THE ADVISORS' INNER CIRCLE FUND
LSV
Value Equity Fund
Investment Adviser:
LSV
Asset Management
The Securities and Exchange Commission has not approved any Fund
shares or determined whether this prospectus is accurate or
complete. It is a crime for anyone to tell you otherwise.
PROSPECTUS
MARCH 15, 1999
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HOW TO READ THIS PROSPECTUS
The LSV Value Equity Fund (Fund) is a separate series of the Advisors'
Inner Circle Fund, a mutual fund family that offers separate investment
portfolios that have individual investment goals and strategies. This prospectus
gives you important information about the LSV Value Equity Fund that you should
know before investing. Please read this prospectus and keep it for future
reference.
This prospectus has been arranged into different sections so that you can
easily review this important information. On the next page, there is some
general information you should know about the Fund. For more detailed
information about the Fund, please see:
PAGE
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INVESTMENT STRATEGIES AND PRINCIPAL RISKS................... 2
PERFORMANCE INFORMATION AND EXPENSES........................ 3
MORE INFORMATION ABOUT RISK................................. 4
THE FUND'S OTHER INVESTMENTS................................ 4
THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS............... 4-5
PURCHASING AND SELLING FUND SHARES.......................... 6
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................... 7
HOW TO OBTAIN MORE INFORMATION ABOUT THE LSV VALUE EQUITY
FUND...................................................... Back Cover
1
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LSV VALUE EQUITY FUND
FUND SUMMARY
<TABLE>
<S> <C>
Investment Goal........................... Long-term growth of capital
Investment Focus.......................... Medium to large capitalization U.S. common
stocks
Share Price Volatility.................... High
Principal Investment Strategy............. Investing in undervalued stocks which are
out-of-favor in the market
Investor Profile.......................... Investors who seek long-term growth of capital
and income and are willing to bear the risk of
investing in equity securities
</TABLE>
INVESTMENT STRATEGY OF THE LSV VALUE EQUITY FUND
The Fund invests primarily in common stocks of large and medium U.S. companies
(i.e., those with market capitalization of $1 billion or more) which, in the
Adviser's opinion, are out-of-favor (undervalued) in the marketplace at the time
of purchase and have potential for near-term appreciation. The Fund may also
invest to a lesser extent in common stocks of such undervalued companies with
small market capitalization (between $500 million and $1 billion). The Adviser
believes that these out-of-favor securities will produce superior future returns
if their future growth exceeds the market's low expectations. The Fund expects
to remain as fully invested in the above securities as practicable, but in any
case, at least 65% of its assets will be invested in these securities.
The Adviser's investment strategy uses a strictly quantitative investment model
to make investment decisions for the Fund. The investment model ranks securities
based on fundamental measures of value (such as the price-to-earnings ratio) and
indicators of near-term appreciation potential (such as recent price
appreciation). The investment model selects the stocks to buy from the
higher-ranked stocks and selects stocks to sell from those whose rankings have
decreased. This investment strategy seeks to control overall portfolio risk
while seeking to maximize the expected return. The Fund is expected to
experience a low level of portfolio turnover.
PRINCIPAL RISKS OF INVESTING IN THE LSV VALUE EQUITY FUND
Since it purchases common stocks, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies.
These securities may be traded over-the-counter or listed on an exchange and may
or may not pay dividends.
The Fund is also subject to the risk that its market segment, mid to large cap
equity value securities, may underperform other equity market segments or the
equity markets as a whole.
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PERFORMANCE INFORMATION
The Fund is new and had no performance information available at the time this
prospectus was printed.
FUND FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses deducted from Fund assets)
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Investment Advisory Fees.................................... .55%
Other Expenses.............................................. .77%
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Total Annual Fund Operating Expenses........................ 1.32%*
* The Fund's total actual annual fund operating expenses are expected to be less
than the amount shown above because the Adviser is waiving a portion of the
fees in order to keep total operating expenses at a specified level. The
Adviser may discontinue all or part of these waivers at any time. With these
fee waivers, the Fund's actual total operating expenses are estimated to be as
follows:
LSV Value Equity Fund................................. .90%
For more information about these fees, see "Investment Adviser."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
operating expenses remain the same. Although your actual costs and returns might
be different, your estimated costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
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$134 $418
3
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MORE INFORMATION ABOUT RISK
The Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
The Fund has an investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help the
Fund achieve its goal. Still, investing in the Fund involves risk and there is
no guarantee that the Fund will achieve its goal. An investment manager's
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. In fact, no matter how good
a job an investment manager does, you could lose money on your investment in the
Fund, just as you could with other investments.
The value of your investment in the Fund is based on the market value of the
securities the Fund holds. These prices change daily due to economic and other
events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities the Fund owns and the markets in which they trade. The
effect on the Fund of a change in the value of a single security will depend on
how widely the Fund diversifies its holdings.
YEAR 2000 RISK
The Fund depends on the smooth functioning of computer systems in almost every
aspect of its business. Like other mutual funds, businesses and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process dates on and after January
1, 2000, and distinguish between the year 2000 and the year 1900. The Fund has
asked its service providers whether they expect to have their computer systems
adjusted for the year 2000 transition, and is seeking assurances from each
service provider that they are devoting significant resources to prevent
material adverse consequences to the Fund. While it is likely that such
assurances will be obtained, the Fund and its shareholders may experience losses
if these assurances prove to be incorrect or as a result of year 2000 computer
difficulties experienced by issuers of portfolio securities or third parties,
such as custodians, banks, broker-dealers or others with which the Fund does
business.
THE FUND'S OTHER INVESTMENTS
This prospectus describes the Fund's primary strategies, and the Fund will
normally invest in the types of securities described in this prospectus.
However, in addition to the investments and strategies described in this
prospectus, the Fund also may invest in other securities, use other strategies
and engage in other investment practices. These investments and strategies, as
well as those described in this prospectus, are described in detail in our
Statement of Additional Information. For liquidity purposes, the Fund may invest
a portion of its assets in cash, money market instruments or equity index
futures contracts. But, the Fund intends to remain as fully invested as
practicable regardless of market conditions. Of course, we cannot guarantee that
the Fund will achieve its investment goal.
INVESTMENT ADVISER
The Investment Adviser makes investment decisions for the Fund and continuously
reviews, supervises and administers the Fund's investment program. The Board of
Trustees of the Advisors' Inner Circle Fund supervises the Adviser and
establishes policies that the Adviser must follow in its management activities.
LSV Asset Management (LSV) serves as the Adviser to the Fund. Formed in 1994,
LSV is a quantitative value equity manager providing active asset management for
institutional clients through the application of proprietary models. As of
December 31, 1998, LSV had approximately $ 4.2 billion in assets under
management. For its services, the Adviser is entitled to an annual investment
advisory fee of .55% of the average daily net assets of the Fund. The Adviser
has voluntarily agreed to waive a portion of its fees and reimburse certain
expenses of the Fund so that total operating expenses do not exceed .90% of the
Fund's average daily net assets. The Adviser may discontinue all or part of this
waiver at any time.
