<PAGE>
THE GLENMEDE FUND, INC.
One South Street, Baltimore, Maryland 21202
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(800) 442-8299
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Prospectus--January 1, 1998 (as revised September 10, 1998)
INVESTMENT OBJECTIVES
The Glenmede Fund, Inc., a Maryland corporation ("Glenmede Fund"), is an
open-end management investment company. The Glenmede Fund consists of ten series
of shares, each of which has different investment objectives and policies. The
securities offered hereby are shares of the Tax Managed Equity Portfolio,
International Portfolio and Large Cap Value Portfolio and Advisor Shares
(collectively with the other securities offered hereby, "shares") of the Small
Capitalization Equity Portfolio (each Portfolio is a diversified portfolio and
is referenced herein as a "Portfolio") of the Glenmede Fund.
Tax Managed Equity Portfolio. The objective of the Tax Managed Equity Portfolio
is to provide maximum long-term total return consistent with reasonable risk to
principal. The Tax Managed Equity Portfolio seeks to achieve its objective by
investing, under normal market conditions, primarily in common stocks. The Tax
Managed Equity Portfolio also seeks to minimize the impact of taxes on
shareholders' returns. However, the Tax Managed Equity Portfolio is not a
tax-exempt fund, and it expects to distribute taxable dividends and capital
gains to shareholders from time to time. The net asset value of this Portfolio
will fluctuate.
International Portfolio. The objective of the International Portfolio is to
provide maximum long-term total return consistent with reasonable risk to
principal. The International Portfolio seeks to achieve its objective by
investing, under normal market conditions, primarily in common stocks and other
equity securities of companies located outside the United States. The net asset
value of this Portfolio will fluctuate.
Small Capitalization Equity Portfolio. The objective of the Small Capitalization
Equity Portfolio is to provide long-term appreciation consistent with reasonable
risk to principal. The Small Capitalization Equity Portfolio seeks to achieve
its investment objective by investing, under normal market conditions, at least
65% of the value of its total assets in equity securities of companies with
market capitalizations, at the time of purchase, that are below the maximum
capitalization permitted for a stock in the Russell 2000 Index.
Large Cap Value Portfolio. The objective of the Large Cap Value Portfolio is to
provide maximum long-term total return consistent with reasonable risk to
principal. The Large Cap Value Portfolio seeks to achieve its objective by
investing primarily in common stocks using The Glenmede Trust Company's (the
"Advisor") proprietary equity computer model as an investment guide. The net
asset value of this Portfolio will fluctuate. The Large Cap Value Portfolio
seeks to achieve its objective by investing, under normal market conditions, at
least 65% of the value of its total assets in equity securities of companies
with market capitalizations, at the time of purchase, of greater than $5
billion.
Total return consists of income (dividend and/or interest income from
portfolio securities) and capital gains and losses, both realized and
unrealized, from portfolio securities.
Shares of the Portfolios are subject to investment risks, including the
possible loss of principal, are not bank deposits and are not endorsed by,
insured by, guaranteed by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, The Glenmede Corporation or any of its affiliates or any other
governmental agency or bank.
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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 Glenmede
Fund has been filed with the Securities and Exchange Commission. Such SAI, dated
March 2, 1998, as amended or supplemented from time to time, is incorporated by
reference into this Prospectus. The 1997 Annual Report to Shareholders contains
additional investment and performance information about the Portfolios. A copy
of the SAI and the 1997 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: 1) incurred by the
Tax Managed Equity, International and Large Cap Value Portfolios for the fiscal
year ended October 31, 1997; and 2) incurred by Advisor Shares of the Small
Capitalization Equity Portfolio for the fiscal year ended October 31, 1997 as
restated to reflect current fees.
<TABLE>
<CAPTION>
Small
Capitalization
Tax Managed Equity Large Cap
Equity International Portfolio Value
Portfolio(1) Portfolio (Advisor Shares) Portfolio(2)
------------- --------------- ------------------ -------------
<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 ................. .00% .00% .55% .00%
Administration Fees ...................... .04% .04% .04% .04%
Other Expenses ........................... .09% .10% .28% .09%
----- ----- ------ -----
Total Operating Expenses ................. .13% .14% .87% .13%
===== ===== ====== =====
</TABLE>
- ------------
(1) The Equity Portfolio was renamed the Tax Managed Equity Portfolio on August
20, 1998.
(2) The Model Equity Portfolio was renamed the Large Cap Value Portfolio on
February 27, 1997.
* A transaction charge may be imposed by broker-dealers or others that make
shares of the Portfolio available. There is no transaction charge for shares
purchased directly from the Portfolio.
** The Tax Managed Equity, International and Large Cap Value Portfolios do not
pay any advisory fees to the Advisor, or its affiliates ("Affiliates").
However, investors in these Portfolios must be clients of the Advisor or
Affiliates. The "Maximum Annual Client Fee" in the above table is the
current maximum fee that the Advisor or an Affiliate would charge its
clients directly for fiduciary, trust and/or advisory services (e.g.,
personal trust, estate, advisory, tax and custodian services). The actual
annual fees ("Client Fees") charged by the Advisor and its Affiliates
directly to their clients for such services vary depending on a number of
factors, including the particular services provided to the client, but are
generally under 1% of the client's assets under management. Investors also
may have to pay various fees to others to become clients of the Advisor or
an Affiliate. See "Investment Advisor."
*** The Advisor and its Affiliates currently intend to exclude the portion of
its clients' assets invested in the Small Capitalization Equity Portfolio
when calculating Client Fees. The annual fees charged by the Advisor and its
Affiliates directly to their clients varies as described above.
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" and "Administrative, Transfer Agency and Dividend Paying
Services."
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, investment and other services which
investors pay the Advisor, Affiliates or institutions as clients. See
"Investment Advisor." As noted in the above table, Glenmede Fund charges no
redemption fees of any kind.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Tax Managed Equity Portfolio .......... $ 1 $ 4 $ 7 $ 17
International Portfolio ............... $ 1 $ 5 $ 8 $ 18
Small Capitalization Equity Portfolio
Advisor Shares ....................... $ 9 $28 $48 $107
Large Cap Value Portfolio ............. $ 1 $ 4 $ 7 $ 17
</TABLE>
- ------------
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables provide financial highlights of each Portfolio for the
respective periods presented and includes data derived from Glenmede Fund's
Financial Statements included in Glenmede Fund's 1997 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>
Tax Managed Equity Portfolio+
----------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1997 1996 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of year ...................... $ 16.79 $ 14.67 $ 12.56 $ 13.23
------- ------- ------- -------
Income from investment
operations:
Net investment
income ..................... 0.28 0.41 0.32 0.31
Net realized and unrealized
gain/(loss) on investments.. 5.69 3.73 2.64 (0.17)
------- ------- ------- -------
Total from investment
operations ............... 5.97 4.14 2.96 0.14
------- ------- ------- -------
Less Distributions:
Distributions from net
investment income ......... (0.28) (0.40) (0.33) (0.29)
Distributions from net
realized capital gains..... (2.37) (1.62) (0.52) (0.52)
Distributions from capital ... -- -- -- --
------- ------- ------- -------
Total Distributions .......... (2.65) (2.02) (0.85) (0.81)
------- ------- ------- -------
Net asset value, end of year..... $ 20.11 $ 16.79 $ 14.67 $ 12.56
======= ======= ======= =======
Total return+++ ................. 36.39% 28.65% 23.78% 1.21%
======= ======= ======= =======
Ratios to average net
assets/Supplemental
data:
Net assets, end of year
(in 000's) ................. $140,495 $ 94,185 $ 80,157 $64,046
Ratio of operating
expenses to average
net assets ................. 0.13% 0.15% 0.14% 0.16%
Ratio of net investment
income to average net
assets ..................... 1.91% 2.26% 2.32% 2.40%
Portfolio turnover rate....... 26% 36% 70% 109%
Average Commission
per share** ................ $ 0.0623 $ 0.0700 N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tax Managed Equity Portfolio+
------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
1993 1992 1991 1990 1989++
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ...................... $ 11.84 $ 11.21 $ 8.57 $ 10.04 $ 10.00
------- ------- ------- --------- -------
Income from investment
operations:
Net investment
income ..................... 0.32 0.31 0.29 0.34 0.14
Net realized and unrealized
gain/(loss) on investments.. 1.63 0.65 2.66 (1.44) (0.01)
------- ------- ------- --------- -------
Total from investment
operations ............... 1.95 0.96 2.95 (1.10) 0.13
------- ------- ------- --------- -------
Less Distributions:
Distributions from net
investment income ......... (0.32) (0.33) (0.31) (0.34) (0.09)
Distributions from net
realized capital gains..... (0.24) -- -- -- --
Distributions from capital ... -- -- -- -- (0.03)
------- ------- ------- --------- -------
Total Distributions .......... (0.56) (0.33) (0.31) (0.37) (0.09)
------- ------- ------- --------- -------
Net asset value, end of year..... $ 13.23 $ 11.84 $ 11.21 $ 8.57 $10.04
======= ======= ======= ========= =======
Total return+++ ................. 16.60% 8.62% 34.81% (11.34)% 1.27%
======= ======= ======= ========= =======
Ratios to average net
assets/Supplemental
data:
Net assets, end of year
(in 000's) ................. $43,611 $18,049 $ 9,135 $ 5,903 $6,523
Ratio of operating
expenses to average
net assets ................. 0.20% 0.24% 0.22% 0.24% 0.42%*
Ratio of net investment
income to average net
assets ..................... 2.61% 2.91% 2.89% 3.59% 5.39%*
Portfolio turnover rate....... 61% 30% 86% 91% --
Average Commission
per share** ................ N/A N/A N/A N/A N/A
</TABLE>
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+ The Portfolio's name was changed from the Equity Portfolio to the Tax
Managed Equity Portfolio on August 20, 1998.
++ 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.
3
<PAGE>
<TABLE>
<CAPTION>
International Portfolio
-----------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1997 1996 1995 1994
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of year ...................... $ 13.87 $ 12.70 $ 13.04 $ 12.69
------- ------- ------- -------
Income from investment
operations:
Net investment income ........ 0.39 0.40 0.32 0.27
Net realized and unrealized
gain/(loss) on investments .. 1.89 1.29 0.23 1.50
------- ------- ------- -------
Total from investment
operations ................ 2.28 1.69 0.55 1.77
------- ------- ------- -------
Less Distributions:
Distributions from net
investment income ........... (0.35) (0.43) (0.32) (0.25)
Distributions from net
realized gains .............. (0.62) (0.04) (0.57) (1.16)
Distributions in excess of
net realized gains .......... -- (0.05) -- (0.01)
Distributions in excess of
net investment income........ (0.07) -- -- --
Distributions from capital ... -- -- -- --
------- ------- ------- -------
Total Distributions ......... (1.04) (0.52) (0.89) (1.42)
------- ------- ------- -------
Net asset value, end
of year ...................... $ 15.11 $ 13.87 $ 12.70 $ 13.04
======= ======= ======= =======
Total return++ ................ 16.35% 13.47% 4.23% 14.26%
======= ======= ======= =======
Ratios to average net
assets/Supplemental
data:
Net assets, end of year
(in 000's) ................ $1,051,102 $ 643,459 $343,209 $292,513
Ratio of operating
expenses to average
net assets ................ 0.14% 0.18% 0.18% 0.16%
Ratio of net investment
income to average net
assets .................... 2.77% 3.05% 2.61% 2.11%
Portfolio turnover rate...... 15% 6% 24% 39%
Average Commissions
per share** ............... $ 0.0332 $ 0.0200 N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
International Portfolio
------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
1993 1992 1991 1990 1989+
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ...................... $ 9.84 $ 10.89 $ 10.48 $ 11.20 $ 10.00
------- ------- ------- ------- -------
Income from investment
operations:
Net investment income ........ 0.27 0.26 0.21 0.30 0.40
Net realized and unrealized
gain/(loss) on investments .. 2.98 (0.51) 1.00 0.22 0.81
------- ------- ------- ------- -------
Total from investment
operations ................ 3.25 (0.25) 1.21 0.52 1.21
------- ------- ------- ------- -------
Less Distributions:
Distributions from net
investment income ........... (0.26) (0.26) (0.28) (0.42) (0.01)
Distributions from net
realized gains .............. (0.14) (0.54) (0.52) -- --
Distributions in excess of
net realized gains .......... -- -- -- -- --
Distributions in excess of
net investment income........ -- -- -- -- --
Distributions from capital ... -- -- -- ( 0.82) --
------- ------- ------- ------- -------
Total Distributions ......... (0.40) (0.80) (0.80) (1.24) (0.01)
------- ------- ------- ------- -------
Net asset value, end
of year ...................... $ 12.69 $ 9.84 $ 10.89 $ 10.48 $ 11.20
======= ======= ======= ======= =======
Total return++ ................ 33.47% (2.73)% 12.12% 4.27% 12.07%
======= ======= ======= ======= =======
Ratios to average net
assets/Supplemental
data:
Net assets, end of year
(in 000's) ................ $221,515 $167,191 $176,397 $107,690 $ 91,181
Ratio of operating
expenses to average
net assets ................ 0.17% 0.23% 0.23% 0.22% 0.20%*
Ratio of net investment
income to average net
assets .................... 2.31% 2.47% 2.99% 3.84% 3.84%*
Portfolio turnover rate...... 34% 40% 46% 44% 47%
Average Commissions
per share** ............... N/A 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.
4
<PAGE>
<TABLE>
<CAPTION>
International Portfolio
-------------------------------------------
Year ended Year ended Year ended
October 31, October 31, October 31,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Net asset value, beginning
of year ..................... $ 16.12 $ 14.98 $ 13.95
------- ------- -------
Income from investment
operations:
Net investment income ....... 0.38 0.33 0.28
Net realized and unrealized
gain on investments ........ 6.32 2.38 2.69
------- ------- -------
Total from investment
operations ............... 6.70 2.71 2.97
------- ------- -------
Less Distributions:
Distributions from net
investment income .......... (0.37) (0.33) (0.26)
Distributions from net
realized capital gains...... (3.39) (1.24) (1.68)
------- ------- -------
Total Distributions ........ (3.76) (1.57) (1.94)
------- ------- -------
Net asset value, end of year.. $ 19.06 $ 16.12 $ 14.98
======= ======= =======
Total return++ ............... 41.80% 18.22% 21.15%
======= ======= =======
Ratios to average net
assets/Supplemental
data:
Net assets, end of year
(in 000's) ............... $ 434,656 $ 308,415 $ 170,969
Ratio of operating
expenses to average
net assets ............... 0.12% 0.17% 0.14%
Ratio of net investment
income to average net
assets ................... 2.00% 2.15% 1.92%
Portfolio turnover rate..... 59% 37% 57%
Average Commission
per share** .............. $ 0.0615 $ 0.0700 N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Small Capitalization Equity Portfolio (Advisor Shares)
----------------------------------------------------------
Year ended Year ended Year ended Period ended
October 31, October 31, October 31, October 31,
1994 1993 1992 1991+
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of year ..................... $ 13.97 $ 11.12 $ 11.02 $ 10.00
------- ------- ------- -------
Income from investment
operations:
Net investment income ....... 0.16 0.14 0.16 0.16
Net realized and unrealized
gain on investments ........ 0.23 3.60 0.09 1.02
------- ------- ------- -------
Total from investment
operations ............... 0.39 3.74 0.25 1.18
------- ------- ------- -------
Less Distributions:
Distributions from net
investment income .......... (0.15) (0.15) (0.15) (0.16)
Distributions from net
realized capital gains...... (0.26) (0.74) -- --
------- ------- ------- -------
Total Distributions ........ (0.41) (0.89) (0.15) (0.16)
------- ------- ------- -------
Net asset value, end of year $ 13.95 $ 13.97 $ 11.12 $ 11.02
======= ======= ======= =======
Total return++ ............... 2.85% 33.86% 2.32% 11.84%
======= ======= ======= =======
Ratios to average net
assets/Supplemental
data:
Net assets, end of year
(in 000's) ............... $109,872 $68,418 $39,728 $ 39,631
Ratio of operating
expenses to average
net assets ............... 0.14% 0.14% 0.19% 0.20%*
Ratio of net investment
income to average net
assets ................... 1.18% 1.08% 1.44% 2.24%*
Portfolio turnover rate..... 31% 63% 56% 29%
Average Commission
per share** .............. 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.
