THE EXPEDITION TAX-FREE MONEY MARKET FUND
(A PORTFOLIO OF THE EXPEDITION FUNDS)
INVESTMENT SERVICE SHARES
PROSPECTUS
The Investment Service Shares ("Shares") offered by this prospectus represent
interests in the portfolio known as The Expedition Tax-Free Money Market Fund
(the "Fund"). The Fund is one of a series of investment portfolios in The
Expedition Funds (the "Trust"), an open-end, management investment company (a
mutual fund).
THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
The investment objective of the Fund is to provide current income, exempt from
Federal income taxes, consistent with stability of principal. The Fund pursues
this investment objective by investing in a variety of high-quality money market
instruments maturing in thirteen months or less, the interest on which is exempt
from Federal income tax.
Shareholders can invest in or redeem Shares at any time without charge or
penalty imposed by the Fund.
Compass Bank, an Alabama state banking corporation, professionally manages the
Fund's portfolio.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF COMPASS
BANK, COMPASS BANCSHARES, INC. OR ANY OF ITS AFFILIATES, OR OF ANY BANK, ARE NOT
ENDORSED OR GUARANTEED BY COMPASS BANK, COMPASS BANCSHARES, INC. OR ANY OF ITS
AFFILIATES, OR BY ANY BANK, AND ARE NOT OBLIGATIONS OF, GUARANTEED BY OR INSURED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
Compass Bank, an Alabama banking corporation, serves as investment adviser and
custodian of the Fund, and Compass Bank and certain of its affiliates provide or
may provide certain other services to the Fund, for which services Compass Bank
and/or its affiliates will be compensated. SEI Investments Distribution Co.,
which is not affiliated with Compass Bank, is the sponsor and serves as
distributor of the Fund.
This prospectus contains the information you should read and know before you
invest in Shares of the Fund. Keep this prospectus for future reference.
The Trust has also filed a Statement of Additional Information dated April 2,
1998 with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information free of charge by calling 1-800-992-2085. To obtain other
information or make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated April 2, 1998
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TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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GENERAL INFORMATION 2
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Investment Limitations 10
FUND INFORMATION 10
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Management of the Fund 10
Distribution of Investment Service Shares 12
Administration of the Fund 12
NET ASSET VALUE 13
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INVESTING IN INVESTMENT SERVICE SHARES 14
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Share Purchases 14
What Shares Cost 15
Shareholder Accounts 15
Dividends 15
Capital Gains 16
Systematic Investment Program 16
EXCHANGE PRIVILEGE 16
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REDEEMING INVESTMENT SERVICE SHARES 18
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Systematic Withdrawal Program 20
Accounts with Low Balances 20
SHAREHOLDER INFORMATION 21
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Voting Rights 21
EFFECT OF BANKING LAWS 21
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TAX INFORMATION 22
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PERFORMANCE INFORMATION 24
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OTHER CLASSES OF SHARES 24
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ADDRESSES 25
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SUMMARY OF FUND EXPENSES
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INVESTMENT SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)....................... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)....................... None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, as
applicable)............................................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable)............................................... None*
Exchange Fee................................................ None
* Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)................................. 0.07%
Total Other Expenses (2).......................................... 0.61%
Shareholder Servicing Fee.............................. 0.25%
Total Operating Expenses (3)...................................... 0.68%
(1) The management fee has been reduced to reflect a voluntary waiver. Absent
this waiver, the maximum management fee is .40%. The Adviser has
voluntarily agreed to waive all or a portion of its fee to limit Total
Operating Expenses to not more than .68%. The Adviser reserves the right,
in its sole discretion, to terminate these voluntary fee waivers at any
time.
(2) The Administrator has agreed to waive, on a voluntary basis, a portion of
its fees. The Administrator reserves the right to terminate its waiver at
any time in its sole discretion. Absent such waiver, "Total Other Expenses"
for the Fund are estimated to be .66% for the current fiscal year.
(3) Absent the voluntary waivers and reimbursements described above, "Total
Operating Expenses" for the Fund are estimated to be 1.06% for the current
fiscal year.
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THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE INVESTMENT SERVICE SHARES
OF THE FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTY. FOR MORE COMPLETE
DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE "FUND INFORMATION" AND
"INVESTING IN THE INVESTMENT SERVICE SHARES."
EXAMPLE 1 year 3 years
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You would pay the following expenses on a $1,000
investment assuming (1) a 5% annual return and (2)
redemption at the end of each time period.............. $7 $22
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. THE FUND IS NEW AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. BECAUSE THE FUND IS NEW, THE FUND HAS NOT PROJECTED EXPENSES BEYOND
THE THREE-YEAR PERIOD SHOWN
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated August 7, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares of beneficial interest in any one
portfolio may be offered in separate classes. As of the date of this prospectus,
the Board of Trustees (the "Trustees") has established two classes of shares of
the Fund, Institutional Shares and Investment Service Shares. This prospectus
relates only to Investment Service Shares of the Expedition Tax-Free Money
Market Fund. The Trust offers three other portfolios: The Expedition Money
Market Fund, The Expedition Equity Fund and The Expedition Bond Fund.
Information regarding the Institutional Shares of the Fund and the Trust's other
portfolios is contained in separate prospectuses which may be obtained by
calling 1-800-992-2085.
Investment Service. Shares of the Fund are primarily designed for investors who
desire a convenient means of accumulating an interest in a professionally
managed portfolio that seeks current income exempt from Federal income taxes and
that is consisting primarily of tax-free money market instruments maturing in
thirteen months or less.
The Fund attempts to stabilize the value of a Share at $1.00. Shares are
currently sold and redeemed at that price.
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INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income, exempt from
Federal income taxes, consistent with stability of principal. The investment
objective cannot be changed without approval of shareholders. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by complying with the diversification and other requirements of Rule 2a-7
under the Investment Company Act of 1940 (the "1940 Act") which regulates money
market mutual funds and by following the investment policies described in this
prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing primarily in a portfolio
of money market instruments maturing in thirteen months or less. The average
maturity of money market instruments in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies set forth below may be changed by the Trustees without the
approval of shareholders. Shareholders will be notified before any material
change in these policies becomes effective. Since the Fund often purchases
securities by credit enhancements from banks and other financial institutions,
changes in the credit quality of these institutions could cause losses to the
Fund and affect its share price.
ACCEPTABLE INVESTMENTS. Under normal market conditions, the Fund will invest at
least 80% of its net assets in eligible securities issued by or on behalf of the
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities
(collectively, "Municipal Securities"), the interest on which is exempt from
Federal income tax. The Fund will invest at least 80% of its assets in Municipal
Securities the interest on which is not treated as a preference item for
purposes of the federal alternative minimum tax. This investment policy is a
fundamental policy of the Fund. The Fund will purchase municipal bonds,
municipal notes, municipal lease obligations, tax-exempt money market mutual
funds, and tax-exempt commercial paper rated in the two highest short-term
rating categories by a nationally recognized statistical rating organization (an
"NRSRO") in accordance with Securities and Exchange Commission ("SEC")
regulations at the time of
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investment or, if not rated, determined by the Adviser to be of comparable
quality.
The Adviser will not invest 25% or more of the Fund's assets in Municipal
Securities (a) whose issuers are located in the same state or (b) the interest
on which is derived from revenues of similar type projects. This restriction
does not apply to Municipal Securities in any of the following categories:
public housing authorities; general obligations of states and localities; state
and local housing finance authorities; or municipal utilities systems.
The Fund may purchase municipal obligations with demand features, including
variable and floating rate obligations. In addition, the Fund may invest in
commitments to purchase securities on a "when issued" basis and purchase
securities subject to a standby commitment.
The Fund may purchase securities on a when-issued or delayed basis only when
settlement takes place within 15 days of the purchase of such securities.
The Fund may invest up to 20% of the Fund's net assets in the aggregate in
taxable money market instruments, taxable money market mutual funds, and
securities subject to the alternative minimum tax. Taxable money market
instruments in which the Fund may invest consist of (i) Municipal Securities;
(ii) bankers' acceptances, certificates of deposits, notes and time deposits of
highly-rated U.S. banks and U.S. branches of foreign banks; (iii) U.S. Treasury
obligations and obligations issued or guaranteed by the agencies and
instrumentalities of the U.S. Government, including STRIPS; (iv) high quality
commercial paper issued by U.S. and foreign corporations; (v) debt obligations
with a maturity of one year or less issued by corporations with outstanding
high-quality commercial paper; (vi) receipts (including TRs, TIGRs and CATs, as
defined below) and (vii) repurchase agreements involving any of the foregoing
obligations entered into with highly-rated banks and broker-dealers.
The Fund may engage in securities lending and may also borrow money in amounts
up to 33 1/3% of its net assets.
With respect to investments in U.S. Treasury STRIPS, which are sold with
original issue discount and do not make periodic cash interest payments, the
Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
all of its net investment income to its shareholders, the Fund may have to sell
portfolio securities to distribute such imputed income, which may occur at a
time when the Adviser would
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not have chosen to sell such securities and which may result in a taxable gain
or loss.
Investment income received directly by the Fund on direct U.S. Government
obligations is exempt from income tax at the state level when received directly
and may be exempt, depending on the state, when received by a shareholder as
income dividends provided certain state specific conditions are satisfied.
Interest received on repurchase agreements collateralized by direct U.S.
Government obligations normally is not exempt from state taxation. The Fund will
inform shareholders annually of the percentage of income and distributions
derived from direct U.S. Government obligations. Shareholders should consult
their tax advisers to determine whether any portion of the income dividends
received from the Fund is considered tax exempt in their particular states.
A sale, exchange or redemption of a Fund's shares generally is a taxable
transaction to the shareholder.
BANKERS' ACCEPTANCES. Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods and to furnish dollar
exchange. Maturities are generally six months or less.
CERTIFICATES OF DEPOSIT. Certificates of deposit are interest bearing
instruments with a specific short-term maturity. They are issued by banks and
savings and loan institutions in exchange for the deposit of funds and normally
can be traded in the secondary market prior to maturity. Certificates of deposit
with penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER. Commercial paper is a term used to describe unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few to 270 days.
FIXED INCOME SECURITIES. Fixed income securities include bonds, notes,
debentures and other interest-bearing securities that represent indebtedness.
The market value of the fixed income investments in which the Fund invests will
change in response to interest rate changes and other factors. During periods of
falling interest rates, the values of outstanding fixed income securities
generally rise. Conversely, during periods of rising interest rates, the values
of such securities generally decline. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates.
Changes by recognized agencies in the rating of any fixed income security and in
the ability of an issuer to make payments of interest and principal
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also affect the value of these investments. Changes in the value of these
securities will not necessarily affect cash income derived from these securities
but will affect the Fund's net asset value.
INVESTMENT COMPANIES. As a shareholder in an investment company, the Fund would
bear its ratable share of that investment company's expenses, including its
advisory and administration fees.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract, or a
participation certificate in any of the above.
Municipal lease obligations typically are not backed by the municipality's
credit, and their interest may become taxable if the lease is assigned. If funds
are not appropriated for the following year's lease payments, a lease may
terminate, with a possibility of default on the lease obligation and significant
loss to the Fund. Under guidelines established by the Board of Trustees, the
credit quality of municipal leases will be determined on an ongoing basis,
including an assessment of the likelihood that a lease will be canceled.
MUNICIPAL SECURITIES. Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair, or improvement of privately operated
facilities. General obligations bonds are backed by the taxing power of the
issuing municipality. Revenue bonds are backed by the revenues of a project or
facility; tolls from a toll bridge for example. Certificates of participation
represent an interest in an underlying obligation or commitment such as an
obligation issued in connection with a leasing arrangement. The payment of
principal and interest on private activity and industrial development bonds
generally is dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment.
Municipal securities include general obligation notes, tax anticipation notes,
revenue anticipation notes, bond anticipation notes, certificates of
indebtedness, demand notes and construction loan notes. Municipal bonds include
general obligation bonds, revenue or special obligation bonds, private activity
and industrial development bonds.
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PARTICIPATION INTERESTS. Participation interests are interests in Municipal
Securities from financial institutions such as commercial and investment banks,
savings and loan associations and insurance companies. These interests may take
the form of participations, beneficial interests in a trust, partnership
interests or any other form of indirect ownership that allows a Fund to treat
the income from the investment as exempt from federal income tax. The Fund
invests in these participation interests in order to obtain credit enhancement
or demand features that would not be available through direct ownership of the
underlying Municipal Securities.
RECEIPTS. TRs, TIGRs and CATS--interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury obligations into
a special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts are sold as
zero coupon securities which means that they are sold at a substantial discount
and redeemed at face value at their maturity date without interim cash payments
of interest or principal. The amount of this discount is accrued over the life
of the security and constitutes the income earned on the security for both
accounting and tax purposes. Because of these features, receipts may be subject
to greater price volatility than interest paying U.S. Treasury Obligations.
Receipts include Treasury Receipts ("TRs"), Treasury Investment Growth Receipts
("TIGRs"), and Certificates of Accrual on Treasury Securities ("CATS").
REPURCHASE AGREEMENTS. Repurchase agreements are agreements by which the Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. Repurchase
agreements must be fully collateralized at all times. The Fund bears a risk of
loss in the event the other party defaults on its obligations and the Fund is
delayed or prevented from its right to dispose of the collateral. The Fund will
enter into repurchase agreements only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
established guidelines. Repurchase agreements are considered loans under the
1940 Act.
SECURITIES LENDING. In order to generate additional income, the Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash or securities of the U.S.
Government or its agencies equal to at least 100% of the market value of the
securities lent. The Fund continues to receive interest on the securities lent
while simultaneously earning a portion of the return
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generated from the collateral (or a portion of the return on the investment of
cash collateral). Collateral is marked to market daily. There may be risks of
delay in recovery of the securities or even loss of rights in the collateral
should the borrower of the securities fail financially or become insolvent.
STANDBY COMMITMENTS. Some securities dealers are willing to sell Municipal
Securities to the Fund accompanied by their commitments to repurchase the
Municipal Securities prior to maturity, at the Fund's option, for the amortized
cost of the Municipal Securities at the time of repurchase. These arrangements
are not used to protect against changes in the market value of Municipal
Securities. They permit the Fund, however, to remain fully invested and still
provide liquidity to satisfy redemptions. The cost of Municipal Securities
accompanied by these "standby" commitments could be greater than the cost of
Municipal Securities without such commitments. Standby commitments are not
marketable or otherwise assignable and have value only to the Fund. The default
or bankruptcy of a securities dealer giving such a commitment would not affect
the quality of the Municipal Securities purchased. However, without a standby
commitment, these securities could be more difficult to sell. The Fund enters
into standby commitments only with those dealers whose credit the Adviser
believes to be of high quality.
TIME DEPOSITS. Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time deposits may be considered to be illiquid
securities.