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PORTFOLIO MANAGERS
Josef Lakonishok has served as CEO, Partner and Portfolio Manager for LSV since
its founding in 1994. He has more than 20 years of investment and research
experience. In addition to his duties at LSV, Mr. Lakonishok serves as the
William G. Karnes Professor of Finance at the University of Illinois at
Urbana-Champaign.
Robert Vishny has served as a Partner and Portfolio Manager of LSV since its
founding in 1994. He has more than 13 years of investment and research
experience. In addition to his duties at LSV, Mr. Vishny serves as the Eric J.
Gleacher Professor of Finance at the University of Chicago.
Menno Vermuelen has served as a Portfolio Manager and Senior Quantitative
Analyst of LSV since 1995 and a Partner since 1998. He has more than 8 years of
investment experience. Prior to joining LSV, Mr. Vermuelen served as a portfolio
manager for ABP Investments.
THE ADVISER'S PAST PERFORMANCE
The following table represents the average annual total return and the one year
total returns for all of the accounts managed by LSV with investment goals and
strategies that are substantially similar to those of the LSV Value Equity Fund,
and a comparison to the Fund's performance benchmark. These similarly managed
accounts are referred to as a "composite." The composite was managed by the same
portfolio managers that currently manage the investments of the Fund. The
composite performance has been adjusted using the estimated total operating
expenses of the Fund, based on the Adviser's voluntary agreement to waive its
fees and reimburse Fund expenses to limit the Fund's expenses to .90% of average
daily net assets. The comparison of the composite to the benchmark is meant to
provide you with a general sense of how the composite performed compared to an
appropriate broad-based equity market index. The past performance of the
composite is no guarantee of the future performance of the Fund.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN FOR THE ONE YEAR TOTAL RETURN FOR THE
PERIODS ENDED DECEMBER 31, 1998 PERIODS ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
SINCE
COMPOSITE/BENCHMARK 1 YEAR 3 YEAR 5 YEAR INCEPTION* 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LSV Large Cap Value Composite
(gross of fees) 9.8% 24.8% 23.1% 23.0% 39.1% 27.2% 41.5% 2.6%
LSV Large Cap Value Composite
(net of fees)** 8.8% 23.7% 22.0% 21.9% 37.9% 26.1% 40.2% 1.7%
Russell 1000 Value Index 15.6% 23.9% 20.9% 20.9% 35.2% 21.6% 38.3% (2.0%)
====================================================================================================================================
</TABLE>
* Inception date 12/1/93.
** Gross returns adjusted for estimated annual fees of .90%.
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Frank Russell 1000 Value Index is a widely-
recognized, capitalization-weighted (companies with larger market
capitalizations have more influence than those with smaller market
capitalization) index of the 1000 largest U.S. companies with lower forecasted
growth rates and price-to-book ratios.
5
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PURCHASING AND SELLING FUND SHARES
This section tells you how to buy and sell (sometimes called "redeem") shares of
the Fund.
The Fund is for individual and institutional investors.
HOW TO PURCHASE FUND SHARES
To purchase shares directly from us, please call 1-888-FUND-LSV, or complete and
send in the application. Unless you arrange to pay by wire, write your check,
payable in U.S. dollars, to "LSV Value Equity Fund." The Fund cannot accept
third-party checks, credit cards, credit card checks or cash.
Shares of the Fund may also be purchased "in-kind," subject to the Adviser's
determination that the securities are acceptable investments for the Fund. In an
in-kind purchase, investors transfer securities to the Fund in exchange for Fund
shares. Securities accepted by the Fund in an in-kind purchase will be valued at
market value. More information about in-kind purchases is discussed in our
Statement of Additional Information.
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its
procedures, which may be different from the procedures for investing directly.
Your institution may charge a fee for its services, in addition to the fees
charged by the Fund. You will also generally have to address your correspondence
or questions regarding the Fund to your institution.
GENERAL INFORMATION
You may purchase shares by mail or wire on any day that the New York Stock
Exchange is open for business (a Business Day). Shares cannot be purchased by
Federal Reserve wire on days when either the New York Stock Exchange or the
Federal Reserve is closed.
The Fund may reject any purchase order if it determines that accepting the order
would not be in the best interests of the Fund or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after the Fund receives your purchase order.
The Fund calculates its NAV once each Business Day at the regularly-scheduled
close of normal trading on the New York Stock Exchange (normally, 4:00 p.m.
Eastern time). So, for you to receive the current Business Day's NAV, generally
the Fund must receive your purchase order before 4:00 p.m. Eastern time.
HOW WE CALCULATE NAV
NAV for one Fund share is the value of that share's portion of the net assets in
the Fund.
In calculating NAV, the Fund generally values its investment portfolio at market
price. If market prices are unavailable or the Fund thinks that they are
unreliable, fair value prices may be determined in good faith using methods
approved by the Board of Trustees.
MINIMUM PURCHASES
To purchase shares for the first time, you must invest at least $500,000 in the
Fund. There is no minimum for subsequent investments. The Fund may accept
investments of smaller amounts at its discretion.
HOW TO SELL YOUR FUND SHARES
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares.
If you own your shares directly, you may sell your shares on any Business Day by
contacting the Fund directly by mail or telephone at 1-888-FUND-LSV.
If you would like to close your account, or have your sale proceeds sent to a
third party or an address other than your own, please notify the Fund in writing
and include a signature guarantee by a bank or other financial institution (a
notarized signature is not sufficient).
6
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The sale price of each share will be the next NAV determined after the Fund
receives your request.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within seven days after we receive
your request. Your proceeds can be wired to your bank account (subject to a $10
fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK,
REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY
TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE).
REDEMPTIONS IN KIND
We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (or for the protection of the
Fund's remaining shareholders) we might pay all or part of your redemption
proceeds in securities with a market value equal to the redemption price
(redemption in kind). If your shares are redeemed in kind, you would probably
have to pay transaction costs to sell the securities distributed to you, as well
as taxes on any capital gains from the sale as with any redemption. The Fund may
also redeem in kind to discourage short-term trading of shares.
INVOLUNTARY REDEMPTIONS OF YOUR SHARES
If your account balance drops below $500,000 because of redemptions, the Fund
may redeem your shares. But, the Fund will always give you at least 60 days'
written notice to give you time to add to your account and avoid the involuntary
redemption of your shares.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
The Fund may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in our Statement of Additional Information.
TELEPHONE TRANSACTIONS
Purchasing and selling Fund shares over the telephone is extremely convenient,
but not without risk. Although the Fund has certain safeguards and procedures to
confirm the identity of callers and the authenticity of instructions, the Fund
is not responsible for any losses or costs incurred by following telephone
instructions we reasonably believe to be genuine. If you or your financial
institution transact with the Fund over the telephone, you will generally bear
the risk of any loss.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund distributes its income annually and the Fund makes distributions of
capital gains, if any, at least annually. If you own Fund shares on the Fund's
record date, you will be entitled to receive the distribution.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Fund
receives your written notice. To cancel your election, simply send the Fund
written notice.
TAXES
PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Fund and its shareholders. This summary is based on current tax
laws, which may change.
The Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from the Fund may be taxable whether or not you reinvest them. EACH SALE
OF FUND SHARES IS A TAXABLE EVENT.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
7
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LSV
Value Equity Fund
Investment Adviser:
LSV Asset Management
200 W. Madison Street, 27th Floor
Chicago, Illinois 60606
Distributor:
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
Legal Counsel:
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
More information about the Fund is available without charge through the
following:
Statement of Additional Information (SAI):
The SAI dated March 15, 1999, includes detailed information about the LSV Value
Equity Fund and The Advisors' Inner Circle Fund. The SAI is on file with the SEC
and is incorporated by reference into this prospectus. This means that the SAI,
for legal purposes, is a part of this prospectus.
Annual and Semi-Annual Reports:
These reports list the Fund's holdings and contain information from the Fund's
managers about strategies, and recent market conditions and trends. The reports
also contain detailed financial information about the Fund.
To Obtain More Information:
By Telephone: Call 1-888-FUND-LSV
By Mail: Write to us
LSV Value Equity Fund
c/o The Advisors' Inner Circle Fund
P.O. Box 419009
Kansas City, Missouri 64141-6009
From the SEC:
You can also obtain the SAI or the Annual and Semi-Annual reports, as well as
other information about The Advisors' Inner Circle Fund, from the SEC's website
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009. The Fund's Investment Company Act registration number
is 811-6400.
March 15, 1999
LSV-F-001-01000
<PAGE>
TRUST:
THE ADVISORS' INNER CIRCLE FUND
FUND:
LSV VALUE EQUITY FUND
INVESTMENT ADVISER:
LSV ASSET MANAGEMENT
This STATEMENT OF ADDITIONAL INFORMATION is not a prospectus and relates only to
the LSV Value Equity Fund (the "Fund"). It is intended to provide additional
information regarding the activities and operations of The Advisors' Inner
Circle Fund (the "Trust") and the Fund and should be read in conjunction with
the Fund's Prospectus dated March 15, 1999. The Prospectus for the Fund may be
obtained by calling 1-888-FUND-LSV.
TABLE OF CONTENTS
THE TRUST................................................................S - 2
INVESTMENT OBJECTIVE AND POLICIES........................................S - 2
DESCRIPTION OF ADDITIONAL INVESTMENTS....................................S - 2
INVESTMENT LIMITATIONS...................................................S - 6
THE ADVISER..............................................................S - 8
THE ADMINISTRATOR........................................................S - 9
THE DISTRIBUTOR..........................................................S - 11
THE TRANSFER AGENT.......................................................S - 11
THE CUSTODIAN............................................................S - 11
INDEPENDENT PUBLIC ACCOUNTANTS...........................................S - 11
LEGAL COUNSEL............................................................S - 11
TRUSTEES AND OFFICERS OF THE TRUST.......................................S - 11
PERFORMANCE INFORMATION..................................................S - 15
CALCULATION OF TOTAL RETURN..............................................S - 15
PURCHASING SHARES........................................................S - 15
REDEEMING SHARES.........................................................S - 16
DETERMINATION OF NET ASSET VALUE.........................................S - 16
TAXES ................................................................S - 16
FUND TRANSACTIONS........................................................S - 20
TRADING PRACTICES AND BROKERAGE..........................................S - 20
DESCRIPTION OF SHARES....................................................S - 21
SHAREHOLDER LIABILITY....................................................S - 21
LIMITATION OF TRUSTEES' LIABILITY........................................S - 22
March 15, 1999
LSV-F-002-01
<PAGE>
THE TRUST
This Statement of Additional Information ("SAI") relates only to the LSV Value
Equity Fund (the "Fund"). As of the date of this SAI, the Fund had not yet
commenced the continuous offering of its shares. The Fund is a separate series
of The Advisors' Inner Circle Fund (the "Trust"), an open-end investment
management company established under Massachusetts law as a Massachusetts
business trust under a Declaration of Trust dated July 18, 1991. The Declaration
of Trust permits the Trust to offer separate series ("portfolios") of shares of
beneficial interest ("shares"). Each portfolio is a separate mutual fund, and
each share of each portfolio represents an equal proportionate interest in that
portfolio. See "Description of Shares." No investment in shares of a portfolio
should be made without first reading that portfolio's prospectus. Capitalized
terms not defined herein are defined in the Prospectus offering shares of the
Fund.
The Fund pays its (i) operating expenses, including fees of its service
providers, expenses of preparing prospectuses, proxy solicitation material and
reports to shareholders, costs of custodial services and registering its shares
under federal and state securities laws, pricing and insurance expenses and pays
additional expenses, brokerage costs, interest charges, taxes and organization
expenses and (ii) pro rata share of the Trust's other expenses, including audit
and legal expenses. The Fund's expense ratios are disclosed under "Fund Fees and
Expenses" in the Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks long term growth of capital. The Fund intends to be as fully
invested as practicable (at least 65% of its total assets under normal
conditions) in common stocks as described in the Prospectus. However, the Fund
may also invest in warrants, rights to purchase common stocks, debt securities
convertible into common stocks and preferred stocks. A portion of the Fund may
also be invested in investment grade fixed income securities, cash and money
market securities. Investment grade fixed income securities are debt securities
rated in one of the four highest rating categories ("investment grade") by a
nationally recognized statistical rating organization (an "NRSRO") or that the
Adviser determines are of comparable quality. The Fund may also make limited use
of equity index futures contracts for liquidity purposes.
In order to generate additional income, the Fund may lend securities which it
owns. The Fund may also invest in repurchase agreements.
DESCRIPTION OF ADDITIONAL INVESTMENTS
The Fund may invest in any of the following instruments for temporary cash
management purposes:
BANKERS' ACCEPTANCES -- A bankers' acceptance is a bill of exchange or time
draft drawn on and accepted by a commercial bank. It is used by corporations to
finance the shipment and storage of goods and to furnish dollar exchange.
Maturities are generally six months or less.
S - 2
<PAGE>
CERTIFICATES OF DEPOSIT -- A certificate of deposit is a negotiable,
interest-bearing instrument with a specific maturity. Certificates of deposit
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 have penalties for early withdrawal.
COMMERCIAL PAPER -- Commercial paper is the term used to designate unsecured,
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a day to nine months.
Futures Contracts -- Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a specific security at a
specified future time and at a specified price.
The Fund may use futures contracts for bona fide hedging purposes or to gain
exposure to a particular portion of the equity market or instrument. The Fund
will minimize the risk that it will be unable to close out a futures contract by
only entering into futures contracts which are traded on national futures
exchanges and for which there appears to be a liquid secondary market.
Index futures are futures contracts for various indices that are traded on
registered securities exchanges. An index futures contract obligates the seller
to deliver (and the purchaser to take) an amount of cash equal to a specific
dollar amount times the difference between the value of a specific index at the
close of the last trading day of the contract and the price at which the
agreement is made.
Although futures contracts by their terms call for actual delivery or acceptance
of the underlying securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery. Closing out an
open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract which has
previously been "purchased") in an identical contract to terminate the position.
Brokerage commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with or for the account of a broker or custodian to
initiate and maintain open positions in futures contracts until a contract is
closed out. However, there is no certainty that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, the Fund would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily margin requirements
at a time when it may be disadvantageous to do so. In addition, the Fund may be
required to make delivery of the instruments underlying the futures contracts
they hold. The inability to close futures positions also could have an adverse
impact on the ability to effectively gain exposure to the portion of the equity
market represented by the underlying index.