5
<PAGE>
<TABLE>
<CAPTION>
Large Cap Value Portfolio+
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Period Ended
October 31, October 31, October 31, October 31, October 31,
1997 1996 1995 1994 1993++
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ................... $ 11.68 $ 10.34 $ 10.62 $ 10.92 $ 10.00
------- ------- ------- ------- -------
Income from investment
operations:
Net investment income ....... 0.29 0.26 0.32 0.21 0.21
Net realized and unrealized
gain on investments ....... 3.95 1.49 1.38 (0.31) 2.06
------- ------- ------- ------- -------
Total from investment
operations ............. 4.24 1.75 1.70 (0.10) 2.27
------- ------- ------- ------- -------
Less Distributions:
Distributions from net
investment income ........ (0.29) (0.27) (0.31) (0.20) (0.20)
Distributions from net
realized capital gains.... (2.34) (0.14) (1.67) -- (1.15)
------- ------- ------- ------- -------
Total Distributions ........ (2.63) (0.41) (1.98) ( 0.20) (1.35)
------- ------- ------- ------- -------
Net asset value, end of
year ..................... $ 13.29 $ 11.68 $ 10.34 $ 10.62 $ 10.92
======= ======= ======= ======= =======
Total return +++ ........... 36.55% 17.13% 16.01% ( 0.91)% 23.05%
======= ======= ======= ======= =======
Ratios to average net
assets/Supplemental
data:
Net assets, end of year
(in 000's) ................. $ 71,177 $ 50,131 $15,981 $20,654 $ 13,969
Ratio of operating
expenses to average
net assets .............. 0.13% 0.15% 0.20% 0.24% 0.24%*
Ratio of net investment
income to average net
assets ................... 2.10% 2.62% 2.80% 2.04% 2.47%*
Portfolio turnover rate ...... 109% 104% 227% 287% 230%
Average Commissions
per share** ................ $ 0.0622 $ 0.0700 N/A N/A N/A
</TABLE>
- ------------
+ The Portfolio's name was changed from the Model Equity Portfolio to the
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.
6
<PAGE>
PERFORMANCE CALCULATIONS
Each of the Tax Managed Equity, International, Small Capitalization Equity
and Large Cap Value Portfolios may advertise or quote total return data from
time to time for the shares. Total return for the shares will be calculated on
an average annual total return basis, and may also be calculated on an aggregate
total return basis, for various periods. Average annual total return reflects
the average annual percentage change in value of an investment in the particular
Portfolio over the measuring period. Aggregate total return reflects the total
percentage change in value over the measuring period. Both methods of
calculating total return assume that dividends and capital gains distributions
made by the Portfolio with respect to the shares during the period are
reinvested in additional Portfolio shares.
Each of the Tax Managed Equity, International, Small Capitalization Equity
and Large Cap Value Portfolios may compare their total returns for the shares to
that of other investment companies with similar investment objectives and to
stock and other relevant indices such as the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"), the Dow Jones Industrial Average, the Russell
2000 Index or the National Association of Securities Dealers, Inc.'s National
Market and Automated Quotations Systems ("NASDAQ") Composite Index or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
total return of the shares of the Tax Managed Equity, International, Small
Capitalization Equity or Large Cap Value Portfolios may also be compared to data
prepared by Lipper Analytical Services, Inc. In addition, the International
Portfolio's total return may be compared to the Morgan Stanley Capital
International EAFE Index. Total return and other performance data as reported in
national financial publications such as Money Magazine, Forbes, Barron's, The
Wall Street Journal and The New York Times, or in publications of a local or
regional nature, may also be used in comparing the performance of the shares of
the Tax Managed 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.
TAX MANAGED EQUITY PORTFOLIO
The objective of the Tax Managed 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
of U.S. companies. Stocks purchased by the Portfolio will be primarily those
traded on the various stock exchanges and the NASDAQ. Under normal
circumstances, at least 65% of the Tax Managed Equity Portfolio's total assets
will be invested in equity securities such as common and preferred stock and
securities convertible into such stock.
The Tax Managed Equity Portfolio seeks to minimize the impact of taxes on
shareholders' return. However, when deciding whether to sell a security,
investment considerations will take precedence over tax considerations.
The Tax Managed Equity Portfolio will use several methods to reduce the
impact of federal and state income taxes on investment income and realized
capital gains distributed by the Portfolio. The Tax Managed Equity Portfolio
will seek to distribute relatively low levels of taxable investment income by
investing in stocks with low dividend yields. The Tax Managed Equity Portfolio
will also endeavor to hold taxes on realized capital gains to a minimum by
investing primarily in the securities of companies with above average earnings
predictability and stability which the Portfolio expects to hold for several
years. The Portfolio will generally seek to avoid realizing short-term capital
gains, and expects to have a relatively low overall portfolio turnover rate. The
Portfolio may, when consistent with its overall investment approach, sell
depreciated securities to offset realized capital gains, thus reducing capital
gains distributions.
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The Tax Managed Equity Portfolio expects to have a low portfolio turnover
rate relative to other funds with similar investment objectives. It is
impossible to predict the impact of such a strategy on the realization of gains
and losses. For example, the Portfolio may forgo the opportunity to realize
gains or reduce losses as a result of this tax managed investment strategy.
Additionally, the Tax Managed Equity Portfolio reserves the right to sell
securities irrespective of how long they have been held.
Certain equity and other securities held by the Tax Managed Equity
Portfolio will produce ordinary taxable income on a regular basis. The Tax
Managed Equity Portfolio may also sell a particular security, even though it may
realize a short-term capital gain, if the value of that security is believed to
have reached its peak or is expected to decline before the Portfolio would have
held it for the long-term holding period. The Portfolio may also be required to
sell securities in order to generate cash to pay expenses or satisfy shareholder
redemptions. Accordingly, while the Tax Managed Equity Portfolio seeks to
minimize the effect of taxes on its dividends and distributions, the Portfolio
is not a tax-exempt fund, and should be expected to distribute taxable income
and to realize capital gains.
The Tax Managed Equity Portfolio may purchase or write call and put options
on any securities in which it may invest or on any securities index composed of
securities in which it may invest. The purchase and writing of options involves
some investment analysis and risks that are different from those associated with
securities transactions in common stocks. Options are utilized to enhance return
through price appreciation of the option, increase income, hedge to reduce
overall portfolio risk, and/or hedge to reduce individual security risk.
Purchasing options to seek to increase return through their price appreciation
involves the risk of loss of option premium if the Advisor is incorrect in its
expectation of the direction or magnitude of the change in securities prices.
Writing options to seek to increase income in the Portfolio involves the risk of
net loss (after receiving the option premium) if the Advisor is incorrect in its
expectation of the direction or magnitude of the change in securities prices.
The successful use of options for hedging purposes also depends in part on the
degree of correlation between the option and a security or index of securities.
If the Advisor is incorrect in its expectation of changes in securities prices
or its estimation of the correlation between the option and a security index,
the investment performance of the Portfolio will be less favorable than it would
have been in the absence of such options transactions. The aggregate value of
the Tax Managed Equity Portfolio's assets subject to options written may not
exceed 50% of its total assets (taken at market value on the date written) and
the aggregate premiums on options purchased by the Portfolio will not exceed 50%
of its total assets. The use of options may increase the Portfolio's portfolio
turnover rate. Higher rates of turnover may result in increased brokerage
commissions, and could increase the amount of income received by the Portfolio
that constitutes taxable capital gains. To the extent capital gains are
realized, distributions from those gains may be taxable as ordinary income for
federal tax purposes.
The Tax Managed Equity Portfolio intends to remain, for the most part,
fully invested in equity securities, which may include securities of companies
located outside the United States, and will not engage in "market timing"
transactions. See "Investment Policies and Risk Factors--International
Portfolio" for a discussion of special risks and considerations involved in
investing in securities of foreign companies. However, the Portfolio may invest
a portion of its assets (up to 20% under normal circumstances) in preferred
stocks, convertible debentures, and the following fixed income and money market
securities: obligations of the U.S. Government and its guaranteed or sponsored
agencies, including shares of open-end or closed-end investment companies which
invest in such obligations (such shares will be purchased within the limits
prescribed by the Investment Company Act of 1940, as amended (the "1940 Act")
and would subject a shareholder of the Portfolio to expenses of the other
investment company in addition to the expenses of the Portfolio); short-term
money market instruments issued in the U.S. or abroad, denominated in dollars or
any foreign currency, including short-term certificates of deposit (including
variable rate certificates of deposit), time deposits with a maturity no greater
than 180 days, bankers acceptances, commercial paper rated A-1 by Standard &
Poor's Ratings Group, Division of McGraw Hill ("S&P") or Prime-1 by Moody's
Investors Service, Inc. ("Moody's"), or in equivalent money market securities;
and high quality fixed income securities denominated in U.S. dollars, any
foreign currency, or a multi-national currency unit such as the European
Currency Unit.
For a description of other securities in which the Tax Managed Equity
Portfolio may invest, see "Common Investment Policies and Risk Factors."
INTERNATIONAL PORTFOLIO
The objective of the International Portfolio is to provide maximum,
long-term total return consistent with reasonable risk to principal. The
International Portfolio seeks to achieve its objective by investing primarily in
common stocks and other equity securities of companies located outside the
United States. The Portfolio is expected to diversify its investments across
companies located in a number of foreign countries, which may include, but are
not
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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 1940 Act and would subject a shareholder of the
Portfolio to the expenses of the other investment company in addition to the
expenses of the Portfolio); U.S. or foreign securities convertible into foreign
common stock; and American Depository Receipts, which are U.S. domestic
securities representing ownership rights in foreign companies.
The International Portfolio also may enter into forward foreign currency
exchange contracts in connection with the purchase and sale of investment
securities; such contracts may not be used for speculative purposes. A forward
foreign currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts may be bought or sold to protect the Portfolio,
to some degree, against a possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S. dollar. This method of
protecting the value of the Portfolio's investment securities against a decline
in the value of a currency does not eliminate fluctuations in the underlying
prices of the securities. It simply establishes a rate of exchange at some
future point in time. Additionally, although such contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain which might result should the value
of such currency increase.
Investors should recognize that investing in the securities of foreign
companies and the utilization of forward foreign currency contracts involve
special risks and considerations not typically associated with investing in U.S.
companies. These risks and considerations include differences in accounting,
auditing and financial reporting standards, generally higher commission rates on
foreign portfolio transactions, the possibility of expropriation or confiscatory
taxation, adverse changes in investment or exchange control regulations,
political instability which could affect U.S. investment in foreign countries
and potential restrictions on the flow of international capital. Moreover, the
dividends payable on the Portfolio's foreign portfolio securities may be subject
to foreign withholding taxes, thus reducing the net amount of income available
for distribution to the Portfolio's shareholders. Further, foreign securities
often trade with less frequency and volume than domestic securities and,
therefore, may exhibit greater price volatility. Also, changes in foreign
exchange rates will affect, favorably or unfavorably, the value of those
securities in a portfolio which are denominated or quoted in currencies other
than the U.S. dollar. In addition, in many countries there is less publicly
available information about issuers than is available in reports about companies
in the United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to U.S. companies.
Further, a Portfolio may encounter difficulties or be unable to pursue legal
remedies and obtain judgments in foreign courts.
Brokerage commissions, custodial services, and other costs relating to
investment in foreign securities markets are generally more expensive than in
the United States. Foreign securities markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of the Portfolio are
uninvested and no return is earned thereon. The inability of the Portfolio to
make intended security purchases due to these and other 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.
The International Portfolio intends to remain, for the most part, fully
invested in equity securities of companies located outside of the United States.
However, the Portfolio may invest a portion of its assets (up to 35% under
normal circumstances) in the following fixed income and money market securities:
obligations of the U.S. Government and its guaranteed or sponsored agencies,
including shares of open-end or closed-end investment companies which invest in
such obligations (such shares will be purchased within the limits prescribed by
the 1940 Act and would subject a shareholder of the Portfolio to expenses of the
other investment company in addition to the expenses of the
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Portfolio); short-term money market instruments issued in the U.S. or abroad,
denominated in dollars or any foreign currency, including short-term
certificates of deposit (including variable rate certificates of deposit), time
deposits with a maturity no greater than 180 days, bankers acceptances,
commercial paper rated A-1 by S&P or Prime-1 by Moody's, or in equivalent money
market securities; and high quality fixed income securities denominated in U.S.
dollars, any foreign currency, or a multi-national currency unit such as the
European Currency Unit.
For a description of other securities in which the International Portfolio
may invest, see "Common Investment Policies and Risk Factors."
SMALL CAPITALIZATION EQUITY PORTFOLIO
The objective of the Small Capitalization Equity Portfolio is to provide
long-term appreciation consistent with reasonable risk to principal. The Small
Capitalization Equity Portfolio seeks to achieve its objective by investing
primarily in equity securities with market capitalizations, at the time of
purchase, that are below the maximum capitalization permitted for a stock in the
Russell 2000 Index. Crucial to this valuation process is a systematic
examination of the earning and dividend paying ability of companies and
denominating these characteristics by the market value of the underlying equity
securities. Equity securities purchased by the Portfolio will be primarily those
traded on the various stock exchanges and NASDAQ, however, the Portfolio may
purchase unlisted securities and penny stocks. Many different company types and
industries may be represented by the securities purchased by the Portfolio.
Factors considered by the Advisor in the selection of securities include,
but are not limited to, price-to-earnings ratios, price-to-cash flow ratios,
reinvestment rates, dividend yields, expected growth rates, and balance sheet
quality. The Small Capitalization Equity Portfolio may invest in securities
located outside the United States. Investors in the Portfolio should recognize
that securities denominated in foreign currencies or a multi-national currency
unit involve special risks. The Portfolio may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and may incur costs in connection with conversions between various currencies.
See "Investment Policies and Risk Factors--International Portfolio" for a
discussion of special risks and considerations involved in investing in
securities of foreign companies.
The Portfolio's holdings will tend to be characterized by relatively low
price-to-earnings ratios. There is no mandated income requirement for securities
held by the Portfolio. The Portfolio generally will be more volatile and have a
higher expected growth rate than the overall market. In certain periods, the
Portfolio may fluctuate independently of broad, larger capitalization indices
such as the S&P 500.
