investors in these
Portfolios must be clients of the Advisor or Affiliates. The "Maximum Annual
Client Fee" in the above table is the current maximum fee that the Advisor or
an Affiliate would charge its clients directly for fiduciary, trust and/or
advisory services (e.g., personal trust, estate, advisory, tax and custodian
services). The actual annual fees charged by the Advisor and its Affiliates
directly to their clients for such services vary depending on a number of
factors, including the particular services provided to the client, but are
generally under 1% of the client's assets under management. Investors may
also have to pay various fees to others to become clients of the Advisor or
an Affiliate. See "Investment Advisor."
The purpose of the above table is to assist an investor in
understanding the various estimated costs and expenses that an investor in a
Portfolio will bear directly or indirectly. Actual expenses may be greater or
lesser than such estimates. For further information concerning the Funds'
expenses see "Investment Advisor," "Administrative, Transfer Agency and Dividend
Paying Services" and "Board Members and Officers."
The following example illustrates the estimated Annual Portfolio
Operating Expenses that an investor would pay on a $1,000 investment over
various time periods assuming (i) a 5% annual rate of return and (ii) redemption
at the end of each time period. The example does not include fees for fiduciary
and investment services which investors pay the Advisor or Affiliates as
clients. See "Investment Advisor." As noted in the above table the Funds charge
no shareholder transaction expenses of any kind.
-2-
<PAGE>
<TABLE>
<CAPTION>
1 Year* 3 Years* 5 Years* 10 Years*
------ ------- ------- --------
<S> <C> <C> <C> <C>
Government Cash Portfolio.................. $2 $ 5 $ 9 $20
Tax-Exempt Cash Portfolio.................. $2 $ 5 $ 8 $19
Intermediate Government Portfolio.......... $2 $ 5 $ 9 $20
Muni Intermediate Portfolio................ $3 $10 $18 $41
New Jersey Muni Portfolio.................. $2 $ 8 $14 $31
</TABLE>
*You would pay the same expenses set forth above on the same investment,
assuming no redemptions at the end of the period.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER
THAN THOSE SHOWN.
-3-
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables provide financial highlights of each Portfolio for
the respective periods presented and includes data derived from the Funds'
Financial Statements included in the Funds' 1996 Annual Report to Shareholders,
which Financial Statements and reports thereon of Coopers & Lybrand L.L.P., the
Funds' independent accountants, are incorporated by reference in the SAI. The
following information should be read in conjunction with such Financial
Statements. Glenmede Fund's Financial Statements for the periods ended October
31, 1991, 1990 and 1989 were examined by the Funds' previous independent
accountants, Price Waterhouse L.L.P.
<TABLE>
<CAPTION>
Government Cash Portfolio
----------------------------------------------------------------------------------------------------------
Year Year Year Year Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1996 1995 1994 1993 1992 1991 1990 1989+
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net investment
income................. 0.053 0.059 0.038 0.031 0.041 0.064 0.081 0.089
Distributions from
net investment income.. $ (0.053) $ (0.059) $ (0.038) $ (0.031) $ (0.041) $ (0.064) $ (0.081) $ (0.089)
---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net asset value, end
of year................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========= ========= ========= ========== ========== ==========
Total return++.......... 5.46% 5.87% 3.78% 3.18% 4.19% 6.59% 8.41% 9.27%
========== ========= ========= ========= ========== ========== ========== ==========
Ratios to average
net assets/
Supplemental data:
Net assets, end of year
(in 000's).............$ 452,395 $ 408,605 $ 353,405 $ 247,816 $ 203,882 $ 253,260 $ 217,398 $ 229,555
Ratio of operating
expenses to average net
assets................ 0.16% 0.15% 0.11% 0.11% 0.13% 0.13% 0.15% 0.14%*
Ratio of net
investment income to
average net assets.... 5.32% 5.71% 3.82% 3.14% 4.18% 6.45% 8.08% 9.00%*
</TABLE>
- -----------------
+ The Portfolio commenced operations on November 7, 1988.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
-4-
<PAGE>
<TABLE>
<CAPTION>
Tax-Exempt Cash Portfolio
-----------------------------------------------------------------------------------------------------------
Year Year Year Year Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended
Oct. 31 Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1996 1995 1994 1993 1992 1991 1990 1989+
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- --------- --------- --------
Net investment income.... 0.034 0.038 0.025 0.023 0.033 0.047 0.057 0.061
Distributions from net
investment income.... $ (0.034) $ (0.038) $ (0.025) $ (0.023) $ (0.033) $ (0.047) $ (0.057) $ (0.061)
--------- --------- --------- --------- --------- --------- --------- --------
Net asset value,
end of year.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= ========= ========= ========
Total return++........... 3.42% 3.76% 2.48% 2.34% 3.30% 4.83% 5.85% 6.27%
========= ========= ========= ========= ========= ========= ========= ========
Ratios to average net
assets/Supplemental
data:
Net assets, end of year
(in 000's).. $224,999 $225,808 $222,985 $106,590 $ 125,826 $81,394 $107,283 $69,047
Ratio of operating
expenses to
average net
assets........ 0.15% 0.15% 0.13% 0.13% 0.15% 0.16% 0.15% 0.15%*
Ratio of net investment
income to
average net
assets........ 3.36% 3.69% 2.52% 2.33% 3.21% 4.78% 5.78% 6.31%*
</TABLE>
- -----------------
+ The Portfolio commenced operations on November 10, 1988.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
-5-
<PAGE>
<TABLE>
<CAPTION>
Intermediate Government Portfolio
-------------------------------------------------------------------------------------------------------------
Year Year Year Year Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1996 1995 1994 1993 1992 1991 1990 1989+
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $ 10.36 $ 9.89 $ 10.84 $ 10.76 $ 10.61 $ 10.11 $ 10.28 $ 10.00
--------- --------- --------- --------- --------- --------- --------- ---------
Income from
investment operations:
Net investment income.. 0.66 0.69 0.64 0.66 0.74 0.87 0.88 0.86
Net realized and
unrealized
gain/(loss) on
investments........ (0.08) 0.46 (0.96) 0.41 0.22 0.56 (0.07) 0.22
--------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations........... 0.58 1.15 (0.32) 1.07 0.96 1.43 0.81 1.08
--------- --------- --------- --------- --------- --------- --------- ---------
Less Distributions:
Distribution from net
investment income.. (0.65) (0.68) (0.63) (0.67) (0.70) (0.93) (0.89) (0.80)
Distributions from net
realized capital
gains.............. - - - (0.32) (0.11) - (0.09) -
--------- --------- --------- --------- --------- --------- --------- ---------
Total Distributions (0.65) (0.68) (0.63) (0.99) (0.81) (0.93) (0.98) (0.80)
--------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end of
year............... $ 10.29 $ 10.36 $ 9.89 $ 10.84 $ 10.76 $ 10.61 $ 10.11 $ 10.28
========= ========= ========= ========== ========= ========= ========= =========
Total return++......... 5.88% 12.06% (3.03)% 10.38% 9.34% 14.75% 8.32% 11.20%
========= ========= ========= ========== ========= ========= ========= =========
Ratios to average
net assets/
Supplemental data:
Net assets, end of year
(in 000's)......... $ 259,503 $ 342,874 $ 333,797 $ 581,823 $ 445,816 $ 265,963 $ 207,182 $ 187,012
Ratio of operating
expenses to average
net assets......... 0.16% 0.11% 0.12%** 0.14%** 0.16% 0.16% 0.14% 0.14%*
Ratio of net investment
income to average
net assets......... 6.37% 6.67% 6.06% 6.03% 7.03% 8.22% 8.75% 9.07%*
Portfolio turnover rate 47% 228% 165% 83% 39% 91% 94% 29%
</TABLE>
- -----------------
+ The Portfolio commenced operations on November 17, 1988.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
** The annualized operating expense ratios exclude interest expense. The ratios
including interest expense for the years ended October 31, 1994 and
October 31, 1993 were 0.14% and 0.16%, respectively.
-6-
<PAGE>
<TABLE>
<CAPTION>
Muni Intermediate Portfolio
----------------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
1996 1995 1994 1993 1992+
---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................. $10.32 $ 9.74 $ 10.59 $ 10.00 $ 10.00
Income from investment operations:.................
Net investment income........................... 0.53 0.53 0.53 0.44 0.11
Net realized and unrealized gain/loss
on investments................................. (0.06) 0.58 (0.85) 0.59 (0.03)
------- -------- -------- ------- -------
Total from investment operations.............. 0.47 1.11 (0.32) 1.03 0.08
Distributions from net investment
income.......................................... (0.53) (0.53) (0.53) (0.44) (0.08)
------- -------- -------- ------- -------
Net asset value, end of period..................... $10.26 $ 10.32 $ 9.74 $ 10.59 $ 10.00
======= ======== ========= ========= ========
Total return++..................................... 4.67% 11.76% (3.13)% 10.54% 0.74%
======= ======== ========= ========= ========
Ratios to average net assets/Supplemental
data:
Net assets, end of period (in 000's)............... $18,471 $ 18,096 $ 22,097 $ 94,803 $ 42,533
Ratio of operating expenses to average
net assets...................................... 0.32% 0.28% 0.25% 0.25% 0.25%*
Ratio of net investment income to average
net assets...................................... 5.16% 5.23% 4.78% 4.41% 4.22%*
Portfolio turnover rate............................ 44% 28% 11% 10% 3%
</TABLE>
- --------------------------
+ The Portfolio commenced operations on June 5, 1992.
++ Total return represents aggregate return for the period indicated.
* Annualized.
-7-
<PAGE>
<TABLE>
<CAPTION>
New Jersey
Muni Portfolio
-------------------------------------------------------
Year Year Year
Ended Ended Ended
October 31, October 31, October 31,
1996 1995 1994+
----------- ---------- ------
<S> <C> <C> <C>
Net asset value, beginning of period.............................. $10.00 $ 9.22 $ 10.00
------ ---------- ----------
Income from investment operations:
Net investment income......................................... 0.44 0.41 0.32
Net realized and unrealized loss on investments............... (0.03) 0.78 (0.82)
--------- ---------- -----------
Total from investment operations............................ 0.41 1.19 (0.50)
Distributions from net investment income.......................... (0.44) (0.41) (0.28)
--------- ----------- -----------
Net asset value, end of period.................................... $ 9.97 $ 10.00 $ 9.22
====== ========== ==========
Total return++.................................................... 4.24% 13.25% (5.13)%
====== ========== ===========
Ratios to average net assets/Supplemental data:
Net assets, end of period (in 000's).......................... $7,545 $ 5,932 $ 4,564
Ratio of operating expenses to average net assets............. 0.24% 0.53% 0.60%
Ratio of net investment income to average net assets.......... 4.56% 4.30% 3.60%
Portfolio turnover rate....................................... 33% 12% 65%
</TABLE>
- --------------
+ The Portfolio commenced operations on November 1, 1993.
++ Total return represents aggregate total return for the period indicated.
-8-
<PAGE>
PERFORMANCE CALCULATIONS
From time to time, the Government Cash Portfolio and the Tax-Exempt
Cash Portfolio (each a "Cash Portfolio," collectively, the "Cash Portfolios")
may advertise or quote its "yield" and "effective yield." The "yield" of either
of the Cash Portfolios refers to the income generated by an investment in each
such Portfolio over a seven-day period (which period will be stated in the
advertisement or quote). This income is then "annualized." That is, the amount
of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when annualized,
the income earned by an investment in such a Portfolio is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment.
The Intermediate Government, Muni Intermediate and New Jersey Muni
Portfolios also may advertise or quote yield data from time to time. The yield
of such Portfolios is computed based on the net income of the Portfolio during a
30-day (or one-month) period, which period will be identified in connection with
the particular yield quotation. More specifically, each such Portfolio's yield
is computed by dividing the Portfolio's net income per share during a 30-day (or
one-month) period by the maximum offering price per share on the last day of the
period and annualizing the result on a semi-annual basis.
The Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios'
"tax-equivalent yields" may be advertised or quoted from time to time. The tax
equivalent yield shows the level of taxable yield needed to produce an after-tax
equivalent to each such Portfolio's tax-free yield. This is done by increasing
each such Portfolio's yield (calculated as above) by the amount necessary to
reflect the payment of Federal and/or State income tax at a stated tax rate.
Each of the Intermediate Government, Muni Intermediate and New Jersey
Muni Portfolios may advertise or quote total return data from time to time.
Total return will be calculated on an average annual total return basis and also
may be calculated on an aggregate total return basis, for various periods.
Average annual total return reflects the average annual percentage change in
value of an investment in the particular Portfolio. Aggregate total return
reflects the total percentage change in value over the measuring period. Both
methods of calculating total return assume that dividend and capital gains
distributions made by the Portfolio during the period are reinvested in
additional Portfolio shares.
Each of the Intermediate Government, Muni Intermediate and New Jersey
Muni Portfolios may compare their total returns, and their yields, to that of
other investment companies with similar investment objectives and to bond and
other relevant indices such as those compiled by Merrill Lynch, Lehman Brothers
or others or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For example,
the total return or the yield of the Intermediate Government, Muni Intermediate
or New Jersey Muni Portfolios may be compared to data prepared by Lipper
Analytical Services, Inc. Total return and yield data as reported in national
financial publications such as Money Magazine, Forbes, Barron's, The Wall Street
Journal and The New York Times, or in publications of a local or regional
nature, also may be used in comparing the performance of the Intermediate
Government, Muni Intermediate or New Jersey Muni Portfolios.