S - 3
<PAGE>
The risk of loss in trading futures contracts can be substantial, due both to
the low margin deposits required and the extremely high degree of leverage
involved in futures pricing. As a result, a relatively small price movement in a
futures contract may result in immediate and substantial loss (or gain) to the
Fund. For example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of the
futures contract would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the original margin deposit if
the contract were closed out. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the contract. However, the
Adviser will not use futures contracts for leverage purposes and, does not
believe that the Fund will generally be subject to the risks of loss frequently
associated with futures transactions. The Fund presumably would have sustained
comparable losses if, instead of the futures contract, they had invested in the
underlying financial instrument and sold it after the decline.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some futures
traders to substantial losses.
ILLIQUID SECURITIES - Illiquid securities are securities that cannot be disposed
of within seven days at approximately the price at which they are being carried
on the Fund's books. Illiquid securities include demand instruments with a
demand notice period exceeding seven days, when there is no secondary market for
such security and repurchase agreements with durations over seven days in
length.
INVESTMENT COMPANY SHARES -- The Fund may invest up to 10% of its total assets
in shares of other investment companies that invest exclusively in those
securities in which the Fund may invest directly. 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
S - 4
<PAGE>
(3) securities (other than treasury stock) issued by all investment companies
represent more than 10% of the total assets of the Fund.
MONEY MARKET INSTRUMENTS -- Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They consist of: (i) bankers'
acceptances, certificates of deposits, notes and time deposits of U.S. banks and
U.S. branches of foreign banks; (ii) U.S. Treasury obligations and obligations
of agencies and instrumentalities of the U.S. Government; (iii) commercial paper
issued by U.S. and foreign corporations rated in one of the two highest ratings
categories by an NRSRO; (iv) debt obligations with a maturity of one year or
less issued by corporations that issue commercial paper rated in one of the two
highest ratings categories by an NRSRO; and (v) repurchase agreements involving
any of the foregoing obligations entered into with highly-rated banks and
broker-dealers.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a person
(e.g., the Fund) obtains a security and simultaneously commits to return the
security to the seller (a primary securities dealer as recognized by the Federal
Reserve Bank of New York or a national member bank as defined in Section 3(d)(1)
of the Federal Deposit Insurance Act, as amended) at an agreed upon price
(including principal and interest) on an agreed upon 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.
Repurchase agreements are considered to be loans by the Fund for purposes of its
investment limitations. 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 102% 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 appropriate 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
the sale including accrued interest are less than the resale price provided in
the agreement including interest. In addition, even though the Bankruptcy Code
provides protection for most repurchase agreements, if the seller should be
involved in bankruptcy or insolvency 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.
SECURITIES LENDING --The Fund may lend securities pursuant to agreements which
require that the loans be continuously secured by collateral at all times equal
to 100% of the market value of the loaned securities which consists of: cash,
securities of the U.S. Government or its agencies, or any combination of cash
and such securities. 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.
S - 5
<PAGE>
However, the Fund will normally pay lending fees to such broker-dealers and
related expenses from the interest earned on invested collateral. 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 appropriate Adviser to be of good standing and when, in the
judgment of that 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 an Adviser as a broker in these
transactions.
U.S. GOVERNMENT AGENCY OBLIGATIONS -- U.S. Government agency obligations are
obligations issued or guaranteed by agencies or instrumentalities of the U.S.
Government. Agencies of the United States Government which issue obligations
consist of, among others, the Export Import Bank of the United States, Farmers
Home Administration, Federal Farm Credit Bank, Federal Housing Administration,
Government National Mortgage Association ("GNMA"), Maritime Administration,
Small Business Administration and The Tennessee Valley Authority. Obligations of
instrumentalities of the United States Government include securities issued by,
among others, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation
("FHLMC"), Federal Intermediate Credit Banks, Federal Land Banks, Fannie Mae and
the United States Postal Service as well as government trust certificates. 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 and still others are supported only by the credit of the
instrumentality. Guarantees of principal by agencies or instrumentalities of the
U.S. 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 the value of the obligation prior to maturity.
INVESTMENT LIMITATIONS
FUNDAMENTAL POLICIES
The following investment limitations are fundamental policies of the Fund that
cannot be changed without the consent of the holders of a majority of the Fund's
outstanding shares. The phrase "majority of the outstanding shares" means the
vote of (i) 67% or more of the Fund's shares present at a meeting, if more than
50% of the outstanding shares of the Fund are present or represented by proxy,
or (ii) more than 50% of the Fund's outstanding shares, whichever is less.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements involving such securities) if as a result
more than 5% of the total assets of the Fund would be invested in the
securities of such issuer. This restriction applies to 75% of the
Fund's total assets.
S - 6
<PAGE>
2. Purchase any securities which would cause 25% or more of the total
assets of the Fund to be invested in the securities of one or more
issuers conducting their principal business activities in the same
industry, provided that this limitation does not apply to investments
in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements involving such
securities. For purposes of this limitation, (i) utility companies will
be classified according to their services, for example, gas
distribution, gas transmission, electric and telephone will each be
considered a separate industry; and (ii) financial service companies
will be classified according to the end users of their services, for
example, automobile finance, bank finance and diversified finance will
each be considered a separate industry.
3. Acquire more than 10% of the voting securities of any one issuer.
4. Invest in companies for the purpose of exercising control.
5. Issue any class of senior security or sell any senior security of which
it is the issuer, except that the Fund may borrow from any bank,
provided that immediately after any such borrowing there is asset
coverage of at least 300% for all borrowings of the Fund, and further
provided that, to the extent that such borrowings exceed 5% of the
Fund's total assets, all borrowings shall be repaid before the Fund
makes additional investments. The term "senior security" shall not
include any temporary borrowings that do not exceed 5% of the value of
the Fund's total assets at the time the Fund makes such temporary
borrowing. In addition, investment strategies that either obligate the
Fund to purchase securities or require the Fund to segregate assets
will not be considered borrowings or senior securities. This investment
limitation shall not preclude the Fund from issuing multiple classes of
shares in reliance on SEC rules or orders.
6. Make loans if, as a result, more than 33 1/3% of its total assets would
be lent to other parties, 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) lend its
securities.
7. Purchase or sell real estate, real estate limited partnership
interests, physical commodities or commodities contracts except that
the Fund may purchase commodities contracts relating to financial
instruments, such as financial futures contracts and options on such
contracts.
8. 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 and
sell securities short "against the box."
9. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling the Fund security.
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<PAGE>
10. Purchase securities of other investment companies except as permitted
by the Investment Company Act of 1940, as amended (the "1940 Act") and
the rules and regulations thereunder.
The foregoing percentages apply at the time of the purchase of a security.
NON-FUNDAMENTAL POLICIES
The following investment limitation of the Fund is non-fundamental and may be
changed by the Trust's Board of Trustees without shareholder approval:
1. The Fund may not invest in illiquid securities in an amount exceeding,
in the aggregate, 15% of the Fund's net assets.
Except with respect to the Fund's policy concerning borrowing and illiquid
securities, if a percentage restriction is adhered to at the time of an
investment, a later increase or decrease in percentage resulting from changes in
values or assets will not constitute a violation of such restriction.