Under normal market conditions, at least 65% of the Portfolio's total
assets will be invested in equity securities of companies with market
capitalizations, at the time of purchase, that are below the maximum
capitalization permitted for a stock in the Russell 2000 Index. However, if
warranted in the judgement of the Advisor, the Portfolio may invest a portion of
its assets (up to 20% under normal circumstances) in preferred stocks and
convertible debentures with a minimum rating of BBB by S&P or Baa by Moody's,
and the following fixed income and money market securities: obligations of the
U.S. Government and its guaranteed or sponsored agencies, including shares of
open-end or closed-end investment companies which invest in such obligations
(such shares will be purchased within the limits prescribed by the 1940 Act and
would subject a shareholder of the Portfolio to expenses of the other investment
company in addition to the expenses of the Portfolio, as more fully described
under "Investment Limitations" in the SAI); short-term money market instruments
issued in the U.S. or abroad, denominated in dollars or any foreign currency,
including short-term certificates of deposit (including variable rate
certificates of deposit), time deposits with a maturity no greater than 180
days, bankers acceptances, commercial paper rated A-1 by S&P or Prime-1 by
Moody's, or in equivalent money market securities; and high quality fixed income
securities denominated in U.S. dollars, any foreign currency, or a
multi-national currency unit such as the European Currency Unit.
For a description of other securities in which the Small Capitalization
Equity Portfolio may invest, see "Common Investment Policies and Risk Factors."
LARGE CAP VALUE PORTFOLIO
The objective of the Large Cap Value Portfolio is to provide maximum
long-term total return consistent with reasonable risk to principal. The Large
Cap Value Portfolio seeks to achieve its objective by investing, under normal
market conditions, at least 65% of the value of its total assets in equity
securities of companies with market capitalizations, at the time of purchase, of
greater than $5 billion.
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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 Tax Managed Equity,
International, Small Capitalization Equity and Large Cap Value Portfolios will
not enter into repurchase agreements if entering into such agreements would
cause, at the time of entering into such agreements, more than 20% of the value
of the total assets of the particular Portfolio to be subject to repurchase
agreements. The International Portfolio would generally enter into repurchase
transactions to invest cash reserves and for temporary defensive purposes.
In a repurchase agreement, a Portfolio purchases a security and
simultaneously commits to resell that security at a future date to the seller (a
qualified bank or securities dealer) at an agreed upon price plus an agreed upon
market rate of interest (itself unrelated to the coupon rate or date of maturity
of the purchased security). The securities held subject to a repurchase
agreement may have stated maturities exceeding 13 months, but the Advisor
currently expects that repurchase agreements with respect to the Tax Managed
Equity, International, Small Capitalization Equity and Large Cap Value
Portfolios will mature in less than 13 months. The seller under a repurchase
agreement will be required to maintain the value of the securities subject to
the agreement at not less than 101% of the repurchase price including accrued
interest. Glenmede Fund's administrator and the Advisor will mark-to-market
daily the value of the securities purchased, and the Advisor will, if necessary,
require the seller to deposit additional securities to ensure that the value is
in compliance with the 101% requirement stated above. The Advisor will consider
the creditworthiness of a seller in determining whether a Portfolio should enter
into a repurchase agreement, and the Portfolios will only enter into repurchase
agreements with banks and dealers which are determined to present minimal credit
risk by the Advisor under procedures adopted by the Board of Directors.
In effect, by entering into a repurchase agreement, a Portfolio is lending
its funds to the seller at the agreed upon interest rate, and receiving
securities as collateral for the loan. Such agreements can be entered into for
periods of one day (overnight repo) or for a fixed term (term repo). Repurchase
agreements are a common way to earn interest income on short-term funds.
The use of repurchase agreements involves certain risks. For example, if
the seller of a repurchase agreement defaults on its obligation to repurchase
the underlying securities at a time when the value of these securities has
declined, a Portfolio may incur a loss upon disposition of them. Default by the
seller would also expose a Portfolio
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to possible loss because of delays in connection with the disposition of the
underlying obligations. If the seller of an agreement becomes insolvent and
subject to liquidation or reorganization under the Bankruptcy Code or other
laws, a bankruptcy court may determine that the underlying securities are
collateral not within the control of a Portfolio and therefore subject to sale
by the trustee in bankruptcy. Further, it is possible that a Portfolio may not
be able to substantiate its interest in the underlying securities.
BORROWING
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.
LENDING OF SECURITIES
Each Portfolio may lend its portfolio securities with a value up to
one-third of its total assets (including the value of the collateral for the
loans) to qualified brokers, dealers, banks and other financial institutions for
the purpose of realizing additional net investment income through the receipt of
interest on the loan. Such loans would involve risks of delay in receiving
additional collateral in the event the value of the collateral decreased below
the value of the securities loaned or of delay in recovering the securities
loaned or even loss of rights in the collateral should the borrower of the
securities fail financially. Loans will be made only to borrowers deemed by the
Advisor to be of good standing.
"WHEN ISSUED," "DELAYED SETTLEMENT" AND "FORWARD DELIVERY" SECURITIES
The Portfolios may purchase and sell securities on a "When issued,"
"delayed settlement" or "forward delivery" basis. "When issued" or "forward
delivery" refer to securities whose terms and indenture are available and for
which a market exists, but which are not available for immediate delivery. When
issued or forward delivery transactions may be expected to occur one month or
more before delivery is due. Delayed settlement is a term used to describe
settlement of a securities transaction in the secondary market which will occur
sometime in the future. No payment or delivery is made by a Portfolio in a when
issued, delayed settlement or forward delivery transaction until the Portfolio
receives payment or delivery from the other party to the transaction. A
Portfolio will maintain a separate account of cash, U.S. Government securities
or other high grade debt obligations at least equal to the value of purchase
commitments until payment is made. Such segregated securities will either mature
or, if necessary, be sold on or before the settlement date. Although a Portfolio
receives no income from the above described securities prior to delivery, the
market value of such securities is still subject to change.
A Portfolio will engage in when issued transactions to obtain what is
considered to be an advantageous price and yield at the time of the transaction.
When a Portfolio engages in when issued, delayed settlement or forward delivery
transactions, it will do so for the purpose of acquiring securities consistent
with its investment objective and policies and not for the purpose of
speculation. Each Portfolio's when issued, delayed settlement and forward
delivery commitments are not expected to exceed 25% of its total assets absent
unusual market circumstances, and each Portfolio will only sell securities on
such a basis to offset securities purchased on such a basis.
INVESTMENT COMPANY SECURITIES
In connection with the management of their daily cash positions, the
Portfolios may each invest in securities issued by other open-end investment
companies with investment objectives and policies that are consistent with those
of the investing portfolio. Except as otherwise permitted under the 1940 Act,
each Portfolio limits its investments so that, as determined immediately after a
securities purchase is made: (a) not more than 5% of the value of its total
assets will be invested in the securities of any one investment company; (b) not
more than 10% of the value of its total assets will be invested in the aggregate
in the securities of investment companies as a group; and (c) not more than 3%
of the outstanding voting stock of any one investment company will be owned by
the Portfolio. As a shareholder of another investment company, the Portfolio
would bear its pro rata portion of the other investment company's advisory fees
and other expenses, in addition to the expenses the Portfolio bears directly in
connection with its own operations.
ILLIQUID SECURITIES
No Portfolio will invest more than 10% of its net assets in securities that
are illiquid.
Unless specified above and except as described under "Investment
Limitations," the foregoing investment policies are not fundamental and the
Board may change such policies without shareholder approval.
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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." There are no minimum
initial or minimum subsequent investment requirements for the Tax Managed
Equity, International or Large Cap Value Portfolios or for Advisor Shares of the
Small Capitalization Equity Portfolio. Beneficial ownership of shares will be
reflected on books maintained by the Advisor or the Institutions. The Advisor
has informed Glenmede Fund that neither it nor its Affiliates currently have any
minimum or subsequent investment requirements for their Clients' investments in
the Portfolios. Other Institutions may have such requirements. A prospective
investor wishing to purchase shares in the Glenmede Fund should contact the
Advisor or his or her Institution.
It is the responsibility of the Advisor or Institutions to transmit orders
for share purchases to Investment Company Capital Corp. ("ICC"), Glenmede Fund's
transfer agent, and deliver required funds to The Chase Manhattan Bank, N.A.,
Brooklyn, New York, Glenmede Fund's custodian, on a timely basis.
Glenmede Fund reserves the right, in its sole discretion, to suspend the
offering of shares of its Portfolios or reject purchase orders when, in the
judgment of management, such suspension or rejection is in the best interests of
Glenmede Fund.
Purchases of a Portfolio's shares will be made in full and fractional
shares of the Portfolio calculated to three decimal places. In the interest of
economy and convenience, certificates for shares will not be issued except upon
the written request of the shareholder. Certificates for fractional shares,
however, will not be issued.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value of the particular shares of the Portfolio next determined after
receipt of the redemption request by the transfer agent. Generally, a properly
signed written request is all that is required. Any redemption may be more or
less than the purchase price of the shares depending on the market value of the
investment securities held by the Portfolio. An investor wishing to redeem
shares should contact the Advisor or his or her Institution. It is the
responsibility of the Advisor or Institutions to transmit promptly redemption
orders to the transfer agent.
Payment of the redemption proceeds will ordinarily be made within one
business day, but in no event more than seven days, after receipt of the order
in proper form by the transfer agent. Redemption orders are effected at net
asset value per share next determined after receipt of the order in proper form
by the transfer agent. Glenmede Fund may suspend the right of redemption or
postpone the date of payment at times when the New York Stock Exchange (the
"Exchange") is closed, or under any emergency circumstances as determined by the
Securities and Exchange Commission (the "Commission"). See "Valuation of Shares"
for the days on which the Exchange is closed.
If the Board determines that it would be detrimental to the best interests
of the remaining shareholders of Glenmede Fund to make payment wholly or partly
in cash, Glenmede Fund may pay the redemption proceeds in whole or in part by a
distribution in-kind of securities held by a Portfolio in lieu of cash in
conformity with applicable rules of the Commission. Investors may incur
brokerage charges on the sale of portfolio securities received as a redemption
in kind.
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION
OF SHARES OF THE PORTFOLIOS
Glenmede Fund may, from time to time, in its sole discretion appoint one or
more entities as its agent to receive purchase and redemption orders of shares
of the Portfolios and cause these orders to be transmitted, on a net basis, to
Glenmede Fund's transfer agent. In these instances, orders are effected at the
net asset value per share next determined after receipt of that order by the
entity, if the order is actually received by Glenmede Fund's transfer agent not
later than the next business morning.
VALUATION OF SHARES
The net asset value per share of the Portfolios is determined by dividing
the total market value of each Portfolio's investments and other assets
attributable to the shares, less any liabilities of that Portfolio attributable
to the shares, by the total number of those shares outstanding. For the Tax
Managed Equity, International, Small Capitalization Equity and Large Cap Value
Portfolios, net asset value per share is determined as of the close of regular
trading
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hours of the Exchange on each day that the Exchange is open for business.
Currently the Exchange is closed on weekends and the customary national business
holidays of New Year's Day, Dr. Martin Luther King Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day (or the days on which they are observed). One or more pricing
services may be used to provide securities valuations in connection with the
determination of the net asset value of each Portfolio.
TAX MANAGED 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 Tax Managed Equity, Small
Capitalization Equity and Large Cap Value Portfolios, securities listed on a
foreign exchange and unlisted foreign securities are valued as described below
under "International Portfolio."
INTERNATIONAL PORTFOLIO
Equity securities listed on a U.S. securities exchange for which market
quotations are available are valued at the last quoted sale price as of the
close of that exchange's regular trading hours on the day the valuation is made.
Securities listed on a foreign exchange and unlisted foreign securities are
valued at the latest quoted sales price available before the time when assets
are valued. Price information on listed securities is taken from the exchange
where the security is primarily traded. Unlisted U.S. equity securities and
listed securities not traded on the valuation date for which market quotations
are readily available are valued not in excess of the asked prices or less than
the bid prices. The value of securities for which no quotations are readily
available (including restricted securities) is determined in good faith at fair
value using methods determined by the Board. Foreign currency amounts are
translated into U.S. dollars at the bid prices of such currencies against U.S.
dollars last quoted by a major bank.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The International, Tax Managed 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 Tax
Managed 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 Tax Managed 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
generally relieves a Portfolio of liability for Federal income taxes to the
extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that a taxable Portfolio distribute
to its shareholders an amount at least equal to 90% of its investment company
taxable income and 90% of its net exempt interest income, if any, for such
taxable year. In general, a Portfolio's investment company taxable income will
be the sum of its net investment income, including interest and dividends,
subject
14
<PAGE>
to certain adjustments, and net short-term capital gain over net long-term
capital loss, if any, for such year. Each Portfolio intends to distribute as
dividends substantially all of its investment company taxable income each year.
Such dividends will be taxable as ordinary income to each Portfolio's
shareholders who are not currently exempt from Federal income taxes, whether
such income or gain is received in cash or reinvested in additional shares. The
dividends received deduction for corporations will apply to such ordinary income
distributions to the extent the total qualifying dividends received by a
Portfolio are from domestic corporations for the taxable year. It is anticipated
that only a small part, if any, of the dividends paid by the International
Portfolio will be eligible for the dividends received deduction.
Substantially all of each Portfolio's net realized long-term capital gains,
if any, will be distributed at least annually to its shareholders. A Portfolio
generally will have no tax liability with respect to such gains and the
distributions will be taxable as long-term capital gains to the shareholders who
are not currently exempt from Federal income taxes, regardless of how long the
shareholders have held the shares and whether such gains are received in cash or
reinvested in additional shares.
A shareholder considering buying shares of a Portfolio on or just before
the record date of a dividend should be aware that the amount of the forthcoming
dividend payment, although in effect a return of capital, will be taxable.
A taxable gain or loss may be realized by a shareholder upon redemption or
transfer of shares of each Portfolio, depending upon the tax basis of such
shares and their price at the time of redemption or transfer.
International Portfolio. It is expected that dividends and certain interest
income earned by the International Portfolio from foreign securities will be
subject to foreign withholding taxes or other taxes. So long as more than 50% of
the value of the Portfolio's total assets at the close of any taxable year
consists of stocks or securities of foreign corporations, the Portfolio may
elect, for U.S. Federal income tax purposes, to treat certain foreign taxes paid
by it, including generally any withholding taxes and other foreign income taxes,
as paid by its shareholders. If the Portfolio makes this election, the amount of
such foreign taxes paid by the Portfolio will be included in its shareholders'
income pro rata (in addition to taxable distributions actually received by
them), and each shareholder will be entitled (a) to credit his proportionate
amount of such taxes against his U.S. Federal income tax liabilities, or (b) if
he itemizes his deductions, to deduct such proportionate amount from his U.S.
income, should he so choose.
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.
<PAGE>
The foregoing discussion of tax consequences is based on tax laws and
regulations in effect on the date of this Prospectus, which are subject to
change by legislative or administrative action.
Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made each year.
Each Portfolio will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or gross proceeds realized
upon sale paid to shareholders who have failed to provide a correct tax
identification number in the manner required, or who are subject to withholding
by the IRS for failure properly to include on their return payments of taxable
interest or dividends, or who have failed to certify to the Portfolio that they
are not subject to backup withholding when required to do so or that they are
"exempt recipients."
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on distributions
from Glenmede Fund. A shareholder should consult with his or her tax adviser
with respect to the tax status of distributions from Glenmede Fund in a
particular state and locality.