Performance quotations represent a Portfolio's past performance and
should not be considered as indicative of future results. Since performance will
fluctuate, performance data for a Portfolio should not be used to compare an
investment in the Portfolio's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield/return for a stated period of time. Shareholders should remember
that performance is generally a function of the kind and quality of the
instruments held in a Portfolio, portfolio maturity, operating expenses and
market conditions. Any management fees charged by the Advisor or an Affiliate to
its respective clients will not be included in the Portfolio's calculations of
yield, effective yield, tax-equivalent yield or total return. See "Investment
Advisor."
-9-
<PAGE>
INVESTMENT POLICIES AND RISK FACTORS
The investment objective of each Portfolio is not fundamental and may
be changed by the particular Funds' Board members without shareholder approval.
GOVERNMENT CASH PORTFOLIO
The objective of the Government Cash Portfolio is to provide maximum
current interest income consistent with the preservation of capital and
liquidity. The Government Cash Portfolio seeks to achieve its objective by
investing in short-term U.S. dollar-denominated money market instruments issued
by the U.S. Treasury, U.S. Government agencies, or other agencies, enterprises
or instrumentalities sponsored by the U.S. Government and by entering into
repurchase agreements secured thereby. During normal market conditions, the
Portfolio will invest at least 65% of its total assets in such instruments.
The Portfolio may invest in the following securities provided they are
"eligible securities," as defined below ("Eligible Securities"), which the
Advisor believes presents minimal credit risk at the time of purchase: (i)
straight-debt and mortgage-backed obligations issued by the U.S. Government or
its sponsored agencies, enterprises or instrumentalities; (ii) securities of
international institutions (Asian Development Bank, Export-Import Bank, Inter
American Development Bank, International Bank for Reconstruction and
Development, Government Trust Certificates, Private Export Funding Corp. and
Agency for International Development) which are not direct obligations of the
U.S. Government but which involve governmental agencies, instrumentalities or
enterprises (such investments will represent no more than 25% of the Portfolio's
total assets); and (iii) any publicly or privately placed, unrated securities
issued by the U.S. Government, its agencies, enterprises or instrumentalities,
including floating and variable rate securities, which, in the Advisor's
opinion, are equivalent in credit quality to securities rated AAA by Standard &
Poor's Ratings Group, Division of McGraw Hill ("S&P") or Aaa by Moody's
Investors Service, Inc. ("Moody's"). The Portfolio will invest in securities
maturing within 13 months from the date of purchase, except that securities
collateralizing repurchase agreements may bear maturities exceeding 13 months,
and the Portfolio may also purchase bonds with longer final maturities if such
bonds pursuant to a demand feature provide for an earlier redemption date within
13 months from the date of purchase.
Obligations of certain agencies and instrumentalities of the U.S.
Government, such as the Government National Mortgage Association and the
Export-Import Bank of the United States, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the right of the issuer to borrow from
the Treasury; others, such as those of the Student Loan Marketing Association,
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; still others, such as those of the Federal Farm Credit
Banks or the Federal Home Loan Mortgage Corporation, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-sponsored agencies
or instrumentalities if it is not obligated to do so by law.
Securities issued or guaranteed by the U.S. Government, its agencies
and instrumentalities have historically involved little risk of loss of
principal if held to maturity. However, due to fluctuations in interest rates,
the market value of such securities may vary during the period a shareholder
owns shares of the Portfolio. See "Investment Policies -- Intermediate
Government Portfolio" for a description of obligations of certain agencies,
enterprises and instrumentalities of the U.S. Government. Securities in which
the Government Cash Portfolio may invest may not earn as much income as longer
term and/or lower quality securities.
The Government Cash Portfolio may only invest in: (i) securities rated
in the two highest rating categories of a nationally recognized statistical
rating organization (an "NRSRO"), provided that if they are rated by more than
one NRSRO, at least one other NRSRO rates them in one of its two highest
categories; and (ii) unrated securities determined to be of comparable quality
at the time of purchase (collectively, "Eligible Securities"). The rating
symbols of the NRSROs which the Fund may use are described in the Appendix in
the Statement of Additional Information.
For a description of other securities in which the Portfolio may
invest, see "Common Investment Policies and Risk Factors."
-10-
<PAGE>
TAX-EXEMPT CASH PORTFOLIO
The objective of the Tax-Exempt Cash Portfolio is to provide maximum
current interest income exempt from Federal income taxes consistent with the
preservation of capital and liquidity. The Tax-Exempt Cash Portfolio seeks to
achieve its objective by investing primarily in short-term, high quality
Municipal Obligations (defined below). Under normal circumstances, at least 80%
of the net assets of the Portfolio will be invested in Municipal Obligations,
the interest on which, in the opinion of bond counsel or the issuer's counsel,
is exempt from regular Federal income tax and does not constitute an item of tax
preference for purposes of the Federal alternative minimum tax ("Tax-Exempt
Interest"). Glenmede Fund will use its best efforts to not invest any of the
Tax-Exempt Cash Portfolio's assets in Municipal Obligations the interest on
which constitutes an item of tax preference for purposes of the Federal
alternative minimum tax.
Municipal Obligations in which the Portfolio may invest include the
following, provided at the time of purchase they are Eligible Securities which
the Advisor believes presents minimal credit risk: project notes, demand notes,
short-term municipal obligations (including tax anticipation notes, revenue
anticipation notes, bond anticipation notes, tax and revenue anticipation notes,
construction loan notes, and short-term discount notes) rated SP-1+ or SP-1 by
S&P or MIG-1 by Moody's; tax-exempt commercial paper rated A-1+ or A-1 by S&P or
Prime-1 by Moody's; municipal bonds with a remaining effective maturity of 13
months or less, rated AA or better by S&P or Aa or better by Moody's; variable
rate demand notes rated "VMIG-1" by Moody's; and any non-rated tax-exempt,
privately placed securities which, in the Advisor's opinion, are equivalent in
credit quality to an AA or Aa-rated security as determined by S&P or Moody's,
respectively.
The Portfolio will invest in securities maturing within 13 months from
the date of purchase, except that securities collateralizing repurchase
agreements may bear maturities exceeding 13 months; and the Portfolio may
purchase bonds with final maturities exceeding 13 months if such bonds pursuant
to a demand feature provide for an earlier redemption date within 13 months from
the date of purchase.
Municipal Obligations. The two principal classifications of Municipal
Obligations are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special or specific excise tax or other specific revenue source such as the user
of the facility being financed. Revenue securities include private activity
bonds which are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of private activity bonds is usually directly
related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Municipal Obligations may include variable rate demand notes, provided
they are Eligible Securities. Such notes are frequently not rated by credit
rating agencies, but unrated notes will be purchased by the Portfolio if they
are comparable in quality at the time of the purchase to rated Eligible
Securities as determined by the Advisor. Where necessary to ensure that a note
is an Eligible Security, the Portfolio will require that the issuer's obligation
to pay the principal of the note be backed by an unconditional bank letter or
line of credit, guarantee or commitment to lend. While there may be no active
secondary market with respect to a particular variable rate demand note
purchased by the Portfolio, the Portfolio may, upon the notice specified in the
note, demand payment of the principal of the note at any time or during
specified periods not exceeding 13 months, depending upon the instrument
involved. The absence of such an active secondary market, however, could make it
difficult for the Portfolio to dispose of a variable rate demand note if the
issuer defaulted on its payment obligation or during the periods that the
Portfolio is not entitled to exercise its demand rights. The Portfolio could,
for this or other reasons, suffer a loss to the extent of the default. The
Portfolio invests in variable rate demand notes only when the Advisor deems the
investment to involve minimal credit risk. The Advisor also monitors the
continuing creditworthiness of issuers of such notes and parties providing
credit enhancement to determine whether the Portfolio should continue to hold
the notes.
For a further discussion of Municipal Obligations, see the Appendix to
the Statement of Additional Information.
-11-
<PAGE>
For a description of other securities in which the Portfolio may
invest, see "Common Investment Policies and Risk Factors."
INTERMEDIATE GOVERNMENT PORTFOLIO
The objective of the Intermediate Government Portfolio is to provide
maximum, long-term total return consistent with reasonable risk to principal.
The Intermediate Government Portfolio seeks to achieve its objective by
investing primarily in mortgage-backed securities and medium-term fixed income
securities issued by the U.S. Treasury, U.S. Government agencies, or other
agencies, enterprises or instrumentalities sponsored by the U.S. Government. The
Portfolio seeks to achieve consistent results over the long-term. While
portfolio securities will be traded, the Portfolio is not expected to engage in
active trading under normal circumstances. The net asset value of the Portfolio
will fluctuate, and it is anticipated that the Portfolio will maintain an
average weighted maturity of 3 to 10 years.
The Portfolio may invest in the following securities: (i) straight-debt
and mortgage-backed obligations issued by the U.S. Government or its sponsored
agencies, enterprises or instrumentalities; (ii) securities of international
institutions which are not direct obligations of the U.S. Government but which
involve governmental agencies, enterprises or instrumentalities; (iii) any other
publicly or privately placed, unrated securities issued by the U.S. Government,
its agencies, enterprises or instrumentalities, which, in the Advisor's opinion,
are equivalent in credit quality to securities rated AAA by S&P or Aaa by
Moody's; (iv) mortgage-backed obligations which are privately issued with a
rating of at least AA by S&P or Aa by Moody's or which if unrated, are in the
Advisor's opinion equivalent in credit quality to either such rating; and (v)
corporate debt obligations of domestic and foreign corporations rated A or
better by S&P or Moody's. Any of the above securities may be variable or
floating rate. Under normal circumstances, at least 65% of the Intermediate
Government Portfolio's total assets will be invested in U.S. government
securities and repurchase agreements relating thereto, and no more than 35% of
the value of its total assets will be invested in the securities described in
(ii) and (v) of the first sentence of this paragraph.
Mortgage-Backed Obligations. Mortgage-backed obligations represent an
ownership interest in a pool of residential mortgage loans, the interests in
which are issued and guaranteed by an agency or instrumentality of the U.S.
Government, though not necessarily by the U.S. Government itself.
One such type of mortgage-backed obligation in which the Portfolio may
invest is a Government National Mortgage Association ("GNMA") Certificate. GNMA
Certificates are backed as to the timely payment of principal and interest by
the full faith and credit of the U.S. Government. Another type is a Federal
National Mortgage Association ("FNMA") Certificate; the principal and interest
of which are guaranteed only by FNMA itself, not by the full faith and credit of
the U.S. Government. Another type is a Federal Home Loan Mortgage Association
("FHLMC") Participation Certificate. This type of obligation is guaranteed by
FHLMC as to timely payment of principal and interest. However, like a FNMA
security, it is not guaranteed by the full faith and credit of the U.S.
Government. Another type is a privately issued obligation with a rating of at
least AA by S&P or Aa by Moody's or which if unrated, is in the Advisor's
opinion equivalent in credit quality to either such rating. Mortgage-backed
obligations issued by private issuers, whether or not such obligations are
subject to guarantees by the private issuer, may entail greater risk than
obligations directly or indirectly guaranteed by the U.S. Government.
Mortgage-backed obligations are characterized by monthly payments to
the security holder, reflecting the monthly payments, net of certain fees, made
by the mortgagors of the underlying mortgage loans. The payments to the security
holders (such as the Portfolio), similar to the payments on the underlying
loans, represent both principal and interest. Although the underlying mortgage
loans are for specified periods of time (such as thirty years) the borrowers
can, and typically do, repay them sooner. Thus, the security holders frequently
receive prepayments of principal, in addition to the principal which is part of
the regular monthly payments. A borrower is more likely to prepay a mortgage
which bears a relatively high rate of interest. Therefore, in times of declining
interest rates, some of the Portfolio's higher yielding securities might be
repaid and thereby converted to cash and the Portfolio will be forced to accept
lower interest rates when that cash is used to purchase additional securities.
The Portfolio normally will not distribute principal payments (whether regular
or prepaid) to its shareholders. Interest received by the Portfolio will,
however, be distributed to shareholders in the form of dividends. For a further
discussion of mortgage-backed obligations, see the Appendix to the Statement of
Additional Information.
-12-
<PAGE>
Corporate Debt Obligations. Corporate debt obligations of domestic and
foreign corporations may include a broad range of fixed and variable rate bonds,
debentures and notes.
Although government-guaranteed or sponsored securities reduce credit
risk (the possibility that issuers of bonds will default on payments of interest
and principal), the Portfolio's shares are still subject to the risk of market
value fluctuations inherent in owning fixed income securities, including
securities of international institutions and corporate debt obligations. The
market value of securities held by the Intermediate Government Portfolio is
expected to vary according to, among other factors, changes in prevailing
interest rates and the average weighted maturity of the Portfolio maintained by
the Advisor. In general, if interest rates increase from the time a fixed income
investment is made, the market value of that investment is likely to decline.
Similarly, if interest rates fall from the time a fixed income investment is
made, the market value of that investment is likely to increase. Also, in
general, for a given change in interest rates, a fixed income investment with a
longer maturity is likely to fluctuate more in market value than a comparable
investment with a shorter maturity. An investment in the Intermediate Government
Portfolio is expected to be subject to such market risks.
For a description of other securities in which the Intermediate
Government Portfolio may invest, see "Common Investment Policies and Risk
Factors."