U.S. GOVERNMENT AGENCY OBLIGATIONS. Obligations issued or guaranteed by agencies
of the United States Government, including, among others, the Federal Farm
Credit Bank, the Federal Housing Administration and the Small Business
Administration, and obligations issued or guaranteed by instrumentalities of the
United States Government, including, among others, the Federal Home Loan
Mortgage Corporation, the Federal Land Banks and the United States Postal
Service. Some of these securities are supported by the full faith and credit of
the United States Treasury, others are supported by the right of the issuer to
borrow from the Treasury, while still others are supported only by the credit of
the instrumentality. Guarantees of principal by agencies or instrumentalities of
the United States Government may be a guarantee of payment at the maturity of
the obligation so that in the event of a default prior to maturity there might
not be a market and thus no means of realizing on the obligation prior to
maturity. Guarantees as to the timely payment of principal and interest do not
extend to the value or yield of these securities nor to the value of the Fund's
shares.
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U.S. GOVERNMENT SECURITIES. Any guaranty by the U.S. Government of the
securities in which the Fund invests guarantees only the payment of principal
and interest on the guaranteed security and does not guarantee the yield or
value of that security or the yield or value of shares of the Fund.
U.S. TREASURY OBLIGATIONS. U.S. Treasury obligations consist of bills, notes,
and bonds issued by the U.S. Treasury, and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS"). The Fund does not expect to trade STRIPS
actively.
VARIABLE AND FLOATING RATE INSTRUMENTS. Certain of the obligations purchased by
the Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. Such instruments bear interest at rates which are not
fixed, but which vary with changes in specified market rates or indices. The
interest rates on these securities may be reset daily, weekly, quarterly or some
other reset period, and may have a floor or ceiling on interest rate changes.
There is a risk that the current interest rate on such obligations may not
accurately reflect existing market interest rates. A demand instrument with a
demand notice exceeding seven days may be considered illiquid if there is no
secondary market for such securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
However, the Fund may purchase securities on a when-issued or delayed basis only
when settlement takes place within 15 days of the purchase of such securities.
To the extent required by the 1940 Act, the Fund will maintain with the
custodian a separate account with liquid securities or cash in an amount at
least equal to these commitments. The interest rate realized on these securities
is fixed as of the purchase date and no interest accrues to the Fund before
settlement. These securities are subject to market fluctuation due to changes in
market interest rates and it is possible that the market value at the time of
settlement could be higher or lower than the purchase price if the general level
of interest rates has changed. Although the Fund generally purchases securities
on a when-issued or forward commitment basis with the intention of actually
acquiring securities for its portfolio, the Fund may dispose of a when-issued
security or forward commitment prior to settlement if it deems appropriate.
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INVESTMENT LIMITATIONS
The Fund will not:
o borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge
up to 15% of the value of its total assets to secure such borrowings; or
o with respect to 75% of the value of its total assets, invest more than
5% of the value of its total assets in the securities of any one issuer,
other than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities. However, to the
extent that the diversification requirements imposed by Rule 2a-7 are
more stringent, the Fund will follow the dictates of Rule 2a-7.
The above investment limitations cannot be changed without shareholder approval.
FUND INFORMATION
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MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Board of Trustees is responsible for managing the
business affairs of the Trust and for exercising all of the powers of the Trust
except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust
and subject to direction by the Trustees, investment decisions for the Fund are
made by Compass Bank, an Alabama state banking corporation that is a Federal
Reserve System member bank (the "Adviser"). The Adviser has delegated these
responsibilities, subject to its supervision, to the sub-adviser.
ADVISORY FEES. The Adviser is entitled to receive an annual investment
advisory fee equal to .40% of the Fund's average daily net assets payable
from the assets of the Fund. The Adviser may choose to voluntarily waive or
reimburse a portion of its fee. The Adviser
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reserves the right, in its sole discretion, to terminate these voluntary
waivers at any time.
ADVISER'S BACKGROUND. The Adviser is a wholly-owned subsidiary of Compass
Bancshares, Inc. ("Bancshares"), a bank holding company organized under the
laws of Delaware. Through its subsidiaries and affiliates, Bancshares, the
54th largest bank holding company in the United States in terms of total
assets as of June 30, 1997, offers a full range of financial services to
the public including commercial lending, depository services, cash
management, brokerage services, retail banking, credit card services,
investment advisory services and trust services.
As of December 31, 1997, the Adviser offered a broad range of commercial
banking services. The Adviser has served as investment adviser to mutual
funds since February 5, 1990. Through the Compass Asset Management Group,
the Adviser and certain other affiliates of Bancshares provide investment
advisory and management services for the assets of individuals, pension and
profit sharing plans, endowments and foundations. As of December 31, 1997,
the Compass Asset Management Group had approximately $7.7 billion under
administration ($5.08 billion of which was under administration by the
Adviser), of which the Compass Asset Management Group had discretion over
approximately $2.8 billion ($1.8 billion of which was comprised of assets
of accounts over which the Adviser exercised discretion).
As part of its regular banking operations, the Adviser may make loans to
public companies. Thus, it may be possible, from time to time, for the Fund
to hold or acquire the securities of issuers which are also lending clients
of the Adviser. The lending relationship will not be a factor in the
selection of securities.
INVESTMENT SUB-ADVISER. Weiss, Peck & Greer, L.L.C. ("WPG") serves as the
Fund's investment sub-adviser under a sub-advisory agreement (the
"Sub-Advisory Agreement") with the Adviser. Under the Sub-Advisory
Agreement, WPG invests the assets of the Fund on a daily basis, and
continuously administers the investment program of the Fund.
WPG is a limited liability company founded as a limited partnership in
1970, and engages in investment management, venture capital management and
management buyouts. Since its founding, WPG has been active in managing
portfolios of tax exempt securities. As of February 28, 1998, WPG manages
over $15.9 billion in assets, $2.6 billion of which is invested in
tax-exempt money market funds. The
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principal business address of WPG is One New York Plaza, New York, N.Y. 10004.
WPG is entitled to a fee which is paid by the Adviser and which is calculated
daily and paid monthly, at an annual rate of: .075% of the Fund's average daily
net assets up to $150 million; .05% of the next $350 million of the Fund's
average daily net assets, .04% of the next $500 million in average daily net
assets; and .03% of the Fund's average daily net assets over $1 billion.
DISTRIBUTION OF INVESTMENT SERVICE SHARES
SEI Investments Distribution Co. (the "Distributor") is the principal
distributor for Shares of the Fund. It is a wholly-owned subsidiary of SEI
Investments Company ("SEI Investments") and is the principal distributor for a
number of investment companies. In connection with the sale of Investment
Service Shares, the Distributor may, from time to time, offer certain items of
nominal value to any shareholder or investor. The Fund reserves the right to
reject any purchase request.
SHAREHOLDER SERVICE PLAN. Pursuant to the provisions of a shareholder service
plan (the "Plan"), the Fund will pay to the Distributor an amount computed at an
annual rate of .25% of the average daily net asset value of the Fund's
Investment Service Shares.
The Distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers and broker/dealers, including
the Adviser and other affiliates of Bancshares, to provide shareholder and/or
administrative services as agents for their clients or customers who
beneficially own shares of the Fund. Administrative services may include, but
are not limited to, the following functions: providing office space, equipment,
telephone facilities, and various personnel including clerical, supervisory, and
computer as necessary or beneficial to establish and maintain shareholder
accounts and records; processing purchase and redemption transactions and
automatic investments of client account cash balances; answering routine client
inquiries regarding the Fund; assisting clients with changing dividend options,
account designations and addresses; and providing such other services as the
Fund reasonably requests. The schedules of fees and the basis upon which fees
will be paid will be determined, from time to time, by the Distributor.
12
<PAGE>
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. SEI Fund Resources (the "Administrator"), a
wholly-owned subsidiary of SEI Investments, provides the Fund with certain
administrative personnel and services necessary to operate the Fund. Such
services include shareholder servicing and certain legal and accounting
services. For these services, the Administrator is entitled to a fee which is
calculated daily and paid monthly at an annual rate of .20% of the Fund's
average daily net assets payable from the assets of the Fund. The Administrator
may choose to voluntarily waive a portion of its fee. The Administrator reserves
the right, in its sole discretion, to terminate these voluntary waivers at any
time.
TRANSFER AGENT / SERVICING AGENT. State Street Bank and Trust Company (the
"Transfer Agent") and Boston Financial Data Services, Inc. (the "Servicing
Agent") act as transfer agent and servicing agent, respectively, for the Trust,
and are entitled to compensation for such services payable from the assets of
the Fund.
CUSTODIAN. Compass Bank, an Alabama state banking corporation, which is also the
Adviser, is custodian for the securities and cash of the Fund for which it
receives an annual fee of .02% of the Fund's daily net assets payable from the
assets of the Fund and is reimbursed for its out of pocket expenses.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its Shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per Share is determined by adding the interest of the Shares in the value
of all securities and other assets of the Fund, subtracting the interest of the
Shares in the liabilities of the Fund and those attributable to Shares, and
dividing the remainder by the total number of Shares outstanding. The Fund, of
course, cannot guarantee that its net asset value will always remain at $1.00
per Share.
The net asset value is determined at 12:00 noon (Central time) and as of the
regularly-scheduled close of normal trading on the New York Stock Exchange
("NYSE"), normally 3:00 p.m., (Central time), on days on which both the NYSE and
the Federal Reserve wire system are open for business (a "Business Day").
13
<PAGE>
INVESTING IN INVESTMENT SERVICE SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Investment Service Shares are available through the Asset Management Group of
Compass Bank, or through other affiliates of Bancshares or divisions of
affiliates of Bancshares providing fiduciary, trust, private banking, agency,
custody and similar services. Investment Service Shares also may be purchased
through divisions and affiliates of Compass Bank and other affiliates of
Bancshares providing brokerage and investment services, including Compass
Brokerage, Inc., or through the Transfer Agent. Investors may purchase
Investment Service Shares of the Fund on each Business Day. The minimum initial
investment is $1,000, except that the minimum initial investment is $25 in the
case of directors, officers and employees of Bancshares and its affiliates (and
their spouses and children under 21 years of age) participating in the
Systematic Investment Program discussed below. Subsequent investments must be in
amounts of at least $100 ($25 in the case of directors, officers and employees
of Bancshares and its affiliates (or their spouses or children under 21 years of
age) participating in the Systematic Investment Program discussed below). The
Trust reserves the right to reject any purchase request.
Compass Bank, Compass Brokerage Inc. and other affiliates of Bancshares and
divisions of any affiliate of Bancshares through which Investment Service Shares
are available sometimes are referred to below as "Compass."
To purchase Shares, customers of the Compass Asset Management Group or of the
trust division of a Bancshares banking affiliate or of a Bancshares trust
company affiliate (hereinafter sometimes referred to as "Compass Asset
Management") should contact the Asset Management Group or such trust division or
trust company by telephoning Compass Bank.
Other customers may contact a Compass Brokerage, Inc. personal investment
officer or other authorized registered representative or the Transfer Agent by
telephoning 1-800-992-2085. Payment may be made either by check or wire transfer
of federal funds or by debiting a customer's bank DDA.
To purchase by check, the check must be included with the order and made payable
to "The Expedition Tax-Free Money Market Fund--Investment Service Shares."
Purchase orders received after the Fund's net asset value has been determined
will be priced at the Fund's next determined net asset value. Orders are
considered received after payment by check is converted
14
<PAGE>
into federal funds. Third party checks, credit cards, credit card checks and
cash will not be accepted. When purchases are made by check, redemptions will
not be allowed until the investment being redeemed has been in the account 15
business days.
When payment is made through wire transfer of federal funds, the order is
considered received immediately upon receipt of the wire. Payment by wire must
be received before 1:00 p.m. (Central time). Prior to purchasing by wire,
customers (other than Compass Asset Management customers) should call a Compass
Brokerage, Inc. personal investment officer or other authorized registered
representative or the Transfer Agent prior to 11:00 a.m. (Central time). Federal
funds should be wired as follows: State Street Bank & Trust Co. ABA #011000028
for credit to DDA #9905-303-5, Further credit to: The Expedition Tax-Free Money
Market Fund--Investment Service Shares; Re: (Shareholder name and account
number). Shares cannot be purchased by Federal Reserve wire on days when the
NYSE or the Federal Reserve is closed.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund.
SHAREHOLDER ACCOUNTS
Share certificates are not issued. Investment Service Shares sold to a Compass
Asset Management division or affiliate acting in a fiduciary, advisory,
custodial, agency, or similar capacity on behalf of customers may be held of
record by such Compass Asset Management division or affiliate. Beneficial
ownership of the Investment Service Shares are recorded by the Compass Asset
Management division or affiliate and reflected in the account statements
provided by such division or affiliate to customers, and reports of purchases
and redemptions of Shares by Compass Asset Management divisions or affiliates on
behalf of customers will be provided periodically by such division or affiliate
to such customers.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional Shares unless cash payments are
requested by shareholders in writing to the Transfer Agent or Compass as
appropriate. Share purchase orders received by the Fund before 11:00 a.m
(Central time) earn dividends that day.
15
<PAGE>
CAPITAL GAINS
Net capital gains, realized by the Fund if any, could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If, for some
extraordinary reason, the Fund realizes net long-term capital gains, it will
distribute them at least once every twelve months and will be automatically
reinvested in additional Shares unless cash payments are requested in writing to
the Transfer Agent or Compass as appropriate.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment of
Investment Service Shares on a regular basis in a minimum amount of $100 ($25
for directors, officers and employees of Bancshares or its affiliates (and their
spouses and children under 21 years of age) participating in the Systematic
Investment Program). Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account and invested in Fund shares
at the net asset value next determined after an order is received. A shareholder
may apply for participation in this program by calling Compass Brokerage, Inc.
or the Transfer Agent at 1-800-992-2085.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders may exchange Investment Service Shares of the Fund for Investment
Service Shares of the Expedition Money Market Fund or for Investment Shares in
the Expedition Equity Fund or the Expedition Bond Fund. Shares of Funds with a
sales charge may be exchanged at net asset value for shares of other Funds with
an equal sales charge or no sales charge. Shares of Funds with no sales charge
acquired by direct purchase or reinvestment of dividends on such shares may be
exchanged for shares of Funds with a sales charge at net asset value, plus the
applicable sales charge imposed by the Fund shares being purchased. Neither the
Trust nor any of the Funds imposes any additional fees on exchanges.
When an exchange is made from a Fund with a sales charge to a Fund with no sales
charge, the shares are exchanged and additional shares which have been purchased
by reinvesting dividends on such shares retain the character of the exchanged
shares for purposes of exercising further exchange privileges; thus, an exchange
of such shares for shares of a fund with a sales charge would be at net asset
value.
16
<PAGE>
Compass Asset Management customers wishing to exercise exchange privileges
should contact their Compass Asset Management division or affiliate. Other
shareholders should contact Compass Brokerage, Inc. or other authorized
registered representative or the Transfer Agent as described below.
Shareholders who exercise this privilege must exchange shares having a net asset
value of at least $1,000 ($25 for directors, officers and employees of
Bancshares or its affiliates (and their spouses and children under 21 years of
age) participating in the Systematic Investment Program). Prior to any exchange,
the shareholder must receive a copy of the current prospectus of the
participating Fund into which an exchange is being made.