15
<PAGE>
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 December 31, 1997, the Advisor had over $13 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 Tax Managed Equity, International and Large Cap Value
Portfolios. Prior to January 1, 1998, the Advisor did not receive any fee from
Glenmede Fund for its investment services. Effective January 1, 1998, the
Advisor is entitled to receive a fee from the Small Capitalization Equity
Portfolio for its investment services computed daily and payable monthly, at an
annual rate of .55% of that Portfolio's average daily net assets. Additionally,
Shareholders in Glenmede Fund who are clients of the Advisor, or an affiliate of
the Advisor, pay fees which vary, depending on the capacity in which the Advisor
or its affiliate provides fiduciary and investment services to the particular
client (e.g., personal trust, estate settlement, advisory and custodian
services). Shareholders in the Portfolios who are customers of other
Institutions may pay fees to those Institutions.
Bruce D. Simon, Chief Investment Officer of the High Net Worth Division of
the Advisor, and Thomas R. Angers, CFA, Vice President and Director of Equity
Research of the Advisor, are the portfolio managers primarily responsible for
the management of the Tax Managed Equity Portfolio. Mr. Simon has been
responsible for the management of the Tax Managed Equity Portfolio since January
1, 1998 and has been employed by the Advisor since May 2, 1994. Mr. Angers has
been responsible for the management of the Tax Managed Equity Portfolio since
September 10, 1998 and has been employed by the Advisor since 1995. Prior to
joining the Advisor, Mr. Angers was a vice president, portfolio manager and
securities analyst at Independence Capital Management, Inc.
Andrew B. Williams, Senior Vice President of the Advisor, is the portfolio
manager primarily responsible for the management of the International
Portfolio. Mr. Williams has been responsible for the management of the
International Portfolio since November 17, 1988. Mr. Williams has been employed
by the Advisor since May 1985.
Robert J. Mancuso is the portfolio manager primarily responsible for the
management of the Small Capitalization Equity Portfolio. Mr. Mancuso has been
primarily responsible for the management of that Portfolio since February 27,
1996. Mr. Mancuso has been employed by the Advisor since November 1992. Prior
to joining the Advisor, he was responsible for leading the equity research
function at Penn Mutual Life Insurance Company.
Stephen A. Mozur, CFA, CPA is the portfolio manager primarily responsible
for the management of the Large Cap Equity Portfolio. Mr. Mozur has been
responsible for the management of the Large Cap Equity Portfolio since February
9, 1998. Mr. Mozur has been employed by the Advisor since February 1998. Prior
to joining the Advisor, he was responsible for portfolio management and research
at both Newbold's Asset Management and Pilgrim Baxter & Associates.
ADMINISTRATIVE, TRANSFER AGENCY AND DIVIDEND PAYING SERVICES
ICC serves as Glenmede Fund's administrator, transfer agent and dividend
paying agent pursuant to a Master Services Agreement, and in those capacities
supervises all aspects of the Funds' day-to-day operations, other than
management of Glenmede Funds' investments. ICC is an indirect subsidiary of
Bankers Trust New York Corporation. For its services as administrator, transfer
agent and dividend paying agent, ICC is entitled to receive fees from Glenmede
Fund equal to .12% of the first $100 million of the combined net assets of
Glenmede Fund and The Glenmede Portfolios, an investment company with the same
officers, Board and service providers as Glenmede Fund (the "Funds"); .08% of
the next $150 million of the combined net assets of the Funds; .04% of the next
$500 million
16
<PAGE>
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, 1997, ICC
received fees at the rate of .04% of the Tax Managed 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 an Amended and Restated Shareholder Servicing
Plan (the "Plan") effective January 1, 1998 under which each Portfolio may pay a
fee to broker/dealers, banks and other financial institutions (including the
Advisor and its affiliates) that are dealers of record or holders of record or
which have a servicing relationship ("Servicing Agents") with the beneficial
owners of shares in any of the Portfolios. Under the Plan, Servicing Agents
enter into Shareholder Servicing Agreements (the "Agreements") with the Glenmede
Fund. Pursuant to such Agreements, Servicing Agents provide shareholder support
services to investors ("Customers") who beneficially own shares of the
Portfolios. The fee, which is at an annual rate of .05% for the Tax Managed
Equity, International and Large Cap Value Portfolios, and .25% (.05% prior to
January 1, 1998) for Advisor Shares of the Small Capitalization Equity
Portfolio, is computed monthly and is based on the average daily net assets of
the shares beneficially owned by Customers of such Servicing Agents. All
expenses incurred by the Portfolios in connection with the Agreements and the
implementation of the Plan is borne entirely by the holders of the shares of the
particular Portfolio involved and will result in an equivalent increase to such
shares' Total Portfolio Operating Expenses. The Advisor has entered into an
Agreement with Glenmede Fund.
The services provided by the Servicing Agents under the Agreements may
include: aggregating and processing purchase and redemption requests from
Customers and transmitting purchase and redemption orders to the transfer agent;
providing Customers with a service that invests the assets of their accounts in
shares pursuant to specific or pre-authorized instructions; processing dividend
and distribution payments from the Glenmede Fund on behalf of Customers;
providing information periodically to Customers showing their positions;
arranging for bank wires; responding to Customers' inquiries concerning their
investments; providing sub-accounting with respect to shares beneficially owned
by Customers or the information necessary for sub- accounting; if required by
law, forwarding shareholder communications (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to Customers; and providing such other similar services as may
be reasonably requested.
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) With respect to 75% of its total assets, invest more than 5% of its
total assets at the time of purchase in the securities of any single
issuer (other than obligations issued or guaranteed by the U.S.
Government, its agencies, enterprises or instrumentalities);
(b) Purchase more than 10% of any class of the outstanding voting
securities of any issuer;
(c) Acquire any securities of companies within one industry if, as a result
of such acquisition, more than 25% of the value of the Portfolio's
total assets would be invested in securities of companies within such
industry; provided, however, that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government,
its agencies, enterprises or instrumentalities;
(d) Pledge, mortgage, or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value, except as described
in this Prospectus and the Statement of Additional Information and in
connection with entering into futures contracts, but the deposit of
assets in a segregated account in connection with the writing of
covered put and call options and the purchase of securities on a when
issued, delayed settlement or forward delivery basis and collateral
arrangements with respect to initial or variation margin for futures
contracts will not be deemed to be pledges of a Portfolio's assets or
the purchase of any securities on margin for purposes of this
investment limitation;
(e) Issue senior securities, except that a Portfolio may borrow money in
accordance with investment limitation (f), purchase securities on a
when issued, delayed settlement or forward delivery basis and enter
into reverse repurchase agreements; and
17
<PAGE>
(f) Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then not in excess of 10% of its total assets
at the time of borrowing (entering into reverse repurchase agreements
and purchasing securities on a when issued, delayed settlement or
forward delivery basis are not subject to this investment limitation).
With respect to investment limitation (c), (a) there is no limitation with
respect to (i) instruments issued or guaranteed by the United States, any state,
territory or possession of the United States, the District of Columbia or any of
their authorities, agencies, instrumentalities or political subdivisions, and
(ii) repurchase agreements secured by the instruments described in clause (i);
(b) wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents; and (c) utilities will be divided according to their
services; for example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry.
If a percentage restriction for a Portfolio is adhered to at the time an
investment is made, a later increase in percentage resulting from a change in
value or assets will not constitute a violation of such restriction. If a
Portfolio's borrowings are in excess of 5% (excluding overdrafts) of its total
net assets, additional portfolio purchases will not be made until the amount of
such borrowing is reduced to 5% or less. A Portfolio's borrowings including
reverse repurchase agreements and securities purchased on a when-issued, delayed
settlement or forward delivery basis may not exceed 33 1/3% of its total net
assets.
The investment limitations (other than the third sentence of the preceding
paragraph) described here and in the SAI are fundamental policies of the
Portfolios and may be changed only with the approval of the holders of a
majority of the outstanding shares (as defined in the 1940 Act) of the affected
Portfolio.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
Glenmede Fund was organized as a Maryland corporation on June 30, 1988.
Glenmede Fund's Articles of Incorporation authorize the Board members to issue
2,500,000,000 shares of common stock, with a $.001 par value. The Board has the
power to designate one or more classes ("Portfolios") of shares of common stock
and to classify or reclassify any unissued shares with respect to such
Portfolios. The Board also has the power to designate separate classes of shares
within the same Portfolio. Currently, Glenmede Fund is offering shares of ten
Portfolios. Glenmede Fund has classified Institutional Shares, described in a
separate prospectus, and Advisor Shares of the Small Capitalization Equity
Portfolio.
The shares of each Portfolio have no preference as to conversion, exchange,
dividends, retirement or other rights, and, when issued and paid for as provided
in this Prospectus, will be fully paid and non-assessable. The shares of each
Portfolio have no pre-emptive rights and do not have cumulative voting rights,
which means that the holders of more than 50% of the shares of Glenmede Fund
voting for the election of its Board members can elect 100% of the Board of
Glenmede Fund if they choose to do so. A shareholder is entitled to one vote for
each full share held (and a fractional vote for each fractional share held),
then standing in his or her name on the books of Glenmede Fund. Glenmede Fund
will not hold annual meetings of shareholders except as required by the 1940
Act, the next sentence and other applicable law. Glenmede Fund has undertaken
that its Board will call a meeting of shareholders for the purpose of voting
upon the question of removal of a Board member or members if such a meeting is
requested in writing by the holders of not less than 10% of the outstanding
shares of Glenmede Fund. To the extent required by the undertaking, Glenmede
Fund will assist shareholder communication in such matters.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as Glenmede Fund shall not be deemed to have been effectively acted
upon unless approved by a majority of the outstanding shares of each Portfolio
or class affected by the matter. A Portfolio or class is affected by a matter
unless it is clear that the interests of each Portfolio or class in the matter
are substantially identical or that the matter does not affect any interest of
the Portfolio or class. Under Rule 18f-2, the approval of an investment advisory
agreement or any change in a fundamental investment policy would be effectively
acted upon with respect to a Portfolio only if approved by a majority of the
outstanding shares of such Portfolio. However, the Rule also provides that the
ratification of independent public accountants and the election of directors may
be effectively acted upon by shareholders of Glenmede Fund voting without regard
to particular Portfolios.
Notwithstanding any provision of Maryland law requiring a greater vote of
the Fund's common stock (or of the shares of a Portfolio or class voting
separately as a class) in connection with any corporate action, unless otherwise
18
<PAGE>
provided by law (for example by Rule 18f-2 discussed above) or by Glenmede
Fund's Articles of Amendment and Restatement, Glenmede Fund may take or
authorize such action upon the favorable vote of the holders of more than 50% of
the outstanding common stock of Glenmede Fund entitled to vote thereon.
At November 30, 1997, the Advisor was the record owner of substantially all
of the outstanding shares of each Portfolio.
DISTRIBUTOR
ICC Distributors, Inc., P.O. Box 7558, Portland, Maine, 04101, serves as
Glenmede Fund's distributor.
CUSTODIAN
The Chase Manhattan Bank, N.A., Brooklyn, New York, serves as the custodian
of Glenmede Fund's assets.
TRANSFER AGENT
ICC, One South Street, Baltimore, Maryland 21202, acts as Glenmede Fund's
transfer agent.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., serves as independent accountants for Glenmede
Fund and will audit its financial statements annually.
REPORTS
Shareholders receive unaudited semi-annual financial statements and audited
annual financial statements.
COUNSEL
Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania, serves as counsel
to Glenmede Fund.
--------------------
Shareholder inquiries regarding the Portfolios should be addressed to
Glenmede Fund at the address or telephone number stated on the cover page.
Shareholder inquiries regarding Institutional Shares of the Small
Capitalization Equity Portfolio should be addressed to Glenmede Fund at the
address or telephone number stated on the cover page.
19
<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. 42 Director of Glenmede Fund; Trustee of The Glenmede Portfolios;
Finance Department Nippon Life Professor of Finance and Economics; Professor of
The Wharton School Finance and Economics from 1990-1996; Vice Dean and Director of
University of Pennsylvania Wharton Doctoral Programs from 1990-1993. He has been employed
Philadelphia, PA 19104-6367 by The University of Pennsylvania since 1980.
Willard S. Boothby, Jr. 76 Director of Glenmede Fund; Trustee of The Glenmede Portfolios;
600 East Gravers Lane Director, Penn Engineering & Manufacturing Corp.; Former Director
Wyndmoor, PA 19118 of Georgia-Pacific Corp.; Former Managing Director of PaineWebber,
Inc.
John W. Church, Jr.* 65 Chairman and Director of Glenmede Fund; Chairman and Trustee of
44 Wistar Road The Glenmede Portfolios; Retired, formerly the Executive Vice
Villanova, PA 19085 President and Chief Investment Officer of The Glenmede Trust
Company. Mr. Church was employed by The Glenmede Trust
Company from 1979-1997.
Francis J. Palamara 73 Director of Glenmede Fund; Trustee of The Glenmede Portfolios;
P.O. Box 44024 Trustee of Gintel Fund; Director of XTRA Corporation; Former
Phoenix, AZ 85064-4024 Executive Vice President--Finance of ARAMARK, Inc.
G. Thompson Pew, Jr.* 56 Director of Glenmede Fund; Trustee of The Glenmede Portfolios;
310 Caversham Road Director of The Glenmede Trust Company; Former Director of
Bryn Mawr, PA 19010 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 47 President of Glenmede Fund; First Vice President and Manager of
One Liberty Place The Fixed Income Division of The Glenmede Trust Company. She
1650 Market Street, Suite 1200 has been employed by The Glenmede Trust Company since 1982.
Philadelphia, PA 19103
Kimberly C. Osborne 32 Executive Vice President of Glenmede Fund; Vice President of The
One Liberty Place Glenmede Trust Company. She has been employed by The Glenmede
1650 Market Street, Suite 1200 Trust Company since 1993. From 1992-1993, she was a Client
Philadelphia, PA 19103 Service Manager with Mutual Funds Service Company and from
1987-1992, a Client Administrator with The Vanguard Group, Inc.
Michael P. Malloy 39 Secretary of Glenmede Fund; Partner in the law firm of Drinker
Philadelphia National Bank Biddle & Reath LLP.
Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Edward J. Veilleux 55 Assistant Secretary of Glenmede Fund; Principal, BT Alex. Brown
One South Street Inc.; Executive Vice President of ICC.
Baltimore, MD 21202
Joseph A. Finelli 41 Treasurer of Glenmede Fund. He has been a Vice President of B.T.
One South Street Alex. Brown Inc. since 1995. Prior thereto, he was Vice President
Baltimore, MD 21202 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.
20
<PAGE>
THE GLENMEDE FUND, INC.
One South Street, Baltimore, Maryland 21202
===============================================================================
Prospectus
Dated January 1, 1998
(as revised September 10, 1998)
Investment Advisor Administrator and Transfer Agent
The Glenmede Trust Company Investment Company Capital Corp.