MUNI INTERMEDIATE PORTFOLIO AND NEW JERSEY MUNI PORTFOLIO
The objective of each of the Muni Intermediate and New Jersey Muni
Portfolios is to seek as high a level of current income exempt from Federal
income tax as is consistent with preservation of capital. To the extent
possible, the Muni Intermediate Portfolio seeks to achieve its objective by
investing primarily in intermediate and long-term Municipal Obligations issued
by the Commonwealth of Pennsylvania and its political subdivisions, agencies,
instrumentalities and authorities ("Pennsylvania Municipal Obligations") and the
New Jersey Muni Portfolio seeks to achieve its objective by investing primarily
in intermediate and long-term Municipal Obligations issued by the State of New
Jersey and its political subdivisions, agencies, instrumentalities and
authorities ("New Jersey Municipal Obligations"). Municipal Obligations acquired
by these Portfolios will be rated at the time of purchase within the three
highest ratings assigned by Moody's (i.e., Aaa, Aa, A) or by S&P (AAA, AA, A) in
the case of bonds, rated SP-1 or higher by S&P or MIG-2 or higher by Moody's in
the case of notes, rated A-1 or higher by S&P or Prime-1 or higher by Moody's in
the case of tax-exempt commercial paper or in unrated securities determined by
the Advisor at the time of purchase to be of comparable quality. If a portfolio
security is reduced below A by Moody's or S&P, the Advisor will dispose of the
security in an orderly fashion as soon as practicable. The Muni Intermediate and
New Jersey Muni Portfolios may not be able to achieve as high a level of current
income under all market conditions as would be possible if they were permitted
to invest in lower quality and longer term securities which, however, generally
are less liquid, have greater market risk and are generally subject to more
fluctuation of market value. See "Investment Policies--Tax-Exempt Cash
Portfolio" for a description of Municipal Obligations and the Appendix to the
SAI for a description of Moody's and S&P's ratings.
To the extent possible, during normal market conditions at least 65% of
the net assets of the New Jersey Muni Portfolio will be invested in New Jersey
Municipal Obligations. It is anticipated that the New Jersey Portfolio and the
Muni Intermediate Portfolio will each maintain an average weighted maturity of
three to ten years.
During normal market conditions: up to 20% of each Portfolio's net
assets may be invested in securities which are not Municipal Obligations; and at
least 80% of the Portfolio's net assets will be invested in intermediate and
long-term Municipal Obligations, the interest on which is Tax-Exempt Interest.
Each of the Portfolios may invest up to 20% of its net assets in Municipal
Obligations, the interest on which is exempt from regular Federal income tax but
is an item of tax preference for purposes of the Federal alternative minimum
tax. During temporary defensive periods, each Portfolio may invest without
limitation in obligations which are not Municipal Obligations and may hold
without limitation uninvested cash reserves. Such securities may include,
without limitation, bonds, notes, variable rate demand notes and commercial
paper, provided such securities are rated within the relevant categories
applicable to Municipal Obligations set forth above, or if unrated, are of
comparable quality as determined by the Advisor and may also include, without
limitation, other debt obligations, such as bank obligations which are also of
comparable quality as determined by the Advisor. Each Portfolio may acquire
"stand-by commitments" with respect to Municipal Obligations held by it. Under a
stand-by commitment, a dealer agrees to purchase, at the Portfolio's option,
specified Municipal Obligations at a specified price. The acquisition of a
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stand-by commitment may increase the cost, and thereby reduce the yield, of the
Municipal Obligation to which such commitment relates. Each Portfolio will
acquire stand-by commitments solely to facilitate portfolio liquidity and does
not intend to exercise its rights thereunder for trading purposes.
Each Portfolio is classified as non-diversified under the Investment
Company Act of 1940, as amended (the "1940 Act"). Investment returns on a
non-diversified portfolio typically are dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio. Consequently, the change in value of any one security may affect the
overall value of a non-diversified portfolio more than it would a diversified
portfolio. Additionally, a non-diversified portfolio may be more susceptible to
economic, political and regulatory developments than a diversified portfolio
with a similar objective.
Since each of the Muni Intermediate and New Jersey Muni Portfolios will
invest primarily in securities issued by issuers located in one state, each of
these Portfolios is susceptible to adverse changes in value due to changes in
the economic condition and governmental policies of that state and its political
subdivisions, agencies, instrumentalities and authorities. A comparable
municipal bond fund which is not concentrated in obligations issued by issuers
located in one state would be less susceptible to these risks. If any issuer of
securities held by one of these Portfolios is unable to meet its financial
obligations, that Portfolio's income, capital, and liquidity may be adversely
affected.
With respect to the Commonwealth of Pennsylvania, although the balance
in the General Fund of the Commonwealth (the principal operating fund of the
Commonwealth) experienced deficits in fiscal 1990 and 1991, tax increases and
spending decreases have resulted in surpluses the last three years; as of June
30, 1994, the General Fund had a surplus of $892.9 million. The deficit in the
Commonwealth's unreserved/undesignated funds also has been eliminated, and there
was a surplus of $79.2 million as of June 30, 1994.
The concentration of investments by the New Jersey Muni Portfolio in
New Jersey Municipal Obligations also raises special investment considerations.
The State of New Jersey generally has a diversified economic base consisting of,
among others, commerce and service industries, selective commercial agriculture,
insurance, tourism, petroleum refining and manufacturing, although New Jersey's
manufacturing industry has shown a downward trend in the last few years. New
Jersey is a major recipient of Federal assistance and, of all the states, is
among the highest in the amount of Federal aid received. Therefore, a decrease
in Federal financial assistance may adversely affect New Jersey's financial
condition. While New Jersey's economic base has become more diversified over
time and thus its economy appears to be less vulnerable during recessionary
periods, a recurrence of high levels of unemployment could adversely affect New
Jersey's overall economy and its ability to meet its financial obligations. In
addition, because New Jersey maintains a balanced budget which restricts total
appropriation increases to only 5% annually to any municipality or county, the
balanced budget plan may actually adversely affect a particular municipality's
or county's ability to repay its obligations.
See "Common Investment Policies and Risk Factors" for a description of
other investment policies.
COMMON INVESTMENT POLICIES AND RISK FACTORS
There can be no assurance that any of the Portfolios will achieve its
stated investment objective. There are a number of investment policies common to
each of the Portfolios.
REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements with qualified
brokers, dealers, banks and other financial institutions deemed creditworthy by
the Advisor. Under normal circumstances, however, each of the Intermediate
Government, Muni Intermediate and New Jersey Muni 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.
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In a repurchase agreement, a Portfolio purchases a security and
simultaneously commits to resell that security at a future date to the seller (a
qualified bank or securities dealer) at an agreed upon price plus an agreed upon
market rate of interest (itself unrelated to the coupon rate or date of maturity
of the purchased security). The securities held subject to a repurchase
agreement may have stated maturities exceeding 13 months, provided that with
respect to the Cash Portfolios, the repurchase agreement itself matures in less
than 13 months. The Advisor currently expects that repurchase agreements with
respect to the Intermediate Government, Muni Intermediate and New Jersey Muni
Portfolios also will mature in less than 13 months. The seller under a
repurchase agreement will be required to maintain the value of the securities
subject to the agreement at not less than 101% of the repurchase price including
accrued interest. The Funds' administrator will mark to market daily the value
of the securities purchased, and the Advisor will, if necessary, require the
seller to deposit additional securities to ensure that the value is in
compliance with the 101% requirement stated above. The Advisor will consider the
creditworthiness of a seller in determining whether a Portfolio should enter
into a repurchase agreement, and the Portfolios will only enter into repurchase
agreements with banks and dealers which are determined to present minimal credit
risk by the Advisor under procedures adopted by the Board members.
In effect, by entering into a repurchase agreement, a Portfolio is
lending its funds to the seller at the agreed upon interest rate, and receiving
a security as collateral for the loan. Such agreements can be entered into for
periods of one day (overnight repo) or for a fixed term (term repo). Repurchase
agreements are a common way to earn interest income on short-term funds.
The use of repurchase agreements involves certain risks. For example,
if the seller of a repurchase agreement defaults on its obligation to repurchase
the underlying securities at a time when the value of these securities has
declined, a Portfolio may incur a loss upon disposition of them. Default by the
seller would also expose a Portfolio to possible loss because of delays in
connection with the disposition of the underlying obligations. If the seller of
an agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a bankruptcy court may determine that
the underlying securities are collateral not within the control of a Portfolio
and therefore subject to sale by the trustee in bankruptcy. Further, it is
possible that a Portfolio may not be able to substantiate its interest in the
underlying securities.
REVERSE REPURCHASE AGREEMENTS
The Government Cash and Intermediate Government Portfolios may enter
into reverse repurchase agreements. In a reverse repurchase agreement a
Portfolio sells a security and simultaneously commits to repurchase that
security at a future date from the buyer. In effect, the Portfolio is
temporarily borrowing funds at an agreed upon interest rate from the purchaser
of the security, and the sale of the security represents collateral for the
loan. The Portfolio retains record ownership of the security and the right to
receive interest and principal payments on the security. At an agreed upon
future date, the Portfolio repurchases the security by remitting the proceeds
previously received, plus interest. In certain types of agreements, there is no
agreed upon repurchase date and interest payments are calculated daily, often
based on the prevailing overnight repurchase rate. These agreements, which are
treated as if reestablished each day, are expected to provide the Government
Cash Portfolio and the Intermediate Government Portfolio with a flexible
borrowing tool. Reverse repurchase agreements are considered to be borrowings by
a Portfolio under the 1940 Act.
A Portfolio's investment of the proceeds of a reverse repurchase
agreement is the speculative factor known as leverage. The Portfolio may enter
into a reverse repurchase agreement only if the interest income from investment
of the proceeds is greater than the interest expense of the transaction and the
proceeds are invested for a period no longer than the term of the agreement. A
Portfolio will maintain with the custodian a separate account with a segregated
portfolio of liquid securities at least equal to its purchase obligations under
these agreements. The Advisor will consider the creditworthiness of the other
party in determining whether a Portfolio will enter into a reverse repurchase
agreement.
Under normal circumstances each of the Government Cash and Intermediate
Government Portfolios will not enter into reverse repurchase agreements if
entering into such agreements would cause, at the time of entering into such
agreements, more than 10% of the value of its total assets to be subject to such
agreements.
The use of reverse repurchase agreements involves certain risks. For
example, the other party to the agreement may default on its obligation or
become insolvent and unable to deliver the securities to the Portfolio at a time
when the value of the securities has increased. Reverse repurchase agreements
also involve the risk that a Portfolio may not be able to substantiate its
interest in the underlying securities.
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BORROWING
Each Portfolio may purchase securities on a "when issued," "delayed
settlement" or "forward delivery" basis, and the Government Cash and
Intermediate Government Portfolios may enter into reverse repurchase agreements.
As a temporary measure for extraordinary or emergency purposes, a Portfolio may
borrow money from banks. However, none of the Portfolios will borrow money for
speculative purposes. See "Common Investment Policies--'When Issued,' 'Delayed
Settlement,' 'Forward Delivery Securities' and 'Reverse Repurchase
Agreements.' "
LENDING OF SECURITIES
Each Portfolio may lend its portfolio securities with a value of up to
one-third of its total assets to qualified brokers, dealers, banks and other
financial institutions for the purpose of realizing additional net investment
income through the receipt of interest on the loan. Such loans would involve
risks of delay in receiving additional collateral in the event the value of the
collateral decreased below the value of the securities loaned or of delay in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially. Loans will be made only to
borrowers deemed by the Advisor to be of good standing.
MUNICIPAL OBLIGATIONS
The Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios
may each invest 25% or more of its net assets in Municipal Obligations, the
interest on which is paid solely from revenues of similar projects, and may
invest up to 20% of its total assets in private activity bonds when added
together with any taxable investments held by the Portfolio when, in the opinion
of the Advisor, the investment is warranted. To the extent a Portfolio's assets
are invested in Municipal Obligations payable from the revenues of similar
projects or are invested in private activity bonds, the particular Portfolio
will be subject to the peculiar risks presented by the laws and economic
conditions relating to such projects and bonds to a greater extent than it would
be if its assets were not so invested.
"WHEN ISSUED," "DELAYED SETTLEMENT" AND "FORWARD DELIVERY" SECURITIES
The Portfolios may purchase and sell securities on a "when issued,"
"delayed settlement" or "forward delivery" basis. "When issued" or "forward
delivery" refers to securities whose terms and indenture are available and for
which a market exists, but which are not available for immediate delivery. When
issued or forward delivery transactions may be expected to occur one month or
more before delivery is due. Delayed settlement is a term used to describe
settlement of a securities transaction in the secondary market which will occur
sometime in the future. No payment or delivery is made by a Portfolio in a when
issued, delayed settlement or forward delivery transaction until the Portfolio
receives payment or delivery from the other party to the transaction. A
Portfolio will maintain a separate account of cash, U.S. Government securities
or other high grade debt obligations at least equal to the value of purchase
commitments until payment is made. Such segregated securities will either mature
or, if necessary, be sold on or before the settlement date. Although a Portfolio
receives no income from the above described securities prior to delivery, the
market value of such securities is still subject to change. A Portfolio receives
no income from "when issued," "delayed settlement" or "forward delivery"
securities prior to delivery of such securities.
A Portfolio will engage in when issued transactions to obtain what is
considered to be an advantageous price and yield at the time of the transaction.
When a Portfolio engages in when issued, delayed settlement or forward delivery
transactions, it will do so for the purpose of acquiring securities consistent
with its investment objective and policies and not for the purpose of
speculation. Each Portfolio's when issued, delayed settlement and forward
delivery commitments are not expected to exceed 25% of its total assets absent
unusual market circumstances, and each Portfolio will only sell securities on
such a basis to offset securities purchased on such a basis.
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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
particular Funds' Board members may change such policies without shareholder
approval.