THE ADVISER
LSV Asset Management (the "Adviser") and the Trust have entered into an advisory
agreement dated March 15, 1999 (the "Advisory Agreement"). The Advisory
Agreement provides that the Adviser shall not be protected against any liability
to the Trust or its shareholders by reason of willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or from reckless
disregard of its obligations or duties thereunder.
Formed in 1994, the Adviser is a quantitative value equity manager providing
active management through the application of proprietary models. The principals
of this Delaware general partnership are Josef Lakonishok, Andrei Shleifer,
Robert Vishny, Menno Vermuelen and Christopher LaCroix. The general partners of
the partnership are Lakonishok Corporation, Shleifer Corporation, Vishny
Corporation, Menno LLC, LaCroix LLC, and SEI Funds, Inc. SEI Investment Company
is the parent of SEI Funds, Inc. As of December 31, 1998 LSV had approximately
$4.2 billion in assets under management. The principal business address of the
Adviser is 200 W. Madison Street, 27th Floor, Chicago, Illinois 60606.
Under the Advisory Agreement, the Adviser makes the investment decisions for the
assets of the Fund and continuously reviews, supervises and administers the
Fund's investment program, subject to the supervision of, and policies
established by, the Trustees of the Trust. In addition to advising the Funds,
the Adviser provides advisory services to institutional investors and serves as
a sub-adviser to registered investment companies.
S - 8
<PAGE>
The continuance of the Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees or by a
vote of the shareholders of the Fund, 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 Advisory Agreement will terminate automatically in the event
of its assignment, and is terminable at any time without penalty by the Trustees
of the Trust or, with respect to the Fund, by a majority of the outstanding
shares of that Fund, on not less than 30 days' nor more than 60 days' written
notice to the Adviser, or by the Adviser on 90 days' written notice to the
Trust.
For its services, the Adviser is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate of .55% of the average daily net assets of
the Fund. The Adviser has voluntarily agreed to waive a portion of its advisory
fees in order to limit total operating expenses of the Fund to not more than
.90% of average daily net assets. The Adviser reserves the right, in its sole
discretion, to terminate its fee waiver at any time.
Prior to the effective date of the Prospectus, the Fund had not commenced
operations and therefore did not pay advisory fees.
PORTFOLIO MANAGEMENT
Messrs. Lakonishok, Shleifer and Vishny have developed proprietary computer
models based on their research of investor behavior and the performance of
contrarian investment strategies. The portfolio decision making process is
strictly quantitative and driven by (i) a proprietary computer model which ranks
securities based on fundamental measures of value and indicators of near-term
appreciation potential and, (ii) a risk control process that controls for
residual benchmark risk while attempting to maximize the expected return of the
portfolios. Refinements to the model are made as suggested by advances in the
Adviser's research and these refinements are generally incremental in nature.
The Adviser may modify the investment model used to manage the Fund at any time
without notice.
THE ADMINISTRATOR
SEI Investments Mutual Funds Services (the "Administrator"), serves as the
administrator of the Trust. The Administrator provides the Trust with
administrative services, including regulatory reporting and all necessary office
space, equipment, personnel and facilities. For these administrative services,
the Administrator is entitled to a fee from the Fund, which is calculated daily
and paid monthly, at an annual rate of 0.10% of the Fund's first $100 million of
average daily net assets; 0.08% of the next $100 million of average daily net
assets; and 0.07% of the Fund's average daily net assets over $200 million.
However, the Fund pays the Administrator a minimum annual fee of $75,000.
S - 9
<PAGE>
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 of its duties and obligations thereunder.
The Administration Agreement shall remain effective for the initial term of the
Agreement and each renewal term thereof unless earlier terminated (a) by the
mutual written agreement of the parties; (b) by either party of the
Administration Agreement on 90 days' written notice, as of the end of the
initial term or the end of any renewal term; (c) by either party of the
Administration Agreement on such date as is specified in written notice given by
the terminating party, in the event of a material breach of the Administration
Agreement by the other party, provided the terminating party has notified the
other party of such breach at least 45 days' prior to the specified date of
termination and the breaching party has not remedied such breach by the
specified date; (d) effective upon the liquidation of the Administrator; or (e)
as to the Fund or the Trust, effective upon the liquidation of the Fund or the
Trust, as the case may be.
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, Alpha Select Funds, The Arbor Fund, ARK Funds, Armada Funds, Bishop
Street Funds, Boston 1784 Funds(R), CrestFunds, Inc., CUFUND, The Expedition
Funds, First American Funds, Inc., First American Investment Funds, Inc., First
American Strategy Funds, Inc., HighMark Funds, Huntington Funds, The Nevis Fund,
Inc., Oak Associates Funds, The PBHG Funds, Inc., PBHG Advisor Funds, Inc., PBHG
Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI
Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid
Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust
and TIP Funds.
The Administrator will not be required to bear expenses of the Fund to an extent
which would result in the Fund's inability to qualify as a regulated investment
company under provisions of the Code. The term "expenses" is defined in such
laws or regulations, and generally excludes brokerage commissions, distribution
expenses, taxes, interest and extraordinary expenses.
S - 10
<PAGE>
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments, and the Trust are parties to a distribution agreement (the
"Distribution Agreement"). The Distributor will not receive compensation for
distribution of shares of the Fund.
The Distribution Agreement shall remain in effect for a period of two years
after the effective date of the agreement and 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 vote of the outstanding securities
of the Trust upon not more than 60 days' written notice by either party or upon
assignment by the Distributor.
THE TRANSFER AGENT
DST Systems, Inc., 330 W. 9th Street, Kansas City, Missouri 64105 serves as the
Trust's transfer agent.
THE CUSTODIAN
First Union National Bank, Broad and Chestnut Streets, P.O. Box 7618,
Philadelphia, Pennsylvania 19101 acts as custodian (the "Custodian") of the
Fund. The Custodian holds cash, securities and other assets of the Fund as
required by the 1940 Act.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP serves as independent public accountants for the Trust.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, D.C. 20036 serves
as legal counsel to the Trust.
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws of the Commonwealth of Massachusetts. The Trustees have approved contracts
under which, as described above, certain companies provide essential management
services to the Trust. 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 the 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, Alpha Select Funds, The Arbor Fund, ARK Funds,
S - 11
<PAGE>
Armada Funds, Bishop Street Funds, Boston 1784 Funds(R), CrestFunds, Inc.,
CUFUND, The Expedition Funds, First American Funds, Inc., First American
Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds,
Huntington Funds, The Nevis Fund, Inc., Oak Associates Funds, The Parkstone
Group of Funds, The PBHG Funds, Inc., PBHG Advisor Funds, Inc., PBHG Insurance
Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily
Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid
Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust
and TIP Funds, each of which is an open-end management investment company
managed by SEI Investments Mutual Funds Services or its affiliates and, except
for PBHG Advisor 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 SEI Investments, 1986-1994.
Director and Executive Vice President of the Administrator and the Distributor,
1981-1994. Trustee of The Arbor Fund, Boston 1784 Funds(R), The Expedition
Funds, 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 Institutional 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 Arbor Fund, The
Expedition Funds and Oak Associates Funds.