One Liberty Place One South Street
1650 Market Street, Suite 1200 Baltimore, Maryland 21202
Philadelphia, PA 19103
Distributor
ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
- --------------------------------------------------------------------------------
Table of Contents
Page
-----
Expenses of the Portfolios ....................... 2
Financial Highlights ............................. 3
Performance Calculations ......................... 7
Investment Policies and Risk Factors ............. 7
Common Investment Policies and Risk
Factors ........................................ 11
Purchase of Shares ............................... 13
Redemption of Shares ............................. 13
Additional Information on the Purchase and
Redemption of Shares of the Portfolios ......... 13
Valuation of Shares .............................. 13
Dividends, Capital Gains Distributions and
Taxes .......................................... 14
Investment Advisor ............................... 16
Administrative, Transfer Agency and Divi-
dend Paying Services ........................... 16
Shareholder Servicing Plan ....................... 17
Investment Limitations ........................... 17
General Information .............................. 18
Board Members and Officers ....................... 20
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in Glenmede Fund's
Statement of Additional Information, in connection with the offering made by
this Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by Glenmede Fund or its
Distributor. This Prospectus does not constitute an offering by Glenmede Fund or
the Distributor in any jurisdiction in which such offering may not lawfully be
made.
<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
(800) 442-8299
STATEMENT OF ADDITIONAL INFORMATION
March 2, 1998
(as revised September 10, 1998)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with The Glenmede Fund, Inc.'s ("Glenmede Fund") and The
Glenmede Portfolios' ("Glenmede Portfolios" and collectively with Glenmede Fund,
the "Funds") Prospectuses dated January 1, 1998 and March 2, 1998, as amended or
supplemented from time to time (the "Prospectuses"). This Statement of
Additional Information is for the Government Cash, Tax-Exempt Cash, Core Fixed
Income, International, Tax Managed Equity, Small Capitalization Equity, Large
Cap Value, Muni Intermediate and New Jersey Muni Portfolios. To obtain any of
the Prospectuses, please call the Funds at the above telephone number.
Capitalized terms used in this Statement of Additional Information and
not otherwise defined have the same meanings given to them in the Funds'
Prospectuses.
. Table of Contents Page
THE FUNDS...............................................................1
INVESTMENT OBJECTIVES AND POLICIES......................................1
PURCHASE OF SHARES......................................................5
REDEMPTION OF SHARES....................................................5
SHAREHOLDER SERVICES....................................................6
PORTFOLIO TURNOVER......................................................6
INVESTMENT LIMITATIONS..................................................6
MANAGEMENT OF THE FUNDS................................................10
INVESTMENT ADVISORY AND OTHER SERVICES.................................11
DISTRIBUTOR............................................................13
PORTFOLIO TRANSACTIONS.................................................13
ADDITIONAL INFORMATION CONCERNING TAXES................................14
PERFORMANCE CALCULATIONS...............................................25
GENERAL INFORMATION....................................................30
FINANCIAL STATEMENTS...................................................30
OTHER INFORMATION......................................................31
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS.....................A-1
<PAGE>
THE FUNDS
On February 27, 1997, the Model Equity Portfolio changed its name to
the Large Cap Value Portfolio. On September 25, 1997, the Intermediate
Government Portfolio changed its name to the Core Fixed Income Portfolio. On
August 20, 1998, the Equity Portfolio changed its name to the Tax Managed Equity
Portfolio. References in this Statement of Additional Information are to a
Portfolio's current name.
On March 1, 1991 the Small Capitalization Equity Portfolio commenced
operations offering a single class of shares. On January 1, 1998 the Small
Capitalization Portfolio began to offer a second class of shares known as
"Institutional Shares." The original class of shares has been designated as
"Advisor Shares." Historical information concerning expenses and performance
prior to January 1, 1998 is that of the Advisor Shares.
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
-1-
<PAGE>
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
contracts are usually effected with the currency trader who is a party to the
original forward contract.
Securities Lending
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, a Portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolio. Each Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940 (the "1940 Act") or the
rules and regulations or interpretations of the Securities and Exchange
Commission (the "Commission") thereunder. The Portfolios may, from time to time,
pay negotiated fees in connection with the lending of securities.
Options on Securities and Securities Indices
Purchasing Options. The Tax Managed Equity Portfolio may purchase put
and call options on any securities in which it may invest or options on any
securities index composed of securities in which it may invest. The Portfolio
may also enter into closing sale transactions in order to realize gains or
minimize losses on options it has purchased.
The Tax Managed Equity Portfolio will normally purchase call options in
anticipation of an increase in the market value of securities of the type in
which it may invest. The purchase of a call option entitles the Portfolio, in
return for the premium paid, to purchase specified securities at a specified
price during the option period. The Tax Managed Equity Portfolio will ordinarily
realize a gain if, during the option period, the value of such securities
exceeds the sum of the exercise price, the premium paid and transaction costs;
otherwise the Portfolio will realize either no gain or a loss on the purchase of
the call option.
The Tax Managed Equity Portfolio will normally purchase put options in
anticipation of a decline in the market value of securities in its portfolio or
in securities in which it may invest.
-2-
<PAGE>
The purchase of a put option entitles the Portfolio, in exchange for
the premium paid, to sell specified securities at a specified price during the
option period. The purchase of puts is designed to offset or hedge against a
decline in the market value of the Portfolio's securities. Put options may also
be purchased by the Portfolio for the purpose of affirmatively benefitting from
a decline in the price of securities which it does not own. The Tax Managed
Equity Portfolio will ordinarily realize a gain if, during the option period,
the value of the underlying securities decreases below the exercise price
sufficiently to more than cover the premium and transaction costs; otherwise the
Portfolio will realize either no gain or a loss on the purchase of the put
option. Gains and losses on the purchase of put options will tend to be offset
by countervailing changes in the value of the underlying portfolio securities.
The Tax Managed Equity Portfolio will purchase put and call options on
securities indices for the same purposes as it will purchase options on
individual securities.
Writing Covered Options. The Tax Managed Equity Portfolio may write
covered call and put options on any securities in which it may invest. A call
option written by the Tax Managed Equity Portfolio obligates the Portfolio to
sell specified securities to the holder of the option at a specified price if
the option is exercised at any time before the expiration date. All call options
written by the Tax Managed Equity Portfolio will be covered, which means that
the Portfolio will own the securities subject to the option as long as the
option is outstanding or the Portfolio will use the other methods described
below. The Portfolio's purpose in writing covered call options is to realize
greater income than would be realized on portfolio securities transactions
alone. However, the Portfolio foregoes the opportunity to profit from an
increase in the market price of the underlying security that exceeds the
exercise price of the call option.
A put option written by the Tax Managed Equity Portfolio obligates the
Portfolio to purchase specified securities from the option holder at a specified
price if the option is exercised at any time before the expiration date. All put
options written by the Portfolio will be covered, which means that the Portfolio
will segregate cash or liquid assets with a value at least equal to the exercise
price of the put option. The purpose of writing such options is to generate
additional income for the Portfolio. However, in return for the option premium,
the Portfolio accepts the risk that it may be required to purchase the
underlying securities at a price in excess of the securities' market value at
the time of purchase.
Call and put options written by the Tax Managed Equity Portfolio will
also be considered to be covered to the extent that the Portfolio's liabilities
under such options are wholly or partially offset by its rights under call and
put options purchased by the Portfolio.
In addition, a written call option or put option may be covered by
segregating cash or liquid assets, by entering into an offsetting forward
contract and/or by purchasing an offsetting option which, by virtue of its
exercise price or otherwise, reduces the Portfolio's net exposure on its written
option position.
-3-
<PAGE>
The Tax Managed Equity Portfolio may also write covered call and put
options on any securities index composed of securities in which it may invest.
Options on securities indices are similar to options on securities, except that
the exercise of securities index options requires cash payments and does not
involve the actual purchase or sale of securities. In addition, securities index
options are designed to reflect price fluctuations in a group of securities or
segment of the securities market rather than price fluctuations in a single
security.
The Tax Managed Equity Portfolio may cover call options on a securities
index by owning securities whose price changes are expected to be similar to
those of the underlying index, or by having an absolute and immediate right to
acquire such securities without additional cash consideration (or for additional
cash consideration segregated by the Portfolio) upon conversion or exchange of
other securities in its portfolio. The Portfolio may cover call and put options
on a securities index by segregating cash or liquid assets with a value equal to
the exercise price.
The Tax Managed Equity Portfolio may terminate its obligations under an
exchange traded call or put option by purchasing an option identical to the one
it has written. Obligations under over-the-counter options may be terminated
only by entering into an offsetting transaction with the counterparty to such
option. Such purchases are referred to as "closing purchase transactions."
Risks Associated with Options Transactions. There is no assurance that
a liquid secondary market on an options exchange will exist for any particular
exchange-traded option or option traded over-the-counter at any particular time.
If the Tax Manged Equity Portfolio is unable to effect a closing purchase
transaction with respect to covered options it has written, the Portfolio will
not be able to sell the underlying securities or dispose of segregated assets
until the options expire or are exercised. Similarly, if the Portfolo is unable
to effect a closing sale transaction with respect to options it has purchased,
it will have to exercise the options in order to realize any profit and will
incur transaction costs upon the purchase or sale of the underlying securities.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options; (iv) unusual
or unforeseen circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume; or (v) one or more exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that class
or series of options) would cease to exist, although outstanding options on that
exchange that had been issued by the Options Clearing Corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms.
-4-
<PAGE>
The Tax Managed Equity Portfolio may purchase and sell both options
that are traded on U.S. exchanges and options traded over-the-counter with
broker-dealers who make markets in these options. The ability to terminate
over-the-counter options is more limited than with exchange-traded options and
may involve the risk that broker-dealers participating in such transactions will
not fulfill their obligations. Until such time as the staff of the Securities
and Exchange Commission changes its position, the Portfolio will treat purchased
over-the-counter options and all assets used to cover written over-the-counter
options as illiquid securities.
The writing and purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The successful use of
purchasing puts for hedging purposes depends in part on the Advisor's ability to
predict future price fluctuations and the degree of correlation between the
options and securities markets.
PURCHASE OF SHARES
The purchase price of shares of each Portfolio is the net asset value
next determined after receipt of the purchase order by the particular Fund.
Each Portfolio reserves the right in its sole discretion (i) to suspend
the offering of its shares, (ii) to reject purchase orders when in the judgment
of management such rejection is in the best interest of the particular Fund, and
(iii) to reduce or waive the minimum for initial and subsequent investments from
time to time.
At the discretion of the Funds, investors may be permitted to purchase
Portfolio shares by transferring securities to the Portfolio that meet the
Portfolios investment objectives and policies.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date
of payment (i) during any period that the Exchange is closed, or trading on the
Exchange is restricted as determined by the Commission, (ii) during any period
when an emergency exists as defined by the rules of the Commission as a result
of which it is not reasonably practicable for a Portfolio to dispose of
securities owned by it, or fairly to determine the value of its assets, and
(iii) for such other periods as the Commission may permit.
No charge is made by any Portfolio for redemptions. Any redemption may
be more or less than the shareholder's initial cost depending on the market
value of the securities held by the Portfolio.
-5-
<PAGE>
SHAREHOLDER SERVICES
Shareholders may transfer shares of the Portfolios to another person.
An investor wishing to transfer shares should contact the Advisor.
PORTFOLIO TURNOVER
The Portfolios will not normally engage in short-term trading, but
reserve the right to do so. A high portfolio turnover rate can result in
corresponding increases in brokerage commissions; however, the Advisor will not
consider turnover rate a limiting factor in making investment decisions
consistent with that Portfolio's investment objectives and policies. The
Portfolios' portfolio turnover rates for each of the past fiscal years are set
forth under "Financial Highlights" in the Funds' Prospectuses. Changes in the
Portfolios' turnover rates were due to market fluctuations and investment
opportunities.
INVESTMENT LIMITATIONS
Each Portfolio is subject to the following restrictions. The numbered
restrictions are fundamental policies and may not be changed without the
approval of the lesser of: (1) 67% of the voting securities of the affected
Portfolio present at a meeting if the holders of more than 50% of the
outstanding voting securities of the affected Portfolio are present or
represented by proxy, or (2) more than 50% of the outstanding voting securities
of the affected Portfolio. Each Portfolio will not:
(1) invest in commodities or commodity contracts, except that each
Portfolio may invest in futures contracts and options;
(2) purchase or sell real estate, although it may purchase and
sell securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;
(3) make loans, except (i) by purchasing bonds, debentures or
similar obligations (including repurchase agreements, subject
to the limitation described in investment limitation (9)
below, and money market instruments, including bankers
acceptances and commercial paper, and selling securities on a
when issued, delayed settlement or forward delivery basis)
which are publicly or privately distributed, and (ii) by
lending its portfolio securities to banks, brokers, dealers
and other financial institutions so long as such loans are not
inconsistent with the 1940 Act or the rules and regulations or
interpretations of the Commission thereunder;
-6-
<PAGE>
(4) purchase on margin or sell short, except as specified above in
investment limitation (1);
(5) purchase more than 10% of any class of the outstanding voting
securities of any issuer;
(6) issue senior securities, except that a Portfolio may borrow
money in accordance with investment limitation (7) below,
purchase securities on a when issued, delayed settlement or
forward delivery basis and enter into reverse repurchase
agreements;
(7) borrow money, except as a temporary measure for extraordinary
or emergency purposes, and then not in excess of 10% of its
total assets at the time of the borrowing (entering into
reverse repurchase agreements and purchasing securities on a
when issued, delayed settlement or forward delivery basis are
not subject to this investment limitation);
(8) pledge, mortgage, or hypothecate any of its assets to an
extent greater than 10% of its total assets at fair market
value, except as described in the Prospectus and this
Statement of Additional Information and in connection with
entering into futures contracts, but the deposit of assets in
a segregated account in connection with the writing of covered
put and call options and the purchase of securities on a when
issued, delayed settlement or forward delivery basis and
collateral arrangements with respect to initial or variation
margin for futures contracts will not be deemed to be pledges
of a Portfolio's assets or the purchase of any securities on
margin for purposes of this investment limitation;
(9) underwrite the securities of other issuers or invest more than
an aggregate of 10% of the total assets of the Portfolio, at
the time of purchase, in securities subject to legal or
contractual restrictions on resale or securities for which
there are no readily available markets, including repurchase
agreements which have maturities of more than seven days;
(10) invest for the purpose of exercising control over management
of any company;
(11) invest its assets in securities of any investment company,
except in connection with mergers, acquisitions of assets or
consolidations and except as may otherwise be permitted by the
1940 Act;
-7-
<PAGE>
(12) acquire any securities of companies within one industry if, as
a result of such acquisition, more than 25% of the value of
the Portfolio's total assets would be invested in securities
of companies within such industry; provided, however, that
there shall be no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities, or instruments issued by
U.S. banks; and
(13) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.
Each Portfolio, with the exception of the Muni Intermediate 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).
Pursuant to Rule 2a-7 under the 1940 Act, each of the Government Cash
Portfolio and the Tax-Exempt Cash Portfolio may not invest more than 5% of its
total assets in securities of any one issuer (other than U.S. Government
securities, repurchase agreements collateralized by such obligations, certain
money market fund securities and securities subject to certain guarantees which
are issued by persons that, directly or indirectly, do not control and are not
controlled by or under common control with the issuer). Each of these portfolios
may, however, invest more than 5% of its total assets in First Tier Securities
(as defined in Rule 2a-7) of a single issuer for a period of three business days
after the purchase thereof. For the Government Cash Portfolio and the Tax-Exempt
Cash Portfolio compliance with the diversification provisions of Rule 2a-7 under
the 1940 Act will be deemed to be compliance with the diversification limitation
in paragraph (1).