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PURCHASE OF SHARES
Shares of each Portfolio are sold without a sales commission on a
continuous basis to the Advisor acting on behalf of its or an Affiliate's
clients ("Clients") and to other institutions (the "Institutions"), at the net
asset value per share next determined after receipt of the purchase order by the
transfer agent. See "Valuation of Shares." The minimum initial investment for
each Portfolio is $25,000; the minimum for subsequent investments for each
Portfolio is $1,000. The Funds reserve the right to reduce or waive the minimum
initial and subsequent investment requirements from time to time. Beneficial
ownership of shares will be reflected on books maintained by the Advisor or the
Institutions. A prospective investor wishing to purchase shares in the Funds
should contact the Advisor or his or her Institution.
It is the responsibility of the Advisor to transmit orders for share
purchases to Investment Company Capital Corp. ("ICC"), the Funds' transfer
agent, and deliver required funds to The Chase Manhattan Bank, N.A., Brooklyn,
New York, the Funds' custodian, on a timely basis. Shares purchased in the Cash
Portfolios before 12:00 noon (Eastern time) begin earning dividends on the same
business day provided Federal funds are available to the particular Portfolio
before 12:00 noon (Eastern time) that day.
The Funds reserve the right, in its sole discretion, to suspend the
offering of shares of its Portfolios or reject purchase orders when, in the
judgment of management, such suspension or rejection is in the best interests of
the Fund.
Purchases of a Portfolio's shares will be made in full and fractional
shares of the Portfolio calculated to three decimal places. In the interest of
economy and convenience, certificates for shares will not be issued except upon
the written request of the shareholder. Certificates for fractional shares,
however, will not be issued.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed at any time, without cost, at
the net asset value of the Portfolio next determined after receipt of the
redemption request by the transfer agent. Generally, a properly signed written
request is all that is required. Any redemption may be more or less than the
purchase price of the shares depending on the market value of the investment
securities held by the Portfolio. An investor wishing to redeem shares should
contact the Advisor or his or her Institution. It is the responsibility of the
Advisor to transmit promptly redemption orders to the transfer agent.
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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. The Funds may suspend the right of redemption or
postpone the date of payment at times when the New York Stock Exchange (the
"Exchange") is closed, or under any emergency circumstances as determined by the
Securities and Exchange Commission (the "Commission"). See "Valuation of Shares"
for the days on which the Exchange is closed.
If the Funds' Board determines that it would be detrimental to the best
interests of the remaining shareholders of the Funds to make payment wholly or
partly in cash, the Funds 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.
The Funds reserve the right, upon 30 days' written notice, to redeem an
account in any of the Portfolios if the net asset value of the account's shares
falls below $100 and is not increased to at least such amount within such 30-day
period.
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION
OF SHARES OF THE PORTFOLIOS
The Funds 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
the Funds' transfer agent. As of date of this Prospectus, only the Advisor
serves as the Funds' agent to receive and transmit purchase and redemption
orders. The Advisor is not entitled to receive any fee from shareholders and/or
the Funds for acting as the Funds' agent to receive and transmit purchase and
redemption orders. 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 the Funds' transfer agent not later than the
next business morning. The Advisor does receive shareholder servicing fees for
shareholder support services. See "Shareholder Servicing Plan."
VALUATION OF SHARES
The net asset value of the Portfolios is determined by dividing the
total market value of each Portfolio's investments and other assets, less any
liabilities of that Portfolio, by the total outstanding shares of that
Portfolio. For the Cash Portfolios, net asset value per share is determined as
of 12:00 noon (Eastern time) on each day that the Exchange is open for business
(an "Exchange Business Day"). Currently the Exchange is closed on weekends and
the customary national business holidays of New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day (or the days on which they are observed). For the Intermediate
Government, Muni Intermediate and New Jersey Muni Portfolios, net asset value
per share is determined as of the close of regular trading hours of the Exchange
on each Exchange Business Day on which the Portfolio receives an order to
purchase or redeem its shares. One or more pricing services may be used to
provide securities valuations in connection with the determination of the net
asset value of each Portfolio.
GOVERNMENT CASH AND TAX-EXEMPT CASH PORTFOLIOS
For the purpose of calculating each Cash Portfolio's net asset value
per share, securities are valued by the "amortized cost" method of valuation,
which does not take into account unrealized gains or losses. The amortized cost
method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price the Portfolio would receive if it sold the instrument.
The use of amortized cost and the maintenance of each Portfolio's per
share net asset value at $1.00 is based on its election to operate under the
provisions of Rule 2a-7 under the 1940 Act. As a condition of operating under
that rule, each Cash Portfolio must maintain an average weighted maturity of 90
days or less, purchase only instruments deemed to have remaining maturities of
13 months or less, and invest only in securities which are determined by the
Advisor, pursuant to procedures established by the Board, to present minimal
credit risks and which are Eligible Securities, pursuant to procedures
established by the Board.
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The Board has established procedures reasonably designed to stabilize
the net asset value per share for the purposes of sales and redemptions at
$1.00. These procedures include daily review of the relationship between the
amortized cost value per share and a net asset value per share based upon
available indications of market value.
In the event of a deviation of over 1/2 of 1% between a Cash
Portfolio's net asset value based upon available market quotations or market
equivalents and $1.00 per share based on amortized cost, the Board members will
promptly consider what action, if any, should be taken. The Board members also
will take such action as they deem appropriate to eliminate or to reduce to the
extent reasonably practicable any material dilution or other unfair results
which might arise from differences between the two. Such action may include
redemption in kind, selling instruments prior to maturity to realize capital
gains or losses or to shorten the average weighted maturity, exercising puts,
withholding dividends, paying distributions from capital or capital gains or
utilizing a net asset value per share as determined by using available market
quotations.
The net asset value per share of each Cash Portfolio will ordinarily
remain at $1.00, but each Cash Portfolio's daily dividends will vary in amount.
There can be no assurance, however, that the Cash Portfolios will maintain a
constant net asset value per share of $1.00.
INTERMEDIATE GOVERNMENT PORTFOLIO
Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the
over-the-counter market, at the most recent quoted bid price, or when stock
exchange valuations are used, at the latest quoted sale price on the day of
valuation. If there is not such a reported sale, the latest quoted bid price
will be used. Net asset value includes interest on fixed income securities which
is accrued daily. In addition, bond and other fixed income securities may be
valued on the basis of prices provided by a pricing service when the Advisor
believes such prices reflect the fair market value of such securities. The
prices provided by a pricing service are determined without regard to bid or
last sale prices but take into account institutional size trading in similar
groups of securities and any developments related to specific securities. Debt
securities with remaining maturities of 60 days or less are valued at amortized
cost, pursuant to which (i) such securities shall be valued initially at cost on
the date of purchase or, in the case of securities purchased with more than 60
days maturity, at their market or fair value on the 61st day prior to maturity,
and (ii) thereafter (absent unusual circumstances), a constant proportionate
amortization of any discount or premium shall be assumed until maturity of the
security.
The value of other assets and securities for which no quotations are
readily available (including restricted securities) is determined in good faith
at fair value using methods determined by the Board.
MUNI INTERMEDIATE AND NEW JERSEY MUNI PORTFOLIOS
Municipal Obligations for which quotations are readily available are
valued at the most recent quoted bid price provided by investment dealers,
provided that Municipal Obligations may be valued on the basis of prices
provided by a pricing service when such prices are determined by the
administrator to reflect the fair market value of such Municipal Obligations.
Municipal Obligations for which market quotations are not readily available are
valued at fair market value as determined in good faith by or under the
direction of the particular Board. Debt obligations with remaining maturities of
60 days or less are valued on the basis of amortized cost, pursuant to which (i)
such securities are valued initially at cost on the date of purchase or, in the
case of securities purchased with more than 60 days maturity, at their market or
fair value on the 61st day prior to maturity, and (ii) thereafter (absent
unusual circumstances), a constant proportionate amortization of any discount or
premium shall be assumed until maturity of the security.
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DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Portfolios have the following dividend and capital gains policies:
(a) The Cash Portfolios declare dividends daily and normally
distribute substantially all of their net investment income to
shareholders monthly.
(b) The Intermediate Government, Muni Intermediate and New Jersey
Muni Portfolios normally will distribute substantially all of
their net investment income to shareholders in the form of
monthly dividends.
If any net capital gains are realized, the Portfolios normally
distribute such gains at least once a year. However, see "Dividends, Capital
Gains Distributions and Taxes--Federal Taxes--Miscellaneous," for a discussion
of the Federal excise tax applicable to certain regulated investment companies.
Undistributed net investment income is included in a Portfolio's net
assets for the purpose of calculating net asset value per share. Therefore, on
the Intermediate Government, Muni Intermediate and New Jersey Muni Portfolios'
"ex-dividend" date, the net asset value per share excludes the dividend (i.e.,
is reduced by the per share amount of the dividend). Dividends paid shortly
after the purchase of shares of the Intermediate Government, Muni Intermediate
and New Jersey Muni Portfolios by an investor, although in effect a return of
capital, are taxable to the investor.
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Portfolio of liability for Federal income taxes to the
extent its earnings are distributed in accordance with the Code.
Taxable Portfolios. Qualification as a regulated investment company
under the Code for a taxable year requires, among other things, that a taxable
Portfolio distribute to its shareholders an amount at least equal to 90% of its
investment company taxable income and 90% of its net exempt interest income (if
any) for such taxable year. In general, a Portfolio's investment company taxable
income will be its net investment income, including interest and dividends,
subject to certain adjustments, and net short-term capital gains and excluding
the excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. Each Portfolio intends to
distribute as dividends substantially all of its investment company taxable
income each year. Such dividends will be taxable as ordinary income to each
Portfolio's shareholders who are not currently exempt from Federal income taxes,
whether such income or gain is received in cash or reinvested in additional
shares. The dividends received deduction for corporations will apply to such
ordinary income distributions to the extent the total qualifying dividends
received by a Portfolio are from domestic corporations for the taxable year. It
is anticipated that none of the dividends paid by the Government Cash and
Intermediate Government Portfolios will be eligible for the dividends received
deduction.
Substantially all of each Portfolio's net realized long-term capital
gains, if any, will be distributed at least annually to its shareholders. A
Portfolio generally will have no tax liability with respect to such gains and
the distributions will be taxable to the shareholders who are not currently
exempt from Federal income taxes as long-term capital gains, regardless of how
long the shareholders have held the shares and whether such gains are received
in cash or reinvested in additional shares.
With respect to shares of the Intermediate Government, Muni
Intermediate and New Jersey Muni Portfolios, a shareholder considering buying
shares of a fund on or just before the record date of a dividend should be aware
that the amount of the forthcoming dividend payment, although in effect a return
of capital, will be taxable.
A taxable gain or loss may be realized by a shareholder upon redemption
or transfer of shares of the Intermediate Government, Muni Intermediate and New
Jersey Muni Portfolios, depending upon the tax basis of such shares and their
price at the time of redemption or transfer.
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<PAGE>
Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios.
Exempt-interest dividends may be treated by shareholders as items of interest
excludable from their gross income under Section 103(a) of the Code, unless
under the circumstances applicable to the particular shareholder the exclusion
would be disallowed. (See "Additional Information Concerning Taxes" in the SAI.)
Distributions of net income may be taxable to investors under state or local law
as dividend income even though a substantial portion of such distributions may
be derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such income taxes.
If the Portfolio should hold certain private activity bonds issued
after August 7, 1986, shareholders must include, as an item of tax preference,
the portion of dividends paid by a Portfolio that is attributable to interest on
such bonds in their Federal alternative minimum taxable income for purposes of
determining liability (if any) for the alternative minimum tax and the
environmental tax applicable to corporations. Corporate shareholders must also
take all exempt-interest dividends into account in determining certain
adjustments for Federal alternative minimum and environmental tax purposes. For
individuals, the alternative minimum tax rate is 26% for alternative minimum
taxable income in excess of an exemption amount and 28% for any amount of
alternative minimum taxable income in excess of the exemption amount plus
$175,000. For corporations, the alternative minimum tax rate is 20%. The
environmental tax applicable to corporations is imposed at the rate of .12% on
the excess of the corporation's modified Federal alternative minimum taxable
income over $2,000,000. Shareholders receiving Social Security benefits should
note that all exempt-interest dividends will be taken into account in
determining the taxability of such benefits.
To the extent that dividends paid to shareholders are derived from
taxable interest or from long-term or short-term capital gains, such dividends
will be subject to Federal income tax (whether such dividends are paid in cash
or additional shares) and may also be subject to state and local taxes.
Miscellaneous. Dividends declared in October, November or December of
any year payable to shareholders of record on a specified date in such months
will be deemed to have been received by the shareholders and paid by a Portfolio
on December 31, in the event such dividends are paid during January of the
following year.
A 4% nondeductible excise tax is imposed on regulated investment
companies that fail to currently distribute specified percentages of their
ordinary taxable income and net capital gain (excess of capital gains over
capital losses). Each Portfolio intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any net capital gain
prior to the end of each calendar year to avoid liability for this excise tax.
The foregoing summarizes some of the important tax considerations
generally affecting the Portfolios and their shareholders and is not intended as
a substitute for careful tax planning. Accordingly, potential investors in the
Portfolios should consult their tax advisers with specific reference to their
own tax situation.
The foregoing discussion of tax consequences is based on tax laws and
regulations in effect on the date of this Prospectus, which are subject to
change by legislative or administrative action.
Shareholders will be advised at least annually as to the federal income
tax consequences of distributions made each year.