WILLIAM M. DORAN (DOB 05/26/40) -- Trustee* --1701 Market Street, Philadelphia,
PA 19103-2921. Partner, Morgan, Lewis & Bockius LLP (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 Arbor Fund, The Expedition Funds, Oak Associates
Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI
Institutional 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 Arbor Fund, The Expedition Funds 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
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<PAGE>
Chief Executive Office of Jos. Schlitz Brewing Company before 1978. Trustee
of The Arbor Fund, The Expedition Funds and Oak Associates Funds.
JAMES M. STOREY (DOB 04/12/31) -- Trustee** -- Partner, Dechert Price & Rhoads,
from September 1987 - December 1993; Trustee of The Arbor Fund, The Expedition
Funds, Oak Associates Funds, SEI Asset Allocation Trust, SEI Daily Income Trust,
SEI Index Funds, SEI Institutional Investments Trust, SEI Institutional Managed
Trust, SEI Institutional International Trust, SEI Liquid Asset Trust and SEI Tax
Exempt Trust.
GEORGE J. SULLIVAN, JR. (DOB 11/13/42) -- Trustee** -- Chief Executive Officer,
Newfound Consultants Inc. since April 1997. General Partner, Teton Partners,
L.P., June 1991- December 1996; Chief Financial Officer, Noble Partners, L.P.,
March 1991-December 1996; Treasurer and Clerk, Peak Asset Management, Inc.,
since 1991; Trustee, Navigator Securities Lending Trust, since 1995. Trustee of
The Arbor Fund, The Expedition Funds, Oak Associates Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Liquid Asset Trust, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI
Institutional International Trust and SEI Tax Exempt Trust.
TODD B. CIPPERMAN (DOB 02/14/66) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of SEI Investments, the Administrator and
the Distributor since 1995. Associate, Dewey Ballantine (law firm), 1994-1995.
Associate, Winston & Strawn (law firm) 1991-1994.
JAMES R. FOGGO (DOB 06/30/64) -- Vice President and Assistant Secretary -- Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Associate, Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998.
Associate, Baker & McKenzie (law firm), 1995-1998. Associate, Battle Fowler
L.L.P. (law firm), 1993-1995. Operations Manager, The Shareholder Services
Group, Inc., 1986-1990.
LYDIA A. GAVALIS (DOB 06/05/64) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of the Administrator and the Distributor
since 1998. Assistant General Counsel and Director of Arbitration, Philadelphia
Stock Exchange, 1989-1998.
KATHY HEILIG (DOB 12/21/58) -- Vice President and Assistant Secretary --
Treasurer of SEI Investments since 1997; Assistant Controller of SEI Investments
since 1995; Vice President of SEI Investments since 1991; Director of Taxes of
SEI Investments, 1987 to 1991. Tax Manager, Arthur Andersen LLP prior to 1987.
JOSEPH M. O'DONNELL (DOB 11/13/54) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of the Administrator and the Distributor
since 1998. Vice President and General Counsel, FPS Services, Inc., 1993-1997.
Staff Counsel and Secretary, Provident Mutual Family of Funds, 1990-1993.
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<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 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.
LYNDA J. STRIEGEL (DOB 10/30/48) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of the Administrator and the Distributor
since 1998. Senior Asset Management Counsel, Barnett Banks, Inc., 1997-1998.
Partner, Groom and Nordberg, Chartered, 1996-1997. Associate General Counsel,
Riggs Bank, N.A., 1991-1995.
MARK E. NAGLE (DOB 10/20/59) -- Controller and Chief Financial Officer -- Vice
President of Fund Accounting and Administration for SEI Fund Resources and Vice
President of the Administrator since 1996. Vice President of the Distributor
since December 1997. Vice President, Fund Accounting, BISYS Fund Services,
September 1995 to November 1996. Senior Vice President and Site Manager,
Fidelity Investments 1981 to September 1995.
JOHN H. GRADY, JR. (DOB 06/01/61) -- Secretary --1701 Market Street,
Philadelphia, PA 19103-2921, Partner since 1995, Morgan, Lewis & Bockius LLP
(law firm), counsel to the Trust, SEI Investments, the Administrator and the
Distributor.
- ----------
*Messrs. Nesher and Doran are Trustees who may be deemed to be
"interested" persons of the Fund as that term is defined in the 1940 Act.
**Messrs. Cooney, Patterson, Peters, Storey and Sullivan serve as members of the
Audit Committee of the Fund.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for unaffiliated Trustees.
The following table exhibits Trustee compensation for the fiscal year ended
October 31, 1998.
<TABLE>
<CAPTION>
Aggregate Pension or Estimated Total Compensation From
Name of Person, Position Compensation From Retirement Benefits annual Registrant and Fund
Registrant for the Accrued as Part of benefits Upon Complex* Paid to Trustees for
Fiscal Year Ended Trust Expenses Retirement the Fiscal period Ended
October 31, 1998 October 31, 1998
- -------------------------------- -------------------- ------------------- ------------- --------------------------
<S> <C> <C> <C> <C>
John T. Cooney, Trustee $8,142 N/A N/A $29,000 for services on 1
board
- -------------------------------- -------------------- ------------------- ------------- --------------------------
**Frank E. Morris, Trustee $8,142 N/A N/A $29,000 for services on 1
board
- -------------------------------- -------------------- ------------------- ------------- --------------------------
Robert Patterson, Trustee $8,337 N/A N/A $30,000 for services on 1
board
- -------------------------------- -------------------- ------------------- ------------- --------------------------
Eugene B. Peters, Trustee $8,337 N/A N/A $30,000 for services on 1
board
- -------------------------------- -------------------- ------------------- ------------- --------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Aggregate Pension or Estimated Total Compensation From
Name of Person, Position Compensation From Retirement Benefits annual Registrant and Fund
Registrant for the Accrued as Part of benefits Upon Complex* Paid to Trustees for
Fiscal Year Ended Trust Expenses Retirement the Fiscal period Ended
October 31, 1998 October 31, 1998
- -------------------------------- -------------------- ------------------- ------------- --------------------------
<S> <C> <C> <C> <C>
James M. Storey, Esq., Trustee $8,337 N/A N/A $30,000 for services on 1
board
- -------------------------------- -------------------- ------------------- ------------- --------------------------
William M. Doran, Esq., Trustee $0 N/A N/A $0 for service on 1 board
- -------------------------------- -------------------- ------------------- ------------- --------------------------
Robert A. Nesher, Chairman of the $0 N/A N/A $0 for service on 1 board
Board
================================ ==================== ==================== ============== ==========================
</TABLE>
*For purposes of this table, the Trust is the only investment company in the
"Fund Complex."
** Retired December 31, 1998.
PERFORMANCE INFORMATION
From time to time, the Trust may advertise total return of the Fund. These
figures will be based on the Fund's historical earnings and are not intended to
indicate future performance. No representation can be made concerning actual
future returns.
PERFORMANCE COMPARISONS
The Fund may periodically compare its performance to other mutual funds tracked
by mutual fund rating services, to broad groups of comparable mutual funds, or
to unmanaged indices. These comparisons to unmanaged indices may assume
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs.