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 diversify its investments such that at the close of
each quarter of the taxable year at least 50% of the value of its total assets
will be represented by specified investments, provided that the Portfolio may
not, 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).
-8-
<PAGE>
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value or assets
will not constitute a violation of such restriction.
With regard to limitation (11), the 1940 Act currently prohibits an
investment company from acquiring securities of another investment company if,
as a result of the transaction, the acquiring company and any company or
companies controlled by it would own in the aggregate: (i) more than 3% of the
total outstanding voting stock of the acquired company, (ii) securities issued
by the acquired company having an aggregate value in excess of 5% of the value
of the total assets of the acquiring company, or (iii) securities issued by the
acquired company and all other investment companies (other than treasury stock
of the acquired company) having an aggregate value in excess of 10% of the value
of the total assets of the acquiring company. In addition to the advisory fees
and other expenses that a Portfolio bears directly in connection with its own
operations, as a shareholder of another investment company, such Portfolio would
bear its "pro rata" portion of the other investment company's advisory fees and
other expenses. Therefore, to the extent that a Portfolio is invested in shares
of other investment companies, such Portfolio's shareholders will be subject to
expenses of such other investment companies, in addition to expenses of the
Portfolio.
As a matter of policy which may be changed by the particular Fund's
Board without shareholder approval, with respect to limitation (12), Portfolios
other than the Government Cash Portfolio and the Tax-Exempt Cash Portfolio will
not invest more than 25% of the value of their respective total assets in
instruments issued by U.S. banks.
In addition, with respect to investment limitation (12), (a) there is
no limitation with respect to (i) instruments issued or guaranteed by the United
States, any state, territory or possession of the United States, the District of
Columbia or any of their authorities, agencies, instrumentalities or political
subdivisions, and (ii) repurchase agreements secured by the instruments
described in clause (i); (b) wholly-owned finance companies will be considered
to be in the industries of their parents if their activities are primarily
related to financing the activities of the parents; and (c) utilities will be
divided according to their services; for example, gas, gas transaction, electric
and gas, electric and telephone will each be considered a separate industry.
-9-
<PAGE>
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
Glenmede Fund pays each Board member, other than officers of the
Advisor, 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. Glenmede Portfolios pays each Board member, other than
officers of the Advisor, an annual fee of $1,000 per year and out-of-pocket
expenses incurred in attending Board meetings. Officers of the Funds receive no
compensation as officers from the Funds.
Set forth in the table below is the compensation received by Board
members for the fiscal year ended October 31, 1997.
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Aggregate Benefits Estimated
Compensation Compensation Total Annual Total
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>
Dr. H. Franklin Allen, Ph.D., $15,459 $1,041 None None $16,500
Director/Trustee
Willard S. Boothby, Jr., $14,196 $1,054 None None $15,250
Director/Trustee
John W. Church, Jr. None None None None None
Director/Trustee
Francis J. Palamara, $14,196 $1,054 None None $15,250
Director/Trustee
G. Thompson Pew, Jr., $16,696 $1,054 None None $17,750
Director/Trustee
</TABLE>
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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
76 shareholders. The Corporation has a nine person Board of Directors which, at
September 30, 1997, collectively, owned 98.67% of the Corporation's voting
shares and 37.80% of the Corporation's total outstanding shares. The members of
the Board and their respective interests in the Corporation at September 30,
1997 are as follows:
The Glenmede Corporation Percent of Percent of
Board of Directors Voting Shares Total Shares
- ------------------ ------------- ------------
Susan W. Catherwood..................... 10.83% 1.23%
Richard F. Pew.......................... 10.83% 1.07%
Thomas W. Langfitt, M.D................. 11.07% 8.69%
Arthur E. Pew III....................... 10.83% 1.07%
J. Howard Pew, II....................... 10.83% 1.43%
J. N. Pew, III.......................... 11.07% 5.45%
J. N. Pew, IV........................... 11.07% 1.43%
R. Anderson Pew......................... 11.07% 6.03%
Ethel Benson Wister..................... 11.07% 11.40%
------ ------
98.67% 37.80%
As noted in the Prospectuses, the Advisor does not receive any fee from
the Government Cash, Tax-Exempt Cash, Core Fixed Income, International, Tax
Managed Equity, Large Cap Value, Muni Intermediate and New Jersey Muni
Portfolios for its investment services. Prior to January 1, 1998, the Advisor
did not receive any fee from The Small Capitalization Equity Portfolio for its
investment services. Effective January 1, 1998, the Advisor is entitled to
receive a fee from the Small Capitalization Equity Portfolio for its investment
services computed daily and payable monthly, at an annual rate of .55% of that
Portfolio's average daily net assets. Additionally, all shareholders in the
Portfolios are clients of the Advisor or an Affiliate and, as clients, pay fees
which vary depending on the capacity in which the Advisor or Affiliate provides
fiduciary and investment services to the particular client. Such services may
include personal trust, estate settlement, advisory and custodian services. For
example, for advisory services, the Advisor charges its clients up to 1% on the
first $1 million of principal, .60% on the next $1 million of principal, .50% on
the next $3 million of principal and .40% on the next $5 million of principal,
with a minimum annual fee of $10,000. For accounts in excess of $10 million of
principal, the fee would be determined by special analysis.
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<PAGE>
Since July 1, 1995, administrative, transfer agency and dividend paying
services have been provided to each of the Funds by ICC, pursuant to a Master
Services Agreement between each of the Funds and ICC. See "Administrative,
Transfer Agency and Dividend Paying Services" in the Prospectuses for
information concerning the substantive provisions of each Master Services
Agreement. For the fiscal year ended October 31, 1997, the Funds paid ICC fees
of $178,351 for the Government Cash Portfolio, $99,450 for the Tax-Exempt Cash
Portfolio, $101,654 for the Core Fixed Income Portfolio, $342,102 for the
International Portfolio, $45,406 for the Tax Managed Equity Portfolio, $144,610
for the Small Capitalization Equity Portfolio, $24,893 for the Large Cap Value
Portfolio, $7,183 for the Muni Intermediate Portfolio and $3,821 for the New
Jersey Muni Portfolio.
For the fiscal year ended October 31, 1996, the Funds paid ICC fees of
$183,151 for the Government Cash Portfolio, $95,073 for the Tax-Exempt Cash
Portfolio, $110,811 for the Core Fixed Income Portfolio, $216,069 for the
International Portfolio, $33,415 for the Tax Managed Equity Portfolio, $101,413
for the Small Capitalization Equity Portfolio, $12,716 for the Large Cap Value
Portfolio, $7,474 for the Muni Intermediate Portfolio and $2,571 for the New
Jersey Muni Portfolio.
For the period July 1, 1995 to October 31, 1995, the Funds paid ICC
fees of $59,300 for the Government Cash Portfolio, $30,104 for the Tax-Exempt
Cash Portfolio, $48,906 for the Core Fixed Income Portfolio, $55,781 for the
International Portfolio, $11,445 for the Tax Managed 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 Core Fixed Income Portfolio,
$172,504 for the International Portfolio, $38,056 for the Tax Managed 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.
As described more fully in the Prospectuses, the Advisor provides
shareholder support services to their clients who beneficially own shares of the
Portfolios pursuant to a Shareholder Servicing Agreement ("Agreement") with each
of the Funds. Shareholder servicing fees payable for the fiscal year ended
October 31, 1997 for the Government Cash, Tax-Exempt Cash, Core
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<PAGE>
Fixed Income, Muni Intermediate, New Jersey Muni, Tax Managed Equity,
International, Small Capitalization Equity and Large Cap Value Portfolios were
$233,912, $130,408, $129,813, $9,418, $5,023, $59,674, $448,678, $189,976 and
$32,710, respectively.
Shareholder servicing fees payable for the fiscal year ended October
31, 1996 for the Government Cash, Tax-Exempt Cash, Core Fixed Income, Muni
Intermediate, New Jersey Muni, Tax Managed Equity, International, Small
Capitalization Equity and Large Cap Value Portfolios were $226,624, $117,082,
$136,249, $9,135, $3,168, $42,934, $265,082, $125,390 and $15,789, respectively.
Shareholder servicing fees payable for the period January 1, 1995 to
October 31, 1995 for the Government Cash, Tax-Exempt Cash, Core Fixed Income,
Muni Intermediate, New Jersey Muni, Tax Managed 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 ICC Distributors, Inc. ("ICC Distributors"), pursuant to
Distribution Agreements between the Funds and ICC Distributors. ICC Distributors
receives no fee from the Funds for its distribution services.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Advisor to select the
brokers or dealers that will execute the purchases and sales of investment
securities for each of the Portfolios and direct the Advisor to use its best
efforts to obtain the best available price and most favorable execution with
respect to all transactions for the Portfolios. The Advisor may, however,
consistent with the interests of a Portfolio, select brokers on the basis of the
research, statistical and pricing services they provide to a Portfolio.
Information and research received from such brokers will be in addition to, and
not in lieu of, the services required to be performed by the Advisor under the
Investment Advisory Agreements. A commission paid to such brokers may be higher
than that which another qualified broker would have charged for effecting the
same transaction, provided that such commissions are paid in compliance with the
Securities Exchange Act of 1934, as amended, and that the Advisor determines in
good faith that such commission is reasonable in terms either of the transaction
or the overall responsibility of the Advisor to a Portfolio and the Advisor's
other clients.
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<PAGE>
During the fiscal year ended October 31, 1997, the Tax Managed Equity,
International, Small Capitalization Equity and Large Cap Value Portfolios paid
$80,102, $1,256,020, $592,458 and $171,033 in brokerage commissions,
respectively. During the fiscal year ended October 31, 1996, the Tax Managed
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
Tax Managed Equity, International, Small Capitalization Equity and Large Cap
Value Portfolios paid $157,547, $453,721, $343,683 and $165,103 in brokerage
commissions, respectively.
The Government Cash, Core Fixed Income, Muni Intermediate and New
Jersey Muni Portfolios do not currently expect to incur any brokerage commission
expense on transactions in their portfolio securities because debt instruments
are generally traded on a "net" basis with dealers acting as principal for their
own accounts without a stated commission. The price of the security, however,
usually includes a profit to the dealer.
Because shares of the Portfolios are not marketed through intermediary
brokers or dealers, it is not the Funds' practice to allocate brokerage or
effect principal transactions with dealers on the basis of sales of shares which
may be made through such firms. However, the Advisor may place portfolio orders
with qualified broker-dealers who refer clients to the Advisor.
Some securities considered for investment by each Portfolio may also be
appropriate for other clients served by the Advisor. If purchase or sale of
securities is consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Advisor and is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Advisor.
While in some cases this practice could have a detrimental effect on the price,
value or quantity of the security as far as a Portfolio is concerned, in other
cases it is believed to be beneficial to the Portfolios.
ADDITIONAL INFORMATION CONCERNING TAXES
General. The following summarizes certain additional tax considerations
generally affecting the Portfolios and their shareholders that are not described
in the Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Portfolios or their shareholders, and the discussion here
and in the Prospectus is not intended as a substitute for careful tax planning.
Potential investors should consult their tax advisers with specific reference to
their own tax situation.
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<PAGE>
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.
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.
The maximum capital gains tax rate for individuals is 20% if the
property was held for more than 12 months. 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%).
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<PAGE>
The following Portfolios have available capital loss carryforwards to
offset future net capital gains through the indicated expiration dates as
follows:
<TABLE>
<CAPTION>
Expiring Expiring Expiring Expiring Expiring Expiring Expiring
Portfolio in 1999 in 2000 in 2001 in 2002 in 2003 in 2004 in 2005
- --------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Government Cash - - $127 $1,000 $26,819 - $7,815
Tax Exempt Cash $18,922 - 19,079 8,905 27,815 $13 -
Core Fixed - - - 9,261,440 - - -
Income
Muni - $656 4,787 215,936 549,436 2,107 42,723
Intermediate
New Jersey Muni - - - 56,594 21,708 11,660 -
</TABLE>
If for any taxable year a Portfolio does not qualify for the special
Federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to Federal income tax at regular corporate rates
(without any deduction for distributions to its shareholders). In such event,
dividend distributions (including amounts derived from interest on tax-exempt
obligations in the case of the Tax-Exempt Cash, Muni Intermediate and New Jersey
Muni Portfolios) would be taxable as ordinary income to shareholders to the
extent of the Portfolio's current and accumulated earnings and profits, and
would be eligible for the dividends received deduction for corporations.
Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios. As
described in the Prospectus, these Portfolios are designed to provide investors
with current tax-exempt interest income. Shares of the Portfolios would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans and individual
retirement accounts since such plans and accounts are generally tax-exempt and,
therefore, would not only fail to gain any additional benefit from each such
Portfolio's dividends being tax-exempt, but such dividends would be ultimately
taxable to the beneficiaries when distributed to them. In addition, the
Portfolios may not be an appropriate investment for entities which are
"substantial users" of facilities financed by private activity bonds or "related
persons" thereof. "Substantial user" is defined under U.S. Treasury Regulations
to include a non-exempt person who regularly uses a part of such facilities in
his trade or business and whose gross revenues derived with respect to the
facilities financed by the issuance of bonds are more than 5% of the total
revenues derived by all users of such facilities, who occupies more than 5% of
the usable area of such facilities or for whom such facilities or a part thereof
were specifically constructed, reconstructed or acquired. "Related persons"
include certain related natural persons, affiliated corporations, a partnership
and its partners and an S corporation and its shareholders.
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<PAGE>
The percentage of total dividends paid by each Portfolio with respect
to any taxable year which qualify as Federal exempt-interest dividends will be
the same for all shareholders receiving dividends for such year. In order for
each Portfolio to pay exempt-interest dividends with respect to any taxable
year, at the close of each quarter of its taxable year at least 50% of the
aggregate value of each Portfolio's assets must consist of exempt-interest
obligations. After the close of its taxable year, each Portfolio will notify its
shareholders of the portion of the dividends paid by it which constitutes an
exempt-interest dividend with respect to such year. However, the aggregate
amount of dividends so designated by each Portfolio cannot exceed the excess of
the amount of interest exempt from tax under Section 103 of the Code received by
the particular Portfolio for the taxable year over any amounts disallowed as
deductions under Sections 265 and 171(a)(2) of the Code.
Interest on indebtedness incurred by a shareholder to purchase or carry
such a Portfolio's shares generally is not deductible for Federal income tax
purposes if the Portfolio distributes exempt-interest dividends during the
shareholder's taxable year.
While each Portfolio will seek to invest substantially all of its
assets in tax-exempt obligations (except on a temporary basis or for temporary
defensive periods), any investment company taxable income earned by a Portfolio
will be distributed. In general, each Portfolio's investment company taxable
income will be its taxable income (including taxable interest received from
temporary investments and any net short-term capital gains realized by a
Portfolio) subject to certain adjustments and excluding the excess of any net
long-term capital gains for the taxable year over the net short-term capital
loss, if any, for such year.