Upon receipt by Compass Brokerage, Inc. or the Transfer Agent of proper
instructions and all necessary supporting documents, shares submitted for
exchange will be redeemed at the next-determined net asset value. If the
exchanging shareholder does not have an account in the participating fund whose
shares are being acquired, a new account will be established with the same
registration, dividend and capital gain options as the account from which shares
are exchanged, unless otherwise specified by the shareholder. In the case where
the new account registration is not identical to that of the existing account, a
signature guarantee is required. (See "Redeeming Shares-- By Mail.") Exercise of
this privilege is treated as a redemption and new purchase for federal income
tax purposes and, depending on the circumstances, a short or long-term capital
gain or loss may be realized. The Trust reserves the right to modify or
terminate the exchange privilege at any time. Shareholders would be notified
prior to any modification or termination. Shareholders may obtain further
information on the exchange privilege by calling Compass Brokerage, Inc. or the
Transfer Agent at 1-800-992-2085. Shareholders who exchange into Shares of the
Fund will not receive a dividend from the Fund on the date of the exchange.
EXCHANGE BY TELEPHONE. Shareholders may provide instructions for exchanges
between participating funds by calling their Compass representative or the
Transfer Agent at 1-800-992-2085. In addition, investors may exchange Shares by
calling their Compass Brokerage, Inc. personal investment officer or authorized
registered representative directly.
An authorization form permitting the Trust to accept telephone exchange requests
must first be completed. It is recommended that investors request this privilege
at the time of their initial application. If not completed at the time of
initial application, authorization forms and information on this service can be
obtained through Compass Brokerage, Inc. or the Transfer Agent.
17
<PAGE>
Shares may be exchanged by telephone only between fund accounts having identical
shareholder registrations. Exchange instructions given by telephone may be
electronically recorded. If reasonable procedures are not followed by the Trust,
it may be liable for losses due to unauthorized or fraudulent telephone
instructions.
Telephone exchange instructions must be received before 1:00 p.m. (Central time)
for Shares to be exchanged the same day.
WRITTEN EXCHANGE. A shareholder wishing to make an exchange by written request
may do so by sending it to: The Expedition Tax-Free Money Market
Fund--Investment Service Shares, P.O. Box 8010, Boston, Massachusetts
02266-8010.
REDEEMING INVESTMENT SERVICE SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after
Compass or the Transfer Agent receives the redemption request. A redemption
request received after the Fund's net asset value has been determined will be
priced at the next determined net asset value. Redemptions will be made on each
Business Day. Telephone or written requests for redemptions must be received in
proper form and can be made through Compass or the Transfer Agent.
Compass Asset Management customers wishing to redeem should contact their
Compass Asset Management division or affiliate. Other Shareholders should
contact Compass Brokerage, Inc. or another authorized registered representative
or the Transfer Agent as described below.
BY TELEPHONE. Shareholders may redeem Shares of the Fund by telephoning Compass
Brokerage, Inc. or the Transfer Agent. An authorization form permitting the Fund
to accept telephone redemption requests must first be completed. Shareholders
may call toll-free 1-800-992-2085. Redemption requests through Compass
Brokerage, Inc. or the Transfer Agent must be received before 11:30 a.m.
(Central time). It is the responsibility of Compass Brokerage, Inc. or the
Transfer Agent to transmit orders to the Fund by 11:30 a.m. (Central time). If
at any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
Redemption requests must be received by and transmitted to Compass Brokerage,
Inc. or the Transfer Agent before 11:30 a.m. (Central time) in order for the
proceeds to be wired that same day. Compass Brokerage, Inc.
18
<PAGE>
is responsible for promptly submitting redemption requests and providing proper
written redemption instructions to the Transfer Agent.
For calls received by Compass Brokerage, Inc. or the Transfer Agent before 11:30
a.m. (Central time) proceeds will normally be wired the same day. For calls
received after 11:30 a.m. (Central time) proceeds will normally be wired the
following business day. In no event will proceeds be wired more than seven days
after a proper request for redemption has been received.
Redemption requests received before 11:30 a.m. (Central time) will normally be
paid the same day but will not be entitled to that day's dividend.
None of Compass, the Transfer Agent nor the Trust will be responsible for any
loss, liability, cost or expense for acting upon wire or telephone instructions
that it reasonably believes to be genuine. The Trust, Compass Brokerage, Inc.
and the Transfer Agent will each employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, including requiring a form
of personal identification prior to acting upon instructions received by
telephone and recording telephone instructions. Such procedures may include
taping of telephone conversations.
If market conditions are extraordinarily active or other extraordinary
circumstance exist, and you experience difficulties placing redemption orders by
telephone, you may consider placing your order by mail.
BY MAIL. Shareholders may redeem Shares of the Fund by sending a written request
to the Fund through Compass Brokerage, Inc. or the Transfer Agent. The written
request should include the shareholder's name, the Fund name, the class name,
the account number, and the Share or dollar amount requested. Shareholders
redeeming through the Transfer Agent should mail written requests to: The
Expedition Tax-Free Money Market Fund--Investment Service Shares, P.O. Box 8010,
Boston, Massachusetts 02266-8010.
SIGNATURES. Shareholders requesting a redemption of any amount to be sent to an
address other than that on record with the Fund or a redemption payable other
than to the shareholder of record must have their signatures guaranteed by:
o a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund ("BIF"), which is administered by the FDIC;
o a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
19
<PAGE>
o a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF") which is administered by the
FDIC; or
o any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and the Transfer Agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. Redemptions of $40,000 or greater for a Fund must
be in writing and a signature guarantee must accompany the written request. The
Trust and the Transfer Agent reserve the right to amend these standards at any
time without notice.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders of Investment Service Shares who desire to receive monthly or
quarterly payments of a predetermined amount may take advantage of the
Systematic Withdrawal Program. Under this program, Investment Service Shares are
redeemed to provide for periodic withdrawal payments in an amount directed by
the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions, and the fluctuation of
the net asset value of shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investments in the Fund. For
this reason, payments under this program should not be considered as yield or
income on the shareholder's investment in the Fund. To be eligible to
participate in this program, a shareholder must have invested at least $10,000
in the Fund.
A shareholder may apply for participation in this program through Compass
Brokerage, Inc. or the Transfer Agent.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any Investment Service Shares account and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,000 ($25 in the case of directors, officers and employees of Bancshares and
its affiliates (and their spouses and children
20
<PAGE>
under 21 years of age) participating in the Systematic Investment Program
discussed above). Before Investment Service Shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights, except that in matters affecting only a
particular portfolio or class, only shares of that portfolio or class are
entitled to vote.
As used in this Prospectus, a "vote of a majority of the outstanding shares" of
a Fund means, with respect to the approval of an investment advisory agreement,
sub-advisory agreement, or a change in a fundamental investment limitation, the
lesser of (a) more than 50% of the outstanding shares of a Fund, or (b) at least
67% of the shares of a Fund present at a meeting at which the holders of more
than 50% of the outstanding shares of such Fund are represented in person or by
proxy.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust or the Fund's operation and for the election of Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and from issuing, underwriting, selling or distributing securities in general.
Such laws and regulations do
21
<PAGE>
not prohibit such a holding company or affiliate from acting as investment
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of their
customers.
The Adviser, Bancshares and certain of Bancshares' affiliates are subject to
such banking laws and regulations. They believe, based on the advice of their
counsel, that they may perform those services for the Fund contemplated by any
existing agreement entered into with the Trust without violating those laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
these entities from continuing to perform all or a part of the above services.
If this happens, the Trustees would consider alternative means of continuing
available investment services. It is not expected that shareholders would suffer
any adverse financial consequences as a result of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund intends to pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
If, at the close of each quarter of its taxable year, at least 50% of the value
of the Fund's assets consist of obligations the interest on which is excludable
from gross income for federal tax purposes, the Fund may pay "exempt-interest
dividends" to its shareholders. Those dividends constitute the portion of the
aggregate dividends as designated by the Fund equal to the excess of the
excludable interest over certain amounts disallowed as deductions.
Exempt-interest dividends are excludable from a shareholder's gross income for
regular federal income tax purposes, but may have certain collateral federal
income tax consequences, including alternative minimum tax. See the Statement of
Additional Information.
22
<PAGE>
Current federal law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Fund to purchase sufficient amounts of tax-exempt securities to
satisfy the Code's requirements for the payment of "exempt-interest dividends."
Dividends declared by the Fund in October, November or December of any year and
payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of the year and paid by the Fund at any time during the following
January.
With respect to investments in U.S. Treasury STRIPS, which are sold with
original issue discount and do not make periodic cash interest payments, the
Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
all of its net investment income to its shareholders, the Fund may have to sell
portfolio securities to distribute such imputed income, which may occur at a
time when the Adviser would not have chosen to sell such securities and which
may result in a taxable gain or loss.
Investment income received directly by the Fund on direct U.S. Government
obligations is exempt from income tax at the state level when received directly
and may be exempt, depending on the state, when received by a shareholder as
income dividends provided certain state specific conditions are satisfied.
Interest received on repurchase agreements collateralized by direct U.S.
Government obligations normally is not exempt from state taxation. The Fund will
inform shareholders annually of the percentage of income and distributions
derived from direct U.S. Government obligations. Shareholders should consult
their tax advisers to determine whether any portion of the income dividends
received from the Fund is considered tax exempt in their particular states.
A sale, exchange or redemption of a Fund's shares generally is a taxable
transaction to the shareholder.
STATE AND LOCAL TAXES. Shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
23
<PAGE>
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its yield, effective yield, tax-
equivalent yield and total return.
The yield of Shares represents the annualized rate of income earned on an
investment in Shares over a seven-day period. It is the annualized dividends
earned during the period on the investment, shown as a percentage of the
investment. The effective yield is calculated similarly to the yield, but, when
annualized, the income earned by an investment in Shares is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The Fund may also advertise a "tax-equivalent yield," which is calculated by
determining the rate of return that would have to be achieved on a fully taxable
investment to produce the after-tax equivalent of the Fund's yield, assuming
certain tax brackets for the shareholder.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income distributions. It
is calculated by dividing that change by the initial investment and is expressed
as a percentage.
Yield, effective yield, tax-equivalent yield and total return will be calculated
separately for Institutional Shares and Investment Service Shares. Because
Investment Service Shares have a shareholder servicing plan, the yield,
effective yield, tax-equivalent yield and total return for Institutional Shares,
for the same period, ordinarily will exceed that of Investment Service Shares.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Institutional Shares.
Institutional Shares are sold at net asset value.
The stated advisory fee is the same for both classes of shares.
To obtain more information and a prospectus for Institutional Shares, investors
may call 1-800-992-2085.
24
<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
The Expedition Tax-Free One Freedom Valley Drive
Money Market Fund Oaks, Pennsylvania 19456
- --------------------------------------------------------------------------------
Distributor
SEI Investments Distribution Co. One Freedom Valley Drive
Oaks, Pennsylvania 19456
- --------------------------------------------------------------------------------
Investment Adviser and Custodian
Compass Bank 15 S. 20th Street
Birmingham, Alabama 35233
- --------------------------------------------------------------------------------
Investment Sub-Adviser
Weiss, Peck & Greer, L.L.C. One New York Plaza
New York, New York 10004
- --------------------------------------------------------------------------------
Transfer Agent and Servicing Agent
Transfer Agent Servicing Agent
State Street Bank and Trust Boston Financial Data Services, Inc.
Company Two Heritage Drive
225 Franklin Street Quincy, Massachusetts 02171
Boston, Massachusetts 02110
- --------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 117 Campus Drive
Princeton, NJ 08540
- --------------------------------------------------------------------------------
Counsel
Morgan, Lewis & Bockius LLP 1800 M Street, N.W.
Washington, D.C. 20036
- --------------------------------------------------------------------------------
25
<PAGE>
THE EXPEDITION TAX-FREE MONEY
MARKET FUND
(A PORTFOLIO OF THE EXPEDITION FUNDS)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares ("Shares") offered by this prospectus represent
interests in the portfolio known as The Expedition Tax-Free Money Market Fund
(the "Fund"). The Fund is one of a series of investment portfolios in The
Expedition Funds (the "Trust"), an open-end, management investment company (a
mutual fund).
THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
The investment objective of the Fund is to provide current income, exempt from
Federal income taxes, consistent with stability of principal. The Fund pursues
this investment objective by investing in a variety of high-quality money market
instruments maturing in thirteen months or less, the interest on which is exempt
from Federal income tax.
Shareholders can invest in or redeem Shares at any time without charge or
penalty imposed by the Fund.
Compass Bank, an Alabama state banking corporation, professionally manages the
Fund's portfolio.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF COMPASS
BANK, COMPASS BANCSHARES, INC. OR ANY OF ITS AFFILIATES, OR OF ANY BANK, ARE NOT
ENDORSED OR GUARANTEED BY COMPASS BANK, COMPASS BANCSHARES, INC. OR ANY OF ITS
AFFILIATES, OR BY ANY BANK, AND ARE NOT OBLIGATIONS OF, GUARANTEED BY OR INSURED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
Compass Bank, an Alabama banking corporation, serves as investment adviser and
custodian of the Fund, and Compass Bank and certain of its affiliates provide or
may provide certain other services to the Fund, for which services Compass Bank
and/or its affiliates will be compensated. SEI Investments Distribution Co.,
which is not affiliated with Compass Bank, is the sponsor and serves as
distributor of the Fund.
This prospectus contains the information you should read and know before you
invest in Institutional Shares of the Fund. Keep this prospectus for future
reference.
The Trust has also filed a Statement of Additional Information dated April 2,
1998 with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information free of charge by calling 1-800-992-2085. To obtain other
information or make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated April 2, 1998
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- --------------------------------------------------------------------------------
GENERAL INFORMATION 3
- --------------------------------------------------------------------------------
INVESTMENT INFORMATION 3
- --------------------------------------------------------------------------------
Investment Objective 3
Investment Policies 4
Investment Limitations 10
FUND INFORMATION 11
- --------------------------------------------------------------------------------
Management of the Fund 11
Distribution of Institutional Shares 12
Administration of the Fund 12
NET ASSET VALUE 13
- --------------------------------------------------------------------------------
INVESTING IN INSTITUTIONAL SHARES 13
- --------------------------------------------------------------------------------
Share Purchases 13
What Shares Cost 14
Shareholder Accounts 14
Dividends 15
Capital Gains 15
EXCHANGE PRIVILEGE 15
- --------------------------------------------------------------------------------
REDEEMING INSTITUTIONAL SHARES 16
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION 18
- --------------------------------------------------------------------------------
Voting Rights 18
EFFECT OF BANKING LAWS 19
- --------------------------------------------------------------------------------
TAX INFORMATION 19
Federal Income Tax 19
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION 21
- --------------------------------------------------------------------------------
OTHER CLASSES OF SHARES 21
- --------------------------------------------------------------------------------
ADDRESSES 22
- --------------------------------------------------------------------------------
I
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SUMMARY OF FUND EXPENSES
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INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)....................... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)....................... None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, as
applicable)............................................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable)............................................... None*
Exchange Fee................................................ None
* Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)........................... 0.07%
Total Other Expenses (2).................................... 0.36%
Total Operating Expenses (3)......................... 0.43%
(1) The management fee has been reduced to reflect a voluntary waiver. Absent
this waiver, the maximum management fee is .40%. The Adviser has
voluntarily agreed to waive all or a portion of its fee to limit Total
Operating Expenses to not more than .43%. The Adviser reserves the right,
in its sole discretion, to terminate these voluntary fee waivers at any
time.