CALCULATION OF TOTAL RETURN
The total return of the Fund refers to the average compounded rate of return to
a hypothetical investment for designated time periods (including, but not
limited to, the period from which that Fund commenced operations through the
specified date), assuming that the entire investment is redeemed at the end of
each period. In particular, total return will be calculated according to the
following formula: P (1 + T)n = ERV, where P = a hypothetical initial payment of
$1,000; T = average annual total return; n = number of years; and ERV = ending
redeemable value, as of the end of the designated time period, of a hypothetical
$1,000 payment made at the beginning of the designated time period.
PURCHASING SHARES
Purchases and redemptions may be made through the Distributor on a day on which
the New York Stock Exchange is open for business, except Good Friday. Shares of
the Fund are offered on a continuous basis. Currently, the holidays observed by
the New York Stock Exchange are as follows: New Year's Day, Presidents' Day,
Martin Luther King Jr. Day, Memorial Day, Independence Day, Labor Day, Columbus
Day, Veterans' Day, Thanksgiving and Christmas.
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REDEEMING SHARES
It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by the Fund in
lieu of cash. Shareholders may incur brokerage charges on the sale of any such
securities so received in payment of redemptions. The Trust has received
exemptive relief from the Securities and Exchange Commission (the "SEC"), which
permits the Trust to make in-kind redemptions to those shareholders that are
affiliated with the Fund solely by their ownership of a certain percentage of
the Fund.
A Shareholder will at all times be entitled to aggregate cash redemptions from
all portfolios of the Trust during any 90-day period of up to the lesser of
$250,000 or 1% of the Trust's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
the disposal or valuation of the Fund's securities is not reasonably
practicable, or for such other periods as the SEC has by order permitted. The
Trust also reserves the right to suspend sales of shares of any Fund for any
period during which the New York Stock Exchange, the Federal Reserve Banks, the
Adviser, the Administrator, the Transfer Agent and/or the Custodian are not open
for business.
DETERMINATION OF NET ASSET VALUE
The securities of the Fund are valued by the Administrator. The Administrator
will use an independent pricing service to obtain valuations of securities. The
pricing service relies primarily on prices of actual market transactions as well
as trader quotations. However, the service may also use a matrix system to
determine valuations of fixed income securities, which system considers such
factors as security prices, yields, maturities, call features, ratings and
developments relating to specific securities in arriving at valuations. The
procedures of the pricing service and its valuations are reviewed by the
officers of the Trust under the general supervision of the Trustees.
TAXES
The following is only a summary of certain additional federal income tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the Fund's prospectus is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax advisors with
specific reference to their own tax situations, including their state and local
tax liabilities.
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FEDERAL INCOME TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following general discussion of certain federal income tax consequences is
based on the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations issued thereunder as in effect on the date of this SAI. New
legislation, as well as administrative changes or court decisions, may
significantly change the conclusions expressed herein, and may have a
retroactive effect with respect to the transactions contemplated herein.
QUALIFICATION AS REGULATED INVESTMENT COMPANY
The Fund intends to qualify and elect to be treated as a "regulated investment
company" ("RIC") as defined under Subchapter M of the Code. By following such a
policy, the Fund expects to eliminate or reduce to a nominal amount the federal
taxes to which it may be subject.
In order to qualify as a RIC, the Fund must distribute at least 90% of its net
investment income (generally, includes dividends, taxable interest, and the
excess of net short-term capital gains over net long-term capital losses less
operating expenses) and at least 90% of its net tax exempt interest income, for
each tax year, if any, to its shareholders and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
the Fund's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stock or securities, or certain other income; (ii) at the
close of each quarter of the Fund's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RICs and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does not
exceed 5% of the value of the Fund's assets and that does not represent more
than 10% of the outstanding voting securities of such issuer; and (iii) at the
close of each quarter of the Fund's taxable year, not more than 25% of the value
of its assets may be invested in securities (other than U.S. Government
securities or the securities of other RICs) of any one issuer or of two or more
issuers that the Fund controls or that are engaged in the same, similar or
related trades or business.
Although the Fund intends to distribute substantially all of its net investment
income and may distribute its capital gains for any taxable year, the Fund will
be subject to federal income taxation to the extent any such income or gains are
not distributed.
If the Fund fails to qualify for any taxable year as a RIC, all of its taxable
income will be subject to tax at regular corporate income tax rates without any
deduction for distributions to shareholders and such distributions generally
will be taxable to shareholders as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits. In this event,
distributions generally will be eligible for the dividends-received deduction
for corporate shareholders.
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FUND DISTRIBUTIONS
Distributions of investment company taxable income will be taxable to
shareholders as ordinary income, regardless of whether such distributions are
paid in cash or are reinvested in additional Shares, to the extent of the Fund's
earnings and profits. The Fund anticipates that it will distribute substantially
all of its investment company taxable income for each taxable year.
The Fund may either retain or distribute to shareholders its excess of net
long-term capital gains over net short-term capital losses ("net capital
gains"). If such gains are distributed as a capital gains distribution, they are
taxable to shareholders who are individuals at a maximum rate of 20%, regardless
of the length of time the shareholder has held shares. If any such gains are
retained, the Fund will pay federal income tax thereon.
In the case of corporate shareholders, distributions (other than capital gains
distributions) from a RIC, generally qualify for the dividends-received
deduction only to the extent of the gross amount of qualifying dividends
received by the Fund for the year. Generally, and subject to certain
limitations, a dividend will be treated as a qualifying dividend if it has been
received from a domestic corporation. Accordingly, such distributions will
generally qualify for the corporate dividends-received deduction.
Ordinarily, investors should include all dividends as income in the year of
payment. However, dividends declared payable to shareholders of record in
December of one year, but paid in January of the following year, will be deemed
for tax purposes to have been received by the shareholder and paid by the Fund
in the year in which the dividends were declared.
The Fund will provide a statement annually to shareholders as to the federal tax
status of distributions paid (or deemed to be paid) by the Fund during the year,
including the amount of dividends eligible for the corporate dividends-received
deduction.
Sale or Exchange of Fund Shares
Generally, gain or loss on the sale or exchange of a Share will be capital gain
or loss that will be long-term if the Share has been held for more than twelve
months and otherwise will be short-term. For individuals, long-term capital
gains are currently taxed at a maximum rate of 20% and short-term capital gains
are currently taxed at ordinary income tax rates. However, if a shareholder
realizes a loss on the sale, exchange or redemption of a Share held for six
months or less and has previously received a capital gains distribution with
respect to the Share (or any undistributed net capital gains of the Fund with
respect to such Share are included in determining the shareholder's long-term
capital gains), the shareholder must treat the loss as a long-term capital loss
to the extent of the amount of the prior capital gains distribution (or any
undistributed net capital gains of the Fund that have been included in
determining such shareholder's long-term capital gains). In addition, any loss
realized on a sale or other disposition of Shares will be disallowed to the
extent an investor repurchases (or enters into a contract or option to
repurchase) Shares within a period of 61 days (beginning 30 days before and
ending 30 days after the disposition of the Shares). This loss disallowance rule
will apply to Shares received through the reinvestment of dividends during the
61-day period.