Each Portfolio will be required in certain cases to withhold and remit
to the United States Treasury 31% of taxable dividends or gross proceeds
realized upon sale paid to shareholders who have failed to provide a correct tax
identification number in the manner required, who are subject to withholding by
the IRS for failure properly to include on their return payments of taxable
interest or dividends, or who have failed to certify to the Portfolio that they
are not subject to backup withholding when required to do so or that they are
"exempt recipients."
PENNSYLVANIA TAX CONSIDERATIONS
Shareholders of the Muni Intermediate Portfolio will not be subject to
Pennsylvania Personal Income Tax on distributions from the Portfolio
attributable to interest income from Pennsylvania Municipal Obligations held by
the Portfolio, either when received by the Portfolio or when credited or
distributed to the shareholders. The exemption from Pennsylvania Personal Income
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<PAGE>
Tax also will extend to interest on obligations of the United States, its
territories and certain of its agencies and instrumentalities ("Federal
Securities"). Shareholders of the Portfolio will not be subject to the
Philadelphia School District Net Income Tax imposed on Philadelphia residents on
distributions from the Portfolio attributable to interest income from
Pennsylvania Municipal Obligations or Federal Securities held by the Portfolio,
either when received by the Portfolio or when credited or distributed to the
shareholders.
For purposes of the Pennsylvania Personal Income Tax and the School
District Tax, distributions derived from investments in other than Pennsylvania
Municipal Obligations and Federal Securities and distributions from net realized
capital gains in respect of such investments will be taxable. Distributions
qualifying as capital gain dividends for Federal income tax purposes are not
taxable for purposes of the School District Tax. Gain on the disposition of a
share of the Muni Intermediate Portfolio will be subject to the Pennsylvania
Personal Income Tax and the School District Tax, except that gain realized with
respect to a share held for more than six months is not subject to the School
District Tax.
Shareholders of the Muni Intermediate Portfolio are not subject to the
Pennsylvania personal property tax imposed by many counties in Pennsylvania to
the extent that the Portfolio is comprised of Pennsylvania Municipal Obligations
and Federal Securities. In addition, Glenmede Fund has obtained a Certificate of
Authority to do business as a foreign corporation in Pennsylvania, and currently
does business in that state. Accordingly, the shares of the Glenmede Fund will
be exempt from Pennsylvania Personal Property Taxes.
NEW JERSEY TAX CONSIDERATIONS
It is anticipated that substantially all dividends paid by the New
Jersey Muni Portfolio will not be subject to New Jersey personal income tax. In
accordance with the provisions of New Jersey law, as currently in effect,
distributions paid by a "qualified investment fund" will not be subject to the
New Jersey personal income tax to the extent that the distributions are
attributable to income received as interest or gain from New Jersey Municipal
Obligations, or as interest or gain from direct U.S. Government obligations.
Distributions by a qualified investment fund that are attributable to most other
sources will be subject to the New Jersey personal income tax. If the New Jersey
Muni Portfolio qualifies as a qualified investment fund under New Jersey law,
any gain on the redemption or sale of the Portfolio's shares will not be subject
to the New Jersey personal income tax. To be classified as a qualified
investment fund, at least 80% of the Portfolio's investment must consist of New
Jersey Municipal Obligations or direct U.S. Government obligations; it must have
no investments other than interest-bearing obligations, obligations issued at a
discount, and cash and cash items (including receivables) and financial options,
futures and forward contracts related to interest bearing obligations issued at
a discount; and it must satisfy certain reporting obligations and provide
certain information to its shareholders. Shares of the Portfolio are not subject
to property taxation by New Jersey or its political subdivisions. To the extent
that a shareholder is subject to state or local taxes outside New Jersey,
dividends earned by an investment in the Fund may represent taxable income.
The New Jersey personal income tax is not applicable to corporations.
For all corporations subject to the New Jersey Corporation Business Tax,
dividend and distributions from a "qualified investment fund" are included in
the net income tax base for purposes of computing the Corporation Business Tax.
Furthermore, any gain upon the redemption or sale of Fund shares by a corporate
shareholder is also included in the net income tax base for purposes of
computing the Corporation Business Tax.
The foregoing is only a summary of certain New Jersey tax
considerations generally affecting the Portfolio and its shareholders, and is
not intended as a substitute for careful tax planning. Shareholders are urged to
consult their tax advisors with specific reference to their own tax situations.
OTHER STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on
distributions from the Funds. A shareholder should consult with his or her tax
adviser with respect to the tax status of distributions from the Funds in a
particular state and locality.
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<PAGE>
INVESTMENT ADVISOR
The Advisor, a limited purpose trust company chartered in 1956,
provides fiduciary and investment services to endowment funds, foundations,
employee benefit plans and other institutions and individuals. The Advisor is a
wholly-owned subsidiary of The Glenmede Corporation and is located at One
Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania 19103.
At January 31, 1997, the Advisor had over $10.3 billion in assets in the
accounts for which it serves in various capacities including as executor,
trustee or investment advisor.
Under Investment Advisory Agreements (the "Investment Advisory
Agreements") with the Funds, the Advisor, subject to the control and supervision
of the particular Fund's Board and in conformance with the stated investment
objective and policies of each Portfolio, manages the investment and
reinvestment of the assets of each Portfolio. It is the responsibility of the
Advisor to make investment decisions for the Portfolios and to place each
Portfolio's purchase and sales orders.
The Advisor does not receive any fee from the Funds for its investment
services provided to the Portfolios described in this Prospectus. However,
shareholders in the Funds who are clients of the Advisor or an Affiliate pay
fees which vary depending on the capacity in which the Advisor or the Affiliate
provides fiduciary and investment services to the particular client (e.g.,
personal trust, estate settlement, advisory and custodian services).
Mary Ann B. Wirts, Vice President and Manager of the Fixed Income
Division of the Advisor, has been the portfolio manager primarily responsible
for the management of the Tax-Exempt Cash Portfolio since that Portfolio
commenced operations. Since November 1, 1996, Mrs. Wirts has also been the
portfolio manager primarily responsible for the management of the Government
Cash and Intermediate Government Portfolios. Mrs. Wirts has been employed by the
Advisor since 1982.
Laura LaRosa is the portfolio manager primarily responsible for the
management of the Muni Intermediate and New Jersey Muni Portfolios. Ms. LaRosa
has been primarily responsible for the management of those Portfolios since
November 1994. Prior to her employment with the Advisor, Ms. LaRosa was Vice
President of Institutional Sales at Hopper Soliday, Philadelphia from 1986
through October 1994. Ms. LaRosa has been employed by the Advisor since November
1994.
ADMINISTRATIVE, TRANSFER AGENCY AND DIVIDEND PAYING SERVICES
ICC serves as the Funds' administrator, transfer agent and dividend
paying agent pursuant to a Master Services Agreement, and in those capacities
supervises all aspects of the Funds' day-to-day operations, other than
management of the Funds' investments. ICC is a wholly-owned subsidiary of Alex.
Brown & Sons Incorporated ("Alex. Brown"). For its services as administrator,
transfer agent and dividend paying agent, ICC is entitled to receive fees from
the Funds equal to .12% of the first $100 million of the combined net assets of
the Funds; .08% of the next $150 million of the combined net assets of the
Funds; .04% of the next $500 million of the combined net assets of the Funds and
.03% of the combined net assets of the Funds over $750 million. For the fiscal
year ended October 31, 1996, ICC received fees at the rate of .04% of the
Government Cash Portfolio's average net assets; .04% of the Tax-Exempt Cash
Portfolio's average net assets; .04% of the Intermediate Government Portfolio's
average net assets; .04% of the Muni Intermediate Portfolio's average net
assets; and .04% of the New Jersey Muni Portfolio's average net assets.
SHAREHOLDER SERVICING PLAN
The Funds have adopted a Shareholder Servicing Plan (the "Plan")
effective January 1, 1995 under which the Funds may pay a fee to broker/dealers,
banks and other financial institutions (including the Advisor and its
affiliates) that are dealers of record or holders of record or which have a
servicing relationship ("Servicing Agents") with the beneficial owners of shares
in any of the Portfolios. Under the Plan, Servicing Agents enter into
Shareholder Servicing Agreements (the "Agreements") with the Funds. Pursuant to
such Agreements, Servicing Agents provide shareholder support services to their
clients ("Customers") who beneficially own shares of the Portfolios. The fee,
which is at an annual rate of .05%, is computed monthly and is based on the
average daily net assets of the shares beneficially owned by Customers of such
Servicing Agents. All expenses incurred by the Portfolios in connection with the
Agreements and the implementation of the Plans shall be borne entirely by the
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<PAGE>
holders of the shares of the particular Portfolio involved and will result in an
equivalent increase to each Portfolio's Total Annual Portfolio Operating
Expenses. The Advisor has entered into an Agreement with the Funds.
The services provided by the Servicing Agents under the Agreements may
include aggregating and processing purchase and redemption requests from
Customers and transmitting purchase and redemption orders to the transfer agent;
providing Customers with a service that invests the assets of their accounts in
shares pursuant to specific or pre-authorized instructions; processing dividend
and distribution payments from the Funds on behalf of Customers; providing
information periodically to Customers showing their positions; arranging for
bank wires; responding to Customers' inquiries concerning their investments;
providing sub-accounting with respect to shares beneficially owned by Customers
or the information necessary for sub-accounting; if required by law, forwarding
shareholder communications (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
Customers; and providing such other similar services as may be reasonably
requested.
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) purchase more than 10% of any class of the outstanding voting
securities of any issuer;
(b) acquire any securities of companies within one industry if, as
a result of such acquisition, more than 25% of the value of
the Portfolio's total assets would be invested in securities
of companies within such industry; provided, however, that
there shall be no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities;
(c) pledge, mortgage, or hypothecate any of its assets to an
extent greater than 10% of its total assets at fair market
value, except as described in this Prospectus and the
Statement of Additional Information and in connection with
entering into futures contracts, but the deposit of assets in
a segregated account in connection with the writing of covered
put and call options and the purchase of securities on a when
issued, delayed settlement or forward delivery basis and
collateral arrangements with respect to initial or variation
margin for futures contracts will not be deemed to be pledges
of a Portfolio's assets or the purchase of any securities on
margin for purposes of this investment limitation;
(d) issue senior securities except that a Portfolio may borrow
money in accordance with investment limitation (e), purchase
securities on a when issued, delayed settlement or forward
delivery basis and enter into reverse repurchase agreements;
and
(e) borrow money except as a temporary measure for extraordinary
or emergency purposes, and then not in excess of 10% of its
total assets at the time of borrowing (entering into reverse
repurchase agreements and purchasing securities on a when
issued, delayed settlement or forward delivery basis are not
subject to this investment limitation).
With respect to investment limitation (b), (a) there is no limitation
with respect to (i) instruments issued or guaranteed by the United States, any
state, territory or possession of the United States, the District of Columbia or
any of their authorities, agencies, instrumentalities or political subdivisions,
and (ii) repurchase agreements secured by the instruments described in clause
(i); (b) wholly-owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related to
financing the activities of the parents; and (c) utilities will be divided
according to their services; for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry.
Each Portfolio, with the exceptions of the Muni Intermediate and New
Jersey Muni Portfolios, also will not:
(a) with respect to 75% of its total assets, invest more than 5%
of its total assets at the time of purchase in the securities
of any single issuer (other than obligations issued or
guaranteed by the U.S. Government, its agencies, enterprises
or instrumentalities).
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<PAGE>
Each of the Muni Intermediate and New Jersey Muni Portfolios is
classified as a "non-diversified" investment company under the 1940 Act, which
means that each Portfolio is not limited by the 1940 Act in the proportion of
its assets that it may invest in the securities of a single issuer. However,
each Portfolio intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended, which generally will relieve the Portfolio of any liability
for federal income tax to the extent its earnings are distributed to
shareholders. In order to qualify as a regulated investment company for federal
income tax purposes, each Portfolio will limit its investments and at the close
of each quarter of the taxable year will not, with respect to 50% of its total
assets, invest more than 5% of its total assets at the time of purchase in the
securities of any single issuer (other than obligations issued or guaranteed by
the U.S. Government, its agencies, enterprises or instrumentalities).
If a percentage restriction for a Portfolio is adhered to at the time
an investment is made, a later increase in percentage resulting from a change in
value or assets will not constitute a violation of such restriction. If a
Portfolio's borrowings are in excess of 5% (excluding overdrafts) of its total
net assets, additional portfolio purchases will not be made until the amount of
such borrowing is reduced to 5% or less.
The investment limitations described here and in the SAI are
fundamental policies of the Portfolios and may be changed only with the approval
of the holders of a majority of the outstanding shares (as defined in the 1940
Act) of the affected Portfolio.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
Glenmede Fund was organized as a Maryland corporation on June 30, 1988.
Glenmede Fund's Articles of Incorporation authorize the Board members to issue
2,500,000,000 shares of common stock, with a $.001 par value. The Board has the
power to designate one or more classes ("Portfolios") of shares of common stock
and to classify or reclassify any unissued shares with respect to such
Portfolios. Currently, Glenmede Fund is offering shares of nine Portfolios.
Glenmede Portfolios was organized as a Massachusetts business trust on
March 3, 1992. Glenmede Portfolios' Master Trust Agreement authorizes Glenmede
Portfolios' Board to issue an unlimited number of shares of beneficial interest
with a $.001 par value. Glenmede Portfolios' Board has the power to designate
one or more series (Sub-Trusts) of shares of beneficial interest and to classify
or reclassify any unissued shares with respect to such Sub-Trusts. Currently,
Glenmede Portfolios is offering shares of two Sub-Trusts, the Muni Intermediate
and New Jersey Muni Portfolios.