(2) The Administrator has agreed to waive, on a voluntary basis, a portion of
its fees. The Administrator reserves the right to terminate its waiver at
any time in its sole discretion. Absent such waiver, Total Other Expenses
for the Fund are estimated to be .41% for the current fiscal year.
(3) Absent the voluntary waivers and reimbursements described above, Total
Operating Expenses for the Fund are estimated to be .81% for the current
fiscal year.
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THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE INSTITUTIONAL SHARES OF THE
FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF
THE VARIOUS COSTS AND EXPENSES, SEE "FUND INFORMATION" AND "INVESTING IN THE
INSTITUTIONAL SHARES."
EXAMPLE 1 year 3 years
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You would pay the following expenses on a $1,000
investment assuming (1) a 5% annual return and (2)
redemption at the end of each time period.......... $4 $14
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. THE FUND IS NEW AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. BECAUSE THE FUND IS NEW, THE FUND HAS NOT PROJECTED EXPENSES BEYOND
THE THREE-YEAR PERIOD SHOWN.
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GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated August 7, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares of beneficial interest in any one
portfolio may be offered in separate classes. As of the date of this prospectus,
the Board of Trustees (the "Trustees") has established two classes of shares of
the Fund, Investment Service Shares and Institutional Shares. This prospectus
relates only to Institutional Shares of the Expedition Tax-Free Money Market
Fund. The Trust offers three other portfolios: The Expedition Money Market Fund,
The Expedition Equity Fund and The Expedition Bond Fund. Information regarding
the Investment Service Shares of the Fund and the Trust's other portfolios is
contained in separate prospectuses which may be obtained by calling
1-800-992-2085.
Institutional Shares of the Fund are primarily designed for individuals and
entities establishing certain fiduciary, trust, agency, private banking, custody
or similar relationships with the Asset Management Group of Compass Bank or a
trust division of a Compass Bancshares, Inc. banking affiliate or trust company
affiliate of Compass Bancshares, Inc. who desire a convenient means of
accumulating an interest in a professionally managed portfolio that seeks
current income exempt from Federal income taxes and that is consisting primarily
of tax-free money market instruments maturing in thirteen months or less.
The Fund attempts to stabilize the value of a Share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income, exempt from
Federal income taxes, consistent with stability of principal. The investment
objective cannot be changed without approval of shareholders. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by complying with the diversification and other requirements of Rule 2a-7
under the Investment Company Act of 1940 (the "1940 Act") which regulates money
market mutual funds and by following the investment policies described in this
prospectus.
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INVESTMENT POLICIES
The Fund pursues its investment objective by investing primarily in a portfolio
of money market instruments maturing in thirteen months or less. The average
maturity of money market instruments in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies set forth below may be changed by the Trustees without the
approval of shareholders. Shareholders will be notified before any material
change in these policies becomes effective. Since the Fund often purchases
securities by credit enhancements from banks and other financial institutions,
changes in the credit quality of these institutions could cause losses to the
Fund and affect its share price.
ACCEPTABLE INVESTMENTS. Under normal market conditions, the Fund will invest at
least 80% of its net assets in eligible securities issued by or on behalf of the
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities
(collectively, "Municipal Securities"), the interest on which is exempt from
Federal income tax. The Fund will invest at least 80% of its assets in Municipal
Securities the interest on which is not treated as a preference item for
purposes of the federal alternative minimum tax. This investment policy is a
fundamental policy of the Fund. The Fund will purchase municipal bonds,
municipal notes, municipal lease obligations, tax-exempt money market mutual
funds, and tax-exempt commercial paper rated in the two highest short-term
rating categories by a nationally recognized statistical rating organization (an
"NRSRO") in accordance with Securities and Exchange Commission ("SEC")
regulations at the time of investment or, if not rated, determined by the
Adviser to be of comparable quality.
The Adviser will not invest 25% or more of the Fund's assets in Municipal
Securities (a) whose issuers are located in the same state or (b) the interest
on which is derived from revenues of similar type projects. This restriction
does not apply to Municipal Securities in any of the following categories:
public housing authorities; general obligations of states and localities; state
and local housing finance authorities; or municipal utilities systems.
The Fund may purchase municipal obligations with demand features, including
variable and floating rate obligations. In addition, the Fund may invest in
commitments to purchase securities on a "when issued" basis and purchase
securities subject to a standby commitment.
The Fund may purchase securities on a when-issued or delayed basis only when
settlement takes place within 15 days of the purchase of such securities.
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The Fund may invest up to 20% of the Fund's net assets in the aggregate in
taxable money market instruments, taxable money market mutual funds, and
securities subject to the alternative minimum tax. Taxable money market
instruments in which the Fund may invest consist of (i) Municipal Securities;
(ii) bankers' acceptances, certificates of deposits, notes and time deposits of
highly-rated U.S. banks and U.S. branches of foreign banks; (iii) U.S. Treasury
obligations and obligations issued or guaranteed by the agencies and
instrumentalities of the U.S. Government, including STRIPS; (iv) high quality
commercial paper issued by U.S. and foreign corporations; (v) debt obligations
with a maturity of one year or less issued by corporations with outstanding
high-quality commercial paper; (vi) receipts (including TRs, TIGRs and CATs as
defined below) and (vii) repurchase agreements involving any of the foregoing
obligations entered into with highly-rated banks and broker-dealers.
The Fund may engage in securities lending and may also borrow money in amounts
up to 33 1/3% of its net assets.
With respect to investments in U.S. Treasury STRIPS, which are sold with
original issue discount and do not make periodic cash interest payments, the
Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
all of its net investment income to its shareholders, the Fund may have to sell
portfolio securities to distribute such imputed income, which may occur at a
time when the Adviser would not have chosen to sell such securities and which
may result in a taxable gain or loss.
Investment income received directly by the Fund on direct U.S. Government
obligations is exempt from income tax at the state level when received directly
and may be exempt, depending on the state, when received by a shareholder as
income dividends provided certain state specific conditions are satisfied.
Interest received on repurchase agreements collateralized by direct U.S.
Government obligations normally is not exempt from state taxation. The Fund will
inform shareholders annually of the percentage of income and distributions
derived from direct U.S. Government obligations. Shareholders should consult
their tax advisers to determine whether any portion of the income dividends
received from the Fund is considered tax exempt in their particular states.
A sale, exchange or redemption of a Fund's shares generally is a taxable
transaction to the shareholder.
BANKERS' ACCEPTANCES. Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods and to furnish dollar
exchange. Maturities are generally six months or less.
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CERTIFICATES OF DEPOSIT. Certificates of deposit are interest bearing
instruments with a specific short-term maturity. They are issued by banks and
savings and loan institutions in exchange for the deposit of funds and normally
can be traded in the secondary market prior to maturity. Certificates of deposit
with penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER. Commercial paper is a term used to describe unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few to 270 days.
FIXED INCOME SECURITIES. Fixed income securities include bonds, notes,
debentures and other interest-bearing securities that represent indebtedness.
The market value of the fixed income investments in which the Fund invests will
change in response to interest rate changes and other factors. During periods of
falling interest rates, the values of outstanding fixed income securities
generally rise. Conversely, during periods of rising interest rates, the values
of such securities generally decline. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates.
Changes by recognized agencies in the rating of any fixed income security and in
the ability of an issuer to make payments of interest and principal also affect
the value of these investments. Changes in the value of these securities will
not necessarily affect cash income derived from these securities but will affect
the Fund's net asset value.
INVESTMENT COMPANIES. As a shareholder in an investment company, the Fund would
bear its ratable share of that investment company's expenses, including its
advisory and administration fees.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract, or a
participation certificate in any of the above.
Municipal lease obligations typically are not backed by the municipality's
credit, and their interest may become taxable if the lease is assigned. If funds
are not appropriated for the following year's lease payments, a lease may
terminate, with a possibility of default on the lease obligation and significant
loss to the Fund. Under guidelines established by the Board of Trustees, the
credit quality of municipal leases will be determined on an ongoing basis,
including an assessment of the likelihood that a lease will be canceled.
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MUNICIPAL SECURITIES. Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair, or improvement of privately operated
facilities. General obligations bonds are backed by the taxing power of the
issuing municipality. Revenue bonds are backed by the revenues of a project or
facility; tolls from a toll bridge for example. Certificates of participation
represent an interest in an underlying obligation or commitment such as an
obligation issued in connection with a leasing arrangement. The payment of
principal and interest on private activity and industrial development bonds
generally is dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment.
Municipal securities include general obligation notes, tax anticipation notes,
revenue anticipation notes, bond anticipation notes, certificates of
indebtedness, demand notes and construction loan notes. Municipal bonds include
general obligation bonds, revenue or special obligation bonds, private activity
and industrial development bonds.
PARTICIPATION INTERESTS. Participation interests are interests in Municipal
Securities from financial institutions such as commercial and investment banks,
savings and loan associations and insurance companies. These interests may take
the form of participations, beneficial interests in a trust, partnership
interests or any other form of indirect ownership that allows a Fund to treat
the income from the investment as exempt from federal income tax. The Fund
invests in these participation interests in order to obtain credit enhancement
or demand features that would not be available through direct ownership of the
underlying Municipal Securities.
RECEIPTS. TRs, TIGRs and CATS--interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury obligations into
a special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts are sold as
zero coupon securities which means that they are sold at a substantial discount
and redeemed at face value at their maturity date without interim cash payments
of interest or principal. The amount of this discount is accrued over the life
of the security and constitutes the income earned on the security for both
accounting and tax purposes. Because of
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these features, receipts may be subject to greater price volatility than
interest paying U.S. Treasury Obligations. Receipts include Treasury Receipts
("TRs"), Treasury Investment Growth Receipts ("TIGRs"), and Certificates of
Accrual on Treasury Securities ("CATS").
REPURCHASE AGREEMENTS. Repurchase agreements are agreements by which the Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. Repurchase
agreements must be fully collateralized at all times. The Fund bears a risk of
loss in the event the other party defaults on its obligations and the Fund is
delayed or prevented from its right to dispose of the collateral. The Fund will
enter into repurchase agreements only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
established guidelines. Repurchase agreements are considered loans under the
1940 Act.
SECURITIES LENDING. In order to generate additional income, the Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash or securities of the U.S.
Government or its agencies equal to at least 100% of the market value of the
securities lent. The Fund continues to receive interest on the securities lent
while simultaneously earning a portion of the return generated from the
collateral (or a portion of the return on the investment of cash collateral).
Collateral is marked to market daily. There may be risks of delay in recovery of
the securities or even loss of rights in the collateral should the borrower of
the securities fail financially or become insolvent.
STANDBY COMMITMENTS. Some securities dealers are willing to sell Municipal
Securities to the Fund accompanied by their commitments to repurchase the
Municipal Securities prior to maturity, at the Fund's option, for the amortized
cost of the Municipal Securities at the time of repurchase. These arrangements
are not used to protect against changes in the market value of Municipal
Securities. They permit the Fund, however, to remain fully invested and still
provide liquidity to satisfy redemptions. The cost of Municipal Securities
accompanied by these "standby" commitments could be greater than the cost of
Municipal Securities without such commitments. Standby commitments are not
marketable or otherwise assignable and have value only to the Fund. The default
or bankruptcy of a securities dealer giving such a commitment would not affect
the quality of the Municipal Securities purchased. However, without a standby
commitment, these securities could be more difficult to sell. The Fund enters
into standby commitments only with those dealers whose credit the Adviser
believes to be of high quality.
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TIME DEPOSITS. Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time deposits may be considered to be illiquid
securities.
U.S. GOVERNMENT AGENCY OBLIGATIONS. Obligations issued or guaranteed by agencies
of the United States Government, including, among others, the Federal Farm
Credit Bank, the Federal Housing Administration and the Small Business
Administration, and obligations issued or guaranteed by instrumentalities of the
United States Government, including, among others, the Federal Home Loan
Mortgage Corporation, the Federal Land Banks and the United States Postal
Service. Some of these securities are supported by the full faith and credit of
the United States Treasury, others are supported by the right of the issuer to
borrow from the Treasury, while still others are supported only by the credit of
the instrumentality. Guarantees of principal by agencies or instrumentalities of
the United States Government may be a guarantee of payment at the maturity of
the obligation so that in the event of a default prior to maturity there might
not be a market and thus no means of realizing on the obligation prior to
maturity. Guarantees as to the timely payment of principal and interest do not
extend to the value or yield of these securities nor to the value of the Fund's
shares.
U.S. GOVERNMENT SECURITIES. Any guaranty by the U.S. Government of the
securities in which the Fund invests guarantees only the payment of principal
and interest on the guaranteed security and does not guarantee the yield or
value of that security or the yield or value of shares of the Fund.
U.S. TREASURY OBLIGATIONS. U.S. Treasury obligations consist of bills, notes,
and bonds issued by the U.S. Treasury, and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS"). The Fund does not expect to trade STRIPS
actively.
VARIABLE AND FLOATING RATE INSTRUMENTS. Certain of the obligations purchased by
the Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. Such instruments bear interest at rates which are not
fixed, but which vary with changes in specified market rates or indices. The
interest rates on these securities may be reset daily, weekly, quarterly or some
other reset period, and may have a floor or ceiling on interest rate changes.
There is a risk that the current interest rate on such obligations may not
accurately reflect existing market interest rates.
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A demand instrument with a demand notice exceeding seven days may be considered
illiquid if there is no secondary market for such securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
However, the Fund may purchase securities on a when-issued or delayed basis only
when settlement takes place within 15 days of the purchase of such securities.
To the extent required by the 1940 Act, the Fund will maintain with the
custodian a separate account with liquid securities or cash in an amount at
least equal to these commitments. The interest rate realized on these securities
is fixed as of the purchase date and no interest accrues to the Fund before
settlement. These securities are subject to market fluctuation due to changes in
market interest rates and it is possible that the market value at the time of
settlement could be higher or lower than the purchase price if the general level
of interest rates has changed. Although the Fund generally purchases securities
on a when-issued or forward commitment basis with the intention of actually
acquiring securities for its portfolio, the Fund may dispose of a when-issued
security or forward commitment prior to settlement if it deems appropriate.
INVESTMENT LIMITATIONS
The Fund will not:
o borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge
up to 15% of the value of its total assets to secure such borrowings; or
o with respect to 75% of the value of its total assets, invest more than
5% of the value of its total assets in the securities of any one issuer,
other than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities. However, to the
extent that the diversification requirements imposed by Rule 2a-7 are
more stringent, the Fund will follow the dictates of Rule 2a-7.
The above investment limitations cannot be changed without shareholder approval.