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In certain cases, the Fund will be required to withhold, and remit to the United
States Treasury, 31% of any distributions paid to a shareholder who (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
backup withholding by the Internal Revenue Service, or (3) has failed to certify
to the Fund that such shareholder is not subject to backup withholding.
In-Kind Purchases
The Fund may, in certain circumstances involving tax-free reorganizations and
certain other transactions, accept securities that are appropriate investments
as payment for Fund shares (an "In-Kind Purchase"). An In-Kind Purchase may
result in adverse tax consequences under certain circumstances to: (1) investors
transferring securities for shares ("In-Kind Investors"), (2) investors who
acquire shares of the Fund after a transfer ("new shareholders") or (3)
investors who own shares at the time of transfer ("current shareholders"). As a
result of an In-Kind Purchase, the Fund may acquire securities that have
appreciated in value or depreciated in value from the date they were acquired.
If appreciated securities were to be sold after an In-Kind Purchase, the amount
of the gain would be taxable to new shareholders, current shareholders and
In-Kind Investors. The effect of this for current shareholders or new
shareholders would be to tax them on a distribution that represents an increase
in the value of their investment. The effect on In-Kind Investors would be to
reduce their potential liability for tax on capital gains by spreading it over a
larger asset base. The opposite may occur if the Fund acquire securities having
an unrealized capital loss. In that case, In-Kind Investors will be unable to
utilize the loss to offset gains, but, because an In-Kind Purchase will not
result in any gains, the inability of In-Kind Investors to utilize unrealized
losses will have no immediate tax effect. For new shareholders or current
shareholders, to the extent that unrealized losses are realized by the Fund, new
shareholders or current shareholders may benefit by any reduction in net tax
liability attributable to the losses. The Adviser cannot predict whether
securities acquired in any In-Kind Purchase will have unrealized gains or losses
on the date of the In-Kind Purchase. Consistent with its duties as investment
adviser, the Adviser will, however, take tax consequences to investors into
account when making decisions to sell portfolio assets, including the impact of
realized capital gains on shareholders of the Fund.
Federal Excise Tax
If the Fund fails to distribute in a calendar year at least 98% of its ordinary
income for the year and 98% of its capital gain net income (the excess of short
and long term capital gains over short and long term capital losses) for the
one-year period ending October 31 of that year (and any retained amount from the
prior calendar year), the Fund will be subject to a nondeductible 4% Federal
excise tax on the undistributed amounts. The Fund intends to make sufficient
distributions to avoid imposition of this tax, or to retain, at most its net
capital gains and pay tax thereon.
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STATE AND LOCAL TAXES
The Fund is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by the Fund to
shareholders and the ownership of shares may be subject to state and local
taxes.
FUND TRANSACTIONS
The Fund has no obligation to deal with any broker-dealer or group of
broker-dealers in the execution of transactions in portfolio securities. Subject
to policies established by the Trustees of the Trust, the Adviser is responsible
for placing the orders to execute transactions for the Fund. In placing orders,
it is the policy of the Trust to seek to obtain the best net results taking into
account such factors as price (including the applicable dealer spread), the
size, type and difficulty of the transaction involved, the firm's general
execution and operational facilities and the firm's risk in positioning the
securities involved. While the Adviser generally seeks reasonably competitive
spreads or commissions, the Fund will not necessarily be paying the lowest
spread or commission available.
The money market instruments in which the Fund invests are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the Adviser
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
instruments 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 Fund will primarily consist of dealer spreads and
underwriting commissions.
TRADING PRACTICES AND BROKERAGE
The Adviser selects brokers or dealers to execute transactions for the purchase
or sale of portfolio securities on the basis of its judgment of their
professional capability to provide the service. The primary consideration is to
have brokers or dealers provide transactions at best price and execution for the
Adviser. Best price and execution includes many factors, including the price
paid or received for a security, the commission charged, the promptness and
reliability of execution, the confidentiality and placement accorded the order
and other factors affecting the overall benefit obtained by the account on the
transaction. The Adviser's determination of what are reasonably competitive
rates is based upon the professional knowledge of its trading department as to
rates paid and charged for similar transactions throughout the securities
industry. In some instances, the Adviser pays a minimal share transaction cost
when the transaction presents no difficulty. Some trades are made on a net basis
where the Adviser either buys securities directly from the dealer or sells them
to the dealer. In these instances, there is no direct commission charged but
there is a spread (the difference between the buy and sell price) which is the
equivalent of a commission.
The Adviser may place a combined order for two or more accounts or funds engaged
in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
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price and execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or fund. It is believed that the ability
of the accounts to participate in volume transactions will generally be
beneficial to the accounts and funds. Although it is recognized that, in some
cases, the joint execution of orders could adversely affect the price or volume
of the security that a particular account or the Fund may obtain, it is the
opinion of the Adviser and the Trust's Board of Trustees that the advantages of
combined orders outweigh the possible disadvantages of separate transactions.
It is expected that the Fund may execute brokerage or other agency transactions
through the Distributor, which is a registered broker-dealer, for a commission
in conformity with the 1940 Act, the Securities Exchange Act of 1934 and rules
promulgated by the SEC. Under these provisions, the Distributor is permitted to
receive and retain compensation for effecting portfolio transactions for the
Fund on an exchange if a written contract is in effect between the Distributor
and the Trust expressly permitting the Distributor to receive and retain such
compensation. These rules further require that commissions paid to the
Distributor by the Fund for exchange transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." The Trustees, including those who are not "interested persons" of the
Trust, have adopted procedures for evaluating the reasonableness of commissions
paid to the Distributor and will review these procedures periodically.
Since the Trust does not market its shares through intermediary brokers or
dealers, it is not the Trust's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, the Adviser may place portfolio orders with qualified
broker-dealers who recommend the Fund's shares to clients, and may, when a
number of brokers and dealers can provide best net results on a particular
transaction, consider such recommendations by a broker or dealer in selecting
among broker-dealers.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
portfolios and shares of each portfolio, each of which represents an equal
proportionate interest in the portfolio with each other share. Shares are
entitled upon liquidation to a pro rata share in the net assets of the
portfolio. Shareholders have no preemptive rights. The Declaration of Trust
provides that the Trustees of the Trust may create additional series of shares.
All consideration received by the Trust for shares of any additional series and
all assets in which such consideration is invested would belong to that series
and would be subject to the liabilities related thereto. Share certificates
representing shares will not be issued.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
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of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the shareholders incurring financial loss for that reason appears
remote because the Trust's Declaration of Trust contains an express disclaimer
of shareholder liability for obligations of the Trust and requires that notice
of such disclaimer be given in each agreement, obligation or instrument entered
into or executed by or on behalf of the Trust or the Trustees, and because the
Declaration of Trust provides for indemnification out of the Trust property for
any shareholder held personally liable for the obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his or
her own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or investment advisers, shall not be
liable for any neglect or wrongdoing of any such person. The Declaration of
Trust also provides that the Trust will indemnify its Trustees and officers
against liabilities and expenses incurred in connection with actual or
threatened litigation in which they may be involved because of their offices
with the Trust unless it is determined in the manner provided in the Declaration
of Trust that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust. However, nothing in the
Declaration of Trust shall protect or indemnify a Trustee against any liability
for his or her willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties.
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