Federal Taxation of Certain Financial Instruments. Generally, certain
foreign currency contracts entered into and held by the International Portfolio
at the close of the Fund's taxable year may be treated for Federal income tax
purposes as sold for their fair market value on the last business day of such
year, a process known as "mark-to-market." Forty percent of any gain or loss
resulting from such constructive sale will be treated as short-term capital gain
or loss and sixty percent of such gain or loss will be treated as long-term
capital gain or loss without regard to the length of time the Portfolio holds
the foreign currency contract ("the 40-60 rule"). To receive such Federal income
tax treatment, a foreign currency contract must meet the following conditions:
(1) the contract must require delivery of , or the settlement of the contract
must depend on the value of, a foreign currency of a type in which regulated
futures contracts are traded; (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
-17-
<PAGE>
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.
Special rules govern the Federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules include the
following: (i) the acquisition of, or becoming the obligor under, a bond or
other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option and similar financial instrument if such
instrument is not marked to market. The disposition of a currency other than the
U.S. dollar by a U.S. taxpayer is also treated as a transaction subject to the
special currency rules. However, foreign currency-related regulated futures
contracts and non-equity options are generally not subject to the special
currency rules if they are or would be treated as sold for their fair market
value at year-end under the mark-to-market rules, unless an election is made to
have such currency rules apply. With respect to transactions covered by the
special rules, foreign currency gain or loss is calculated separately from any
gain or loss on the underlying transaction and is normally taxable as ordinary
gain or loss. A taxpayer may elect to treat as capital gain or loss foreign
currency gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not part of a straddle. In accordance with Treasury regulations under
which certain transactions that are part of a "section 988 hedging transaction"
(as defined in the Code and the Treasury regulations) will be integrated and
treated as a single transaction or otherwise treated consistently for purposes
of the Code. Any gain or loss attributable to the foreign currency component of
a transaction engaged in by a Portfolio which is not subject to the special
currency rules (such as foreign equity investments other than certain preferred
stocks) will be treated as capital gain or loss and will not be segregated from
the gain or loss on the underlying transaction. It is anticipated that some of
the non-U.S. dollar denominated investments and foreign currency contracts the
International Portfolio may make or enter into will be subject to the special
currency rules described above.
Options. When the Tax Managed Equity Portfolio writes an option, an
amount equal to the net premium (the premium less the commission) received by
the Portfolio is included as a deferred credit in the liability section of the
Portfolio's statement of assets and liabilities. The amount of the deferred
credit will be subsequently marked-to-market to reflect the current value
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<PAGE>
of the option written. The current value of the traded option is the last sale
price or, in the absence of a sale price, the average of the closing bid and
asked prices. If an option expires on the stipulated expiration date or if the
Portfolio enters into a closing purchase transaction, it will realize a gain (or
loss if the cost of a closing purchase transaction exceeds the net premium
received when the option is sold), and the deferred credit related to such
option will be eliminated. If an option is exercised, the Tax Managed Equity
Portfolio may deliver the underlying security from its portfolio and purchase
the underlying security in the open market. In either event, the proceeds of the
sale will be increased by the net premium originally received, and the Portfolio
will realize a gain or loss. Premiums from expired call options written by the
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 treated as short-term capital losses.
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's economy historically has been dependent on heavy
industry although recent declines in the coal, steel and railroad industries
have led to diversification of the Commonwealth's economy. Recent sources of
economic growth in Pennsylvania are in the service sector, including trade,
medical and health services, education and financial institutions. Agriculture
continues to be an important component of the Commonwealth's economic structure,
with nearly one-third of the Commonwealth's total land area devoted to cropland,
pasture and farm woodlands.
The Commonwealth utilizes the fund method of accounting and over 120
funds have been established for purposes of recording receipts and disbursements
of the Commonwealth, of which the General Fund is the largest. Most of the
Commonwealth's operating and administrative expenses are payable from the
General Fund. The major tax sources for the General Fund are the sales tax, the
personal income tax and the corporate net income tax. Major expenditures of the
Commonwealth include funding for education, public health and welfare,
transportation, and economic development.
The constitution of the Commonwealth provides that operating budget
appropriations of the Commonwealth may not exceed the estimated revenues and
available surplus in the fiscal year for which funds are appropriated.
Annual budgets are enacted for the General Fund and for
certain special revenue funds which together represent the majority of
expenditures of the Commonwealth. Although the balance in the General Fund of
the Commonwealth (the principal operating fund of the Commonwealth) experienced
deficits in fiscal 1990 and 1991, tax increases
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<PAGE>
and spending decreases have resulted in surpluses the last four years; as of
June 30, 1996, the General Fund had a surplus of $635.2 million.
Current constitutional provisions permit the Commonwealth to issue the
following types of debt: (i) electorate approved debt, (ii) debt for capital
projects subject to an aggregate debt limit of 1.75 times the annual average tax
revenues of the preceding five fiscal years, (iii) tax anticipation notes
payable in the fiscal year of issuance and (iv) debt to suppress insurrection or
rehabilitate areas affected by disaster. Certain state-created agencies issue
debt supported by assets of, or revenues derived from, the various projects
financed and the debt of such agencies is not an obligation of the Commonwealth
although some of the agencies are indirectly dependent on Commonwealth
appropriations.
Certain litigation is pending against the Commonwealth that could
adversely affect the ability of the Commonwealth to pay debt service on its
obligations including suits relating to the following matters: (a) the ACLU has
filed suit in federal court demanding additional funding for child welfare
services; the Commonwealth settled a similar suit in the Commonwealth Court of
Pennsylvania and is seeking the dismissal of the federal suit, 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; a special master
appointed by the Court submitted an implementation plan in 1997, recommending a
four phase transition to state funding of a unified judicial system; the special
master recommended that the implementation of the phase should be effective July
1, 1998, with the completion of the final phase early next century; objections
to the Special Master's report were due by September 1, 1997; the General
Assembly has yet to consider legislation implementing the Court's judgment; (c)
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 resolve to which Envirotest's claims that will say
Environtest a conditional sum of $195 million over four years; (d) in litigation
brought by the Pennsylvania Human Relations Commission to remedy unintentional
conditions of segregation in the Philadelphia public schools, the School
District of Philadelphia filed a third-party complaint against the Commonwealth
asking the Commonwealth Court to require the Commonwealth to supply funding
necessary for the District to comply with orders of the court; the Commonwealth
Court found that the School District was entitled to receive an additional $45.1
million for the 1996-97 school year, but the Pennsylvania Supreme Court vacated
this decision in September 1996; pursuant to the Court's orders, the parties
have briefed certain issues, but oral argument has not yet been scheduled (no
available estimate of potential liability); (e) in February 1997, five residents
of the City of Philadelphia, joined by the City, the School District and Others,
filed a civil action in the Commonwealth Court for declaratory judgment against
the Commonwealth
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<PAGE>
and certain Commonwealth officers and officials that the defendants had failed
to provide an adequate quality of education in Philadelphia, as required by the
Pennsylvania Constitution; after preliminary objections and briefs were filed,
the Court heard oral argument en banc in September 1997, and has taken the
matter under advisement (no available estimate of potential liability); (f) in
April 1995, the Commonwealth reached a settlement agreement with Fidelity Bank
and certain other banks with respect to the constitutional validity of the
Amended Bank Shares Act and related legislation; although this settlement
agreement did not require expenditure of Commonwealth funds, the petitions of
other banks are currently pending with the Commonwealth Court (no available
estimate of potential liability); and (g) suit has been filed in state court
against the State Employees' Retirement Board claiming that the use of gender
distinct actuarial factors to compute benefits received before August 1, 1983
violates the Pennsylvania Constitution (gender-neutral factors have been used
since August 1, 1983, the date on which the U.S. Supreme Court held in Arizona
Governing Committee v. Norris that the use of such factors violated the Federal
Constitution); in 1996, the Commonwealth Court heard oral argument en banc, and
in 1997 denied the plaintiff's motion for judgment on the pleadings (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 creditworthiness of that issuer or, in the case of
revenue bonds, on the revenue producing ability of the project being financed,
and not directly on the credit-worthiness of the Commonwealth of Pennsylvania as
a whole.
The City of Philadelphia (the "City") experienced a series of General
Fund deficits for Fiscal Years 1988 through 1992 and, while its general
financial situation has improved, the City is still seeking a long-term solution
for its economic difficulties. The City has no legal authority to issue deficit
reduction bonds on its own behalf, but state legislation has been enacted to
create an Intergovernmental Cooperation Authority (the "Authority") to provide
fiscal oversight for
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<PAGE>
Pennsylvania cities (primarily Philadelphia) suffering recurring financial
difficulties. The Authority is broadly empowered to assist cities in avoiding
defaults and eliminating deficits by encouraging the adoption of sound budgetary
practices and issuing bonds. In order for the Authority to issue bonds on behalf
of the City, the City and the Authority entered into an intergovernmental
cooperative agreement providing the Authority with certain oversight powers with
respect to the fiscal affairs of the City, and in recent years, the Authority
has issued approximately $1.76 billion of Special Revenue Bonds on behalf of the
City. The City currently is operating under a five year plan approved by the
Authority in 1996, with technical amendments officially incorporated on July 18,
1996. The audited balance of the City's General Fund as of June 30, 1996 showed
a surplus of approximately $118.5 million up from approximately $80.5 million as
of June 30, 1995.
The Authority's power to issue further bonds to finance capital
projects or deficit expired on December 31, 1994. The Authority's power to issue
debt to finance a cash flow deficit expired on December 31, 1996, and its
ability to refund outstanding bonds is unrestricted. The Authority had
approximately $1.1 billion in Special Revenue Bonds outstanding as of June 30,
1997.
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
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.
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<PAGE>
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,
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
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<PAGE>
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) representatives of the
trucking industry have filed a constitutional challenge to annual hazardous and
solid waste licensure renewal fees; (vii) 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; (viii) a group of insurance
companies have filed a constitutional challenge to the challenge to the State's
assessment of monies pursuant to the Fair Automobile Insurance Reform Act of
1990; (ix) a class action consisting of prisoners with serious mental disorders
has been filed against officers of the Department of Corrections, alleging sex
discrimination, violation of the Americans with Disabilities Act of 1990, and
constitutional violations; (x) a class action has been brought in federal court
challenging the State's method of determining the monthly needs of a spouse of
an institutionalized person under the Medicare Catastrophic Act; (xi) several
suits have been filed against the State in federal court alleging that the State
committed securities fraud and environmental violations in the financing of a
new Atlantic City highway and tunnel; (xii) a class action has been filed
against the State alleging the State's breach of contract for not paying certain
Medicare co-insurance and deductibles; and (xiii) an action has been filed
challenging the State's issuance of bonds to fund the accrued liability in its
pension funds under the Pension Bond Financing Act of 1997.
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<PAGE>
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
From time to time, the Government Cash Portfolio and the Tax-Exempt
Cash Portfolio (the "Cash Portfolios"), may advertise or quote yield, effective
yield or total return. The "yield" and "effective yield" of the Government Cash
and Tax-Exempt Cash Portfolios, and the "tax-equivalent yield" of the Tax-Exempt
Cash Portfolio, are calculated according to formulas prescribed by the
Commission. The standardized seven-day yield of each of these Portfolios is
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account in the particular Portfolio having
a balance of one share at the beginning of the period, dividing the net change
in account value by the value of the account at the beginning of the base period
to obtain the base period return, and multiplying the base period return by
(365/7). The net change in the value of an account in the Cash Portfolios
includes the value of additional shares purchased with dividends from the
original share, and dividends declared on both the original share and any such
additional shares, net of all fees, other than nonrecurring account or sales
charges, that are charged by the Fund to all shareholder accounts in proportion
to the length of the base period and the Portfolio's average account size. The
capital changes to be excluded from the calculation of the net change in account
value are realized gains and losses from the sale of securities and unrealized
appreciation and depreciation. An effective annualized yield for the Cash
Portfolios may be computed by compounding the unannualized base period return
(calculated as above) by adding 1 to the base period return, raising the sum to
a power equal to 365 divided by 7, and subtracting 1 from the result.
The Tax-Exempt Cash Portfolio's "7-day tax-equivalent yield" may be
computed by dividing the tax-exempt portion of the Portfolio's yield (calculated
as above) by one minus a stated Federal income tax rate and adding the product
to that portion, if any, of the Portfolio's yield that is not tax-exempt. The
Tax-Exempt Cash Portfolio's tax-equivalent yield, and the Cash Portfolios' yield
and effective yield, do not reflect any fees charged by the Advisor to its
clients. See "Investment Advisor."
Set forth below is an example, for purposes of illustration only, of
the current yield calculations for each of the Cash Portfolios for the seven day
period ended October 31, 1997.
-25-
<PAGE>
<TABLE>
<CAPTION>
Government Cash Tax-Exempt
Portfolio Cash Portfolio
10/31/97 10/31/97
--------------- ----------
<S> <C> <C>
7-Day Yield (Net Change X 365/7 average net asset value) 5.56% 3.52%
7-Day Effective Yield 5.71% 3.58%
7-Day Tax-Equivalent Yield 8.06% 5.10%*
</TABLE>
- ---------------------------------
* Assumes an effective Federal income tax rate of 31%
The Commission yield of the Core Fixed Income Portfolio, Muni
Intermediate Portfolio and the New Jersey Muni Portfolio for the 30-day period
ended October 31, 1997 was 7.22%, 4.75% and 4.22%, respectively. These yields
were calculated by dividing the net investment income per share (as described
below) earned by the Portfolio during a 30-day (or one month) period by the
maximum offering price per share on the last day of the period and annualizing
the result on a semi-annual basis by adding one to the quotient, raising the sum
to the power of six, subtracting one from the result and then doubling the
difference. The Portfolio's net investment income per share earned during the
period is based on the average daily number of shares outstanding during the
period entitled to receive dividends and includes dividends and interest earned
during the period minus expenses accrued for the period, net of reimbursements.
This calculation can be expressed as follows:
6
Yield = 2 [( a-b + 1) - 1]
---
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period net of
reimbursements.
c = the average daily number of shares
outstanding during the period that
were entitled to receive dividends.
d = maximum offering price per share on the last
day of the period.
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), interest earned on any debt obligations
held by the Core Fixed Income, Muni Intermediate or New Jersey Muni Portfolios
is calculated by computing the yield to maturity of each obligation held by the
Portfolio based on the market value of the obligation (including actual accrued
interest) at the close of business on the last business day of each month, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest) and dividing the result by 360 and multiplying the
quotient by the market value of the obligation (including actual accrued
interest) in order to determine the interest income on the obligation for each
day of the subsequent month that the obligation is held by the particular
Portfolio. For purposes of this calculation, it is assumed that each month
contains 30 days. The
-26-
<PAGE>
maturity of an obligation with a call provision is the next call date on which
the obligation reasonably may be expected to be called or, if none, the maturity
date. With respect to debt obligations purchased at a discount or premium, the
formula generally calls for amortization of the discount or premium. The
amortization schedule will be adjusted monthly to reflect changes in the market
values of such debt obligations.
Undeclared earned income will be subtracted from the maximum offering
price per share (variable "d" in the formula). Undeclared earned income is the
net investment income which, at the end of the base period, has not been
declared as a dividend, but is reasonably expected to be and is declared and
paid as a dividend shortly thereafter. The Core Fixed Income, Muni Intermediate
and New Jersey Muni Portfolios' yields do not reflect any fees charged by the
Advisor or an Affiliate to its clients. See "Investment Advisor."