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FUND INFORMATION
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MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Board of Trustees is responsible for managing the
business affairs of the Trust and for exercising all of the powers of the Trust
except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust
and subject to direction by the Trustees, investment decisions for the Fund are
made by Compass Bank, an Alabama state banking corporation that is a Federal
Reserve System member bank (the "Adviser"). The Adviser has delegated these
responsibilities, subject to its supervision, to the sub-adviser.
ADVISORY FEES. The Adviser is entitled to receive an annual investment
advisory fee equal to .40% of the Fund's average daily net assets payable
from the assets of the Fund. The Adviser may choose to voluntarily waive or
reimburse a portion of its fee. The Adviser reserves the right, in its sole
discretion, to terminate these voluntary waivers at any time.
ADVISER'S BACKGROUND. The Adviser is a wholly-owned subsidiary of Compass
Bancshares, Inc. ("Bancshares"), a bank holding company organized under the
laws of Delaware. Through its subsidiaries and affiliates, Bancshares, the
54th largest bank holding company in the United States in terms of total
assets as of June 30, 1997, offers a full range of financial services to
the public including commercial lending, depository services, cash
management, brokerage services, retail banking, credit card services,
investment advisory services and trust services.
As of December 31, 1997, Compass Bank offered a broad range of commercial
banking services. The Adviser has served as investment adviser to mutual
funds since February 5, 1990. Through the Compass Asset Management Group,
the Adviser and certain other affiliates of Bancshares provide investment
advisory and management services for the assets of individuals, pension and
profit sharing plans, endowments and foundations. As of December 31, 1997,
the Compass Asset Management Group had approximately $7.7 billion under
administration ($5.08 billion of which was under administration by the
Adviser), of which the Compass Asset Management Group had discretion over
approximately $2.8 billion ($1.8 billion of which was comprised of assets
of accounts over which the Adviser exercised discretion).
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As part of its regular banking operations, the Adviser may make loans to
public companies. Thus, it may be possible, from time to time, for the Fund
to hold or acquire the securities of issuers which are also lending clients
of the Adviser. The lending relationship will not be a factor in the
selection of securities.
INVESTMENT SUB-ADVISER. Weiss, Peck & Greer, L.L.C. ("WPG") serves as the Fund's
investment sub-adviser under a sub-advisory agreement (the "Sub-Advisory
Agreement") with the Adviser. Under the Sub-Advisory Agreement, WPG invests the
assets of the Fund on a daily basis, and continuously administers the investment
program of the Fund.
WPG is a limited liability company founded as a limited partnership in 1970, and
engages in investment management, venture capital management and management
buyouts. Since its founding, WPG has been active in managing portfolios of tax
exempt securities. As of February 28, 1998, WPG manages over $15.9 billion in
assets, $2.6 billion of which is invested in tax exempt money market funds. The
principal business address of WPG is One New York Plaza, New York, N.Y. 10004.
WPG is entitled to a fee which is paid by the Adviser and which is calculated
daily and paid monthly, at an annual rate of: .075% of the Fund's average daily
net assets up to $150 million; .05% of the next $350 million of the Fund's
average daily net assets, .04% of the next $500 million in average daily net
assets; and .03% of the Fund's average daily net assets over $1 billion.
DISTRIBUTION OF INSTITUTIONAL SHARES
SEI Investments Distribution Co. (the "Distributor") is the principal
distributor for Shares of the Fund. It is a wholly-owned subsidiary of SEI
Investments Company ("SEI Investments") and is the principal distributor for a
number of investment companies. In connection with the sale of Institutional
Shares, the Distributor may, from time to time, offer certain items of nominal
value to any shareholder or investor.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. SEI Fund Resources (the "Administrator") a wholly-owned
subsidiary of SEI Investments provides the Fund with certain administrative
personnel and services necessary to operate the Fund. Such services include
shareholder servicing and certain legal and accounting services. For these
services, the Administrator is entitled to a fee which is calculated daily and
paid monthly at an annual rate of .20% of the Fund's average daily net assets
payable from the assets of the Fund. The Administrator may choose to voluntarily
waive a portion of its fee. The Administrator reserves the right, in its sole
discretion, to terminate these voluntary waivers at any time.
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TRANSFER AGENT/SERVICING AGENT. State Street Bank and Trust Company (the
"Transfer Agent") and Boston Financial Data Services, Inc. (the "Servicing
Agent") act as transfer agent and servicing agent, respectively, for the Trust,
and are entitled to compensation for such services payable from the assets of
the Fund.
CUSTODIAN. Compass Bank, an Alabama state banking corporation, which is also the
Adviser, is custodian for the securities and cash of the Fund for which it
receives an annual fee of .02% of the Fund's daily net assets payable from the
assets of the Fund and is reimbursed for its out of pocket expenses.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of its Shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per Share is determined by adding the interest of the Shares in the value
of all securities and other assets of the Fund, subtracting the interest of the
Shares in the liabilities of the Fund and those attributable to Shares, and
dividing the remainder by the total number of Shares outstanding. The Fund, of
course, cannot guarantee that its net asset value will always remain at $1.00
per Share.
The net asset value is determined at 12:00 noon (Central time) and as of the
regularly-scheduled close of normal trading on the New York Stock Exchange
("NYSE"), normally 3:00 p.m., (Central time), on days on which both the NYSE and
the Federal Reserve wire system are open for business (a "Business Day").
INVESTING IN INSTITUTIONAL SHARES
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SHARE PURCHASES
Shares are available through the Asset Management Group of Compass Bank or
through the trust division of any banking affiliate of Bancshares or trust
company affiliate of Bancshares for qualifying customers establishing fiduciary,
trust, private banking, agency, custody, and similar relationships with Compass
Bank's Asset Management Group or such trust division or trust company affiliate.
Investors may purchase Institutional Shares of the Fund on each Business Day.
The Trust reserves the right to reject any purchase request.
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The Compass Bank Asset Management Group and other affiliates and divisions of
any affiliate of Bancshares through which Institutional Shares are available
sometimes are referred to below as "Compass."
To purchase Shares, a customer may contact the Compass Asset Management Group or
other Compass trust division or trust company affiliate by telephoning Compass
Bank. Payment may be made either by check or wire transfer of federal funds or
by debiting a customer's account at a Bancshares banking affiliate.
To purchase by check, the check must be included with the order and made payable
to "The Expedition Tax-Free Money Market Fund--Institutional Shares." Purchase
orders received after the Fund's net asset value has been determined will be
priced at the next Business Day's net asset value. Orders are considered
received after payment by check is converted into federal funds. Third party
checks, credit cards, credit card checks and cash will not be accepted. When
purchases are made by check, redemptions will not be allowed until the
investment being redeemed has been in the account for 15 business days.
When payment is made through wire transfer of federal funds, the order is
considered received immediately upon receipt of the wire. Payment by wire must
be received before the Fund calculates its net asset value, normally 3:00 p.m.
(Central time), on the same day as the order. Prior to purchasing by wire,
investors should call their Compass representative prior to 1:00 p.m. (Central
time). Federal funds should be wired as follows: State Street Bank & Trust Co.
ABA #011000028 for credit to DDA #9905-303-5, Further credit to: The Expedition
Tax-Free Money Market Fund--Institutional Shares; Re: (Shareholder name and
account number). Shares cannot be purchased by Federal Reserve wire on days when
the NYSE or the Federal Reserve is closed.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund.
SHAREHOLDER ACCOUNTS
Compass maintains a Share account for each shareholder of record. Share
certificates are not issued. Shares sold to Compass acting in a fiduciary,
advisory, custodial, agency, or similar capacity on behalf of customers may be
held of record by Compass. Beneficial ownership of the Shares are recorded by
Compass and reflected in the account statements provided by Compass to
customers, and reports of purchases and redemptions of Shares by Compass in a
fiduciary, advisory, custodial, agency or similar capacity
14
<PAGE>
on behalf of customers are provided periodically by Compass to such customers.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional Shares unless cash payments are
requested by shareholders in writing to the Trust or Compass, as appropriate.
Share purchase orders received by the Fund before 11:00 a.m. (Central time) earn
dividends that day.
CAPITAL GAINS
Net capital gains realized by the Fund, if any, could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If, for some
extraordinary reason, the Fund realizes net long-term capital gains, it will
distribute them at least once every twelve months, and will be automatically
reinvested in additional Shares unless cash payments are requested in writing to
the Transfer Agent or Compass, as appropriate.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders may exchange Institutional Shares of the Fund for Institutional
Shares in The Expedition Money Market Fund, The Expedition Equity Fund and The
Expedition Bond Fund. Neither the Trust nor any of the Funds imposes any
additional fees on exchanges.
Upon receipt by Compass of proper instructions and all necessary supporting
documents, shares submitted for exchange will be redeemed at the next-determined
net asset value. If the exchanging shareholder does not have an account in the
participating fund whose shares are being acquired, a new account will be
established with the same registration, dividend and capital gain options as the
account from which shares are exchanged, unless otherwise specified by the
shareholder. In the case where the new account registration is not identical to
that of the existing account, a signature guarantee is required. (See "Redeeming
Shares--By Mail.") Exercise of this privilege is treated as a redemption and new
purchase for federal income tax purposes and, depending on the circumstances, a
short or long-term capital gain or loss may be realized. The Trust reserves the
right to modify or terminate the exchange privilege at any time. Shareholders
would be notified prior to any modification or termination. Shareholders may
obtain further information on the exchange privilege by calling Compass.
Shareholders who exchange into Shares of the Fund will not receive a dividend
from the Fund on the date of the exchange. Prior to any exchange,
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<PAGE>
the shareholder must receive a copy of the current prospectus of the
participating Fund into which an exchange is being made.
EXCHANGE BY TELEPHONE. Shareholders may provide instructions for exchanges
between participating funds by calling their Compass representative or the
Transfer Agent at 1-800-992-2085. In addition, investors may exchange Shares by
calling their authorized representative directly.
An authorization form permitting the Trust to accept telephone exchange requests
must first be completed. It is recommended that investors request this privilege
at the time of their initial application. If not completed at the time of
initial application, authorization forms and information on this service can be
obtained through a Compass representative.
Shares may be exchanged by telephone only between fund accounts having identical
shareholder registrations. Exchange instructions given by telephone may be
electronically recorded. If reasonable procedures are not followed by the Trust,
it may be liable for losses due to unauthorized or fraudulent telephone
instructions.
Telephone exchange instructions must be received before 1:00 p.m. (Central time)
for Shares to be exchanged the same day.
WRITTEN EXCHANGE. A shareholder wishing to make an exchange by written request
may do so by sending it to: The Expedition Tax-Free Money Market Fund--
Institutional Shares, P.O. Box 8010, Boston, Massachusetts 02266-8010.
REDEEMING INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after Compass
receives the redemption request. Redemptions will be made on each Business Day.
A redemption request received after the Fund's net asset value has been
determined will be priced at the next determined net asset value. Telephone or
written requests for redemptions must be received in proper form and can be made
through Compass.
BY TELEPHONE. Shareholders may redeem Shares of the Fund by telephoning Compass.
An authorization form permitting the Fund to accept telephone redemption
requests must first be completed. Shareholders may call toll-free
1-800-992-2085. Redemption requests through Compass must be received before
11:30 a.m. (Central time). If at any time, the Fund shall determine it necessary
to terminate or modify this method of redemption, shareholders would be promptly
notified.
Redemption requests must be received by and transmitted to Compass before 11:30
a.m. (Central time) in order for the proceeds to be wired that same day. Compass
is responsible for promptly submitting redemption
16
<PAGE>
requests and providing proper written redemption instructions to the Transfer
Agent.
For calls received by Compass before 11:30 a.m. (Central time) proceeds will
normally be wired the same day to Compass. For calls received after 11:30 a.m.
(Central time) proceeds will normally be wired the following business day. In no
event will proceeds be wired more than seven days after a proper request for
redemption has been received.
Redemption requests received before 11:30 a.m. (Central time) will normally be
paid the same day but will not be entitled to that day's dividend.
None of Compass, the Transfer Agent nor the Trust will be responsible for any
loss, liability, cost or expense for acting upon wire or telephone instructions
that it reasonably believes to be genuine. The Trust, Compass and Transfer Agent
will each employ reasonable procedures to confirm that instructions communicated
by telephone are genuine, including requiring a form of personal identification
prior to acting upon instructions received by telephone and recording telephone
instructions. Such procedures may include taping of telephone conversations.
If market conditions are extraordinarily active or other extraordinary
circumstance exist, and you experience difficulties placing redemption orders by
telephone, you may consider placing your order by mail.
BY MAIL. Shareholders may redeem Shares of the Fund by sending a written request
to the Fund through Compass. The written request should include the
shareholder's name, the Fund name, the class name, the account number, and the
Share or dollar amount requested. Shareholders redeeming through Compass should
mail written requests to: The Expedition Tax-Free Money Market
Fund--Institutional Shares, P.O. Box 8010, Boston, Massachusetts 02266-8010.
SIGNATURES. Shareholders requesting a redemption of any amount to be sent to an
address other than that on record with the Fund or a redemption payable other
than to the shareholder of record must have their signatures guaranteed by:
o a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund ("BIF"), which is administered by the FDIC;
o a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
o a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF") which is administered by the
FDIC; or
17
<PAGE>
o any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and the Transfer Agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. Redemptions of $40,000 or greater for the Fund must
be in writing and a signature guarantee must accompany the written request. The
Trust and the Transfer Agent reserve the right to amend these standards at any
time without notice.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights, except that in matters affecting only a
particular portfolio or class, only shares of that portfolio or class are
entitled to vote.
As used in this Prospectus, a "vote of a majority of the outstanding shares" of
a Fund means, with respect to the approval of an investment advisory agreement,
sub-advisory agreement, or a change in a fundamental investment limitation, the
lesser of (a) more than 50% of the outstanding shares of a Fund, or (b) at least
67% of the shares of a Fund present at a meeting at which the holders of more
than 50% of the outstanding shares of such Fund are represented in person or by
proxy.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust or the Fund's operation and for the election of Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
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<PAGE>
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and from issuing, underwriting, selling or distributing securities in general.
Such laws and regulations do not prohibit such a holding company or affiliate
from acting as investment adviser, transfer agent, or custodian to such an
investment company or from purchasing shares of such a company as agent for and
upon the order of their customers.
The Adviser, Bancshares and certain of Bancshares' affiliates are subject to
such banking laws and regulations. They believe, based on the advice of their
counsel, that they may perform those services for the Fund contemplated by any
existing agreement entered into with the Trust without violating those laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
these entities from continuing to perform all or a part of the above services.
If this happens, the Trustees would consider alternative means of continuing
available investment services. It is not expected that shareholders would suffer
any adverse financial consequences as a result of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund intends to pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
If, at the close of each quarter of its taxable year, at least 50% of the value
of the Fund's assets consist of obligations the interest on which is excludable
from gross income for federal tax purposes, the Fund may pay "exempt-interest
dividends" to its shareholders. Those dividends constitute the portion of the
aggregate dividends as designated by the Fund equal to the
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<PAGE>
excess of the excludable interest over certain amounts disallowed as deductions.
Exempt-interest dividends are excludable from a shareholder's gross income for
regular federal income tax purposes, but may have certain collateral federal
income tax consequences, including alternative minimum tax. See the Statement of
Additional Information.