The shares of each Portfolio have no preference as to conversion,
exchange, dividends, retirement or other rights, and, when issued and paid for
as provided in this Prospectus, will be fully paid and non-assessable. The
shares of each Portfolio have no pre-emptive rights and do not have cumulative
voting rights, which means that the holders of more than 50% of the shares of a
Fund voting for the election of its Board members can elect 100% of the Board of
that Fund if they choose to do so. A shareholder is entitled to one vote for
each full share held (and a fractional vote for each fractional share held),
then standing in his or her name on the books of the particular Fund. The Funds
will not hold annual meetings of shareholders, except as required by the 1940
Act, the next sentence and other applicable law. Each Fund has undertaken that
its Board will call a meeting of shareholders for the purpose of voting upon the
question of removal of a Board member or members if such a meeting is requested
in writing by the holders of not less than 10% of the outstanding shares of the
particular Fund. To the extent required by the undertaking, the particular Fund
will assist shareholder communication in such matters. The staff of the
Commission has expressed the view that the use of this combined Prospectus for
the Funds may subject a Fund to liability for misstatements, inaccuracies or
incomplete disclosure about the other Fund.
At January 31, 1997, the Advisor was the record owner of 100% of the
outstanding shares of each Portfolio.
DISTRIBUTOR
Armata Financial Corp. ("Armata"), located at 1 South Street,
Baltimore, Maryland 21202, serves as the Funds' distributor. Armata is a
subsidiary of Alex. Brown.
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<PAGE>
CUSTODIAN
The Chase Manhattan Bank, N.A., Brooklyn, New York, serves as the
custodian of the Funds' respective assets.
TRANSFER AGENT
ICC, located at 1 South Street, Baltimore, Maryland 21202, acts as the
Funds' transfer agent.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., Philadelphia, Pennsylvania, serves as
independent accountants for each of the Funds and will audit its respective
financial statements annually.
REPORTS
Shareholders receive unaudited semi-annual financial statements and
audited annual financial statements.
COUNSEL
Drinker Biddle & Reath, Philadelphia, Pennsylvania, serves as counsel
to each of the Funds.
BOARD MEMBERS AND OFFICERS
The business and affairs of each of the Funds are managed under the
direction of its Board. The following is a list of the Board members and
officers of each of the Funds and a brief statement of their principal
occupations during the past five years:
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<TABLE>
<CAPTION>
Name and Address Age Principal Occupation During Past Five Years
- ------------------------ --- ---------------------------------------------------
<S> <C> <C>
H. Franklin Allen, Ph.D. 40 Director of Glenmede Fund; Trustee of The Glenmede
Finance Department Portfolios; Nippon Life Professor of Finance and Economics;
The Wharton School Professor of Finance and Economics from 1990-1996; Vice
University of Pennsylvania Dean and Director of Wharton Doctoral Programs from 1990-
Philadelphia, PA 19104-6367 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 Corp.;
Wyndmoor, PA 19118 Former Director of Georgia-Pacific Corp.; Former Managing
Director of PaineWebber, Inc.
John W. Church, Jr.* 64 Chairman, President and Director of Glenmede Fund;
One Liberty Place Chairman, President and Trustee of The Glenmede Portfolios;
1650 Market Street, Suite 1200 Executive Vice President and Chief Investment Officer of The
Philadelphia, PA 19103 Glenmede Trust Company. He has been employed by The
Glenmede Trust Company since 1979.
Francis J. Palamara 71 Director of Glenmede Fund; Trustee of The Glenmede
P.O. Box 44024 Portfolios; Trustee of Gintel Fund ; Director, XTRA
Phoenix, AZ 85064-4024 Corporation; Former Executive Vice President--Finance of
ARAMARK, Inc.
G. Thompson Pew, Jr.* 54 Director of Glenmede Fund; Trustee of The Glenmede
310 Caversham Road Portfolios; Former Director of Brown & Glenmede Holdings,
Bryn Mawr, PA 19010 Inc.; Former Co-Director, Principal and Officer of Philadelphia
Investment Banking Co.; Former Director and Officer of Valley
Forge Administrative Services Company.
Mary Ann B. Wirts 44 Executive Vice President of Glenmede Fund and The Glenmede
One Liberty Place Portfolios; Vice President and Manager of the Fixed Income
1650 Market Street, Suite 1200 Division of The Glenmede Trust Company. She has been
Philadelphia, PA 19103 employed by The Glenmede Trust Company since 1982.
Kimberly C. Osborne 31 Vice President of Glenmede Fund and The Glenmede
One Liberty Place Portfolios; Vice President of The Glenmede Trust Company.
1650 Market Street, Suite 1200 She has been employed by The Glenmede Trust Company since
Philadelphia, PA 19103 1993. From 1992-1993, she was a Client Service Manager
with Mutual Funds Service Company, and from 1987-1992, she
was a Client Administrator with The Vanguard Group, Inc.
Michael P. Malloy 37 Secretary of Glenmede Fund and The Glenmede Portfolios;
Philadelphia National Bank Building Partner in the law firm of Drinker Biddle & Reath.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Edward J. Veilleux 53 Assistant Secretary of Glenmede Fund and The Glenmede
1 South Street Portfolios; Principal, Alex. Brown; President, ICC and Armata.
Baltimore, MD 21202
Joseph A. Finelli 40 Treasurer of Glenmede Fund and The Glenmede Portfolios. He
1 South Street has been a Vice President of Alex. Brown since 1995. Prior
Baltimore, MD 21202 thereto, he was Vice President and Treasurer of The Delaware
Group.
</TABLE>
- ------------
* Board members Church and Pew are "interested persons" of the Funds as that
term is defined in the 1940 Act.
For additional information concerning remuneration of Board members see
"Management of the Funds" in the SAI.
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<PAGE>
--------------------------------------------
Shareholder inquiries should be addressed to the Funds at the address
or telephone number stated on the cover page.
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<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
1 South Street, Baltimore, Maryland 21202
================================================================================
Prospectus
Dated February 27, 1997
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
Armata Financial Corp.
1 South Street
Baltimore, Maryland 21202
- --------------------------------------------------------------------------------
Table of Contents
Page
----
EXPENSES OF THE PORTFOLIOS.............................................. 2
FINANCIAL HIGHLIGHTS.................................................... 4
PERFORMANCE CALCULATIONS................................................ 9
INVESTMENT POLICIES AND RISK FACTORS.................................... 10
COMMON INVESTMENT POLICIES AND RISK FACTORS............................. 14
PURCHASE OF SHARES...................................................... 17
REDEMPTION OF SHARES.................................................... 17
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF SHARES......... 18
VALUATION OF SHARES..................................................... 18
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES........................ 20
INVESTMENT ADVISOR...................................................... 23
ADMINISTRATIVE, TRANSFER AGENCY AND DIVIDEND PAYING SERVICES............ 23
SHAREHOLDER SERVICING PLAN.............................................. 23
INVESTMENT LIMITATIONS.................................................. 24
GENERAL INFORMATION..................................................... 25
BOARD MEMBERS AND OFFICERS.............................................. 26
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Funds' Statement of
Additional Information, in connection with the offering made by this Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Funds or their Distributor. This
Prospectus does not constitute an offering by the Funds or the Distributor in
any jurisdiction in which such offering may not lawfully be made.
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<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
(800) 442-8299
STATEMENT OF ADDITIONAL INFORMATION
February 27, 1997
This Statement of Additional Information is not a prospectus but should
be read in conjunction with The Glenmede Fund, Inc.'s ("Glenmede Fund") and The
Glenmede Portfolios' ("Glenmede Portfolios" and collectively with Glenmede Fund,
the "Funds") Prospectuses dated February 27, 1997, as amended or supplemented
from time to time (the "Prospectuses"). This Statement of Additional Information
is for the Government Cash, Tax-Exempt Cash, Intermediate Government,
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
Page
INVESTMENT OBJECTIVES AND POLICIES....................................... 2
PURCHASE OF SHARES....................................................... 3
REDEMPTION OF SHARES .................................................... 3
SHAREHOLDER SERVICES..................................................... 4
PORTFOLIO TURNOVER....................................................... 4
INVESTMENT LIMITATIONS................................................... 4
MANAGEMENT OF THE FUNDS.................................................. 8
INVESTMENT ADVISORY AND OTHER SERVICES................................... 9
DISTRIBUTOR.............................................................. 11
PORTFOLIO TRANSACTIONS................................................... 11
ADDITIONAL INFORMATION CONCERNING TAXES.................................. 13
PERFORMANCE CALCULATIONS................................................. 24
GENERAL INFORMATION...................................................... 28
FINANCIAL STATEMENTS..................................................... 29
OTHER INFORMATION ....................................................... 30
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS........................ A-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and
policies set forth in the Funds' Prospectuses:
Repurchase Agreements
Repurchase agreements that do not provide for payment to a Portfolio
within seven days after notice without taking a reduced price are considered
illiquid securities.
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 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
-2-
<PAGE>
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 Company 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.
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.
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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. As a result of a change in how the Large Cap Value Portfolio
seeks to achieve its investment objective, the portfolio turnover rate decreased
from 227% for fiscal year ended October 31, 1995 to 104% for fiscal year ended
October 31, 1996.
INVESTMENT LIMITATIONS
Each Portfolio is subject to the following restrictions which are
fundamental policies and may not be changed without the approval of the lesser
of: (1) 67% of the voting securities of the affected Portfolio present at a
meeting if the holders of more than 50% of the outstanding voting securities of
the affected Portfolio are present or represented by proxy, or (2) more than 50%
of the outstanding voting securities of the affected Portfolio. Each Portfolio
will not:
(1) invest in commodities or commodity contracts, except
that each Portfolio may invest in futures contracts and
options;
(2) purchase or sell real estate, although it may purchase and
sell securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;
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(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
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;
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<PAGE>
(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.
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
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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.
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,
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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, 1996.
-8-
<PAGE>
<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., $14,441 $1,059 None None $15,500
Director/Trustee
Willard S. Boothby, Jr., $11,941 $1,059 None None $13,000
Director/Trustee
.
John W. Church, Jr. None None None None None
Director/Trustee
Francis J. Palamara, $11,941 $1,059 None None $13,000
Director/Trustee
G. Thompson Pew, Jr., $14,441 $1,059 None None $15,500
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
73 shareholders. The Corporation has a nine person Board of Directors which, at
January 31, 1997, collectively, owned 98.67% of the Corporation's voting shares
and 35.70% of the Corporation's total outstanding shares. The members of the
Board and their respective interests in the Corporation at January 31, 1997 are
as follows:
<TABLE>
<CAPTION>
The Glenmede Corporation Percent of Percent of
Board of Directors Voting Shares Total Shares
- ------------------ ------------- ------------
<S> <C> <C>
Susan W. Catherwood.................................. 10.83% 1.17%
Richard F. Pew....................................... 10.83% 1.03%
Thomas W. Langfitt, M.D.............................. 11.07% 7.59%
Arthur E. Pew III.................................... 10.83% 1.03%
J. Howard Pew, II.................................... 10.83% 1.37%
J. N. Pew, III....................................... 11.07% 5.25%
J. N. Pew, IV........................................ 11.07% 1.37%
R. Anderson Pew...................................... 11.07% 5.82%
Ethel Benson Wister.................................. 11.07% 11.07%
------ ------
98.67% 35.70%
</TABLE>
As noted in the Prospectus, the Advisor does not receive any fee from
the Portfolios for its investment services. However, all shareholders in the
Portfolios are clients of the Advisor or an Affiliate and, as clients, pay fees
which vary depending on the capacity in which the Advisor or Affiliate provides
fiduciary and investment services to the particular client. Such services may
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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, 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 Intermediate Government 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 Intermediate Government 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.
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 Intermediate Government
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 Intermediate Government Portfolio, $126,733 for the International
Portfolio, $28,783 for the Equity Portfolio, $44,272 for the Small
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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.
Prior to May 6, 1994, The Boston Company Advisors, Inc. ("Boston
Advisors"), an indirect wholly owned subsidiary of Mellon Bank Corporation,
served as the Funds' administrator. For the period November 1, 1993 to May 5,
1994, the Funds paid fees to Boston Advisors of $106,343 for the Government Cash
Portfolio, $63,862 for the Tax-Exempt Cash Portfolio, $236,483 for the
Intermediate Government Portfolio, $108,217 for the International Portfolio,
$23,504 for the Equity Portfolio, $35,777 for the Small Capitalization Equity
Portfolio, $7,061 for the Large Cap Value Portfolio, $37,283 for the Muni
Intermediate Portfolio and $1,378 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, 1996 for the Government Cash, Tax-Exempt Cash, Intermediate
Government, 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, Intermediate
Government, 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.
DISTRIBUTOR
Shares of the Funds are distributed continuously and are offered
without a sales load by Armata, pursuant to a Distribution Agreement between
the Funds and Armata. Armata 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,
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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, 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. During the fiscal
year ended October 31, 1994, the Equity, International, Small Capitalization
Equity and Large Cap Value Portfolios paid $212,177, $617,512, $180,822 and
$212,005 in brokerage commissions, respectively.
The Government Cash, Intermediate Government, 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 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.
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<PAGE>
While in some cases this practice could have a detrimental effect on the price,
value or quantity of the security as far as a Portfolio is concerned, in other
cases it is believed to be beneficial to the Portfolios.