The Muni Intermediate and New Jersey Muni Portfolios' "tax-equivalent"
yield is computed by dividing the portion of the yield that is exempt from
Federal and/or State income taxes by one minus a stated Federal income tax rate
and/or the State income tax rate and by adding that figure to that portion, if
any, of the yield that is not tax-exempt. The 30 day tax-equivalent yield for
the Muni Intermediate Portfolio and New Jersey Portfolio for the 30-day period
ended October 31, 1997 was 7.18% and 6.65%, respectively (assuming a marginal
Federal income tax rate of 31% and marginal Pennsylvania and New Jersey income
tax rates of 2.80 and 5.525%, respectively).
The Core Fixed Income, Tax Managed Equity, International, Small
Capitalization Equity, Muni Intermediate, New Jersey Muni and Large Cap Value
Portfolios each compute their respective average annual total returns separately
for each class by determining the average annual compounded rates of return
during specified periods that equate the initial amount invested to the ending
redeemable value of such investment. This is done by dividing the ending
redeemable value of a hypothetical $1,000 initial payment by $1,000 and raising
the quotient to a power equal to one divided by the number of years (or
fractional portion thereof) covered by the computation and subtracting one from
the result. This calculation can be expressed as follows:
-27-
<PAGE>
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.
The Core Fixed Income, Tax Managed Equity, International, Small
Capitalization Equity, Muni Intermediate, New Jersey Muni and Large Cap Value
Portfolios compute their aggregate total returns separately for each class by
determining the aggregate rates of return during specified periods that likewise
equate the initial amount invested to the ending redeemable value of such
investment. The formula for calculating aggregate total return is as follows:
T = [( ERV ) - 1]
---
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions.
The ending redeemable value (variable "ERV" in each formula) is determined by
assuming complete redemption of the hypothetical investment and the deduction of
all nonrecurring charges at the end of the period covered by the computations.
Each Portfolio's average annual total return and aggregate total return do not
reflect any fees charged by the Advisor to its clients. See "Investment
Advisor."
As of January 1, 1998, the Small Capitalization Equity Portfolio began
to offer Institutional Shares. Institutional Shares are subject to an annual
.05% fee payable pursuant to the Amended and Restated Shareholder Servicing Plan
("Shareholder Servicing Fee"). Prior to January 1, 1998, the Small
Capitalization Equity Portfolio did not have an advisory fee and Advisor Shares
had a .05% Shareholder Servicing Fee. Performance of the Institutional Shares
prior to January 1, 1998 is represented by performance of the Advisor Shares.
-28-
<PAGE>
Set forth below are the average annual total return figures for the
Core Fixed Income, Tax Managed Equity, International, Small Capitalization
Equity, Muni Intermediate, Large Cap Value and New Jersey Muni Portfolios since
inception and for the one year and five year periods ended October 31, 1997.
<TABLE>
<CAPTION>
Tax Small
Core Fixed Managed Capitalization Muni
Income Equity International Equity Intermediate
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
Advisor Institutional
Shares Shares
------ ------
<S> <C> <C> <C> <C> <C> <C>
1 Year Ended 10/31/97 8.63% 36.39% 16.35% 41.80% N/A 6.69%
5 Years Ended 10/31/97 6.65% 20.71% 15.98% 22.83% N/A 5.97%
Inception to 10/31/97 8.55% 15.79% 11.61% 19.05% N/A 5.65%
Large Cap New
Value Jersey Muni
Portfolio Portfolio
--------- ---------
1 Year Ended 10/31/97 36.55% 6.90%
Inception to 10/31/97 18.44% 4.62%
Inception Dates:
Core Fixed Income Portfolio.................................. 11/17/88
Tax Managed 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
</TABLE>
Set forth below are the aggregate total return figures for the Core
Fixed Income, Tax Managed Equity, International, Small Capitalization Equity,
Muni Intermediate, Large Cap Value and New Jersey Muni Portfolios from inception
to October 31, 1997.
<TABLE>
<CAPTION>
Portfolio Inception Date Aggregate Total Return
- --------- -------------- ----------------------
<S> <C> <C>
Core Fixed Income 11/17/88 108.50%
Tax Managed Equity 07/20/89 236.96%
International 11/17/88 167.39%
Small Capitalization Equity 03/01/91 219.93%1
Muni Intermediate 06/05/92 34.65%
Large Cap Value 12/31/92 126.25%
New Jersey Muni 11/01/93 19.73%
</TABLE>
1 Represents performance of Advisor Shares.
-29-
<PAGE>
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, Tax Managed Equity, Small Capitalization Equity and
Large Cap Value Portfolios normally distribute substantially all of their net
investment income to shareholders in the form of a quarterly dividend and the
Core Fixed Income, Muni Intermediate and New Jersey Muni Portfolios normally
distribute substantially all of their net investment income to shareholders in
the form of a monthly dividend. If any net capital gains are realized by a
Portfolio, that Portfolio normally distributes such gains at least once a year.
The amounts of any income dividends or capital gains distributions for a
Portfolio cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares
of a Portfolio by an investor may have the effect of reducing the per share net
asset value of that Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect a
return of capital, are subject to income taxes as set forth in the Prospectus.
Certain Record Holders
As of January 31, 1998, the Advisor held of record substantially all of
the outstanding shares of each Portfolio. For more information about the
Advisor, see "Investment Advisor" in the Prospectus. As of January 31, 1998 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 Government Cash, Tax-Exempt
Cash, Core Fixed Income, International, Tax Managed Equity, Small Capitalization
Equity, Large Cap Value, Muni Intermediate and New Jersey Muni Portfolios for
the year ended October 31, 1997 and the financial highlights for each of the
respective periods presented, appearing in the 1997 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. No other parts of the 1997 Annual
Report to Shareholder are incorporated herein.
-30-
<PAGE>
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 Securities Act of 1933 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
-31-
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. Description of Bond Ratings
Excerpts from Moody's description of its highest bond ratings: Aaa --
judged to be the best quality; carry the smallest degree of investment risk; Aa
- -- judged to be of high quality by all standards; A -- judged to be of upper
medium quality; factors giving security to principal and interest considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future; Baa -- judged to be of medium quality;
lacking outstanding investment characteristics and in fact having speculative
characteristics.
Excerpts from S&P description of its highest bond ratings: AAA --
highest grade obligations; indicates an extremely strong capacity to pay
interest and repay principal; AA -- also qualify as high grade obligations;
indicates a very strong capacity to pay interest and repay principal and differs
from AAA issues only in small degree; A -- qualifies as upper medium grade
obligations; have strong capacity to pay interest and repay principal, although
somewhat more susceptible to adverse effects of change in circumstances and
economic conditions than higher rated bonds; BBB -- indicates adequate capacity
to pay interest and repay principal, although adverse economic conditions are
likely to weaken such capacity.
Description of Moody's ratings of state and municipal notes: Moody's
ratings for state and municipal notes, other short-term obligations and variable
rate demand obligations are as follows: MIG-1/VMIG-1 -- Best quality, enjoying
strong protection by established cash flows, superior liquidity support or
demonstrated broadbased access to the market for refinancing; MIG-2/VMIG-2 --
High quality with margins of protection ample although not so large as in the
preceding group.
Description of Moody's highest commercial paper rating: Prime-1 ("P-1")
- -- judged to be of the best quality. Issuers rated P-1 (or related supporting
institutions) are considered to have a superior capacity for repayment of
short-term promissory obligations.
Excerpt from S&P rating of municipal note issues: SP-1+ -- overwhelming
capacity to pay principal and interest; SP-1 -- very strong or strong capacity
to pay principal and interest.
Description of S&P highest commercial papers ratings: A-1+ -- this
designation indicates the degree of safety regarding timely payment is
overwhelming. A-1 -- this designation indicates the degree of safety regarding
timely payment is either overwhelming or very strong.
A-1
<PAGE>
II. Description of Mortgage-Backed Securities
Mortgage-Related Securities. The Core Fixed Income Portfolio may
purchase mortgage-backed securities that are secured by entities such as the
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"),
commercial banks, trusts, financial companies, finance subsidiaries of
industrial companies, savings and loan associations, mortgage banks and
investment banks. These certificates are in most cases pass-through instruments,
through which the holder receives a share of all interest and principal payments
from the mortgages underlying the certificate, net of certain fees. The average
life of a mortgage-backed security varies with the underlying mortgage
instruments, which have maximum maturities of 40 years. The average life is
likely to be substantially less than the original maturity of the mortgage pools
underlying the securities as the result of prepayments, mortgage refinancings or
foreclosure. Mortgage prepayment rates are 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. Such prepayments are
passed through to the registered holder with the regular monthly payments of
principal and interest and have the effect of reducing future payments.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities guaranteed
by GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") which are guaranteed as to the timely payment of principal and interest
by GNMA and such guarantee is backed by the full faith and credit of the United
States. GNMA is a wholly-owned U.S. Government corporation within the Department
of Housing and Urban Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Treasury to make payments under
its guarantee. Mortgage-related securities issued by FNMA include FNMA
guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes")
which are solely the obligations of FNMA, are not backed by or entitled to the
full faith and credit of the United States and are supported by the right of the
issuer to borrow from the Treasury. FNMA is a government-sponsored organization
owned entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of principal and interest by FNMA. Mortgage-related securities issued by
the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a
corporate instrumentality of the United States, created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are
not guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by FHLMC. FHLMC guarantees either ultimate collection or timely
payment of all principal payments on the underlying mortgage loans. When FHLMC
does not guarantee timely payment of principal, FHLMC may remit the amount due
on account of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable.
A-2
<PAGE>
III. Description of Asset-Backed Securities
Asset-Backed Securities. The Core Fixed Income Portfolio may invest in
asset-backed securities. Asset-backed securities include interests in pools of
receivables, such as motor vehicle installment purchase obligations and credit
card receivables. Such securities are generally issued as pass-through
certificates, which represent undivided fractional ownership interests in the
underlying pools of assets. Such securities may also be debt instruments, which
are also known as collateralized obligations and are generally issued as the
debt of a special purpose entity organized solely for the purpose of owning such
assets and issuing such debt. Asset-backed securities are not issued or
guaranteed by the U.S. Government or its agencies or instrumentalities; however,
the payment of principal and interest on such obligations may be guaranteed up
to certain amounts and for a certain time period by a letter of credit issued by
a financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities.
The purchase of asset-backed securities may raise considerations
peculiar to the financing of the instruments underlying such securities. For
example, most organizations that issue asset-backed securities relating to motor
vehicle installment purchase obligations perfect their interests in the
respective obligations only by filing a financing statement and by having the
servicer of the obligations, which is usually the originator, take custody
thereof. In such circumstances, if the servicer were to sell the same
obligations to another party, in violation of its duty not to do so, there is a
risk that such party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. Also, although most of such
obligations grant a security interest in the motor vehicle being financed, in
most states the security interest in a motor vehicle must be noted on the
certificate of title to perfect such security interest against competing claims
of other parties. Due to the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the obligations
underlying the asset-backed securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
the asset-backed securities. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on those securities. In addition, various state and federal laws give
the motor vehicle owner the right to assert against the holder of the owner's
obligation certain defenses such owner would have against the seller of the
motor vehicle. The assertion of such defenses could reduce payments on the
related asset-backed securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances owed on the credit card,
thereby reducing the amounts paid on such receivables. In addition, unlike most
other asset-backed securities, credit card receivables are unsecured obligations
of the cardholder.
A-3
<PAGE>
IV. Description of U.S. Government Securities and Certain Other Securities
The term "U.S. Government securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.
U.S. Treasury securities are backed by the "full faith and
credit" of the United States. Securities issued or guaranteed by Federal
agencies and U.S. Government sponsored enterprises or instrumentalities may or
may not be backed by the full faith and credit of the United States. In the case
of securities not backed by the full faith and credit of the United States, an
investor must look principally to the agency, enterprise or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency,
enterprise or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export
Import Bank, Farmers Home Administration, Federal Financing Bank and others.
Certain agencies, enterprises and instrumentalities, such as the Government
National Mortgage Association are, in effect, backed by the full faith and
credit of the United States through provisions in their charters that they may
make "indefinite and unlimited" drawings on the Treasury, if needed to service
its debt. Debt from certain other agencies, enterprises and instrumentalities,
including the Federal Home Loan Bank and Federal National Mortgage Association,
are not guaranteed by the United States, but those institutions are protected by
the discretionary authority for the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies, enterprises and instrumentalities, such as the Farm
Credit System and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under Government supervision, but their debt securities
are backed only by the creditworthiness of those institutions, not the U.S.
Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency
organized under Federal charter with Government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Overseas Private
Investment Corporation, Federal Home Loan Banks, the Federal Land Banks, Central
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal
National Mortgage Association.
A-4
<PAGE>
International institutions that issue securities which the Core Fixed
Income Portfolio may purchase include the Asian Development Bank, Inter-American
Development Bank and the International Bank for Reconstruction and Development
(the "World Bank").
V. 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.
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.
A-5
<PAGE>
Note obligations with demand or put options may have a stated maturity
in excess of 13 months, but permit any holder to demand payment of principal
plus accrued interest upon a specified number of days' notice. Frequently, such
obligations are secured by letters of credit or other credit support
arrangements provided by banks. The issuer of such notes normally has a
corresponding right, after a given period, to repay in its discretion the
outstanding principal of the note plus accrued interest upon a specific number
of days' notice to the bondholders. The interest rate on a demand note may be
based upon a known lending rate, such as a bank's prime rate, and be adjusted
when such rate changes, or the interest rate on a demand note may be a market
rate that is adjusted at specified intervals. The demand notes in which the
Tax-Exempt Cash Portfolio will invest are payable on not more than thirteen
months notice.
The yields of Municipal Obligations depend on, among other things,
general money market conditions, conditions in the Municipal Obligation market,
the size of a particular offering, the maturity of the obligation, and the
rating of the issue. The ratings of Moody's and S&P represent their opinions of
the quality of the Municipal Obligations rated by them. It should be emphasized
that such ratings are general and are not absolute standards of quality.
Consequently, Municipal Obligations with the same maturity, coupon and rating
may have different yields, while Municipal Obligations of the same maturity and
coupon, but with different ratings may have the same yield. It will be the
responsibility of the Advisor to appraise independently the fundamental quality
of the bonds held by the Tax-Exempt Cash Portfolio.
Municipal Obligations are sometimes purchased on a "when issued" basis,
which means the buyer has committed to purchase certain specified securities at
an agreed upon price when they are issued. The period between commitment date
and issuance date can be a month or more. It is possible that the securities
will never be issued and the commitment cancelled.
From time to time proposals have been introduced before Congress to
restrict or eliminate the Federal income tax exemption for interest on Municipal
Obligations. Similar proposals may be introduced in the future. If any such
proposal were enacted, it might restrict or eliminate the ability of the
Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios to achieve
their investment objectives. In that event the Funds' Board members and officers
would reevaluate the Tax-Exempt Cash, Muni Intermediate and New Jersey Muni
Portfolios' investment objectives and policies and consider recommending to
their shareholders changes in such objectives and policies.
A-6
<PAGE>
VI. 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 Tax Managed Equity,
International, Small Capitalization Equity and Large Cap Value Portfolios may
temporarily hold uninvested reserves in bank deposits in foreign currencies, the
Tax Managed 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 Tax Managed Equity, International, Small Capitalization
Equity and Large Cap Value Portfolios will endeavor to achieve most favorable
execution costs in its portfolio transactions, 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 Tax Managed
Equity, International, Small Capitalization Equity and Large Cap Value
Portfolios.
A-7