Current federal law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Fund to purchase sufficient amounts of tax-exempt securities to
satisfy the Code's requirements for the payment of "exempt-interest dividends."
Dividends declared by the Fund in October, November or December of any year and
payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of the year and paid by the Fund at any time during the following
January.
With respect to investments in U.S. Treasury STRIPS, which are sold with
original issue discount and do not make periodic cash interest payments, the
Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
all of its net investment income to its shareholders, the Fund may have to sell
portfolio securities to distribute such imputed income, which may occur at a
time when the Adviser would not have chosen to sell such securities and which
may result in a taxable gain or loss.
Investment income received directly by the Fund on direct U.S. Government
obligations is exempt from income tax at the state level when received directly
and may be exempt, depending on the state, when received by a shareholder as
income dividends provided certain state specific conditions are satisfied.
Interest received on repurchase agreements collateralized by direct U.S.
Government obligations normally is not exempt from state taxation. The Fund will
inform shareholders annually of the percentage of income and distributions
derived from direct U.S. Government obligations. Shareholders should consult
their tax advisers to determine whether any portion of the income dividends
received from the Fund is considered tax exempt in their particular states.
A sale, exchange or redemption of a Fund's shares generally is a taxable
transaction to the shareholder.
STATE AND LOCAL TAXES. Shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
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<PAGE>
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its yield, effective yield, tax-
equivalent yield and total return.
The yield of Shares represents the annualized rate of income earned on an
investment in Shares over a seven-day period. It is the annualized dividends
earned during the period on the investment, shown as a percentage of the
investment. The effective yield is calculated similarly to the yield, but, when
annualized, the income earned by an investment in Shares is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The Fund may also advertise a "tax-equivalent yield," which is calculated by
determining the rate of return that would have to be achieved on a fully taxable
investment to produce the after-tax equivalent of the Fund's yield, assuming
certain tax brackets for the shareholder.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income distributions. It
is calculated by dividing that change by the initial investment and is expressed
as a percentage.
Yield, effective yield, tax-equivalent yield and total return will be calculated
separately for Institutional Shares and Investment Service Shares. Because
Investment Service Shares have a shareholder servicing plan, the yield,
effective yield, tax-equivalent yield and total return for Institutional Shares,
for the same period, ordinarily will exceed that of Investment Service Shares.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Investment Service Shares.
Investment Service Shares are sold at net asset value. Except as otherwise noted
in the prospectus for the Fund's Investment Service Shares, investments in
Investment Service Shares are subject to a minimum initial investment of $1,000.
The stated advisory fee is the same for both classes of shares.
To obtain more information and a prospectus for Investment Service Shares,
investors may call 1-800-992-2085.
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<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Expedition Tax-Free One Freedom Valley Drive
Money Market Fund Oaks, Pennsylvania 19456
- ----------------------------------------------------------------------------
Distributor
SEI Investments Distribution Co. One Freedom Valley Drive
Oaks, Pennsylvania 19456
- ----------------------------------------------------------------------------
Investment Adviser and Custodian
Compass Bank 15 S. 20th Street
Birmingham, Alabama 35233
- ----------------------------------------------------------------------------
Investment Sub-Adviser
Weiss, Peck & Greer, L.L.C. One New York Plaza
New York, New York 10004
- ----------------------------------------------------------------------------
Transfer Agent and Servicing Agent
Transfer Agent Servicing Agent
State Street Bank and Trust Boston Financial Data Services, Inc.
Company Two Heritage Drive
225 Franklin Street Quincy, Massachusetts 02171
Boston, Massachusetts 02110
- ----------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 117 Campus Drive
Princeton, NJ 08540
- ----------------------------------------------------------------------------
Counsel
Morgan, Lewis & Bockius LLP 1800 M Street, N.W.
Washington, D.C. 20036
- ----------------------------------------------------------------------------
</TABLE>
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<PAGE>
THE EXPEDITION TAX-FREE MONEY MARKET FUND
(A PORTFOLIO OF THE EXPEDITION FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with a prospectus of The
Expedition Tax-Free Money Market Fund (the "Fund") dated April 2, 1998.
This Statement of Additional Information is not a prospectus itself. To receive
a copy of the prospectus, write the Fund or call toll-free 1-800-992-2085.
Statement of Additional Information dated April 2, 1998
<PAGE>
TABLE OF CONTENTS
General Information About the Fund.......................... 1
Investment Objective and Policies........................... 1
Investment Limitations...................................... 6
Regulatory Compliance....................................... 7
The Expedition Funds Management............................. 7
Investment Advisory Services................................ 10
Brokerage Transactions...................................... 11
Other Services.............................................. 11
Purchasing Shares........................................... 12
Determining Net Asset Value................................. 13
Redeeming Shares............................................ 15
Massachusetts Partnership Law............................... 15
Tax Status.................................................. 15
Fund Ownership.............................................. 17
Total Return................................................ 17
Yield....................................................... 17
Effective Yield............................................. 17
Tax Equivalent Yield........................................ 17
Performance Comparisons..................................... 18
Financial Statements........................................ 18
<PAGE>
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in The Expedition Funds (the "Trust"). The Trust,
formerly The Starburst Fund, was established as a Massachusetts business trust
under a Declaration of Trust dated August 7, 1989.
Shares of the Fund are offered in two classes, known as Investment Service
Shares and Institutional Shares.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide current income, exempt from
Federal income taxes, consistent with stability of principal. The investment
objective cannot be changed without approval of shareholders. The investment
policies described below may be changed by the Board of Trustees (the
"Trustees") without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
ADDITIONAL DESCRIPTION OF PERMITTED INVESTMENTS
VARIABLE AND FLOATING RATE NOTES
The Fund may invest in variable rate notes and floating rate notes (together,
"adjustable interest rate notes"). A variable rate note is a note whose terms
provide for the adjustment of its interest rate on set dates and which, upon
such adjustment, can reasonably be expected to have a market value that
approximates its par value; the degree to which a variable rate note's market
value approximates its par value will depend on the frequency of the
readjustment of the note's interest rate and the length of time that must elapse
before the next readjustment. A floating rate note is a note whose terms provide
for the adjustment of its interest rate whenever a specified interest rate
changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value. Although there may be no active secondary
market with respect to a particular variable or floating rate note purchased by
the Fund, the Fund may seek to resell the note at any time to a third party. The
absence of an active secondary market, however, could make it difficult for the
Fund to dispose of a variable or floating rate note in the event the issuer of
the note defaulted on its payment obligations, and the Fund could, as a result
or for other reasons, suffer a loss to the extent of the default. In addition, a
variable or floating rate demand note with a demand notice exceeding seven days
may be considered illiquid if there is no secondary market for such securities.
Variable or floating rate notes may be secured by bank letters of credit.
Variable and floating rate notes will be deemed to have maturities as follows:
1. A variable rate note, the principal amount of which is scheduled on the
face of the instrument to be paid in 397 calendar days or less, will be
deemed by the Fund to have a maturity equal to the period remaining
until the next readjustment of the interest rate.
2. A variable rate note that is subject to a demand feature will be deemed
by the Fund to have a maturity equal to the longer of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand.
3. A floating rate note that is subject to a demand feature will be deemed
by the Fund to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.
As used above, a note is "subject to a demand feature" where the Fund is
entitled to receive the principal amount of the note either at any time on no
more than thirty days' notice or at specified intervals not exceeding 397 days
and upon no more than thirty days' notice.
1
<PAGE>
BANK OBLIGATIONS
The Fund is not prohibited from investing in obligations of banks that are
clients of SEI Investments Company ("SEI Investments"). However, the purchase of
shares of the Fund by such banks or by their customers will not be a
consideration in determining which bank obligations the Fund will purchase. The
Fund will not purchase obligations of the Adviser.
SEPARATELY TRADED INTEREST AND PRINCIPAL SECURITIES ("STRIPS")
The Fund may invest in STRIPS which are component parts of U.S. Treasury
Securities traded through the Federal Book-Entry System. The Adviser will only
purchase STRIPS that it determines are liquid or, if illiquid, do not violate
the Fund's investment policy concerning investments in illiquid securities.
Consistent with Rule 2a-7 of the Investment Company Act of 1940 (the "1940
Act"), the Adviser will purchase for the Fund only those STRIPS that have a
remaining maturity of 397 days or less; therefore, the Fund currently may only
purchase interest component parts of U.S. Treasury Securities. While there is a
20% limitation on the percentage of the Fund's net assets that may be comprised
of taxable securities, including STRIPS, the Adviser will monitor the level of
such holdings to avoid the risk of impairing shareholders' redemption rights and
of deviations in the value of shares of the Fund.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with primary securities dealers
recognized by the Federal Reserve Bank of New York or with national member banks
as defined in Section 3(d)(1) of the Federal Deposit Insurance Act, as amended.
The repurchase agreement will have an agreed-upon price (including principal and
interest) and an agreed-upon repurchase date within a number of days (usually
not more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed-upon market rate of interest which is unrelated to
the coupon rate or maturity of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security.
The repurchase agreements entered into by the Fund will provide that the
underlying security at all times shall have a value at least equal to 100% of
the resale price stated in the agreement; the Adviser monitors compliance with
this requirement. Under all repurchase agreements entered into by the Fund, the
Custodian or its agent must take possession of the underlying collateral.
However, if the seller defaults, the Fund could realize a loss on the sale of
the underlying security to the extent that the proceeds of sale including
accrued interest are less than the resale price provided in the agreement
including interest. In addition, even though the Federal Bankruptcy Code
provides protection for proceedings, the Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal and interest
if the Fund is treated as an unsecured creditor and required to return the
underlying security to the seller's estate.
MUNICIPAL SECURITIES
Municipal Securities -- The two principal classifications of Municipal
Securities are "general obligation" and "revenue" issues. General obligation
issues are issues involving the credit of an issuer possessing taxing power and
are payable from the issuer's general unrestricted revenues, although the
characteristics and method of enforcement of general obligation issues may vary
according to the law applicable to the particular issuer. Revenue issues are
payable only from the revenues derived from a particular facility or class of
facilities or other specific revenue source. Municipal Securities include debt
obligations issued by governmental entities to obtain funds for various public
purposes, such as the construction of a wide range of public facilities, the
refunding of outstanding obligations, the payment of general operating expenses,
and the extension of loans to other public institutions and facilities. Certain
private activity bonds that are issued by or on behalf of public authorities to
finance various privately-owned or operated facilities are included within the
term "Municipal Securities." Private activity bonds and industrial development
bonds are generally
2
<PAGE>
revenue bonds, the credit and quality of which are directly related to the
credit of the private user of the facilities.
Municipal Securities may also include general obligation notes, tax anticipation
notes, bond anticipation notes, revenue anticipation notes, project notes,
certificates of indebtedness, demand notes, tax-exempt commercial paper,
construction loan notes and other forms of short-term, tax-exempt loans. Such
instruments are issued with a short-term maturity in anticipation of the receipt
of tax funds, the proceeds of bond placements or other revenues. Project notes
are issued by a state or local housing agency and are sold by the Department of
Housing and Urban Development. While the issuing agency has the primary
obligation with respect to its project notes, they are also secured by the full
faith and credit of the United States through agreements with the issuing
authority which provide that, if required, the Federal government will lend the
issuer an amount equal to the principal of and interest on the project notes.
The quality of Municipal Securities, both within a particular classification and
between classifications, will vary, and the yields on Municipal Securities
depend upon a variety of factors, including general money market conditions, the
financial condition of the issuer (or other entity whose financial resources are
supporting the securities), general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation and the rating(s)
of the issue. In this regard, it should be emphasized that the ratings of any
NRSRO are general and are not absolute standards of quality. Municipal
Securities with the same maturity, interest rate and rating(s) may have
different yields, while Municipal Securities of the same maturity and interest
rate with different rating(s) may have the same yield.
An issuer's obligations under its Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Securities may be
materially adversely affected by litigation or other conditions.
Municipal Leases -- The Fund may invest in instruments, or participations in
instruments, issued in connection with lease obligations or installment purchase
contract obligations of municipalities ("municipal lease obligations"). Although
municipal lease obligations do not constitute general obligations of the issuing
municipality, a lease obligation is ordinarily backed by the municipality's
covenant to budget for, appropriate funds for, and make the payments due under
the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses, which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose in the relevant years. Municipal lease
obligations are a relatively new form of financing, and the market for such
obligations is still developing. Municipal leases will be treated as liquid only
if they satisfy criteria set forth in guidelines established by the Board of
Trustees, and there can be no assurance that a market will exist or continue to
exist for any municipal lease obligation. The guidelines indicate that (a) the
Adviser shall consider and evaluate such factors as it deems appropriate to
determine that the securities to be purchased are liquid, including, but not
limited to the following factors: (i) the frequency of trades and market
quotations for the securities; (ii) the number of dealers willing and ready to
purchase and sell the securities; (iii) the number of potential purchasers for
the securities; (iv) whether any dealers have agreed to make a market in the
securities; (v) the nature of the securities and the nature of marketplace
trades, including the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer; (vi) whether the lease can be
canceled; (vii) what assurances, if any, exist that the assets represented by
the lease can be sold; (viii) the strength of the lessee's general credit; (ix)
the likelihood that the municipality will discontinue appropriating funding for
the leased property because the property is no longer deemed essential to the
operation of the municipality; and (x) the legal recourse in the event of
failure to appropriate.
3
<PAGE>
Puts on Municipal Securities -- The Fund may acquire "puts" with respect to its
acquisition of Municipal Securities. A put is a right to sell a specified
security (or securities) within a specified period of time at a specified
exercise price. The Fund may sell, transfer, or assign the put only in
conjunction with the sale, transfer, or assignment of the underlying security or
securities.
The amount payable upon the exercise of a put is normally (i) the Fund's
acquisition cost of the Municipal Securities (excluding any accrued interest
which the Fund paid on the acquisition), less any amortized market premium or
plus any amortized market or original issue discount during the period the Fund
owned the securities, plus (ii) all interest accrued on the securities since the
last interest payment date during that period.
Puts on Municipal Securities may be acquired to facilitate the liquidity of
portfolio assets and the reinvestment of assets at a rate of return more
favorable than that of the underlying security. The Fund will generally acquire
puts only where the puts are available without the payment of any direct or
indirect consideration. However, if necessary or advisable, the Fund may pay for
puts either separately in cash or by paying a higher price for portfolio
securities which are acquired subject to the puts (thus reducing the yield to
maturity otherwise available for the same securities).
Taxable Municipal Securities -- The Tax-Free Money Market Fund may invest up to
20% of its net assets in taxable securities, including Municipal Securities,
such as certain private activity or industrial revenue bonds, the interest on
which is not tax-exempt for Federal income tax purposes but which otherwise meet
the Fund's investment criteria.