ADDITIONAL INFORMATION CONCERNING TAXES
General. The following summarizes certain additional tax considerations
generally affecting the Portfolios and their shareholders that are not described
in the Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Portfolios or their shareholders, and the discussion here
and in the Prospectus is not intended as a substitute for careful tax planning.
Potential investors should consult their tax advisers with specific reference to
their own tax situation.
Each Portfolio is treated as a separate corporate entity under the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to qualify
as a regulated investment company. Qualification as a regulated investment
company under the Code requires, among other things, that each Portfolio
distribute to its shareholders an amount equal to at least the sum of 90% of its
investment company taxable income and 90% of its tax-exempt income (if any) net
of certain deductions for a taxable year. In addition, each Portfolio must
satisfy certain requirements with respect to the source of its income for a
taxable year. At least 90% of the gross income of each Portfolio must be derived
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies, and
other income (including, but not limited to, gains from options, futures, or
forward contracts) derived with respect to the Portfolio's business of investing
in such stock, securities or currencies. The Treasury Department may by
regulation exclude from qualifying income foreign currency gains which are not
directly related to a Portfolio's principal business of investing in stock or
securities, or options and futures with respect to stock or securities. Any
income derived by a Portfolio from a partnership or trust is treated for this
purpose as derived with respect to the Portfolio's business of investing in
stock, securities or currencies only to the extent that such income is
attributable to items of income which would have been qualifying income if
realized by the Portfolio in the same manner as by the partnership or trust.
A Portfolio will not be treated as a regulated investment Company under
the Code if 30% or more of the Portfolio's gross income for a taxable year is
derived from gains realized on the sale or other disposition of the following
investments held for less than three months: (1) stock and securities (as
defined in section 2(a)(36) of the 1940 Act); (2) options, futures and forward
contracts other than those on foreign currencies; and (3) foreign currencies
(and options, futures and forward contracts on foreign currencies) that are not
directly related to a Portfolio's principal business of investing in stock and
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<PAGE>
securities (and options and futures with respect to stocks and securities).
Interest (including original issue discount and accrued market discount)
received by a Portfolio upon maturity or disposition of a security held for less
than three months will not be treated as gross income derived from the sale or
other disposition of such security within the meaning of this requirement.
However, income which is attributable to realized market appreciation will be
treated as gross income from the sale or other disposition of securities for
this purpose. With respect to covered call options, if the call is exercised by
the holder, the premium and the price received on exercise constitute the
proceeds of sale, and the difference between the proceeds and the cost of the
securities subject to the call is capital gain or loss. Premiums from expired
call options written by a Portfolio and net gains from closing purchase
transactions are treated as short-term capital gains for Federal income tax
purposes, and losses on closing purchase transactions are short-term capital
losses.
Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to a shareholder as long-term capital gain,
regardless of how long the shareholder has held the distributing Portfolio's
shares and whether such distribution is received in cash or additional Portfolio
shares. Each Portfolio will designate such distributions as capital gain
dividends in a written notice mailed to shareholders within 60 days after the
close of the Portfolio's taxable year. Shareholders should note that, upon the
sale or exchange of Portfolio shares, if the shareholder has not held such
shares for more than six months, any loss on the sale or exchange of those
shares will be treated as long-term capital loss to the extent of the capital
gain dividends received with respect to the shares.
An individual's net capital gains are 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
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<PAGE>
Muni Portfolios) would be taxable as ordinary income to shareholders to the
extent of the Portfolio's current and accumulated earnings and profits, and
would be eligible for the dividends received deduction for corporations.
Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios. As
described in the Prospectus, these Portfolios are designed to provide investors
with current tax-exempt interest income. Shares of the Portfolios would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans and individual
retirement accounts since such plans and accounts are generally tax-exempt and,
therefore, would not only fail to gain any additional benefit from each such
Portfolio's dividends being tax-exempt, but such dividends would be ultimately
taxable to the beneficiaries when distributed to them. In addition, the
Portfolios may not be an appropriate investment for entities which are
"substantial users" of facilities financed by private activity bonds or "related
persons" thereof. "Substantial user" is defined under U.S. Treasury Regulations
to include a non-exempt person who regularly uses a part of such facilities in
his trade or business and whose gross revenues derived with respect to the
facilities financed by the issuance of bonds are more than 5% of the total
revenues derived by all users of such facilities, who occupies more than 5% of
the usable area of such facilities or for whom such facilities or a part thereof
were specifically constructed, reconstructed or acquired. "Related persons"
include certain related natural persons, affiliated corporations, a partnership
and its partners and an S corporation and its shareholders.
The percentage of total dividends paid by each Portfolio with respect
to any taxable year which qualify as Federal exempt-interest dividends will be
the same for all shareholders receiving dividends for such year. In order for
each Portfolio to pay exempt-interest dividends with respect to any taxable
year, at the close of each quarter of its taxable year at least 50% of the
aggregate value of each Portfolio's assets must consist of exempt-interest
obligations. After the close of its taxable year, each Portfolio will notify its
shareholders of the portion of the dividends paid by it which constitutes an
exempt-interest dividend with respect to such year. However, the aggregate
amount of dividends so designated by each Portfolio cannot exceed the excess of
the amount of interest exempt from tax under Section 103 of the Code received by
the particular Portfolio for the taxable year over any amounts disallowed as
deductions under Sections 265 and 171(a)(2) of the Code.
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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 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.
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<PAGE>
As described more fully above, in order to qualify as a regulated
investment company under the Code a Portfolio must derive less than 30% of its
gross income from the sale or other disposition of securities and certain other
investments held for less than three months. With respect to 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
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
-17-
<PAGE>
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 and its municipalities could adversely affect the
value of the Portfolio and its portfolio securities. This section briefly
describes current economic trends in Pennsylvania.
Pennsylvania has historically been dependent on heavy industry although
recent declines in the coal, steel and railroad industries have led to
diversification of the Commonwealth's economy. Recent sources of economic growth
in Pennsylvania are in the service sector, including trade, medical and health
services, education and financial institutions. Agriculture continues to be an
important component of the Commonwealth's economic structure, with nearly
one-third of the Commonwealth's total land area devoted to cropland, pasture and
farm woodlands.
The population of Pennsylvania experienced a slight increase in the
period 1990 through 1995 and has a high proportion of persons 65 or older. The
Commonwealth is highly urbanized, with almost 85% of the 1990 census population
residing in metropolitan statistical areas. The two largest metropolitan
statistical areas, those containing the Cities of Philadelphia and Pittsburgh,
together comprise approximately 50% of the Commonwealth's total population.
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.
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<PAGE>
The constitution of the Commonwealth provides that operating budget
appropriations of the Commonwealth may not exceed the estimated revenues and
available surplus in the fiscal year for which funds are appropriated. Annual
budgets are enacted for the General Fund and for certain special revenue funds
which together represent the majority of expenditures of the Commonwealth.
Although the balance in the General Fund of the Commonwealth (the principal
operating fund of the Commonwealth) experienced deficits in fiscal 1990 and
1991, tax increases and spending decreases have resulted in surpluses the last
four years; as of June 30, 1995, the General Fund had a surplus of $688.3
million.
Current constitutional provisions permit the Commonwealth to issue the
following types of debt: (i) electorate approved debt, (ii) debt for capital
projects subject to an aggregate debt limit of 1.75 times the annual average tax
revenues of the preceding five fiscal years, (iii) tax anticipation notes
payable in the fiscal year of issuance and (iv) debt to suppress insurrection or
rehabilitate areas affected by disaster. General obligation debt totaled
$5,045.4 million at June 30, 1995. Certain state-created agencies issue debt
supported by assets of, or revenues derived from, the various projects financed
and the debt of such agencies is not an obligation of the Commonwealth although
some of the agencies are indirectly dependent on Commonwealth appropriations.
Certain litigation is pending against the Commonwealth that could
adversely affect the ability of the Commonwealth to pay debt service on its
obligations including suits relating to the following matters: (a) the ACLU has
filed suit in federal court demanding additional funding for child welfare
services; the Commonwealth settled a similar suit in the Commonwealth Court of
Pennsylvania and is seeking the dismissal of the federal suit, inter alia,
because of that settlement. After its earlier denial was reversed by the Third
Circuit Court of Appeals, the district court granted class certification to the
ACLU, and the parties are proceeding with discovery (no available estimates of
potential liability); (b) in 1987, the Supreme Court of Pennsylvania held that
the statutory scheme for county funding of the judicial system to be in conflict
with the constitution of the Commonwealth, but stayed judgment pending enactment
by the legislature of funding consistent with the opinion and the legislature
has yet to consider legislation implementing the judgment; in 1992, a new action
in mandamus was filed seeking to compel the Commonwealth to comply with the
original decision; (c) litigation has been filed in both state and federal court
by an association of rural and small schools and several individual school
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<PAGE>
districts and parents challenging the constitutionality of the Commonwealth's
system for funding local school districts -- the federal case has been stayed
pending resolution of the state case and the state case is in the pre-trial
stage (no available estimate of potential liability); (d) Envirotest/Synterra
Partners ("Envirotest") filed suit against the Commonwealth asserting that it
sustained damages in excess of $350 million as a result of investments it made
in reliance on a contract to conduct emissions testing before the emissions
testing program was suspended. Envirotest has entered into a Settlement
Agreement with the Commonwealth pursuant to which Envirotest will receive $145
million over four years in full satisfaction of its claims against the
Commonwealth; and (e) the Pennsylvania Human Relations Commission joined
additional respondents, including the Commonwealth of Pennsylvania, in its
enforcement action against the School District of Philadelphia pursuant to the
Pennsylvania Human Relations Act. The Commonwealth and the city have appealed an
adverse action of the Commonwealth Court to the Supreme Court of Pennsylvania
(no available estimate of potential liability).
Local government units in the Commonwealth of Pennsylvania (which
include, among other things, counties, cities, boroughs, towns, townships,
school districts and other municipally created units such as industrial
development authorities and municipality authorities, including water and sewer
authorities) are permitted to issue debt for capital projects: (i) in any amount
so long as the debt has been approved by the voters of the local government
unit; or (ii) without electoral approval if the aggregate outstanding principal
amount of debt of the local government unit is not in excess of 100% of its
borrowing base (in the case of a school district of the first class), 300% of
its borrowing base (in the case of a county) or 250% of its borrowing base (in
the case of all other local government units); or (iii) without electoral
approval and without regard to the limit described in (ii) in any amount in the
case of certain subsidized debt and self-liquidating debt (defined to be debt
with no claim on taxing power, secured solely by revenues from a specific source
which have been projected to be sufficient to pay debt service on the related
debt). Lease rental debt may also be issued, in which case the total debt limits
described in section (ii) (taking into account all existing lease rental debt in
addition to all other debt) are increased. The borrowing base for a local
government unit is the average of total revenues for the three fiscal years
preceding the borrowing. The risk of investing in debt issued by any particular
local government unit depends, in the case of general obligation bonds secured
by tax revenues, on the credit-worthiness of that issuer or, in the case of
revenue bonds, on the revenue producing ability of the project being financed,
and not directly on the credit-worthiness of the Commonwealth of Pennsylvania as
a whole.
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<PAGE>
The City of Philadelphia (the "City") has been experiencing severe
financial difficulties which have impaired its access to public credit markets
and a long-term solution to the City's financial crisis is still being sought.
The City experienced a series of General Fund deficits for Fiscal Years 1988
through 1992. The City has no legal authority to issue deficit reduction bonds
on its own behalf, but state legislation has been enacted to create an
Intergovernmental Cooperation Authority (the "Authority") to provide fiscal
oversight for Pennsylvania cities (primarily Philadelphia) suffering recurring
financial difficulties. The Authority is broadly empowered to assist cities in
avoiding defaults and eliminating deficits by encouraging the adoption of sound
budgetary practices and issuing bonds. In order for the Authority to issue bonds
on behalf of the City, the City and the Authority entered into an
intergovernmental cooperative agreement providing the Authority with certain
oversight powers with respect to the fiscal affairs of the City. The City
currently is operating under a five year plan approved by the Authority on April
17, 1995, with technical amendments officially incorporated on July 18, 1995.
The audited balance of the City's General Fund as of June 30, 1995 showed a
surplus of approximately $80.5 million.
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, and its
ability to refund outstanding bonds is unrestricted.
The foregoing information as to certain Pennsylvania risk factors
constitutes only a brief summary, does not purport to be a complete description
of Pennsylvania risk factors and is principally drawn from official statements
relating to securities offerings of the Commonwealth of Pennsylvania that have
come to the Funds' attention and were available as of the date of this Statement
of Additional Information.
Special Considerations Regarding Investment in New Jersey
Municipal Obligations
The State of New Jersey (the "State") 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
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<PAGE>
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. 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,
-22-
<PAGE>
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 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
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<PAGE>
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; and (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.
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 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."
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<PAGE>
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, 1996.
Government Cash Tax-Exempt
Portfolio Cash Portfolio
10/31/96 10/31/96
-------- --------
7-Day Yield (Net Change
X 365/7 average net
asset value) 5.25% 3.23%
7-Day Effective Yield 5.39% 3.28%
7-Day Tax-Equivalent Yield 7.61% 4.68%*
- ---------------------------------
* Assumes an effective Federal income tax rate of 31%
The Commission yield of the Intermediate Government Portfolio, Muni
Intermediate Portfolio and the New Jersey Muni Portfolio for the 30-day period
ended October 31, 1996 was 6.46%, 5.75% and 4.63%, 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:
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 Intermediate Government, 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
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<PAGE>
each month, or, with respect to obligations purchased during the month, the
purchase price (plus actual accrued interest) and dividing the result by 360 and
multiplying the quotient by the market value of the obligation (including actual
accrued interest) in order to determine the interest income on the obligation
for each day of the subsequent month that the obligation is held by the
particular Portfolio. For purposes of this calculation, it is assumed that each
month contains 30 days. The maturity of an obligation with a call provision is
the next call date on which the obligation reasonably may be expected to be
called or, if none, the maturity date. With respect to debt obligations
purchased at a discount or premium, the formula generally calls for amortization
of the discount or premium. The amortization schedule will be adjusted monthly
to reflect changes in the market values of such debt obligations.