WHEN-ISSUED SECURITIES
The Fund may purchase debt obligations on a when-issued basis, in which case
delivery and payment normally take place on a future date. The Fund will make
commitments to purchase obligations on a when-issued basis only with the
intention of actually acquiring the securities, but may sell them before the
settlement date. During the period prior to the settlement date, the securities
are subject to market fluctuation, and no interest accrues on the securities to
the purchaser. The payment obligation and the interest rate that will be
received on the securities at settlement are each fixed at the time the
purchaser enters into the commitment. Purchasing obligations on a when-issued
basis may be used as a form of leveraging because the purchaser may accept the
market risk prior to payment for the securities. The Fund, however, will not use
such purchases for leveraging; instead, as disclosed in the Prospectus, the Fund
will set aside assets to cover its commitments. If the value of these assets
declines, the Fund will place additional liquid assets aside on a daily basis so
that the value of the assets set aside is equal to the amount of the commitment.
SECURITIES LENDING
The Fund may lend securities pursuant to agreements requiring that the loans be
continuously secured by cash, U.S. Government securities, or any combination of
cash and such securities, as collateral equal to 100% of the market value at all
times of the securities lent. Such loans will not be made if, as a result, the
aggregate amount of all outstanding securities loans for the Fund exceed
one-third of the value of the Fund's total assets taken at fair market value.
The Fund will continue to receive interest on the securities lent while
simultaneously earning interest on the investment of the cash collateral in U.S.
Government securities. However, the Fund will normally pay lending fees to such
broker-dealers and related expenses from the interest earned on invested
collateral. Investments made with this collateral are considered to be assets of
the Fund and must comply with the Fund's investment limitations. There may be
risks of delay in receiving additional collateral or risks of delay in recovery
of the securities or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans are made only to borrowers
deemed by the Adviser to be of good standing and when, in the judgment of the
Adviser, the consideration which can be earned currently from such securities
loans justifies the attendant risk. Any loan may be terminated by either party
upon reasonable notice to the other party. The Fund may use the Distributor or a
broker-dealer affiliate of the Adviser as a broker in these transactions.
4
<PAGE>
INVESTMENT COMPANY SHARES
The Fund may invest in shares of other investment companies, to the extent
permitted by applicable law and subject to certain restrictions. These
investment companies typically incur fees that are separate from those fees
incurred directly by the Fund. The Fund's purchase of such investment company
securities results in the layering of expenses, such that shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees, in addition to paying Fund
expenses. Under applicable regulations, the Fund is prohibited from acquiring
the securities of another investment company if, as a result of such
acquisition: (1) the Fund owns more than 3% of the total voting stock of the
other company; (2) securities issued by any one investment company represent
more than 5% of the Fund's total assets; or (3) securities (other than treasury
stock) issued by all investment companies represent more than 10% of the total
assets of the Fund. See also "Investment Limitations."
5
<PAGE>
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
I. INVESTMENT LIMITATIONS OF THE FUND
The Fund is subject to a number of fundamental investment restrictions that may
be changed only by a vote of a majority of the outstanding shares of the Fund. A
"majority of the outstanding shares" of the Trust or the Fund means the
affirmative vote, at a meeting of shareholders duly called, of the lesser of (a)
67% or more of the votes of shareholders of the Trust or the Fund present at a
meeting at which the holders of more than 50% of the votes attributable to
shareholders of record of the Trust or the Fund are represented in person or by
proxy, or (b) the holders of more than 50% of the outstanding votes of
shareholders of the Trust or the Fund.
Pursuant to these investment restrictions, the Fund will not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities and
repurchase agreements involving such securities, if, immediately after such
purchase, more than 5% of the value of its total assets would be invested in
any one issuer, or more than 10% of the outstanding voting securities of
such issuer; provided that the Fund may invest up to 25% of its total assets
without regard to this restriction only as permitted by applicable laws and
regulations. For purposes of this limitation, a security is considered to be
issued by the government entity (or entities) whose assets and revenues back
the security; with respect to a private activity bond that is backed only by
the assets and revenues of a non-governmental user, a security is considered
to be issued by such non-governmental user. For purposes of this limitation,
all debt securities are each considered as one class.
2. Invest in companies for the purpose of exercising control.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding one-third of the value of total assets. Any borrowing
will be done from a bank and to the extent that such borrowing exceeds 5% of
the value of the Fund's assets, asset coverage of at least 300% is required.
In the event that such asset coverage shall at any time fall below 300%, the
Fund shall, within three days thereafter or such longer period as the
Securities and Exchange Commission may prescribe by rules and regulations,
reduce the amount of its borrowings to such an extent that the asset
coverage of such borrowings shall be at least 300%. This borrowing provision
is included solely to facilitate the orderly sale of portfolio securities to
accommodate heavy redemption requests if they should occur and is not for
investment purposes. All borrowings will be repaid before making additional
investments and any interest paid on such borrowings will reduce income.
4. Pledge, mortgage or hypothecate assets except to secure temporary borrowings
permitted by (3) above in aggregate amounts not to exceed 15% of total
assets taken at current value at the time of the incurrence of such loan,
except as permitted with respect to securities lending.
5. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts and interests in a pool of securities
that are secured by interests in real estate. However, subject to their
permitted investments, the Fund may invest in companies which invest in real
estate commodities or commodities contracts.
6. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Fund may obtain short-term credits as
necessary for the clearance of security transactions; this limitation shall
not prohibit short sales "against the box."
7. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter under Federal securities laws in selling the Fund
security.
6
<PAGE>
8. Purchase securities of other investment companies except as permitted by
the 1940 Act, and the rules and regulations thereunder.
9. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described above or as permitted by rule,
regulation or order of the Securities and Exchange Commission.
10. Make loans except that the Fund may (i) purchase or hold debt instruments
in accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending as described
in the Prospectus and this Statement of Additional Information.
The Fund has no present intention to sell securities short "against the box."
NON-FUNDAMENTAL POLICIES
The Fund may not invest in illiquid securities in an amount exceeding, in the
aggregate, 10% of its net assets.
The Fund may not invest in interests in oil, gas or other mineral exploration or
development programs or oil, gas or mineral leases.
With the exception of the limitations that apply to illiquid securities, the
foregoing percentages will apply at the time of the purchase of a security and
shall not be considered violated unless an excess occurs or exists immediately
after and as a result of a purchase of such security.
REGULATORY COMPLIANCE
- --------------------------------------------------------------------------------
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Fund will comply
with the various requirements of Rule 2a-7, which regulates money market mutual
funds. For example, with limited exceptions, Rule 2a-7 prohibits the investment
of more than 5% of the Fund's total assets in the securities of any one issuer,
although the Fund's investment limitation only requires such 5% diversification
with respect to 75% of its assets. The Fund will invest more than 5% of its
assets in any one issuer only under the circumstances permitted by Rule 2a-7.
The Fund will also determine the effective maturity of its investments, as well
as its ability to consider a security as having received the requisite
short-term ratings by NRSROs according to Rule 2a-7. The Fund may change these
operational policies to reflect changes in the laws and regulations without the
approval of its shareholders.
THE EXPEDITION FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Fund are supervised by the Trustees under the
laws of the Commonwealth of Massachusetts. The Trust pays the fees for
unaffiliated Trustees.
The Trustees and Executive Officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with named companies during that
period. Unless otherwise noted, the business address of each Trustee and each
Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as officers of some or all of the following:
The Achievement Funds Trust, The Advisors' Income Circle Fund, The Arbor Fund,
ARK Funds, Bishop Street Funds, Boston 1784
7
<PAGE>
Funds(Registered), CoreFunds, Inc., CrestFunds, Inc., CUFUND, FMB Funds, Inc.,
First American Funds, Inc., First American Investment Funds, Inc., First
American Strategy Funds, Inc, HighMark Fund, Marquis Funds(Registered), Monitor
Funds, Morgan Grenfell Investment Trust, The PBHG Funds, Inc., The Pillar Funds,
Santa Barbara Group of Mutual Funds, Inc., SEI Asset Allocation Trust, SEI Daily
Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI International Trust, SEI Liquid Asset Trust,
SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust, TIP Funds
and TIP Institutional Funds, each of which is an open-end management investment
company managed by SEI Fund Resources or its affiliates and, except for Santa
Barbara Group of Mutual Funds, Inc., distributed by SEI Investments distribution
Co.
ROBERT A. NESHER (DOB 08/17/46) -- Chairman of the Board of Trustees* --
Currently performs various services on behalf of SEI Investments for which Mr.
Nesher is compensated. Executive Vice President of the Administrator and the
Distributor, 1981-1994. Trustee of The Advisors' Inner Circle Fund, The Arbor
Fund, Boston 1784 Funds(Registered), Marquis Funds(Registered), Oak Associates
Funds, Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional Investments Trust, SEI Institutional Managed
Trust, SEI International Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust.
JOHN T. COONEY (DOB 01/20/27) -- Trustee** -- Vice Chairman of Ameritrust Texas
N.A., 1989-1992, and MTrust Corp., 1985-1989. Trustee of The Advisors' Inner
Circle Fund, The Arbor Fund, Marquis Funds(Registered) and Oak Associates Funds.
WILLIAM M. DORAN (DOB 05/26/40) -- Trustee* -- 2000 One Logan Square,
Philadelphia, PA 19103. Partner, Morgan, Lewis & Bockius (law firm), counsel to
the Trust, SEI Investments, the Administrator and the Distributor. Director and
Secretary of SEI Investments and Secretary of the Administrator and the
Distributor. Trustee of The Advisors' Inner Circle Fund, The Arbor Fund, Marquis
Funds(Registered), Oak Associates Funds, SEI Asset Allocation Trust, SEI Daily
Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI International Trust, SEI Liquid Asset Trust and
SEI Tax Exempt Trust.
FRANK E. MORRIS (DOB 12/30/23) -- Trustee** -- Peter Drucker Professor of
Management, Boston College, 1989-1990. President, Federal Reserve Bank of
Boston, 1968-1988. Trustee of The Advisors' Inner Circle Fund, The Arbor Fund,
Marquis Funds(Registered), Oak Associates Funds, SEI Asset Allocation Trust, SEI
Daily Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI International Trust, SEI Liquid Asset Trust,
and SEI Tax Exempt Trust.
ROBERT A. PATTERSON (DOB 11/05/27) -- Trustee** -- Pennsylvania State
University, Senior Vice President, Treasurer (Emeritus). Financial and
Investment Consultant, Professor of Transportation (1984-present). Vice
President-Investments, Treasurer, Senior Vice President (Emeritus) (1982-1984).
Director, Pennsylvania Research Corp.; Member and Treasurer, Board of Trustees
of Grove City College. Trustee of The Advisors' Inner Circle Fund, The Arbor
Fund, Marquis Funds(Registered) and Oak Associates Funds.
EUGENE B. PETERS (DOB 06/03/29) -- Trustee** -- Private investor from 1987 to
present. Vice President and Chief Financial Officer, Western Company of North
America (petroleum service company) (1980-1986). President of Gene Peters and
Associates (import company) (1978-1980). President and Chief Executive Officer
of Jos. Schlitz Brewing Company before 1978. Trustee of The Advisor's Inner
Circle Fund, The Arbor Fund, Marquis Funds(Registered) and Oak Associates Funds.
JAMES M. STOREY (DOB 04/12/31) -- Trustee** -- Partner, Dechert Price & Rhoads,
from September 1987 - December 1993; Trustee of The Advisors' Inner Circle Fund,
The Arbor Fund, Marquis Funds(Registered), Oak Associates Funds, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI International Trust, SEI
Liquid Asset Trust and SEI Tax Exempt Trust.
SANDRA K. ORLOW (DOB 10/18/53) -- Vice President and Assistant Secretary -- Vice
President and Assistant Secretary of the Administrator and the Distributor since
1988.
8
<PAGE>
KEVIN P. ROBINS (DOB 04/15/61) -- Vice President and Assistant Secretary --
Senior Vice President and General Counsel of SEI Investments, the Administrator
and the Distributor since 1994. Assistant Secretary of SEI Investments since
1992; Secretary of the Administrator and Distributor since 1994. Vice President,
General Counsel and Assistant Secretary of the Administrator and the
Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius LLP (law firm),
1988-1992.
RICHARD W. GRANT (DOB 10/25/45) -- Secretary -- 2000 One Logan Square,
Philadelphia, PA 19103, Partner, Morgan, Lewis & Bockius LLP (law firm), Counsel
to the Trust, SEI Investments, the Administrator and the Distributor.
KATHRYN L. STANTON (DOB 11/19/58) -- Vice President and Assistant Secretary --
General Counsel, Investment Systems and Services since 1997. Deputy General
Counsel of SEI Investments since 1996. Vice President and Assistant Secretary of
SEI Investments, the Administrator and the Distributor since 1994. Associate,
Morgan, Lewis & Bockius LLP (law firm), 1989-1994.
ROBERT DELLACROCE (DOB 12/17/63) -- Controller and Chief Financial Officer --
Director, Funds Administrator and Accounting of SEI Investments since 1994.
Senior Audit Manager, Arthur Andersen LLP, 1986-1994.
TODD B. CIPPERMAN (DOB 02/14/66) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of SEI Investments, the Administrator and
Distributor since 1995. Associate, Dewey Ballantine (law firm) (1994-1995).
Associate, Winston & Strawn (law firm) (1991-1994).
JOSEPH M. O'DONNELL (DOB 11/13/54) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of the Administrator and Distributor
since 1998. Vice President and General Counsel, FPS Services, Inc., 1993-1997.
Staff Counsel and Secretary, Provident Mutual Family of Funds, 1990-1993.
- ------------------
* Messrs. Nesher and Doran are Trustees who may be deemed to be "interested"
persons of the Trust as that term is defined in the 1940 Act.
** Messrs. Cooney, Morris, Patterson, Peters and Storey serve as members of the
Audit Committee of the Trust.
Officers and Trustees own less than 1% of the Trust's outstanding shares.
The Board of Trustees was elected at a Shareholder meeting on May 16, 1997. The
following table exhibits Trustee compensation for the fiscal period ended
October 31, 1997.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION PENSION OR
FROM REGISTRANT FOR THE RETIREMENT BENEFITS
FISCAL PERIOD ENDED ACCRUED AS PART OF
NAME OF PERSON, POSITION OCTOBER 31, 1997 TRUST EXPENSES
- ------------------------ ----------------------- -------------------
<S> <C> <C>
John T. Cooney, Trustee............................ $1,426 N/A
Frank E. Morris, Trustee........................... $1,426 N/A
Robert Patterson, Trustee.......................... $1,426 N/A
Eugene B. Peters, Trustee.......................... $1,426 N/A
James M. Storey, Esq., Trustee..................... $1,426 N/A
William M. Doran, Esq., Trustee.................... $ 0 N/A
Robert A. Nesher, Chairman of the Board............ $ 0 N/A
</TABLE>
9
<PAGE>
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Compass Bank, an Alabama state banking
corporation (the "Adviser"). The Adviser is a wholly-owned subsidiary of Compass
Bancshares, Inc. ("Bancshares"), a bank holding company organized under the laws
of Delaware.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
Because of the internal controls maintained by the Adviser to restrict the flow
of non-public information, Fund investments are typically made without any
knowledge of the Adviser or its affiliates' lending relationships with an
issuer.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus.
For the fiscal year ended October 31, 1997, the Fund had not commenced
operations and therefore did not pay advisory fees.
SUB-ADVISER TO THE FUND
The Adviser has entered into a sub-advisory agreement (the "Sub-Advisory
Agreement") with Weiss, Peck & Greer, L.L.C. ("WPG") dated April 1, 1998
relating to the Fund.
The continuance of a Sub-Advisory Agreement, after the first year, must be
specifically approved at least annually (i) by the vote of the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to the
Agreement or "interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. The Sub-Advisory
Agreement may be terminated by the Adviser, the Trust's Board of Trustees or by
a vote of the majority of the outstanding voting securities of the Fund at any
time, without the payment or any penalty, on sixty (60) days' written notice to
WPG and may be terminated at any time by ninety (90) days' written notice to the
Adviser. This Agreement will immediately terminate in the event of its
assignment or upon termination of the Advisory Agreement between the Adviser and
the Trust with regard to the Fund (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested persons" and
"assignment" have the same meaning of such terms in the 1940 Act).
SUB-ADVISORY FEES
For its sub-advisory services, WPG received an annual sub-advisory fee as
described in the prospectus.
For the fiscal year ended October 31, 1997, the Fund had not commenced
operations and therefore did not pay sub-advisory fees.
10
<PAGE>
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
The money market securities in which the Fund invests are traded primarily in
the over-the-counter market. Where possible, the Adviser or Sub-Advisor, as
appropriate, will deal directly with the dealers who make a market in the
securities involved except in those circumstances where better prices and
execution are available elsewhere. Such dealers usually are acting as principal
for their own account. On occasion, securities may be purchased directly from
the issuer. Money market securities are generally traded on a net basis and do
not normally involve either brokerage commissions or transfer taxes. The cost of
executing portfolio securities transactions of the Trust will primarily consist
of dealer spreads and underwriting commissions. For the fiscal year ended
October 31, 1997, the Fund had not commenced operations and therefore did not
pay brokerage commissions.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the Adviser or Sub-Adviser, investments of the
type the Fund may make may also be made by those other accounts. When the Fund
and one or more other accounts managed by the Adviser or Sub-Adviser are
prepared to invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner believed by
the Adviser to be equitable to each. In some cases, this procedure may adversely
affect the price paid or received by the Fund or the size of the position
obtained or disposed of by the Fund. In other cases, however, it is believed
that coordination and the ability to participate in volume transactions will be
to the benefit of the Fund.
OTHER SERVICES
- --------------------------------------------------------------------------------
FUND ADMINISTRATION
The Trust and SEI Fund Resources (the "Administrator") have entered into an
administration agreement (the "Administration Agreement"). The Administration
Agreement provides that the Administrator shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which the Administration Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Administrator in the performance of its duties or from reckless disregard by
it of its duties and obligations thereunder. The Administration Agreement shall
remain in effect with respect to the Trust for three years.
The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a
wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the
owner of all beneficial interest in the Administrator. SEI Investments and its
subsidiaries and affiliates, including the Administrator, are leading providers
of funds evaluation services, trust accounting systems, and brokerage and
information services to financial institutions, institutional investors and
money managers. The Administrator and its affiliates also serve as administrator
or sub-administrator to the following other mutual funds: The Achievement Funds
Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK Funds, Bishop Street
Funds, Boston 1784 Funds(Registered), CoreFunds, Inc., CrestFunds, Inc., CUFUND,
FMB Funds, First American Funds, Inc., First American Investment Funds, Inc.,
First American Strategy Funds, Inc., HighMark Funds, Marquis Funds(Registered),
Monitor Funds, Morgan Grenfell Investment Trust, Oak Associates Funds, The PBHG
Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, Santa Barbara
Group of Mutual Funds, Inc., SEI Asset Allocation Trust, SEI Daily Income Trust,
SEI Index Funds, SEI Institutional Investments Trust, SEI Institutional Managed
Trust, SEI International Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust,
Stepstone Funds, STI Classic Funds, STI Classic Variable Trust, TIP Funds and
TIP Institutional Funds.
11
<PAGE>
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments, and the Trust are parties to a distribution agreement
("Distribution Agreement") which applies to both Institutional Shares and
Investment Service Shares of the Fund.
The Distribution Agreement is renewable annually. The Distribution Agreement may
be terminated by the Distributor, by a majority vote of the Trustees who are not
interested persons and have no financial interest in the Distribution Agreement
or by a majority of the outstanding shares of the Trust upon not more than 60
days' written notice by either party or upon assignment by the Distributor.
CUSTODIAN
Compass Bank, Birmingham, Alabama, which is also the Adviser, is custodian for
the securities and cash of the Fund for which it receives an annual fee of 0.02%
of the Fund's average aggregate daily net assets and is reimbursed for its
out-of-pocket expenses.
TRANSFER AGENT AND SERVICING AGENT
State Street Bank and Trust Company (the "Transfer Agent") and Boston Financial
Data Services, Inc. (the "Servicing Agent") serves as transfer agent and
servicing agent for the Trust, respectively. The fee paid to the Transfer Agent
is based upon the size, type and number of accounts and transactions made by
shareholders. The Transfer Agent pays the Servicing Agent's compensation.
INDEPENDENT AUDITORS
The independent auditors for the Trust are Deloitte & Touche LLP, Pittsburgh,
Pennsylvania.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days when
both the New York Stock Exchange and the Federal Reserve are open for business
except for federal or state holidays restricting wire transfers. The procedure
for purchasing Institutional Shares of the Fund is explained in the appropriate
prospectus under: "Investing in Institutional Shares;" and for purchasing
Investment Service Shares under "Investing in Investment Service Shares."
Compass Bank, Compass Brokerage, Inc. and the other affiliates of Bancshares
which provide shareholder and administrative services to the Fund sometimes are
referred to herein as "Compass."
SHAREHOLDER SERVICE PLAN
With respect to the Investment Service Shares class of the Fund, the Trust has
adopted a Shareholder Service Plan (the "Plan"). Pursuant to the Plan, the
distributor may pay fees to administrators for administrative services as to
Shares. The administrative services are provided by a representative who has
knowledge of the shareholder's particular circumstances and goals, and include,
but are not limited to: communicating account openings; communicating account
closings; entering purchase transactions; entering redemption transactions;
providing or arranging to provide accounting support for all transactions;
wiring funds and receiving funds for Share purchases and redemptions; confirming
and reconciling all transactions; reviewing the activity in Fund accounts; and
providing training and supervision of broker personnel; posting and reinvesting
dividends to Fund accounts or arranging for this service to be performed by the
Fund's transfer agent; and maintaining and distributing current copies of
prospectuses and shareholder reports to the beneficial owners of Shares and
prospective shareholders.
12
<PAGE>
For the fiscal year ended October 31, 1997, the Fund had not commenced
operations and therefore did not pay shareholder servicing fees.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the value of a Share at $1.00. Net asset value is
calculated on days on which both the New York Stock Exchange and the Federal
Reserve wire system are open for business. Currently, the Fund is closed for
business when the following holidays are observed: New Year's Day, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans' Day, Thanksgiving and Christmas.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the SEC under the 1940 Act. Under the Rule, the Trustees must
establish procedures reasonably designed to stabilize the net asset value per
Share, as computed for purposes of distribution and redemption, at $1.00 per
Share, taking into account current market conditions and the Fund's investment
objective.
Under the Rule, the Fund is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by the Rule, a demand
feature entitles the Fund to receive the principal amount of the instrument from
the issuer or a third party on (1) no more than 30 days' notice or (2) at
specified intervals not exceeding one year on no more than 30 days' notice. A
standby commitment entitles the Fund to achieve same day settlement and to
receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.
13
<PAGE>
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between then
amortized cost value per Share and the net asset value per Share based upon
available indications of market value. The Trustees will decide what, if
any, steps should be taken if there is a difference of more than 0.5%
between the two values. The Trustees will take any steps they consider
appropriate (such as redemption in kind or shortening the average portfolio
maturity) to minimize any material dilution or other unfair results arising
from differences between the two methods of determining net asset value.
INVESTMENT RESTRICTIONS
The Rule requires that the Fund limit its investments to instruments that,
in the opinion of the Trustees, present minimal credit risks and have
received the requisite rating from one or more NRSRO. If the instruments are
not rated, the Trustees must determine that they are of comparable quality.
The Rule also requires the Fund to maintain a dollar-weighted average
portfolio maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per Share. Except as allowed
under Rule 2a-7, no instrument with a remaining maturity of more than
thirteen months can be purchased by the Fund.
Should the disposition of a portfolio security result in a dollar-weighted
average portfolio maturity of more than 90 days, the Fund will invest its
available cash to reduce the average maturity to 90 days or less as soon as
possible.
The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. Under the amortized cost method of
valuation, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on Shares of
the Fund, computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above, may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.
In periods of rising interest rates, the indicated daily yield on Shares of the
Fund computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
14
<PAGE>
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at the next computed net asset value after the Transfer
Agent receives the redemption request. Redemption procedures are explained in
the prospectus under "Redeeming Investment Service Shares" and "Redeeming
Institutional Shares" as appropriate. Although the Trust does not charge for
telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Trust intends to redeem Shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the respective Fund's portfolio.
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Trustees determine to be fair and
equitable.
The Trust has elected to be governed by Rule 18f-1 of the 1940 Act under which
the Trust is obligated to redeem Shares for any one shareholder in cash only up
to the lesser of $250,000 or 1% of the respective class' net asset value during
any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
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Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation or instrument that the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them.
TAX STATUS
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THE FUND'S TAX STATUS
The Fund intends to pay no Federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
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SHAREHOLDERS' TAX STATUS
Exempt-interest dividends are excludable from a shareholder's gross income for
regular Federal income tax purposes. Exempt-interest dividends may nevertheless
be subject to the alternative minimum tax (the "Alternative Minimum Tax")
imposed by Section 55 of the Code or the environmental tax (the "Environmental
Tax") imposed by Section 59A of the Code. The Alternative Minimum Tax is imposed
at rates of 26% and 28% in the case of non-corporate taxpayers and at the rate
of 20% in the case of corporate taxpayers, to the extent it exceeds the
taxpayer's regular tax liability. The Environmental Tax is imposed at the rate
of 0.12% and applies only to corporate taxpayers. The Alternative Minimum Tax
and the Environmental Tax may be imposed in two circumstances. First,
exempt-interest dividends derived from certain "private activity bonds" issued
after August 7, 1986, will generally be an item of tax preference (and therefore
potentially subject to the Alternative Minimum Tax and the Environmental Tax)
for both corporate and non-corporate taxpayers. Second, in the case of
exempt-interest dividends received by corporate shareholders, all
exempt-interest dividends, regardless of when the bonds from which they are
derived were issued or whether they are derived from private activity bonds,
will be included in the corporation's "adjusted current earnings," as defined in
Section 56(g) of the Code, in calculating the corporation's alternative minimum
taxable income for purposes of determining the Alternative Minimum Tax and the
Environmental Tax.
Any loss recognized by a shareholder upon the sale or redemption of shares of
the Fund held for six months or less will be disallowed to the extent of any
exempt-interest dividends the shareholder has received with respect to such
shares. Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Fund will not be deductible for federal income tax purposes. The
deduction otherwise allowable to property and casualty insurance companies for
"losses incurred" will be reduced by an amount equal to a portion of
exempt-interest dividends received or accrued during any taxable year. Foreign
corporations engaged in a trade or business in the United States will be subject
to a "branch profits tax" on their "dividend equivalent amount" for the taxable
year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income,"
which could include exempt-interest dividends. Up to 85% of the Social Security
benefits or railroad retirement benefits received by an individual during any
taxable year will be included in the gross income of such individual if the
individual's "modified adjusted gross income" (which includes exempt-interest
dividends) plus one-half of the Social Security benefits or railroad retirement
benefits received by such individual during that taxable year exceeds the base
amount described in Section 86 of the Code.
The Fund may not be an appropriate investment for persons (including
corporations and other business entities) who are "substantial users" (or
persons related to such users) of facilities financed by industrial development
or private activity bonds. A "substantial user" is defined generally to include
certain persons who regularly use a facility in their trade or business. Such
entities or persons should consult their tax advisors before purchasing shares
of the Fund.
Issuers of bonds purchased by the Fund (or the beneficiary of such bonds) may
have made certain representations or covenants in connection with the issuance
of such bonds to satisfy certain requirements of the Code that must be satisfied
subsequent to the issuance of such bonds. Investors should be aware that
exempt-interest dividends derived from such bonds may become subject to federal
income taxation retroactively to the date thereof if such representations are
determined to have been inaccurate or if the issuer of such bonds (or the
beneficiary of such bonds) fails to comply with such covenants.
CAPITAL GAINS
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If, for
some extraordinary reason, the Fund realizes net long-term capital gains,
it will distribute them at least once every 12 months.
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FUND OWNERSHIP
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The Fund is new and therefore there are no shareholders who own 5% or more of
the shares of the Fund as of the date of this Statement of Additional
Information.
TOTAL RETURN
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The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the offering price per Share at the end of the period. The number of Shares
owned at the end of the period is based on the number of Shares purchased at the
beginning of the period with $1,000, less any applicable sales charge, adjusted
over the period by any additional Shares, assuming the monthly reinvestment of
all dividends and distributions.
YIELD
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The Fund calculates the yield for both classes of shares daily, based upon the
seven days ending on the day of the calculation, called the "base period." This
yield is computed by:
o determining the net change in the value of a hypothetical account with a
balance of one Share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional Shares purchased with dividends earned from the original one
Share and all dividends declared on the original and any purchased
Shares;
o dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine the base period
return; and
o multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in either
class of shares, the performance will be reduced for those shareholders paying
those fees.
EFFECTIVE YIELD
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The Fund's effective yield for both classes of shares is computed by compounding
the unannualized base period return by:
o adding 1 to the base period return;
o raising the sum to the 365/7th power; and
o subtracting 1 from the result.
TAX-EQUIVALENT YIELD
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The Fund may also advertise its "tax-equivalent yield," which is calculated by
determining the rate of return that would have to be achieved on a fully taxable
investment to produce the after-tax equivalent of the Fund's yield, assuming
certain tax brackets for a shareholder. The tax-equivalent yield of the Fund
will be calculated by adding (a) the portion of the Fund's yield that is not
tax-exempt and (b) the result obtained by dividing the portion of the Fund's
yield that is tax-exempt by the difference of one minus a stated income tax
rate.
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PERFORMANCE COMPARISONS
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The Fund's performance of both classes of shares depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates on money market instruments;
o changes in the Fund's or either class of shares expenses; and
o the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all income dividends and capital gains
distributions, if any. From time to time, the Fund will quote its Lipper
ranking in the "money market instrument funds" category in advertising
and sales literature.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Fund. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI, 63
million individuals are pursuing their financial goals through mutual funds.
These investors, as well as businesses and institutions, have entrusted over
$3.5 trillion to the more than 6,300 funds available.
FINANCIAL STATEMENTS
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Deloitte & Touche LLP serves as the Trust's independent public accountants.
Financial information with respect to the Fund will be included in the Trust's
1998 Annual Report to Shareholders, which, when available, may be obtained free
of charge.
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