Undeclared earned income will be subtracted from the maximum offering
price per share (variable "d" in the formula). Undeclared earned income is the
net investment income which, at the end of the base period, has not been
declared as a dividend, but is reasonably expected to be and is declared and
paid as a dividend shortly thereafter. The Intermediate Government, Muni
Intermediate and New Jersey Muni Portfolios' yields do not reflect any fees
charged by the Advisor or an Affiliate to its clients. See "Investment Advisor."
The Muni Intermediate and New Jersey Muni Portfolios' "tax-equivalent"
yield is computed by dividing the portion of the yield that is exempt from
Federal and/or State income taxes by one minus a stated Federal income tax rate
and/or the State income tax rate and by adding that figure to that portion, if
any, of the yield that is not tax-exempt. The 30 day tax-equivalent yield for
the Muni Intermediate Portfolio and New Jersey Portfolio for the 30-day period
ended October 31, 1996 was 8.57% and 7.08%, respectively (assuming a marginal
Federal income tax rate of 31% and marginal Pennsylvania and New Jersey income
tax rates of 2.80 and 5.28%, respectively).
The Intermediate Government, Equity, International, Small
Capitalization Equity, Muni Intermediate, New Jersey Muni and Large Cap Value
Portfolios each compute their respective average annual total returns by
determining the average annual compounded rates of return during specified
periods that equate the initial amount invested to the ending redeemable value
of such investment. This is done by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
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<PAGE>
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 Intermediate Government, Equity, International, Small
Capitalization Equity, Muni Intermediate, New Jersey Muni and Large Cap Value
Portfolios compute their aggregate total returns by determining the aggregate
rates of return during specified periods that likewise equate the initial amount
invested to the ending redeemable value of such investment. The formula for
calculating aggregate total return is as follows:
T = [( ERV ) - 1]
---
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions.
The ending redeemable value (variable "ERV" in each formula) is determined by
assuming complete redemption of the hypothetical investment and the deduction of
all nonrecurring charges at the end of the period covered by the computations.
Each Portfolio's average annual total return and aggregate total return do not
reflect any fees charged by the Advisor to its clients. See "Investment
Advisor."
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<PAGE>
Set forth below are the average annual total return figures for the
Intermediate Government, 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, 1996.
<TABLE>
<CAPTION>
Small
Intermediate Capitalization Muni
Government Equity International Equity Intermediate
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1 Year Ended 10/31/96 5.88% 28.65% 13.47% 18.22% 4.67%
5 Years Ended 10/31/96 6.79% 15.34% 11.90% 15.07% --
Inception to 10/31/96 8.54% 13.22% 11.03% 15.44% 5.42%
</TABLE>
Large Cap New
Value Jersey Muni
Portfolio Portfolio
--------- ----------
1 Year Ended 10/31/96 17.13% 4.24%
Inception to 10/31/96 14.11% 3.85%
Inception Dates:
Intermediate Government Portfolio............................ 11/17/88
Equity Portfolio............................................. 07/20/89
International Portfolio...................................... 11/17/88
Small Capitalization Equity Portfolio........................ 03/01/91
Muni Intermediate Portfolio.................................. 06/05/92
Large Cap Value Portfolio.................................... 12/31/92
New Jersey Muni Portfolio.................................... 11/01/93
Set forth below are the aggregate total return figures for the
Intermediate Government, Equity, International, Small Capitalization Equity,
Muni Intermediate, Large Cap Value and New Jersey Muni Portfolios from inception
to October 31, 1996.
Portfolio Inception Date Aggregate Total Return
- --------- -------------- ----------------------
Intermediate Government 11/17/88 91.94%
Equity 07/20/89 147.05%
International 11/17/88 129.82%
Small Capitalization Equity 03/01/91 125.63%
Muni Intermediate 06/05/92 26.21%
Large Cap Value 12/31/92 65.69%
New Jersey Muni 11/01/93 12.00%
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
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<PAGE>
income to shareholders in the form of a quarterly dividend and the Intermediate
Government, Muni Intermediate and New Jersey Muni Portfolios normally distribute
substantially all of their net investment income to shareholders in the form of
a monthly dividend. If any net capital gains are realized by a Portfolio, that
Portfolio normally distributes such gains at least once a year. The amounts of
any income dividends or capital gains distributions for a Portfolio cannot be
predicted.
Any dividend or distribution paid shortly after the purchase of shares
of a Portfolio by an investor may have the effect of reducing the per share net
asset value of that Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect a
return of capital, are subject to income taxes as set forth in the Prospectus.
Certain Record Holders
As of January 31, 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 January 31, 1997, the
directors/trustees and officers of the Funds collectively owned less than 1% of
the outstanding shares of each of the Funds' Portfolios.
FINANCIAL STATEMENTS
The Funds' Financial Statements for the year ended October 31, 1996 and
the financial highlights for each of the respective periods presented, appearing
in the 1996 Annual Report to Shareholders, and the reports thereon of Coopers &
Lybrand L.L.P., the Funds' independent accountants, also appearing therein, are
incorporated by reference in this Statement of Additional Information.
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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.
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II. Description of Mortgage-Backed Securities
Mortgage-backed securities represent an ownership interest in a pool of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. The mortgagor's monthly
payments to his/her lending institution are "passed-through" to an investor such
as the Government Cash Portfolio and the Intermediate Government Portfolio. Most
issuers or poolers provide guarantees of payments, regardless of whether or not
the mortgagor actually makes the payment. The guarantees made by issuers or
poolers are supported by various forms of credit, collateral, guarantees or
insurance, including individual loan, title, pool and hazard insurance purchased
by the issuer. There can be no assurance that the private issuers or poolers can
meet their obligations under the policies. Mortgage-backed securities issued by
private issuers or poolers, whether or not such securities are subject to
guarantees, may entail greater risk than securities directly or indirectly
guaranteed by the U.S. Government.
About Mortgage-Backed Securities. Interests in pools of mortgage-backed
securities differ from other forms of debt securities, which normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities provide a monthly
payment which consists of both interest and principal payments. In effect, these
payments are a "pass-through" of the monthly payments made by the individual
borrowers on their residential mortgage loans, net of any fees paid. Additional
payments are caused by repayments resulting from the sale of the underlying
residential property, refinancing or foreclosure net of fees or costs which may
be incurred. Some mortgage-backed securities are described as "modified
pass-through." These securities entitle the holders to receive all interest and
principal payments owed on the mortgages in the pool, net of certain fees,
regardless of whether or not the mortgagors actually make the payments.
Residential mortgage loans are pooled by the Federal Home Loan Mortgage
Corporation (FHLMC). FHLMC is a corporate instrumentality of the U.S. Government
and was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. Its stock is owned by
the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PC's") which represent interests in mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal.
The Federal National Mortgage Association (FNMA) is a Government
sponsored corporation owned entirely by private stockholders. It is subject to
general regulation by the Secretary of Housing and Urban Development. FNMA
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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 on securities issued by
approved institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Pools
created by such non-governmental issuers generally offer a higher rate of
interest than Government and Government-related pools because there are no
direct or indirect Government guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance purchased by the issuer. The insurance and guarantees are
issued by Governmental entities, private insurers and the mortgage poolers.
There can be no assurance that the private insurers or mortgage poolers can meet
their obligations under the policies.
The Funds expect that Governmental or private entities may create
mortgage loan pools offering pass-through investments in addition to those
described above. The mortgages underlying these securities may be alternative
mortgage instruments, that is, mortgage instruments whose principal or interest
payment may vary or whose terms to maturity may be shorter than previously
customary. As new types of mortgage-backed securities are developed and offered
to investors, each of the Government Cash Portfolio and the Intermediate
Government Portfolio will, consistent with its investment objective and
policies, consider making investments in such new types of securities.
Underlying Mortgages. Pools consist of whole mortgage loans or
participations in loans. The majority of these loans are made to purchasers of
1-4 family homes. The terms and characteristics of the mortgage instruments are
generally uniform within a pool but may vary among pools. For example, in
addition to fixed-rate, fixed-term mortgages, the Intermediate Government
Portfolio may purchase pools of variable rate mortgages (VRM), growing equity
mortgages (GEM), graduated payment mortgages (GPM) and other types where the
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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.
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.
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III. Description of U.S. Government Securities and Certain Other
Securities
The term "U.S. Government securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored enterprises or instrumentalities may or may not be backed
by the full faith and credit of the United States. In the case of securities not
backed by the full faith and credit of the United States, an investor must look
principally to the agency, enterprise or instrumentality issuing or guaranteeing
the obligation for ultimate repayment, and may not be able to assert a claim
against the United States itself in the event the agency, enterprise or
instrumentality does not meet its commitment. Agencies which are backed by the
full faith and credit of the United States include the Export Import Bank,
Farmers Home Administration, Federal Financing Bank and others. Certain
agencies, enterprises and instrumentalities, such as the Government National
Mortgage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service its
debt. Debt from certain other agencies, enterprises and instrumentalities,
including the Federal Home Loan Bank and Federal National Mortgage Association,
are not guaranteed by the United States, but those institutions are protected by
the discretionary authority for the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies, enterprises and instrumentalities, such as the Farm
Credit System and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under Government supervision, but their debt securities
are backed only by the creditworthiness of those institutions, not the U.S.
Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency
organized under Federal charter with Government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Overseas Private
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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 Intermediate
Government Portfolio may purchase include the Asian Development Bank,
Inter-American Development Bank and the International Bank for Reconstruction
and Development (the "World Bank").
IV. Description of Municipal Obligations
Municipal Obligations generally include debt obligations issued by
states and their political subdivisions, and duly constituted authorities and
corporations, to obtain funds to construct, repair or improve various public
facilities such as airports, bridges, highways, hospitals, housing, schools,
streets and water and sewer works. Municipal Obligations may also be issued to
refinance outstanding obligations as well as to obtain funds for general
operating expenses and for loan to other public institutions and facilities.
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" or "special tax" bonds. General obligation bonds are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue or special tax bonds are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise or other tax, but not
from general tax revenues. The Tax-Exempt Cash Portfolio may also invest in
tax-exempt industrial development bonds, short-term municipal obligations (rated
SP-1+ or SP-1 by S&P or MIG-1/VMIG-1 by Moody's), project notes, demand notes
and tax-exempt commercial paper (rated A-1+ or A-1 by S&P or P-1 by Moody's),
and municipal bonds with a remaining effective maturity of 13 months or less
(rated AA or better by S&P or Aa or better by Moody's).
Industrial revenue bonds in most cases are revenue bonds and generally
do not have the pledge of the credit of the issuer. The payment of the principal
and interest on such industrial revenue bonds is dependent solely on the ability
of the user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment. Short-term municipal obligations issued by states,
cities, municipalities or municipal agencies, include Tax Anticipation Notes,
Revenue Anticipation Notes, Bond Anticipation Notes, Construction Loan Notes and
Short-Term Discount Notes. Project Notes are instruments guaranteed by the
Department of Housing and Urban Development but issued by a state or local
housing agency. While the issuing agency has the primary obligation on Project
Notes, they are also secured by the full faith and credit of the United States.
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Municipal Obligations may also include "moral obligation" bonds, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Note obligations with demand or put options may have a stated maturity
in excess of 13 months, but permit any holder to demand payment of principal
plus accrued interest upon a specified number of days' notice. Frequently, such
obligations are secured by letters of credit or other credit support
arrangements provided by banks. The issuer of such notes normally has a
corresponding right, after a given period, to repay in its discretion the
outstanding principal of the note plus accrued interest upon a specific number
of days' notice to the bondholders. The interest rate on a demand note may be
based upon a known lending rate, such as a bank's prime rate, and be adjusted
when such rate changes, or the interest rate on a demand note may be a market
rate that is adjusted at specified intervals. The demand notes in which the
Tax-Exempt Cash Portfolio will invest are payable on not more than thirteen
months notice.
The yields of Municipal Obligations depend on, among other things,
general money market conditions, conditions in the Municipal Obligation market,
the size of a particular offering, the maturity of the obligation, and the
rating of the issue. The ratings of Moody's and S&P represent their opinions of
the quality of the Municipal Obligations rated by them. It should be emphasized
that such ratings are general and are not absolute standards of quality.
Consequently, Municipal Obligations with the same maturity, coupon and rating
may have different yields, while Municipal Obligations of the same maturity and
coupon, but with different ratings may have the same yield. It will be the
responsibility of the Advisor to appraise independently the fundamental quality
of the bonds held by the Tax-Exempt Cash Portfolio.
Municipal Obligations are sometimes purchased on a "when issued" basis,
which means the buyer has committed to purchase certain specified securities at
an agreed upon price when they are issued. The period between commitment date
and issuance date can be a month or more. It is possible that the securities
will never be issued and the commitment cancelled.
From time to time proposals have been introduced before Congress to
restrict or eliminate the Federal income tax exemption for interest on Municipal
Obligations. Similar proposals may be introduced in the future. If any such
proposal were enacted, it might restrict or eliminate the ability of the
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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 foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
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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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